Question 1

_____ are board members who are not employees of the firm,but frequently are senior executives from other firms or full-time professionals.

Accepted Answer

A)   Inside directors
B)   Outside directors
C)   CEOs
D)   AuditorsE) B) and D)
F) A) and B)

Question 2

_____ are the board members who are part of a company's senior management team appointed by shareholders to provide the board with necessary information pertaining to the company's internal workings and performance.

Accepted Answer

A)   Investors
B)   Outside directors
C)   Inside directors
D)   AuditorsE) B) and C)
F) B) and D)

Question 3

Sam is a manager at StyleOne Apparels Inc.and is friends with the company's CEO.This privilege gives Sam the information that StyleOne Apparels is in the midst of talks to take over a leading rival.Sam buys stocks of StyleOne with the expectation that its stocks will appreciate.But the deal falls through and the stocks of StyleOne depreciate in the following months.Are Sam's actions unethical? Why?

Accepted Answer

A)   Yes, because it is unethical to trade stocks based on insider information irrespective of the final outcome.
B)   Yes, because it is illegal and unethical for Sam to possess any kind of insider information.
C)   No, because Sam did not ask the CEO to disclose such information to him.
D)   No, because Sam did not make any profits from trading stocks using this information.E) None of the above
F) A) and B)

Question 4

Why do shareholders of public companies need to appoint a board of directors to represent their interests?

Accepted Answer

A)   because of the separation of ownership and control
B)   because employees of a company cannot be shareholders
C)   because the board of directors itself is made up of shareholders
D)   because they want tighter control over day-to-day operations of a companyE) All of the above
F) A) and C)

Question 5

Hoptin Inc.is a public stock company.Which of the following best exemplifies the legal personality of the company?

Accepted Answer

A)   Rosa can legally sell shares of Hoptin in the stock market.
B)   John is a shareholder of Hoptin but does not have any managerial duties.
C)   Kevin, an employee at Hoptin, is not responsible for any losses that Hoptin incurs.
D)   Jessi Hoptin, the company's founder, died a few years ago, yet the company is doing well.E) A) and B)
F) None of the above

Question 6

What are poison pills?

Accepted Answer

A)   They are used by shareholders to prevent the founder of a company from taking the company private through a leveraged buyout.
B)   They are unspecified conditions in the contract between stakeholders in an organization.
C)   They are used by companies in a bid to perform a hostile takeover of competing firms.
D)   They are defensive provisions that kick in should a buyer reach a certain level of share ownership.E) All of the above
F) C) and D)

Question 7

Which of the following is not true about the members of the board of directors in a public stock company?

Accepted Answer

A)   They represent the shareholders' interests.
B)   They may hire and fire top management.
C)   They oversee the firm's operations.
D)   They are not responsible to shareholders.E) A) and B)
F) A) and C)

Question 8

Which of the following is true of the board of directors in a public stock company?

Accepted Answer

A)   Votes at shareholder meetings determine whose representatives are appointed to the board of directors.
B)   Because shareholders generally have uniform interests, the composition of the board is generally a unanimous decision.
C)   The board of directors acts as a facilitator to convey interests of the stockholders to the management without any real authority.
D)   The functions of the board of directors are limited to ensuring the hiring and firing of CEOs.E) B) and C)
F) None of the above

Question 9

Raj is a recent graduate who states that he has interned at a major accounting firm so that his value as a candidate for employment increases.A start-up recruits Raj based on his stated credentials without verifying them.Two days into the job,Raj's team lead realizes that Raj does not know much of what he claimed to know during the interview.This scenario best exemplifies

Accepted Answer

A)   moral hazard.
B)   adverse selection.
C)   shared value creation.
D)   corporate governance.E) A) and C)
F) A) and D)

Question 10

Adverse selection in a public stock company occurs when

Accepted Answer

A)   information asymmetry increases the likelihood of selecting inferior alternatives.
B)   a firm's work tasks, incentives, and employment contracts minimize opportunism by agents.
C)   a principal is not aware of the context from which information from an agent is derived.
D)   an agent manipulates information to benefit stockholders.E) All of the above
F) A) and B)

Question 11

Jennifer received a tip from a close friend who is an executive manager of a publicly traded company called MegaRed Inc.The manager received some inside information about how to trade MegaRed stock to get a huge profit.He shared this information with his Jennifer.This scenario is an example of

Accepted Answer

A)   information asymmetry.
B)   adverse selection.
C)   stakeholder strategy.
D)   shared value creation.E) None of the above
F) A) and B)

Question 12

Which of the following statements best supports the separation of ownership and control in publicly traded companies?

Accepted Answer

A)   Shareholders are liable only for the capital they invest and not for their personal wealth.
B)   Shareholders can freely trade the company stocks.
C)   Shareholders own stocks but do not run the company.
D)   Managers control the company but may also have stock ownership.E) None of the above
F) A) and B)

Question 13

TopDrawer Inc.has a board of directors that consists of seven members.Which of the following is most likely an accurate statement about TopDrawer's board of directors?

Accepted Answer

A)   TopDrawer's board of directors ensures the firm's compliance with laws and regulations but does not conduct risk assessments.
B)   TopDrawer's board of directors provides guidance for the firm's CEO but does not monitor the firm's corporate actions.
C)   TopDrawer's board of directors oversees the firm's succession plan but does not evaluate the firm's CEO.
D)   TopDrawer's board of directors evaluates the firm's strategic initiatives but does not include any employees of the firm.E) None of the above
F) A) and D)

Question 14

In principal-agent relationships,_____ describes the difficulty of principals to ascertain whether agents have really put forth their best efforts.

Accepted Answer

A)   the agency problem
B)   adverse selection
C)   on-the-job consumption
D)   moral hazardE) None of the above
F) A) and D)

Question 15

Which of the following could most likely have prevented the accounting scandals of the early 2000s and the global financial crisis?

Accepted Answer

A)   adopting a narrow shareholder perspective
B)   separating economic interests and social needs
C)   practicing effective corporate governance
D)   adopting the principles of shareholder capitalismE) All of the above
F) A) and B)

Question 16

How did Uber conflict with Carnegie Mellon University's National Robotics Engineering Center (NREC) ?

Accepted Answer

A)   Uber promised a large donation to NREC but then reneged on the offer when NREC would not provide Uber with researchers.
B)   Uber poached entire NREC research teams with signing bonuses, twice the salaries, and stock options, thereby threatening the future of NREC.
C)   Uber allegedly stole ideas from the NREC research team and then claimed that these ideas were generated by their own researchers.
D)   Uber bribed NREC officials to give permission for building an extension to the NREC facility that focuses solely on Uber research.E) None of the above
F) B) and C)

Question 17

Grameen Bank in Bangladesh was founded to provide microcredit to impoverished farmers who wanted to start their own entrepreneurial ventures that would help themselves climb out of poverty.This best exemplifies Michael Porter's suggestion that

Accepted Answer

A)   managers need to keep economic needs and societal needs disconnected from each other.
B)   a firm should expand its internal value chain to include nontraditional partners.
C)   businesses should focus on creating regional clusters such as Silicon Valley in the U.S.
D)   the largest but poorest socioeconomic group can yield significant business opportunities.E) None of the above
F) C) and D)

Question 18

Which of the following do not serve as additional external-governance mechanisms?

Accepted Answer

A)   auditors
B)   government regulators
C)   board of directors
D)   industry analystsE) A) and B)
F) A) and C)

Question 19

The day-to-day operations of a publicly traded company are conducted by

Accepted Answer

A)   people who own the company, such as shareholders.
B)   its managers and lower-level employees.
C)   people who finance the company, such as investors.
D)   the CEO and the board of directors.E) A) and D)
F) B) and C)

Question 20

The risk of employee opportunism on behalf of agents in a public stock company is exacerbated by

Accepted Answer

A)   stakeholder strategy.
B)   information asymmetry.
C)   corporate governance.
D)   groupthink.E) C) and D)
F) B) and D)

Exam 12: Corporate Governance and Business Ethics

Which of the following could most likely have prevented the accounting scandals of the early 2000s and the global financial crisis?

Correct Answer
verified

Correct Answer
verified

Adverse selection in a public stock company occurs when

Correct Answer
verified

Which of the following do not serve as additional external-governance mechanisms?

Correct Answer
verified

_____ are board members who are not employees of the firm,but frequently are senior executives from other firms or full-time professionals.

Correct Answer
verified

In principal-agent relationships,_____ describes the difficulty of principals to ascertain whether agents have really put forth their best efforts.

Correct Answer
verified

TopDrawer Inc.has a board of directors that consists of seven members.Which of the following is most likely an accurate statement about TopDrawer's board of directors?

Correct Answer
verified

The risk of employee opportunism on behalf of agents in a public stock company is exacerbated by

Correct Answer
verified

How did Uber conflict with Carnegie Mellon University's National Robotics Engineering Center (NREC) ?

Correct Answer
verified

What are poison pills?

Correct Answer
verified

Grameen Bank in Bangladesh was founded to provide microcredit to impoverished farmers who wanted to start their own entrepreneurial ventures that would help themselves climb out of poverty.This best exemplifies Michael Porter's suggestion that

Correct Answer
verified

The day-to-day operations of a publicly traded company are conducted by

Correct Answer
verified

Which of the following statements best supports the separation of ownership and control in publicly traded companies?

Correct Answer
verified

Correct Answer
verified

Which of the following is not true about the members of the board of directors in a public stock company?

Correct Answer
verified

Jennifer received a tip from a close friend who is an executive manager of a publicly traded company called MegaRed Inc.The manager received some inside information about how to trade MegaRed stock to get a huge profit.He shared this information with his Jennifer.This scenario is an example of

Correct Answer
verified

Which of the following is true of the board of directors in a public stock company?

Correct Answer
verified

_____ are the board members who are part of a company's senior management team appointed by shareholders to provide the board with necessary information pertaining to the company's internal workings and performance.

Correct Answer
verified

Why do shareholders of public companies need to appoint a board of directors to represent their interests?

Correct Answer
verified

Hoptin Inc.is a public stock company.Which of the following best exemplifies the legal personality of the company?

Correct Answer
verified

Exam 12: Corporate Governance and Business Ethics

Which of the following could most likely have prevented the accounting scandals of the early 2000s and the global financial crisis?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Adverse selection in a public stock company occurs when

Correct AnswerverifiedShow Answer

Which of the following do not serve as additional external-governance mechanisms?

Correct AnswerverifiedShow Answer

_____ are board members who are not employees of the firm,but frequently are senior executives from other firms or full-time professionals.

Correct AnswerverifiedShow Answer

In principal-agent relationships,_____ describes the difficulty of principals to ascertain whether agents have really put forth their best efforts.

Correct AnswerverifiedShow Answer

TopDrawer Inc.has a board of directors that consists of seven members.Which of the following is most likely an accurate statement about TopDrawer's board of directors?

Correct AnswerverifiedShow Answer

The risk of employee opportunism on behalf of agents in a public stock company is exacerbated by

Correct AnswerverifiedShow Answer

How did Uber conflict with Carnegie Mellon University's National Robotics Engineering Center (NREC) ?

Correct AnswerverifiedShow Answer

What are poison pills?

Correct AnswerverifiedShow Answer

Grameen Bank in Bangladesh was founded to provide microcredit to impoverished farmers who wanted to start their own entrepreneurial ventures that would help themselves climb out of poverty.This best exemplifies Michael Porter's suggestion that

Correct AnswerverifiedShow Answer

The day-to-day operations of a publicly traded company are conducted by

Correct AnswerverifiedShow Answer

Which of the following statements best supports the separation of ownership and control in publicly traded companies?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Which of the following is not true about the members of the board of directors in a public stock company?

Correct AnswerverifiedShow Answer

Jennifer received a tip from a close friend who is an executive manager of a publicly traded company called MegaRed Inc.The manager received some inside information about how to trade MegaRed stock to get a huge profit.He shared this information with his Jennifer.This scenario is an example of

Correct AnswerverifiedShow Answer

Which of the following is true of the board of directors in a public stock company?

Correct AnswerverifiedShow Answer

_____ are the board members who are part of a company's senior management team appointed by shareholders to provide the board with necessary information pertaining to the company's internal workings and performance.

Correct AnswerverifiedShow Answer

Why do shareholders of public companies need to appoint a board of directors to represent their interests?

Correct AnswerverifiedShow Answer

Hoptin Inc.is a public stock company.Which of the following best exemplifies the legal personality of the company?

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified