Question 1

Which of the following statements is true about takeover constraint?

Accepted Answer

A)   It encourages managers to put their own interests above those of stockholders.
B)   It usually occurs when the management has maximized the wealth of the stockholders.
C)   It often gives senior managers more independence when it comes to granting stock options.
D)   It has ceased to exist in companies since the late 1990s.
E)   It is the governance mechanism of last resort and is often invoked only when other governance mechanisms have failed.

Question 2

Alpha LLC is a large paint manufacturing company. Despite government regulations, the company has been illegally disposing of its chemical wastes in a lake, which is an important habitat for several fish and birds. Which of the following ethical concerns is illustrated in this scenario?

Accepted Answer

A)   On-the-job consumption
B)   Opportunistic exploitation
C)   Environmental degradation
D)   Self-dealing
E)   Substandard working conditions

Question 3

Robert has been the CEO at Nikita Incorporated for the last seven years. For the last three years, he has illegally diverted cash and assets to himself and his family members. He has abused corporate perks, such as using a company jet to fly to the Bahamas for a vacation and allowed his family members to use the gym and other amenities at the corporate office for free. He has spent corporate funds on vacation home in Miami, Florida and a threw a lavish New Year's Eve party for a hundred friends. Which of the following governance mechanisms is illustrated in this scenario?

Accepted Answer

A)   Stock options
B)   Self-dealing
C)   The takeover constraint
D)   Employee incentives
E)   Greenmail

Question 4

Maximizing long-run profitability and profit growth is the best way to satisfy the claims of several key stakeholder groups irrespective of how the company accomplishes this goal.

Accepted Answer

A) True 
 B)False

Question 5

Using a strategic control system known as the balanced scorecard model, which of the following would be evaluated from the customer perspective?

Accepted Answer

A)   Level of service
B)   Cash flow
C)   Employee satisfaction
D)   Percentage of revenues generated from new products in a defined period
E)   Revenue growth

Question 6

A stock option is a right to purchase:

Accepted Answer

A)   shares of the company's stock at the stock's current price.
B)   shares of the company's stock at half the stock's current price.
C)   shares of the company's stock at a predetermined price at some point in the future.
D)   bonds issued by the company.
E)   stock in an underperforming company.

Question 7

According to an SEC investigation, Computer Associates, one of the world's largest software companies, backdated contracts to boost the company's reported revenues. This is not an ethical business practice.

Accepted Answer

A) True 
 B)False

Question 8

A criticism of stock-based compensation plans is that they:

Accepted Answer

A)   discourage empire building.
B)   reduce motivation among agents.
C)   do not align management and stockholder interests.
D)   dilute stockholders' equity.
E)   adversely affect the earnings of principals.

Question 9

An agency relationship continues throughout the hierarchy within a company.

Accepted Answer

A) True 
 B)False

Question 10

One cause of the diverging interests between principals and agents is that managers in the company are motivated by different desires such as power, job security, and income and may use their position to help fulfill those desires rather than invest in ways that increase stockholder returns.

Accepted Answer

A) True 
 B)False

Question 11

Which of the following statements is true about strategic control systems?

Accepted Answer

A)   They are usually set by government regulators and require top management to follow them.
B)   Their primary purpose is to foster on-the-job consumption.
C)   Their purpose is to ensure that the wealth of stockholders is maximized.
D)   They relieve employees and management of legal and ethical constraints.
E)   They are designed to encourage information asymmetry.

Question 12

Stockholders receive a return on their investment in a company's stock from dividend payments and capital appreciation.

Accepted Answer

A) True 
 B)False

Question 13

Rebecca works at a company where she has consistently noticed the questionable decisions and unethical behavior of her superiors. She has decided to contact the media and "blow the whistle". Rebecca is exhibiting which kind of ethical principle?

Accepted Answer

A)   Organization culture and leadership
B)   Decision-making processes
C)   Strong corporate governance
D)   Moral courage
E)   Hiring and promotion

Question 14

Why do inside directors often dominate outsiders on a board of directors?

Accepted Answer

A)   Insiders can use their position within the management hierarchy to exercise control over the company-specific information that the board receives.
B)   They can present information in a way that puts them in a favorable light.
C)   They have intimate knowledge of the company's operations, and because superior knowledge and control over information are sources of power.
D)   They may be better positioned than outsiders to influence boardroom decision making.
E)   All of these are reasons why inside directors often dominate outsiders on a board of directors.

Question 15

Arnold is a CEO at Gamma LLC. He has control over the corporate funds of the company. Arnold has often used funds from the company to pay for his travel and hotel expenses. The funds could otherwise have increased stockholder returns. Which of the following concepts is illustrated in this scenario?

Accepted Answer

A)   Corporate governance
B)   On-the-job consumption
C)   Greenmail
D)   Information asymmetry
E)   Information manipulation

Question 16

Which of the following statements is true about corporate raiders?

Accepted Answer

A)   They are underperforming corporations that have been acquired by other companies.
B)   They are government-funded organizations that help underperforming companies recover.
C)   They may purchase stock in a company to take over the business and run it more efficiently.
D)   They lack power to interfere with the top management decisions.
E)   They discourage companies from pursuing strategies that help maximize stockholder wealth.

Question 17

Gemini Corp. is a large automobile manufacturer that has contracts with several suppliers. To gain more benefits from an upholstery supplier, Gemini Corp. unilaterally changed the contract and pressurized the supplier to lower its prices. Which of the following concepts is illustrated in this scenario?

Accepted Answer

A)   Opportunistic exploitation
B)   On-the-job consumption
C)   Agency strategy
D)   Greenmail
E)   Self-dealing

Question 18

A union and the public are examples of internal stakeholders.

Accepted Answer

A) True 
 B)False

Question 19

Gamma Corp. recently bought stocks in an underperforming company that has failed to maximize stockholder wealth. Gamma Corp. made changes to the top management structure of the company and persuaded the management to pursue strategies that maximize the wealth of stockholders. Gamma Corp. has been able to earn millions by doing so. Which of the following concepts is illustrated in this scenario?

Accepted Answer

A)   Greenmail
B)   Agency theory
C)   Information asymmetry
D)   Self-dealing
E)   On-the-job consumption

Question 20

Which of the following statements about the board of directors is NOT true?

Accepted Answer

A)   Board members are elected by stockholders.
B)   The board can be held legally accountable for a company's actions.
C)   The board has the legal authority to hire, fire, and compensate the CEO.
D)   All the directors are full-time employees of the company.
E)   Outside directors help perform the monitoring function of the board.

Exam 11: Corporate Governance, Social Responsibility, and Ethics

One cause of the diverging interests between principals and agents is that managers in the company are motivated by different desires such as power, job security, and income and may use their position to help fulfill those desires rather than invest in ways that increase stockholder returns.

Correct Answer
verified

Correct Answer
verified

Which of the following statements is true about takeover constraint?

Correct Answer
verified

Maximizing long-run profitability and profit growth is the best way to satisfy the claims of several key stakeholder groups irrespective of how the company accomplishes this goal.

Correct Answer
verified

Which of the following statements about the board of directors is NOT true?

Correct Answer
verified

According to an SEC investigation, Computer Associates, one of the world's largest software companies, backdated contracts to boost the company's reported revenues. This is not an ethical business practice.

Correct Answer
verified

A union and the public are examples of internal stakeholders.

Correct Answer
verified

Which of the following statements is true about corporate raiders?

Correct Answer
verified

Stockholders receive a return on their investment in a company's stock from dividend payments and capital appreciation.

Correct Answer
verified

Correct Answer
verified

Alpha LLC is a large paint manufacturing company. Despite government regulations, the company has been illegally disposing of its chemical wastes in a lake, which is an important habitat for several fish and birds. Which of the following ethical concerns is illustrated in this scenario?

Correct Answer
verified

A stock option is a right to purchase:

Correct Answer
verified

An agency relationship continues throughout the hierarchy within a company.

Correct Answer
verified

Rebecca works at a company where she has consistently noticed the questionable decisions and unethical behavior of her superiors. She has decided to contact the media and "blow the whistle". Rebecca is exhibiting which kind of ethical principle?

Correct Answer
verified

Which of the following statements is true about strategic control systems?

Correct Answer
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Using a strategic control system known as the balanced scorecard model, which of the following would be evaluated from the customer perspective?

Correct Answer
verified

Why do inside directors often dominate outsiders on a board of directors?

Correct Answer
verified

Arnold is a CEO at Gamma LLC. He has control over the corporate funds of the company. Arnold has often used funds from the company to pay for his travel and hotel expenses. The funds could otherwise have increased stockholder returns. Which of the following concepts is illustrated in this scenario?

Correct Answer
verified

Correct Answer
verified

A criticism of stock-based compensation plans is that they:

Correct Answer
verified

Exam 11: Corporate Governance, Social Responsibility, and Ethics

One cause of the diverging interests between principals and agents is that managers in the company are motivated by different desires such as power, job security, and income and may use their position to help fulfill those desires rather than invest in ways that increase stockholder returns.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Which of the following statements is true about takeover constraint?

Correct AnswerverifiedShow Answer

Maximizing long-run profitability and profit growth is the best way to satisfy the claims of several key stakeholder groups irrespective of how the company accomplishes this goal.

Correct AnswerverifiedShow Answer

Which of the following statements about the board of directors is NOT true?

Correct AnswerverifiedShow Answer

According to an SEC investigation, Computer Associates, one of the world's largest software companies, backdated contracts to boost the company's reported revenues. This is not an ethical business practice.

Correct AnswerverifiedShow Answer

A union and the public are examples of internal stakeholders.

Correct AnswerverifiedShow Answer

Which of the following statements is true about corporate raiders?

Correct AnswerverifiedShow Answer

Stockholders receive a return on their investment in a company's stock from dividend payments and capital appreciation.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Alpha LLC is a large paint manufacturing company. Despite government regulations, the company has been illegally disposing of its chemical wastes in a lake, which is an important habitat for several fish and birds. Which of the following ethical concerns is illustrated in this scenario?

Correct AnswerverifiedShow Answer

A stock option is a right to purchase:

Correct AnswerverifiedShow Answer

An agency relationship continues throughout the hierarchy within a company.

Correct AnswerverifiedShow Answer

Rebecca works at a company where she has consistently noticed the questionable decisions and unethical behavior of her superiors. She has decided to contact the media and "blow the whistle". Rebecca is exhibiting which kind of ethical principle?

Correct AnswerverifiedShow Answer

Which of the following statements is true about strategic control systems?

Correct AnswerverifiedShow Answer

Using a strategic control system known as the balanced scorecard model, which of the following would be evaluated from the customer perspective?

Correct AnswerverifiedShow Answer

Why do inside directors often dominate outsiders on a board of directors?

Correct AnswerverifiedShow Answer

Arnold is a CEO at Gamma LLC. He has control over the corporate funds of the company. Arnold has often used funds from the company to pay for his travel and hotel expenses. The funds could otherwise have increased stockholder returns. Which of the following concepts is illustrated in this scenario?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

A criticism of stock-based compensation plans is that they:

Correct AnswerverifiedShow Answer

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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