Question 1

When managers pay bribes to gain access to lucrative business contracts,they are engaging in:

Accepted Answer

A)  information asymmetry
B)  utilitarianism.
C)  self-dealing.
D)  greenmail.
E)  corruption.

Question 2

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 3

Consider a national chain of company-owned fast-food restaurants.For this firm,list the important stakeholders.Then describe how each stakeholder group can affect the firm's profitability.

Accepted Answer

Internal stakeholders of a national chai...

Question 4

Which of the following is a major function of the Board of Directors of a company?

Accepted Answer

A)  Approving decisions made by divisional managers
B)  Monitoring line managers
C)  Aligning corporate strategy with stockholder interests
D)  Creating contracts with suppliers
E)  Designing marketing strategies for the company

Question 5

Which of the following is NOT an accurate statement about current levels of pay for CEOs of U.S.-based firms?

Accepted Answer

A)  CEOs also earn from the stock options that they grant to managers.
B)  Empire building helps CEOs increase their earnings.
C)  CEO compensation is closely tied to corporate performance in most firms.
D)  CEO pay is rising more rapidly than pay for other workers.
E)  The level of CEO compensation is determined by the corporate Board of Directors.

Question 6

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 7

An agency relationship continues throughout the hierarchy within a company.

Accepted Answer

A) True 
 B)False

Question 8

To ensure that basic ethical principles are adhered to in the organization,managers should:

Accepted Answer

A)  build an organizational culture that places a high value on economic aspects.
B)  make sure that leaders within the business only articulate the rhetoric of ethical behavior.
C)  put minimal governance processes in place.
D)  check with prior employees regarding someone's reputation before hiring.
E)  foster and encourage on-the-job consumption.

Question 9

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 invoked only when the others have failed.

Question 10

An effective governance arrangement exists when the CEO is also the chairman of the Board of Directors.

Accepted Answer

A) True 
 B)False

Question 11

Emphasizing current profitability at the expense of future profitability and profit growth makes an enterprise more attractive to shareholders.

Accepted Answer

A) True 
 B)False

Question 12

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 13

Which of the following statements is true in the context of unethical behavior?

Accepted Answer

A)  Business ethics significantly differ from personal ethics.
B)  An individual with a strong sense of personal ethics is more likely to engage in self-dealing.
C)  A personal ethical code will exert a profound influence on the way individuals behave as businesspeople.
D)  Focusing only on applying straightforward business calculus can completely eliminate ethical concerns.
E)  An organizational culture that fosters decision making on purely economic terms eliminates unethical practices. C

Question 14

Which of the following statements is true in the context of financial statements and auditors?

Accepted Answer

A)  The information contained in the financial statements can enable a stockholder to calculate the ROIC of a company in which he or she invests.
B)  Publicly traded companies in the United States are not required to file quarterly or annual reports with the SEC.
C)  So far, there have been no cases in which auditors were found cooperating with companies to misrepresent financial information.
D)  The SEC requires that the accounts be audited by a committee formed by the Board members and senior employees of the company.
E)  Sarbanes-Oxley Act in 2002 barred CEOs and CFOs from endorsing their company's financial statements. A

Question 15

Explain the principles of agency theory,including the issues it addresses.What are some effective ways to deal with agency problems,as implied or stated by agency theory?

Accepted Answer

Agency theory addresses situations where...

Question 16

Governance mechanisms help align the incentives between principals and agents,and help monitor and control agents.

Accepted Answer

A) True 
 B)False

Question 17

A circumstance in which a manager is using company funds for his or her own personal consumption is called _____.

Accepted Answer

A)  information manipulation
B)  self-dealing
C)  takeover constraint
D)  greenmail
E)  information asymmetry

Question 18

When managers of a firm seek to unilaterally rewrite the terms of contracts with suppliers,buyers,or complement providers in a way that is more favorable to their firm,they are engaging in:

Accepted Answer

A)  opportunistic exploitation.
B)  information manipulation.
C)  downsizing.
D)  greenmail.
E)  self-dealing.

Question 19

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. C

Question 20

Which of the following governance mechanisms is regarded as the option of last resort?

Accepted Answer

A)  Strategic control system
B)  Takeover constraint
C)  Board of Directors
D)  Stock-based compensation system
E)  Financial statements and auditors

Exam 11: Corporate Performance, Governance, and Business Ethics

When managers pay bribes to gain access to lucrative business contracts,they are engaging in:

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

Consider a national chain of company-owned fast-food restaurants.For this firm,list the important stakeholders.Then describe how each stakeholder group can affect the firm's profitability.

Correct AnswerverifiedInternal stakeholders of a national chai...View AnswerShow Answer

Which of the following is a major function of the Board of Directors of a company?

Correct AnswerverifiedShow Answer

Which of the following is NOT an accurate statement about current levels of pay for CEOs of U.S.-based firms?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

An agency relationship continues throughout the hierarchy within a company.

Correct AnswerverifiedShow Answer

To ensure that basic ethical principles are adhered to in the organization,managers should:

Correct AnswerverifiedShow Answer

Which of the following statements is true about takeover constraint?

Correct AnswerverifiedShow Answer

An effective governance arrangement exists when the CEO is also the chairman of the Board of Directors.

Correct AnswerverifiedShow Answer

Emphasizing current profitability at the expense of future profitability and profit growth makes an enterprise more attractive to shareholders.

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

Which of the following statements is true in the context of unethical behavior?

Correct AnswerverifiedC

Which of the following statements is true in the context of financial statements and auditors?

Correct AnswerverifiedA

Explain the principles of agency theory,including the issues it addresses.What are some effective ways to deal with agency problems,as implied or stated by agency theory?

Correct AnswerverifiedAgency theory addresses situations where...View AnswerShow Answer

Governance mechanisms help align the incentives between principals and agents,and help monitor and control agents.

Correct AnswerverifiedShow Answer

A circumstance in which a manager is using company funds for his or her own personal consumption is called _____.

Correct AnswerverifiedShow Answer

When managers of a firm seek to unilaterally rewrite the terms of contracts with suppliers,buyers,or complement providers in a way that is more favorable to their firm,they are engaging in:

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedC

Which of the following governance mechanisms is regarded as the option of last resort?

Correct AnswerverifiedShow Answer

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Internal stakeholders of a national chai...
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C

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A

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Agency theory addresses situations where...
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C

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