Deck 4: The Board of Directors

Question 1

To vote on major operating decisions is one of the five board functions.

Answer 1

True

Question 2

In the summer of 2002, what legislation increased the monitoring ability and responsibilities of American board directors?

A)Securities and Exchange Commission Act
B)Sarbanes-Oxley Act
C)Corporate Securities Act
D)Board of Directors Act
E)Act of Nature

Answer 2

B

Question 3

The lack of CEOs serving as Board Directors by America's top companies is evidence that the practice should be avoided

Answer 3

False

Question 4

Some European countries have firms with a two-tier board structure.

Question 5

Which of the following is NOT a common board committee?

A)audit committee
B)nomination committee
C)marketing committee
D)compensation committee
E)All of the above are common board committees.

Question 6

Federal law explicitly dictates that public corporations must have a board of directors.

Question 7

According to research, larger boards are more likely to act independent and therefore are more effectively at enhancing a firm's value than smaller boards.

Question 8

Because directors are supposed to represent shareholders' interests, directors have all these duties EXCEPT:

A)Fiduciary duty
B)Duty of care
C)Duty of auditing
D)Duty of loyalty and fair dealing
E)Directors have all of the above duties.

Question 9

A director is not independent if he or immediate family) has worked for the company or its auditor within the last 10 years.

Question 10

According to NYSE standards, the audit committee has increased authority and responsibility to hire and fire the auditing firm.

Question 11

Generally, what can be said about the structure of boards?

A)The more directors, the better the firm's financial performance will be.
B)All the Fortune-listed firms have an independent chairman of the board.
C)In regards to board composition, it is important to identify which specific board committees are best served by independent directors.
D)There is little controversy about what defines the best board structure.
E)All of the above.

Question 12

A young growth-oriented firm may actually need more insiders on its Board of Directors.

Question 13

Board members are chosen by:

A)Being related to a member of the board
B)A vote by all employees
C)A vote of the shareholders
D)Promotion within the company
E)An appointment by the executive committee