Deck 10: Corporate Governance and Reform

Question 1

Corporate governance of any organization,publicly traded or not,must focus on all of the following basic principles EXCEPT:

A)Accounting
B)Reporting
C)Board Structure
D)Entry-level employee compensation
E)Executive compensation

Answer 1

D

Question 2

________ is a relationship between two parties whereby one party has the trust and legal and ethical duty to act in the best interests of the other.

A)Fiduciary responsibility
B)Agency theory
C)Corporate governance
D)Transparency
E)Corporate sustainability

Answer 2

A

Question 3

XYZ Suppliers,Inc.supplies the trees needed for production of paper at the ABC Paper Company.XYZ Suppliers are ________ stakeholders.

A)financial
B)business
C)internal
D)external
E)social

Answer 3

B

Question 4

The ________ stakeholders of a firm are all those employed by the firm,including management and leadership.

A)financial
B)business
C)internal
D)external
E)social

Question 5

Which of the following is NOT a significant result when a firm begins its initial sale of shares to the public in the United States?

A)The firm will now have to disclose a sizeable degree of financial and operational detail
B)The firm will now have to publish financial and operational detail once a year
C)The firm will now have to comply with Securities and Exchange Commission rules
D)The firm will now have to comply with all the specific operating and reporting requirements of the specific exchange on which it is traded
E)The firm will now have increased regulatory requirements

Question 6

ABC Oil Company went bankrupt after it was discovered that the company had engaged in accounting fraud and questionable business ethics.In recent years,failures in ________ have raised issues about the very ethics and culture of the conduct of business.

A)corporate authority
B)corporate bureaucracy
C)corporate jurisdiction
D)corporate governance
E)corporate regulation

Question 7

________ is the pursuit of the interests of corporate shareholders,primarily the profitability of the organization,over and above the interests of other stakeholders.

A)Fiduciary responsibility
B)Agency theory
C)Stakeholder capitalism
D)Dividend yield
E)Maximization of shareholder value

Question 8

According to the text,companies from which of the following countries have been credited with striving to operate in the interest of multiple stakeholders,not just the shareholders?

A)Turkey
B)Germany
C)Hungary
D)China
E)Spain

Question 9

According to Milton Friedman in The New York Times Magazine,"The social responsibility of business is to increase its ________."

A)customers
B)employees
C)creditors
D)profits
E)suppliers

Question 10

The ________is the most common form of business organization which has all of the rights and responsibilities as that of an individual,while possessing limited liability to its owners.

A)corporation
B)firm
C)company
D)conglomerate
E)business

Question 11

The two primary financial stakeholders of a firm,the providers of capital for both investment and operation,are ________ and ________.

A)customers; manufacturers
B)employees; creditors
C)shareholders; creditors
D)shareholders; customers
E)employees; shareholders

Question 12

The management at Cold Chill Ice Cream Company attempts to balance the interests of all stakeholders of the organization.Cold Chill has a predominant business philosophy of:

A)Maximization of shareholder value
B)Dividend yield
C)Corporate governance
D)Stakeholder capitalism
E)Transparency

Question 13

________ is the operation of a firm or organization in a manner which attempts to balance the interests of all stakeholders of the organization.

A)Maximization of shareholder value
B)Dividend yield
C)Stakeholder capitalism
D)Corporate governance
E)Transparency

Question 14

Melanie lives in a small community in Virginia.The vast majority of people who live in the area shop and dine at locally-owned businesses and restaurants.With news that a large supermarket might be opening in her town,Melanie and others are worried about the locally-owned businesses and their future.Melanie and the other members of her community are examples of ________ stakeholders.

A)financial
B)business
C)internal
D)social
E)economic

Question 15

A corporation is a legal creation deemed to have rights and responsibilities like a person.Unlike human beings,however,a corporation ________.

A)cannot sue
B)cannot borrow
C)cannot buy
D)cannot sell
E)cannot posses a moral conscience

Question 16

According to 2009 survey results on how important the interests of specific stakeholder groups should be in the business decisions by corporate CEOs,the ________ interests should come first in a CEO's business decisions.

A)customers
B)employees
C)investors
D)communities
E)governments

Question 17

It is estimated that more than ________ percent of the world's publicly traded companies are U.S.or British.

A)10
B)20
C)30
D)50
E)70

Question 18

Joshua is a member of management at the firm where he works,Great Coffee Company.Lately he has been studying how shareholder and management interests diverge and how his firm can motivate its management to act like owners when managing the corporation.Joshua is utilizing the ________ field of thought.

A)organization
B)association
C)institution
D)agency
E)society

Question 19

In some countries,the management of the corporation strives to operate the firm in the interest of multiple stakeholders,not just the shareholders.It is generally referred to as:

A)Shareholder capitalism
B)Maximization of shareholder value
C)Stakeholder capitalism
D)Shareholder free enterprise
E)Stakeholder free enterprise

Question 20

Best Flowers is currently a private firm.Within the next 6 months,the company plans to issue shares of its stock to the market for the first time.Best Flowers is about to schedule a(n):

A)Dividend yield
B)Fiduciary responsibility
C)Initial public offering
D)Sustainability listing
E)Corporate governance

Question 21

________ is the open and public disclosure and reporting of the activities of an organization,including financial,civil,and environmental impacts and concerns.

A)Lucidity
B)Straight-forwardness
C)Transparency
D)Candidness
E)Sincerity

Question 22

Which of the following is NOT a major requirement of the Sarbanes-Oxley Act?

A)CEOs and CFOs of publicly traded firms must vouch for the veracity of the firm's published financial statements
B)Corporate boards must have audit and compensation committees drawn from independent (outside)directors
C)Owners of privately-owned firms must publish financial statements on a quarterly basis
D)Companies are prohibited from making loans to corporate officers and directors
E)Companies must test their internal financial controls against fraud

Question 23

It is estimated that the average senior executive in the United States today receives ________ times the pay of the company's lowest-paid worker.

A)50
B)100
C)200
D)300
E)400

Question 24

Lizzie's Subs uses only recycled cups and napkins.The company uses energy-efficient lighting and encourages employees to carpool to work.Lizzie's Subs is demonstrating:

A)Corporate good deed
B)Corporate social responsibility
C)Business best practices
D)Business good deed
E)Corporate collective responsibility

Question 25

________ regimes,like that of the United States,Canada,and the United Kingdom,are characterized by relatively efficient capital markets in which the ownership of publicly traded companies is widely dispersed.

A)Market based
B)Bank based
C)Government affiliated
D)Family based
E)Collectivism based

Question 26

According to recent country rankings compiled by Governance Metrics International (GMI),________ has the highest country governance ranking.

A)South Africa
B)Ireland
C)Canada
D)Australia
E)Germany

Question 27

Countries such as Hong Kong,Indonesia,Taiwan,and France utilize the ______ comparative corporate governance regime.

A)market based
B)bank based
C)government affiliated
D)family based
E)free enterprise based

Question 28

The ________ channel argues that because the corporation has all the rights and responsibilities of a citizen,it also has the responsibility to act in the best interests of society and society's future.

A)economic
B)moral
C)financial
D)honorable
E)principled

Question 29

________ and ________ represent the internal structure of corporate governance.

A)The board of directors; management
B)The board of directors; equity markets
C)Management; debt markets
D)Equity markets; debt markets
E)Auditors; legal advisors

Question 30

About ________ percent of consumers are willing to pay a premium for sustainable goods despite the economic downturn.

A)5
B)18
C)26
D)34
E)50

Question 31

The Code Napoleon is typically the basis of the legal systems in all of the following countries EXCEPT:

A)Belgium
B)Spain
C)France
D)Italy
E)Canada

Question 32

________ is either first or second in importance across countries in a survey of differing perceptions on corporate responsibility.

A)Executive pay
B)Political influence of companies
C)Ethical advertising
D)Privacy
E)The environment

Question 33

The current and future role and responsibilities of business are in many ways ultimately dependent on the degree of ________ that the people have in business.

A)faith
B)hope
C)optimism
D)trust
E)devotion

Question 34

The results of Edelman's trust barometer shows that trust in business in the United States ________ in January 2009 following the major financial crisis and bank failures in the fall of 2008.

A)rose to a very high level
B)fell to a very low level
C)rose to a moderate level
D)fell to a moderate level
E)remained the same

Question 35

In more than ________ percent of the companies in the U.S.Fortune 500,the CEO is also the chairman of the board.

A)20
B)50
C)60
D)70
E)80

Question 36

The legal body that is accountable for the governance of the corporation is its ________.

A)officers
B)management
C)board of directors
D)auditors
E)legal advisors

Question 37

Management at Yummy Bread Corporation believes that a responsible organization must ensure that its actions over time,whether or not required by law or markets,conduct its business in a way which does not reduce future choices.Yummy Bread Corporation is operating on the ________ channel.

A)economic
B)financial
C)moral honorable
D)monetary
E)principled

Question 38

Depending on the marketplace,an outside investor may conduct what is termed a ________,slowly accumulating shares over time,gradually gaining more and more relative equity and voting strength.

A)creeping takeover
B)creeping acquisition
C)slow takeover
D)sluggish takeover
E)slow acquisition

Question 39

Joe was hired by a corporation to provide an external professional opinion as to the fairness,legality,and accuracy of corporate financial statements.He tries to determine whether the firm's financial records follow generally accepted accounting principles with regard to accounting procedures.Joe is a(n):

A)Officer
B)Auditor
C)Manager
D)Regulator
E)Chairman

Question 40

________ is often described as a goal,while ________ is an obligation of the corporation.

A)Sustainability; responsibility
B)Responsibility; sustainability
C)Accountability,sustainability
D)Sustainability; profitability
E)Sustainability; profitability

Question 41

The New York Stock Exchange,London Stock Exchange,and Mexico City Bolsa are examples of debt markets.

Question 42

A right is when a person or group is potentially affected by the actions of an organization or firm.

Question 43

The strength of the shareholder wealth maximization model is its clear focus on the returns to a specific stakeholder,the stockholder.

Question 44

In terms of global business,most companies are publicly traded.

Question 45

Stakeholder capitalism implies that the stockholder is the primary stakeholder,and all other stakeholders are of lesser priority.

Question 46

Equity markets,debt markets,auditors,legal advisors,and regulators are elements of the internal structure of corporate governance.

Question 47

There are differing perceptions of different cultures to the trustworthiness of business.According to the text,the public holds greater faith in business to do what is right (for society)in ________ and ________ than in the United States and United Kingdom.

A)France; Germany
B)France; India
C)China; India
D)Germany; China
E)France; China

Question 48

If a corporation loses money,acquires debt,or incurs legal liabilities,the individual owners are at risk of losing more than what they have invested in the company.

Question 49

Totally Tea is owned by a few private individuals.Totally Tea is an example of a(n):

A)Sole proprietorship
B)Publicly traded company
C)Corporation
D)Corporation sole
E)Partnership

Question 50

A recent study of firms included in the S&P500 found that families are present in ________ percent of the S&P500.

A)15
B)33
C)50
D)82
E)90

Question 51

The New York Stock Exchange (NYSE)is an example of a(n):

A)Equity market
B)Debt market
C)Value market
D)Interest market
E)Liability

Question 52

Which of the following statements is true?

A)A corporation and its owners are not legally separated.
B)The owners of a corporation are legally liable for its debts or obligations to creditors beyond their ownership investment.
C)A corporation does not have the responsibility to follow all laws of the state.
D)A corporation cannot die in the normal human sense of the word.
E)A corporation has a moral conscience.

Question 53

Outside the U.S.and U.K.,ownership is usually characterized by controlling shareholders.Typical controlling shareholders are: government,institutions,family,and consortiums.

Question 54

Stakeholder capitalism has its own set of challenges.Finding common ground between multiple stakeholder interests often proves daunting,slowing decision making and often the ability to move quickly enough to remain competitive.

Question 55

The creation of the corporation freed the business entity to act as if a machine,devoid of the multitude of social,cultural,and moral concerns of the human individual.

Question 56

The management objective of maximizing profit is relatively simple because the measure of profit used by ownership/management is the same between the privately held firm and the publicly traded firm.

Question 57

William is employed at a firm in his hometown.He can be described as an external stakeholder of his firm.

Question 58

The single overriding objective of corporate governance in the non-Anglo-American markets is the optimization over time of the returns to shareholders.

Question 59

A business may be owned by a single individual,a few private individuals,a multitude of private owners who may exchange their ownership portions,or even partially or wholly by government.

Question 60

The privately held firm does not have a share price.It,therefore,simply focuses on generating current income,primarily dividend income,to generate the returns to its ownership.

Question 61

Based upon a recent survey,the public holds greater faith in business to do what is right (for society)in India and China than in the United States and the United Kingdom.

Question 62

A(n)________is the most common form of business organization which has all of the rights and responsibilities as that of an individual,while possessing limited liability to its owners.

Question 63

Define and describe maximization of shareholder value and stakeholder capitalism.

Question 64

________ refers to the operation of a firm or organization in a manner which attempts to balance the interests of all stakeholders of the organization.

Question 65

The Sarbanes-Oxley Act was passed in an effort to reform corporate governance.

Question 66

Profits that arise from the increase in the value of an asset,such as a publicly traded share,over what was paid for that same asset are called ________.

Question 67

The open and public disclosure and reporting of the activities of an organization,including financial,civil,and environmental impacts and concerns is referred to as ________.

Question 68

The field of thought known as ________ is the study of how shareholder and management's interests may diverge and how a firm can motivate managers to act like owners when managing the corporation.

Question 69

The Sarbanes-Oxley Act has been an effective tool in the reformation of corporate governance.As a result,it has become widely accepted and adopted by firms internationally.

Question 70

All persons or groups which may affect or be affected by the activities of an organization like a corporation are called ________.

Question 71

________ is the corporate pursuit of long-term profitability and viability while making positive contributions to both society and the environment.

Question 72

List and briefly describe the five structures of corporate governance.

Question 73

A(n)________ is the first sale or issuance of shares of ownership (stock)in an organization to the market.

Question 74

Executives from Enron,WorldCom,Parmalat,Global Crossing,Tyco,Adelphia,HealthSouth,and other firms represent failures in corporate governance.

Question 75

Bank-based regimes,like that of Korea and Germany,are characterized by government influence in bank lending,lack of transparency,and family control.

Question 76

________ represents the relationship among stakeholders that is used to determine and control the strategic direction and performance of the corporation.

Question 77

________ is a relationship between two parties whereby one party has the trust and legal and ethical duty to act in the best interests of the others.

Question 78

________ refers to the pursuit of the interests of corporate shareholders,primarily the profitability of the organization,over and above the interests of other stakeholders.

Question 79

________is the dividend paid per share to shareholders as a percent of the current share price.

Question 80

Describe the three fundamental dilemmas that were solved by the creation of the corporation.