Deck 6: Shareholders and Business

Question 1

Please complete the following definition (two missing words): ___________describes the rules, processes and structures through which corporations are directed and controlled in the interests of shareholders and other stakeholders'.

Answer 1

Corporate governance

Question 2

According to Shankman (1999), two features make agency relations special. One of these is the inherent conflict of interest between shareholders and managers. What is the other?

A) Short-term focus of the ownership goals.
B) Limited communication between owners and managers.
C) Large differences in defined rights and obligations.
D) Informational asymmetry between principal and agent.

Answer 2

D

Question 3

Correctly complete the comparison of corporate governance regimes globally, with respect to ownership identity.
-Anglo-American model

A) Individuals, pensions and mutual funds
B) Banks, corporations, state
C) Families, foreign investors, banks
D) State, families, corporations

Answer 3

A

Question 4

Correctly complete the comparison of corporate governance regimes globally, with respect to ownership identity.
-Rhenish capitalism

A) Individuals, pensions and mutual funds
B) Banks, corporations, state
C) Families, foreign investors, banks
D) State, families, corporations

Question 5

Correctly complete the comparison of corporate governance regimes globally, with respect to ownership identity.
-India

A) Individuals, pensions and mutual funds
B) Banks, corporations, state
C) Families, foreign investors, banks
D) State, families, corporations

Question 6

Correctly complete the comparison of corporate governance regimes globally, with respect to ownership identity.
-China

A) Individuals, pensions and mutual funds
B) Banks, corporations, state
C) Families, foreign investors, banks
D) State, families, corporations

Question 7

There are numerous ethical issues around executive pay. Which of these do Crane et al identify as a reason that executive pay touches an ethical chord with the public in many countries?

A) The pay differentials between those at the top and those at the bottom appear to be highly inequitable.
B) It is difficult to design appropriate performance-related pay.
C) Shifts in remuneration show the influence of globalization on executive pay.
D) The influence of the board is limited, often failing to reflect shareholder (or other stakeholder) interests.

Question 8

Ballwieser and Clemm (1999) identify five main problematic aspects of the financial intermediary's job. Which of the following is not one of them?

A) Conflict of interest.
B) Ratings are frequently unreliable.
C) The size of the financial intermediary firms threaten standards.
D) Long-term relationships with clients can threaten independence.

Question 9

The _______ in a company plays a key role in managing the _______ relationship, as it appoints the CEO, determines their salary and holds their ________ to account.

Question 10

An investment decision that combines the search for financial returns with the achievement of social, ethical, and environmental goals is known as __________

Question 11

Mackenzie (1998) identifies two types of SRI funds. Market-led funds choose the firms to invest in following the indication of the market. Deliberative funds, meanwhile, base their portfolio decisions on:

A) Their ability to engage in dialogue with companies.
B) Their own ethical criteria.
C) Data from research agencies.
D) A range of negative criteria.

Question 12

In the Anglo-American and Asian context, the board of directors typically has two-tiers, while in continental Europe a single tier board is the norm.

Question 13

Cooperatives are owned and run by their managers.

Question 14

Three ethical issues associated with executive pay in firm-shareholder relations are: the issue of designing appropriate performance related pay, the influence of globalization on executive pay and the limited influence of the board in ensuring shareholder interests are championed.

Question 15

According to Crane et al, which of the following is NOT an alternative form of ownership of corporations?
incorrect

A) State-owned firms
B) Co-operatives
C) Social purpose corporations
D) Limited Liability Corporations

Question 16

_______ such as Fitch Ratings, and ________ such as Deloitte are charged with providing a _______ and fair representation of the financial position of a large firm.

A) Credit rating agencies, Accounting firms, True
B) Banks, Accounting firms, True
C) Accounting firms, Banks, Partial
D) Credit rating agencies, Hedge funds, Partial

Question 17

Crane et al. discuss steps that can be taken to make supervisory, non-executive, board members more independent. Choose all that apply.

A) Non-executive board members should be appointed independently.
B) Non-executive board members should be drawn from outside the company.
C) Non-executive board members should be appointed for a limited time.
D) Board members should have executive experience in the industry.

Question 18

The breadth in skills, backgrounds, age, gender, ethnicity and sexual orientation possessed by the non-executive and executive directors of a company is often referred to as?