Deck 13: Corporate Valuation, Value-Based Management and Corporate Governance

Question 1

The CEO of D'Amico Motors has been granted some stock options that have provisions similar to most other executive stock options. If D'Amico's stock underperforms the market, these options will necessarily be worthless.

Answer 1

False

Question 2

A poison pill is also known as a corporate restructuring.

Answer 2

False

Question 3

ESOPs were originally designed to help improve worker productivity, but today they are also used to help prevent hostile takeovers.

Answer 3

True

Question 4

Two important issues in corporate governance are (1) the rules that cover the board's ability to fire the CEO and (2) the rules that cover the CEO's ability to remove members of the board.

Question 5

Which of the following is NOT normally regarded as being a barrier to hostile takeovers?

A) Targeted share repurchases.
B) Shareholder rights provisions.
C) Restricted voting rights.
D) Poison pills.
E) Abnormally high executive compensation.

Question 6

Which of the following is NOT normally regarded as being a good reason to establish an ESOP?

A) To enable the firm to borrow at a below-market interest rate.
B) To make it easier to grant stock options to employees.
C) To help prevent a hostile takeover.
D) To help retain valued employees.
E) To increase worker productivity.