Question 1

Frank is a board member at Lofloy Greens Inc., a publicly traded company.In addition to his duties on the board, Frank is also a full-time employee as a senior manager at Spinson Locomotives Inc.Which of the following is most likely to be true of Frank?

Accepted Answer

A)   Frank is a part-time employee at Lofloy Greens.
B)   Frank cannot serve as a director on Spinson Locomotives' board.
C)   Frank is an outside director on Lofloy's board of directors.
D)   Frank is a stockholder of Lofloy Greens.E) B) and C)
F) A) and B)

Question 2

Which of the following real-world events would act as the most likely deterrent against adopting a purely stakeholder strategy approach to business?

Accepted Answer

A)   The nonsustainable debt levels incurred by sovereign governments to fund social programs
B)   The financial crisis in Europe brought about by money lenders seeking to make quick money
C)   The collapse of the economy in the U.S. brought about by the housing crisis
D)   The rise of GDP in countries that do not believe in Milton Friedman's philosophyE) A) and B)
F) B) and C)

Question 3

_____ are the board members who are part of a company's senior management team appointed by shareholders to provide the board with necessary information pertaining to the company's internal workings and performance.

Accepted Answer

A)   Investors
B)   Outside directors
C)   Inside directors
D)   AuditorsE) A) and C)
F) C) and D)

Question 4

Hashim is a board member at Kluster Motors Inc.He is also a senior executive of the firm.On the other hand, the board is chaired by Compton Smith, the CEO of Jensen Electronics.According to this scenario, Hashim _____.

Accepted Answer

A)   cannot serve on the board of any other organization
B)   is more likely than Compton to take care of stockholder interests
C)   is an inside director of Kluster Motors
D)   can use information from board meetings to trade stocks of Kluster MotorsE) A) and C)
F) A) and B)

Question 5

A compensatory governance mechanism that allows executives to buy a company's stock at a predetermined price sometime in the future is called a(n) _____.

Accepted Answer

A)   stock option
B)   commission
C)   stock exchange
D)   bonusE) C) and D)
F) A) and C)

Question 6

How can a manager decide whether a decision is ethical or not?

Accepted Answer

Since business decisions are not made in...

Question 7

_____ is a mechanism to direct and control an enterprise in order to ensure that it pursues its strategic goals successfully and legally.

Accepted Answer

A)   Corporate social responsibility
B)   Stakeholder impact analysis
C)   Corporate governance
D)   Shareholder capitalismE) None of the above
F) C) and D)

Question 8

A bank, YPC, offers a customer a personal loan.In which of the following circumstances will this decision most likely be considered unethical?

Accepted Answer

A)   The bank knows that the customer will be unable to pay the loan if the interest rate rises.
B)   The bank is not aware of the investments made by the customer.
C)   The bank has the financial statements of the customer, but it is not aware of each source of income.
D)   The bank is depending on the customer to pay back the loan before term completion.E) None of the above
F) C) and D)

Question 9

Which of the following is a major issue at the forefront of CEO compensation in recent years?

Accepted Answer

A)   A comparison of the performance of the organization before and after the CEO's tenure
B)   The performance of the CEO as an employee versus the performance as a board member
C)   The absolute size of the CEO pay package compared with the pay of the average employee
D)   A comparison of the compensation of senior management hired during and before the CEO's tenureE) B) and C)
F) A) and D)

Question 10

Which of the following is true of the board of directors in a public stock company?

Accepted Answer

A)   Votes at shareholder meetings determine whose representatives are appointed to the board of directors.
B)   Because shareholders generally have uniform interests, the composition of the board is generally a unanimous decision.
C)   The board of directors acts as a facilitator to convey interests of the stockholders to the management without any real authority.
D)   The functions of the board of directors are limited to ensuring the hiring and firing of CEOs.E) A) and B)
F) A) and C)

Question 11

What is the benefit of granting stock options as part of a compensation package in a public stock company?

Accepted Answer

To align incentives between shareholders...

Question 12

What does "limited liability for investors" imply in a public stock company?

Accepted Answer

A)   Shareholders are liable for their invested capital and personal wealth and not for any other investments made.
B)   Shareholders who provide the risk capital are liable only to the capital specifically invested.
C)   Shareholders are liable for all the decisions made by the board of directors of the company.
D)   Shareholders have financial but not legal responsibilities toward the public stock company.E) None of the above
F) A) and D)

Question 13

Which of the following perspectives best supports the Shared Value creation framework?

Accepted Answer

A)   Markets are more often than not defined by societal needs rather than economic needs.
B)   Failing to create value for society almost always reflects on the bottom line.
C)   A firm's competitive advantage depends on pitting economic and societal needs in a trade-off.
D)   Externalities such as pollution, wasted energy, and costly accidents actually create internal costs.E) All of the above
F) B) and C)

Question 14

Which of the following proves that GE's board of directors is significantly independent?

Accepted Answer

A)   26 percent of the board members at GE are female.
B)   The CEO of GE is also the chairman of the board.
C)   16 of the 17 board directors are from outside the organization.
D)   GE's board has five committees, each with its own chair.E) B) and C)
F) A) and D)

Question 15

What is the principal-agent problem?

Accepted Answer

Corporate governance attempts to address...

Question 16

Which of the following best explains why a board of directors may grant stock options as part of a compensation package?

Accepted Answer

A)   To reduce the transferability of stocks between stockholders
B)   To bring about a separation of CEO/chair duality
C)   To align incentives between shareholders and management
D)   To change the liability of shareholders from limited to unlimitedE) A) and B)
F) None of the above

Question 17

The board of directors of a public stock company consists of:

Accepted Answer

A)   managers appointed by the owners of a company to run its day-to-day operations.
B)   individuals who formally represent the firm's shareholders and oversee the work of executives.
C)   the legal owners of a publicly traded company that was purchased in a leveraged buyout.
D)   employees of a company who belong to the senior management and directly report to the CEO of the firm.E) A) and B)
F) None of the above

Question 18

Discuss the implications for the strategist in the context of corporate governance and sustained competitive advantage.

Accepted Answer

An important implication for the strateg...

Question 19

Describe the four characteristics of public stock companies that make it an attractive corporate form.

Accepted Answer

The public stock company enjoys four cha...

Question 20

_____ are board members who are not employees of the firm but frequently are senior executives from other firms or full-time professionals.

Accepted Answer

A)   Inside directors
B)   Outside directors
C)   CEOs
D)   AuditorsE) A) and D)
F) C) and D)

Exam 12: Corporate Governance and Business Ethics

A compensatory governance mechanism that allows executives to buy a company's stock at a predetermined price sometime in the future is called a(n) _____.

Correct AnswerverifiedShow Answer

_____ is a mechanism to direct and control an enterprise in order to ensure that it pursues its strategic goals successfully and legally.

Correct AnswerverifiedShow Answer

How can a manager decide whether a decision is ethical or not?

Correct AnswerverifiedSince business decisions are not made in...View AnswerShow Answer

Which of the following perspectives best supports the Shared Value creation framework?

Correct AnswerverifiedShow Answer

Which of the following best explains why a board of directors may grant stock options as part of a compensation package?

Correct AnswerverifiedShow Answer

Which of the following real-world events would act as the most likely deterrent against adopting a purely stakeholder strategy approach to business?

Correct AnswerverifiedShow Answer

_____ are board members who are not employees of the firm but frequently are senior executives from other firms or full-time professionals.

Correct AnswerverifiedShow Answer

Describe the four characteristics of public stock companies that make it an attractive corporate form.

Correct AnswerverifiedThe public stock company enjoys four cha...View AnswerShow Answer

Which of the following is true of the board of directors in a public stock company?

Correct AnswerverifiedShow Answer

A bank, YPC, offers a customer a personal loan.In which of the following circumstances will this decision most likely be considered unethical?

Correct AnswerverifiedShow Answer

_____ are the board members who are part of a company's senior management team appointed by shareholders to provide the board with necessary information pertaining to the company's internal workings and performance.

Correct AnswerverifiedShow Answer

Discuss the implications for the strategist in the context of corporate governance and sustained competitive advantage.

Correct AnswerverifiedAn important implication for the strateg...View AnswerShow Answer

Hashim is a board member at Kluster Motors Inc.He is also a senior executive of the firm.On the other hand, the board is chaired by Compton Smith, the CEO of Jensen Electronics.According to this scenario, Hashim _____.

Correct AnswerverifiedShow Answer

What is the principal-agent problem?

Correct AnswerverifiedCorporate governance attempts to address...View AnswerShow Answer

The board of directors of a public stock company consists of:

Correct AnswerverifiedShow Answer

What does "limited liability for investors" imply in a public stock company?

Correct AnswerverifiedShow Answer

What is the benefit of granting stock options as part of a compensation package in a public stock company?

Correct AnswerverifiedTo align incentives between shareholders...View AnswerShow Answer

Which of the following is a major issue at the forefront of CEO compensation in recent years?

Correct AnswerverifiedShow Answer

Which of the following proves that GE's board of directors is significantly independent?

Correct AnswerverifiedShow Answer

Frank is a board member at Lofloy Greens Inc., a publicly traded company.In addition to his duties on the board, Frank is also a full-time employee as a senior manager at Spinson Locomotives Inc.Which of the following is most likely to be true of Frank?

Correct AnswerverifiedShow Answer

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Since business decisions are not made in...
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The public stock company enjoys four cha...
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Correct Answer
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An important implication for the strateg...
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Corporate governance attempts to address...
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To align incentives between shareholders...
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