Question 1

All public companies listed on the U.S.stock exchanges must file a number of financial statements with the

Accepted Answer

A)   GovernanceMetrics International (GMI) .
B)   Securities and Exchange Commission (SE
C)  .
C)   EDGAR database.
D)   The Wall Street Journal.E) B) and D)
F) A) and B)

Question 2

The informational advantage that agents possess over principals is often based on the fact that

Accepted Answer

A)   the information is extremely secure and protected from exposure to anyone outside the company.
B)   public stock companies are characterized by information symmetry.
C)   insiders are the first to learn about important developments before the information is released to the public.
D)   agents are legally permitted to freely trade the information in exchange for benefits, unlike principals.E) None of the above
F) A) and B)

Question 3

The root cause of the principal-agent problem between senior executives and lower-level employees can be explained by the

Accepted Answer

A)   informational advantage of the lower-level employees.
B)   higher number of lower-level employees than senior executives.
C)   knowledge of employees regarding day-to-day tasks.
D)   operational expertise of lower-level employees in concentrated areas of a particular field.E) None of the above
F) A) and D)

Question 4

In publicly traded companies,individuals who are delegated to perform duties on behalf of company owners are known as

Accepted Answer

A)   principals.
B)   shareholders.
C)   agents.
D)   clients.E) B) and C)
F) C) and D)

Question 5

The _____ is the centerpiece of corporate governance and is composed of inside and outside members.

Accepted Answer

A)   institutional investors group
B)   board of directors
C)   group of shareholders
D)   scientific advisory boardE) B) and D)
F) All of the above B

Question 6

What is the result of managers' pursuit of strategies that define value creation too narrowly in public stock companies?

Accepted Answer

A)   It gives the managers greater control of the performance of the organization in the long term.
B)   It reduces the trust of shareholders in the organization as a vehicle for value creation.
C)   It helps companies increase firm profits by creating shared value.
D)   It enables companies to create social value by addressing society's needs but prevents them from creating economic value for shareholders.E) A) and B)
F) A) and D)

Question 7

John Hammergren,the CEO of McKesson,received an annual compensation of $50 million.The compensation was closely tied to the performance of McKesson's stock,which appreciated considerably during his tenure.This situation best exemplifies

Accepted Answer

A)   the strong relationship between executive compensation and company performance.
B)   the public's perception of a company's stock value based on executive compensation figures.
C)   the avoidance of control mechanisms to guide performance.
D)   the inversely proportional relationship between CEO compensation and the pay of the average employee.E) A) and D)
F) None of the above

Question 8

Which of the following is the source of the principal-agent problem in publicly traded companies?

Accepted Answer

A)   the law of legal personality
B)   the separation of ownership and control
C)   limited liability for investors
D)   transferability of investor ownershipE) All of the above
F) C) and D)

Question 9

Which of the following is an advantage that a private company enjoys over a public company?

Accepted Answer

A)   Private companies are not required to disclose financial statements.
B)   Private companies experience more scrutiny from analysts.
C)   Private companies can focus more on short-term viability.
D)   Private companies often do not have a CEO.E) A) and D)
F) None of the above

Question 10

A company scientist at a biotechnology company decides to work on his own research project,hoping to eventually start his own firm,rather than on the project he was assigned.However,the company's stockholders are unaware of this situation.This is an example of a(n) _____ in the context of a principle-agent problem.

Accepted Answer

A)   adverse selection
B)   stakeholder strategy
C)   moral hazard
D)   shared value creationE) None of the above
F) C) and D)

Question 11

Which of the following accurately describes GE's ecomagination initiative?

Accepted Answer

A)   Ecomagination decreases the perceived value it creates for its customers while raising costs to produce and deliver "green" products and services.
B)   Ecomagination decreases the perceived value it creates for its customers while lowering costs to produce and deliver "green" products and services.
C)   Ecomagination increases the perceived value it creates for its customers while raising costs to produce and deliver "green" products and services.
D)   Ecomagination increases the perceived value it creates for its customers while lowering costs to produce and deliver "green" products and services.E) None of the above
F) A) and B)

Question 12

_____ suggests that the firm can be viewed as a nexus of legal contracts (loosely defined) between resource holders.

Accepted Answer

A)   Shareholder capitalism
B)   Stakeholder strategy
C)   Agency theory
D)   Corporate governanceE) A) and C)
F) None of the above C

Question 13

Kaito is the CEO of Henson and Fukui Consulting Inc.Kaito's efforts to persuade the board of directors to pursue a new business strategy fail.He borrows money from different sources and purchases all the outstanding shares of Henson and Fukui Consulting.What does this scenario best exemplify?

Accepted Answer

A)   buyback
B)   merger
C)   leveraged buyout
D)   initial public offeringE) A) and B)
F) A) and C)

Question 14

Jamiro Inc.is a public stock company.Which of the following statements about the company best illustrates the fact that its investors have limited liability?

Accepted Answer

A)   Employees of Jamiro are legally permitted to invest their capital in the company's stock.
B)   Employees of Jamiro are also the owners of the company.
C)   Shareholders of Jamiro are responsible to the company only for the capital they have invested.
D)   Shareholders of Jamiro are not permitted to trade their company stock at the New York Stock Exchange (NYS
E)  .E) A) and B)
F) A) and C)

Question 15

Mario founded Tapoz Communications Inc.in 1993.Ten years later,the company went public.Despite Mario's death in 2005,the company reported a 75 percent increase in revenue in 2006.Which of the following characteristics of a publicly traded company does this scenario best exemplify?

Accepted Answer

A)   transferability of investor ownership
B)   legal personality
C)   limited liability for investors
D)   separation of legal ownership and management controlE) All of the above
F) B) and C)

Question 16

Which of the following characteristics of a public stock company deals with principals and agents?

Accepted Answer

A)   limited liability of investors
B)   transferability of investor ownership
C)   separation of legal ownership and management control
D)   legal personalityE) A) and D)
F) None of the above

Question 17

Vijay is a firm believer in Milton Friedman's view of a firm's social obligations.With which of the following statements is Vijay most likely to agree?

Accepted Answer

A)   Businesses can use their resources to create profit as long as they do so within the rules of the game.
B)   Firms should not go beyond their economic responsibility to increase profits.
C)   Firms should define value creation more narrowly in terms of financial performance.
D)   Businesses should engage in open and free competition without deception or fraud, only as long as their competitors do so.E) C) and D)
F) B) and C) A

Question 18

Creating economic value for shareholders while also creating social value is known as creating

Accepted Answer

A)   a social market economy.
B)   shareholder capitalism.
C)   shared value.
D)   stakeholder strategy.E) A) and D)
F) None of the above

Question 19

Rajat Gupta's role in providing inside information to Galleon Group for the benefit of Galleon Group's stockholders and himself is an example of

Accepted Answer

A)   shareholder capitalism.
B)   adverse selection.
C)   shared value creation.
D)   moral hazard.E) A) and C)
F) A) and B)

Question 20

Which of the following best supports the fact that Goldman Sachs was unethical in the Abacus deal?

Accepted Answer

A)   It was given a "triple A" rating for Abacus.
B)   It made no effort to ascertain the stability of the real estate market.
C)   It knew that Paulson & Co. had bundled high-risk mortgages into the collateralized debt obligation.
D)   It lost $100 million in the Abacus fiasco.E) A) and B)
F) None of the above

Exam 12: Corporate Governance and Business Ethics

All public companies listed on the U.S.stock exchanges must file a number of financial statements with the

Correct Answer
verified

The informational advantage that agents possess over principals is often based on the fact that

Correct Answer
verified

The root cause of the principal-agent problem between senior executives and lower-level employees can be explained by the

Correct Answer
verified

In publicly traded companies,individuals who are delegated to perform duties on behalf of company owners are known as

Correct Answer
verified

The _____ is the centerpiece of corporate governance and is composed of inside and outside members.

Correct Answer
verified
B

What is the result of managers' pursuit of strategies that define value creation too narrowly in public stock companies?

Correct Answer
verified

John Hammergren,the CEO of McKesson,received an annual compensation of $50 million.The compensation was closely tied to the performance of McKesson's stock,which appreciated considerably during his tenure.This situation best exemplifies

Correct Answer
verified

Which of the following is the source of the principal-agent problem in publicly traded companies?

Correct Answer
verified

Which of the following is an advantage that a private company enjoys over a public company?

Correct Answer
verified

Correct Answer
verified

Which of the following accurately describes GE's ecomagination initiative?

Correct Answer
verified

_____ suggests that the firm can be viewed as a nexus of legal contracts (loosely defined) between resource holders.

Correct Answer
verified
C

Kaito is the CEO of Henson and Fukui Consulting Inc.Kaito's efforts to persuade the board of directors to pursue a new business strategy fail.He borrows money from different sources and purchases all the outstanding shares of Henson and Fukui Consulting.What does this scenario best exemplify?

Correct Answer
verified

Jamiro Inc.is a public stock company.Which of the following statements about the company best illustrates the fact that its investors have limited liability?

Correct Answer
verified

Mario founded Tapoz Communications Inc.in 1993.Ten years later,the company went public.Despite Mario's death in 2005,the company reported a 75 percent increase in revenue in 2006.Which of the following characteristics of a publicly traded company does this scenario best exemplify?

Correct Answer
verified

Which of the following characteristics of a public stock company deals with principals and agents?

Correct Answer
verified

Vijay is a firm believer in Milton Friedman's view of a firm's social obligations.With which of the following statements is Vijay most likely to agree?

Correct Answer
verified
A

Creating economic value for shareholders while also creating social value is known as creating

Correct Answer
verified

Rajat Gupta's role in providing inside information to Galleon Group for the benefit of Galleon Group's stockholders and himself is an example of

Correct Answer
verified

Which of the following best supports the fact that Goldman Sachs was unethical in the Abacus deal?

Correct Answer
verified

Exam 12: Corporate Governance and Business Ethics

All public companies listed on the U.S.stock exchanges must file a number of financial statements with the

Correct AnswerverifiedShow Answer

The informational advantage that agents possess over principals is often based on the fact that

Correct AnswerverifiedShow Answer

The root cause of the principal-agent problem between senior executives and lower-level employees can be explained by the

Correct AnswerverifiedShow Answer

In publicly traded companies,individuals who are delegated to perform duties on behalf of company owners are known as

Correct AnswerverifiedShow Answer

The _____ is the centerpiece of corporate governance and is composed of inside and outside members.

Correct AnswerverifiedB

What is the result of managers' pursuit of strategies that define value creation too narrowly in public stock companies?

Correct AnswerverifiedShow Answer

John Hammergren,the CEO of McKesson,received an annual compensation of $50 million.The compensation was closely tied to the performance of McKesson's stock,which appreciated considerably during his tenure.This situation best exemplifies

Correct AnswerverifiedShow Answer

Which of the following is the source of the principal-agent problem in publicly traded companies?

Correct AnswerverifiedShow Answer

Which of the following is an advantage that a private company enjoys over a public company?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Which of the following accurately describes GE's ecomagination initiative?

Correct AnswerverifiedShow Answer

_____ suggests that the firm can be viewed as a nexus of legal contracts (loosely defined) between resource holders.

Correct AnswerverifiedC

Kaito is the CEO of Henson and Fukui Consulting Inc.Kaito's efforts to persuade the board of directors to pursue a new business strategy fail.He borrows money from different sources and purchases all the outstanding shares of Henson and Fukui Consulting.What does this scenario best exemplify?

Correct AnswerverifiedShow Answer

Jamiro Inc.is a public stock company.Which of the following statements about the company best illustrates the fact that its investors have limited liability?

Correct AnswerverifiedShow Answer

Mario founded Tapoz Communications Inc.in 1993.Ten years later,the company went public.Despite Mario's death in 2005,the company reported a 75 percent increase in revenue in 2006.Which of the following characteristics of a publicly traded company does this scenario best exemplify?

Correct AnswerverifiedShow Answer

Which of the following characteristics of a public stock company deals with principals and agents?

Correct AnswerverifiedShow Answer

Vijay is a firm believer in Milton Friedman's view of a firm's social obligations.With which of the following statements is Vijay most likely to agree?

Correct AnswerverifiedA

Creating economic value for shareholders while also creating social value is known as creating

Correct AnswerverifiedShow Answer

Rajat Gupta's role in providing inside information to Galleon Group for the benefit of Galleon Group's stockholders and himself is an example of

Correct AnswerverifiedShow Answer

Which of the following best supports the fact that Goldman Sachs was unethical in the Abacus deal?

Correct AnswerverifiedShow Answer

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B

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C

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A

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