Chapter 4

Which of the following is a key feature of effective boards of directors? A) Hold regular meetings without the CEO present B) Combine duties of the board chairman and the chief executive C) Ensure that no outside members are included on the board D) Fill all important positions on the board with managers with insider knowledge of the firm

A) Hold regular meetings without the CEO present

The board committee that administers and approves salaries and benefits of high-leval managers in the company is called: A) Human Resources B) Compensation C) Executive D) Nominating

B) Compensation

Which of the following is an example of fulfilling social objectives through stock ownership? A) Investing in Burmese companies that had been accused of human rights abuses B) Selling stock of companies with a below-market rate of return C) Divesting from Chinese companies that made products using forced labor D) Selling stock of companies that refused to do business with nations that produced conflict minerals

C) Divesting from Chinese companies that made products using forced labor

One of the main reasons that American executives are paid so much is: A) High executive compensation in other nations puts upward pressure on the salaries of U.S executives B) Qualified Individuals are scarce because mose current CEOs were born during the :baby bust" years of the Great Depression C) Pay is set by the compensation committees of the board, largely comprised of other CEOs who have an interest in pushing compensation up D) Most executives are paid based on their performance, and rising compensation reflects the excellent performance of their firms

C) Pay is set by the compensation committees of the board, largely comprised of other CEOs who have an interest in pushing compensation up

Which of the follwoing statements is not true about shareholders? A) Managers pay close attention to their needs and interests B) They are legal owners of business corporations C) They own equal shares of company assets D) They are investors in the company

C) They own equal shares of company assets

Investors may receive an economic benefit from the ownership of stock by receiving: A) Interest B) DIvidends C) Capital gains D) Both dividends and capital gains

D) Both dividends and capital gains

The directors of a company are a central factor in corporate governance because they: A) Have the highest stake in the performace of the company B) inherited the business from their predecessors C) Have a moral responsibility to serve botht he company's employees and customers D) Exercise formal legal authority over company policy

D) Exercise formal legal authority over company policy

An argument that opposes the idea of high executive pay is: A) High salaries provide an incentive for innovation and risk-taking B) Not many individuals are capable of running today's large, complex organizations c) Top athletes and entertainers make a lot of money, so top executives should, too D) High salaries divert resources that could be used to invest in the business

D) High salaries divert resources that could be used to invest in the business

An argument in support of high executive compensation is: A) there is currently a surplus of qualified executive candidates B) Inflated executive pay helps U.S. firms compete with foreign rivals C) High executive pay drives away talented middle managers who feel unfairly compensated D) High salaries provide an incentive for innovation and risk-taking

D) High salaries provide an incentive for innovation and risk-taking

A legal right of shareholders is: A) To receive interest, if declared B) To publish annual financial reports C) to vote on who will become chief executive officer D) To vote on members for the board of directors

D) To vote for the board of directors