Chapter 14

33. Social responsibility shareholder resolutions generally garner approximately % of the vote? A) 15 B) 25 C) 33 D) 50

15

21. The directors of a company are a central factor in corporate governance because: A) They establish corporate objectives and develop broad policies. B) They have the highest stake in the performance of the company. C) They have a moral responsibility to fulfill the needs of both the company's employees and customers. D) They inherited the business from their predecessors.

A

22. Which of the following is true about corporate boards? A) Corporate boards average 10 members. B) About half of the directors are "outside" directors. C) Approximately one-third of all companies have at least one woman on their board. D) About half of all companies have at least one ethnic minority board member.

A

24. In the United States, which committee is almost always comprised solely of outsiders A) Audit B) Procurement C) Standards and Practices D) Safety Compliance

A

26. How are directors of boards selected? A) Shareholders elect the directors from a list of candidates. B) The company's CEO appoints the directors. C) The nominating committee elects the directors. D) Shareholders with the greatest share in the company become directors.

A

29. Which CEO of AIG earned $1 in 2008. A) Edward Liddy B) Douglas Sandhaus C) Judith Smylie D) Paul Randazzo

A

31. According to Social investment forum, socially responsible investment grew more than % between 2005 and 2007. A) 18 B) 7 C) 27 D) 11

A

38. The mission of the Securities and Exchange Commission (SEC) is to: A) Protect shareholders' rights by making sure that stock markets are run fairly. B) Protect companies from hostile takeovers. C) Ensuring that institutional investors do not take control of company management. D) Ensuring that the federal treasury receives its share of the revenues from stock trading.

A

41. Which of the following companies is NOT generally believed to have filed fraudulent financial statements in the early 2000s? A) Comcast B) Adelphi C) Enrom D) WorldCom

A

16. The largest bailout in U.S. history was which company. A) Enron. B) AIG. C) Wells Fargo. D) General Motors.

B

17. Which of the following is not true about institutional investors? A) Institutions invest the funds of individuals by purchasing shares of stock in corporations. B) The proportion of institutional ownership of stock in the U.S. has declined slowly since the 1960s. C) The government is an institutional investor. D) Institutions accounted for 75 percent of the value of all equities owned in the U.S. in 2007.

B

20. An individual who cannot attend an annual stockholder's meeting can vote by: A) Marker. B) Proxy. C) Check. D) Que.

B

27. The concept of recovering pay from executives with failing companies is also known as: A) "off the top" B) "clawback" C) "return to sender. D) None of the above.

B

28. Who earned $686 million over 13 years at Exxon Mobil. A) Charles Smithson B) Lee Raymond C) Dennis Kozlowski D) Frederick Thompson

B

30. What is the primary organization which represents institutional and investment funds investors: A) TIA. B) CII. C) LOP. D) TBI.

B

25. Colin Carter was a co-author of: A) Way too much!!! Executive compensation in the Western World B) How to run an ethical business C) Back to the Drawing Board D) What hath we wrought? Conflict of interest in 2000 and beyond

C

34. The SEC was founded in: A) 1896 B) 1919 C) 1934 D) 1951

C

35. In 2009, what company voted to give itself an advisory role in executively salary setting: A) Merck B) New Amsterdam C) Pfizer D) Smithson Enterprises

C

37. Which of the following is not an example of fulfilling social objectives through stock ownership? A) Selling stock of companies that did business in South Africa when it had a policy of racial discrimination. B) Divesting from Chinese companies that made products by forced labor. C) Selling stock of companies with a below-market rate of return. D) Not investing in Burmese companies that had been accused of human rights abuses.

C

39. In response to concerns about the lack of transparency in financial accounting, Congress passed a new law called: A) COT (Corporate Openness Now). B) Principles of Corporate Governance. C) Sarbanes-Oxley Act. D) Securities and Exchange Act.

C

40. Which of the following is not an instance of "insider trading"? A) An auditor using nonpublic information about the company to invest in its stock. B) A marketing executive briefing stock analysts on the company's sales performance. C) The CEO's cousin buying stock after the CEO mentioned a pending offer to buy the company. D) A stock broker passing an "inside tip" to a client, but not trading for his or her own account.

C

18. Investors may receive an economic benefit from the ownership of stock by: A) Receiving federal reserve credits. B) Receiving dividends. C) Receiving interest. D) Both b and c, but not a.

D

19. Which if the following is not a legal right of stockholders: A) To vote on members for the board of directors. B) To vote on major mergers and acquisitions. C) To vote on changes in the corporate charter. D) To vote on who will become chief executive officer (CEO).

D

23. In 2007, the median compensation of board members at the largest U.S. companies was approximately: A) $119,000. B) $185,000. C) $193,000. D) $205,000.

D

36. The social objectives of investing in stocks include eliminating from investment portfolios companies that: A) Pollute the environment. B) Discriminate against employees. C) Make dangerous products like tobacco or weapons. D) All of the above.

D

42. Bernie Madoff's victims lost approximately A) fifty billion dollars B) fifty five billion dollars C) sixty billion dollars D) sixty five billion dollars

D

1. The three types of stockholders who own shares of stock in United States corporations are individuals, institutions, and secular. A) True B) False

False

11. Boards of Directors of large companies are careful to make sure that members of the Compensation committee have no relationship to the current CEO. A) True B) False

False

12. In 2007, CEOs in the United States made 406 times what the average employee made. A) True B) False

False

13. The ratio of average employee pay to CEO pay peaked at 480 times in 1990. A) True B) False

False

3. Investors always choose to invest in the stock of companies that pay high dividends. A) True B) False

False

5. Typically, Boards of Directors meet in full 8 times a year. A) True B) False

False

32. Stock options can best be described as: A) The right to buy a company's stock at the price at incorporation. B) The right to buy a company's stock at a strike price for a certain period. C) The obligation to buy a company's stock at the price at incorporation. D) The obligation to buy a company's stock at a strike price for a certain period.

The right to buy a company's stock at a strike price for a certain period.

10. The influence of the institutional sector of the stock market has grown over the past two decades. A) True B) False

True

14. In 2009, shareholders at Pfizer voted themselves an advisory vote on executive compensation. A) True B) False

True

15. The second Bush administration cut staffing at the SEC. A) True B) False

True

2. The government is considered an institutional investor. A) True B) False

True

4. African American households are more likely to own stock than Hispanic households A) True B) False

True

6. The New York Stock Exchange requires listed companies to have a majority of outside directors on its Board of Directors. A) True B) False

True

7. Executive compensation is set by the Board of Directors. A) True B) False

True

8. Executive compensation is substantially higher in the United States than in Germany. A) True B) False

True

9. One study established that the higher the proportion of executive pay in stock options, the more likely a company must restate profits. A) True B) False

True