CH 10

d

A company is part of a keiretsu in Japan. Its leaders are worried about the company's financial viability and ask for help from other members of the keiretsu. Why would other participants of the keiretsu feel the need to aid the failing company? a. Members of the keiretsu are legally obligated to aid when members are in need. b. Keiretsu are companies that make a profit from lending money. c. Members of the keiretsu will not feel obligated to help, as they will have members of the company fend for themselves. d. Members of the keiretsu are seen as family, which commands the attention and allegiance.

a

Activists are very unhappy with the Board of Directors' recent pattern of decisions. They believe that they need to be given more decision-making capabilities, have their voices heard, and nominate another Board member. What should the activists propose? a. A proxy vote b. Hostile takeover c. A coup d'é tat d. A dumping of shares to drop stock price and force actions by the Board

c

After a recent round of share releases, many individuals bought up shares and reduced the number of large-block shareholders. The company's managers recently had the luxury of performing without much interference or monitoring by their shareholders. The managers are now engaging in risky strategic tactics that may not be in the best interest of shareholders. What type of ownership does this company have? a. Universal ownership b. Diverse ownership c. Diffuse ownership d. Hostile ownership

b

An institution that holds 15 percent of shares in a company in order to be a powerful governance mechanism is an example of a(n): a. internal shareholder. b. institutional owner. c. external shareholder. d. corporate sponsor.

c

Christopher is the CEO of a company that another company is trying to acquire. The success of Christopher's company has declined dramatically over recent years. Chris knows that the acquisition could help save the shareholders and other stakeholders from the turmoil that would ensue if the company went bankrupt. However, this is Christopher's only line of income for his family. He decides to defend his company from being taken over to help secure his position. Which defense strategy would you recommend be implemented that would benefit all stakeholders? a. Capital structure change b. Charter amendment c. Golden parachute d. Litigation lawsuits

d

Do German firms have the presence of agency problems as much as U.S. firms? a. Yes. German firms have the same exact issues and difficulties as American firms. b. Yes. German agencies have the same structures as American agencies. c. No. Many German firms are publically owned by the government and its citizens. d. No. Many German firms are managed and owned by the same individual.

b

Elected individuals whose primary responsibility is to act in the owners' best interest by formally monitoring and controlling the firm's top level managers is the definition for _______. a. Corporate Senate b. Board of Directors c. Corporate Governance d. Executive Suite

b

Greg is the CEO of a leading company in the consumer packaged goods industry. He is trying to grow his company for personal gain and wealth. However, Greg sees that his company has an opportunity to break into the chemical industry. He has decided to invest free cash flow into acquiring small chemical companies that have the potential of growth, if funded properly. Shareholders are not happy. Their case for wanting to cease these actions is that Greg is practicing ______. a. underdiversification b. overdiversification c. diversification d. segmentation

d

How does the market for corporate control help stakeholders? a. By causing managers and executives to focus on the stakeholders b. By having larger, more profitable companies take over businesses and cut costs solely to raise profits c. By having the company stay alive, but under government supervision d. By taking undervalued companies and helping them grow and become more profitable, thus benefitting all stakeholders

b

If a company were to only have insider directors and related outsider directors, which would leave out the independence of outsider directors, what could the consequences be? a. Increase of profits from not having to pay an outsider director's salary b. Stockholders' interests could be ignored due to executives desire for personal financial gain without regard for all shareholders c. A more streamlined decision-making process from insider directors who know the company and industry intimately. This, in turn, will prove to be an ideal situation for stockholders d. A larger focus on stockholders, as insider directors and executives only focus on stockholders' interests.

b

Kevin is on the Board of Directors of a local company and has become concerned with a situation that came to his attention. The Board is in talks to elect the current CEO as Chairman of the Board. Does Kevin have a reason for concern? a. Yes, if Kevin knows the CEO and doesn't like his or her personality. b. Yes, as the CEO will not be able to be forced out if his or her performance becomes unacceptable. c. No, because the Board will be sure to elect the best individual as Chairman, regardless of current title. d. No, because a single individual as CEO and Chairman of the Board has proven to be very successful in the past.

b

Laws and regulations require independent outsider directors to lead important committees, such as audit and compensation. Why are these rules in place? a. To ensure that personal relationships are honored during a compensation analysis b. To avoid the influence of insider directors who may sway the Board in their self-interests c. To speed up the committee process and increase efficiency d. To ensure the best service during committee meetings

d

Lisa is the CEO of her company and is on the Board of Directors as an insider director. She has recently become suspicious of certain events and discussions. The discussions have been about replacing management. These discussions have been sparked by letters from shareholders, which have become more frequent. What may Lisa be suspicious of? a. Managerial employment risk b. Corporate espionage c. Fraudulent behavior d. Hostile takeover

b

Melissa is the CEO of her company and has to make a business decision. She is faced with a scenario where she can please one group of stakeholders, or all of them minimally. What is Melissa's most likely action? a. To please the suppliers, as they are of the highest priority b. To please as many stakeholders as possible, because if stakeholders are not minimally satisfied, they will give support to another company c. To please the employees because a happy workforce will have a ripple effect on the rest of the value chain d. To determine which action will result in higher executive compensation and make that choice.

a

Susan is worried about her performance as CEO. She thinks that she may lose her position, receive a cut to her salary, or be seen by her peers as incompetent and ineffective. What is another term for what Susan is worried about? a. Managerial employment risk b. Unemployment risk c. Failure to perform d. Negative performance reviews

c

The Carter family has been the successful owner of a manufacturing company for over 50 years. The company has always performed better than expected and was projected to grow for years to come. To help with this growth, the Carters decided to hire a CEO who is not from the family, the first time in its history. After the hire, the performance of the company shifts for the worse, and there is a separation of ownership and managerial control. What factors should the Carter family change? a. The Carters should align the goals of the family and the CEO. b. The CEO should diversify the company, as it has reached the end of its growth projection. c. The Carters should appoint a family member as CEO, as research shows that family-owned firms perform better when a member of the family is the CEO. d. The CEO should resign, as he or she is not performing in the interest of the shareholders

c

What are the benefits of having strong corporate governance? a. Managers and employees fear for their jobs; fear improves productivity. b. One person has a large amount of power to make actions as quickly and risky as necessary. c. The ability to be strategically competitive and perform without risk of being ethically or legally exposed. d. There are no benefits to corporate governance as it is seen as an unneeded expense.

b

What are the concepts that affect attitudes toward corporate governance in Japan? a. Friendship, honor, loyalty b. Obligation, family, consensus c. Service, responsibility, modesty d. Integrity, responsibly, respect

d

What is an agency relationship? a. A group of people who are in disagreement b. Where one party is responsible for the actions of another in a workplace setting c. Where two parties decide to invest and act as one for a united goal d. When one party delegates decision-making responsibility to a second party for compensation

a

What is another instance where decision-making bodies are separated like the Board structure in German firms? a. The United States' three branches of government b. The Board of Directors in American companies c. The voting system where citizens determine laws and regulations d. German Board structures are completely unique

d

What is believed to be a likely consequence if shareholders, lawmakers, and regulators are not critical and attentive to the actions of a company's top managers? a. A new type of economy that is related to a socialist economy b. An invisible hand economic industry where actions will be handled by market preferences c. A free corporate market that is laissez-faire d. A financial crisis due to manager ineffectiveness and lack of focus on all stakeholders, causing the company to fail, resulting in a rise in unemployment

d

What is the agency relationship the text is most concerned with? a. The U.S. government acting in the interest of its citizens b. The relationship of employees and their duty to the customer's interests c. The suppliers of a company and the interests of the organization that they are supplying d. The relationship between management and the individuals who have a stake in the company

b

What is the definition of ownership concentration? a. The ratio of owners and their specialty fields of training to the industry of the company b. The number of large-block shareholders and the total percentage of the firm's shares they own c. The total number of shareholders of a company d. The percentage of shareholders who are internal and/or external

a

What is the market for corporate control? a. An external governance mechanism that is active when a firm's internal governance mechanisms fail b. A term that describes the power that purchasers have when buying shares of stocks c. A set of mechanisms used to manage the relationships among stakeholders, and to determine and control the strategic direction and performance of organizations d. The pool of prospects who are qualified to become CEO

c

Which is an alternate definition for "poison pill"? a. A contract between the target firm and the potential acquirer specifying that the acquirer will not purchase additional shares of the target firm for a specified period of time in exchange for a fee paid by the target firm b. The repurchase of the target firm's shares of stock that were obtained by the acquiring firm at a premium in exchange for an agreement that the acquirer will no longer target the company for takeover c. When a company decides to increase the number of overall shares, which will both dilute the hostile company's shares and also increase the cost of the company overall, making the company less appealing to take over d. A lump-sum payment of cash that is given to one or more top-level managers when the firm is acquired in a takeover bid

c

Who are seen as the most significant stakeholders in the United States? a. Employees b. Communities c. Shareholders d. Suppliers

b

Why are corporate governance mechanisms important to foreign investors? a. To prove that the organization being invested in is legitimate b. To protect their investments; governance mechanisms are designed to protect shareholders c. To prevent exposure for investors who might otherwise place their money in a legal gray area d. To ensure that the country's government is in control of the business, which protects shareholders' investments

d

Why could many large-block owners be beneficial to a company? a. The large-block owners will not be able to collaborate and organize as well as many small owners. b. The company will know exactly who their owners are and can persuade the owners interests to align with their personal interests. c. The company will be able to act much more quickly due to less time needed to vote. d. Large-block owners will be able to easily collaborate on current issues and drive change in an organization, more so than many small share owners

a

Why is bribery a major issue confronted by multinational companies operating in international markets? a. The prevalence of bribery in foreign markets leaves industries at a competitive disadvantage. b. Bribery is the only issue of international markets. c. Bribery is the only issue international companies will be able to confront with success. d. The issue of bribery has the potential to benefit multinational companies as they will not be performing illegal acts in the U.S.

d

Without strong corporate governance, what is likely to become of a company? a. The company will thrive due to less regulation. b. The company will fail due to the lack of risk taking. c. The company will thrive as long as the CEO has a strong vision for the company and is willing to focus only on profits. d. The company will fail because of legal issues, lack of strategic focus and risky behavior.