Chapter 13 & 14
The activism of institutional investors in other countries has been spearheaded by: A. U.S.-based pension and mutual funds that in recent years acquired large stakes in foreign countries. B. Foreign institutions that were granted new rights by their governments. C. Managers who became less active in proxy battles on a global level.
A. U.S.-based pension and mutual funds that in recent years acquired large stakes in foreign countries.
Many companies have argued that the evolution of strict liability has: A. Unfairly burdened them with excess costs. B. Decreased liability insurance rates. C. Increased corporate revenues and dividends.
A. Unfairly burdened them with excess costs.
A prime social responsibility of business is to safeguard consumers: A. While continuing to supply them with goods and services they want. B. While maintaining high profit margins. C. By supplying consumers with products at the lowest possible cost.
A. While continuing to supply them with goods and services they want.
In 2013, median compensation for directors at the largest U.S. corporations was around: A. $150,000. B. $240,000. C. $550,000. D. $1,200,000.
B. $240,000.
Which of the following statements is not true about shareholders? A. They are the legal owners of business corporations. B. They own equal shares of company assets. C. They are investors in the company. D. Managers pay close attention to their needs and interests.
B. They own equal shares of company assets.
Institutional investors are sometimes referred to as: A. Main Street investors. B. Wall Street investors. C. Inside investors. D. Outside investors.
B. Wall Street investors.
In 2015, slightly more than what percent of U.S. boards had separated the positions of CEO and board chairman? A. 12 percent. B. 31 percent. C. 50 percent. D. 72 percent.
C. 50 percent.
One alternative to product liability lawsuits is called: A. Limited resolution. B. Punitive damages reform. C. Alternative dispute resolution. D. Consumerism.
C. Alternative dispute resolution.
The "agency problem" arises when: A. Owners manage the company on their own behalf. B. There is no separation of ownership and control in a company. C. Managers act in their own interest, rather than in the interest of shareholders. D. Shareholders act in their own interest, rather than in the interest of the board.
C. Managers act in their own interest, rather than in the interest of shareholders.
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 using forced labor. C. Selling stock of companies with a below-market rate of return.
C. Selling stock of companies with a below-market rate of return.
The main responsibility of the National Highway Traffic Safety Administration is to: A. Set a uniform national speed limit. B. Set airline safety standards. C. Set motor vehicle safety standards.
C. Set motor vehicle safety standards.
In some cases, businesses have banded together to agree on how they will treat their customers. This is called: A. Code of regulation. B. Consumer affairs doctrine. C. Voluntary industry codes of conduct. D. Industry action standards.
C. Voluntary industry codes of conduct.
The audit committee is required by U.S. law to be: A. Composed entirely of outside directors. B. Financially literate. C. Headed by the company's CEO. D. A and B, but not C.
D. A and B, but not C.
Which of the following is not a function of board committees? A. The executive committee works closely with top managers on business matters. B. The audit committee reviews the company's financial reports. C. The compensation committee administers and approves salaries and benefits. D. The finance committee works closely with the human resources department to fund employee salaries.
D. The finance committee works closely with the human resources department to fund employee salaries.
Which of the following is not a legal right of shareholders? 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 and proposals. D. To vote on who will become chief executive officer (CEO).
D. To vote on who will become chief executive officer (CEO).
The Securities and Exchange Commission outlaws: A. Any manipulative or deceptive device used to trade stocks. B. Compensating company executives with stock options. C. Trading in stocks by institutions.
A. Any manipulative or deceptive device used to trade stocks.
Which of the following is true about corporate boards? A. Corporate boards average 12 members. B. About half of the directors are "outside" directors. C. Only one-third of all companies have at least one woman on their board. D. About 13 percent of board members are Latino.
A. Corporate boards average 12 members.
The directors of a company are a central factor in corporate governance because they: A. Exercise formal legal authority over company policy. B. Have the highest stake in the performance of the company.
A. Exercise formal legal authority over company policy.
Before deregulation, government agencies frequently: A. Held prices artificially high, shielding businesses from competition. B. Held prices artificially low, shielding consumers from selection. C. Encouraged overseas trade, shielding businesses from competition.
A. Held prices artificially high, shielding businesses from competition.
Which of the following is a key feature of effective boards of directors? A. Hold regular meetings without the CEO present. B. Fill all important positions on the board with managers with insider knowledge of the firm. C. Combine the duties of the board chairman and the chief executive. D. Ensure that no outside members are included on the board.
A. Hold regular meetings without the CEO present.
When businesses adopt voluntary policies for protecting the privacy of individuals' information disclosed during electronic transactions, this is an example of: A. Industry self-regulation. B. Privacy legislation. C. Consumer self-help. D. Business privacy regulation.
A. Industry self-regulation.
Which of these is not a current consumer law that protects individual privacy? A. Internet "do not track" rules. B. The FTC's "do not call" list to avoid unwanted telemarketing calls. C. Unwanted calls to a person's mobile phone.
A. Internet "do not track" rules.
A reason for institutions becoming more assertive in promoting the interests of their member investors is: A. It is difficult for institutions to sell their holdings. B. Institutional investors are rarely able to influence management policy. C. Institutions have greater flexibility in selling stocks.
A. It is difficult for institutions to sell their holdings.
One of the main reasons that American executives are paid so much is: A. Pay is set by the compensation committees of the board, largely comprised of other CEOs who have an interest in pushing compensation up. B. Qualified individuals are scarce, because most current CEOs were born during the "baby bust" years of the Great Depression.
A. Pay is set by the compensation committees of the board, largely comprised of other CEOs who have an interest in pushing compensation up.
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. Ensure that institutional investors do not take control of company management.
A. Protect shareholders' rights by making sure that stock markets are run fairly.
The "right to be heard" assures that consumers' interests will: A. Receive full and sympathetic consideration. B. Be protected against fraudulent or misleading information. C. Be assured satisfactory quality and service at a fair price. D. Be given all the facts to make an informed choice.
A. Receive full and sympathetic consideration.
How are directors (members of corporate 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.
A. Shareholders elect the directors from a list of candidates.
Under what legal doctrine does a firm bear legal responsibility for injuries caused by something it made or sold, whether or not it was negligent or breached a warranty? A. Strict liability. B. Product liability. C. Consumer liability.
A. Strict liability.
Consumers have become more dependent on businesses for product quality because: A. The complexity of products makes choices complicated for consumers. B. Instructions for use or care of product are provided in clear and simple language. C. Their technical competence allows them to inspect the products thoroughly.
A. The complexity of products makes choices complicated for consumers.
Which of the following is (are) core rights of consumers? A. The right to safety. B. The right to be represented. C. The right to purchase.
A. The right to safety.
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.
B. A marketing executive briefing stock analysts on the company's sales performance.
Which part of the Department of Justice protects the public from being charged excess fees based on one's race? A. Consumer Product Safety Commission. B. Civil Rights Division. C. Consumer Financial Protection Bureau.
B. Civil Rights Division.
Which organization brings together 250 nonprofit groups to espouse the consumer viewpoint? A. Consumers Union. B. Consumer Federation of America. C. National Consumer League.
B. Consumer Federation of America.
Businesses can take a number of measures to respond voluntarily to consumer demands. Which of the following is an example of such a measure? A. Product liability law reform. B. Customer call centers. C. Consumer advocacy groups. D. Alternative dispute resolution policies.
B. Customer call centers.
Groups that collect and combine data from various sources into individual profiles that are sold to retailers and advertisers are called: A. Flash cookies. B. Data aggregators. C. Internet marketers.
B. Data aggregators.
This law tightened regulation on issuers of complex securities, especially those related to subprime mortgages: A. Sarbanes-Oxley Act. B. Dodd-Frank Act. C. Affordable Care Act. D. Securities and Exchange Act.
B. Dodd-Frank Act.
Corporate governance involves the exercise of control over a company's: A. Finance and accounting departments. B. Entire corporate direction. C. Manufacturing facilities. D. Marketing and human resources departments.
B. Entire corporate direction.
Which of the following is not a goal of consumer protection laws? A. Encourage competitive pricing. B. Facilitate consumers' getting extended credit when making purchases. C. Provide consumers with better information when making purchases.
B. Facilitate consumers' getting extended credit when making purchases.
Consumer groups have generally opposed the idea of product liability reform using which of the following arguments? A. Punitive damages should be limited. B. Strict liability should be retained. C. The burden of proof should be shifted to consumers.
B. Strict liability should be retained.
Which of the following is not true about institutional investors? A. Institutions invest their funds 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. Pension funds and university endowments are examples of institutional investors. D. Institutions accounted for 63 percent of the value of all equities owned in the U.S. in
B. The proportion of institutional ownership of stock in the U.S. has declined slowly since the 1960s.
In 2008 and early 2009, share values declined sharply as the global economy fell into a severe recession. This type of stock market is referred to as a: A. Bull market. B. Volatile market. C. Bear market. D. None of the above.
C. Bear market.
Advertising that is targeted to particular customers, based on their observed online behavior, is called: A. Targeted advertising. B. Tracking advertising. C. Behavioral advertising. D. Online advertising.
C. Behavioral advertising.
The law requiring that toys and infant products be tested before sale is called the: A. Child Safety Act. B. Strong Product Safety Bill. C. Consumer Product Safety Improvement Act. D. Uniform Safety Testing Bill.
C. Consumer Product Safety Improvement Act.
An identifying marker placed on a user's computer hard drive during visits in order to identify the user during each subsequent visit and to build profiles of their behavior over time is called A. Web beacon. B. Deep packet. C. Cookie. D. Firewall.
C. Cookie.
In the United States, which of the following agencies enforces the laws prohibiting deceptive advertising? A. Congress. B. Consumer Product Safety Commission. C. Federal Trade Commission.
C. Federal Trade Commission.
Warning consumers about the possible side effects of pharmaceutical drugs is an example of consumer protection against: A. Predatory pricing. B. Incomplete information disclosure. C. Hazardous products. D. Violations of individual privacy.
C. Hazardous products.
Which of the following arguments supports the concept of high executive compensation? A. Inflated executive pay helps U.S. firms compete with foreign rivals. B. High executive pay drives away talented middle managers who feel unfairly compensated. C. High salaries provide an incentive for innovation and risk-taking.
C. High salaries provide an incentive for innovation and risk-taking.
In 2014, of the following nations, the fastest growing stock market was in: A. United States. B. Japan. C. India. D. Indonesia.
C. India.
Which of the following statements is not true about the organization Consumer Reports? A. It is involved in activities promoting the interests of consumers. B. It conducts extensive tests on selected consumer products and services. C. It is supported by the federal government.
C. It is supported by the federal government.
Reports filed with the SEC provide information on a company's: A. Sales and earnings. B. Depreciation by line of business. C. Details of foreign operations. D. All of the above.
D. All of the above.
Social investors seek to eliminate from their 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. All of the above.
The major federal consumer protection agencies are authorized by law to: A. Intervene directly into the very center of free market activities, if that is considered necessary to protect consumers. B. Substitute government-mandated standards for decision making by private buyers and sellers. C. Substitute private manufacturing standards for government-mandated standards. D. Both A and B, but not C.
D. Both A and B, but not C.
Which of these statements is true regarding the Class Action Fairness Act of 2005? A. Lawyers were restricted from shopping for friendly venues to try interstate cases. B. Excessive attorney compensation was limited. C. The burden of proof was shifted to government. D. Both A and B, but not C.
D. Both A and B, but not C.
The primary goal(s) of the Food and Drug Administration include: A. Ensuring the safety and effectiveness of a wide range of consumer products. B. Prohibiting unfair or deceptive advertising. C. Reviewing and approving new products before they are released to consumers. D. Both A and C, but not B.
D. Both A and C, but not B.
Investors may receive an economic benefit from the ownership of stock by receiving: A. Interest. B. Dividends. C. Capital gains. D. Both B and C, but not A.
D. Both B and C, but not A.
Which of the following describe why the consumer movement exists? A. Services have become less specialized. B. Some product advertising claims have been inflated. C. Some businesses have violated the public's privacy. D. Both B and C, but not A.
D. Both B and C, but not A.
The board committee that administers and approves salaries and benefits of high-level managers in a company is called the: A. Executive committee. B. Human resources committee. C. Nominating committee. D. Compensation committee.
D. Compensation committee.
Which of the following arguments opposes the idea of high executive pay? 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.
Online shoppers always run the risk that: A. They might have to pay state and local taxes on goods purchased. B. Their favorite Web sites provide a large variety of products and services. C. The government might become overly involved in protecting consumer privacy. D. Information they reveal in the course of a sales transaction might be misused.
D. Information they reveal in the course of a sales transaction might be misused.
Consumers owe more money on their home loans (mortgages) than on any other kind of household debt. After mortgages, what makes up the largest portion of household debt? A. Credit card debt. B. Medical debt. C. Car loans. D. Student loans.
D. Student loans.
The act that requires lenders to inform borrowers of the annual rate of interest to be charged, plus related fees and services charges is called: A. The Consumer Protection Act. B. The Product Safety Act. C. The Predatory Mortgage Act. D. The Truth in Lending Act.
D. The Truth in Lending Act.