Man4720 CH.10 MindTap Questions

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

A

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

C

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

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, as the CEO will not be able to be forced out if his or her performance becomes unacceptable. b. Yes, if Kevin knows the CEO and doesn't like his or her personality. c. No, because a single individual as CEO and Chairman of the Board has proven to be very successful in the past. d. No, because the Board will be sure to elect the best individual to Chairman, regardless of current title.

A

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. Hostile takeover b. Fraudulent behavior c. Managerial employment risk d. Corporate espionage

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. Failure to perform c. Unemployment risk d. Negative performance reviews

A

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

A

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 financial crisis due to manager ineffectiveness and lack of focus on all stakeholders, causing the company to fail, resulting in a rise in unemployment b. An invisible hand economic industry in which actions will be handled by market preferences c. A new type of economy that is related to a socialist economy d. A free corporate market that is laissez-faire

A

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

A

Why could many large-block owners be beneficial to a company? a. 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. b. The company's top managers 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. The large-block owners will not be able to collaborate and organize as well as many small 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.

A

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. corporate sponsor. b. institutional owner. c. external shareholder. d. internal shareholder.

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 for growth if funded properly. Shareholders are not happy. Their case for wanting to cease these actions is that Greg is practicing: a. diversification. b. overdiversification. c. underdiversification. d. segmentation

B

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

B

Which is an alternate definition for "poison pill"? a. 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 b. A strategy whereby a company decides to increase the number of overall shares, which will both dilute the hostile company's shares and increase the cost of the company overall, making the company less appealing to take over c. 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 d. 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

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. Hostile ownership b. Universal ownership c. Diffuse ownership d. Diverse ownership

C

Corporate governance is: a. a means by which firms collaborate to achieve a shared objective. b. a structure in which the owner-manager makes all major decisions and monitors all activities, while the staff serves as an extension of the manager's supervisory authority. c. the set of mechanisms used to manage the relationships among stakeholders and to determine and control the strategic direction and performance of organizations. d. a group of elected individuals whose primary responsibility is to act in the owners' best interests by formally monitoring and controlling the firm's top-level managers.

C

If a company were to have only 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. 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 c. Stockholders' interests could be ignored due to executives' desire for personal financial gain without regard for all shareholders d. A larger focus on stockholders, as insider directors and executives focus on only stockholders' interests

C

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

C

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 thrive as long as the CEO has a strong vision for the company and is willing to focus only on profits. c. The company will fail because of legal issues, lack of strategic focus, and risky behavior. d. The company will fail due to the lack of risk taking.

C

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 coup d'état b. A hostile takeover c. A dumping of shares to drop stock price and force actions by the Board d. A proxy vote

D

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. Litigation lawsuits b. Capital structure change c. Charter amendment d. Golden parachute

D

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 CEO should resign, as he or she is not performing in the interest of the shareholders. d. 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

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

D

What is the market for corporate control? a. The pool of prospects who are qualified to become CEO 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. An external governance mechanism that is active when a firm's internal governance mechanisms fail

D

Which of the following is not a form of executive compensation?' a. Stock options b. Stock awards c. Salaries d. Stock performance

D