BUS 100 (wk 4) Quiz Questions

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

High salaries provide an incentive for innovation and risk-taking.

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

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 following statements is not true about shareholders? They are investors in the company. They are the legal owners of business corporations. Managers pay close attention to their needs and interests. They own equal shares of company assets.

They own equal shares of company assets.

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

To vote on members for the board of directors.

Investors may receive an economic benefit from the ownership of stock by receiving: Dividends Capital gains. Both dividends and capital gains. Interest

Both dividends and capital gains.

The directors of a company are a central factor in corporate governance because they: Inherited the business from their predecessors. Have a moral responsibility to serve both the company's employees and customers Have the highest stake in the performance of the company. Exercise formal legal authority over company policy.

Exercise formal legal authority over company policy.

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

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

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

Hold regular meetings without the CEO present.

The board committee that administers and approves salaries and benefits of high-level managers in a company is called: Executive. Nominating. Human resources. Compensation.

Compensation.

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

Divesting from Chinese companies that made products using forced labor.