BUS/475: Integrated Business Topics Wk 5 - Practice: Ch.12. Corporate Governance and Business [due Day 5]

Corporate governance is a system of ______.

checks and balances

The right to buy a company's stock at a predetermined price sometime in the future is known as a(n) ______.

stock option

The relationship between CEO pay and job performance has been shown to be ______.

weak

The ratio of CEO to average employee pay in the United States is about ______.

300:1

Svanhildur's company is committed to corporate social responsibility but also understands that growth and profit are imperative for survival. What should Svanhildur's company do to achieve this balance?

It should use the shared value creation framework.

Which of the following is a federal regulatory agency whose task it is to oversee stock trading and enforce federal securities laws?

Securities and Exchange Commission

True or false: The shared value creation framework aims to reconcile the concept of gaining and sustaining a competitive advantage with corporate social responsibility.

True

Which type of company is considered a unicorn?

a private start-up company valued at more than $1 billion

The idea that a corporation is simply a collection of legal contracts is known as ______.

agency theory

Financial statements by public companies must ______. (Check all that apply.)

be audited by certified public accountants adhere to generally accepted accounting principles (GAAP)

Narrowly defining public stock companies in terms of financial performance can lead to ______.

black swan events

In a public stock company, the centerpiece of corporate governance is the ______.

board of directors

Social consequences of business activities, including pollution, energy loss, and dangerous accidents, are known as ___.

externalities

Which of the following are critical aspects of maintaining good relationships between a firm and its stakeholders?

fairness transparency

Economist Michael Porter and many others argue that the value of public stock companies is too narrowly defined in terms of ______, leading to scandals and economic crises.

financial performance

Incentives that are too high-powered, such as an outsized bonus, may cause individuals to ______.

focus too much attention on the incentive and not enough on strategic activities

Under agency theory, a manager should seek to align ______ between principals and agents to minimize opportunism.

incentives

In regard to the public stock company, limited liability means that ______.

investors are not responsible for any debts incurred by the company and are only at risk of losing the invested capital

According to agency theory, conflicts such as the principal-agent problem are considered ______ issues.

legal

A fiduciary responsibility is a(n) ______.

legal duty to act in another party's interests

The main goal of a poison pill is to ______.

minimize the threat of a hostile takeover

According to agency theory, which of the following managerial functions can be used to avoid adverse selection and moral hazard?

organization and control

The subprime mortgage crisis of the early 2000s is an example of ______.

poor corporate governance

What are the four characteristics of a public stock company that make it an attractive corporate form? (Check all that apply.)

separation of ownership and control legal personality limited liability for investors transferability of investor interests

Private start-up companies valued at over $1 billion, such as some of those in the tech sector, are called ______.

unicorns

Which of the following statements about stock options is true?

The recipient is given the right to purchase stock at a predetermined price sometime in the future.

Following the rise of institutional investors, the use of poison pills to avoid hostile takeover has ______.

become rarer

One of the key characteristics of a leveraged buyout (LBO) is that it _______.

changes the ownership structure of a company from public to private.

What do stakeholders want above all else?

fair treatment

In ______, a single investor or group of investors buys, with the help of borrowed money, the outstanding shares of a publicly traded company and assumes control of it.

leveraged buyout

The shared value creation framework encourages managers to focus on which of the following needs?

social and economic

What are the two significant issues regarding the CEO pay debate? (Check all that apply.)

- the relationship between firm performance and CEO pay - the size of the CEO compensation in relation to average employee pay