MGMT 325 - Ch 13 Quiz

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:

Bear market.

The audit committee is required by U.S. law to be:

Both composed entirely of outside directors and headed by the company's CEO. ** this is technically incorrect, it should be: composed entirely of outside directors and financially literate - BUT in order to get the points, you have to answer what is written above; i think it was a typo**

Which of the following is an example of fulfilling social objectives through stock ownership?

Divesting from Chinese companies that made products using forced labor.

Corporate governance involves the exercise of control over a company's:

Entire corporate direction.

Supporters of declassifying board elections argue that this approach:

Increases accountability and responsiveness to shareholders.

In 2014, of the following nations, the fastest-growing stock market was in:

India

(T/F) Stock options represent the right to buy a company's stock at a set price for a certain period.

True

(T/F) The Organization for Economic Cooperation and Development (OECD), representing 34 nations, issued a revised set of principles of corporate governance to serve as a benchmark for companies and policymakers worldwide.

True

The "agency problem" arises when:

Managers act in their own interest, rather than in the interest of shareholders.

Reports filed with the SEC provide information on a company's:

All of the following are correct: -Sales and earnings. -Depreciation by line of business. -Details of foreign operations.

An argument that opposes the idea of high executive pay is:

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?

Hold regular meetings without the CEO present.

The mission of the Securities and Exchange Commission (SEC) is to:

Protect shareholders' rights by making sure that stock markets are run fairly.

(T/F) It is the responsibility of the board of directors and its audit committee to engage an independent accounting firm to audit the financial statements prepared by management.

True

An example of "insider trading" is:

A company executive passing nonpublic information about an upcoming acquisition to a friend, who traded for a profit.

(T/F) Shareholders have become an increasingly powerful and vocal stakeholder group in corporations.

True

The board committee that administers and approves salaries and benefits of high-level managers in a company is called:

Compensation.

Which of the following is true about corporate boards?

Corporate boards average between 9 and 11 members.

(T/F) Investors always choose to invest in the stock of companies that pay high dividends.

False

(T/F) It is illegal in the United States to offer stock trade tips to clients based on public information.

False

The company justified Wynn's high compensation package, in the discussion case Executive Misconduct at Wynn Resorts, by saying that:

He had led the company to total returns of 19 percent per year between 2002 and 2017.

The activism of institutional investors in other countries has been spearheaded by:

U.S.-based pension and mutual funds that in recent years acquired large stakes in foreign countries.