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Exam 12: Corporate Governance and Business Ethics

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Question 1

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Which of the following is a common result of a hostile takeover of a company?

A) The new owner sells the company in pieces.
B) The new owner keeps the company intact.
C) The new owner keeps the board of directors of the company the same.
D) The new owner enhances the reputations of the company's management.

E) None of the above
F) All of the above

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Question 2

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Which of the following statements is true of shareholders in a public stock company?

A) They directly supervise and coordinate the manufacture of products and delivery of services.
B) They are granted a charter of incorporation by the state and legally own company stock.
C) They are the centerpiece of corporate governance.
D) They are appointed by a board of directors to oversee the company's management.

E) None of the above
F) All of the above

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Question 3

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A detergent manufacturer decides to clean up the waterways it uses even though no federal, state, or local laws require the firm to do this. The firm's managers believe that the cleanup will improve the company's image and benefit the environment. This scenario is an example of shareholder capitalism.

Yelena, the CEO of Andron Inc., reports to the board of directors appointed by the shareholders of Andron. Based on shareholder suggestions, the board ties Yelena's compensation to the performance of Andron. Due to this pressure, Yelena begins devoting extra time to projects and undertakes other activities to ensure that she has job security and that she receives adequate compensation. The reasons why the board ties Yelena's compensation to firm performance is to overcome

The root cause of the principal-agent problem between senior executives and lower-level employees can be explained by the

Which of the following could be used as an example of why a stakeholder strategy approach to business has shortcomings?

Jaronda founded Diamond Communications Inc. in 1993. Ten years later, the company went public. Despite Jaronda's death in 2005, the company reported a 75 percent increase in revenue in 2006. Which of the following characteristics of a publicly traded company does this scenario best exemplify?

What usually happens if a hostile takeover attempt is successful?

CPA Inc. is a publicly traded company. The stockholders of this company delegate the authority to make decisions for the company to a CEO named Joaquin. The stockholders expect Joaquin to make decisions that will benefit the company. However, Joaquin begins to find ways to maximize his total compensation, which hinders CPA's performance. This scenario reflects

Research indicates that most corporate ethics problems are caused by a few "bad apples" rather than an unethical culture.

What is the benefit of granting stock options as part of a compensation package in a public stock company?

David and Fred are customer care employees at JPN Care. In between calls, David and Fred spend time on Facebook and YouTube. The relaxed guidelines at JPN allow them to do that. However, sometimes, they knowingly avoid answering calls or keep customers on hold, while they check their social networking accounts. Such behavior

Describe the role of outside directors as part of a company's board of directors.

Jeannette was a manager at Fabco. Instead of working full-time on Fabco's projects, she used Fabco's tools, employees, computers, and other resources to work on a research project that she hopes might help her start her own firm. This is an example of adverse selection.

At Agile Ltd., a cross-functional team is formed to work on a project for a new client. The team consists of Charles and four other members. At most of the team's presentations to senior management, Charles takes the lead and discusses project specifics with the management, while others chip in with additional information. At the completion of the project, Charles is recommended for promotion, while the other team members receive little recognition for their hard work. The reality is that Charles did very little actual work but spent some time compiling the project report based on different documents submitted by the others. This scenario at Agile Ltd. is a typical consequence of

Which of the following scenarios best exemplifies a leveraged buyout of a microchip manufacturer, Rigoletto Inc.?

If a privately held company has a history of legal and ethical problems, those problems can prevent a successful initial public offering (IPO) from taking place.

A mortgage-loan officer persuades unsuspecting consumers to sign up for exotic mortgages, such as "option ARMs." These mortgages offer borrowers the choice to pay less than the required interest, which is then added to the principal while the interest rate can adjust upward. Because of this setup, many borrowers are unable to repay the mortgage once the interest rates go up. Which of the following phrases best describes this scenario?

The name for an agreed-upon code of conduct in business, based on societal norms, is

What are poison pills?