Deck 13: Corporate Governance and Ethics

Question 1

Autumn Inc.is a company that functions on its own.It has the right to enter into contracts, hire employees, and also pay taxes.The shareholders of the company are entitled to its profits.Autumn Inc.is an example of a _____.

A) cooperative
B) limited partnership
C) general partnership
D) corporation

Answer 1

D

Question 2

Raj, a student of business management, claims that the shareholder primacy model is not a good model of business management.Which of the following statements should he use in order to best support his claim?

A) The shareholders are not the legal owners of the corporation's assets.
B) Financial capital is the most important input into making a business successful.
C) The shareholders cannot not trade or own any stock of the corporation.
D) Managing for shareholder value creates negative consequences for firms.

Answer 2

D

Question 3

Tinos Inc.is a company that manufactures toys.Which of the following would be its primary stakeholder?

A) Other local toy manufacturers
B) Foreign toy manufacturers
C) People who purchase its toys
D) People who purchase toys in foreign countries

Answer 3

C

Question 4

TinyToys Inc.is a company that manufactures toys.Which of the following would be its secondary stakeholder?

A) Other local toy manufacturers
B) Companies that supply its raw materials
C) People who purchase its toys
D) People who work for the company

Question 5

Chang, the founder of a multinational corporation, believes that his business should mainly focus on the benefit of those people who own its stock.In this scenario, he most likely follows _____, a model of business management.

A) stakeholder model
B) shareholder primacy
C) customer value
D) stakeholder value

Question 6

Salma owns stocks of an e-commerce business.In exchange for the money she has invested, she has received two property rights from the business.Which of the following is most likely to be one of the property rights given to her?

A) She will get a share of the residual earnings of the business.
B) She will be the only owner of the assets of the business.
C) She will get ownership of the private properties owned by other investors of the business.
D) She will be entitled to a higher percentage of the profits earned by the business.

Question 7

Jiao, a student of business management, claims that the shareholder primacy model is better than the stakeholder model of business management.Which of the following statements best supports her claim?

A) The customers are the legal owners of the corporation's assets.
B) The most important input into making a business successful is wealth.
C) The shareholders own stock of a corporation that they can easily trade.
D) The shareholders have different objectives for investing in a firm.

Question 8

A(n) _____ is a legal structure for organizing a business where the organization is a distinct and separate entity from its owners.

A) general partnership
B) proprietorship
C) corporation
D) limited partnership

Question 9

Kate, a business owner, is a proponent of the stakeholder model of business management.Which of the following is a reason she supports this model?

A) The stakeholders are the legal owners of the corporation's assets.
B) Managers spend most of their time interacting with and managing the demands and needs of different stakeholder groups.
C) The stakeholders own stock of a corporation that they can easily trade.
D) Managers have no way to efficiently and effectively run their firms as they have no way to decide whose claims have priority.

Question 10

_____ is a model of the corporation suggesting that a firm is the sum total of its contracts with different stakeholders.

A) Nexus of contracts
B) Shareholder primacy
C) Stakeholder model
D) Supplier contracts

Question 11

Anastasia, a student of business management, claims that since most businesses are primarily concerned with acquiring more assets, the shareholder primacy model is better than the stakeholder model of business management.Which of the following facts strengthens her claims?

A) Shareholders can easily trade the stock they own of an organization.
B) Shareholders exchange money with the corporation without a clearly specified payment in return.
C) Shareholder value creates negative consequences for firms.
D) Shareholders are the legal owners of all the material possessions of the corporation.

Question 12

How did the general-purpose corporations formed in the twentieth century grow?

A) By allowing investors to run the corporation
B) By relying on investors to run the corporation
C) By selling products and services to the investors at reduced prices
D) By offering investors a share of ownership in the company, or stock

Question 13

Javier is the shareholder of a cellphone manufacturing company.Which of the following statements about him is true?

A) He does not have any claim to the residual earnings of the company.
B) He is the only person entitled to receive the profits of the company.
C) He is protected from being taken advantage of by the management team due to his oversight rights.
D) He is not able to exchange money with the corporation without a clearly specified payment in return.

Question 14

Fatima wants to start a small business.She does not want to share the profits of her business with anyone else.In this scenario, Fatima should most likely opt for which of the following types of business ownership?

A) A joint venture
B) An individual proprietorship
C) A partnership
D) A corporation

Question 15

Which of the following statements is true of the intrinsic stakeholder model of business management?

A) It is the belief that stakeholder groups have the right to be considered in decisions that will impact them.
B) It is the belief that giving importance to stakeholders makes it difficult for managers to effectively run their firms.
C) It is the belief that stakeholder interactions have longer-term consequences on a firm's performance and competitive advantage.
D) It is the belief that financial capital is the most important input into making a business successful.

Question 16

Veltek Development Solutions was a company that existed in the nineteenth century.It was formed after obtaining a charter from the state legislature for the purpose of building a small bridge over a river.In this scenario, Veltek Development Solutions can be considered a _____.

A) cooperative
B) limited partnership
C) general partnership
D) corporation

Question 17

_____ is best described as the processes and structures that provide the ultimate decision making authority for a firm.

A) Strategic management
B) Corporate responsibility
C) Corporate governance
D) Corporate management

Question 18

Ria and Maria start an investment firm together that is not a separate legal entity.They have an equal share of the profits and the liabilities of the business.This type of business ownership can be best categorized as a(n) _____.

A) cooperative
B) partnership
C) corporation
D) individual proprietorship

Question 19

Antonia owns and runs a bakery in her neighborhood.She is the only person responsible for the liabilities of her bakery.Her bakery is an example of a(n) _____.

A) individual proprietorship
B) corporation
C) partnership
D) joint venture

Question 20

Which of the following statements is true of an individual proprietorship?

A) It is owned by two or more partners.
B) It is run and owned by the same person.
C) It is considered a distinct and separate entity from its owners.
D) It is a rare form of business ownership in the United States.

Question 21

Which of the following statements is true of the agency problem facing the modern public corporation?

A) It arises when a corporation hires a private agency to conduct audits of its business practices.
B) It arises when a government agency is assigned with the task of identifying corrupt practices by a corporation.
C) It arises as a consequence of the separation of ownership and control in the corporation.
D) It arises as a consequence of the managers of the corporation focusing on enhancing shareholder value.

Question 22

Pick N Shop Inc.operates a chain of supermarkets.The company offers a bonus of $500 to its sales representatives if they can sell products worth $5,000 per month.It also offers bonuses and other benefits to its employees and managers.By offering such bonuses, Pick N Shop Inc.is primarily trying to avoid a(n) _____.

A) hostile takeover
B) proxy fight
C) agency problem
D) accountability problem

Question 23

Peach Corp.operates a chain of supermarkets.The managers and employees of the company have been on strike for months due to their differences with its owners.As a result, the share price of the company has fallen to historic low.Globe Investments decides to purchase a majority of the shares of Peach Corp., confident that it can manage the company better.Globe Investments makes a public offer to purchase the shares of the investors who are dissatisfied with the performance of Peach Corp.The offer made by Globe Investments can be termed as a(n) _____.

A) proxy offer
B) tender offer
C) discount offer
D) private offer

Question 24

DigiGo Inc.is a multinational corporation that manufactures and sells home appliances.Who among the following are its principals?

A) The people who own stocks of the company
B) The people who purchase the home appliances it manufactures
C) The electronics engineers who work for the company
D) The retailers that sell the home appliances it manufactures

Question 25

Agrolus Corp.is a company that manufactures fertilizers used in farming.Its customers consist of farmers who purchase its products.Its employees will be affected by the business through the:

A) working conditions of the company.
B) payment it makes to its suppliers.
C) earnings it generates for its investors.
D) fertilizers sold by the company.

Question 26

ShopEazy Inc.operates a chain of supermarkets.The managers and employees of the company have been on strike for months due to their differences with its owners.As a result, the share price of the company has fallen to a historic low.Zeltro Investments decides to purchase a majority of ShopEazy's shares, confident that it can manage the company better.In this scenario, Zeltro Investments can be best categorized as a(n) _____.

A) corporate raider
B) venture capitalist
C) secondary stakeholder
D) angel investor

Question 27

YCL Inc.operates a retail chain.The managers and employees of the company have been on strike for months due to their differences with its owners.As a result, the share price of the company has fallen to a historic low.UltraPlus Investments decides to purchase a majority of the shares of YCL, confident that it can manage the company better.The board of directors of YCL refuses to sell the shares of the company to UltraPlus Investments.As a result, UltraPlus tries to place its own people on the YCL's board of directors to change their decision.In this scenario, UltraPlus is involved in a(n) _____.

A) agency problem
B) proxy fight
C) employee buyout
D) friendly acquisition

Question 28

Which of the following individuals has a legal fiduciary duty to act in the best interests of the owners of the corporation where he or she works?

A) Neehara, a nurse at a private hospital
B) Ivana, a senior executive at a financial corporation
C) Steve, a salesperson at an electronic store
D) Jamal, a technical support engineer at an IT firm

Question 29

RedMart Corp.operates a chain of supermarkets.The managers and other employees of the company have been on strike for months due to their differences with its owners.As a result, the share price of the company has fallen drastically.Pro Investments Inc.purchases a majority of the shares of RedMart, confident that it can manage the company better.The problem faced by RedMart Corp.as result of the separation of ownership and control can be termed as a(n) _____.

A) hostile takeover
B) proxy fight
C) agency problem
D) accountability problem

Question 30

Which of the following statements is true of corporate culture?

A) An organization's culture, by itself, can be regarded as good.
B) Culture proves to be very weak because it cannot inform action without the need for supervision.
C) Put simply, culture is just how things are done in any organization.
D) It consists of behavioral assumptions that are considered inappropriate for organizational members.

Question 31

Chemica Corp.is a company that manufactures household chemicals and fertilizers used in farming.The government of the state in which it operates will be affected by the business through the:

A) effect its products have on environmental pollution.
B) reputation of the company.
C) earnings generated by the company.
D) employment opportunities that the company generates.

Question 32

Monica is a senior interior designer who works at 360 Marks Inc.As part of her compensation package, she is entitled to 2,000 shares of the company at $30 each.In this scenario, the type of compensation offered can be termed as a(n) _____.

A) stock option
B) stock grant
C) tender offer
D) initial grant

Question 33

HMR Inc.is a company that manufactures household chemicals and fertilizers used in farming.Its customers consist of farmers and other people who purchase its products.Its suppliers will be most affected by the business through the:

A) working conditions of the company.
B) reputation of the company.
C) earnings it generates for its investors.
D) chemicals and other products sold by it.

Question 34

Zygaton Corp.is a firm that offers its customers financial services.Which of the following members of its board of directors should ideally bring vast knowledge and a new perspective in order to ensure that the firm's strategy will serve the financial interests of the shareholders?

A) Javier, an employee
B) Maria, an outside director
C) Cataleya, a senior executive
D) Esposito, a senior manager

Question 35

Newe Chemicals Inc.is a company that manufactures household chemicals.Its customers consist of people who purchase its products.They will be affected by the business through the:

A) wages it pays to its employees.
B) payment it makes to its suppliers.
C) earnings it generates for its investors.
D) advertising campaigns it uses to promote its products.

Question 36

Abdul, a student of business management, claims that the stakeholder model is not a good model of business management.Which of the following would he most likely cite as a reason for his claim?

A) The shareholders are not the legal owners of the corporation's assets.
B) Managers need to focus on the only objective of increasing shareholder value.
C) The stakeholder groups should be considered in decisions that will impact them.
D) Managers spend most of their time interacting with stakeholders.

Question 37

Yellow Moon Inc.is a company that manufactures consumer electronics.Its investors will be primarily affected by the business through the:

A) training and development provided to its employees.
B) employees living in its community.
C) earnings generated by the company.
D) order consistency of the company.

Question 38

_____ is the right to buy a certain number of the corporation's shares at a specified future date for a specified price.

A) Pay for performance
B) Stock-based compensation
C) A stock grant
D) A stock option

Question 39

The _____ of a corporation have a legal fiduciary duty to act in the best interests of the corporation's owners.

A) customers
B) suppliers
C) directors
D) distributors

Question 40

Anastasia is one of the managers of Geller Technology Inc., an information technology firm.She will be considered the agent of the:

A) people who own stocks of the firm.
B) people who purchase the software created by the firm.
C) software engineers who work for the firm.
D) businesses that use the software created by the firm.

Question 41

In a company, who are called agents?

Question 42

Describe two of the arguments used by participants of debates about ethics.

Question 43

A _____ is a formal declaration of a company's core values, business objectives, and ethical aspirations.

Question 44

Describe how style can help a company create a climate where ethical behavior becomes the expected norm.

Question 45

Explain with examples how the engagement of a company with its key stakeholders can affect its overall performance and competitive advantage.

Question 46

Define ethical behavior.

Question 47

Briefly describe agency problems.How can they destroy value in an organization?

Question 48

_____ are those values that define for an individual, group, or society things that are morally right or wrong.

Question 49

Explain the difference between the shareholder primacy model and the stakeholder model.

Question 50

Who is a stakeholder of a business organization?