Question 1

Theory suggests that &#8230;&#10;A)Greater board independence is always advisable.&#10;B)Less board independence is always preferable.&#10;C)For firms, for which the advisory role of the board is more important than the monitoring role, a less independent board may be optimal.&#10;D)None of the above.

Accepted Answer

The theory suggests that for firms where the advisory role of the board is more critical than the monitoring role, a less independent board may be optimal. Therefore, option C is the correct answer. Option A and B are not always advisable or preferable in all cases, and option D is an incorrect statement.

Question 2

Which one of the following statements is correct?&#10;A)In a firm with duality the functions of chairman and CEO are assumed by two separate persons.&#10;B)In a firm with duality the functions of chairman and CEO are assumed by the same person.&#10;C)Duality consists of a person being both an executive and a shareholder of the firm.&#10;D)None of the above.

Accepted Answer

In a firm with duality, the functions of chairman and CEO are assumed by the same person. This is also known as CEO duality. Option A is incorrect as it implies that there are two separate persons performing the roles of chairman and CEO. Option C is incorrect as it does not accurately describe duality. Option D is incorrect as there is a correct answer among the given choices.

Question 3

The empirical evidence on the effectiveness of non-executive/ outside directors is conclusive and suggests that the latter increase firm value and performance.&#10;A)No, the existing evidence suggests that non-executives reduce firm performance and value.&#10;B)The existing evidence suggests that non-executives increase firm value, but only if they dominate the board of directors.&#10;C)No, the existing empirical evidence is as yet inconclusive.&#10;D)None of the above.

Accepted Answer

The empirical evidence on the effectiveness of non-executive or outside directors in increasing firm value and performance is inconclusive. Studies have shown mixed results, with some suggesting positive impacts under certain conditions, while others find little to no effect, or even negative impacts. This inconsistency in findings means there is no definitive conclusion on their overall effectiveness.

Question 4

The expression 'the glass ceiling' refers to &#8230;&#10;A)The great accountability of non-executive directors.&#10;B)The increasing pressure put on companies by the general public to reduce greenhouse gases.&#10;C)The difficulty that women face to move to the higher echelons in companies.&#10;D)None of the above.

Accepted Answer

The expression 'the glass ceiling' specifically refers to the invisible barrier that prevents women from advancing to high-level positions in companies, despite having the required qualifications and experience. Therefore, option C is the correct answer.

Deck 7: Boards of Directors