Question 1

A takeover defense wherein preferred stock in the merged firm is offered to shareholders at a highly attractive rate of exchange is called

Accepted Answer

This is referred to as a poison pill defense, as it makes the target firm unattractive to the acquiring company by diluting the value of its shares. By offering preferred stock at an attractive rate, shareholders are incentivized to hold onto their shares, making it harder for the acquirer to gain control of the company. Greenmail is when a company buys back its own shares from a hostile acquirer at a premium. A standstill agreement is a contractual obligation by the acquirer not to purchase more shares in the target company for a certain period of time. Crossing the palm with silver is a phrase that means to bribe someone.

Question 2

Japanese keiretsu are

Accepted Answer

Japanese keiretsu are a system of cross-shareholding among firms, where companies invest in each other's stocks and maintain long-term business relationships. This interlocking ownership structure helps to foster cooperation and stability in the Japanese economy.

Question 3

Which of the following is TRUE of trends in Japan's corporate governance structure?

Accepted Answer

Some major Japanese firms are bringing more outsiders onto their boards of directors. This has been a trend in recent years as Japanese corporations aim to improve transparency and accountability in their decision-making processes.

Question 4

International Food Services (IFS) has a contract with the Marines to supply meals for its troops in Iraq and other foreign assignments. As a means of increasing profits, IFS has used substandard ingredients in these meals and has consistently lied about this practice during quality investigations by the Marines. Who is ultimately responsible for the corporate climate that resulted in this wrongdoing?

Accepted Answer

The board of directors of IFS is ultimately responsible for the corporate climate and decisions made by the company. As the governing body, they have the power to set policies and guidelines for the company, and they are responsible for ensuring the company operates with integrity and transparency. The director of food service may have some responsibility for the quality of the food, but ultimately it is the board of directors who is accountable for any unethical practices. The employees directly involved in the wrongdoing may face repercussions, but they are not responsible for creating the corporate climate that allowed this behavior to occur. The head of contract services for the Marines may have some oversight responsibilities, but they are not ultimately responsible for the actions of a private company.

Question 5

____ is an important influence in Japanese corporate governance structures.

Accepted Answer

Consensus is a key element of the Japanese culture and is reflected in their corporate governance structures. In Japanese companies, decisions are made through a lengthy and inclusive process of consultation and consensus-building, which involves all stakeholders including employees, suppliers, and the community. This approach values group harmony and collective decision-making over individualism and competition. As a result, Japanese corporate governance structures tend to prioritize long-term stability and sustainable growth over short-term profits.

Question 6

In Japan, the principal source of the active monitoring of large companies comes from

Accepted Answer

The answer of In Japan, the principal source of the...

Question 7

Define the three internal corporate governance mechanisms and how they may be used to control and monitor managerial decisions.

Accepted Answer

The answer of Define the three internal corporate governance mechanisms...

Question 8

All of the following statements are TRUE about the use of defense tactics by the target firm during a hostile takeover EXCEPT

Accepted Answer

Defense tactics are meant to increase the costs and difficulties of a hostile takeover and make it less appealing to the acquirer, so it is incorrect to say that they make the costs of a takeover lower. Choices A, B, and C are all true statements about defense tactics.

Question 9

Define the agency relationship and managerial opportunism and discuss their strategic implications.

Accepted Answer

The answer of Define the agency relationship and managerial opportunism...

Question 10

Agricultural Chemicals, Inc., was the target of a hostile takeover six months ago. The CEO and the top executives successfully fended off the takeover and are concentrating on strategies to improve the performance of the firm. Which of the following is most likely to be TRUE?

Accepted Answer

The fact that the CEO and top executives successfully fended off the hostile takeover does not necessarily mean their jobs are secure. Shareholders may still hold them accountable for the firm's performance and may push for changes if they are dissatisfied.

Question 11

The governance mechanism most closely connected with deterring unethical behaviors by holding top management accountable for the corporate culture is

Accepted Answer

The board of directors is responsible for overseeing top management and ensuring that the corporate culture aligns with the company's values and ethical standards. The board can hold top management accountable through its power to hire and fire executives, establish and enforce ethical policies, and monitor management's actions. Ownership concentration and the market for corporate control are not as closely linked to corporate culture and ethical behavior, while executive compensation systems can incentivize good behavior but are not the primary mechanism for deterring unethical behaviors.

Question 12

Which of the following statements is FALSE?

Accepted Answer

The Vorstand is not elected by the firm's employees, but rather appointed by the Aufsichtsrat (board of directors) in Germany.

Question 13

German executives are not dedicated to the maximization of shareholder value largely because

Accepted Answer

The answer of German executives are not dedicated to the...

Question 14

Historically, ____ have been at the center of German corporate governance structure.

Accepted Answer

Banks have played a significant role in the German corporate governance structure. Traditionally, German companies have relied on a group of banks, known as "Deutschland AG", to provide long-term financing and to foster alliances between companies. These banks often hold significant stakes in the companies they finance and thus have a strong influence on management decisions.

Question 15

What is corporate governance and how is it used to monitor and control managers' decisions?

Accepted Answer

The answer of What is corporate governance and how is...

Question 16

The CEO of Skyco, a publicly-traded company that has been earning below-average returns, has been publicly criticized by shareholders for persuading the board of directors to give her interest-free loans, for having the company purchase and furnish a lavish apartment in Paris for her personal use on her twice-yearly trips there, and for excessive stock options. The CEO's behavior may be indication of

Accepted Answer

The behavior of the CEO in using company resources for personal benefit indicates a weak board of directors. This suggests that the board has not been able to effectively monitor and control the actions of the CEO, allowing her to engage in activities that are not in the best interest of the company or its shareholders. A strong and independent board would have been able to identify and prevent such behavior, thereby safeguarding the interests of the shareholders.

Question 17

The repurchase at a premium of shares of stock that have been acquired by the aggressor firm in a hostile takeover in exchange for an agreement that the aggressor will no longer target the company for takeover is called

Accepted Answer

The answer of The repurchase at a premium of shares...

Question 18

Ambrose Bierce, the CEO of DictionAry, has been paid a lump sum amounting to three years' salary because DictionAry has been bought in a hostile takeover by its main competitor. Ambrose received

Accepted Answer

Ambrose received a golden parachute, which is a compensation package given to top executives in the event of a takeover or merger. It usually includes a large sum of money, stock options, and other benefits.

Question 19

Discuss the effect of the separation of ownership and control in the modern corporation.

Accepted Answer

The answer of Discuss the effect of the separation of...

Question 20

James Abercrombie has a thriving consulting firm specializing in training boards of directors in decision-making skills. Mr. Abercrombie has had striking success in reducing conflict and hostility among directors and allowing boards to develop more cohesiveness. Mr. Abercrombie is considering expanding his consulting practice overseas. Which of the following statements is most likely to be TRUE?

Accepted Answer

The answer of James Abercrombie has a thriving consulting firm...

Quiz 10: Corporate Governance