Deck 5: Corporate Governance

Question 1

The development of a separate corporate entity allowed organizations to raise funds from individual shareholders to enlarge their operations.

Answer 1

True

Question 2

Managers only are accountable to their owners.

Answer 2

False

Question 3

The compensation committee is responsible for monitoring the financial policies and procedures of the organization.

Answer 3

False

Question 4

Corporations who now face numerous misconduct charges often had the governance model in place.

Question 5

The "comply or else" methodology is a set of guidelines that require companies to abide by a set of operating standards or face stiff financial penalties.

Question 6

While the issue of corporate governance has reached new heights of media attention in the wake of recent corporate scandals,the topic has received increasing attention for over a century.

Question 7

The Sarbanes-Oxley Act of 2002 incorporates the "comply or else" approach.

Question 8

A board of directors is the group of individuals who oversee governance of an organization.

Question 9

Corporate governance is the system that directs and controls business corporations.

Question 10

The corporate governance committee represents a more public demonstration of the organization's commitment to ethical business practices.

Question 11

The audit committee is comprised of independent specialists who have no connection to the company.

Question 12

The compensation committee is responsible for setting the compensation for all employees and outside contractors.

Question 13

A set of guidelines that require companies to abide by a set of operating standards or face stiff financial penalties refers to the "comply or explain" methodology.

Question 14

The Cadbury report argued for a guideline of "comply or else."

Question 15

The term outside director can be misleading because some outside members may have direct connections to the company.

Question 16

The compensation committee is a committee staffed by members of the board of directors plus independent or outside directors.

Question 17

A board of directors is elected by vote of the employees at the annual general meeting.

Question 18

"King II" formally recognized the need to move the stakeholder model forward and to consider a triple bottom line instead of a single bottom line of profitability.

Question 19

In contrast to the Cadbury report's focus on internal governance,the King report included a code of corporate practices and conduct that went beyond the corporation itself.

Question 20

The board of directors runs the organization on a day-to-day basis.

Question 21

Walter Salmon developed a 50-question checklist to assess the quality of an organization's board.

Question 22

Simply having the mechanisms in place will,in itself,guarantee good governance.

Question 23

One question in Salmon's 22-question checklist includes: Is there one outside director for every insider?

Question 24

Efficiency is the main argument for merging the chief executive officer and the chairman of the board positions together.

Question 25

To be truly effective,a board of directors should create a climate of trust and candor and ensure individual accountability.

Question 26

Enron maintained an audit committee consisting exclusively of nonexecutives,and the independent directors were not affiliated with organizations that benefited directly from Enron's operations.

Question 27

The board of an organization can be effective if it takes an active role in assessing leadership talent.

Question 28

Oversight of the board of directors remains intact even when the roles of chief executive officer and chairman of the board merge.

Question 29

A fiduciary responsibility is ultimately based on trust.

Question 30

A ______ is the process that directs and controls organizations.

A)corporate management
B)corporate guidance
C)corporate governance
D)corporate control

Question 31

The owners of a corporation are typically a fragmented group consisting of all of the following,except:

A)individual public shareholders
B)the government
C)employees
D)other companies

Question 32

Before the development of ______,managers and owners of organizations were the same people.

A)venture capitalists
B)proprietorships
C)partnerships
D)large corporations

Question 33

One question in Salmon's 22-question checklist includes: Is there a way for outside directors to alter the meeting agenda set by your CEO?

Question 34

Enron maintained an audit committee consisting exclusively of nonexecutives.

Question 35

To be truly effective,a board of directors should foster a culture of "no dissent."

Question 36

Effectively governed organizations must have mechanisms in place that oversee both the long-term strategy of the company and the appointment of those personnel tasked with the responsibility of delivering that strategy.

Question 37

A board of directors typically consists of ______.

A)inside members
B)shareholder members
C)outside members
D)both inside and outside members

Question 38

Managers carry accountability to ______.

A)the owner's interests only
B)the public's interests only
C)the government's interests only
D)both the owner's and the public's interests

Question 39

A fiduciary responsibility is not a difficult trait to test when you are hiring a manager or enforcing,once that manager is in place.

Question 40

When questioned,the boards of the corporations that faced charges for corporate misconduct in recent years all shared similar stories of being "ambushed" or kept in the dark about the massive frauds the senior executives of their corporations allegedly carried out.

Question 41

The ______ is an operating committee staffed by members of the board of directors plus independent or outside directors,and they are responsible for setting the compensation for the CEO and other senior executives.

A)board of directors
B)audit committee
C)frontline managers
D)compensation committee

Question 42

To be truly effective,a board of an organization must do all of the following,except:

A)Mix up roles
B)Ensure individual accountability
C)Create a climate of trust
D)Give peer performance evaluations

Question 43

Which of the following is NOT a question on Walter Salmon's checklist to assess the quality of an organization's board?

A)Are the insiders limited to the CEO,the COO,and the CFO?
B)Is your board the right size (15 to 20 members)?
C)Do you take the right measures to build trust among directors?
D)Are there three or more outside directors to every insider?

Question 44

Who oversees the governance of an organization?

A)The board of directors
B)The audit committee
C)The frontline managers
D)The compensation committee

Question 45

Which of the following is NOT a step to being a truly effective board?

A)Create a climate of trust and candor.
B)Foster a culture of "rubber stamping."
C)Let the board assess leadership talent.
D)Ensure individual accountability.

Question 46

_____ formally recognized the need to move the stakeholder model forward and to consider a triple bottom line instead of a single bottom line of profitability.

A)King report
B)Shareholder model
C)Stakeholder model
D)King II

Question 47

Even with a board that passes all of the tests and meets all of the established criteria,ethical misconduct still comes down to ______.

A)the corporate culture
B)the situation
C)the personalities involved
D)the environment

Question 48

__________________ is a reason to merge the roles of the chief executive officer and the chairman of the board?

A)Extensive company knowledge
B)Efficiency
C)Ethical reasoning
D)Effectiveness

Question 49

What would be a negative consequence of merging the roles of the chief executive officer and the board of directors?

A)Extensive company knowledge
B)Efficiency
C)Ethical reasoning
D)Effectiveness

Question 50

The set of guidelines that requires companies to abide by a set of operating standards and to explain why they choose not to refers to ________.

A)"explain or else"
B)"comply or explain"
C)"comply or else"
D)"comply or resign"

Question 51

In 1992,_______ led a committee on the new topical issue of corporate governance.

A)Daniel Everton
B)Mervyn King
C)Alexander Elkins
D)Adrian Cadbury

Question 52

The ______ is responsible for overseeing the financial reporting process of an organization and is staffed by members of the board of directors plus independent or outside directors.

A)board of directors
B)audit committee
C)frontline managers
D)compensation committee

Question 53

Who is responsible for overseeing the financial reporting process of an organization?

A)The board of directors
B)The audit committee
C)The frontline managers
D)The compensation committee

Question 54

Which of the following describes the first step in a policy of disregarding the corporate governance model?

A)Merge the roles of chief executive officer and chairman of the board into one individual.
B)Separate the roles of chief executive officer and chairman of the board into different individuals.
C)Hire outside individuals to sit on the board of directors.
D)Assign the senior management team of the firm to serve on the board of directors.

Question 55

The corporate ______ is responsible for monitoring the ethical business practices of an organization.

A)board of directors
B)audit committee
C)governance committee
D)frontline managers

Question 56

The Cadbury report argued for a guideline of ______.

A)"comply or resign"
B)"comply or else"
C)"comply or explain"
D)"explain or else"

Question 57

________ was the focus of the Cadbury report.

A)Internal governance
B)Shareholder model
C)Stakeholder model
D)The triple bottom line

Question 58

The set of guidelines that requires companies to abide by a set of operating standards or face stiff financial penalties refers to _______.

A)"comply or explain"
B)"comply or resign"
C)"explain or else"
D)"comply or else"

Question 59

The Sarbanes-Oxley Act of 2002 incorporates the approach of _______.

A)"comply or else"
B)"comply or resign"
C)"comply or explain"
D)"explain or else"

Question 60

In contrast to the Cadbury report's focus on internal governance,the ______ included a code of corporate practices and conduct that went beyond the corporation itself.

A)King report
B)Shareholder model
C)Stakeholder model
D)King II

Question 61

____________________ formally recognized the need to move the stakeholder model forward and to consider a triple bottom line instead of a single bottom line of profitability.

Question 62

The ____________________committee is responsible for overseeing the financial reporting process of an organization.

Question 63

The _________________ committee is responsible for overseeing the financial reporting process of an organization and is staffed by members of the board of directors plus independent or outside directors.

Question 64

The argument in favor of merging the roles of the chief executive officer and the chairman of the board is ___________________.

Question 65

The Sarbanes-Oxley Act of 2002 incorporates the approach of "comply or ____________."

Question 66

The set of guidelines that requires companies to abide by a set of operating standards and to explain why they choose not to refers to "______________ or ______________."

Question 67

The set of guidelines that requires companies to abide by a set of operating standards or face stiff financial penalties refers to "______________________."

Question 68

The _____________________________ oversee the governance of an organization.

Question 69

The __________________________ committeeis responsible for monitoring the ethical business practices of an organization.

Question 70

A commitment to good corporate governance can make a company ___________________.

Question 71

A commitment to good corporate governance can make a company ______.

A)less profitable
B)unattractive to investors
C)more profitable
D)as profitable as a commitment to bad corporate governance

Question 72

The fiduciary responsibility of a manager is ultimately based on ______.

A)educational background
B)experience
C)charisma
D)trust

Question 73

_____________________________ was the focus of the Cadbury report.

Question 74

The Cadbury report argued for a guideline of "comply or ____________."

Question 75

The ___________________ committee is an operating committee staffed by members of the board of directors plus independent or outside directors and is responsible for setting the compensation for the CEO and other senior executives.

Question 76

In contrast to the Cadbury report's focus on internal governance,the ___________________ report included a code of corporate practices and conduct that went beyond the corporation itself.

Question 77

In 1992,____________________________ led a committee on the new topical issue of corporate governance.

Question 78

A board of directors typically consists of both _______________ and __________________ members.

Question 79

The fiduciary responsibility of a manager is ultimately based on _________________.

Question 80

____________________________ is the process that directs and controls organizations.