Question 1

Leveraged buyouts are historically associated with reduction in workforces in an effort to streamline processes and decrease costs.

Accepted Answer

Leveraged buyouts often involve restructuring to improve financial performance, which can include workforce reductions to cut costs and increase efficiency.

Question 2

An unsolicited takeover attempt is often dubbed a hostile takeover.

Accepted Answer

An unsolicited takeover attempt is considered hostile because it is made without the consent or cooperation of the target company's board of directors.

Question 3

Shark repellants are potential defenses against CEO duality.

Accepted Answer

False

Question 4

CEO pay is a function of a day's work for a day's pay.

Accepted Answer

CEO pay is typically determined by a variety of factors including company performance, market benchmarks, and compensation packages, rather than strictly being a function of hours worked.

Question 5

CEO duality is a situation where a single individual acts as both the CEO and the chairman of the board of directors of an organization.

Accepted Answer

CEO duality refers to the practice where one person holds both the CEO and chairman positions, combining executive and board leadership roles.

Question 6

In most publicly traded firms, CEO compensation generally includes guaranteed salary, cash bonuses, and stock options.

Accepted Answer

Most publicly traded firms offer a combination of guaranteed salary, cash bonuses, and stock options to align the CEO's interests with those of the shareholders and incentivize performance.

Question 7

In Kohlberg's Stage five of moral reasoning, individuals focus on the direct consequences their actions will have.

Accepted Answer

Stage five of Kohlberg's moral reasoning is characterized by a social contract orientation, where individuals consider the greater good and societal rules, rather than focusing solely on direct consequences.

Question 8

Individuals or firms that hope to conduct a takeover are often referred to as corporate raiders.

Accepted Answer

Corporate raiders are individuals or firms that target companies for takeover, often with the intent to restructure or sell off parts of the business for profit.

Question 9

In Kohlberg's pre-conventional level of moral reasoning, morality is judged by comparing individuals' actions with the expectations of society.

Accepted Answer

In Kohlberg's pre-conventional level, morality is judged based on personal consequences and self-interest, not societal expectations.

Question 10

The board of directors has the power to hire or fire a CEO.

Accepted Answer

The board of directors is responsible for overseeing the management of a company, which includes hiring and firing the CEO.

Question 11

Many institutional investors, such as mutual funds and pension funds, often prefer significant representation by board insiders in the board of directors.

Accepted Answer

Institutional investors typically prefer a majority of independent directors on the board to ensure objective oversight and reduce potential conflicts of interest.

Question 12

A leveraged buyout happens when the management of a company threatens to sell additional stock to existing shareholders, increasing the shares needed for a viable takeover.

Accepted Answer

A leveraged buyout (LBO) involves acquiring a company using a significant amount of borrowed money, not threatening to sell additional stock to existing shareholders.

Question 13

The term perks, derived from perquisite, refers to special privileges or rights as a function of one's position.

Accepted Answer

Perks, short for perquisites, are benefits or privileges that come with a particular job or position, often beyond regular salary or wages.

Question 14

Taking a poison pill refers to a potential takeover firm selling additional stocks to existing shareholders, increasing the shares needed for a viable takeover.

Accepted Answer

A poison pill is a strategy used by companies to prevent or discourage hostile takeovers by making the company less attractive to the potential acquirer, often by diluting the value of the shares.

Question 15

Greenmail refers to a corporate raider purchasing large blocks of stock at a premium to execute a takeover.

Accepted Answer

Greenmail refers to a corporate raider purchasing a significant amount of a company's stock and then forcing the company to buy back the stock at a premium to prevent a takeover, not to execute one.

Question 16

A white knight is an alternative buyer of a potential takeover target, who is more favorable to the existing management of the target firm.

Accepted Answer

A white knight is a more favorable buyer who steps in to acquire a company facing a hostile takeover, often preserving the interests of the existing management and shareholders.

Question 17

A golden parachute refers to a lucrative financial incentive for the newly appointed executives of a firm that's been taken over.

Accepted Answer

A golden parachute is a lucrative financial package given to executives if they are terminated after a company is taken over, not specifically for newly appointed executives.

Question 18

An agency problem reflects the separation of interest between the board of directors of a company and its employees.

Accepted Answer

An agency problem typically refers to the conflict of interest between the management (agents) and the shareholders (principals) of a company, not between the board of directors and employees.

Question 19

CEOs often favor the use of board insiders who typically have intimate knowledge of the firm's business affairs.

Accepted Answer

CEOs may prefer board insiders because they have a deep understanding of the company's operations, culture, and strategic goals, which can facilitate more informed decision-making and governance.

Question 20

CEO compensation is a function of the competitive wages that other corporations would offer for a potential CEO's services.

Accepted Answer

CEO compensation is influenced by market forces, including what other companies are willing to pay for similar talent, to attract and retain top executives.

Quiz 10: Leading an Ethical Organization: Corporate Governance, Corporate Ethics, and Social Responsibility