Question 1

Prints4U is a small printing firm in Minneapolis, MN.As is typical for a firm of this size, the managers own a __________ percentage of the firm.As a result, there is __________ separation between ownership and managerial control.

Accepted Answer

In small firms, managers often own a large percentage of the firm, leading to less separation between ownership and managerial control.

Question 2

Foreign investors are playing a relatively minor role in the governance of firms in many countries.

Accepted Answer

The answer of Foreign investors are playing a relatively minor...

Question 3

Scandals at companies such as Enron, WorldCom, and HealthSouth illustrate the negative effects of poor ethical behavior on a firm's efforts to satisfy stakeholders.

Accepted Answer

These scandals demonstrate how unethical practices can lead to financial losses, legal consequences, and damage to a company's reputation, ultimately harming stakeholders.

Question 4

Amos Ball, Inc., is a printing company in Iowa that has been family owned and managed for three generations.Which of the following statements is MOST likely to be true?

Accepted Answer

Family-owned businesses often perform better with a family member as CEO due to alignment of interests, long-term commitment, and deep understanding of the company culture and values.

Question 5

In the United States, a firm's key stakeholder(s) is(are) the:

Accepted Answer

Shareholders are considered key stakeholders in a firm as they own shares of the company and have a vested interest in its financial performance and governance.

Question 6

The separation between firm ownership and management creates a(n) __________ relationship.

Accepted Answer

The separation between firm ownership and management creates an agency relationship, where managers (agents) are hired to run the company on behalf of the owners (principals).

Question 7

Corporate governance mechanisms are designed to ensure that top-level managers make strategic decisions that best serve the interests of all stakeholders.

Accepted Answer

Corporate governance mechanisms are established to align the interests of management with those of stakeholders, ensuring that strategic decisions benefit the organization and its stakeholders.

Question 8

Corporate governance is all of the following EXCEPT:

Accepted Answer

Corporate governance primarily focuses on the relationship between the owners (shareholders) and the management of a company, rather than resolving conflicts among all corporate employees.

Question 9

Managerial employment risk is the:

Accepted Answer

Managerial employment risk refers to the potential for managers to lose their jobs, compensation, or reputation, which can influence their decision-making and behavior within a company.

Question 10

Ethically responsible companies design and use governance mechanisms that will at least minimally satisfy stakeholders' interests.

Accepted Answer

Ethically responsible companies aim to balance and address the needs and interests of their stakeholders, ensuring that their governance mechanisms are designed to meet these expectations at a minimum level.

Question 11

The way that U.S.corporate boards of directors are presently structured, they have little influence on the unethical behavior of top management.

Accepted Answer

Corporate boards of directors have significant influence over top management, including oversight responsibilities and the ability to hold executives accountable for unethical behavior.

Question 12

LeederTech is facing a hostile takeover.Its focus as a defense strategy has been to ensure some continuity.It has decided to pursue a strategy that will prevent an acquirer from replacing the entire board of directors immediately, even though this tends to have very low success and a negative or negligible effect on shareholder wealth.What strategy did LeederTech select?

Accepted Answer

Corporate charter amendments can include staggered board elections, which prevent an acquirer from replacing the entire board at once, aligning with LeederTech's strategy for continuity.

Question 13

Large German firms must include employees, union members, and shareholders in the formal governance structure.

Accepted Answer

German corporate governance follows a two-tier board system where employees and union members are represented on the supervisory board, alongside shareholders, as part of the co-determination model.

Question 14

Corporate governance primarily revolves around the relationship between which of the following two parties?

Accepted Answer

The answer of Corporate governance primarily revolves around the relationship...

Question 15

Attitudes toward corporate governance in Japan are affected by the concepts of obligation, family, and consensus.

Accepted Answer

Japanese corporate governance is influenced by cultural values such as obligation (giri), family (ie), and consensus (nemawashi), which emphasize loyalty, group harmony, and collective decision-making.

Question 16

Corporate governance is important to nations because:

Accepted Answer

Firms seek to invest in nations with national governance standards that are acceptable to them.

Question 17

Why would the top-level managers at Nutzandboltz, a hardware company, decide to invest free cash flow in product lines such as clothing or toys?

Accepted Answer

Investing in new product lines like clothing or toys increases the company's diversification, which can spread risk and potentially open up new revenue streams.

Question 18

In the United States, the fundamental goal of business is to:

Accepted Answer

The fundamental goal of business in the United States is to maximize shareholder wealth. This means that businesses are primarily focused on making money for their owners, rather than on other goals such as customer satisfaction, job security, or generating profits.

Question 19

If a stakeholder is dissatisfied with a firm, it will withdraw its support and give it to another firm.

Accepted Answer

A stakeholder is an individual or group that has a vested interest in a firm. If a stakeholder is dissatisfied with a firm, it may withdraw its support and give it to another firm. This can have a negative impact on the firm's financial performance and reputation.

Question 20

Which of the following is NOT an internal governance mechanism?

Accepted Answer

The market for corporate control is an external governance mechanism, as it involves external parties potentially taking over a company to improve its management and performance.

Quiz 10: Corporate Governance

Prints4U is a small printing firm in Minneapolis, MN.As is typical for a firm of this size, the managers own a percentage of the firm.As a result, there is separation between ownership and managerial control.