Question 1

To vote on major operating decisions is one of the five board functions.

Accepted Answer

To vote on major operating decisions is one of the key functions of a board of directors.

Question 2

In the summer of 2002, what legislation increased the monitoring ability and responsibilities of American board directors?

Accepted Answer

The Sarbanes-Oxley Act (also known as the Public Company Accounting Reform and Investor Protection Act) was enacted in July 2002 and increased the monitoring abilities and responsibilities of American board directors. It aimed to improve corporate governance and enhance financial disclosures to protect investors from accounting fraud.

Question 3

The lack of CEOs serving as Board Directors by America's top companies is evidence that the practice should be avoided

Accepted Answer

The lack of CEOs serving as Board Directors in some of America's top companies does not necessarily indicate that the practice should be avoided. It could be due to various strategic reasons, governance models, or conflict of interest policies specific to each company. The effectiveness of CEOs serving as Board Directors can vary based on the context and goals of the organization.

Question 4

Some European countries have firms with a two-tier board structure.

Accepted Answer

Some European countries, such as Germany and the Netherlands, have a two-tier board structure, which includes both a management board and a supervisory board.

Question 5

Which of the following is NOT a common board committee?

Accepted Answer

Audit, nomination, and compensation committees are all common board committees that focus on financial reporting, selecting board members, and determining executive compensation, respectively. However, a marketing committee is not typically a common board committee as its focus is more on developing and implementing marketing strategies for the company, rather than overseeing governance and financial matters.

Question 6

Federal law explicitly dictates that public corporations must have a board of directors.

Accepted Answer

The answer of Federal law explicitly dictates that public corporations...

Question 7

According to research, larger boards are more likely to act independent and therefore are more effectively at enhancing a firm's value than smaller boards.

Accepted Answer

Research suggests that while larger boards may offer a wider range of expertise and resources, they can also suffer from coordination and communication problems, making decision-making slower and potentially less effective. Smaller boards are often seen as more cohesive and agile, which can enhance a firm's value by enabling quicker and more unified decision-making.

Question 8

Because directors are supposed to represent shareholders' interests, directors have all these duties EXCEPT:

Accepted Answer

The duty of auditing is not a typical duty of directors. The other duties listed (fiduciary duty, duty of care, duty of loyalty and fair dealing) are all common responsibilities of directors to represent the best interests of shareholders.

Question 9

A director is not independent if he or immediate family) has worked for the company or its auditor within the last 10 years.

Accepted Answer

The answer of A director is not independent if he...

Question 10

According to NYSE standards, the audit committee has increased authority and responsibility to hire and fire the auditing firm.

Accepted Answer

According to NYSE standards, the audit committee has increased authority and responsibility to hire and fire the auditing firm.

Question 11

Generally, what can be said about the structure of boards?

Accepted Answer

While A and B have been found to be untrue, C is a widely accepted statement regarding board structure. D is not true as there are varying opinions on the best board structure.

Question 12

A young growth-oriented firm may actually need more insiders on its Board of Directors.

Accepted Answer

A young growth-oriented firm may benefit from having more insiders on its Board of Directors because these individuals have firsthand knowledge and experience with the company's operations and can provide valuable insights and guidance. Additionally, having insiders on the board can help align the interests of management with those of shareholders. However, it is still important to have independent directors to provide objective perspectives and ensure proper corporate governance.

Question 13

Board members are chosen by:

Accepted Answer

Board members are chosen by a vote of the shareholders. This is the most democratic and fair way to ensure that the people who make decisions for the company are representative of its owners. Being related to a member of the board (A) or being promoted within the company (D) could lead to conflicts of interest, while a vote by all employees (B) may not be practical or effective. An appointment by the executive committee (E) could also lead to potential conflicts of interest.

Quiz 4: The Board of Directors

To vote on major operating decisions is one of the five board functions.

In the summer of 2002, what legislation increased the monitoring ability and responsibilities of American board directors?

The lack of CEOs serving as Board Directors by America's top companies is evidence that the practice should be avoided

Some European countries have firms with a two-tier board structure.

Which of the following is NOT a common board committee?

Federal law explicitly dictates that public corporations must have a board of directors.

According to research, larger boards are more likely to act independent and therefore are more effectively at enhancing a firm's value than smaller boards.

Because directors are supposed to represent shareholders' interests, directors have all these duties EXCEPT:

A director is not independent if he or immediate family) has worked for the company or its auditor within the last 10 years.

According to NYSE standards, the audit committee has increased authority and responsibility to hire and fire the auditing firm.

Generally, what can be said about the structure of boards?

A young growth-oriented firm may actually need more insiders on its Board of Directors.

Board members are chosen by: