Question 1

Corporate governance of any organization,publicly traded or not,must focus on all of the following basic principles EXCEPT:

Accepted Answer

The basic principles of corporate governance include accounting, reporting, board structure, and executive compensation. Entry-level employee compensation is an important aspect of the organization's overall compensation strategy, but it is not part of the basic principles of corporate governance.

Question 2

________ is a relationship between two parties whereby one party has the trust and legal and ethical duty to act in the best interests of the other.

Accepted Answer

Fiduciary responsibility is a legal and ethical duty based on trust for one party to act in the best interest of the other. It often refers to the responsibility of agents, such as lawyers or financial advisors, to act on behalf of their clients in a trustworthy manner.

Question 3

XYZ Suppliers,Inc.supplies the trees needed for production of paper at the ABC Paper Company.XYZ Suppliers are ________ stakeholders.

Accepted Answer

B

Question 4

The ________ stakeholders of a firm are all those employed by the firm,including management and leadership.

Accepted Answer

The term "internal stakeholders" refers to individuals or groups employed by the firm, including its management and leadership. Therefore, choice C "internal" is the best option. Choices A, B, and D refer to external factors such as financial, business, and external stakeholders, respectively. Choice E refers to social stakeholders, which include communities and other non-business related parties.

Question 5

Which of the following is NOT a significant result when a firm begins its initial sale of shares to the public in the United States?

Accepted Answer

When a firm begins its initial sale of shares to the public in the United States, it is required to disclose a sizeable degree of financial and operational detail, comply with Securities and Exchange Commission rules, comply with all the specific operating and reporting requirements of the specific exchange on which it is traded, and will now have increased regulatory requirements. However, the firm will not only have to publish financial and operational detail once a year but also on a quarterly basis.

Question 6

ABC Oil Company went bankrupt after it was discovered that the company had engaged in accounting fraud and questionable business ethics.In recent years,failures in ________ have raised issues about the very ethics and culture of the conduct of business.

Accepted Answer

The term "corporate governance" relates to the rules, regulations, and mechanisms by which corporations are directed and controlled. It refers to the ethical and responsible business practices that guide decision-making by a business organization. In the given scenario, the failure of ABC Oil Company was due to unethical practices and accounting fraud, which highlights the importance of corporate governance in ensuring ethical conduct in business organizations. Therefore, option D is the correct answer. Options A, B, C, and E are not relevant to the given scenario.

Question 7

________ is the pursuit of the interests of corporate shareholders,primarily the profitability of the organization,over and above the interests of other stakeholders.

Accepted Answer

Maximization of shareholder value is the pursuit of the interests of corporate shareholders, primarily the profitability of the organization, over and above the interests of other stakeholders, such as employees, customers, and the community. This concept is rooted in the belief that the ultimate goal of a corporation is to create value for its shareholders through increased profits and share price, which in turn leads to higher dividends and capital gains.

Question 8

According to the text,companies from which of the following countries have been credited with striving to operate in the interest of multiple stakeholders,not just the shareholders?

Accepted Answer

According to the text, German companies have been credited with striving to operate in the interest of multiple stakeholders, not just the shareholders.

Question 9

According to Milton Friedman in The New York Times Magazine,"The social responsibility of business is to increase its ________."

Accepted Answer

According to Milton Friedman, the social responsibility of a business is to increase its profits. In his view, businesses should focus solely on maximizing profits within the confines of the law and ethical standards, without concern for broader social or environmental concerns.

Question 10

The ________is the most common form of business organization which has all of the rights and responsibilities as that of an individual,while possessing limited liability to its owners.

Accepted Answer

A corporation is a legal entity that has the same rights and responsibilities as an individual, but limited liability for its owners or shareholders. This makes it the most common form of business organization for many reasons including tax benefits, easier access to funding, and legal protection for its owners.

Question 11

The two primary financial stakeholders of a firm,the providers of capital for both investment and operation,are ________ and ________.

Accepted Answer

The providers of capital for both investment and operation are shareholders and creditors. Shareholders provide equity capital, while creditors provide debt capital. Customers, manufacturers, and employees are not primary financial stakeholders in the firm.

Question 12

The management at Cold Chill Ice Cream Company attempts to balance the interests of all stakeholders of the organization.Cold Chill has a predominant business philosophy of:

Accepted Answer

The best choice is stakeholder capitalism as the management of Cold Chill Ice Cream Company attempts to balance the interests of all stakeholders which includes not only the shareholders but also customers, employees, suppliers, and the community. Stakeholder capitalism focuses on creating value for all stakeholders, rather than just maximizing shareholder value.

Question 13

________ is the operation of a firm or organization in a manner which attempts to balance the interests of all stakeholders of the organization.

Accepted Answer

Stakeholder capitalism refers to the practice of considering the interests of all stakeholders, including employees, customers, suppliers, and the community, and not just that of shareholders. This approach involves creating a sustainable and ethical business model that benefits both the company and its stakeholders in the long run. It focuses on responsible and equitable practices that support the well-being of everyone involved in the organization's operations.

Question 14

Melanie lives in a small community in Virginia.The vast majority of people who live in the area shop and dine at locally-owned businesses and restaurants.With news that a large supermarket might be opening in her town,Melanie and others are worried about the locally-owned businesses and their future.Melanie and the other members of her community are examples of ________ stakeholders.

Accepted Answer

Melanie and the other members of her community are concerned about the impact of the large supermarket on the locally-owned businesses in their town. This makes them social stakeholders, as they are invested in the well-being and social impact of the businesses in their community. Financial stakeholders are more concerned with the financial performance of a business, while business stakeholders are those directly involved in the operation of the businesses themselves. Internal stakeholders are those within the businesses or organization, and economic stakeholders are concerned with the broader economic impact of the businesses on a larger scale.

Question 15

A corporation is a legal creation deemed to have rights and responsibilities like a person.Unlike human beings,however,a corporation ________.

Accepted Answer

The other options (A-D) are incorrect because corporations can indeed sue, borrow, buy and sell, whereas possessing a moral conscience is a subjective concept that only applies to living beings.

Question 16

According to 2009 survey results on how important the interests of specific stakeholder groups should be in the business decisions by corporate CEOs,the ________ interests should come first in a CEO's business decisions.

Accepted Answer

The interests of customers are often prioritized in business decisions by corporate CEOs, as customer satisfaction and loyalty are crucial for a company's success and long-term sustainability.

Question 17

It is estimated that more than ________ percent of the world's publicly traded companies are U.S.or British.

Accepted Answer

The answer of It is estimated that more than ________...

Question 18

Joshua is a member of management at the firm where he works,Great Coffee Company.Lately he has been studying how shareholder and management interests diverge and how his firm can motivate its management to act like owners when managing the corporation.Joshua is utilizing the ________ field of thought.

Accepted Answer

Joshua's focus on the divergence of shareholder and management interests and motivating management to act like owners suggest that he is studying agency theory, which is concerned with the conflicts that can arise between a company's owners (shareholders) and its managers (agents). This makes D) agency the best choice.

Question 19

In some countries,the management of the corporation strives to operate the firm in the interest of multiple stakeholders,not just the shareholders.It is generally referred to as:

Accepted Answer

Stakeholder capitalism refers to the approach taken by management to consider the interests and needs of all stakeholders, including shareholders, employees, customers, suppliers, and the community, in their decision-making processes. This approach places importance on creating long-term value for all stakeholders rather than just focusing on maximizing shareholder value. This model is commonly practiced in countries like Germany and Japan whereas shareholder capitalism is more common in the United States.

Question 20

Best Flowers is currently a private firm.Within the next 6 months,the company plans to issue shares of its stock to the market for the first time.Best Flowers is about to schedule a(n):

Accepted Answer

An initial public offering (IPO) is the process of a private company issuing shares of its stock to the public. This would allow Best Flowers to become a publicly traded company and raise capital through the sale of shares in the stock market. Dividend yield, fiduciary responsibility, sustainability listing, and corporate governance are all important aspects of being a publicly traded company, but they are not directly related to the process of issuing shares through an IPO.

Quiz 10: Corporate Governance and Reform