Question 1

The purpose of governance mechanisms in corporations is to

Accepted Answer

The purpose of governance mechanisms is to reduce the scope and frequency of the agency problem. This problem arises due to the separation of ownership and management in the corporation, where managers may act in their own self-interest rather than for the benefit of shareholders. Governance mechanisms help align the interests of managers and shareholders, and ensure that managers are held accountable for their actions. Regulatory requirements, employee discipline, and corporate growth limitations are not the primary purposes of governance mechanisms.

Question 2

Thinking of it in its simplest terms,the balanced scorecard approach may be viewed as the

Accepted Answer

The balanced scorecard approach is often compared to the dials and indicators in an airplane cockpit because it provides various measures and indicators that help managers assess the performance of their organization from multiple perspectives. Just like a pilot needs to monitor multiple indicators to ensure a safe flight, managers need to monitor multiple indicators to ensure their organization's success. The other choices (dashboard on an automobile, touchpad on a cell phone, keyboard for a computer) do not adequately capture the complexity and multifaceted nature of the balanced scorecard approach.

Question 3

To make sure that ethical issues are considered in business decisions,

Accepted Answer

Top managers are responsible for setting the ethical tone for the entire organization. By articulating and modeling ethical behaviors, they communicate to employees what is expected and valued in the company. This can help prevent ethical lapses and ensure that ethical issues are considered in business decisions. Therefore, option C is the best choice. The other options are not effective in addressing ethical issues in business decisions.

Question 4

Business ethics are concerned with accepted principles of right or wrong governing the conduct of businesspeople.Identify and discuss the common examples of unethical decisions that businesspeople have made.

Accepted Answer

The answer of Business ethics are concerned with accepted principles...

Question 5

A stock option is a right to buy

Accepted Answer

A stock option is a contract that gives the holder the right, but not the obligation, to buy or sell shares of a stock at a predetermined price, known as the strike price, on or before a specific date. Thus, choice C is the correct answer. Choice A is incorrect because the stock option strike price may be different from the current market price. Choices B, D and E are incorrect because they are not related to stock options.

Question 6

A typical board of directors is composed of

Accepted Answer

A typical board of directors is composed of both inside and outside directors, with inside directors being individuals who are employed by the company and have a direct involvement in its operations, while outside directors are individuals who are not employed by the company and provide an independent perspective and expertise in areas such as finance, law, or industry knowledge.

Question 7

Pursuing strategies that maximize the long-run profitability and profit growth of a company benefits which group(s)of stakeholders?

Accepted Answer

Pursuing strategies that maximize the long-run profitability and profit growth of a company benefits all of the mentioned stakeholders. Employees benefit from job security and potential career advancement opportunities; creditors benefit from a more financially stable company that is more likely to repay debts; charitable organizations in the local community can benefit from donations and support from a profitable company; and the general public benefits from a thriving economy and potential job opportunities. Additionally, maximizing long-term profitability can lead to more sustainable business practices that benefit the environment and the global community.

Question 8

Sarbanes-Oxley,federal legislation enacted in 2002,requires

Accepted Answer

Sarbanes-Oxley requires CEOs and CFOs to endorse their company's financial statements, which ensures that they take responsibility for the accuracy and completeness of the financial statements. This provision is intended to prevent fraudulent financial reporting, which was a significant problem prior to the enactment of the legislation. The other options are incorrect as they either do not reflect the requirements of Sarbanes-Oxley or are not relevant to the legislation.

Question 9

What is the major purpose of a corporate board of directors?

Accepted Answer

The major purpose of a corporate board of directors is to monitor corporate strategy decisions and ensure that they are consistent with stockholders' interests. While they may also approve certain decisions and oversee the selection of additional board members, their primary responsibility is to protect the interests of shareholders. The board also plays a critical role in overseeing executive compensation to ensure it aligns with the company's goals and stockholders' interests. However, their central function is to provide strategic guidance and ensure that the company is moving in the right direction.

Question 10

Ethics may best be thought of as

Accepted Answer

Ethics are moral principles or standards that govern behavior and determine what is right or wrong. While they may sometimes overlap with legal prescriptions or cultural mores, they are distinct in that they are based on principles of morality rather than on rules or traditions. Therefore, the best answer is B - standards of right and wrong.

Question 11

The basic principles of agency theory are

Accepted Answer

The basic principles of agency theory are relatively straightforward and can be easily understood.

Question 12

When managers of a firm seek to unilaterally rewrite the terms of a contract with suppliers,buyers,or complement providers in a way that is more favorable to their firm,they are engaging in

Accepted Answer

Unilaterally rewriting the terms of a contract to benefit one's firm is a form of opportunistic exploitation, as it takes advantage of the other party's reliance on the existing terms of the contract. This behavior is generally considered unethical and can harm the long-term relationships and reputation of the firm.

Question 13

Which of the following is not something that managers can do to make sure that ethical issues are considered in business decisions?

Accepted Answer

The Friedman doctrine, which states that a company's only responsibility is to maximize profits for its shareholders, does not consider ethical considerations in business decisions. Therefore, to ensure ethical issues are considered, adopting this doctrine would not be a helpful approach. The other choices listed are all effective ways that managers can make sure ethical issues are considered in business decisions.

Question 14

Business ethics is concerned with

Accepted Answer

Business ethics is concerned with ensuring that managers weigh the ethical implications of their decisions. While teaching the difference between right and wrong is a component of ethics, it is not its primary concern. Ensuring legal compliance and maximizing profits are also important in business, but ethics is not solely focused on these areas. Additionally, the notion of replacing economics with social responsibility is not a goal of ethics, but rather finding a balance between the two.

Question 15

When managers pay bribes to gain access to lucrative business contracts,they are engaging in

Accepted Answer

Managers who pay bribes to gain access to lucrative business contracts are engaging in corruption, which is the abuse of power for personal gain. This behavior is unethical and illegal.

Question 16

Identify and discuss the governance mechanisms that help align the incentives of stockholders and managers and help monitor and control management.

Accepted Answer

The answer of Identify and discuss the governance mechanisms that...

Question 17

The takeover constraint refers to the

Accepted Answer

The takeover constraint refers to the risk of being acquired by another company. This constraint puts pressure on managers to make decisions that will prevent their company from being acquired, such as implementing anti-takeover measures or making strategic acquisitions themselves.

Question 18

CEO compensation packages are most frequently criticized because of their

Accepted Answer

CEO compensation packages are often criticized for not being properly tied to the company's performance. Many believe that CEOs receive large salaries and bonuses even if the company is not performing well or if the company's performance is declining. This disconnect between pay and performance is seen as unfair to other employees and shareholders.

Question 19

Consider a national chain of company-owned fast-food restaurants.For this firm,list the important stakeholders.Then describe how each stakeholder group can affect the firm's profitability.

Accepted Answer

The answer of Consider a national chain of company-owned fast-food...

Question 20

Explain the principles of agency theory,including the issues it addresses.What are some effective ways to deal with agency problems,as implied or stated by agency theory?

Accepted Answer

The answer of Explain the principles of agency theory,including the...

Quiz 11: Corporate Performance, Governance, and Business Ethics