1. Some analysts believe that business’s social
legitimacy
is
fragile.
a. True
b.
False
2.
Business,
by virtue of its place in society, has an inherent right to
exist.
a. True
b.
False
3. The
corporate
system as a whole rarely
addresses
the idea of social
legitimacy.
a. True
b.
False
4. The
purpose
of
corporate governance
is a direct
outgrowth
of the
question
of
legitimacy.
a. True
b.
False
5. Shareholders’ control is manifested primarily in the right to select the CEO of the
company.
a. True
b.
False
6. The major condition of modern corporations that contributes to the corporate governance problem is the
separation
of ownership from
control.
a. True
b.
False
7. Much of the blame for corporate scandals like Enron and WorldCom can be placed on the audit committees of
the
boards of
directors.
a. True
b.
False
8. Wages have grown faster than CEO salaries over the past decade.
a. True
b.
False
9. The Say on Pay movement evolved from concerns over low executive compensation.
a. True
b.
False
10. Research has shown that golden parachutes have had no effect on senior managers’ resistance to takeover attempts.
a. True
b.
False
II.
The issue at the heart of the Sarbanes-Oxley Act is protection for whistle-blowers.
a. True
b.
False
12. Penalties under the Sarbanes-Oxley Act can include fines and prison
terms.
a. True
b.
False
13. There is some early evidence that the Sarbanes-Oxley Act has made little difference in the attention
fmancial
executives pay to shareholder
reports.
a. True
b.
False
14. Although initially, companies did not object to the compliance costs of Sarbanes-Oxley, after 10 years
experience
with the law, they now object
strenuously
a. True
b.
False
15. During the past forty years, corporate boards have become more diverse.
a. True
b.
False
16. Audit committees arguably have the most
responsibility
of all board committees.
a. True
b.
False
17. Practically speaking the corporate CEO often does the work the nominating committee should
do.
a. True
b.
False
18. Because of its theoretical role of authority over the CEO, it has always been the board’s responsibility to get tough
with the senior manager when needed.
a. True
b.
False
19. Most shareholder resolutions concern some aspect of executive compensation.
a. True
b.
False
20. Managers have successfully lobbied Congress to make shareholder lawsuits very difficult to file.
a. True
b.
False
21. In the grand scheme of things, the interests of the investing public are more important than those of the
management
team.
a. True
b.
False
22. Congruence between the organization’s activities and society’s expectations is
called
a. aligrunent.
b. legitimacy.
c. social norms.
d. acceptability.
23. The dynamic process by which business seeks to perpetuate its acceptance is
called
a. advertising.
b. marketing.
c. legitimation.
d. embedding.
24. The micro level of legitimacy refers to achieving and maintaining legitimacy by conforming to societal expectations
for
a. the business system as a
whole.
b. public policy partnerships.
c. non-government organizations.
d. individual businesses.
25. The macro level of legitimacy refers to the achievement and maintenance of legitimacy
by
a. goverrnnent.
b. private/public partnerships.
c. business as a
whole.
d. individual businesses.
26. Which of the following is not a method of obtaining the micro level of legitimacy?
a. A company adapts its operations to conform to prevailing
standards.
b. A company may seek to avoid detection that it is operating contrary to social
norms.
c. A company may attempt to changes the public’s values and
norms.
d. A company may identity itself with other organization, people, or
values.
27. The method by which a finn is being governed, directed, administered, or controlled is
a. corporate
governance.
b.
management.
c. management by
objectives.
d.
management
by
decree.
28. The state-issned docnment that grants the corporation’s right to exist and stipulating the basic terms of its
existence
is
a(n)
a. certificate of
legitimacy.
b. occupancy
permit.
c.
charter.
d. article of incorporation.
29. Shareholders
are
a. owners of the
corporation.
b.
creditors of the
corporation.
c. anyone who is affected by the
corporation.
d. also employees of the
corporation.
30. The group that is elected by shareholders to govern and oversee management is
the
a. investment council.
b. board of
directors.
c. board of
trustees.
d. governing council.
31. The people hired by the board to run the company and operate it on a daily basis is
a. the employee council.
b.
management.
c. administration.
d.
headquarters.
32. Employees are the people hired by the company to
a. oversee
management.
b. work with the board to keep management in
line.
c. do the actual work of operating the
company.
d. set the course for the company to
follow.
33. The method by which shareholders elect boards of directors is known as
a.
distributive
voting.
b.
cumulative
voting.
c. the proxy process.
d.
direct
balloting.
34. When the interests of management and owners are not aligned, there will likely be a(n)
a. agency problem.
b. free agency dilemma.
c.
shareholder
rebellion.
d.
shareholder
resolution.
35. Boards have recently improved in all of the following ways
except
a. more directors are independent.
b. reducing executive pay.
c. more directors own stock in the company.
d. more boards are likely to demand change.
36. Directors who have some sort of ties to the firm are
termed
a. dependent
directors.
b. independent
directors.
c. inside directors.
d. outside
directors.
37. Directors who have no ties to the frrrn other than membership on the board are
called
a. dependent
directors.
b. free agent
directors.
c. inside directors.
d. outside
directors.
38. Executive Excess reports that in 2011 the ratio of CEO pay to average workers’ pay
was:
a. 531 to 1.
b. 209 to 1.
c. 1,063 to 1.
d. 18 to 1.
39. The Say on Pay
movement:
a. First began with regulations including a requirement to put a remuneration report to a shareholder
vote
b. Began in the United
States
c. Evolved from concerns over low executive
compensation
d. Is supported by the
SEC
40. Compensation recovery mechanisms that enable a company to recoup compensation funds is called .
a. proxy
process.
b. risk
arbitrage.
c. golden
parachutes.
d. clawback provisions.
41. A major criticism of CEOs and boards during the 1980s, when corporate takeovers were regular occurrences,
was
a. not trying to get the best price they could for
shareholders.
b. focusing on “making deals” instead of running the business.
c. trying to run up the price of their company’s stock in preparation for the
sale.
d. being obsessed with self-preservation instead of making optimal decisions on behalf of
shareholders.
42. A shareholder rights plan aimed at discouraging or preventing a hostile takeover is known as
a. a poison pill.
b. golden handcuffs.
c. a golden
parachute.
d. insider trading.
43. A contract in which a corporation agrees to make payments to key officers in the event of a change in the control
of
the corporation is called
a. a golden
parachute.
b. golden handcuffs.
c. greenmail.
d. the silver rule.
44. Which of the following is not an argument against the use of golden
parachutes?
a. The covered executives are already being well paid for their
work.
b. The covered executives are given an incentive to run the company
poorly.
c. The covered executives are being rewarded for
failure.
d. The covered executives are giving themselves the golden
parachutes.