CHAPTER 10—CORPORATE GOVERNANCE
1. Two important issues in corporate governance are (1) the rules that cover the board’s ability to fire the CEO and (2) the
rules that cover the CEO’s ability to remove members of the board.
a.
True
b.
False
False
1
2. A poison pill is also known as a corporate restructuring.
a.
True
b.
False
False
1
3. The CEO of D’Amico Motors has been granted some stock options that have provisions similar to most other executive
stock options. If D’Amico’s stock underperforms the market, these options will necessarily be worthless.
a.
True
b.
False
False
1
4. ESOPs were originally designed to help improve worker productivity, but today they are also used to help prevent
CHAPTER 10—CORPORATE GOVERNANCE
hostile takeovers.
a.
True
b.
False
True
1
Difficulty: Moderate
INTE.GENE.16.68 – LO: 10-3
United States – BUSPROG: Reflective Thinking
forecasting, and cash flows
United States – OH – Default City – TBA
ESOP
5. Which of the following is NOT normally regarded as being a barrier to hostile takeovers?
a.
Targeted share repurchases.
b.
Shareholder rights provisions.
c.
Restricted voting rights.
d.
Poison pills.
e.
Abnormally high executive compensation.
e
1
Difficulty: Moderate
INTE.GENE.16.67 – LO: 10-2
United States – BUSPROG: Analytic
forecasting, and cash flows
United States – OH – Default City – TBA
Corporate governance
TYPE: Multiple Choice: Conceptual
6. Which of the following is NOT normally regarded as being a good reason to establish an ESOP?
a.
To enable the firm to borrow at a below-market interest rate.
b.
To make it easier to grant stock options to employees.
c.
To help prevent a hostile takeover.
d.
To help retain valued employees.
e.
To increase worker productivity.
b
1
Difficulty: Moderate
INTE.GENE.16.68 – LO: 10-3
CHAPTER 10—CORPORATE GOVERNANCE