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
11. 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 financial
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.
alignment.
b.
legitimacy.
c.
social norms.
d.
acceptability.
23. The dynamic process by which business seeks to perpetuate its acceptance is called
a.
b.
c.
d.
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.
government.
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 identify itself with other organization, people, or values.
27. The method by which a firm is being governed, directed, administered, or controlled is
a.
corporate governance.
b.
management.
c.
management by objectives.
d.
management by decree.
28. The state-issued document 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 firm 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 2014 the ratio of CEO pay to average workers’ pay was:
a.
531 to 1.
b.
216 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.