Question 1

To foster ethical behavior through organizational culture, businesses should:

Accepted Answer

A)  avoid explicitly articulating values that place a strong emphasis on ethical behavior.
B)  draft a formal statement of the ethical priorities to which a business adheres.
C)  encourage self-dealing among managers.
D)  eliminate the need of a moral compass. 
E)  avoid putting strong governance processes in place.F) B) and E)
G) A) and E)

Question 2

Arnold is a CEO at Gamma LLC.He has control over the corporate funds of the company.Arnold has often taken funds from the company to pay for his travel and hotel expenses.The funds could otherwise have increased stockholder returns.Which of the following concepts is illustrated in this scenario?

Accepted Answer

A)  Corporate governance
B)  On-the-job consumption
C)  Greenmail
D)  Information asymmetry 
E)  Information manipulationF) A) and B)
G) D) and E) B

Question 3

Which of the following is NOT a responsibility of the board of directors?

Accepted Answer

A)  Monitor corporate strategy decisions and ensure that they are consistent with stockholder interests
B)  Apply sanctions on management when appropriate
C)  Hire, fire, and compensate the CEO
D)  Develop targets for divisional managers
E)  Make sure the audited fmancial statements present a true picture of the company's financial situationF) B) and D)
G) B) and C)

Question 4

In order to reduce its production costs, Delta LLC.has moved its manufacturing units to an underdeveloped country where there are few labor laws.The employees at the manufacturing units are children and teenagers, and they receive minimal wages.Which of the following ethical issues is illustrated in this scenario?

Accepted Answer

A)  On-the-job consumption
B)  Opportunistic exploitation
C)  Self-dealing
D)  Information manipulation 
E)  Substandard working conditionsF) A) and E)
G) A) and D)

Question 5

The internal research department of Libra Inc.has found that the packaging of health supplements produced by the company is faulty, and is resulting in poor quality.Despite this knowledge, the company has not improved the packaging and instead has advertised to its customers that their packaging is foolproof.Which of the following concepts is illustrated in this scenario?

Accepted Answer

A)  Information manipulation
B)  Anticompetitive behavior
C)  Agency strategy
D)  Information symmetry 
E)  On-the-job consumptionF) A) and B)
G) B) and E)

Question 6

Inside directors are not full-time employees of the company.

Accepted Answer

A) True 
 B)False

Question 7

Agency theory offers a way of understanding why managers do not always act in the best interests of stakeholders.

Accepted Answer

A) True 
 B)False

Question 8

are external stakeholders in a company.

Accepted Answer

A)  Stockholders
B)  Managers
C)  Employees
D)  Customers 
E)  Board membersF) A) and D)
G) D) and E) D

Question 9

When corporate CEOs and top managers use their power and control over funds to satisfy their personal desires for wealth or status, it is called:

Accepted Answer

A)  on-the-job consumption.
B)  greernnail.
C)  information asymmetry.
D)  self-dealing. 
E)  risk capital.F) A) and C)
G) All of the above

Question 10

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

Accepted Answer

Agency problems in organizations are wel...

Question 11

Financial statements can be a tool of effective governance only if they provide consistent, detailed, and accurate information.

Accepted Answer

A) True 
 B)False

Question 12

The purpose of governance mechanisms in corporations is to:

Accepted Answer

A)  centralize company resources to the top management.
B)  reduce the scope and frequency of the agency problems.
C)  satisfy the requirements of the Securities and Exchange Commission (SE
C)  .
D)  limit corporate growth to manageable rates.
E)  monitor the performance of the board of directors.F) D) and E)
G) None of the above B

Question 13

Which of the following statements is true in the context of stock-based compensation?

Accepted Answer

A)  Stock options usually result in information asymmetry.
B)  Stock-based compensation schemes for executives can align management and stockholder interests.
C)  A particular cause for concern is that stock options are often granted at extremely high strike prices.
D)  Critics deny that stock-based compensations motivate managers to improve company performance.
E)  Granting more stock options often results in an increase in stockholder equity.F) C) and D)
G) A) and B)

Question 14

An agency relationship continues down a hierarchy within a company.

Accepted Answer

A) True 
 B)False

Question 15

Which of the following statements is true about the board of directors?

Accepted Answer

A)  The board members are directly elected by the employees of the company.
B)  The board has no legal authority to hire, fire, and compensate the CEO.
C)  Some of the board members hold positions on the boards of several companies.
D)  The board has no power to nominate people for positions in the management.
E)  Divisional and functional managers usually form the board.F) A) and B)
G) A) and C)

Question 16

In corporations, agency theory is used to explain the relationship between stockholders and corporate managers, and between upper-level managers and the lower-level managers they supervise.

Accepted Answer

A) True 
 B)False

Question 17

A stock option is a right to buy:

Accepted Answer

A)  shares of the company's stock at the stock's current price.
B)  shares of the company's stock at half the stock's current price.
C)  shares of the company's stock at a predetermined price at some point in the future.
D)  bonds issued by the company.
E)  stock in an underperforrning company.F) A) and B)
G) A) and C)

Question 18

Which of the following statements is true about strategic control systems?

Accepted Answer

A)  They are usually set by government regulators that top management is required to follow.
B)  Their primary purpose is to foster on-the-job consumption.
C)  Their purpose is to ensure that the wealth of stockholders is maximized.
D)  They relieve employees and management of legal and ethical constraints.
E)  They are designed to encourage information asymmetry.F) B) and E)
G) None of the above

Question 19

is a situation where an agent has more knowledge about resources he or she is managing than the principal has.

Accepted Answer

A)  Information manipulation
B)  On-the-job consumption
C)  Information asymmetry
D)  Greenmail
E)  Self-dealingF) B) and D)
G) A) and E)

Question 20

Which of the following statements is true in the context of principal-agent relationships?

Accepted Answer

A)  The agency relationship is confmed to the top management and does not continue down the hierarchy within the company.
B)  Agents almost always have more information about the resources they are managing than the principal does.
C)  Information asymmetry can make it easier for principals to measure how well an agent is performing.
D)  In a principal-agent relationship, the decision making power rests entirely with the principals. 
E)  The relationship between the company and the suppliers is an example of a principal-agent relationship.E) A) and B)
F) None of the above

Exam 11: Corporate Performance, Governance, and Business Ethics

To foster ethical behavior through organizational culture, businesses should:

Correct Answer
verified

Arnold is a CEO at Gamma LLC.He has control over the corporate funds of the company.Arnold has often taken funds from the company to pay for his travel and hotel expenses.The funds could otherwise have increased stockholder returns.Which of the following concepts is illustrated in this scenario?

Correct Answer
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B

Which of the following is NOT a responsibility of the board of directors?

Correct Answer
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Correct Answer
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Correct Answer
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Inside directors are not full-time employees of the company.

Correct Answer
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Agency theory offers a way of understanding why managers do not always act in the best interests of stakeholders.

Correct Answer
verified

are external stakeholders in a company.

Correct Answer
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D

When corporate CEOs and top managers use their power and control over funds to satisfy their personal desires for wealth or status, it is called:

Correct Answer
verified

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

Correct Answer
verified
Agency problems in organizations are wel...
View Answer

Financial statements can be a tool of effective governance only if they provide consistent, detailed, and accurate information.

Correct Answer
verified

The purpose of governance mechanisms in corporations is to:

Correct Answer
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B

Which of the following statements is true in the context of stock-based compensation?

Correct Answer
verified

An agency relationship continues down a hierarchy within a company.

Correct Answer
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Which of the following statements is true about the board of directors?

Correct Answer
verified

In corporations, agency theory is used to explain the relationship between stockholders and corporate managers, and between upper-level managers and the lower-level managers they supervise.

Correct Answer
verified

A stock option is a right to buy:

Correct Answer
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Which of the following statements is true about strategic control systems?

Correct Answer
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is a situation where an agent has more knowledge about resources he or she is managing than the principal has.

Correct Answer
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Which of the following statements is true in the context of principal-agent relationships?

Correct Answer
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Exam 11: Corporate Performance, Governance, and Business Ethics

To foster ethical behavior through organizational culture, businesses should:

Correct AnswerverifiedShow Answer

Arnold is a CEO at Gamma LLC.He has control over the corporate funds of the company.Arnold has often taken funds from the company to pay for his travel and hotel expenses.The funds could otherwise have increased stockholder returns.Which of the following concepts is illustrated in this scenario?

Correct AnswerverifiedB

Which of the following is NOT a responsibility of the board of directors?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Inside directors are not full-time employees of the company.

Correct AnswerverifiedShow Answer

Agency theory offers a way of understanding why managers do not always act in the best interests of stakeholders.

Correct AnswerverifiedShow Answer

are external stakeholders in a company.

Correct AnswerverifiedD

When corporate CEOs and top managers use their power and control over funds to satisfy their personal desires for wealth or status, it is called:

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedAgency problems in organizations are wel...View AnswerShow Answer

Financial statements can be a tool of effective governance only if they provide consistent, detailed, and accurate information.

Correct AnswerverifiedShow Answer

The purpose of governance mechanisms in corporations is to:

Correct AnswerverifiedB

Which of the following statements is true in the context of stock-based compensation?

Correct AnswerverifiedShow Answer

An agency relationship continues down a hierarchy within a company.

Correct AnswerverifiedShow Answer

Which of the following statements is true about the board of directors?

Correct AnswerverifiedShow Answer

In corporations, agency theory is used to explain the relationship between stockholders and corporate managers, and between upper-level managers and the lower-level managers they supervise.

Correct AnswerverifiedShow Answer

A stock option is a right to buy:

Correct AnswerverifiedShow Answer

Which of the following statements is true about strategic control systems?

Correct AnswerverifiedShow Answer

is a situation where an agent has more knowledge about resources he or she is managing than the principal has.

Correct AnswerverifiedShow Answer

Which of the following statements is true in the context of principal-agent relationships?

Correct AnswerverifiedShow Answer

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B

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D

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Agency problems in organizations are wel...
View Answer

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B

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