14 – Flashcards
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Which of the following statements is not true about stockholders?
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They own equal shares of company assets.
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Which of the following is not true about institutional investors?
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The proportion of institutional ownership of stock in the U.S. has declined slowly since the 1960s.
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Institutional investors are sometimes referred to as:
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Wall Street investors.
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In 2008 and early 2009, share values declined sharply as the global economy fell into a severe recession. This type of stock market is referred to as a:
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Bear market.
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Which if the following is not a legal right of stockholders?
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To vote on who will become chief executive officer (CEO).
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Corporate governance involves the exercise of control over a company's:
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Entire operations.
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The directors of a company are a central factor in corporate governance because they:
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Exercise formal legal authority over company policy.
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The paramount duty of the board of directors of a public corporation is to:
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Select and oversee competent and ethical management to run the company.
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Which of the following is true about corporate boards?
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Corporate boards average 12 members.
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In 2010, median compensation for directors at the largest U.S. corporations was (rounded to the nearest $10):
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$212,510.
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The board committee that administers and approves salaries and benefits of high-level managers in a company is called the:
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Compensation committee.
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Which of the following is not a function of board committees?
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The finance committee works closely with the human resources department to fund employee salaries.
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How are directors (members of corporate boards) selected?
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Shareholders elect the directors from a list of candidates.
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Which of the following is a key feature of effective boards of directors?
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Hold regular meetings without the CEO present.
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By 2010, out of the 100 largest US companies, how many had separated the positions of CEO and board chairman?
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Thirty-one.
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The "agency problem" arises when:
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Managers act in their own interest, rather than in the interest of shareholders.
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The main reason that American executives are paid so much is:
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Pay is set by the compensation committees of the board, largely comprised of other CEOs who have an interest in pushing compensation up.
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Which of the following arguments opposes the idea of high executive pay?
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High salaries divert resources that could be used to invest in the business.
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Which of the following is not an argument for high executive compensation?
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Inflated executive pay helps U.S. firms compete with foreign rivals.
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A reason for institutions becoming more assertive in promoting the interests of their member investors is:
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It is difficult for institutions to sell their holdings.
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The activism of institutional investors in other countries has been spearheaded by:
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U.S.-based pension and mutual funds that in recent years acquired large stakes in foreign countries.
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Which of the following is not an example of fulfilling social objectives through stock ownership?
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Selling stock of companies with a below-market rate of return.
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The mission of the Securities and Exchange Commission (SEC) is to:
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Protect shareholders' rights by making sure that stock markets are run fairly.
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In response to concerns about the lack of transparency in financial accounting, Congress passed a new law called the:
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Sarbanes-Oxley Act.
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The Securities and Exchange Commission outlaws:
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Any manipulative or deceptive device used to trade stocks.
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Which of the following is not an instance of "insider trading"?
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A marketing executive briefing stock analysts on the company's sales performance.
