Chapter 12

Generally, a board member who is a source of information about a firm's day-to-day activities is classified as ________ director.
1. a lead independent
2. an encumbered
3. a related
4. an inside
Research suggests that firms with ________ perform better, especially when collaboration among top management team members is important.
1. benchmarking used for top executive pay
2. smaller pay gap between the CEO and other top executives
3. larger proportion of insiders on the board of directors
4. greater emphasis on stock options
Ownership concentration is determined by both:
1. the number of outside directors and total percentage of shares they own.
2. the number of stockholders and total percentage of shares they own.
3. the number of outside directors and the parties they represent.
4. the number of stockholders and the parties they represent.
As ownership of the corporation is diffused, shareholders' ability to monitor managerial decisions:
1. increases.
2. decreases.
3. remains constant.
4. is eliminated.
A takeover defence wherein preferred stock in the merged firm is offered to shareholders at a highly attractive rate of exchange is called:
1. a standstill agreement.
2. greenmail.
3. a poison pill.
4. crossing the palm with silver.
Japanese keiretsu are:
1. company unions, which are a type of governance system.
2. the banks owing the largest shares of stock in the firm.
3. a group of firms tied together by cross-shareholdings.
4. management structures related to total quality management systems.
An agency relationship exists when one party delegates:
1. financial responsibility to employees.
2. decision making responsibility to a second party.
3. ownership of a company to a second party.
4. strategy implementation actions to functional managers.
Boards of directors are now becoming more involved in:
1. governmental relations.
2. the firm's tax issues.
3. selecting new CEOs.
4. the strategic decision making process.
Which of the following reasons would NOT explain the difficulty of determining appropriate executive compensation?
1. A number of factors intervene between top-level management decisions and firm performance (e.g., unpredictable economic, social, or legal changes).
2. The decisions made by top-level managers are typically complex and nonroutine.
3. An executive's decisions often affect firm performance only over the long run.
4. The compensation committee may not have comprehensive firm performance data.
In Japan, the principal source of the active monitoring of large companies comes from:
1. the government.
2. stock brokerage companies.
3. banks.
4. boards of directors.

Chapter 12

Quiz