TM 9

Multiple Choice Questions AND EXPLANATION

Which of the following best describes the process of communication?
A) Transferring of information between senders and receivers
B) Using digital media to convey data
C) Providing inspiration to others
D) Agreeing upon meaning

Answer: A
Explanation: Communication is the process of transferring information and
meaning between senders and receivers using a variety of methods and resources.
It may or may not inspire others, and meaning may not be agreed upon. The
essence of communication is sharing in a way that benefits both the sender and
the receiver.

1. Which of the following groups typically own the most public corporation shares?
a. Directors, officers, employees.
b. Individual outside shareholders.
c. Financial institutions.
d. All of the above typically own a similar amount.
2. The relation between the company and other corporations or organizations is
determined by:
a. Intercorporate networks.
b. The structure of power and opportunity.
c. Corporate governance.
d. None of the above.
3. Providing timely access to information, enhancing shareholders’ rights, and
promoting shareholder democracy can result in:
a. Positive effects on corporate governance.
b. Negative consequences such as directors challenging the CEO’s preferences.
c. An increase in the likelihood that a merger or acquisition will ensue.
d. All of the above.
4. Which of the following would be considered a method of institutional investor
intervention?
a. Meeting with directors, particularly independent directors, lead directors, or the
chairperson of the board.
b. Making a public statement in advance of annual shareholder meetings.
c. Submitting resolutions and proposals for vote at shareholders’ meetings.
d. All of the above.
5. The first level of agency problems is associated with:
a. Potential conflicts of interest between individual investors and their trustees and
fiduciaries.
 b. Potential conflicts of interest between professional money managers and
corporations and their corporate clients.
c. Ownership society.
d. Monitoring public companies’ governance, affairs, and business.
6. Which one of the following is among the plans considered by the SEC:
a. Standardize exchange governance by requiring U.S. stock exchanges to file quarterly
reports with regulators.
b. Ensure that a majority of directors are not independent.
c. Ensure that members of the nominating, governance, audit, compensation, and
regulatory committees are not entirely independent.
d. Limit exchange members’ ownership interest to 35 percent.
7. The core principles do not provide considerations for:
a. Board independence & leadership.
b. Board processes & evaluation.
c. 9Individual director characteristics.
d. Shareowner rights.
8. Employee performance of an assigned job should be compensated through:
a. Salary-based pay.
b. Stock ownership to encourage employees to devote and retain these skills in the
company.
c. Stock options.
d. Fringe benefits.
9. Shareholder rights are enhanced by providing means for:
a. Asking questions and raising concerns.
b. Tabling resolutions.
c. Voting in absentia.
d. All of the above.
10. Only large shareowners and particularly institutional shareholders have incentives and
resources to monitor companies’ governance and other shareholder benefits because:
a. Corporate ownership in the United States is highly dispersed and diffused.
b. The incentives and opportunities for individual investors to monitor the company’s
governance are very remote.
c. Individual investors cannot afford the high costs of monitoring.
d. All of the above.