Business and society Chapter 14

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Which of the following statements is not true about stockholders?

They own equal shares of company assets.

Which of the following is not true about institutional investors?

The proportion of institutional ownership of stock is the U.S. has declined slowly since the 1960’s.

Institutional investors are sometimes referred to as:

Wall Street investors

Investors may receive an economic benefit from the ownership of stock by receiving:

Dividends and capital gains Both B and C, but not A

In 2008 and early 2009, share values decline sharply as the global economy fell into a severe recession. This type of stock market is referred to as a:

Bear market

Which of the following is not a legal rights of stockholders?

To vote on who will become CEO

The directors of a company are a central factor in corporate governance because they:

Exercise warm or legal authority over company policy

The Paramount duty of the Board of director of a public corporation is to:

Select an oversea competent and ethical management to run the company

Which of the following is true about corporate boards?

Corporate boards average 12 members.

Which of the following is not a function of corporate committees?

The Finance Committee works slowly with a human resource department to fund employee salaries

The Audit Committee is required by U.S. law to be:

Composed entirely of outside directors and Financially literate A and B, but not C

How are directors (members of corporate boards) selective?

Shareholders elect the directors from a list of candidate.

Which of the following is a key feature of it effective boards of directors?

Hold regular meetings without the CEO present.

The "agency problem" arises when:

Managers act in their own interests, rather than in the interest of shareholders.

The main reason that American executives are paid so much is:

Pay is set by the Compensation Committee of the board, largely comprised of other CEOs who have an interest in pushing compensation up

Which of the following arguments opposes the idea of high executive pay?

High salaries divert resources that could be used to invest in the business

Which of the following is not an argument for height executive compensation?

Inflated executive pay helps U.S. firms compete with foreign rivals

The activism of industrial investors in other countries has been spearheaded by:

U.S.-based pensions and mutual funds that in recent years acquired large stakes in foreign countries

Social investors seek to eliminate from their investment portfolios companies that:

Pollute the environment, Discriminate against employees, Make dangerous products like tobacco or weapons All of the above

Which of the following is not an example of for filling social objectives through stock ownership?

Selling stock of companies with a below market rate of return.

The mission of the Securities and Exchange Commission (SEC) is to:

Protect shareholders rights by making sure that stock markets are run fairly.

Reports filed with the SEC provide informational on the company’s:

Sales and earnings, depreciation by line of business, details of foreign operations All of the above

In response to concerns about the lack of transparency and financial accounting, Congress passed a new law called the:

Sarbanes-Oxley Act

The Securities and Exchange Commission outlaws:

Any manipulative or deceptive device used to trade stocks

Which of the following is not an instance of insider trade?

A marketing executive briefing stock analysis on the companies sell performance

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