ST MGN MT EXAM QUESTIONS WITH ANSWERS

ST MGN MT EXAM QUESTIONS WITH ANSWERS Corporate governance is: - ANSWER- c. the set of mechanisms used to manage the relationships among stakeholders and to determine and control the strategic direction and performance of organizations. Which of the following statements about the recent global emphasis on corporate governance is NOT true? - ANSWER- d. The recent global emphasis on corporate governance stems mainly from the need to give shareholders more power in organizations. Over the past three years, Simcom's board of directors has become increasingly concerned about the top-level managers' reliance on external acquisitions, as opposed to internal product innovations. They are discussing the possibility of replacing the CEO. Their decision to exercise corporate governance is primarily motivated by concerns over - ANSWER- d. strategic direction. The Carter family has been the successful owner of a manufacturing company for more than 50 years. The company has always performed better than expected and was projected to grow for years to come. To help with this growth, the Carters decided to hire a CEO who is not from the family, the first time in its history. After the hire, the performance of the company shifted for the worse, and there is now a separation of ownership and managerial control. What is the best next step? - ANSWER- c. The Carters should appoint a family member as CEO, as research shows that family-owned firms perform better when a member of the family is the CEO. Managerial opportunism occurs when managers: - ANSWER- b. make decisions to satisfy their own self-interests. What is an agency relationship? - ANSWER- d. A situation in which one party delegates decision-making responsibility to a second party for compensation Susan is worried that her company's poor performance is reflecting badly on her performance as CEO. She thinks she may lose her position, receive a cut to her salary, or be seen by her peers as incompetent and ineffective. What is another term for Susan's concerns? - ANSWER- a. Managerial employment risk Greg is the CEO of a leading company in the consumer packaged goods industry. He is trying to grow his company for personal gain and wealth. However, Greg sees that his company has an opportunity to break into the chemical industry. He has decided to invest free cash flow into acquiring small chemical companies that have the potential for growth if funded properly. Shareholders are not happy because they are concerned about: - ANSWER- b. overdiversification. What is the definition of ownership concentration? - ANSWER- b. The number of largeblock shareholders and the total percentage of the firm's shares they own After a recent round of share releases, many individuals bought up shares and reduced the number of large-block shareholders. The company's managers recently had the luxury of performing without much interference or monitoring by their shareholders. The managers are now engaging in risky strategic tactics that may not be in the best interest of shareholders. What type of ownership does this company have? - ANSWER- c. Diffuse ownership An institution that holds 15 percent of shares in a company in order to be a powerful governance mechanism is an example of a(n): - ANSWER- b. institutional owner. Shareholder activists are very unhappy with a certain board of directors' recent pattern of decisions. The activists believe they need to be given more decision-making capabilities, have their voices heard, and have the opportunity to nominate another board member. What should the shareholder activists propose? - ANSWER- a. A proxy vote Jordan Brady just purchased an additional 2,000 shares of Singleton Inc., which means he now possesses about 6 percent of the firm's issued shares. This makes Jordan a(n): - ANSWER- d. large-block shareholder. Kevin is on the board of directors of a local company and has become concerned with a situation that came to his attention. The board is considering electing the current CEO as chair of the board. Does Kevin have a reason for concern? - ANSWER- b. Yes, as the CEO will not be able to be forced out if his or her performance becomes unacceptable