WPC 480 Chapter 10 ACTUAL Questions
and CORRECT Answers
Corporate governance - CORRECT ANSWER - is the set of
mechanisms used to manage the relationships
among stakeholders and to determine and
control the strategic direction and performance
of organizations
Agency costs - CORRECT ANSWER - are the sum of incentive costs,
monitoring costs, enforcement costs, and
individual financial losses incurred by principals
because governance mechanisms cannot
guarantee total compliance by the agent.
agency relationship - CORRECT ANSWER - exists when one party
delegates decision-making responsibility to a
second party for compensation.
Managerial opportunism - CORRECT ANSWER - is the seeking of selfinterest
with guile (i.e., cunning or deceit).
Large-block shareholders - CORRECT ANSWER - typically own at
least 5 percent of a company's issued shares.
Ownership concentration - CORRECT ANSWER - is defined by the
number of large-block shareholders and the
, total percentage of the firm's shares they own.
Institutional owners - CORRECT ANSWER - are financial institutions,
such as mutual funds and pension funds, that
control large-block shareholder positions.
market for corporate control - CORRECT ANSWER - is an
external governance mechanism that is active
when a firm's internal governance mechanisms
fail.
board of directors - CORRECT ANSWER - is a group of elected
individuals whose primary responsibility is to act
in the owners' best interests by formally
monitoring and controlling the firm's top level
managers.
executive compensation - CORRECT ANSWER - is a governance
mechanism that seeks to align the interests of
managers and owners through salaries,
bonuses, and long-term incentives such as
stock awards and options.
Corporate governance is: - CORRECT ANSWER - the set of mechanisms used to manage
the relationships among stakeholders and to determine and control the strategic direction and
performance of organizations.
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
and CORRECT Answers
Corporate governance - CORRECT ANSWER - is the set of
mechanisms used to manage the relationships
among stakeholders and to determine and
control the strategic direction and performance
of organizations
Agency costs - CORRECT ANSWER - are the sum of incentive costs,
monitoring costs, enforcement costs, and
individual financial losses incurred by principals
because governance mechanisms cannot
guarantee total compliance by the agent.
agency relationship - CORRECT ANSWER - exists when one party
delegates decision-making responsibility to a
second party for compensation.
Managerial opportunism - CORRECT ANSWER - is the seeking of selfinterest
with guile (i.e., cunning or deceit).
Large-block shareholders - CORRECT ANSWER - typically own at
least 5 percent of a company's issued shares.
Ownership concentration - CORRECT ANSWER - is defined by the
number of large-block shareholders and the
, total percentage of the firm's shares they own.
Institutional owners - CORRECT ANSWER - are financial institutions,
such as mutual funds and pension funds, that
control large-block shareholder positions.
market for corporate control - CORRECT ANSWER - is an
external governance mechanism that is active
when a firm's internal governance mechanisms
fail.
board of directors - CORRECT ANSWER - is a group of elected
individuals whose primary responsibility is to act
in the owners' best interests by formally
monitoring and controlling the firm's top level
managers.
executive compensation - CORRECT ANSWER - is a governance
mechanism that seeks to align the interests of
managers and owners through salaries,
bonuses, and long-term incentives such as
stock awards and options.
Corporate governance is: - CORRECT ANSWER - the set of mechanisms used to manage
the relationships among stakeholders and to determine and control the strategic direction and
performance of organizations.
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
