Question 1

Three decades of privatization suggest all of the following except:
a. Privatization to insiders helps improve the performance of small firms.
b. In large corporations privatization to insiders, without external governance pressures, is hardly conducive for needed restructuring.
c. Outside ownership and control, preferably by blockholders, funds, foreigners, and/ or banks, are more likely to facilitate restructuring.
d. Such outside ownership and control does not happen frequently because incumbent managers do not necessarily welcome such outside "intrusion."
e. When outside investors such as institutional investors do come in, they fail to assert their power.

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Question 2

Which of the following is true regarding CEO duality?
a. From an agency theory standpoint, if the board is to supervise agents such as the CEO, it seems imperative that the board be chaired by the same individual.
b. In US firms with CEO duality, the trend now is to appoint a lead independent director, who chairs the sessions held by outside directors that do not involve company executives.
c. A corporation led by two top leaders-a board chairman and a CEO - will at least have unity of command and experience less top-level conflict.
d. East Asia and Latin America where most firms have concentrated family ownership and control, there is less CEO duality.
e. Firms around the world are being pressured to combine the two top jobs.

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Question 3

Industry-Based Considerations regarding corporate governance include all of the following except:
a. Having more outside directors on the board is often regarded as having a negative impact on performance because of their lack of understanding as compared to insiders.
b. In industries characterized by rapid innovation requiring significant R&D investments (such as information technology), outside directors may have a negative impact on firm performance.
c. Research finds that for firms in low-growth, stable industries, no relationship exists between inside management ownership and firm performance.
d. In relatively high-growth, turbulent industries, there is a relationship between inside management ownership and firm performance.
e. In industries experiencing great turbulence, the presence of a single leader may allow a faster and more unified response to changing events.

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Question 4

Which are not among the aspects of globalization?
a. Contact with different governance norms.
b. FPI investors demand more protection.
c. The focus on governance has been replaced by a focus on shareholder value.
d. The thirst for global capital requires adherence to listing requirements.
e. The global diffusion of "best practices."

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Question 5

In regards to family ownership, all of the following are true except:
a. Most small firms in the world are owned and controlled by families.
b. The vast majority of large corporations throughout continental Europe, Asia, Latin America, and Africa no longer feature concentrated family ownership and control.
c. Family ownership and control may provide better incentives for the firm to focus on long-run performance.
d. Such ownership may also minimize the conflict between owners and professional managers typically encountered in widely owned firms.
e. Family ownership and control may lead to the selection of less qualified managers who happen to be the sons, daughters, and relatives of owners.

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Question 6

Issues involved regarding how a board of directors can be established so as to be most effective include:
a. The insider/outsider mix.
b. CEO duality.
c. Board Interlocks.
d. The Role of Boards of Directors.
e. All of the above.

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Question 7

Diffused ownership is the opposite of concentrated ownership, and is more common in:
a. The US and UK.
b. South America.
c. Asia.
d. Africa.
e. The Pacific.

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Question 8

As the closing case points out on the negative side, private equity firms have been accused of all of the following except:
a. Being "barbarians."
b. Being "asset strippers," and "locusts."
c. Internationally, causing shock in countries suddenly facing the full rigor of Anglo-American private equity.
d. Placing CSR ahead of all rational economic decisions.
e. None of the above.

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Question 9

Institution-based considerations in governance include all of the following except:
a. Formal institutional framework.
b. International experience of senior executives.
c. Formal legal protection and impact on founder's dilution of equity.
d. Lack of legal protection and its impact regarding large shareholders in emerging economies.
e. Impact of informal norms and values.

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Question 10

Which of the following is true in regards to outside directors?
a. The trend around the world is to introduce less outside directors.
b. In the United States, less than a half century ago, most boards were made up entirely or largely of outside directors.
c. Many US firms are now favoring a board that is entirely made of people who are insiders due the need for people who can understand the increasing complexity of MNEs.
d. Japanese boards have not waited until they are in financial difficulty to bring in outside directors from banks.
e. Academic research has failed to empirically establish a link between the outsider/insider ratio and firm performance.

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Question 11

As the closing case points out, the positive side private equity firms excel in all the following ways except:
a. They always send experts to sit on the board and are hands-on in managing.
b. They use a high level of debt that imposes strong financial discipline.
c. Private equity turns managers from agents to principals with substantial equity, thus providing a powerful incentive to them.
d. They pay managers more generously, but also punish failure more heavily.
e. They reduce income inequality between financiers and the rest of us.

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Question 12

Which of the following make up a governance package?
a. Internal Mechanisms + External Mechanisms.
b. Carrots to motivate managers such as stock options.
c. Sticks that may result in CEO and top management team turnover.
d. The Market for Corporate Control.
e. The Market for Private Equity.

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Question 13

Agency theory assumes that managers:
a. Have a responsibility to the owners.
b. Are agents who are opportunistic and engage in self-serving activities.
c. A and B above.
d. Can be left to their own devices.
e. Are effective steward of the owners' interests.

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a. Have a...

Question 14

Ownership will likely be diffused under which of the following situations?
a. A start up firm.
b. Family owned firm.
c. State ownership.
d. All of the above.
e. None of the above.

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Question 15

In regards to global convergence:
a. Advocates argue that globalization will unleash a "survival-of the-fittest" process.
b. Advocates claim firms will be forced to adopt globally the best practices.
c. Others contend that governance practices will continue to diverge throughout the world.
d. The text indicates that complete divergence in corporate governance is probably unrealistic.
e. All of the above.

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a. Advocates argue...

Question 16

Strategists should:
a. Understand the nature of principal-agent and principal-principal conflicts to create better governance mechanisms.
b. Develop firm-specific capabilities to differentiate on governance dimensions.
c. Understand the rules, anticipate changes, and be aware of differences, especially when doing business abroad.
d. Use an understanding of corporate governance to help answer the four fundamental questions in strategy.
e. All of the above.

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a. Understand the nature of principal-agent...

Question 17

Boards of directors perform all of the following except:
a. Control.
b. Service.
c. Resource acquisition functions.
d. A through C above.
e. Day to day operations.

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Question 18

Most large, publicly traded UK corporations are now characterized by all of the following except:
a. Diffused ownership.
b. Numerous small shareholders.
c. A separation of ownership and control.
d. Control is largely concentrated in the hands of salaried, professional managers.
e. Corporate managers who own a majority of the stock.

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Question 19

The defense of private equity includes all of the following points except:
a. While private equity results in job cuts, the same might happen if targets were acquired by public firms.
b. It would not be rational for private buyers to destroy their prize therefore they attempt to avoid doing that.
c. Their record as corporate citizens is no more barbaric than that of public firms.
d. They point to a Texas utility in which owners paid shareholders a 25% premium, gave retail customers a 10% price cut, and dropped plans to build eight dirty coal-fired power plants-hailed by environmentalists as a major victory.
e. The actions of U.S. private equity firms have enhanced the image of the U.S. and capitalism around the world.

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Question 20

Which of the following is not true regarding large institutional investors?
a. They include professionally managed mutual funds and pension pools.
b. They now own over 50 percent of the stock in major corporations.
c. They are the controlling stockholders in China.
d. Their ability to dump the stock is limited because selling out depresses the share price and harms the institutions.
e. They are more likely to exercise shareholder rights than smaller investors.

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Quiz 11: Corporate Governance

Issues involved regarding how a board of directors can be established so as to be most effective include: a. The insider/outsider mix. b. CEO duality. c. Board Interlocks. d. The Role of Boards of Directors. e. All of the above.

Diffused ownership is the opposite of concentrated ownership, and is more common in: a. The US and UK. b. South America. c. Asia. d. Africa. e. The Pacific.

Which of the following make up a governance package? a. Internal Mechanisms + External Mechanisms. b. Carrots to motivate managers such as stock options. c. Sticks that may result in CEO and top management team turnover. d. The Market for Corporate Control. e. The Market for Private Equity.

Agency theory assumes that managers: a. Have a responsibility to the owners. b. Are agents who are opportunistic and engage in self-serving activities. c. A and B above. d. Can be left to their own devices. e. Are effective steward of the owners' interests.

Ownership will likely be diffused under which of the following situations? a. A start up firm. b. Family owned firm. c. State ownership. d. All of the above. e. None of the above.

Boards of directors perform all of the following except: a. Control. b. Service. c. Resource acquisition functions. d. A through C above. e. Day to day operations.