Question 1

Surveys of large U.S.and Canadian corporations found outsiders make up what percentage of total board membership?

Accepted Answer

Outsiders typically make up a large percentage of board membership in large U.S. and Canadian corporations, often around 80%, to provide independent oversight and reduce conflicts of interest.

Question 2

According to the text, most publicly owned large corporations today tend to have boards with what degree of involvement in the strategic management process?

Accepted Answer

The text states that publicly owned large corporations tend to have boards with "nominal to active" involvement in the strategic management process, meaning their involvement ranges from minimal to active participation. Thus, option D, which states "nominal to active," is the best choice. Options A, B, and C are incorrect as they suggest less involvement than what is typical for most publicly owned large corporations. Option E is incorrect as it suggests a higher degree of involvement than what is typical.

Question 3

When a board of directors is involved to a limited degree in the performance or review of selected key decisions, indicators, or programs of management, there is a ________ degree of involvement.

Accepted Answer

Nominal participation means that the board of directors is involved to a limited degree in the performance or review of selected key decisions, indicators, or programs of management. They may be consulted or informed but do not have active involvement. A rubber stamp degree of involvement implies that the board simply approves decisions without any critical review, while active participation and minimal review suggest a higher level of involvement than nominal participation. A phantom degree of involvement implies that the board is completely absent or non-existent.

Question 4

Which of the following regions is the most globalized region of the world in terms of boards of directors with most companies having one or more non-national directors?

Accepted Answer

Europe is known for its high level of globalization, particularly in terms of boards of directors. Many European companies have at least one non-national board member, making it the most globalized region in this regard.

Question 5

Research reveals that the likelihood of a firm engaging in illegal behavior or being sued declines

Accepted Answer

Research has shown that the addition of outsiders on the board is associated with a decreased likelihood of illegal behavior or being sued. This is due to the fact that outsiders bring valuable expertise, diverse perspectives, and a level of independence to the board, which can help ensure that the company operates in an ethical and legal manner.

Question 6

The vast majority of inside directors are from all of the following EXCEPT:

Accepted Answer

Inside directors are typically high-level executives within the company, including the president of the corporation, vice-presidents of operational and functional units, and the chief executive officer. Lower-level operating employees are not typically in a position to serve as an inside director.

Question 7

According to ________ theory, _______ directors tend to identify with the corporation.

Accepted Answer

Based on stewardship theory, which emphasizes the responsibility and accountability of corporate leaders to act in the best interests of the organization and its stakeholders, inside directors are more likely to identify with the corporation and act as stewards of its resources. Therefore, choice C is the most appropriate answer.

Question 8

The percentage of directors of small, publicly-held U.S.corporations which are outsiders is approximately

Accepted Answer

According to a study by the National Association of Corporate Directors, the percentage of directors of small, publicly-held U.S. corporations who are outsiders is approximately 20%. This means that 80% of the directors are insiders, such as executives or major shareholders within the company.

Question 9

A survey of U.S.corporations found that ________ of boards of directors had at least one African American member in 2006.

Accepted Answer

In 2006, 46% of boards of directors in U.S. corporations had at least one African American member.

Question 10

________ theory argues that senior executives over time tend to view the corporation as an extension of themselves.

Accepted Answer

The stewardship theory argues that senior executives have a sense of responsibility towards the corporation and view it as their own and work towards its long-term success. They tend to be more concerned with the welfare of the organization rather than their self-interests. Hence, they tend to see the corporation as an extension of themselves.

Question 11

Board members who are most likely to face a conflict of interest are known as

Accepted Answer

Affiliated directors are board members who have a relationship with the company beyond their directorship, such as being an executive or having significant financial ties. This makes them more susceptible to conflicts of interest.

Question 12

The average board member of a U.S.Fortune 500 firm serves on ________ boards.

Accepted Answer

According to a study conducted by Spencer Stuart, the average board member of a U.S. Fortune 500 firm serves on three boards. This is based on data from 2018.

Question 13

Codetermination

Accepted Answer

Codetermination is the inclusion of a corporation's employees on its board, allowing them to have a say in decision-making processes within the company. It is commonly practiced in European countries such as Germany. A, C, D, and E are not accurate descriptions of codetermination.

Question 14

One study conducted by Korn/Ferry International of directors of large U.S.corporations found that more than ________ of directors indicated that their CEOs were not utilizing them to their full potential in the strategy setting process.

Accepted Answer

The answer of One study conducted by Korn/Ferry International of...

Question 15

Outside directors are defined as

Accepted Answer

Outside directors are individuals who serve on a board of directors but are not employed by the corporation. They are meant to provide an objective perspective and oversee management decisions.

Question 16

Which country pioneered the use of worker participation on corporate boards?

Accepted Answer

Germany pioneered the use of worker participation on corporate boards, which is also known as co-determination. This was introduced in the 1950s as a result of post-World War II labor agreements and has since become a cultural norm in German business practices.

Question 17

The theory which states that problems arise in corporations because top management no longer is willing to bear the brunt of their decisions unless they own a substantial amount of stock in the corporation is called

Accepted Answer

The theory which states that problems arise in corporations because top management no longer is willing to bear the brunt of their decisions unless they own a substantial amount of stock in the corporation is called agency theory. This theory suggests that top management may prioritize their own self-interest over the interests of the organization and its stakeholders if they do not share in the financial risks and rewards of the corporation.

Question 18

Board members who are not employed by the corporation, but handle the legal or insurance needs of the firm and are thus not a true "outsider" are what kind of directors?

Accepted Answer

Affiliated directors handle the legal or insurance needs of the firm and are not true "outsiders," but they are not employed by the corporation either. Therefore, they are considered affiliated directors. Family directors are those who have family ties with the owners of the firm, retired directors are no longer a part of the corporate entity, management directors are current employees of the corporation, and interlocked directors serve on two or more boards, potentially creating conflicts of interest.

Question 19

What percentage of the Fortune 1000 U.S.corporations had boards of directors with at least one woman member in 2006?

Accepted Answer

The answer of What percentage of the Fortune 1000 U.S.corporations...

Question 20

An agency problem can occur when

Accepted Answer

All of the given statements can lead to an agency problem. When the goals of owners and managers or agents differ, it creates a situation of agency problem. Similarly, when it is difficult or expensive for owners to monitor the work of agents, it can create an agency problem. Also, different attitudes towards risk can create conflicts between owners and agents. Lastly, executives may avoid taking risky decisions to safeguard their job security, which again leads to an agency problem.

Quiz 2: Corporate Governance