Which of the following is incorrect: Options: a) The Market for Corporate Control is an important external mechanism for encouraging corporate managers to act in their shareholders’ best interests b) GMU Dean Emeritus Henry G. Manne developed the theoretical concept of “Market for Corporate Control” c) The Market for Corporate Control was enacted into law by the Williams Act d) The Market for Corporate Control protects rationally ignorant shareholders e) None of the above

Which of the following is incorrect: Options: a) The Market for Corporate Control is an important external mechanism for encouraging corporate managers to act in their shareholders’ best interests b) GMU Dean Emeritus Henry G. Manne developed the theoretical concept of “Market for Corporate Control” c) The Market for Corporate Control was enacted into law by the Williams Act d) The Market for Corporate Control protects rationally ignorant shareholders e) None of the above

Business/Professional Ethics Directors/Executives/Acct

8th Edition

ISBN:9781337485913

Author:BROOKS

Publisher:BROOKS

Chapter5: Corporate Ethical Governance & Accountabililty

Section: Chapter Questions

Problem 13.2EC

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QUESTION 39 Which of the following is incorrect: A. The Market for Corporate Control is an important external mechanism for encouraging corporate managers to act in their shareholders’ best interests B. GMU Dean Emeritus Henry G. Manne developed the theoretical concept of "Market for Corporate Control" C. The Market for Corporate Control was enacted into law by the Williams Act D. The Market for Corporate Control protects rationally ignorant shareholders E. None of the above
Are poison-pill defenses ethical? If a potential acquirer buys company stock legally, thereby becoming a part owner of the company, should management be allowed to entrench itself against the wishes of this owner? Explain your answer.
2 (a)There is a conflict of interest between stockholders and managers. In theory, stockholders are expected to exercise control over managers through the annual meeting or the board of directors. In practice, why might these disciplinary mechanisms not work? (b)There are some corporate strategists who have suggested that firms focus on maximizing market share rather than market prices. When might this strategy work, and when might it fail? (c)It is often argued that managers, when asked to maximize stock price, have to choose between being socially responsible and carrying out their fiduciary duty. Do you agree? Can you provide an example where social responsibility and firm value maximization go hand in hand?
What are some factors that can increase the risk that a corporation does not have a corporate culture that supports ethical decision making? Please explain.
Which of the following statements is true? a. Restrictive covenants in debt agreements are an effective way to reduce agency conflicts between stockholders and managers. b. Managers generally welcome hostile takeovers since they often increase the company’s stock price. None of the choices is correct. c. One advantage of organizing your business as a corporation is that your shareholders are not subject to limited liability. d. An effective ethics program can enhance corporate value by producing a number of positive benefits like building shareholder confidence.
Which of the following best characterizes an agency problem? Group of answer choices a spending corporate resources b dislike of firm's bondholders by its equity holders c differing incentives between managers and owners d friction between the primary and secondary markets
Consider again Milton Friedman’s article. 1. What does Friedman mean by “ethical custom”? 2. If the laws of the society are limiting the company’s profitability, would the company be within its rights to disobey the law? 3. What if the law is “on the books,” but the company could count on a lack of enforcement from state officials who were overworked and underpaid? Should the company limit its profits? Suppose that it could save money by discharging a pollutant into a nearby river, adversely affecting fish and, potentially, drinking water supplies for downstream municipalities. In polluting against laws that aren’t enforced, is it still acting “within the rules of the game”? What if almost all other companies in the industry were saving money by doing similar acts?
Ethical Considerations. Are poison-pill defenses ethical? If a potential acquirer buys company stock legally,thereby becoming a part owner of the company, shouldmanagement be allowed to entrench itself against thewishes of this owner? Explain your answer.
Which of the following methods would be most likely to decrease the agency problems by helping motivate managers to act in the best interests of shareholders? 1. Increase the proportion of executive compensation that comes from stock options and reduce the proportion that is paid as cash salaries. 2. Eliminate a requirement that members of the board of directors have a substantial investment in the firm's stock. 3. Decrease the use of restrictive covenants in bond agreements. 4. Take actions that reduce the possibility of a hostile takeover. 5. Elect a board of directors that allows managers greater freedom of action.
The Principal-Agent Problem arises A) because managers have little incentive to work in the interest of shareholders when this means working against their own self-interest. B) because of the separation of ownership and control in a corporation. C) Both A and B D) None of the above
Which of the following statements is consistent with the principle of control as defined by IFRS 10 Consolidated Financial Statements? a. The investor must be exposed to a return from the investee. b. The investor has the ability to use its power over the investee to affect the amount of the returns from the investee. c. An investor yet to direct the relevant activities of an investee has no power over the investee. d. An investor cannot have control over an investee if another investor has existing rights to participate in the direction of the relevant activities.
1.Which of the following situations could be evidence that the investor lacks the capacity to exercise significant influence over the company in which he invested? Select one: a. The investor fails to obtain representation on the board of directors of the other company. b. The investor fails to obtain from the other company the information necessary to correctly account for the investment. c. The other company objects to the investor having significant influence and has gone to court or a regulatory agency. d. All the alternatives presented.