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LOS c: Explain the shortcomings of boards of directors as monitors of management and state and discuss prescriptions for improving board oversight.
Q1. Which of the following prescriptions would least likely improve board of director effectiveness?
A) The board should have an independent chairman.
B) Self-evaluations of boards should be performed.
C) Directors should be subject to maximum equity positions.
Q2. Which of the following would enable a Board of Directors to act in the best long-term interest of the shareholders?
A) A majority of the Board of Directors is comprised of independent members and the Chairman of the Board is also a former Chief Executive Officer of the firm.
B) There are Board members who are closely aligned with a firm supplier and the Board meets regularly outside the presence of management.
C) A majority of the Board of Directors is comprised of independent members and the Board meets regularly outside the presence of management.
Q3. In which of the following situations is the board of directors most likely to become more effective?
A) The firm has sustained several quarters of losses and the firm’s stock price has been consistently declining.
B) The firm’s earnings have been increasing and the stock price has been consistently increasing.
C) The economy is in a recession and the firm’s stock price has been consistently declining.
Q4. Which of the following statements regarding management compensation is most accurate?
A) Stock-based compensation and bonuses are complements whereas explicit and implicit incentives are most often substitutes.
B) Stock-based compensation and bonuses are substitutes whereas explicit and implicit incentives are most often complements.
C) Stock-based compensation and bonuses are complements whereas explicit and implicit incentives are most often complements.
Q5. Suppose shareholders wish that the board directors undertook more risk. Which of the following would most likely achieve that goal?
A) The directors were paid with stock and their liability insurance was paid for.
B) The directors were paid with stock options and their liability insurance was their responsibility.
C) The directors were paid with stock options and their liability insurance was paid for. | 
发表于 2009-3-10 15:35
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