Question 1

What was Leo Apotheker's role in the downfall of HP's market value?

Accepted Answer

A)   Mr. Apotheker leaked sensitive internal information to an online magazine.
B)   Mr. Apotheker was involved in a sexual harassment lawsuit with Jodie Fisher, an independent contractor.
C)   Mr. Apotheker appointed Meg Whitman as the interim head of HP.
D)   Mr. Apotheker was instrumental in acquiring the overvalued British software company Autonomy.E) A) and B)
F) C) and D)

Question 2

Which of the following best supports the fact that Goldman Sachs was unethical in the Abacus deal?

Accepted Answer

A)   It was given a "triple A" rating for Abacus.
B)   It made no effort to ascertain the stability of the real estate market.
C)   It knew that Paulson had bundled high-risk mortgages into the collateralized debt obligation.
D)   It lost $100 million in the Abacus fiasco.E) B) and C)
F) A) and B)

Question 3

How does the access to insider information in a public stock company exemplify information asymmetry?

Accepted Answer

Managers, executives, and board members ...

Question 4

How does GE exemplify the creation of a Shared Value creation framework?

Accepted Answer

The Shared Value creation framework prop...

Question 5

Jamiro Inc.is a public stock company.Which of the following statements about the company best illustrates the fact that its investors have limited liability?

Accepted Answer

A)   Employees of Jamiro are legally permitted to invest their capital in the company's stock.
B)   Employees of Jamiro are also the owners of the company.
C)   Shareholders of Jamiro are responsible to the company only for the capital they have invested.
D)   Shareholders of Jamiro are not permitted to trade their company stock at the New York Stock Exchange (NYS
E)  .E) C) and D)
F) None of the above

Question 6

The risk of employee opportunism on behalf of agents in a public stock company is exacerbated by _____.

Accepted Answer

A)   stakeholder strategy
B)   information asymmetry
C)   corporate governance
D)   groupthinkE) A) and B)
F) A) and C)

Question 7

The root cause of the principal-agent problem between senior executives and lower-level employees can be explained by the:

Accepted Answer

A)   informational advantage of the lower-level employees.
B)   higher number of lower-level employees than senior executives.
C)   knowledge of employees regarding day-to-day tasks.
D)   operational expertise of lower-level employees in concentrated areas of a particular field.E) A) and D)
F) A) and C)

Question 8

Which of the following statements best supports the separation of ownership and control in publicly traded companies?

Accepted Answer

A)   Shareholders are liable only for the capital they invest and not for their personal wealth.
B)   Shareholders can freely trade the company stocks.
C)   Shareholders own stocks but do not run the company.
D)   Managers control the company but may also have stock ownership.E) B) and C)
F) A) and D)

Question 9

What are the problems associated with information asymmetry in public stock companies?

Accepted Answer

The risk of opportunism on behalf of age...

Question 10

In public stock companies, which of the following expectations of principals is most likely to lead to principal-agent problems?

Accepted Answer

A)   The expectation that the agent will follow the country's laws and regulations
B)   The expectation that the agent will go above and beyond the call of duty
C)   The expectation that the agent will reconnect economic and social needs
D)   The expectation that the agent will act in the principal's best interestE) None of the above
F) B) and D)

Question 11

Which of the following is a characteristic of a public stock company?

Accepted Answer

A)   Shareholders who provide risk capital are liable for all losses incurred by the company.
B)   Investor ownership cannot be transferred easily between investors.
C)   Legal personality allows a firm's continuation beyond the founder or the founder's family.
D)   In publicly traded companies, professional managers are the legal owners of the company.E) A) and D)
F) None of the above

Question 12

_____ is illustrated by a situation in which the principal cannot determine the value created by individual members of a team.

Accepted Answer

A)   Moral hazard
B)   Adverse selection
C)   Information asymmetry
D)   Shareholder capitalismE) A) and D)
F) A) and B)

Question 13

Which of the following real-world scenarios best exemplifies information asymmetry in a public stock company?

Accepted Answer

A)   Based on a tipoff by a Goldman Sachs employee, the Galleon Group was able to sell its holdings in Goldman Sachs' stocks prior to the announcement.
B)   GE knew that it could create a profitable venture out of producing green products, so it rolled out the ecomagination strategy.
C)   Mark Hurd, CEO of HP, was unaware of the sexual harassment allegations, and the board's demand for him to resign caught him by surprise.
D)   Goldman Sachs was party to the Abacus deal despite knowing its shortcomings.E) A) and B)
F) All of the above

Question 14

Discuss the agency problem of adverse selection.

Accepted Answer

Adverse selection occurs when informatio...

Question 15

What was Goldman Sachs' rebuttal to SEC's claim that it defrauded investors?

Accepted Answer

A)   It is up to the clients to assess the risks involved in any investments.
B)   Fabrice Tourre was responsible for putting the deal together, and it was the lapse of an individual, not the entire firm.
C)   John Paulson did not reveal his intentions behind creating Abacus.
D)   Goldman Sachs' itself lost $100 million in the deal.E) B) and C)
F) All of the above

Question 16

Grameen Bank in Bangladesh was founded to provide microcredit to impoverished farmers who wanted to start their own entrepreneurial ventures that would help themselves climb out of poverty.This best exemplifies Michael Porter's suggestion that:

Accepted Answer

A)   managers need to keep economic needs and societal needs disconnected from each other.
B)   a firm should expand its internal value chain to include nontraditional partners.
C)   businesses should focus on creating regional clusters such as Silicon Valley in the U.S.
D)   the largest but poorest socioeconomic group can yield significant business opportunities.E) All of the above
F) B) and C)

Question 17

Which of the following acts in the Goldman Sachs-Galleon Group insider trading scandal is an egregious exploitation of information asymmetry?

Accepted Answer

A)   Galleon Group's decision to trust Rajat Gupta's information as accurate
B)   Rajaratnam receiving information regarding Warren Buffet's impending multibillion-dollar injection into Goldman Sachs
C)   Warren Buffet's decision to inject a huge amount of money into Goldman Sachs based on its financial reports
D)   Rajat Gupta providing information regarding Warren Buffet's impending multibillion-dollar injection into Goldman SachsE) B) and C)
F) None of the above

Question 18

List the specific functions of a board of directors in a public stock company.

Accepted Answer

In addition to general strategic oversig...

Question 19

Which of the following is true of the codes of conduct of an organization?

Accepted Answer

A)   They detail how the organization expects an employee to behave and to represent the company in business dealings.
B)   They are a reiteration of the laws pertaining to business dealings in a corporate environment.
C)   They are a guide to determine what is lawful and what is unlawful.
D)   They help the board of directors and the CEO implement shareholder capitalism.E) B) and C)
F) A) and C)

Question 20

Why was Patricia Dunn, then chair of the board in HP, fired?

Accepted Answer

Quoting an anonymous source, the online ...

Exam 12: Corporate Governance and Business Ethics

Which of the following statements best supports the separation of ownership and control in publicly traded companies?

Correct AnswerverifiedShow Answer

How does GE exemplify the creation of a Shared Value creation framework?

Correct AnswerverifiedThe Shared Value creation framework prop...View AnswerShow Answer

Discuss the agency problem of adverse selection.

Correct AnswerverifiedAdverse selection occurs when informatio...View AnswerShow Answer

Why was Patricia Dunn, then chair of the board in HP, fired?

Correct AnswerverifiedQuoting an anonymous source, the online ...View AnswerShow Answer

Which of the following is a characteristic of a public stock company?

Correct AnswerverifiedShow Answer

Which of the following best supports the fact that Goldman Sachs was unethical in the Abacus deal?

Correct AnswerverifiedShow Answer

Jamiro Inc.is a public stock company.Which of the following statements about the company best illustrates the fact that its investors have limited liability?

Correct AnswerverifiedShow Answer

What are the problems associated with information asymmetry in public stock companies?

Correct AnswerverifiedThe risk of opportunism on behalf of age...View AnswerShow Answer

What was Goldman Sachs' rebuttal to SEC's claim that it defrauded investors?

Correct AnswerverifiedShow Answer

Which of the following is true of the codes of conduct of an organization?

Correct AnswerverifiedShow Answer

How does the access to insider information in a public stock company exemplify information asymmetry?

Correct AnswerverifiedManagers, executives, and board members ...View AnswerShow Answer

In public stock companies, which of the following expectations of principals is most likely to lead to principal-agent problems?

Correct AnswerverifiedShow Answer

The risk of employee opportunism on behalf of agents in a public stock company is exacerbated by _____.

Correct AnswerverifiedShow Answer

Which of the following real-world scenarios best exemplifies information asymmetry in a public stock company?

Correct AnswerverifiedShow Answer

Grameen Bank in Bangladesh was founded to provide microcredit to impoverished farmers who wanted to start their own entrepreneurial ventures that would help themselves climb out of poverty.This best exemplifies Michael Porter's suggestion that:

Correct AnswerverifiedShow Answer

_____ is illustrated by a situation in which the principal cannot determine the value created by individual members of a team.

Correct AnswerverifiedShow Answer

The root cause of the principal-agent problem between senior executives and lower-level employees can be explained by the:

Correct AnswerverifiedShow Answer

List the specific functions of a board of directors in a public stock company.

Correct AnswerverifiedIn addition to general strategic oversig...View AnswerShow Answer

Which of the following acts in the Goldman Sachs-Galleon Group insider trading scandal is an egregious exploitation of information asymmetry?

Correct AnswerverifiedShow Answer

What was Leo Apotheker's role in the downfall of HP's market value?

Correct AnswerverifiedShow Answer

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The Shared Value creation framework prop...
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Adverse selection occurs when informatio...
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Quoting an anonymous source, the online ...
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The risk of opportunism on behalf of age...
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Managers, executives, and board members ...
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In addition to general strategic oversig...
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Correct Answer
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