FINAL TEST.docx - Chapter 4 1 Some analysts believe that...

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Chapter 4 1. Some analysts believe that business's social legitimacy is fragile. a. True b. False ANSWER: True
2. Business, by virtue of its place in society, has an inherent right to exist.
3. The corporate system as a whole rarely addresses the idea of social legitimacy.
4. The purpose of corporate governance is a direct outgrowth of the question of legitimacy.
5. Shareholders' control is manifested primarily in the right to select the CEO of the company. a. True b. False ANSWER: False
6. The major condition of modern corporations that contributes to the corporate governance problem is the separation of ownership from control.
7. Much of the blame for corporate scandals like Enron and WorldCom can be placed on the audit committees of the boards of directors.
8. Wages have grown faster than CEO salaries over the past decade.
9. The Say on Pay movement evolved from concerns over low executive compensation. a. True b. False ANSWER: False
10. Research has shown that golden parachutes have had no effect on senior managers' resistance to takeover attempts.
11. The issue at the heart of the Sarbanes-Oxley Act is protection for whistle-blowers.
12. Penalties under the Sarbanes-Oxley Act can include fines and prison terms.
13. There is some early evidence that the Sarbanes-Oxley Act has made little difference in the attention financial executives pay to shareholder reports. a. True b. False ANSWER: False
14. Although initially, companies did not object to the compliance costs of Sarbanes-Oxley, after 10 years experience with the law, they now object strenuously
15. During the past forty years, corporate boards have become more diverse.
16. Audit committees arguably have the most responsibility of all board committees.
17. Practically speaking the corporate CEO often does the work the nominating committee should do. a. True b. False ANSWER: True
18. Because of its theoretical role of authority over the CEO, it has always been the board's responsibility to get tough with the senior manager when needed.

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