HSE Corporate Governance Quiz 1

The central issue(s) of Corporate Governance is (are):

• how to alleviate conflicts of interest between managers and shareholders

• how to protect outside investors from the controlling insiders

• how to protect creditors from managers and controlling shareholders

• how to solve conflicts of interest between shareholders and bondholders

The board of directors is responsible for hiring middle managers in the corporation

• True

• False

Why do private companies usually make transition to the public ones?

• Minimize government involvement in their activities

• Promote their product to the world

• Gain access to external funds

• Avoid paying taxes

Which of the following surely indicates weak Corporate Governance system?

• Focus on shareholder’s value as the ultimate objective

• Separation of Chairman and CEO role

• Passive shareholders and concentrated ownership

• Dominant shareholder and activism of minorities

What legislations could enhance corporate governance practice?

• Legislation that encourage majority of insiders on the Board

• Legislation that encourage less independent board members

• Legislation that allows CEO to nominate board members

• Legislation that enhance the power of shareholders to pressure the BoD to act in their best interest

Advantage(s) of strong CG is (are):

• Lower cost of capital

• Higher bonuses to directors

• Less shareholder's return

• Easier access to capital markets

Which one of these is NOT a key concept of corporate governance?

• Accountability

• Independence

• Integrity

• Confidentiality

What sounds most as the Board of Directors' duty?

• Help to control the actions of shareholders and make decisions

• Assistance to management in strategic matters and control of their actions

• Help company to become public

• Hire managers to direct the company and make financial decisions

What is the difference between outsiders and insiders in the BoD ?

• Outsiders manage insiders

• Outsiders act in the interests of shareholders, insiders in the interests of management

• Insiders work in the company, outsiders don't

• Insiders manage outsiders

The market price of the stock is determined by

• The board of directors of the firm

• The stock exchange on which the stock is listed

• The president of the company

• Individuals buying and selling the stock