Q&A Hero

Q: If the corporate governance in an organization is poor, it _____. A. weakens the company's potential and makes it less attractive to investors B. forces the board of directors to be accountable to the senior executives against their will C. leads to employees taking control of their own decisions without consulting their managers D. results in underpinning the integrity and efficiency of financial markets

Q: Setting up a governance system that allows organizations to be directed and controlled: A. leads to underpinning the integrity and efficiency of financial markets. B. weakens a company's potential and makes it less attractive to investors. C. paves way for financial difficulties and incidents of fraud. D. makes managers and board members less accountable to shareholders.

Q: Corporate governance is the process by which _____. A. the revenue assets of a business are fixed B. corporations are nationalized by the government C. the government is monitored by corporations D. corporations are directed and controlled

Q: Studies show that a commitment to good corporate governance makes a company both more attractive to investors and lenders and more profitable.

Q: One of the flaws in the board of directors of Enron was that many of the directors were affiliated with organizations that benefited directly from the company's operations.

Q: Having all the effective mechanisms listed on the corporate governance checklist in place ensures completely effective corporate governance.

Q: The ethical conduct of a business can be influenced by the individual personalities involved.

Q: Ethical misconduct is possible even if a board of directors passes all the criteria established by Walter Salmon.

Q: In his Harvard Business Review article, Walter Salmon recommends that a good board comprises three or more outside directors for every insider.

Q: Running a small company does not require a constant evaluation of risk-versus-reward scenarios.

Q: If the board of directors is to serve its purpose in setting the operational tone for an organization, it should be comprised of members who represent professional conduct in their own organizations.

Q: The CRAFTED principles of governance, offered by the European business school INSEAD, recommend creating a culture and climate of consistency in an organization.

Q: By permitting one individual to function as both the chief executive officer of a company and the chairperson of its board, the power of the stockholders is maximized.

Q: The board of directors of an organization can secure its independence by permitting one individual to function as both the chief executive officer of the organization and the chairperson of its board.

Q: By permitting one individual to function as both the chief executive officer of a company and the chairperson of its board, the board is given the benefit of leadership from someone who is in touch with the inner workings of the organization.

Q: The argument in favor of merging the roles of the chairperson of the board and the chief executive officer of an organization is one of efficiency.

Q: By merging the roles of the chief executive officer and the chairperson of the board of an organization, the oversight provided by the board of directors is magnified.

Q: The Sarbanes-Oxley Act of 2002 incorporates the "comply or else" approach to corporate governance.

Q: The "comply or else" methodology is more aggressive than the "comply or explain" methodology.

Q: The "comply or explain" methodology refers to the set of guidelines that requires companies to abide by a set of operating standards or face stiff financial penalties.

Q: The "comply or explain" guideline proved to be an effective deterrent to corporate financial scandals.

Q: The "comply or else" guideline gave companies the flexibility to comply with governance standards or explain their noncompliance in their corporate documents.

Q: The Cadbury report, established by Sir Adrian Cadbury in 1992 to address financial aspects of corporate governance, argued for a guideline of "comply or else," which required companies to abide by a set of operating standards or face stiff financial penalties.

Q: The King II report emphasized the need for companies to adopt an exclusive approach to corporate governance instead of an inclusive one.

Q: The triple bottom line proposed by the King II report, released by the committee formed by Mervyn King, recognizes the economic, environmental, and social aspects of a company's activities.

Q: The King II report, released by the committee formed by Mervyn King, formally recognized the need to move the stakeholder model forward and to consider a triple bottom line instead of a single bottom line of profitability.

Q: The King I report, established by Mervyn King in 1994, failed to recognize the involvement of all the corporation's stakeholders in the efficient and appropriate operation of an organization.

Q: The King Report on Corporate Governance of 1994 incorporated a code of corporate practices and conduct that looked beyond the corporation itself, taking into account its impact on the larger community.

Q: The Cadbury report, established by Sir Adrian Cadbury in 1992 to address financial aspects of corporate governance, dealt exclusively with external governance.

Q: The corporate governance committee of a company oversees compliance with its internal code of ethics as well as any federal and state regulations on corporate conduct.

Q: The corporate governance committee of an organization is staffed by members of the board of directors and specialists.

Q: Typically, the compensation package of a CEO and other senior executives of an organization consists of a base salary and stock options but does not include any performance bonus or other perks.

Q: The main responsibility of the auditing committee of an organization is to set the compensation for all the employees of the organization, including its outside contractors.

Q: Independent or outside directors are not eligible to be a part of the compensation committee of an organization.

Q: The strategic business unit of an organization is responsible for monitoring the financial policies and procedures of the organization.

Q: Members of a board of directors are not eligible to be a part of the audit committee of an organization.

Q: Creditors, suppliers, and professional consultants represent the inside members of a board of directors.

Q: A board of directors is a group of individuals who oversee the governance of an organization.

Q: Corporate governance does not impact the efficiency of financial markets.

Q: The board members of a company are not accountable to the company and its shareholders.

Q: Corporate transparency is concerned with how well an organization meets its obligations to its stakeholders.

Q: The stakeholders of a company include its customers, its vendor partners, state and local entities, and the community in which it conducts its business operations.

Q: Management consulting is the system by which business organizations are directed and controlled.

Q: Does a commitment to good corporate governance affect a company's profitability?

Q: Explain the "comply or explain" guideline. Why did the "comply or else" policy come into force?

Q: In what way did the King I approach on corporate governance differ from the Cadbury approach?

Q: What roles do the audit committee and the compensation committee of an organization play in ensuring good governance?

Q: What is corporate governance? Why it is important?

Q: Corporate governance is about managers fulfilling a _____ responsibility to the owners of their companies.

Q: Running a company of any size effectively requires the board of directors to work with the _____, making constant evaluations of risk-versus-reward scenarios.

Q: _____ recommended a checklist of 22 questions to assess the quality of boards of directors in his Harvard Business Review article.

Q: INSEAD, the European business school, offers the _____ principles of corporate governance.

Q: The argument in favor of merging the roles of the CEO and chairperson is one of _____.

Q: The "_____" approach to corporate governance requires companies to abide by a set of operating standards or face stiff financial penalties.

Q: The Sarbanes-Oxley Act of 2002 incorporates the "_____" approach to corporate governance.

Q: The "_____" approach to corporate governance gave companies the flexibility to comply with governance standards or explain their noncompliance in their corporate documents.

Q: The triple bottom line advocated by the King II report, released by the committee formed by Mervyn King, recognizes the economic, environmental, and _____ aspects of a company's activities.

Q: The King II report, released by the committee formed by Mervyn King, recommended moving beyond the traditional single bottom line of _____.

Q: The _____ report, released by the committee formed by Mervyn King, formally recognized the need to move the stakeholder model forward and consider a triple bottom line as opposed to the traditional single bottom line of profitability.

Q: The focus of the _____ report, established in 1992, on corporate governance was on internal governance.

Q: The corporate governance committee of an organization oversees compliance with the company's internal _____ as well as any federal and state regulations on corporate conduct.

Q: The primary responsibility of the _____ committee of an organization is to oversee the compensation packages for the senior executives of the organization.

Q: The _____ committee of an organization is responsible for monitoring the financial policies and procedures of the organization.

Q: _____ members of a board of directors hold management positions in a company.

Q: A _____ is elected by the owners of a company to represent their interests in the effective running of the company.

Q: A board of directors is a group of individuals, elected by the vote of _____ at the annual general meeting, who oversee the governance of an organization.

Q: The involvement of individual shareholders as owners of an organization helps increase the _____ of managers.

Q: _____ is the process by which organizations are directed and controlled.

Q: If the board of an organization is to serve its purpose in setting the operational tone for the organization, it should be composed of members who: A. represent professional conduct in their own organizations. B. are opposed to the practice of utilitarianism. C. support a decentralized model of corporate management. D. are more likely to take risks in high-risk situations.

Q: The first step in a policy of disregarding the corporate governance model is the decision to: A. merge the roles of chief executive officer (CEO) and chairperson of the board into one individual. B. nominate a compensation committee by the board of directors of an organization. C. reach out to consultants to find new solutions on maximizing the effectiveness of corporate governance. D. elect an auditing committee to oversee the financial reporting processes of an organization by the chief executive officer (CEO).

Q: The Cadbury report, established to address financial aspects of corporate governance, argued for a guideline of _____, which gave companies the flexibility to act in accordance with governance standards or clarify why they do not in their corporate documents. A. basic limiting principle B. comply or else C. comply or explain D. maximum power principle

Q: The _____ of an organization is staffed by members of the board of directors plus independent or outside directors. A. editorial committee B. human resources team C. accounting team D. audit committee

Q: Explain the practice of making a company's operations "carbon neutral."

Q: Discuss the difference between ethical, altruistic, and strategic types of corporate social responsibility (CSR).

Q: Depending on the actions taken by a corporation, some stakeholders will be positively affected and others will be negatively affected. Explain.

Q: Differentiate between the instrumental approach and the social contract approach to corporate management.

Q: Explain corporate social responsibility (CSR) and the assumption on which it operates.

Q: The _____ was created in November 2006, when the Deutsche Bank teamed up with more than a dozen investment banks and five carbon-trading organizations in Europe to promote the standardization of carbon trading on a global scale.

Q: One of the newest and increasingly questionable practices in the world of corporate social responsibility (CSR) is the notion of making operations "_____" in such a way as to offset whatever damage is being done to the environment through greenhouse gas emissions by purchasing credits to balance out emissions.

Q: _____ corporate social responsibility (CSR) runs the greatest risk of being perceived as self-serving behavior on the part of the organization.