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Chapter 12If a privately held company has a history of legal and
ethical problems, those problems can prevent a successful
initial public offering (IPO) from taking place. - ✔✔True
A detergent manufacturer decides to clean up the
waterways it uses even though no federal, state, or local laws
require the firm to do this. The firm's managers believe that
the cleanup will improve the company's image and benefit the environment. This scenario is an
example of shareholder capitalism. - ✔✔False
Gary is a senior manager at a large, publicly traded
corporation. He has access to insider information about the
company profits, losses, mergers, and acquisitions. It is
legally and ethically acceptable for him to have this information as long as he does not use it buy or
sell stocks and does not tell others to buy or sell stocks. - ✔✔True
Alexi was a manager at Inquiry Inc. Instead of
working full-time on Inquiry's projects, she used Inquiry's
tools, employees, computers, and other resources to work on a research project that she hopes might
%
help her start her own firm. This is an example of adverse selection. - ✔✔False
One of the most challenging aspects of principal—
agent problems is that firms have almost no defenses against
them. - ✔✔False
Ruth owns and runs her own firm. She also serves on
the boards of several companies. Although she does not work
for these companies, she attends board meetings, analyzes
information, and tries to act in the best interests of their shareholders. Ruth is an example of an
outside director. - ✔✔True
It is up to shareholders to make certain that the
financial statements that their firms release are correct and not
misleading. - ✔✔False
It can be difficult for shareholders of publicly traded
companies to determine how much money those companies
, are making or losing because these companies use different accounting firms, and each accounting
firm follows different rules. - ✔✔False
Corporate codes of conduct go beyond what the law
requires, imposing higher standards of honesty and fairness - ✔✔True
Research indicates that most corporate ethics problems
are caused by a few "bad apples" rather than an unethical
culture. - ✔✔False
Corporate governance needs to address the issue of
adverse selection, which describes the difficult for the principal to know whether the agent has really
put forth his/hers best efforts. - ✔✔False
Executive compensation is an important element of
corporate governance. Research has found that the rate of
executive pay to average employee pay has been relatively stable over the last couple of decadess -
✔✔False
Maritza is trying to understand the relationship
between what is legal and what is ethical. Tiffany explains that both of these terms are often
%
synonymous in business. Your response is - ✔✔Tiffany is incorrect; a manager's actions can be
legal but ethically questionable.
To help increase and maintain ethical values for future
managers, a group of Harvard Business School students
developed - ✔✔a voluntary MBA oath that explicitly recognizes
the role of business in society and its responsibilities beyond shareholders
Some argue that the global financial crisis of 2008 was
worsened because large fortune 500 companies did not
practice effective - ✔✔Corporate governance.
onathan is interested in building the centerpiece of his
firm's corporate governance, and so hires a ________ that is
made up of individuals from both inside and outside the firm. - ✔✔board of directors
Frank is a newly elected board member of XYZ Inc., a
publicly traded stock. As a newly elected board member,
Frank has a(n) ________, which is a legal duty to act solely in
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