BT Ch-11,12,13

Where there are a large number of external shareholders who play no role in the day-to-

day running of a company, there is a situation that is described as

• detached corporate ownership

• uninvolved external ownership

• dividend based shareholding

• separation of ownership and management

The 'agency problem' refers to which of the following situations?

• Shareholders acting in their own short-term interests rather than the long-term

  interests of the company

• A vocal minority of shareholders expecting the directors to act as their agents and pay

  substantial dividends

• Companies reliant upon substantial government contracts such that they are

  effectively agents of the government

• The directors acting in their own interests rather than the shareholders' interests

To encourage Executive Directors to operate in the best interests of the shareholders, they

could

• be given a high basic salary

• receive share options based on both individual and company's performance

• be entitled to large payment upon resignation or termination

• be asked to attend AGMs

Corporate social responsibility refers to the idea that a company should

• play an active part in the social life Of the local neighbourhood

• be sensitive to the needs Of all stakeholders

• be alert to the social needs of all employees

• act responsibly in relation to shareholders' overall needs — not just their financial needs

Which of the following would best explain the concept of sustainable development?

• Starting business in developed countries where the economic climate is conducive to

  trade

• Development which meets the needs of the present without compromising the ability

  of future generations to meet their own needs

• Sustaining the at the level of maximum capacity

• Developing the business by signing long-term contracts with suppliers

Modern view on Corporate Social Responsibility is

• it is a way to further a company's business and attract additional shareholders

• it is necessary to reduce product liability claims

• a company must give part Of its profits to charity

• social responsibility is incompatible With the objective of maximisingLTHshareholKder's

  WEA

The agency problem refers to the fact that shareholders cannot legally be the directors of an

organisation.

Is this statement TRUE or FALSE?

• True

  False

• True

• False

• False
  True

Which of the following would render a non-executive director of a company less suitable

for this post?

• The person worked for the company six years ago

• The person has served as a non-executive for the last six years

• The person has no previous contact with the executive directors

• The person owns a number of the company's shares

Which of the following would render a non-executive director of a company less suitable

for this post?

• The person worked for the company six years ago

• The person has served as a non-executive for the last six years

• The person has no previous contact with the executive directors

• The person owns a number of the company's shares

An audit committee should

• consist of independent non-executive directors only

• include at least one senior member of the internal audit team

• include one member from the external audit firm

• carry out a detailed review of critical elements of the statement of financial position