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Chapter 10: Corporate Governance
True / False
1. Corporate governance is the set of mechanisms used to manage the relationship among stakeholders and to determine
and control the strategic direction and performance of an organization.
a. True
b. Fals
e
ANSWER: True
2. Corporate governance involves oversight in areas where owners, managers, and members of Boards of Directors may
have conflicts of interest.
a. True
b. Fals
e
ANSWER: True
3. Corporate governance is a means to establish harmony between parties [the firm's owners and its top-level managers]
whose interests may conflict.
a. True
b. Fals
e
ANSWER: True
4. In modern corporations—especially those in the United States and United Kingdom—a primary objective of corporate
governance is to ensure that the interests of top-level managers are aligned with the interests of shareholders.
a. True
b. Fals
e
ANSWER: True
5. Recent emphasis on corporate governance stems mainly from the failure of corporate governance mechanisms to
adequately monitor and control top-level managers' decisions.
a. True
b. Fals
e
ANSWER: True
6. The three internal corporate governance mechanisms are ownership concentration, Board of Directors, and the market
for corporate control.
a. True
b. Fals
e
ANSWER: Fals
e
7. Executive compensation is considered an external corporate governance mechanism because it determined in part by
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