A) The substantial use of stock and option grants in the 1990s greatly increased managers' pay-for-performance sensitivity.
B) The optimal level of sensitivity of managers' compensation to the performance of their firms depends on the managers' level of risk aversion,which is hard to measure.
C) While decreasing managers' risk exposure,increasing the sensitivity of managerial pay and wealth to firm performance does have some negative effects.
D) In the absence of monitoring,the other way the conflict of interest between managers and owners can be mitigated is by closely aligning their interests through the managers' compensation policy.
F) B) and D)
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A) The Sarbanes-Oxley Act called on the SEC to force companies to have audit committees that are dominated by outside directors and required that at least one outside director have a financial background.
B) Whether information is material has been defined in the courts as referring to whether the information would have been a significant factor in an investor's decision about the value of the security.
C) CEOs and CFOs must return bonuses or profits from the sale of stock or the exercise of options during any period covered by statements that are later restated.
D) The law is especially strict with regard to takeover announcements,prohibiting any insider with nonpublic information about a pending or ongoing tender offer from trading on that information or revealing it to someone who is likely to trade on it.
F) C) and D)
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A) The United States is somewhat of an exception,in that it focuses solely on maximizing shareholder welfare.
B) A controlling family has many opportunities to expropriate minority shareholders in a pyramid structure.
C) One way for families to gain control over firms even when they do not own more than half the shares is to issue dual class shares-a scenario in which companies have more than one class of shares and one class has superior voting rights over the other class.
D) Researchers have claimed that the degree of investor protection was largely determined by the legal origin of the country-specifically,whether its legal system was based on British common law (less protection) or French,German,and Scandinavian civil law (more protection) .
F) C) and D)
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A) always results in agency conflicts that are bad for minority shareholders.
B) can sometimes,as in the case of Google,have benefits that outweigh the costs.
C) is illegal in the U.S.and most other industrialized countries.
D) is never beneficial to employees.
F) C) and D)
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A) One study found that firms with fewer restrictions on shareholder power performed worse than firms with more restrictions during the 1990s.
B) Some large public pension funds,such as CalPERS (the California Public Employees Retirement System) ,take an activist role in corporate governance.
C) In 2004 with the Walt Disney Company,major shareholders were dissatisfied with the recent performance of Disney under long-time CEO and Chairman,Michael Eisner.They began an organized campaign to convince the majority of Disney shareholders to withhold their approval of the reelection of Eisner as director and chairman of the board.
D) Given the importance of shareholder action in corporate governance,researchers and large investors alike have become increasingly interested in measuring the balance of power between shareholders and managers in a firm.
F) None of the above
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A) Managers not working as diligently if they are not the sole owner of the business.
B) The board of directors firing an incompetent manager.
C) The manager owning a great deal of stock in the company.
D) A corporate raider attempting to purchase the company.
F) C) and D)
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