Q&A Hero

Q: (p. 119) The Federal Sentencing Guidelines for Organizations table factors in both the nature of the crime and the amount of the loss suffered by the victim.

Q: (p. 119) The sentence of an organization punished under the Federal Sentencing Guidelines for Organizations is calculated through a three-step process: determination of mitigating factors, credit rating, and the elasticity of the economy.

Q: (p. 118) In its mission to promote ethical organizational behavior and increase the costs of unethical behavior, the Federal Sentencing Guidelines for Organizations establishes a definition of an organization that is so broad as to prompt the assessment that "no business enterprise is exempt."

Q: (p. 118) According to the Federal Sentencing Guidelines for Organizations, businesses cannot be held liable for the criminal acts of their employees and agents.

Q: (p. 118) Under the Foreign Corrupt Practices Act, payments to foreign officials made in connection with the promotion or demonstration of company products or services are legal.

Q: (p. 118) Payments to foreign officials made in connection with expediting lawful customs clearances and obtaining the issuance of entry or exit visas are considered bribes under the Foreign Corrupt Practices Act.

Q: (p. 118) Grease payments are illegal under the Foreign Corrupt Practices Act.

Q: (p. 117) The Securities and Exchange Commission can enforce criminal penalties of up to $2 million per violation of the Foreign Corrupt Practices Act for corporations and other business entities.

Q: (p. 117) A company can be found in violation of the Foreign Corrupt Practices Act even if its bribe is unsuccessful.

Q: (p. 116) The processing of governmental papers, such as visas, is an example of a routine governmental action.

Q: (p. 116) Under the Foreign Corrupt Practices Act, facilitation payments are payments that are acceptable (legal), provided they expedite or secure the performance of a routine governmental action.

Q: (p. 116) The Foreign Corrupt Practices Act focuses on disclosure, which requires corporations to fully reveal any and all transactions conducted with foreign officials and politicians, in line with the Securities and Exchange Commission provisions.

Q: (p. 116) The Foreign Corrupt Practices Act encompasses all the secondary measures that were in use to prohibit bribery and other illegal forms of payment to foreign officials by focusing on two distinct areasdisclosure and prohibition.

Q: (p. 116) The Credit Rating Agency and New York Stock Exchange are the only bodies authorized to enforce the Foreign Corrupt Practices Act.

Q: (p. 116) Prior to the passing of the Foreign Corrupt Practices Act, the Securities and Exchange Commission was not authorized to penalize company executives for failing to disclose payments under its securities rules.

Q: (p. 116) Prior to the passing of the Foreign Corrupt Practices Act, making illegal payments to foreign officials was not punishable through any type of legislation.

Q: (p. 116) The Foreign Corrupt Practices Act was introduced to more effectively control bribery and other less obvious forms of payment to foreign officials and politicians by American publicly traded companies as they pursued international growth.

Q: (p. 100) _____ recommended a checklist of 22 questions to assess the quality of the board of directors in his Harvard Business Review article.

Q: (p. 99) INSEAD, the European business school, offers the _____ principles of corporate governance.

Q: (p. 99) The argument in favor of merging the roles of the CEO and chairperson is one of _____.

Q: (p. 97) The "_____" approach to corporate governance requires companies to abide by a set of operating standards or face stiff financial penalties.

Q: (p. 97) The Sarbanes-Oxley Act of 2002 incorporates the "_____" approach to corporate governance.

Q: (p. 97) The "_____" approach to corporate governance gave companies the flexibility to comply with governance standards or explain their noncompliance in their corporate documents.

Q: (p. 96) The triple bottom line advocated by the King II report recognizes the economic, environmental, and _____ aspects of a company's activities.

Q: (p. 96) The King II report recommended moving beyond the traditional single bottom line of _____.

Q: (p. 96) The _____ report 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: (p. 96) The focus of the _____ report was on internal governance.

Q: (p. 96) The corporate governance committee oversees compliance with the company's internal _____ as well as any federal and state regulations on corporate conduct.

Q: (p. 95) The primary responsibility of the _____ committee of an organization is to oversee the compensation packages for the senior executives of the organization.

Q: (p. 95) The _____ committee of an organization is responsible for monitoring the financial policies and procedures of the organization.

Q: (p. 95) _____ members of the board of directors hold management positions in a company.

Q: (p. 94) The _____ is elected by the owners to represent their interests in the effective running of a corporation.

Q: (p. 94) The 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: (p. 94) The involvement of individual shareholders as owners of an organization helps increase the _____ of managers.

Q: (p. 94) _____ is the process by which organizations are directed and controlled.

Q: (p. 104) Which of the following checks, when in place, reduces the risk of fraud or unethical behavior in a corporation? A. The participants of the governance process must be made accountable effectively. B. The roles of the chief executive officer and the chairperson of the board must be merged. C. The authority of the chief executive officer should be absolute and unchallenged. D. The company should follow the "comply or explain" approach to governance.

Q: (p. 104) A commitment to good corporate governance: A. necessitates decreasing the independence of the board. B. often affects a company's public image adversely. C. means adopting the "comply or explain" approach. D. makes a company more attractive to investors.

Q: (p. 103) Which of the following is true of managers in an organization with good corporate governance? A. Managers must be nominated by the compensation committee. B. Managers should fulfill a fiduciary responsibility to the owners. C. Managers must consider only the single bottom line of profitability. D. Managers should follow an exclusive, rather than an internal, approach.

Q: (p. 103) The fiduciary responsibility of a manager is ultimately based on _____. A. educational background B. experience C. charisma D. trust

Q: (p. 101) Which of the following is true of ethical misconduct? A. It can occur even with all the checks governing the board of directors in place. B. It cannot be influenced by the personalities of individual board members. C. It is least likely to occur when the CEO has more authority than board members. D. It is barred effectively by the "comply or explain" approach to corporate governance.

Q: (p. 100) Which of the following is true of Walter Salmon's checklist to assess the quality of the board? A. It recommends following an exclusive rather than an inclusive approach. B. It recommends the consideration of a single bottom line of profitability. C. It recommends that the roles of the CEO and chairperson of the board be merged. D. It recommends that there be three or more outside directors for every insider.

Q: (p. 100) Which of the following principles should a company follow for effective corporate governance? A. Appointments to the board of directors should always be made on basis of quid pro quo agreements. B. The board of directors and the CEO should work together when evaluating risk-versus-reward scenarios. C. The board of directors should consist solely of members who have direct connections to the company. D. The roles of the chairperson of the board and that of the chief executive officer should be merged.

Q: (p. 100) Which of the following actions is a step toward running a company successfully? A. Merging the roles of the chief executive officer and the chairperson of the board. B. Liberating the chief executive officer from constraints laid by the board members. C. Evaluating risk-versus-reward scenarios frequently, regardless of the company's size. D. Reducing the board's independence and decreasing the power of stockholders.

Q: (p. 99) Which of the following is true of the CRAFTED principles of governance? A. It recommends creating a culture of consistency, accountability, and responsibility. B. It considers only the financial profitability of all operational actions. C. It favors a tight information flow managed by a company's senior executive leaders. D. It approves of selecting members of the board by trading professional favors.

Q: (p. 99) Merging the roles of the chief executive officer and the chairperson of the board is inadvisable because: A. the power of the board of directors increases. B. long-term goals typically replace short-term goals. C. the power of the chief executive officer decreases. D. the power of the stockholders is minimized.

Q: (p. 99) Which of the following is an effect of merging the roles of the chief executive officer and the chairperson of the board? A. The power of the stockholders is maximized. B. The oversight provided by the board is increased. C. The independence of the board is compromised. D. The influence of the CEO is minimized.

Q: (p. 99) Merging the roles of the chief executive officer and the chairperson of the board of an organization is advantageous because: A. the power of the stockholders and the independence of the board is increased. B. the company begins to prioritize long-term goals over short-term goals. C. the checks that the board set in place against unethical behavior become more effective. D. the board is led by someone familiar with the inner workings of the organization.

Q: (p. 97) In what way did the "comply or else" approach differ from the "comply or explain" approach to corporate governance? A. Unlike "comply or else", the "comply or explain" approach penalizes companies that don't conform to its regulations heavily. B. Unlike "comply or explain", the "comply or else" approach does not offer corporations an easy way to avoid conforming to its operating standards. C. Unlike "comply or explain", the "comply or else" approach has a vague definition for what constitutes an acceptable explanation for noncompliance. D. Unlike "comply or else", the "comply or explain" approach was successful in discouraging unethical behavior in corporations.

Q: (p. 97) Which of the following is true of the "comply or else" approach to corporate governance? A. It set stiff financial penalties for companies that refused to abide by its operational standards. B. It gave companies the flexibility to comply with its standards or explain why they didn't in their corporate documents. C. It was extremely vague when it came to defining what would be an acceptable explanation for noncompliance. D. It was not incorporated into the Sarbanes-Oxley Act of 2002which governs ethical behavior in corporations.

Q: (p. 97) The _____ of 2002 incorporates the "comply or else" approach to corporate governance. A. Sarbanes-Oxley Act B. Comstock Act C. Rehabilitation Act D. Federal Intervention Act

Q: (p. 97) Why was the "comply or explain" approach to corporate governance problematic? A. It was too strict and fined corporations that did not conform to its standards heavily. B. It did not permit corporations to express why they chose not to comply with certain rules. C. Its definition of what constitutes an acceptable explanation for not complying was vague. D. It expected corporations to abide by an extremely rigid set of operating standards.

Q: (p. 97) Which of the following is true of the "comply or explain" approach to corporate governance? A. It set stiff financial penalties for companies that refused to abide by its operational standards. B. It gave companies the flexibility to comply with its governance standards or justify why they didn't in their corporate documents. C. It was extremely explicit when it came to defining what would be acceptable explanations for noncompliance. D. It proved to be an effective deterrent to financial scandals and reduced the incidence of unethical behavior in corporations.

Q: (p. 96) What did the King I and King II reports have in common? A. They both limited their scope to the financial and regulatory accountability of corporations. B. They both advocated following the traditional, single bottom line of profitability. C. They both rejected the triple bottom line suggested by the Cadbury approach. D. They both incorporated a code of corporate practices that looked beyond corporations.

Q: (p. 96) The King II report on corporate governance: A. strongly advocated that companies follow the traditional, single bottom line of profitability. B. did not look beyond companies or take their impact upon the larger community into account. C. formally recognized the economic, environmental, and social aspects of a company's activities. D. failed to recognize the involvement of all of a corporation's stakeholders in the efficient operation of the organization.

Q: (p. 96) Which of the following is true of the King I report? A. It took a less integrated approach to corporate governance than the Cadbury report. B. It limited its scope to internal corporate governance. C. It limited its scope to financial and regulatory accountability. D. It considered corporations' impact on the larger community.

Q: (p. 96) The Cadbury report recommended: A. adopting a Code of Best Practice to achieve high standards of corporate behavior. B. considering the environmental and social aspects of an organization's activities. C. formally recognizing all the stakeholders of an organization. D. considering a company's impact on the larger community.

Q: (p. 96) The Cadbury report focused on: A. environmental equilibrium. B. corporate social responsibility. C. internal governance. D. the triple bottom line.

Q: (p. 96) The Cadbury report addressed: A. the cultural aspects of a company's activities. B. the financial aspects of corporate governance. C. the need to consider the triple bottom line. D. the failings of the "comply or explain" policy.

Q: (p. 96) One of the primary responsibilities of an organization's _____ is to ensure compliance with the company's internal code of ethics. A. business sales unit B. quality assurance unit C. corporate governance committee D. proposal committee

Q: (p. 96) The corporate governance committee of a company: A. monitors the ethical performance of the corporation. B. does not oversee compliance with the company's internal code of ethics. C. is primarily in charge of recruiting and training new employees. D. cannot be staffed by members of the company's board of directors.

Q: (p. 95) Which of the following is true of the compensation committee of a company? A. It sets the compensation for all the employees of the company. B. It cannot be staffed by individuals on the company's board of directors. C. It cannot be staffed by independent or outside directors of the company. D. It oversees the salaries and bonuses of the senior executives only.

Q: (p. 95) The _____ of a company is an operating committee responsible for determining the salaries, bonuses, and perks for the CEO and other senior executives. A. credit committee B. business sales unit C. compensation committee D. quality assurance unit

Q: (p. 95) Catherine, a board member of Clayton Inc., is also part of an operating committee that is responsible for overseeing the accounting policies of the company. This committee is known as the _____. A. business sales unit B. audit committee C. compensation committee D. quality assurance unit

Q: (p. 95) One of the responsibilities of the audit committee of a company is to: A. elect the members of the company's board of directors. B. manage the company's leadership pipeline. C. monitor the company's accounting policies and procedures. D. elect the members of the corporate governance committee.

Q: (p. 95) The outside members of a company's board of directors: A. are not permitted to have other connections to the company. B. hold management positions inside the company. C. play no role in the board of directors' decision-making process. D. may comprise of the company's creditors, suppliers, or consultants.

Q: (p. 95) The inside members of a company's board of directors: A. typically have no direct connection with the company. B. hold managerial positions within the company. C. comprise the company's creditors and suppliers. D. include the external consultants used by the company.

Q: (p. 94) The board of directors of a company: A. is not accountable to its stakeholders. B. should ideally be elected by the CEO. C. oversees the governance of the organization. D. should ideally have less power than the CEO.

Q: (p. 94) Poor corporate governance: A. weakens a company's potential and makes it less attractive to investors. B. forces the managers of a company to be accountable to its shareholders. C. indicates effective mechanisms for monitoring the company's policies. D. results in underpinning the integrity and efficiency of financial markets.

Q: (p. 94) 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 the way for financial difficulties and incidents of fraud. D. makes managers and board members less accountable to shareholders.

Q: (p. 94) Corporate governance is the process by which: A. the government appropriates the assets of a business. B. corporations are nationalized by the government. C. corporations monitor the government. D. corporations are directed and controlled.

Q: (p. 104) Studies show that a commitment to good corporate governance makes a company both more attractive to investors and lenders, and more profitable.

Q: (p. 103) 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 Enron's operations.

Q: (p. 102) Having all the effective mechanisms listed on the corporate governance checklist in place ensures completely effective corporate governance.

Q: (p. 101) The ethical conduct of a business can be influenced by the individual personalities involved.

Q: (p. 101) Ethical misconduct is possible even if the board of directors passes all the criteria established by Walter Salmon.

Q: (p. 100) In his Harvard Business Review article, Walter Salmon recommends that a good board have three or more outside directors for every insider.

Q: (p. 100) Running a small company does not require a constant evaluation of risk-versus-reward scenarios.

Q: (p. 100) 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: (p. 99) The CRAFTED principles of governance, offered by the European business school INSEAD, recommend creating a culture and climate of consistency in an organization.

Q: (p. 99) Permitting one individual to function as both the chief executive officer of a company and the chairperson of its board has no impact upon the power of the stockholders.