Questions
4510_CORPFIN_1002UAC Mid-Semester Exam
Single choice
Which of the following statements is false?
Options
A.Due to separation of ownership and control, managers may not always act in the shareholders' interests, resulting in agency problems.
B.Maximising profits and minimising costs will always lead to an increase in share price.
C.The goal of the corporation should be to maximise market value of shareholders' equity.
D.None of the options is false.
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Step-by-Step Analysis
Question restatement: The task is to identify which statement is false among the given options.
Option A: 'Due to separation of ownership and control, managers may not always act in the shareholders' interests, resulting in agency problems.' This is a classic description of agency theory. It is widely accepted that ownership (shareholders) and control (managers) are separated in many firms, creating incentives for managers to pursue thei......Login to view full explanationLog in for full answers
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Background: Shelley Newcome is the new CEO for a publicly traded financial services company, Asset Management Co. (AMC). Newcome is new to the corporate governance requirements of a publicly traded company; she previously worked for a family office that invested in private equity. At her first board meeting, the company's first in six months, she asks a director what the objectives of corporate governance should be. The director tells her that the most important objective he can think of is to eliminate or mitigate conflicts of interest among stakeholders. One of Newcome's first steps as CEO is to fly to New York City to address a group of Wall Street analysts. Newcome is happy to discover that AMC provides her, and other senior management, with a company jet to attend such meetings. At the opening of the meeting, Newcome is surprised to hear that most of the analysts are extremely interested in learning about AMC's corporate governance system. One analyst indicates that he has studied several of AMC's competitors and found that they share a set of critical and core attributes. The analyst goes on to note that, like its competitors, AMC has included in its corporate governance system the following attributes: (a) the rights of shareholders and other core stakeholders are clearly delineated; (b) there is complete transparency and accuracy in disclosures regarding operations, performance, risk, and financial position, and identifiable and measurable accountabilities for the performance of responsibilities are in place. The analyst also says that to verify that the board is meeting its major objectives, he has looked at AMC’s conflicts of interest and has one more area to review. Newcome then asks the analyst why his corporate governance evaluation of AMC is so important. The analyst responds by saying that his decision whether to invest in AMC and ultimately the long run performance of the company are dependent on the quality of AMC’s managers’ decisions and the skills they use in applying sound management practices. Closing the meeting, Newcome is delayed by on analyst who complains about the difficulties of flying these days and he has to get to the airport hours ahead of time. The analyst goes on to say that he reviewed AMC regulatory filings and was happy to see that the company does not spend money on frivolous perquisites like executive jets. Question: Based on the information provided in the case, which of the following corporate disclosures could investment professionals use to evaluate the quality of the corporate governance system at AMC?
The most significant change in the 2020 version of the UK Stewardship Code is the:
An investor with a history of governance-led engagement is most likely to start engagement with a company by entering into a dialogue with the:
Investors engage in monitoring their investees to:
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