Several Members of the Board of Directors of American Textile

question 108

Multiple Choice

Several members of the board of directors of American Textile Products (ATP) have proposed creating the position of lead director. What circumstances would most likely have initiated this proposal?

• A) ATP has been the initiator of several hostile takeovers in the last two years.
• B) The board has been successful in reducing the percentage of CEO pay that is composed of stock options.
• C) The CEO/Chairperson of the board has been suspected of opportunistic behavior.
• D) The firm is traded on the New York Stock Exchange and must change its corporate governance to comply with the NYSE's new rules.

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Definitions:

Equity Methods

An accounting technique used to record investments in other entities where the investor has significant influence over the investee but does not have full control.

Cost

The amount of money or resources expended to purchase or produce a good or service.

Capital Gains

Capital gains are the profits realized from the sale of assets, such as stocks or real estate, when the selling price exceeds the original purchase price.

Significant Influence

A level of power that allows an entity to affect the decision-making of another entity without full control, often associated with ownership of a significant but not majority share percentage.