Which of the Following Statements Is False

question 38

Multiple Choice

Which of the following statements is false?

• A) The incentives come from owning stock in the company and from compensation that is sensitive to performance.
• B) The role of the corporate governance system is to mitigate the conflict of interest that results from the combination of ownership and control without unduly burdening managers with the risk of the firm.
• C) Punishment comes when a board fires a manager for poor performance or fraud, or when, upon failure of the board to act, shareholders or raiders launch control contests to replace the board and management.
• D) The corporate governance system attempts to align interests by providing incentives for taking the right action and punishments for taking the wrong action.

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Definitions:

Acquisition

The act of obtaining control of another company by purchasing its shares or assets.

Merger

The act of amalgamating two distinct entities into a single organization, often aimed at enhancing competitive position and operational efficiency.

Acquiring Firm

A firm that acquires or gains control over another business by means of a merger, acquisition, or takeover.

Parent

The controlling company in a group of companies, which owns a controlling interest in one or more subsidiaries.