Which of the Following Statements Is False

question 31

Multiple Choice

Which of the following statements is false?

• A) The shareholders as a group elect a board of directors to monitor managers. The directors themselves, however, have the same conflict of interest - monitoring is costly and in many cases directors do not get significantly greater benefits than other shareholders from monitoring the managers closely.
• B) In principle, the board of directors hires the executive team, sets its compensation, approves major investments and acquisitions, and dismisses executives if necessary.
• C) In Canada, the board of directors has a clear fiduciary duty to protect the interests of both the owners of the firm (the shareholders) and the interests of other stakeholders in the firm (such as the employees).
• D) When the ownership of a corporation is widely held, no one shareholder has an incentive to bear the cost of monitoring, because he or she bears the full cost of monitoring but the benefit is divided among all shareholders.

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Definitions:

Dissipates

The process by which matter or energy disperses or spreads out to a less concentrated form, often resulting in a more uniform distribution.

Usable

Suitable or ready for use; able to be used for a particular purpose or in a particular way.

Delta G

The change in Gibbs free energy, predicting the direction of chemical reactions and their spontaneity.

Free Energy

A thermodynamic quantity that represents the amount of energy in a system that is available to do work.