Which of the Following Statements Is FALSE

question 22

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:

Capital Stock

The total amount of physical goods or financial assets that a company possesses which are used in the production of goods and services.

Gross Investment

The total amount of money spent on capital assets before accounting for depreciation.

Net Investment

The amount spent by a company on new capital assets after accounting for depreciation.

Foreign Investments

Investments made by individuals, companies, or governments in assets or business ventures in another country.