Question

4. Corporate governance: Methods for influencing management's decisions Corporate govemance refers to policies and rules, regulations and laws, and activities that (1) influence both management's decisions and its company's operations, and (2) affect the relationships between a business's stakeholders. These stakeholders include the company's executives and managers, shareholders, creditors, current and former employees, competitors, and local and global communities. In simple terms, corporate govemance provisions can take two fom carrots and stickswith the fomer generally taking the form of to reward management for benefitting the firm's stakeholders, and the latter resulting in their damaging decisions or undertaking unacceptable activities. These goveming forces are both internal and external to the organization, and they can eithe of their shareholders (a positive outcome) or further entrench the firm's management (a not-so-positive outcome). An entrenched management is one that isless likely to be removed, all other things remaining equal. r align management's interests with those ation designed for making Internal and external corporate govemance provisions and activities can take many forms, including a targeted share repurchase provision. Which of the following best describes this technique? O This anti-takeover tactic requires the firm to automatically confiscate and sell the shares of an individual shareholder who owns more than a specified amount of a target company's stock. This method of resisting a takeover involves the repurchase of shares from a firm threatening a hostile takeover O This procedure for facilitating a takeover and changing a firm's management involves repurchasing, for a fraction of their market value, the shares owned by the firm's board members. According to financial and management theory, which of the following practices are reasonably expected to align the behaviors of a corporation's management with those of the firm's shareholders? Check all that apply Senior managers should borrow capital in such amounts that a firm's risk of bankruptcy increases dramatically, since this strategy causes managers to underinvest in risky, positive-NPV projects. The board should have a true majority of outside members who bring business experience to the board and are not too busy to give sufficient attention to the board's responsibilities and activities. All provisions that result in an entrenched senior management team, since an entrenched management is more stable and can devote more time and energy to running the business. The board of directors and senior managers should advocate using an accounting firm that provides both accounting and consulting services to the company

Answer 1

Hi,

Since it is not very clear which answer you want me to give, I will confirm both the answers here:

Q1) Internal and External....

A1) B answer highlighted is correct. One example of this situation is below:
One way that target companies attempt to fend off hostile takeovers is to make the business less valuable to a potential bidder. When a company acquires another, any assets of the target company are used to pay off its debts after the acquisition. By using any cash on hand to repurchase stock, the target company effectively reduces its asset total. This means a bidder would need to use other assets to meet the target's financial obligations.

Q2) Which of the ...
A2) B, C [This way, there is deeper understanding between Shareholders and helps reduce 'Agency Problem']