GMAC Corporate Governance 2

Question 1

Which of the following is a key principle of good corporate governance according to the OECD Principles?

Accepted Answer

Ensuring that shareholder rights are recognized and protected

Answer

The OECD Principles of Corporate Governance place recognition and protection of shareholder rights as a foundational element of the governance framework.

Question 2

What is 'say-on-pay' in the context of corporate governance?

Accepted Answer

A shareholder vote expressing approval or disapproval of executive compensation packages

Answer

'Say-on-pay' provisions give shareholders a non-binding advisory vote to weigh in on whether executive compensation packages are appropriate.

Question 3

Which type of board director is generally considered most effective at providing independent oversight of management?

Accepted Answer

Independent directors with no material relationship to the company

Answer

Independent directors, lacking material relationships with the company or management, are best positioned to provide objective oversight free from conflicts of interest.

Question 4

What is a 'staggered board' (also called a classified board) structure in corporate governance?

Accepted Answer

A board where only a portion of directors stand for election each year

Answer

A staggered board divides directors into classes with only one class elected per year, making it much harder for activist investors or hostile acquirers to rapidly replace the entire board.

Question 5

What does 'shareholder activism' typically involve in corporate governance?

Accepted Answer

Shareholders using their equity stakes to pressure companies to change strategy or governance

Answer

Shareholder activism involves investors leveraging their ownership positions to engage management and push for operational, financial, or governance changes they believe will create value.

GMAC - Graduate Management Admission Council Practice Test

GMAC - Graduate Management Admission Council Practice Test

GMAC Corporate Governance 2