Class 10: Corporate Governance Part 2

Question 1

Interlocking boards

Answer 1

take place when directors sit on each other’s boards

Question 2

when the CEOs sit on each other’s board, is it good or bad

Answer 2

it is aggravating situation

Question 3

when are Interlocking boards less likely to exist?

Answer 3

when stock options have higher weight than salary in CEO compensation packages

when boards meet more frequently

Question 4

who are more prone to replace an incumbent CEO if necessary?

Answer 4

Outsiders

Question 5

Complex firms

Answer 5

those that are diversified across industries, large in size, or have high leverage

Question 6

how do complex firms tend to benefit from regarding Board of directors

Answer 6

tend to benefit from a larger board of directors, and with large share of outsiders

Question 7

Firms for which the firm-specific knowledge of insiders is relatively important (e.g., R&D) tend to benefit from what

Answer 7

a large share of insiders in the board

Question 8

Takeover threats tend to curb board size to which level?

Answer 8

to a level that is lower than the optimal level perceived by the market

it could erode firm value, but could draw bidders