Stakeholders and Governance: Quiz :Corporate Strategy (Strategic Leadership and Management Specialization) Answers 2025

Question 1

Key characteristics of public firms include:

❌ Limited liability for investors
❌ Transferability of investor interests
❌ Separation of ownership and control
✅ All of the above

Explanation:
Public firms are defined by limited liability, freely transferable shares, and separation between owners (shareholders) and managers.

Question 2

Transferability of investor interests is best described by:

✅ Investors are allowed to trade stocks.
❌ Investors can be hired as employees.
❌ Investors are allowed to participate in strategy formulation.
❌ Investors can give company stocks as a gift.

Explanation:
Transferability means investors can buy and sell shares freely in the market.

Question 3

The following statement about stakeholders is correct:

❌ Stakeholders are less important than shareholders.
❌ Stakeholders refer only to the members in a company’s supply chain.
✅ Failure to consider stakeholders can damage the company’s long run performance.
❌ “Stakeholders” is just another name for shareholders.

Explanation:
Ignoring stakeholders (employees, customers, communities, etc.) can harm long-term firm performance.

Question 4

A decision tool to recognize, evaluate, and address stakeholder needs is:

❌ SWOT analysis
❌ Financial impact analysis
✅ Stakeholder impact analysis
❌ Shareholder analysis

Explanation:
Stakeholder impact analysis helps managers assess how decisions affect different stakeholder groups.

Question 5

Professor Milton Friedman argued that:

❌ Corporate social responsibility need not include economic responsibilities.
❌ Corporate social responsibility is universal across the world.
✅ The only social responsibility of business is to increase profits so long as it stays within the rules of the game.
❌ Corporate responsibility is vital to a firm’s success.

Explanation:
Friedman’s view emphasizes profit maximization within legal and ethical rules.

Question 6

The difficulty of the agent misrepresenting his/her ability is called:

❌ A moral hazard problem
❌ A hierarchy problem
✅ An adverse selection problem
❌ A hold-up problem

Explanation:
Adverse selection occurs when one party has private information before a contract is made.

Question 7

Institutions of capitalism that lessen separation of ownership and control include:

❌ Takeovers (market for corporate control)
❌ Monitoring by institutional investors
❌ Separate chairperson and CEO
✅ All of the above

Explanation:
All these mechanisms help align managers’ interests with shareholders’ interests.

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