Question

1. There are many ways to measure good corporate governance.  Those ways include:
   1. Determining if the net present value of the Companys cash flow is positive
   2. Determining if the Companys cash flow is being used for the benefit of the shareholders
   3. Not allowing the board to remove the Chief Executive Officer
   4. Both A and B
   5. Both B and C
   6. All of the above
2. A Company develops a compensation philosophy to:
   1. Determine where they would like to pay employees in relation to the market
   2. Always pays bonuses at 100%
   3. Balances salary, cash bonus and stock compensation
   4. Both A and B
   5. Both A and C
   6. All of the above

3. Company stock plans used to motivate employees include:
   1. Incentive Stock Options
   2. Restricted Stock
   3. Employee Stock Option Plans
   4. All of the above

Answer 1

Answer to Question 1: answers (a) and (b)

Corporate Governance is very vital factor for any company to have healthy operational and financial status and growth. This in simple words, means a set of rules, procedues, policies or framework advocated in the company and are used in each and every aspect of the operations of the company. This brings up discipline within the organisation and helps in controlling any unethical practices etc.

There are many ways to keep this up, however, based on the given question, I would suggest answers (a) and (b); Regular monitoring the future cash flows and assessing their present value to check the financial health is a good corporate governance; Also, to check whether the cash flows are ultimately being used for the benefit of the shareholders is as well very key factor.

Not allowing the board to remove the Chief Executive Officer: This cannot be considered as a Corporate Governance, as these shall form part of fiduciary duties of the Board of Directors and their duties cannot be compromised.

Answer to Question 2: Both A and C

Company develops a compensation philosophy to: to check the internal employee package details on whether the same are in line with the market parameters. This shall help in assessing whether the employees are being correcly paid or overpaid and also helps in checking the employee turnover. Also, this policy helps in balacing between the salary, bonus, stock compensations and other perquisites, to mutually benefit between the employees and the company.

Answer to Question 3: All the three (All of the Above)

Stock options now a days have form key compensation modes for the employees. This lessen the burden on the company and for employees this helps as a long term equity saving mode. On the other hand, various stock options have been evolved over the time to incentivise the employees - restricted options are generally over the vested period and the employee cannot exercise his rights immediately. Other incentive optinos, stock options can be exercised with a Price.