EUR Lieton Statuss QUESTION 3 Which of the following mechanisms would be most likely to help motivate managers to act in the best interests of shareholders? a. Decrease the use of restrictive covenants in bond agreements. O b. Take actions that reduce the possibility of a hostile takeover. O Elect a board of directors that allows managers greater freedom of action od. Increase the proportion of executive compensation that comes from stock options and reduce the proportion that is paid as cash salaries. Oe. Eliminate a requirement that members of the board of directors have a substantial investment in the firm's stock. QUESTION 4 Which of the following statements is CORRECT? O a. In most corporations, the CFO ranks above the CEO b. By law in most states, the chairman of the board must also be the CEO The board of directors is the highest ranking body in a corporation, and the chairman of the board is the highest ranking individual. The CEO generally works under the board and its chairman, and the board generally has the authority to remove the CEO under certain conditions. The OC CEO, however, cannot remove the board, but he or she can endeavor to have the board voted out and a new board voted in should a conflict arise. It is possible for a person to simultaneously serve as CEO and chairman of the board, though many corporate control experts believe it is bad to vest both offices in the same person d. The CFO generally reports to the firm's chief accounting officer, who is normally the controller The CFO is responsible for raising capital and for making sure that capital expenditures are desirable, but he or she is not responsible for the we validity of the financial statements, as the controller and the auditors have that responsibility