Tronc is a publishing firm that owns several$$ newspapers, including the Los Angeles Times and the Chicago Tribune. In early$2017,$ one of$$ Tronc's largest investors sent the corporation a letter stating that he was$$ "troubled by the$$ company's corporate$$ governance, or lack$$ thereof." In$$ particular, he was unhappy with a limit of $25$ percent on how many of the$$ corporation's shares he could own and with an attempt to remove him from the board of directors.

$$Source: Lukas I.$$ Alpert, "Tronc's$$ Second$-$Largest Shareholder Raises Corporate Governance$$ Questions," Wall Street Journal$,$ March$27,2017.$

What is corporate$$ governance? In whose interest should corporations be$$ governed?$$

A$.$

Corporate governance is the way in which a firm is structured to represent shareholder interests.

B$.$

Corporate governance is the standard by which accountants audit large firms to provide information for investors.

C$.$

It is the process by which the government regulates large firms to protect consumers.

D$.$

It is the manner in which a$$ firm's board of directors run the company for its top managers.

Part $2$

Is limiting the percentage of a$$ firm's stock that one person can hold an example of good corporate governance or bad corporate$$ governance? Briefly explain.

A$.$

$$Good$,$ since this person would have an incentive to encourage managers to pursue$$ profit$-$maximizing profits that benefit all shareholders.

B$.$

$$Bad$,$ if this person encourages managers to pursue policies that are riskier than other shareholders believe is prudent.

C$.$

$$Bad$,$ if it reduces the role of board members to more of an advisory role who serve at the pleasure of this one individual.

D$.$

All of the above are correct.