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Which of the following statements is FALSE? A. The incentives come from owning stock in the...

Which of the following statements is FALSE?

A. The incentives come from owning stock in the company and from compensation that is sensitive to performance.

B. The role of the corporate governance system is to mitigate the conflict of interest that results from the combination of ownership and control without unduly burdening managers with the risk of the firm.

C. Punishment comes when a board fires a manager for poor performance or fraud, or when, upon failure of the board to act, shareholders or raiders launch control contests to replace the board and management.

D. The corporate governance system attempts to align interests by providing incentives for taking the right action and punishments for taking the wrong action.

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Answer #1

Ans B. The role of the corporate governance system is to mitigate the conflict of interest that results from the combination of ownership and control without unduly burdening managers with the risk of the firm.

All other options are TRUE.

The incentives come from owning stock in the company and from compensation that is sensitive to performance, Punishment comes when a board fires a manager for poor performance or fraud, or when, upon failure of the board to act, shareholders or raiders launch control contests to replace the board and management, The corporate governance system attempts to align interests by providing incentives for taking the right action and punishments for taking the wrong action.

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