Question

5. 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. E) None of the above

Answer 1

Answer: 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.

Step-by-step explanation:

Corporate governance has to do with the combination of laws, rules, and processes through which businesses are being operated, regulated. Corporate governance comprises of both the internal factors and the external factors which has an impact on the interests of the stakeholders in the company.

From the options given, the option that is false is B. It should be noted that the role of corporate governance system isn't about mitigating conflict of interest which arises from the combination of ownership and control.