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1.
Whom does the board of directors of a company represent?
The shareholders. The board is elected by the shareholders and technically represents them.
2.
A stock analyst might interview a companys customers to get a sense of whether the company would be a good investment.
True. An analyst might interview customers, typically larger institutional ones.
3.
The chief executive officer is accountable to _______.
The board of directors. The chief executive officer is accountable to the board of directors, who, in turn, represent (and are elected by) the shareholders of the company. This is the primary reason we object to companies in which the CEO and chairman of the board are the same person--we believe it may lead to situations in which the CEO wields undue influence over the affairs of the board, which should be primarily independent and provide oversight of the CEO.
4.
Should an investor look with suspicion on companies whose employees do not have a clear separation between business and personal relationships?
Yes. Lack of a boundary can be very bad for business.
5.
In terms of financial transparency, investors should prefer companies that _______.
Disclose the minimum information, plus useful information that helps investors understand the business. Certainly every company should disclose all the information required by the SEC and other regulators. Above and beyond that, we think investors should favor companies that are forthright about their businesses, in good times and bad, and provide information that helps investors understand operations.
