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1.
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.
2.
Whom does the board of directors of a company represent?
The shareholders. The board is elected by the shareholders and technically represents them.
3.
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.
4.
Which of the following signs may indicate that company directors are motivated to look out for the firms long-term interests?
They own many shares of the company. If a director has a significant stake (in terms of his or her personal wealth) in the shares of the firm, we think this is the best sign that he or she will look out for the long-term interests of the firm.
5.
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.
