Analysis Intermediate: Weighing Management Quality

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1.
Whom does the board of directors of a company represent?
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The shareholders. The board is elected by the shareholders and technically represents them.
2.
Should an investor look with suspicion on companies whose employees do not have a clear separation between business and personal relationships?
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Yes. Lack of a boundary can be very bad for business.
3.
A stock analyst might interview a companys customers to get a sense of whether the company would be a good investment.
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True. An analyst might interview customers, typically larger institutional ones.
4.
Which of the following signs may indicate that company directors are motivated to look out for the firms long-term interests?
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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.
A companys board of directors represents its management.
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False. The board represents the shareholders and their interests.