Analysis Intermediate: Weighing Management Quality

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1.
A companys board of directors represents its management.
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False. The board represents the shareholders and their interests.
2.
Investors should look for companies that _______.
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Have set clear goals for measuring progress. Good measurement is good management.
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.
A great way to reward managers for building a successful business is to _______.
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Pay them a reasonable salary and a bonus tied to company profits. We like to see executive pay, in any form, tied to the operating and financial performance of the company. The best way to motivate executives is to pay them a reasonable salary (maybe even a "low" salary) and give them the opportunity to earn a significantly higher amount in the form of a bonus. Tying executive compensation to the stock price creates a perverse, short-term incentive for managers to say good things in public about the company rather than focus on making the company run better.
5.
To learn about a prospective company, stock analysts might interview _______.
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All of the above. An analyst might interview all of them, and others as well, such as suppliers.