Stocks 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.
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.
3.
Investors should look for companies that _______.
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Have set clear goals for measuring progress. Good measurement is good management.
4.
In terms of financial transparency, investors should prefer companies that _______.
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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.
5.
How much money the company pays its CEO and top management is _______.
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An important sign of how the company has set up its incentive system. The compensation of top corporate officers is a touchy subject, mostly because a lot of corporate officers are paid a great deal of money. We dont have any hard and fast rules for determining how much is "too much," but at the extremes, executive pay can eat up a significant chunk of corporate profits, which eats directly into shareholder returns.