This document provides summarized answers to the Corporate Governance state exam questions at the IES FSV UK (Institut ekonomických studií Fakulty sociálních věd Univerzity Karlovy).
The exam questions were:
- The system of corporate governance is often described as an instrument to reduce costs of incomplete contracts in separation of ownership and control that prevail between shareholders and management. Explain the nature of this “incompleteness” and provide a theoretical basis for it.
- There are two main corporate governance concepts: shareholder and stakeholder one. Explain their underpinnings and show their consequences in the ownership patterns prevalent in the US on one side and continental Europe on the other.
- In the 1990’s, the stock option plans for top managers were seen as an instrument aligning interests of shareholders and the management, thus solving most of the corporate governance issues. Explain why this hope has failed.
- In the US, the ratio of the CEO payment to an average worker salary rose from about 5 at the end of the 1970’s to about 30 at the end of the century. Does this development reflect increasing value of good management or does it result from insufficient corporate governance control that let managers to award high bonuses to themselves?