21.
|
Short-term
objectives and action plans are types of boundaries that channel the efforts
of employees toward goal accomplishment.
TRUE
Short-term objectives and
action plans represent boundaries that help to allocate resources in an
optimal manner and to channel the efforts of employees at all levels
throughout the organization.
|
AACSB: Analytic
Blooms: Understand Learning Objective: 09-04 The benefits of having the proper balance among the three levers of behavioral control: culture; rewards and incentives; and boundaries. Level of Difficulty: 2 Medium Topic: Attaining Behavioral Control: Balancing Culture, Rewards, and Boundaries |
22.
|
Unexpected
events have little effect on short-term objectives, because short-term
objectives are not changeable.
FALSE
Short-term objectives must
provide proper direction and also provide enough flexibility for the firm to
keep pace with and anticipate changes in the external environment, new
government regulations, a competitor introducing a substitute product, or
changes in consumer taste.
|
AACSB:
Analytic
Blooms: Understand Learning Objective: 09-04 The benefits of having the proper balance among the three levers of behavioral control: culture; rewards and incentives; and boundaries. Level of Difficulty: 2 Medium Topic: Attaining Behavioral Control: Balancing Culture, Rewards, and Boundaries |
23.
|
Action
plans permit a degree of autonomy for managers who sometimes must modify
activities to achieve the desired outcome.
TRUE
Short-term objectives must
provide proper direction and also provide enough flexibility for the firm to
keep pace with and anticipate changes in the external environment. Unexpected
events within a firm may require a firm to make important adjustments in both
strategic and short-term objectives.
|
AACSB:
Analytic
Blooms: Understand Learning Objective: 09-04 The benefits of having the proper balance among the three levers of behavioral control: culture; rewards and incentives; and boundaries. Level of Difficulty: 2 Medium Topic: Attaining Behavioral Control: Balancing Culture, Rewards, and Boundaries |
24.
|
Boundaries
and constraints, when used properly, can minimize improper and unethical
conduct.
TRUE
Boundaries and constraints
can serve many useful purposes for organizations, including minimizing improper
and unethical conduct. Guidelines can be useful in specifying proper
relationships with customers and suppliers of the company. Many companies
have explicit rules regarding commercial practices, including the prohibition
of any form of payment, bribe, or kickback.
|
AACSB:
Analytic
Blooms: Understand Learning Objective: 09-04 The benefits of having the proper balance among the three levers of behavioral control: culture; rewards and incentives; and boundaries. Level of Difficulty: 2 Medium Topic: Attaining Behavioral Control: Balancing Culture, Rewards, and Boundaries |
25.
|
Rule-based
controls are appropriate in organizations, where most of the employees are
unskilled.
TRUE
Control in bureaucratic
organizations is dependent on members following a highly formalized set of
rules and regulations. Most activities are routine and the desired behavior
can be specified in a detailed manner because there is generally little need
for innovative or creative activity.
|
AACSB:
Analytic
Blooms: Understand Learning Objective: 09-04 The benefits of having the proper balance among the three levers of behavioral control: culture; rewards and incentives; and boundaries. Level of Difficulty: 2 Medium Topic: Attaining Behavioral Control: Balancing Culture, Rewards, and Boundaries |
26.
|
The
primary participants in corporate governance, according to Monks and Minow,
are the shareholders, board of directors, and employees.
FALSE
Robert Monks and Nell Minow,
two leading scholars in corporate governance, define it as the relationship
among various participants in determining the direction and performance of
corporations. The primary participants are the shareholders, the management (led
by the CEO), and the board of directors. Agency theory is concerned with
resolving two problems that can occur in agency relationships. The first is
the agency problem that arises when the goals of the principals and agents
conflict and when it is difficult or expensive for the principal to verify
what the agent is actually doing.
|
AACSB:
Analytic
Blooms: Remember Learning Objective: 09-05 The three key participants in corporate governance: shareholders; management (led by the CEO); and the board of directors. Level of Difficulty: 1 Easy Topic: The Role of Corporate Governance |
27.
|
Central
to agency theory is the relationship between two primary players, the
principals (stockholders) and agents (management).
TRUE
Central to agency theory is the
relationship between two primary players, the principals who are the owners
of the firm (stockholders) and the agents, who are the people paid by
principals to perform a job on their behalf (management).
|
AACSB:
Analytic
Blooms: Understand Learning Objective: 09-05 The three key participants in corporate governance: shareholders; management (led by the CEO); and the board of directors. Level of Difficulty: 2 Medium Topic: The Role of Corporate Governance |
28.
|
Research
has shown that executives who have large holdings of stock in their firm were
more likely to have diversification strategies more consistent with
shareholder interests, like increasing long-term returns.
TRUE
Agents (executives) may have
a stronger preference toward diversification than shareholders, because it
reduces their personal level of risk from potential loss of employment.
Executives who have large holdings of stock in their firms were more likely
to have diversification strategies that were more consistent with shareholder
interests, like increasing long-term returns.
|
AACSB:
Analytic
Blooms: Understand Learning Objective: 09-05 The three key participants in corporate governance: shareholders; management (led by the CEO); and the board of directors. Level of Difficulty: 2 Medium Topic: The Role of Corporate Governance |
29.
|
One
of the most critical roles of the board of directors is to create incentives
that align the interests of the CEO and top executives with the interests of
shareholders.
TRUE
Managerial incentives,
sometimes called contract-based outcomes, consist of reward and compensation
agreements for managers. Here the goal is to carefully craft managerial
incentive packages to align the interests of management with those of the
stockholders.
|
AACSB:
Analytic
Blooms: Understand Learning Objective: 09-06 The role of corporate governance mechanisms in ensuring that the interests of managers are aligned with those of shareholders from both the United States and international perspectives. Level of Difficulty: 2 Medium Topic: The Role of Corporate Governance |
30.
|
According
to the Business Roundtable, representing the largest U.S. corporations, the
most important quality of a good board of directors is that they do not get
involved in critiquing company strategies.
FALSE
According to the Business
Roundtable, the most important quality for a good board of directors is to be
active, critical participants in determining company strategies. That does
not mean board members should micromanage or circumvent the CEO. Rather, they
should provide strong oversight going beyond simply approving the plans of the
CEO.
|
AACSB:
Analytic
Blooms: Understand Learning Objective: 09-06 The role of corporate governance mechanisms in ensuring that the interests of managers are aligned with those of shareholders from both the United States and international perspectives. Level of Difficulty: 2 Medium Topic: The Role of Corporate Governance |
31.
|
In
order to have effective board operations, firms need to cultivate engaged and
committed boards.
TRUE
Research and simple
observations of boards indicate that simple prescriptions, such as having a
majority of outside directors, are insufficient to lead to effective board
operations. Firms need to cultivate engaged and committed boards.
|
AACSB:
Analytic
Blooms: Understand Learning Objective: 09-06 The role of corporate governance mechanisms in ensuring that the interests of managers are aligned with those of shareholders from both the United States and international perspectives. Level of Difficulty: 2 Medium Topic: The Role of Corporate Governance |
32.
|
Changes
in board of director configurations since 1987 indicate that board directors
were paid more in 2011, were older, were likely to be female and were
independent from the company (not insiders).
TRUE
According to a Harvard
Business Review article in 2011, the percentage of boards that had an average
age of 64 or older increased; the average pay for directors increased; the
percentage of board members who were female increased; the percentage of
boards with 12 or fewer members increased; and the percentage of directors
who were independent increased. These changes resulted from regulator and
investor efforts in response to financial crises and corporate scandals.
|
AACSB:
Analytic
Blooms: Understand Learning Objective: 09-06 The role of corporate governance mechanisms in ensuring that the interests of managers are aligned with those of shareholders from both the United States and international perspectives. Level of Difficulty: 2 Medium Topic: The Role of Corporate Governance |
33.
|
CalPERS,
the California Public Employees Retirement System, manages over 240 billion
dollars in assets. As an example of shared activism, they review all short-
and long-term performance figures for each of the firms in which they invest
and request changes in the governance structure of those firms, when they
feel the firm is not responsive to their concerns.
TRUE
Shareholder activism refers
to actions by large shareholders, both institutions and individuals, to
protect their interests when they feel that managerial actions diverge from
shareholder value maximization. Every year CalPERS reviews the performance of
the 1,000 firms in which it retains a sizable investment. They review short-
and long-term performance of each firm in its portfolio, its governance
characteristics, its financial status, and market expectations for the firm.
CalPERS then meets with selected companies to better understand their governance
and business strategy. If needed, CalPERS requests changes in the governance
structure of the firm and works to ensure shareholder rights.
|
AACSB:
Analytic
Blooms: Understand Learning Objective: 09-06 The role of corporate governance mechanisms in ensuring that the interests of managers are aligned with those of shareholders from both the United States and international perspectives. Level of Difficulty: 2 Medium Topic: The Role of Corporate Governance |
34.
|
When
firms like Siebel Systems, Disney, Oracle, and Microsoft separated the roles
of CEO and chairman of the board, they were creating CEO duality.
FALSE
CEO duality also serves to
reinforce popular doubts about the legitimacy of the system as a whole and
evokes images of bosses writing their own performance reviews and setting
their own salaries. Firms like Siebel Systems, Disney, Oracle, and Microsoft
have also decided to divide the roles between the CEO and chairman and
eliminate duality.
|
AACSB:
Analytic
Blooms: Understand Learning Objective: 09-06 The role of corporate governance mechanisms in ensuring that the interests of managers are aligned with those of shareholders from both the United States and international perspectives. Level of Difficulty: 2 Medium Topic: The Role of Corporate Governance |
35.
|
The
risk of being acquired by hostile raiders is often referred to as the
takeover constraint.
TRUE
The risk of being acquired by
a hostile raider is often referred to as the takeover constraint. The
takeover constraint deters management from engaging in opportunistic behavior
since the first thing that the raider may do on assuming control over the
company will be to fire the underperforming management.
|
AACSB:
Analytic
Blooms: Remember Learning Objective: 09-06 The role of corporate governance mechanisms in ensuring that the interests of managers are aligned with those of shareholders from both the United States and international perspectives. Level of Difficulty: 1 Easy Topic: The Role of Corporate Governance |
36.
|
Auditors
are appointed by the Securities and Exchange Commission to audit company
financial statements.
FALSE
All accounting statements are
required to be audited and certified to be accurate by external auditors. But
auditors are appointed by the firm being audited. The desire to continue that
business relationship sometimes makes them overlook financial irregularities.
|
AACSB:
Analytic
Blooms: Understand Learning Objective: 09-06 The role of corporate governance mechanisms in ensuring that the interests of managers are aligned with those of shareholders from both the United States and international perspectives. Level of Difficulty: 2 Medium Topic: The Role of Corporate Governance |
37.
|
Stock
analysts generally issue more sell recommendations than buy
recommendations.
FALSE
It is generally observed that
analyst recommendations are often more optimistic than warranted by facts.
Sell recommendations tend to be exceptions rather than the norm. Part of the
explanation may be that most analysts work for firms that also have
investment banking relationships with companies they follow. Negative
recommendations may cause them to take their investment banking business to a
rival firm.
|
AACSB:
Analytic
Blooms: Understand Learning Objective: 09-06 The role of corporate governance mechanisms in ensuring that the interests of managers are aligned with those of shareholders from both the United States and international perspectives. Level of Difficulty: 2 Medium Topic: The Role of Corporate Governance |
38.
|
Public
companies are required by law to disclose information regarding executive
compensation packages.
TRUE
All public corporations are
required to disclose a substantial amount of financial information by bodies
such as the Securities and Exchange Commission. These include quarterly and
annual filings of financial performance, stock trading by insiders, and
details of executive compensation packages.
|
AACSB:
Analytic
Blooms: Understand Learning Objective: 09-06 The role of corporate governance mechanisms in ensuring that the interests of managers are aligned with those of shareholders from both the United States and international perspectives. Level of Difficulty: 2 Medium Topic: The Role of Corporate Governance |
39.
|
The
Sarbanes-Oxley Act of 2002 requires that CEOs and CFOs of publicly-listed
companies must reveal off-balance-sheet finances and vouch for the accuracy
of information provided.
TRUE
The failure of a variety of
external control mechanisms led the U.S. Congress to pass the Sarbanes-Oxley
Act in 2002. This act calls for many stringent measures that would ensure
better governance of U.S. corporations. One of these measures is that CEOs
and CFOs must fully reveal off-balance-sheet finances and vouch for the
accuracy of the information revealed.
|
AACSB:
Analytic
Blooms: Understand Learning Objective: 09-06 The role of corporate governance mechanisms in ensuring that the interests of managers are aligned with those of shareholders from both the United States and international perspectives. Level of Difficulty: 2 Medium Topic: The Role of Corporate Governance |
40.
|
The
Sarbanes-Oxley Act of 2002 stipulates that executives of a firm will still be
able to sell their shares in the firm when other employees cannot.
FALSE
The failure of a variety of
external control mechanisms led the U.S. Congress to pass the Sarbanes-Oxley
Act in 2002. This act calls for many stringent measures that would ensure
better governance of U.S. corporations. One of these measures is that
executives must promptly reveal the sale of shares in firms they manage and
are not allowed to sell when other employees cannot.
|
AACSB:
Analytic
Blooms: Understand Learning Objective: 09-06 The role of corporate governance mechanisms in ensuring that the interests of managers are aligned with those of shareholders from both the United States and international perspectives. Level of Difficulty: 2 Medium Topic: The Role of Corporate Governance
|
No comments:
Post a Comment