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Management
Q:
Conditions that must be met for principal-principal (PP) conflicts to occur include all of the following except _____________.
A. a dominant owner or group of owners who have interests that are distinct from minority shareholders
B. legislation that protects the interests of minority shareholders
C. a motivation for the controlling shareholders to exercise their dominant position to their advantage
D. few formal (such as legislation or regulatory bodies) or informal constraints that discourage or prevent the controlling shareholders from exploiting their advantageous positions
Q:
In principal-principal conflicts (conflicts between controlling shareholders and minority shareholders), the ownership (of equity) is _____________.
A. widely dispersed
B. controlled almost completely by management
C. concentrated
D. often held by employee stock ownership programs
Q:
In emerging economies and continental Europe, firms often can be characterized by all of the following except _____________.
A. concentrated ownership
B. low family ownership and control
C. business group structures
D. weak legal protection for minority shareholders
Q:
All of the following are types of information that a firm is required to disclose except _____________.
A. quarterly and annual filings of financial information
B. stock trading by insiders
C. details of new products under development
D. details of executive compensation packages
Q:
The reasons analyst recommendations are often more optimistic than warranted by an objective analysis of the facts include all of the following except that _____________.
A. many analysts fail to grasp the gravity of the problems facing a company
B. sell recommendations generate lower commissions than buy recommendations
C. the firms for which analysts work may have lucrative investment banking relationships with the firm
D. analysts are often pressured by their superiors to overlook negative information
Q:
The failure of many auditing firms to raise red flags about accounting irregularities in companies such as Enron and WorldCom is generally attributed to all of the following factors except _____________.
A. the desire to get future auditing contracts from the company
B. the desire to get consulting work from the company because most audit firms also do consulting work
C. the fact that auditors are appointed by the firm
D. the failure of U.S. audit firms to hire technically qualified professionals
Q:
It is generally argued that the takeover constraint deters management from _____________.
A. engaging in opportunistic behavior
B. considering acquiring other companies
C. declaring dividends
D. increasing the level of borrowing of a firm
Q:
The takeover constraint refers to _____________.
A. constraints placed by the firm on raiders who want to take over the firm
B. legal constraints that limit the ability of the raiders to acquire a firm
C. provisions in the charter of a company that prevents it from attempting a takeover of other companies
D. the risk of being acquired by a hostile raider
Q:
In trying to assure that managerial actions lead to shareholder value maximization, a risk can come about if the market value of a firm becomes less than its book value. The risk is _____________.
A. it becomes an attractive takeover target
B. the firm will be delisted by the stock exchange
C. the Securities and Exchange Commission will not allow it to declare dividends until the market value once again exceeds the book value
D. the firm will be unable to service its debt
Q:
External governance control mechanisms include all of the following except _____________.
A. auditors
B. analysts
C. competitors
D. media
Q:
In choosing sides concerning CEO duality, two schools of thought exist. Which of the following would not be a consideration for the Agency Theory school of thought?
A. CEO duality complicates the issue of CEO succession.
B. CEO duality reinforces popular doubts about the legitimacy of the system as a whole.
C. CEO duality can create conflicts of interest that can negatively affect the interests of the shareholders.
D. Firm performance always is improved under CEO duality.
Q:
In choosing sides concerning CEO duality, two schools of thought exist. Which of the following would not be a consideration for the Unity of Command school of thought?
A. One person holding both roles will be able to act more efficiently and effectively.
B. CEO duality provides smoother strategic decision making.
C. CEO duality creates unit across the board of directors and managers of a company.
D. CEO duality slows down decision-making.
Q:
CEO duality refers to a situation in which the _____________.
A. CEO formulates and implements strategies
B. CEO serves as both the CEO and the chair of the board of directors
C. CEO is responsible for acting as CEO and serving on the compensation committee
D. CEO is responsible for acting as CEO and Chief Operating Officer (COO)
Q:
Boards of directors have responded to financial crises, corporate scandals, regulator obligations, and investor requests for structural changes. In looking at the 2011 Harvard Business Review study of the changes in configuration of boards since 1987, which change has been brought about by government legislation?
A. Percentage of boards that have an average age of 64 or older has increased.
B. Average pay for directors has increased.
C. Percentage of boards with 12 or fewer members has increased.
D. Percentage of the directors that are independent has increased.
Q:
Shareholders rely on CEOs to adopt policies and strategies that maximize the value of their shares. To motivate CEOs to maximize the value of their companies, boards of directors can consider all of the following options except one. Which one is it?
A. Boards can require that the CEOs become substantial owners of company stock.
B. Salaries, bonuses, and stock options can be structures to provide rewards for superior performance.
C. Salaries can be structured to provide penalties for poor performance.
D. Dismissal for poor performance is not an option.
Q:
Individual and institutional shareholders have the same rights that include all except one of the following. Which one is not a shareholder right?
A. the right to sell stock
B. the right to vote the proxy
C. the right to bring suit for damages, if the economy declines
D. certain residual rights following the liquidation of the company, once creditors and claimants are paid
Q:
In order to minimize the temptation for managers to act in their own self-interest, governance mechanisms exist for implementation consideration. Which of the following is not a primary means for monitoring managerial behavior?
A. a board of directors that acts in the best interests of shareholders to create short-term value
B. shareholder activism in which owners view themselves as shareowners
C. a board of directors that acts in the best interests of shareholders to create long-term value
D. managerial incentives to align management interests with those of the stockholders
Q:
The primary participants in corporate governance do not include _____________.
A. the shareholders
B. the financial institutions
C. the management (led by the chief executive officer)
D. the board of directors
Q:
Most organizations with strong cultures and a sound system of rewards and incentives can eventually internalize boundaries rather than use explicit rules and regulations. Which of the following is not a technique for moving in that direction?
A. Hire people that identify with the dominant values of the organization.
B. Develop managerial role models.
C. Minimize training and indoctrination.
D. Align reward systems with organizational goals and objectives.
Q:
Rules and regulations, rather than culture or rewards, would be used for strategic control at which type of company?
A. software developer
B. stock brokerage firm
C. manufacturer of mass produced products
D. high tech research facility
Q:
Rule-based controls are least appropriate in organizations with which one of the following characteristics?
A. Environments are stable and predictable.
B. Employees are highly skilled and independent.
C. There is consistency in product and service.
D. The risk of malfeasance is extremely high.
Q:
Most successful organizations minimize the need for explicit rules, regulations, and other boundaries by _____________.
A. posting written statements of the organizational goals and objectives
B. discouraging the formation of subcultures that isolate work groups
C. designing effective reward systems
D. encouraging employees to see themselves as free agents
Q:
Which of the following approaches to behavioral strategic control would be the least appropriate for an organization in which there is a great need for innovation and a high degree of autonomy?
A. culture
B. rewards
C. rules
D. incentives
Q:
The best way to minimize improper and unethical conduct is to ______________ and _____________.
A. set boundaries; constraints
B. establish standards; guidelines
C. develop policies; regulations
D. design sanctions; guidelines
Q:
Rules and regulations are examples of ______________ and _____________.
A. controls; behaviors
B. controls; norms
C. boundaries; behaviors
D. boundaries; constraints
Q:
Which of the following statements about action plans is true?
A. Action plans, though specific, should permit a degree of autonomy to managers and not be constrained by budgets.
B. Action plans must be specific so that managers will have a clear understanding of the resource requirements necessary to implement the plan.
C. Action plans should not be constrained by a time frame in order to allow for modification.
D. Although managers must be held accountable for implementing action plans, this accountability often erodes the managers' motivation to implement the plan on a timely basis.
Q:
Effective short-term objectives should ______________ and _____________.
A. be specific; measurable
B. be achievable; not challenging
C. be motivating; not limiting
D. be time defined; not limiting
Q:
Effective boundaries and constraints _____________.
A. tend to inhibit efficiency and effectiveness
B. distract employees who are trying to focus on organizational priorities
C. minimize improper and unethical conduct
D. tend to limit organizational growth
Q:
Lack of a clear understanding of organizational goals and objectives is a probable cause of _____________.
A. productive behavior
B. counterproductive motivation
C. counterproductive behavior
D. motivated self-interest
Q:
Which of the following is not a characteristic of effective reward and incentive systems?
A. Performance measures are clear and highly visible.
B. The structure is fixed to assure employees of consistency.
C. The compensation system is perceived as fair and equitable.
D. Objectives are well understood, and broadly accepted.
Q:
When subcultures emerge that have shared values opposite from the dominant culture of an organization _____________.
A. organizational cohesiveness increases
B. information is shared rather than hoarded
C. individuals begin working at cross purposes
D. individuals gain insights into overarching goals and objectives
Q:
Individual rationality ______________ organizational rationality.
A. is a good indicator of
B. will ensure
C. is often the opposite of
D. does not always guarantee
Q:
Which of the following is NOT one of the characteristics of reward and incentive systems?
A. They represent a poor means of influencing the culture of an organization.
B. They focus efforts on high priority tasks.
C. They motivate high levels of individual and collective task performance.
D. They represent an effective control mechanism.
Q:
The late Sam Walton, founder of Walmart, used to give pep rallies at local Walmart stores. What purpose did this serve?
A. It was used to remind employees of Walmart rules and regulations.
B. It helped reinforce and sustain the Walmart culture.
C. It demonstrated to employees the importance of articulating explicit goals and objectives.
D. It made the Walmart reward system very explicit.
Q:
Which of the following is not an example of how organizational culture exerts behavioral control?
A. Culture helps maintain control by creating behavioral norms.
B. Culture generates unwritten standards of acceptable behavior.
C. Culture encourages individual identification with the organization and its objectives.
D. Culture sets explicit boundaries.
Q:
As firms simultaneously downsize and face the need for increased coordination across organizational boundaries, a control system based primarily on ______________ is dysfunctional.
A. boundaries and constraints
B. culture and rewards
C. organizational loyalty
D. innovation and risk taking
Q:
Top managers at ABC Company meet every Friday to review daily operational reports and year to date data. This is an example of _____________.
A. behavioral control
B. informational control
C. strategy formulation
D. strategy implementation
Q:
Which of the following is NOT one of the characteristics of a contemporary control system?
A. It is a key catalyst for an ongoing debate about underlying data, assumptions, and action plans.
B. It must focus on constantly changing information that is strategically important.
C. It circumvents the need for face-to-face meetings among superiors, subordinates, and peers.
D. It generates information that is important enough to demand regular and frequent attention.
Q:
Continuous monitoring, in the contemporary approach, is beneficial because _____________.
A. it reduces time lags
B. it increases the time it takes to detect changes in the competitive environment
C. organizational flexibility is reduced
D. organization response time is increased
Q:
Informational control systems are concerned with which of the following?
A. Is the organization doing things right?
B. Is the organization doing the right things?
C. Are rules and regulations being followed as information is processed?
D. Is the environment of the organization a necessary and sufficient condition for success?
Q:
Contemporary approaches to strategic control rely primarily on _____________.
A. feedback controls
B. single-loop learning
C. double-loop learning
D. comparative learning
Q:
For businesses facing complex and turbulent business environments, which of the following is true?
A. Goals and objectives that are uncertain prevent opportunism.
B. Traditional strategic controls are usually inappropriate.
C. Complacency about predetermined milestones can prevent adaptability.
D. Detailed plans are needed to maintain order.
Q:
Which of the following is the primary drawback of traditional strategic control systems?
A. They are only appropriate when the environment is stable and simple.
B. Goals and objectives cannot be measured with a high level of certainty.
C. They lead to complacency.
D. They lack the flexibility needed to adjust to changes in the environment.
Q:
The traditional approach to strategic control is sequential. Which of the following is not one of the steps in the sequence?
A. Action plans are submitted by lower level managers.
B. Performance is measured against the predetermined goal.
C. Strategies are implemented.
D. Strategies are formulated and top management sets goals.
Q:
Behavioral controls are aspects of strategic change that involve finding the appropriate ______________ and ______________ among the culture, rewards, and boundaries of the firm.
A. balance; alignment
B. measure; balance
C. alignment; balance
D. measure; outcome
Q:
Principal-principal (PP) conflicts frequently result in expropriation, which is defined as activities to enrich minority shareholders to assure their support.
Q:
In emerging economies and continental Europe, principal-principal conflicts are frequent. These consist of conflicts between controlling shareholders and executives.
Q:
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.
Q:
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.
Q:
Public companies are required by law to disclose information regarding executive compensation packages.
Q:
Stock analysts generally issue more sell recommendations than buy recommendations.
Q:
Auditors are appointed by the Securities and Exchange Commission to audit company financial statements.
Q:
The risk of being acquired by hostile raiders is often referred to as the takeover constraint.
Q:
When firms like Siebel Systems, Disney, Oracle, and Microsoft separated the roles of CEO and chairman of the board, they were creating CEO duality.
Q:
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.
Q:
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).
Q:
In order to have effective board operations, firms need to cultivate engaged and committed boards.
Q:
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.
Q:
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.
Q:
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.
Q:
Central to agency theory is the relationship between two primary players, the principals (stockholders) and agents (management).
Q:
The primary participants in corporate governance, according to Monks and Minow, are the shareholders, board of directors, and employees.
Q:
Rule-based controls are appropriate in organizations, where most of the employees are unskilled.
Q:
Boundaries and constraints, when used properly, can minimize improper and unethical conduct.
Q:
Action plans permit a degree of autonomy for managers who sometimes must modify activities to achieve the desired outcome.
Q:
Unexpected events have little effect on short-term objectives, because short-term objectives are not changeable.
Q:
Short-term objectives and action plans are types of boundaries that channel the efforts of employees toward goal accomplishment.
Q:
Boundaries and constraints are just used to maintain order in an organization and have little effect on the strategic priorities of the organization.
Q:
For a reward system to be effective, it must be perceived as fair and equitable.
Q:
Rewards systems that reinforce the core values of the organization and contribute to organizational cohesiveness are the least effective type.
Q:
Different functional areas within an organization often have different reward systems.
Q:
The organizational reward system is typically a weak method for motivating employees.
Q:
The collective sum of individual behaviors of the employees of an organization generally results in what is best for the organization; thus, individual rationality assures organizational rationality.
Q:
Once a strong and healthy organizational culture has been established, it becomes self-sustaining.
Q:
For young managers who see themselves as free agents, behavioral controls such as rewards and culture can be an effective way to enhance organizational loyalty.
Q:
As firms downsize, a control system based on rewards and culture becomes dysfunctional.
Q:
Continuous monitoring enhances the ability of the organization to respond with speed and flexibility.
Q:
Informational control is primarily concerned with whether or not the organization is doing the right things.
Q:
Contemporary strategic controls involve comparing actual performance to predetermined goals.
Q:
In single loop learning, the assumptions, premises, goals, and strategies of the organization are continuously monitored, tested, and reviewed.