Question 1

Which of the following statements about the board of directors is NOT true?

Accepted Answer

A)  Board members are elected by stockholders. 
B)  The board can be held legally accountable for a company's actions. 
C)  The board has the legal authority to hire, fire, and compensate the CEO. 
D)  All the directors are full-time employees of the company. 
E)  Outside directors help perform the monitoring function of the board. 
A)  Board members are elected by stockholders. 
B)  The board can be held legally accountable for a company's actions. 
C)  The board has the legal authority to hire, fire, and compensate the CEO. 
D)  All the directors are full-time employees of the company. 
E)  Outside directors help perform the monitoring function of the board.

Question 2

Why do inside directors often dominate outsiders on a board of directors?

Accepted Answer

A)  Insiders can use their position within the management hierarchy to exercise control over the company-specific information that the board receives. 
B)  They can present information in a way that puts them in a favorable light. 
C)  They have intimate knowledge of the company's operations, and because superior knowledge and control over information are sources of power. 
D)  They may be better positioned than outsiders to influence boardroom decision making. 
E)  All of these are reasons why inside directors often dominate outsiders on a board of directors. 
A)  Insiders can use their position within the management hierarchy to exercise control over the company-specific information that the board receives. 
B)  They can present information in a way that puts them in a favorable light. 
C)  They have intimate knowledge of the company's operations, and because superior knowledge and control over information are sources of power. 
D)  They may be better positioned than outsiders to influence boardroom decision making. 
E)  All of these are reasons why inside directors often dominate outsiders on a board of directors.

Question 3

A union and the public are examples of internal stakeholders.

Accepted Answer

A) True 
 B)False

Question 4

Stockholders receive a return on their investment in a company's stock from dividend payments and capital appreciation.

Accepted Answer

A) True 
 B)False

Question 5

Robert has been the CEO at Nikita Incorporated for the last seven years. For the last three years, he has illegally diverted cash and assets to himself and his family members. He has abused corporate perks, such as using a company jet to fly to the Bahamas for a vacation and allowed his family members to use the gym and other amenities at the corporate office for free. He has spent corporate funds on vacation home in Miami, Florida and a threw a lavish New Year's Eve party for a hundred friends. Which of the following governance mechanisms is illustrated in this scenario?

Accepted Answer

A)  Stock options 
B)  Self-dealing 
C)  The takeover constraint 
D)  Employee incentives 
E)  Greenmail 
A)  Stock options 
B)  Self-dealing 
C)  The takeover constraint 
D)  Employee incentives 
E)  Greenmail

Question 6

Which of the following statements is true about strategic control systems?

Accepted Answer

A)  They are usually set by government regulators and require top management to follow them. 
B)  Their primary purpose is to foster on-the-job consumption. 
C)  Their purpose is to ensure that the wealth of stockholders is maximized. 
D)  They relieve employees and management of legal and ethical constraints. 
E)  They are designed to encourage information asymmetry. 
A)  They are usually set by government regulators and require top management to follow them. 
B)  Their primary purpose is to foster on-the-job consumption. 
C)  Their purpose is to ensure that the wealth of stockholders is maximized. 
D)  They relieve employees and management of legal and ethical constraints. 
E)  They are designed to encourage information asymmetry.

Question 7

Gemini Corp. is a large automobile manufacturer that has contracts with several suppliers. To gain more benefits from an upholstery supplier, Gemini Corp. unilaterally changed the contract and pressurized the supplier to lower its prices. Which of the following concepts is illustrated in this scenario?

Accepted Answer

A)  Opportunistic exploitation 
B)  On-the-job consumption 
C)  Agency strategy 
D)  Greenmail 
E)  Self-dealing 
A)  Opportunistic exploitation 
B)  On-the-job consumption 
C)  Agency strategy 
D)  Greenmail 
E)  Self-dealing

Question 8

One cause of the diverging interests between principals and agents is that managers in the company are motivated by different desires such as power, job security, and income and may use their position to help fulfill those desires rather than invest in ways that increase stockholder returns.

Accepted Answer

A) True 
 B)False

Question 9

An agency relationship continues throughout the hierarchy within a company.

Accepted Answer

A) True 
 B)False

Question 10

A stock option is a right to purchase:

Accepted Answer

A)  shares of the company's stock at the stock's current price. 
B)  shares of the company's stock at half the stock's current price. 
C)  shares of the company's stock at a predetermined price at some point in the future. 
D)  bonds issued by the company. 
E)  stock in an underperforming company. 
A)  shares of the company's stock at the stock's current price. 
B)  shares of the company's stock at half the stock's current price. 
C)  shares of the company's stock at a predetermined price at some point in the future. 
D)  bonds issued by the company. 
E)  stock in an underperforming company.

Question 11

Which of the following statements is true about takeover constraint?

Accepted Answer

A)  It encourages managers to put their own interests above those of stockholders. 
B)  It usually occurs when the management has maximized the wealth of the stockholders. 
C)  It often gives senior managers more independence when it comes to granting stock options. 
D)  It has ceased to exist in companies since the late 1990s. 
E)  It is the governance mechanism of last resort and is often invoked only when other governance mechanisms have failed. 
A)  It encourages managers to put their own interests above those of stockholders. 
B)  It usually occurs when the management has maximized the wealth of the stockholders. 
C)  It often gives senior managers more independence when it comes to granting stock options. 
D)  It has ceased to exist in companies since the late 1990s. 
E)  It is the governance mechanism of last resort and is often invoked only when other governance mechanisms have failed.

Question 12

A criticism of stock-based compensation plans is that they:

Accepted Answer

A)  discourage empire building. 
B)  reduce motivation among agents. 
C)  do not align management and stockholder interests. 
D)  dilute stockholders' equity. 
E)  adversely affect the earnings of principals. 
A)  discourage empire building. 
B)  reduce motivation among agents. 
C)  do not align management and stockholder interests. 
D)  dilute stockholders' equity. 
E)  adversely affect the earnings of principals.

Question 13

Maximizing long-run profitability and profit growth is the best way to satisfy the claims of several key stakeholder groups irrespective of how the company accomplishes this goal.

Accepted Answer

A) True 
 B)False

Question 14

Using a strategic control system known as the balanced scorecard model, which of the following would be evaluated from the customer perspective?

Accepted Answer

A)  Level of service 
B)  Cash flow 
C)  Employee satisfaction 
D)  Percentage of revenues generated from new products in a defined period 
E)  Revenue growth 
A)  Level of service 
B)  Cash flow 
C)  Employee satisfaction 
D)  Percentage of revenues generated from new products in a defined period 
E)  Revenue growth

Question 15

Gamma Corp. recently bought stocks in an underperforming company that has failed to maximize stockholder wealth. Gamma Corp. made changes to the top management structure of the company and persuaded the management to pursue strategies that maximize the wealth of stockholders. Gamma Corp. has been able to earn millions by doing so. Which of the following concepts is illustrated in this scenario?

Accepted Answer

A)  Greenmail 
B)  Agency theory 
C)  Information asymmetry 
D)  Self-dealing 
E)  On-the-job consumption 
A)  Greenmail 
B)  Agency theory 
C)  Information asymmetry 
D)  Self-dealing 
E)  On-the-job consumption

Question 16

Alpha LLC is a large paint manufacturing company. Despite government regulations, the company has been illegally disposing of its chemical wastes in a lake, which is an important habitat for several fish and birds. Which of the following ethical concerns is illustrated in this scenario?

Accepted Answer

A)  On-the-job consumption 
B)  Opportunistic exploitation 
C)  Environmental degradation 
D)  Self-dealing 
E)  Substandard working conditions 
A)  On-the-job consumption 
B)  Opportunistic exploitation 
C)  Environmental degradation 
D)  Self-dealing 
E)  Substandard working conditions

Question 17

Which of the following statements is true about corporate raiders?

Accepted Answer

A)  They are underperforming corporations that have been acquired by other companies. 
B)  They are government-funded organizations that help underperforming companies recover. 
C)  They may purchase stock in a company to take over the business and run it more efficiently. 
D)  They lack power to interfere with the top management decisions. 
E)  They discourage companies from pursuing strategies that help maximize stockholder wealth. 
A)  They are underperforming corporations that have been acquired by other companies. 
B)  They are government-funded organizations that help underperforming companies recover. 
C)  They may purchase stock in a company to take over the business and run it more efficiently. 
D)  They lack power to interfere with the top management decisions. 
E)  They discourage companies from pursuing strategies that help maximize stockholder wealth.

Question 18

Arnold is a CEO at Gamma LLC. He has control over the corporate funds of the company. Arnold has often used funds from the company to pay for his travel and hotel expenses. The funds could otherwise have increased stockholder returns. Which of the following concepts is illustrated in this scenario?

Accepted Answer

A)  Corporate governance 
B)  On-the-job consumption 
C)  Greenmail 
D)  Information asymmetry 
E)  Information manipulation 
A)  Corporate governance 
B)  On-the-job consumption 
C)  Greenmail 
D)  Information asymmetry 
E)  Information manipulation

Question 19

Rebecca works at a company where she has consistently noticed the questionable decisions and unethical behavior of her superiors. She has decided to contact the media and "blow the whistle". Rebecca is exhibiting which kind of ethical principle?

Accepted Answer

A)  Organization culture and leadership 
B)  Decision-making processes 
C)  Strong corporate governance 
D)  Moral courage 
E)  Hiring and promotion 
A)  Organization culture and leadership 
B)  Decision-making processes 
C)  Strong corporate governance 
D)  Moral courage 
E)  Hiring and promotion

Question 20

According to an SEC investigation, Computer Associates, one of the world's largest software companies, backdated contracts to boost the company's reported revenues. This is not an ethical business practice.

Accepted Answer

A) True 
 B)False

Which of the following statements about the board of directors is NOT true?

Why do inside directors often dominate outsiders on a board of directors?

A union and the public are examples of internal stakeholders.

Stockholders receive a return on their investment in a company's stock from dividend payments and capital appreciation.

Which of the following statements is true about strategic control systems?

One cause of the diverging interests between principals and agents is that managers in the company are motivated by different desires such as power, job security, and income and may use their position to help fulfill those desires rather than invest in ways that increase stockholder returns.

An agency relationship continues throughout the hierarchy within a company.

A stock option is a right to purchase:

Which of the following statements is true about takeover constraint?

A criticism of stock-based compensation plans is that they:

Maximizing long-run profitability and profit growth is the best way to satisfy the claims of several key stakeholder groups irrespective of how the company accomplishes this goal.

Using a strategic control system known as the balanced scorecard model, which of the following would be evaluated from the customer perspective?

Alpha LLC is a large paint manufacturing company. Despite government regulations, the company has been illegally disposing of its chemical wastes in a lake, which is an important habitat for several fish and birds. Which of the following ethical concerns is illustrated in this scenario?

Which of the following statements is true about corporate raiders?

Arnold is a CEO at Gamma LLC. He has control over the corporate funds of the company. Arnold has often used funds from the company to pay for his travel and hotel expenses. The funds could otherwise have increased stockholder returns. Which of the following concepts is illustrated in this scenario?

Rebecca works at a company where she has consistently noticed the questionable decisions and unethical behavior of her superiors. She has decided to contact the media and "blow the whistle". Rebecca is exhibiting which kind of ethical principle?

According to an SEC investigation, Computer Associates, one of the world's largest software companies, backdated contracts to boost the company's reported revenues. This is not an ethical business practice.

Strategic Leadership: Managing the Strategy-Making Process for Competitive Advantage

External Analysis: the Identification of Opportunities and Threats

Internal Analysis: Resources and Competitive Advantage

Competitive Advantage Through Functional-Level Strategies

Business-Level Strategy

Business-Level Strategy and the Industry Environment

Strategy and Technology

Strategy in the Global Environment

Corporate-Level Strategy: Horizontal Integration, Vertical Integration, and Strategic Outsourcing

Corporate-Level Strategy: Related and Unrelated Diversification

Implementing Strategy Through Organization

Filters

Exam 11: Corporate Governance, Social Responsibility, and Ethics

Which of the following statements about the board of directors is NOT true?

Why do inside directors often dominate outsiders on a board of directors?

A union and the public are examples of internal stakeholders.

Stockholders receive a return on their investment in a company's stock from dividend payments and capital appreciation.

Which of the following statements is true about strategic control systems?

One cause of the diverging interests between principals and agents is that managers in the company are motivated by different desires such as power, job security, and income and may use their position to help fulfill those desires rather than invest in ways that increase stockholder returns.

An agency relationship continues throughout the hierarchy within a company.

A stock option is a right to purchase:

Which of the following statements is true about takeover constraint?

A criticism of stock-based compensation plans is that they:

Maximizing long-run profitability and profit growth is the best way to satisfy the claims of several key stakeholder groups irrespective of how the company accomplishes this goal.

Using a strategic control system known as the balanced scorecard model, which of the following would be evaluated from the customer perspective?

Alpha LLC is a large paint manufacturing company. Despite government regulations, the company has been illegally disposing of its chemical wastes in a lake, which is an important habitat for several fish and birds. Which of the following ethical concerns is illustrated in this scenario?

Which of the following statements is true about corporate raiders?

Arnold is a CEO at Gamma LLC. He has control over the corporate funds of the company. Arnold has often used funds from the company to pay for his travel and hotel expenses. The funds could otherwise have increased stockholder returns. Which of the following concepts is illustrated in this scenario?

Rebecca works at a company where she has consistently noticed the questionable decisions and unethical behavior of her superiors. She has decided to contact the media and "blow the whistle". Rebecca is exhibiting which kind of ethical principle?

According to an SEC investigation, Computer Associates, one of the world's largest software companies, backdated contracts to boost the company's reported revenues. This is not an ethical business practice.

Strategic Leadership: Managing the Strategy-Making Process for Competitive Advantage

External Analysis: the Identification of Opportunities and Threats

Internal Analysis: Resources and Competitive Advantage

Competitive Advantage Through Functional-Level Strategies

Business-Level Strategy

Business-Level Strategy and the Industry Environment

Strategy and Technology

Strategy in the Global Environment

Corporate-Level Strategy: Horizontal Integration, Vertical Integration, and Strategic Outsourcing

Corporate-Level Strategy: Related and Unrelated Diversification

Implementing Strategy Through Organization

Filters