CH 12

Jack is a board member of firm A but is not an employee of firm A; Jack is a senior executive from firm B. Jack can best be described as a(n) A) outside director. B) inside director. C) shareholder. D) philanthropists.

A

Some argue that the global financial crisis of 2008 was worsened because large fortune 500 companies did not practice effective A) corporate governance. B) external analysis. C) balanced scorecard techniques. D) co-opetition.

A

Which of the following descriptions best exemplifies adverse selection? A) A manager cannot ascertain the contributions of individual team members in team production. B) A research scientist uses the organization's resources to conduct personal research. C) An employee spends time on social networking sites during work hours. D) An interview candidate lists his qualifications in chronological order.

A

Which of the following is true of the board of directors in a public stock company? A) Votes at shareholder meetings determine whose representatives are appointed to the board of directors. B) Because shareholders generally have uniform interests, the composition of the board is generally a unanimous decision. C) The board of directors acts as a facilitator to convey interests of the stockholders to the management without any real authority. D) The functions of the board of directors are limited to ensuring the hiring and firing of CEOs.

A

According to the perspective of shareholder capitalism, shareholders in public stock companies A) are restricted from buying shares of two competing companies. B) have the most legitimate claim on profits. C) have significant decision-making power. D) have unlimited financial liability.

B

All of the following are examples of external-governance mechanisms except A) industry analysts. B) shareholders. C) auditors. D) government regulators.

B

Tommy is the CEO of a private start-up firm that is valued at just over $1.2 billion dollars. His firm can be classified as being a A) highly differentiated firm. B) unicorn. C) conglomerate. D) dominate firm.

B

Which of the following is the source of the principal-agent problem in publicly traded companies? A) the law of legal personality B) the separation of ownership and control C) limited liability for investors D) transferability of investor ownership

B

Which of the following statements is true of shareholders in a public stock company? A) They directly supervise and coordinate the manufacture of products and delivery of services. B) They are granted a charter of incorporation by the state and legally own company stock. C) They are the centerpiece of corporate governance. D) They are appointed by a board of directors to oversee the company's management.

B

Janet hires Vanessa to perform a critical task in her organization. However, Vanessa has misrepresented her knowledge, skills and abilities and Janet has no way of knowing whether Vanessa can indeed perform well. This is an example of A) agency theory. B) disparate treatment. C) adverse selection. D) ineffective corporate governance.

C

Jonathan is interested in building the centerpiece of his firm's corporate governance, and so hires a ________ that is made up of individuals from both inside and outside the firm. A) strategy consultant B) C-level suite team C) board of directors D) shareholders

C

Frank is a newly elected board member of XYZ Inc., a publicly traded stock. As a newly elected board member, Frank has a(n) ________, which is a legal duty to act solely in another party's interests. A) moral code B) ethical obligation C) competitive advantage D) fiduciary responsibility

D

In public stock companies, which of the following expectations of principals is most likely to lead to principal-agent problems? A) the expectation that the agent will follow the country's laws and regulations B) the expectation that the agent will go above and beyond the call of duty C) the expectation that the agent will reconnect economic and social needs D) the expectation that the agent will act in the principal's best interest

D

Which of the following perspectives best supports the shared value creation framework? A) Markets are more often than not defined by societal needs rather than economic needs. B) Failing to create value for society almost always reflects on the bottom line. C) A firm's competitive advantage depends on pitting economic and societal needs in a trade-off. D) Externalities such as pollution, wasted energy, and costly accidents actually create internal costs.

D

________ is the term that describes the difficulty of the principal to ascertain whether the agent has really put forth a best effort. A) Disparate treatment B) Adverse selection C) The agent issue D) Moral hazard

D

Adverse selection in a public stock company occurs when A) information asymmetry increases the likelihood of selecting inferior alternatives. B) a firm's work tasks, incentives, and employment contracts minimize opportunism by agents. C) a principal is not aware of the context from which information from an agent is derived. D) an agent manipulates information to benefit stockholders.

A

The root cause of the principal-agent problem between senior executives and lower-level employees can be explained by the A) informational advantage of the lower-level employees. B) higher number of lower-level employees than senior executives. C) knowledge of employees regarding day-to-day tasks. D) operational expertise of lower-level employees in concentrated areas of a particular field.

A

What is the result of managers' pursuit of strategies that define value creation too narrowly in public stock companies? A) It gives the managers greater control of the performance of the organization in the long term. B) It reduces the trust of shareholders in the organization as a vehicle for value creation. C) It helps companies increase firm profits by creating shared value. D) It enables companies to create social value by addressing society's needs but prevents them from creating economic value for shareholders.

B

________ are the board members who are part of the company's senior management team appointed by shareholders to provide the board with necessary information pertaining to the company's internal workings and performance. A) Outside directors B) Inside directors C) Stockholders D) Philanthropists

B

Which of the following characteristics of a public stock company deals with principals and agents? A) limited liability of investors B) transferability of investor ownership C) separation of legal ownership and management control D) legal personality

C