Chapter 9

Managers consider both external and internal factors to determine how to achieve appropriate (1) control over the individuals who work for the organization.

1. behavioral

The set of unwritten standards of acceptable behavior in an organization is called organizational (1).

1. culture

One form of opportunistic behavior that managers exhibit is engaging in excessive product-market (1), which reduces their employment risk.

1. diversification

Public corporations must disclose financial information to government (1) bodies such as the Securities and Exchange Commission.

1. regulatory

Policies that specify who gets praised and recognized and why is called the (1) system.

1. reward

The takeover constraint refers to the risk of being acquired by which of the following?

A hostile raider

______ are independent, certified professionals who verify the firm's books of accounts to unearth financial irregularities and ensure good accounting practices.

Auditors

______ are external control mechanisms that ensure that the firm's finances are in order and loan covenants are being followed.

Banks and analysts

Select all that apply Which of the following actions that can have a positive influence on the dynamics of the boards of directors?

Choosing directors who have time to dedicate to their duties on the board Building in the right expertise on the board

______ governance is when shareholders, management, and the board of directors work together to align their goals.

Corporate

Select all that apply Which of the following are steps that organizations can take to evolve the organization from boundaries to rewards and culture? (Check all that apply.)

Develop a reward system that is clearly aligned with organizational goals. Hire the right people. Make training an important part of the organization.

Select all that apply Which of the following are attributes of an effective board of directors? (Check all that apply.)

Directors rigorously evaluate senior managers, the company's strategic plan, and new senior management hires. Directors are actively involved. Directors provide strong oversight.

True or false: Research of boards of directors shows that simple restrictions, such as a requirement that a majority of the board members be outside directors, is enough to make the operations of the board effective.

False

Business groups are particularly dominant in which of the following?

In emerging economies

Select all that apply Which of the following statements regarding informational control are correct? (Check all that apply.)

It considers assumptions that create the foundation for an organization's strategy. It reviews goal and strategies in the context of the current environment. It deals with internal environment and the external strategic context.

Which of the following statements about CEO duality is true?

It is one of the most controversial issues in corporate governance.

Which of the following is an external control mechanism in which shareholders dissatisfied with a firm's management sell their shares?

Market for corporate control

Select all that apply Which of the following are part of the traditional approach sequence? (Check all that apply.)

Performance is measured against the predetermined set of goals. Strategies are formulated and goals are set by top management. Strategies are implemented.

Select all that apply Which of the following are characteristics of an effective reward system? (Check all that apply.)

Reinforces basic core values. Perceived as "fair and equitable" Enhances cohesion and commitment to goals

Select all that apply Which of the following duties are primary responsibilities of a board of directors? (Check all that apply.)

Rigorously scrutinize strategic plans. Take control of the management succession process. Evaluate senior managers' performance.

Select all that apply Which of the following are examples of how managers can exhibit opportunistic behavior? (Check all that apply.)

Shirking responsibilities Taking on excessive product-market diversification through corporate acquisitions Engaging in on-the-job consumption by spending large sums on executive luxuries

Which of the following has a fiduciary duty to ensure that the company is run consistently with the long-term interests of the business owners or shareholders and to act as an intermediary between the shareholders and management?

The board of directors

______ is one external mechanism that provides a solution to opportunistic behavior by managers.

The market for corporate control

Select all that apply Which of the following statements about stock analysts are true? (Check all that apply.)

They are often more optimistic than they should be and do not often make "sell" recommendations. They make recommendations to their clients to buy, hold, or sell. They conduct ongoing studies of the firms they follow.

Select all that apply Which of the following statements about external auditors are true? (Check all that apply.)

They often have lucrative consulting contracts with the firms they audit. They often fail to catch accounting irregularities.

True or false: Informational control is primarily concerned with whether the organization is "doing the right things."

True

Boundaries and constraints play a valuable role in focusing ______.

a company's strategic priorities

Select all that apply Which of the following are external governance control mechanisms? (Check all that apply.)

auditors market for corporate control banks and analysts

Culture, rewards, and boundaries are key "levers" of ______ controls.

behavioral

The duties of the ______ involve reviewing the organization's financial objectives and major strategies, providing advice to top management, and reviewing systems to ensure compliance with laws and regulations. Multiple choice question.

board of directors

Hiring the right people, training, management role models, and rewards are part of evolving from ______ to culture.

boundaries

The three elements of behavioral control are culture, rewards, and ______.

boundaries

Rules that specify behaviors that are acceptable and unacceptable are called ______.

boundaries and constraints

A set of firms that, though legally independent, are bound together by informal and formal ties and are accustomed to taking coordinated action are known as ______.

business groups

Informational and behavioral control are two types of control in the ______ approach to strategic control.

contemporary

Shareholder activism and an involved and committed board of directors are mechanisms of ______.

corporate governance

The relationship between various participants, including shareholders and management, in determining the direction and performance of corporations is called ______.

corporate governance

A mechanism created to allow for different parties to contribute capital, expertise, and labor for the benefit of each party is called a(n) _______.

corporation

In a(n) ______, shareholders have limited liability as well as limited involvement with the businesses' operation.

corporation

The leadership structure where the CEO acts as both the chief executive officer and the chair of the board of directors is called CEO ______.

duality

Government regulatory bodies, auditors, public activists, and the media are all ______ governance control mechanisms.

external

The type of behavior control used in an organization is often based on internal and ______ controls.

external

Which of the following provides external oversight of companies?

government regulatory bodies

The control system that addresses the assumptions that form the foundation of the organization is ______ control.

informational

The two central aspects of strategic control are ______ control and ______ control.

informational; behavioral

Principal—principal conflicts are conflicts between controlling shareholders and ________ shareholders.

minority

A system of shared values and beliefs that shape a company's people, organizational structure, and control systems to produce behavioral norms is ______.

organizational culture

The board of directors functions as a "go between" for the ______.

owners and controllers of the corporation

Conflicts between controlling shareholders and minority shareholders are called principal-______ conflicts.

principal

A system that focuses and motivates employee efforts on high-priority tasks is called a ______ system.

reward

Enhanced cohesion and reinforcement of basic core values are part of an effective ______ system.

reward

Managers can reduce the need for organizational rules and regulations by hiring the right people, providing training, developing management role models, and creating ______ systems.

reward

Two means of monitoring the behavior of managers through corporate governance mechanisms are through a committed board of directors and ______.

shareholder activism

Corporate governance is the relationship among ______.

shareholders, managers, and the board of directors

Informal control and behavioral control are two central aspects of ______ control.

strategic

The risk of being acquired by a hostile raider is often referred to as the ______ and deters opportunistic behavior by management.

takeover constraint

The ______ approach to strategic control is sequential.

traditional