Chapter 12.1-12.3 LearnSmart
Which of the following have been found to be ethical norms in business? (Check all that apply.) -honesty -fairness -self-interest -reciprocity -deception
-honesty -fairness -reciprocity
Which of the following statements are correct regarding the interests of principals and agents? (Check all that apply.) -agents may be more interested in personal goals, such as maximizing their compensation or gaining power -principals want to maximize corporate social responsibility initiates -agents want to maximize oversight in federal regulations -principals want to maximize shareholder returns -principals want to maximize agents' total compensation including benefits, status, and power
-agents may be more interested in personal goals, such as maximizing their compensation or gaining power -principals want to maximize shareholder returns
When facing an ethical dilemma, a manager should __ (Check all that apply). -consider whether the action in question conforms to the firm's code of conduct and industry practices -determine whether he or she could comfortable defend the action to the public -keep his or her action hidden under the cover of inside information -consult local laws and municipal codes
-consider whether the action in question conforms to the firm's code of conduct and industry practices -determine whether he or she could comfortable defend the action to the public
According to agency theory, which of the following managerial functions can be used to avoid adverse selection and moral hazard? (Check all that apply.) -control -leadership -organization -discipline
-control -organization
Additional functions of a board of directors beyond general strategic oversight include __ (Check all that apply). -day-to-day operational management -ensuring that the firm's accounting practices and reports are accurate -assessing and mitigating risk -selecting, evaluating, and compensating the CEO -conducting background checks on all potential employees
-ensuring that the firm's accounting practices and reports are accurate -assessing and mitigating risk -selecting, evaluating, and compensating the CEO
In order to reconcile economic and social needs, managers should focus on __ (Check all that apply). -making products affordable for the poorest socioeconomic groups in order to improve standards of living -re-establishing the firm as a non-profit which a focus on social equity -creating new regional clusters and business centers -understanding the supplier-buyer relationship -expanding value chains to include NGOs and other organizations committed to social goals
-making products affordable for the poorest socioeconomic groups in order to improve standards of living -creating new regional clusters and business centers -expanding value chains to include NGOs and other organizations committed to social goals
What are the four characteristics of a public stock company that make it an attractive corporate form? (Check all that apply.) -separation of ownership and control -funded mostly by friends and family -limited liability for investors -private ownership -legal personality -transferability of investor interests -definition of corporate governance processes
-separation of ownership and control -limited liability for investors -legal personality -transferability of investor interests
The shared value creation framework encourages managers to focus on which of the following needs? (Check all that apply.) -emotional -spiritual -social -economic
-social -economic
What are the two significant issues regarding the CEO pay debate? (Check all that apply.) -the size of the CEO compensation in relation to average employee pay -the history of CEO pay in the manufacturing industry -the relationship between firm performance and CEO pay -the legal and political ramifications of CEO pay
-the size of the CEO compensation in relation to average employee pay -the relationship between firm performance and CEO pay
The ideas of corporate social responsibility and stakeholder strategy are particularly prevalent in __. -Europe -South America -Asia -Africa
Europe
Which of the following is a federal regulatory agency whose task it is to oversee stock trading and enforce federal securities laws? -World Trade Organization -EDGAR -Securities and Exchange Commission -Consumer Financial Protection Bureau
Securities and Exchange Commission
In team-based environments, the principal may have difficulty determining individual contributions by members. This can create a situation in which an opportunistic employee does little work but takes credit. This is known as __. -independent contract -adverse selection -shared value creation -corporate governance
adverse selection
Employees who work in organizations that emphasize ethical behavior __. -are more likely to act ethically -are more likely to engage in moral hazard -are no more or less likely to act ethically -are less likely to act ethically
are more likely to act ethically
Following the rise of institutional investors, the use of poison pills to avoid hostile takeover has __. -been eliminated entirely -become rare -grown steadily -become mandatory
become rare
The shared value creation framework is a tool intended to help businesses __. -secure capital investments -increase shareholder profits -identify profitable opportunities -benefit all stakeholders, not just shareholders
benefit all stakeholders, not just shareholders
One of the key characteristics of a leveraged buyout (LBO) is that it __. -changes the ownership structure of a company from public to private -increases the value of the firm's assets -ensures job security for all employees -requires the company to publicly disclose its financial statements for the next 5 years
changes the ownership structure of a company from public to private
Corporate governance is a system of __. -checks and balances -inputs and outputs -related and unrelated diversification -legal and ethical issues
checks and balances
The idea of corporate social responsibility (CSR) suggests that a firm's obligations should __. -never include any other performance indicator other than increasing profits -exceed the traditional imperative to increase profits -not extend to ethical and philanthropic expectations -always be focused on increasing the price of the firm's shares by selling higher volume
exceed the traditional imperative to increase profits
A diverse board of directors is less likely to fall victim to __. -accounting scandals -adverse selection -disagreements -groupthink
groupthink
If a company is poorly managed, its stock price may fall low enough for the firm to become a target for a(n) __. -shared value creation framework -hostile takeover -internal corporate-governance mechanism -principal-agent problem
hostile takeover
Under agency theory, a manager should seek to align __ between principals and agents to minimize opportunism. -disciplinary actions -decision-making power -work schedules -incentives
incentives
__ is when agents are better informed than principals. -information overload -information asymmetry -corporate governance -the seesaw effect
information asymmetry
According to agency theory, conflicts such as the principal-agent problem are considered __ issues. -ethical -moral -social -legal
legal
A fiduciary responsibility is a(n) __. -set of incentives designed to improve employee performance -at-will employment contract -mandate to act in one's own self interest -legal duty to act in another party's interests
legal duty to act in another party's interests
A situation in which one party has an incentive to shirk their responsibility because the costs will fall to the other party is known as __. -a debt pendulum -adverse selection -moral hazard -unbalanced burden
moral hazard
The interests of inside directors on the board of directors typically align with those of __. -shareholders -low-level employees -society as a whole -senior management
senior management
The right to buy a company's stock at a predetermined price sometimes in the future is known as a(n) __. -executive negotiated price -outside stock opportunity -lateral compensation -stock option
stock option
Which of the following is a major drawback of public stock companies, according to Michael Porter and others? -they prioritize financial performance over all else -they focus too heavily on the greater good -they get caught up in sustainability and overlook financial issues -they suffer too easily from inertia
they prioritize financial performance over all else
The SEC argued that by NOT disclosing the risky nature of the mortgages in the Abacus CDO, Goldman Sachs __. -violated its fiduciary duty -neglected its economic imperatives -active in an ethical and legal manner -focused too strongly on the interest of Abacus shareholders
violated its fiduciary duty
The relationship between CEO pay and job performance has been shown to be __. -somewhat strong -weak -very strong -moderate
weak