Management 428 Chapter 12

Which of the following have been found to be ethical norms in business? 1) self-interest 2) reciprocity 3) deception 4) fairness 5) honesty

2, 4, 5

Corporate governance addresses the ____________ problem, which underscores the risk of delegating responsibility and control to individuals who may not have the firm's best interests in mind.

principal-agent

The relationship between CEO pay and job performance has been shown to be ___________.

weak

Financial statements by public companies must ___________. 1) divulge insider information 2) meet shareholder expectations 3) be audited by certified public accountants 4) adhere to GAAP

3, 4

The primary difference between outside and inside members of the board of directors is __________________. A) inside directors have a fiduciary duty to act in the interest of shareholders, whereas outside directors are not B) outside directors are management employees specialized in more than one industry C) outside directors manage employees outside of the US, whereas inside directors handle US-based operations only D) outside directors are not employees of the firms, whereas inside directors are

D

Uber's unethical behavior resulted in which of the following? A) the company was acquired by Lyft, the biggest competitor B) the company's reputation was strengthened C) the company's valuation plummeted D) the company's CEO was forced to resign

D

The ideas of corporate social responsibility and stakeholder strategy are particularly prevalent in ____________.

Germany

The shared value creation framework is a tool intended to help businesses _____________.

benefit all stkeholders, just not shareholders

The mechanism used to guide a company toward meeting its strategic goals within the bounds of the law is known as __________.

corporate governance

The idea of corporate social responsibility (CSR) suggests that a firm's obligations should _________________.

exceed the traditional imperative to increase profits

Social consequences of business activities, including pollution, energy loss, and dangerous accidents, are known as ____________.

externalities

T or F: Any actiona taken by a manger that is within the bounds of the law is, by definition, an ethical action.

false

Managers who act upon secret company information for personal gain, such as by trading stocks based on the knowledge of future initiativs, are guilty of ____________.

insider trading

According to agency theory, conflicts such as principal-agent problem are considered _________________ issues.

legal

A situation in which one party has an incentive to shrink their responsibility because the costs will fall to the other party is known as _____________.

moral hazard

The SEC argued that by NOT disclosing the risky nature of the mortgages in the Abascus CDO, Goldman Sachs ____________.

violated its fiduciary duty

One of the key characteristics of a leveraged buyout (LBO) is that it _____________. A) increases the value of the firm's assets B) requires the company to publically disclose its financial statements for the next 5 years C) changes the ownership structure of a company from public to private D) ensures job security for all employees

C

In team-based environments, the principal may have difficulty detrmining individual contributions by members. This can create a situation in which an opportunistic employee does little work but takes credit. This is known as _____________.

adverse selection

Employees who work in organizations that emphasize ethical behavior ______________.

are more likely to act ethically

Narrowly defining public stock companies in terms of financial performance can lead to ______________.

black swan events

In a public stock company, the centerpiece of corporate governance is the _____________.

board of directors

A diverse board of directors is less likely to fall victim to ____________.

groupthink

If a company is poorly managed, its stock price may fall low enough for the firm to become a target for a(n) _____________.

hostile takeover

Svanhildur's company is committed to corporate social responsiility but also understands that growth and profit are imperative for survival. What should Svanhildur's company do to achieve this balance?

it should use the shared value creation framework

In comparison to other countries, the US ranks _____________ in terms of its acceptance of Milton Friedman's philosophy that "the social responsibility of business is to increase its profits".

near the middle

According to agency theory, which managerial functions can be used to avoid adverse selection and moral hazard?

organization and control

Following the rise of institutional investors, the use of poison pills to avoid hostile takeover has become _______________.

rare

An executive can legally earn a significant profit from stock option if _____________.

the firm performs well and the actual price per share exceeds the negotiated strike price

What are the two significant issues regarding the CEO pay debate? 1) the relationship between firm performance and CEO pay 2) the size of the CEO compensation in relation to averagte employee pay 3) the history of CEO pay in the manufacturing industry 4) the legal and political ramifications of CEO pay

1, 2

Additional functions of a board of directors beyond general strategic oversight include __________. 1) ensuring that the firm's accounting practices and reports are accurate 2) selecting, evaluating, and compensating the CEO 3) day-to-day operational management 4) conducting background checks on all potential employees 5) assessing and mitigating risk

1, 2, 5

When facing an ehtical dilemma, a manager should ___________. 1) determined whether he or she could comfortably defend the action to the public 2) keep his or her actions hidden under the cover of inside information 3) consult local laws and municipal codes 4) consider whether the action in question conforms to the firm's code of conduct and industry practices

1, 4

Which of the following are examples of Uber's unethical, as opposed to illegal, behavior? 1) it poached drivers from competing companies 2) it allegedly stole a competitor's proprietary self-driving technology 3) it continued to offer services in cities where it did not have licensing agreements to operate 4) it considered hiring private investigators to find damaging information on journalists who had written negative articles about uber

1, 4

Which of thefollowing are examples of moral hazard? 1) a processed food manufacturer distributes frozen vegetables tainted with e coli. 2) a company dumps pollution into a local lake that will be cleaned using taxpayer money 3) banks make very risky loans with the knowledge that the government will bail them out if necessary 4) a copywriter secretly works on her novel while at work

2, 3, 4

What are the four characteristics of a public stock company that make it an attractice corporate form? 1) definition of corporate governance processes 2) limited liability for investors 3) transferability of investor interests 4) legal personality 5) seperation of ownership and control 6) private ownership 7) funded mostly by friends and family

2, 3, 4, 5

Which of the following statements are correct regarding the interests of principals and agents? 1) principals want to maximize corporate social responsibility initiates 2) agents want to mximize oversight in federal regulations 3) principals want to maximize shareholder returns 4) agents may be more interested in personal goals, such as maximizing their compensation or gaining power 5) principals want to maximize agents' total compensations including benefits, status, and power

3, 4

High-profile accounting scandals and the global financial crisis are exmaples of ___________. A) companies and industries that did not conform to business ethics B) acceptable standards regarding the way business works around the globe C) how universal norms guide international businesses D) the importance and impact of agency theory

A

In line with stakeholder theory, which of the following strategic actions would not, according to Michael Porter, connect economic and societal needs? A) offer financial support to local politicians B) focus on creting regional clusters C) expand the customer based to bring in non-consumers such as those at the bottom of the pyramid D) include non-traditional partners into the value chain such as NGOs

A