MGT 491 Ch. 12 Quiz

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

A manager cannot ascertain the contributions of individual team members in team production.

In ________, the stockholders are the legal owners of the company who delegate decision-making authority to professional managers. nonprofit companies family-owned firms proprietorships public stock companies

public stock companies

In public stock companies, inside directors are appointed by shareholders to provide the board with necessary company information. are more likely to watch out for shareholders' interests than external directors are. generally form the lower levels of management in an organization. are not full-time employees of the firm.

are appointed by shareholders to provide the board with necessary company information.

A leveraged buyout (LBO) forces shareholders to sell their shares at lower prices than the actual value. requires the buyer to disclose financial statements of the company once it becomes private. changes the ownership structure of a company from public to private. is based on an expectation that the new private owners will not restructure the company at any cost.

changes the ownership structure of a company from public to private.

Which of the following is a problem that corporate governance seeks to address? the principal-agent problem the Ecomagination problem shared-value creation limited liability for investors

the principal-agent problem

________ is a mechanism to direct and control an enterprise and attempts to address the principal-agent problem, which can occur any time an agent performs activities on behalf of a principal. Corporate social responsibility (CSR) Corporate governance Stakeholder impact standard operating procedure

Corporate governance

What, according to Greg Smith, was the cause for the change in ethical climate within Goldman Sachs? The company acquired Abacus, and the conflicting cultures prompted Goldman Sachs to adopt a new hybrid culture. The company went from caring about customers to creating an inflated share price at any cost. The company had earned a reputation that it could not live up to in the long run. The company went public and began looking at clients and itself as counter parties to a transaction.

The company went public and began looking at clients and itself as counter parties to a transaction.

Which of the following is true of public stock companies? Public stock companies are not required to disclose financial statements. There exists an implicit contract based on trust between society and the public stock company. The public stock company is not an important institutional arrangement in developing economies. Society expects public stock companies to add value to society by making profits for shareholders.

There exists an implicit contract based on trust between society and the public stock company.

Michael Porter is in favor of the shared value creation framework because he believes that it will help to pit economic and societal needs in a trade-off. is the duty of a company to focus on benefitting shareholders who have the most legitimate claim on profits. will not only allow companies to gain and sustain a competitive advantage, but it will also reshape capitalism and its relationship to society. is the responsibility of the company to focus on creating profits and nothing else.

will not only allow companies to gain and sustain a competitive advantage, but it will also reshape capitalism and its relationship to society.