Strategic Management: Chapter 12

Which of the following have been found to be ethical norms in business?

-reciprocity -honesty -fairness

A fiduciary responsibility is a ___________

A legal duty to act in another party's interest

A public stock company is considered by law to be an entity with legal rights and obligations. This is known as ___________

Legal personality

Which of the following statements about stock options is true?

The recipient is given the right to purchase stock at a predetermined price sometime in the future.

Employees who work in organizations that emphasize ethical behavior _________.

are more likely to act ethically

Following the rise of institutional investors, the use of poison pills to avoid hostile takeovers has _________.

become rare

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

benefit all stakeholders, not just the 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.

High-profile accounting scandals and the global financial crisis are exampled of __________.

companies and industries that did not conform to business ethics

The primary purpose of the board of directors is _________.

general strategic oversight and guidance

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

hostile takeover

Under agency theory, a manager should seek to align __________ between principals and agents to minimize opportunism.

incentives

In comparison to other countries, the United States 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

The subprime mortgage crisis of the early 2000's is an example of ______.

poor corporate governance

The interests of inside directors on the board of directors typically align with those of ________.

senior management

By taking a _________ position in Abacus, Mr. Paulson made more than $1 billion in profit while his clients suffered huge losses.

short

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

violated his fiduciary duty

Which of the following are examples of moral hazard?

-Banks make risky loans with the knowledge that the government will bail them out if necessary -a copywriter secretly works on her novel while at work. -A company dumps pollution into a local lake that will be cleaned using taxpayer money.

When facing an ethical dilemma, a manager should ___________.

-Consider whether the action in question conforms to the firms code of conduct and industry practices -determine whether he or she could comfortably defend the action to the public

Financial statements by public companies must __________.

-adhere to GAAP -be audited by certified public accountants

Optics Incorporated, a publicly traded eyewear business, places profits ahead of all other performance metrics. This practice ____________.

-conforms to the traditional notion of shareholder capitalism -fails to take into account the idea of corporate social responsibility

Addition functions of a board of directors beyond general strategic oversight include ________.

-ensuring that the firms 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 ___________.

-expanding value chains to include NGOs and other organizations committed to social goals -creating new regional clusters and business centers -making products affordable for the poorest socioeconomic groups in order to improve standards of living.

Which of the following are examples of Uber's unethical, as opposed to, illegal, behavior?

-it considered hiring private investigators to find damaging information on journalists who had written negative articles about Uber, -It poached drivers from competing companies

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

-organization -control

Which of the following statements are correct regarding the interests of principals and agents?

-principals want to maximize shareholder returns -Agents may be more interested in personal goals, such as maximizing their compensation or gaining power.

The shared value creation framework encourages managers to focus on which of the following needs?

-social -economic

What are the two significant issues regrading the CEO pay debate?

-the relationship between firm performance and CEO pay -the size of the CEO compensation in relation to average employee pay

What are the four characteristics of a public stock company that make it an attractive corporate form?

-transferability of investor interest -limited liability for investors -separation of ownership and control -legal personality

In _________, a single investor or group of investors buys, with the help of borrowed money, the outstanding shares of a publicly traded company and assumes control of it.

A leveraged buyout

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

Europe

True or False: Any action take by a manager that is within the bounds of the law is, by definition, an ethical action.

False

__________ is when agents are better informed than principals.

Information asymmetry

In line with stakeholder theory, which of the following strategic actions would NOT, according to Michael Porter, connect economic and societal needs?

Offer financial support to local politicians

Which of the following is a federal regulatory agency whose task it is to oversee stock trading and enforce federal securities laws?

Securities and Exchange Commission

Which of the following is a major drawback of public stock companies, according to Michael Porter and others?

The prioritize financial performance over all else

Pavel works for a successful pharmaceutical company. Despite several years of unprecedented growth, the company wants to boost profits even more. It has taken steps to drastically raise the prices of its most widely distributed medications, which are difficult to imitate. Research into employee ethical decision making capacity indicates that Pavel will probably ___________.

act in a manner that reflects his company's organizational culture

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 ______________.

adverse selection

The idea that a corporation is simply a collection of legal contracts is know as ___________.

agency theory

Economist Michael Porter and many others argue that the value of public stock companies is too narrowly defined in terms of ________, leading to scandals and economic crises.

financial performance

Incentives that are too high-powered, such as an outsized bonus, may cause individuals to __________.

focus too much attention on the incentives and not enough on strategic activities

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

groupthink

In regard to the public stock company, limited liability means that __________.

investors are not responsible for any debts incurred by the company and are only at risk of losing the invested capital.

The main goal of a poison pill is to __________.

minimize the threat of a hostile takeover.

Corporate governance addresses the _________ problem, which underscores the risk of delegating responsibility and control to individuals who may not have the firms best interest in mind.

principal-agent

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

weak