Strategic Management Chapter 12
The ratio of CEO to average employee pay in the United States is about ______. Multiple choice question. 300 to 1 10 to 1 50 to 1 100 to 1
300 to 1
Which of the following is a federal regulatory agency whose task it is to oversee stock trading and enforce federal securities laws? Multiple choice question. Consumer Financial Protection Bureau EDGAR World Trade Organization Securities and Exchange Commission
Securities and Exchange Commission
Which of the following is a major drawback of public stock companies, according to Michael Porter and others? Multiple choice question. They prioritize financial performance over all else. They suffer too easily from inertia. They focus too heavily on the greater good. They get caught up in sustainability and overlook financial issues.
They prioritize financial performance over all else.
The idea that a corporation is simply a collection of legal contracts is known as ______. Multiple choice question. the matrix principle information asymmetry the principal-agent problem agency theory
agency theory
Following the rise of institutional investors, the use of poison pills to avoid hostile takeover has ______. Multiple choice question. become mandatory grown steadily become rarer been eliminated entirely
become rarer
The shared value creation framework is a tool intended to help businesses ______. Multiple choice question. increase shareholder profits secure capital investments benefit all stakeholders, not just shareholders identify profitable opportunities
benefit all stakeholders, not just shareholders
Narrowly defining public stock companies in terms of financial performance can lead to ______. Multiple choice question. improved public relations more efficient production more accurate accounting black swan events
black swan events
The mechanism used to guide a company toward meeting its strategic goals within the bounds of the law is known as ______. Multiple choice question. corporate social responsibility corporate governance strategic intent stakeholder impact analysis
corporate governance
The shared value creation framework encourages managers to focus on which of the following needs? (Check all that apply.) Multiple select question. spiritual emotional economic social
economic social
Which of the following have been found to be ethical norms in business? (Check all that apply.) Multiple select question. self-interest honesty reciprocity deception fairness
honesty reciprocity fairness
According to agency theory, conflicts such as the principal-agent problem are considered ______ issues. Multiple choice question. social legal ethical moral
legal
A public stock company is considered by law to be an entity with legal rights and obligations. This is known as ______. Multiple choice question. limited liability legal ownership legal personality investor ownership
legal personality
Employees who work in organizations that emphasize ethical behavior are ______. Multiple choice question. more likely to engage in moral hazard. less likely to act ethically. more likely to act ethically. no more or less likely to act ethically.
more likely to act ethically.
The subprime mortgage crisis of the early 2000s is an example of ______. Multiple choice question. effective corporate governance poor corporate governance blue ocean strategy shared value creation
poor corporate governance
The subprime mortgage crisis of the early 2000s is an example of ______. Multiple choice question. shared value creation poor corporate governance blue ocean strategy effective corporate governance
poor corporate governance
A board of directors is elected to represent the interests of ______. Multiple choice question. company founders low-level employees society as a whole shareholders
shareholders
The right to buy a company's stock at a predetermined price sometime in the future is known as a(n) ______. Multiple choice question. lateral compensation stock option outside stock opportunity executive negotiated price
stock option
The ratio of CEO to average employee pay in the United States is about ______. Multiple choice question. 50 to 1 10 to 1 100 to 1 300 to 1
300 to 1
Financial statements by public companies must ______. (Check all that apply.) Multiple select question. divulge insider information and trade secrets adhere to generally accepted accounting principles (GAAP) be audited by certified public accountants meet shareholder expectations
adhere to generally accepted accounting principles (GAAP) be audited by certified public accountants
Following the rise of institutional investors, the use of poison pills to avoid hostile takeover has ______. Multiple choice question. been eliminated entirely grown steadily become rarer become mandatory
become rarer
The mechanism used to guide a company toward meeting its strategic goals within the bounds of the law is known as ______. Multiple choice question. strategic intent corporate governance corporate social responsibility stakeholder impact analysis
corporate governance
Svanhildur's company is committed to corporate social responsibility but also understands that growth and profit are imperative for survival. What should Svanhildur's company do to achieve this balance? Multiple choice question. It should adopt a functional corporate structure. It should manipulate corporate-governance mechanisms. It should apply agency theory. It should use the shared value creation framework.
It should use the shared value creation framework.
Which of the following is a federal regulatory agency whose task it is to oversee stock trading and enforce federal securities laws? Multiple choice question. Securities and Exchange Commission World Trade Organization EDGAR Consumer Financial Protection Bureau
Securities and Exchange Commission
Which of the following statements about stock options is true? Multiple choice question. Companies save money by offering stock options, but employees always lose money with stock options. The recipient has the right to set the price of the stock. If the recipient agrees to stock options as part of a compensation package, the recipient is obligated to buy stock in the future. The recipient is given the right to purchase stock at a predetermined price sometime in the future.
The recipient is given the right to purchase stock at a predetermined price sometime in the future.
True or false: The shared value creation framework aims to reconcile the concept of gaining and sustaining a competitive advantage with corporate social responsibility. True false question. True False
True
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. Multiple choice question. an initial public offering a leveraged buyout internal corporate governance information asymmetry
a leveraged buyout
Which type of company is considered a unicorn? Multiple choice question. a private company that was once valued at over $100 million but has since lost most or all of its value a private start-up company valued at more than $1 billion a public company whose share price exceeds $1,000 a public company valued at over $1 billion
a private start-up company valued at more than $1 billion
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 ______. Multiple choice question. speak out against his company's unethical activities report his discomfort about drastically raising prices to his manager act in a manner that reflects his company's organizational culture immediately quit his job and file for unemployment
act in a manner that reflects his company's organizational culture
The code of professional conduct based on societal norms and expectations is known as ______. Multiple choice question. business ethics industry oaths societal reconciliation stakeholder impact analysis
business ethics
One of the key characteristics of a leveraged buyout (LBO) is that it _______. Multiple choice question. requires the company to publicly disclose its financial statements for the next 5 years increases the value of the firm's assets ensures job security for all employees changes the ownership structure of a company from public to private
changes the ownership structure of a company from public to private
Corporate governance is a system of ______. Multiple choice question. related and unrelated diversification checks and balances inputs and outputs legal and ethical issues
checks and balances
Social consequences of business activities, including pollution, energy loss, and dangerous accidents, are known as ______. Multiple choice question. externalities overruns internal costs output incidences
externalities
Under agency theory, a manager should seek to align ______ between principals and agents to minimize opportunism. Multiple choice question. educational backgrounds disciplinary actions work schedules incentives
incentives
In regard to the public stock company, limited liability means that ______. Multiple choice question. the company does not have any responsible to earn a profit on invested capital investors are not responsible for any debts incurred by the company and are only at risk of losing the invested capital the business cannot be held legally responsible for any damage or injury caused to customers, the environment, or society at large employees are free to pursue any initiative that interests them
investors are not responsible for any debts incurred by the company and are only at risk of losing the invested capital
A fiduciary responsibility is a(n) ______. Multiple choice question. legal duty to act in another party's interests at-will employment contract set of incentives designed to improve employee performance mandate to act in one's own self interest
legal duty to act in another party's interests
The main goal of a poison pill is to ______. Multiple choice question. overcome moral hazard minimize the threat of a hostile takeover enter a new market fire the top management team
minimize the threat of a hostile takeover
According to agency theory, which of the following managerial functions can be used to avoid adverse selection and moral hazard? (Check all that apply.) Multiple select question. discipline organization inspiration control
organization control
The right to buy a company's stock at a predetermined price sometime in the future is known as a(n) ______. Multiple choice question. outside stock opportunity stock option lateral compensation executive negotiated price
stock option
An executive can legally earn a significant profit from stock options if ______. Multiple choice question. he or she commits to purchasing the maximum amount of shares allowed he or she engages in insider trading the firm falls victim to a hostile takeover the firm performs well and the actual price per share exceeds the negotiated strike price
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? (Check all that apply.) Multiple select question. 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 history of CEO pay in the manufacturing industry
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? (Check all that apply.) Multiple select question. private ownership transferability of investor interests funded mostly by friends and family separation of ownership and control legal personality limited liability for investors
transferability of investor interests separation of ownership and control legal personality limited liability for investors
Private start-up companies valued at over $1 billion, such as some of those in the tech sector, are called ______. Multiple choice question. dragons piranhas butterflies unicorns
unicorns