Business strategy quiz 2 review
All of the following statements are true about agency theory EXCEPT ________. A. the agency theory proposes that, because of their long tenure with the corporation, insiders tend to identify with the corporation and its success B. the agency theory states that a majority of a board needs to be from outside the firm so that top management is prevented from acting selfishly to the detriment of the shareholders C. the agency theory proposes that management-controlled firms with weak boards are more likely to go into debt to diversify into unrelated markets D. according to the agency theory, the likelihood that problems will occur increases when stock is widely held, when the board of directors is composed of people who know little of the company or who are personal friends with top management E. proponents of the agency theory argue that managers in management-controlled firms select less risky strategies with quick payoffs to keep their jobs
A. the agency theory proposes that, because of their long tenure with the corporation, insiders tend to identify with the corporation and its success
All of the following are considered successful transformational leaders EXCEPT ________. A. Richard Branson B. Meg Whitman C. Bernie Madoff D. Anita Roddick E. Bill Gates
Bernie Madoff
________ refers to the relationship among groups in determining the direction and performance of the corporation.
Corporate governance
More than half of all publicly traded companies in the United States are incorporated in the state of ________.
Delaware
________ is the directing of activities toward the accomplishment of corporate objectives, and it sets the tone for the entire corporation.
Executive leadership
________ refers to the situation where it is difficult or expensive for the owners to verify what the agents are actually doing.
Moral hazard
Similar to the New York Stock Exchange, ________ rules require that nominations for new directors be made by either a nominating committee of independent outsiders or by a majority of independent outside directors.
NASDAQ
The U.S. Securities and Exchange Commission (SEC) requires that mutual funds publicly disclose the proxy votes cast at company board meetings in its portfolio. Which of the following choices describes the benefit of this action?
Reduction in rubberstamping management proposals
In response to the many corporate scandals uncovered since 2000, the U.S. Congress passed the ________ in June 2002 to protect shareholders from the excesses and failed oversight that characterized criminal activities at many prominent firms.
Sarbanes-Oxley Act
All of the following statements are true about outside directors EXCEPT ________. A. There is a trend in the United States to increase the number of outsiders on boards and to reduce the total size of the board B. Outside directors might be executives of other firms but are not employees of the board's corporation C. Outsiders account for 80% of board members in large U.S. corporations D. There is clear evidence indicating that a high proportion of outsiders on a board results in improved financial performance .E. The board of directors of a typical large U.S. corporation has an average of 10 directors (2 are inside directors and 8 are outside directors)
There is clear evidence indicating that a high proportion of outsiders on a board results in improved financial performance
________ provide(s) change and movement in an organization by providing a vision for change, and they command respect and execute effective strategy formulation and implementation.
Transformational leaders
The ________ theory states that problems arise in corporations because the agents (top management) are not willing to bear responsibility for their decisions unless they own a substantial amount of stock in the corporation.
agency
A(n) ________ arises when the desires or objectives of the owners and the agents conflict.
conflict of interest
Strategic management involves ________ in the organization.
everyone
All of the following statements are true about the Board of Directors EXCEPT ________. A. in a legal sense, the board of directors is required to manage the affairs of the corporation B. the board of directors is charged by law to act with due care C. a survey of outside directors revealed that more than 40% had been named as part of lawsuits against corporations D. if a director or the board as a whole fails to act with due care and, as a result, the corporation is in some way harmed, the careless director or directors can be held personally liable for the harm done E. corporations have found that they need directors' and officers' liability insurance to attract people to become members of boards of directors
in a legal sense, the board of directors is required to manage the affairs of the corporation
A(n) ________ occurs when two corporations have directors who also serve on the board of a third firm, such as a bank.
indirect interlock
When compensation committee members are significant shareholders, they tend to offer the CEO ________ but with a higher incentive component than do compensation committee members who own little to no stock.
less salary
Based on the degree of involvement in strategic management the most passive boards are referred to as ____________________.
phantom
Research indicates that boards with equity ownership use ________ to evaluate the CEO.
quantifiable, verifiable criteria
The board of directors is responsible for all of the following tasks and responsibilities EXCEPT ________. A. sustainability B. risk versus initiative and the overall risk profile of the organization C. board leadership including the processes, makeup, and output of the board D. strategy of the organization .E. succession planning for the board but not for top management
succession planning for the board but not for top management
All of the following are true about top management responsibilities EXCEPT ________. A. a diversity of skills and abilities among top management is important B. top management responsibilities involve getting things accomplished through and with others to meet the corporate objectives C. specific top management tasks vary from firm to firm and are developed from an analysis of the mission, objectives, strategies, and key activities of the corporation D. tasks are typically divided among the lower-level employees E. top management's job is multidimensional and is oriented toward the welfare of the total organ
tasks are typically divided among the lower-level employees
Recall that many of those who prefer that the Chairman and CEO positions be combined agree that the outside directors should elect a lead director. All of the following are correct statements about the lead director EXCEPT ________. A. the lead director is consulted by the Chair/CEO regarding board affairs and coordinates the annual evaluation of the CEO .B. of those U.S. companies combing the Chairman and CEO positions, the majority had a lead director C. the lead director becomes less important because only a small percentage of U.S. boards held regular executive sessions without the CEO being present .D. a lead director creates a balance in power when the CEO is also the Chair of the Board E. the lead director position is popular in the United Kingdom, where it originated
the lead director becomes less important because only a small percentage of U.S. boards held regular executive sessions without the CEO being present
All of the following are true statements about inside directors EXCEPT ________. A. inside directors account for 20% of the board members in large United States corporations B. the board of directors in a typical U.S. corporation has an average of two inside directors C. inside directors are sometimes called management directors D. there is a trend in the United States to increase the number of inside directors .E. inside directors are typically officers or executives employed by the corporation
there is a trend in the United States to increase the number of inside directors
