Strategic Management ch.12 Corporate Governance and Business Ethics

Optics Incorporated, a publicly traded eye-wear 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

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

- control - organization

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

- honesty - fairness - reciprocity

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

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

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

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

1. Size of CEO compensation in relation to average employee pay 2. the relationship between firm performance and CEO pay

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

Europe

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 (SEC)

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

a leveraged buyout

The hiring of a job seeker who claims to have extensive computer programming experience when his knowledge of the subject is minimal would be an example of __________.

adverse selection

The idea that a corporation is simply a collection of legal contracts is known as _____________.

agency theory

One of the key characteristics of a leveraged buyout (LBO) is that it ___________.

changes the ownership structure of a company from public to private

The idea of 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

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

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

To achieve board independence, experts in corporate governance recommend that _________.

less than one-third of the board is made up of insiders

The main goal of a poison pill is to ____________.

minimize the threat of a hostile takeover

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

moral hazard

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

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

An external governance mechanism that makes a poorly managed company vulnerable to takeover by outside investors is known as ____________.

the market for corporate control

In order to reconcile economic and social needs, managers should focus on ________________.

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

The primary purpose of the board of directors is _______.

general strategic oversight and guidance

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

groupthink

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 profits."

near the middle

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

senior management

A board of directors is elected to represent the interests of _____________.

shareholders

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

they prioritize financial performance over all else

The share value creation framework aims to reconcile the concept of gaining and sustaining a competitive advantage with CSR

true