Chapter 10 - LEADING AN ETHICAL ORGANIZATION: CORPORATE GOVERNANCE, CORPORATE ETHICS, AND SOCIAL RESPONSIBILITY
True
1. The board of directors has the power to hire or fire a CEO.
False
10. A leveraged buyout happens when the management of a company threatens to sell additional stock to existing shareholders, increasing the shares needed for a viable takeover.
True
11. Leveraged buyouts historically are associated with reduction in workforces in an effort to streamline processes and decrease costs.
True
12. Individuals or firms that hope to conduct a takeover are often referred to as corporate raiders.
True
13. An unsolicited takeover attempt is often dubbed a hostile takeover.
False
14. Shark repellants are potential defenses against CEO duality.
True
15. A white knight is an alternative buyer of a potential takeover target, who is more favorable to the existing management of the target firm.
False
16. Greenmail refers to a corporate raider purchasing large blocks of stock at a premium to execute a takeover.
True
17. Taking a poison pill refers to a potential takeover firm selling additional stocks to existing shareholders, increasing the shares needed for a viable takeover.
False
18. A golden parachute refers to a lucrative financial incentive for the newly appointed executives of a taken over firm.
False
19. In Kohlberg's pre-conventional level of moral reasoning, morality is judged by comparing individuals' actions with the expectations of society.
False
2. An agency problem reflects the separation of interest between the board of directors of a company and its employees.
False
20. In Kohlberg's Stage five of moral reasoning, individuals focus on the direct consequences that their actions will have.
True
21. In Kohlberg's Stage two of moral reasoning, right or wrong is defined by the reward stage, where a 'what's in it for me' mentality is seen.
False
22. Kohlberg's conventional level of moral reasoning is very egocentric in nature, and moral reasoning is tied to personal concerns.
False
23. In Kohlberg's Stage two of moral reasoning, individuals are conformity driven, and act with the goal of fulfilling social roles.
False
24. In Kohlberg's Stage three of moral reasoning, the importance of obeying laws, social conventions, or other forms of authority to aid in the maintenance of a functional society is encouraged.
True
25. Kohlberg's post-conventional level of moral reasoning occurs when morality is more than simply following social rules or norms.
True
26. Kohlberg's stage five of moral reasoning considers different values and opinions.
False
27. In Kohlberg's stage five, moral reasoning is based on universal ethical principles.
True
28. Making the workplace an enjoyable environment is key to managing Generation Y
True
29. Anchoring and adjustment bias occurs when individuals react to arbitrary or irrelevant numbers when setting financial or other numerical targets.
False
3. Many institutional investors such as mutual funds and pension funds often prefer significant representation by board insiders in the board of directors.
False
30. The fundamental attribution error occurs when more readily available information is incorrectly assessed to also be more likely.
True
31. Hindsight bias occurs when mistakes seem obvious after they have already occurred.
False
32. To avoid delivering an unpleasant message to the CEO, an employee frames the information in a more positive light than reality. This is an example of overconfidence bias.
e. The board of directors
33. Who, among the following, has the power to potentially hire or fire the CEO of a publicly traded firm? a. The federal government b. Shareholders of the firm c. The Secretary of State d. Stakeholders of the firm e. The board of directors
a. agency problem
34. The interests of the individuals that manage the company (agents such as the CEO) may not align with the interest of the owners (such as stockholders). This separation of interest creates a(n) _____. a. agency problem b. bricolage issue c. arbitration divide d. blue ocean gap e. execution limit
c. Making the CEO also the chairman of the board of directors helps avoid bitter divide within a corporation.
35. Which of the following statements is true regarding the composition of the board of directors? a. CEOs often favor significant representation by board outsiders. b. Institutional investors favor people who have intimate knowledge of the firm's business affairs. c. Making the CEO also the chairman of the board of directors helps avoid bitter divide within a corporation. d. CEOs often favor the use of people who have intimate knowledge of the firm's business affairs. e. Significant representation by board outsiders increases the potential for CEO duality.
d. leveraged buyout
36. A(n) _____ refers to a situation where a publicly traded company is purchased and then taken off the stock market. a. insider takeover b. market delisting c. outsider takeover d. leveraged buyout e. premium purchase
a. corporate raiders
37. Individuals or firms that hope to conduct a takeover are often referred to as _____. a. corporate raiders b. corporate sharks c. white knights d. greenmailers e. green pirates
d. hostile takeover
38. An unsolicited takeover attempt is often dubbed a _____. a. shark takeover b. corporate raid c. leveraged buyout d. hostile takeover e. white knight takeover
a. It refers to the potential defenses against a hostile takeover attempt.
39. Which of the following is true about a shark repellent? a. It refers to the potential defenses against a hostile takeover attempt. b. It refers to a potential buyer who is favorable to the existing management of a takeover target firm. c. It refers to a takeover target firm's management repurchasing large blocks of stocks at a premium to avoid a potential takeover. d. It refers to a takeover target firm selling additional stock to existing shareholders, increasing the shares needed for a viable takeover. e. It refers to a lucrative financial settlement given to exiting executives of a taken over firm.
True
4. CEOs often favor the use of board insiders who often have intimate knowledge of the firm's business affairs.
c. white knight
40. A potential buyer who is favorable to the existing management of a takeover target firm is known as a _____. a. corporate raider b. greenmailer c. white knight d. corporate shark e. green pirate
c. It refers to a takeover target firm's management repurchasing large blocks of stocks at a premium to avoid a potential takeover.
41. Which of the following is true about greenmail? a. It refers to an unsolicited takeover attempt. b. It refers to a potential buyer who is favorable to the existing management of a takeover target firm. c. It refers to a takeover target firm's management repurchasing large blocks of stocks at a premium to avoid a potential takeover. d. It refers to a takeover target firm selling additional stock to existing shareholders, increasing the shares needed for a viable takeover. e. It refers to a lucrative financial settlement given to exiting executives of a taken over firm.
b. A poison pill
42. Which of the following refers to a takeover target firm selling additional stock to existing shareholders, increasing the shares needed for a viable takeover? a. Greenmail b. A poison pill c. A white knight d. A leveraged defense e. A golden parachute
d. A golden parachute
43. Which of the following refers to a lucrative financial settlement given to existing executives of a taken over firm? a. Greenmail b. A white knight settlement c. A poison pill d. A golden parachute e. A leveraged defense
e. It refers to a lucrative financial settlement given to exiting executives of a taken over firm.
44. Which of the following is true about a golden parachute? a. It refers to the potential defenses against a hostile takeover attempt. b. It refers to an unsolicited takeover attempt. c. It refers to a takeover target firm's management repurchasing large blocks of stocks at a premium to avoid a potential takeover. d. It refers to a takeover target firm selling additional stock to existing shareholders, increasing the shares needed for a viable takeover. e. It refers to a lucrative financial settlement given to exiting executives of a taken over firm.
d. pre-conventional
45. According to Kohlberg, _____ level of moral reasoning is very egocentric in nature. a. post-operational b. sub-conventional c. conventional d. pre-conventional e. pre-operational
a. individuals focus on the direct consequences that their actions will have.
46. In Kohlberg's stage one of moral reasoning: a. individuals focus on the direct consequences that their actions will have. b. individuals exhibit a 'what's in it for me' mentality. c. individuals are conformity driven, and act with the goal of fulfilling social roles. d. individuals understand the importance of obeying forms of authority to aid in the maintenance of a functional society. e. laws are viewed as social contracts that promote the greatest good for the greatest number of people.
b. Stage two
47. According to Kohlberg, in which of the following stages of moral reasoning individuals exhibit a 'what's in it for me' mentality? a. Stage one b. Stage two c. Stage three d. Stage four e. Stage five
c. conventional
48. In Kohlberg's _____ level of moral reasoning, morality is judged by comparing individuals' actions with the expectations of society. a. post-conventional b. pre-operational c. conventional d. pre-conventional e. post-operational
c. individuals are conformity driven, and act with the goal of fulfilling social roles.
49. In Kohlberg's stage three of moral reasoning: a. individuals focus on the direct consequences that their actions will have. b. individuals exhibit a 'what's in it for me' mentality. c. individuals are conformity driven, and act with the goal of fulfilling social roles. d. individuals obey laws, social conventions, or other forms of authority to aid in the maintenance of a functional society. e. individuals are viewed as social contracts that promote the greatest good for the greatest number of people.
True
5. CEO duality is a situation where a single individual acts both as the CEO and the chairman of the board of directors of an organization.
d. Stage four
50. According to Kohlberg, in which of the following stages of moral reasoning the importance of obeying laws, social conventions, or other forms of authority to aid in the maintenance of a functional society is encouraged? a. Stage one b. Stage two c. Stage three d. Stage four e. Stage five
a. post-conventional
51. According to Kohlberg, _____ level of moral reasoning occurs when morality is more than simply following social rules or norms. a. post-conventional b. pre-operational c. conventional d. pre-conventional e. operational
e. individuals view laws as social contracts that promote the greatest good for the greatest number of people.
52. In Kohlberg's stage five of moral reasoning: a. individuals focus on the direct consequences that their actions will have. b. individuals exhibit a 'what's in it for me' mentality. c. individuals are conformity driven, and act with the goal of fulfilling social roles. d. individuals obey laws, social conventions, or other forms of authority to aid in the maintenance of a functional society. e. individuals view laws as social contracts that promote the greatest good for the greatest number of people.
c. Stage six
53. According to Kohlberg, in which of the following stages is moral reasoning based on universal ethical principles? a. Stage one b. Stage two c. Stage six d. Stage four e. Stage five
a. The community
54. In-tatters, Inc. manufactures customized T-shirts for teens. It regularly engages in charitable and innovative giving that supports housing, education, and relations with indigenous peoples. Which of the following dimensions of corporate social performance (CSP) will be assessed positively by KLD for In-tatters? a. The community b. The diversity c. The corporate governance d. The product quality/safety e. The employee relations
b. The diversity dimension
55. Clifford International Group is an American multinational insurance corporation. A mandatory survey by the government revealed that there were very few women on top management positions - suggesting that a glass ceiling is present at the company. Based on this information, which of the following dimensions of corporate social performance (CSP) will be assessed negatively by KLD for Clifford International Group? a. The community dimension b. The diversity dimension c. The corporate governance dimension d. The product quality/safety dimension e. The employee relations dimension
b. The diversity dimension
56. Asset Inc., a management consultancy firm, actively pursues the policy of employing the disabled. The firm ensures that all its office buildings are disabled-friendly. This indicates that KLD would score Asset Inc. positively in the _____ dimension of CSP. a. The community dimension b. The diversity dimension c. The corporate governance dimension d. The environmental dimension e. The employee relations dimension
e. employee relations
57. Tiny Toys Inc. manufactures a range of toy cars for children. The firm has poor union relations, and has repeatedly paid fines due to violations of health and safety standards. This indicates that KLD would score Tine Toys Inc. positively in the _____ dimension of CSP. a. community b. diversity c. corporate governance d. product quality/safety e. employee relations
e. employee relations
58. Yellow Brick House Inc. manufactures and distributes expertly crafted home furniture. The firm has notable union relations and positive health and safety programs for its workers. The employees are also provided with good pension plans. This indicates that KLD would score Yellow Brick House Inc. positively in the _____ dimension of CSP. a. community b. diversity c. corporate governance d. product safety e. employee relations
d. The product quality/safety dimension
59. According to KLD, which of the following dimensions of corporate social performance will be assessed negatively for a firm that has been engaged in questionable marketing practices, paid fines related to antitrust practices, and has been accused of price fixing? a. The environmental dimension b. The diversity dimension c. The corporate governance dimension d. The product quality/safety dimension e. The employee relations dimension
False
6. CEO pay is a function of a day's work for a day's pay.
b. The environment dimension
60. According to KLD, which of the following dimensions of corporate social performance will be assessed positively if a firm is committed to recycling waste and using alternative energies? a. The community dimension b. The environment dimension c. The corporate governance dimension d. The product quality/safety dimension e. The employee relations dimension
a. traditionalists.
61. The generation born between 1925 and 1946 that fought in World War II and through The Great Depression are referred to as the: a. traditionalists. b. baby boomers. c. conservatives. d. Generation X. e. Generation Y.
b. baby boomers
62. The generation known as _____ was born between 1946-1964, corresponding with an increase of population following the end of World War II. a. traditionalists b. baby boomers c. conservatives d. Generation X e. Generation Y
a. They view face time as an important contribution to a successful work environment.
63. Which of the following is a defining characteristic of the members of the baby boomers generation? a. They view face time as an important contribution to a successful work environment. b. They now make up roughly five percent of the work force. c. They were born between 1925 and 1946, and fought in World War II. d. They dislike being micro-managed. e. They are resistant to change.
b. They prize flexibility in their jobs.
64. Which of the following is true about Gen X members? a. They view face time as an important contribution to a successful work environment. b. They prize flexibility in their jobs. c. They were born between 1925 and 1946, and fought in World War II. d. They like being micro-managed. e. They are resistant to change.
e. Generation Y
66. Which of the following groups is also known as Millenial? a. Traditionalists b. Baby boomers c. Conservatives d. Generation X e. Generation Y
e. Generation Y
67. More than any other generation, _____ prize(s) job and life satisfaction highly, so making the workplace an enjoyable environment is key to managing them. a. traditionalists b. baby boomers c. conservatives d. Generation X e. Generation Y
d. Problem identification
68. Which of the following is the first step of the process of rational decision-making? a. Establishment and weighing of decision criteria b. Decision evaluation c. Generation and evaluation of alternatives d. Problem identification e. Selection of the best alternative
b. It occurs when information that is readily available is incorrectly assessed to also be more likely.
69. Which of the following is true about the availability bias? a. It occurs when individuals react to arbitrary or irrelevant numbers when setting financial or other numerical targets. b. It occurs when information that is readily available is incorrectly assessed to also be more likely. c. It occurs when good outcomes are attributed to personal characteristics but undesirable outcomes are attributed to external circumstances. d. It occurs when mistakes seem obvious after they have already occurred. e. It occurs when individuals are more confident in their abilities to predict an event than logic suggests is actually possible.
True
7. CEO compensation is a function of the competitive wages that other corporations would offer for a potential CEO's services.
a. Escalation of commitment
70. Which of the following decision biases is displayed by individuals who continue on a failing course of action even after it becomes clear that this may be a poor path to follow? a. Escalation of commitment b. Availability bias c. Fundamental attribution error d. Judgments about correlation and casualty e. Anchoring and adjustment bias
c. It occurs when good outcomes are attributed to personal characteristics but undesirable outcomes are attributed to external circumstances.
71. Which of the following is true about the fundamental attribution error? a. It occurs when individuals react to arbitrary or irrelevant numbers when setting financial or other numerical targets. b. It occurs when information that is more handy is incorrectly assessed to also be more likely. c. It occurs when good outcomes are attributed to personal characteristics but undesirable outcomes are attributed to external circumstances. d. It occurs when mistakes seem obvious after they have already occurred. e. It occurs when individuals are more confident in their abilities to predict an event than logic suggests is actually possible.
b. Fundamental attribution error
72. Ruth is the store manager at Pink & Blue, a store that sells children's clothing and baby care products. Whenever the sales are high at the store, Ruth feels that it is because she manages the store efficiently. When the sale drops and there are instances of customer dissatisfaction, she decides that it is caused by the inefficiency of her sales staff. In this example, Ruth exhibits which of the following decision biases? a. Escalation of commitment b. Fundamental attribution error c. Availability bias d. Judgments about correlation and casualty e. Anchoring and adjustment bias
e. Misunderstandings about sampling
73. Which of the following decision biases may occur when individuals draw broad conclusions from small sets of observations instead of more reliable sources of information derived from large, randomly selected sets of observations? a. Escalation of commitment b. Overconfidence bias c. Fundamental attribution error d. Judgments about correlation and casualty e. Misunderstandings about sampling
c. Misunderstandings about sampling
74. Andrew, a stock broker at a leading investment firm, often recommends his clients to invest in stocks based on a few observation. Andrew relies on his instincts to make such decisions, rather than basing his decisions on reliable sources of information and careful number crunching. In this example, Andrew makes which of the following decision biases? a. Escalation of commitment b. Fundamental attribution error c. Misunderstandings about sampling d. Availability bias e. Judgments about correlation and casualty
e. It occurs when individuals have more faith in their abilities to predict an event than logic suggests is actually possible.
75. Which of the following is true about the overconfidence bias? a. It occurs when individuals react to arbitrary or irrelevant numbers when setting financial or other numerical targets. b. It occurs when information that is more handy is incorrectly assessed to also be more likely. c. It occurs when good outcomes are attributed to personal characteristics but undesirable outcomes are attributed to external circumstances. d. It occurs when mistakes seem obvious after they have already occurred. e. It occurs when individuals have more faith in their abilities to predict an event than logic suggests is actually possible.
d. It occurs when the way information is presented alters the decision an individual will make.
76. Which of the following is true about the representativeness bias? a. It occurs when individuals react to arbitrary or irrelevant numbers when setting financial or other numerical targets. b. It occurs when information that is more handy is incorrectly assessed to also be more likely. c. It occurs when good outcomes are attributed to personal characteristics but undesirable outcomes are attributed to external circumstances. d. It occurs when the way information is presented alters the decision an individual will make. e. It occurs when individuals have more faith in their abilities to predict an event than logic suggests is actually possible.
a. representativeness
77. Sharon works as a customer service agent at Ace Technologies, a firm that develops inventory management software. Sharon needs to inform her manager about a customer issue that has been escalated. Sharon, to avoid presenting negative information to her manager, frames information in a more positive light than reality. In this example, _____ bias occurs. a. representativeness b. satisficing c. overconfidence d. underconfidence e. hindsight
a. It occurs when individuals settle for the first acceptable alternative instead of seeking the best possible decision.
78. Which of the following is true about satisficing? a. It occurs when individuals settle for the first acceptable alternative instead of seeking the best possible decision. b. It occurs when information that is more handy is incorrectly assessed to also be more likely. c. It occurs when good outcomes are attributed to personal characteristics but undesirable outcomes are attributed to external circumstances. d. It occurs when the way information is presented alters the decision an individual will make. e. It occurs when individuals have more faith in their abilities to predict an event than logic suggests is actually possible.
True
8. In most publicly traded firms, CEO compensation generally includes guaranteed salary, cash bonus, and stock options.
True
9. The term perks, derived from perquisite, refers to special privileges or rights as a function of one's position.
