Chapter 12-Combined
The ratio of CEO to average employee pay in the United States is about ______.
300 to 1
agency theory
The idea that a corporation is simply a collection of legal contracts is known as _______________.
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
In terms of agency theory, which of the following is an agency problem?
adverse selection
According to agency theory, which of the following managerial functions can be used to avoid adverse selection and moral hazard? (Check all that apply.)
control organization
The shared value creation framework encourages managers to focus on which of the following needs? (Check all that apply.)
economic social
in order to reconcile economic and social needs, managers should focus on
expand the customer base to bring in nonconsumers expand traditional internal firm value chains to include more nontraditional partners focus on creating new regional clusters
True or false: Any action taken by a manager that is within the bounds of the law is, by definition, an ethical action.
false
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 get distracted from strategic activities which might negatively impact job performace
According to agency theory, conflict such as the principal-agent problem are considered __________ issues. moral social legal ethical
legal
according to agency theory, conflicts such as the principal-agent problem are considered ____ issues
legal
the main goal of a poison pill
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?
organization control
The right to buy a company's stock at a predetermined price sometime in the future is known as a(n) ______.
stock option
any price they want
Under the wholesale model, RETAILERS (not the wholesalers) sell goods for _______________.
the share value creation framework encourages managers to focus on both _ and _ needs
economic and social
ethical norms in business
fairness honesty reciprocity
Financial statements by public companies must __________.
-adhere to GAAP -be audited by certified public accountants
aspirational vision
A(n) _______________ can help employees feel that they are doing something worthwhile and are part of something important and meaningful.
Differentiation
A(n) _______________ strategy may fail when the focus of the competition shifts to price rather than unique product features.
a change in leadership often results in a change in culture
Because executives make decisions about structure and strategy, _______________.
How should we compete?
Business-level strategy addresses which overarching question?
Which of the following is a recommended guideline for the composition of a board of directors to implement corporate governance?
Close to two-thirds of the board of directors should consist of outside directors.
Which of the following real-world examples best exemplifies a Shared Value creation framework?
GE's ecomagination strategy that focuses on providing cleaner and efficient sources of energy, while generating billions in revenues
Why did the local Metro Transit Authority (MTA) order Uber to cease and desist?
MTA argued that Uber was operating a taxi service without proper licensing.
adhering to core organizational values
Merck's choice to pull the drug Vioxx off the market in 2004 is an example of _______________?
improve the firm's strategic position
Positive adjustments in product features, customer service, and complements may enable managers to _______________.
Externalities
Social consequences of business activities, including pollution, energy loss, and dangerous accidents, are known as _______________.
experience curve
The concept of a(n) _______________ attempts to combine both learning effects and process improvements.
How is the characteristic of separation of legal ownership and management control disadvantageous to publicly traded companies?
The managers delegated to make decisions on behalf of shareholders might pursue their personal interests.
boundaryless
The organizational structure at Gore, in which everyone is encouraged to speak to anyone they wish to within the organization, is called a(n) _______________ organizational form.
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
Happiness
Which of the following is NOT an example of an artifact of an organization's culture?
The idea that a corporation is simply a collection of legal contracts is known as ___
agency theory
Employees who work in organizations that emphasize ethical behavior _________.
are more likely to act ethically
employees that 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 takeover has grown steadily. become rare. become mandatory. been eliminated entirely.
become rare.
When facing an ethical dilemma, a manager should ______. (Check all that apply.)
determine whether he or she could comfortably defend the action to the public consider whether the action in question conforms to the firm's code of conduct and industry practices
optics incorporated, a publicly-traded eyewear business, places profits ahead of all over performance metrics. this practice
fails to take into account the idea of corporate social responsibility conforms to the traditional notion of shareholder capitalism
What do stakeholders want to above all else?
fair treatment
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
The risk of employee opportunism, on behalf of agents, is exacerbated by the concept of
information asymmetry.
Managers who act upon secret company information for personal gain, such as by trading stocks based on the knowledge of future initiatives, are guilty of ____
insider trading
In a ________________ , a single investor or group of investors buys, with the help of borrowed money, the outstanding shares of a publicly traded company in order to take it private.
leveraged buyout
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
The primary difference between outside and inside members of the board of directors is that ______.
outside directors are not employees of the firms, whereas inside directors are
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
Which of the following is one of the implications of information asymmetry between principals and agents?
Agents can pass on the information to select principals who can trade stocks based on this information.
Which of the following statements are correct regarding the interests of principals and agents? (Check all that apply.)
Agents may be more interested in personal goals, such as maximizing their compensation or gaining power. Principals want to maximize shareholder returns.
two or more firms achieve the same performance results
Competitive parity occurs when _______________.
Artifacts
Corporate culture is expressed through _______________, which are elements such as vocabulary and the type of clothing worn by employees.
strong
When a firm's employees have internalized norms and share the same firm's core values, the firm is said to have a(n) _______________ culture.
concentrate decision-making at the top of the organization
When supporting a related-diversification strategy with the M-form organizational structure, managers typically _______________.
many employees
When the span of control within an organization is wide, one manager supervises _______________.
High-profile accounting scandals and the global financial crisis are exampled of __________.
companies and industries that did not conform to business ethics
High-profile accounting scandals and the global financial crisis are examples of ______.
companies and industries that did not conform to business ethics
The mechanism used to guide a company toward meeting its strategic goals within the bounds of the law is known as stakeholder impact analysis corporate governance corporate social responsibility strategic intent
corporate governance
In order to reconcile economic and social needs within the shared value creation network, managers need to focus on ______. (Check all that apply.)
creating new regional clusters and business centers 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
Through a bottom-up initiative
How did Zappos formulate its list of 10 core values?
Tesla generated 500,000 preorders for an unseen model.
Which of the following is the best indicator that Tesla's strategy is working as intended?
gaining momentum
With the growing popularity of the Internet, the pay-as-you-go model is _______________.
when facing an ethical dilemma, a manager can
consider whether the action in question conforms to the firm's code of conduct and industry practices determine whether he or she could comfortably defend the action to the public
the mechanism used to guide a company toward meeting its strategic goals within the bounds of the law
corporate governance
The idea of corporate social responsibility (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 internal costs. externalities. output incidences. overruns.
externalities
Social consequences of business activities, including pollution, energy loss, and dangerous accidents, are known as __
externalities
In 2014, 25% of GE's Board were women. Compared to other Fortune 500 companies, the Board of Directors at GE is ____________ in gender. very small. fairly diverse. boring. too homogeneous.
fairly diverse
in 2014, 25% of GE's board were women. compared to other fortune 500 companies, the board of directors at ge is ___ in gender
fairly diverse
the primary purpose of the board of directors
general strategic oversight and guidancce
The primary purpose of the board of directors is to ensure that individual work tasks are completed time. managerial diversification to offset information asymmetry general strategic oversight and guidance
general strategic oversight and guidance
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
A fiduciary responsibility is a(n) ______.
legal duty to act in another party's interests
The main goal of a poison pill is to __________.
minimize the threat of a hostile takeover.
The ________ and __________ commission is a federal regulatory agency whose task it is to oversee stock trading and enforce federal securities laws.
securities , exchange
The interests of inside directors on the board of directors typically align with those of ______.
senior management
Private start-up companies valued at over $1 billion, such as some of those in the tech sector, are called ______.
unicorns
One of the major differences between inside directors and outside directors of a company is that outside directors are more likely to
watch out for the interests of the shareholders of the company.
Michael Porter is in favor of the Shared Value creation framework because he believes that it
will not only allow companies to gain and sustain a competitive advantage, but also reshape capitalism and its relationship to society.
Their actions that are costly, long-term oriented, and difficult to reverse.
What are strategic commitments?
that create more value for consumers than competitors' offerings
A firm can gain a competitive advantage by providing goods and services _______________.
BestTech Inc. is a publicly traded company that specializes in manufacturing consumer electronics. Which of the following best exemplifies the implementation of a Shared Value creation framework at BestTech Inc.?
BestTech uses recycled materials to create its commercially successful products.
Corporate governance is a system of legal and ethical issues. inputs and outputs. checks and balances. related and unrelated diversification.
Checks and balances
board of directors
In a public stock company, the centerpiece of corporate governance is the _______________.
How high should our profit be?
To formulate an appropriate business-level strategy, managers must answer the "who-what-why-and-how" questions of competition. Which of the following would NOT be the appropriate question to answer?
A fiduciary responsibility is a) a legal duty to act in another party's interests. b) a set of incentives designed to improve employee performance. c) a mandate to act in one's own self interest. d) an at-will employment contract
a) a legal duty to act in another party's interests.
When facing an ethical dilemma, a manager can a) determine whether he or she could comfortably defend the action to the public. b) keep his or her actions hidden under the cover of inside information. c) consult local laws and municipal codes. d) consider whether the action in question conforms to the firm's code of conduct and industry practices.
a) determine whether he or she could comfortably defend the action to the public. d) consider whether the action in question conforms to the firm's code of conduct and industry practices.
What are the four characteristics of a public stock company that make it an attractive corporate form? a) limited liability for investors b) definition of corporate governance processes c) funded mostly by friends, family, and fools d) transferability of investor interests e) private ownership f) legal personality g) separation of ownership and control
a) limited liability for investors d) transferability of investor interests f) legal personality g) separation of ownership and control
A job seeker claiming to have extensive computer programming experience when their knowledge of the subject is minimal would be an example of intuitive recruitment moral hazard native digitalization adverse selection
adverse selection
The code of professional conduct based on societal norms and expectations is known as societal reconciliation corporate social responsibility stakeholder impact analysis business ethics
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 ________ takeover.
hostile
If a company is poorly managed, its stock price may fall low enough for the firm to become a target for a ___________.
hostile takeover
If a company is poorly managed, its stock price may fall low enough for the firm to become a target for a(n) ______.
hostile takeover
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
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. unbalanced burden a debt pendulum adverse selection
moral hazard
a situation in which one party has an incentive to shirk their responsibility because the costs will fall to the other party
moral hazard
In comparison to other countries, the United States ranks _______ in terms of its acceptance of shareholder capitalism. toward the top near the middle toward the bottom dead last
near the middle
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
in comparison to other countries, the US ranks ___ in terms of its acceptance of shareholder capitalism
near the middle
Corporate governance addresses the __________ problem, which underscores the risk of delegating responsibility and control to individuals who may not have the firm's best interest in mind. SEC financial corporate social responsibility related diversification principal-agent
principal-agent
Who sets the tone for the ethical climate within an organization?
strategic leaders
Adverse selection is particularly a problem in privately-owned businesses. situations where one employee is responsible for an entire project. independent contracting roles team-based environments
team-based environments
Which of the following is not true concerning corporate governance?
Corporate governance exists only in public organizations.
the shared values creation framework is a tool intended to help businesses
benefit all stakeholders, not just shareholders
The shared value creation framework is a tool intended to help businesses secure capital investments. benefit all stakeholders, not just shareholders. identify probable opportunities. increase shareholder profits.
benefit all stakeholders, not just shareholders.
The shared value creation framework is a tool intended to help businesses ___________.
benefit all stakeholders, not just the shareholders
Narrowly defining public stock companies in terms of financial performance can lead to more accurate accounting. black swan events. more efficient production. improved public relations.
black swan events
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
Under the shared value creation framework, which of the following strategic actions would fail to connect economic and societal needs?
Focusing exclusively on maximizing returns for shareholders.
Which of the following have been found to be ethical norms in business? (may choose multiple) Self Interest Reciprocity Honesty Fairness Deception
Reciprocity, Honesty, Fairness
They are meant to facilitate collaboration between departments.
Which of the following are true of cross-functional teams?
Following the rise of institutional investors, the use of poison pills to avoid hostile takeovers has _________.
become rare
The mechanism used to guide a company toward meeting its strategic goals within the bounds of the law is known as ______.
corporate governance
According to agency theory,
corporations are viewed as a set of legal contracts between different parties.
The subprime mortgage crisis of the early 2000's is an example of ______.
poor corporate governance
By taking a __________ position in Abacus, Mr. Paulson made more than $1 Billion in profits while his clients suffered huge losses. left short right long
short
by taking a ___ position in Abacus, Mr. paulson made more than 1 billion in profits while his clients suffered huge losses
short
The shared value creation framework encourages managers to focus on both ___________ and __________ needs. (choose multiple) social spiritual economic emotional
social , economic
The right to buy a company's stock at a predetermined price sometime in the future is know as a(n) stock option lateral compensation outside stock opportunity executive negotiated price
stock option
The relationship between CEO pay and job performance has been shown to be very strong moderare somewhat strong weak
weak
Additional functions of a board of directors beyond general strategic oversight include ______. (Check all that apply.)
- assessing and mitigating risk - ensuring that the firm's accounting practices and reports are accurate - selecting, evaluating, and compensating the CEO
Financial statements by public companies must ______. (Check all that apply.)
- be audited by certified public accountants - adhere to generally accepted accounting principles (GAAP)
Which of the following are important components of fostering ethical behavior in employees?
- board members setting clear ethical expectations - strategic goals that are achievable with legal means - executive behavior that is in sync with the organization's vision and values
When facing an ethical dilemma, a manager should ______. (Check all that apply.)
- determine whether he or she could comfortably defend the action to the public - consider whether the action in question conforms to the firm's code of conduct and industry practices
Which of the following are critical aspects of maintaining good relationships between a firm and its stakeholders?
- fair - transparency
What are the two significant issues regarding the CEO pay debate? (Check all that apply.)
- the relationship between firm performance and CEO pay - the size of the CEO compensation in relation to average employee pay
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
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.
Which of the following have been found to be ethical norms in business?
-reciprocity -honesty -fairness
The shared value creation framework encourages managers to focus on which of the following needs?
-social -economic
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
Which of the following are examples of moral hazard? (Check all that apply.)
A company dumps pollution into a local lake that will be cleaned using taxpayer money. Banks make very risky loans with the knowledge that the government will bail them out if necessary. A CEO with a multi-million-dollar severance agreement performs poorly knowing he will be well compensated even if he is laid off.
Charge a higher price than the cost leader.
A firm pursuing a blue ocean strategy can increase its profit margins by implementing which of the following pricing options?
cost drivers
A firm that hopes to achieve a competitive advantage by maintaining an efficient supply chain and taking advantage of economies of scale and a well-trained staff is focusing on _______________.
Bundling
A firm uses the _______________ business model when it sells a set of products that have different levels of demand for a price less than their total combined prices.
a diagnosis of the competitive advantage
A good strategy consists of three elements. The first element is accomplished through analysis of the firm's external and internal environments. We also call this _______________.
A fiduciary responsibility is a ___________
A legal duty to act in another party's interest
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
Which of the following descriptions best exemplifies adverse selection?
A manager cannot ascertain the contributions of individual team members in team production.
Less intense competition from imitators.
A producer of consumer headphones that successfully differentiates its products with a patented noise-canceling technology and celebrity endorsements will enjoy which of the following benefits?
Moral Hazard
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 _______________.
highly centralized
A top-down strategic plan generally takes place in which type of organization?
________ is a mechanism to direct and control an enterprise and attempts to address the principal-agent problem, which can occur any time an agent performs activities on behalf of a principal.
Corporate governance
stay the same
Economies of scale present an opportunity to increase profits because as the number of units within the relevant range increases, fixed costs _______________.
financial performance
Economist Michael Porter and many others argue that the value of public stock companies is to narrowly defined in terms of _______________, leading to scandals and economic crises.
the leaders of the organization also adhere to the values
Employees tend to adhere to organizational core values when _______________.
The ideas of corporate social responsibility and stakeholder strategy are particularly prevalent in ________.
Europe
The ideas of corporate social responsibility and stakeholder strategy are particularly prevalent in Europe. South America. Asia. Africa.
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
a transnational
Firms that pursue _______________ strategy tend to use a global matrix structure.
The ideas of corporate social responsibility and stakeholder strategy are particularly prevalent in ______.
Germany
By taking their vision and making it into reality.
How do founders leave their imprint on their organizations?
vision
In crafting a strategic management plan, leaders must first determine the company's long-term objective. This means leaders must first define the organization's _______________.
the performance of other firms in its industry
In order to determine if Home Depot has a competitive advantage, we must compare Home Depot's performance to _______________.
organizational design
In the _______________ step of the strategy implementation phase of the AFI strategy framework, managers would examine how the firm should be structured in order to implement the desired strategy.
"How do external forces affect our strategy and competitive advantage?"
In the external analysis phase of the AFI strategy framework, managers should ask, _______________
__________ is when agents are better informed than principals.
Information asymmetry
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?
It should use the shared value creation framework.
A public stock company is considered by law to be an entity with legal rights and obligations. This is known as ___________
Legal personality
Specialization
Leslie, Juan, and Felicia all work for the same company. Leslie pays the bills and invoices customers, Juan make sure the company's computers and phones work, and Felicia interacts with customers and sellers of the firm's products. This is an example of _______________.
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
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. Focus on creating regional clusters. Include non-traditional partners into the value chain such as NGOs Expand the customer base to bring in non-customers such as those at the bottom of the pyramid
Offer financial support to local politicians.
red
Products in the affordable "business-casual" clothing market have largely become commoditized, and most retailers have begun to compete mainly on price rather than product features. In this environment, it is impossible for one retailer to gain market share without another losing it. This is an example of a(n) _______________ ocean.
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
a federal regulatory agency whose task it is to oversee stock trading and enforce federal securities laws
Securities and Exchange Commission SEC
It should use the shared value creation framework.
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?
scope of competition
The _______________ determines whether to pursue a specific narrow part of the market or to go after the broader market.
Which of the following best exemplifies information asymmetry at Lizer Tech Inc., a publicly traded software development firm?
The board of directors at Lizer Tech makes significant structural changes to the organization and issues a press release to notify the shareholders.
business ethics
The code of professional conduct based on societal norms and expectations is known as _______________.
What, according to Greg Smith, was the cause for the change in ethical climate within Goldman Sachs?
The company went public and began looking at clients and itself as counter parties to a transaction.
vision
The element of a firm's strategy that summarizes the ultimate goals of the firm is known as the _______________.
exceed the traditional imperative to increase profits
The idea of corporate social responsibility (CSR) suggests that a firm's obligation should _______________.
Corporate Governance
The mechanism used to guide a company toward meeting and strategic goals within the bounds of the law is known as
bring down
The minimum efficient scale indicates the level of output needed to _______________ the cost per unit as much as possible.
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.
Economic
The shared value creation framework encourages managers to focus on which of the following needs?
Which one of the following statements below can best be linked to the Nobel laureate Milton Friedman?
The social responsibility of a business is to increase its profits.
organizational design
The structure, processes, and procedures of an organization are designed, put into place, reviewed, and reworked three process known as _______________.
Multi-divisional
The type of structure that is used by experienced firms and consists of distinct, essentially independent strategic business units is the _______________ structure.
Which of the following is true of public stock companies?
There exists an implicit contract based on trust between society and the public stock company.
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 trade-offs required by strategic positioning
Walmart and Nordstrom maintain very different strategic positions, one based on cost-leadership and the other based on differentiation through superior customer service. This is an example of _______________.
To control costs while offering products or services at a higher perceived value, thereby creating a competitive advantage.
What is the goal of a differentiation strategy?
Product-Oriented
What type of vision is most likely to fail?
strategy follows structure
When "_______________, " managers limit themselves to strategies that maintain the status quo.
functional
When a firm covers a limited geographic area and is narrowly focused in terms of product/service offerings, a(n) _______________ structure is recommended.
pay-as-you-go
When you join the vehicle-sharing company Zoooomm, you are allowed to use a motorized scooter whenever you like, though you do not have to own the machine. You have to pay by the hours of usage. Zoooomm operates on a(n) _______________ model.
The orchestration of the work efforts of individuals and teams.
Which of the following activities would be defined by a firm's organizational structure?
Amazon sold e-books for its e-reader device at a loss to promote sales of the e-reader.
Which of the following describes how Amazon disrupted the traditional wholesale model for book publishers?
A firm's organizational structure
Which of the following determines the allocation of resources and the organization and operations of workers?
self-interest
Which of the following has NOT been found to be an ethical norm in business?
Zipcar-by-the-hour
Which of the following industries does NOT use a subscription model?
Centralized Decision-Making
Which of the following is NOT a characteristic of a simple organizational structures?
Logos
Which of the following is NOT a key element of organizational culture?
a leadership group with relevant prior industry experience
Which of the following is NOT an element of a good strategy according to the AFI framework?
A processed food manufacturer distributes frozen vegetables tainted with E. coli.
Which of the following is NOT an example of a moral hazard?
Value
Which of the following is NOT one of the variables managers primarily manipulate in order to answer the question, "How should we compete?"
Groupthink
Which of the following is a situation in which individuals follow a leader without challenging or critically evaluating the leader's ideas?
A Matrix Structure
Which of the following structures is a combination of the multidivisional structure and the functional structure?
Exploration
Which of the following terms describe searching for new knowledge that may enhance a firm's future performance?
Information asymmetry
_______________ is when agents are better informed than principals.
examples of moral hazard
a company dumping pollution into a local lake that must be cleaned using taxpayer money banks making very risky loans with the knowledge that the government will bail them out if necessary a copywriter secretly working on her novel while at work
if a company is poorly managed, its stock price may fall low enough for the firm to become a target for
a hostile takeover
a fiduciary responsibility is
a legal duty to act in another party's interests
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
Which type of company is considered a unicorn?
a private start-up company valued at more than $1 billion
Which of the following are examples of moral hazard (select 3)? a) A company dumping pollution into a local lake that must be cleaned using taxpayer money. b) A processed food manufacturer distributing frozen vegetables tainted with E Coli. c) Banks making very risky loans with knowledge that the government will bail them out if necessary. d) A copywriter secretly working on her novel at work.
a) A company dumping pollution into a local lake that must be cleaned using taxpayer money. c) Banks making very risky loans with knowledge that the government will bail them out if necessary. d) A copywriter secretly working on her novel at work.
Optics Incorporated, a publicly-traded eyewear business, places profits ahead of all other performance metrics. This practice (may choose multiple) a) fails to take into account the idea of corporate social responsibility. b) is a good example of corporate social responsibility. c) benefits all of society, not just shareholders. d) conforms to the traditional notion of shareholder capitalism
a) fails to take into account the idea of corporate social responsibility. d) conforms to the traditional notion of shareholder capitalism
One of the key characteristics of a leveraged buyout (LBO) is that it _____________.
changes the ownership structure of a company from public to private.
Corporate governance is a system of _____
checks and balances
In order to reconcile economic and social needs, managers should focus on a) making products affordable for the poorest socioeconomic groups in order to improve standards of living b) creating new regional clusters and business centers. c) re-establishing the firm as a non-profit with a focus on social equity. d) expanding value chains to include NGOs and other organizations committed to social goals. e) understanding the supplier-buyer relationship
a) making products affordable for the poorest socioeconomic groups in order to improve standards of living b) creating new regional clusters and business centers. d) expanding value chains to include NGOs and other organizations committed to social goals.
What are the two significant issues regarding the CEO pay debate? a) the relationship between firm performance and CEO pay b) The legal and political ramifications of CEO pay c) The history of CEO pay in the manufacturing industry d) the size of the CEO compensation in relation to average employee pay
a) the relationship between firm performance and CEO pay d) the size of the CEO compensation in relation to average employee pay
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
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 ______.
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 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
a job seeker claiming to have extensive computer programming experience when their 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 know as ___________.
agency theory
the idea that a corporation is simply a collection of legal contracts
agency theory
The idea that a corporation is simply a collection of legal contracts is known as the principal-agent problem. agency theory. information asymmetry. the matrix principal.
agency theory.
In public stock companies, inside directors
are appointed by shareholders to provide the board with necessary company information.
Employees that work in organizations that emphasize ethical behavior are more likely to engage in moral hazard are less likely to act ethically are no more or less likely to act ethically are more likely to act ethically
are more likely to act ethically
Additional functions of a board of directors beyond general strategic oversight include ______. (Check all that apply.)
assessing and mitigating risk ensuring that the firm's accounting practices and reports are accurate selecting, evaluating, and compensating the CEO
Financial statements by public companies must ______. (Check all that apply.)
be audited by certified public accountants adhere to generally accepted accounting principles (GAAP)
Financial statements by public companies must (may choose multiple) divulge insider information. be audited by certified public accountants. adhere to GAAP meet shareholder expectations
be audited by certified public accountants. adhere to GAAP
Following the rise of institutional investors, the use of poison pills to avoid hostile takeover has ______.
become rarer
The shared value creation framework is a tool intended to help businesses ___
benefit all stakeholders, not just shareholders
Which of the following are important components of fostering ethical behavior in employees?
board members setting clear ethical expectations strategic goals that are achievable with legal means executive behavior that is in sync with the organization's vision and values
The code of professional conduct based on societal norms and expectations is known as ______.
business ethics
In regard to the public stock company, limited liability means that a) the company does not have any responsibility to earn a profit on invested capital. b) employees are free to pursue any initiative that interests them. c) investors are not responsible for any debts incurred by the company, and are only at risk of losing the invested capital. d) the business cannot be held legally responsible for any damage or injury caused to customers, the environment, or society at large.
c) investors are not responsible for any debts incurred by the company, and are only at risk of losing the invested capital.
The primary difference between outside and inside members of the board of directors is a) outside directors manage employees outside of the US, whereas inside directors handle US-based operations only. b) outside directors are management employees specialized in more than one industry. c) outside directors are not employees of the firms, whereas inside directors are. d) inside directors have a fiduciary duty to act in the interest of shareholders, whereas outside directors are not
c) outside directors are not employees of the firms, whereas inside directors are.
One of the key characteristics of a leveraged buyout (LBO) is that it _______.
changes the ownership structure of a company from public to private
A leveraged buyout (LBO)
changes the ownership structure of a company from public to private.
Which of the following statements is correct in regarding the interests of principals and agents? (may choose multiple) a) Principals want to maximize corporate social responsibility initiates. b) Principals want to maximize agents' total compensation including benefits, status, and power. c) Agents want to maximize oversight in federal regulations. d) Agents may be more interested in personal goals, such as maximizing their compensation or gaining power. e) Principals want to maximize shareholder returns.
d) Agents may be more interested in personal goals, such as maximizing their compensation or gaining power. e) Principals want to maximize shareholder returns.
In general, women and minorities a) hold many top level management positions in Fortune 500 companies. b) make up about 45% of directors on corporate boards. c) are forbidden from serving on corporate boards in the United States. d) are underrepresented on corporate boards.
d) are underrepresented on corporate boards.
Which of the following is an example of an application of agency theory?
employment contracts
Additional functions of a board of directors beyond general strategic oversight include conducting background checks on all potential employees. ensuring that the firm's accounting practices and reports are accurate. day-to-day operational management. selecting, evaluating, and compensating the CEO. assessing and mitigating risk.
ensuring that the firm's accounting practices and reports are accurate. selecting, evaluating, and compensating the CEO. assessing and mitigating risk.
the ideas of corporate social responsibility and stakeholder strategy are particularly prevalent in
europe
The idea of corporate social responsibility (CSR) suggest that a firm's obligations should always be focused on increasing the price of the firm's shares by selling higher volume. exceed the traditional imperative to increase profits. never include any other performance indicator other than increasing profits. not to extend ethical and philanthropic expectations.
exceed the traditional imperative to increase profits.
Optics Incorporated, a publicly traded eyewear business, places profits ahead of all other performance metrics. This practice ______. (Check all that apply.)
fails to take into account the idea of corporate social responsibility conforms to the traditional notion of shareholder capitalism
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
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. environmental protection social initiatives sales volume financial performance
financial performance
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 incentive and not enough on strategic activities
Under agency theory, a manager should seek to align ______ between principals and agents to minimize opportunism.
incentives
Under agency theory, a manager should seek to align ________ between principals and agents to minimize opportunism. disciplinary actions work schedules incentives decision-making power
incentives
Under agency theory, a manager should seek to align __________ between principals and agents to minimize opportunism.
incentives
Incentives that are too high-powered, such as an outsized bonus may cause ___________ individuals to use information symmetries to their own benefit. individuals to have lower job stress and higher job performance. individuals to get distracted from strategic activities which may negatively impact job performance. individuals to recognize that law and ethics are not synonymous.
individuals to get distracted from strategic activities which may negatively impact job performance.
When agents are better informed that principals, a phenomenon known as ____________, the principal-agent problem may be exacerbated. unbalanced knowledge the seesaw effect information overload information asymmetry
information asymmetry
Which of the following occurs when agents are better informed than principals?
information asymmetry
managers who act upon secret company information for personal gain, such as trading stocks based on the knowledge of future initiatives, are guilty of
insider trading
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.
To achieve board independence, experts in corporate governance recommend that _________ more than 1 third of the board is female. 40% of the board members should be citizens of other countries. members do not talk to each other. less than one third of the board is made up of insiders.
less than one third of the board is made up of insiders.
a single investor or group of investors buys, with the help of borrowed money, the outstanding shares of a publicly traded company in order to take it private
leveraged buyout
Travis owns shares of Lobster Krown Inc., a food and beverages company. The company's financial situation takes a turn for the worse and ends up in severe debt. Despite owning shares of Lobster Krown, Travis is not responsible for bringing more money into the company to get it out of its debt. Which characteristic of public stock companies does this scenario best exemplify?
limited liability for investors
what are the four characteristics of a public stock company that make it an attractive corporate form?
limited liability for investors transferability of investor ownership legal personality separation of legal ownership and management control
Christopher works for Ocean Media Inc., a large corporation. His work requires him to travel extensively and, as a result, he spends much time working remotely. Taking advantage of the situation, Christopher often works on personal projects instead of company projects. Ocean Media has difficulty checking on Christopher's work because he has no supervision in many of the places where he travels. This scenario exemplifies a(n)
moral hazard.
Employees who work in organizations that emphasize ethical behavior are ______.
more likely to act ethically.
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
According to agency theory, which of the following managerial functions can be used to avoid adverse selection and moral hazard? (can choose multiple) organization control leadership discipline
organization , control
Corporate governance addresses the ___ problem, which underscores the risk of delegating responsibility and control to individuals who may not have the firm's best interests in mind
principal-agent
Corporate governance addresses the ______ problem, which underscores the risk of delegating responsibility and control to individuals who may not have the firm's best interests in mind.
principal-agent
Which of the following is one of the problems that corporate governance seeks to address?
principal-agent problem
In __________, the stockholders are the legal owners of the company who delegate decision-making authority to professional managers.
public stock companies
two significant issues regarding the CEO pay debate
relationship between firm performance and CEO pay size of the CEO compensation in relation to average employee pay
The interests of inside directors on the board of directors typically align with those of ________.
senior management
The interests of inside directors typically align with those of senior management low-level employees society as a whole shareholders
senior management
the interests of inside directors typically align with those of
senior management
A board of directors is elected to represent the interests of society as a whole company founders low-level employees shareholders
shareholders
A board of directors is elected to represent the interests of ______.
shareholders
By taking a _________ position in Abacus, Mr. Paulson made more than $1 billion in profit while his clients suffered huge losses.
short
the right to buy a company's stock at a predetermined price sometime in the future is known as a
stock option
An executive can legally earn a significant profit from stock options if 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
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
What are the two significant issues regarding the CEO pay debate? (Check all that apply.)
the relationship between firm performance and CEO pay the size of the CEO compensation in relation to average employee pay
The SEC argued that by NOT disclosing the risky nature of the mortgages in the Abacus CDO, Goldman Sachs _________.
violated his fiduciary duty
The relationship between CEO pay and job performance has been shown to be _____
weak
The relationship between CEO pay and job performance has been shown to be __________.
weak
What are the four characteristics of a public stock company that make it an attractive corporate form? (Check all that apply.)
~transferability of investor interests ~legal personality ~separation of ownership and control ~limited liability for investors
