Chapter 12 Strategic Management

the mechanism used to guide a company toward meeting its strategic goals within the bounds of the law

corporate governance

ethical norms in business

fairness honesty reciprocity

a federal regulatory agency whose task it is to oversee stock trading and enforce federal securities laws

Securities and Exchange Commission SEC

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

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

agency theory

employees that work in organizations that emphasize ethical behavior

are more likely to act ethically

the shared values creation framework is a tool intended to help businesses

benefit all stakeholders, not just shareholders

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 share value creation framework encourages managers to focus on both _ and _ needs

economic and social

the ideas of corporate social responsibility and stakeholder strategy are particularly prevalent in

europe

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

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

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

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

the primary purpose of the board of directors

general strategic oversight and guidancce

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

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

according to agency theory, conflicts such as the principal-agent problem are considered ____ issues

legal

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

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

the main goal of a poison pill

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

moral hazard

in comparison to other countries, the US ranks ___ in terms of its acceptance of shareholder capitalism

near the middle

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

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

by taking a ___ position in Abacus, Mr. paulson made more than 1 billion in profits while his clients suffered huge losses

short

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 typically align with those of

senior management

the right to buy a company's stock at a predetermined price sometime in the future is known as a

stock option