Ketchen Chapter 10
Which of the following refers to a lucrative financial settlement given to existing executives of a taken over firm?
A golden parachute
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 poison pill
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?
Escalation of commitment
A golden parachute refers to a lucrative financial incentive for the newly appointed executives of a taken over firm.
False
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.
False
An agency problem reflects the separation of interest between the board of directors of a company and its employees.
False
CEO pay is a function of a day's work for a day's pay.
False
Greenmail refers to a corporate raider purchasing large blocks of stock at a premium to execute a takeover.
False
In Kohlberg's Stage five of moral reasoning, individuals focus on the direct consequences that their actions will have.
False
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.
False
In Kohlberg's Stage two of moral reasoning, individuals are conformity driven, and act with the goal of fulfilling social roles.
False
In Kohlberg's pre-conventional level of moral reasoning, morality is judged by comparing individuals' actions with the expectations of society.
False
In Kohlberg's stage five, moral reasoning is based on universal ethical principles.
False
Kohlberg's conventional level of moral reasoning is very egocentric in nature, and moral reasoning is tied to personal concerns.
False
Many institutional investors such as mutual funds and pension funds often prefer significant representation by board insiders in the board of directors.
False
Shark repellants are potential defenses against CEO duality.
False
The fundamental attribution error occurs when more readily available information is incorrectly assessed to also be more likely.
False
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.
False
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?
Fundamental attribution error
More than any other generation, _____ prize(s) job and life satisfaction highly, so making the workplace an enjoyable environment is key to managing them.
Generation Y
Which of the following groups is also known as Millenial?
Generation Y
Which of the following is true about the fundamental attribution error?
It occurs when good outcomes are attributed to personal characteristics but undesirable outcomes are attributed to external
Which of the following is true about the overconfidence bias?
It occurs when individuals have more faith in their abilities to predict an event than logic suggests is actually possible.
Which of the following is true about satisficing?
It occurs when individuals settle for the first acceptable alternative instead of seeking the best possible decision.
Which of the following is true about the availability bias?
It occurs when information that is readily available is incorrectly assessed to also be more likely.
Which of the following is true about the representativeness bias?
It occurs when the way information is presented alters the decision an individual will make.
Which of the following is true about a golden parachute?
It refers to a lucrative financial settlement given to exiting executives of a taken over firm.
Which of the following is true about greenmail?
It refers to a takeover target firm's management repurchasing large blocks of stocks at a premium to avoid a potential takeover.
Which of the following is true about a shark repellent?
It refers to the potential defenses against a hostile takeover attempt.
Which of the following statements is true regarding the composition of the board of directors?
Making the CEO also the chairman of the board of directors helps avoid bitter divide within a corporation.
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?
Misunderstandings about sampling
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?
Misunderstandings about sampling
Which of the following is the first step of the process of rational decision-making?
Problem identification
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?
Stage four
According to Kohlberg, in which of the following stages is moral reasoning based on universal ethical principles?
Stage six
According to Kohlberg, in which of the following stages of moral reasoning individuals exhibit a 'what's in it for me' mentality?
Stage two
Who, among the following, has the power to potentially hire or fire the CEO of a publicly traded firm?
The board of directors
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?
The community
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.
The diversity dimension
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?
The diversity dimension
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?
The environment dimension
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?
The product quality/safety dimension
Which of the following is true about Gen X members?
They prize flexibility in their jobs.
Which of the following is a defining characteristic of the members of the baby boomers generation?
They view face time as an important contribution to a successful work environment.
A white knight is an alternative buyer of a potential takeover target, who is more favorable to the existing management of the target firm.
True
An unsolicited takeover attempt is often dubbed a hostile takeover.
True
Anchoring and adjustment bias occurs when individuals react to arbitrary or irrelevant numbers when setting financial or other numerical targets.
True
CEO compensation is a function of the competitive wages that other corporations would offer for a potential CEO's services.
True
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.
True
CEOs often favor the use of board insiders who often have intimate knowledge of the firm's business affairs.
True
Hindsight bias occurs when mistakes seem obvious after they have already occurred.
True
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.
True
In most publicly traded firms, CEO compensation generally includes guaranteed salary, cash bonus, and stock options.
True
Individuals or firms that hope to conduct a takeover are often referred to as corporate raiders.
True
Kohlberg's post-conventional level of moral reasoning occurs when morality is more than simply following social rules or norms.
True
Kohlberg's stage five of moral reasoning considers different values and opinions.
True
Leveraged buyouts historically are associated with reduction in workforces in an effort to streamline processes and decrease costs.
True
Making the workplace an enjoyable environment is key to managing Generation Y
True
Taking a poison pill refers to a potential takeover firm selling additional stocks to existing shareholders, increasing the shares needed for a viable takeover.
True
The board of directors has the power to hire or fire a CEO.
True
The term perks, derived from perquisite, refers to special privileges or rights as a function of one's position.
True
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) _____.
agency problem
The generation known as _____ was born between 1946-1964, corresponding with an increase of population following the end of World War II.
baby boomers
In Kohlberg's _____ level of moral reasoning, morality is judged by comparing individuals' actions with the expectations of society.
conventional
Individuals or firms that hope to conduct a takeover are often referred to as _____.
corporate raiders
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.
employee relations
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.
employee relations
An unsolicited takeover attempt is often dubbed a _____.
hostile takeover
In Kohlberg's stage three of moral reasoning:
individuals are conformity driven, and act with the goal of fulfilling social roles.
In Kohlberg's stage one of moral reasoning:
individuals focus on the direct consequences that their actions will have.
In Kohlberg's stage five of moral reasoning:
individuals view laws as social contracts that promote the greatest good for the greatest number of people.
A(n) _____ refers to a situation where a publicly traded company is purchased and then taken off the stock market.
leveraged buyout
According to Kohlberg, _____ level of moral reasoning occurs when morality is more than simply following social rules or norms.
post-conventional
According to Kohlberg, _____ level of moral reasoning is very egocentric in nature.
pre-conventional
Generation X differs from the baby boomers in that Generation X members:
prize flexibility in their jobs.
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.
representativeness
The generation born between 1925 and 1946 that fought in World War II and through The Great Depression are referred to as the:
traditionalists.
A potential buyer who is favorable to the existing management of a takeover target firm is known as a _____.
white knight
