Ch 5

Question 1

What is governance

Answer 1

System of structures rights, and obligations for directing and controlling corporations

Question 2

What does the the distribution of rights and responsibilities do

Answer 2

Specifies how the board of directors, managers, and shareholders share power in a firm

Question 3

What is the mechanism for monitoring

Answer 3

Governance aims to align stakeholder interests a create value

Question 4

What makes up the internal governance mechanism

Answer 4

Board of directors, concentrated ownership,and performance based-pay

Question 5

What does the board of directors do?

Answer 5

Monitors and advises managers in a company

Question 6

What do blockholders do in a concentrated ownership?

Answer 6

Ensure efficient management of the firm

Question 7

What does performance- based pay do for managers and owners

Answer 7

Aligns their interests

Question 8

What makes up the external governance mechanism

Answer 8

Product Market competition, managerial labor market, and threat of takeover

Question 9

What exactly does the product market competition do to firms and products

Answer 9

Outcompetes underperforming firms and products

Question 10

What exactly does the managerial labor market do for the managing staff

Answer 10

Replaces underperforming managers with more competent ones

Question 11

What is the threat of takeover

Answer 11

Makes underperforming firms easy takeover targets

Question 12

What are the main motivational points of family owners

Answer 12

①financian goals ② indiversitied wealth ③ supervise managers

Question 13

What is the reality of the functionality of traditional governance mechanisms in terms of family firms

Answer 13

The board of directors, concentrated ownership, and performance based-pay have limited effectiveness

Question 14

What are the main specific governance problems in family firms

Answer 14

①altruism-induced ② owner nadir ③ majority-minority owner ④ family blockholder governance problems

Question 15

What is the problem with altruism
Induced governance

Answer 15

Family owners favor family members over hinfamily members- leading to adverse selection and shirking

Question 16

In family firms, what is the problem with
Owner holdup governance

Answer 16

Family owners steer the firms Ina particularistic way exposing non family employees to risks

Question 17

What exactly is the governance problem: majority - minority

Answer 17

Disagreements between majority and minority owner about goons , and information access

Question 18

What occurs when there are family blackhader governance problems

Answer 18

Family owners disagree about strategy and influence within the organization

Question 19

What do governance constellations mean in terms of family firms?

Answer 19

The different ownership and management structures

Question 20

When ownership and management is shared among family members

Answer 20

Owner-manager

Question 21

When ownership and management is shared among siblings

Answer 21

Sibling partnership

Question 22

When the ownership of business is shaved among cousins

Answer 22

Cousin consortium

Question 23

What dynamic is it when extended family controls portfolio of business activities

Answer 23

Family enterprise

Question 24

How are the performance implications of governance constellations measured? (Relationship) hint: certain shape

Answer 24

U-shaped relationship between family governance constellation and financial performance

Question 25

What does corporate governance instill

Answer 25

Efficient cooperation of board members, managers, and shareholders

Question 26

What must one look for when choosing the correct people for their board of directors?

Answer 26

Skills, communication, managerial skillset, knowledge, and motivation

Question 27

What are the roles and involvement of the board of directors?

Answer 27

① appoint, monitor, and dismiss top management ② invoke general assembly ③ set dividend policy ④ review business strategy

Question 28

What exactly is the board's involvement in the strategy formation process

Answer 28

① before broad direction ② offers advice ③ monitors strategic plans actual execution

Question 29

What exactly does ownership governance legally define (ownership aspects)

Answer 29

① voting rights ②stalemates ③ transfer of shares ④ dissolution of agreements

Question 30

What does family governance secure in matters related to the firm

Answer 30

Efficient operation of the family

Question 31

The family values and Goals defines

Answer 31

Core values, overarching goal, family membership sand valves about being in business

Question 32

Family involvement in management determines family members'

Answer 32

Positions, qualifications, career paths, and termination

Question 33

What does family involvement in ownership specify or need specification in

Answer 33

Ownership strategy, in-laws and non-family managers as owners, trust ownership, and ownership requirements

Question 34

What does family involvement in new entrepreneurial activity do?

Answer 34

Supports next-generational family member's entrepreneur endeavors

Question 35

What does family involvement in philanthropy support?

Answer 35

Family members in need and education or just other philanthropic activities

Question 36

What does wealth governance do in family firms

Answer 36

Organizes and monitors the management of family wealth

Question 37

When a family has no coordination of interests amongst family members in regards of managing wealth - they become known as the

Answer 37

Uncoordinated family

Question 38

In an embedded family office, who manages wealth within the family firm

Answer 38

Fiduciary (trusted individual)

Question 39

In a single family office, who manages family wealth?

Answer 39

Distinct organizational entity

Question 40

What happens when a family trust or foundation is made

Answer 40

Wealth is allocated (in a trust/foundation) for the benefit of family members

Question 41

What governance document emotionally binds family members to joint governance of business, ownership, family and wealth

Answer 41

Family charter

Question 42

Family assembly is comprised of or comprises

Answer 42

Family members

Question 43

Family council is what

Answer 43

Governs family affairs

Question 44

What does integrated governance in family firms align and integrate?

Answer 44

Governance in the areas of family, ownership, corporate and wealth