regular exam review - 1

Question 1

true 0r false. Shareholder activism refers to actions by large shareholders, both institutions and individuals,
to protect their interests when they feel that managerial actions diverge from shareholder value
maximization

Answer 1

true

Question 2

________ is the elected representatives of shareholders in order to represent their interests. They
have a fiduciary duty for shareholder’s long-term interests.

Answer 2

b0ard 0f direct0rs

Question 3

Unplanned decisions that emerge from the complex processes in which managers adapt to
changing external circumstances are
(a) Intended strategy
(b) Realized strategy
(c) Emergent strategy
(d) Deliberate strategy

Answer 3

(c) Emergent strategy

Question 4

true 0r false. The separation of ownership and control is the most effective means used by firms to prevent
managerial opportunism

Answer 4

false

Question 5

true 0r false. An agency relationship exists when one or more persons (the principal or principals) hire another
person or persons (the agent or agents) as decision-making specialists to perform a service.

Answer 5

true

Question 6

true 0r false. Corporate level strategy is concerned with how the firm competes within a particular industry
or market (i.e., how to compete?):

Answer 6

false

Question 7

true 0r false. Large block shareholders typically own at least 5% of a corporation’s issued shares.

Answer 7

true

Question 8

true 0r false. According to agency theory, the primary role of the board of directors is to monitor and control
top-level executives to protect owners’ interests.

Answer 8

true

Question 9

true 0r false. Generally, the board of directors can be classified as insiders, unrelated insiders, outsiders, and
unrelated outsiders

Answer 9

false

Question 10

true 0r false. Amelia Smith is the sole owner of the successful restaurant chain, Amelia’s Café. Ms. Smith
has taken a no-interest loan from the company in order to build a luxurious seaside house for
herself in Carmel, California. This constitutes a classic agency problem.

Answer 10

false

Question 11

Organizational stakeholders include

(a) unions
(b) host communities
(c) employees
(d) suppliers of capital

Answer 11

(c) employees

Question 12

Dissatisfied capital market stakeholders may:

(a) sell their stock
(b) tighten loan covenants
(c) seek to increase their power
(d) all of these

Answer 12

d

(a) sell their stock
(b) tighten loan covenants
(c) seek to increase their power
(d) all of these

Question 13

true 0r false. Triple bottom line is a measure of corporate social responsibility that includes financial, social
and environmental performance measures.

Answer 13

true

Question 14

true 0r false. There are ‘zero sum view’ and ‘symbiosis view’. Zero sum view emphasizes the responsibility
over profitability.

Answer 14

false

Question 15

Organization’s role as a taxpayer is most important to ____ as stakeholders.

(a) major suppliers of capital
(b) shareholders
(c) host communities
(d) unions

Answer 15

(c) host communities

Question 16

true 0r false. A sound strategy relies on four factors: measurable goals or targets; sound understanding of
the competitive environment; objective appraisal of resources; and effective implementation of
strategic decisions.

Answer 16

true

Question 17

________ is the relationship among various participants in determining the direction and
performance of corporations. The primary participants are (1) shareholders, (2) managers and (3)
the board of directors

Answer 17

c0rp0rate g0vernance

Question 18

true 0r false. In modern corporations-especially those in the U.S., a primary objective of corporate
governance is to ensure that the interests of top-level managers are aligned with the interests of
shareholders.
True or False?

Answer 18

true

Question 19

true 0r false. Executive compensation is considered an external corporate governance mechanism because
it determined in part by market forces

Answer 19

false

Question 20

true 0r false. In the U.S., the members of the board of directors are a firm’s key stakeholders and a
company’s legal owners.

Answer 20

false

Question 21

true 0r false. Organizational mission statements typically do not include statements about profitability and
earning above-average returns

Answer 21

true

Question 22

true 0r false. Relative power is an important criteria for prioritizing the demands of stakeholders

Answer 22

true

Question 23

A strategy can be described as:

(a) Intended, emergent, or realized
(b) Intended, emergent, or sustained
(c) Emergent, critical, or sustained
(d) Realized, emergent, failed

Answer 23

(a) Intended, emergent, or realized

Question 24

Outback Steakhouse has developed a sophisticated quantitative model and found that there
were positive relationships between employee satisfaction, customer satisfaction, and financial
results. According to the text, this is an example of ( ).
(a) zero-sum relationship among stakeholders
(b) stakeholder symbiosis
(c) rewarding stakeholders
(d) emphasizing financial returns

Answer 24

(b) stakeholder symbiosis

Question 25

There are several perspectives of stakeholder model. One perspective is zero-sum thinking.
Zero-sum thinking means that
(a) all parts of the organization gain at no loss.
(b) in order for someone to gain others must experience no gain or benefit.
(c) one can only gain at the expense of someone else.
(d) everyone in the organization shares gains and losses equally.

Answer 25

(c) one can only gain at the expense of someone else.