Question 1

Conditions that must be met for principal-principal (PP)  conflicts to occur include all of the following except

Accepted Answer

A)  a dominant owner or group of owners who have interests that are distinct from minority shareholders.
B)  legislation that protects the interests of minority shareholders.
C)  a motivation for the controlling shareholders to exercise their dominant position to their advantage.
D)  few formal (such as legislation or regulatory bodies)  or informal constraints that discourage or prevent the controlling shareholders from exploiting their advantageous positions.E) A) and B)
F) C) and D)

Question 2

According to the Business Roundtable, representing the largest U.S. corporations, the most important quality of a good board of directors is that they do not get involved in critiquing company strategies.

Accepted Answer

A) True 
 B)False

Question 3

It is generally argued that the takeover constraint deters management from

Accepted Answer

A)  engaging in opportunistic behavior.
B)  considering acquiring other companies.
C)  declaring dividends.
D)  increasing the level of borrowing of a firm.E) All of the above
F) A) and B) A

Question 4

Continuous monitoring, in the contemporary approach, is beneficial because

Accepted Answer

A)  it reduces time lags.
B)  it increases the time it takes to detect changes in the competitive environment.
C)  organizational flexibility is reduced.
D)  organization response time is increased.E) A) and D)
F) A) and C)

Question 5

Hiring is important in organizations, especially hiring the right people who already identify with the dominant values of the organization and have attributes that are consistent with them.

Accepted Answer

A) True 
 B)False

Question 6

Continuous monitoring enhances the ability of the organization to respond with speed and flexibility.

Accepted Answer

A) True 
 B)False

Question 7

By takeover constraint, we mean

Accepted Answer

A)  constraints placed by the firm on raiders who want to take over the firm.
B)  legal constraints that limit the ability of the raiders to acquire a firm.
C)  provisions in the charter of a company that prevents it from attempting a takeover of other companies.
D)  the risk of being acquired by a hostile raider.E) All of the above
F) A) and B)

Question 8

Individual rationality ______________ organizational rationality.

Accepted Answer

A)  is a good indicator of
B)  will ensure
C)  is often the opposite of
D)  does not always guaranteeE) B) and D)
F) A) and B)

Question 9

The need for rules and regulations can be minimized if the organization has a strong culture. There is no necessity to have a system of rewards and incentives as well.

Accepted Answer

A) True 
 B)False

Question 10

Informational controls involve the balance and alignment of the culture, rewards, and boundaries of a firm.

Accepted Answer

A) True 
 B)False

Question 11

In building strong reward and incentives, it is vital to have good managerial role models.

Accepted Answer

A) True 
 B)False  True

Question 12

Boundaries and constraints are just used to maintain order in an organization and have little effect on the strategic priorities of the organization.

Accepted Answer

A) True 
 B)False

Question 13

Which of the following is not one of the characteristics of a contemporary control system?

Accepted Answer

A)  It is a key catalyst for an ongoing debate about underlying data, assumptions, and action plans.
B)  It must focus on constantly changing information that is strategically important.
C)  It circumvents the need for face-to-face meetings among superiors, subordinates, and peers.
D)  It generates information that is important enough to demand regular and frequent attention.E) A) and B)
F) None of the above

Question 14

According to a 2012 article published in The Economist, managerial actions to improve company control systems do not need to consider employee perceived reception of these actions.

Accepted Answer

A) True 
 B)False

Question 15

In order to have effective board operations, firms need to cultivate engaged and committed boards.

Accepted Answer

A) True 
 B)False  True

Question 16

For businesses facing complex and turbulent business environments, which of the following is true?

Accepted Answer

A)  Goals and objectives that are uncertain prevent opportunism.
B)  Traditional strategic controls are usually inappropriate.
C)  Complacency about predetermined milestones can prevent adaptability.
D)  Detailed plans are needed to maintain order.E) A) and D)
F) B) and C)

Question 17

Principal-principal (PP) conflicts frequently result in expropriation, which is defined as activities to enrich minority shareholders to assure their support.

Accepted Answer

A) True 
 B)False

Question 18

Central to agency theory is the relationship between two primary players, the principals (stockholders) and agents (management).

Accepted Answer

A) True 
 B)False

Question 19

Shareholders rely on CEOs to adopt policies and strategies that maximize the value of their shares. To motivate CEOs to maximize the value of their companies, boards of directors can consider all of the following options except one. Which one is it?

Accepted Answer

A)  Boards can require that the CEOs become substantial owners of company stock.
B)  Salaries, bonuses, and stock options can be structures to provide rewards for superior performance.
C)  Salaries can be structured to provide penalties for poor performance.
D)  Dismissal for poor performance is not an option.E) B) and C)
F) A) and B)

Question 20

The organizational reward system is typically a weak method for motivating employees.

Accepted Answer

A) True 
 B)False

Exam 9: Strategic Control and Corporate Governance

Conditions that must be met for principal-principal (PP) conflicts to occur include all of the following except

Correct AnswerverifiedShow Answer

According to the Business Roundtable, representing the largest U.S. corporations, the most important quality of a good board of directors is that they do not get involved in critiquing company strategies.

Correct AnswerverifiedShow Answer

It is generally argued that the takeover constraint deters management from

Correct AnswerverifiedA

Continuous monitoring, in the contemporary approach, is beneficial because

Correct AnswerverifiedShow Answer

Hiring is important in organizations, especially hiring the right people who already identify with the dominant values of the organization and have attributes that are consistent with them.

Correct AnswerverifiedShow Answer

Continuous monitoring enhances the ability of the organization to respond with speed and flexibility.

Correct AnswerverifiedShow Answer

By takeover constraint, we mean

Correct AnswerverifiedShow Answer

Individual rationality ______________ organizational rationality.

Correct AnswerverifiedShow Answer

The need for rules and regulations can be minimized if the organization has a strong culture. There is no necessity to have a system of rewards and incentives as well.

Correct AnswerverifiedShow Answer

Informational controls involve the balance and alignment of the culture, rewards, and boundaries of a firm.

Correct AnswerverifiedShow Answer

In building strong reward and incentives, it is vital to have good managerial role models.

Correct AnswerverifiedTrue

Boundaries and constraints are just used to maintain order in an organization and have little effect on the strategic priorities of the organization.

Correct AnswerverifiedShow Answer

Which of the following is not one of the characteristics of a contemporary control system?

Correct AnswerverifiedShow Answer

According to a 2012 article published in The Economist, managerial actions to improve company control systems do not need to consider employee perceived reception of these actions.

Correct AnswerverifiedShow Answer

In order to have effective board operations, firms need to cultivate engaged and committed boards.

Correct AnswerverifiedTrue

For businesses facing complex and turbulent business environments, which of the following is true?

Correct AnswerverifiedShow Answer

Principal-principal (PP) conflicts frequently result in expropriation, which is defined as activities to enrich minority shareholders to assure their support.

Correct AnswerverifiedShow Answer

Central to agency theory is the relationship between two primary players, the principals (stockholders) and agents (management).

Correct AnswerverifiedShow Answer

Shareholders rely on CEOs to adopt policies and strategies that maximize the value of their shares. To motivate CEOs to maximize the value of their companies, boards of directors can consider all of the following options except one. Which one is it?

Correct AnswerverifiedShow Answer

The organizational reward system is typically a weak method for motivating employees.

Correct AnswerverifiedShow Answer

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