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Which of the following perspectives best supports the shared value creation framework?


A) Markets are more often than not defined by societal needs rather than economic needs.
B) Failing to create value for society almost always reflects on the bottom line.
C) A firm's competitive advantage depends on pitting economic and societal needs in a trade-off.
D) Externalities such as pollution, wasted energy, and costly accidents actually create internal costs.

E) A) and D)
F) A) and C)

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Which of the following real-world scenarios best exemplifies information asymmetry in a public stock company?


A) Based on a tip-off by a Goldman Sachs employee, the Galleon Group was able to sell its holdings in Goldman Sachs' stocks prior to the announcement.
B) GE knew that it could create a profitable venture out of producing green products, so it rolled out the ecomagination strategy.
C) Mark Hurd, CEO of HP, was unaware of the sexual harassment allegations, and the board's demand for him to resign caught him by surprise.
D) Goldman Sachs was party to the Abacus deal despite knowing its shortcomings.

E) B) and C)
F) A) and B)

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Which of the following is true of business ethics?


A) Certain notions such as fairness, honesty, and reciprocity are universal norms.
B) Business ethics is an agreed-upon code of conduct in business, based on laws.
C) The perception of what is ethical and what is not is similar across different cultures.
D) Business ethics needs to be codified into law in order to be followed.

E) A) and B)
F) A) and C)

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Which of the following scenarios best exemplifies a leveraged buyout of a telecommunications firm,Telbok Inc.?


A) The owner of another company buys all the outstanding shares of Telbok.
B) A private equity firm, Rainbow Inc., buys a large amount of shares of Telbok.
C) Telbok sells all its shares and declares bankruptcy.
D) Telbok buys back a large amount of its own shares from the stock market.

E) A) and B)
F) A) and C)

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At Opnic Corp.,a cross-functional team is formed to work on a project for a new client.The team consists of Darius and four other members.At most of the team's presentations to senior management,Darius takes the lead and discusses project specifics with the management,while others chip in with additional information.At the completion of the project,Darius is recommended for promotion,while the other team members receive little recognition for their hard work.The reality is that Darius did very little actual work but spent some time compiling the project report based on different documents submitted by the others.This scenario at Opnic Corp.is a typical consequence of


A) moral hazard.
B) adverse selection.
C) shared value creation.
D) corporate governance.

E) None of the above
F) B) and C)

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In late 2014,Uber senior executive Emil Michael was heard to say that Uber should spend a million dollars to hire private investigators to dig up dirt on journalists who wrote damaging pieces on Uber.When the remarks became public,he apologized.How did Uber's CEO deal with Michael?


A) Uber's CEO demoted Michael.
B) Uber's CEO fired Michael.
C) Uber's CEO promoted Michael.
D) Uber's CEO refused to discipline Michael.

E) B) and C)
F) None of the above

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Which of the following is regarded as the most internal of control mechanisms?


A) business ethics
B) executive compensation
C) the market for corporate control
D) government regulation

E) None of the above
F) A) and B)

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Which of the following is an implication for the strategist in the context of corporate governance and a company's success?


A) Very few and specific corporate-governance mechanisms can be effective in addressing the principal-agent problem.
B) Effective corporate governance and solid business ethics are critical to gaining and sustaining competitive advantage.
C) Leading by ethical example often has a less strong effect on employee behavior than words.
D) A firm that restricts its responsiveness to stockholders (and no other stakeholders) and keeps them committed to its vision will be successful.

E) A) and B)
F) A) and C)

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Serena is the CEO of Pedalo Inc.,a publicly traded company.The shareholders want Serena on the board of directors despite her recent appointment as the CEO.This decision of the shareholders is most likely because Serena


A) is a board member of a major client.
B) is more likely than other board members to take care of the stockholders.
C) is also the CEO of other companies.
D) is likely to provide the board with valuable inside information.

E) None of the above
F) All of the above

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Which of the following real-world events would act as the most likely deterrent against adopting a purely stakeholder strategy approach to business?


A) the nonsustainable debt levels incurred by sovereign governments to fund social programs
B) the financial crisis in Europe brought about by money lenders seeking to make quick money
C) the collapse of the economy in the U.S. brought about by the housing crisis
D) the rise of GDP in countries that do not believe in Milton Friedman's philosophy

E) A) and C)
F) B) and C)

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Leila is a graduate student pursuing a course in business.Presented with the case of Uber's unethical behavior,Leila wonders if Uber's board of directors should ask the CEO of Uber,Travis Kalanick,to step down.Having a strong belief in Michael Porter's idea of value creation,Leila is most likely to conclude that


A) Uber's board of directors should not ask Kalanick to step down because doing so would cause a profit dip that would affect its shareholders.
B) Uber's board of directors should ask Kalanick to step down because it has a greater obligation toward society.
C) Uber's board of directors should not ask Kalanick to step down because he was responsible for an almost 90 percent appreciation of the company's stock.
D) Uber's board of directors should ask Kalanick to step down because agents, unlike principals, are disposable.

E) B) and C)
F) A) and C)

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Which of the following best defines duality in a board of directors?


A) A person holds both the role of CEO and chairperson of the board.
B) A person holds both the role of inside director and outside director of the board.
C) A person holds both the role of director and shareholder of the company.
D) A person holds the role of CEO on the boards of two companies.

E) C) and D)
F) B) and D)

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Neville and Andre are customer care employees at JPN Care.In between calls,Neville and Andre spend time on Facebook and YouTube.The relaxed guidelines at JPN allow them to do that.However,sometimes,they knowingly avoid answering calls or keep customers on hold,while they check their social networking accounts.Such behavior


A) is neither unlawful nor unethical; hence, Neville and Andre cannot be reprimanded.
B) typically exemplifies the agency problem of adverse selection.
C) goes against the principles of shareholder capitalism.
D) can be stopped by implementing performance incentives and strict control mechanisms.

E) B) and C)
F) All of the above

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In a public stock company,senior executives,such as the CEO,face agency problems when


A) they delegate authority of strategic business units to general managers.
B) they decide to get involved in the day-to-day operations of a company.
C) the board of directors possesses more information about the company than they do.
D) the firm designs work tasks, incentives, and employments that minimize opportunism.

E) All of the above
F) A) and B)

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A bank,YPC,offers a customer a personal loan.In which of the following circumstances will this decision most likely be considered unethical?


A) The bank knows that the customer will be unable to pay the loan if the interest rate rises.
B) The bank is not aware of the investments made by the customer.
C) The bank has the financial statements of the customer, but it is not aware of each source of income.
D) The bank is depending on the customer to pay back the loan before term completion.

E) B) and C)
F) C) and D)

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GE's board has only one inside director,Jeffrey Immelt,GE's CEO,who also acts as chairman of the board.This is known as duality.Which of the following statements represents the best argument for this duality in GE?


A) The CEO is likely to be more responsible because he is setting his own performance targets.
B) The CEO might be able to influence the board through setting the meeting agendas.
C) The CEO possesses invaluable inside information that can help chair the board effectively.
D) The CEO will suggest board appointees who are friendly toward him or her.

E) B) and C)
F) A) and C)

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Which of the following is a major issue at the forefront of CEO compensation in recent years?


A) a comparison of the performance of the organization before and after the CEO's tenure
B) the performance of the CEO as an employee versus the performance as a board member
C) the absolute size of the CEO pay package compared with the pay of the average employee
D) a comparison of the compensation of senior management hired during and before the CEO's tenure

E) A) and D)
F) B) and C)

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Frank is a board member at Lofloy Greens Inc.,a publicly traded company.In addition to his duties on the board,Frank is also a full-time employee as a senior manager at Spinson Locomotives Inc.Which of the following is most likely to be true of Frank?


A) Frank is a part-time employee at Lofloy Greens.
B) Frank cannot serve as a director on Spinson Locomotives' board.
C) Frank is an outside director on Lofloy's board of directors.
D) Frank is a stockholder of Lofloy Greens.

E) None of the above
F) B) and D)

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Fakhir is a board member at Garfield Motors Inc.He is also a senior executive of the firm.The board is chaired by Ernest Jones,the CEO of Blixt Electronics.According to this scenario,Fakhir


A) cannot serve on the board of any other organization.
B) is more likely than Ernest to take care of stockholder interests.
C) is an inside director of Garfield Motors.
D) can use information from board meetings to trade stocks of Garfield Motors.

E) All of the above
F) B) and D)

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Who appoints the board of directors in a public stock company?


A) auditors
B) shareholders
C) employees
D) CEOs

E) B) and D)
F) None of the above

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