Deck 15: Strategy and Corporate Governance

Question 1

In general, what are the two main strategic purposes of the Board?

A) To define purpose and monitor performance
B) To allocate resources and monitor performance
C) To measure and reward
D) To lead and control

Answer 1

To lead and control

Question 2

Briefly outline the key principles of corporate governance.

Answer 2

Corporate governance defines the relationship between the owners and the managers of a firm. It isthere to ensure that the objectives of the firm are carried out and that performance is monitored. It is supposed to ensure that managers do not act primarily in their own interests, but consider all of thestakeholders defined in the governance framework. The type of governance that operates depends onthe macro environment, particularly the political, legal and social context in which the firm operates.Governance frameworks therefore differ in different parts of the world.

Question 3

What is the key difference between the agency model and the stakeholder model of corporate governance?

Answer 3

The agency model of corporate governance assumes that the main objective of the firm is to pursueprofit maximization and that shareholders should be given priority in the governance framework.A contrasting view comes from stakeholder theory which argues that firms affect a wider range ofstakeholders such as employees and local community - therefore, the governance framework shouldreflect this.

Question 4

On what bases should the Board of companies be judged?

Question 5

Why is corporate governance in the UK conducted through the vehicle of regulation rather than through the vehicle of statute law?

Question 6

What is the nature of the market for corporate control in the UK?

Question 7

In which country do banks tend to have a relatively high level of involvement in the management of companies?

A) UK
B) USA
C) Japan
D) France

Question 8

In the UK, management is accountable to directors and directors are accountable to

A) stakeholders
B) shareholders
C) agents
D) financiers

Question 9

In which country are shareholder rights the highest?

A) Japan
B) Sweden
C) UK
D) Germany

Question 10

In which country is the 'market for corporate control' the highest?

A) UK
B) Germany
C) Japan
D) Sweden

Question 11

In the 'triple bottom line', what is the third element?

A) Global impact
B) Corporate Social Responsibility
C) Stakeholder impact
D) Learning and innovation

Question 12

In 1999 Kofi Annan set out nine principles by which corporations should be judged against. These principles are known as

A) 'The Global Compact'
B) 'The Global Treaty'
C) 'The Global Promise'
D) The Global Future'

Question 13

Approaches to corporate governance around the world can be broadly categorized as the 'outsider/market exit' approach and the

A) Control approach
B) Agency approach
C) Relational approach
D) Insider/outsider approach

Question 14

The 'outsider/market exit' approach to corporate governance is likened to which system of corporate governance?

A) The Scandinavian system
B) The Anglo-Saxon system
C) The German system
D) The Japanese system

Question 15

Who is who in the principal-agent model?

A) The principal is the owner of the business and the agent is the manager of the business
B) The principal is the manager of the business and the agent is the owner of the business
C) The principal and the agent is the same person
D) The principal is the director of the business and the agent is the manager of the business

Question 16

What is meant by the 'double-agency' relationship?

A) The relationship between shareholders and stakeholders
B) The relationship between board of directors and shareholders
C) The relationship between top management and other stakeholders in the organization
D) The relationship between principals of two firms

Question 17

Which approach to corporate governance emphasizes the impact of business on society?

A) Multiple agency theory
B) Agency theory
C) Stakeholder theory
D) Shareholder theory

Question 18

Directors' remuneration was the focus of which review?

A) The Greenbury Report
B) The Cadbury Committee
C) The Hampel Committee
D) The Higgs Report

Question 19

Which of the following changes to corporate governance resulted in the possibility of criminal prosecution?

A) The Greenbury Report
B) The Sarbanes-Oxley Act
C) The Hampel Committee
D) The Cadbury Report

Question 20

How many directors are UK Public Limited Companies (established after 1929) required to have?

A) 1
B) 2
C) 3
D) 4

Question 21

Which aspect of organizations are industrial sociologists primarily concerned about?

A) class
B) motivation
C) gender
D) power

Question 22

A framework for defining relationships between management, board of directors, shareholders and other stakeholders is commonly known as

A) business ethics
B) corporate governance
C) the triple bottom line
D) the stakeholder model of business

Question 23

The Sarbanes-Oxley Act (2002) came into being as a result of which corporate collapse?

A) Barings Bank
B) Parmalat
C) Enron
D) Rover

Question 24

Which theory assumes that profit maximization is the firm's main objective?

A) Principal theory
B) Agency theory
C) Stakeholder theory
D) Shareholder theory

Question 25

The phrase 'who manages the managers?' is known as

A) The agency problem
B) The shareholder problem
C) The stakeholder problem
D) The governance problem