Question 1

Describe the role of outside directors as part of a company's board of directors.

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Question 2

Describe the role of inside directors as part of a company's board of directors.

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Question 3

Elvira is the CEO of a firm. She has an opportunity to increase the competitive advantage of her company but is not sure if accepting the opportunity is ethical. Which of the following questions would help her decide if accepting the opportunity is ethical?

Accepted Answer

Asking the question "How would the media report her decision to accept the opportunity if it were to become public?" would help her decide if accepting the opportunity is ethical. Because business decisions are not made in a vacuum but are embedded within a societal context that expects ethical behavior, managers can improve their decision making by also considering this question.

Question 4

Describe moral hazard with an example.

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Question 5

Why is board independence critical to effectively fulfilling a board's governance responsibilities?

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Question 6

What is the connection between Rajat Gupta and insider trading?

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Question 7

How do principal-agent problems cascade down the hierarchy in an organization? Describe an example of principal-agent problems. The example can be from your reading in this class, your reading outside of class, or your own experience.

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Question 8

How does a leveraged buyout affect a public company?

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Question 9

The name for an agreed-upon code of conduct in business, based on societal norms, is

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Business ethics are an agreed-upon code of conduct in business, based on societal norms.

Question 10

How does Nobel laureate Milton Friedman's view of the firm's social obligations tie in with shareholder capitalism?

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Question 11

How does the market for corporate control work? Provide at least one example. The example can be from your reading in this class, your reading in other classes, or your own experience.

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Question 12

Discuss the agency problem of adverse selection.

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Question 13

How does the separation of ownership and control in public stock companies present a problem? Provide an example of this problem from your reading in this class, your reading outside of class, or your own experience.

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Question 14

The MBA oath first developed at Harvard Business School and now signed by students at over 300 business schools is modeled after

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The MBA oath was modeled after both the Hippocratic oath for doctors and bar association standards for attorneys. The oath explicitly recognizes the role of business in society and its responsibilities beyond shareholders. It also holds managers to a high ethical standard based on more or less universally accepted principles in order to "create value responsibly and ethically."

Question 15

Describe the arguments for and against the CEO of a company serving as the chair of the board of directors.

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Question 16

A mortgage-loan officer persuades unsuspecting consumers to sign up for exotic mortgages, such as "option ARMs." These mortgages offer borrowers the choice to pay less than the required interest, which is then added to the principal while the interest rate can adjust upward. Because of this setup, many borrowers are unable to repay the mortgage once the interest rates go up. Which of the following phrases best describes this scenario?

Accepted Answer

The officer's actions are completely legal but ethically questionable.

Question 17

Describe moral hazard in the context of the principal-agent relationship. Use an example.

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Question 18

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

Accepted Answer

An important implication for the strategist is the recognition that effective corporate governance and solid business ethics are critical to gaining and sustaining competitive advantage. A variety of corporate-governance mechanisms can be effective in addressing the principal-agent problem.

Question 19

How does GE exemplify the creation of a shared value creation framework?

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Question 20

What is the benefit of granting stock options as part of a compensation package in a public stock company?

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Quiz 12: Corporate Governance and Business Ethics