Deck 12: Corporate Governance, Business Ethics, and Strategic Leadership

Question 1

The pyramid of corporate social responsibility (CSR),shown in Exhibit 12.4,symbolizes that the firm needs to fulfill its responsibilities in a step-by-step sequential fashion.

Answer 1

False
Explanation: The CSR pyramid symbolizes the need for these responsibilities to be carefully balanced and pursued simultaneously.

Question 2

Corporate social responsibility (CSR)includes economic,legal,ethical,and philanthropic responsibilities.

Answer 2

True
Explanation: The items listed in the statement are the four areas of CSR.

Question 3

The idea of focusing on shared value is for managers to spend most of their efforts on building up short-term perceived value from customers,and therefore building market share.

Answer 3

False
Explanation: Shared value is espoused by Porter and Kramer as a concept involving both shareholder value creation and value creation for society. Managers should NOT focus on short-term financial performance but the more inclusive shared-value-creation framework.

Question 4

To become a strategic leader,a person needs to become a highly capable individual first.

Question 5

The combination of ownership and control is one attractive characteristic of a public company.

Question 6

What best describes transferability of investor interests?

A) Investors can give company stocks as a gift.
B) Investors are allowed to trade stocks.
C) Investors are allowed to participate in strategy formulation.
D) Investors can be hired as employees.

Question 7

It is generally believed that a firm can do well by doing good.

Question 8

According to the opening case,why did Mark Hurd resign?

A) Because of his incompetence in leading the company to achieve its goal
B) Because of his unethical behavior
C) Because of political wrestling among board members
D) None of these

Question 9

Former CEO of HP,Mark Hurd,resigned his job due to his unethical behavior.

Question 10

What best describes the separation of ownership and control?

A) Shareholders own stocks but do not run the company.
B) Shareholders can freely trade the company stocks.
C) Shareholders provide necessary information to the company.
D) Managers control the company but may also have stock ownership.

Question 11

An effective governance mechanism is needed to direct and control the enterprise.

Question 12

Private companies are the backbone of any modern economy.

Question 13

Corporate governance needs to address adverse selection,which is describing how difficult it is for the principal to know whether the agent has really put forth the best efforts.

Question 14

Strategic leadership is irrelevant when a firm pursues its goals.

Question 15

________ is/are the institutional backbone of the modern free-market economy.

A) Family-owned firms
B) Agency theory
C) Public stock companies
D) Nonprofit organizations

Question 16

The diversity of the members of a board of directors,such as that found at GE,is important to avoid groupthink.

Question 17

The main lesson from the opening case is that ___________________.

A) A CEO can do whatever they want
B) A governance mechanism must be in place to monitor business practices
C) A financial statement is the most important measurement of performance
D) None of these

Question 18

A manager's action can be completely legal but ethically questionable.

Question 19

Stakeholders impact analysis is a tool used to quantify which specific stakeholders have the largest financial impact on the firm.

Question 20

Executive compensation is an important element of corporate governance.Research has found that the rate of executive pay to average employee pay has been relatively stable over the last couple of decades.

Question 21

________ is a theoretical framework that is concerned with how various stakeholders create and trade value.

A) Shareholder theory
B) Agency theory
C) The groupthink model
D) Stakeholder theory

Question 22

Exhibit 12.2 displayed results of a 2010 Gallup poll on honesty and ethics.Which of the following groups ranked the very lowest in honesty and ethics?

A) Nurses
B) Teacher
C) Lobbyists
D) Business executives

Question 23

When congress passed the Sarbanes-Oxley Act,it forced CEOs to be more _______ responsible for the reporting of the company.

A) Economically
B) Legally
C) Ethically
D) Philanthropically

Question 24

Which of the following can be considered a firm's stakeholder?

A) Customers
B) Suppliers
C) Financiers
D) All of these

Question 25

Which of the following is NOT an essential component of the Sarbanes-Oxley Act?

A) Accounting oversight by the CEO
B) Auditor independence
C) Shareholders' responsibility to ensure accounting integrity
D) All of these

Question 26

________ is a decision tool with which managers can recognize,assess,and address the needs of different stakeholders.

A) Shareholder analysis
B) Stakeholder impact analysis
C) SWOT analysis
D) Financial impact analysis

Question 27

Starbucks developed a sourcing policy to help source coffee of the highest quality while adhering to fair trade and responsible growing practices.What type of responsibility does Starbucks have in this example?

A) Economic
B) Legal
C) Ethical
D) Philanthropic

Question 28

Many companies incentivize employees through stock options.This practice is called __________.

A) Employee stock ownership plans
B) Corporate incentives
C) Shareholder monitoring
D) The upper-echelons theory

Question 29

Effective management of the stakeholders can lead to greater organizational flexibility and __________.

A) Credibility
B) Core competence
C) Adaptability
D) Product quality

Question 30

______ are the individuals or groups that can affect,or are affected by,a firm's actions.

A) Shareholders
B) The board of directors
C) Stakeholders
D) Top management

Question 31

______ is a framework that helps firms recognize the public expectation that society has of a business at a given point in time.

A) Core competence
B) Stakeholder impact
C) Corporate governance
D) Corporate social responsibility

Question 32

Which of the following statements about stakeholders is correct?

A) Failure to consider stakeholders can damage the company's performance.
B) Stakeholders is just another name for shareholders.
C) Stakeholders are less important than shareholders.
D) Stakeholders are the members in a company's supply chain.

Question 33

A firm's effective stakeholder management can ___________.

A) Reduce negative outcomes and risks
B) Induce information inflow
C) Build a strong reputation
D) All of these

Question 34

Walmart spent $288 million for education and environment protection.This is an example of what type of corporate social responsibility?

A) Economic
B) Legal
C) Ethical
D) Philanthropic

Question 35

Which one of the following statements is NOT true?

A) Increased trust among stakeholders will increase the transaction cost.
B) Satisfied stakeholders are more cooperative and can increase a firm's value creation.
C) Negative outcomes can be avoided if stakeholders are satisfied.
D) Firms can build a stronger reputation through effective stakeholder management.

Question 36

_________ is an integrative framework to connect corporate governance,business ethics,and strategic leadership.

A) Stakeholder strategy
B) Competitive strategy
C) Supply chain management
D) International strategy

Question 37

The three attributes of stakeholders are _________,legitimacy,and urgency.

A) Competency
B) Trust
C) Power
D) Control

Question 38

Two common features of the recent financial crisis are that management actions (1)affect the economic well-being of the globe and (2)_____________.

A) Failure to implement strategy is unwise
B) Organizational design is necessary
C) Green technology is the future
D) Must consider a variety of stakeholders

Question 39

By November 2008,the Dow Jones Industrial Average lost 50 percent of its value because of which of the following?

A) The subprime mortgage bubble burst.
B) Several Ponzi Schemes were discovered.
C) The unethical behavior of some CEOs.
D) All of these.

Question 40

The major theme of stakeholder theory is that _________.

A) Stakeholders' interests are less important
B) The relationship among stakeholders and the firm is a complex web and needs to be managed
C) Stakeholders usually create problems for the firm
D) Stakeholders are a key part of the firm's supply chain

Question 41

Corporate social responsibility has four components: economic,legal,ethical,and __________ responsibilities.

A) Trust
B) Control
C) Philanthropic
D) Social

Question 42

________________ is a mechanism to direct and control an enterprise in order to ensure that it pursues its strategic goals.

A) Corporate social responsibility
B) Stakeholder impact analysis
C) Corporate governance
D) Principal-agent theory

Question 43

Investors expect a firm to make a profit while governments expect a firm to pay taxes.This is the ________ responsibility of a firm.

A) Economic
B) Legal
C) Ethical
D) Value-driven

Question 44

Which one of the following statements is true?

A) Corporate social responsibility should focus only on making profits.
B) Corporate social responsibility helps firms gain competitive advantage.
C) Corporate social responsibility is universal across the world.
D) Corporate social responsibility should not include NGOs.

Question 45

Regarding the empirical evidence connecting corporate social responsibility and firm performance,the text notes there have been a variety of studies performed to look at this question.Which ONE of the following most accurately describes what has been found?

A) CSR has been shown to strongly cause improved firm performance.
B) There is a positive relationship but the causality is murky.
C) Strong firm performance has been shown to strongly cause improved CSR by the firm.
D) Prior research has not shown a connection between CSR and firm performance.

Question 46

Which of the following is NOT true concerning the relationship between corporate governance and strategy?

A) Corporate governance provides control mechanisms.
B) Boards ensure that a firm's mission is in its strategy.
C) Governance monitors the way the strategy is executed.
D) Boards make day-to-day decisions on strategy execution.

Question 47

Porter and Kramer offer a shared value framework for corporate social responsibility.Which of the following is NOT one of the focal points they recommend in this framework?

A) Firms should create regional clusters.
B) Firms need to expand customers to nonconsumers.
C) The value chain of the firm should include partners such as NGOs.
D) Firms need to focus new business in the BRIC nations.

Question 48

Managers must ensure that their firms obey all the laws,including labor,consumer,and environmental laws.This is a firm's __________ responsibility.

A) Legal
B) Ethical
C) Social
D) Economic

Question 49

The ______ is the centerpiece of corporate governance and is composed of inside and outside members.

A) Chief executive office
B) Board of directors
C) Shareholders
D) Scientific advisory board

Question 50

Corporate citizenship refers to _______ responsibility.

A) Economic
B) Legal
C) Ethical
D) Philanthropic

Question 51

Which one of the following statements is in agreement with the approach espoused by Nobel laureate Milton Friedman?

A) The only social responsibility of business is to increase its profits.
B) Corporate social responsibility is vital to a firm's success.
C) Corporate social responsibility is universal across the world.
D) Corporate social responsibility should not include NGOs.

Question 52

An individual who hires another to act on his/her behalf is referred to as _________.

A) Principal
B) Manager
C) Executive
D) Agent

Question 53

Corporate social responsibility has four components: ______,legal,ethical,and philanthropic responsibilities.

A) Trust
B) Control
C) Economic
D) Social

Question 54

_______ is the term that describes the difficulty of the principal to ascertain whether the agent has really put forth a best effort.

A) Moral hazard
B) Adverse selection
C) The board of directors
D) The agency problem

Question 55

_________ describes a situation in which an agent misrepresents his or her ability to do a job.

A) A moral hazard
B) An adverse selection
C) Stakeholder theory
D) An agency problem

Question 56

Which of the following is NOT true concerning corporate governance?

A) Corporate governance is present only in public organizations.
B) Corporate governance provides rules for making decisions on corporate affairs.
C) Corporate governance provides a structure for monitoring performance.
D) It seeks to benefit multiple stakeholders, not just shareholders.

Question 57

An individual who acts on behalf of others is referred to as ______.

A) Principal
B) Shareholder
C) Agent
D) Stakeholder

Question 58

A firm's legal responsibilities are often defined only minimum standards.Firms often go beyond minimum legal responsibilities by being ________ responsible to society.

A) Legally
B) Economically
C) Philanthropically
D) Ethically

Question 59

The risk of employee opportunism on behalf of agents is exacerbated by _______.

A) Information asymmetry
B) Isomorphism
C) Network effect
D) Groupthink

Question 60

Corporate citizenship is often associated with ________ responsibility.

A) Legal
B) Ethical
C) Philanthropic
D) Economic

Question 61

______ is the phenomenon by which corporate control can be shifted to competitors/investors,encouraging management to operate the firm differently.

A) Managerialism
B) Employee stock ownership plans
C) The market for corporate control
D) A compensation package

Question 62

The behaviors and styles of executives that influence others to achieve organizational goals are called ___________.

A) Strategic analysis
B) Strategic leadership
C) Ethical behavior
D) The board of directors

Question 63

Which of the following statements is true concerning U.S.boards of directors?

A) They are typically made up of a majority of insiders.
B) They are often chaired by CEOs.
C) They are appointed by the CEOs.
D) All of these are true.

Question 64

Which of the following is a disadvantage associated with stock options?

A) They may encourage the CEO to falsely cook the company's financials.
B) They align incentives with shareholder interests.
C) They encourage executives to create stock value.
D) They motivate CEOs to act like owners.

Question 65

______ are board members who are not employees of the firm but who are frequently senior executives from other firms or full-time professionals.

A) Inside directors
B) Outside directors
C) CEOs
D) Auditors

Question 66

The task of managing an overall enterprise and influencing key organizational outcomes is referred to as __________.

A) Managerial discretion
B) Stakeholder analysis
C) Management by objectives
D) Strategic leadership

Question 67

_______ is the process of the board acting in its legal responsibility to oversee executives' behaviors and performance.

A) Advising
B) Evaluating
C) Approving
D) Monitoring

Question 68

The most common executive compensation is _______.

A) Stock options
B) Commission
C) Health benefits
D) Straight salary

Question 69

Which of the following national governments uses state-directed capitalism to influence a company's ownership and operations?

A) Germany
B) France
C) China
D) The United States

Question 70

_______ are the board members who are part of the company's senior management team appointed by shareholders to provide the board with necessary information pertaining to the company's internal workings and performance.

A) Inside directors
B) Outside directors
C) CEOs
D) Auditors

Question 71

All of the following are examples of a leader's interpersonal roles EXCEPT ________.

A) Liaison
B) Monitor
C) Leader
D) Figurehead

Question 72

Which of the following is NOT true concerning the role of the board of directors?

A) They represent the shareholders' interests.
B) They may hire and fire top management.
C) They oversee the firm's operations.
D) They are always independent.

Question 73

In line with appropriate corporate governance,before a manager commits to a major strategic direction,he or she must first determine ______.

A) How many strategic options are available
B) Whether it is practical
C) Whether it is ethical
D) How to measure the outcomes

Question 74

A group of individuals that formally represent the firm's shareholders and oversee the work of executives are referred to as __________.

A) Agents
B) The board of directors
C) Managers
D) Governing boards

Question 75

________ is an agreed upon code of conduct in business based on societal norms.

A) Business strategy
B) Business ethics
C) Core competence
D) Board of directors

Question 76

Decisional roles include all the following EXCEPT _________.

A) Entrepreneur
B) Disturbance handler
C) Spokesperson
D) Negotiator

Question 77

All of the following are roles played by the board of directors except ___________.

A) Creating the firm's strategy
B) Transporting information from external sources
C) Providing leads for acquisition candidates
D) Providing advice for the CEO and other executives

Question 78

Executive activities include interpersonal roles,informational roles,and ________.

A) Decisional roles
B) Strategic roles
C) Communicational roles
D) Leadership roles

Question 79

Loan officers persuading unsuspecting consumers to sign up for exotic mortgages that turned out to be very expensive for the home buyers is an example of what?

A) Actions that helped consumers get into homes they could afford
B) Actions that are not legal but meet most ethical norms
C) Decisions in the long-term best interest of the banks
D) Actions that are legal but ethically questionable

Question 80

The MBA Oath first developed at Harvard and now signed by students at over 500 business schools is modeled after what?

A) The Hippocratic oath in medicine
B) The Sarbanes-Oxley pledge
C) Level-5 leadership
D) None of these; it's entirely unique.