Deck 9: Strategic Control and Corporategovernance

Question 1

For firms competing in highly unstable and turbulent industries,traditional strategic controls are most appropriate.

Answer 1

False
Explanation: Traditional control systems are most appropriate when the environment is stable and relatively simple, goals and objectives can be measured with a high level of certainty, and there is little need for complex measures of performance.

Question 2

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

Answer 2

False
Explanation: Boundaries and constraints play a valuable role in focusing company strategic priorities. For example, several years ago, IBM sold off its PC business as part of its desire to focus its business on computing services. Similarly, Pfizer sold its infant formula business as it refocused its attention on core pharmaceutical products.

Question 3

For young managers who see themselves as free agents,behavioral controls such as rewards and culture can be an effective way to enhance organizational loyalty.

Answer 3

True
Explanation: Younger managers today have been conditioned to see themselves as free agents and view a career as a series of opportunistic challenges. As managers are advised to specialize, market yourself, and have work, if not a job, the importance of culture and rewards in building organizational loyalty claims greater importance.

Question 4

The traditional approach to strategic control is interactive,while the contemporary approach to strategic control is sequential.

Question 5

Different functional areas within an organization often have different reward systems.

Question 6

Once a strong and healthy organizational culture has been established,it becomes self-sustaining.

Question 7

For a reward system to be effective,it must be perceived as fair and equitable.

Question 8

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

Question 9

The traditional approach to strategic control relies on feedback from performance measurement to formulate strategy.

Question 10

Informational control is primarily concerned with whether or not the organization is doing the right things.

Question 11

Strategic control systems,both informational and behavioral,are used to correct the performance and ultimate strategy of a firm.

Question 12

Contemporary strategic controls involve comparing actual performance to predetermined goals.

Question 13

Sales quotas,operating budgets,and production schedules are examples of traditional controls.

Question 14

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

Question 15

The collective sum of individual behaviors of the employees of an organization generally results in what is best for the organization; thus,individual rationality assures organizational rationality.

Question 16

Rewards systems that reinforce the core values of the organization and contribute to organizational cohesiveness are the least effective type.

Question 17

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

Question 18

As firms downsize,a control system based on rewards and culture becomes dysfunctional.

Question 19

In single loop learning,the assumptions,premises,goals,and strategies of the organization are continuously monitored,tested,and reviewed.

Question 20

Behavioral controls involve the ability to respond effectively to environmental change.

Question 21

Boundaries and constraints,when used properly,can minimize improper and unethical conduct.

Question 22

Research has shown that executives who have large holdings of stock in their firm were more likely to have diversification strategies more consistent with shareholder interests,like increasing long-term returns.

Question 23

When firms like Siebel Systems,Disney,Oracle,and Microsoft separated the roles of CEO and chairman of the board,they were creating CEO duality.

Question 24

Unexpected events have little effect on short-term objectives,because short-term objectives are not changeable.

Question 25

CalPERS,the California Public Employees Retirement System,manages over 240 billion dollars in assets.As an example of shared activism,they review all short- and long-term performance figures for each of the firms in which they invest and request changes in the governance structure of those firms,when they feel the firm is not responsive to their concerns.

Question 26

The Sarbanes-Oxley Act of 2002 requires that CEOs and CFOs of publicly-listed companies must reveal off-balance-sheet finances and vouch for the accuracy of information provided.

Question 27

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.

Question 28

Auditors are appointed by the Securities and Exchange Commission to audit company financial statements.

Question 29

One of the most critical roles of the board of directors is to create incentives that align the interests of the CEO and top executives with the interests of shareholders.

Question 30

Action plans permit a degree of autonomy for managers who sometimes must modify activities to achieve the desired outcome.

Question 31

The Sarbanes-Oxley Act of 2002 stipulates that executives of a firm will still be able to sell their shares in the firm when other employees cannot.

Question 32

Stock analysts generally issue more sell recommendations than buy recommendations.

Question 33

Rule-based controls are appropriate in organizations,where most of the employees are unskilled.

Question 34

The primary participants in corporate governance,according to Monks and Minow,are the shareholders,board of directors,and employees.

Question 35

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

Question 36

Public companies are required by law to disclose information regarding executive compensation packages.

Question 37

Short-term objectives and action plans are types of boundaries that channel the efforts of employees toward goal accomplishment.

Question 38

Changes in board of director configurations since 1987 indicate that board directors were paid more in 2011,were older,were likely to be female and were independent from the company (not insiders).

Question 39

The risk of being acquired by hostile raiders is often referred to as the takeover constraint.

Question 40

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

Question 41

Which of the following is not a characteristic of effective reward and incentive systems?

A) Performance measures are clear and highly visible.
B) The structure is fixed to assure employees of consistency.
C) The compensation system is perceived as fair and equitable.
D) Objectives are well understood, and broadly accepted.

Question 42

Which of the following is the primary drawback of traditional strategic control systems?

A) They are only appropriate when the environment is stable and simple.
B) Goals and objectives cannot be measured with a high level of certainty.
C) They lead to complacency.
D) They lack the flexibility needed to adjust to changes in the environment.

Question 43

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

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.

Question 44

The traditional approach to strategic control is sequential.Which of the following is not one of the steps in the sequence?

A) Action plans are submitted by lower level managers.
B) Performance is measured against the predetermined goal.
C) Strategies are implemented.
D) Strategies are formulated and top management sets goals.

Question 45

The late Sam Walton,founder of Walmart,used to give pep rallies at local Walmart stores.What purpose did this serve?

A) It was used to remind employees of Walmart rules and regulations.
B) It helped reinforce and sustain the Walmart culture.
C) It demonstrated to employees the importance of articulating explicit goals and objectives.
D) It made the Walmart reward system very explicit.

Question 46

Continuous monitoring,in the contemporary approach,is beneficial because _____________.

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

Question 47

Lack of a clear understanding of organizational goals and objectives is a probable cause of _____________.

A) productive behavior
B) counterproductive motivation
C) counterproductive behavior
D) motivated self-interest

Question 48

Behavioral controls are aspects of strategic change that involve finding the appropriate ______________ and ______________ among the culture,rewards,and boundaries of the firm.

A) balance; alignment
B) measure; balance
C) alignment; balance
D) measure; outcome

Question 49

As firms simultaneously downsize and face the need for increased coordination across organizational boundaries,a control system based primarily on ______________ is dysfunctional.

A) boundaries and constraints
B) culture and rewards
C) organizational loyalty
D) innovation and risk taking

Question 50

In emerging economies and continental Europe,principal-principal conflicts are frequent.These consist of conflicts between controlling shareholders and executives.

Question 51

When subcultures emerge that have shared values opposite from the dominant culture of an organization _____________.

A) organizational cohesiveness increases
B) information is shared rather than hoarded
C) individuals begin working at cross purposes
D) individuals gain insights into overarching goals and objectives

Question 52

Individual rationality ______________ organizational rationality.

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

Question 53

Contemporary approaches to strategic control rely primarily on _____________.

A) feedback controls
B) single-loop learning
C) double-loop learning
D) comparative learning

Question 54

Which of the following is not an example of how organizational culture exerts behavioral control?

A) Culture helps maintain control by creating behavioral norms.
B) Culture generates unwritten standards of acceptable behavior.
C) Culture encourages individual identification with the organization and its objectives.
D) Culture sets explicit boundaries.

Question 55

Informational control systems are concerned with which of the following?

A) Is the organization doing things right?
B) Is the organization doing the right things?
C) Are rules and regulations being followed as information is processed?
D) Is the environment of the organization a necessary and sufficient condition for success?

Question 56

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

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.

Question 57

Which of the following is NOT one of the characteristics of reward and incentive systems?

A) They represent a poor means of influencing the culture of an organization.
B) They focus efforts on high priority tasks.
C) They motivate high levels of individual and collective task performance.
D) They represent an effective control mechanism.

Question 58

Effective boundaries and constraints _____________.

A) tend to inhibit efficiency and effectiveness
B) distract employees who are trying to focus on organizational priorities
C) minimize improper and unethical conduct
D) tend to limit organizational growth

Question 59

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

Question 60

Top managers at ABC Company meet every Friday to review daily operational reports and year to date data.This is an example of _____________.

A) behavioral control
B) informational control
C) strategy formulation
D) strategy implementation

Question 61

Individual and institutional shareholders have the same rights that include all except one of the following.Which one is not a shareholder right?

A) the right to sell stock
B) the right to vote the proxy
C) the right to bring suit for damages, if the economy declines
D) certain residual rights following the liquidation of the company, once creditors and claimants are paid

Question 62

Rules and regulations,rather than culture or rewards,would be used for strategic control at which type of company?

A) software developer
B) stock brokerage firm
C) manufacturer of mass produced products
D) high tech research facility

Question 63

External governance control mechanisms include all of the following except _____________.

A) auditors
B) analysts
C) competitors
D) media

Question 64

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?

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.

Question 65

Boards of directors have responded to financial crises,corporate scandals,regulator obligations,and investor requests for structural changes.In looking at the 2011 Harvard Business Review study of the changes in configuration of boards since 1987,which change has been brought about by government legislation?

A) Percentage of boards that have an average age of 64 or older has increased.
B) Average pay for directors has increased.
C) Percentage of boards with 12 or fewer members has increased.
D) Percentage of the directors that are independent has increased.

Question 66

In choosing sides concerning CEO duality,two schools of thought exist.Which of the following would not be a consideration for the Agency Theory school of thought?

A) CEO duality complicates the issue of CEO succession.
B) CEO duality reinforces popular doubts about the legitimacy of the system as a whole.
C) CEO duality can create conflicts of interest that can negatively affect the interests of the shareholders.
D) Firm performance always is improved under CEO duality.

Question 67

The best way to minimize improper and unethical conduct is to ______________ and _____________.

A) set boundaries; constraints
B) establish standards; guidelines
C) develop policies; regulations
D) design sanctions; guidelines

Question 68

In choosing sides concerning CEO duality,two schools of thought exist.Which of the following would not be a consideration for the Unity of Command school of thought?

A) One person holding both roles will be able to act more efficiently and effectively.
B) CEO duality provides smoother strategic decision making.
C) CEO duality creates unit across the board of directors and managers of a company.
D) CEO duality slows down decision-making.

Question 69

CEO duality refers to a situation in which the _____________.

A) CEO formulates and implements strategies
B) CEO serves as both the CEO and the chair of the board of directors
C) CEO is responsible for acting as CEO and serving on the compensation committee
D) CEO is responsible for acting as CEO and Chief Operating Officer (COO)

Question 70

Most successful organizations minimize the need for explicit rules,regulations,and other boundaries by _____________.

A) posting written statements of the organizational goals and objectives
B) discouraging the formation of subcultures that isolate work groups
C) designing effective reward systems
D) encouraging employees to see themselves as free agents

Question 71

Which of the following approaches to behavioral strategic control would be the least appropriate for an organization in which there is a great need for innovation and a high degree of autonomy?

A) culture
B) rewards
C) rules
D) incentives

Question 72

The takeover constraint refers to _____________.

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

Question 73

Most organizations with strong cultures and a sound system of rewards and incentives can eventually internalize boundaries rather than use explicit rules and regulations.Which of the following is not a technique for moving in that direction?

A) Hire people that identify with the dominant values of the organization.
B) Develop managerial role models.
C) Minimize training and indoctrination.
D) Align reward systems with organizational goals and objectives.

Question 74

In order to minimize the temptation for managers to act in their own self-interest,governance mechanisms exist for implementation consideration.Which of the following is not a primary means for monitoring managerial behavior?

A) a board of directors that acts in the best interests of shareholders to create short-term value
B) shareholder activism in which owners view themselves as shareowners
C) a board of directors that acts in the best interests of shareholders to create long-term value
D) managerial incentives to align management interests with those of the stockholders

Question 75

Effective short-term objectives should ______________ and _____________.

A) be specific; measurable
B) be achievable; not challenging
C) be motivating; not limiting
D) be time defined; not limiting

Question 76

Rules and regulations are examples of ______________ and _____________.

A) controls; behaviors
B) controls; norms
C) boundaries; behaviors
D) boundaries; constraints

Question 77

Rule-based controls are least appropriate in organizations with which one of the following characteristics?

A) Environments are stable and predictable.
B) Employees are highly skilled and independent.
C) There is consistency in product and service.
D) The risk of malfeasance is extremely high.

Question 78

In trying to assure that managerial actions lead to shareholder value maximization,a risk can come about if the market value of a firm becomes less than its book value.The risk is _____________.

A) it becomes an attractive takeover target
B) the firm will be delisted by the stock exchange
C) the Securities and Exchange Commission will not allow it to declare dividends until the market value once again exceeds the book value
D) the firm will be unable to service its debt

Question 79

The primary participants in corporate governance do not include _____________.

A) the shareholders
B) the financial institutions
C) the management (led by the chief executive officer)
D) the board of directors

Question 80

Which of the following statements about action plans is true?

A) Action plans, though specific, should permit a degree of autonomy to managers and not be constrained by budgets.
B) Action plans must be specific so that managers will have a clear understanding of the resource requirements necessary to implement the plan.
C) Action plans should not be constrained by a time frame in order to allow for modification.
D) Although managers must be held accountable for implementing action plans, this accountability often erodes the managers' motivation to implement the plan on a timely basis.