Question 1

The divisions in an M-form organization are true profit-and-loss centers.

Accepted Answer

In an M-form organization, each division functions as a separate profit-and-loss center, responsible for its own revenues, expenses, and profits.

Question 2

One common agency problem occurs when managers decide to take some of a firm's capital and invest it in managerial perquisites that do not add economic value to the firm but that do directly benefit those managers.

Accepted Answer

This is a correct statement about agency problems, where managers may prioritize their own interests over those of the firm and its shareholders. Such behavior can lead to inefficiencies and reduced shareholder value.

Question 3

To the extent that a board of directors begins to operate a business on a day-to-day basis,it goes beyond its capabilities.

Accepted Answer

The role of the board of directors is to provide strategic direction and oversight of a company, not to manage its day-to-day operations. When a board of directors starts to involve itself in the detailed operation of a business, it can become less effective and may not have the expertise necessary to make the best decisions for the company. This is why it is important for companies to have a clear division of responsibilities between the board of directors and management team.

Question 4

Another name for the M-form is the multidivisional structure.

Accepted Answer

The M-form structure is also known as the multidivisional structure, which is a hierarchical organizational structure consisting of multiple levels of organizational units, each with its own set of functions, resources, and responsibilities.

Question 5

A board of directors typically consists of 15 to 30 individuals drawn from a firm's top management group and from individuals outside the firm.

Accepted Answer

While it is true that a board of directors can include individuals from both inside and outside the firm, the typical size of a board of directors is between 5 and 15 members, not 15 to 30.

Question 6

In an M-form organization the role of the board of directors is to formulate corporate strategies consistent with equity holders' interests and to assure strategy implementation.

Accepted Answer

The answer of In an M-form organization the role of...

Question 7

Whenever one party to an exchange delegates decision-making authority to a second party,an agency relationship has been created between these parties.

Accepted Answer

This statement is true. An agency relationship is created when one party (the principal) delegates decision-making authority to another party (the agent) to act on their behalf. The agent is then responsible for carrying out the principal's instructions and making decisions that are in the principal's best interests.

Question 8

In an agency relationship the party delegating the decision-making authority is called the agent.

Accepted Answer

The answer of In an agency relationship the party delegating...

Question 9

Each division in an M-form organization typically adopts a matrix structure and the division general manager takes on the role of senior project executive.

Accepted Answer

The answer of Each division in an M-form organization typically...

Question 10

The most common organization structure for implementing a corporate diversification strategy is the U-form.

Accepted Answer

The answer of The most common organization structure for implementing...

Question 11

Divisions in an M-form organization should be large enough to represent identifiable business entities but small enough so that a division general manager can manage each one effectively.

Accepted Answer

This is because the M-form organization is designed to create semi-autonomous units that operate as individual businesses within the larger organizational structure. Each division should be large enough to have a dedicated management team and resources, but small enough so that the general manager can effectively oversee operations and make strategic decisions.

Question 12

The title chairman of the board often,but not always,identifies the firm's senior executive.

Accepted Answer

The title "chairman of the board" typically refers to the leader of the board of directors, not necessarily the firm's senior executive, who is often the CEO.

Question 13

In 1970,institutions owned 62 percent of the equity traded in the United States; by 1990,institutions owned 48 percent of this equity and by 2002,they owned only 32 percent of this equity.

Accepted Answer

The answer of In 1970,institutions owned 62 percent of the...

Question 14

In principle,only the CEO and the president report to the board of directors while other senior managers report only to the CEO.

Accepted Answer

Other senior managers such as CFO or COO also report to the board of directors in addition to reporting to the CEO.

Question 15

Research on outside members of boards of directors tends to show that outside directors,as compared to insiders,tend to focus less on monitoring a firm's economic performance than on other measures of firm performance.

Accepted Answer

The answer of Research on outside members of boards of...

Question 16

In the multidivisional structure,each business that the firm engages in is managed through a division.

Accepted Answer

In the multidivisional structure, each division manages a separate business that the firm engages in.

Question 17

The M-form structure is designed to create checks and balances for managers that increase the probability that a diversified firm will be managed in ways consistent with the interests of its equity holders.

Accepted Answer

The M-form structure is designed to prevent the problems associated with single-unit management and to create checks and balances for managers that increase the probability that a diversified firm will be managed in ways consistent with the interests of its equity holders.

Question 18

Institutional owners are usually pension funds,mutual funds,insurance companies,or other groups of investors that have joined together to manage their investments.

Accepted Answer

Institutional owners are indeed typically pension funds, mutual funds, insurance companies, and other groups of investors that pool their resources and expertise to manage their investments.

Question 19

All firms that use the multidivisional structure use the same criteria for defining the boundaries of profit-and-loss centers.

Accepted Answer

While firms using the multidivisional structure may use similar criteria for creating their profit-and-loss centers, they are not uniform across all firms. Each firm may have different factors that guide their decision-making process for defining these boundaries.

Question 20

Research has shown that separating the roles of CEO and board chair is positively correlated with firm performance when firms operated in high-growth and very complex environments.

Accepted Answer

Research has consistently found that separating the roles of CEO and board chair is positively correlated with firm performance, particularly in high-growth and complex environments where there is a greater need for strategic oversight and independent governance.

Quiz 8: Organizing to Implement Corporate Diversification