Question 1

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.

Accepted Answer

Managerial incentives,sometimes called contract-based outcomes,consist of reward and compensation agreements for managers.Here the goal is to carefully craft managerial incentive packages to align the interests of management with those of the stockholders.

Question 2

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

Accepted Answer

Research and simple observations of boards indicate that simple prescriptions,such as having a majority of outside directors,are insufficient to lead to effective board operations.Firms need to cultivate engaged and committed boards.

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.

Accepted Answer

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 themselves,and have work,if not a job,the importance of culture and rewards in building organizational loyalty claims greater importance.

Question 4

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

Accepted Answer

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 5

Informational control is primarily concerned with whether the organization is doing the right things.

Accepted Answer

There are two different types of strategic control in the contemporary approach: informational control and behavioral control.Informational control is primarily concerned with whether or not the organization is doing the right things.

Question 6

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

Accepted Answer

The traditional approach to strategic control is based on a feedback loop from performance measurement to strategy formulation.Such traditional control systems,termed single-loop learning by Chris Argyris of Harvard University,simply compare actual performance to a predetermined goal.

Question 7

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

Accepted Answer

The traditional approach to strategic control is based on a feedback loop from performance measurement to strategy formulation.This process typically involves lengthy time lags,often tied to the annual planning cycle of a firm.

Question 8

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

Accepted Answer

Central to agency theory is the relationship between two primary players,the principals who are the owners of the firm (stockholders)and the agents,who are the people paid by principals to perform a job on their behalf (management).

Question 9

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

Accepted Answer

Traditional control systems include sales quotas,operating budgets,production schedules,and similar quantitative control mechanisms.

Question 10

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

Accepted Answer

Strategic control is the process of monitoring and correcting the strategy and performance of a firm.Two central aspects of strategic control are informational control (the ability to respond effectively to environmental change)and behavioral control (the appropriate balance and alignment among the culture,rewards,and boundaries of a firm).

Question 11

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

Accepted Answer

Robert Monks and Nell Minow,two leading scholars in corporate governance,define it as the relationship among various participants in determining the direction and performance of corporations.The primary participants are the shareholders,the management (led by the CEO),and the board of directors.Agency theory is concerned with resolving two problems that can occur in agency relationships.The first is the agency problem that arises when the goals of the principals and agents conflict and when it is difficult or expensive for the principal to verify what the agent is actually doing.

Question 12

Double-loop learning in the contemporary approach to strategic control means that the organizational assumptions,premises,goals and strategies are occasionally monitored,tested,and reviewed.

Accepted Answer

In the contemporary approach to strategic control,there is double-loop learning in which the assumptions,premises,goals,and strategies of the firm are continuously monitored,tested,and reviewed.Time lags are dramatically shortened,changes in the competitive environment are detected earlier,and the ability of the organization to respond with speed and flexibility is enhanced.

Question 13

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

Accepted Answer

Agents (executives)may have a stronger preference toward diversification than shareholders,because it reduces their personal level of risk from potential loss of employment.Executives who have large holdings of stock in their firms were more likely to have diversification strategies that were more consistent with shareholder interests,like increasing long-term returns.

Question 14

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

Accepted Answer

As firms simultaneously downsize and face the need for increased coordination across organizational boundaries,a control system based primarily on rigid strategies,rules,and regulations is dysfunctional.The use of rewards and culture to align individual and organizational goals becomes increasingly important.

Question 15

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

Accepted Answer

Powerful organizational cultures just do not happen overnight,and they do not remain in place without a strong commitment,both in terms of words and deeds,by leaders throughout the organization.

Question 16

Contemporary strategic controls involve comparing actual performance to predetermined goals.

Accepted Answer

Traditional control systems,termed single-loop learning by Chris Argyris of Harvard University,simply compare actual performance to a predetermined goal.

Question 17

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.

Accepted Answer

According to the Business Roundtable,the most important quality for a good board of directors is to be active,critical participants in determining company strategies.That does not mean board members should micromanage or circumvent the CEO.Rather,they should provide strong oversight going beyond simply approving the plans of the CEO.

Question 18

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

Accepted Answer

Strategic control is the process of monitoring and correcting the strategy and performance of a firm.Two central aspects of strategic control are informational control (the ability to respond effectively to environmental change)and behavioral control (the appropriate balance and alignment among the culture,rewards,and boundaries of a firm).

Question 19

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

Accepted Answer

The traditional approach to strategic control is sequential,while in the contemporary approach,the relationships between strategy formulation,implementation,and control are highly interactive.

Question 20

In contemporary control systems,data and information generated are best interpreted and discussed in online forums,in order to have traceability of the discussion.

Accepted Answer

Contemporary control systems must have four characteristics to be effective.One of these is that the data and information generated are best interpreted and discussed in face-to-face meetings.

Quiz 9: Strategic Control and Corporate Governance

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.

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

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.

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

Informational control is primarily concerned with whether the organization is doing the right things.

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

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

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

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

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

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

Double-loop learning in the contemporary approach to strategic control means that the organizational assumptions,premises,goals and strategies are occasionally monitored,tested,and reviewed.

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

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

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

Contemporary strategic controls involve comparing actual performance to predetermined goals.

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.

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

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

In contemporary control systems,data and information generated are best interpreted and discussed in online forums,in order to have traceability of the discussion.