Deck 9: Strategic Control and Corporate Governance

Question 1

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.

Answer 1

False
Explanation: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 2

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

Answer 2

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

Question 3

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

Answer 3

False
Explanation: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.

Question 4

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

Question 5

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

Question 6

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

Question 7

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

Question 8

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.

Question 9

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 10

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

Question 11

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

Question 12

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

Question 13

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

Question 14

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.

Question 15

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 16

Contemporary strategic controls involve comparing actual performance to predetermined goals.

Question 17

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

Question 18

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

Question 19

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

Question 20

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

Question 21

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 22

Ritz-Carlton hotels employees meet each day for 15 minutes to share stories about how they went the extra yard to meet customer needs.What is the intended outcome of these activities?

A) Stories help build a customer-centric culture.
B) Storytime gives employees an opportunity to vent their frustrations.
C) Storytime demonstrates to employees the importance of articulating explicit goals and objectives.
D) Storytime gives management more control over employees.

Question 23

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 24

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 25

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 26

In the contemporary approach to strategic control,adapting to and anticipating both internal and external environmental change is an integral part.The relationships between ________,________,and ________ are highly interactive.

A) change; leadership; control
B) strategy formulation; leadership; control
C) strategy formulation; implementation; control
D) strategic information; organizational behavior; implementation

Question 27

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 28

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 29

Contemporary approaches to strategic control rely primarily on

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

Question 30

Which of the following is not a key control lever of behavioral control?

A) structure
B) culture
C) rewards
D) boundaries

Question 31

Brent Beshore,CEO of adventur.es,a private investment firm,walks around the office every day thanking people for their contributions.What purpose does this serve in terms of attaining behavioral control?

A) It reminds employees of adventur.es rules and regulations.
B) It helps reinforce and sustain the adventur.es culture.
C) It demonstrates to employees the importance of articulating explicit goals and objectives.
D) It makes the adventur.es reward system very explicit.

Question 32

Single-loop learning,according to Chris Argyris,is most appropriate when the environment is ________,goals and objective can be measured with a ________ of certainty,and there is ________ need for complex measures of performance.

A) stable; high level; little
B) unstable; low level; great
C) stable; low level; great
D) unstable; high level; little

Question 33

Zappos and Amazon focus on customer service.What purpose does this serve in terms of attaining behavioral control?

A) It uses culture to sustain their primary source of competitive advantage.
B) It uses rewards and incentives to sustain corporate culture.
C) It demonstrates to employees the importance of articulating explicit goals and objectives.
D) It gives management more control over employees.

Question 34

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 35

Informational control systems are concerned with which of the following questions?

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 36

Tesco was forced to restate its earnings for the first half of 2014 to 431 million USD because senior managers in the U.K.food business had booked income early and delayed the booking of costs in order to improve appearances of financial performance.This scandal results from ________ and ________.

A) poor environment; management systems
B) poor governance; control
C) external environmental factors; internal environmental factors
D) leadership; financial systems

Question 37

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 38

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 39

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 40

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 41

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 42

In 2016,John Stumpf,CEO of Wells Fargo,was forced to resign after both stakeholder and government scrutiny of the practices of the firm.Firm management had instituted very aggressive sales goals for employees,leading employees to create sham accounts using the names and money of the real customers of the bank.This is an example of ________ corporate governance.

A) sound
B) controlled
C) flawed
D) guided

Question 43

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 44

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 who 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 45

For the maximum benefit of each part,a corporation is a mechanism created to allow different parties to contribute all the following except

A) buildings.
B) capital.
C) expertise.
D) labor.

Question 46

Rules and regulations are examples of ________ and ________.

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

Question 47

Agency theory is concerned with resolving two problems that can occur in agency relationships.Which of the following is not one of those problems?

A) Goals conflict between principals and agents.
B) Verification of actual agency activity is expensive and difficult to obtain.
C) Principals and agents have differing attitudes toward risk.
D) Stockholders and management align with external stakeholders.

Question 48

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 49

The primary participants in corporate governance do not include the

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

Question 50

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 51

Chesapeake Energy set a goal to improve workplace safety.To reinforce this,one year it gave out over 8 million USD in safety bonuses to over 6000 employees for following safe work practices.This served to create

A) happy employees because they got more free time.
B) an effective reward and incentive program because it reinforced commitment to goals.
C) a new mission statement for the company.
D) an effective incentive program because employees worked harder.

Question 52

In addition to an annual base salary of 1.3 million USD and 10.4 million USD in stock compensation and bonuses,Heather Bresch,CEO of Mylan Pharmaceuticals,also received 6.4 million USD in other compensation in 2015.This included 19,200 USD for the use of a company-provided automobile and 310,000 USD in personal use of the company jet.Which of the following statements is true regarding this situation?

A) Shareholders favor diversification.
B) Executives favor diversification.
C) Top level managers always act in the shareholder interest.
D) Top level managers may pursue their own interests over that of the company.

Question 53

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 54

Which of the following statements about action plans is true?

A) Action plans should permit a degree of autonomy to managers and not be constrained by budgets.
B) Action plans must be specific so that managers 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) Action plans should hold employees accountable for the implementation.

Question 55

Andy Grove,former CEO and cofounder of Intel,encouraged openness by not having many of the trappings of success.This is an example of evolving from boundaries to rewards and culture by

A) hiring people who identify with the dominant values of the organization.
B) developing managerial role models.
C) maximizing training and indoctrination.
D) aligning rules with organizational goals and objectives.

Question 56

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 57

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 58

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 59

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 60

Effective short-term objectives should be ________ and ________.

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

Question 61

The board of directors is a group that has a ________ duty to ensure that the company is run consistently with ________ interests of the owners,or shareholders of a corporation and that acts as an ________ between the shareholders and management.

A) legal; short-term; intermediary
B) sworn; long-term; advisor
C) fiduciary; long-term; intermediary
D) formal; short-term; advisor

Question 62

Many institutional investors are aggressive in protecting and enhancing their investments.They are shifting from ________ to owners.They are assuming the role of ________ shareholders and rigorously analyzing issues of corporate governance.In the process,they are reinventing systems of corporate monitoring and accountability.

A) sellers; part-time
B) investors; full-time
C) investors; part-time
D) traders; permanent

Question 63

In addition to traditional institutional investors,a growing set of activist investors aggressively pressure firm managers for major changes.These activist investors include individual investors,such as ________,and activist investor funds,such as ________.

A) CalPERS; Bill Gates
B) ValuAct; Trian
C) Berkshire Hathaway; Warren Buffet.
D) Carl Icahn; Pershing Square.

Question 64

The failure of many auditing firms to raise red flags about accounting irregularities in companies such as Enron and WorldCom is generally attributed to all the following factors except the

A) desire to get future auditing contracts from the company.
B) desire to get consulting work from the company because most audit firms also do consulting work.
C) fact that auditors are appointed by the firm.
D) failure of U.S. audit firms to hire technically qualified professionals.

Question 65

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 66

The Lending Club removed CEO Renaud Laplanche in 2016.Hans Morris,the company executive chairman,lauded him,saying his entrepreneurial spirit was critical to the success of the firm.But he also signaled the board was removing Mr.Laplanche because he had failed to build a strong control system and culture,stating that as a public company that provides a financial service,Lending Club must meet the industry high standards of transparency and disclosure.This kind of dismissal signals what message to the public?

A) Mr. Laplanche was not a creative entrepreneur.
B) The board of directors is active and engaged.
C) The board of directors needed a scapegoat to cover up their ineffectiveness.
D) Mr. Laplanche was dishonest.

Question 67

Which of the following is not a reason analyst recommendations are often more optimistic than warranted by an objective analysis of the facts?

A) Many analysts fail to grasp the gravity of the problems facing a company.
B) Sell recommendations generate lower commissions than buy recommendations.
C) The firms for which analysts work may have lucrative investment banking relationships with the firm.
D) Analysts are often pressured by their superiors to overlook negative information.

Question 68

It is generally argued that the takeover constraint deters management from

A) engaging in opportunistic behavior.
B) considering acquiring other companies.
C) declaring dividends.
D) increasing the level of borrowing of a firm.

Question 69

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 70

If a board of directors is to be effective,it needs to allocate its scarce time to the ________ issues to which its members can add ________.

A) most clear; capital
B) most critical; value
C) newest; information
D) hardest; time

Question 71

Individual and institutional shareholders have the same rights that include all the following except

A) right to sell stock.
B) 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 72

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 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 73

External governance control mechanisms include all the following except

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

Question 74

While there are 20 percent more companies in the United States than the mid-1990s,the number of firms that are publicly traded on a major stock exchange has dropped 45 percent compared to 1995.Which of the following is one of the reasons why?

A) Stock exchange fees are too high.
B) Firm managers want more money for themselves.
C) It lessens the threat of hostile takeovers.
D) It permits managers the freedom to think shorter term.

Question 75

CEO duality refers to a situation in which the CEO

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

Question 76

Takeover constraint describes

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 77

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 exceeds the book value.
D) the firm will be unable to service its debt.

Question 78

The power of shareholders has intensified in recent years because of the

A) decreasing influence of large institutional investors.
B) increasing influence of large institutional investors.
C) decline in the number of interested institutional investors.
D) increasing influence of small individual investors.

Question 79

Director independence and non-interlocking directorships are desirable traits of top-ranked boards.What does this mean?

A) Directors can serve on the board of directors of other related companies.
B) Directors are free of all ties to the CEO and the company.
C) The CEO can serve as a director on the other director boards.
D) Top managers cannot be on the board of directors.

Question 80

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 typically improves under CEO duality.