b. likely to gain financially if their employing firm is taken over by another. a. safer strategies with greater diversification for the firm. a. decision making responsibility to a second party. Consequently, the board is: "The top management team at Sierra Infusion is concerned about the declining performance of firms in their industry. a. greenmail. Researchers studied 1,644 public companies. b. d. a system of cross-shareholding among firms. As we said, directors generally don't really want to monitor, and they are not sure if they can do so effectively. Ambrose Bierce, the CEO of DictionAry, has been paid a lump sum amounting to three years' salary because DictionAry has been bought in a hostile takeover by its main competitor. d.risk managers will not find a new top management position if they should be dismissed. Hostile takeover attempts are so common that they do not reflect negatively on the firm's performance. Nor do they perform worse. At a meeting over dinner, the top management team agrees to go to the board of directors with a proposal for: c. The CEO/Chairperson of the board has been suspected of opportunistic behavior. When executives have ownership positions or stock options with their employing firm, they are a. mandating that all outside directors be drawn from government or academia rather than industry. c. an increased number of IPOs (initial public offerings) are expected. d. This type of plan is likely to cause the CEO to underinvest in R&D in order to boost CamCell's long-term profitability. Oh, we have an opening, who do we know? He shared that many times board members only knew people like them. "The board of directors of Acme Brands is discussing the design of a very generous stock option plan for its top executives. b. more common than data values close to the mean. Managers in the U.S. receive ____ compensation than managers in the rest of the world. Mr. Abercrombie is considering expanding his consulting practice overseas. The research found that diversity doesnt guarantee a better performing board and firm; rather, the culture of the board is what can affect how well diverse boards perform their duties and oversee their firms. a. firms with unethical top executives Diversity doesnt matter as much on boards where members perspectives are not regularly elicited or valued. b. decreases. Consequently, the board has decided on an incentive plan that involves payout based on the firm's performance five years in the future. "The use of excessively-generous stock options for executive compensation has been slowed in the past couple years for all of the following reasons EXCEPT: "Archibald Smith has moved from an upper-middle management job at Chromatic Array, Inc., to a similar position with Pixilair Corporation. c. the government. Still, the relationship between gender diversity and accounting returns was tiny. Many of our interviewees suggested that their boards had made progress on gender diversity but not on other forms of social diversity such as race, nationality, and age. d. potential tax burden for. Consequently, the board has decided on an incentive plan that involves payout based on the firm's performance five years in the future. c. private shareholders rarely have large ownership positions in the firm. Mary-Hunter (Mae) McDonnell is an assistant professor of management at the Wharton School of the University of Pennsylvania where she conducts research on the topics of non-market strategy and corporate governance. Even if women who are named to corporate boards are different from the men on these boards and even if the women do speak up and influence board decision-making, their influence may not be consistently positive (or consistently negative, for that matter). d.banks. In research over the last five years, we found that only 24 percent of the boards of companies listed in the US and having over $1 billion in revenues were digitally savvy, and that these companies outperformed the others in our research on key metrics. d. Large institutional investors such as pension funds, and insurance companies are relatively insignificant owners of corporate stock. They prefer to start from a position of trust. In a study of 1,069 leading firms across 35 countries and 24 industries, we found that gender diversity relates to more productive companies, as measured by market value and revenue, only in . When they argue, they do it in a pretty much respectful way. Generally, a board member who is a source of information about a firm's day-to-day activities is classified as a(an) ____ director. d. a system of cross-shareholding among firms. d. outside directors own significant equity in the organization. c. large; small According to a 2016 Bloomberg analysis, five of the biggest U.S. activist funds had succeeded in getting over 100 board members appointed in the previous five years. the CEO is also the chairperson of the board of directors.b. All of the following are consequences of the Sarbanes-Oxley Act EXCEPT So, existing findings could reflect a causal relationship, a reverse-causal relationship, or the effects of other variables. Write the statements in symbolic form . Collegial boards are more likely to accept and integrate differences of opinion. "Shareholder value is: Mr. Abercrombie has had striking success in reducing conflict and hostil-ity among directors and allowing boards to develop more cohesiveness. "The major determinant of CEO pay is(are): a. a golden parachute. d.penalties for inadequate firm performance. c. the board is homogenous in composition. d. has weakened the effect of other governance mechanisms. c. having the stock option plan designed by insiders on the board of directors who are familiar with day-to-day operations of the firm. But, thats impossible here; we cant randomly assign board members to companies. a. the strategic decision making process. c. remains constant. They increase the boards cognitive variety. The greater a boards cognitive variety, the theory goes, the more options it is likely to consider and the more deeply it is likely to debate those options. b. increasing the concentration of ownership of large U.S. firms. The average correlation is .15. This plan will be very attractive in luring candidates for the CEO position. c. focusing attention on ineffective boards of directors. Mr. Abercrombie has had striking success in reducing conflict and hostility among directors and allowing boards to develop more cohesiveness. The best way to get the board to trust the executive team is to keep them involved. a. available to comment to external analysts. c. salary. The compensation of top executives of Chinese companies is closely related to pri-or and current financial performance of the firm. d. The firing by President Obama of the CEO of General Motors because the board had failed to act in previous years. c. pressure the board of directors to reprice their stock options. d.the top management team's interests and the owners' interests are aligned. d. frozen assets, Product diversification provides two benefits to managers that do not accrue to shareholders: ____ and ____. Which of the following statements is about corporate governance in Germany is FALSE? "Product diversification provides two benefits to managers that do not accrue to shareholders: ____ and ____. The decisions made by top-level managers are typically complex and nonroutine. c. is so aggressive that boards of directors have become overly cautious. In contrast to managers' desires, shareholders usually prefer that free cash flows be c. remains constant. One board member shared: We look at diversity in a lot of different ways experience, age, ethnicity, gender, etc.. It is also important to consider recruiting from outside of the CEO and CFO pool to increase board diversity. Whats going on here? b. appoint another individual as chairperson of the board of directors. c. strategy implementation actions to functional managers. One interviewee discussed how this was a particularly challenging dynamic on a board that was resistant to input either from shareholders or board members: There was not a lot of open communication. "The ownership of major blocks of stock by institutional investors have resulted in all of the following EXCEPT: You know people listen. d.the difference in risk propensity between owners and managers. Ownership concentration is determined by both Research suggests that boards of directors perform better ifa. a. risk that managers will behave opportunistically. a. We dont know exactly why this theoretical logic doesnt hold among corporate boards. a. monitoring c. safer strategies with more focused diversification for the firm. There is overwhelming evidence to support the value of having more women in senior leadership positions. The number of women among them? Hed speak like, without taking any breaths for two hours on end., But even in hierarchical cultures, the CEO, Chairman, or lead director can help to create a more open communication environment. (Statistical significance depends in part on sample size. d. the proportion of insiders on the board of directors. a. less common than data values close to the mean. The research found that diversity doesnt guarantee a better performing board and firm; rather, the culture of the board is what can affect how well diverse boards perform their duties and oversee their firms. We interviewed 19 board directors (15 women and four men) to learn whether and how corporate boards were benefiting from diversity. Despite popular press accounts that suggest that teams high in gender diversity outperform those composed only of men or only of women, rigorous research does not support this conclusion. If Culver had just signed a blank piece of paper after being told that the bank would make a receipt out of it by printing the appropriate words around his signature, would he be able to avail himself of the defense of fraud? Which of the following is NOT an internal governance mechanism? a. Mr. Abercrombie will have a large market in Japan because the culture highly values consensus decision making. c. reduce the risk of total firm failure, reduce their total portfolio risk Based on these findings, they worked with the Chairman of the Board at Deloitte to develop recommendations for how board chairs and directors can create more egalitarian board cultures and improve their governance. Our evidence is consistent with Sah and Stiglitz. Ambrose received: b. risks borne by c. German firms will not be interested in Mr. Abercrombie's services because the German system of decision-making is based on authority and few conflicts emerge. a. unsubstantial profits c. related There have been many rigorous, peer-reviewed studies of board gender diversity. The chapter Opening Case indicates that many CEOs earn more than ____times the amount re-ceived by their firm's lowest-paid employee. b. the board of directors of IFS. Board gender diversity thus explains about 1% of the variance in companies engagement in CSR. Women should be appointed to boards for reasons of gender equality, but not because gender diversity on boards leads to improvements in company performance. Diversity wins is the third report in a McKinsey series investigating the business case for diversity, following Why diversity matters (2015) and Delivering through diversity (2018). The fact that two quite distinctive meta-analyses reached nearly identical conclusions carries a lot of weight. d. Mr. Abercrombie should find significant need for his services in companies in tran-sitional economies. c. Research shows that once a hostile takeover has been defeated, the firm is safe from other hostile takeover attempts for many years. b. a standstill agreement. r:r:r: The apartment is hot. By studying outcomes that are more proximal or immediately related to board decision-making than is company performance, researchers may shed more light on when, whether, and how diverse boards differ from all-male boards. d.consulting accounting advisors to make sure that the plan transfers wealth to the CEO without immediately appearing on the balance sheet of CyberScope. a. the firm's free cash flow. d.independence of the committees on the firm's Board of Directors. b. the board includes employees as votingmembers. Who is ultimately responsible for the corporate climate that resulted in this wrongdoing? c. the board is homogenous in composition. Women should be appointed to boards for reasons of gender equality, but not because gender diversity on boards leads to improvements in company performance. This will have no effect on the stock option plan design discussion, because CalPERS' main concern is stock dividends. "Executive compensation is a governance mechanism that seeks to align managers' and owners' interests through all of the following EXCEPT: A virtually exclusive reliance on financial controls may occur when outsider-dominated boards exist. The Sarbanes-Oxley Act requires all of the following EXCEPT: a. the director of food service for IFS HBR Learnings online leadership training helps you hone your skills with courses like Diversity, Inclusion, and Belonging. d. reduction in R&D expenditure. b. the board includes employees as voting members. Idea diversity is also important., To offset these concerns, some boards are ensuring that skills and expertise, along with demographics, are front and center in their recruiting processes. a. Many boards continue to recruit directors from the pool of current or former CEO/CFOs, and changing demographics within these pools do present opportunities to recruit more diverse members. 1. Diversity advocates often argue that gender-diverse boards make better decisions than all-male boards. c. determined by the size of the firm. c. poorly-performing firms Byron and Post (2016) meta-analyzed the results of 87 studies and found that board gender diversity is weakly but significantly positively correlated with CSR. a. shareholders in the large institutional firms listed on the New York Stock Exchange. a. the roles of CEO and chairperson of the board of directors are usually combined. Writing recently on Huffington Post, for example, one consultant observed the following: Companies with gender-diverse management teams have been proven to consistently perform better and be more profitable than those without them. International Food Services (IFS) has a contract with the Marines to supply meals for its troops in Iraq and other foreign assignments. d.the board of directors. c. public pension funds Boards that want to maximize their effectiveness need to do more to ensure that different perspectives are regularly elicited and integrated into the boards work. The argument is that women differ from men in their knowledge, experiences, and values and thus bring novel information and perspectives to the board. b. a number of publicly-traded companies have decided to privatize. The average correlation between CEO gender and long-term financial performance is .007. a. this delays their compensation for present actions to future years. a. shareholders in the large institutional firms listed on the New York Stock Exchange. d.curvilinearly related to, "The longer the focus of managerial incentive compensation, the greater the ____ top-level managers. People coming from that diverse role I think really does help a board to get better results.. Simon Leagreet, the Chairperson and CEO of L-EVA Industries, Inc., has long been the major power at L-EVA. a. boards of directors. The Vorstand of a German corporation makes decisions about organization direction and management. Also discuss the following: How will the company justify the travel costs? a. usually on the verge of bankruptcy. d.greater concentration on Sierra's core industry. d. the top management team's interests and the owners' interests are aligned. One interviewee said, The lead director has a role here to make sure that they invite people in and if somebody is really quiet they should go to that personand make sure they feel comfortable saying anything that they want.. "There is some evidence that performance bonuses for executives based on annual results are ____ investments in R&D where the firm was highly diversified. Earn badges to share on LinkedIn and your resume. Which of the following is TRUE of trends in Japan's corporate governance structure? b. control d. the number of outside directors and total percentage of shares they own. b. the addition of outside directors to the board. c. equally as common as data values close to the mean. d.Mr. c. Institutional investors disapprove of long-term executive incentive plans and they may sell their blocks of stock in CamCell. a. b. Yet, the answers have not been clear or consistent. b. selecting new CEOs. b. firms earning above-average returns They also raised. Members of these boards believe that both their expertise and willingness to learn is recognized and incorporated into the boards work. d.a poison pill. On January 1, California law said that all locally headquartered publicly traded companies must have at least one female director by 2020. 25 "Generally, a board member who is a source of information about a firm's day-to-day activities is classified as a(an) ____ director. As ownership of the corporation is diffused, shareholders' ability to monitor managerial deci-sions While the relationship between board gender diversity and company performance is very weak, there appears to be a somewhat stronger relationship between board gender diversity and corporate social responsibility (CSR). b. CamCell may have to over-compensate its CEO in order to offset the personal risk a CEO would undertake under this plan. "The governance mechanism most closely connected with deterring unethical behaviors by holding top management accountable for the corporate culture is: a. the CEO is also the chairperson of the board of directors. a. defense tactics are usually beneficial for the executives of the target firm. d.prevented by the Sarbanes-Oxley Act from owning more than 50% of the stock of any one firm. We find that companies that appoint women to the board see a decline in their market value for two years following the appointment (after which we no longer see any effect). "Recent research evidence shows that ownership concentration is associated with: 25 CamCell is presently searching for a new CEO. James Abercrombie has a thriving consulting firm specializing in training boards of directors in decision-making skills. At a meeting over dinner, the top management team agrees to go to the board of directors with a proposal for For example, our interviewees on the boards of hi-tech start-ups and cyber security firms revealed that women, minorities, and younger board members often hold these coveted roles on boards in their firms and industries. 2010).These studies generally focus on institutional investors as shareholders (Roberts and Yuan 2006), and when they do address the role of . d.Traditionally privately-owned Japanese firms are going public. Couple times it hasnt been but someone will just say, Hey thats not very respectful, you know the way you just said that., Several interviewees told us that boards that value open communication are more likely to engage in conversations about diversity even those that believe they still have a long way to go. Managers may decide to invest ____ in products that are not associated with the firm's current lines of business to increase the firm's level of diversification and decrease their employment risk. The board has been successful in reducing the percentage of CEO pay that is composed of stock options. And even when individuals who are minorities, tokens, or outliers speak up, the majority group members may discount their views. Pletzer, Nikolova, Kedzior, and Voelpel (2015) took a different approach, conducting a meta-analysis of a smaller set of studies 20 studies that were published in peer-reviewed academic journals and that tested the relationship between board gender diversity and firm financial performance (return on assets, return on equity, and Tobins Q). During the debate, one of the directors raises the point that CalPERS owns a significant portion of Acme Brand stock. They also raised concerns with what they referred to as checking the box initiatives and tokenism for the sake of board diversity. a. generate free cash flows, reduce the risk of total firm failure b. long-term incentives such as stock options. c. require Mr. Leagreet to personally certify the firm's financial reports. The market for corporate control may not be as efficient as previously thought as recent findings suggest that those firms targeted for takeover by active corporate raiders are a. banks c. liable for any illegal actions by the top management team. ____ is an important influence in Japanese corporate governance structures. d. Section 404 creates excessive costs for firms. b. requiring that outside directors be former executives of the firm. a. moving toward having directors from different backgrounds "In the U.S. the fundamental goal of business is to: "In the U.S., a firm's key stakeholder(s) is(are) the: "Which of the following is NOT an internal governance mechanism? All rights reserved. d. The CEO and top executives should not consider their jobs secure. c. salary. The board wishes the CEO to take more short-term risks in order to achieve poten-tially higher long-term returns. We merged our data on board composition and firm financials with social performance ratings from KLD STATS, an index for socially responsible investing. This seems unlikely. The CEO of Alta Corp. is dismayed by a lack of effort and insights his directors provide during board meetings. d.This type of plan is likely to cause the CEO to underinvest in R&D in order to boost CamCell's long-term profitability. a. determine and control the strategic direction of an organization, so that the top executives are focused on maximizing corporate profits. b. free cash flows b. a. Mr. Abercrombie will have a large market in Japan because the culture highly val-ues consensus decision making. Again, we cant know for certain why board diversity doesnt predict company performance, but it seems likely that some of the following factors explain the very weak and mostly non-significant effects: While research indicates that in general male and female adults differ somewhat in their values, experiences, and knowledge (and the differences are not huge), its not clear that male and female board members differ all that much in their values, experiences, and knowledge. b. the number of stockholders and total percentage of shares they own. d. made up of CPAs with auditing experience. What circumstances would most likely have initiated this proposal? c. lower Diversity, Inclusion, and Belonging Course. d.riskier strategies with greater diversification for the firm. Research suggests that firms with ____ perform better, especially when collaboration among top management team members is important. Increases in board diversity may signal to investors that the firm is motivated by social goals and cares less about maximizing shareholder value. c. the number of outside directors and the parties they represent. a. James Abercrombie has a thriving consulting firm specializing in training boards of directors in decision-making skills. But academic research says otherwise.
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