a. safer strategies with greater diversification for the firm. Compared to managers, shareholders prefer c. pressure the board of directors to reprice their stock options. d.independence of the committees on the firm's Board of Directors. It is not uncommon for a firm to explicitly mention gender when they announce appointments of new board members but of course this only happens if the new board member is a woman. b. defense tactics are opposed by institutional investors. If these dynamics occur within corporate boards, boards may not take full advantage of their own cognitive variety. The CEO and the top executives successfully fended off the takeover and are concentrating on strategies to improve the performance of the firm. Research suggests that boards of directors perform - Course Hero c. opportunity Older boards are better boards, so beware of diversity targets a. shareholders in the large institutional firms listed on the New York Stock Exchange. c. defense tactics are typically ineffective in deterring the takeover. Usually, large block shareholders are considered to be those shareholders with at least ____ percent of the firm's stock. a. the CEO is also the chairperson of the board of directors. c. salary. b. internal controls have failed. b. banks and other lending institutions that have provided major financing to the firm. "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? This isnt a strong relationship, but its a good bit stronger than the relationship between board diversity and corporate performance. a. a. Consequently, the board has decided on an incentive plan that involves payout based on the firm's performance five years in the future. c. large block shareholders such as mutual funds and pension funds. That gives you an opening to say, Oh, okay, we need to look for somebody who understands manufacturing abroad. So, as long as we are going to go look for somebody, lets use it as an opportunity to build some diversity.. It is not because companies perform worse after they appoint female directors. It is also important to consider recruiting from outside of the CEO and CFO pool to increase board diversity. 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 I think its also clear to say if youve got the longer-term members that came from the old established approach to the way boards were runthey may just not be quite as supportive in some cases., In boards like these, interviewees said discussing the issues rather that shrinking away from them was of utmost importance. d.The firm is traded on the New York Stock Exchange and must change its corporate governance to comply with the NYSE's new rules. Access more than 40 courses trusted by Fortune 500 companies. a. some foreign firms have delisted on U.S. stock exchanges. b. Working in a group, discuss how the New Therapy Company can meet the deadline and still ensure a high quality of care. b. Prior research on the effects of institutional investors often addresses shareholders and bondholder wealth and is commonly based on the framework of the conventional US/UK model of corporate control (Elyasiani et al. a. the firm is overpriced in the market. a. ownership concentration. b. typically under-performing their industry. c. opportunity Find the area bounded by the graphs of the indicated equations over the given intervals (when stated). "Executive compensation is a governance mechanism that seeks to align managers' and owners' interests through all of the following EXCEPT: c. Electing an lead director. Evidence that board diversity benefits firms is mixed. b. large institutional investors control large blocks of stock. d.is less expensive than maintaining two top executives. b. increasing the concentration of ownership of large U.S. firms. The research literature includes over 100 studies of firms in 35 countries and five continents (Post and Byron, 2015). c. used to reduce corporate debt. d.likely to be terminated by the acquiring firm even in a friendly takeover. 48 d. Section 404 creates excessive costs for firms. "There is some evidence that those firms targeted for takeover by active corporate raiders are: b. the total revenue of the firm. "Product diversification provides two benefits to managers that do not accrue to shareholders: ____ and ____. If this was the case, board diversity could have no effect on operating performance but still have a negative effect on market returns. Boards of directors are now becoming more involved in d.reduce the size of the stock option package provided to Mr. Leagreet. a. Mr. Abercrombie will have a large market in Japan because the culture highly values consensus decision making. Results of numerous academic studies of the topic suggest that the presence of more female board members does not much improve or worsen a firms performance. b. insuring that the strike price value of the options can be lowered if the organiza-tional environment becomes more risky. b. more common than data values close to the mean. b. returned to them as dividends. c. increased shareholder participation in decision making. Increases in board diversity may signal to investors that the firm is motivated by social goals and cares less about maximizing shareholder value. 47; Gender-diverse boards also tend to adopt more progressive organizational management practices, such as work-life support programs, which increase employee satisfaction. The women named to corporate boards may not in fact differ very much in their values, experiences, and knowledge from the men who already serve on these boards. a. ATP has been the initiator of several hostile takeovers in the last two years. A majority of the directors are concerned that while Mr. Leagreet has been responsible for the firm's earning above-average returns, that he has been displaying a tendency toward personal extravagance at the firm's expense. The gap between CEO pay and the pay of other top executives at Chromatic was significantly larger than at Pixilair. Pletzer and his colleagues (2015) found that the average correlation between the percentage of women on the board and firm performance was small (.01) and not statistically significant. But firms expecting a financial performance boost simply by increasing female board representation may end up disappointed. d. riskier strategies with greater diversification for the firm. d.re-invested in additional corporate assets. c. The CEO/Chairperson of the board has been suspected of opportunistic behavior. "Which of the following reasons would NOT explain the difficulty of determining appropriate executive compensation? d. The compensation committee may not have comprehensive firm performance data. Corporate Directors' Implicit Theories of the Roles and Duties of Boards This plan will be very attractive in luring candidates for the CEO position. a. management structures related to total quality management systems. To establish causal effects, you need to conduct a randomized control trial. d. establishing and using formal processes to evaluate the board's performance. James Abercrombie has a thriving consulting firm specializing in training boards of directors in decision-making skills. But are investors walking the walk on board diversity? Rigorous, peer-reviewed studies suggest that companies do not perform better when they have women on the board. Evidence that board diversity benefits firms, however, has been mixed. d.reduce their employment risk, increase the company's value, Agency costs reflect all of the following EXCEPT ____ costs. When they argue, they do it in a pretty much respectful way. Innovation Managerial employment risk is the a. d. The firm is traded on the New York Stock Exchange and must change its corporate governance to comply with the NYSE's new rules. the board includes employees as voting members.c. The best evidence comes from a recent meta-analysis of 146 studies (Jeong and Harrison, 2017). d. of the focus on stewardship-management in German firms rather than the financial performance focus of U.S. firms. d. outside directors own significant equity in the organization. a. a uniform compensation plan for all corporate executives, U.S. and foreign alike. A recent survey of more than 770 directors from public and private companies across industries around the world and from nonprofit organizations suggests that some are responding more energetically than others. Still, given all the studies of board diversity and company performance that have been conducted to date, it seems very unlikely that new research will reveal a strong, clear relationship between board diversity and company performance. c. Borders' decision to increase the size of its board c. crossing the palm with silver. c. salary. a. 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? c. lower d.of the focus on stewardship-management in German firms rather than the financial perform-ance focus of U.S. firms. a. mandating that all outside directors be drawn from government or academia rather than industry. Seven. b. Japanese firms will have little interest in Mr. Abercrombie's specialty because these skills are already practiced at a high level. d.government agencies. Companies with a Digitally Savvy Board Perform Better a. defense tactics are usually beneficial for the executives of the target firm. As one long-time board director described it: The problem is how boards get formed and how you fill vacancies. a. c. focusing attention on ineffective boards of directors. d.consulting accounting advisors to make sure that the plan transfers wealth to the CEO without immediately appearing on the balance sheet of CyberScope. Which of the following is FALSE about corporate governance in China? German executives are not dedicated to the maximization of shareholder value largely because: The Vorstand is elected by the firm's employees. b. headed by outside directors. Even if the women named to corporate boards are different from the men on these boards, they may not speak up in board conversations and they may lack the influence to change the boards decisions. b. control b. the board of directors of IFS One interviewee revealed how she turned down a board position because she felt that the interviewing board members were not able to comment on her expertise only their desire to have gender diversity on the board. c. the board is homogenous incomposition. ____ is an important influence in Japanese corporate governance structures. Managers in the U.S. receive ____ compensation than managers in the rest of the world. c. private shareholders rarely have large ownership positions in the firm. Research has found little to no evidence supporting the idea that companies with female board directors perform better than companies run by all-male boards. b. risks borne by And to the extent investors care about shareholder value, they will penalize those companies they suspect are putting other goals first. One board member shared: We look at diversity in a lot of different ways experience, age, ethnicity, gender, etc.. A primary objective of corporate governance is to. a. the firm is overpriced in the market. 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. All of the following are consequences of the Sarbanes-Oxley Act EXCEPT c. an increased number of IPOs (initial public offerings) are expected. a. To achieve cognitive diversity, then, we should focus on dimensions of diversity other than gender. The gap between CEO pay and the pay of other top executives at Chromatic was significantly larger than at Pixilair. a. monitoring But when it comes to stock market performance, companies with women on the board actually see a decline in their market value for two years following the appointment. a. unsubstantial profits c. crossing the palm with silver. a. used to diversify the firm. What circumstances would most likely have initiated this proposal? In this opinion piece, Wharton management professor Katherine Klein summarizes academic research on the topic and discusses the possible reasons and implications for these surprising findings. A virtually exclusive reliance on financial controls may occur when outsider-dominated boards exist. 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). c. lobby legislators to pass laws that are aligned with the organization's interests. d. reduction in R&D expenditure. "Given the demands for greater accountability and improved performance, which of the following is NOT a voluntary change many boards of directors have initiated? a. some foreign firms have delisted on U.S. stock exchanges. primary focus is on maximizing shareholder value. However, rigorous, peer-reviewed academic research paints a different picture. d. encumbered. Research suggests that boards of directors perform better ifa. a. setting the option strike price substantially higher than the current stock price. Indeed, this is what Post and Byrons meta-analysis showed. d.Mr. The CEO and the top executives successfully fended off the takeover and are concentrating on strategies to improve the performance of the firm. c. the board is homogenous in composition. d. Mr. Abercrombie should find significant need for his services in companies in tran-sitional economies. d. a silver handshake. The chapter Opening Case indicates that many CEOs earn more than ____times the amount re-ceived by their firm's lowest-paid employee. In a recent study, we examine board composition and financial data on 1,644 public companies in the U.S. between 1998 and 2011, controlling for numerous firm-specific characteristics like size and corporate governance structure. Mr. Abercrombie is considering expanding his consulting practice overseas. Compute answers to three decimal places. Its worth noting that even if the meta-analyses revealed a stronger relationship between board gender diversity and firm performance, we couldnt conclude that board gender diversity causes firm performance. d. dependent. c. liable for any illegal actions by the top management team. c. related If so, board gender diversity may be positively related to accounting returns, but not market returns. Consensus 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. c. the board is homogenous in composition. ____ is an important influence in Japanese corporate governance structures. c. defense tactics vary in their effectiveness as a defense to takeovers. The CEO genuinely seeks their greater involvement. Earn badges to share on LinkedIn and your resume. c. the banks owing the largest shares of stock in the firm. In the U.S., the fundamental goal of business is to, In the U.S., a firm's key stakeholder(s) is(are) the. The average correlation between CEO gender and long-term financial performance is .007. Corporate governance mechanisms sometimes fail to monitor and control top man-agers' decisions. Oh, we have an opening, who do we know? He shared that many times board members only knew people like them. She shared, I can understand what it means to be a token person. c. Employees, union members, and shareholders appoint members to the Aufsichsrat (the supervisory tier of the board). c. agency Given global interest in the effects of board gender diversity and the availability of abundant data on board gender composition and firm performance, many researchers have investigated the topic. a. Sometimes, its laziness. c. liable for any illegal actions by the top management team. a. earnings potential for: The board wishes the CEO to take more short-term risks in order to achieve poten-tially higher long-term returns. We found no difference in the perceived competence of Marilyn and Jack, which was not surprising given their identical bios. b. a weak board of directors. Some boards are more hierarchical in their communication orientation while others are more egalitarian. 1 The survey revealed dramatic differences in how directors . b. riskier strategies with more focused diversifica-tion for the firm. As a means of increasing profits, IFS has used substandard ingredients in these meals and has consistently lied about this practice during quality investiga-tions by the Marines. c. uncontrollable events may affect the long-term performance of the firm. a. firms with unethical top executives While its possible that the addition of women to the board causes an increase in CSR, existing research cannot prove it. But academic research says otherwise. shipping point, and $22,000 of goods sold to Alvarez Company for$30,000, f.o.b. "International Food Services (IFS) has a contract with the Marines to supply meals for it troops in Iraq and other foreign assignments. Many popular press articles and fund managers make this claim, citing studies by consulting firms, information providers and financial institutions, such as McKinsey, Thomson Reuters and Credit Suisse. a. generate free cash flows, reduce the risk of total firm failure The governance mechanism most closely connected with deterring unethical behaviors by hold-ing top management accountable for the corporate culture is a. a uniform compensation plan for all corporate executives, U.S. and foreign alike. The argument is that women differ from men in their knowledge, experiences, and values and thus bring novel information and perspectives to the board. 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. Another recent study by Jonson et al. a. boards of directors. Members of these boards believe that both their expertise and willingness to learn is recognized and incorporated into the boards work. a. bonuses. Klein is also the vice dean of the Wharton Social Impact Initiative. c. the corporation has greatly exceeded perform-ance expectations. d.75. a. reasonably compensating a CEO. d. reduction in R&D expenditure. c. CalPERS supports generous stock option plans for executives because it motivates under-performing executives. d. always outperforming their industry. "A virtually exclusive reliance on financial controls may occur when outsider-dominated boards exist. This may lead to all EXCEPT: b. the board includes employees as voting members.c. Both the Pelzer purchase and the Alvarez sale were in transit at year-end. d.a silver handshake. c. related d. frozen assets, Product diversification provides two benefits to managers that do not accrue to shareholders: ____ and ____. b. company unions, which are a type of governance system. a. moving toward having directors from different backgrounds Depending on which meta-analysis you read, board gender diversity either has a very weak relationship with board performance or no relationship at all. We find that companies are not any less profitable after appointing female directors to the board than they were prior to the appointment. 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). 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. "The CEO of Skyco, a publicly-traded company that has been earning below-average returns, has been publicly criticized by shareholders for persuading the board of directors to give her interest-free loans, for having the company purchase and furnish a lavish apartment in Paris for her personal use on her twice-yearly trips there, and for excessive stock options. The separation between firm ownership and management creates a(n) ____ relationship. 2023 Knowledge at Wharton. One shared: I have some influence, and Im trying to exert my influence.. a. increased diversification of Sierra Infusion. a. increased diversification of Sierra Infusion. The board of directors of CyberScope, Inc., is designing a stock option plan for its CEO that will motivate the CEO to increase the market value of 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. a. increases shareholder value significantly. Activist shareholders are not necessarily more convinced about diversity being a source of value creation. d. is eliminated. b. We dont know exactly why this theoretical logic doesnt hold among corporate boards. They also raised. d.the top management team's interests and the owners' interests are aligned. Researchers interviewed 19 board directors (15 women and four men) to learn whether and how corporate boards were benefiting from diversity. a. Mr. Abercrombie will have a large market in Japan because the culture highly val-ues consensus decision making. d. a system of cross-shareholding among firms. a. increases. c. poorly-performing firms d. ownership of a company to a second party. On January 1, California law said that all locally headquartered publicly traded companies must have at least one female director by 2020. The fact that a hostile takeover has occurred is proof that the firm was under-performing. d.banks. The board of directors of CamCell, Inc., wishes to design a CEO compensation plan that will align the personal interests of the CEO with the interests of the shareholders in long-term firm performance. In McKinsey's previous studyconducted with 2014 numbersthat increase had been 35%. b. financial responsibility to employees. "Usually, large block shareholders are considered to be those shareholders with at least ____ percent of the firm's stock. The relationship was statistically significant suggesting it wasnt a chance effect but it was tiny. c. incentives for b. positively related to b. typically under-performing their industry. c. compensating directors with stock options rather than with fixed remuneration The decisions made by top-level managers are typically complex and nonroutine. b. a weak board of directors. b. But, thats impossible here; we cant randomly assign board members to companies. Collegial boards are more likely to accept and integrate differences of opinion. d.Traditionally privately-owned Japanese firms are going public. One interviewee talked about the importance of respectful disagreement, acknowledging mishaps in communication, and in valuing different perspectives: I havent had anybody shut me down or shut other people down. "Amos Ball, Inc., is a printing company in Iowa that has been family owned and managed for three generations.

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