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The requirements of a board of directors vary significantly by country and by state; however, there is a developing consensus as to what the major responsibilities should be. Which of the following is NOT one of the responsibilities?

becoming directly involved in managerial decisions

Society increasingly expects corporate boards to balance the economical goal of profitability with the social needs of society (T/F)

true

Catalyst-level board of directors typically

take leading roles in establishing and modifying the company missions, objectives and strategy

Agency theory suggests that the majority of a board needs to be from outside the firm (T/F)

true

While 97% of large US corporations now use nominating committees to identify potential directors, this practice is not as common in Europe (T/F)

true

Those directors who fail to act with due care and allow the corporation to be harmed may be held personally liable (T/F)

true

The concept of the lead director originated in

the united kingdom

Which of the following is NOT one of the four major issues researched by the S & P Corporate governance Scoring System?

research and development initiatives

Under what circumstances does an INDIRECT interlocking directorate exist?

when two corporations have directors who serve on the board of a third firm

The New York Stock Exchange (NYSE) requires corporations to have

an audit committee composed entirely of independent, outside members

A highly involved board does all of the following EXCEPT

manage the every day operations of the organization

The average large, publicly held US corporation has around

10 directors

Transformational leaders transform their organizations from market leaders in one industry to market leadership in another (T/F)

false

The U.S. Clayton Act and Banking Act of 1933

prohibit interlocking directorates by U.S. companies competing in the same industry

From the perspective of the public, the primary job of the board of directors is

to closely monitor the actions of management

A direct interlocking directorate occurs when two corporations have directors who also serve on the board of a third firm, such as a bank (T/F)

false

The theory which states that problems arise in corporations because top management no longer is willing to bear the brunt of their decisions unless they own a substantial amount of stock in the corporation is called

agency theory

The average board member of a U.S. Fortune 500 firm serves on ___ boards

3

Hiring and firing the CEO and top management is one of the five responsibilities of the board of directors (T/F)

true

Jeff Bezos, CEO of Amazon.com , uses the S team to engage in continuous strategic planning (T/F)

true

An agency problem can occur when

all of the above

Which of the following is NOT descriptive of interlocking directorates?

interlocking directorates are more common in small, family owned companies

Fewer large corporations may keep the firm's recently retired CEO on the board after retirement since there is a greater likelihood of conflict of interest and less objectivity (T/F)

true

Which of the following is NOT a key characteristic of transformational executive leaders?

the CEO energized the board to formulate strategy

According to the text, most publicly owned large corporations today tend to have boards with what degree of involvement in the strategic management process?

nominal to active

The confidence levels of executive leaders may blind them to information that is contrary to a decided course of action; this may help to understand why overconfident CEO's are more likely to conduct mergers and acquisitions (T/F)

true

The Sarbanes-Oxley Act was designed to protect

shareholders from the excesses and failed oversight of firms

A description of what the company is capable of becoming is referred to as

strategic vision

A benefit of the increased disclosure requirements of the Sarbanes-Oxley Act has been more reliable corporate financial statements (T/F)

true

The top criterion for selecting a good director in U.S. corporations is their willingness to challenge management when necessary (T/F)

true

According to __ theory, ___ directors tend to identify with the corporation

stewardship; inside

All of the following are true of overconfident CEO's EXCEPT

overconfident CEOs were less likely to make an acquisition when they could avoid selling new stock to finance them

The vast majority of inside directors are from all of the following EXCEPT

lower-level operating employee

What percentage of the Fortune 1000 U.S. corporations had boards of directors with at least one woman member in 2006?

85%

Research reveals that the likelihood of a firm engaging in illegal behavior or being sued declines

with the addition of outsiders on the board

More than ___ of outside directors surveyed that they had been names as part of a lawsuit against the corporation

50%

When a board of directors is involved to a limited degree in the performance or review of selected key decisions, indicators, or programs of management, there is a ___ degree of involvement

nominal participation

The function of a nominating committee is to

find outside board members for electing by the stockholder

Generally, the smaller the corporation, the less active is its board of directors

true

The ___ boards typically never initiate or determine strategy unless a crisis occurs

rubber stamp

Executive leadership is the directing of activities toward the accomplishment of corporate objectives (T/F)

true

The SEC requires the nominating and compensation committees are staffed entirely by outside directors (T/F)

true

Which of the following statements is true regarding the board of directors?

all of the above

The vast majority of inside directors are from all the following EXCEPT

lower-level operating employee

In implementing the Sarbanes-Oxley Act, the SEC required in 2004 that a company disclose

if it has adopted a code of ethics that applied to the CEO and the CFO

The percentage of large U.S. corporations using nominating committees to identify potential new directors is approximately

97%

Codetermination has been used in Germany since the 1950s, but has not been used in the US (T/F)

false

The board of directors has an obligation to approve all decisions that might affect the long-run of the corporation (T/F)

true

The role of the board of directors in the strategic management of the corporation is likely to

be more active in the future

Board members who are not employed by the corporation, but handle the legal or insurance needs of the firm and are thus not a true "outsider" are what kind of directors?

affiliated directors

One study conducted by Korn/Ferry International of directors of large US corporations found that more than ___ of directors indicated that their CEOs were not utilizing them to their full potential in strategy setting process

30%

According to a survey of 156 large corporations in what percentage of the firms were strategies first proposed in business units and then sent to headquarters for approval?

65%

A survey of U.S. corporations found that ____ of boards of directors had at least one African American member in 2006

46%

Surveys of large U.S. and Canadian corporations found outsiders make up what percentage of total board members?

80%

Which of the following is NOT a trend in corporate governance expected to continue

boards are getting larger

A careless director or directors can be held personably liable for harm done to the corporation if they failed to act with

due care

____ theory argues that senior executive over time tend to view the corporation as an extension of themselves

stewardship

The percentage of CEOs of British corporations who also serve as chairman of the board is

5%

Usually, the strategic planning staff is charged with supporting only top management in the strategic planning process (T/F)

false

Interlocking directorates are a useful method of gaining both inside information about an uncertain environment and objective expertise about potential strategies and tactics. They are however increasingly frowned upon because of the possibility of collusion (T/F)

true

Which of the following is NOT a task of the board of directors in strategic management?

to implement

Board members who are most likely to face conflict of interest are known as

affiliated directors

Which country pioneered the use of worker participation on corporate boards?

germany

Approximately 70% of the top executives of the US publicly held corporations hold the dual designation of chairman and CEO (T/F)

true

A staggered board

has only one portion of the board stand for election each year

Stewardship theory proposes insiders tend to identify with the corporation and is success (T/F)

true

Under what circumstances does a DIRECT interlocking directorate exist?

occurs when one or more individuals on one board also serve on a board of a second firm

According to the text, which of the following is NOT a typical standing committee of boards of directors?

public relations committee

The term corporate governance refers to the relationship among the board of directors, top management, and the shareholders in determining the direction and performance of the corporation (T/F)

true

A 2008 McKinsey and Company survey found that less than 10 percent of a board's time is spent on strategy (T/F)

false

The role of the board of directors in the strategic management of the corporation is likely to be less active in the future (T/F)

false

Corporation is

a mechanism established to allow different parties to contribute capital, expertise and labor for their mutual benefit

Corporation is governed by

the board of directors that oversees top management with the concurrence of the shareholders

Corporate Governance

the relationship among the board of directors, top management and shareholders in determining the direction and performance of the corporation

Responsibilities of the Board of Directors

sets corporate strategy, overall direction, mission or vision, hires and fires the CEO and top management, controls, monitors, or supervises top management, reviews and approves the use of resources, cares for shareholder's interests, and assures that the corporation is managed in accordance with state laws, security regulations and conflict of interest situations

Monitor

developments inside and outside the corporation

Evaluate and Influence

management proposals, decisions, and actions

Initiate and Determine

the corporations mission and strategies

Inside Directors

are officers or executives employed by the boards corporation

Outside directors

are executives of other firms by are not employees of the boards corporation

Phantom (LOW)

never knows what to do, if anything; no degree of involvement

Minimal Review (Medium)

formally reviews selected issues that officers bring to its attention

Catalyst (High)

takes the leading role in establishing and modifying the mission, objectives, strategies, and policies. it has a very active strategy committee

Retired Executive Directors

used to work for the corporation, partly responsible for past decisions affecting current strategy

Family Directors

decedents of the found and own significant black of stock

Avoiding Governance Improvements

multiple classes of stock, public to private ownership, and controlled companies

Strategic Vision

description of what the company is capable of becoming

According to an international selection of board of directors, which of the following tasks is the board of directors primary responsibility?

setting corporate strategy, overall direction, mission, or vision

The inclusion of a corporation's workers on its board is called

codetermination

According to the Sarbanes-Oxley Act, what must be true of directors serving on an audit committee?

they must all be independent of the firm and receive no fees other than for services of the director

The Standards & Poor Corporate Governance Scoring system researches all of the following major issues EXCEPT

financial transparency and information disclosure

Which of the following is an accurate statement concerning trends in the power structure of boards?

outside directors are increasing their power in publicly held corporations and CEOs are loosening their grip on boards

If a top management team has a diversity of functional backgrounds, experiences, and length of time with the company, what impact does this tend to have on corporate market share and profitability?

diversity in top management tends to be significantly related to improvements in corporate market share and profitability

What is the most effective strategy for a CEO to take regarding performance standards if she wants to command respect and influences strategy formulation and implementation?

she will communicate challenging performance standards but will also show confidence in her follower's ability to meet these standards

The percentage of directors of small, publicly held corporations which are outsiders is approximately

20%

Codetermination

is the inclusions of a corporations employees on its board

The majority of outside directors are active or retired CEOs and COOs of other corporations (T/F)

true

The percentage of CEOs of U.S. fortune 500 corporations to also serve as chairman of the board is

70%

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