MGT 491 ch 12 quiz

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Which of the following descriptions best exemplifies adverse selection?

a. A research scientist uses the organization's resources to conduct personal research.
b. A manager cannot ascertain the contributions of individual team members in team production.
c. An employee spends time on social networking sites during work hours.
d. An interview candidate lists his qualifications in chronological order.
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Terms in this set (10)
Which of the following descriptions best exemplifies adverse selection?

a. A research scientist uses the organization's resources to conduct personal research.
b. A manager cannot ascertain the contributions of individual team members in team production.
c. An employee spends time on social networking sites during work hours.
d. An interview candidate lists his qualifications in chronological order.
b
According to agency theory,

a. principals should empower agents to run the corporation as they deem fit.
b. agents are viewed as people who are the legal owners of the company.
c. corporations are viewed as a set of legal contracts between different parties.
d. trading stocks using inside information is ethical but not legal.
c
Michael Porter is in favor of the shared value creation framework because he believes that it

a. is the duty of a company to focus on benefitting shareholders who have the most legitimate claim on profits.
b. will not only allow companies to gain and sustain a competitive advantage, but it will also reshape capitalism and its relationship to society.
c. will help to pit economic and societal needs in a trade-off.
d. is the responsibility of the company to focus on creating profits and nothing else.
b
One of the major differences between inside directors and outside directors of a company is that outside directors are more likely to

a. be full-time professionals at the company.
b. align interests with the management and CEO of the company.
c. provide the board with information regarding the company's performance.
d. watch out for the interests of the shareholders of the company.
d
Which of the following is true of public stock companies?

a. Public stock companies are not required to disclose financial statements.
b. There exists an implicit contract based on trust between society and the public stock company. Correct
c. The public stock company is not an important institutional arrangement in developing economies.
d. Society expects public stock companies to add value to society by making profits for shareholders.
b
Which of the following is a recommended guideline for the composition of a board of directors to implement corporate governance?

a. Fortune 500 companies should only hire directors from each other's companies.
b. A company's board of directors should not contain more than ten members.
c. The CEO is the best person to act as the chairman or chairwoman of the board.
d. Close to two-thirds of the board of directors should consist of outside directors. Correct
d
Alexander works for Salamon Telecommunications Inc., a large corporation. His work requires him to travel extensively and, as a result, he spends much time working remotely. Taking advantage of the situation, Alexander often works on personal projects instead of company projects. Salamon Telecommunications has difficulty checking on Alexander's work because he has no supervision in many of the places where he travels. This scenario exemplifies a(n)

a. poison pill.
b. moral hazard.
c. outside director.
d. inverse selection.
b
Which of the following is a problem that corporate governance seeks to address?

a. limited liability for investors
b. the principal-agent problem
c. the Ecomagination problem
d. shared-value creation
b
Which of the following is one of the implications of information asymmetry between principals and agents?

a. Principals tend to be better informed than the agents, and thus will avoid delegating decision-making authority to their agents.
b. Outsiders, such as shareholders, are the first to learn about important developments, before the information is released to the employees.
c. Agents can pass on the information to select principals who can trade stocks based on this information.
d. The information comes to all stakeholders simultaneously, which is disadvantageous to the stockholders.
c
Which of the following best exemplifies information asymmetry at Amber Narwhal Inc., a publicly traded software development firm?

a. The new CEO of Amber Narwhal implements a new strategy that focuses on social initiatives.
b. The board of directors at Amber Narwhal makes significant structural changes to the organization and waits several weeks before issuing a press release about it.
c. The shareholders of Amber Narwhal subscribe to Milton Friedman's views of capitalism, while the agents subscribe to Michael Porter's views.
d. The lower-level employees at Amber Narwhal are often unaware of what happens in boardroom meetings.
b