c. public pension funds d. governmental relations. For an all-American board this might mean including individuals from other countries. The CEO genuinely seeks their greater involvement. Institutional owners are d. Banks have less influence on the governance of German corporations than they do on U.S. corporations. And to the extent investors care about shareholder value, they will penalize those companies they suspect are putting other goals first. Compared to managers, shareholders prefer In other words, investors seem to be penalizing, rather than rewarding, companies that strive to be more inclusive. The decisions made by top-level managers are typically complex and nonroutine. This wouldnt be a problem if diversity initiatives were not seen by many investors as little more than costly experiments. d.has weakened the effect of other governance mechanisms. Earn badges to share on LinkedIn and your resume. They are more a function of general market conditions. The ownership of major blocks of stock by institutional investors have resulted in all of the fol-lowing EXCEPT a. greenmail. d. outside directors own significant equity in the organization. "The board of directors of Acme Brands is discussing the design of a very generous stock option plan for its top executives. b. strengthening the internal management and accounting control systems b. may not have a direct effect on firm performance. c. poorly-performing firms As ownership of the corporation is diffused, shareholders' ability to monitor managerial deci-sions This suggests that gender diversity on the board explains about two-tenths of 1% of the variance in company performance. The repurchase at a premium of shares of stock that have been acquired by the aggressor firm in a hostile takeover in exchange for an agreement that the aggressor will no longer target the company for takeover is called: c. the government. c. the board is homogenous in composition. d. requiring that outside directors be truly objective by having no ownership interest in the firm. shipping point, and $22,000 of goods sold to Alvarez Company for$30,000, f.o.b. d.defense tactics make the costs of a takeover lower. The board wishes the CEO to take more short-term risks in order to achieve potentially higher long-term returns. In contrast to managers' desires, shareholders usually prefer that free cash flows be d. defense tactics make the costs of a takeover lower. b. d. establishing and using formal processes to evaluate the board's performance. At the board of directors level, more ethnically and cultural diverse companies were 43% more likely to see. b. Diversity advocates often argue that gender-diverse boards make better decisions than all-male boards. d. always outperforming their industry. The interests of multinational corporations' shareholders may be best served when there is "Product diversification provides two benefits to managers that do not accrue to shareholders: ____ and ____. c. elevation of foreign executive compensation to U.S. levels. a. installation of an outsider as the lead director on the Board of Directors. a. governance c. lobby legislators to pass laws that are aligned with the organization's interests. d. risk managers will not find a new top management position if they should be dis-missed. Research suggests that boards of directors perform - Course Hero d.reduce the size of the stock option package provided to Mr. Leagreet. c. lower Our interviewees suggested that social diversity (e.g., gender, race/ethnicity, and age diversity) and professional diversity are both important for increasing the diversity of perspectives represented on the board. c. opportunity 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. d. outside directors own significant equity in the organization. Innovation performance of boards of directors and how various studies have tackled this challenge. d.CEOs and other top executives tend to hold their jobs for five years or less, meaning they are not employed by the firm for the appropriate period of time. More Evidence That Company Diversity Leads To Better Profits - Forbes The Chinese governance system has been moving towards the Western model in recent years. The problem is that there is scant evidence that women directors are much different from men when it comes to their approach or experiences especially when they have similar educational and professional backgrounds. The CEO and the top executives successfully fended off the takeover and are concentrating on strategies to improve the performance of the firm. If investors are indeed interpreting female appointments as a sign that the company is less committed to maximizing returns to their shareholders, the effect of increases in board diversity should be larger for those companies that demonstrate commitment to social goals in other ways. a. Satyam's stock price suffered a significant decline. We dont know exactly why this theoretical logic doesnt hold among corporate boards. d. Large institutional investors such as pension funds, and insurance companies are relatively insignificant owners of corporate stock. "An agency relationship exists when one party delegates: The CEO's behav-ior may be indication of a. c. Institutional investors disapprove of long-term executive incentive plans and they may sell their blocks of stock in CamCell. a. some foreign firms have delisted on U.S. stock exchanges. Consequently, the board is Some research suggests, for example, that gender-diverse boards make fewer acquisitions than all-male boards (. a. determine and control the strategic direction of an organization, so that the top executives are focused on maximizing corporate profits. d. reduction in R&D expenditure. d.the difference in risk propensity between owners and managers. This will have no effect on the stock option plan design discussion, because CalPERS' main concern is stock dividends. The chapter Opening Case indicates that many CEOs earn more than ____times the amount re-ceived by their firm's lowest-paid employee. 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. If the market for corporate control were efficient as a governance device, then only ____ would be targets for takeovers. 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 discovered that firms that had made investments in other diversity initiatives, such as work-life benefits, LGBT policies, and programs to employ disabled workers, suffered a greater stock market penalty for appointing female directors than companies that had no previous track record of promoting diversity. "Research suggests that boards of directors perform better if: The gap between CEO pay and the pay of other top executives at Chromatic was significantly larger than at Pixilair. Legislation, codes of conduct, and guidelines have been developed to improve corporate governance. Hostile takeover attempts are so common that they do not reflect negatively on the firm's performance. 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 inter-est-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. 2023 Knowledge at Wharton. Boards of directors are now becoming more involved in c. Corporate governance mechanisms can be in conflict with one another. Again, its important to remember that a significant correlational relationship does not prove causality. Firms should be selecting the very best directors from the largest talent pool possible, and excluding women from that pool to avoid market penalties would be counterproductive. a. decision making responsibility to a second party. Institutional Investors on Boards: Does Their Behavior Influence b. increased diversification of the firm. b. This is in line with numerous academic studies that have found little to no evidence supporting the idea that board diversity leads to better financial performance. EXCEPT HBR Learnings online leadership training helps you hone your skills with courses like Diversity, Inclusion, and Belonging. The CEO would pick up the phone frequently and connect us., Whoever is leading the board also has the responsibility of ensuring that quieter board members speak up in board meetings. High-performing boards: What's on their agenda? | McKinsey The CEO and the top executives successfully fended off the takeover and are concentrating on strategies to improve the performance of the firm. a. setting the option strike price substantially higher than the current stock price. Companies with a Digitally Savvy Board Perform Better The decisions made by top-level managers are typically complex and nonroutine. Other things being equal, market analysts may, consciously or unconsciously, regard all-male boards as more competent than boards that are more gender-diverse. c. incentives for Consider two recent meta-analyses that have been conducted to summarize prior research on the topic. One board member discussed her experience on a board: I do feel Im listened to The CEO makes a big difference in terms of the openness., Similarly, another shared how a different CEO made it easier for board members to access the management team: It starts, again, with the CEO not playing the hierarchical role and saying, You cant talk to one of my VPs unless you come through meSo we had access to the next level of management. a. Mr. Abercrombie will have a large market in Japan because the culture highly val-ues consensus decision making. b. increase the price of the firm's stock, increase the dividends paid out from free cash flows Whats going on here? c. The CEO/Chairperson of the board has been suspected of opportunistic behavior. "Amos Ball, Inc., is a printing company in Iowa that has been family owned and managed for three generations. Chapter 10 (Multiple Choice) Flashcards | Quizlet d. Firms with higher state ownership tend to have lower market value and more vola-tility in those values over time. b. defense tactics are opposed by institutional investors. a. bonuses. 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. Activist shareholders are not necessarily more convinced about diversity being a source of value creation. b. the addition of outside directors to the board. Research suggests that boards of directors perform - Course Hero a. available to comment to external analysts. d.always outperforming their industry. b. increasing the concentration of ownership of large U.S. firms. In contrast to hierarchical boards, more egalitarian boards have a more collegial board culture. a. boards of directors. c. equally as common as data values close to the mean. "Managerial employment risk is the: d.the board of directors. "International Food Services (IFS) has a contract with the Marines to supply meals for it troops in Iraq and other foreign assignments. d.a variety of compensation plans for execu-tives of foreign subsidiaries. d.independence of the committees on the firm's Board of Directors. Which of the following is a FALSE statement about corporate governance? 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MGMT Chapter 10 Flashcards | Quizlet You need the right culture and structure. Depending on which meta-analysis you read, board gender diversity either has a very weak relationship with board performance or no relationship at all. See answer Advertisement sandlee09 Answer: c. Explanation: Which of the following statements is most likely to be TRUE? "In Japan, the principal source of the active monitoring of large companies comes from: Which of the following statements is most likely to be TRUE? Given the findings of research on board gender diversity, one might wonder about the effects on company performance of CEO gender and top management team gender diversity. Combined, the board members held seats on 47 corporate boards in the U.S. across a variety of industries. 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. Companies that engage in CSR, or intend to do so, may be particularly inclined to appoint women to the board. But while many prescriptions for improving corporate governance focus on the structure of. b. "Which of the following reasons would NOT explain the difficulty of determining appropriate executive compensation? Consequently, the board has decided on an incentive plan that involves payout based on the firm's performance five years in the future. b. a number of publicly-traded companies have decided to privatize. a. When executives have ownership positions or stock options with their employing firm, they are d. The CEO was a recipient of the Golden Peacock Award for Corporate Governance. d.reduce their employment risk, increase the company's value, Agency costs reflect all of the following EXCEPT ____ costs. "Monitoring by shareholders is usually accomplished through: One suggested explanation for this puzzling finding is that the stock market is biased and believes that women are not as competent when making business decisions. c. increased shareholder participation in decision making. Because women directors tend to be significantly . Rigorous, academic studies of CEO gender and company performance tell much the same story as rigorous, academic studies of board gender diversity and company performance do. a. used to diversify the firm. b. enforcement a. usually on the verge of bankruptcy. d. Mr. Abercrombie should find significant need for his services in companies in tran-sitional economies. CamCell is presently searching for a new CEO. d. prevented by the Sarbanes-Oxley Act from owning more than 50% of the stock of any one firm. German executives are not dedicated to the maximization of shareholder value largely because: However, rigorous, peer-reviewed academic research paints a different picture. c. CEOs and CFOs must personally certify the company's financial reports. a. firms with unethical top executives Nor do they perform worse. The slow progress on gender diversity has frustrated policymakers, industry groups, and institutional investors, many of whom have publicly advocated for inclusion of women and minorities among the top ranks of management. d. ownership of a company to a second party. d. the CEO is also the chairperson of the board of directors. c. Membership of U.S. boards of directors is less directly influenced by the company's employees than is the membership of German Aufsichsrat. a. the roles of CEO and chairperson of the board of directors are usually combined. d. All of these choices would increase involvement. c. 50 a. high executive turnover. Implementing a director appraisal system. So, a tiny effect is statistically significant if the sample is big enough.). a. lead independent d.internal auditing costs have increased by about one-third. d.Mr. c. the employees directly involved in the wrongdoing b. the market for corporate control. a. safer strategies with greater diversification for the firm. a. d.a silver handshake. b. composed solely of outside directors. b. banks and other lending institutions that have provided major financing to the firm. When executives have ownership positions or stock options with their employing firm, they are: New Report: Companies With Diverse Boards Out Performed Their Peers 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. d.For legal reasons, the board cannot consider the interests of CalPERS over the interests of its top executives. I dont like that I said, If you think my only value is the fact that Im a female, I cant add value to your board., Other interviewees similarly addressed concerns for tokenism: I think that theres so much conversation right now about adding more females to boards and everyone feels like, Okay if we have ten board members, we should recruit three women. But I think we need to make sure they have the right skills.
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