Corporate governance addresses the ___ problem, which underscores the risk of delegating responsibility and control to individuals who may not have the firm's best interests in mind
principal-agent
what are the four characteristics of a public stock company that make it an attractive corporate form?
limited liability for investors
transferability of investor ownership
legal personality
separation of legal ownership and management control
in 2014, 25% of GE's board were women. compared to other fortune 500 companies, the board of directors at ge is ___ in gender
fairly diverse
ethical norms in business
fairness
honesty
reciprocity
a federal regulatory agency whose task it is to oversee stock trading and enforce federal securities laws
Securities and Exchange Commission
SEC
the shared values creation framework is a tool intended to help businesses
benefit all stakeholders, not just shareholders
the mechanism used to guide a company toward meeting its strategic goals within the bounds of the law
corporate governance
a single investor or group of investors buys, with the help of borrowed money, the outstanding shares of a publicly traded company in order to take it private
leveraged buyout
according to agency theory, conflicts such as the principal-agent problem are considered ____ issues
legal
according to agency theory, which of the following managerial functions can be used to avoid adverse selection and moral hazard?
organization
control
economist michael porter and many others argue that the value of public stock companies is too narrowly defined in terms of ___, leading to scandals and economic crises
financial performance
examples of moral hazard
a company dumping pollution into a local lake that must be cleaned using taxpayer money
banks making very risky loans with the knowledge that the government will bail them out if necessary
a copywriter secretly working on her novel while at work
two significant issues regarding the CEO pay debate
relationship between firm performance and CEO pay
size of the CEO compensation in relation to average employee pay
when facing an ethical dilemma, a manager can
consider whether the action in question conforms to the firm's code of conduct and industry practices
determine whether he or she could comfortably defend the action to the public
the idea that a corporation is simply a collection of legal contracts
agency theory
if a company is poorly managed, its stock price may fall low enough for the firm to become a target for
a hostile takeover
managers who act upon secret company information for personal gain, such as trading stocks based on the knowledge of future initiatives, are guilty of
insider trading
the primary purpose of the board of directors
general strategic oversight and guidancce
optics incorporated, a publicly-traded eyewear business, places profits ahead of all over performance metrics. this practice
fails to take into account the idea of corporate social responsibility
conforms to the traditional notion of shareholder capitalism
by taking a ___ position in Abacus, Mr. paulson made more than 1 billion in profits while his clients suffered huge losses
short
a fiduciary responsibility is
a legal duty to act in another party's interests
the ideas of corporate social responsibility and stakeholder strategy are particularly prevalent in
europe
the share value creation framework encourages managers to focus on both _ and _ needs
economic and social
the main goal of a poison pill
minimize the threat of a hostile takeover
in order to reconcile economic and social needs, managers should focus on
expand the customer base to bring in nonconsumers
expand traditional internal firm value chains to include more nontraditional partners
focus on creating new regional clusters
a job seeker claiming to have extensive computer programming experience when their knowledge of the subject is minimal would be an example of
adverse selection
the right to buy a company's stock at a predetermined price sometime in the future is known as a
stock option
a situation in which one party has an incentive to shirk their responsibility because the costs will fall to the other party
moral hazard
incentives that are too high-powered, such as an outsized bonus, may cause _____
individuals to get distracted from strategic activities which might negatively impact job performace
the interests of inside directors typically align with those of
senior management
employees that work in organizations that emphasize ethical behavior
are more likely to act ethically
in comparison to other countries, the US ranks ___ in terms of its acceptance of shareholder capitalism
near the middle