Chapter 09 Strategic Control and Corporate Governance
Chapter 09 - Strategic Control and Corporate Governance
Chapter 09
Strategic Control and Corporate Governance
True / False Questions
1.The "traditional" approach to strategic control is
interactive; the "contemporary" approach to strategic control is
sequential.TrueFalse
2.The traditional approach to strategic control relies on
feedback from performance measurement to strategy
formulation.TrueFalse
3.For firms competing in highly unstable and turbulent
industries, "traditional" strategic controls are most
appropriate.TrueFalse
4.Sales quotas, operating budgets, and production schedules are
examples of "traditional" controls.TrueFalse
5.In "single loop" learning, the organization's assumptions,
premises, goals, and strategies are continuously monitored, tested,
and reviewed.TrueFalse
6."Contemporary" strategic controls involve comparing actual
performance to predetermined goals.TrueFalse
7.Informational control is primarily concerned with whether or
not the organization is "doing the right things."TrueFalse
8.Continuous monitoring enhances an organization's ability to
respond with speed and flexibility.TrueFalse
9.As firms downsize, a control system based on rewards and
culture becomes dysfunctional.TrueFalse
10.For young managers who see themselves as free agents,
behavioral controls such as rewards and culture can be an effective
way to enhance organizational loyalty.TrueFalse
11.Once a strong and healthy organizational culture has been
established, it becomes self-sustaining.TrueFalse
12.The collective sum of individual behaviors of an
organization's employees generally results in what is best for the
organization; thus, individual rationality assures organizational
rationality.TrueFalse
13.An organization's reward system is typically a weak method of
motivating employees.TrueFalse
14.Different functional areas within an organization often have
different reward systems.TrueFalse
15.Rewards systems that reinforce an organization's core values
and contribute to organizational cohesiveness are the least
effective type.TrueFalse
16.For a reward system to be effective, it must be perceived as
fair and equitable.TrueFalse
17.Boundaries and constraints are just used to maintain order in
an organization and have little effect on the organization's
strategic priorities.TrueFalse
18.Short-term objectives and action plans are types of
boundaries that channel the efforts of employees toward goal
accomplishment.TrueFalse
19.Unexpected events (such as wildcat strikes or new government
regulations) have little effect on short-term objectives that need
to remain fixed to be effective.TrueFalse
20.Action plans permit a degree of autonomy for managers who
sometimes must modify activities to achieve the desired
outcome.TrueFalse
21.Boundaries and constraints, when used properly, can minimize
improper and unethical conduct.TrueFalse
22.Rule-based controls are appropriate in organizations where
most of the employees are unskilled.TrueFalse
23.The primary participants in corporate governance, according
to Monks and Minow, are (1) the shareholders, (2) board of
directors, and (3) employees.TrueFalse
24.Central to agency theory is the relationship between two
primary playersthe principals (stockholders) and agents
(management).TrueFalse
25.Research has shown that executives who have large holdings of
stock in their firm were more likely to have diversification
strategies more consistent with shareholder interestsincreasing
long-term returns.TrueFalse
26.One of the most critical roles of the board of directors is
to create incentives that align the interests of the CEO and top
executives with the interests of shareholders.TrueFalse
27.The risk of being acquired by hostile raiders is often
referred to as the takeover constraint.TrueFalse
28.Auditors are appointed by the Securities and Exchange
Commission to audit a company's financial statements.TrueFalse
29.Stock analysts generally issue more "sell" recommendations
than "buy" recommendations.TrueFalse
30.Public companies are required by law to disclose information
regarding executive compensation packages.TrueFalse
31.The Sarbanes-Oxley Act of 2002 requires that CEOs and CFOs of
publicly-listed companies must reveal off-balance-sheet finances
and vouch for the accuracy of information provided.TrueFalse
32.The Sarbanes-Oxley Act of 2002 stipulates that executives of
a firm will still be able to sell their shares in the firm when
other employees cannot.TrueFalse
33.In emerging economies and continental Europe,
principal-principal conflicts are frequent. These consist of
conflicts between controlling shareholders and
executives.TrueFalse
34.Principal-principal (PP) conflicts frequently result in
expropriation, which is defined as activities to enrich minority
shareholders to assure their support.TrueFalse
Multiple Choice Questions
35.The "traditional" approach to strategic control is
sequential. Which of the following is not one of the steps in the
sequence?A.Action plans are submitted by lower level
managers.B.Performance is measured against the predetermined
goal.C.Strategies are implemented.D.Strategies are formulated and
top management sets goals.
36.The primary drawback of "traditional" strategic control
systems isA.they are only appropriate when the environment is
stable and simple.B.goals and objectives cannot be measured with a
high level of certainty.C.they lead to complacency.D.they lack the
flexibility needed to adjust to changes in the environment.
37.For businesses facing complex and turbulent business
environmentsA.goals and objectives that are uncertain prevent
opportunism.B.traditional strategic controls are usually
inappropriate.C.complacency about predetermined milestones can
prevent adaptability.D.detailed plans are needed to maintain
order.
38.Contemporary approaches to strategic control rely primarily
onA.feedback controls.B.single-loop learning.C.double-loop
learning.D.comparative learning.
39.Informational control systems askA.is the organization "doing
things right"?B.is the organization "doing the right things"?C.are
rules and regulations being followed as information is
processed?D.is the organization's environment a necessary and
sufficient condition for success?
40.The benefits of continuous monitoring includeA.enhancing the
organization's ability to respond with speed and
flexibility.B.replacing the time-consuming process of
organizational learning.C.dramatically altering the organization's
response to its competitive environment.D.all of the above.
41.Which of the following is not one of the characteristics of a
contemporary control system?A.It is a key catalyst for an ongoing
debate about underlying data, assumptions, and action plans.B.It
must focus on constantly changing information that is strategically
important.C.It circumvents the need for face-to-face meetings among
superiors, subordinates, and peers.D.It generates information that
is important enough to demand regular and frequent attention.
42.Top managers at ABC Company meet every Friday to review daily
operational reports and year-to-date data. This is an example
ofA.behavioral control.B.informational control.C.strategy
formulation.D.strategy implementation.
43.Complete the following sentence: "As firms simultaneously
downsize and face the need for increased coordination across
organization boundaries, a control system based primarily on
__________ is dysfunctional."A.boundaries and constraintsB.culture
and rewardsC.organizational loyaltyD.innovation and risk taking
44.All of the following are examples of how organizational
culture exerts behavioral control exceptA.culture helps maintain
control by creating behavioral norms.B.culture generates unwritten
standards of acceptable behavior.C.culture encourages individual
identification with the organization and its objectives.D.culture
sets explicit boundaries.
45.The late Sam Walton, founder of Wal-Mart, used to give pep
rallies at local Wal-Mart stores. What purpose did this serve?A.It
was used to remind employees of Wal-Mart's rules and
regulations.B.It helped reinforce and sustain Wal-Mart's
culture.C.It demonstrated to employees the importance of
articulating explicit goals and objectives.D.It made Wal-Mart's
reward system very explicit.
46.Which of the following is not one of the functions of reward
and incentive systems?A.They represent a poor means of influencing
an organization's culture.B.They focus efforts on high-priority
tasks.C.They motivate high levels of individual and collective task
performance.D.They represent an effective control mechanism.
47.Complete the following sentence: "Individual rationality
__________ organizational rationality."A.is a good indicator
ofB.will ensureC.is often the opposite ofD.does not always
guarantee
48.When countercultures emerge that have shared values opposite
from the dominant culture of an organizationA.organizational
cohesiveness increases.B.information is shared rather than
hoarded.C.individuals begin working at cross purposes.D.individuals
gain insights into overarching goals and objectives.
49.All of the following are characteristics of effective reward
and incentive systems exceptA.performance measures are clear and
highly visible.B.the structure is fixed to assure employees of
consistency.C.the compensation system is perceived as fair and
equitable.D.objectives are well understood, and broadly
accepted.
50.The causes of counterproductive behavior in organizations
includeA.lack of a clear understanding of organizational goals and
objectives.B.motivated self-interest.C.outright malfeasance.D.all
of the above.
51.Effective boundaries and constraintsA.tend to inhibit
efficiency and effectiveness.B.distract employees who are trying to
focus on organizational priorities.C.minimize improper and
unethical conduct.D.tend to limit organizational growth.
52.Effective short-term objectives have all of the following
priorities exceptA.an emphasis on "do your best" goals.B.being
achievable yet challenging.C.providing a specific time horizon for
their attainment.D.being specific and measurable.
53.Which of the following statements about action plans is
true?A.Action plans, though specific, should permit a degree of
autonomy to managers and not be constrained by budgets.B.Action
plans must be specific so that managers will have a clear
understanding of the resource requirements necessary to implement
the plan.C.Action plans should not be constrained by a time frame
in order to allow for modification.D.Although managers must be held
accountable for implementing action plans, this accountability
often erodes the managers' motivation to implement the plan on a
timely basis.
54.Rules and regulations are examples ofA.implicit
controls.B.informational controls.C.cultural norms.D.boundaries and
constraints.
55.Cadbury Schweppes has a policy that all payments, no matter
how unusual, are recorded in the company's books. This rule
isA.overly cumbersome.B.aimed at encouraging managers to make
better budgetary decisions.C.directed at protecting client
confidentiality.D.designed to minimize improper and unethical
conduct.
56.Which of the following approaches to behavioral strategic
control should be utilized least in an organization in which there
is a great need for innovation and a high degree of
autonomy?A.cultureB.rewardsC.boundariesD.All of the above are
equally important.
57.Most successful organizations minimize the need for explicit
rules, regulations, and other boundaries byA.posting written
statements of the organization's goals and
objectives.B.discouraging the formation of subcultures that isolate
work groups.C.designing effective reward systems.D.encouraging
employees to see themselves as free agents.
58.Rule-based controls are most appropriate in organizations
with all of the following characteristics exceptA.environments are
stable and predictable.B.employees are highly skilled and
independent.C.consistency in product or service.D.the risk of
malfeasance is extremely high.
59.Rules and regulations, rather than culture or rewards, would
be used for strategic control at which type of company?A.software
developerB.stock brokerage firmC.manufacturer of mass produced
productsD.high tech research facility
60.Most organizations with strong cultures and a sound system of
rewards and incentives can eventually internalize boundaries rather
than use explicit rules and regulations. Which of the following is
not a technique for moving in that direction?A.Hire people that
identify with the organization's dominant values.B.Develop
managerial role models.C.Minimize training and
indoctrination.D.Align reward systems with organizational goals and
objectives.
61.The primary participants in corporate governance are all of
the following exceptA.the shareholders.B.key stakeholders such as
financial institutions.C.management (led by the chief executive
officer).D.the board of directors.
62.Intel's exemplary corporate governance practices include all
of the following exceptA.a mix of inside and outside
directors.B.all outside directors to assure objectivity in
decision-making.C.board presentations and access to
employees.D.formal evaluation of officers.
63.External control mechanisms include all of the following
exceptA.auditors.B.analysts.C.competitors.D.the market for
corporate control.
64.Managerial opportunism can take all of the following forms
exceptA.shirking.B.job-hopping.C.on the job consumption.D.excessive
product diversification.
65.If the market value of a firm becomes less than its book
value,A.it becomes an attractive takeover target.B.the firm will be
delisted by the stock exchange.C.the Securities and Exchange
Commission will not allow it to declare dividends until the market
value once again exceeds the book value.D.the firm will be unable
to service its debt.
66.By takeover constraint, we meanA.constraints placed by the
firm on raiders who want to takeover the firm.B.legal constraints
that limit the ability of the raiders to acquire a
firm.C.provisions in the charter of a company that prevents it from
attempting a takeover of other companies.D.the risk of being
acquired by a hostile raider.
67.It is generally argued that the takeover constraintA.deters
management from engaging in opportunistic behavior.B.deters
management from considering acquiring other companies.C.deters
management from declaring dividends.D.deters management from
increasing a firm's level of borrowing.
68.The failure of many auditing firms to raise red flags about
accounting irregularities in companies such as Enron and WorldCom
is generally attributed to all of the following factors exceptA.the
desire to get future auditing contracts from the company.B.the
desire to get consulting work from the company because most audit
firms also do consulting work.C.the fact that auditors are
appointed by the firm.D.the failure of U.S. audit firms to hire
technically qualified professionals.
69.The reasons analyst recommendations are often more optimistic
than warranted by an objective analysis of a firm's prospects
include all of the following exceptA.many analysts fail to grasp
the gravity of the problems facing a company.B."sell"
recommendations generate lower commissions than buy
recommendations.C.the firms for which analysts work may have
lucrative investment banking relationships with the firm.D.analysts
are often pressured by their superiors to overlook negative
information or tone down their criticisms of the firms they
analyze.
70.All of the following are types of information that a firm is
required to disclose exceptA.quarterly and annual filings of
financial information.B.stock trading by insiders.C.details of new
products under development.D.details of executive compensation
packages.
71.In emerging economics and continental Europe, firms often can
be characterized by all of the following exceptA.concentrated
ownership.B.low family ownership and control.C.business group
structures.D.weak legal protection for minority shareholders.
72.In principal-principal conflicts (conflicts between
controlling shareholders and minority shareholders), the ownership
(of equity) isA.widely dispersed (5-20% is considered "concentrated
ownership").B.controlled almost completely by
management.C.concentratedoften greater than 50% of equity is
controlled by controlling shareholders.D.often held by employee
stock ownership programs.
73.Conditions for principal-principal (PP) conflicts (conflicts
between controlling shareholders and minority shareholders) to
occur include all of the following exceptA.a dominant owner or
group of owners who have interests that are distinct from minority
shareholders.B.legislation that protects the interests of minority
shareholders.C.a motivation for the controlling shareholders to
exercise their dominant position to their advantage.D.few formal
(such as legislation or regulatory bodies) or informal constraints
that discourage or prevent the controlling shareholders from
exploiting their advantageous positions.
74.Expropriation of minority shareholders means thatA.minority
shareholders must sell their shares upon demand.B.minority
shareholders cannot own shares in foreign firms.C.minority
shareholders do not receive dividends.D.minority shareholders are
adversely affected by the actions of controlling shareholders.
Essay Questions
75.What are the advantages and disadvantages associated with
using "traditional" approaches to strategic control?
76.What are the advantages and disadvantages associated with
using "contemporary" approaches to strategic control?
77.What are the four characteristics of effective contemporary
control systems? Give examples of how firms apply these
practices.
78.Why is it important to have a balance among the three
behavioral controls - culture, rewards, and boundaries? Is there a
danger associated with emphasizing one behavioral approach more
than another?
79.Discuss the benefits and risks of using reward and incentive
systems as a means of strategic control.
80.What are the characteristics of short-term objectives?
Provide examples of practical applications of these characteristics
by organizations.
81.What are the three key means to align the interests of owners
(shareholders) and managers in a corporation?
82.What is meant by the term "market for corporate control?" How
does the market for corporate control act as an external control
mechanism?
83.Identify at least three external control mechanisms. Discuss
the role played by each of these.
84.What is meant by principal-principal (PP) conflict? What are
the implications for sound corporate governance?
Chapter 09 Strategic Control and Corporate Governance Answer
Key
True / False Questions
1.(p.313 - 315)The "traditional" approach to strategic control
is interactive; the "contemporary" approach to strategic control is
sequential.FALSE
AACSB: AnalyticBloom's: KnowledgeDifficulty: EasyLearning
Objective: 09-22.(p.313)The traditional approach to strategic
control relies on feedback from performance measurement to strategy
formulation.TRUE
AACSB: AnalyticBloom's: ComprehensionDifficulty: MediumLearning
Objective: 09-23.(p.313)For firms competing in highly unstable and
turbulent industries, "traditional" strategic controls are most
appropriate.FALSE
AACSB: AnalyticBloom's: ComprehensionDifficulty: MediumLearning
Objective: 09-24.(p.313)Sales quotas, operating budgets, and
production schedules are examples of "traditional"
controls.TRUE
AACSB: AnalyticBloom's: ComprehensionDifficulty: MediumLearning
Objective: 09-25.(p.313)In "single loop" learning, the
organization's assumptions, premises, goals, and strategies are
continuously monitored, tested, and reviewed.FALSE
AACSB: AnalyticBloom's: ComprehensionDifficulty: MediumLearning
Objective: 09-26.(p.314 - 315)"Contemporary" strategic controls
involve comparing actual performance to predetermined
goals.FALSE
AACSB: AnalyticBloom's: KnowledgeDifficulty: EasyLearning
Objective: 09-37.(p.315)Informational control is primarily
concerned with whether or not the organization is "doing the right
things."TRUE
AACSB: AnalyticBloom's: KnowledgeDifficulty: EasyLearning
Objective: 09-38.(p.315)Continuous monitoring enhances an
organization's ability to respond with speed and
flexibility.TRUE
AACSB: AnalyticBloom's: ComprehensionDifficulty: MediumLearning
Objective: 09-39.(p.316 - 317)As firms downsize, a control system
based on rewards and culture becomes dysfunctional.FALSE
AACSB: AnalyticBloom's: ComprehensionDifficulty: MediumLearning
Objective: 09-410.(p.317)For young managers who see themselves as
free agents, behavioral controls such as rewards and culture can be
an effective way to enhance organizational loyalty.TRUE
AACSB: AnalyticBloom's: ComprehensionDifficulty: MediumLearning
Objective: 09-411.(p.318)Once a strong and healthy organizational
culture has been established, it becomes self-sustaining.FALSE
AACSB: AnalyticBloom's: ComprehensionDifficulty: MediumLearning
Objective: 09-412.(p.319)The collective sum of individual behaviors
of an organization's employees generally results in what is best
for the organization; thus, individual rationality assures
organizational rationality.FALSE
AACSB: AnalyticBloom's: ComprehensionDifficulty: MediumLearning
Objective: 09-413.(p.319)An organization's reward system is
typically a weak method of motivating employees.FALSE
AACSB: AnalyticBloom's: ComprehensionDifficulty: MediumLearning
Objective: 09-414.(p.319)Different functional areas within an
organization often have different reward systems.TRUE
AACSB: AnalyticBloom's: ComprehensionDifficulty: MediumLearning
Objective: 09-415.(p.319)Rewards systems that reinforce an
organization's core values and contribute to organizational
cohesiveness are the least effective type.FALSE
AACSB: AnalyticBloom's: ComprehensionDifficulty: MediumLearning
Objective: 09-416.(p.319)For a reward system to be effective, it
must be perceived as fair and equitable.TRUE
AACSB: AnalyticBloom's: ComprehensionDifficulty: MediumLearning
Objective: 09-417.(p.320)Boundaries and constraints are just used
to maintain order in an organization and have little effect on the
organization's strategic priorities.FALSE
AACSB: AnalyticBloom's: ComprehensionDifficulty: MediumLearning
Objective: 09-418.(p.320 - 321)Short-term objectives and action
plans are types of boundaries that channel the efforts of employees
toward goal accomplishment.TRUE
AACSB: AnalyticBloom's: ComprehensionDifficulty: MediumLearning
Objective: 09-419.(p.320 - 321)Unexpected events (such as wildcat
strikes or new government regulations) have little effect on
short-term objectives that need to remain fixed to be
effective.FALSE
AACSB: AnalyticBloom's: ComprehensionDifficulty: MediumLearning
Objective: 09-420.(p.320 - 321)Action plans permit a degree of
autonomy for managers who sometimes must modify activities to
achieve the desired outcome.TRUE
AACSB: AnalyticBloom's: ComprehensionDifficulty: MediumLearning
Objective: 09-421.(p.321 - 322)Boundaries and constraints, when
used properly, can minimize improper and unethical conduct.TRUE
AACSB: AnalyticBloom's: ComprehensionDifficulty: MediumLearning
Objective: 09-422.(p.324)Rule-based controls are appropriate in
organizations where most of the employees are unskilled.TRUE
AACSB: AnalyticBloom's: ComprehensionDifficulty: MediumLearning
Objective: 09-423.(p.324)The primary participants in corporate
governance, according to Monks and Minow, are (1) the shareholders,
(2) board of directors, and (3) employees.FALSE
AACSB: AnalyticBloom's: KnowledgeDifficulty: EasyLearning
Objective: 09-524.(p.326 - 327)Central to agency theory is the
relationship between two primary playersthe principals
(stockholders) and agents (management).TRUE
AACSB: AnalyticBloom's: ComprehensionDifficulty: MediumLearning
Objective: 09-525.(p.327)Research has shown that executives who
have large holdings of stock in their firm were more likely to have
diversification strategies more consistent with shareholder
interestsincreasing long-term returns.TRUE
AACSB: AnalyticBloom's: ComprehensionDifficulty: MediumLearning
Objective: 09-526.(p.327 - 328)One of the most critical roles of
the board of directors is to create incentives that align the
interests of the CEO and top executives with the interests of
shareholders.TRUE
AACSB: AnalyticBloom's: ComprehensionDifficulty: MediumLearning
Objective: 09-627.(p.333)The risk of being acquired by hostile
raiders is often referred to as the takeover constraint.TRUE
AACSB: AnalyticBloom's: KnowledgeDifficulty: EasyLearning
Objective: 09-628.(p.334)Auditors are appointed by the Securities
and Exchange Commission to audit a company's financial
statements.FALSE
AACSB: AnalyticBloom's: ComprehensionDifficulty: MediumLearning
Objective: 09-629.(p.334)Stock analysts generally issue more "sell"
recommendations than "buy" recommendations.FALSE
AACSB: AnalyticBloom's: ComprehensionDifficulty: MediumLearning
Objective: 09-630.(p.335)Public companies are required by law to
disclose information regarding executive compensation
packages.TRUE
AACSB: AnalyticBloom's: ComprehensionDifficulty: MediumLearning
Objective: 09-631.(p.335)The Sarbanes-Oxley Act of 2002 requires
that CEOs and CFOs of publicly-listed companies must reveal
off-balance-sheet finances and vouch for the accuracy of
information provided.TRUE
AACSB: AnalyticBloom's: ComprehensionDifficulty: MediumLearning
Objective: 09-632.(p.335)The Sarbanes-Oxley Act of 2002 stipulates
that executives of a firm will still be able to sell their shares
in the firm when other employees cannot.FALSE
AACSB: AnalyticBloom's: ComprehensionDifficulty: MediumLearning
Objective: 09-633.(p.336 - 337)In emerging economies and
continental Europe, principal-principal conflicts are frequent.
These consist of conflicts between controlling shareholders and
executives.FALSE
AACSB: AnalyticBloom's: ComprehensionDifficulty: MediumLearning
Objective: 09-634.(p.338)Principal-principal (PP) conflicts
frequently result in expropriation, which is defined as activities
to enrich minority shareholders to assure their support.FALSE
AACSB: AnalyticBloom's: ComprehensionDifficulty: MediumLearning
Objective: 09-6
Multiple Choice Questions
35.(p.313)The "traditional" approach to strategic control is
sequential. Which of the following is not one of the steps in the
sequence?A.Action plans are submitted by lower level
managers.B.Performance is measured against the predetermined
goal.C.Strategies are implemented.D.Strategies are formulated and
top management sets goals.
AACSB: AnalyticBloom's: KnowledgeDifficulty: EasyLearning
Objective: 09-236.(p.313)The primary drawback of "traditional"
strategic control systems isA.they are only appropriate when the
environment is stable and simple.B.goals and objectives cannot be
measured with a high level of certainty.C.they lead to
complacency.D.they lack the flexibility needed to adjust to changes
in the environment.
AACSB: AnalyticBloom's: ComprehensionDifficulty: MediumLearning
Objective: 09-237.(p.313)For businesses facing complex and
turbulent business environmentsA.goals and objectives that are
uncertain prevent opportunism.B.traditional strategic controls are
usually inappropriate.C.complacency about predetermined milestones
can prevent adaptability.D.detailed plans are needed to maintain
order.
AACSB: AnalyticBloom's: ComprehensionDifficulty: MediumLearning
Objective: 09-238.(p.315)Contemporary approaches to strategic
control rely primarily onA.feedback controls.B.single-loop
learning.C.double-loop learning.D.comparative learning.
AACSB: AnalyticBloom's: ComprehensionDifficulty: MediumLearning
Objective: 09-339.(p.315)Informational control systems askA.is the
organization "doing things right"?B.is the organization "doing the
right things"?C.are rules and regulations being followed as
information is processed?D.is the organization's environment a
necessary and sufficient condition for success?
AACSB: AnalyticBloom's: KnowledgeDifficulty: EasyLearning
Objective: 09-340.(p.315)The benefits of continuous monitoring
includeA.enhancing the organization's ability to respond with speed
and flexibility.B.replacing the time-consuming process of
organizational learning.C.dramatically altering the organization's
response to its competitive environment.D.all of the above.
AACSB: AnalyticBloom's: ComprehensionDifficulty: MediumLearning
Objective: 09-341.(p.315)Which of the following is not one of the
characteristics of a contemporary control system?A.It is a key
catalyst for an ongoing debate about underlying data, assumptions,
and action plans.B.It must focus on constantly changing information
that is strategically important.C.It circumvents the need for
face-to-face meetings among superiors, subordinates, and peers.D.It
generates information that is important enough to demand regular
and frequent attention.
AACSB: AnalyticBloom's: ComprehensionDifficulty: MediumLearning
Objective: 09-342.(p.315)Top managers at ABC Company meet every
Friday to review daily operational reports and year-to-date data.
This is an example ofA.behavioral control.B.informational
control.C.strategy formulation.D.strategy implementation.
AACSB: AnalyticBloom's: ComprehensionDifficulty: MediumLearning
Objective: 09-343.(p.316 - 317)Complete the following sentence: "As
firms simultaneously downsize and face the need for increased
coordination across organization boundaries, a control system based
primarily on __________ is dysfunctional."A.boundaries and
constraintsB.culture and rewardsC.organizational
loyaltyD.innovation and risk taking
AACSB: AnalyticBloom's: ComprehensionDifficulty: MediumLearning
Objective: 09-444.(p.317 - 318)All of the following are examples of
how organizational culture exerts behavioral control
exceptA.culture helps maintain control by creating behavioral
norms.B.culture generates unwritten standards of acceptable
behavior.C.culture encourages individual identification with the
organization and its objectives.D.culture sets explicit
boundaries.
AACSB: AnalyticBloom's: ComprehensionDifficulty: MediumLearning
Objective: 09-445.(p.318)The late Sam Walton, founder of Wal-Mart,
used to give pep rallies at local Wal-Mart stores. What purpose did
this serve?A.It was used to remind employees of Wal-Mart's rules
and regulations.B.It helped reinforce and sustain Wal-Mart's
culture.C.It demonstrated to employees the importance of
articulating explicit goals and objectives.D.It made Wal-Mart's
reward system very explicit.
AACSB: AnalyticBloom's: ComprehensionDifficulty: MediumLearning
Objective: 09-446.(p.318 - 319)Which of the following is not one of
the functions of reward and incentive systems?A.They represent a
poor means of influencing an organization's culture.B.They focus
efforts on high-priority tasks.C.They motivate high levels of
individual and collective task performance.D.They represent an
effective control mechanism.
AACSB: AnalyticBloom's: ComprehensionDifficulty: MediumLearning
Objective: 09-447.(p.319)Complete the following sentence:
"Individual rationality __________ organizational rationality."A.is
a good indicator ofB.will ensureC.is often the opposite ofD.does
not always guarantee
AACSB: AnalyticBloom's: ComprehensionDifficulty: MediumLearning
Objective: 09-448.(p.319)When countercultures emerge that have
shared values opposite from the dominant culture of an
organizationA.organizational cohesiveness increases.B.information
is shared rather than hoarded.C.individuals begin working at cross
purposes.D.individuals gain insights into overarching goals and
objectives.
AACSB: AnalyticBloom's: ComprehensionDifficulty: MediumLearning
Objective: 09-449.(p.318 - 319)All of the following are
characteristics of effective reward and incentive systems
exceptA.performance measures are clear and highly visible.B.the
structure is fixed to assure employees of consistency.C.the
compensation system is perceived as fair and equitable.D.objectives
are well understood, and broadly accepted.
AACSB: AnalyticBloom's: ComprehensionDifficulty: MediumLearning
Objective: 09-450.(p.319)The causes of counterproductive behavior
in organizations includeA.lack of a clear understanding of
organizational goals and objectives.B.motivated
self-interest.C.outright malfeasance.D.all of the above.
AACSB: AnalyticBloom's: ComprehensionDifficulty: MediumLearning
Objective: 09-451.(p.320 - 321)Effective boundaries and
constraintsA.tend to inhibit efficiency and
effectiveness.B.distract employees who are trying to focus on
organizational priorities.C.minimize improper and unethical
conduct.D.tend to limit organizational growth.
AACSB: AnalyticBloom's: ComprehensionDifficulty: MediumLearning
Objective: 09-452.(p.320 - 321)Effective short-term objectives have
all of the following priorities exceptA.an emphasis on "do your
best" goals.B.being achievable yet challenging.C.providing a
specific time horizon for their attainment.D.being specific and
measurable.
AACSB: AnalyticBloom's: ComprehensionDifficulty: MediumLearning
Objective: 09-453.(p.320 - 321)Which of the following statements
about action plans is true?A.Action plans, though specific, should
permit a degree of autonomy to managers and not be constrained by
budgets.B.Action plans must be specific so that managers will have
a clear understanding of the resource requirements necessary to
implement the plan.C.Action plans should not be constrained by a
time frame in order to allow for modification.D.Although managers
must be held accountable for implementing action plans, this
accountability often erodes the managers' motivation to implement
the plan on a timely basis.
AACSB: AnalyticBloom's: ComprehensionDifficulty: MediumLearning
Objective: 09-454.(p.321)Rules and regulations are examples
ofA.implicit controls.B.informational controls.C.cultural
norms.D.boundaries and constraints.
AACSB: AnalyticBloom's: ComprehensionDifficulty: MediumLearning
Objective: 09-455.(p.321)Cadbury Schweppes has a policy that all
payments, no matter how unusual, are recorded in the company's
books. This rule isA.overly cumbersome.B.aimed at encouraging
managers to make better budgetary decisions.C.directed at
protecting client confidentiality.D.designed to minimize improper
and unethical conduct.
AACSB: AnalyticBloom's: ComprehensionDifficulty: MediumLearning
Objective: 09-456.(p.324)Which of the following approaches to
behavioral strategic control should be utilized least in an
organization in which there is a great need for innovation and a
high degree of autonomy?A.cultureB.rewardsC.boundariesD.All of the
above are equally important.
AACSB: AnalyticBloom's: ComprehensionDifficulty: MediumLearning
Objective: 09-457.(p.323 - 324)Most successful organizations
minimize the need for explicit rules, regulations, and other
boundaries byA.posting written statements of the organization's
goals and objectives.B.discouraging the formation of subcultures
that isolate work groups.C.designing effective reward
systems.D.encouraging employees to see themselves as free
agents.
AACSB: AnalyticBloom's: ComprehensionDifficulty: MediumLearning
Objective: 09-458.(p.324)Rule-based controls are most appropriate
in organizations with all of the following characteristics
exceptA.environments are stable and predictable.B.employees are
highly skilled and independent.C.consistency in product or
service.D.the risk of malfeasance is extremely high.
AACSB: AnalyticBloom's: ComprehensionDifficulty: MediumLearning
Objective: 09-459.(p.324)Rules and regulations, rather than culture
or rewards, would be used for strategic control at which type of
company?A.software developerB.stock brokerage firmC.manufacturer of
mass produced productsD.high tech research facility
AACSB: AnalyticBloom's: ComprehensionDifficulty: MediumLearning
Objective: 09-460.(p.323 - 324)Most organizations with strong
cultures and a sound system of rewards and incentives can
eventually internalize boundaries rather than use explicit rules
and regulations. Which of the following is not a technique for
moving in that direction?A.Hire people that identify with the
organization's dominant values.B.Develop managerial role
models.C.Minimize training and indoctrination.D.Align reward
systems with organizational goals and objectives.
AACSB: AnalyticBloom's: ComprehensionDifficulty: MediumLearning
Objective: 09-461.(p.324)The primary participants in corporate
governance are all of the following exceptA.the shareholders.B.key
stakeholders such as financial institutions.C.management (led by
the chief executive officer).D.the board of directors.
AACSB: AnalyticBloom's: ComprehensionDifficulty: MediumLearning
Objective: 09-562.(p.329)Intel's exemplary corporate governance
practices include all of the following exceptA.a mix of inside and
outside directors.B.all outside directors to assure objectivity in
decision-making.C.board presentations and access to
employees.D.formal evaluation of officers.
AACSB: AnalyticBloom's: ComprehensionDifficulty: MediumLearning
Objective: 09-663.(p.332 - 336)External control mechanisms include
all of the following
exceptA.auditors.B.analysts.C.competitors.D.the market for
corporate control.
AACSB: AnalyticBloom's: ComprehensionDifficulty: MediumLearning
Objective: 09-664.(p.333)Managerial opportunism can take all of the
following forms exceptA.shirking.B.job-hopping.C.on the job
consumption.D.excessive product diversification.
AACSB: AnalyticBloom's: ComprehensionDifficulty: MediumLearning
Objective: 09-665.(p.333 - 334)If the market value of a firm
becomes less than its book value,A.it becomes an attractive
takeover target.B.the firm will be delisted by the stock
exchange.C.the Securities and Exchange Commission will not allow it
to declare dividends until the market value once again exceeds the
book value.D.the firm will be unable to service its debt.
AACSB: AnalyticBloom's: ComprehensionDifficulty: MediumLearning
Objective: 09-666.(p.333)By takeover constraint, we
meanA.constraints placed by the firm on raiders who want to
takeover the firm.B.legal constraints that limit the ability of the
raiders to acquire a firm.C.provisions in the charter of a company
that prevents it from attempting a takeover of other
companies.D.the risk of being acquired by a hostile raider.
AACSB: AnalyticBloom's: KnowledgeDifficulty: EasyLearning
Objective: 09-667.(p.333)It is generally argued that the takeover
constraintA.deters management from engaging in opportunistic
behavior.B.deters management from considering acquiring other
companies.C.deters management from declaring dividends.D.deters
management from increasing a firm's level of borrowing.
AACSB: AnalyticBloom's: ComprehensionDifficulty: MediumLearning
Objective: 09-668.(p.334)The failure of many auditing firms to
raise red flags about accounting irregularities in companies such
as Enron and WorldCom is generally attributed to all of the
following factors exceptA.the desire to get future auditing
contracts from the company.B.the desire to get consulting work from
the company because most audit firms also do consulting work.C.the
fact that auditors are appointed by the firm.D.the failure of U.S.
audit firms to hire technically qualified professionals.
AACSB: AnalyticBloom's: ComprehensionDifficulty: MediumLearning
Objective: 09-669.(p.334)The reasons analyst recommendations are
often more optimistic than warranted by an objective analysis of a
firm's prospects include all of the following exceptA.many analysts
fail to grasp the gravity of the problems facing a company.B."sell"
recommendations generate lower commissions than buy
recommendations.C.the firms for which analysts work may have
lucrative investment banking relationships with the firm.D.analysts
are often pressured by their superiors to overlook negative
information or tone down their criticisms of the firms they
analyze.
AACSB: AnalyticBloom's: ComprehensionDifficulty: MediumLearning
Objective: 09-670.(p.335)All of the following are types of
information that a firm is required to disclose exceptA.quarterly
and annual filings of financial information.B.stock trading by
insiders.C.details of new products under development.D.details of
executive compensation packages.
AACSB: AnalyticBloom's: ComprehensionDifficulty: MediumLearning
Objective: 09-671.(p.336)In emerging economics and continental
Europe, firms often can be characterized by all of the following
exceptA.concentrated ownership.B.low family ownership and
control.C.business group structures.D.weak legal protection for
minority shareholders.
AACSB: AnalyticBloom's: ComprehensionDifficulty: MediumLearning
Objective: 09-672.(p.336)In principal-principal conflicts
(conflicts between controlling shareholders and minority
shareholders), the ownership (of equity) isA.widely dispersed
(5-20% is considered "concentrated ownership").B.controlled almost
completely by management.C.concentratedoften greater than 50% of
equity is controlled by controlling shareholders.D.often held by
employee stock ownership programs.
AACSB: AnalyticBloom's: ComprehensionDifficulty: MediumLearning
Objective: 09-673.(p.337)Conditions for principal-principal (PP)
conflicts (conflicts between controlling shareholders and minority
shareholders) to occur include all of the following exceptA.a
dominant owner or group of owners who have interests that are
distinct from minority shareholders.B.legislation that protects the
interests of minority shareholders.C.a motivation for the
controlling shareholders to exercise their dominant position to
their advantage.D.few formal (such as legislation or regulatory
bodies) or informal constraints that discourage or prevent the
controlling shareholders from exploiting their advantageous
positions.
AACSB: AnalyticBloom's: ComprehensionDifficulty: MediumLearning
Objective: 09-674.(p.338)Expropriation of minority shareholders
means thatA.minority shareholders must sell their shares upon
demand.B.minority shareholders cannot own shares in foreign
firms.C.minority shareholders do not receive dividends.D.minority
shareholders are adversely affected by the actions of controlling
shareholders.
AACSB: AnalyticBloom's: KnowledgeDifficulty: EasyLearning
Objective: 09-6
Essay Questions
75.(p.313 - 314)What are the advantages and disadvantages
associated with using "traditional" approaches to strategic
control?
Answers will vary.
AACSB: AnalyticBloom's: ComprehensionDifficulty: MediumLearning
Objective: 09-276.(p.314 - 315)What are the advantages and
disadvantages associated with using "contemporary" approaches to
strategic control?
Answers will vary.
AACSB: AnalyticBloom's: ComprehensionDifficulty: MediumLearning
Objective: 09-377.(p.315)What are the four characteristics of
effective contemporary control systems? Give examples of how firms
apply these practices.
Answers will vary.
AACSB: AnalyticBloom's: ApplicationDifficulty: HardLearning
Objective: 09-378.(p.316 - 317)Why is it important to have a
balance among the three behavioral controls - culture, rewards, and
boundaries? Is there a danger associated with emphasizing one
behavioral approach more than another?
Answers will vary.
AACSB: AnalyticBloom's: ComprehensionDifficulty: MediumLearning
Objective: 09-479.(p.316 - 317)Discuss the benefits and risks of
using reward and incentive systems as a means of strategic
control.
Answers will vary.
AACSB: AnalyticBloom's: ComprehensionDifficulty: MediumLearning
Objective: 09-480.(p.320 - 321)What are the characteristics of
short-term objectives? Provide examples of practical applications
of these characteristics by organizations.
Answers will vary.
AACSB: AnalyticBloom's: ApplicationDifficulty: HardLearning
Objective: 09-481.(p.327 - 332)What are the three key means to
align the interests of owners (shareholders) and managers in a
corporation?
Answers will vary.
AACSB: AnalyticBloom's: ComprehensionDifficulty: MediumLearning
Objective: 09-682.(p.333 - 334)What is meant by the term "market
for corporate control?" How does the market for corporate control
act as an external control mechanism?
Answers will vary.
AACSB: AnalyticBloom's: ComprehensionDifficulty: MediumLearning
Objective: 09-683.(p.332 - 336)Identify at least three external
control mechanisms. Discuss the role played by each of these.
Answers will vary.
AACSB: AnalyticBloom's: ComprehensionDifficulty: MediumLearning
Objective: 09-684.(p.336 - 338)What is meant by principal-principal
(PP) conflict? What are the implications for sound corporate
governance?
Answers will vary.
AACSB: AnalyticBloom's: ComprehensionDifficulty: MediumLearning
Objective: 09-69-1