kupdf com chap 009 test bank

The "traditional" approach to strategic control is interactive; the "contemporary" approach to strategic control is sequential.. Informational control is primarily concerned with whether

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

True False

2 The traditional approach to strategic control relies on feedback from performance

measurement to strategy formulation

7 Informational control is primarily concerned with whether or not the organization is "doing the right things."

True False

13 An organization's reward system is typically a weak method of motivating employees True False

14 Different functional areas within an organization often have different reward systems True False

15 Rewards systems that reinforce an organization's core values and contribute to

organizational cohesiveness are the least effective type

21 Boundaries and constraints, when used properly, can minimize improper and unethical conduct

28 Auditors are appointed by the Securities and Exchange Commission to audit a company's financial statements

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

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 is

A 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 environments

A 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 on

A feedback controls

B single-loop learning

C double-loop learning

D comparative learning

39 Informational control systems ask

A 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 include

A 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 of

A boundaries and constraints

B culture and rewards

C organizational loyalty

D innovation and risk taking

44 All of the following are examples of how organizational culture exerts behavioral control

except

A 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 of

B will ensure

C is often the opposite of

D does not always guarantee

48 When countercultures emerge that have shared values opposite from the dominant culture

of an organization

A 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 except

A 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 include

A 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 constraints

A 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 except

A 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 of

55 Cadbury Schweppes has a policy that all payments, no matter how unusual, are recorded

in the company's books This rule is

A 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 culture

B rewards

C boundaries

D All of the above are equally important

57 Most successful organizations minimize the need for explicit rules, regulations, and other boundaries by

A 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 except

A 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 developer

B stock brokerage firm

C manufacturer of mass produced products

D high tech research facility

60 Most organizations with strong cultures and a sound system of rewards and incentives caneventually 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 except

A 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 except

A 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 except

A auditors

B analysts

C competitors

D the market for corporate control

64 Managerial opportunism can take all of the following forms except

A 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 mean

A 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 constraint

A 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

except

A 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 except

A 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 except

A 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 except

A 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) is

A widely dispersed (5-20% is considered "concentrated ownership")

B controlled almost completely by management

C concentrated—often 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 except

A 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 that

A 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

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

4. (p 313) Sales quotas, operating budgets, and production schedules are examples of

7. (p 315) Informational control is primarily concerned with whether or not the organization is

"doing the right things."

8. (p 315) Continuous monitoring enhances an organization's ability to respond with speed and flexibility

12. (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