Chapter 8 CS
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Questions and Answers

According to Peter Brabeck, what does he believe is crucial for the success of a company?

  • Personal integrity
  • Regulations
  • Leadership and management principles (correct)
  • Corporate governance

    • What is one of the learning goals of the session on Corporate Governance?

  • To understand why governance fails (correct)
  • To understand corporate advantage
  • To analyze stakeholder returns
  • To identify regulations in corporate governance

    • How does Peter Brabeck view regulations in relation to personal integrity?

  • Personal integrity is more important than regulations (correct)
  • Regulations are necessary to maintain integrity
  • Regulations are more important than personal integrity
  • Both regulations and personal integrity are equally important

    • What does Peter Brabeck believe is key for creating long-term sustainable value for shareholders?

    <p>Behavior and strategies</p> Signup and view all the answers

    In the context of corporate governance, what is emphasized as essential to create value for various stakeholders according to the text?

    <p>Creating value for communities and business partners</p> Signup and view all the answers

    What is the primary task of the Board of Directors (BOD) according to the text?

    <p>Acting in the interests of the owners</p> Signup and view all the answers

    What is a key responsibility of the Board of Directors (BOD) in terms of corporate strategy?

    <p>Selecting, monitoring, and rewarding executives</p> Signup and view all the answers

    Why might the Board of Directors (BOD) be considered not objective and independent according to the text?

    <p>Operating without adequate information and independence</p> Signup and view all the answers

    What role can influential shareholders like institutional investors play in the governance mechanisms?

    <p>Obtaining board seats to increase monitoring role</p> Signup and view all the answers

    Which group typically makes up the Board of Directors (BOD) according to the text?

    <p>Insiders and outsiders including CEO and top managers</p> Signup and view all the answers

    According to the Swiss Code of Best Practice for Corporate Governance, what does Corporate Governance aim to achieve?

    <p>Maintaining transparency and a balanced relationship between leadership and control at the highest corporate level.</p> Signup and view all the answers

    What is the key problem highlighted when there is a separation of ownership and control in a company?

    <p>Agency Costs</p> Signup and view all the answers

    What is the role of stakeholders in relation to an organization's purpose?

    <p>Stakeholders can affect or be affected by the achievement of an organization's purpose.</p> Signup and view all the answers

    In a situation where interests are not aligned, what issue can arise between principals and agents?

    <p>Conflict of interests resulting in detrimental actions by either party.</p> Signup and view all the answers

    What is a common concern among stakeholders in terms of corporate governance?

    <p>Valuing personal interests over organizational goals.</p> Signup and view all the answers

    What is the main objective of the Board of Directors (BOD) according to the text?

    <p>To harmonize the interests of the CEO and the owners of the corporation</p> Signup and view all the answers

    Which governance mechanism helps in aligning executive compensation with company performance?

    <p>Stock options structured to reward success and penalize failure</p> Signup and view all the answers

    In M-Form organizational structure, which level typically has the most authority?

    <p>Colonel B</p> Signup and view all the answers

    What is a common feature of two-tiered boards in medium to large German firms?

    <p>Employees and union members providing board appointees</p> Signup and view all the answers

    How does corporate governance in Germany differ from U.S. firms according to the text?

    <p>Emphasis on shareholder value is declining in Germany but increasing in the U.S.</p> Signup and view all the answers

    What is the purpose of a 'Golden parachute' in corporate governance?

    <p>To provide guaranteed payment after job loss</p> Signup and view all the answers

    What is the primary aim of 'Empire Building' as a practice in corporate strategy?

    <p>To increase the size of the corporation without benefiting shareholders</p> Signup and view all the answers

    In the context of corporate governance, what do 'Poison pills' refer to?

    <p>Hindering activities for a takeover even when shareholders support it</p> Signup and view all the answers

    What is the main focus of 'Acquisitions and disinvestments' in corporate strategy?

    <p>To divest previous acquisitions to prevent legal issues</p> Signup and view all the answers

    Why are 'Insider trading' scandals considered a challenge to corporate governance?

    <p>They pose legal risks and undermine fair market practices</p> Signup and view all the answers

    What is one of the key responsibilities of the governing body in a corporation according to the text?

    <p>Appointing and dismissing key management personnel</p> Signup and view all the answers

    Which governance mechanism involves large-block shareholders who hold at least 5% of the issued shares?

    <p>Ownership Concentration</p> Signup and view all the answers

    In a corporation, what aspect does the governing body oversee specifically with regard to management?

    <p>Compliance with laws, statutes, and regulations</p> Signup and view all the answers

    Which mechanism is associated with the threat of takeover and measures against takeover in the corporate governance environment?

    <p>LBOs (Leveraged Buyouts)</p> Signup and view all the answers

    What does Ownership Concentration entail in terms of shareholders' stock holdings?

    <p>Holding at least 5% of the issued shares</p> Signup and view all the answers

    What is the primary purpose of executive compensation in corporate governance?

    <p>To align the interests of the owner and manager</p> Signup and view all the answers

    Why are strategic decisions considered complicating factors in compensation schemes?

    <p>They are influenced by many external factors</p> Signup and view all the answers

    How does stock ownership affect managers in terms of market changes?

    <p>It makes them contingent for market changes</p> Signup and view all the answers

    What role do incentive systems play in managerial decisions?

    <p>Increase the likelihood of managers acting in alignment with their incentives</p> Signup and view all the answers

    Which governance mechanism combines the interests of the owner and manager through various forms of payment?

    <p>Hierarchical GM</p> Signup and view all the answers

    Why do incentive systems not ensure that managers always make the 'right' decisions?

    <p>The 'right' decision is subjective</p> Signup and view all the answers

    Which aspect of compensation makes managers more responsive to market changes?

    <p>Long-term incentives like stock options</p> Signup and view all the answers

    Corporate governance aims to create long-term sustainable value for shareholders by aligning behavior, strategies, and operations with the interests of ___________

    <p>communities</p> Signup and view all the answers

    According to Peter Brabeck, the success of a company depends more on leadership and management principles than on corporate ___________

    <p>governance</p> Signup and view all the answers

    The key to creating corporate advantage lies in aligning the interests of the owners, top-management team, and ___________

    <p>employees</p> Signup and view all the answers

    The stakeholder value approach involves deriving goals related to returns, investments, labor management, and ___________

    <p>manpower</p> Signup and view all the answers

    Peter Brabeck emphasizes that regulations can never replace the importance of good personal ___________

    <p>integrity</p> Signup and view all the answers

    According to the Swiss Code of Best Practice for Corporate Governance, Corporate Governance aims to achieve transparency and an ____________ ratio of leadership and control

    <p>balanced</p> Signup and view all the answers

    When interests are virtually identical, the agency problem is small: executives do what is in principals’ best interests. However, when there are conflicting interests, then agents may act to the detriment of principals and ____________

    <p>vice-versa</p> Signup and view all the answers

    Stakeholders are defined as 'any group or individual who can affect or is affected by the achievement of an organization’s purpose'. This includes the Board of Directors, Owners/Shareholders, and those with personal ____________

    <p>interests</p> Signup and view all the answers

    The separation of Ownership and Control leads to the Agency Problem, resulting in Agency Costs incurred by the principals and ____________

    <p>agents</p> Signup and view all the answers

    Corporate Governance emphasizes creating shared value through competence, ambition, and ____________

    <p>integrity</p> Signup and view all the answers

    _______ barking: guaranteed payment of a specific amount of money after job loss

    <p>Golden parachutes</p> Signup and view all the answers

    _______: Hindering activities for a takeover (also when majority of the shareholders supported a takeover)

    <p>Poison pills</p> Signup and view all the answers

    _______ compensation involves the purchase of several businesses to raise the size of corporation, but not the shareholder value

    <p>Empire Building</p> Signup and view all the answers

    _______ and disinvestments: divestments of previous acquisitions

    <p>Acquisitions</p> Signup and view all the answers

    _______ scandals, e.g., overrating earnings (Enron)

    <p>Accounting</p> Signup and view all the answers

    In M-Form organizational structure, the ___________ typically has the most authority

    <p>General</p> Signup and view all the answers

    German corporate governance often involves a two-tiered board where management monitors and controls managerial decisions, while the Board of Directors elects the ___________

    <p>management</p> Signup and view all the answers

    In international corporate governance, there is often less emphasis on shareholder value in German firms compared to U.S. firms; however, this perception may be ___________

    <p>changing</p> Signup and view all the answers

    The primary aim of 'Empire Building' as a practice in corporate strategy is to expand the company's size or scope often at the expense of shareholder ___________

    <p>value</p> Signup and view all the answers

    The Swiss Code of Best Practice for Corporate Governance aims to achieve high standards of ___________ and transparency in corporate operations

    <p>integrity</p> Signup and view all the answers

    In corporate governance, executive compensation serves as a governance mechanism that aligns the interests of the owner and manager through payment of fixed salaries, bonuses, and long-term incentives such as ______

    <p>stock options</p> Signup and view all the answers

    Strategic decisions are considered complicating factors in compensation schemes because they are complex, non-routine, and have a long-term impact on the organization's ______

    <p>performance</p> Signup and view all the answers

    Stock ownership, as a long-term incentive compensation, makes managers contingent for market changes over which they have limited ______

    <p>control</p> Signup and view all the answers

    Incentive systems in executive compensation offer no guarantee that managers always make the 'right' decisions, but they increase the probability that managers set actions for which they are ______

    <p>paid</p> Signup and view all the answers

    The primary aim of executive compensation in corporate governance is to combine the interests of the owner with those of the manager by providing various forms of payment such as fixed salaries, bonuses, and long-term incentives like ______

    <p>stock options</p> Signup and view all the answers

    Institutional investors may obtain board seats to increase their monitoring role. Institutional investors have size (proxy voting power) and can affect firms' strategies. The Board of Directors (BOD) consists of insiders (CEO and other top-manager of the corporation) and outsiders (related and unrelated). BOD has a treasury responsibility to secure shareholders' investments. The primary task of the Board of Directors (BOD) is to act in the interests of the owners through regulation and monitoring of the top-managements. The Board of Directors (BOD) frequently operates without adequate information and is often not objective and independent as they are not involved in daily business. This lack of objectivity and independence can be a challenge in corporate governance due to the BOD not being fully _____ in the company's operations.

    <p>engaged</p> Signup and view all the answers

    In corporate strategy, the Board of Directors (BOD) plays a crucial role in decisions on corporate strategy, selection, monitoring, assessing, and rewarding executives, succession planning, protection of the value of corporate assets, regulation of the financial corporate conduct, and delegation of decision authority. The BOD is responsible for overseeing the overall corporate strategy and ensuring that the executives are aligned with the company's goals. One key responsibility of the Board of Directors (BOD) is to ensure that the executives' actions are in line with the company's _____ and long-term objectives.

    <p>short-term</p> Signup and view all the answers

    Corporate governance mechanisms like the Board of Directors (BOD) are essential for overseeing the corporate strategy and ensuring that the company's operations are in line with the interests of the shareholders. In the context of corporate governance, the primary aim of the Board of Directors (BOD) is to act in the best interests of the owners by regulating and monitoring the top management. This regulatory role helps in ensuring that the executives are accountable for their actions and that the company's operations are in compliance with the shareholders' _____.

    <p>interests</p> Signup and view all the answers

    In the realm of corporate strategy, one of the key challenges faced by the Board of Directors (BOD) is the lack of objectivity and independence. This lack of independence can hinder the BOD's ability to make unbiased decisions and oversee the corporate strategy effectively. To address this challenge, it is crucial for the Board of Directors (BOD) to ensure that they are fully ____ in the company's operations and have access to all relevant information.

    <p>engaged</p> Signup and view all the answers

    The Board of Directors (BOD) in corporate governance plays a critical role in overseeing the company's operations, regulating the financial corporate conduct, and ensuring that the executives are aligned with the company's goals. One of the primary objectives of the Board of Directors (BOD) is to protect the value of the corporate assets by making strategic decisions that safeguard the investments of the shareholders. This responsibility involves making decisions on corporate strategy, succession planning, and monitoring and assessing the executives to ensure that they are contributing to the _____ of the company.

    <p>growth</p> Signup and view all the answers

    Ownership Concentration entails the number of major shareholders and percentage of their stock holdings; holding at least 5% of the issued shares. Large-block shareholders have an interest to control ____________

    <p>management</p> Signup and view all the answers

    Hierarchical Governance Mechanisms involve the appointment and removal of individuals entrusted with management and representation tasks, such as the ____________

    <p>Board of Directors</p> Signup and view all the answers

    The Corporate Governance mechanism related to the threat of takeover and defensive measures against takeover is known as ____________

    <p>Corporate Raiders</p> Signup and view all the answers

    The key responsibility of a corporation's governing body includes overseeing the adherence to laws, statutes, regulations, and ____________

    <p>instructions</p> Signup and view all the answers

    The preparation of the business report and the facilitation of the General Assembly, along with executing its decisions, are tasks assigned to the body responsible for the ____________ of the company

    <p>management</p> Signup and view all the answers

    A key function of the hierarchical governance mechanisms is the appointment and dismissal of individuals entrusted with the management and representation of the company, emphasizing the importance of ____________

    <p>structure</p> Signup and view all the answers

    The notification to the judge in case of insolvency is part of the responsibilities related to financial control and financial planning, especially in the context of tackling ____________

    <p>over-indebtedness</p> Signup and view all the answers

    The governance mechanism that involves large-block shareholders holding significant stock percentages, typically at least 5% of the issued shares, is known as ____________

    <p>Ownership Concentration</p> Signup and view all the answers

    One of the primary roles of the governing body in a corporation is to provide the necessary guidance and ____________ to the organization

    <p>instructions</p> Signup and view all the answers

    In the context of corporate strategy, the main focus of the organization's structure, specifically the M-form, is to establish an efficient ____________

    <p>organization</p> Signup and view all the answers

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