If the market for corporate control were efficient as a governance device, then only ____ would be targets for takeovers. She said, Having a diversity on the board does not just mean having a bunch of CEOs or a bunch of capitalists.Having board members with different roles whether its a CIO or a CTO or you know independent board directors that come from a different background is really good. c. 50 d. outside directors own significant equity in the organization. The compensation of top executives of Chinese companies is closely related to pri-or and current financial performance of the firm. Consensus a. the firm is overpriced in the market. d.75. d. banks. c. executive compensation systems. Women should be appointed to boards for reasons of gender equality., Women Directors and Other Dimensions of Company Performance. In contrast to managers' desires, shareholders usually prefer that free cash flows be d. governmental relations. This wouldnt be a problem if diversity initiatives were not seen by many investors as little more than costly experiments. c. the employees directly involved in the wrongdo-ing. d.Mr. In a study of 1,069 leading firms across 35 countries and 24 industries, we found that gender diversity relates to more productive companies, as measured by market value and revenue, only in . c. the firm's top managers. d. requiring that outside directors be truly objective by having no ownership interest in the firm. a. Several members of the board of directors of American Textile Products (ATP) have proposed creating the position of lead director. a. management structures related to total quality management systems. Given the demands for greater accountability and improved performance, which of the follow-ing is NOT a voluntary change many boards of directors have initiated? But research conducted by consulting firms and financial institutions is not as rigorous as peer-reviewed academic research. Which of the following is TRUE of trends in Japan's corporate governance structure? a. usually on the verge of bankruptcy. A virtually exclusive reliance on financial controls may occur when outsider-dominated boards exist. Does this mean that we should not promote women to corporate boards? c. increased shareholder participation in decision making. c. the firm's tax issues. In order to limit Mr. Leagreet's power, the board of directors plans to a. There have been many rigorous, peer-reviewed studies of board gender diversity. Still, the relationship between gender diversity and accounting returns was tiny. d.always outperforming their industry. We find that companies that appoint women to the board see a decline in their market value for two years following the appointment (after which we no longer see any effect). But while many prescriptions for improving corporate governance focus on the structure of. ANS: D PTS: 1 DIF: Medium REF: 314 d. b. firms earning above-average returns d. 75. One means that is considered to improve the effectiveness of outside directors is d.establishing and using formal processes to evaluate the board's performance. People coming from that diverse role I think really does help a board to get better results.. 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. b. a standstill agreement. You know people listen. As one long-time board director described it: The problem is how boards get formed and how you fill vacancies. a. Cultivate trust and encourage the board to be involved in strategy. a. the firm's free cash flow. Shareholder value is b. banks and other lending institutions that have provided major financing to the firm. b. internal controls have failed. d.prevented by the Sarbanes-Oxley Act from owning more than 50% of the stock of any one firm. b. increase the price of the firm's stock, increase the dividends paid out from free cash flows Further, there is no evidence available to suggest that the addition, or presence, of women on the board actually causes a change in company performance. In a normal distribution, data values farther from the mean are c. the manager's supervisory needs are lowered, the manager is allowed greater time to oversee a wider range of activities The argument is that women differ from men in their knowledge, experiences, and values and thus bring novel information and perspectives to the board. d. more variable, The longer the focus of managerial incentive compensation, the greater the ____ top-level man-agers. Sometimes, its laziness. d. over-valued firms. But it would also mean that investors think it is possible for one incompetent female director to drive down the profitability of the company while her male colleagues watch helplessly from the sidelines. Here, I dig into the findings of rigorous, peer-reviewed studies of the relationship between board gender diversity and company performance. a. installation of an outsider as the lead director on the Board of Directors. The CEO's behav-ior may be indication of d. incentive. Some major Japanese firms are bringing in more outsiders onto their boards of directors. c. requiring outside directors to own significant equity stakes in the firm. This is because women bring new insights and perspectives and increase the cognitive diversity of the board. a. Mr. Abercrombie will have a large market in Japan because the culture highly val-ues consensus decision making. For example, Norway, Spain, France, and Iceland all have laws requiring that women comprise at least 40% of boards at publicly listed companies. d.risk managers will not find a new top management position if they should be dismissed. "Which of the following reasons would NOT explain the difficulty of determining appropriate executive compensation? d.internal auditing costs have increased by about one-third. c. liable for any illegal actions by the top management team. The best way to get the board to trust the executive team is to keep them involved. d. the opportunity for higher compensation through firm growth, a reduction in mana-gerial employment risk. d.independence of the committees on the firm's Board of Directors. 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: b. large institutional investors control large blocks of stock. Implementing a director appraisal system. We then gave the participants a list of 10 corporate goals and asked them how much they thought the company cared about each of them. c. Borders' decision to increase the size of its board a. the firm's free cash flow. b. the board of directors of IFS. d. The compensation committee may not have comprehensive firm performance data. "One means that is considered to improve the effectiveness of outside directors is: Amos Ball, Inc., is a printing company in Iowa that has been family owned and managed for three generations. It is not because companies perform worse after they appoint female directors. Companies that engage in CSR, or intend to do so, may be particularly inclined to appoint women to the board. International Food Services (IFS) has a contract with the Marines to supply meals for its troops in Iraq and other foreign assignments. This seems unlikely. Many boards continue to recruit directors from the pool of current or former CEO/CFOs, and changing demographics within these pools do present opportunities to recruit more diverse members. Collegial boards are more likely to accept and integrate differences of opinion. b. higher c. an increased number of IPOs (initial public offerings) are expected. German executives are not dedicated to the maximization of shareholder value largely because: 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 takeover defense wherein preferred stock in the merged firm is offered to shareholders at a highly attractive rate of exchange is called At a meeting over dinner, the top management team agrees to go to the board of directors with a proposal for: "Research suggests that boards of directors perform better if: But our research suggests that shifting the diversity discourse away from gender to other dimensions of expertise and experience might, in fact, help women and other underrepresented groups for example, instead of saying we have appointed a female director the focus should be we have appointed an expert on China. With less emphasis on gender, female appointments might one day no longer be perceived as checking a social performance box, and signal nothing about firm preferences other than its commitment to hiring the best people for the job. The CEO was involved in overstating company revenues and profits. d.governmental relations. c. safer strategies with more focused diversifica-tion for the firm. In contrast to hierarchical boards, more egalitarian boards have a more collegial board culture. c. compensating directors with stock options rather than with fixed remuneration "As ownership of the corporation is diffused, shareholders' ability to monitor managerial decisions: c. the corporation has greatly exceeded performance expectations. If male and female board members are fairly similar in their values, experience, and knowledge, the addition of women to an all-male board may not increase the boards cognitive variety as one might expect at first blush. CamCell is presently searching for a new CEO. There are small but dependably positive associations of female representation in CEO positions and TMTs with long-term value creation for a firms fiscal outcomes. These dynamics appear to shape whether diversity on the board actually matters to the boards work. Spoiler alert: Rigorous, peer-reviewed studies suggest that companies do not perform better when they have women on the board. In sum, the research results suggest that there is no business case for or against appointing women to corporate boards. A growing body of research including studies by McKinsey & Company has proven that companies with more women in senior executive and board roles have advantages over those that dont.. Which of the following is most likely to be TRUE? Research suggests that boards of directors perform better if a. the CEO is also the chairperson of the board of directors. y=2x+8;y=12;1x2. Its worth noting that even if the meta-analyses revealed a stronger relationship between board gender diversity and firm performance, we couldnt conclude that board gender diversity causes firm performance. 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. b. c. public pension funds One interviewee discussed how this was a particularly challenging dynamic on a board that was resistant to input either from shareholders or board members: There was not a lot of open communication. the board includes employees as voting members.c. The women named to corporate boards may not in fact differ very much in their values, experiences, and knowledge from the men who already serve on these boards. 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. Research suggests that boards of directors perform betterif a. the CEO is also the chairperson of the board ofdirectors. a. d.over-valued firms. Similarly, the relationship of top management team (TMT) gender diversity and company performance is statistically significant but very small. Our evidence is consistent with Sah and Stiglitz. Many boards are also broadening the range of professional backgrounds considered for board member positions, allowing them to attract more socially diverse directors who bring, as one interviewee referred to it, diversity of thought. This is easier to achieve when boards avoid filling open seats with people already in their personal and professionals networks. "A virtually exclusive reliance on financial controls may occur when outsider-dominated boards exist. Pletzer, Nikolova, Kedzior, and Voelpel (2015) took a different approach, conducting a meta-analysis of a smaller set of studies 20 studies that were published in peer-reviewed academic journals and that tested the relationship between board gender diversity and firm financial performance (return on assets, return on equity, and Tobins Q). This plan will be very attractive in luring candidates for the CEO position. And in many cases, this might mean recruiting board members outside of existing networks. b. may not have a direct effect on firm performance. Also discuss the following: How will the company justify the travel costs? "In the U.S. the fundamental goal of business is to: "In the U.S., a firm's key stakeholder(s) is(are) the: "Which of the following is NOT an internal governance mechanism? Research following the resource dependence theory generally expects boards to have a positive effect on firm performance by engaging in the resource provision function, as doing so the firms to benefit from directors' human capital and social capital in value creation ( Haynes and Hillman, 2010; Jiang et al., 2020 ). At a meeting over dinner, the top management team agrees to go to the board of directors with a proposal for Some have expressed concern that broadening the definition of diversity, without associated efforts to reduce bias in director selection efforts, could provide firms with an out, effectively allowing them to exclude underrepresented demographic minorities from the board. shipping point, and $22,000 of goods sold to Alvarez Company for$30,000, f.o.b. d. Banks have less influence on the governance of German corporations than they do on U.S. corporations. d. the board of directors. b. typically under-performing their industry. Nor do they perform worse.. c. liable for any illegal actions by the top management team. Who is ultimately responsible for the corporate climate that resulted in this wrongdoing? b. This may lead to all of the following EXCEPT The Vorstand (management board) of a German corporation makes decisions about strategy and management. When individuals are minorities, tokens, or outliers in a group, they often self-censor, holding back from expressing beliefs and opinions that run counter to the beliefs and opinions of the majority of the group. Differing views between board members act as a governance mechanism, preventing radical decisions from being made. The argument that gender diversity on the board will improve company performance rests on the assumption that the addition of one or more women to an all-male board will increase the boards cognitive variety because women the argument goes differ from men in their values, experiences, and knowledge. Who is ultimately responsible for the corporate climate that resulted in this wrongdoing? c. an increased number of IPOs (initial public offerings) are expected. b. requiring that outside directors be former executives of the firm. c. excessive management compensation. a. available to comment to external analysts. d.defense tactics make the costs of a takeover lower. a. going to actively defend their firm from takeover attempts. The CEO's behavior may be indication of: d. Section 404 creates excessive costs for firms. So, existing findings could reflect a causal relationship, a reverse-causal relationship, or the effects of other variables. The market for corporate control may not be as efficient as previously thought as recent findings suggest that those firms targeted for takeover by active corporate raiders are d. the proportion of insiders on the board of directors. c. opportunity a. setting the option strike price substantially higher than the current stock price. During the debate, one of the directors raises the point that CalPERS owns a significant portion of Acme Brand stock. 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. b. strengthening the internal management and accounting control systems c. Institutional investors disapprove of long-term executive incentive plans and they may sell their blocks of stock in CamCell. We showed them a press release of a fictional company, announcing the appointment of Jack Smith or Marilyn Clark as a new member of the board. Many of our interviewees suggested that their boards had made progress on gender diversity but not on other forms of social diversity such as race, nationality, and age. How to build a better, more just workplace. And, finally, even if the addition of women to corporate boards does improve cognitive variety and decision making, companies may only see benefits to their accounting performance (their sales, profits, return on assets, for example) not their market returns. d. a variety of compensation plans for executives of foreign subsidiaries. c. salary. Byron and Post (2016) meta-analyzed the results of 87 studies and found that board gender diversity is weakly but significantly positively correlated with CSR. Mr. Abercrombie has had striking success in reducing conflict and hostil-ity among directors and allowing boards to develop more cohesiveness. b. enforcement This plan will be very attractive in luring candidates for the CEO position. Women should be appointed to boards for reasons of gender equality, but not because gender diversity on boards leads to improvements in company performance. "The interests of multinational corporations' shareholders may be best served when there is: d.the difference in risk propensity between owners and managers. Conventional wisdom says gender diversity in the corporate boardroom improves company performance. a. the CEO is also the chairperson of the board of directors. b. internal auditing scrutiny has improved and there is greater trust in financial report-ing. c. private shareholders rarely have large ownership positions in the firm. Knowledge at Wharton is an affiliate of the Wharton School of the University of Pennsylvania. c. the number of outside directors and the parties they represent. d. Large institutional investors such as pension funds, and insurance companies are relatively insignificant owners of corporate stock. The results of these two meta-analyses, summarizing numerous rigorous, original peer-reviewed studies, suggest that the relationship between board gender diversity and company performance is either non-exist (effectively zero) or very weakly positive. b. returned to them as dividends. a. greenmail. c. managers' risk of job loss, loss of compensation, and/or loss of reputation. 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Our foremost conclusion is that there is no cumulative, zero-order evidence of long-term performance declines for firms that have more females in their upper echelons (as CEOs or TMT members). d.greater concentration on Sierra's core industry. c. A number of factors intervene between top-level management decisions and firm performance (e.g., unpredictable economic, social, or legal changes). 2023 Knowledge at Wharton. The governance mechanism most closely connected with deterring unethical behaviors by hold-ing top management accountable for the corporate culture is b. the number of stockholders and total percentage of shares they own. "Shareholder value is: Research suggests that boards of directors perform better if: a. outside directors own significant equity in the organization. When they argue, they do it in a pretty much respectful way. b. government auditors. Research suggests that firms with ____ perform better, especially when collaboration among top management team members is important: A primary objective of corporate governance is to: Which of the following is a FALSE statement about corporate governance? We dont know exactly why this theoretical logic doesnt hold among corporate boards. As a means of increasing profits, IFS has used substandard ingredients in these meals and has consistently lied about this practice during quality investigations by the Marines. d. ownership of a company to a second party. The Vorstand of a German corporation makes decisions about organization direction and management. d. The CEO was a recipient of the Golden Peacock Award for Corporate Governance. primary focus is on maximizing shareholder value. 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 com-pany for takeover is called a. mandating that all outside directors be drawn from government or academia rather than industry. They are more a function of general market conditions. Do companies with women on the board perform better than companies whose boards are all-male? a. used to diversify the firm. Klein is also the vice dean of the Wharton Social Impact Initiative. b. Working in a group, discuss how the New Therapy Company can meet the deadline and still ensure a high quality of care. c. gives the Board of Directors more power. b. a weak board of directors. The team members are becoming concerned about the security of their jobs at Sierra Infusion. Other things being equal, market analysts may, consciously or unconsciously, regard all-male boards as more competent than boards that are more gender-diverse. The authors conclude the following: Undoubtedly, breaking the glass ceiling matters. The CEO tended to dominate the conversation. b. "The market for corporate control serves as a means of governance when: b. positively related to d. The firing by President Obama of the CEO of General Motors because the board had failed to act in previous years. b. the board includes employees as voting members. The fact that a hostile takeover has occurred is proof that the firm was un-der-performing. Accelerate your career with Harvard ManageMentor. a. safer strategies with greater diversification for the firm. Writing recently on Huffington Post, for example, one consultant observed the following: Companies with gender-diverse management teams have been proven to consistently perform better and be more profitable than those without them. The board wishes the CEO to take more short-term risks in order to achieve poten-tially higher long-term returns. c. strategy implementation actions to functional managers. c. used to reduce corporate debt. "Managers in the U.S. receive ____ compensation than managers in the rest of the world. "The governance mechanism most closely connected with deterring unethical behaviors by holding top management accountable for the corporate culture is: Even if the women named to corporate boards are different from the men on these boards, they may not speak up in board conversations and they may lack the influence to change the boards decisions. a. Agricultural Chemicals, Inc., was the target of a hostile takeover six months ago. If this was the case, board diversity could have no effect on operating performance but still have a negative effect on market returns. d. ownership of a company to a second party. b. risks borne by d.encumbered. c. excessive management compensation. The separation between firm ownership and management creates a(n) ____ relationship. By and large, the obverse is true: breaking glass helps firms slightly. They prefer to start from a position of trust. a. shareholders in the large institutional firms listed on the New York Stock Exchange. Researchers have also studied the relationship between board diversity and various board decisions and practices such as acquisitions, board monitoring and dividend payouts (Ararat, Aksu, Cetin, 2015; Chen, Crossland and Huang, 2016; Chen, Leung, & Goergen, 2017). b. Japanese firms will have little interest in Mr. Abercrombie's specialty because these skills are already practiced at a high level. Managers in the U.S. receive ____ compensation than managers in the rest of the world. "Several members of the board of directors of American Textile Products (ATP) have proposed creating the position of lead director. All of the following are correct about the chapter Strategic Focus on fraud and corporate gov-ernance failure at Satyam Computer Services Ltd. a. reasonably compensating a CEO. a. An agency relationship exists when one party delegates a. ownership concentration. b. greater managerial autonomy. destination. b. the total revenue of the firm. I think its also clear to say if youve got the longer-term members that came from the old established approach to the way boards were runthey may just not be quite as supportive in some cases., In boards like these, interviewees said discussing the issues rather that shrinking away from them was of utmost importance. The board wishes the CEO to take more short-term risks in order to achieve potentially higher long-term returns. c. financial institutions such as mutual funds and pension funds that control large-block shareholder positions. a. increases. b. headed by outside directors. What amount should Stallman report as its December 31 inventory? d. potential tax burden for. Hostile takeover attempts are so common that they do not reflect negatively on the firm's performance. d. consulting accounting advisors to make sure that the plan transfers wealth to the CEO without immediately appearing on the balance sheet of CyberScope. b. typically under-performing their industry. Which of the following statements is true? 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. c. large block shareholders such as mutual funds and pension funds. The interests of multinational corporations' shareholders may be best served when there is The Vorstand is elected by the firm's employees. b. executive compensation that is primarily based on long-term performance. d.reduce the size of the stock option package provided to Mr. Leagreet. c. the board is homogenous in composition. ____ is an important influence in Japanese corporate governance structures. b. a standstill agreement. a. elect an insider as the lead director. c. having the stock option plan designed by insiders on the board of directors who are familiar with day-to-day operations of the firm. The CEO of Alta Corp. is dismayed by a lack of effort and insights his directors provide during board meetings. c. increased shareholder participation in decision making. d. The CEO and top executives should not consider their jobs secure. "Simon Leagreet, the Chairperson and CEO of L-EVA Industries, Inc., has long been the major power at L-EVA. Research suggests that boards of directors perform better if a. the CEO is also the chairperson of the board of directors. For example, our interviewees on the boards of hi-tech start-ups and cyber security firms revealed that women, minorities, and younger board members often hold these coveted roles on boards in their firms and industries. A recent study, of board. b. inside d. has weakened the effect of other governance mechanisms. b. may not have a direct effect on firm performance. d. of the focus on stewardship-management in German firms rather than the financial performance focus of U.S. firms. EXCEPT 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. b. large institutional investors control large blocks of stock. d. made up of CPAs with auditing experience. However, rigorous, peer-reviewed academic research paints a different picture. Complete the following: In small firms, managers often own a ____ percentage of the firm, which means there is ____ separation between ownership and managerial control. In Japan, the principal source of the active monitoring of large companies comes from
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