425 Chapter 10 Corporate Governance
Why is corporate governance so challenging? - answerIt is comprehensive in scope and
complex in nature.
Corporate governance is a tool for achieving which organizational goal? - answer
establishing and maintaining harmony between owners and managers
What impact have activist investors had on corporate governance?
They have decreased focus on corporate governance.
They have expanded the number of stakeholders.
They have increased focus on corporate governance.
They have undermined the efficacy of corporate governance. - answerThey have
increased focus on corporate governance.
How do shareholders manage the risk they take on with firm ownership?
They lower employee wages.
They take activist positions.
They diversify their shareholdings.
They invest very little. - answerThey diversify their shareholdings.
How do family-owned businesses grow successfully while remaining family-owned?
They give up their equity in the business so it can grow.
They expand ownership to more family members.
They contract with managerial specialists while maintaining equity.
They establish franchises. - answerThey contract with managerial specialists while
maintaining equity.
What happened to founder-owned U.S. firms as they grew?
They acquired larger companies.
They remained founder-owned and founder-controlled.
Control stayed with the founder-owners while management shifted to professionals.
Control shifted to professional managers while ownership shifted to shareholders. -
answerControl shifted to professional managers while ownership shifted to
shareholders.
What happens when the interests of ownership and control diverge?
Managerial opportunism emerges.
Managerial expertise emerges.
Owners take on managerial responsibilities.
The corporation expands. - answerManagerial opportunism emerges.
Why is corporate governance so challenging? - answerIt is comprehensive in scope and
complex in nature.
Corporate governance is a tool for achieving which organizational goal? - answer
establishing and maintaining harmony between owners and managers
What impact have activist investors had on corporate governance?
They have decreased focus on corporate governance.
They have expanded the number of stakeholders.
They have increased focus on corporate governance.
They have undermined the efficacy of corporate governance. - answerThey have
increased focus on corporate governance.
How do shareholders manage the risk they take on with firm ownership?
They lower employee wages.
They take activist positions.
They diversify their shareholdings.
They invest very little. - answerThey diversify their shareholdings.
How do family-owned businesses grow successfully while remaining family-owned?
They give up their equity in the business so it can grow.
They expand ownership to more family members.
They contract with managerial specialists while maintaining equity.
They establish franchises. - answerThey contract with managerial specialists while
maintaining equity.
What happened to founder-owned U.S. firms as they grew?
They acquired larger companies.
They remained founder-owned and founder-controlled.
Control stayed with the founder-owners while management shifted to professionals.
Control shifted to professional managers while ownership shifted to shareholders. -
answerControl shifted to professional managers while ownership shifted to
shareholders.
What happens when the interests of ownership and control diverge?
Managerial opportunism emerges.
Managerial expertise emerges.
Owners take on managerial responsibilities.
The corporation expands. - answerManagerial opportunism emerges.
