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Strategic Management Chapter 10
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Chapter 10—Corporate GovernanceTRUE/FALSE
1. According to the chapter Opening Case, an average of $47.22 million was paid to CEOs in 2008 when
their firms had experienced significant losses.
ANS: T PTS: 1 DIF: Medium REF: 285
OBJ: 10-01 TYPE: application
NOT: AACSB: Business Knowledge & Analytical Skills | Management: Leadership Principles |
Dierdorff & Rubin: Managing administration & control
2. According to the chapter Opening Case, despite popular beliefs, most CEOs did not receive pay
increases when their firms lost market value.
ANS: F PTS: 1 DIF: Medium REF: 285
OBJ: 10-01 TYPE: application
NOT: AACSB: Business Knowledge & Analytical Skills | Management: Leadership Principles |
Dierdorff & Rubin: Managing administration & control
3. According to the chapter Opening Case, most CEOs earn about 10 times the amount received by their
lowest-paid employee.
ANS: F PTS: 1 DIF: Medium REF: 285
OBJ: 10-01 TYPE: application
NOT: AACSB: Business Knowledge & Analytical Skills | Management: Leadership Principles |
Dierdorff & Rubin: Managing administration & control
4. The chapter Opening Case reports on a survey in the Financial Times where respondents from several
countries believed that business leaders were not paid too much.
ANS: F PTS: 1 DIF: Medium REF: 285
OBJ: 10-01 TYPE: application
NOT: AACSB: Business Knowledge & Analytical Skills | Management: Leadership Principles |
Dierdorff & Rubin: Managing administration & control
5. The chapter Opening Case suggests that an inadequate system of corporate governance is frequently
blamed for high CEO pay during periods where corporate performance has been poor.
ANS: T PTS: 1 DIF: Medium REF: 285
OBJ: 10-01 TYPE: application
NOT: AACSB: Business Knowledge & Analytical Skills | Management: Leadership Principles |
Dierdorff & Rubin: Managing administration & control
6. Corporate governance is the set of mechanisms used to manage the relationship among stakeholders
and to determine and control the strategic direction and performance of an organization.
ANS: T PTS: 1 DIF: Easy REF: 286
OBJ: 10-01 TYPE: knowledge
NOT: AACSB: Business Knowledge & Analytical Skills | Management: Creation of Value | Dierdorff
& Rubin: Managing administration & control
, 7. Corporate involves oversight in areas where owners, managers, and members of boards of directors
may have conflicts of interest.
ANS: T PTS: 1 DIF: Easy REF: 286
OBJ: 10-01 TYPE: comprehension
NOT: AACSB: Business Knowledge & Analytical Skills | Management: Leadership Principles |
Dierdorff & Rubin: Managing administration & control
8. Corporate governance is a means to establish harmony between parties (the firm’s owners and its top-
level managers) whose interests may conflict.
ANS: T PTS: 1 DIF: Easy REF: 286
OBJ: 10-01 TYPE: comprehension
NOT: AACSB: Business Knowledge & Analytical Skills | Management: Leadership Principles |
Dierdorff & Rubin: Managing administration & control
9. In modern corporations-especially those in the United States and United Kingdom-a primary objective
of corporate governance is to ensure that the interests of top-level managers are aligned with the
interests of shareholders.
ANS: T PTS: 1 DIF: Easy REF: 286
OBJ: 10-01 TYPE: comprehension
NOT: AACSB: Business Knowledge & Analytical Skills | Management: Leadership Principles |
Dierdorff & Rubin: Managing administration & control
10. Recent emphasis on corporate governance stems mainly from the failure of corporate governance
mechanisms to adequately monitor and control top-level managers’ decisions.
ANS: T PTS: 1 DIF: Easy REF: 286
OBJ: 10-01 TYPE: comprehension
NOT: AACSB: Business Knowledge & Analytical Skills | Management: Leadership Principles |
Dierdorff & Rubin: Managing administration & control
11. The three internal corporate governance mechanisms are ownership concentration, board of directors,
and the market for corporate control.
ANS: F PTS: 1 DIF: Medium REF: 287
OBJ: 10-01 TYPE: comprehension
NOT: AACSB: Business Knowledge & Analytical Skills | Management: Leadership Principles |
Dierdorff & Rubin: Managing administration & control
12. Executive compensation is considered an external corporate governance mechanism because it
determined in part by market forces.
ANS: F PTS: 1 DIF: Medium REF: 287
OBJ: 10-01 TYPE: comprehension
NOT: AACSB: Business Knowledge & Analytical Skills | Management: Leadership Principles |
Dierdorff & Rubin: Managing administration & control
13. In the United States, the primary goal of a firm is to maximize profits to provide a financial gain to
shareholders.
ANS: T PTS: 1 DIF: Medium REF: 287
OBJ: 10-02 TYPE: comprehension
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