Key terms for Final Exam

Question 1

Strategic Control objectives

Answer 1

1. Once the strategy is formulated, it must be implemented, and part of implementation is establishing a mechanism for monitoring and correcting organizational performance
2. must be consistent with Firm Strategy
3. Consider How does a firm make sure all key stakeholders are moving in the right direction?

Question 2

Strategic Control

Answer 2

involves monitoring performance toward strategic goals and taking corrective action when needed via effective systems.

Question 3

Traditional Approach of Strategic Control

Answer 3

Sequential

1. Strategies are formulated, Goals are set
2. Strategies are implemented
3. Performance is measured against goals set

Question 4

Informational Control Question

Answer 4

Is the organization “doing the right things”?

Question 5

Behavioral Control

Answer 5

Is the organization “doing things right” in the implementation of its strategy?

Question 6

Contemporary Control

Answer 6

1. focus on constantly changing information that has potential strategic importance
2. information is important enough to demand frequent and regular attention from all levels
3. Data is interpreted and discussed
   in face to face meetings
4. control system is a key catalyst for the ongoing debate over underlying data assumptions and action plans

Question 7

Organizational Culture

Answer 7

system of shared values and beliefs- it shapes a firm’s people, structure, and control systems

PRODUCES BEHAVIORAL NORMS “ THE WAY WE DO THINGS AROUND HERE”

Question 8

Contract-based outcomes

Answer 8

reward & compensation agreements that align management & stockholder interests

Question 9

Shareholder Activism Assumes:

Answer 9

1. Individual Shareholders Have Rights to sell a stock, vote the proxy, bring suites for damage, receive residual rights following a liquidation
   2.

Question 10

Institutional Investors can be aggressive by

Answer 10

By reviewing performance, requesting changes in the firm’s governance structure, filing court action, pushing social initiatives

Question 11

The Board on managerial incentives

Answer 11

1. can require the CEO to purchase substantial ownership in the stock
2. provide a reward for good performance and repercussion for bad performance
3. dismissal for poor performance should be a real threat

Question 12

CEO duality

Answer 12

refers to a dual leadership structure where the CEO acts as head of the board of directors
two theories on whether it works or doesn’t: Unity of Command & Agency Theory

Question 13

Agency Theory

Answer 13

Charmain and CEO position should not be held by the same person - separation of power

1. Conflict of internal control
2. eliminates the ability for the board to review and place limits on what the CEO does
3. No longer able to safeguard assets

Question 14

Unity of Command

Answer 14

having the position as both a CEO & Chairman allows them to act more efficiently

1. eliminates confusion
2. enhances responsiveness
3. enables quick decisions based on knowledge

Question 15

External Control governance control mechanisms

Answer 15

make sure that managerial actions are actually maximizing shareholder value & do not harm other stakeholder groups that could be affected by the corporation

Question 16

Take over constraint

Answer 16

fear of acquisition by hostile raider

Question 17

The market for Corporate Control

Answer 17

external control mechanisms in which shareholders dissatisfied with how the corporation is being run by the executives sell their shares.

Question 18

Principal- Principal Conflicts

Answer 18

the conflict between controlling shareholders and minority shareholders.

Question 19

Counterproductive behavior can arise because

Answer 19

lack of understanding, motivated self-interest, or outright malfeasance