Prelims-goodgov-ans

Part I. Multiple Choice 1. The basic premise on accountability is that accountable organization will a. All choices below b. Set a policy based on balance understanding and response to material stakeholders issues and concerns c. Disclosed creditable information d. Set goals and standards against which strategy and associated performance can be measured & evaluated 2. Which is not a benefit of good governance? a. improves marketability b. reduce the vulnerability of companies c. reduction of corporate value d. improve company’s credibility 3. The primary inside stakeholder of a corporation a. Bondholder b. Board of directors c. Shareholders d. Public 4. Which one is not the role of non-executive director a. Monitoring of performance b. Audit c. Implements internal control d. Setting of strategy 5. Which one is not a role of CFO? a. Supervises major impact projects b. Relationship role c. Risk manager d. None of the above 6. The following are the external risk (independent) that the audit committee should consider except a. Downturns in the industry b. Rapid technological changes c. Unrealistic earnings expectation d. Turn over of key personnel 7. Which of the following would contribute to information risk a. Unsuitable control environment b. Lack of sincere management supervision c. Inappropriate management override d. All of the above 8. Which one is/are not part of corporate governance? a. BOD b. CFO c. CEO d. All of the above e. None of the above 9. Which one is not among the incentives and disincentives of agency under principal-agent relationship? a. Managerial defensiveness b. Share incentives c. Threat of being fired d. Takeover threat

10. Which is not among the effects of agency in governance? a. Conflict of interest b. Managerial opportunism c. Incurrence of agency cost d. All of the above e. None of the above 11. One of the tasks for financial managers when identifying projects that increase firm value is to identify those projects where a. Benefits are at least equal to the project’s costs b. Taking the project will increase the book value of the firm’s ordinary shares c. Taking the project will decrease the book value of the firm’s debt outstanding d. None of the above 12. Which form of invested capital is subject to most of the firm’s business and financial risk? a. Debt capital b. Equity capital c. Borrowed capital d. Intellectual capital 13. The rules dictating voting procedures and other aspects of corporate governance for a corporation are a. The minutes of the board of directors meeting b. The articles of incorporation c. The corporate governance institute of the Philippines d. The securities and exchange commission’s rules for corporate governance 14. The ultimate owner(s) of a corporation are a. National government b. The debt holders c. The equity holders d. The executive staff of the corporation 15. Agency costs refer to a. The costs associated with managing the demands of government agencies b. The costs involved when converting an entity from a proprietorship to a corporation c. The costs that arise due to conflicts of interest between shareholders and managers d. None of the above 16. Managers of firms should only take actions that: a. Increase the value of the firm’s future cash flows b. They expect will increase the firm’s share price c. Have benefits which are at least as great as the cost of those actions d. All of the above 17. Which of the following parties have the proper incentives to make risky, value increasing investments for the firm? a. Suppliers b. Creditors c. Shareholders d. Managers who are only compensated with a salary 18. Shareholders can attempt to overcome agency problems by all but the following: a. Incurring costs to monitor managers b. Paying managers a good salary c. Relying on market forces to exert managerial discipline d. Paying the manager a proportion of the profits that the firm generates

19. Which of the following is one of the most expensive methods for the firm to overcome agency costs? a. Let the securities and exchange commission inform the firm of a problem b. Proper design of an executive’s compensation contract c. Monitor the executive’s work d. Require executives to own a large proportion of their firm’s outstanding shares 20. Which of the following is the best bonding expenditure to help limit agency costs? a. Auditing the managers work on a monthly basis b. A contract whereby the manager will forfeit a portion of his deferred compensation in the event of poor performance c. Granting the manager a large number of options that will become valuable if the firm performs well d. Paying the manager a bonus if the firm performs well 21. A root cause of firm agency costs is a. Managerial carelessness b. A manager owning too much of his firm’s stock c. A manager concern for his personal well-being d. The various BIR and SEC filing requirements 22. Which of the following is a strength of the corporate form of business? a. Limited life of the business b. Unlimited access to capital c. Unlimited liability d. Double taxation of income 23. Which of the following is not a strength of a corporate form of business? a. Unlimited life of the business b. Unlimited access to capital c. Unlimited liability d. Individual contracting 24. Shareholders are said to have a residual claim on the firm’s assets. What does this mean? a. Shareholders have limited liability in their investment b. Shareholders do not receive any payoff from the firm until all creditors are paid c. Shareholders are allowed to recover their investment first if the firm experiences financial distress d. Shareholders have priority in electing the board of directors for the firm 25. What is fiduciary? a. Someone who performs ratio analysis for a corporation b. Someone who invest and manages money on someone else’s behalf c. Someone who manages the release of initial public offering d. Someone who evaluates the performance of individual bonds. 26. What is the proper goal for management of a firm? a. Maximize shareholder wealth b. Maximize net income or earnings c. Maximize sales revenue d. Minimize expenses 27. What is a basic guide for financial decision making? a. Make decisions where the benefits exceed the costs b. Make decisions where the total benefits exceed the total costs c. Make decisions where the average benefits exceed the fixed costs. d. Make decisions where the average benefits exceed the average costs

28. Which of the following describes the “collective action problem”? a. When a CEO fails to represent the interest of shareholders in daily decisions of the firm b. When the shareholders of a firm fail to act in their own best interests c. When the managers of a firm lack incentive to maximize shareholder wealth d. When an individual stockholder spends time and resources monitoring managers, bearing the cost, while the benefits go to all the shareholders in the firm 29. You were just hired as the CEO of the company. Your primary objective should be a. To maximize the company’s earnings b. To maximize profits c. To maximize the company’s price of ordinary shares d. To eliminate the company’s competitors 30. What should be the objective of a focus on stakeholders? a. Maximize the stakeholders’ interests b. In situations of conflict pick stakeholders’ interests over shareholders’ interest c. Preserve stakeholders’ interests d. Disregard shareholders’ interests all together 31. Which of the following encourages managers to act in the shareholders’ interests? a. Performance-based compensation b. Audits c. Threat of hostile takeovers d. All of the above 32. Why do shareholders bear most of the risk of running a firm? a. They only have a residual claim on the firm’s cash flows b. They receive a salary from the company c. They are guaranteed a fixed payout each quarter d. Shares can be taken away at any time without notice 33. What do we call the possible conflict of interests between shareholders and management? a. Agency problem b. Stakeholder problem c. Double taxation d. Shareholders’ dilemma 34. Investors except management to do all of the following except a. Consult them on ethical decisions b. Increase sales c. Boost the company’s profit d. Increase the return to the investor e. Make sensible financial decisions 35. What are the responsibilities of the board of directors in a corporation? a. Hire and fire managers b. Manage day-today operations c. Amend the firm’s articles of incorporation when necessary d. Hire and fire entry level employees 36. As a manager, you encountered an important problem that seems almost impossible to solve. Top management would likely suggest that you a. hire a consultant who brings the right knowledge and expertise to the problem. b. stand out of the way and let someone else work on the issue.

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c. try using different lenses to analyse the problem and develop strategies. d. call a meeting of everyone who knows about the issue and make a group decision about what to do. It is argued that even the smartest managers take foolish actions in decision- making because they a. are too clever for their own good. b. have a parochial and distorted view of the problem at hand. c. are driven by self-love and ego, which stifle their ability to understand a situation correctly. d. fall into the trap of personality foibles such as pride, haughtiness and unconscious need to err. As described the actions of the successful manager as similar to a skilled carpenter using the right tools for the job. Thus, successfully manager must a. make sure their organizations are “level” (i.e. balanced) b. possess “ a diverse collection of high-quality implements. (i. e. frames)” along with the knowledge of when and how to use them. c. “measure twice but cut once” (i.e. employees) for the job. The world the we perceive is for the most part a. constructed objectively. b. existing independent of us. c. constructed internally on the basis of individuals’ beliefs and perceptual filters. d. dependent upon the quality of our sight. When defining an organization’s structure, the key consideration should involve a. allocation of responsibilities across different units and members as well as the integration of these efforts in pursuit of common goals. b. the number of organizational levels and their breadth. c. the level of centralization versus decentralization of responsibilities. d. ways on how to effectively motivate organizational members to maximize their performance. The organization’s structure should not be dependent upon a. its workforce. b. goals. c. emotional liability. d. technology. Patriarchal organizations are characterized by a a. fixed division of labor. b. hierarchy of offices. c. set of rules governing performance. d. dominant father figure or a ruler with almost unlimited authority and power. When designing the structure of an organization, creating roles and units yields benefits of specialization but creates problems of ________. a. pay scales for the various roles. b. how to motivate the employees in each unit. c. coordination and control. d. where to locate the different units. Forecasting and measuring organizational performance is accomplished through ___________. a. planning and control systems. b. rules and regulations. c. formal authority. d. standard operating procedures.

45. Lateral coordination is often achieved through a. rules and regulation. b. authority and delegations. c. meetings and task forces. d. a clear chain of command. 46. __________ are becoming more prevalent in fast moving fields like biotechnology, where knowledge is so complex and widely dispersed that organizations find it impractical to exercise initiatives alone. a. Inter-organizational networks b. Matrix structures c. Task forces d. Rules and regulations 47. When deciding how to coordinate work roles and units in an organization, it is best to a. use either vertical or horizontal coordination but not both. b. base the choice on the workers’ preference. c. base the decisions on the leader’s preference. d. base the choice on the organization’s environment. 48. If employees are unclear about what they are supposed to do, they often tailor their roles around a. the most professional standards. b. personal preferences. c. industry standards. d. organizational goals. 49. The chief contribution of Henry Mintzberg’s conception of structural possibilities is a. a detailed prescription of how to structure an organization in response to different missions and external challenges to envision organizations as webs of inclusion. b. clustering various functions into groupings and showing their relative size and clout in response to different missions and external challenges. c. to envision organizations as organic, circular architectural forms. d. None of the above. 50. As conceptualized by Mintzberg, a simple structure consists of? a. A loose, flexible, self-renewing organic form tied together mostly through lateral means. b. An operating core that is large relative to its other structural parts and few managerial layers exist between the strategic apex and operating cores. c. A strategic apex and an operating level. d. A large support staff and a sizeable techno structure, with many layers between the apex and operating levels. Decisions are made at the strategic apex, and day-to-day operations are controlled by managers and standardized procedures. 51. In Mintzberg’s model, _________ resist control from the top and tend to put organization towards balkanization. a. top management b. supervisors c. front-line employees d. middle managers 52. When a process is reengineered, a. employees begin to make choices and decisions on their own. b. managers finally begin to act like bosses. c. workers become more willing to follow orders. d. jobs get narrower and more routine.

53. What holds organizations together and allows them to focus on efficiency, productivity, and profits? a. Respect b. Diversity c. Trust d Competence e. Reliable source of funds.

54. In the long run, the successes of a company is built on a company’s commitment to be on the leading edge of technology. b. its efficiency in operations. c. long-term relationships with customers built on mutual respect and cooperation that leads to repeat purchasing. d. a company’s ability to negotiate with suppliers and vendors. e. innovative integrated marketing communications programs., 55. Employee commitment develops from a. employees who believe their future is tied to that of the organization and are willing to make personal sacrifices for the organization. b. paying the best wages in the industry. c. working in a team-based organization. d. the reality that unemployment is on the rise, and people are lucky to have good jobs. e. offering child care to working mothers and fathers. 56. Which type of the investor causes the most problems for CEOs in developing strategic plans? a. Shareholder seeking short-term gains. b. Institutional investors c. Shareholders willing to sacrifice short-term gains for long-term income d. Employees who owns stock e. Global investors who don’t understand the business. 57. The framework to understand how business meet their economic, legal, ethical and philanthropic responsibilities is developed around the assumption that social responsibility is a a. process. b. specific set of rules and guidelines. c. result that does not need further attention. d. theory, with little relevance to business practice. e. requirement by law 58. In the first three decades of the twentieth century, working conditions were horrible and dangerous, and abuses were common. Most people of the time believed these abuses would be rectified by a. strict government action to punish the offenders. b. a shift to a communist economy. c. consumer advocacy groups who promoted social responsibility. d. competition and interaction in the marketplace. e. returning to a less industrialized society.

59. What does government encourage in order to protect the consumer’s right to choose? a. Competition b. Monopolies c. Trust Laws d. Divestitures e. Cooperation 60. When defining an organization’s structure, the key consideration should involve: a. Allocation of responsibilities across different units and members, as well as the integration of these efforts in pursuit of common goals. b. The number of organizational levels and their breadth. c. The level of centralization versus decentralization of responsibilities. d. How to effectively motivate organizational members to maximize their performance. 61. An organization’s structure should not be dependent upon a. Its workforce b. Goals c. Emotional liability d. Technology 62. Patriarchal organization are characterized by a: a. Fixed division of labor. b. Hierarchy of offices. c. Set of rules governing performance d. Dominant father figure, a rule with almost unlimited authority and power. 63. The two primary methods of coordinating individual and group efforts and linking local initiatives with overall organizational goals are: a. Monthly and bi-annual coordination. b. Weekly and monthly coordination c. Email and video conferencing coordination d. Vertical and lateral coordination 64. Forecasting and measuring organizational performance is accomplished through __________. a. Planning and control systems. b. Rules and regulations. c. Formal authority. d. Standard operating procedures. 65. Lateral coordination is often achieved through a. Rules and regulations b. Authority and delegation c. Meetings and task forces d. A clear chain of command 66. ____________ are becoming more prevalent in fast moving fields like biotechnology, where knowledge is so complex and widely dispersed that organizations find it impractical to exercise initiatives alone. a. Inter-organizational networks b. Matrix structures c. Task forces d. Rules and regulations 67. When deciding how to coordinate work roles and units in an organization, it is best to a. use either vertical or horizontal coordination but not both. b. base the choice on the workers’ preference.

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c. base the decisions on the leader’s preference. d. base the choice on the organization’s environment. The chief contribution of Henry Mintzberg’s conception of structural possibilities is a. a detailed prescription of how to structure an organization in response to different missions and external challenges to envision organizations as webs of inclusion. b. clustering various functions into groupings and showing their relative size and clout in response to different missions and external challenges. c. to envision organizations as organic, circular architectural forms. d. None of the above. As conceptualized by Mintzberg, a simple structure consists of? a. A loose, flexible, self-renewing organic form tied together mostly through lateral means. b. An operating core that is large relative to its other structural parts and few managerial layers exist between the strategic apex and operating cores. c. A strategic apex and an operating level. d. A large support staff and a sizeable techno structure, with many layers between the apex and operating levels. Decisions are made at the strategic apex, and day-to-day operations are controlled by managers and standardized procedures. In Mintzberg’s model, _________ resist control from the top and tend to put organization towards balkanization. a. top management b. supervisors c. front-line employees d. middle managers When a process is reengineered, a. employees begin to make choices and decisions on their own. b. managers finally begin to act like bosses. c. workers become more willing to follow orders. d. jobs get narrower and more routine. In Henry Mintzberg’s conception of structural possibilities, the ___________ is composed of specialists, technicians and analysts who standardize, measure, and inspect outputs and procedures. a. Operating core b. Techno-structure c. Support staff d. Administrative component In Henry Mintzberg’s conception of structural possibilities, the ___________ is composed of the workers who provide products and services to customers. a. Operating core b. Techno-structure c. Support staff d. Administrative component

Part II: True or False Legend:

Red-false

Black- true

1. The primary sources of managerial “cluelessness” are personality disorders and IQ. 2. The explosive and technological social changes of recent years have simplified our lives and our understandings of the world. 3. Modern organizations rely too much on an artistic approach to management and too little on engineering approach. 4. Customers are used to misleading advertising that it does not infuriate them. 5. Sponsors of advertisements aimed at children must be especially careful to avoid misleading messages. 6. An individual’s moral values and central, value-related attitudes clearly influence one’s business behaviour. 7. A personnel manager of a large company would probably agree that the more ethical the company, the easier it is to attract good people. 8. Customers can’t find out which firms are acting responsibly and which are not. 9. During the early twentieth century, working conditions were deplorable by today’s standards. 10. Awareness of businesses’ social responsibilities has increased along with government involvement. 11. There are many more socially responsible businesses today than there were ten years ago. 12. In support of their position, proponents if the socioeconomic model argue that businesses should be allowed to ignore social issues. 13. One major reason for improving product safety is the consumer’s demand for safe products. 14. It is naive and romantic to hope that organizational politics can be eliminated. 15. Political activity is more visible and dominant under conditions of homogeneity that diversity. 16. Conflict encourages new ideas and approaches problems, stimulating innovation. 17. One of the assumptions of the structural frame is that organizations work best when rationality prevails over personal agendas and extraneous pressure. 18. The essence of lateral coordination is that higher levels control the work of subordinates through authorities, rules and policies, and planning and control systems. 19. Rules, policies, standards and standard operating procedures limit individual discretion and help ensure that behaviour is predictable and consistent. 20. The structural perspective emphasizes dealing with organizational issues by changing people through training, rotation, promotion and dismissal. 21. Organizational growth spawns informality and simplicity. 22. During restructuring, the five components of Mintzberg’s model of structural possibilities indicate that top management has the most influence on the final outcome. 23. As the complexity of the role structure of an organization grows, it needs more sophisticated coordination strategies. 24. In a machine bureaucracy, the bulk of the work is done in quasi-autonomous units. 25. More complicated projects generally require structure with clearly defined roles, elementary forms of interdependence and coordination by plan or command. 26. Although it is a noble idea, no research evidence exists that supports the notion of investing in employees and responding to their needs. 27. Because profit sharing plans have had a positive impact on performance, they have been quickly adopted by the majority of companies. 28. The primary reason that change initiatives fail is that managers’ intentions are insincere. 29. Managers spend most of their time relating to people.