research suggests that boards of directors perform better if

d.riskier strategies with greater diversification for the firm. The CEO tended to dominate the conversation. "An agency relationship exists when one party delegates: I dont like that I said, If you think my only value is the fact that Im a female, I cant add value to your board., Other interviewees similarly addressed concerns for tokenism: I think that theres so much conversation right now about adding more females to boards and everyone feels like, Okay if we have ten board members, we should recruit three women. But I think we need to make sure they have the right skills. One means that is considered to improve the effectiveness of outside directors is It is not uncommon for a firm to explicitly mention gender when they announce appointments of new board members but of course this only happens if the new board member is a woman. Ambrose Bierce, the CEO of DictionAry, has been paid a lump sum amounting to three years' salary because DictionAry has been bought in a hostile takeover by its main competitor. An executive's decisions often affect firm performance only over the long run. You need the right culture and structure. 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? They are more a function of general market conditions. She shared, I can understand what it means to be a token person. The CEO and the top executives successfully fended off the takeover and are concentrating on strategies to improve the performance of the firm. Still, given all the studies of board diversity and company performance that have been conducted to date, it seems very unlikely that new research will reveal a strong, clear relationship between board diversity and company performance. Of course not. d. The CEO was a recipient of the Golden Peacock Award for Corporate Governance. In order to limit Mr. Leagreet's power, Board of Directors plans to: Access more than 40 courses trusted by Fortune 500 companies. b. strengthening the internal management and accounting control systems b. increased diversification of the firm. Consensus Which of the following statements is most likely to be TRUE? Annual U.S. beer production data is given below. a. a uniform compensation plan for all corporate executives, U.S. and foreign alike. "Shareholder value is: We dont know exactly why this theoretical logic doesnt hold among corporate boards. Nor do they perform worse.. b. a number of publicly-traded companies have decided to privatize. Which of the following statements is most likely to be TRUE? Consequently, the board has decided on an incentive plan that involves payout based on the firm's performance five years in the future. Which of the following is most likely to be TRUE? Accelerate your career with Harvard ManageMentor. a. shareholders in the large institutional firms listed on the New York Stock Exchange. In McKinsey's previous studyconducted with 2014 numbersthat increase had been 35%. Stallman Company took a physical inventory on December 31 and determined that goods costing $200,000 were on hand. a. determine and control the strategic direction of an organization, so that the top executives are focused on maximizing corporate profits. d.prevented by the Sarbanes-Oxley Act from owning more than 50% of the stock of any one firm. c. reduce the risk of total firm failure, reduce their total portfolio risk Research suggests that boards of directors perform betterif a. the CEO is also the chairperson of the board ofdirectors. d. The firm is traded on the New York Stock Exchange and must change its corporate governance to comply with the NYSE's new rules. 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 . d.has weakened the effect of other governance mechanisms. The fact that a hostile takeover has occurred is proof that the firm was under-performing. c. related The Chinese governance system has been moving towards the Western model in recent years. 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. One suggested explanation for this puzzling finding is that the stock market is biased and believes that women are not as competent when making business decisions. c. determined by the size of the firm. "One means that is considered to improve the effectiveness of outside directors is: c. public pension funds a. less common than data values close to the mean. d. Banks have less influence on the governance of German corporations than they do on U.S. corporations. 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. "Product diversification provides two benefits to managers that do not accrue to shareholders: ____ and ____. Similarly, after promising to address board diversity, Skechers explained their decision not to nominate a female director by saying that the firms primary focus is on maximizing shareholder value. In May 2019, the company nominated their first female board member following the enactment a law requiring California companies to have at least one woman on their board. Stephanie Creary is an assistant professor of management and organizational behavior scholar at the Wharton School of the University of Pennsylvania. d. The CEO and top executives should not consider their jobs secure. The research found that diversity doesnt guarantee a better performing board and firm; rather, the culture of the board is what can affect how well diverse boards perform their duties and oversee their firms. b. the board of directors of IFS. 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. Innovation In sum, the research results suggest that there is no business case for or against appointing women to corporate boards. Earn badges to share on LinkedIn and your resume. a. small; small We interviewed 19 board directors (15 women and four men) to learn whether and how corporate boards were benefiting from diversity. What other expenses might it expect? Board diversity matters but concentrating on only one form of diversity isnt enough. Requiring that the directors own stock in the company. b. higher a. The women named to corporate boards may not in fact differ very much in their values, experiences, and knowledge from the men.. They also raised. b. CamCell may have to over-compensate its CEO in order to offset the personal risk a CEO would undertake under this plan. Alternatively, work by Raaj Sah and Joseph Stiglitz suggests that diversity moderates group decisions. The best evidence comes from a recent meta-analysis of 146 studies (Jeong and Harrison, 2017). Firms should be selecting the very best directors from the largest talent pool possible, and excluding women from that pool to avoid market penalties would be counterproductive. Depending on which meta-analysis you read, board gender diversity either has a very weak relationship with board performance or no relationship at all. Find the area bounded by the graphs of the indicated equations over the given intervals (when stated). d.a variety of compensation plans for execu-tives of foreign subsidiaries. While new to the U.S., mandates to increase gender diversity on corporate boards are common elsewhere. c. the employees directly involved in the wrongdoing a. the firm's free cash flow. d.establishing and using formal processes to evaluate the board's performance. Idea diversity is also important., To offset these concerns, some boards are ensuring that skills and expertise, along with demographics, are front and center in their recruiting processes. d. Corporate governance is best achieved with a board of directors with strong ties to management. EXCEPT d. the head of contract services for the Marines. Consequently, the board has decided on an incentive plan that involves payout based on the firm's performance five years in the future. Research suggests that boards of directors perform - Course Hero If so, how and when? a. increases shareholder value significantly. c. elevation of foreign executive compensation to U.S. levels. See answer Advertisement sandlee09 Answer: c. Explanation: a. bonuses. German executives are not dedicated to the maximization of shareholder value largely because: a. boards of directors. International Food Services (IFS) has a contract with the Marines to supply meals for its troops in Iraq and other foreign assignments. 47; Gender-diverse boards also tend to adopt more progressive organizational management practices, such as work-life support programs, which increase employee satisfaction. b. positively related to Another explanation is that investors react to what they perceive to be a change in firm preferences. Consequently, the board is c. liable for any illegal actions by the top management team. Does Gender Diversity on Boards Really Boost Company Performance? b. increasing the concentration of ownership of large U.S. firms. It is not because companies perform worse after they appoint female directors. a. decision making responsibility to a second party. a. the roles of CEO and chairperson of the board of directors are usually combined. b. likely to gain financially if their employing firm is taken over by another. The fact that a hostile takeover has occurred is proof that the firm was un-der-performing. the board is homogenous in composition. Knowledge at Wharton is an affiliate of the Wharton School of the University of Pennsylvania. All rights reserved. d.the board of directors. b. strengthening the internal management and accounting control systems The decisions made by top-level managers are typically complex and nonroutine. d.internal auditing costs have increased by about one-third. d. reflected in the price of the stock. Research suggests that boards of directors perform better if a. the CEO is also the chairperson of the board of directors. c. not correlated with b. selecting new CEOs. a. unsubstantial profits c. used to reduce corporate debt. 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. They increase the boards cognitive variety. The greater a boards cognitive variety, the theory goes, the more options it is likely to consider and the more deeply it is likely to debate those options. d.requiring that outside directors be truly objective by having no ownership interest in the firm. A recent study, of board. We find that companies are not any less profitable after appointing female directors to the board than they were prior to the appointment. Which of the following statements is true? d.is eliminated. This wouldnt be a problem if diversity initiatives were not seen by many investors as little more than costly experiments. While its possible that the addition of women to the board causes an increase in CSR, existing research cannot prove it. Indeed, this is what Post and Byrons meta-analysis showed. a. making CEOs more accountable for their performance. a. high executive turnover. 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. The authors conclude the following: Undoubtedly, breaking the glass ceiling matters. d.made up of CPAs with auditing experience. Why or why not? d.a poison pill. The top management team at Sierra Infusion is concerned about the declining performance of firms in their industry. Here, I dig into the findings of rigorous, peer-reviewed studies of the relationship between board gender diversity and company performance. a. banks An agency relationship exists when one party delegates "Which of the following is TRUE of trends in Japan's corporate governance structure? b. long-term incentives such as stock options. All of the following statements are TRUE about the use of defense tactics by the target firm during a hostile takeover EXCEPT a. the firm's free cash flow. Board gender diversity thus explains about 1% of the variance in companies engagement in CSR. "The governance mechanism most closely connected with deterring unethical behaviors by holding top management accountable for the corporate culture is: If Culver had just signed a blank piece of paper after being told that the bank would make a receipt out of it by printing the appropriate words around his signature, would he be able to avail himself of the defense of fraud? a. elect an insider as the lead director. b. increased diversification of the firm. a. generate free cash flows, reduce the risk of total firm failure c. Banks' influence over corporations is increas-ing. 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? a. lead independent A 2015 meta-analysis of 140 research studies of the relationship between female board representation and performance found a positive relationship with accounting returns, but no significant relationship with market performance. In other words, investors seem to be penalizing, rather than rewarding, companies that strive to be more inclusive. Governance is used to establish order between parties whose interests may be in conflict. 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 The CEO of Skyco, a publicly-traded company that has been earning below-average returns, has been publicly criticized by shareholders for persuading the board of directors to give her inter-est-free loans, for having the company purchase and furnish a lavish apartment in Paris for her personal use on her twice-yearly trips there, and for excessive stock options. "Amos Ball, Inc., is a printing company in Iowa that has been family owned and managed for three generations. We dont know and cannot know. b. a. ATP has been the initiator of several hostile takeovers in the last two years. The team members are becoming concerned about the security of their jobs at Sierra Infusion. a. a golden parachute. One explained that their collegial board culture resulted from information being shared openly, with little back channeling or meeting outside of the formal meeting to raise concerns. c. lower 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. c. pressure the board of directors to reprice their stock options. b. small; large A recent survey of more than 770 directors from public and private companies across industries around the world and from nonprofit organizations suggests that some are responding more energetically than others. Nor do they perform worse. b. enforcement The average correlation between board gender diversity and firm market performance (such as stock performance, shareholder returns) was even smaller and was not statistically significant. When they argue, they do it in a pretty much respectful way. b. The Vorstand is elected by the firm's employees. b. But academic research says otherwise. c. the banks owing the largest shares of stock in the firm. a. management consultants. d. always outperforming their industry. Let 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. And in many cases, this might mean recruiting board members outside of existing networks. This plan will be very attractive in luring candidates for the CEO position. a. the strategic decision making process. d. risk managers will not find a new top management position if they should be dis-missed. c. opportunity Combined, the board members held seats on 47 corporate boards in the U.S. across a variety of industries. The average correlation between board gender diversity and firm accounting performance, Post and Byron found, was .047. Yet, the answers have not been clear or consistent. b. a poison pill. The CEO of Alta Corp. is dismayed by a lack of effort and insights his directors provide during board meetings. The apartment is hot or the air conditioner is not working , if and only if the temperature is 9090^{\circ}90. As an illustration, I show that two current measures of board of director performance, board meeting activity and director attendance, suggest that the boards of Asian firms do not compare favorably to the boards of firms from developed markets. ANS: D PTS: 1 DIF: Medium REF: 314 d. Differing views between board members act as a governance mechanism, preventing radical decisions from being made. Women board directors are more likely than men to identify social issues like human rights, climate change, and income inequality as critical to corporate strategy. b. the total revenue of the firm. b. ensure that the interests of top-level managers are aligned with the interests of shareholders. d.potential tax burden for. "Research suggests that the activism of institutional investors such as TIAA-CREF and CalPERS: d. potential tax burden for. The benefits of having a socially and professionally diverse board cannot be realized without an egalitarian board culture. d. is eliminated. A recent study, of board composition and financial data on 1,644 public companies in the United States between 1998 and 2011, finds that companies that appoint women to the board are no more profitable than those that do not. Complete the following: In small firms, managers often own a ____ percentage of the firm, which means there is ____ separation between ownership and managerial control. a. Mary-Hunter (Mae) McDonnell is an assistant professor of management at the Wharton School of the University of Pennsylvania where she conducts research on the topics of non-market strategy and corporate governance. 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. This plan will be very attractive in luring candidates for the CEO position. As a means of increasing profits, IFS has used substandard ingredients in these meals and has consistently lied about this practice during quality investiga-tions by the Marines. Activist shareholders are not necessarily more convinced about diversity being a source of value creation. Post and Byron (2015) synthesized the findings from 140 studies of board gender diversity with a combined sample of more than 90,000 firms from more than 30 countries. a. reasonably compensating a CEO. Research suggests that boards of directors perform - Course Hero To achieve cognitive diversity, then, we should focus on dimensions of diversity other than gender. Again, we cant know for certain why board diversity doesnt predict company performance, but it seems likely that some of the following factors explain the very weak and mostly non-significant effects: While research indicates that in general male and female adults differ somewhat in their values, experiences, and knowledge (and the differences are not huge), its not clear that male and female board members differ all that much in their values, experiences, and knowledge. Not included in the physical count were$25,000 of goods purchased from Pelzer Corporation, f.o.b. b. typically under-performing their industry. Which of the following statements is most likely to be TRUE? c. the firm's tax issues. d.reduce their employment risk, increase the company's value, Agency costs reflect all of the following EXCEPT ____ costs. CamCell is presently searching for a new CEO. c. strategy implementation actions to functional managers. b. the board includes employees as voting members. "A major conflict of interest between top executives and owners, is that top executives wish to diversify the firm in order to ____, while owners wish to diversify the firm to ____. 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. d.consulting accounting advisors to make sure that the plan transfers wealth to the CEO without immediately appearing on the balance sheet of CyberScope. a. high executive turnover. Increases in board diversity may signal to investors that the firm is motivated by social goals and cares less about maximizing shareholder value. b. insuring that the strike price value of the options can be lowered if the organiza-tional environment becomes more risky. a. equivalent d.75. c. executive compensation systems. b. CalPERS' interest in Acme Brands will cause the directors to reduce the size of the stock option plan from what it would otherwise have been. If the market for corporate control were efficient as a governance device, then only ____ would be targets for takeovers. 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. Many popular press articles and fund managers make this claim, citing studies by consulting firms, information providers and financial institutions, such as McKinsey, Thomson Reuters and Credit Suisse. a. b. increase the price of the firm's stock, increase the dividends paid out from free cash flows The board of directors of CyberScope, Inc., is designing a stock option plan for its CEO that will motivate the CEO to increase the market value of the firm. a. the number of stockholders and the parties they represent. b. a standstill agreement. If so, board gender diversity may be positively related to accounting returns, but not market returns. b. the board includes employees as voting members. We merged our data on board composition and firm financials with social performance ratings from KLD STATS, an index for socially responsible investing. It might be unconscious bias. b. the market for corporate control. "As ownership of the corporation is diffused, shareholders' ability to monitor managerial decisions: Pletzer and his colleagues (2015) found that the average correlation between the percentage of women on the board and firm performance was small (.01) and not statistically significant. b. financial responsibility to employees. One interviewee talked about the importance of respectful disagreement, acknowledging mishaps in communication, and in valuing different perspectives: I havent had anybody shut me down or shut other people down. b. a standstill agreement. c. Borders' decision to increase the size of its board d.government agencies. The research found that diversity doesnt guarantee a better performing board and firm; rather, the culture of the board is what can affect how well diverse boards perform their duties and oversee their firms. The CEO's behav-ior may be indication of d. the difference in risk propensity between owners and managers. "Institutional owners are: b. a. the CEO is also the chairperson of the board of directors. b. typically under-performing their industry. b. stock brokerage companies. b. internal controls have failed. And the greater the cognitive diversity, the better the board is at solving complex problems and coming up with novel solutions. d.reflected in the price of the stock. James Abercrombie has a thriving consulting firm specializing in training boards of directors in decision-making skills. b. riskier strategies with more focused diversification for the firm. b. long-term incentives such as stock options. "The board of directors of CyberScope, Inc., is designing a stock option plan for its CEO that will motivate the CEO to increase the market value of the firm. Diversity wins is the third report in a McKinsey series investigating the business case for diversity, following Why diversity matters (2015) and Delivering through diversity (2018). According to a 2016 Bloomberg analysis, five of the biggest U.S. activist funds had succeeded in getting over 100 board members appointed in the previous five years. Despite persistent efforts to tackle underrepresentation of women on corporate boards, most boardrooms remain mostly male. d.The firm is traded on the New York Stock Exchange and must change its corporate governance to comply with the NYSE's new rules. One interviewee commented on how having social diversity wasnt good enough if all board members were former CEOs or CFOs. b. risk undertaken by managers to earn stock options. d. a poison pill. Simon Leagreet, the Chairperson and CEO of L-EVA Industries, Inc., has long been the major power at L-EVA. d.Mr. 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).
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