Research Review: Does Gender Diversity on Boards Really Boost Company d. Firms with higher state ownership tend to have lower market value and more vola-tility in those values over time. c. determined by the size of the firm. a. bonuses. b. the market for corporate control. c. focusing attention on ineffective boards of directors. b. increased diversification of the firm. Nor do they perform worse. All of the following are unintended consequences of the Sarbanes-Oxley Act EXCEPT: When executives have ownership positions or stock options with their employing firm, they are c. defense tactics vary in their effectiveness as a defense to takeovers. d. reflected in the price of the stock. The Chinese governance system has been moving towards the Western model in recent years. German executives are not dedicated to the maximization of shareholder value largely because 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 the activism of institutional investors such as TIAA-CREF and CalPERS Many commentators suggest that gender diversity in the corporate boardroom improves company performance because of the different points of view and experience it offers. The board has been successful in reducing the percentage of CEO pay that is composed of stock options. The research literature includes over 100 studies of firms in 35 countries and five continents (Post and Byron, 2015). Institutional owners are a. boards of directors. d. Corporate governance is best achieved with a board of directors with strong ties to management. Do companies with women on the board perform better than companies whose boards are all-male? The CEO of Alta Corp. is dismayed by a lack of effort and insights his directors provide during board meetings. His current boards are shifting to a different approach: a process of assessment where you periodically look at the skill sets that you would ideally want on the board, given the business its in, and then the skill sets you have, and you identify any missing. We showed them a press release of a fictional company, announcing the appointment of Jack Smith or Marilyn Clark as a new member of the board. Similarly, the relationship of top management team (TMT) gender diversity and company performance is statistically significant but very small. They prefer to start from a position of trust. a. These dynamics appear to shape whether diversity on the board actually matters to the boards work. In this opinion piece, Wharton management professor Katherine Klein summarizes academic research on the topic and discusses the possible reasons and implications for these surprising findings. 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. monitoring c. the firm's top managers. "The argument for having one individual serve as CEO and chairperson of the Board of Directors is that this: a. risk that managers will behave opportunistically. One interviewee said, The lead director has a role here to make sure that they invite people in and if somebody is really quiet they should go to that personand make sure they feel comfortable saying anything that they want.. As a means of increasing profits, IFS has used substandard ingredients in these meals and has consistently lied about this practice during quality investigations by the Marines. "Compared to managers, shareholders prefer: a. the strategic decision making process. On January 1, California law said that all locally headquartered publicly traded companies must have at least one female director by 2020. The top management team at Sierra Infusion is concerned about the declining performance of firms in their industry. d. outside directors own significant equity in the organization. a. safer strategies with greater diversification for the firm. Chapter 10 (Multiple Choice) Flashcards | Quizlet If the market for corporate control were efficient as a governance device, then only ____ would be targets for takeovers. 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. Legislation, codes of conduct, and guidelines have been developed to improve corporate governance. Research suggests that boards of directors perform better if a. the CEO is also the chairperson of the board of directors. d.incentive. a. some foreign firms have delisted on U.S. stock exchanges. Executive compensation is a governance mechanism that seeks to align managers' and owners' interests through all of the following EXCEPT "Shareholder value is: If so, how and when? b. decreases. the board includes employees as voting members.c. b. CamCell may have to over-compensate its CEO in order to offset the personal risk a CEO would undertake under this plan. In the U.S., the fundamental goal of business is to, In the U.S., a firm's key stakeholder(s) is(are) the. a. setting the option strike price substantially higher than the current stock price. d. the board of directors. 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Ownership concentration is determined by both a. equivalent You know you might have somebody from HR on the board. "Which of the following is TRUE of trends in Japan's corporate governance structure? b. c. managers' risk of job loss, loss of compensation, and/or loss of reputation. This is because women bring new insights and perspectives and increase the cognitive diversity of the board. c. the board is homogenous in composition. b. James Abercrombie has a thriving consulting firm specializing in training boards of directors in decision-making skills. However, rigorous, peer-reviewed academic research paints a different picture. c. executive compensation systems. Compared to managers, shareholders prefer c. the corporation has greatly exceeded perform-ance expectations. b. risk undertaken by managers to earn stock options. c. often performing above their industry averages. b. company unions, which are a type of governance system. By studying outcomes that are more proximal or immediately related to board decision-making than is company performance, researchers may shed more light on when, whether, and how diverse boards differ from all-male boards. c. the laxity of institutional investors. Corporate Directors' Implicit Theories of the Roles and Duties of Boards "An agency relationship exists when one party delegates: Which of the following statements is most likely to be TRUE? b. the board includes employees as voting members. Which of the following statements is about corporate governance in Germany is FALSE? b. institutional shareholders So, existing findings could reflect a causal relationship, a reverse-causal relationship, or the effects of other variables. Another recent study by Jonson et al. All of the following statements are TRUE about the use of defense tactics by the target firm during a hostile takeover EXCEPT a. a golden parachute. Historically, ____ have been at the center of German corporate governance structure. b. strengthening the internal management and accounting control systems c. require Mr. Leagreet to personally certify the firm's financial reports. a. safer strategies with greater diversification for the firm. The market for corporate control serves as a means of governance when c. liable for any illegal actions by the top management team. Five or so years after the financial crisis, the pressure on boards and directors to raise their game remains acute. b. positively related to Older boards are better boards, so beware of diversity targets d.is eliminated. a. this delays their compensation for present actions to future years. a. the firm is overpriced in the market. a. Mr. Abercrombie is con-sidering expanding his consulting practice overseas. Some have expressed concern that broadening the definition of diversity, without associated efforts to reduce bias in director selection efforts, could provide firms with an out, effectively allowing them to exclude underrepresented demographic minorities from the board. d.a silver handshake. c. Institutional investors disapprove of long-term executive incentive plans and they may sell their blocks of stock in CamCell. d. reduction in R&D expenditure. They are more a function of general market conditions. Write the statements in symbolic form . German executives are not dedicated to the maximization of shareholder value largely because: As one long-time board director described it: The problem is how boards get formed and how you fill vacancies. This will have no effect on the stock option plan design discussion, because CalPERS' main concern is stock dividends. c. the firm's top managers. d.of the focus on stewardship-management in German firms rather than the financial perform-ance focus of U.S. firms. ANS: D PTS: 1 DIF: Medium d. d.a poison pill. Consequently, the board is In order to limit Mr. Leagreet's power, Board of Directors plans to: When they argue, they do it in a pretty much respectful way. Historically, ____ have been at the center of the German corporate governance structure. 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. 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. b. requiring that outside directors be former executives of the firm. We dont know exactly why this theoretical logic doesnt hold among corporate boards. 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). c. an increased number of IPOs (initial public offerings) are expected. Despite the intuitive appeal of the argument that gender diversity on the board improves company performance, research suggests otherwise. Research suggests that boards of directors perform - Course Hero d.The compensation committee may not have comprehensive firm performance data. a. a. the CEO is also the chairperson of the board of directors. How diversity, equity, and inclusion (DE&I) matter | McKinsey "Given the demands for greater accountability and improved performance, which of the following is NOT a voluntary change many boards of directors have initiated? a. earnings potential for: b. selecting new CEOs. b. enforcement d.greater concentration on Sierra's core industry. If male and female board members are fairly similar in their values, experience, and knowledge, the addition of women to an all-male board may not increase the boards cognitive variety as one might expect at first blush. a. increases in executive compensation. Given global interest in the effects of board gender diversity and the availability of abundant data on board gender composition and firm performance, many researchers have investigated the topic. The chapter Opening Case suggests that ___________ is (are) frequently blamed for high CEO pay during periods where corporate performance has been poor. c. managers' risk of job loss, loss of compensation, and/or loss of reputation. a. available to comment to external analysts. b. control The CEO genuinely seeks their greater involvement. The problem is that there is scant evidence that women directors are much different from men when it comes to their approach or experiences especially when they have similar educational and professional backgrounds. a. a golden parachute. One interviewee discussed how this was a particularly challenging dynamic on a board that was resistant to input either from shareholders or board members: There was not a lot of open communication. Alternatively, work by Raaj Sah and Joseph Stiglitz suggests that diversity moderates group decisions. The correlation is .03. Spoiler alert: Rigorous, peer-reviewed studies suggest that companies do not perform better when they have women on the board. Its hard to get much closer to zero. c. crossing the palm with silver. The board of directors and firm innovation: A meta-analytical review Boards that want to maximize their effectiveness need to do more to ensure that different perspectives are regularly elicited and integrated into the boards work. a. lead independent a. lead independent "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. b. the board includes employees as voting members. d. a poison pill. a. decision making responsibility to a second party. The board of directors of CamCell, Inc., wishes to design a CEO compensation plan that will align the personal interests of the CEO with the interests of the shareholders in long-term firm performance. primary focus is on maximizing shareholder value. b. increase the price of the firm's stock, increase the dividends paid out from free cash flows The fact that two quite distinctive meta-analyses reached nearly identical conclusions carries a lot of weight. c. requiring outside directors to own significant equity stakes in the firm. There is overwhelming evidence to support the value of having more women in senior leadership positions. And even when individuals who are minorities, tokens, or outliers speak up, the majority group members may discount their views. c. crossing the palm with silver. b. Institutional Investors on Boards: Does Their Behavior Influence We dont know and cannot know. c. elevation of foreign executive compensation to U.S. levels. 25 The average correlation is .15. a. increased diversification of Sierra Infusion. b. appoint another individual as chairperson of the board of directors. a. greater experience in a wider range of industries, lessening of managerial employ-ment risk a. usually on the verge of bankruptcy. b. requiring that outside directors be former executives of the firm. c. remains constant. b. the CEO is also the chairperson of the board of directors.b. a. used to diversify the firm. d. made up of CPAs with auditing experience. They also raised concerns with what they referred to as checking the box initiatives and tokenism for the sake of board diversity. Which of the following is most likely to be TRUE? The market for corporate control has collapsed with the economic crises in Japan. c. public pension funds b. institutional shareholders b. inside Consequently, the board has decided on an incentive plan that involves payout based on the firm's performance five years in the future. The CEO and the top executives successfully fended off the takeover and are concentrating on strategies to improve the performance of the firm. The average correlation between CEO gender and long-term financial performance is .007. c. defense tactics are typically ineffective in deterring the takeover. c. require Mr. Leagreet to personally certify the firm's financial reports. b. the board includes employees as voting members. 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. d.riskier strategies with greater diversification for the firm. Cultivate trust and encourage the board to be involved in strategy. c. equally as common as data values close to the mean. And to the extent investors care about shareholder value, they will penalize those companies they suspect are putting other goals first. c. opportunity a. the firm's free cash flow. If this was the case, board diversity could have no effect on operating performance but still have a negative effect on market returns. This isnt a strong relationship, but its a good bit stronger than the relationship between board diversity and corporate performance. b. greater managerial autonomy. b. the manager frequently invests in the acquired firm which allows him or her exten-sive profits, the manager can frequently buy excess assets divested by the acquired firm "The governance mechanism most closely connected with deterring unethical behaviors by holding top management accountable for the corporate culture is: If so, board gender diversity may be positively related to accounting returns, but not market returns. "Managers in the U.S. receive ____ compensation than managers in the rest of the world. b. increased diversification of the firm. d. a poison pill. Diversity doesnt matter as much on boards where members perspectives are not regularly elicited or valued. d. The firing by President Obama of the CEO of General Motors because the board had failed to act in previous years. d. Individualism. Despite popular press accounts that suggest that teams high in gender diversity outperform those composed only of men or only of women, rigorous research does not support this conclusion. Which of the following is TRUE of trends in Japan's corporate governance structure? a. some foreign firms have delisted on U.S. stock exchanges. c. compensating directors with stock options rather than with fixed remuneration d. government agencies. 1 The survey revealed dramatic differences in how directors . c. pressure the board of directors to reprice their stock options. d. The CEO was a recipient of the Golden Peacock Award for Corporate Governance. Klein is also the vice dean of the Wharton Social Impact Initiative. What would you recommend? d.CEOs and other top executives tend to hold their jobs for five years or less, meaning they are not employed by the firm for the appropriate period of time. c. The CEO/Chairperson of the Board has been suspected of opportunistic behavior. In other words, investors seem to be penalizing, rather than rewarding, companies that strive to be more inclusive. "Which of the following reasons would NOT explain the difficulty of determining appropriate executive compensation? Depending on which meta-analysis you read, board gender diversity either has a very weak relationship with board performance or no relationship at all. Even if women who are named to corporate boards are different from the men on these boards and even if the women do speak up and influence board decision-making, their influence may not be consistently positive (or consistently negative, for that matter). Board diversity matters but concentrating on only one form of diversity isnt enough. c. the corporation has greatly exceeded performance expectations. 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. a. c. related Amos Ball, Inc., is a printing company in Iowa that has been family owned and managed for three generations. "In the U.S. the fundamental goal of business is to: "In the U.S., a firm's key stakeholder(s) is(are) the: "Which of the following is NOT an internal governance mechanism? But our research suggests that shifting the diversity discourse away from gender to other dimensions of expertise and experience might, in fact, help women and other underrepresented groups for example, instead of saying we have appointed a female director the focus should be we have appointed an expert on China. With less emphasis on gender, female appointments might one day no longer be perceived as checking a social performance box, and signal nothing about firm preferences other than its commitment to hiring the best people for the job. It is also important to consider recruiting from outside of the CEO and CFO pool to increase board diversity. the board is homogenous in composition. the board is homogenous in composition. The benefits of having a socially and professionally diverse board cannot be realized without an egalitarian board culture. Companies that engage in CSR, or intend to do so, may be particularly inclined to appoint women to the board. c. Borders' decision to increase the size of its board "Product diversification provides two benefits to managers that do not accrue to shareholders: ____ and ____. a. usually on the verge of bankruptcy. c. excessive management compensation. Research suggests that boards of directors perform better if: a. outside directors own significant equity in the organization. c. requiring outside directors to own significant equity stakes in the firm. d. riskier strategies with greater diversification for the firm. b. defense tactics are opposed by institutional investors. Innovation | Brian Berkey. 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? "Recent research evidence shows that ownership concentration is associated with: Conventional wisdom says gender diversity in the corporate boardroom improves company performance. b. decreases. d.outside directors own significant equity in the organization. But while many prescriptions for improving corporate governance focus on the structure of. d. ownership of a company to a second party. The compensation of top executives of Chinese companies is closely related to pri-or and current financial performance of the firm. b. increase the price of the firm's stock, increase the dividends paid out from free cash flows b. insuring that the strike price value of the options can be lowered if the organiza-tional environment becomes more risky. d.prevented by the Sarbanes-Oxley Act from owning more than 50% of the stock of any one firm. "In contrast to managers' desires, shareholders usually prefer that free cash flows be: Many boards are also broadening the range of professional backgrounds considered for board member positions, allowing them to attract more socially diverse directors who bring, as one interviewee referred to it, diversity of thought. This is easier to achieve when boards avoid filling open seats with people already in their personal and professionals networks. While the relationship between board gender diversity and company performance is very weak, there appears to be a somewhat stronger relationship between board gender diversity and corporate social responsibility (CSR). d.reflected in the price of the stock. Rigorous, academic studies of CEO gender and company performance tell much the same story as rigorous, academic studies of board gender diversity and company performance do. b. returned to them as dividends. d. the proportion of insiders on the board of directors. c. the board is homogenous in composition. 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. a. management structures related to total quality management systems. 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. Women should be appointed to boards for reasons of gender equality, but not because gender diversity on boards leads to improvements in company performance. The Vorstand of a German corporation makes decisions about organization direction and management. d. always outperforming their industry. 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. There was, however, a difference in the perceived goals of the company. This plan will be very attractive in luring candidates for the CEO position. Again, its important to remember that a significant correlational relationship does not prove causality. c. pressure the board of directors to reprice their stock options. b. executive compensation that is primarily based on long-term 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. In sum, the research results suggest that there is no business case for or against appointing women to corporate boards. On more hierarchical boards, the CEO, Chairman, or lead independent director tends to dominate board meetings. "Amos Ball, Inc., is a printing company in Iowa that has been family owned and managed for three generations. d. a system of cross-shareholding among firms. d. This type of plan is likely to cause the CEO to underinvest in R&D in order to boost CamCell's long-term profitability. b. may not have a direct effect on firm performance. d. penalties for inadequate firm performance. In a recent study, we examine board composition and financial data on 1,644 public companies in the U.S. between 1998 and 2011, controlling for numerous firm-specific characteristics like size and corporate governance structure. Activist shareholders are not necessarily more convinced about diversity being a source of value creation. Shareholder value is b. risks borne by This may lead to all EXCEPT: b. c. greenmail. Managerial employment risk is the Our latest report shows not only that the business case remains robust but also that the relationship between diversity on executive teams and the likelihood of financial outperformance has strengthened over time. c. lower levels of product diversification. b. composed solely of outside directors. Board Diversity, Firm Risk, and Corporate Policies Research suggests that boards of directors perform - Course Hero "Top executives resist tying their compensation to long-term performance of the firm mainly because: Which of the following statements is likely to be TRUE? b. d. defense tactics make the costs of a takeover lower. a. increases. c. greenmail. d. incentive. "Executive compensation is a governance mechanism that seeks to align managers' and owners' interests through all of the following EXCEPT: b. internal controls have failed. Which of the following is FALSE about corporate governance in China? b. large institutional investors control large blocks of stock. 2010).These studies generally focus on institutional investors as shareholders (Roberts and Yuan 2006), and when they do address the role of . c. used to reduce corporate debt. 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 ____.
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