They also raised concerns with what they referred to as checking the box initiatives and tokenism for the sake of board diversity. a. greater experience in a wider range of industries, lessening of managerial employ-ment risk There is overwhelming evidence to support the value of having more women in senior leadership positions. One explained raising issues around diversity in the leadership pipeline and his desire to make this a higher board priority: One of our board members who is African-American came up to me afterwards and said, Thank you for bringing that up because I brought it up years ago, not so delicately, and nothing ever happened. So, hes like, Maybe if we get more of us looking at this, itll move the needle., Others similarly commented on the need to serve as a champion for diversity and inclusion on their boards if they wanted to keep the topic front and center. a. boards of directors. At a meeting over dinner, the top management team agrees to go to the board of directors with a proposal for: a. risk that managers will behave opportunistically. b. a standstill agreement. 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. Consequently, the board is: c. large; small d. consulting accounting advisors to make sure that the plan transfers wealth to the CEO without immediately appearing on the balance sheet of CyberScope. Seven. 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. a. greenmail. 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. 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.. We merged our data on board composition and firm financials with social performance ratings from KLD STATS, an index for socially responsible investing. b. Japanese firms will have little interest in Mr. Abercrombie's specialty because these skills are already practiced at a high level. Her research examines how people manage multiple identities, boundaries, and inclusion in organizations while navigating any tensions associated with doing so. 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. One interviewee revealed how she turned down a board position because she felt that the interviewing board members were not able to comment on her expertise only their desire to have gender diversity on the board. Sometimes, its laziness. 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. d. over-valued firms. c. financial institutions such as mutual funds and pension funds that control large-block shareholder positions. a. making CEOs more accountable for their performance. d. Mr. Abercrombie should find significant need for his services in companies in tran-sitional economies. The CEO would pick up the phone frequently and connect us., Whoever is leading the board also has the responsibility of ensuring that quieter board members speak up in board meetings. 25 b. stock brokerage companies. 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. c. large block shareholders such as mutual funds and pension funds. d.companies in mature, slow-cycle industries. d.curvilinearly related to, "The longer the focus of managerial incentive compensation, the greater the ____ top-level managers. Which of the following is most likely to be TRUE? CamCell is presently searching for a new CEO. c. opportunity c. The CEO/Chairperson of the Board has been suspected of opportunistic behavior. 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. In McKinsey's previous studyconducted with 2014 numbersthat increase had been 35%. Another recent study by Jonson et al. c. A number of factors intervene between top-level management decisions and firm performance. Complete the following: In small firms, managers often own a ____ percentage of the firm, which means there is ____ separation between ownership and managerial control. Consensus c. the firm's tax issues. d.establishing and using formal processes to evaluate the board's performance. Increased regulation in the financial sector has increased the cost of mounting hos-tile takeovers. a. elect an insider as the lead director. a. firms with unethical top executives 2023 Knowledge at Wharton. Increases in board diversity may signal to investors that the firm is motivated by social goals and cares less about maximizing shareholder value. The CEO's behav-ior may be indication of It is therefore not much of a leap to assume companies appoint female directors as part of a diversity initiative. 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. d. ownership of a company to a second party. d. banks. "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 interest-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. One board member shared: We look at diversity in a lot of different ways experience, age, ethnicity, gender, etc.. "Research suggests that boards of directors perform better if: d. Large institutional investors such as pension funds, and insurance companies are relatively insignificant owners of corporate stock. c. opportunity b. financial responsibility to employees. c. safer strategies with more focused diversifica-tion for the firm. a. "Simon Leagreet, the Chairperson and CEO of L-EVA Industries, Inc., has long been the major power at L-EVA. Other research has found no relationship to performance at all. a. Women should be appointed to boards for reasons of gender equality, but not because gender diversity on boards leads to improvements in company performance. Based on these findings, they worked with the Chairman of the Board at Deloitte to develop recommendations for how board chairs and directors can create more egalitarian board cultures and improve their governance. 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. d. likely to be terminated by the acquiring firm even in a friendly takeover. d. potential tax burden for. Board gender diversity thus explains about 1% of the variance in companies engagement in CSR. A recent study, of board. All of the following are consequences of the Sarbanes-Oxley Act EXCEPT b. decreases. d. Firms with higher state ownership tend to have lower market value and more vola-tility in those values over time. Our foremost conclusion is that there is no cumulative, zero-order evidence of long-term performance declines for firms that have more females in their upper echelons (as CEOs or TMT members). d.Traditionally privately-owned Japanese firms are going public. Conventional wisdom says gender diversity in the corporate boardroom improves company performance. Corporate governance and board effectiveness 2.0 - ResearchGate b. We dont know and cannot know. These dynamics appear to shape whether diversity on the board actually matters to the boards work. The average correlation between board gender diversity and firm accounting performance, Post and Byron found, was .047. a. b. inside 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. 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. But research conducted by consulting firms and financial institutions is not as rigorous as peer-reviewed academic research. b. riskier strategies with more focused diversifica-tion for the firm. c. pressure the board of directors to reprice their stock options. c. require Mr. Leagreet to personally certify the firm's financial reports. d. a variety of compensation plans for executives of foreign subsidiaries. Managers may decide to invest ____ in products that are not associated with the firm's current lines of business to increase the firm's level of diversification and decrease their employment risk. 1. c. German firms will not be interested in Mr. Abercrombie's services because the German system of decision-making is based on authority and few conflicts emerge. b. banks and other lending institutions that have provided major financing to the firm. "Amos Ball, Inc., is a printing company in Iowa that has been family owned and managed for three generations. b. typically under-performing their industry. Byron and Post (2016) meta-analyzed the results of 87 studies and found that board gender diversity is weakly but significantly positively correlated with CSR. An immense investigative effort has been devoted to these questions: over 140 studies in the past several decades, conducted in dozens of countries, and published in journals from many different disciplines and theoretical traditions. In research over the last five years, we found that only 24 percent of the boards of companies listed in the US and having over $1 billion in revenues were digitally savvy, and that these companies outperformed the others in our research on key metrics. 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. a. increases. b. government auditors. c. poorly-performing firms a. d.75. a. management structures related to total quality management systems. To achieve cognitive diversity, then, we should focus on dimensions of diversity other than gender. Oh, we have an opening, who do we know? He shared that many times board members only knew people like them. The market for corporate control serves as a means of governance when c. agency That gives you an opening to say, Oh, okay, we need to look for somebody who understands manufacturing abroad. So, as long as we are going to go look for somebody, lets use it as an opportunity to build some diversity.. c. public pension funds c. lobby legislators to pass laws that are aligned with the organization's interests. a. installation of an outsider as the lead director on the Board of Directors. Which of the following statements is true? c. poorly-performing firms d.re-invested in additional corporate assets. c. lower b. strengthens the governance processes of the firm. a. moving toward having directors from different backgrounds c. Membership of U.S. boards of directors is less directly influenced by the company's employees than is the membership of German Aufsichsrat. c. reduce the risk of total firm failure, reduce their total portfolio risk d.incentive. a. safer strategies with greater diversification for the firm. 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. a. The Vorstand is elected by the firm's employees. d.outsidedirectors ownsignificantequityintheorganization. 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. a. the director of food service for IFS. Who is ultimately responsible for the corporate climate that resulted in this wrongdoing? Activist shareholders are not necessarily more convinced about diversity being a source of value creation. Research suggests that boards of directors perform better if: a. outside directors own significant equity in the organization. The number of women among them? a. going to actively defend their firm from takeover attempts. Whats going on here? c. remains constant. c. strategy implementation actions to functional managers. Some research suggests, for example, that gender-diverse boards make fewer acquisitions than all-male boards (. c. CalPERS supports generous stock option plans for executives because it motivates under-performing executives. a. determine and control the strategic direction of an organization, so that the top executives are focused on maximizing corporate profits. And, finally, even if the addition of women to corporate boards does improve cognitive variety and decision making, companies may only see benefits to their accounting performance (their sales, profits, return on assets, for example) not their market returns. b. a. greenmail. b. increase the price of the firm's stock, increase the dividends paid out from free cash flows German executives are not dedicated to the maximization of shareholder value largely because c. an increased number of IPOs (initial public offerings) are expected. If so, board gender diversity may be positively related to accounting returns, but not market returns. b. the board includes employees as voting members.c. a. this delays their compensation for present actions to future years. d. Section 404 creates excessive costs for firms. c. pressure the board of directors to reprice their stock options. a. p:p:p: The temperature is 9090^{\circ}90. b. large institutional investors control large blocks of stock. Diversity doesnt matter as much on boards where members perspectives are not regularly elicited or valued. It is worth noting that gender diversity in other kinds of work teams is not significantly positively related to performance, either. b. company unions which are a type of governance system. b. large institutional investors control large blocks of stock. Combined, the board members held seats on 47 corporate boards in the U.S. across a variety of industries. This is because women bring new insights and perspectives and increase the cognitive diversity of the board. The relationship between CEO gender and long-term company performance is statistically significant, the authors find, but tiny. Stephanie Creary is an assistant professor of management and organizational behavior scholar at the Wharton School of the University of Pennsylvania. a. "Executive compensation is a governance mechanism that seeks to align managers' and owners' interests through all of the following EXCEPT: Research suggests that boards of directors perform - Course Hero c. the government. b. the board of directors of IFS. All rights reserved. b. risk undertaken by managers to earn stock options. One board member discussed her experience on a board: I do feel Im listened to The CEO makes a big difference in terms of the openness., Similarly, another shared how a different CEO made it easier for board members to access the management team: It starts, again, with the CEO not playing the hierarchical role and saying, You cant talk to one of my VPs unless you come through meSo we had access to the next level of management. 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. So, a tiny effect is statistically significant if the sample is big enough.). b. selecting new CEOs. c. the banks owing the largest shares of stock in the firm. For example, a few years ago, Apples shareholders voted against recruiting more minorities to its top management team, after the company argued that such a measure would be overly restrictive. a. mandating that all outside directors be drawn from government or academia rather than industry. Yet, the answers have not been clear or consistent. c. related c. the board is homogenous in composition. b. higher The chapter Opening Case indicates that many CEOs earn more than ____times the amount re-ceived by their firm's lowest-paid employee. a. moving toward having directors from different backgrounds "An agency relationship exists when one party delegates: This will have no effect on the stock option plan design discussion, because CalPERS' main concern is stock dividends. "A virtually exclusive reliance on financial controls may occur when outsider-dominated boards exist. CamCell is presently searching for a new CEO. Mr. Abercrombie is considering expanding his consulting practice overseas. c. the board is homogenous in composition. b. decreases. d. riskier strategies with greater diversification for the firm. c. determined by the size of the firm. a. defense tactics are usually beneficial for the executives of the target firm. Boards Need To Up Their Game In Terms Of Cognitive Diversity - Forbes d.independence of the committees on the firm's Board of Directors. b. increased diversification of the firm. c. the manager's supervisory needs are lowered, the manager is allowed greater time to oversee a wider range of activities 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. The board of directors and firm innovation: A meta-analytical review c. the firm's tax issues. d.banks. When they argue, they do it in a pretty much respectful way. d.tying the compensation of CEOs to measur-able financial criteria. Meta-analyses linking team gender diversity to team performance (e.g., Bell et al., 2011) reach much the same conclusion as meta-analyses linking board gender diversity to firm performance that is, the relationship between team gender diversity and team performance is tiny. 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. government auditors. A. greater experience in a wider range of indus-tries, lessening of managerial employment risk b. ensure that the interests of top-level managers are aligned with the interests of shareholders. 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.
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