Exercise 3

Chapter 3: Internal and External Institution and Influences of Corporate Governance

Identification

Board of Directors 1. The body of elected or appointed by shareholders who

jointly oversee the activities and the overall managerial and operational aspects of the
corporation.

Chief Executive Officer 2. Usually the singular organizational position that is

principally accountable in carrying out strategic policies and procedure as established by the
board of directors.

Shareholders 3. Collective term of a group of people considered as the

owners of corporation.

Product Market 4. This is one of the items under external environment of

governance which is considered as the most feared disciplinarian by companies.

Auditors 5. One of the most important institution of governance the

job of which is to help ensure that firms are run efficiently by keeping public records are
accurate, adhering standards of reporting for public purposes.

Anti-Takeover Tactics 6. Refers to defensive means or tactics that companies use

to challenge a lurking merger of two or more businesses into one.

Supermajority 7. The term given which refers to a majority that is way

beyond the ordinary majority.

Shareholder Voting Agreement 8.A legal contract among shareholders of corporation

Involving voting of shares. The agreement frequently covers how members of the Board of
Directors are to be selected and may covers major corporate events such as mergers and
acquisition.

Veto Rights 9. This refers to the right to overturn the decisions reached by
the board of directors.

Implements Internal Control 10. It is one of the functions of the CFO which covers
Effective administration of cash flow and overhead expenses, establishing Credit policies for
customer and working with major vendors to attain more favorable Payment terms.
Enumeration

1 to 4: Responsibilities of Chief Executive Officer (CEO)

5 to 8: Functions of Chief Finance Officer (CFO)

9 to 12: The External Environment of Governance

13 to 15: Advantages of Anti-Takeover Defenses

1. Support to the Board

2. Delivery of Program, Product and Services (PPS)
3. Financial, Risk and Tax Management
4. Human Capital Management
5. Implements Internal Control
6. Supervises Major Impact Projects
7. Develops Relations with Financing Resources
8. Advisor to Management
9. Auditors
10. Legal Environment
11. Markets
12. Political Environment
13. Anti-takeover tactics are positive when a company has the sense to believe that its stock
has a higher market price than reflected and thus may become the target for a takeover.
14. Anti-takeover tactics are good when the predator company’s purpose is to acquire the
company and then use it for not good purposes which would not benefit the constituent
companies. E.g. load the company being taken over with liabilities. Hide the predator
company’s corporate inefficiencies, distorting the performance of the acquired
companies, and hiding the corporate inefficiencies of the predator company
15. Short-term poison pills may help businesses go through difficult financial periods when
they could be defenseless targets.
True or False

True ___1. One of the assumptions of the structural frame is that organizations work best
when rationality prevails over personal agendas and extraneous pressure.
False ___2. The essence of lateral coordination is that higher levels control the work of
subordinates through authority, rules and policies, and planning and control systems.
True ___3. Rules, policies, standards and standard operating procedures limit individual
discretion and help ensure that behavior is predictable and consistent.
False ___4. The structural perspective emphasizes dealing with organizational issues by
changing people through training, rotation, promotion and dismissal.
False ___5. Organizational growth spawns informality and simplicity.
False ___6. During restructuring, the five components of Mintzberg’s model of structural
possibilities indicate that top management has the most influence on the final outcome.
True ___7. As the complexity of the role structure of an organization grows, it needs more
sophisticated coordination strategies.

False ___8. In a machine bureaucracy, the bulk of the work is done in quasi-autonomous
units.
False ___9. More complicated projects generally require structure with clearly defined roles
elementary forms of interdependence and coordination by plan or command
False ___10. Although it is a noble idea, no research evidence exists that supports the
notion of investing in employees and responding to their needs.

False ___11. Because profit sharing plans have had a positive impact on performance that
been quickly adopted by the majority of companies.

False ___12. The primary reason that change initiatives fail is that managers’ intentioned
insincere.

False ___13. Managers spend most of their time relating to people.

True ___14. It is naïve and romantic to hope that organizational politics can be eliminated.

False __ 15. Political activity is more visible and dominant under conditions of homogeneity
than diversity.

True ___ 16. Conflict encourages new ideas and approaches to problems, stimulating
innovation