Bus 497A Chapter 10

Front 1

corporate governance

Back 1

The processes, policies, and laws that govern an
organization (often corporations) to establish
accountability and try to eliminate conflicts of interest
associated with the principle-agent problems.

Front 2

stakeholders

Back 2

Individuals and groups that have an interest to stake a
claim in an organization.

Front 3

agency problem

Back 3

The interest of individuals that act as agents to manage the company may not align with the interest of the firm’s
stockholders.

Front 4

board insiders

Back 4

Members of the board of directors that are generally
employed inside of the organization

Front 5

institutional investors

Back 5

Organizations that invest large sums of money into a
broad portfolio of holding, such as banks, retirement
funds, mutual funds, and pension funds.

Front 6

board outsiders

Back 6

Members of the board of directors that are generally
employed outside of the organization.

Front 7

CEO duality

Back 7

a situation in which the CEO is also the chairman of the board of directors.

Front 8

leveraged buyout (LBO)

Back 8

A company that is purchased through significant debt.

Front 9

corporate raider

Back 9

An individual or firm that purchases stock in another
firm with the goal of an eventual takeover.

Front 10

hostile takeover

Back 10

An attempt to purchase a company that is strongly
resisted by the targeted firm’s CEO and/or board.

Front 11

shark repellent

Back 11

Defenses against takeover attempts.

Front 12

white knight

Back 12

a firm that rescues a target firm by offering a friendly
takeover as an alternative to a hostile one.

Front 13

greenmail

Back 13

An unfriendly firm forces a target company to
repurchase a large block of stock at a premium to thwart
a takeover attempt.

Front 14

poison pill

Back 14

An attempt to make the firm’s stock unattractive to
raiders by letting shareholders buy stock at a
discount, which creates a conversion of equity to debt
that makes the firm less attractive.

Front 15

golden parachute

Back 15

A financial package (often including stock options and
bonuses worth millions of dollars) given to executives
likely to lose their jobs after a takeover.

Front 16

Lawrence Kohlberg - three levels (6 stages) of moral development

Back 16

(1) preconventional, (2) conventional, and
(3) postconventional

Front 17

pre-conventional level

Back 17

Ego-centric
Stage 1 - Focus on fear of getting caught, punishment
Stage 2 - Focus on rewards, "what's init for me?"

Front 18

conventional level

Back 18

Focus is on expectations of society
Stage 3 - Conformity driven, fulfill social roles
Stage 4 - Importance of social conventions is encouraged, authority and social order

Front 19

Post-conventional level

Back 19

morality is more than simply following social rules or norms
Stage 5 - Social contract orientations, considers different values and opinions
Stage 6 - Moral reasoning is based on universal ethical principles, ideas of justice, right and wrong

Front 20

Sarbanes-Oxley Act of 2002

Back 20

Law that set new or increased standards for the boards of public US companies and accounting firms.

Front 21

social entrepreneurship

Back 21

Entrepreneurial actions where both economic and
social value creation occur.

Front 22

corporate social performance

Back 22

The degree to which a firm’s actions honor ethical values that respect individuals, communities, and the natural
environment.

Front 23

traditionalists

Back 23

The generation born between 1925 and 1946 that fought in World War II and lived through the
Great Depression. They value personal communication,
loyalty, hierarchy, and are resistant to change.

Front 24

baby boomers was born between 1946 and 1964

Back 24

Boomers make up the majority of the workforce, value face time

Front 25

Generation X, born between 1965 and 1980, is marked by an X symbolizing their unknown nature.

Back 25

Gen X members prize flexibility in their jobs and dislike the feeling that they are being micromanaged.

Front 26

Generation Y

Back 26

prizes job and life satisfaction highly

Front 27

anchoring and adjustment bias

Back 27

Individuals react to arbitrary or irrelevant numbers
when setting financial or other numerical targets.

Front 28

availability bias

Back 28

readily available information is incorrectly assessed to
also be more likely.

Front 29

escalation of commitment

Back 29

throwing good money after bad

Front 30

Fundamental attribution error

Back 30

when good outcomes are attributed to personal characteristics but undesirable outcomes are attributed to external circumstances.

Front 31

Hindsight bias

Back 31

mistakes seem obvious after they have already occurred

Front 32

Judgments about correlation and causality

Back 32

when individuals make inaccurate attributions about the causes of events.

Front 33

Misunderstandings about sampling

Back 33

draw broad conclusions from small sets of observations

Front 34

Overconfidence bias

Back 34

individuals are more confident in their abilities to predict an event than logic suggests is actually possible.

Front 35

Representativeness bias

Back 35

managers use stereotypes of similar occurrences when
making judgments or decisions.

Front 36

Framing bias

Back 36

the way information is presented alters the decision an individual will make.

Front 37

Satisficing

Back 37

individuals settle for the first acceptable alternative instead of seeking the best possible (optimal) decision.