A Major Conflict of Interest Between Top Executives and Owners

question 115

Multiple Choice

A major conflict of interest between top executives and owners, is that top executives wish to diversify the firm in order to ____, whereas owners wish to diversify the firm to ____.

• A) generate free cash flows; reduce the risk of total firm failure
• B) increase the price of the firm's stock; increase the dividends paid out from free cash flows
• C) reduce the risk of total firm failure; reduce their total portfolio risk
• D) reduce their employment risk; increase the company's value

Understand the principles of responsibility and authority in management.

Understand different types of organizational structures and their characteristics.

Recognize the impact of organizational design on management and operations.

Identify the features of organic versus mechanistic organizational designs.

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Definitions:

Natural Resources

Materials or substances occurring in nature which can be exploited for economic gain, such as minerals, forests, water, and fertile land.

Anthropologists

Scientists who study human societies, cultures, and their development.

Conspicuous Consumption

The spending of money on and the acquisition of luxury goods and services to publicly display economic power, status, or wealth.

Prestige And Status

Recognition and respect received from others based on achievements, position, or quality of character, which often influences social ranking.