MGMT 5560 Practice Test Questions with
100% Correct Answers
How does CEO age affect decision-making?
Older CEOs may avoid complex strategic moves and exhibit diminishing cognitive abilities.
What is the Career Horizon effect in relation to CEOs?
CEOs' priorities change as they approach retirement, affecting their decision-making.
How does CEO functional experience influence their strategy?
CEOs with operational backgrounds focus on efficiency, while those with marketing
backgrounds prioritize innovation.
What is the optimal CEO tenure length for performance?
Approximately 4.8 years, based on stock return volatility.
What is CEO narcissism?
A personality trait characterized by exaggerated pride and self-confidence.
What are the sources of CEO hubris?
Recent organizational success, media praise, and inflated self-importance.
How does media praise influence CEO behavior?
It can reinforce a CEO's self-image and confidence, potentially leading to hubris.
What is self-attribution bias in the context of CEO success?
The tendency to attribute success to personal skills while blaming failures on external factors.
What is the better-than-average effect?
,The belief that one is superior to the average person, common among CEOs.
What is the impact of CEO pay disparity?
It reflects the CEO's belief in their unique contributions and value to the organization.
What is a characteristic of CEOs with narcissism?
They tend to make less comprehensive, faster, and more centralized decisions.
How does CEO narcissism affect firm strategies?
It leads to more large-scale strategic initiatives, including bigger acquisitions.
What is a common behavior of narcissistic CEOs regarding CSR?
They often do not engage in Corporate Social Responsibility, perceiving themselves as less
dependent on stakeholders.
What is the relationship between CEO narcissism and firm performance?
Narcissistic CEOs can lead to more extreme firm performance.
How do narcissistic CEOs respond to social praise?
They are exceptionally emboldened by social praise, such as media recognition.
What is the principal-agent conflict?
It occurs when managers make decisions that benefit themselves rather than the shareholders.
What is one solution to the principal-agent conflict?
Aligning incentives by paying managers partially in stock to make them stakeholders.
What are the components of CEO compensation?
Baseline salary, bonuses, stock options, stock ownership, and perks.
, What is the purpose of pay-for-performance compensation design?
To align executive compensation with the company's success.
How does compensation design differ globally?
U.S. CEOs have a 100% pay premium, while Asia lags in compensation components due to
regulations.
What is a say-on-pay vote?
An advisory vote required by law for public companies on executive compensation,
conducted at least every three years.
What role does the Board of Directors (BOD) play?
They represent shareholders' interests, provide strategic guidance, and hire top executives.
What factors can limit the monitoring ability of BODs?
Outside job demands, board expertise, meeting frequency, and CEO power.
What are some sources of CEO power?
Personal characteristics, control of resources, external prestige, stock ownership, and CEO
duality.
What does CEO duality refer to?
When the CEO also serves as the chair of the board.
What is the significance of diversity in top positions?
It leads to new insights, a more collaborative culture, and better monitoring of non-financial
performance measures.
What is Mendelow's Matrix used for?
100% Correct Answers
How does CEO age affect decision-making?
Older CEOs may avoid complex strategic moves and exhibit diminishing cognitive abilities.
What is the Career Horizon effect in relation to CEOs?
CEOs' priorities change as they approach retirement, affecting their decision-making.
How does CEO functional experience influence their strategy?
CEOs with operational backgrounds focus on efficiency, while those with marketing
backgrounds prioritize innovation.
What is the optimal CEO tenure length for performance?
Approximately 4.8 years, based on stock return volatility.
What is CEO narcissism?
A personality trait characterized by exaggerated pride and self-confidence.
What are the sources of CEO hubris?
Recent organizational success, media praise, and inflated self-importance.
How does media praise influence CEO behavior?
It can reinforce a CEO's self-image and confidence, potentially leading to hubris.
What is self-attribution bias in the context of CEO success?
The tendency to attribute success to personal skills while blaming failures on external factors.
What is the better-than-average effect?
,The belief that one is superior to the average person, common among CEOs.
What is the impact of CEO pay disparity?
It reflects the CEO's belief in their unique contributions and value to the organization.
What is a characteristic of CEOs with narcissism?
They tend to make less comprehensive, faster, and more centralized decisions.
How does CEO narcissism affect firm strategies?
It leads to more large-scale strategic initiatives, including bigger acquisitions.
What is a common behavior of narcissistic CEOs regarding CSR?
They often do not engage in Corporate Social Responsibility, perceiving themselves as less
dependent on stakeholders.
What is the relationship between CEO narcissism and firm performance?
Narcissistic CEOs can lead to more extreme firm performance.
How do narcissistic CEOs respond to social praise?
They are exceptionally emboldened by social praise, such as media recognition.
What is the principal-agent conflict?
It occurs when managers make decisions that benefit themselves rather than the shareholders.
What is one solution to the principal-agent conflict?
Aligning incentives by paying managers partially in stock to make them stakeholders.
What are the components of CEO compensation?
Baseline salary, bonuses, stock options, stock ownership, and perks.
, What is the purpose of pay-for-performance compensation design?
To align executive compensation with the company's success.
How does compensation design differ globally?
U.S. CEOs have a 100% pay premium, while Asia lags in compensation components due to
regulations.
What is a say-on-pay vote?
An advisory vote required by law for public companies on executive compensation,
conducted at least every three years.
What role does the Board of Directors (BOD) play?
They represent shareholders' interests, provide strategic guidance, and hire top executives.
What factors can limit the monitoring ability of BODs?
Outside job demands, board expertise, meeting frequency, and CEO power.
What are some sources of CEO power?
Personal characteristics, control of resources, external prestige, stock ownership, and CEO
duality.
What does CEO duality refer to?
When the CEO also serves as the chair of the board.
What is the significance of diversity in top positions?
It leads to new insights, a more collaborative culture, and better monitoring of non-financial
performance measures.
What is Mendelow's Matrix used for?
