Chapter 4: Strategic Leadership and Strategic Direction
Chapter 4
Strategic Leadership and Strategic Direction
TRUE/FALSE QUESTIONS
1. The traditional view of leaders in organizations is that they set direction, make the
important decisions, and rally the followers.
2. One important responsibility of boards of directors is to monitor and prevent the
potential for agency problems.
3. Agency problems occur when an agent sacrifices his or her own interests for the
benefit of the organization.
4. Government regulation can influence corporate governance practices.
5. Inertia facilitates change in organizations.
6. Broad environmental forces influence strategic direction.
7. The labels a firm uses for its written statements of strategic direction are just as
important as the elements they contain.
8. It has been suggested that the business definition question should include not only
“What is our business?” but also “What was our business?”
9. A mission statement may contain a statement of vision.
10. The scope of an organization is the breadth of its activities across markets, functions,
resource conversion processes, and products.
11. Sustainable development is defined as growth that is sustainable because there are so
Chapter 4: Strategic Leadership and Strategic Direction
many available resources that they will virtually never run out.
MULTIPLE CHOICE QUESTIONS
12. The traditional view of leaders in organizations is that they:
A. Are dictators to be followed without question
B. Set direction, make the important decisions, and rally the followers
C. Rise to the top of an organization just like cream on milk
D. Are ineffective
E. Delegate all important decisions to other managers
13. The primary responsibilities of CEOs include all of the following except:
A. They make all the low-level operating decisions
B. They design the organization’s purpose, vision, and core values
C. They oversee the creation of policies, strategies, and structure
D. They serve as stewards for their organizations
E. They serve as a coach, teacher, and facilitator in order to facilitate
organizational learning
14. In Collin’s (Good to Great) leadership skills hierarchy, the skill that comes right after
becoming a capable individual is:
A. Becoming an organizer
B. Becoming an effective leader
C. Becoming a team player
D. Becoming a transformational leader
E. Becoming a super star
15. A heterogeneous top management team:
A. Is ineffective in most competitive settings
B. Can lead to improved organizational decisions
C. Makes implementing a strategy easier
D. Is made up of managers with a wide variety of backgrounds, education, and
experience.
E. Both B and D are true.
16. Which of the following is the best example of an agency problem?
A. A CEO makes a decision that maximizes his or her own self-interest at the
expense of shareholders
Chapter 4: Strategic Leadership and Strategic Direction
B. The CEO of one organization sits on the board of directors of another
organization
C. Both shareholders and managers express an interest in maximizing
organizational profits
D. A CEO decides to take a pay cut because the corporation is struggling
E. A female CEO receives less salary than she should just because she is a
woman
17. All of the following are ways to encourage top managers to act in the best interests of
the shareholders except:
A. Board independence might encourage it, although the evidence is inconclusive
B. Including close personal friends of the CEO on the board of directors
C. Incentive compensation
D. Government regulation
E. Threat of a hostile takeover
18. The Sarbanes-Oxley Act of 2002:
A. Provides requirements regarding independence of corporate auditors
B. Requires that financial records be kept for at least five years
C. Requires the CEO to personally certify the corporation’s financial reports
D. Was partially a response to large corporate scandals
E. All of the above
19. Strategic direction is reflected by:
A. The organization’s purpose
B. A definition of the organization’s business or businesses
C. The organization’s vision
D. The organizational mission
E. All of the above
20. Factors that influence strategic direction include all of the following except:
A. The firm’s history
B. Social trends
C. Economic influences
D. Competitors
E. All of these factors influence strategic direction; there is no exception.
21. The forces in a firm that work to maintain the status quo are called:
Chapter 4: Strategic Leadership and Strategic Direction
A. Strategic direction
B. Value impediments
C. Strategic inertia
D. Social responsibility
E. None of the above
22. Strategic inertia is stronger:
A. In a firm that has been successful over a long period of time
B. In a firm with flexible systems and processes
C. In a firm with a weak culture
D. In a firm that has had low performance over a long period of time
E. When the economy is weak
23. A mission statement often contains:
A. An organization’s vision
B. An organization’s strengths and weaknesses
C. An organization’s functional-level strategies
D. An organization’s top management team membership
E. All of the above
24. The view of top management concerning what an organization can become is the
organization’s:
A. Business definition
B. Mission
C. Vision
D. Ethical dilemma
E. Enterprise strategy
25. A business definition should contain answers to all of the following questions except:
A. When should customer needs be satisfied?
B. What is being satisfied?
C. How are customer needs satisfied?
D. Who is being satisfied?
E. What are our products and services?
26. Values statements:
A. Are sometimes incorporated into a mission statement
B. Help the firm define what it stands for
Chapter 4: Strategic Leadership and Strategic Direction
C. Help guide the behavior of employees
D. Define what matters when making decisions
E. All of the above
27. Ethical dilemmas:
A. Are, by definition, completely unrelated to legal issues
B. Only occur in companies that lack codes of ethics
C. Occur when the values of different stakeholder of the organization are in
conflict over a particular issue
D. Are rare
E. None of the above
28. Organizations can encourage ethical behavior by:
A. Establishing systems and programs to ensure ethical compliance
B. Having a CEO that reinforces ethical behavior
C. Creating an “integrity program” to communicate and reinforce values
D. All of these are correct
E. A and B are correct
29. Which of the following is not a major component of social responsibility?
A. Economic responsibilities
B. Legal responsibilities
C. Political obligations
D. Moral obligations
E. Discretionary responsibilities
30. Sustainable development can be defined in terms of an organization’s practices with
regard to all of the following except:
A. Financial management
B. Technology advancement
C. Environmental protection
D. Community development
E. Advancement of society
ESSAY QUESTIONS
31. What are the four primary leadership responsibilities of the CEO?
Chapter 4: Strategic Leadership and Strategic Direction
32. Daniel Goleman concluded that successful leaders exhibit five types of emotional
intelligence. What are they? Can they be learned?
33. What is corporate governance? What are the functions of a board of directors?
34. What are the four areas of a business definition? Why is it important to periodically
review a firm’s business definition?
35. Discuss the components of social responsibility. Why would you expect a trustworthy
firm to have higher profits over the long term?