fiduciary
/fəˈduʃiˌɛri/Relating to a legal duty to manage someone else's money honestly and in their best interest.
Example: The manager broke his fiduciary duty by misusing client funds.
C222 words · Proficient
Business Management vocabulary — C2
Expert-level business vocabulary for corporate governance and decision-making, including fiduciary duty, insolvency, a hostile takeover and the groupthink behind boardroom mistakes.
22 questions
Words in this set
22receivership
/rɪˈsivərˌʃɪp/A legal process in which an independent manager takes control of a struggling company's assets.
Example:
The retailer was placed into receivership after months of losses.
conglomerate
/kənˈɡlɑmərət/A large company made up of several smaller, often unrelated, businesses.
Example:
The conglomerate owns businesses in food, media and finance.
insolvency
/ˌɪnˈsɑlvənsi/The state of being unable to pay debts as they fall due.
Example:
Rising costs pushed the firm towards insolvency.
liquidation
/ˌlɪkwɪˈdeɪʃən/The process of closing a company and selling its assets to pay off its debts.
Example:
The factory went into liquidation after losing its main client.
divestiture
/dɪˈvɛstɪtʃər/The sale of part of a business, such as a subsidiary or division.
Example:
The divestiture of its retail arm raised needed cash.
diversification
/daɪˌvɜrsəfəˈkeɪʃən/The strategy of expanding into new markets or products to spread business risk.
Example:
The firm's diversification into software paid off.
hostile takeover
Buying a company by going directly to shareholders, against the wishes of its leaders.
Example:
The firm fought off a hostile takeover by a rival group.
leveraged buyout
Buying a company mostly with borrowed money, using the company's own assets as security.
Example:
Investors financed the leveraged buyout with a large bank loan.
golden parachute
A large payment guaranteed to a top executive if they lose their job after a takeover.
Example:
The outgoing CEO left with a golden parachute worth millions.
agency cost
The loss caused when managers act in their own interest, not the owners'.
Example:
The whole bonus scheme was an attempt to reduce agency cost.
principal-agent problem
The difficulty of making someone act on your behalf faithfully.
Example:
Every outsourcing contract is a principal-agent problem in disguise.
moral hazard
Taking bigger risks because someone else carries the loss.
Example:
Guaranteeing the debt created a textbook moral hazard.
path dependency
The way early decisions constrain everything that follows.
Example:
Path dependency explains most of what looks like stupidity in that structure.
institutional memory
The accumulated knowledge held by an organisation's people.
Example:
Three retirements wiped out the institutional memory of a decade.
tacit knowledge
Knowledge people have but cannot easily write down.
Example:
Tacit knowledge is what walks out of the door on a Friday.
organisational slack
Spare capacity that lets an organisation absorb shocks.
Example:
Cutting all the organisational slack made the next crisis fatal.
satisficing
Choosing the first option that is good enough rather than the best.
Example:
The committee was satisficing and calling it strategy.
groupthink
A group agreeing too readily and suppressing doubts.
Example:
The minutes are a case study in groupthink and nobody dissented.
sunk cost fallacy
Continuing with something only because of what has already been spent.
Example:
Four more years of the sunk cost fallacy followed that decision.
survivorship bias
Drawing conclusions only from the cases that survived.
Example:
The whole strategy rested on survivorship bias and a good anecdote.
bureaucratic capture
The taking over of a regulator by the industry it regulates.
Example:
Bureaucratic capture is slow and nobody ever signs anything.
