You currently work as a financial analyst with a large investment bank, RP Investments. Last year, there was a major scandal at one of your major competitors, CC Bank, involving manipulation of some auctions for government bonds. A number of senior partners at CC Bank were charged with price fixing in the government bond market. The ensuing investigation led four of the eight managing directors (the highest-ranking officials at CC Bank) to resign. A new senior managing director was brought in from outside to run the firm. This individual recruited three outside managing directors to replace the ones who resigned. A thorough ‘house cleaning’ then took place. In the following six months, 15 additional partners and over 40 senior managers left CC Bank and were replaced, usually with people from outside the firm.

RP Investments has had no such scandal and almost all of its senior executives have been with the firm for all of their careers.

a. Describe zero-base budgeting (ZBB).

b. Which firm, RP Investments or CC Bank, is more likely to be using ZBB and why?