BGS Pain Flashcards
What is a Business?
Any organizations that is engaged in making a product or providing a service for a profit
What is a Society?
human beings and to the social structures they collectively create
What is General system theory?
all organizations are open to, and interact with, their external environments
What is the property/finance/ownership theory of the firm?
the firm is seen as the property of its owners
- purpose of firm is to maximize its long-term market value
What is the stakeholder theory of the film?
corporations serve a broad public purpose; to create value for society
What is a stakeholder?
persons and groups that affect, or are affected by, an organization’s decisions, policies and operations
What are shareholders/investors/stockholders?
any person, company, or institution that owns shares in a company’s stock
Are stakeholders and stockholders the same?
No, a stockholder is some one/organization that owns share of a company’s stock
What is a market stakeholder?
Those that engage in economic transactions with the company as it carries out its purpose of providing society with goods and services
What is a nonmarket stakeholder?
people and groups who do not engage directly in economic exchange with the firm are however affected by and can affects its actions
What is the difference between an internal stakeholder and an external stakeholder
Internal stakeholder are employed by the firm and are “inside the firm” while external stakeholder are not directly employed but have transactions with the the firm
What is stakeholder analysis?
identify relevant stakeholders and to understand both their interests and the power they may have to assert these interests
What is focal organizations?
organization from whose perspective the analysis is conducted
What are the 4 key questions of stakeholder analysis?
Who are the relevant stakeholders?
What are the interest of each stakeholder?
What is the power of each stakeholder?
How are coalitions likely to form?
What is stakeholder interest?
the nature of each group’s stake - their concerns and what they want from their r/s from firm
What is stakeholder power?
ability to use resources to make an event happen or to secure a desired outcome
What are the 5 kinds of stakeholder powers?
Voting, economic, political, legal and informational
What are stakeholder coalitions?
Stakeholders of similar interest temporary form alliance to pursue common interest
What is the GREETS framework
G - globalization
R - regulations
E - ethical standards
E - environment standards
T- technology
S - societal expectations
What is the ecosystem?
organizations and their surrounding environment of business suppliers, clients, bankers and other stakeholders, with whom they interact
What are the 4 traits of an ecosystem?
Dynamic - entities in ecosystem are always active and in motions
Interactive - many actors interact with each other - certain r/s influence actions and decisions
Interdependent - connections and collaborations are essential for a business to survive
Adaptive/Adaptable - environment is VUCA
What is the IPCC?
Intergovernmental Panel on Climate Change - bunch of scientist study climate change and write reports of what government should do
What is the C - suite?
CEO - strategic decision of company and public face
CFO - account + strategic investment decisions
COO - responsible of daily operations, resource management and collabs within company - efficient and effective
CTO - Hardware and software + technology, innovation and technical leadership
CIO - oversees the flow of info within company and externally (PR)
What is Maslow’s Hierarchy of Needs?
Bottom to top:
Biological & Physiological: air, food, shelter
Safety needs: protection from elements, law order stability
Love and belonging: friendship, intimacy, affection, love
Esteem: achievement, mastery, independence, status
Self-actualization: realizing personal potential, self-fulfillment
What is an public/social/sociopolitical issues?
any issue that is of mutual concern to an organization and one or more of its stakeholders
What is the performance-expectation gap?
Gap between the expected corporate performance (what stakeholders expect) and the actual corporate performance
Are public issues a risk or an opportunity?
Risk: if firms do not anticipate and plan for effectively can seriously hurt a company
Opportunity: Correctly anticipating the emergence of a public issue can confer a competitive advantage
What is environmental analysis?
method managers use to gather information about external issues and trends -> develop organizational strategy to minimize threat and take advantage of new opportunities
What is an environmental intelligence?
acquisition of information gained from analyzing the multiple environments affecting organizations - informal or formal
What are the 8 strategic radar screen for environmental intelligence?
Customer, competitor, geophysical, legal, political, social, technological, economic
What is competitive intelligence?
systematic and continuous process of gathering, analyzing, and managing external information about the organization’s competitors that can affect the organization’s plans, decisions, and operations
- may overstep ethical and legal boundaries when attempting to learn as much as they can about their competitors
What is stakeholder materiality?
importance of prioritizing the relevance of the stakeholders and their issues to the company
What are the 5 steps in the issue management process?
Identify issue -> analyze issue -> generate options -> take action -> evaluate results
What is stakeholder engagement?
process of ongoing relationship building between a business and its stakeholders
What are the 4 stages in the business-stakeholder relationship?
stage 1 to 4:
Inactive - ignore stakeholder concerns and firm believe they are correct without considering impact on others
Reactive - act when forced in a defensive manner
Proactive - try to anticipate stakeholder concerns but treat it as problem to be managed, not as competitive advantage
Interactive - companies actively engage stakeholders in ongoing r/s of mutual respect, openness and trust
What are the drivers of stakeholder engagement?
Goals - both business and stakeholder must hv important and urgent problem to solve
Motivation - must be motivated to work tgt (governmental campaigns)
Organizational capacity - engage each other in productive dialogue - firm: support of top leadership + funding and stakeholders: leadership team for dialogue
What is stakeholder dialogue?
a business and its stakeholder come tgt for face to face conversations about issues of a common concern
What is stakeholder networks?
encounter public issues that they can address effectively only by working collaboratively with other businesses and concerned persons and organizations
What is the tragedy of the commons?
a situation in which individuals with access to a public resource (also called a common) act in their own interest and, in doing so, ultimately deplete the resources
What is corporate power?
capability of corporations to influence government, the economy, and society based on their organizational resources
What is the iron law of responsibility?
in the long run those who do not use power in ways that society considers responsible will tend to lose it
What is corporate social responsibility (CSR)?
corporation should act in a way that enhances society and its inhabitants and be held accountable for any of its actions that affect people, their communities, and their environment
What is corporate citizenship?
the actions they take to put their commitment to corporate social responsibility into practice
What are the 8 aspects of corporate citizenship?
Ethical business behavior, stakeholder commitment, community, consumers, employees, investors, suppliers and environment commitment
What are the principles under ethical business behavior for corporate citizenship?
- Engages in fair and honest business practice in its r/s with stakeholders
- set high standards of behavior for all employees
- exercise ethical oversight executive and board levels
What are principles under stakeholder commitment for corporate citizenship?
- strives to manage the company for benefit of all stakeholders
- initiates and engages in genuine dialogue with stakeholders
- Values and implements dialogue
What are the principles under community for corporate citizenship?
- Fosters a reciprocal relationship between the corporation and community
- Invest in the communities in which the corporation operates
What are the principles under consumer for corporate citizenship?
- Respects the rights of consumers
- Offers quality products and services
- provides information that is truthful and useful
What are the principles under employees for corporate citizenship?
- Provides a family-friendly work environment
- Engages in responsible HR management
- Provides an equitable reward and wage system for employees
- Engages in open and flexible communication with employees
- Invest in employee development
What is the principle under investors for corporate citizenship?
strives for a competitive return on investment
What is the principle under suppliers for corporate citizenship
Engages in fair trading practices with suppliers
What are the principles under environment commitment for corporate citizenship?
Demonstrates a commitment to
1. environment
2. sustainable development
What is enlightened self-interest?
the notion that providing value to stakeholders is in a business’s long run self-interest
What are the arguments for corporate social responsibility?
- Balances corporate power with responsibility
- Discourage government regulations
- Promotes long-term profits for business
- Improves stakeholder relationships
- Enhances business reputation
What are the arguments against corporate social responsibility?
- Lowers economic efficiency and profits
- Imposes unequal cost among competitors
- Imposes hidden cost passed on to stakeholders
- Requires skills business may lack
- Places responsibility on business rather than individuals
What is reputation?
Desirable or undesirable qualities associated with an organization or its actors that may influence the organization’s relationships and stakeholders
What are B Corporations?
Emerging businesses that explicitly seek to balance the interest of multiple stakeholders
What are the 5 stages of global corporate citizenship?
stage 1: Elementary - underdeveloped and defensive
stage 2: Engaged - aware of public expectations and reactive
stage 3: Innovative - Responsive + understand their lacks and will prompt structural innovation
stage 4: Integrated - Proactive - partnerships and alliance
stage 5: transforming - Visionary + multi-organizational approach
What is a social audit?
systematic evaluation of an organization’s social, ethical and environmental performance
What is corporate social reporting?
When company decides to publicize information collected in social audit
What is transparency?
quality of complete clarity
What is an integrated report?
Integration of legally required financial information with social and environmental information into a single report
What is globalization?
increasing movement of goods, services, and capital across national borders
What are transnational corporations (TNCs)?
firms that control assets abroad
What is Foreign direct investment (FDI)?
When a company, individual, or fund invest money in another country
What are the international financial trade institutions (IFTIs)?
Most important are World Bank, the International Monetary Fund and World Trade Organization - they set rules by which the international commerce is transacted
What is the main and initial role of World Bank?
Main: provide economic development loans to its nations - now world’’s largest sources of economic development
Initial: help rebuild the war-torn economies of Europe
How is World Bank’s governing board represented?
Based on economic power; country have voting power based on size of economies
What is the sister organization to the World Bank?
International Monetary Fund (IMF)
What is the main role of the International Monetary Fund (IMF)?
To stabilize the systems of currency exchange rate and international payments to enable member countries to participate in global trade
What is the similarity between World Bank and International Monetary Fund?
imposes strict conditions on governments that receives loans. Conditions may include demands that government cut spending, devalue their currencies, increase exports, liberalize financial markets and reduce wages
What is the main role of the World Trade Organization (WTO)?
international body that establishes ground rules for trade among nations
What is the main objective of the World Trade Organization (WTO)?
Promote free trade; eliminate barriers of trade such as quotas, duties and tariffs
What is World Trade Organization’s predecessor?
General Agreement on Tariffs and Trade (GATT)
What is the difference between WTO and WB + IMF?
WTO does not lend money or foreign exchange; only sets rules for international trade
What is WTO’s most favored nation rule about?
member countries may not discriminate against foreign products for any reasons; all import restrictions are illegal unless proven scientifically
What is inversion?
Local company avoid paying taxes in home country by moving their headquarters or merging with companies outside the home country
What is venture funds?
Private equity fund (aka hedge fund) that buys debt of weak companies or heavily indebted countries with the intention of making a profit
How do venture funds make profit?
Buy defaulted loans of country/company of deep discount and then sue that country/company to pay back loans at full face value with interest :c
What are the benefits of globalization?
- Increases economic productivity
- Reduces prices for consumers
- Gives foreign investments funds to support economic development
- Transfer technology
- Spreads democracy and freedom, and reduces military conflict
What are the costs of globalization?
- Cause job insecurity
- Weakens environmental and labor standards
- Prevents individuals nations form adopting policies promoting environmental or social objectives, if these discriminate against products from another country
- Erodes regional and national cultures and undermines, cultural, linguistic, and religious diversity
- Is compatible with despotism
What does race to the bottom mean?
progressive lowering or deterioration of standards as a result of the pressure of competition
What is democracy?
broadly to the presence of political freedom
What is a military dictatorship?
repressive regimes ruled by dictators who exercise total power through control of the armed forces
What is the free enterprise systems?
principle of voluntary association and exchange
What is central state control?
Economic power is concentrated in the hands of government officials and political authorities
What is wealth?
assets that a person accumulates and he or she owns at a point in time
What is the bottom of the pyramid (The global wealth pyramid)?
individuals who earn below $3000 a year in local purchasing power
What is microfinance?
when financial organizations provides loans to low-income clients or solidarity lending groups (a community of borrowers) who traditionally lack access to banking or related services
What are global action networks (GANs)?
Development of collaborative, multi-sector partnerships focuses on particularly social issues or problems in global economy
What is civil society/NGOs?
social organizations that do not have a commercial or governmental purpose
What is a public policy?
plan of action undertaken by government officials to achieve some broad purpose affecting a substantial segment of a nation’s citizens
What are the elements of a public policy?
Inputs: external pressure that shape a government’s policy decisions and strategies to address the problems (e.g 3k people die in distracted crashes)
Goals: broad and high-minded or narrow and self-serving (e.g. avoid more crashes)
Tools: combinations of incentives and penalties that government uses to prompt citizens and businesses to act in ways to achieve goals (e.g. fines, jail)
Effect: outcomes arising from government regulations - intended and unintended (e.g. number of crashes reduced)
What are the two economic policies?
Fiscal policy and Monetary policy
What is fiscal policy?
patterns of government collecting and spending funds that are intended to stimulate or support the economy
What is monetary policy?
policies that affect supply, demand, and value of a nation’s currency
What are social assistance policies?
government’s response to human needs such as food, housing, healthcare, employment, and other necessities
What are regulations?
primary way of accomplishing public policy
What is market failure?
marketplace fails to adjust to prices for the true cost of a firm’s behavior
What are negative externalities/spillover effects?
the manufacture or distribution of product gives rise to unplanned or unintended costs borne by stakeholders
What are economic regulations?
modify the normal operation of the free market and the forces of supply and demand
What are antitrust laws?
prohibit unfair, anti-competitive practices by businesses
What is predatory pricing?
the practice of selling below cost to drive rivals out of business
What are social regulations?
aimed at such important social goals as protecting consumers and the environment and providing workers with safe and healthy working conditions
What is deregulation?
the removal or scaling down of regulatory authority and regulatory activities of government
What are examples of institutional investors?
pensions, mutual funds, insurance companies, and university endowments, also own stock
What is a bear market?
the global economy fell into a severe recession
What is a bull market?
a market in which share prices are rising
What is proxy?
Shareholders not attending are given an opportunity to vote by absentee ballot
What are the major legal rights of shareholders?
- To receive dividends, if declared
- To vote on:
- Members of board of directors
- Major mergers and acquisitions
- Charter and bylaw changes
- Proposals by stockholders - To receive annual reports on the company’s financial condition
- To bring shareholder suits against the company and officers
- To sell their own shares of stock to others
What is corporate governance?
process by which a company is controlled, or governed
What are the board of directors?
play a central role in corporate governance
What are the two different types of board of directors?
outside directors :not managers of the company
Inside directors: managers of the company
What are the principles of good board governance?
- Select outside directors to fill most positions
- Hold more open elections for members of the board
- Appoint an independent lead director (also called a nonexecutive chairman of the board)
- Align director compensation with corporate performance
- Evaluate the board’s own performance on a regular basis
What is the agency problem?
A conflict of interest inherent in any relationship where one party is expected to act in another’s best interest
What is stock options?
to buy a company’s stock at a set price (called the strike price) for a certain period
What is the idea for pay-for-performance approach for executives?
executives will work hard to improve the company’s results, because this will increase the stock price and therefore the value of their compensation.
What are the 2 main arguments for high salaries for CEOs?
- Being rewarded for outstanding performance
- Incentive for innovation and risk taking
What are the 3 main arguments against high salaries for CEOs?
- Top managers have such high salaries is due to influence over pay-setting process
- High compensation diverts financial resources that could be invested in the business
- higher pay does not necessarily produce higher returns
What is say-on-pay provision?
public companies must hold shareholder votes on executive compensation at least once every 3 years
What is shareholder activism?
Shareholders taking action directly to protect their own interests
What are hedge funds?
pools of private capital; uses aggressive strategies use to earn high returns for their investors
What are private equity firms?
managed pools of money invested by very wealthy individuals and institutions (they are not usually open to ordinary individuals).
Is shareholder activism always beneficial?
-pressure companies to cut costs, add debt, sell divisions and increase share repurchases -> creates shareholder value but its short lived
- don’t promotes investing in jobs, R&D and growth
What is social/sustainable/responsible/impact investment?
to the use of stock ownership as a strategy for promoting social, environmental, and governance objectives
What is stock screening?
selection of companies to invest in and removing those who don’t meet a social criteria: human rights, fair pay, safe products
What is the social responsibility shareholder resolutions?
is a resolution on an issue of corporate social responsibility placed before shareholders for a vote at the company’s annual meeting
What are shareholder/derivative lawsuits?
Checks on abuses, including insider trading, an inadequate price obtained for the company stock in a buyout (or a good price rejected), or failure to disclose material information in a timely manner
What is the role of the Securities and Exchange Committee (SEC)?
major government agency to to protect shareholders’ rights by making sure that stock markets are run fairly and that investment information is fully disclosed
What are the areas that Securities Exchange Committee regulate?
- Information transparency and disclosure
- Insider trading
- Protect investors against fruad
What is insider trading?
when a person gains access to confidential information about a company’s financial condition and then uses that information, before it becomes public knowledge, to buy or sell the company’s stock
What is front running?
another kind of insider trading where traders place buy and sell orders for stock in advance of the moves of big institutional investors - esp with today’s high speed trading, only need a few milliseconds of advance notice
What is agency cost?
type of internal cost that a principal may incur as a result of agency problem e.g. cost of inefficiency
What is the fiduciary rule?
advisors are to put their clients’ interests above their own
What is the goal of the fiduciary rule?
protect investors from advisors who are concealing potential conflicts of interest
