ch 2 Flashcards
customers, shareholders, employees, suppliers, government agencies, communities and others who have a “stake” or claim in some aspect of a company’s products, operations, markets, industry, and outcomes
stakeholder
are those whose continued association and resources are absolutely necessary for a firm’s survival
primary stakeholder
do not typically engage directly in transactions with a company and are therefore not essential to its survival
secondary stakeholders
in this model, there are reciprocal relationships between the firm and a host of stakeholders
stakeholder interaction model
the degree to which a firm understands and addresses stakeholder demands can be referred to
stakeholder orientation
the extent to which businesses strategically meet the economic, legal, ethical, and philanthropic responsibilities placed on them by various stakeholders
corporate citizenship
one of an organization’s greatest intangible assets with tangible value
reputation
founded in classic economic percepts, including the goal of maximizing wealth for investors and owners
shareholder model of corporate governance
the fourth major issue of corporate social responsibility, involves the development of formal systems of accountability, oversight, and control
corporate governance
adopts a broader view of the purpose of business, focus on suppliers, creditors, customers, employees, business partners, the community
stakeholder model of corporate governance
the concept of board members being linked to more than one company
interlocking directorate
financial payments and non-financial benefits provided to the upper level management within a business or organization
executive compensation
Those who have a claim in some aspect of a firm’s products, operations, markets, industry, and outcomes are known as
stakeholders
Stakeholders’ power over businesses stems from their _______.
a. ability to withhold organizational resources
b. ability to generate profits
c. media impact
d. political influence
e. stock ownership
a. ability to withhold organizational resources
is defined as one that does not typically engage in transactions with a company and therefore is not essential for its survival?
Secondary stakeholders
A firm that recognizes other stakeholders beyond investors, employees, and suppliers, and explicitly acknowledges that dialogue exists between a firm’s internal and external environments, has adopted
A stakeholder interaction model
The degree to which a firm understands and addresses stakeholder demands refers to
a stakeholder orientation
Which of the following industries tends to generate a high level of trust from consumers and stakeholders?
a. Insurance
b. Technology
c. Banks
d. Mortgage lenders
e. Energy
b. Technology
Why is it important for businesses to recognize secondary stakeholder groups?
a. They are absolutely necessary for the firm’s survival.
b. They include the employees necessary for the firm’s success.
c. They always have more power than primary stakeholders.
d. They provide vital resources that companies need.
e. They have legitimacy and the power to influence outcomes.
e. They have legitimacy and the power to influence outcomes.
A stakeholder group that is absolutely necessary for a firm’s survival is defined as a _______.
primary stakeholder
When unethical acts are discovered in a firm, which of the following is true in most instances?
a. They are caused by unwilling participants.
b. The cause is due to external stakeholders.
c. The perpetrators are caught and prosecuted.
d. Their acceptance and perpetuation were facilitated by cooperation or complicity.
e. The cause of the unethical conduct is a corrupt board of directors.
d. Their acceptance and perpetuation were facilitated by cooperation or complicity.
Which of the following statements accurately describes the normative approach?
a. It focuses on the firm’s behavior and usually addresses how decisions and strategies are made for stakeholder
relationships.
b. It describes what happens if firms behave in a particular way.
c. It is the degree to which a firm understands and addresses stakeholder demands.
d. It describes reciprocal relationships between the firm and a host of stakeholders.
e. It identifies ethical guidelines that dictate how firms should treat stakeholders.
e. It identifies ethical guidelines that dictate how firms should treat stakeholders.
A stakeholder orientation can be viewed as a(n) _______.
a. necessity for business success
b. continuum
c. polarizing concept
d. good marketing ploy
e. expensive proposition
b. continuum
What do suppliers offer that is critical to a firm’s long-term success?
Material resources and/or intangible knowledge
The four levels of social responsibility include
Economic, legal, ethical, and philanthropic
The first of three activities associated with the stakeholder orientation is _______.
an organization-wide generation of data
Public health and safety and the support of local organizations are issues that are most relevant to which stakeholder
group?
Community
Minimizing the use of energy and reducing emissions and waste are issues of importance to which of the following
stakeholder categories?
Environmental groups
The idea that the basic mission of business is to produce goods and services at a profit, thus maximizing its contribution to society, is associated with which of following individuals?
Milton Friedman
The idea of the invisible hand, which is a fundamental concept in free market capitalism, was developed by
Adam Smith
Some economists believe that if companies address economic and legal issues, they are satisfying the demands of society, and that trying to anticipate and meet additional needs would be almost impossible. Which economist’s theory does this belief most closely follow?
Milton Friedman
The idea that because people live in a community, social rules should benefit the community is known as _______.
the common good
The extent to which a firm meets the economic, legal, ethical, and philanthropic responsibilities placed on it by various stakeholders is referred to as its _______.
corporate citizenship
In corporate governance, the process of auditing and improving organizational decisions and actions is known as
_______.
control
Accountability, oversight, and control all fall under the definition and implementation of corporate_______.
governance
Which of the following is a major ethical concern among corporate boards of directors?
a. Compensation
b. The non-traditional directorship approach
c. Dividend reporting
d. Secondary stakeholders
e. Debt swaps
a. Compensation
Which of the following describes the purpose of a stakeholder orientation?
a. To emphasize shareholders and provide them with a return on their investment
b. To maximize positive outcomes that meet stakeholder needs
c. To diminish the role of stakeholders such as the government and employees
d. To determine which stakeholders to address and which to ignore
e. To allow stakeholders to determine the limits of executive compensation
b. To maximize positive outcomes that meet stakeholder needs
The first step in implementing the stakeholder perspective is _______.
assessing the corporate culture
Which model of corporate governance is founded in classic economic precepts?
Shareholder
Which of the following would typically be considered a secondary stakeholder group?
a. Suppliers
b. Customers
c. Special-interest groups
d. Government regulatory agencies
e. Community
c. Special-interest groups
Which of the following would typically be considered a primary stakeholder group?
a. Competitors
b. Community
c. Trade associations
d. Special interest groups
e. The mass media
b. Community
What do critics of high compensation for boards of directors point to as being problematic?
a. The more directors are paid, the more power they have over the organization.
b. High compensation could cause a conflict of interest.
c. High board member pay leads to poorly compensated employees.
d. High pay will render the board less complacent.
e. Board of director compensation is negatively related to corporate growth.
b. High compensation could cause a conflict of interest.
Board members being linked to more than one company is defined as
An interlocking directorate
The last step in implementing a stakeholder perspective in an organization is
gaining stakeholder feedback
A stakeholder orientation is not complete unless it includes
Activities that address stakeholder issues
A broader view of social responsibility is one that _______.
a. views customers as the most important stakeholder
b. takes into account a shareholder orientation
c. prioritizes all stakeholders the same way
d. considers the long-term welfare of society
e. emphasizes adherence to law as the highest priority
d. considers the long-term welfare of society
In Dodge vs. Ford Motor Co., the court ruled that a business exists for the profit of shareholders, and the board of
directors should focus on that objective.
a. True
b. False
True
The final step in implementing a stakeholder perspective is identifying stakeholders.
a. True
b. False
False
Evidence suggests that caring about the well-being of stakeholders leads to increased profits.
a. True
b. False
True
Ethics and social responsibility can be used interchangeably.
a. True
b. False
False
Government regulatory agencies are considered a secondary stakeholder group.
a. True
b. False
False
A board of directors’ fiduciary duty to a company refers to an assumed position of trust and confidence that entails
certain responsibilities.
a. True
b. False
True
The obligation of individuals to make decisions that are in the best interests of the corporation and its stakeholders is known as a _______.
a. duty of loyalty
b. duty of oversight
c. duty to audit
d. duty of control
e. duty of cooperation
a. duty of loyalty
Fiduciaries are persons placed in positions of trust that act on behalf of the best interests of the organization. Both directors and officers of corporations are fiduciaries for their shareholders, tasked with making informed and prudent decisions, referred to as a _______.
duty of care or a duty of diligence
