Chapter 5 Flashcards
Adverse Selection
The inability of shareholders to identify the precise competencies and personal attributes of top managers when they are hired.
Agency Problem
A situation in which a firms’ top managers (i.e., the “agents” of the firms’ owners) do not act in the best interests of the shareholders.
Diversification
The process of acquiring companies to increase a firm’s size.
Employee Stock Ownership
Formal programs that transfer shares of stock to a company’s employees.
Ethical Relativism
The idea that ethics is based on accepted norms in a culture, meaning that what is ethical in one nation or culture might be unethical in another.
Goals
Desired general ends toward which efforts are directed.
Integrative Social Contracts of View of Ethics
Perspective suggesting that decisions should be based on existing norms of behavior, including cultural, community, or industry factors.
Justice View of Ethics
Perspective suggesting that all decisions will be made in accordance with established rules or guidelines.
Leveraged Buyout
A takeover in which the acquiring party borrows funds to purchase a firm.
Managerial Ethics
An individual’s responsibility to make business decisions that are legal, honest, moral, and fair.
Moral Hazard
When parties in an arrangement do not share equally in the risks and benefits.
Objectives
Specific, verifiable, and often quantified versions of a goal.
Objectivism
A philosophical perspective, espoused by Ayn Rand, that emphasizes an objective reality understood by logic and reason and focuses on individual freedom and property rights.
Offshoring
Relocating some or all of a firm’s manufacturing or other business processes to another country typically to reduce costs.
Religious View of Ethics
Perspective that evaluates organizational decisions on the basis of personal or religious convictions.
Self Interest View of Ethics
Perspective suggesting the benefits of the decision maker should be the primary consideration when weighing a decision.
Social Responsibility
The expectation that business firms should serve both society and the financial interests of shareholders.
Stakeholders
Individuals or groups who are affected by or can influence an organization’s operations.
Sustainable Strategic Management
The strategies and related processes that promote superior performance from both market and environmental perspectives.
Takeover
The purchase of a controlling quantity of shares in a firm by an individual, a group of investors, or another organization. Takeovers may be friendly or unfriendly.
Triple Bottom Line
The notion that firms must maintain and improve social and ecological performance in addition to economic performance.
Utilitarian View of Ethics
Perspective suggesting that anticipated outcomes and consequences should be the only considerations when evaluating an ethical dilemma.
