Corporate Governance

Question 1

What is Shareholder Theory?

Answer 1

Milton Friedman’s viewpoint that the only obligation of a corporation is to maximize profits for the shareholder.

Question 2

Who are all the external stakeholders of an organization?

Answer 2

• Customers
• Suppliers
• Creditors
• Governments
• Unions
• Local Communities
• General Public

Question 3

Who are the Internal stakeholders of an organization?

Answer 3

• Stockholders
• Employees
• Managers
• Board Members

Question 4

What is the focus of Consequentialism?

Answer 4

Directs attention to the future effects of an action, for all people who will be directly or indirectly affected by the action.

The aim is to produce the most amount of good for the most amount of people.

Question 5

What is the focus of the ‘duty’ ethical framework?

Answer 5

It directs attention to the duties that exist prior to the situation and determines obligations.

The aim is to perform the right action.

Question 6

What is the focus of the ‘virtue’ ethical frameworK?

Answer 6

Attempts to discern character traits that are, or could be, motivating the people involved in the situation.

The aim is to develop one’s character

Question 7

What is egoism?

Answer 7

Adam Smith’s and Milton Freidman’s’ School of Thought:

• Says that humans are actors with limited knowledge and objectives.
• This is a consequentialist framework.

Question 8

What is Utilitarianism?

Answer 8

Jeremy Bentham and John Stuart Mill’s school of thought:

• humans are motivated by avoidance of pain and gain of pleasure
• This is a consequentialist framework.

Question 9

What are Ethics of Duties?

Answer 9

-Immanuel Kant’s school of thought:

Humans are rational moral actors.

• This is a non-consequentialist framework.

Question 10

What are Rights and Justice?

Answer 10

• John Locke and John Rawls School of Thought
• Humans are being that are distinguished by dignity
• This is a non-consequentialist framework.

Question 11

What is Corporate Governance?

Answer 11

• the controls put in place to ensure that a corporation acts in an ethical, legal, and transparent manner in the best interests of shareholders and other stakeholders

Question 12

What is the Principal-Agent Problem?

Answer 12

The separation of control and ownership gives rise to the principal-agent problem: represents the conflict of interest between the principal and the agent.

Principal: a person or entity first in rank of importance or level of ownership (shareholders)

Agent: a person or entity that represents the interests of another party (managers or executives)