MIDTERM 2: REVIEW

Question 1

Inspirational Quote:

Answer 1

“There is only one boss. the customer. and he can fire everybody in the company from the chairman down, simply by spending his money somewhere else” - Sam Walton

Question 2

“Corporations”:

Answer 2

a group of individuals legally authorized to act as a single entity; the basic unit of commerce today”

Question 3

“Shareholders” (A.k.a “stockholders”)

Answer 3

: any person, or group of persons who bears ownership shares in the company.

Question 4

“Stakeholder”:

Answer 4

any person, group of organization who an intense or cancer in an organization, i.e. the ability to affect or be affected by the organization’s actions.

Question 5

What is Milton Friedman’s view of a true purpose of corporation:

Answer 5

“there is one and only one social responsibility of business - to use its resources or engage in activities designed to increase its profits so long as its stay within the rules of the game, which is to say, engages in open and free competition within deception or fraud (Friedman, Capitalism and Freedom, 1962)

Question 6

Who is Milton Friedman:

Answer 6

• most influential economist in the second half of 20th century.
• advisor to Ronald Reagan, Margaret thatcher.
• 1976 nobles prize in economics.

Question 7

What is Milton Friedman’s shareholder theory?

Answer 7

• A corporation’s owners, it stockholders, should be “the primary beneficiaries of the business decisions”/
• when making important decisions, executives should make it their top priority to benefit the company’s owners.
  Business’ purpose it profitability;

Question 8

What is instrumentalism

Answer 8

all decisions are made for the ultimate goal of maximizing profit for shareholders.

Question 9

Who believes in instrumentalism

Answer 9

milton friedman
result = profit.

Question 10

What is instrumental reasoning:

Answer 10

fill in owl slides

Question 11

Milton Friedman believed that engaging in social responsibility or to look out for the interest of others outside the shareholders is to:

Answer 11

steal from shareholders.

Question 12

What is Edward freedman view:

Answer 12

stakeholder theory

“every business create, and sometimes destroys, values for customers, supplies, employees, communities, and financiers. The idea that business is about maximizing profits for shreholders is outdated and doesn’t work very well, as the recent global financial crisis has sought us”
- The 21st century is one of ‘managing for stakeholders’. The task of executives is to create as much value as possible for stakeholders without resorting to tradeoffs. Great companies endure because they mange to get stakeholder interests aligned in the same direction.”
- Background assumption: business exists….(fill in)

Question 13

what are primary vs secondary stakeholders

Answer 13

two views: a narrow and broad.
- primary stakeholders (narrow): “any group for individual who (is) vital to survival and success of the corporation”
- customers. employees, investors, supplies, government agencies, local communities.
-

Question 14

Stakeholder example: marks and Spencer

Answer 14

simon marks, former chairmen marks and Spencers.
- policyL management required to monitor the shop floors to see

Question 15

non instrumental reasoning:

Answer 15

meals are valuable in themselves