Reading 25 - Corporate Performance,Governance, and Business Ethics Flashcards
Who are a company’s stakeholders?
Individuals or groups with an interest, claim, or stake in the company, what it does, and how well it performs. They include stockholders, creditors, employees, customers, the communities in which the company does business, and the general public
What is stakeholder impact?
To identify the most important stakeholders and give highest priority to pursuing strategies that satisfy their needs
What are the steps in a stakeholder impact analysis?
- Identify stakeholders
- Identify stakeholders’ interests and concerns
- As a result, identify what claims stakeholders are likely to make on the organization
- Identify the stakeholders who are most important from the organization’s perspective
- Identify the resulting strategic challenges
Who are the 3 most important stakeholder groups to a company?
- Customers
- Employees
- Stockholders
What is the best measure of a company’s profitability
Return on Investment Capital (ROIC)
**It tells managers how effectively they are using the capital resources of the company to generate profits
What is the term on-the-job consumption referring to?
When CEOs use their position to invest corporate funds in various perks that enhance their status - executive jets, lavish offices, and expense paid trips to exotic locations - rather than investing those funds in ways that increase shareholder returns
If confronted with an agency problem, what are some challenges for the principal to overcome?
- Shape the behavior of agents so that they act in accordance with the goals set by the principals
- Reduce the information asymmetry between agents and principals
- Develop mechanisms for removing agents who do not act in accordance with the goals of principals and mislead them
Describe the general idea of business ethics?
the accepted principles of right or wrong governing the conduct of businesspeople
What does the French term Noblesse oblige refer to?
refers to honorable and benevolent behavior that is considered the responsibility of people of high (noble) birth
What is the position of Milton Friedman on business ethics?
The only social responsibility of business is to increase profits, as long as the company stays within the rules of law
Describe the Utilitarian approach to business ethics…
The moral worth of actions or practices is determined by their consequences.
An action is judged to to be desirable if it leads to the best possible balance of good consequences and bad consequences.
It committed to the maximization of good and minimization of harm
What are some tools that businesses have created to measure their business that came from the Utilitarian system?
- Cost-benefit analysis
- Risk assessment
What are the 2 drawbacks to the Utilitarian philosophy?
- Difficult to measure the benefits, costs, and risks of a course of action
- Does not consider justice. (The action that produces the greatest good for the greatest number of people may result in the unjustified treatment of a minority).
Describe the Kantian approach to business ethics…
The people should be treated as ends and never purely as means to the ends of others.
People have dignity and need to be respected as such
Describe the Rights Theories regarding business ethics…..
Recognizes that human being have fundamental rights and privelages. Rights establish a minimum level of morally acceptable behavior
