BA 400 Exam 1 Ch. 1-3

What are the 7 challenges in corporate governance?

1. Independence 2. Quality 3. Performance 4. Shareholder activism 5. Internal controls 6. Audits 7. Risk Management

Which of the following is not one of the benefits of practicing Corporate Social Responsibility (CSR)? a. Customer loyalty b. Organizational trust c. Government regulation d. Employee commitment

C. Government Regulations

Norman Bowie

Bowie contends that when a business also cares about the well-being of stakeholders, it earns trust and cooperation that ultimately reduce costs and increase productivity.12

Control

Control involves the process of auditing and improving organizational decisions and actions.

What are the three Stakeholder Attributes?

Power Legitimacy Urgency

Proxy

an agent legally authorized to act on behalf of another person/party. Used as a voting mechanism when a shareholder is not present at a shareholder's meeting

Social Capital

an asset that resides in relationships and is characterized by mutual goals and trust; Social capital include the social connections that can provide economic benefits that are mutually advantageous.; social capital is not tangible or the obvious property of one organization.

Shareholder

any person or entity that owns at least one share of a company's stock

Market Constituencies

are those that are directly involved and affected by the business purpose, including investors, employees, customers, and other business partners.

What are the 6 steps that have found to be effective to utilize stakeholder framework in managing responsibility and business ethics?

(1) assessing the corporate culture, (2) identifying stakeholder groups, (3) identifying stakeholder issues, (4) assessing the organization's commitment to social responsibility, (5) identifying resources and determining urgency, and (6) gaining stakeholder feedback.

What are the Organization for Economic Co-operation and Development (OECD), principles of corporate governance?

(1) ensuring the basis for an effective corporate governance framework; (2) guaranteeing the rights of shareholders to vote and influence corporate strategy; (3) having greater numbers of skilled, independent members on boards of directors; (4) implementing fewer techniques to protect failing management and strategy; (5) having wider use of international accounting standards; and (6) improving disclosure of executive pay and remuneration.

What are the 7 issues within social responsibility?

1. Common Good 2. Consumer protection laws 3. Sustainability 4. Corporate Governance 5. Philanthropy 6. Legal responsibility 7. Employee well-being

What are the four stages of a Crisis?

1. prodromal stage-is a precrisis period, during which warning signs may exist. 2. the acute stage-in which the actual crisis occurs. 3. chronic stage-the business is required to explain their actions sufficiently for them to move to the 4. crisis resolution- success & failure outcomes for the firm and stakeholders

How many types of Stakeholders are there?

2; Primary and Secondary

How many activities are in Stakeholder Orientation?

3; (1) the organization wide generation of data about stakeholder groups and assessment of the firm's effects on these groups (2) the distribution of this information throughout the firm (3) the organization's responsiveness

How many different types of power is there? And what are they?

3; Coercive Power Utilitarian Power Symbolic Power

Accountability

Accountability relates to how well the content of workplace decisions is aligned with a firm's stated strategic direction.

Values

Enduring beliefs and ideals that are socially enforced.

Because the types and varieties of risks that most businesses may face in their normal operations are relatively broad and unlimited in number, MVH favors limiting the risk management function in businesses to narrowly focusing on insurance for risks to key assets / liabilities and legal exposures (e.g., lawsuits). True False

False

The obligation of directors and officers to make decisions in the interests of the corporation and its stakeholders is the textbook's definition of "duty of care". True False

False

Companies that aim to benefit all parties affected by the success or failure of the organization are described as having a shareholder orientation. True False

False- Stakeholder orientation

What are the two areas Stakeholders evaluate?

Issue Awareness and decisions

Milton Friedman

Milton Friedman has been quoted as saying that "the basic mission of business [is] thus to produce goods and services at a profit, and in doing this, busi-ness [is] making its maximum contribution to society and, in fact, being socially responsible."8 Friedman suggests that, although individuals guilty of wrongdoing should be held accountable, the market is a better deterrent than new laws and regulations that discourage firms from wrongdoing and punish them for it.9

Oversight

Oversight relates to a system of checks and balances that limit employees' and managers' opportunities to deviate from policies and codes of conduct.

Consumer Protection Laws

Regulations enacted to protect vulnerable members of society with formal safeguards for consumers; were enacted to protected vulnerable members of society

Adam Smith

Smith created the concept of the invisible hand and spoke about self-interest; however, he went on to explain that this common good is associated with psychological motives and that each individual has to produce for the common good with values such as propriety, prudence, reason, sentiment, and "promoting the happiness of mankind."10

Who are the principals and agents of a corporation? a. Owners and executives, respectively b. Customers and managers, respectively c. Managers and employees, respectively d. Employees and stockholders, respectively

a. Owners and executives, respectively

How is corporate governance best defined? a. The formal system of oversight of, accountability for, and control over organizational decisions and resources b. The extent to which the content of workplace decisions is aligned with a firm's stated strategic direction c. The exercise of control and authority by those in mid-management positions d. A system of decentralized mechanisms that assists a firm in meeting its goals

a. The formal system of oversight of, accountability for, and control over organizational decisions and resources

What is the purpose of the Organization for Economic Co-operation and Development's (OECD) Corporate Governance Principles? a. To formulate minimum standards of fairness, transparency, accountability, disclosure and responsibility for business practices b. To outline an optimal system of corporate governance techniques that every developed country should strive to duplicate c. To override individual countries' practices and implement identical policies throughout the forum's members d. To place most of the responsibility for corporate governance on the company's managers

a. To formulate minimum standards of fairness, transparency, accountability, disclosure and responsibility for business practices

Ethical Misconduct Disaster (EMD)

can be an unexpected organizational crisis that results from employee misconduct, illegal activities such as fraud, or unethical decisions and that significantly disrupts operations and threatens or is perceived to threaten the firm's continuity of operations.

Stakeholders

constituents who have an interest or stake in a company's products, industry, markets, and outcomes; "stakeholders" as those people and groups to whom an organization is responsible—including customers, shareholders, employees, suppliers, governments, communities, and many others—because they have a "stake," or claim, in some aspect of a company's products, operations, markets, industry, or outcomes.

The process of handling a high-impact event characterized by ambiguity and the need for swift action is the textbook's defined term of: a. stakeholder management. b. risk management. c. reputation management. d. crisis management.

d. Crisis Management

Which of the following is not one of our textbook's factors reflecting social responsibility's need for a strategic focus? a. It requires action and results. b. It must be fully valued and championed by top management. c. It requires a formal commitment, or a way of communicating the company's social responsibility philosophy. d. It applies primarily to larger businesses.

d. It applies primarily to larger businesses

Philanthropic Activities

efforts made by a company to improve human welfare

Urgency

exercise greater pressures on managers and organizations when they stress the urgency of their claims. A company that has discovered a serious product defect that can cause injury must immediately implement a product recall

Corporate Goverance

formal system of oversight of, accountability for, and control over organizational decisions and resources

Shareholder Model of Corporate Governance

founded in classic economic precepts, a model that focuses on making decisions toward what is in the best interest of investors a company can consider itself socially responsible if it generates returns for shareholders and provides jobs for employees

Risk Management

hedging uncertainty while ensuring that leadership is taking the appropriate steps to move the organization and its strategy forward

Nonmarket Constituencies

include the general community, media, government, special-interest groups, and others who are not always directly tied to issues of profitability and performance.

Utilitarian Power

involves financial or material control based on a decision's utility or usefulness.

Coercive Power

involves the use of fear, suppression, punishment, or some type of restraint.

Shareholder Lawsuits

lawsuits brought against a key member of a company by a shareholder or group of shareholders suing on behalf of the corporation

Artificial Intelligence

machines learning and performing tasks that typically require human intelligence by using algorithms; AI relates to machine (computer) learning that can perform activities and tasks that usually require human intelligence, such as decisions, visual perceptions, and speech recognition.

Shareholder Resolutions

nonbinding, yet important, statements about shareholder concerns

Primary Stakeholders

people or groups who are fundamental to a company's operations and survival; these include shareholders and investors, employees, customers, suppliers, and public stakeholders, such as government and the community

Secondary Stakeholders

people or groups who do not typically engage in direct transactions with a company and thus are not essential for its survival; these include the media, trade associations, and special-interest groups

License to Operate

permission to conduct a business activity, subject to regulation by the licensing authority; the right to exist through a combination of social and legal institutions.

Fiduciaries

persons placed in positions of trust who use due care and loyalty in acting on behalf of the best interests of the organization

Symbolic Power

relies on the use of symbols that connote social acceptance, prestige, or some other attributes is the least threatening of all three powers

Corporate Culture

shared values, attitudes, and beliefs that characterize members of an organization

Proxy Access

the ability of long-term shareholders to nominate alternative candidates for the board of directors on the company's annual shareholder meeting ballot

Insider Trading

the act of purchasing or selling a public company's security with access to nonpublic information about the company

Stakeholder Orientation

the aim to benefit all parties affected by the success or failure of an organization

Marketplace of Ideas

the assumption that ideas compete against one another for truth and acceptability

Stakeholder Orientation

the degree to which a firm understands and addresses stakeholder demands

Philanthropy

the desire to improve the welfare of others through donations of money, resources, or effort

Common Good

the development of social conditions that allow for societal welfare and fulfillment to be achieved

Power

the extent to which a stakeholder can gain access to coercive, utilitarian, or symbolic means to impose or communicate its views to an organization a well-established employee in a specialized field has power if replacing the employee would require extensive training and resources

Employee well-being

the health and wellness of employees, including how workers feel about their work and their working environment; occurs when organizations create a safe and healthy employment environment for their workforce.

Legal Responsibility

the most basic expectation that a company must comply with the law; a central factor of social responsibility

Duty of Care (AKA Duty of Diligence)

the obligation of directors and officers to avoid ethical misconduct and provide leadership to prevent ethical misconduct in the organization

Duty of Loyalty

the obligation of directors and officers to make decisions in the interests of the corporation and its stakeholders

Stakeholder Engagement

the organizational process of involving stakeholders who may be affected by the decisions it makes or may influence the content and implementation of its decisions

Legitimacy

the perception or belief that a stakeholder's actions are proper, desirable, or appropriate in a given context Special-interest groups that are against genetically modified foods encourage protest after legislation favorable to biotechnology company is passed.

Business Ethics

the principles and standards that guide behavior in the world of business

Social Audit

the process of assessing and reporting a firm's performance in adopting a strategic focus for fulfilling the economic, legal, ethical, and philanthropic social responsibilities expected of it by its stakeholders

Reputation Management

the process of building and sustaining a company's good name and generating positive feedback from stakeholders; is the process of building and sustaining a company's good name and generating positive feedback from stakeholders. A company's reputation is affected by every contact with a stakeholder.36

Crisis Management

the process of handling a high-impact event characterized by ambiguity and the need for swift action

Core Competencies

unique advantages that differentiate a firm from its competitors

Conflict of Interest

using one's position within an organization to obtain personal gain, at the expense of the organization

These resources may be both tangible and intangible. True False

True

Trust

Trust is the glue that holds organizations together and allows them to focus on efficiency, productivity, and profits.

Sustainability

a company's economic, environmental, and social performance; has also become a growing area of concern in society

Corporate governance

a company's formal system of accountability, oversight, and control; the process of control and accountability in organizations that is necessary for social responsibility

Stakeholder Map

a company-specific map that names its primary and secondary stakeholders, identifies key issues, and examines relationships and networks between the organization and stakeholders

Vision Statement

a description of a company's current and future objectives to help align decisions with their philosophy and goals

Stock Option

a financial tool that gives a shareholder the right to buy or sell a stock at a set price for a certain amount of time

Board of Directors

a group of members who represent shareholders and oversee the firm's operations and legal and ethical compliance

Stakeholder Interaction Model

a model that conceptualizes the two-way relationships between a firm and a host of stakeholders

Stakeholder Model of Corporate Governance

a model where the business is accountable to all its stakeholders, not just shareholder A broad definition of social responsibility interprets the corporation as a vehicle for stakeholders and for public policy

Interorganizational Networks

a set of organizations that are associated through shared or mutual affiliations and interests

Social Responsibility

a strategic focus for fulfilling economic, legal, ethical, and philanthropic responsibilities, can also be referred to as corporate social responsibility (CSR) when adopted by a business

Mission Statement

a summary of a company's aims and values

Enlightened Capitalism

a theory of capitalism originally proposed by Adam Smith as "promoting the happiness of mankind" that emphasizes stakeholder concerns and issues

Resource Advantage Theory

a theory stating that the value of a resource is viewed relative to its potential to create competitive differentiation or customer value

Code of Conduct

a written collection of the rules, principles, values, and expectations of employee behavior code of conduct that addresses dealing with consumers, conduct toward direct sellers, and interactions within the industry.

What are the four types of responsibility?

Stage 1: businesses have a responsibility to be financially viable so that they can provide a return on investment for their owners, create and sustain jobs for the community, and contribute goods and services to the economy. Stage 2: companies are required to maintain compliance with legal and regulatory requirements specifying the nature of responsible business conduct. Stage 3: companies must decide what they consider to be just, fair, and right—the realm of ethics, principles, and values Stage 4: philanthropic activities, which promote human welfare and goodwill. By making philanthropic donations of money, time, and other resources, companies can contribute to their communities and society and improve the quality of life.

U.S. Securities and Exchange Commission (SEC)

The SEC is the government agency that oversees the operations and protection of securities markets and investors.

What are the four components of the process for reputation management?

The process of reputation management involves four components that work together: organizational identity, image, performance, and ultimately, reputation.39

What are the primary ongoing responsibilities of a public company's board of directors? a. To make decisions about hiring, monitoring and firing executives, as well as ensuring legal compliance and ethical culture oversight b. To make decisions about whether to pay dividends, announce stock splits or pursue other corporate financing considerations c. To make decisions about how to manage the day-to-day affairs of the business, including consumer and supplier relationships d. To make decisions about how to manage the workforce, including structuring compensation and benefit packages

a. To make decisions about hiring, monitoring and firing executives, as well as ensuring legal compliance and ethical culture oversight

Research increasingly supports that implementing strategic social responsibility programs: a. is positively associated with a company's financial performance, including profitability. b. is unrelated to the performance of a business. c. is good for a company's reputation, but has little effect on performance. d. negatively affects a business's performance because it increases costs and reduces profits.

a. is positively associated with a company's financial performance, including profitability

An asset that resides in relationships and is characterized by mutual goals and trust is known as: a. social capital. b. social interaction. c. social audit. d. corporate culture.

a. social capital

Which of the following statements best describes the current trends in corporate governance? a. Businesses are gravitating toward the stakeholder orientation because the costs involved are decreasing. b. Forces are driving businesses toward the stakeholder orientation and more formal governance. c. Companies are turning to a shareholder orientation with a more informal corporate governance system. d. Businesses are moving towards a stakeholder orientation with looser corporate governance.

b. Forces are driving businesses toward the stakeholder orientation and more formal governance.

Society's primary method of enforcing its expectations regarding businesses' behaviors is through: a. buying foreign-made products. b. the legal system. c. the media. d. boycotts of goods and services.

b. The legal system

The attributes of stakeholders that would be considered least significant to a business are when: a. their actions are believed to have urgency. b. they can express themselves articulately. c. they make use of their power on the organization. d. their issues are perceived or believed to be legitimate.

b. they can express themselves articulately.

Which of the following best describes the basis of the stakeholder model of corporate governance? a. Because corporations have many managers and resources, it is possible to equally and fully address the needs of all stakeholders. b. A company's primary responsibility is to maximize the wealth of its most important stakeholder, the owners. c. A company has responsibilities to many stakeholders including investors, employees, suppliers, government agencies, and the community. d. The primary focus of this model is social welfare, to the exclusion of economic welfare.

c. A company has responsibilities to many stakeholders including investors, employees, suppliers, government agencies, and the community

The four types of social responsibilities include: a. philanthropic, justice, economic, and ethical. b. ethical, legal, social, and economic. c. legal, philanthropic, economic, and ethical. d. legal, moral, ethical, and economic.

c. Legal, Philanthropic, Economic and Ethical

Which of the following is not an example of a primary stakeholder? a. Owners b. Government c. Media d. Employees

c. Media

A conceptual model that analyzes the two-way relationship between a business and its many stakeholders is specifically called: a. stakeholder management. b. stakeholder relationships. c. stakeholder interaction. d. stakeholder orientation.

c. stakeholder interaction