Ch. 1-8 Midterm

Independent Commissions and Executive Agencies are both

Administrative Agencies.

1. A proposed rule is drafted and published in the Federal Register 2. A comment period follows where the general public and business community may give input about the proposed rule 3. The final rule is published in the Federal Register

Administrative rule making procedures

Multinational corporation (MNC)

Also known as Transnational: an entity headquartered in one country that does business in one or more foreign countries.

Duty

An indirect tax; taxes imposed on the consumer for imported goods, local goods, and interstate transactions. Consumers pay indirectly by paying more for the product.

Public issue

An issue that is of mutual concern to an organization and its stakeholders, sometimes called a social or sociopolitical issue.

Where do most of the regulations that affect businesses come from? A. The Judicial branch through case law B. The Executive branch through administrative agencies C. Legislative branch through congress D. None of the above

Answer: B. The Executive branch through administrative agencies

Who sets fiscal policy? A. Executive branch B. Judicial Branch C. Legislative Branch D. Both A and C

Answer: D. Both A and C In the executive branch, the president and the Secretary of Treasury. In the legislative branch, the U.S. congress passes laws and appropriates spending for any fiscal policy measures. This process involves participation, deliberation, and approval from both the House of Representatives and the Senate.

Nevis and Olsen want to do business as a corporation—Pastries & Pies Inc. The procedure for forming this firm is prescribed by A. City or County Codes B. None of the choices C. Federal Administrative Rules D. State Law

Answer: D. State Law Corporations are governed by state law because the state creates them and/or the state where the main headquarters are located.

A method managers use to gather information about external issues and trends is known as: A. General Systems Theory B. Environmental Intelligence C. Environmental Analysis D. Iron Law of Responsibility

C. Environmental Analysis

Which method is used by managers to prioritize the relevance of the stakeholders and their issues to the company? A. Corporate Social Responsibility B. Environmental Analysis C. Stakeholder Materiality D. None of the above

C. Stakeholder Materiality

Which philosophical ethical decision-making approach relates to the following? 1. Immanuel Kant 2. Commands or Moral Law that should apply equally to all people and situations. 3. An approach that looks at the innate rightness or Wrongness of the act and doesn't consider the consequences.

Categorical Imperative

Socialism

Characteristics of economic system: 1. Classes of society 2. Planned economy 3. Pricing mechanism 4. Non-existence of competition and limited choice of consumer products.

Communism

Characteristics of economic system: 1. Classless society 2. Common ownership of all resources 3. Against democracy

Capitalism

Characteristics of economic system: 1. Rejection of Government interference 2. Private property ownership 3. Competitive Markets 4. Economic Freedom

The United States Supreme Court held in a 5-4 decision that political spending is a form of protected speech under the First Amendment, and the government may not keep corporations or unions from spending money to support or denounce individual candidates in elections. While corporations or unions may not give money directly to campaigns, they may seek to persuade the voting public through other means, including ads and they may spend unlimited amounts of money doing so.

Citizens United decision

Interactive stakeholder engagement

Companies engage with stakeholders in an ongoing relationship of mutual respect, openness, and trust.

Reactive stakeholder engagement

Companies generally act only when forced to do so, and then in a defensive manner.

Inactive stakeholder engagement

Companies ignore stakeholder concerns.

Proactive stakeholder engagement

Companies try to anticipate stakeholder concerns. These firms use environmental scanning practices to identify emerging public issues.

Stakeholder dialogue

Conversations between representatives of a company and its stakeholders about issues of common concern.

1. create wealth 2. avoid harm 3. protect or enhance societal assets

Corporate Social Responsibility is the duty a corporation has to create __(1)__ in ways that avoid __(2)__ to, protect or __(3)__ societal assets.

Corporate governance is focused on achieving profit maximization and increase returns for its investors. Corporate citizenship focuses on taking actions for the benefit of its external stakeholders which may at times be the cost of profits and not desired by share holders.

Corporate governance vs. Corporate citizenship

The idea that business has obligations to society beyond the pursuit of profits

Corporate social responsibility (CSR)

Political Action Committees (PACs)

Created to try to circumvent the caps on individual contributions. Funded by employee contributions but not from corporate treasury. There were no limits on how much money could be raised and spent.

a. Lowers economic efficiency and profits b. Imposes unequal costs among competitors c. Imposes hidden costs passed on to stakeholders d. Requires skills business may lack e. Places responsibility on business rather than individuals

Critics of CSR

Political contributions made to tax-exempt organizations that are not required to report the donor's name and size of contribution to the Federal Election Commission.

Dark Money

The removal or scaling down of regulatory authority and regulatory activities of government.

Deregulation

The _____________ argument says that the stakeholder view is simply a more realistic description of how companies really work.

Descriptive

Legislation passed in the United States in 2010 in response to the financial crisis; reformed the regulation of financial institutions such as banks and credit rating agencies, established a new consumer financial protection bureau, and changed corporate governance and executive compensation rules.

Dodd-Frank Act

The oldest form of regulation in the United States, aimed at modifying the normal operations of the free market and the forces of supply and demand.

Economic regulation

the acquisition gained from analyzing the multiple environments affecting organizations. Acquiring this information may be done informally or as a formal management process.

Environmental Intelligence

What is the difference between ethical universalism and ethical relativism?

Ethical relativism asserts that moral truths vary from person to person or culture to culture. Ethical universalism asserts that moral truths do not vary in this fashion, it is universal and it applies the same to everybody and denying these rights to people would be legally, ethically and morally wrong.

Trade Deficit

Exports are less than imports (buying more than you are selling)

Trade Surplus

Exports are more than imports (selling more than you are buying)

Like the Executive Agencies, the president can remove the head of Independent Commissions at a whim with no cause. True or false?

False

Virtue ethics

Focuses on character traits to define a good person, theorizing that values will direct a person toward good behavior.

Congress passed the Dodd-Frank Wall Street Reform and Consumer Protection Act and created the Consumer Financial Protection Bureau

Following the financial crisis of 2008

Foreign Direct Investment (FDI)

Funds invested by a parent MNC to start, acquire, or expand an affiliate in a foreign nation.

Monetary policy

Government actions that affect the supply, demand, and value of a nation's currency.

Social assistance policies

Government programs aimed at improving social welfare in such areas as health care and education.

Customer environment

Includes demographic factors of the organization's customers, such as gender, age, marital status, social values or preferences, buying preferences, and technology usage.

External stakeholder

Individuals or groups that may have important transactions with a firm but are not directly employed by the firm, such as customers or suppliers.

Internal stakeholder

Individuals who are employed by the firm, such as employees and managers.

The ___________ argument says that stakeholder management is more effective as a corporate strategy.

Instrumental

- The World Bank's sister organization - An international financial institution that seeks to stabilize the system of currency exchange rates and international payments to enable member countries to participate in global trade.

International Monetary Fund (IMF)

The act of trying to directly shape or influence a government official's understanding and position on a public policy issue.

Lobbying

Communicate with and try to persuade others to support an organization's interest or stake as they consider a particular law, policy, or regulation.

Lobbyists

Soft money

Money that is given to a party committee (RNC-Republican National Committee or the DNC-Democratic National Party) that is unregulated as to source and amount.

China

Name a country as an example of communist economy

Where a concentration of the market is acquired by a few firms due to the nature of the industry rather than because of company practices.

Natural Monopolies

civil society

Nonprofit, educational, religious, community, family, and interest-group organizations; social organizations that do not have a commercial or governmental purpose. (See also nongovernmental organization.)

The ___________ argument says that stakeholder management is simply the right thing to do..

Normative

nongovernmental organizations (NGOs)

Organizations that do not have a governmental or commercial purpose, such as religious, community, family, and interest-group organizations. Also called civil society or civil sector organizations.

a. Balances corporate power with responsibility b. Discourages government regulation c. Promotes long-term profits for business d. Improves stakeholder relationships e. Enhances reputation and brand loyalty

Proponents of CSR

A plan of action undertaken by government officials to achieve some broad purpose affecting a substantial segment of a nation's citizens.

Public policy

Considered Natural Monopolies in the U.S.

Railroads and utility companies

The main function of administrative agencies

Rule making

A country moving away from socialism and more toward a capitalist economy

Russia

Assessing and reporting social performance by a corporation are accomplished through

Social audits

is the expectations of society that businesses have a responsibility beyond making a profit and obeying laws and regulations. They have a responsibility to retain public support.

Social contract

A person or group that affects, or is affected by, a corporation's decisions, policies, and operations.

Stakeholder

1. Who are the relevant stakeholders? 2. What are the interests of each stakeholder? 3. What is the power of each stakeholder? 4. How are coalitions likely to form?

Stakeholder analysis is an analytic process used by managers that identifies the relevant stakeholders in a particular situation and seeks to understand their interests, power, and likely coalitions.

A method companies use to prioritize the relevance of the stakeholders and their issues.

Stakeholder materiality

True

Stakeholder power can be exercised by forming stakeholder coalitions. True of False?

1. Customer environment 2. Competitor environment 3. Economic environment 4. Geophysical environment 5. Legal environment 6. Political environment 7. Social environment 8. Technological environment

Strategic radar screens

An organization that raises and spends money focusing on political issues but is not directly affiliated with any political campaign; also called an independent expenditure-only committee.

Super PAC (political action committee)

Development that meets the needs of the present without compromising the ability of future generations to meet their own needs; ensuring a better quality of life for everyone, now and for generations to come.

Sustainable development

Tariff

Taxes on goods that cross the border of a nation (import/export)

The two main antitrust enforcement agencies in the United States that: - may bring suits against companies they believe to be guilty of violating antitrust laws. - may investigate possible violations - Issue guidelines and advisory opinions for firms planning mergers or acquisitions

The Antitrust Division of the U.S. Department of Justice and the Federal Trade Commission.

Regulate business

The Commerce Clause of the U.S. Constitution gives government the ability to

What part of our government is in charge of monetary policy and who is the current elected person for this position?

The Federal Reserve - Jerome Powell

True

The United States follows capitalism as the chosen economic system, True or False?

Iron law of responsibility

The belief that those who do not use their power in ways that society considers responsible will tend to lose their power in the long run.

a. No child labor b. No forced labor c. No discrimination d. Allow collective bargaining

The four core labor standards contained in the Global Reporting Initiative

Law of Comparative Advantage

The idea that efficiency and the general economic welfare of the world is optimized when each country produces the goods and services for which they have a natural talent.

Globalization

The increasing movement of goods, services and capital across national borders.

True

The main purpose of inversion is to reduce corporate income tax obligations. True or False?

Fiscal policy

The patterns of government collecting and spending funds intended to stimulate or support the economy.

Performance-Expectations Gap

The perceived distance between what a firm wants to do or is doing and what the stakeholder expects.

True

The theory of comparative advantage states that productivity rises more quickly when countries produce goods and service for which they have a natural talent. True or False?

Federal Regulation

The tool to implement public policy is

Protectionism

The use of trade barriers to shield domestic industries from foreign competitors.

True

There is an interdependent relationship between business and society. True or False?

- An organization founded and funded by businesses that operate in a specific industry. -Participates in public relations activities such as advertising, education, publishing, lobbying, and political donations, but its focus is collaboration between companies. -One of the primary purposes particularly in the United States, is to attempt to influence public policy in a direction favorable to the group's members.

Trade association

The decisions by the Federal Trade Commission (FTC) to prevent anticompetitive business practices illustrate one kind of economic regulation. True or False?

True

Federal law that prohibits executives of U.S.-based companies from paying bribes to foreign government officials, political parties, or political candidates.

U.S. Foreign Corrupt Practices Act

Understanding and responding to changing societal expectations is a business necessity, True of False?

Understanding and responding to changing societal expectations is a business necessity, True of False?

An ethical approach that emphasizes the consequences of an action and seeks the action or decision where the benefits most outweigh the costs.

Utilitarian reasoning

Which philosophical ethical decision-making approach relates to the following? 1. Jeremy Bentham 2. Greatest good of the greatest number 3. Cost benefit analysis

Utilitarianism

A once democratic country turned into a communist country

Venezuela

Name a country that is close to a socialist economic system

Vietnam is a social-oriented market economy

First Amendment

Which amendment to the U.S. Constitution that allows for freedom of speech and freedom to petition the government

Answer: D. Both A and C, but not B.

Which of the following statements is true about Corporate Social Responsibility? A. Businesses should monitor and prevent social problems in advance of their becoming major issues. B. A company should seek maximum profits from its operations in order to provide the best for society. C. Corporations should be accountable for any actions that affect people, their communities and the environment. D. Both A and C, but not B.

An international financial institution that provides economic development loans to member nations.

World Bank (WB)

An organization of member nations that establishes the ground rules for trade among nations.

World Trade Organization (WTO)

social audit

a systematic evaluation of an organization's progress toward implementing socially responsible and responsive programs

stakeholder coalitions

alliances among a company's stakeholders to pursue a common interest

Business is affected by

both internal and external factors

The capability of corporations to influence government, the economy, and society, based on their organizational resources is called:

corporate power

Trade Barriers

government-placed restrictions on trade between nations (Ex: tariffs, quotas)

What were the three financial mechanisms businesses would use for political influence?

1. Political Action Committees (PAC) 2. Super PAC 3. Tax-exempt organization

Ethical relativism

A belief that ethical right and wrong are defined by various periods of time in history, a society's traditions, the specific circumstances of the moment, or personal opinion.

Answer: B. Shareholders

A firm subscribing to the ownership theory of the firm would mainly be concerned with providing value for its: A. Customers B. Shareholders C. Board of Directors D. The Community

Trade policy

A government action that governs imports from and exports to foreign countries.

Ethical egoist

A person who puts his or her own selfish interests above all other considerations.

Free Trade

A policy in which a country's government does not restrict imports from or exports to other countries.

Most-favored Nation

A principle enacted in some trade agreements requiring that if one nation in that agreement extends any benefit to another, then they must give that same benefit to everyone who is part of the agreement. (Can't favor your friends)

Free enterprise system

A socioeconomic system based on private ownership, profit-seeking business firms, and the principle of free markets.

Nonmarket stakeholder

A stakeholder that does not engage in direct economic exchange with a company, but is affected by or can affect its actions.

Market stakeholder

A stakeholder that engages in economic transactions with a company.

Stakeholder Theory of the Firm

A theory that holds that the purpose of the firm is to create value for society.

Shareholder Theory of the Firm

A theory that holds that the purpose of the firm is to maximize its long-term market value. (Also known as ownership theory of the firm.)

Subsidies

A type of financial aid used when the government gives money to assist an industry or business so that the price of a product may remain low or competitive. (usually a cash payment or a tax reduction).

A Business

is a profit-making activity that provides products and services to satisfy human needs.

The external or macroenvironment of business

is comprised of the economic, social, legal, political and technological environment.

Tax Inversion

is where a U.S.- based MNC buys a firm in a low-tax country in order to shield foreign earnings from U.S. taxes.

A corporation is recognized in legal forums as a

legal person

Free Trade Agreement

parties to the agreement eliminate import duties and other barriers to trade with each other but keep the barriers in place for countries that are not a party to the agreement. Ex: NAFTA, KORUS-FTA

Rules created by Administrative Agencies are as effective as laws

passed by Congress.

The anti-trust laws aim to

prevent firms from acting in ways that reduce competition.