PHIL 1040 CH6

"Why Shouldn't Corporations Be Socially Responsible?" Christopher D. Stone: What is the promissory argument?

A moral claim based upon the corporation's supposed obligations to its shareholders. It is presented as though management's obligation rested upon the keeping of a promise-that the management of the corporation "promised" the shareholders that it would maximize the shareholder's profits.

Who argued that profit maximization points away from the expression of altruistic motives.

Arrow

Who said that employees often feel contemptuous when laws begin to interfere with customary business practices.

Clark

Judge ______ controversially sentenced a corporation to a three-year prison term.

Doumar

"Corporate Moral Agency" Peter A. French: What are the two elements of the CID structure?

First, an organizational or responsibility flow chart that delineates stations and levels within the corporate power structure. Second, corporate decision recognition rules (usually embedded in something called corporate policy)

_______ challenged the assumption of the primacy of the stockholder in the corporation.

Freeman

In his argument _______ states that "the second type of responsibility ascription" involves the notion of accountability.

French

Who argues that the justification for permitting the corporate executive to be hired by the stockholders is that the executive is an agent serving the interests of the stockholders?

Friedman

Who argues that the political principle that underlies the market mechanism is diversity.

Friedman

Who argues, controversially, that the social responsibility of business is to increase its profits.

Friedman

The Mondragon Cooperative is located in ____________.

Spain

The polestar argument, ______ asserts, argues that if managers act to maximize profits, as if they had been told to do so, it is in everyone's best interests.

Stone

Who presents the promissory argument as widespread but unpersuasive.

Stone

"Corporate Moral Agency" Peter A. French: What are the two types of responsibility ascriptions made by French?

The first pens responsibility on someone or something. The second involves the notion of accountability

"The Social Responsibility of Business Is to Increase Its Profits" Milton Friedman: What is the basic reason why the doctrine of "social responsibility" involves the acceptance of the socialist view that political mechanisms, not market mechanisms, are the appropriate way to determine the allocation of scarce resources to alternative uses?

When the corporate executive imposes taxes and spends the proceeds for "social" purposes he becomes in effect a public employee, a civil servant, even though he remains in name an employee of a private enterprise.

"The Social Responsibility of Business Is to Increase Its Profits" Milton Friedman: What is an example of a corporation in which the manager will not have money profit as his objectives but the rendering of certain services?

a corporation for an eleemosynary purpose such as a hospital or school

In his argument French states that "the second type of responsibility ascription" involves the notion of ___________.

accountability

Arrow argues that __________ is a kind of institution embodying the social responsibilities of firms. -taxation -legal regulation -civil liability -all of the above -none of the above

all of the above

Stone criticizes the agency argument because: -the law does not hold that directors are mere agents of the shareholders. -in the real world, the shareholders do not select the directors. - why should the directors have more moral accountability to the shareholders than to other people. -a and b -all of the above

all of the above

Arrow argues that profit maximization points away from the expression of ________ motives.

altruistic

Judge Doumar controversially sentenced a __________ to a three-year prison term.

corporation

Friedman argues that the political principle that underlies the market mechanism is: -diversity -polarity -unanimity -disagreement -competition

diversity

Freeman argues that externalities, moral hazards, and monopoly power have led to more ________ control on managerial _________. -external, capitalism -internal, decision-making -capitalist, decisions -stakeholder, reversals -stakeholder, mistakes

external,capitalism

True or False: An owner of a corporation is not a stakeholder in a corporation.

false

True or False: Freeman insists on the primacy of the role of the stockholder in the corporation.

false

True or False: Stone finds the so-called promissory argument to be both widespread and persuasive.

false

What would Friedman think about corporate executives conducting hypocritical "window- dressing": generating public goodwill through cultivating the appearance of social responsibility? -He would strongly disapprove. -He certainly could not condemn it.s -He certainly would strongly applaud it. -It is impossible to say. -He would roundly denounce it.

he would strongly disapprove

"Why Shouldn't Corporations Be Socially Responsible?" Christopher D. Stone: What is the polestar argument?

if the managers act in such a fashion as to maximize profits- if they act as though they had promised the shareholders they would do so- then it will be best for all of us. Its appeal to the interests of the shareholders is not justified on supposed obligations to the shareholders per se, by as a means of charting a straight course toward what is best for the society as a whole.

"Why Shouldn't Corporations Be Socially Responsible?" Christopher D. Stone: What was Friedmans key point on the agency argument?

is that the manager is the agent of the individuals who own the corporation

"Why Shouldn't Corporations Be Socially Responsible?" Christopher D. Stone: What does Stone point out is wrong with Friedman's agency argument?

it is wrong both as to the state of the law (the directors are not mere agents of the shareholders) and on his assumption as to the facts of corporate life (surely it is closer to the truth that in major corporations the shareholders are not, in any meaningful sense, selecting the directors; management is more often using its control over the proxy machinery to designate who the directors shall be, rather than the other way around)

"The Social Responsibility of Business Is to Increase Its Profits" Milton Friedman: What does it mean to say that the corporate executive has a "social responsibility" in his capacity as businessman?

it must mean that he is to act in some way that is not in the interest of his employers

Clark says that employees often feel contemptuous when _________ begin to interfere with customary business practices.

laws

The idea of _______ capitalism is that in return for controlling the firm, management vigorously pursues the interests of stockholders.

managerial

In the context of arguments about the social responsibility of business, the argument that the management of a corporation promised the shareholders that it would maximize the shareholders" profits and therefore money cannot be spent on other concerns. The above argument is considered by Stone to be the _________ of the various arguments in this debate. -most effective -most widespread but least persuasive -least common but most compelling -best -weakest but happily rarest

most widespread by least persuasive

The _________ argument, Stone asserts, argues that if managers act to maximize profits, as if they had been told to do so, it is in everyone's best interests.

polestar

The relationship between corporate executive and stockholder is: -agent/principal -principal/agent -agent/executive -executive/agent -b and d

principal/agent

Friedman argues that ___________ maximization is the proper duty of _________. -profit, business -profit, society -social good, business -social good, corporations alone -none of the above

profit,business

Friedman argues, controversially, that the social responsibility of business is to increase its __________.

profits

Stone presents the __________ argument as widespread but unpersuasive.

promissory

Friedman argues that the corporate executive must always avoid: -spending someone else's money for a social interest -spending his own money for a social interest -profits -losses -b and d

spending someone else's money for a social interest

Freeman argues for a(n) ____________ theory of the modern corporation. -shareholder -profit-maximization -stakeholder -employee governance -worker

stakeholder

Freeman challenges the assumption of the primacy of the ___________ in the corporation.

stockholder

In the context of arguments about the social responsibility of business, the argument that the shareholders designated management as their proxy is called: -the agency argument -the role argument -the promissory argument -the polestar argument -none of the above

the agency argument

"Corporate Moral Agency" Peter A. French: Describe the CID structure

the personnel organization for the exercise of the corporation's power with respect to its ventures, and as such its primary function is to draw experience from various levels of the corporation into a decision-making and ratification process.

In the context of arguments about the social responsibility of business, the argument that the management of a corporation promised the shareholders that it would maximize the shareholders" profits and therefore money cannot be spent on other concerns is called: -the agency argument -the role argument -the promissory argument -the polestar argument -none of the above

the promissory argument

Friedman argues that the justification for permitting the corporate executive to be hired by the stockholders is that the executive is an agent serving the interests of: -society -the stockholders -the common good -social welfare -c and d

the stockholders

"Why Shouldn't Corporations Be Socially Responsible?" Christopher D. Stone: What is the agency argument?

this argument is based on the idea that the share holders designated the management their agents.

"Corporate Moral Agency" Peter A. French: According to French in what ways are responsibility relationships created?

through promises, contracts, compacts, hirings, assignments, appointments, by agreeing to enter a Rawlsian original position, etc. The "right" to hold responsible is often delegated to third parties; but more importantly, in the case of moral responsibility, no delegation occurs because no person is excluded from the relationship.

True or False: A stakeholder is a group or individual who benefits from or is harmed by corporate actions.

true

True or False: By definition, firms buy the goods or services they need from their own stakeholders.

true

True or False: For the purposes of the law, a corporation is often treated as a kind of person.

true

True or False: Freeman argues in favor of a stakeholder theory of the modern corporation.

true

True or False: In general the moral code (or codes) followed by a society in which a firm does business should be reflected in the business practices of that firm.

true

True or False: One contestant of stakeholder theory is the traditional model of managerial capitalism

true

True or False: The Mondragon Cooperative is the world"s most successful industrial cooperative.

true

Arrow insists that for profit-maximization arguments like Friedman"s to work in discussions of the social responsibility of business, we must be talking about a world of: -rife exploitation -monopoly power -voluntary contracts -minimal transparency between buyers and sellers -moral mistakes

voluntary contracts

"Why Shouldn't Corporations Be Socially Responsible?" Christopher D. Stone: What is the role argument?

we assign obligations to people on the basis of their having assumed some role or status, independent of any specific verbal promise they made. Management never actually promised the shareholders that they would maximize the shareholders' investment, nor did the shareholders designate the directors their agents for this express purpose.