CH 1 - The Corporation and Its Stakeholders

Market stakeholders include nongovernmental organizations and business support groups.

False

A valid business is illustrated by which example(s)? (Check all that apply.)

A major oil refinery A woman permitted to sell homemade tortillas by the roadside An organization that markets tax services

Which argument says that stakeholder management realistically depicts how companies really work? A) Descriptive argument. B) Instrumental argument. C) Normative argument. D) Fiduciary argument.

A) Descriptive argument.

What stakeholder group(s) can exercise legal power? A) Employees. B) Customers. C) Shareholders. D) All of these answers are correct.

D) All of these answers are correct.

A company called Trends plans to close a manufacturing plant in Community A and relocate it to Community B, where labor costs are lower. Which stakeholders are likely to oppose this plan?

Employees in Community A Local government in Community A

Businesses and society are independent of one another.

False

An example of a role set is when someone performs which action(s)? (Check all that apply.)

Works at a company Owns some company stock Lives in the same community as their employer

The argument in favor of the stakeholder theory of the firm that says that it is more effective as a corporate strategy is ______.

instrumental

Stakeholder groups can include: A) Shareholders. B) Business support groups. C) Environmental activists. D) All of these answers are correct.

D) All of these answers are correct.

The fiduciary duty of managers benefits a firm's: A) Shareholders. B) Customers. C) Employees. D) All of these answers are correct.

D) All of these answers are correct.

In which ways do businesses interact with society? (Check all that apply.)

Businesses pay income taxes. Consumers buy products. Businesses employ workers.

The external environment of business is static.

False

The term stakeholder is correctly described by which of the following? (Check all that apply.)

Groups that are affected by an organization Derives from having a claim on a business enterprise Groups that affect an organization

Which element of stakeholder salience refers to the degree of broad societal acceptance?

Legitimacy

A few theorists have called government a market stakeholder of business because _____.

some businesses sell directly to the government and receive payment for goods and services rendered

Select all of the external stakeholders listed below. (Check all that apply.)

Customers Competitors

Which boundary-spanning department would most likely interface with union representatives?

Human Resources

Some argue that managers are not stakeholders of a firm because they _____. (Check all that apply.)

act primarily for the company promote stakeholder interests, not their own

On a stakeholder map, a stakeholder appearing in the bottom right quadrant has _______.

low power, in support of the issue

The general systems theory is best described by which statement(s)? (Check all that apply.)

Plants interacting with soil, light, oxygen, and moisture Organisms interacting with their external environment Organisms and their environment working together

Identify a nonmarket stakeholder in the discussion case Insuring Uber's App-On Gap.

The general public

A business is any organization that is engaged in making a product or providing a service for a profit.

True

A corporation's investor relations department interacts mainly with shareholders.

True

Amazon has been called "Earth's biggest store."

True

Government can be considered both a market and nonmarket stakeholder.

True

Stakeholders involved with one part of a company may have little or no involvement with another part of the company.

True

The instrumental argument for the stakeholder theory of the firm says that companies perform better if they consider the rights and concerns of multiple groups in society.

True

The interests of different stakeholders often coincide.

True

Identify the relevant market stakeholders in the discussion case Insuring Uber's App-On Gap. (Check all that apply.)

Uber's customers Uber drivers

All of the following are external stakeholders of the firm except: A) Managers. B) Customers. C) Shareholders. D) Suppliers.

A) Managers.

The phenomenon of a person or group holding multiple stakeholder duties is referred to as: A) Role sets. B) Primary stakeholder(s). C) Shareholder theory. D) None of these answers is correct.

A) Role sets.

Which stakeholders' interests are most influential for a firm using the stakeholder theory of the firm?

All stakeholders' interests must be taken into account.

The term business is accurately defined by which description(s)? (Check all that apply.)

Any organization that is engaged in making a product for a profit Any firm that provides a service for a profit

Which of the following is not an example of stakeholders' economic power? A) A supplier halts shipments to a business customer that demanded very low prices. B) A social group protests a government's decision to raise taxes. C) A local community boycotts a grocery store suspected of inaccurate weight scales. D) An equal rights group refuses to do business with a company that has a discriminatory hiring policy.

B) A social group protests a government's decision to raise taxes.

Customers can exercise economic stakeholder power by: A) Voting on a proposed merger for the company and a competitor. B) Boycotting products if they believe the goods are too expensive. C) Attending the company's annual meeting. D) Applying for a job with the company.

B) Boycotting products if they believe the goods are too expensive.

The instrumental argument says stakeholder management is: A) A more realistic description of how companies really work. B) More effective as a corporate strategy. C) Simply the right thing to do. D) Determined by the amount of stock owned in the firm.

B) More effective as a corporate strategy.

Which one of the following is considered to be a nonmarket stakeholder of business? A) Customers. B) Nongovernmental organizations. C) Creditors. D) Shareholders.

B) Nongovernmental organizations.

Stakeholders stand out to managers when they exhibit: A) Integrity, power, and legitimacy. B) Power, legitimacy, and urgency. C) Integrity, loyalty, and power. D) Legitimacy, loyalty, and urgency.

B) Power, legitimacy, and urgency.

Which of the following statements is not true about the interactive social system? A) Business and society need, as well as influence, each other. B) The boundary between business and society is clear and distinct. C) Business is a part of society, and society penetrates far and often into the business. D) Business and society are both separate and connected.

B) The boundary between business and society is clear and distinct.

A stakeholder analysis: A) Creates equality among all stakeholder interests. B) Allows managers to examine two primary questions. C) Involves understanding the nature of stakeholder interests. D) All of these answers are correct.

C) Involves understanding the nature of stakeholder interests.

Match each business force (in the left column) with its corresponding characteristic (in the right column).

Changing societal expectations to Being good corporate citizens. Globalization to Companies doing business in many countries. Growing emphasis on ethics to Global human rights protection. Evolving government regulations to Dynamic regulatory controls. Dynamic natural environment to Sustainability. New technology and innovation to Fast-paced change.

Corporations that run their operations according to the stakeholder theory of the firm create value by: A) Innovating new products. B) Increasing their stock price. C) Developing their employees' professional skills. D) All of these answers are correct.

D) All of these answers are correct.

What kind of power might a local community use to influence a company's decisions? A) Publicizing an issue. B) Lobbying government policy makers for regulations. C) Challenging whether a specific business activity should continue. D) All of these answers are correct.

D) All of these answers are correct.

Which of the following statements is (are) correct about stakeholders' power? A) Different stakeholders have different types and degrees of power. B) Shareholders' voting power is limited to the percentage of share owned by the shareholder. C) It uses resources to achieve a desired decision or outcome. D) All of these answers are correct.

D) All of these answers are correct.

A stakeholder map is a useful tool because: A) It enables managers to quickly see how stakeholders feel about an issue. B) It allows managers to evaluate what outcomes are likely regarding an issue. C) It helps managers discourage or dissolve stakeholder coalitions. D) Both of these answers are correct: It enables managers to quickly see how stakeholders feel about an issue, and it allows managers to evaluate what outcomes are likely regarding an issue.

D) Both of these answers are correct: It enables managers to quickly see how stakeholders feel about an issue, and it allows managers to evaluate what outcomes are likely regarding an issue.

Nonmarket stakeholders are those that engage in economic transactions with the company as it carries out its primary purpose of providing society with goods and services.

False

Some scholars have suggested that managers pay the most attention to stakeholders possessing the least salience.

False

The normative argument for the stakeholder theory of the firm says that the stakeholder view is simply a more realistic description of how companies really work.

False

Urgency refers to the extent to which a stakeholder's actions are seen as proper or appropriate by the broader society.

False

The general systems theory states that businesses must do what to survive? (Check all that apply.)

Form an interactive social system with society Be willing to change and evolve

In addition to saying it's the right thing to do, this argument for the stakeholder theory of the firm claims that all stakeholders contribute value to the organization.

Normative

What was the primary interest of Uber drivers in the discussion case Insuring Uber's App-On Gap?

Reduced liability and risk

An online shopping firm performs a stakeholder analysis to guide them in updating their website technology. Which stakeholder would be irrelevant?

Retailers

A firm called Star performs a stakeholder analysis of their supplier Deliveries, their competitor ShineOn, and their creditor LoanMe. Which firm is the focal organization?

Star

A fruit grower has received many complaints about its heavy use of pesticides. Which stakeholders would likely form a coalition to support the grower?

Suppliers who provide pesticides Competitors who use similar pesticides

What is the purpose of the firm under the shareholder theory of the firm?

To maximize its long-term market value

Identify the stakeholders who were likely to support a requirement that Uber extend its insurance to cover the app-on gap in the discussion case Insuring Uber's App-On Gap. (Check all that apply.)

Uber drivers The insurance industry Taxi companies

During stakeholder analysis, what is the first question that must be answered once an issue is identified?

Who are the relevant stakeholders?

The horizontal axis of a stakeholder map represents each stakeholder's ______.

position on an issue

A stakeholder's ability to use resources to make an event happen is measured by the amount and type of their ______.

power

Nonmarket stakeholders include which of these groups? (Check all that apply.)

Business groups Communities

Most theorists say that government is a nonmarket stakeholder because _____.

government does not normally conduct any direct market exchanges with business

Within stakeholder analysis, the focal organization is the _____.

one from whose perspective the analysis is conducted

Owners of an organization are called ______. (Check all that apply.)

shareholders stockholders

The stakeholder theory of the firm argues that a firm's sole purpose is to create value for its shareholders.

False

The five types of stakeholders' power recognized by most experts are: A) Voting, economic, political, legal, and informational power. B) Social, legal, environmental, economic, and political power. C) Social, regulatory, voting, governance, and information power. D) Economic, informational, legal, shareholder, and political power.

A) Voting, economic, political, legal, and informational power.

Interactions between business and society occur: A) Within a finite natural ecosystem. B) Only during an environmental crisis. C) When business employees and the community are of similar cultural backgrounds. D) When legislation is passed requiring interaction.

A) Within a finite natural ecosystem.

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

A) Investors.

When a community group sues a company for health effects caused by the unsafe disposal of toxic chemicals, this is an exercise of a stakeholder's: A) Legal power. B) Voting power. C) Economic power. D) Political power.

A) Legal power.

The term society is accurately defined by which of the following? (Check all that apply.)

All of humankind A collective social structure Nations and communities

When something stands out from a background, is seen as important, or draws attention it is: A) Urgent. B) Salient. C) Powerful. D) Legitimate.

B) Salient.

Departments, or offices, within an organization that reach across the dividing line that separates the company from groups and people in society are: A) Inter-departmental divisions. B) Geographical location areas. C) Boundary-spanning departments. D) Organizational maps.

C) Boundary-spanning departments.

Stakeholders have been able to form international coalitions more successfully through use of: A) Government regulation. B) Community involvement. C) Communications technology. D) Unions.

C) Communications technology.

Select the type of change (in the right column) that matches the six forces of business (in the left column).

Globalization to Global. evolving government regulations to Political. Dynamic natural environment to Ecological. New technology and innovation to Technological. Growing emphasis on ethics to Ethical. Changing societal expectations to Social.

A customer posting a negative review of a purchased product is using which type of stakeholder power?

Informational

Explain the primary difference between internal and external stakeholders of a firm.

Internal stakeholders directly contribute their effort and skill inside the firm.

The term stakeholder salience is correctly described by which statements? (Check all that apply.)

It refers to stakeholders standing out to managers when they have power, legitimacy, and urgency. The greater the salience, the more the stakeholder will be noticed.

A market stakeholder is exemplified by which of the following? A) Government agencies. B) Creditors. C) Activist groups. D) Nongovernmental organizations.

B) Creditors.

In the case Insuring Uber's App-On Gap, which type of power do Uber customers have? A) Economic and informational. B) Legal and economic. C) Political only. D) Voting and legal.

B) Legal and economic.

The main reason a number of European countries require public companies to include employee members on their boards of directors is so that: A) The employees will be available to answer other board members' questions. B) Management will not have to attend the meetings. C) Employees' interests will be explicitly represented. D) Employees will have more power than any other stakeholder.

C) Employees' interests will be explicitly represented.

With the explosive growth of technologies that facilitate the sharing of information, this kind of stakeholder power has become increasingly important: A) Economic power. B) Political power. C) Informational power. D) Legal power.

C) Informational power.

Which statement is not correct about the business-society interdependence? A) Business is a part of society. B) Business is separated from the rest of society by clear boundaries. C) Business activities impact other activities in society. D) Actions by governments rarely affect business.

D) Actions by governments rarely affect business.

According to general systems theory, boundary exchanges are exemplified by which of the following? A) An industrial company installs new equipment in its plant to comply with environmental regulations. B) A software company develops an application for a client. C) A purchasing department employee negotiates a price on parts with a supplier. D) All of these answers are correct.

D) All of these answers are correct.

Which of the following is the result of the inseparable relationship between business and society? A) All business decisions have a social impact. B) The vitality of business depends on society's actions and attitudes. C) The survival of business is independent of society. D) Both of these answers are correct: All business decisions have a social impact and the vitality of business depends on society's actions and attitudes.

D) Both of these answers are correct: All business decisions have a social impact and the vitality of business depends on society's actions and attitudes.

In the case Insuring Uber's App-On Gap, which stakeholders supported ending the App-On Gap? A) Competitors, taxi companies, Internet-based firms. B) Taxi companies, high-tech trade associations, government. C) Uber customers, competitors, government. D) Uber customers, Uber drivers, consumer lawyers.

D) Uber customers, Uber drivers, consumer lawyers.

Match a corporation's boundary-spanning departments (in the left column) with the groups they interact with (in the right column).

Departments of investor relations to Shareholders Departments of human resources to Employees

When a supplier refuses to fill an order, it is using which type of stakeholder power?

Economic

True or false: All stakeholders listed in an analysis will be relevant in every management situation.

False

Market stakeholder relationships are based on ______.

an economic transaction

Some argue that managers are stakeholders of a firm because they _____. (Check all that apply.)

benefit from the company are impacted by a firm's decisions are employed by the firm

When individuals or groups play multiple stakeholder roles, this is called a(n) ______

business role set