Chapter 3: Corporate Social Responsibility

Which statement does NOT support the claim than an unconditioned ethical directive such as the one the economic corporate social responsibility demands of business management is inappropriate for utilitarian theory? a. Markets can work to prevent harm only by first-hand experience with harms that have to occur before they can be remedied. b. It is claimed that once market failures are adequately addressed by the government, business just needs to obey the law that addressed them. Business, however, has the ability to inappropriately influence government policy and the law. c. Business has the ability to influence consumers' desires by helping shape those desires through advertising. d. A more precise formulation of a utilitarian-based principle would be to maximize profit whenever doing so produces the greatest good for the greatest number, with the proviso that managers must consider the impact a decision will have in many ways other than merely financial.

d. A more precise formulation of a utilitarian-based principle would be to maximize profit whenever doing so produces the greatest good for the greatest number, with the proviso that managers must consider the impact a decision will have in many ways other than merely financial.

The stakeholder theory of corporate social responsibility is totally incompatible with the utilitarian ethical theory because the stakeholder concept requires balancing the interests of all the parties affected by business decisions.

False

There is no reason to believe that ad hoc attempts to repair market failures, such as determining shadow prices for unpriced social goods, or exempting social goods from the market, or using the law to address social goods that are unattainable through individual choice, are socially inadequate.

False

To use a company's resources for a project that does not contribute to maximizing profits is sometimes acceptable and even sometimes required under the economic model of corporate social responsibility.

False

Prisoners' dilemma cases are examples of situations in which cooperation does not have a more optimal outcome than competition.

False. Prisoners' dilemma cases are examples of situations in which mutual cooperation between individuals would lead to a more optimal outcome for both parties, but individual self-interest and lack of trust may lead to a suboptimal outcome. In other words, in Prisoners' dilemma cases, cooperation is the optimal outcome, but it is not always achieved due to rational self-interest.

Milton Friedman did not recognize that there are limits to the pursuit of profits.

False. Milton Friedman did recognize that there are limits to the pursuit of profits. He argued that businesses must operate within the "rules of the game," which include laws, regulations, and ethical norms, and that they must not engage in fraud or deception, even if doing so might increase profits. However, he also believed that it is the role of government, rather than businesses, to establish and enforce these rules.

The pursuit of profit is the mechanism by which a business is thought to serve the utilitarian goal of satisfying consumer demand, thereby maximizing the overall good.

True

The significance of the moral minimum approach lies in its recognition that compliance with the law is insufficient for being an ethically responsible business.

True

Utilitarian ethics directs us to maximize happiness.

True

We learn about market failures and thereby prevent harms in the future only by sacrificing the first generation as a means for gaining this information.

True

In which of the following ideas are the ethical roots of the economic model of corporate responsibility found? a. The interests of stakeholders are as important as the interests of the corporation's stockholders. b. Managers are ethically obliged to make as much money as possible for their stockholders. c. Managers must prioritize stakeholders' interests if there is a conflict between the interests of the stockholders and the interests of employees, consumers, suppliers, or society. d. The actions of corporations can and should be restricted by the rights of anyone affected by their decisions.

b. Managers are ethically obliged to make as much money as possible for their stockholders.

According to the private property defense of the economic model of corporate social responsibility, managers who use corporate funds for projects that are not directly devoted to maximizing profits are stealing from their owners. Which statement supports this view? a. Property rights are restricted when they conflict with the basic rules of society as embodied in law and custo. b. The connection between ownership and control that exist for personal property does not legally exist for corporate property. c. Investors buy their stocks with the hope of maximizing return on their investment. d. Stockholders in publicly traded corporations are better understood as investors rather than owners.

c. Investors buy their stocks with the hope of maximizing return on their investment.

Which of the following statements does NOT represent a market failure, a situation in which the pursuit of profit will not result in a net increase in consumer satisfaction? a. The costs of pollution, groundwater contamination and depletion, soil erosion, and nuclear waste disposal are borne by parties external to the economic exchange between buyer and seller. b. Where there is no mechanism for pricing, for setting a value on public goods, there is no guarantee that the markets will result in the optimal satisfaction of the public interest in regard to public goods. c. Situations in which externalities have been internalized result in an equilibrium in the exchange price between true costs and benefits. d. The pursuit of individual self-interest results in a worse outcome than would have occurred had the behavior of the parties involved in th economic exchange been coordinated through cooperation or regulation rather than mere competition.

c. Situations in which externalities have been internalized result in an equilibrium in the exchange price between true costs and benefits.

Which statement represents a challenge to Evan and Freeman's defense of the stakeholder theory against the economic model of corporate social responsibility? a. The law now recognizes a wide range of managerial obligations to such stakeholders as consumers, employees, competitors, the environment, and the disabled. b. Courts and legislatures have recognized that the rights and interests of various constituencies affected by corporate decisions limit managers' fiduciary responsibility. c. The stakeholder theory cannot answer the question as to how, exactly, a manager should go about balancing the diverse and competing claims of all parties. d. There is no guarantee that when managers produce profits, they will serve the interests of either stockholders or the public.

c. The stakeholder theory cannot answer the question as to how, exactly, a manager should go about balancing the diverse and competing claims of all parties.

Which statement is true of Bowie's Kantian approach to business ethics? a. People have a duty both to not cause harm and to prevent harm. b. Both causing no harm and preventing harm override other ethical considerations. c. While it is ethically good for managers to prevent harm or do some good, their duty to stockholders overrides these concerns. d. A narrow interpretation of Bowie's "cause no harm" imperative makes the duties faced by management under the neoclassical model significantly different from the economic model.

c. While it is ethically good for managers to prevent harm or do some good, their duty to stockholders overrides these concerns.

If the costs of externalities like air pollution, ground water contamination and depletion, soil erosion, and nuclear waste disposal are borne by parties who are not involved in the exchange between buyer and seller, the exchange price does not represent an equilibrium between true costs and benefits.

True

Market failures occur in a variety of situations in which the pursuit of profit will not result in a net increase in consumer satisfaction because in these situations markets fail to do what they were designed to do.

True

The free market theory provides the rationale for the responsibility of managers to make as much money for their stockholders as possible.

True

The free market, or neoclassical, theory of corporate social responsibility relies on utilitarianism and the concepts of individual rights to freedom and property for its ethical justification.

True

Bowie's Kantian model of corporate social responsibility obliges managers to do no harm, but they must also be prepared at times to do some good or prevent some harm.

False

Efficient markets guarantee that an ethically worthy outcome has been achieved.

False

A wider interpretation of the meaning of a stakeholder as any affected party places an impossible burden on managers who would have to account for everyone who might be affected by a business decision.

True

According to the private property defense of the economic model of corporate social responsibility, any use of a corporation's resources for any purpose other than maximizing profits is a violation of the owners' property rights and amounts to theft.

True

Which of the following statements is true of the stakeholder model of corporate social responsibility? a. It is based on the premise that a business is a private property, and like any private property, the owners get to decide what to do with it. b. It appeals to such important ethical norms as utilitarianism and freedom because of its connection to the free enterprise system. c. It assumes that compliance with the law is sufficient for being an ethically responsible business. d. It begins with the insight that every business decision affects a wide variety of people, benefiting some and imposing costs on others.

d. It begins with the insight that every business decision affects a wide variety of people, benefiting some and imposing costs on others.

The management of an online retailer is mostly interested in implementing strategies and pushing policies that result in the utilization of their stockholders' property to serve the interests of its employees and the local community. The defenders of which of the following models are likely to consider these actions as theft? a. the triple bottom line theory b. the cyclical theory of social change c. the stakeholder theory of corporate social responsibility d. the economic model of corporate social responsibility

d. the economic model of corporate social responsibility