Sage Chapters 3 Quiz

A(n) ______ provides full-time employees with an equity stake in the company that often grows over time. Cooperative Benefit Corporation Certified B Corp Employee Stock Ownership Plan (ESOP)

Employee Stock Ownership Plan (ESOP)

Under the broad conception of social responsibility, activists argued that businesses must give greater weight to ______ interests. stakeholder shareholder industry public

stakeholder

A benefit corporation is a non-profit group who operates for public benefit and promotes business interests in the policy sphere. True False

False

A sole proprietor who runs a Limited Liability Corporation (LLC) is still responsible for any business debts the LLC accrues. True False

False

While it is an unethical practice, tax evasion is technically not illegal under U.S. business law. True False

False

Under the Sarbanes-Oxley Act of 2002, the ______ was created to regulate the auditing profession which had previously been self-regulating. Securities and Exchange Committee Consumer Protection Office Public Company Accounting Oversight Board Audit Independence Committee

Public Company Accounting Oversight Board

Rajit wants to start his own business but is concerned about the personal financial risk he faces if the business fails. What steps should he take to responsibly start his business? Rajit should start an LLC where only the business will be financially responsible, not him. Rajit should find a partner who can share the financial burden with him. He should begin with an initial public offering to generate capital. He should start a Sole Proprietorship because he can reap all the financial rewards.

Rajit should start an LLC where only the business will be financially responsible, not him.

Prior relationships with board members can lead to ______. unethical behaviors stronger decision-making board bias larger profits

board bias

What is one action a corporate board should take if they want to avoid government regulation of their industry? partner with other businesses to lobby against the regulations minimize public information about the business communicate honestly with shareholders seek out a government exemption

communicate honestly with shareholders

What is one action a corporate board should take if they want to avoid government regulation of their industry? partner with other businesses to lobby against the regulations seek out a government exemption minimize public information about the business communicate honestly with shareholders

communicate honestly with shareholders

Sunny Day Groceries and Goods is a grocery store owned and operated by its employees. What kind of governance structure does this business likely have? benefit corporation Certified B Corp cooperative ESOP

cooperative

Economist Milton Friedman argued that businesses have responsibility for ______ alone. reinvestment in company resources executive compensation the public good and fiscal solvency maximizing profits and obeying the law

maximizing profits and obeying the law

Why is there a gender gap in board membership? qualification, networking, and gender discrimination more men than women in the global population the pipeline for female board members is clogged women largely prefer to work in other areas

qualification, networking, and gender discrimination

Under the Sarbanes-Oxley Act of 2002, the ______ was created to regulate the auditing profession which had previously been self-regulating. Public Company Accounting Oversight Board Audit Independence Committee Securities and Exchange Committee Consumer Protection Office

Public Company Accounting Oversight Board

What is the difference between an S corporation and a C corporation? the number of shareholders who elect the board of directors which tax bracket the company is assessed with the size of the board of directors the number of employees each corporation has

the number of shareholders who elect the board of directors

A shareholder activist uses their position as a shareholder to motivate changes within a publicly-traded corporation. True False

True

Prior relationships with board members can lead to ______. unethical behaviors larger profits board bias stronger decision-making

board bias

Britany has recently joined the board of directors for a large corporation. If she wants to be an ethical board member, what actions would she ideally take in this role? Develop a strategic plan to minimize labor costs and maximize profits. Leak information to the press to get unethical members of the board removed. Act fully informed, in good faith, for the best interests of shareholders and stakeholders. Make public pronouncements about company policies.

Act fully informed, in good faith, for the best interests of shareholders and stakeholders.

Alternative governance structures are developed with a focus on ______. being more marketable to the creative class allowing more remote work create more shareholder benefits benefitting employees and other stakeholders

benefitting employees and other stakeholders

Under the narrow conception of social responsibility, owners and partners determine ______. best interests related to profit sharing and reinvestment best marketing strategies board membership and business strategies all corporate communication policies

best interests related to profit sharing and reinvestment

Corporate governance allows a business to achieve its ______ in the long term. profit margins corporate goals growth projections consumer outreach

corporate goals

A system which holds businesses accountable to fulfill their goals is known as ______. business ethics government regulation shareholder accountability corporate governance

corporate governance

When does a conflict of interest arise with a board member? If a board member is married to the CEO. When a board member's company benefits from their work on another company's board. If a CEO is near retirement and the board is looking to cash in on good stock prices. When the company has the market cornered.

When a board member's company benefits from their work on another company's board.

Boards that decide to remove a CEO from the board chair position often do so after ______. major company failure industry disruptions major company success government intervention

major company failure

What is the most prevalent form of business in the United States? Public corporation Limited Liability Corporation Sole Proprietorship C Corporation

Limited Liability Corporation

Maxine is a CEO passionate about environmental ethics and wants to steer her company towards more accountability when it comes to sustainable business practices. What actions should she take to make this happen? She should get her company to sponsor environmental aid events. She should encourage employees to volunteer with wilderness organizations. She should work on getting B Corp certification. She should maximize profits and make donations to a wildlife fund.

She should work on getting B Corp certification.

Certified B corporations not only have public recognition of their ethical focus, but also receive tax breaks for going through the certification process. True False

False

Britany has recently joined the board of directors for a large corporation. If she wants to be an ethical board member, what actions would she ideally take in this role? Develop a strategic plan to minimize labor costs and maximize profits. Make public pronouncements about company policies. Leak information to the press to get unethical members of the board removed. Act fully informed, in good faith, for the best interests of shareholders and stakeholders.

Act fully informed, in good faith, for the best interests of shareholders and stakeholders.

Why can the work culture of maximizing profits blind managers to long-term financial and reputational costs? Managers can focus too much on their careers and not on the company's best interest. Profit focus can undermine worker satisfaction and lead to more turnover. Customers can adversely react to profit maximizing moves and stop using the company's services. They can focus only on one area of the business and neglect other areas.

Customers can adversely react to profit maximizing moves and stop using the company's services.

Why is it legally advisable to move beyond the neoclassical framework of economics and profit maximization? Customers want more ethical products and are leaving unethical companies behind. Increasingly, the court system has sided with the broad conception of social responsibility. Employees increasingly look for ethical companies to work for. Maximizing profit at the expense of other areas no longer actually maximizes profit.

Increasingly, the court system has sided with the broad conception of social responsibility.

Why is it legally advisable to move beyond the neoclassical framework of economics and profit maximization? Employees increasingly look for ethical companies to work for. Customers want more ethical products and are leaving unethical companies behind. Increasingly, the court system has sided with the broad conception of social responsibility. Maximizing profit at the expense of other areas no longer actually maximizes profit.

Increasingly, the court system has sided with the broad conception of social responsibility.

Moneybags, Inc. operates a factory that produces a significant, but not illegal, amount of pollution which can be lessened through the purchase of an inexpensive piece of technology. If you were a board member who believed in the broad conception of social responsibility, how should you argue in favor of this pollution-cutting purchase? It can be used as a tax write-off. It benefits the well-being of employees, communities, and neighbors. It will help maximize profits and lower overhead. Purchasing this is a public relations win.

It benefits the well-being of employees, communities, and neighbors.

Why might managers be tempted to present dishonest information to board members? Managers don't trust the board to have the company's best interest in mind. Managers are incentivized to provide information that makes them look good for promotion. They are overworked and negligent when it comes to being well-informed. They are afraid of appearing like a failure.

Managers are incentivized to provide information that makes them look good for promotion.

Marisol is a coffee grower who is looking to partner with other growers for mutual benefit. What should she do if she wants to set up this kind of partnership? Attempt to get B corp certification to draw more attention to her farm. Allow her farm to be grafted into a larger corporate farming conglomerate. Marisol should create a producer co-op to pool resources and capital for mutual benefit. Create an LLC and encourage other farmers to become her employees.

Marisol should create a producer co-op to pool resources and capital for mutual benefit.

What is the difference between the two types of shareholder activist? One kind wants to change management while the other wants environmental standard improvement. One kind is concerned about gender inequality and another is concerned about racial inequality. One kind wants to get more shares and another kind is looking to offload shares. One kind wants to gain employment at the company and the other wants to bust unions.

One kind wants to change management while the other wants environmental standard improvement.

Board members are legally allowed to trade company stock as long as what condition is met? Stock information is publicly known. Government approval is given. The board member resigns afterwards. The company is a B corp.

Stock information is publicly known.

The law that requires CEOs and CFOs to sign off on financial statements and restrict audit firm consulting practices is known as ______. Best Business Practices Act Cheney Business Ethics Act The Sarbanes-Oxley Act Dodd-Frank Financial Transparency Act

The Sarbanes-Oxley Act

The law that requires CEOs and CFOs to sign off on financial statements and restrict audit firm consulting practices is known as ______. The Sarbanes-Oxley Act Dodd-Frank Financial Transparency Act Best Business Practices Act Cheney Business Ethics Act

The Sarbanes-Oxley Act

What is uniquely beneficial for companies using the Employee Stock Ownership Plan (ESOP)? They have less government oversight. They have lower overhead than other kinds of businesses. They provide employees with more benefits and increase staff longevity. They generate more employee contributions.

They provide employees with more benefits and increase staff longevity.

Corporate governance structures are expected to maintain high levels of ethics and integrity as evidenced by the transparency, accountability, and honesty of their board members actions. True False

True