BUS 101 Ch 14-17

What are two of the board of directors or managers fiduciary duties?

1. care- good faith and best interest of the company 2.loyalty

What are 3 approaches to safeguarding online privacy?

1. consumer self-help 2. industry self-regulation 3. protective legislation

Name three reasons why individuals and institutions own shares of corporations.

1. earn dividends 2. earn capital $ 3. sometimes, social objectives

What 2 things have altered the expectations on both sides of employment?

1. globalization 2. business cycles

What are some principles of good corporate governance?

1. mostly outside directors to fill positions 2. open elections for board members 3. independent lead director or chair 4. align compensation with performance 5. evaluate board's performance on a regular basis

What are the five key consumer rights?

1.to safety 2.to be informed 3.to choose 4.to be heard 5.to privacy

When was the SEC founded?

1934, after Great Depression

What are dividends?

a return on investment payment made to the owners of shares of corporate stock at the discretion of the company's board of directors

Stakeholder theory involves who?

all stakeholders interests and issues

What does it mean to blow the whistle?

an employee's disclosure of alleged organizational misconduct to the media or appropriate government agency, often after futile attempts to convince organizational authorities to take action against the alleged abuse

What is the FTC?

an organization that addresses the right to choose, to be informed, to be heard, to privacy; protects consumers from unfair or deceptive practices

Gov regulation takes away what?

autonomy or control

Who hires officers?

board of directors

Name some things shareholders are entitled to do.

vote, receive information, select directors, and attempt to shape corporation policies

Why don't Friedman and Freeman want government regulation?

w/ gov regulation, we lose autonomy

Why didn't JCPenny's approach to sales work?

we live in a competitive market

What is capital?

wealth in the form of money $$$

Does the board of directors put their own personal interests above that of the corporation ?

yes

Why do consumer protection laws and regulatory agencies exist?

to assure consumers are treated fairly, receive adequate information, are protected against potential hazards, have free choice in market, and have legal recourse when problems develop

What is the goal of the consumer product safety?

to ensure consumer's safety; develop and enforce standards; ban products; obtain recalls and arrange for repairs; inform and educate consumers

What is the primary role of the government?

to protect the stakeholder

What is the fiduciary duty of loyalty involve?

to set aside personal interests and avoid conflicts of interest

Theory of the firm involves who?

only one stakeholder -->owner stakeholder

Who elects the board of directors?

owners and stockholders

How is compensation of US officials justified?

performance

What is caveat venditor?

places responsibility of seller

Popping vs. false advertising

popping: best machine you'll ever have false advertising: this machine does one load in 5 minutes (false and can be proven false)

What does the CEO of Whole Foods, John Mackey believe?

Our most important stakeholder is not our stockholder--> it is our customers

Why have job safety and heath concerns increased?

a result of rapidly changing technology in the workplace

What is corporate governance?

system of allocating power in a corporation that decides how and by whom the company will be directed

Does a private sector have to listen to the SEC?

technically, no

How does the government protect the stakeholder?

the SEC

What are the legal rights of stockholders?

* share of profit * receive annual reports of earnings and activities * elect board, vote on merger, acquisitions, by-laws, vote by proxy, sell stock, bring suit against company and officers

How do socially responsible companies respond to consumer movement?

* they give serious consideration to consumer problems, increase communication with customers, institute arbitration procedure to resolve complaints, and recall defective products

In Adelphia, what is the difference between stock A and stock B?

1 vote to 10 votes

Give an example of a private sector we studied?

Aldephi

What organization focuses on labeling?

Federal Trade Administration

FTC stands for...

Federal Trade Commission

Adam Smith believes in what?

Invisible Hand

Who is the CEO of Whole Foods?

John Mackey

OSHA stands for...

Occupational Safety and Health Administration

Who makes day to day decisions in corporate management?

Officers

Public vs. Private Sector

Public sector: traded on one of the big stock exchanges and available for public consumption ---> under the eyes of gov regulation and SEC Private sector: run by private individuals for enterprise or profit, not controlled by the state

What is OSHA?

The U.S. Federal gov agency that enforces worker safety and health standards

What is employee at will?

The principle that workers are hired and kept solely at the discretion of the employer- basically, no job security

What is the difference between theory of the firm and stakeholder theory?

Theory of the firm: only one stakeholder --> owner stakeholder (1) VS. Stakeholder theory: looks @ all stakeholder's interests and issues (ALL)

What happened when Adelphia goes public?

They lost control

Why can workers unionize and bargain collectively?

US Labor Laws

Sabanes Oxley Act ?

US law that expanded powers of SEC to regulate information disclosure in the financial markets and the accountability of an organization's senior leadership .. started by 2 Ohio senators,

What is a stakeholder?

a person or group that affects or is affected by, a corporation's decisions, policies and operations -who has the most to gain/lose by the problems presented

What is a class action lawsuit?

When people have the same issue against the same defendant and they join together

Note: When you are on the board of directors, you are NOT a shareholder

Yasssss

How can you make an informed choice if the information you are given is misleading?

You can't

What is proxy?

absentee ballot

What is the fiduciary duty of care involve?

act in good faith with the interest of the organization in mind

Name the three fiduciary of owners.

care, loyalty and obedience

Let the buyer beware can be associated with?

caveat emptor

What is autonomy?

control

Difference between caveat emptor and caveat venditor?

emptor: responsibility on buyer venditor: responsibility of seller (vendor)

What are common stocks?

generally receive one vote per share and last to get assets

Why did stakeholder theory develop?

gov stepped in to regulate

Why do critics believe compensation in the US is too high?

high pay hurts competitiveness and undermines employee commitment

What is the role of management in the stakeholder model?

identifying the stakeholder, the issue, proposing remedies, implementing remedies, and evaluating decisions

What is SEC focused on?

improving accuracy and transparency of financial information provided to investors and curbing insider trading

What do high salaries promote? (2)

innovation and risk taking

What is the purpose of the consumer movement?

it is an attempt to promote interests of consumers by balancing seller and buyer market power

Why do people join together in a class action lawsuit?

it makes them more powerful

What is product liability?

legal responsibility of a form for injuries caused by something it made or sold

What is a fiduciary duty?

legal right to act solely in another party's interests

Why is it important to have an independent chairman?

less bias

What is caveat emptor?

let the buyer beware, ability for the consumer to have power

Employers' right to discharge "at will" has been _____________.

limited

Who supervises employees?

managers

What is causing a new urgency to the issue of consumer privacy?

modern technology

What are preferred stocks?

not necessarily more expensive, but require commitment and first to pay

Who sets corporate objectives and selects managers?

officers

What does the SEC do?

protects from insider training

What does competitiveness lead to?

quality and better prices

SEC stands for...

securities and exchange commission

What are the responsibilities of the board of directors? (3)

set objectives, select and supervise top management, and assure integrity of financial accounting

Who owns the company?

stockholders

What do fair labor standards ensure?

they ensure that their products are not manufactured under substandard sweatshops

How do shareholders influence corporate action?

they form organizations to promote their interests and file lawsuits when they are wronged

What happens when a company moves from a private sector to a public sector?

they lose control

Why has the job of board of directors become more challenging and difficult?

they want to balance the interests of shareholders, managers and other stakeholders basically, balance interests is difficult

What was the consumer movement?

this time recognized the power of consumers and opportunity to be taken advantage of .....make sure product is safe before entering workplace