Chapter 5 Corporations Test

Externalities are

unintended side-effects

The idea that corporations are moral agents

-

T or F: An effective professional or business moral code - as well as the public's awareness of this code- never good for business

False

Which of the following is one of the three arguments in favor of narrow corporate social responsibility discussed in Ch 5?

The idea that incorporation is a by-product of the people's right to associate, not a gift from the state.

T or F: "Limited liability" means that members of a corporation are financially liable for corporate debts only up to the extent of their investments

True

T or F: Most Business observers agree with Berle and Means that, because stock ownership in large corporations is so dispersed, actual control of the corporation has passed to management.

True

Adam Smith proposed that in our pursuit of economic interest we are led by

an invisible hand to promote general good

Milton Friedman's perspective is that the only social responsibility of a business is to

make money for its owners

The first corporations

were towns, universities, and ecclesiastic orders.

One of the three important "limits to what the law can do" discussed by Christopher Stone is

designing effective regulations is difficult.

In the corporate world, the board of directors will typically:

rubber stamp

Which of the following do advocates of the broader view of corporate social responsibility believe?

Corporations have moral obligations to consumers, to employees, to suppliers and contractors, to the surrounding community, and to society at large

T or F: It is never profitable for corporations to acknowledge that business should be conducted to make positive contribution to society rather than just make a profit

False

Which of the following contributed to the more relaxed incorporation procedures of modern times?

The idea that incorporation is a by-product of the people's right to associate, not a gift from the state.

A common point of contention about corporations is

philosophers and business theorist disagree whether corporations are moral agents.

Some argue for the narrow view of corporate social responsibility on the ground that managers have a fiduciary responsibility to maximize the profits of their shareholders. As discussed in Chapter 5, one problem with this argument is that..

promises to try to make the stockholders money don't override all our other obligations.

The "rules of the game" for corporate work are intended to

promote open and free competition

The best statement concerning corporations is

corporate culture can be both explicit and implicit.

The Statement that accurately describes corporations is

corporate shareholders have limited liability for their debts

Those with a broader view concerning business obligations believe that with power comes

social responsibility

Kenneth Arrow discussed two important situations in which profit maximization can be socially inefficient. One of these occurs when:

there is an imbalance of knowledge between buyer and seller.

Corporations differ from partnerships and other forms of business association in two ways. One of these is that

they must be publicly registered or in some way officially acknowledged by the law

Melvin Anshen suggests that there is a relationship between business and society which he termed as..

"social contract"

What is a corporation? How does it differ from partnerships? What are the different kinds of corporations?

A corporation is an independent legal entity owned by shareholders, in which the shareholders decide on how the company is run and who manages it. A partnershipis a business in which two or more individuals share ownership. C, S, limited liability companies, and nonprofit organizations.

Explain Milton Friedman's view of social responsibility?

Business has no social responsibilities other than to maximize profits. Friedman & Levitt said that diverting corporations from the pursuit of profit makes our economic system less efficient. Business' only social responsibility is to make as much money as possible for shareholders within the boundaries of law and custom. Private enterprise shouldn't be forced to undertake public responsibilities that they think properly belong to government, charities, religious institutions, nonprofits, etc.

Momentum for the corporate organization of business really gained momentum after which war?

Civil War

The debate over corporate moral agency hinges on which question?

Corporate Punishment

Milton Snoeyenbos argues that:

Corporate moral codes can make it more reasonable to expect employees to behave ethically.

T or F: Externalities give us a reason to support the narrow view of corporate responsibility

False

T or F: Milton Friedman argues that business has a responsibility to provide employment, refrain from polluting, and eliminate discrimination, even when it's not profitable to do so

False

T or F: The business-can't-handle-it argument is an argument in favor of a broad view of corporate responsibility

False

What is the problem of vanishing individual responsibility?

Inside a corporation, it may be difficult, even impossible, to assign responsibility for a particular outcome to any single individual because so any different people, acting within a given CID framework, contributed to it in small ways.Many find it easy to say "it's not my job" or "I was just following procedure" to escape responsibility. CIDSs seem to make this type of explanation common.

Milton Friedman argues that

a business's only social responsibility is to maximize profits within the rules of the game

T or F: A corporate moral code should set reasonable goals and subgoals, with an eye on blunting unethical pressures on subordinates

True

T or F: According to Milton Friedman, business has no social responsibilities other than to maximize profits so long as it follows the rules of the game

True

T or F: According to proponents of broadening corporate responsibility, corporations should welcome the outside opinions of society as a whole, local community, customers, suppliers, employees, managers, and stockholders.

True

T or F: Adherents of the broader view of corporate responsibility claim that modern business is untimely integrated with the rest of society and that, as a result, although society expects business to pursue its economic interest, business has other responsibilities as well.

True

T or F: Corporate internal decision (CID) structures amount to established procedures for accomplishing specific goals.

True

T or F: Externalities are the unintended negative (or in some cases positive) consequences that an economic transaction between two parties can have on some third party

True

T or F: Internal or external corporate responsibility audits can help improve a corporation's "corporate culture"

True

T or F: Legally a corporation is a thing that can endure beyond the natural lives of its members and that has incorporators who may sue and be sued as a unit and who are able to cosign part of their property to the corporation for ventures of limited liability

True

T or F: The case of Citizens United v. Federal Election Commission ruled that corporations could spend money to support political candidates

True

T or F: The invisible-hand argument against broadening corporate responsibility says that business's appetite for profit should be controlled by the hand of the government

True

In Citizens United v. Federal Elections Commission, the U.S. Supreme Court

defended the first Amendment right of corporations to spend money to support political candidates they favor

Most Americans believe a corporation's top obligation is to its..

employees