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BA 300 ethical behavior exam questions and answers
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BA 300 ethical behavior exam questions and answers
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BA 300 ethical behavior exam questionsand answers
Corporations definition - Answers -"legal entity chartered by the state with rights and
responsibities apart from the persons running or working for the corporation"
The responsablities are characteristic set of duties that corporations will take on for the
priviliage of the owners having limited liability. Because if you are going into business
you can lose everything you put in.
Corporation fundamentals - Answers -separation of ownership and control
shareholder rights vs managerial discretion ( legal rights to know what they are doing
will your money and have to be discert.
Shareholder value - Answers -Maximize profits within the law (and morality)
stakeholder theory - Answers -ethical theory stating that social responsibility is paying
attention to the interest of every affected stakeholder in every aspect of a firm's
operation, even a the expense of losing company profits.
What do shareholders own? - Answers -At IPO, shareholders invest in the promise of
maximum shareholder value within legal and moral constraints, in exchange for taking
on the firm's residual risk.
That promise stays with shares as they change from hand to hand over time
example: if you have a corporation and it goes bankrupt, they pay off legal bounded
entities. the shareholders get the residuals that are left over once everyone else has
been paid off. They are taking a risk that they will get nothing in the end.
Its a trade off with the company that the company will promise to have something left
over for them in the end, but they also have to understand that it is a risk and can not
always happen.
Arguments For Shareholder value - Answers -why this is good
1. Legal argument = by law, corporations are obligated to maximize shareholder value
with the law.
2. Economic imperative = Fundemental to the economy because corporations doing
their job.
3. Ethical Justifications
- Efficiency
-Liberty
, Shareholder value ethical justifications - Answers -1. Efficiency = resources pulled to
their most valued uses. Companies and consumers will pay/invest more into businesses
that are doing things how they want them to be done.
2.Liberty = individuals are free to participate or not. Freedom to or not to buy/invest in
certain corporations.
Challenges to Shareholder value - Answers -1. Difficult to rely on self interested
businesspeople to act on others behalf (this includes shareholders too). market
mechanisms are required to rein them in.
Heirachy: Shareholders- board of directors - ceos - other exec.
2. Shareholder value proponents (ppl who advocate this) think that corporate
responsibility lies in devising effective corporate governance mechanisms to protect the
long term interests of shareholders. (using payment or incentives to ceos)
Corporate Social Responsibility (CSR) definition - Answers -a business's obligation to
pursue policies, decisions, and actions that align with the objectives and values of
society. Besides maximizing shareholder value.
ex being a philantropist.
Instrumental/strategic CSR - Answers -How corporations should engage in CSR
programs in order to maximize profits within legal and moral constraints.
It is a strategic way do be something good (like a cancer funderiser) while in the
direction to make maximum profits.
-For big companies this is a win - win.
Normative CSR - Answers -How corporations should engage in CSR programs because
it's the right or moral thing to do, even at the expense of profits.
-Shareholders are indifferent with this because to them it is not moral because they are
breaking the promise to trying not to lose money of those who are invested. Normative
supporters are taking the shareholders money to take care of others.
Arguments Against Normative CSR - Answers -•Violates owners' property rights
•Presumes that managers have better moral skills than shareholders
•Weakens management's accountability to shareholders. (ceos decide what the use the
money on. Therefore how can you measure the shareholder maximization and their
performance?)
•Distracts management from its primary purpose. (these managers are not skilled social
workers. They should be focused on what they are good at; managing a successful
business.
Impact of Normative CSR - Answers -Going Concern -Shareholders expectations are
undermined and owners of record at announcement pay for entire CSR redirection
ex: if a company like Apple has so much money they should be giving it to social
constructs in need.
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