BA 300 ethical behavior Questions And
Answers
What do shareholders own? 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 ...
What do shareholders own? 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 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
, BA 300 ethical behavior Questions And
Answers
-Liberty
Shareholder value ethical justifications 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 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 a business's obligation to pursue
policies, decisions, and actions that align with the objectives and values of society. Besides
maximizing shareholder value.
, BA 300 ethical behavior Questions And
Answers
ex being a philantropist.
Instrumental/strategic CSR 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 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 •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?)
The benefits of buying summaries with Stuvia:
Guaranteed quality through customer reviews
Stuvia customers have reviewed more than 700,000 summaries. This how you know that you are buying the best documents.
Quick and easy check-out
You can quickly pay through credit card for the summaries. There is no membership needed.
Focus on what matters
Your fellow students write the study notes themselves, which is why the documents are always reliable and up-to-date. This ensures you quickly get to the core!
Frequently asked questions
What do I get when I buy this document?
You get a PDF, available immediately after your purchase. The purchased document is accessible anytime, anywhere and indefinitely through your profile.
Satisfaction guarantee: how does it work?
Our satisfaction guarantee ensures that you always find a study document that suits you well. You fill out a form, and our customer service team takes care of the rest.
Who am I buying these notes from?
Stuvia is a marketplace, so you are not buying this document from us, but from seller UpperClass. Stuvia facilitates payment to the seller.
Will I be stuck with a subscription?
No, you only buy these notes for £13.46. You're not tied to anything after your purchase.
