ch 2

Question 1

customers, shareholders, employees, suppliers, government agencies, communities and others who have a “stake” or claim in some aspect of a company’s products, operations, markets, industry, and outcomes

Answer 1

stakeholder

Question 2

are those whose continued association and resources are absolutely necessary for a firm’s survival

Answer 2

primary stakeholder

Question 3

do not typically engage directly in transactions with a company and are therefore not essential to its survival

Answer 3

secondary stakeholders

Question 4

in this model, there are reciprocal relationships between the firm and a host of stakeholders

Answer 4

stakeholder interaction model

Question 5

the degree to which a firm understands and addresses stakeholder demands can be referred to

Answer 5

stakeholder orientation

Question 6

the extent to which businesses strategically meet the economic, legal, ethical, and philanthropic responsibilities placed on them by various stakeholders

Answer 6

corporate citizenship

Question 7

one of an organization’s greatest intangible assets with tangible value

Answer 7

reputation

Question 8

founded in classic economic percepts, including the goal of maximizing wealth for investors and owners

Answer 8

shareholder model of corporate governance

Question 9

the fourth major issue of corporate social responsibility, involves the development of formal systems of accountability, oversight, and control

Answer 9

corporate governance

Question 10

adopts a broader view of the purpose of business, focus on suppliers, creditors, customers, employees, business partners, the community

Answer 10

stakeholder model of corporate governance

Question 11

the concept of board members being linked to more than one company

Answer 11

interlocking directorate

Question 12

financial payments and non-financial benefits provided to the upper level management within a business or organization

Answer 12

executive compensation

Question 13

Those who have a claim in some aspect of a firm’s products, operations, markets, industry, and outcomes are known as

Answer 13

stakeholders

Question 14

Stakeholders’ power over businesses stems from their _______.
a. ability to withhold organizational resources
b. ability to generate profits
c. media impact
d. political influence
e. stock ownership

Answer 14

a. ability to withhold organizational resources

Question 15

is defined as one that does not typically engage in transactions with a company and therefore is not essential for its survival?

Answer 15

Secondary stakeholders

Question 16

A firm that recognizes other stakeholders beyond investors, employees, and suppliers, and explicitly acknowledges that dialogue exists between a firm’s internal and external environments, has adopted

Answer 16

A stakeholder interaction model

Question 17

The degree to which a firm understands and addresses stakeholder demands refers to

Answer 17

a stakeholder orientation

Question 18

Which of the following industries tends to generate a high level of trust from consumers and stakeholders?
a. Insurance
b. Technology
c. Banks
d. Mortgage lenders
e. Energy

Answer 18

b. Technology

Question 19

Why is it important for businesses to recognize secondary stakeholder groups?
a. They are absolutely necessary for the firm’s survival.
b. They include the employees necessary for the firm’s success.
c. They always have more power than primary stakeholders.
d. They provide vital resources that companies need.
e. They have legitimacy and the power to influence outcomes.

Answer 19

e. They have legitimacy and the power to influence outcomes.

Question 20

A stakeholder group that is absolutely necessary for a firm’s survival is defined as a _______.

Answer 20

primary stakeholder

Question 21

When unethical acts are discovered in a firm, which of the following is true in most instances?
a. They are caused by unwilling participants.
b. The cause is due to external stakeholders.
c. The perpetrators are caught and prosecuted.
d. Their acceptance and perpetuation were facilitated by cooperation or complicity.
e. The cause of the unethical conduct is a corrupt board of directors.

Answer 21

d. Their acceptance and perpetuation were facilitated by cooperation or complicity.

Question 22

Which of the following statements accurately describes the normative approach?
a. It focuses on the firm’s behavior and usually addresses how decisions and strategies are made for stakeholder
relationships.
b. It describes what happens if firms behave in a particular way.
c. It is the degree to which a firm understands and addresses stakeholder demands.
d. It describes reciprocal relationships between the firm and a host of stakeholders.
e. It identifies ethical guidelines that dictate how firms should treat stakeholders.

Answer 22

e. It identifies ethical guidelines that dictate how firms should treat stakeholders.

Question 23

A stakeholder orientation can be viewed as a(n) _______.
a. necessity for business success
b. continuum
c. polarizing concept
d. good marketing ploy
e. expensive proposition

Answer 23

b. continuum

Question 24

What do suppliers offer that is critical to a firm’s long-term success?

Answer 24

Material resources and/or intangible knowledge

Question 25

The four levels of social responsibility include

Answer 25

Economic, legal, ethical, and philanthropic

Question 26

The first of three activities associated with the stakeholder orientation is _______.

Answer 26

an organization-wide generation of data

Question 27

Public health and safety and the support of local organizations are issues that are most relevant to which stakeholder group?

Answer 27

Community

Question 28

Minimizing the use of energy and reducing emissions and waste are issues of importance to which of the following stakeholder categories?

Answer 28

Environmental groups

Question 29

The idea that the basic mission of business is to produce goods and services at a profit, thus maximizing its contribution to society, is associated with which of following individuals?

Answer 29

Milton Friedman

Question 30

The idea of the invisible hand, which is a fundamental concept in free market capitalism, was developed by

Answer 30

Adam Smith

Question 31

Some economists believe that if companies address economic and legal issues, they are satisfying the demands of society, and that trying to anticipate and meet additional needs would be almost impossible. Which economist’s theory does this belief most closely follow?

Answer 31

Milton Friedman

Question 32

The idea that because people live in a community, social rules should benefit the community is known as _______.

Answer 32

the common good

Question 33

The extent to which a firm meets the economic, legal, ethical, and philanthropic responsibilities placed on it by various stakeholders is referred to as its _______.

Answer 33

corporate citizenship

Question 34

In corporate governance, the process of auditing and improving organizational decisions and actions is known as _______.

Answer 34

control

Question 35

Accountability, oversight, and control all fall under the definition and implementation of corporate_______.

Answer 35

governance

Question 36

Which of the following is a major ethical concern among corporate boards of directors? a. Compensation b. The non-traditional directorship approach c. Dividend reporting d. Secondary stakeholders e. Debt swaps

Answer 36

a. Compensation

Question 37

Which of the following describes the purpose of a stakeholder orientation? a. To emphasize shareholders and provide them with a return on their investment b. To maximize positive outcomes that meet stakeholder needs c. To diminish the role of stakeholders such as the government and employees d. To determine which stakeholders to address and which to ignore e. To allow stakeholders to determine the limits of executive compensation

Answer 37

b. To maximize positive outcomes that meet stakeholder needs

Question 38

The first step in implementing the stakeholder perspective is _______.

Answer 38

assessing the corporate culture

Question 39

Which model of corporate governance is founded in classic economic precepts?

Answer 39

Shareholder

Question 40

Which of the following would typically be considered a secondary stakeholder group? a. Suppliers b. Customers c. Special-interest groups d. Government regulatory agencies e. Community

Answer 40

c. Special-interest groups

Question 41

Which of the following would typically be considered a primary stakeholder group? a. Competitors b. Community c. Trade associations d. Special interest groups e. The mass media

Answer 41

b. Community

Question 42

What do critics of high compensation for boards of directors point to as being problematic? a. The more directors are paid, the more power they have over the organization. b. High compensation could cause a conflict of interest. c. High board member pay leads to poorly compensated employees. d. High pay will render the board less complacent. e. Board of director compensation is negatively related to corporate growth.

Answer 42

b. High compensation could cause a conflict of interest.

Question 43

Board members being linked to more than one company is defined as

Answer 43

An interlocking directorate

Question 44

The last step in implementing a stakeholder perspective in an organization is

Answer 44

gaining stakeholder feedback

Question 45

A stakeholder orientation is not complete unless it includes

Answer 45

Activities that address stakeholder issues

Question 46

A broader view of social responsibility is one that _______. a. views customers as the most important stakeholder b. takes into account a shareholder orientation c. prioritizes all stakeholders the same way d. considers the long-term welfare of society e. emphasizes adherence to law as the highest priority

Answer 46

d. considers the long-term welfare of society

Question 47

In Dodge vs. Ford Motor Co., the court ruled that a business exists for the profit of shareholders, and the board of directors should focus on that objective. a. True b. False

Answer 47

True

Question 48

The final step in implementing a stakeholder perspective is identifying stakeholders. a. True b. False

Answer 48

False

Question 49

Evidence suggests that caring about the well-being of stakeholders leads to increased profits. a. True b. False

Answer 49

True

Question 50

Ethics and social responsibility can be used interchangeably. a. True b. False

Answer 50

False

Question 51

Government regulatory agencies are considered a secondary stakeholder group. a. True b. False

Answer 51

False

Question 52

A board of directors' fiduciary duty to a company refers to an assumed position of trust and confidence that entails certain responsibilities. a. True b. False

Answer 52

True

Question 53

The obligation of individuals to make decisions that are in the best interests of the corporation and its stakeholders is known as a _______. a. duty of loyalty b. duty of oversight c. duty to audit d. duty of control e. duty of cooperation

Answer 53

a. duty of loyalty

Question 54

Fiduciaries are persons placed in positions of trust that act on behalf of the best interests of the organization. Both directors and officers of corporations are fiduciaries for their shareholders, tasked with making informed and prudent decisions, referred to as a _______.

Answer 54

duty of care or a duty of diligence