BA 300 Unit 4 || 100% Error-free Solutions.
Corporations: The Fundamentals correct answers - Definition: "legal entity chartered by the state
with rights and responsibilities apart from the persons running or working for the corporation
- Separation of ownership and control
- Shareholder rights vs managerial discretion
- What are the roles and responsibilities of a corporation?
Two Perspectives correct answers - Shareholder value: maximize profits within the law (and
morality)
- Stakeholder theory: advance the interests of all stakeholders (even at expense of profit)
Shareholder Value Perspective correct answers - Maximize profits within the law (and morality)
What Do Shareholders Own? correct 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
Arguments for Shareholder Value correct answers - Legal argument
- Economic imperative
- Ethical justifications
- Efficiency- resources pulled to their most valued uses
- Liberty- individuals are free to participate or not
Challenges to Shareholder Value correct answers - Difficult to rely on self-interested business
people to act on others' behalf (including shareholders'); market mechanisms are required to rein
them in
- Shareholder value proponents think that corporate responsibility lies in devising effective
corporate governance mechanisms to protect the long-term interests of shareholders
Corporate Social Responsibility correct answers "Commitment to corporate actions beyond
maximizing profits within the law" /morality
"Instrumental" vs "Normative" CSR correct answers - Instrumental/Strategic: how corporations
should engage in CSR programs in order to maximize profits within legal and moral constraints
- Normative: how corporations should engage in CSR programs because it's the right or moral
thing to do, even at the expense of profits
Arguments against Normative CSR correct answers - Violates owners' property rights
Presumes that managers have better moral skills than shareholders
- Weakens management's accountability to shareholders
- Distracts management from its primary purpose
Impact of Normative CSR correct answers - Going concern: shareholders' expectations are
undermined, and owners of record at announcement pay for entire CSR redirection
, - Startup: investors purchase IPO shares with full knowledge of potential for lower market price
Stakeholder Theory correct answers - Stakeholders: "entities significantly affected by the firm's
activity, such as employees, customers, shareholders, the community or broader society, the
environment, and suppliers"
- "The debate is not whether management bears ethical responsibilities... it is about the reach and
scope of these responsibilities"
Ethical Justifications correct answers - Powerful corporations can help alleviate global
inequalities
- Stakeholder approach leads to greater liberty for the vulnerable
- Capitalism will only be efficient if the masses buy into it
- Shareholders don't do the real "work"
- Consider non-western values: economic actors should pursue what is sufficient
The Power Argument correct answers - A corporation's purpose is to "use its resources to
advance the interests of all those who are most affected by its corporate activities"
- "With greater power comes great responsibility"
- "The limited capacities of government and the power and influence of corporations require that
the corporations address these social problems"
A Key CSR Distinction correct answers - Repair externalities/ "do no harm," but not responsible
for general social problems
- Advance the common good, "whether or not it's directly related to their core business
Evidence of CSR Popularity correct answers - Socially responsible investing
- CSR-related shareholder proposals
- Nongovernmental organizations
- Benefit corporations: special legal status for for-profit businesses that include social
responsibility in their core mission
Types of Government Intervention correct answers - Limited intervention
- Significant intervention
Limited intervention correct answers - Top-down process: international organizations (ex: the
UN) specify norms endorsed by executives
- Bottom-up processes: "ethical norms are rewarded by the purchasing decisions of consumers
and investors"
Significant intervention correct answers - CSR as legal mandate (ex: codetermination laws)
Whistleblowing "Triggers" correct answers - Truth
- Employee or customer rights
- Trust
- Harm
- Your personal reputation
Corporations: The Fundamentals correct answers - Definition: "legal entity chartered by the state
with rights and responsibilities apart from the persons running or working for the corporation
- Separation of ownership and control
- Shareholder rights vs managerial discretion
- What are the roles and responsibilities of a corporation?
Two Perspectives correct answers - Shareholder value: maximize profits within the law (and
morality)
- Stakeholder theory: advance the interests of all stakeholders (even at expense of profit)
Shareholder Value Perspective correct answers - Maximize profits within the law (and morality)
What Do Shareholders Own? correct 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
Arguments for Shareholder Value correct answers - Legal argument
- Economic imperative
- Ethical justifications
- Efficiency- resources pulled to their most valued uses
- Liberty- individuals are free to participate or not
Challenges to Shareholder Value correct answers - Difficult to rely on self-interested business
people to act on others' behalf (including shareholders'); market mechanisms are required to rein
them in
- Shareholder value proponents think that corporate responsibility lies in devising effective
corporate governance mechanisms to protect the long-term interests of shareholders
Corporate Social Responsibility correct answers "Commitment to corporate actions beyond
maximizing profits within the law" /morality
"Instrumental" vs "Normative" CSR correct answers - Instrumental/Strategic: how corporations
should engage in CSR programs in order to maximize profits within legal and moral constraints
- Normative: how corporations should engage in CSR programs because it's the right or moral
thing to do, even at the expense of profits
Arguments against Normative CSR correct answers - Violates owners' property rights
Presumes that managers have better moral skills than shareholders
- Weakens management's accountability to shareholders
- Distracts management from its primary purpose
Impact of Normative CSR correct answers - Going concern: shareholders' expectations are
undermined, and owners of record at announcement pay for entire CSR redirection
, - Startup: investors purchase IPO shares with full knowledge of potential for lower market price
Stakeholder Theory correct answers - Stakeholders: "entities significantly affected by the firm's
activity, such as employees, customers, shareholders, the community or broader society, the
environment, and suppliers"
- "The debate is not whether management bears ethical responsibilities... it is about the reach and
scope of these responsibilities"
Ethical Justifications correct answers - Powerful corporations can help alleviate global
inequalities
- Stakeholder approach leads to greater liberty for the vulnerable
- Capitalism will only be efficient if the masses buy into it
- Shareholders don't do the real "work"
- Consider non-western values: economic actors should pursue what is sufficient
The Power Argument correct answers - A corporation's purpose is to "use its resources to
advance the interests of all those who are most affected by its corporate activities"
- "With greater power comes great responsibility"
- "The limited capacities of government and the power and influence of corporations require that
the corporations address these social problems"
A Key CSR Distinction correct answers - Repair externalities/ "do no harm," but not responsible
for general social problems
- Advance the common good, "whether or not it's directly related to their core business
Evidence of CSR Popularity correct answers - Socially responsible investing
- CSR-related shareholder proposals
- Nongovernmental organizations
- Benefit corporations: special legal status for for-profit businesses that include social
responsibility in their core mission
Types of Government Intervention correct answers - Limited intervention
- Significant intervention
Limited intervention correct answers - Top-down process: international organizations (ex: the
UN) specify norms endorsed by executives
- Bottom-up processes: "ethical norms are rewarded by the purchasing decisions of consumers
and investors"
Significant intervention correct answers - CSR as legal mandate (ex: codetermination laws)
Whistleblowing "Triggers" correct answers - Truth
- Employee or customer rights
- Trust
- Harm
- Your personal reputation
