OpenStax Business Ethics Test Bank
Chapter 4: Three Special Stakeholders: Society, the Environment, and Government
Chapter 4: Three Special Stakeholders: Society, the Environment, and Government
* = Correct answer
Multiple Choice/Fill in the Blank
1. Corporate law enables businesses to take advantage of a legal structure that ________.
A. shields owners from publicity
B. gives the corporate entity protection from all liability
C. separates liability from ownership and control*
D. means the corporation is only liable in the state where its headquarters is located
Difficulty: Moderate
Blooms: Remember
AACSB: N/A
2. In the case of Dodge v. Ford Motor Company, the Michigan Supreme Court ruled in favor of
shareholder primacy. What was the decision?
A. Henry Ford must operate Ford Motor Company primarily to maximize profit for its
shareholders.*
B. Henry Ford must operate Ford Motor Company primarily for the benefit of creditors.
C. Henry Ford must operate Ford Motor Company primarily for the benefit of its workers.
D. Henry Ford must operate Ford Motor Company primarily to maximize profit for the directors.
Difficulty: Moderate
Blooms: Analyze
AACSB: Application
3. A common law or principle stating that officers, directors, and managers of a corporation are
not liable for losses incurred when the evidence demonstrates that decisions were reasonable
and made in good faith is known as ________.
A. corporate social responsibility
B. business judgment rule*
C. corporate personhood
D. sustainability
Difficulty: Moderate
Blooms: Evaluate
AACSB: Application
4. Which of the following did Nobel Prize–winning economist Milton Friedman believe?
A. It is the job of corporations to do “good deeds.”
B. Business executives should be able to decide what social initiatives shareholders should
donate to or take part in.
C. CSR initiatives based on environmental or social justice do not limit shareholder wealth.
D. Shareholders should be able to decide what social initiatives to donate to or take part in.*
Page 1 of 13
, OpenStax Business Ethics Test Bank
Chapter 4: Three Special Stakeholders: Society, the Environment, and Government
Difficulty: Moderate
Blooms: Remember
AACSB: N/A
5. How is the concept of corporate personhood defined?
A. an enumerated power listed in the Constitution in the Bill of Rights
B. the doctrine that a corporation has some of the same legal rights and responsibilities enjoyed
by natural persons*
C. a business owner’s protection against loss of personal assets
D. a company’s duty to maximize profits for stockholders as specified in federal law
Difficulty: Moderate
Blooms: Analyze
AACSB: Analytical
6. Which legislation was passed in 2002 that mandates reporting transparency by businesses in
areas ranging from finance to accounting to supply chain activities?
A. Sarbanes-Oxley Act*
B. Commerce Clause
C. Citizens United
D. Fair Labor Standards Act
Difficulty: Easy
Blooms: Remember
AACSB: N/A
7. In the Supreme Court ruling Citizens United v. Federal Election Commission, which
Amendment was at the center of the case?
A. First Amendment*
B. Fourteenth Amendment
C. Tenth Amendment
D. Fourth Amendment
Difficulty: Moderate
Blooms: Remember
AACSB: N/A
8. Which of the following theories was popularized by philosopher Garrett Hardin, who tied it
directly to environmental issues?
A. normative approach
B. virtue theory
C. stakeholder theory
D. tragedy of the commons*
Difficulty: Moderate
Page 2 of 13
Chapter 4: Three Special Stakeholders: Society, the Environment, and Government
Chapter 4: Three Special Stakeholders: Society, the Environment, and Government
* = Correct answer
Multiple Choice/Fill in the Blank
1. Corporate law enables businesses to take advantage of a legal structure that ________.
A. shields owners from publicity
B. gives the corporate entity protection from all liability
C. separates liability from ownership and control*
D. means the corporation is only liable in the state where its headquarters is located
Difficulty: Moderate
Blooms: Remember
AACSB: N/A
2. In the case of Dodge v. Ford Motor Company, the Michigan Supreme Court ruled in favor of
shareholder primacy. What was the decision?
A. Henry Ford must operate Ford Motor Company primarily to maximize profit for its
shareholders.*
B. Henry Ford must operate Ford Motor Company primarily for the benefit of creditors.
C. Henry Ford must operate Ford Motor Company primarily for the benefit of its workers.
D. Henry Ford must operate Ford Motor Company primarily to maximize profit for the directors.
Difficulty: Moderate
Blooms: Analyze
AACSB: Application
3. A common law or principle stating that officers, directors, and managers of a corporation are
not liable for losses incurred when the evidence demonstrates that decisions were reasonable
and made in good faith is known as ________.
A. corporate social responsibility
B. business judgment rule*
C. corporate personhood
D. sustainability
Difficulty: Moderate
Blooms: Evaluate
AACSB: Application
4. Which of the following did Nobel Prize–winning economist Milton Friedman believe?
A. It is the job of corporations to do “good deeds.”
B. Business executives should be able to decide what social initiatives shareholders should
donate to or take part in.
C. CSR initiatives based on environmental or social justice do not limit shareholder wealth.
D. Shareholders should be able to decide what social initiatives to donate to or take part in.*
Page 1 of 13
, OpenStax Business Ethics Test Bank
Chapter 4: Three Special Stakeholders: Society, the Environment, and Government
Difficulty: Moderate
Blooms: Remember
AACSB: N/A
5. How is the concept of corporate personhood defined?
A. an enumerated power listed in the Constitution in the Bill of Rights
B. the doctrine that a corporation has some of the same legal rights and responsibilities enjoyed
by natural persons*
C. a business owner’s protection against loss of personal assets
D. a company’s duty to maximize profits for stockholders as specified in federal law
Difficulty: Moderate
Blooms: Analyze
AACSB: Analytical
6. Which legislation was passed in 2002 that mandates reporting transparency by businesses in
areas ranging from finance to accounting to supply chain activities?
A. Sarbanes-Oxley Act*
B. Commerce Clause
C. Citizens United
D. Fair Labor Standards Act
Difficulty: Easy
Blooms: Remember
AACSB: N/A
7. In the Supreme Court ruling Citizens United v. Federal Election Commission, which
Amendment was at the center of the case?
A. First Amendment*
B. Fourteenth Amendment
C. Tenth Amendment
D. Fourth Amendment
Difficulty: Moderate
Blooms: Remember
AACSB: N/A
8. Which of the following theories was popularized by philosopher Garrett Hardin, who tied it
directly to environmental issues?
A. normative approach
B. virtue theory
C. stakeholder theory
D. tragedy of the commons*
Difficulty: Moderate
Page 2 of 13
