Chapter 4 Stakeholders Society & Government Exam Prep

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

1. 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

1. 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

1. 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.

Difficulty: Moderate

Blooms: Remember

AACSB: N/A

1. 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

1. 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

1. 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

1. 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

Blooms: Remember

AACSB: Reflection

1. What level of government regulates intrastate air pollution?

A. local

B. federal

C. state

D. county

Difficulty: Easy

Blooms: Analyze

AACSB: Analytical

1. Results of a recent study indicate corporations benefit from following Corporate Social Responsibility (CSR) policies in multiple ways. These benefits can add value to a business and are collectively called a(n) ________.

A. “halo effect”

B. “revolving door” effect

C. economic benefit

D. legal duty

Difficulty: Moderate

Blooms: Understand

AACSB: Ethics

1. A “moral minimum” means which of the following?

A. promising to earn less profit per share

B. applying U.S. law regarding child labor globally

C. actions a firm undertakes to satisfy the base threshold for acting ethically

D. committing to having 50 percent of board seats held by women or minorities

Difficulty: Moderate

Blooms: Remember

AACSB: Ethics

1. The relationship between a trustee of an estate and its beneficiary or between a fund manager and client are examples of relationships that include what responsibility?

A. fiduciary duty

B. duty of public communication

C. external codes of conduct

D. common law conflict

Difficulty: Easy

Blooms: Evaluate

AACSB: Ethics

1. Which of the following statements regarding earth jurisprudence is not true?

A. Cormac Cullinan is a leading proponent of earth jurisprudence.

B. Earth jurisprudence is based on the belief that society is only sustainable if we recognize the legal rights of Earth as if it were a person.

C. U.S. jurisprudence has officially recognized the concept that Earth has legal rights.

D. Officially recognizing the legal status of the environment is necessary to preserve a healthy planet.

Difficulty: Difficult

Blooms: Evaluate

AACSB: Analytical

1. Cisco Systems, which ranks seventh on the Global 100 list, works to reduce the amount of carbon dioxide and other carbon compounds released by the consumption of fossil fuels. By doing this, the company is working on improving its ________.

A. sustainability

B. carbon footprint

C. energy efficiency

D. environmental responsibilities

Difficulty: Easy

Blooms: Remember

AACSB: Real-world

1. What standards were developed on a global level in the 1990s, updated in 2015, and cover everything from the eco-design of factories and buildings to environmental labels to limits on the release of greenhouse gasses?

A. ISO standards

B. LEED standards

C. EPA standards

D. UCS standards

Difficulty: Moderate

Blooms: Remember

AACSB: N/A

1. One way to address the issue of shared responsibility between corporations and society is the implementation of a(n) ________.

A. environmental change system

B. free enterprise system

C. cap and trade system

D. government regulation system

Difficulty: Difficult

Blooms: Analyze

AACSB: Analytical

1. Which of the following statements does not depict deontology?

A. Deontology offers a longer-term approach.

B. Deontology takes future generations into account.

C. Deontology is often regarded as a “here and now” philosophy.

D. Deontology is aligned with sustainability.

Difficulty: Difficult

Blooms: Analyze

AACSB: Analytical

1. What is a “pay-to-pollute” system that charges a fee or tax to those who discharge carbon into the air?

A. pollution tax

B. carbon tax

C. environmental tax

D. cap and trade tax

Difficulty: Moderate

Blooms: Evaluate

AACSB: Real-world

1. Which clause in the Constitution gives the federal government the right to regulate between states?

A. Small Government Clause

B. States’ Right Clause

C. Government Regulation Clause

D. Commerce Clause

Difficulty: Moderate

Blooms: Evaluate

AACSB: Analytical

1. Which levels of government should work with private-sector businesses to accomplish a fair and rational balance between their respective roles in maintaining a just society? (Select all that apply.)

A. local

B. state

C. federal

D. the United Nations

Difficulty: Easy

Blooms: Remember

AACSB: N/A

1. Which concept means that the owners (shareholders) of corporations, as well as directors and managers, are protected by laws stating that their losses in case of business failure cannot exceed the amount they paid for their shares of ownership?

A. limited liability

B. general partnership

C. limited partnership

D. sole proprietorship

Difficulty: Easy

Blooms: Remember

AACSB: N/A

1. Which of the following statements most accurately describes shareholder primacy?

A. a company’s duty to society

B. a company’s duty to maximize profits for stockholders

C. a company’s duty to attract capital

D. a company’s duty to attract investors

Difficulty: Moderate

Blooms: Evaluate

AACSB: Reflection

1. Which court decision rules that corporate and nonprofit business entities may seek to persuade the voting public by spending an unlimited amount of money on political advertisements?

A. U.S. jurisprudence

B. Sarbanes-Oxley

C. Citizens United

D. corporate personhood

Difficulty: Easy

Blooms: Remember

AACSB: Real-world

1. A tradeoff for a benefit, such as a business advantage, is called ________.

A. corporate status

B. amortization

C. quid pro quo

D. unlimited liability

Difficulty: Easy

Blooms: Remember

AACSB: N/A

1. Which of the following is not a stakeholder in a corporation?

A. customer

B. shareholder

C. employee

D. goodwill

Difficulty: Easy

Blooms: Understand

AACSB: Communication

1. Which of the following descriptions most accurately describes states’ rights?

A. protection against the loss of assets that are guaranteed by the corporation

B. a view that states should have more governing authority than does the federal government

C. Constitutional clause that gives the federal government the right to regulate commerce between states

D. a corporation has the same rights enjoyed by natural persons who are citizens of the same state

Difficulty: Moderate

Blooms: Apply

AACSB: N/A

True/False

1. True or false? The concept of limited liability means the owners of corporations are protected by laws stating that, in most circumstances, their losses in case of business failure cannot exceed the amount they paid for their shares of ownership.

Difficulty: Easy

Blooms: Remember

AACSB: N/A

1. True or false? In the case of Dodge v. Ford Motor Company, Henry Ford said he believed his company was sufficiently profitable to allow it to consider its social responsibility to engage in activities to benefit the public, including its workers and customers.

Difficulty: Moderate

Blooms: Analyze

AACSB: Analytical

1. True or false? Corporate shareholders, directors, and the company’s officers may all benefit from limited liability.

Difficulty: Moderate

Blooms: Remember

AACSB: N/A

1. True or false? The Shlensky v. Wrigley case represented a shift from the idea that corporations should pursue only the maximization of shareholder value.

Difficulty: Difficult

Blooms: Evaluate

AACSB: Real-world

1. True or false? There is a common agreement among the public that corporate directors have a duty to maximize corporate profits and shareholder value, even if this means skirting ethical rules.

Difficulty: Moderate

Blooms: Evaluate

AACSB: Ethics

1. True or false? Social responsibility does not have to mean being unprofitable.

Difficulty: Easy

Blooms: Remember

AACSB: N/A

1. True or false? Sustainability is a short-term approach to the interaction between business activity, environmental responsibility, and societal impact on the environment and other stakeholders.

Difficulty: Difficult

Blooms: Evaluate

AACSB: Reflection

1. True or false? The “revolving door” effect occurs when the relationship between business and government becomes too close, as when executives from the private sector leave their jobs to work for government agencies, becoming the regulators rather than the regulated, and then return to industry.

Difficulty: Moderate

Blooms: Understand

AACSB: Real-world

1. True or false? In Citizens United v. Federal Election Commission, the Supreme Court ruled 5 to 4 in favor of public corporations using public funds for political advertising.

Difficulty: Moderate

Blooms: Understand

AACSB: Real-world

Short Answer

1. Explain the basic governance structure of a corporation (i.e., the interrelationship of shareholders, officers, and directors).

Difficulty: Easy

Blooms: Apply

AACSB: Application

1. Explain the doctrine known as the business judgment rule.

Difficulty: Moderate

Blooms: Analyze

AACSB: Analytical

1. What is the theoretical basis of the earth jurisprudence doctrine? Explain.

Difficulty: Moderate

Blooms: Understand

AACSB: Ethics, Analytical

1. What is the tragedy of the commons, and how does it apply to the environment? Provide an example.

Difficulty: Difficult

Blooms: Evaluate

AACSB: Ethics, Reflection

1. Using the example of Cisco Systems discussed in the text, discuss how sustainability may become part of a company’s supply-chain management process.

Difficulty: Moderate

Blooms: Evaluate

AACSB: Real-world

1. Describe how the Dell Computers program addresses important environmental issues, such as greenhouse gasses.

Difficulty: Moderate

Blooms: Analyze

AACSB: Real-world

1. What is the significance of ISO 14000? Which nations have the most companies that voluntarily comply with the ISO 14000 series?

Difficulty: Moderate

Blooms: Understand

AACSB: Reflection

1. Do businesses have a duty to help achieve public goals, such as helping cities and states pay for repairs to infrastructure (e.g., roads) that is placed under heavy stress from overuse by oil and gas companies? Use the oil industry as an example.

Difficulty: Difficult

Blooms: Evaluate

AACSB: Reflection, Real-world

1. What is a carbon tax, what environmental issue does it address, and are energy companies for or against it?

Difficulty: Moderate

Blooms: Remember

AACSB: Analytical

1. Give an example from the food or cosmetics industry of social responsibility in relation to products sold.

Difficulty: Moderate

Blooms: Remember

AACSB: Real-world

1. Discuss the issue of states’ rights as a constitutional principle related to government regulation.

Difficulty: Difficult

Blooms: Evaluate

AACSB: Analytical, Reflection

1. Do you agree or disagree with the influence of big money in politics? Should a business be able to help a political candidate get elected?

Difficulty: Moderate

Blooms: Evaluate

AACSB: Real-world

1. Discuss the significance of the Burwell v. Hobby Lobby case with regard to the issue of whether business owners who object to compliance with a federal program can opt out of it.

Difficulty: Moderate

Blooms: Evaluate

AACSB: Real-world

1. What is the halo effect? Evaluate its acceptance by experts.

Difficulty: Moderate

Blooms: Evaluate

AACSB: Reflection

1. If a company follows a policy of corporate social responsibility, does that help or hurt its ability to raise capital by selling stock to the investing public?

Difficulty: Moderate

Blooms: Remember

AACSB: Analytical

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