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Chapter 5 - Corporations
1. Corporations are limited-liability companies which means that
a.
corporate shareholders are liable for corporate debts only up to the extent of their investments.
b.
corporations must be "publicly held" and thus traded on the stock market.
c.
corporations are always for-profit but that profit can be limited but often is not in reality.
d.
corporate shareholders are immediately entitled to any profits or the company is liable.
2. Corporations differ from partnerships and other forms of business association in two ways. One of these is that
a.
they are regulated by the Federal Trade Commission.
b.
they are formed simply by an agreement entered into among their members.
c.
they must be publicly registered or in some way officially acknowledged by the law.
d.
their shareholders are entitled to their share of the company's profits as soon as they are ascertained or
determined.
3. The first corporations
a.
were towns, universities, and ecclesiastic orders.
b.
emerged in the 19th century.
c.
were government owned.
d.
were profit-making associations.
4. Which of the following contributed to the more relaxed incorporation procedures of modern times?
a.
The idea that incorporation is a by-product of the people's right to associate, not a gift from the state.
b.
The move from mercantilist thinking to a belief in Benjamin Franklin's invisible hand.
c.
The idea that incorporation is a gift from the state.
d.
The thought that laissez-faire is a losing proposition..
5. In Citizens United v. Federal Election Commission, the U.S. Supreme Court ruling included
a.
support for corporations' First Amendment right to participate in the political process
b.
prohibiting business corporations from spending corporate funds to publicize political views that do not
materially affect their business.
c.
that banking procedures are to be regulated by the Securities and Exchange Commission.
d.
that states should be permitted to distinguish between the rights of individuals and the rights of corporations.
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Chapter 5 - Corporations
6. A common point of contention about corporations is
a.
corporate punishment is no different from individual punishment.
b.
modern corporations no longer utilize a CID structure.
c.
philosophers and business theorists disagree whether corporations are moral agents.
d.
if corporations are moral agents, then this relieves individual human beings of any moral responsibility.
7. Milton Friedman argues that
a.
corporations today should adopt a broader view of their social responsibilities than they have in the past.
b.
corporate officials have a social responsibility that goes beyond serving the interests of their stockholders.
c.
strict governmental controls are necessary if society is to maximize its overall economic well-being.
d.
a business has no social responsibilities other than to maximize profits.
8. Which of the following do proponents of the broader view of corporate social responsibility believe?
a.
Corporations should not internalize their externalities.
b.
Moral responsibility arises from social power.
c.
Businesses have other obligations besides making a profit.
d.
The modern corporation is not a social institution.
9. The narrow view of corporate social responsibility argues companies must make money within the "rules of the game"
which rules out all of the following except for:
a.
deception.
b.
harm.
c.
force.
d.
fraud.
10. Which of the following is one of the three arguments in favor of narrow corporate social responsibility discussed in
this chapter?
a.
business-can-handle-it
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Chapter 5 - Corporations
b.
let-government-do-it
c.
society-lacks-the-expertise
d.
visible-hand
11. One of the three important "limits to what the law can do" discussed by Christopher Stone is
a.
laws are passed before there is any real problem to worry about.
b.
consumers don't want further legal regulation.
c.
designing effective regulations is difficult.
d.
regulators are often "bought off" by corporations.
12. Kenneth Arrow discussed two important situations in which profit maximization can be socially inefficient. One of
these occurs when
a.
there is an imbalance of knowledge between buyer and seller.
b.
business would be an "inept custodian" of public values.
c.
firms are unwilling or simply refuse to maximize profits.
d.
corporate culture promotes dysfunctional social relations.
13. Externalities are
a.
always positive, never negative.
b.
a blessing in disguise in inflationary times.
c.
an inevitable by-product of social responsibility.
d.
unintended side-effects.
14. Kenneth Arrow argues that
a.
settled economic life requires purely selfish behavior.
b.
with ethical codes, there's no need for taxes, laws, or regulations as a way of controlling corporate behavior.
c.
ethical codes can contribute to economic efficiency.
d.
to be viable, ethical codes need not be widely accepted or part of corporate culture.
15. The best statement to describe corporations is
a.
corporations don't need moral codes.
b.
corporate culture refers to the cultural activities sponsored by the company for its employees.
c.
Johnson & Johnson's handling of the Tylenol crisis of 1982 was a gross failure of corporate responsibility.
d.
corporate culture can be both explicit and implicit.
16. Momentum for the corporate organization of business really gained momentum after which war?
a.
Revolutionary War
b.
French and Indian War
c.
Civil War
d.
World War I
17. The debate over corporate moral agency hinges on which question?
a.
Corporate decision
b.
Corporate punishment
c.
Individual responsibility
d.
Corporate fit
18. The courts and the general public find corporate responsibility
a.
useful and intelligible.
b.
contradicting.
c.
ambiguous and useless.
d.
a waste of time.
19. The “rules of the game” for corporate work are intended to
a.
let the games begin.
b.
promote open and free competition.
c.
destroy the competition.
d.
make business fun.
20. Milton Friedman’s perspective is that the only responsibility of a business is to
a.
provide social benefit for the messes.
b.
give jobs to the hard workers.
c.
pay taxes to keep the government operating.
d.
make money for its owners.
21. Those with a broader view concerning business obligations believe that with power comes
a.
more power.
b.
more money.
c.
too many limits .
d.
social responsibility.
22. Melvin Anshen suggests that there is an relationship between business and society which he termed as
a.
“share the wealth”.
b.
“the rich get richer and the poor get poorer”.
c.
“social contract”.
d.
“one for all and all for one”.
23. Most Americans believe a corporation’s top obligation is to its
a.
nation.
b.
stockholders.
c.
community.
d.
employees.
24. In the corporate world, the board of directors will
a.
rubber stamp the policies and recommendations of the management.
b.
write the policies and procedures.
c.
be there just for show.
d.
hire and fire people for key management positions.
25. Adam Smith proposed that in our pursuit of economic interests we are led by
a.
our gut instincts.
b.
an invisible hand to promote general good.
c.
the trends of the economy.
d.
the moral compass within each of us.
26. Most business observers agree with Berle and Means that, because stock ownership in large corporations is so
dispersed, actual control of the corporation has passed to management.
a.
True
b.
False
27. Recent studies have shown that neither corporate moral codes nor corporate culture affect whether individuals inside
the corporation behave morally or immorally.
a.
True
b.
False
28. Corporate internal decision (CID) structures amount to established procedures for accomplishing specific goals.
a.
True
b.
False
29. "Limited liability" means that members of a corporation are financially liable for corporate debts only up to the extent
of their investments.
a.
True
b.
False
30. The invisible-hand argument against broadening corporate responsibility says that business's appetite for profit should
be controlled by the hand of the government.
a.
True
b.
False
31. Most business observers agree with Berle and Means that, because stock ownership in large corporations is so
dispersed, actual control of the corporation has passed to management.
a.
True
b.
False
32. Externalities are the unintended negative (or in some cases positive) consequences that an economic transaction
between two parties can have on some third party.
a.
True
b.
False
33. The business-can't-handle-it argument is an argument in favor of a broad view of corporate responsibility.
a.
True
b.
False
34. Legally a corporation is a thing that can endure beyond the natural lives of its members and that has incorporators who
may sue and be sued as a unit and who are able to consign part of their property to the corporation for ventures of limited
liability.
a.
True
b.
False
35. The case of First National Bank of Boston v. Bellotti sharpened the legal distinction between corporations and
individuals.
a.
True
b.
False
36. Manuel Velasquez claims that the corporate internal decision structure of a corporation shows that a corporation can
have both intentions and intentionality.
a.
True
b.
False
37. According to Milton Friedman, business has no social responsibilities other than to maximize profits.
a.
True
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Chapter 5 - Corporations
b.
False
38. Adherents of the broad view of corporate responsibility claim that modern business is intimately integrated with the
rest of society and that, as a result, although society expects business to pursue its economic interests, business has other
responsibilities as well.
a.
True
b.
False
39. According to Melvin Anshen, the case for a broad view of corporate responsibility can be defended on the basis of
there always being a kind of social contract existing between business and society.
a.
True
b.
False
40. Externalities are the intended negative (or in some cases positive) consequences that two parties purposefully impose
on an external third party.
a.
True
b.
False
41. According to Keith Davis, in addition to considering potential profitability, a business must weigh the long-range
social costs of its activities as well. Only if the overall benefit to society is positive should business act.
a.
True
b.
False
42. According to law professor Christopher D. Stone, the relationship between corporate management and its shareholders
is identical with the relationship between you and an investment advisor.
a.
True
b.
False
43. According to John Kenneth Galbraith, business's social role is purely economic and corporations should not be
considered moral agents.
a.
True
b.
False
44. The idea that corporations will impose their values on us supports one of the arguments for the narrow view of
corporate social responsibility.
a.
True
b.
False
45. In his essay "Social Responsibility and Economic Efficiency," Kenneth Arrow has argued that ethical behavior in the
business world comes only at the expense of economic efficiency.
a.
True
b.
False
46. What society finds to be useful and desirable is always brings profitability to companies.
a.
True
b.
False
47. It is not logical for corporations to acknowledge that business should be conducted morally.
a.
True
b.
False
48. Corporations should welcome the outside opinions of society as a whole, local communities, customers, suppliers,
employees, managers, and stockholders.
a.
True
b.
False
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Chapter 5 - Corporations
49. According to Kenneth Arrow, trust and confidence are highly overrated in business.
a.
True
b.
False
50. Companies should look at a code of ethics as more than just window dressing with more than just a vagueness that is
so general it lacks substance.
a.
True
b.
False
51. What is a corporation (or limited-liability company) and how does it differ from partnerships and other forms of
business association? What are the different kinds of corporations?
52. Briefly sketch the evolution of corporations.
53. What is the problem of "vanishing individual responsibility"?
54. Briefly explain Milton Friedman's view of social responsibility.
55. Explain the relevance of the concept of a promissory relationship to the debate over corporate social responsibility.
56. Describe the ethical challenges that Yahoo faces in the China market.
57. Is Levi Strauss really hurting the people of Costa Rica by opening the operation there? List the pros and cons.
58. Does a company like Levi Strauss have an obligation to keep an plant open in the United States if it can be more
profitable going to a foreign country? Share your reasoning.
If you were the owner of a company, would your perspective be any different?
