Business & Society, 16e (Lawrence)
Chapter 1 The Corporation and Its Stakeholders
1) Amazon has been called “Earth’s biggest store.”
2) A business is any organization that is engaged in making a product or providing a service for a
profit.
3) Businesses and society are independent of one another.
4) The stakeholder theory of the firm argues that a firm’s sole purpose is to create value for its
shareholders.
5) The instrumental argument for the stakeholder theory of the firm says that companies perform
better if they consider the rights and concerns of multiple groups in society.
6) The normative argument for the stakeholder theory of the firm says that the stakeholder view is
simply a more realistic description of how companies really work.
7) Nonmarket stakeholders are those that engage in economic transactions with the company as it
carries out its primary purpose of providing society with goods and services.
8) Market stakeholders include nongovernmental organizations and business support groups.
9) Government can be considered both a market and nonmarket stakeholder.
10) The interests of different stakeholders often coincide.
11) Stakeholders involved with one part of a company may have little or no involvement with
another part of the company.
12) Some scholars have suggested that managers pay the most attention to stakeholders possessing
the least salience.
13) Urgency refers to the extent to which a stakeholder’s actions are seen as proper or appropriate
by the broader society.
14) A corporation’s investor relations department interacts mainly with shareholders.
15) The external environment of business is static.
16) Which statement is not correct about the business-society interdependence?
A) Business is a part of society.
B) Business is separated from the rest of society by clear boundaries.
C) Business activities impact other activities in society.
D) Actions by governments rarely affect business.
17) According to general systems theory, boundary exchanges are exemplified by which of the
following?
A) An industrial company installs new equipment in its plant to comply with environmental
regulations.
B) A software company develops an application for a client.
C) A purchasing department employee negotiates a price on parts with a supplier.
D) All of these answers are correct.
18) Which of the following is the result of the inseparable relationship between business and
society?
A) All business decisions have a social impact.
B) The vitality of business depends on society’s actions and attitudes.
C) The survival of business is independent of society.
D) Both of these answers are correct: All business decisions have a social impact and the vitality of
business depends on society’s actions and attitudes.
19) Which of the following statements is not true about the interactive social system?
A) Business and society need, as well as influence, each other.
B) The boundary between business and society is clear and distinct.
C) Business is a part of society, and society penetrates far and often into the business.
D) Business and society are both separate and connected.
20) A firm subscribing to the shareholder theory of the firm would mainly be concerned with
providing value for its:
A) Investors.
B) Customers.
C) Board of Directors.
D) Community.
21) Corporations that run their operations according to the stakeholder theory of the firm create
value by:
A) Innovating new products.
B) Increasing their stock price.
C) Developing their employees’ professional skills.
D) All of these answers are correct.
22) Which argument says that stakeholder management realistically depicts how companies really
work?
A) Descriptive argument.
B) Instrumental argument.
C) Normative argument.
D) Fiduciary argument.
23) The instrumental argument says stakeholder management is:
A) A more realistic description of how companies really work.
B) More effective as a corporate strategy.
C) Simply the right thing to do.
D) Determined by the amount of stock owned in the firm.
24) The fiduciary duty of managers benefits a firm’s:
A) Shareholders.
B) Customers.
C) Employees.
D) All of these answers are correct.
25) The main reason a number of European countries require public companies to include
employee members on their boards of directors is so that:
A) The employees will be available to answer other board members’ questions.
B) Management will not have to attend the meetings.
C) Employees’ interests will be explicitly represented.
D) Employees will have more power than any other stakeholder.
26) Stakeholder groups can include:
A) Shareholders.
B) Business support groups.
C) Environmental activists.
D) All of these answers are correct.
27) Which one of the following is considered to be a nonmarket stakeholder of business?
A) Customers.
B) Nongovernmental organizations.
C) Creditors.
D) Shareholders.
28) A market stakeholder is exemplified by which of the following?
A) Government agencies.
B) Creditors.
C) Activist groups.
D) Nongovernmental organizations.
29) All of the following are external stakeholders of the firm except:
A) Managers.
B) Customers.
C) Shareholders.
D) Suppliers.
30) The phenomenon of a person or group holding multiple stakeholder duties is referred to as:
A) Role sets.
B) Primary stakeholder(s).
C) Shareholder theory.
D) None of these answers is correct.
31) A stakeholder analysis:
A) Creates equality among all stakeholder interests.
B) Allows managers to examine two primary questions.
C) Involves understanding the nature of stakeholder interests.
D) All of these answers are correct.
32) The five types of stakeholders’ power recognized by most experts are:
A) Voting, economic, political, legal, and informational power.
B) Social, legal, environmental, economic, and political power.
C) Social, regulatory, voting, governance, and information power.
D) Economic, informational, legal, shareholder, and political power.
33) Which of the following statements is (are) correct about stakeholders’ power?
A) Different stakeholders have different types and degrees of power.
B) Shareholders’ voting power is limited to the percentage of share owned by the shareholder.
C) It uses resources to achieve a desired decision or outcome.
D) All of these answers are correct.
34) Customers can exercise economic stakeholder power by:
A) Voting on a proposed merger for the company and a competitor.
B) Boycotting products if they believe the goods are too expensive.
C) Attending the company’s annual meeting.
D) Applying for a job with the company.
35) Which of the following is not an example of stakeholders’ economic power?
A) A supplier halts shipments to a business customer that demanded very low prices.
B) A social group protests a government’s decision to raise taxes.
C) A local community boycotts a grocery store suspected of inaccurate weight scales.
D) An equal rights group refuses to do business with a company that has a discriminatory hiring
policy.
36) When a community group sues a company for health effects caused by the unsafe disposal of
toxic chemicals, this is an exercise of a stakeholder’s:
A) Legal power.
B) Voting power.
C) Economic power.
D) Political power.
37) What stakeholder group(s) can exercise legal power?
A) Employees.
B) Customers.
C) Shareholders.
D) All of these answers are correct.
38) What kind of power might a local community use to influence a company’s decisions?
A) Publicizing an issue.
B) Lobbying government policy makers for regulations.
C) Challenging whether a specific business activity should continue.
D) All of these answers are correct.
39) With the explosive growth of technologies that facilitate the sharing of information, this kind
of stakeholder power has become increasingly important:
A) Economic power.
B) Political power.
C) Informational power.
D) Legal power.
40) Stakeholders have been able to form international coalitions more successfully through use of:
A) Government regulation.
B) Community involvement.
C) Communications technology.
D) Unions.
41) When something stands out from a background, is seen as important, or draws attention it is:
A) Urgent.
B) Salient.
C) Powerful.
D) Legitimate.
42) Stakeholders stand out to managers when they exhibit:
A) Integrity, power, and legitimacy.
B) Power, legitimacy, and urgency.
C) Integrity, loyalty, and power.
D) Legitimacy, loyalty, and urgency.
43) A stakeholder map is a useful tool because:
A) It enables managers to quickly see how stakeholders feel about an issue.
B) It allows managers to evaluate what outcomes are likely regarding an issue.
C) It helps managers discourage or dissolve stakeholder coalitions.
D) Both of these answers are correct: It enables managers to quickly see how stakeholders feel
about an issue, and it allows managers to evaluate what outcomes are likely regarding an issue.
44) Departments, or offices, within an organization that reach across the dividing line that
separates the company from groups and people in society are:
A) Inter-departmental divisions.
B) Geographical location areas.
C) Boundary-spanning departments.
D) Organizational maps.
45) Interactions between business and society occur:
A) Within a finite natural ecosystem.
B) Only during an environmental crisis.
C) When business employees and the community are of similar cultural backgrounds.
D) When legislation is passed requiring interaction.
46) In the case Insuring Uber’s App-On Gap, which type of power do Uber customers have?
A) Economic and informational.
B) Legal and economic.
C) Political only.
D) Voting and legal.
47) In the case Insuring Uber’s App-On Gap, which stakeholders supported ending the App-On
Gap?
A) Competitors, taxi companies, Internet-based firms.
B) Taxi companies, high-tech trade associations, government.
C) Uber customers, competitors, government.
D) Uber customers, Uber drivers, consumer lawyers.
48) Describe how general systems theory can be applied to a business.
49) Supporters of the stakeholder theory of the firm make three core arguments for their position.
Define and provide examples of each.
Answer: Answers may vary.
50) Compare and contrast the relationships a firm may have with market and nonmarket
stakeholders.
Answer: Answers may vary.
51) Discuss why a manager should, or should not, be considered a stakeholder.
Answer: Answers may vary.
52) Explain the process called stakeholder analysis. Include a description of its four key questions.
53) What is a stakeholder map? Why is it a useful tool?
54) Which of the boundary-spanning departments shown in Figure 1.5 is most likely to interact
with internal as well as external stakeholders, and why do you think so?
55) Describe and give examples of the external forces that shape the relationship between business
and society.