Q&A Hero

Q: To generate a measurement of the costs of regulation, economists generally classify regulations as a. safety-related or environment-related. b. ethical or legal. c. standardized or industry-specific. d. state or national. e. economic or social.

Q: Administrative spending for federal regulatory agencies, which is used as a measurement of regulatory costs, has a. decreased in recent years as more of the burden of regulation is shifted to the state agencies. b. increased in recent years because states have been ineffective with their regulations and the burden has shifted to federal agencies. c. decreased because companies have been much more responsible at self-regulation, and less federal spending is needed. d. increased steadily over the years as the world of business has continued to grow and become more complex. e. remained relatively steady throughout the past couple of decades.

Q: To prevent the problems that led to the 2008-2009 financial crisis from leading to future financial crises, the Obama administration proposes legislation that would include all of the following except a. removing some of the Federal Trace Commission's powers and creating a Consumer Financial Protection Agency b. giving the Federal Reserve less power over the financial industry c. creating a Financial Services Oversight Council to identify and address key risks to the financial industry d. establishing a new National Bank Supervisor to oversee federally chartered lenders e. new powers for the Securities and Exchange Commission to monitor credit rating industries for objectivity

Q: When the maker of Doan's pills made unproven claims that its product is more effective than other pain relievers at alleviating back pain, it engaged in a. mergers and acquisitions. b. price discrimination. c. tying agreements. d. exclusive agreements. e. an unfair method of competition.

Q: Which of the following is not a method that the Federal Trade Commission (FTC) uses to influence business activities? a. The FTC can issue a formal complaint stating that a firm is in violation of the law. b. The FTC can issue a cease-and-desist order that requires a company to stop engaging in a specified illegal behavior. c. The FTC can file criminal charges against companies that break antitrust laws. d. The FTC can seek civil penalties against an offending company. e. The FTC helps to resolve complaints and issues rulings on areas of emerging concern in business.

Q: What provisions did the Clayton Act include to clarify and expand upon the Sherman Antitrust Act? a. It created an organization to protect consumers and businesses from unfair competition. b. It limited mergers and acquisitions that have the potential to stifle competition. c. It provided specific exemptions to utility and other similar industries, which tend to have natural monopolies due to the exorbitant costs involved with starting up. d. The Clayton Act actually made most of the provisions of the Sherman Antitrust Act null and void rather than expanding on the earlier legislation. e. It specified that one person could be a member of only three boards of directors within the same industry.

Q: Which act is the principal tool employed by the federal government to prevent businesses from restraining trade and monopolizing markets? a. Sherman Antitrust Act b. Clayton Antitrust Act c. Federal Trade Commission Act d. Anti-Monopoly Act e. Roosevelt Antitrust Act

Q: Which industry did Ralph Nader's 1965 book criticize for ignoring consumers' interests in pursuit of increased profits? a. Pharmaceuticals b. Defense c. Food d. Automobile e. Toy

Q: Environmental regulations for social reasons have been necessary because of which of the following? a. Most companies eagerly pay for the costs involved with protecting their environment because they realize their future is closely linked with the future of the environment. b. Consumers have willingly footed the bill for the costs of protecting the environment through paying higher prices for products and services. c. Companies have felt pressured to "voluntarily" pay for environmental protection acts because they are afraid of the impact on their businesses if they are not viewed as environmentally responsible organizations. d. Social reasons have led to regulations such as environmental protection and preservation because, although most companies voluntarily take on these responsibilities, a few companies have shirked their share of the responsibility. e. Social reasons have led to regulations such as environmental protection since most companies are unwilling to pay for these costs voluntarily.

Q: Which of the following is least likely to be considered destructive or unfair competition? a. Collaborating with a competitor to establish prices so that each firm can ensure a certain level of profit b. Obtaining information through ethical competitive intelligence practices c. Using a "bait and switch" method for selling products to customers d. Lowering prices significantly in an effort to drive competitors out of a market, and then raising prices afterwards e. Stealing competitors' trade secrets

Q: When just one business provides a good or service in a particular market, what results? a. Monopoly b. Lower prices due to that company's efficiency c. Oligopoly d. Trust e. Deregulation

Q: Because no government system is perfect, a. legal and regulatory systems are constantly evolving and changing in response to social institutions, including business. b. the "invisible hand of competition" has replaced many business and economic regulations. c. companies do not have to worry about meeting every law and regulation, since they are likely to change. d. self-regulatory mechanisms have created less of a need for government oversight. e. the costs of business regulation have decreased.

Q: In the United States, the major role that society delegates to government is to a. keep prices of products low so that all consumers can purchase convenience and luxury goods. b. create more jobs. c. encourage larger companies to conduct business in many other countries. d. provide laws based on the Constitution and Bill of Rights and enforce those laws through the judicial system. e. encourage competition by providing economic support to smaller companies in order to be competitive with powerful companies.

Q: What are the arguments for and against high levels of executive compensation?

Q: Describe how the return on corporate governance goes beyond enhanced organizational performance to include the competitiveness of nations.

Q: What criteria do investors use for selecting companies to include in a social investment strategy?

Q: What are some of the characteristics of the best boards of directors?

Q: What caused the 2008-2009 financial crisis and what has the response to it meant for corporate governance?

Q: Describe the fiduciary responsibilities of members of a board of directors.

Q: List and describe five common issues related to corporate governance.

Q: How has the need for corporate governance around the world been affected by increased globalization in business?

Q: Under the social responsibility philosophy, which of the following best describes what the government's role in corporate governance should be? a. Governments should dictate how businesses run their corporate governance systems to ensure equality and fair competition. b. Governments need to be actively engaged in affording both protection and accountability for corporate power and decisions. c. Governments should take a hands-off approach to regulating corporate governance and let the corporations take care of it. d. Governments should wait until after a crisis, such as the Asian economic crisis, before intervening with corporate governance procedures. e. Governments have influence on neither corporate governance nor the overall success of corporations on a global level.

Q: Which of the following statements best describes the current trends in corporate governance? a. Most companies are already using a shareholder orientation with formal governance. b. Businesses are moving towards a stakeholder orientation with looser corporate governance. c. Forces are driving businesses toward the stakeholder orientation and more formal governance. d. Companies are turning to a shareholder orientation with a more informal corporate governance system. e. Businesses are gravitating toward the stakeholder orientation because the costs involved are decreasing.

Q: What is the purpose of the Organisation for Economic Co-operation and Development's (OECD) Corporate Governance Principles? a. To override individual countries' practices and implement identical policies throughout the forum's members b. To formulate minimum standards of fairness, accountability, transparency, and responsibility in business practice c. To place most of the responsibility for corporate governance on the company's managers d. To outline an optimal system of corporate governance techniques that every developed country should strive to duplicate e. To ensure the members of boards of directors are carefully selected to protect the interests of all stakeholders

Q: How can a company align the interests of owners with managers through executive compensation? a. By significantly reducing executive pay across the board b. By linking compensation to company performance and achievement of goals c. By setting executive compensation at a level equal to the industry average d. By capping executive compensation at ten times that of the lowest paid employee e. By basing salaries on seniority with the company in order to increase longevity

Q: In 2007 and 2008, what happened for only the second time in U.S. history? a. Executive compensation became a controversial topic. b. CEOs were required to disclose their salary histories. c. CEOs were paid only five times more than average workers. d. Legislation that set rules for executive compensation passed. e. Overall, CEOs took paycuts for two years in a row.

Q: Perhaps the strongest argument against high levels of compensation for CEOs is a. the discrepancy between the highest paid executives and the median employee wages. b. that the job is relatively simple because most duties are delegated to other managers. c. that the CEO has very little effect on the company's performance. d. the high turnover of executives throughout most large corporations. e. that the CEO is usually just a figurehead, and the board of directors makes the decisions.

Q: Which of the following does not describe how risk plays a role in organizations? a. Minimizing negative situations, such as injury and fraud b. Managing privacy issues related to new technology c. Ensuring that no executive is paid more than 100 times the average employee d. Creating opportunity for innovation e. Dealing with uncertainty through quantitative models

Q: Which of the following internal control mechanisms would be the most difficult for a small company to implement? a. Limiting access to valuable inventory to as few employees as possible b. Screening potential employees before hiring c. Requiring all employees to take one week of vacation per year d. Developing a code of conduct addressing ethical and legal issues e. Having several employees involved with each transaction, decision, or organizational issue

Q: Which of the following is least likely to be a use of internal controls in an organization? a. Ensuring compliance with laws b. Safeguarding corporate assets and resources c. Measuring the effects of advertising on sales d. Allowing comparisons between actual and planned performance e. Protecting the reliability of organizational information

Q: When fundamental expectations about social responsibility are not met by publicly-traded companies, a. the government is most likely to pursue a self-regulatory approach with these firms. b. there is no effect on investors, customers, employees and business partners. c. there is little that any stakeholder can do to remedy the situation. d. stock markets perform better. e. the confidence that investors have in corporations, mutual fund managers, market analysts, and others will be severely tested.

Q: When they refused to invest in, patronize, or partner with any business involved in the slave trade or military concerns, the Quakers applied a. investor confidence b. social investment criteria c. the stakeholder model d. internal audits e. the shareholder model

Q: Social investing is best defined as a. a strategy to ensure short-term return on investments. b. the most profitable approach to investing in public companies. c. the sole use of environmental criteria to determine the best companies in which to invest. d. the integration of social and ethical criteria into the investment decision-making process. e. a strategy to fund social entrepreneurs.

Q: Shareholder resolutions a. are regulated by the Federal Trade Commission. b. may be brought to a proxy vote by any stakeholder. c. are the least effective type of shareholder activism. d. can only be developed by large, institutional investors. e. may prompt a company to change its practices.

Q: Effective shareholder activism could include all of the following activities except a. submitting shareholder resolutions. b. defacing company property. c. using grassroots campaigns, such as letter writing. d. attending annual meetings. e. engaging in dialogue with management.

Q: Which of the following is not one of the responsibilities that will affect boards of directors in the future? a. The selection of board members will become increasingly formalized. b. Boards will need to work more effectively as teams. c. Serving on boards will require less of a commitment than in the past. d. Annual reports and other company documents will include more nonfinancial information. e. Boards will be responsible for developing company purpose statements that cover a range of aims and stakeholder concerns.

Q: According to reports published in Business Week and other sources, the best boards of directors a. are not compensated. b. rarely own stock in the company. c. are generally more independent and more active than other boards. d. rate high on independence but low on innovation. e. are found in Japanese and European countries.

Q: An "outside director" on a company's board of directors a. worked for the company in the past, but is now retired or with another firm. b. is unlikely to bring a diverse or unique perspective to board discussions and decisions. c. can only serve on one board at a time. d. cannot chair the board's audit or compensation committee. e. has valuable expertise, but limited vested interest in the firm before assuming the role.

Q: What is the primary concern of a board of directors? a. To make decisions about how to run the day-to-day affairs of the business b. To monitor the decisions made by managers on behalf of the company c. To determine whether or not to pay dividends to stockholders d. To watch out for the interests of the employees e. To develop short-term goals for the company

Q: In response to the collapse of the U.S. financial system in late 2008, the federal government has become involved in corporate governance to a degree not seen since a. the Great Depression. b. the Sarbanes-Oxley Act. c. the late 1800s and early 1900s. d. the New York Stock Exchange reforms. e. the mid 1950s.

Q: Who are the principals and agents of a corporation? a. Employees and stockholders, respectively b. Managers and employees, respectively c. Owners and executives, respectively d. Stockholders and employees, respectively e. Customers and managers, respectively

Q: Why was there little reason to focus on corporate governance in the late 1800s and early 1900s? a. In most companies, the owner made the strategic decisions about the business, so little governance was needed. b. The stakeholders in organizations had the same views about decision making, so there was little need for governance mechanisms. c. There were no social, safety, or environmental problems at this time, so governance mechanisms were unnecessary. d. The government tightly controlled industries during this time period, thereby making a company's attempt at governance futile. e. Companies followed all laws, so there was little need for governance mechanisms.

Q: Corporate governance requires a system of ____ similar to the distribution of power between the executive, legislative, and judiciary branches of the U.S. government. a. decision-making authorities b. division of labor c. checks and balances d. priorities and divisions e. goals and values

Q: "Corporations are bound by the law, and by the rules of what you might call ordinary decency. Beyond this however, they have no duty to pursue the collective goals of society." This statement exemplifies which approach? a. Stakeholder model of corporate governance b. Ethical approach of corporate governance c. Shareholder model of corporate governance d. Efficiency maximization goal of the firm e. Broader conceptualization of corporate governance

Q: Which of the following best describes the stakeholder model of corporate governance? a. The primary focus of this model is social welfare, to the exclusion of economic welfare. b. A company has responsibilities to many stakeholders including investors, employees, suppliers, government agencies, and the community. c. A company's primary responsibility is to maximize the wealth of its most important stakeholder, the owners. d. Because corporations have many managers and resources, it is possible to equally and fully address the needs of all stakeholders. e. The stakeholder model is a more restrictive approach than the shareholder model approach to corporate governance.

Q: Which stakeholder is the primary focus of the shareholder model of corporate governance? a. Employees b. Suppliers c. Customers d. Investors e. Community

Q: On what basic precept is the shareholder model of corporate governance founded? a. The problem created when ownership and control are not separated b. Supply and demand found in the marketplace c. Everyone should contribute to social welfare d. The maximization of wealth for investors and owners e. The customer is always right

Q: As fiduciaries, members of a company's board of directors are fundamentally expected to a. address conflicts about merging different corporate cultures. b. resolve issues before they become reputation or legal risks. c. reconcile differences in quality standards. d. ensure that daily issues are addressed properly by management. e. exercise both due diligence and due loyalty.

Q: How is corporate governance best defined? a. The extent to which the content of workplace decisions is aligned with a firm's stated strategic direction b. The formal system of oversight, accountability, and control for organizational decisions and resources c. The philosophy that a board or CEO holds regarding accounting methods d. The exercise of control and authority by those in mid-management positions e. A system of decentralized mechanisms that assists a firm in meeting its goals

Q: Name five stakeholder issues and how these could be measured to assess corporate impact and success.

Q: List and describe the six steps involved in implementing a stakeholder perspective into a company's social responsibility strategy.

Q: What is crisis management? Describe the four stages of the crisis management process and possible conditions, strategies, and tactics that an organization may experience or consider at each stage.

Q: Define ethical misconduct disaster (EMD). Provide two examples of ethical misconduct disasters that have occurred in business over the past several years.

Q: What is reputation management? Describe the four components of the reputation management process, and explain how these components work together.

Q: Name the three attributes of stakeholders, and explain how these attributes may affect the development of a relationship between a stakeholder and a company.

Q: Describe the differences between primary and secondary stakeholders.

Q: Describe the purpose of the stakeholder interaction model. Sketch a diagram of the model and briefly explain the types and direction of those relationships that exist.

Q: The Reactive-Defensive-Accommodative-Proactive Scale is best described by which of the following? a. A scale that determines the motivations businesses have for implementing social responsibility programs b. A scale that is used to rate a company's overall efforts at developing and maintaining good relationships with its employees and suppliers c. Another name for a social responsibility audit d. A method for assessing a company's strategy and performance with one particular stakeholder e. A technique for firms to use in developing public relations strategies

Q: When a company is denying responsibility and doing less than is required with a particular stakeholder, it is engaged in a(n) ____ strategy. a. accommodative b. defensive c. reactive d. inactive e. proactive

Q: A company committed to implementing the stakeholder perspective in its social responsibility strategy begins by a. assessing corporate culture and identifying stakeholder groups. b. developing crisis management plans. c. identifying the resources of various stakeholders. d. conducting a social audit. e. measuring social capital.

Q: What asset resides in relationships, and is characterized by mutual goals and trust, and smoothes internal and external transactions and processes? a. Financial capital b. Intellectual capital c. Interpersonal capital d. Social capital e. Relationship capital

Q: When Hormel Foods implemented an Internet-based procurement system, Hormel's relationships with its suppliers were affected in all of the following ways except a. through tangible investments such as equipment, tools, and software. b. by making Hormel's suppliers more attractive to other food companies, which would increase the prices the suppliers could charge. c. through intangible investments such as time, effort, and trust. d. by increased dependency on Hormel's business in order to justify the cost outlays. e. through the suppliers' evaluation to ensure that Hormel was worth the investment.

Q: Which of the following statements is false concerning how a company should communicate after a crisis? a. Crisis events are often chaotic, so management may begin the crisis response with a degree of ambiguity. b. If a company is slow to respond, stakeholders may feel as though the company does not care about their needs or is not remorseful about the crisis. c. It is better to wait until the company has a complete understanding of the crisis so that stakeholders will not be led astray by partial information. d. The company should communicate how it plans to resolve the crisis. e. The communication after a crisis is usually not handled in a completely effective or ineffective manner.

Q: Organizational crises are characterized by all of the following except a. a threat to a company's high-priority goals. b. routine problems occurring in business. c. being a surprise to a company's membership. d. the need for swift action. e. far-reaching events.

Q: Which of the following was not an action taken by Green Mountain Coffee in an effort to manage its reputation? a. Utilizing high-quality Arabica coffees b. Building a corporate culture open to employee ideas and concerns c. Implementing roasting standards that maximize taste and flavor differences between coffees d. Publicly ridiculing other coffee manufacturers for poor quality and unethical harvesting procedures e. Using fair trade certification on qualified coffees

Q: Which of the following is not one of the components of the reputation management process? a. Organizational identity b. Performance c. Image d. Impression e. Reputation

Q: Reputation management is a. the process of building and sustaining a company's good name and generating positive feedback from stakeholders. b. the process of developing positive relationships with media sources in order to influence news about the company. c. not worth much effort, since stakeholders will make their own decisions about the company's actions. d. communicating how an organization wants to be viewed by its stakeholders and by the public. e. top management's efforts to protect its reputation so that top management can achieve greater job security.

Q: The outcomes associated with positive stakeholder relationships are a. always long-term in nature. b. mostly short-term in nature. c. both long-term and short-term in nature. d. unlikely to have an effect on the firm's reputation. e. of minimal importance to the operation of the firm.

Q: On what two factors is a stakeholder's urgency based? a. Ethical sensitivity and the impact on society b. Time sensitivity and the importance of the claim to the stakeholder c. Economic timing and the stakeholder's ability to use coercive power d. Goal orientation and motivation of the stakeholder e. Opportunity and rationale of the stakeholder's claim

Q: Which of the following is the best way for a stakeholder to gain legitimacy? a. Committing acts of violence to show the company and the community that you are serious b. Making claims that you feel are reasonable, regardless of the view of other stakeholders c. Exploring the issue from a variety of perspectives and then communicating your desires for change in a respectful manner d. Insisting that your group's interests are extremely important to society in general e. Informing the media of the horrible things the company has done so that the rest of the world will know

Q: By banning the importation of goods made by children under the age of 15 through indentured or forced labor, the U.S. government exercised which type of power? a. Coercive b. Legal c. Legitimate d. Symbolic e. Utilitarian

Q: The extent to which a stakeholder can gain access to coercive, utilitarian, or symbolic means to impose or communicate its views to an organization is known as a. power. b. legitimacy. c. control. d. urgency. e. force.

Q: Which of the following does not describe the treatment of stakeholders on a worldwide basis? a. Large and progressive companies in most economically developed nations have embraced the stakeholder model. b. As more businesses enter the global market, they encounter the complexity of balancing stakeholders' relationships with other business operations and decisions. c. The importance of stakeholders varies from country to country. d. Catastrophic events around the world have made a compelling case for building relationships with nondomestic stakeholders. e. A company's treatment of domestic stakeholders is generally the same as that of foreign stakeholders.

Q: Which of the following is not normally considered a primary stakeholder? a. Employees b. Media c. Community d. Business partners e. Employees

Q: Groups that are fundamental to a company's operations and survival are collectively called a. critical stakeholders. b. primary stakeholders. c. top stakeholders. d. shareholders. e. VIPs.

Q: The ____ model explicitly acknowledges the dialog that exists between a firm's internal and external environments. a. output b. input c. societal d. shareholder e. stakeholder interaction

Q: Which of the following best describes the rationale of the stakeholder interaction model? a. The customer receives most of the value because investors, suppliers, and employees are compensated at a reasonable level. b. This model involves a two-way relationship with the firm's stakeholders. c. A company basically produces at a level equal to the amount of input received from investors, suppliers, and employees. d. Open communication between employees and management creates the input-output flow in an organization. e. In order to create final products or output, an organization must have several different inputs.

Q: Which stakeholder provides the goods and services necessary for an organization to function effectively and efficiently? a. Stockholders b. Suppliers c. Employees d. Managers e. Government

Q: Under the historical and traditional views of business, who was considered to be a stakeholder? a. Owners b. Owners and customers c. Owners, customers, employees, and business partners d. Owners, customers, employees, business partners, the community, the government, and special-interest groups e. Society in general

Q: What are the four major parts of the social responsibility model? Describe each element and how these elements work together in the model.