Deck 5: "Is the Social Responsibility of Business...to Increase Its Profits"?: Social Responsibility and Stakeholder Theory

Question 1

How is a corporation like a person? How are they different? Why might one argue that a corporation is a moral agent?

Answer 1

No Answer

Question 2

Find three flaws in Friedman's argument that the only social responsibility of a business is to increase its profits.

Answer 2

No Answer

Question 3

Explain the "polestar" argument. What is Stone's criticism of it? How might Friedman respond to Stone?

Answer 3

No Answer

Question 4

Outline French's analysis of corporate moral agency. Can his analysis of corporate moral decision making be applied to individual moral decision making? Does your response strengthen or weaken Stone's case?

Question 5

Write a debate between Friedman and Arrow on social responsibility and economic efficiency. What would Friedman think of Arrow's proposal that businesses could be made more efficient by following moral codes (such as the moral codes followed in other professions like medicine and the law)?

Question 6

How is the current financial crisis similar to that of the Great Depression? How does Parker frame these similarities? Does Berle's analysis of the financial situation of yore bear any relevance to today?

Question 7

Explain the NYSEG's Project Share. What would Friedman say about this idea? What would Arrow say? What do you think? Are programs like these beneficial, harmful, or mere window dressing? Explain your answer.

Question 8

Explain the three problems that Marcoux sees with stakeholder theories. Do you agree that stakeholder theories have these problems? Would R. Edward Freeman have responses to Marcoux's objections?

Question 9

Consider a particular corporate social responsibility (CSR) strategy or project pursued by a company whose products or services you consume. How does this company communicate to its consumers about its CSR commitments? In what ways does its CSR commitments raise the company's costs? In what ways might such commitments improve the company's bottom line?

Question 10

Should a corporation care about the interests of people other than shareholders? How would a corporation behave differently if it accepted a shareholder theory versus a stakeholder theory?

Question 11

What did the ancient Greeks think about business?

A) They were concerned about fair trade practices.
B) They wrote about balancing profit with other values, such as loyalty.
C) They thought businesses should have social responsibility.
D) They thought looting defeated enemies was a better way to make money.
E) They believed strongly in a free market.

Question 12

Milton Friedman argues that the proper ethical duty of business is to:

A) Maximize profits
B) Benefit society
C) Integrate business into society
D) Advocate for minority rights
E) Impose taxes and spend the proceeds

Question 13

Friedman thinks that people, and NOT businesses, have:

A) Inherent value
B) Responsibilities
C) Ethical codes
D) To be watchful of businesses
E) All of the above

Question 14

According to Friedman, when a business is concerned with social responsibility, the executives are:

A) Spending other people's money rather than their own
B) Wasting their money
C) Being heroes
D) Doing the best they can given the situation
E) Left without any other choice

Question 15

In Friedman's words, the reason that the corporate executive is chosen by the stockholders is that:

A) "They should have all of the power in all circumstances."
B) "The executive is an agent serving the interests of his principal."
C) "The executive should indeed keep the stockholder in mind when making difficult decisions."
D) "Markets will afford him more respect."
E) "The executive is the top employee, and they are the most important customer."

Question 16

Milton Friedman argues that the political principle that underlies the market mechanism is:

A) Equality
B) Polarity
C) Unanimity
D) Disagreement
E) Diversity

Question 17

What would Friedman think about corporate executives conducting hypocritical "window dressing," or generating public goodwill through cultivating the appearance of social responsibility?

A) He would strongly disapprove.
B) He certainly could not condemn it.
C) He certainly would strongly applaud it.
D) He thinks no actual executive would do that.
E) It is impossible to say.

Question 18

Stone argues against all of these argument premises EXCEPT:

A) Management has a promise to fulfill to the shareholder.
B) The executive is an agent serving the interests of his principal.
C) Businesses do not have the "role" that obligates them to assume social responsibility.
D) Management owes more to the customer than to the shareholder.
E) Profits at least give us some tangible standard by which to judge progress.

Question 19

In arguments about the social responsibility of business, the argument that the shareholders have designated corporate managers to be their proxies is called:

A) The shareholder argument
B) The agency argument
C) The promissory argument
D) The polestar argument
E) The role argument

Question 20

Stone criticizes the agency argument against corporate social responsibility because:

A) The corporation has not made explicit promises to shareholders.
B) In the real world, the shareholders rarely select the directors.
C) Directors have no more moral accountability to the shareholders than to other people.
D) Corporate social responsibility is rationally indefensible.
E) The law does not hold that directors are mere agents of the shareholders.

Question 21

What is the polestar argument?

A) It is best for society as a whole if businesses act to maximize their profits.
B) It is best for society as a whole if businesses accept social responsibilities.
C) Businesspeople should be stars of ethics to which the rest of us can look up.
D) Businesses have made an explicit promise to shareholders to maximize profits.
E) Each business should have values that guide them like the stars.

Question 22

Who was Tom Wicker?

A) A person concerned with big oil companies' attempt to shirk blame
B) A New York Times columnist
C) A writer irked by a Gulf Oil Corporation advertisement
D) A columnist who perhaps didn't know all of the implications of his charge against the oil company
E) All of the above

Question 23

French wants to argue that corporations should be treated as:

A) All other businesses
B) All biological organisms
C) Biological human beings
D) Servants of the people
E) Kings

Question 24

CID stands for:

A) Corporate internal decision
B) Corporate internal delegation
C) Corporate immutable resource
D) Corporate immutable recourse
E) Company internal decision

Question 25

If we view corporations as French thinks they should be viewed, then what follows?

A) Nothing of any importance
B) They should be allowed a vote in presidential elections.
C) They should be allowed a vote in presidential primaries only.
D) They have moral agency.
E) They will not be allowed to vote more than once every four years.

Question 26

Arrow discusses all of these institutions embodying the social responsibilities of business EXCEPT:

A) Taxation
B) Legal regulation
C) Civil liability
D) Competition
E) Voluntary ethical codes

Question 27

Arrow claims that a mechanism for coercing firms to accept social responsibility must first:

A) Square with profit motivation
B) Have legal authority
C) Have government support
D) Have the support of the local community
E) Have the support of the firm's employees

Question 28

Arrow believes that profit maximization is not always what?

A) Socially desirable
B) In the best interest of the stockholder
C) In the best interest of used car dealers
D) Desirable from a government vantage point
E) All of the above

Question 29

Arrow's example about the used car is intended to show that:

A) Some sellers in the market are dishonest or unreliable.
B) You should obey the rule "buyer beware" when buying.
C) Sellers should not have to be concerned with social responsibility.
D) Profit maximization leads to the best results for all concerned.
E) Sometimes the rule of profit maximization leads to inefficiency.

Question 30

Calling for a "new economic constitutional order," Roosevelt declared it our common duty to:

A) "Enlighten the administration with opinions and personal stories."
B) "Regulate hedge funds."
C) "Build toward the time when a major depression cannot occur again."
D) "Completely alleviate the regulatory role of government in business."
E) "Engage in risky investment strategies, to flood the market with money, in order to stimulate it back to its original glory."

Question 31

Berle compiled data from Gardiner Means to:

A) Examine how markets had become dangerously concentrated
B) See how shareholders had wrested power from the senior managers
C) Expose the seedy dealings of insider trades
D) Show how a nation of farmers brought down the world's economy
E) Do none of the above

Question 32

Berle thought that allowing the markets to self-regulate would lead to:

A) Greater profits in the long run
B) Another market crash like the one in 1929
C) Democracy ruling over corporations
D) The destruction of the corporate system
E) A return to small businesses and farms

Question 33

According to Berle, responsibility for preventing another economic crisis rests with:

A) Large corporations
B) Small businesses and farms
C) Economists
D) The government
E) All citizens

Question 34

Marcoux thinks that stakeholder theory is not as bad as some forms of corporate responsibility theory. Why?

A) Stakeholder theory lets businesses consider the interests of employees and suppliers.
B) Stakeholder theory aims to improve capitalism without overthrowing it.
C) Stakeholder theory allows businesses to still pursue profit.
D) Stakeholder theory suggests moral codes that are voluntary, not legally enforced.
E) Stakeholder theory still gives some importance to the interests of the larger community.

Question 35

What is Marcoux's concern about "managerial accountability"?

A) Managers are not qualified to make social responsibility decisions.
B) Managers who must consider all stakeholders will be overworked.
C) Managers who must consider all stakeholders can hide self-serving behavior.
D) Managers who must consider all stakeholders cannot be altruistic.
E) A manager who considers all stakeholders will make the accountant's job difficult.

Question 36

Marcoux argues that weighing and balancing competing interests, as required under a stakeholder theory, would make business:

A) More fair, because everyone's voice could be heard
B) More efficient, because everyone would be more motivated
C) Wasteful and inefficient because of increased bureaucracy.
D) Less honest, because people would be selfish
E) More profitable, because there would be more ideas and creativity

Question 37

According to Paul Argenti, which of the following can a well-executed corporate social responsibility (CSR) strategy lead to?

A) Customer acquisition
B) Increased sales
C) Employee satisfaction.
D) Better teamwork.
E) All of the above.

Question 38

According to Argenti, in order for a CSR campaign to be successful, it must

A) Be authentic
B) Be in line with the brand image
C) Attentive to what the public demands
D) a. and b.
E) a., b. and c.

Question 39

Friedman holds that executives are fiduciaries of stockholders.

Question 40

Friedman believes that a corporation is like an artificial person.

Question 41

Friedman would rather the economic market take care of itself and leave social responsibilities, such as environmental husbandry, to the government.

Question 42

The promissory argument holds that an executive is an agent of the stockholders.

Question 43

Stone thinks that the polestar argument successfully proves that businesses should act to maximize profit.

Question 44

French thinks that business entities have moral agency.

Question 45

Every corporation must have an external decision making structure, according to French.

Question 46

Arrow gives some examples showing that profit maximization can sometimes have bad effects on society.

Question 47

Arrow does not think that defenders of unrestricted profit maximization usually assume that the consumer is well informed.

Question 48

Berle argues that it is impossible to prevent financial crises like the one in 1929.

Question 49

Berle was a conservative who wanted to preserve the corporate system.

Question 50

Parker argues that the financial crisis of 2008 was caused by our tendency to follow Berle's principles.

Question 51

Marcoux thinks that business ethics has gone wrong because of its narrow focus on just the interests of stockholders.

Question 52

One of Marcoux's concerns is that if a business considers the interests of all stakeholders, it will earn less profit and its shares will become less valuable.

Question 53

Marcoux argues that shareholder-oriented businesses are unethical.

Question 54

According to Argenti, corporate social responsibility (CSR) efforts by a company are like a tax that company managers illegitimately levy against shareholders, consumers and employees.

Question 55

Millennials are more responsive to corporate social responsibility (CSR) in their consumption and employment decisions than earlier generations.

Question 56

The Mondragon Cooperative is the world's most successful industrial cooperative.

Question 57

According to Friedman, a(n) ______________ cannot have responsibilities.

Question 58

Friedman believes that conceiving of the executive as a(n) __________ of the stockholders is the best way to think of their relationship.

Question 59

Stone thinks that __________ is inadequate because stockholders do not really select the directors of corporations.

Question 60

The __________ tries to defend corporate inactivity in regard to social responsibility by arguing that others, in accord with their role, should be socially responsible.

Question 61

French makes a distinction between two types of __________ ascriptions.

Question 62

It is not logically necessary, according to French, for a corporation's policies to __________ the current directors' goals.

Question 63

French argues that we can use a company's _________ to determine the company's beliefs and intentions.

Question 64

Arrow points out that many __________ not only think that corporations like to maximize profits but that they actually have an obligation to do so.

Question 65

Arrow's examples of pollution and traffic congestion are examples of ________ done by a company for which the company does not have to pay.

Question 66

__________ means that one can be sued for damages, a practice that dates back to the medieval period.

Question 67

Berle believed that new controls would have to balance a variety of claims and would have to assign to each "a portion of the income stream on the basis of __________."

Question 68

Parker claims that Berle's genius lies in the alignment of his professional insights with the public's __________.

Question 69

The crash of 1929 brought in people like Gerald Swope of General Electric who supported __________.

Question 70

Marcoux is concerned that stakeholder-oriented management will undermine the value of _____________ and therefore discourage investment.

Question 71

Another of Marcoux's concerns is that ______________ managers will be able to get away with bad behavior because they can claim to be serving the best interest of one stakeholder or another.

Question 72

Millennials are more successfully engaged through __________ than __________.

Question 73

In response to growing demands from millennials for cruelty-free meat, __________ changed the way it raises and slaughters its livestock, even though this increased its costs.

Question 74

The Beech-Nut Nutrition Corporation admittedly deceived the public by selling __________ apple juice under the labeling of __________ apple juice.

Question 75

Judge Doumar controversially sentenced a(n) __________ to a three-year prison term.