Deck 4: Corporate Organization and the Role of Stakeholders

Question 1

Which one of the following statements best describes how incorporating a business has become less restrictive over the last several decades?

A) Corporations have a specific purpose when formed.
B) States have loosened the rules and guidelines for incorporating a business.
C) Competition helps businesses profit.
D) Governments have a vested interest in the goals of corporations.

Answer 1

States have loosened the rules and guidelines for incorporating a business.

Question 2

Which one of the following statements completes the sentence? If a corporation goes bankrupt, a stockholder

A) will likely lose the cost of their investment
B) has the right to be paid before creditors
C) can sell their stock shares after the bankruptcy has been completed
D) owes any monies to creditors that the corporation is unable to pay

Answer 2

will likely lose the cost of their investment

Question 3

Berle's shareholder primacy model is best described by which of the following statements?

A) focuses on management functions
B) allows for community input
C) states that profit and investor returns should be the focus of managers
D) addresses employee concerns

Answer 3

states that profit and investor returns should be the focus of managers

Question 4

A CEO of a publicly traded organization who makes decisions that may or may not directly result in profits for the organization may be viewed as

A) a socially concerned executive
B) not focusing on shareholders' best interests
C) being unlawful
D) spending money to make money

Question 5

A CEO made a decision that would directly impact shareholders in a positive way by means of more profits. Which one of the following statements best describes the model that the CEO used in this situation?

A) shareholder primacy model
B) stakeholder model
C) utilitarian decision making
D) profitability model

Question 6

Claudia, the local manager of a large company's sales office, has been directed to meet with employees to inform them of major company policy changes. These changes will lead to greater profits but may hurt employee morale. This is likely a decision made by an organization with whom in mind?

A) the CEO
B) the shareholders
C) the stakeholders
D) the community

Question 7

A business that considers the impact of all stakeholders does not tend to focus on profits, but rather focuses on how different groups will be impacted. This type of management can lead to which of the following choices? Select all of the options that best apply.

A) lower profits
B) higher costs
C) expedited decisions
D) a more positive reputation

Question 8

Patagonia's founder Yves Chouinard has prioritized preserving the natural environment over profits for his business, ever since he started his first venture. Patagonia decided to use only organic cotton for its clothing production to avoid the use of harmful chemicals and pesticides. The company pledged to donate 1 percent of its sales revenue to environmental organizations, and it encouraged consumers to buy only products that they need. These decisions represent concern for which set of stakeholder groups?

A) shareholders, suppliers, and community
B) government, management, and employees
C) the general public, world society, and creditors
D) future generations, animal species, and the environment

Question 9

Patagonia was the first company to be certified as a B-Corporation in California. B-Corporations identify an intended benefit to society. In this way, investors understand that financial profit is not always the company's primary objective. An investor who is not concerned about benefiting society might instead choose to purchase stock in which of the following organizations?

A) An investor who is not concerned about benefiting society might purchase stock in a corporation that follows Freedman's views on the stakeholder model.
B) An investor who is not concerned about benefiting society might purchase stock in a philanthropic enterprise.
C) An investor who is not concerned about benefiting society might purchase stock in a Low-Profit Limited Liability Company.
D) An investor who is not concerned about benefiting society might purchase stock in a corporation that follows Friedman's shareholder primacy view.

Question 10

Costco is viewed as an employee-friendly company. Costco provides its employees with competitive compensation and benefits. The company also prefers to promote from within, providing opportunity for many of its employees and helping to minimize employee turnover. Choose the option below that best describes the stakeholder groups that most benefit from these employment practices.

A) employees, suppliers, and creditors
B) management, employees, and shareholders
C) local communities, employees, and suppliers
D) creditors, local communities, and employees

Question 11

Costco has higher weekly sales revenues than its direct competitor Sam's Club. When a corporation's revenues are higher than its expenses, there will be a profit in the form of net income. If a Costco store manager reduced store hours and personnel because they felt that the store was too busy, which of the following parties would see the most benefit?

A) customers
B) creditors
C) Sam's Club
D) suppliers

Question 12

Paul Newman's business was bequeathed to his foundation, which led to the creation of the first philanthropic enterprise. The charities that receive the contributions would be considered which of the following?

A) The charities are stakeholders of the corporation because it sells the products.
B) The charities are stakeholders of the corporation because its profits flow to the foundation.
C) The charities are stakeholders of the foundation because it owns the corporation.
D) The charities are stakeholders of the foundation because it provides the contributions they receive.

Question 13

Pranyah's Paleo Restaurant struggled during the COVID-19 pandemic because it was not able to operate as usual. Regulations, uncertainty, and declining revenues put the owner in a financial bind. Pranyah could close the restaurant so that her employees could file for unemployment and the business could avoid the financial losses that could potentially accrue. This decision to close the restaurant would likely have which one of the following effects?

A) decrease tax revenues and local traffic
B) increase tax revenues and local traffic
C) decrease orders from suppliers and create commercial property vacancies
D) increase orders from suppliers and create commercial property vacancies

Question 14

Patagonia has pledged to donate 1 percent of its sales revenues to charitable causes. If the company were instead to give 1 percent of each sale back to its customers, this could also be viewed as a benefit to society. Which of these two options could benefit more stakeholder groups?

A) Donating to charitable causes could benefit more stakeholder groups because these charities could serve shareholders, suppliers, and creditors.
B) Donating to charitable causes could benefit more stakeholder groups because these charities could serve the environment, the general public, and the community.
C) Returning money to customers could benefit more stakeholder groups because the customer is the source of all revenue.
D) Returning money to customers would benefit more stakeholder groups because they would purchase more products and shareholders would benefit.

Question 15

Which one of the following statements best describes the local community as a stakeholder?

A) The local community earns profits when the business is successful.
B) The local community can be influenced by or can influence the organization's business activities.
C) The employees likely live in the local community in which the organization operates.
D) Families in the local community live near the organization.

Question 16

Employees and managers at Ajax Company have been preparing financial statements to include in their annual report. Which of the following choices identify the direct stakeholders that are likely to be more concerned by the information the annual report and financial statements share about the company's standing than the indirect stakeholders?

A) investors
B) creditors
C) employees
D) local nonprofits

Question 17

Which of the following are considered direct stakeholders of a typical company?

A) customers
B) general public
C) suppliers
D) creditors

Question 18

Chu's Shoes is considering expanding its operations by leasing and retrofitting a former shopping center. The closing of the shopping center affected the local community, and thus it welcomes the expansion. Chu's has also pledged to add 150 new jobs with the expansion. Which one of the following statements best describes the plans of Chu's Shoes?

A) instrumental stakeholder model
B) shareholder model
C) intrinsic stakeholder model
D) dependent stakeholder model

Question 19

By law, food products sold in the United States must include a list of ingredients on labels or packaging. Ingredients are listed based on the amount present within the food item. Some manufacturers provided this information prior to it becoming law. By doing this, organizations were using what model when providing ingredient information?

A) stakeholder primacy
B) shareholder perspective
C) instrumental stakeholder
D) intrinsic stakeholder

Question 20

Some managers have problems determining which stakeholders to prioritize and when to put more weight on those specific stakeholders' needs. Select the stakeholder dimensions that managers should use in their analysis.

A) power
B) high-low
C) urgency
D) legitimacy

Question 21

If a stakeholder does not want to be viewed as insignificant to an organization, they need to meet which of the following sets of dimensions?

A) power and urgency
B) urgency and legitimacy
C) power and legitimacy
D) power, urgency, and legitimacy

Question 22

A large community-based organization has been informed of Jones Storage Company's intention to no longer provide employees with Martin Luther King Jr. Day as a holiday. The organization relies on volunteers to help with community projects and initiatives and is upset by the company's decision. Jones Storage knows that the media might give the community-based organization additional coverage. Jones managers offer their employees paid work hours to volunteer for community projects. What type of stakeholder does the community-based organization represent?

A) dormant stakeholder
B) demanding stakeholder
C) discretionary stakeholder
D) dangerous stakeholder

Question 23

Which one of the following choices is the best example of a discretionary stakeholder?

A) a manager of an organization who wants to increase production and reduce the amount of waste in raw materials
B) an investor in a company who believes that corporate decisions are reducing overall profits
C) a local community group that begins a voluntary initiative to reduce water usage in production processes
D) a customer who writes an online review stating that a business's product did not perform as expected and that they were disappointed with the purchase

Question 24

Which of these is the best example of a dominant stakeholder?

A) someone with high power and high legitimacy
B) someone with high urgency and low power
C) someone with low urgency and high legitimacy
D) someone with low legitimacy and low power

Question 25

Which of these is an example of a demanding stakeholder?

A) A manager of an organization has an idea about how to increase production and reduce the amount of waste in raw materials.
B) An investor in a company feels that the decisions being made are hindering the overall profits for the company.
C) The community in which an organization operates is beginning a voluntary initiative for all businesses and households to reduce their use of water in an effort to push environmental awareness.
D) A customer writes an online review stating that a business's product did not perform as expected and that they were disappointed with the purchase.

Question 26

Dependent stakeholders lack what dimension to make their needs important to businesses?

A) legitimacy
B) urgency
C) power
D) dependency

Question 27

Stakeholders can push the limits of what is legal if they feel they are not being heard. This can sometimes lead to actions that may put others at risk. If this occurs, the stakeholder group may be viewed as which one of the following choices?

A) powerful
B) coercive
C) dangerous
D) demanding

Question 28

When an organization has stakeholders that meet all three dimensions of power, urgency, and legitimacy, these stakeholders have more influence on the business and can impact decisions. Which one of the following choices best applies to these stakeholders?

A) definitive stakeholders
B) dominant stakeholders
C) influential stakeholders
D) powerful stakeholders

Question 29

Which one of the following stakeholders is viewed as most important to an organization?

A) dormant
B) discretionary
C) demanding
D) definitive

Question 30

Businesses were once formed with the sole purpose of filling a specific need and making money. If the firm was no longer needed, it was dissolved. What are the positives of this process?

A) The business owner can begin a new business as they see fit.
B) The employees can find new employment.
C) Businesses have limited goals.
D) The investors receive their share of the assets.

Question 31

The Low-Profit Limited Liability Company is not viewed as a legitimate business form by many states in the United States. Which one of the following statements best describes why?

A) The owners of Low-Profit Limited Liability Companies often have bad intentions.
B) Low-Profit Limited Liability Company businesses are not able to expand.
C) Low-Profit Limited Liability Company businesses pay lower taxes.
D) The Low-Profit Limited Liability Company provides limited reports to stakeholders.

Question 32

What is the greatest advantage of a Low-Profit Limited Liability Company that sole proprietors are not able to utilize?

A) limited liability
B) tax benefits
C) investor funding
D) highly profitable

Question 33

An organization that wants to be profitable but also wants to operate with the "greater good" mindset may find what business form to be ideal?

A) Low-Profit Limited Liability Company
B) B-Corporation
C) nonprofit enterprise
D) C-Corp

Question 34

If a business were created with the intention of expansion as it becomes more profitable, the best form of business would be

A) B-Corporation
B) C-Corp
C) nonprofit
D) Low-Profit Limited Liability Company

Question 35

B-Corporations put emphasis on the following stakeholders except

A) shareholders
B) community
C) government
D) employees

Question 36

Tiny Pies wants to create a program that provides a pie to a pediatric patient in the local hospital for every pie sold in the local community. Tiny Pies should consider becoming what type of business form?

A) nonprofit
B) B-Corporation
C) Limited Liability
D) partnership

Question 37

Several requirements must be met to become a B-Lab-certified B-Corporation. Which of the following choices are not among these requirements?

A) meeting performance standards
B) meeting minimum revenue requirements
C) reducing water waste in production processes
D) ensuring the company uses little debt in its funding

Question 38

Opa's Organics is a business formed to give 100 percent of its profits to charitable causes. Opa's wants to maximize profits to provide the most funds possible. With the intention of maximizing profits, Opa's Organics should operate as which one of the following forms of business?

A) B-Corporation
B) nonprofit
C) C-Corp
D) Low-Profit Limited Liability Company

Question 39

An organization is successful and profitable, but it also has a mission that focuses on giving back to society. Forming a business with such a goal is utilizing the basic purpose of what two forms of business?

A) C-Corp and nonprofit
B) B-Corporation and nonprofit
C) Low-Profit Limited Liability Company and B-Corporation
D) nonprofit and Low-Profit Limited Liability Company

Question 40

A business that is formed as a philanthropic enterprise can utilize a tax code that allows for maximization of profits, but it is taxed as a charitable organization. For this to occur, the organization must do which of the following?

A) have several stockholders who determine the charities that receive funds
B) give 100 percent of its profits to charitable causes
C) produce an item that is directly linked to the mission
D) pay employees well above minimum wage

Question 41

A business organization that serves a specific purpose and is not driven by profit is known as what form of business?

A) Low-Profit Limited Liability Company
B) philanthropic enterprise
C) B-Corporation
D) nonprofit enterprise

Question 42

UNICEF is a world-wide organization that focuses on the health, safety, and education of children. They depend on donations to support their cause. This is an example of what type of business form?

A) C-Corp
B) philanthropic enterprise
C) nonprofit enterprise
D) B-Corporation

Question 43

A dependent stakeholder is one that a company views as having merit to their claim, but they do not have _______, which makes their claims less likely to been viewed as important enough to create change.

A) power
B) urgency
C) legitimacy
D) a voice

Question 44

If stakeholders want to gain ground and find a way to make their voices heard, they may cross the line and act in a manner that is viewed as dangerous. When this is done, it creates a lack of _______ to their cause.

A) power
B) urgency
C) legitimacy
D) trust

Question 45

If a stakeholder group has a legitimate claim but lacks the power to be taken seriously by an organization, which one of the following choices is the most effective way for that stakeholder group to gain power?

A) Protest by using force or violence toward the company.
B) Contact the media and describe why the company should support their needs.
C) Write a letter to the CEO.
D) Partner with another organization to become a larger group that supports the same claim.

Question 46

A company that puts its products through rigorous testing to ensure product safety for consumers is showing concern for the basic rights of which group?

A) external stakeholders
B) intrinsic stakeholders
C) community stakeholders
D) buying stakeholders

Question 47

C-Corps are required to have some form of corporate social responsibility in their mission and business goals, but this can lead to being viewed as less socially responsible to society. This has become an increasingly important factor for which of the following groups?

A) shareholders
B) regulators
C) local communities
D) employees

Question 48

Which one of the following statements is the best way for Patagonia to demonstrate the intrinsic stakeholder model?

A) giving employees unlimited days of vacation
B) allowing customers to send in Patagonia clothing for repair at a minimal cost
C) making products with the lowest-priced raw materials in order to give customers the best possible price
D) selling products online

Question 49

If an organization sets strict expectations as to how its suppliers, employees, and other business partners are expected to function in order to meet organizational standards, they are likely giving high importance to all of the following, EXCEPT

A) employees
B) customers
C) the environment
D) profit

Question 50

Business decisions that are socially responsible may also be grounded in which of the following choices?

A) human rights
B) animal rights
C) employee rights
D) shareholder primacy

Question 51

When large organizations are successful and set social or charitable goals, many other organizations may jump on board and follow the same guidance. These expectations can become known as which of the following options for businesses of a similar size and function?

A) standards
B) mission
C) footprint
D) responsibility

Question 52

If an investor looks for organizations that provide high returns and payouts to shareholders, they are likely to invest in companies that use what type of model?

A) instrumental stakeholder model
B) profitability model
C) intrinsic stakeholder model
D) shareholder model

Question 53

If an organization wants to be strategic and profitable, but also sees the value in being responsive to stakeholders, which of the following choices states what the organization should do?

A) Make the company's mission a priority.
B) Focus on profitability.
C) Connect stakeholder issues to company objectives.
D) Ignore local laws that are inconvenient.

Question 54

As an employee of an organization, one has the right to a safe working environment. This was not always the case, but it became a standard all organizations in the United States must meet. Following safety regulations leads to a decrease in which of the following choices?

A) profits
B) employee morale
C) managerial competence
D) investor confidence

Question 55

A local grocery store gives food that is near expiration or nearly past its prime to a homeless shelter and they use it to prepare meals for its visitors. This demonstrates a concern for which kind of stakeholders?

A) customer
B) employee
C) community
D) investor

Question 56

If a company treats employees well, which of the following choices explain how the company and employee benefit?

A) There is more employee turnover.
B) Talented employees are more likely to stay and become managers.
C) Employees will work hard if they feel they are treated well.
D) All employees will have equal opportunities within the company.

Question 57

Managers of a social enterprise should base their decisions on which of the following choices?

A) profit
B) corporate mission
C) investors
D) stakeholder needs

Question 58

There is a spectrum of stakeholder involvement in business decisions. Which types of firms usually include extensive stakeholder involvement?

A) C-Corps
B) Low-Profit Limited Liability Company
C) nonprofit enterprises
D) B-Corporations

Question 59

There is a spectrum of stakeholder involvement in business decisions. On one end, there is extensive involvement. On the other end, there is minimal involvement. What type of firm would fall on the minimal involvement end of the spectrum?

A) C-Corp
B) Low-Profit Limited Liability Company
C) philanthropic enterprise
D) B-Corporation

Question 60

Which form of business uses profits funneled from a corporation to a foundation in order to use those profits in a charitable manner?

A) nonprofit enterprise
B) B-Corporation
C) foundation enterprise
D) philanthropic enterprise

Question 61

Who decides the ethical guidelines and standards for which company decisions should be based?

A) employees
B) managers
C) CEO
D) investors

Question 62

Today, many firms perceive the government to be involved in business decisions solely based on the fact that the government expects laws to the followed and

A) investors to receive their share of profits
B) taxes to be paid
C) employees to be paid higher than minimal wage
D) businesses to reduce their footprint on the community for which they operate

Question 63

Costco treating employees well, which leads to higher profits and productivity, can be viewed as caring about what type of stakeholders and using which model?

A) direct and intrinsic
B) indirect and intrinsic
C) direct and instrumental.
D) direct and instrumental

Question 64

Which one of the following choices best describes how C-Corps communicate with investors and demonstrate shareholder primacy?

A) the annual report and maximized profits
B) social media and company press releases
C) the code of ethics and employee turnover rates
D) the annual report and company press releases

Question 65

Even if a firm does not follow the intrinsic stakeholder model for doing what is morally right and societally good, stakeholders still have rights. Which of the following choices are examples of stakeholder rights?

A) providing suppliers with payment for their services
B) making sure materials from which products are made are not hazardous to employees or customers
C) communicating with investors as to how the company is doing to meet its business goals
D) giving all employees four weeks paid vacation each year

Question 66

What are two specific benefits of the instrumental stakeholder model?

Question 67

What are two specific advantages of the intrinsic stakeholder model?

Question 68

Describe the main difference between C-Corps and B-Corporations.

Question 69

Discuss the process that the B-Lab requires if an organization wishes to become certified and how this compares to forming a C-Corp.

Question 70

In your opinion, what is more important to focus on when businesses make decisions: profit maximization or stakeholders' interests? Explain your reasoning.

Question 71

What are three important differences between the shareholder model and the stakeholder model?

Question 72

Explain the difference between a dormant stakeholder, discretionary stakeholder, and demanding stakeholder. In your opinion, which stakeholder does an organization give more concern about their needs? Explain.

Question 73

Why would an organization be formed as a philanthropic enterprise? What is the intention of the individual(s) who form such a business?

Question 74

Discuss the stakeholder model and the difference between direct and indirect stakeholders. Why should organizations care about both indirect and direct stakeholders?