Chapter 5 Self-Quiz

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

Maximize profits

Benefit society

Integrate business into society

Advocate for minority rights

Impose taxes and spend the proceeds

. Friedman thinks that people, and NOT businesses, have:

Inherent value

Responsibilities

Ethical codes

To be watchful of businesses

All of the above

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

"They should have all of the power in all circumstances."

"The executive is an agent serving the interests of his principal."

"The executive should indeed keep the stockholder in mind when making difficult decisions."

"Markets will afford him more respect."

"The executive is the top employee, and they are the most important customer."

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

He would strongly disapprove.

He certainly could not condemn it.

He certainly would strongly applaud it.

He thinks no actual executive would do that.

It is impossible to say.

. Stone argues against all of these argument premises EXCEPT:

Management has a promise to fulfill to the shareholder.

The executive is an agent serving the interests of his principal.

Businesses do not have the "role" that obligates them to assume social responsibility.

Management owes more to the customer than to the shareholder.

Profits at least give us some tangible standard by which to judge progress.

. Stone criticizes the agency argument against corporate social responsibility because:

The corporation has not made explicit promises to shareholders.

In the real world, the shareholders rarely select the directors.

Directors have no more moral accountability to the shareholders than to other people.

Corporate social responsibility is rationally indefensible.

The law does not hold that directors are mere agents of the shareholders.

. What is the polestar argument?

It is best for society as a whole if businesses act to maximize their profits.

It is best for society as a whole if businesses accept social responsibilities.

Businesspeople should be stars of ethics to which the rest of us can look up.

Businesses have made an explicit promise to shareholders to maximize profits.

Each business should have values that guide them like the stars.

. French wants to argue that corporations should be treated as:

All other businesses

All biological organisms

Biological human beings

Servants of the people

Kings

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

Nothing of any importance

They should be allowed a vote in presidential elections.

They should be allowed a vote in presidential primaries only.

They have moral agency.

They will not be allowed to vote more than once every four years.

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

Square with profit motivation

Have legal authority

Have government support

Have the support of the local community

Have the support of the firm's employees

. Arrow believes that profit maximization is not always what?

Socially desirable

In the best interest of the stockholder

In the best interest of used car dealers

Desirable from a government vantage point

All of the above

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

"Enlighten the administration with opinions and personal stories."

"Regulate hedge funds."

"Build toward the time when a major depression cannot occur again."

"Completely alleviate the regulatory role of government in business."

"Engage in risky investment strategies, to flood the market with money, in order to stimulate it back to its original glory."

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

Large corporations

Small businesses and farms

Economists

The government

All citizens

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

Managers are not qualified to make social responsibility decisions.

Managers who must consider all stakeholders will be overworked.

Managers who must consider all stakeholders can hide self-serving behavior.

Managers who must consider all stakeholders cannot be altruistic.

A manager who considers all stakeholders will make the accountant's job difficult.

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

Be authentic

Be in line with the brand image

Attentive to what the public demands

a. and b.

a., b. and c.

. Friedman holds that executives are fiduciaries of stockholders.

TRUE

FALSE

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

TRUE

FALSE

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

TRUE

FALSE

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

TRUE

FALSE

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

TRUE

FALSE

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

TRUE

FALSE

. 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.

TRUE

FALSE

. 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.

TRUE

FALSE

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

TRUE

FALSE

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