Test bank for strategic corporate social responsibility sustainable value creation 5th edition david

Test Bank for Strategic Corporate Social Responsibility Sustainable Value Creation 5th Editi

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Chandler, Strategic Corporate Social Responsibility, 5e SAGE Publishing, 2020

Chapter 6: Who Owns the Firm?

Test Bank Multiple Choice 1. How did the introduction of limited liability for firms change the focus of firms?

A. profit became the primary purpose B. social good became the primary purpose C. innovation became the primary purpose D. the introduction of limited liability did not change firms’ focus Ans: A Cognitive Domain: Comprehension Answer Location: History of the Corporation Difficulty Level: Medium 2. Which of the following is true about shareholders?

A. Shareholders fully own a corporation.

B. Shareholders have a right of possession of a corporation.

C. Shareholder ownership is a social construction.

D. Shareholders have the right of control over a corporation.

Ans: C Cognitive Domain: Knowledge Answer Location: History of the Corporation Difficulty Level: Easy 3. In the early history of corporations, what was the primary purpose of shares?

A. to raise capital and provide a return on that investment B. to encourage innovation C. to allow outsiders to control a corporation’s major decisions D. to implement social good by a corporation Ans: A Cognitive Domain: Knowledge Answer Location: History of the Corporation | Shareholders Own Shares Difficulty Level: Easy 4. During the early 20th century, which type of stakeholder become more and more favored in terms of legal decisions?

A. employees B. owners C. communities D. investors Ans: D Cognitive Domain: Knowledge

Chandler, Strategic Corporate Social Responsibility, 5e SAGE Publishing, 2020

Answer Location: History of the Corporation Difficulty Level: Easy 5. The ______ is the notion that shareholders cannot second-guess management decisions.

A. management responsibility doctrine B. business judgment rule C. board of directors supremacy D. limited liability corporation Ans: B Cognitive Domain: Knowledge Answer Location: Business Judgment Rule Difficulty Level: Medium 6. Which case lays the legal foundation for the belief in the primacy of shareholder interests?

A. Miller v. Magline, Inc. B. SEC v. Transamerica Corporation C. Dodge v. Ford Motor Company D. Levin v. Mississippi River Corporation Ans: C Cognitive Domain: Knowledge Answer Location: Fiduciary Duty | Dodge v. Ford Difficulty Level: Easy 7. For which of the following events would a court intervene in a firm’s activities?

A. A management decision to not insure a company’s largest warehouse.

B. A management decision to deceive customers about the negative effects of the company’s products.

C. A management decision to not invest in eco-friendly materials because they are less profitable.

D. A management decision to not give raise to employees who have been at the company for more than 15 years.

Ans: B Cognitive Domain: Application Answer Location: Fiduciary Duty | Dodge v. Ford Difficulty Level: Medium 8. The great value of ______ is that it enabled corporations to raise the capital that was needed to finance the infrastructure that fueled the Industrial Revolution.

A. limited liability B. the stock market C. centralized management D. high-frequency stock trades Ans: A Cognitive Domain: Comprehension

Chandler, Strategic Corporate Social Responsibility, 5e SAGE Publishing, 2020

Answer Location: History of the Corporation | Shareholders Own Shares Difficulty Level: Medium 9. According to the textbook, the statement, “Shareholders are the owners of corporations” is a ______, not a ______.

A. legal fact; belief B. belief; legal fact C. legal fact; principle D. principle; theory Ans: B Cognitive Domain: Comprehension Answer Location: Who Owns the Firm?

Difficulty Level: Easy 10. Because many stock trades are governed by third-party transactions, this drives a wedge between shareholders and ______.

A. regulators B. managers C. employees D. markets Ans: B Cognitive Domain: Comprehension Answer Location: History of the Corporation | Limited Liability and the Stock Market Difficulty Level: Easy 11. The combination of high-frequency trading and massive investment funds holding large, but passive, positions is redefining what it means to be a ______.

A. stockbroker B. manager C. director D. shareholder Ans: D Cognitive Domain: Comprehension Answer Location: History of the Corporation | Shareholders Own Shares Difficulty Level: Medium 12. The fact that shareholders have the right to vote at the company’s annual general meeting demonstrates that ______.

A. shareholders can influence day-to-day operations of the firm B. shareholder democracy is neither strong nor broad C. shareholders have direct input on all interests of shareholders D. boards of directors will respond to shareholder concerns Ans: B Cognitive Domain: Analysis Answer Location: Shareholders Own Shares Difficulty Level: Hard

Chandler, Strategic Corporate Social Responsibility, 5e SAGE Publishing, 2020

13. An analysis of the history of the corporation, a review of existing legislation, and legal precedent all support to the conclusion that ______.

A. shareholders do not own the firm B. shareholders are the owners of the firm C. shareholders have the same power as managers of the firm D. shareholders must respect the rights of all stakeholders Ans: A Cognitive Domain: Comprehension Answer Location: Fiduciary Duty Difficulty Level: Medium 14. To encourage long-term thinking across all aspects of operations, firms like Unilever ______.

A. began issuing quarterly earnings guidance B. stopped issuing quarterly earnings guidance C. began issuing monthly earnings reports D. stopped issuing annual earnings reports Ans: B Cognitive Domain: Knowledge Answer Location: Stakeholders, Not Shareholders Difficulty Level: Easy 15. The regular issuance of quarterly earnings reports to shareholders illustrates which of the following?

A. the long-term nature of investing for retirement B. the importance of stakeholder interests over shareholder interests C. the growing importance of CSR in business decisions D. the short-term focus of the economic system Ans: D Cognitive Domain: Comprehension Answer Location: Stakeholders, Not Shareholders Difficulty Level: Medium 16. As the CEO of a publicly traded company, you decide your firm will no longer issue quarterly earnings reports to shareholders. A legitimate reason for your decision is ______.

A. to emphasize the importance of medium- to long-term value creation B. to emphasize the importance of short-term financial strategies C. to encourage investors to buy stock in your company D. to discourage investors from buying stock in your company Ans: A Cognitive Domain: Application Answer Location: Stakeholders, Not Shareholders Difficulty Level: Medium

Chandler, Strategic Corporate Social Responsibility, 5e SAGE Publishing, 2020

17. Which of the following does strategic CSR emphasize?

A. short-term value creation B. meeting the needs of all stakeholders C. medium- to long-term value creation D. meeting the needs of primary stakeholders Ans: C Cognitive Domain: Comprehension Answer Location: Stakeholders, Not Shareholders Difficulty Level: Easy 18. An advantage of the limited liability company (LLC) is that the organization is ______.

A. recognized as an independent entity in the eyes of the law B. not recognized as a legal person and therefore cannot be sued C. provided tax-exempt status D. not liable for its own debts Ans: A Cognitive Domain: Comprehension Answer Location: Shareholders Own Shares | A Legal Person Difficulty Level: Easy 19. The largest passive investor in corporations across the world is ______.

A. BlackRock B. Vanguard C. State Street D. E.F. Hutton Ans: A Cognitive Domain: Comprehension Answer Location: History of the Corporation | Limited Liability and the Stock Market Difficulty Level: Easy 20. There is ______ legal precedent for the idea that managers and directors have a fiduciary responsibility to place shareholder interests over the interests of other stakeholders.

A. no B. weak C. strong D. irrefutable Ans: B Cognitive Domain: Comprehension Answer Location: Fiduciary Duty Difficulty Level: Easy 21. The Dodge brothers sued Henry Ford because of his decision to ______.

A. pay factory workers a living wage B. distribute surplus profit to shareholders in the form of a dividend

Chandler, Strategic Corporate Social Responsibility, 5e SAGE Publishing, 2020

C. reinvest profits in research and development rather than in shareholder dividends D. distribute surplus profit to customers in the form of lower prices for cars Ans: D Cognitive Domain: Knowledge Answer Location: Fiduciary Duty | Dodge v. Ford Difficulty Level: Easy 22. The Dodge v. Ford case has often been used as the legal foundation for the belief that ______.

A. the firm must place the interests of its shareholders over all other interests B. the firm must operate in the interests of all stakeholders C. the firm must place the interests of its managers over all other interests D. management has very little responsibility to shareholders in day-to-day operations Ans: A Cognitive Domain: Comprehension Answer Location: Fiduciary Duty | Dodge v. Ford Difficulty Level: Medium 23. The business judgment rule is important because it reflects the principle that ______, not ______, have the greatest latitude to run companies.

A. shareholders; company directors B. company directors; shareholders C. managers; company directors D. shareholders; managers Ans: B Cognitive Domain: Comprehension Answer Location: Shareholders Own Shares | Business Judgment Rule Difficulty Level: Medium 24. The 1880 New Hampshire Supreme Court decision in Charlestown Boot & Shoe Co. vs. Dunsmore sets a legal precedent for ______.

A. stakeholder theory B. the business judgment rule C. shareholder autonomy D. limited liability Ans: B Cognitive Domain: Knowledge Answer Location: Shareholders Own Shares | Business Judgment Rule Difficulty Level: Hard 25. Between 1870 and 1910, corporations were protected from legislation such as child labor laws by the ______.

A. First Amendment B. Fifth Amendment C. Fourteenth Amendment D. Eighteenth Amendment

Chandler, Strategic Corporate Social Responsibility, 5e SAGE Publishing, 2020

Ans: C Cognitive Domain: Knowledge Answer Location: Shareholders Own Shares | A Legal Person Difficulty Level: Medium 26. In the event that a shareholder resolution is passed by a majority at a company’s annual general meeting (AGM), in most cases the company is obliged to ______.

A. take action immediately B. create a plan for implementation of the idea and present it to shareholders C. consider the proposal at its next board meeting D. do nothing Ans: D Cognitive Domain: Comprehension Answer Location: Shareholders Own Shares Difficulty Level: Hard 27. In Delaware, the part of the firm that is given preeminence is ______.

A. the investor B. the board of directors C. the employees D. the chief executive officer Ans: B Cognitive Domain: Comprehension Answer Location: Fiduciary Duty Difficulty Level: Medium 28. Firms such as Unilever and Amazon are now changing their approach to business thinking by focusing on ______.

A. societal outcomes B. climate change C. long-term focus D. globalization Ans: C Cognitive Domain: Comprehension Answer Location: Fiduciary Duty Difficulty Level: Medium True/False 1. Since their inception in the United States, corporations have all been limited liability.

Ans: F Cognitive Domain: Knowledge Answer Location: History of the Corporation Difficulty Level: Easy 2. Existing securities are traded on the primary market.

Chandler, Strategic Corporate Social Responsibility, 5e SAGE Publishing, 2020

Ans: F Cognitive Domain: Knowledge Answer Location: History of the Corporation | Shareholders Own Shares Difficulty Level: Medium 3. A share is a legal contract between the investor and the firm.

Ans: T Cognitive Domain: Knowledge Answer Location: Shareholders Own Shares Difficulty Level: Easy 4. A limited liability company is, in the eyes of the law, a person.

Ans: T Cognitive Domain: Knowledge Answer Location: Shareholders Own Shares | A Legal Person Difficulty Level: Easy 5. U.S. courts often intervene in the business decisions of a firm to ensure that the firm is both maximizing profits and doing social good.

Ans: F Cognitive Domain: Comprehension Answer Location: Shareholders Own Shares | Business Judgment Rule Difficulty Level: Easy 6. Shareholders definitively own the corporation in which they invest.

Ans: F Cognitive Domain: Comprehension Answer Location: Shareholders Own Shares | Business Judgment Rule Difficulty Level: Easy

Essay 1. Analyze the following statement: “Shareholder ownership of firms is a social construction.” What does this statement mean, and what are the implications for CSR? Ans: Good answers will illustrate that the concept of shareholder ownership is a cultural belief rather than a legally defined fact.

Cognitive Domain: Analysis Answer Location: History of the Corporation Difficulty Level: Hard 2. Why is the question of ownership central to the CSR debate? In your answer, provide specific examples of how ownership impacts CSR issues.

Ans: Good answers will illustrate how agency theory reinforces the belief that directors have a fiduciary responsibility to operate the firm in the interests of shareholders over the interests of other stakeholders.

Test Bank for Strategic Corporate Social Responsibility Sustainable Value Creation 5th Editi Chandler, Strategic Corporate Social Responsibility, 5e SAGE Publishing, 2020

Cognitive Domain: Analysis Answer Location: Throughout Chapter Difficulty Level: Hard 3. How has the definition of what it means to be a shareholder changed over the history of the corporation?

Ans: Good answers should illustrate how the early history of limited liability primarily enabled corporations to raise the capital needed to finance the infrastructure that fueled the Industrial Revolution. In more recent history, the stock markets primarily reflect investor confidence in a firm’s current management and future potential, with most trading being third-party transactions in which the firm receives no capital directly.

Cognitive Domain: Analysis Answer Location: History of the Corporation Difficulty Level: Hard 4. What are the implications of the principle in U.S. corporate law that “no one owns the corporation?”

Ans: Answer should explore the notion that the corporation is treated as a person with a number of rights that a person enjoys. Consequently, regulating companies is similar to regulating people, with all the difficulties that presents.

Cognitive Domain: Analysis Answer Location: Throughout Chapter Difficulty Level: Hard

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