Reading...
Play button
Play button
Use LEFT and RIGHT arrow keys to navigate between flashcards;
Use UP and DOWN arrow keys to flip the card;
H to show hint;
A reads text to speech;
65 Cards in this Set
- Front
- Back
|
Environment of American business
|
capitalism and free market economies
|
|
|
Capitalism
|
economy without any government intervention of any kind, market driven with two classes: owners and workers
|
|
|
Self-interest
|
look out for own financial gains
|
|
|
Invisible hand
|
competition helps create market (survival of the fittest)
|
|
|
Theoretical tenant
|
people are good and if indivuduals maximize wealth, they will share the wealth and society will benefir from pure capitalist economy.
Problem?: people aren't good |
|
|
Industrial Revolution
|
turning point to economic theory
Assembly line is part of industrial revolution, opportunity to make more products efficiently and faster |
|
|
President Reagan
|
dealt with de-regulation of airlines, greater competition because airlines wanted into certain routs so prices kept dropping
|
|
|
Milton Friedman
|
professor at university of chicago, novel piece prize winner in economics, economic advisor for reagan
|
|
|
Social Responsibility (Friedman)
|
doesn't belong in business, free markets should thrive on its own, businesses don't have social conscience
|
|
|
Corporate Philanthropy (Friedman)
|
taxing shareholders
|
|
|
Executive Responsibilities (Friedman)
|
make economic decisions for social reasons it isn't in the best ineterst of the shareholders
|
|
|
Socialism as an economic system(Friedman)
|
view that political rather than market mechanisms are used to determine the allocation of scarce resources
|
|
|
capitalism (Friedman)
|
trickle down economics
|
|
|
socialism (Friedman)
|
government controls, everyone deserves same amount
|
|
|
Responsibility (Friedman)
|
to make money
|
|
|
Who came up with capitalism?
|
Adam Smith
|
|
|
Freeman
|
"Managers bear a special relationship to the stockholders inthe firm since stockholders own shares in the firm, they have certain rights and privelages, wihich must be granted to them by management as well as by others
|
|
|
Managerial capitalism
|
in return for controlling the firm (in the interst of the stockholders), managers can pursue market transactions with other stakeholders in an unconstrained way
|
|
|
Legal Arguments (Freeman)
|
law constrains stockholder interests at the expense of other claimants of the firm, though in genderal the intersts of other stakholders are subordinated to the claims of stockholders
|
|
|
Economic Arguments (Freeman)
|
in it pure ideological form managerial capitalism seeks to maximize the interst of stockholder. In its perennial criticism of gov't regulation, managemnet esopuses the 'invisible hand' doctrine
|
|
|
Why invsible hand doesn't work
|
monopoly power, externalities (effecst on some party that doesn't have a choice whose inetersts are not taken in consideration), free riders, moral hazard (likelihood that a contract encourages riskier choices that owuld be made w.o that contract, due to protection from risk)
|
|
|
Premise
|
implemenations of stakeholder management principles in the long run, mitigates the need for any kind of government intervention/regulation
|
|
|
Role of managers (Freeman)
|
to manage relationships between different stakeholders
-balancing multiple claims of conflciting stakeholders -a firms survival could be in jeopardy when relatinoships between stakeholders become iimbalanced |
|
|
Stockholder theory
|
purpose of the firm is to maximize the welfare of stockholders either because of property rights or because such maxmization leads to the greatest good.
|
|
|
stakholder theory
|
says the reason for paying returns to owners is not that they own company
|
|
|
Why do we need laws
|
constraints on power, define relationships among members of society, maintain order, equal opportunities
|
|
|
How do laws get enforced
|
Judiciary make decisions, members of society make sure laws are maintained
|
|
|
Why is it important to have a set of laws that odon't change arbitrarily form one incident to the next
|
people won't be able to keep up and know which law is right, issue of fairness, no consistncy of laws results in no meaning
|
|
|
What is the role of voluntary compliance by individuals?
|
most people will follow the law without having to be forced to do something
|
|
|
Laws set the floor of our behavior, not the ceiling
|
laws are basic foundation, but interpretation varies and doesn't mean buinesses are doing whats right. Set standard and not cap what we expect people to do.
|
|
|
Hoebel: functions of laws
|
-define relationships among the members of society establishing what activities are okay and not okay
-to allocate authority-who gets to use force -to deal with trouble cases -to adapt and redefine relationships as necessary as life changes |
|
|
What it meants that the law requires purposeful definition of relationships (Selznik)
|
-law needs to be based on social norms
-law derives its working principles from culture, the 'norms' of society are engrained in culture -law sets expectations, individual to individual, group to group -involves re-defining relationships as consitions change(adaptable) |
|
|
Selznick article 'ideal of legality'
|
legality or rule of law is necassary to have an organized, collective society
|
|
|
'Ideal of legality'
|
-necessary element to limit authority by social norms
-legality imposes an environment of constrain, tell you what you can't do -legality is about how policies and rules are made and applied, rather than the content of the rules -arbitrary (having different outcomes of same problems) elements should be minimized by legal norms and decisions |
|
|
Allegory (the story of rex the king), the message
|
in order to function appropriately, society needs a set of laws to be consistent and understandable
|
|
|
Creating/maintaining a system of law may fail in the following ways(allegory of rex the king)
|
1. failure to achieve rules at all
2. failure to publicize the rules 3. use of retroactive rules (after the fact laws) 4. failure to make rules understandable 5. enactment of contradictory rules (not sure what to do) 6. rules that require conduct beyond one's control (can't comply) 7. change the rules frequently 8. failure to adminster the rules ars announced (undercuts integrity) |
|
|
Ideal decisions
|
black and white: legality, industry regulatinos, company policies, or repeat situations
|
|
|
Most decisions
|
gray area: ethics, what's 'right', what's 'best'
|
|
|
To make a decisions you need to...
|
get information: what's the scope of the issue? what products are affected? who else is or should be involved?
|
|
|
Recall? All or some?
|
Important considerations? customer and consumer perspective
|
|
|
Key business considerations
|
marketing perspective, supply chain perspective, R & D perspective, finance perspective
|
|
|
Keys to succes in decision making
|
-focus on what is right for the customer and consumer
-communcation is KEY-get decision makers in meetings/on phone -obsess over the details -alight the common goal- everyone drive towards the same end |
|
|
Legal relatinoships for business-decision-maker originate from four sources
|
1. contract law
2. tort law 3. law of agency .4. statutory/regulatory law |
|
|
Contract law
|
negotiated agreement which create legally enforceable rights and responsibilities between two negotiating parties
|
|
|
Negotiated agreement
|
-contracts must state all rights and responsibilities in form of offer by OFFERER and affirmative acceptance by OFFEREE
-only negotiated by parties of legal age and legal capacity -mututal obligations, cannot have all obligations on one side |
|
|
Tort Law
|
-civil wrong inflicted on a person/persons property
-law recognizes there are duties/responsibilities in world of commerce |
|
|
Failure to reconize ones responsibility results in a...
|
tort
|
|
|
Law of Agency
|
when one party has trust of another and is to 'act' in others best interest, there is a fiduciary resonsiblity. party who has to act in other best interest in the fidicuciary. The party on whose behalf the action is being taken is the 'principal'
|
|
|
Respondent superior
|
let the master answer, principals are liable for agents wrong doing
|
|
|
Statuatory law
|
legislative branch of government, both state and gederal, create administrative agencies to oversee certain aspects of commerce
|
|
|
Business decision makers and owners (contract)
|
-business decisions makers are obligated to earn a return on investors investments
|
|
|
Business decisions makers and owners (Law of Agency)
|
organization exec. act in fiduciary relationships/obligations
|
|
|
Business decisions makers and owners (regulatory/statuatory law)
|
how this is done is also regulated by rules promulgated by SEC as well as various statutes (sox)
|
|
|
Business decisions makers and employees
|
-employee wages (c)
-minimum wage (r) -safe working environment (OSHA) -non-discriminatory treatment (EEOC) |
|
|
Business decision maker and customer
|
-Sales contract governs actual transaction with customer (C)
-Tort law area of "product liability" identifies risk expsure of seller of defective product (T) -Government agency rules such as FTC, consumer product safety commision and court systems in tort cases are also defined relationship C, T, R |
|
|
Business decisions maker and supplier
|
purely contractual; very little government regulation other than controls on credit and arrangement
|
|
|
Business decisions maker and society (community)
|
purely regulatory (enviornmental protection)
|
|
|
warranties
|
expressed: written
implied: not written |
|
|
Common law
|
been a law forever
|
|
|
statuatory law
|
laws cities establish
|
|
|
freeman's take on managerial capitalism
|
disagrees
|
|
|
externalities
|
affects on a party that didn't have a say
|
|
|
Sherman act
|
monopolies are not allowed to exist
|
|
|
Patriot act
|
government can tap into phone lines, not as much privacy
|
|
|
Laws that effect decision maker owners
|
CFR
Contract Laws of agencies Regulatory/Statuatory |
