Ethics Exam 2

Front 1

Primary stakeholders

Back 1

Shareholders, management, customers

Front 2

Secondary stakeholders

Back 2

Activists, government, society

Front 3

Principle of corporate legitimacy

Back 3

Company should be managed for benefit of its stakeholders who participate in decision making

Front 4

Stakeholder fiduciary principle

Back 4

Managers must act in interest of stakeholders to ensure survival of the firm

Front 5

6 rules of stakeholder theory

Back 5

(1) entry and exit (2) governance (3) externalities (4) contracting costs (5) Agency (6) limited immortality

Front 6

Entry and exit

Back 6

Clear rules of how one enters and exits a corporation

Front 7

Governance

Back 7

How rules governing relationship between stakeholders and corporation can be changed

Front 8

Externalities

Back 8

There are certain costs imposed on a group which does not directly benefit from the actions of corporation

Front 9

Contracting costs

Back 9

Each party to a contract should bear the costs equally or in the proportion to their advantage in the corporation

Front 10

Agency

Back 10

C.E.O. or manager acts as an agent of corporation; has responsibility to shareholders and stakeholders

Front 11

Limited immortality

Back 11

The success of a corporation and its stakeholders depends on them existing through time & built to last

Front 12

Limitations of stakeholder theory

Back 12

Lacking guidance (prioritizing stakeholders), assessing impacts, betrayal if fiduciary responsibility (cannot come in and change structure of everything)

Front 13

Homo Economicus

Back 13

(1) humans are self interested (2) humans are rational (3) Humans learn from their mistakes & change their behavior if a choice fails to improve their well being

Front 14

Macro economics

Back 14

Keynesian and Chicago schools

Front 15

Micro economics

Back 15

Focuses on economic actors (families, firms, government agencies). Austrian and neoclassic schools.

Front 16

Neoclassic economists

Back 16

Adam Smith, David Ricardo, Thomas Malthus

Front 17

Adam Smith

Back 17

Gross national product and supply and demand

Front 18

David Ricardo

Back 18

Diminishing returns and comparative advantage

Front 19

Thomas Malthus

Back 19

Theory on population & scarcity

Front 20

Assumptions of Classic Economics

Back 20

Speak to non-government interference, people pursuing self interest, market disciplining, economic activity, appropriate measure of success, contributions to society firms make by engaging in business

Front 21

Choice (market theory)

Back 21

Consumers are supreme because they find preferences and do research to find perfect information.

Front 22

Efficiency (market theory)

Back 22

Attractive opportunities compel firms to enter market, firms get rewarded which lead to efficiency

Front 23

Competition (market theory)

Back 23

Prevent administered pricing and monopolies

Front 24

Choice (market failure)

Back 24

Firms may make it a point to limit info/give consumers misinformation

Front 25

Competition (market failure)

Back 25

Market is not competitive

Front 26

Efficiency (market failure)

Back 26

Negative externalities

Front 27

Limitations with economic outcomes

Back 27

(1) injurious hazards (2) benefit-cost analysis (3) dependence effect

Front 28

Pareto optimality

Back 28

A condition in which the scarce resources of society are being used so efficiently, and goods and services are being distributed so effectively, that it would be impossible to make any single person better off without harming someone else (max social benefit min social cost)

Front 29

Objections to economic theory

Back 29

(1) exclusions of segments of society (2) presence of injurious practices (3) absence of competitive markets

Front 30

Problems with legal requirements

Back 30

(1) negative injunctions (2) insufficient participation (3) lengthy delays

Front 31

John Locke — gov through cooperation

Back 31

Natura of humans to build communities, government evolved

Front 32

Thomas Hobbes — government through conflict

Back 32

Government required bc humans are natural fearful, predatory, greedy. Quick to lie, cheat, steal, and kill. Government protects us from other people.

Front 33

Social contract theory

Back 33

Communal interest takes precedence over self interest of individuals

Front 34

Laws should be

Back 34

Consistent, universal, published, accepted, enforced

Front 35

Laws should be supported by

Back 35

Legislature, courts, police

Front 36

Laws that govern business activities should

Back 36

(1) regulate competition (2) protect consumers (3) promote equity and safety (4) preserve the natural environment (5) encourage ethical conduct