Mgmt 320: Midterm #1

Front 1

What makes an issue a moral issue?

Back 1

Definition 1:
Consequences for others
Choice (volition)

Definition 2:
Violation of a principle

Front 2

Formal Responsibility
Material Responsibility

Back 2

Formal Responsibility:
Support the decision?
Want to see it implemented?

Material responsibility:
Do not support the decision?
Do not want to see it implemented?

Front 3

Other Issues in the Vandivier Case

Back 3

Escalation of commitment
“Shoot the messenger” syndrome
“I just do as I’m told” (obedience to authority)
Internal politics (who writes the report)
“Engineering license”
“You don’t see the big picture”
Does loyalty pay?

Front 4

What is the purpose of business in society?

Back 4

“…use the resources of society to create new wealth”
“…make a profit by producing goods and services at prices attractive to consumers”
“Business management must always, in every decision and action, put economic performance first.” (Peter Drucker)

Plus one from a prominent financial economist, "the appropriate objective of the corporation is to maximize the wealth of its shareholders" (from Michael Jensen)

Front 5

What are the terms of the business/society social contract?

Back 5

Regarding the social contract, the authors claim that: “…the public believes that business has social responsibilities beyond making profits and obeying regulations. If business does not meet them, it will suffer.” S & S, p. 8

Front 6

Corporate Governance

Back 6

The exercise of authority over members of the corporate community based on formal structures, rules, and procedures.

Front 7

The Power Triangle

Back 7

The exercise of authority over members of the corporate community. It is based on rules that define power relationships between shareholders, board of directors and managers.

Front 8

Corporate Charter

Back 8

A document issued by a state government to create a corporation. Corporate charters specify the purpose of the corporation, usually "any lawful act for which a corporation may be organized," and specify basic rights and duties of stockholders, directors and officers.

They include provisions about numbers of shares and classes of stock authorized, dividends, annual shareholder meetings, size of boards, and procedures for removing directors.

Usually no more than 10-20 pages.

Front 9

Fiduciary Responsibility

Back 9

The legal duty of a representative to manage property in the interest of the owners.

Front 10

Bylaws

Back 10

Rules of corporate governance adopted by corporations, or rules the company writes to clarify in detail how broad provisions of its charter will work.

Front 11

Delaware

Back 11

Delaware charters almost 50% of all public corporations in the United States.

Its corporate laws are friendly toward directors and managers. It also has a special Chancery Court that handles only business cases and is very friendly to boards and managers.

Front 12

Legal Line of Power: Legal Theory + Reality

Back 12

The legal line of power in state charters and incorporation laws runs from:

Legal Theory: State to Shareholders to Directors to Managers

Reality: State to CEO to Directors to ALL Shareholders

Front 13

Shareholder's Rights

Back 13

1. Sell their stock
2. Vote to elect directors and on other corporate issues
3. Receive information about the corporation
4. Receive dividends
5. Sue the corporation if directors and officers commit wrongful acts
6. Acquire residual assets in case of bankruptcy, but only after payment of creditors and bondholders

Front 14

Proxy Card

Back 14

Stockholders are invited to attend an annual meeting and vote their shares, if they do not attend, they can fill out a ballot-like proxy card/form that gives management the authority to cast votes for them as they indicate.

Front 15

Proxy Statement

Back 15

A booklet of information sent to stockholders before annual votes on directors, executive pay, and other matters.

Front 16

Shareholder Resolutions/Proposals

Back 16

The Securities & Exchange Commission (SEC) set forth proposal requirements and a company can reject a proposed resolution for any of 13 reasons.