Mgmt 423 Test 2 Ewu

Front 1

Originally corporations (from approximately1712-1889) were different from corporations today. How were they different?

Back 1

Owner were liable, Could notpurchase other corporations, Limited to a single purpose, Limitedlifetime, Size was limited, Forpublic benefit

Front 2

What was the original purpose of the 14thAmendment? What happened to it?

Back 2

To protect the recently freed slaves(13th Amendment); could not be deprived of life,liberty, or property without due process of law.

Front 3

How are corporations different from real people?

Back 3

a) no feelings

b) no conscience

c) no death

Front 4

4. Define thecorporate concept of ‘externalizing costs.’ What are the implications of this concept for the common good?

Back 4

To push the costs off operations orwaste onto a third party not directly involved in the transaction. The costs of low prices (jobs sent overseas,pollution, etc.) dumped on public, causing tax money to be spent on repairingthe damage rather than on providing needed infrastructure or services.

Front 5

In the film, Michael Walker (Executive Directorof the Fraser Institute) discussed the implications of the “privatization” ofeverything. What did he believe thatowners would do that justified his reason for believing in such privateownership?

Back 5

Act as stewards of theresource, maintain the resource, be accountable for the resource.

Front 6

The earliest forms of corporations date back to:

Back 6

India & Ancient Rome

Front 7

How was the Roman Catholic Church of the MiddleAges similar to today’s corporations?

Back 7

It existed as an entity that wasmore than the sum of its members; therefore giving it life perpetually.

Front 8

What form of business was Andrew Carnegie’ssteel industry?

Back 8

Limited partnership

Front 9

What form of business was John D. Rockefeller’sStandard Oil

Back 9

Trust

Front 10

Was the Boston Tea Party similar to the anti-corporatedemonstration (the Battle of Seattle) in Seattlein 1999? Explain.

Back 10

The Boston Tea Party was a protestagainst a government established monopoly; the Battle of Seattle was a protestagainst the perceived globalmonopolies established by governments cooperating on to establish trade policy,monetary policy, etc.

Front 11

From roughly 1810 to 1900, the Supreme Court andState Courts tended to side with:

Back 11

Corporations

Front 12

What was the argument made in one of the papersconcerning corporations and “unalienable rights”?

Back 12

That corporations are simply anotherway to organize a business such as a sole proprietorship or partnership; notbeings with unalienable rights.

Front 13

In the “Hidden History” article, what are some of theconditions that states placed on corporations in granting their charters?

Back 13

limited lifetime, corporations terminated if exceeded charter, limited to onepurpose owners were liable, could not own othercorporations, political and charitable contributions not allowed

Front 14

What does the phrase “scaled voting” mean forcorporate governance?

Back 14

One person, one vote; largeand small shareholders had equal voting power

Front 15

During the Civil War period, corporations paidpeople for a role similar to today’s lobbyists. They were called:

Back 15

borers

Front 16

In the case 1886 of Santa Clara Countyvs. Southern Pacific Railroad (14th Amendment interpretation), isthere any doubt that the Supreme Court granted corporations “personhood”? Explain:

Back 16

there is some indication that it wasa clerical error

Front 17

What did Korten say about the relationship of money to wealth?

Back 17

Money is not wealth; it is a chitthat enables buying things. The makingof money often destroys wealth. Heindicated forms of real wealth are such things as natural resources, a skilledworkforce, a safe and stable society, an effective/honest government, etc.

Front 18

What are “finance capital” and “finance capitalism”?

Back 18

Making money out of money withoutmaking anything useful; trading rather than producing.

Front 19

Name two other forms of capital.

Back 19

1) natural2) human

Front 20

Do increases in share prices necessarily reflectan increase in productive capacity or output?

Back 20

No, since it is oftenaccomplished by cutting cost, jobs, etc. and manipulation of financial reports.

Front 21

In order to increase share prices as financial markets demand, what is an example of corporations depleting:

Back 21

a) natural capital - strip mining,dumping toxic waste

b) human capital - poor working conditions, low wages

c) social capital - union busting, relocating plantsd) institutional capital? - corruptinggovernment for favorable policies

Front 22

How did the Malaysian Forest Minister propose to increase Malaysia’s wealth?

Back 22

To cut down its forests, sell thewood, put the profits in the bank so it could earn interest.

Front 23

According to Korten, does an increase in GDP necessarily indicate an increase in our well being? What are some specific examples when this may not be the case.

Back 23

No. * Children buying guns orcigarettes * Divorces * Security devices *Environmental cleanups

Front 24

Are our political leaders able to assess the economic health of the nation using stock market increases and GDP growth as indicators of economic success? Can they confidently predict that more jobs and increased wages will follow?

Back 24

No, theycan only predict that the rich are getting richer.

Front 25

What does Korten suggest as alternatives to theglobal capitalist economy (name two)?

Back 25

* market economy

* democracy (particularly incorporations)

Front 26

What organization calculates the GDP?

Back 26

Bureau of Economic Analysis, USDepartment of Commerce

Front 27

How do they do it? What kind of information is involved?

Back 27

They do calculations based on some10,000 streams of data that describe recent economic activity in the US.

Front 28

Why are security measures protecting GDP data sostrict?

Back 28

A premature unveiling or leak of thedata would put world markets in turmoil

Front 29

Why is GDP seen as a problematic way to measurea sustainable economy?

Back 29

Because the GDP measures activitiesthat may overburden the planet, deplete natural resources beyond recovery, andpollute the planet past the tipping point.

Front 30

Does the conventional view of the GDP equate GDP growth tohow well the country and its citizens are doing? Why do many see that as misleading?

Back 30

It is common for citizens andpoliticians to equate growth of GDP with the well being of the country. It is misleading since it does not reveal askewed distribution of wealth and increasing gap between rich and poor, itcounts the value of cleaning up disasters, it counts destructive behaviors, itmasks health problems arising from the activities, and it does not show growingunemployment, etc.

Front 31

What would Adam Smith think about a measurementthat indicates that the wealth of the nation is growing when other measurementsshow that most people are getting poorer?

Back 31

It is an indication of monopolistic forces; that it is not afree market.

Front 32

Simon Kuznets, who invented many of theindicators that now include the GDP, was concerned from the start that the GDPmight be mistaken for what?

Back 32

its citizens well-being.

Front 33

How would GDP be a better measurement if it werecalculated on the median income rather than on the average income?

Back 33

Using the average income as a basisfor the calculation is distorted by top earners and corporate profits;consequently masks extreme wage inequalities.

Front 34

How is the GDP compared to the dashboard on an automobile?

Back 34

It is like having only aspeedometer on your dashboard.

Front 35

What are some of the metrics being proposed fora better “dashboard?”

Back 35

*health stats

* education

*environment

* wealthdistribution inequity

*political engagement

*quantification of natural resources (fuel gage)

Front 36

What statistical bias likely exists in the GDPmeasurement concerning public-sector benefits (i.e. the common good)?

Back 36

Public benefits and common good areundervalued leading to inadequate investment in such things as infrastructure,crime prevention, etc.

Front 37

What distinction does the article make betweenpeople’s feelings of satisfaction in making money versus enjoyment orhappiness? What policy options does thatdifference imply for government economic policy and the measurement of nationalprogress?

Back 37

Increased wealth gives people asense of satisfaction, but more money does not give us more happiness orenjoyment according to survey data. Thispresents government with the choice of two different policy alternatives; 1) Is national progress amatter of increasing the number of very rich people, or2) Is it about getting asmany people as possible into the middle class?

Front 38

What is the name of the economic theory thatjustified the CEO stock-option practices described in the article?

Back 38

Principal-agent theory

Front 39

Principal-agent theory

Back 39

To incent the agent (CEO) to act in the interest of theprincipal (shareholder) by providing a type of compensation that gave CEOs astake in the game similar to that of shareholders, in this case, stock options.

Front 40

Under that principal agent theory, how does the principle of‘shareholder return’ relate to other stakeholder interests? What stakeholders are most likely tobenefit? Which ones may be harmed?

Back 40

The principle of “maximize shareholder returns” tends onlyto benefit the major shareholders (today, mostly financial fund managers). Small shareholders are often hurt as arecustomers, employees, and communities.

Front 41

In practice, what kind of ‘shareholder return’was emphasized by the incentive that stock options gave CEO’s?

Back 41

Increasing share prices.

Front 42

List at least 4 legal tactics described in the article that firms useto manipulate the price of stock and therefore the value of stock options. List at least 2 used in the same way that areillegal.

Back 42

You can read these in the article and you should know fromyour accounting classes which ones are legal and which ones are illegal.

Front 43

How did CEO stock-options contribute to therecent corporate corruption? What aresome possible corrections?

Back 43

CEOs of major banks and fundmanagers were incented to make very risky investments and to cash in despitethe crash they caused.

Front 44

What is the name and type business of thecompany that Bogle founded?

Back 44

Founder and CEO of the VanguardGroup Inc., the 2nd largest mutual fund.

Front 45

What did Bogle think about the Wall StreetBanking and investment industries?

Back 45

That by definition they“subtract from the value created by our productive businesses.”

Front 46

What stages did Bogle say that the nation’seconomy had passed through over the past two centuries? According to Bogle, what is the current stageand does it add to or subtract from the value created by our productivebusinesses?

Back 46

agricultural

manufacturing

service

financial

Front 47

What did Bogle say is the likely percentage ofS&P annual profits generated by the finance sector? How does that compare to the energy, healthcare, manufacturing, and information technology sectors?

Back 47

33% Larger than combined profits of energy and health care; 3x as much as manufacturing and IT.

Front 48

Does Bogle suggest that the US economy is healthy and makingthings that the world will buy or simply trading pieces of paper, swappingstocks and bonds back and forth?

Back 48

Simply trading pieces ofpaper back and forth.man"

Front 49

DoesBogle seem to agree with Keynes that the financial markets are like acasino? What does the word, “croupier”mean?

Back 49

* yes*croupier – someone who collects and pays money at the gaming table