Deck 20: Corporate Social Responsibility

Question 1

For consumer industries, CFP is negatively correlated with CSP, whereas for industrial industries it is positively correlated with CSP.

Answer 1

False

Question 2

Social pressure results from private and public politics and is directed to selected firms and industries.

Answer 2

True

Question 3

Friedman's objection is to corporate social responsibility that is anticipated.

Answer 3

False

Question 4

Formulating integrated strategies requires consideration of the market and nonmarket environments as well as attention to moral concerns and social responsibilities.

Question 5

The separation of ownership from management and the resulting managerial discretion means that Adam Smith's market capitalism cannot coexist with managerial capitalism.

Question 6

Firms that are financially weaker face lesser social pressure, which is inconsistent with the soft-target hypothesis.

Question 7

Corporate social performance (CSP) cannot be rewarded.

Question 8

A firm that undertakes social activities motivated by moral principles will act only when there is an opportunity for profits or when forced to act by its nonmarket environment.

Question 9

Social activities could be undertaken as a perquisite for management, and if so, social performance should be greater the greater are the slack resources available to managers.

Question 10

In contrast to corporate social performance, corporate social responsibility need not be motivated by moral considerations but instead could be strategic or a response to the social pressure a firm faces.

Question 11

Ownership of the firm is never mentioned in the Roundtable statement, which suggests that the corporation exists as a legal entity.

Question 12

Corporate social responsibility (CSR) activities can strengthen local community relations and improve employee morale.

Question 13

The market perspective of Friedman leaves unresolved a number of issues about the role of business in society.

Question 14

Milton Friedman argues that the social responsibility of business is to maximize public welfare.

Question 15

Compliance with the law is an essential guide for responsible management, but reliance solely on the law is rarely sufficient.

Question 16

Managerial capitalism can result in inefficiency when the incentives of management are not structured properly.

Question 17

The results for the corporate social performance (CSP) equation provide no support for the perquisites hypothesis and strong support for the responsive CSP hypothesis. That is, better CFP results in lower CSP.

Question 18

Firms can undertake corporate social performance (CSP) because of social norms or audience effects.

Question 19

From Friedman's perspective, the responsibility of managers, serving as agents of the owners of the firm, the principals, is to maximize profits (shareholder value) by engaging in free and open competition.

Question 20

Social performance is not only self-assessed by firms but is also assessed through external monitoring and evaluation by activist and other groups.

Question 21

How can socially responsible mutual funds make takeover of firms less likely?

A) by discouraging diversification of firms and businesses that engage in social activities
B) by discouraging innovation in bleeding-edge technologies
C) by decreasing service convenience for competing firms that engage in social activities
D) by raising the share price of firms that engage in social activities

Question 22

Which of the following defines market capitalism?

A) the reliance on markets to increase the aggregate social welfare
B) the reliance on markets to direct the allocation of resources
C) the reliance on managers to direct market growth
D) the reliance on managers to increase market efficiencies

Question 23

Which of the following statements is true from Friedman's perspective?

A) The economic justification for Friedman's position is based on the premise that social causes cannot be served by firms, and citizens can never obtain complete satisfaction from corporate giving.
B) Citizens cannot obtain satisfaction from their personal giving.
C) The economic justification for Friedman's position is based on an environment in which citizens can both invest their funds in the capital markets and make personal gifts to social causes.
D) Friedman's objection is to CSR that is anticipated since the shareholders bear the cost.

Question 24

Economic theory identifies the ________ as the objective that provides the strongest incentives for efficiency.

A) maximization of social well-being
B) perpetuation of corporate ethics
C) maximization of shareholder value
D) consideration of morality

Question 25

The market for control disciplines management and directors to serve shareholder interests through mergers, acquisitions, hostile takeovers, proxy contests, and depressed market valuations.

Question 26

Which of the following is true with regard to the trust gap between firms and the public in general?

A) The greater the size of the firm, the greater the trust accorded to it.
B) The public trust in large firms is low, and criticisms of business are often viewed with a degree of credibility that is not accorded to the communication by firms.
C) The apparent lack of trust in NGOs stands in stark contrast to the trust in global companies.
D) The public trust in large firms is higher than that in smaller firms because large firms are less vulnerable to social pressures.

Question 27

The extent of corporate social responsibility (CSR) activities by firms depends on ________.

A) the number of vacant job positions in a firm
B) the role of the firm's business in society
C) the financial profits of the past five years
D) the extent of compliance with national laws and regulations

Question 28

The duty of loyalty supports both Friedman's position and the strategic use of corporate social responsibility (CSR).

Question 29

Investors prefer managerial capitalism to market capitalism.

Question 30

Milton Friedman argued that the social responsibility of business is to ________

A) reduce the trust gap between global companies and NGOs
B) identify duties based on conceptions of well-being, rights, and justice
C) minimize shareholder value
D) maximize profits

Question 31

Social responsibility focuses less on pressures and more on normative principles that identify duties based on ________.

A) conceptions of well-being
B) conceptions of nonmarket challenges
C) maximizing shareholder value
D) maximizing profits

Question 32

The duty of care pertains to conflicts of interest and requires that directors serve the interests of the corporation and its shareholders.

Question 33

A stakeholder relationship centers on ________.

A) an exchange
B) rapport with peak organizations
C) voting rights
D) a niche market

Question 34

The courts judge the discharge of the obligations of directors according to a civil law standard referred to as the duty of care rule.

Question 35

Which of the following is true of Friedman's conception of a corporation?

A) The corporation engages in involuntary transactions with both resource providers and customers.
B) In an inefficient capital market, shareholders will unanimously prefer that the firm be operated to maximize its market value.
C) The corporation is managed by shareholders who act as agents.
D) A corporation is a voluntary association of individuals who have joined together for a mutual purpose.

Question 36

According to Adam Smith, the surest way to achieve societal well-being was to ________.

A) facilitate centralized decision making and allow the government to decide on behalf of individuals
B) place resources in the hands of individuals and allow them to transact in markets
C) encourage public ownership of resources
D) rely on goodwill rather than profit incentives

Question 37

From Friedman's perspective, a conception of corporate social responsibility (CSR) that differs from shareholder value maximization must be costly and can have only two interpretations-either a political process is to be used to make decisions or ________.

A) managers are to act as agents rather than as principals
B) managers are to act as principals rather than as agents
C) shareholders are to act as principals rather than as agents
D) consumers are to act as principals rather than as agents

Question 38

Which of the following is true of the relationship between social responsibility and compliance with laws?

A) Criminal prosecution can occur under antitrust laws, securities and exchange laws, certain environmental laws, and many others.
B) Criminal law is not applicable to either firms or their managers.
C) Violations in business rarely lead to more stringent laws.
D) Individual managers and corporations are not liable for damages under statutory laws.

Question 39

Which of the following allows the accumulation of resources through retained earnings and their allocation within the firm without having to incur the transactions costs of raising funds in the capital markets?

A) market capitalism
B) a welfare economy
C) managerial capitalism
D) cooperative socialism

Question 40

Which of the following is true of Adam Smith's view of markets and resource allocation?

A) Markets allow decentralized decision making.
B) Markets discourage innovation.
C) Efficient markets depend on the goodwill of individuals.
D) Markets are usually inefficient in allocating scarce resources to the society.

Question 41

Which of the following is true of the difference between the Business Roundtable's view and Friedman's theory with regard to the conceptions of social responsibility?

A) In contrast to the Roundtable's basic view that does not admit constituencies, Friedman's theory identifies seven constituencies: customers, employees, financiers, suppliers, communities, society at large, and shareholders.
B) The Roundtable views shareholders as principals, whereas Friedman views them as providers of capital risk.
C) In contrast to the Roundtable's perspective, the principals in Friedman's theory are managers.
D) The objective of a corporation is not as clearly identified in the Roundtable statement as it is in Friedman's theory.

Question 42

Which of the following is true with regard to boards of directors?

A) The courts judge the discharge of the obligations of directors according to a civil law standard referred to as the duty of care.
B) Under the business judgment rule, actions taken by the board are generally subject to judicial review.
C) Board members have legal obligations that generally fall into categories referred to as the duty of loyalty and the duty of care.
D) Directors cannot be held liable even when they do not exercise due care.

Question 43

________ means that management and the board have a substantial range of discretion in deciding the extent of corporate social responsibility.

A) The business judgment rule
B) The duty of loyalty
C) The duty of care
D) Market capitalism

Question 44

Which of the following is true with regard to corporate social performance?

A) Responsive corporate social performance increases social pressure that affects financial performance.
B) Responsive corporate social performance is always rewarded by customers.
C) Moral considerations do not motivate corporate social performance.
D) Corporate social performance need not be motivated by moral considerations but instead could be strategic or a response to the social pressure a firm faces.

Question 45

Empirical studies provide a picture of the landscape in which firms operate, but it does not provide a roadmap for individuals firms. What is the challenge faced by individual firms?

Question 46

A firm could be a soft target for social pressure because ________.

A) it has, in the past, been largely unresponsive to social pressure
B) it has, in the past, formed strategic alliance with several peak organizations
C) it is financially strong
D) it is vulnerable to brand or reputation damage

Question 47

Can corporate social performance (CSP) be rewarded? If yes, how? If no, why?

Question 48

Define corporate social performance (CSP).

Question 49

The framework for corporate social performance (CSP) begins with ________.

A) managers who can strategically manipulate market forces to maximize shareholder value
B) firms which have demonstrated consistent growth over a period of time
C) individuals who can allocate their resources among consumption goods, investments in the shares of firms, and direct contributions to social causes
D) firms which have a high rate of attrition

Question 50

Which of the following is an example of morally motivated social performance?

A) An international retailer that sells diamond jewelry strengthened its sourcing and auditing policies after allegations that diamonds were being imported from conflict-ridden countries in Africa.
B) A leading cosmetic company that supports animal rights presented a petition to the European Union against the use of whale oil in products to raise awareness about the issue.
C) An infant formula manufacturer stopped exporting breast milk substitute baby food to developing countries after a boycott campaign that raised awareness of the product's health hazards.
D) After a worldwide campaign against obesity, a leading fast food chain introduced healthy salads and options to buy smaller portions.

Question 51

Which of the following is true with regard to social pressure as a motivator of corporate social performance (CSP)?

A) Social pressure cannot affect the financial performance of a firm directly.
B) Social pressure is rarely targeted to individual firms or industries.
C) Responsive CSP could relieve social pressure that affects financial performance.
D) The presence of social pressure discourages firms to conduct social activities.

Question 52

The Business Roundtable view of a corporation considers ________.

A) managers the agents
B) suppliers as the providers of revenue for the firm
C) a corporation as an entity whose existence depends on society's approval
D) shareholders as principals

Question 53

Which of the following social activities can be referred to as corporate social performance?

A) social activities that involve the public redistribution of private property
B) social activities that increase the shareholder value
C) social activities that increase sales and revenue
D) social activities that involve the private provision of public goods or private redistribution

Question 54

Corporate social responsibility focuses on the responsibility of a firm for social performance. Where does that responsibility and duty originate?

Question 55

Even Friedman's dictum to maximize profits is subject to the limits of the law and ethical custom, both of which leave a gray area between what is clearly responsible and what is clearly irresponsible. Under such circumstances, where should managers obtain guidance from?