497-163 Final Exam Questions of Ethics - Coombs

Part 2: Ethics and Governance (10 points)

The following questions on are drawn from the reading in the textbook and not from the LEGO case study. Circle the best answer among each set.

  1. Which of the following is true of stakeholders in a public stock company?
  1. They directly supervise and coordinate the manufacture of products and delivery of services.
  2. They are granted a charter of incorporation by the state and legally own company stock.
  3. They are the centerpiece of corporate governance.
  4. They are appointed by a board of directors to oversee the company’s management.
  1. According to Michael Porter, which of the following is a problem with may publicly traded companies?
  1. Shareholders of publicly traded companies do not have a legitimate claim on profits.
  2. Many publicly traded companies have defined value creation too narrowly in terms of financial performance.
  3. There is no transferability of stock ownership in publicly traded companies.
  4. The legal owners of publicly traded companies also make management decisions for the company.
  1. Which of the following perspectives best supports the Shared Value creation framework?
  1. Markets are more often than not defined by societal needs rather than economic needs.
  2. Failing to create value for society almost always reflects on the bottom line.
  3. A firm’s competitive advantage depends on pitting economic and societal needs in a trade-off.
  4. Externalities such as pollution, wasted energy, and costly accidents usually create internal costs.
  1. Why does Michael Porter recommend expanding the customer base of an organization in terms of the Shared Value framework?
  1. Doing so could yield significant business opportunities that could improve the standard of living of the poor.
  2. Doing so is the best way to ensure that shareholders have the most legitimate claim on profits made by the organization.
  3. Doing so could be the only way to meet shareholder expectations in a highly competitive market.
  4. Doing so will help to prevent the inclusion of more nontraditional partners into internal firm value chains.
  1. The informational advantage that agents possess over principals is often based upon the fact that:
  1. The information is extremely secure and protected from exposure to anyone outside the company.
  2. Public stock companies are characterized by information symmetry.
  3. Insiders are the first to learn about important developments before the information is released to the public.
  4. Agents are legally permitted to freely trade the information in exchange for benefits, unlike principals.
  1. Which of the following is true of business ethics?
  1. Certain notions such as fairness, honesty, and reciprocity are universal norms.
  2. Business ethics is an agreed-upon code of conduct in business, based on laws.
  3. The perception of what is ethical and what is not is similar across different cultures.
  4. Business ethics needs to be codified into law in order to be followed.
  1. Ethics is:
  1. Not synonymous with law.
  2. Impossible to codify into law.
  3. Always universal and cannot differ between cultures.
  4. The minimum acceptable standard in business practice.
  1. Which of the following is true of the codes of conduct of an organization?
  1. They detail how the organization expects an employee to behave and to represent the company in business dealings.
  2. They are a reiteration of the laws pertaining to business dealings in a corporate environment.
  3. They are a guide to determine what is lawful and what is unlawful.
  4. They help the board of directors and the CEO implement shareholder capitalism.
  1. One of the ways to foster ethical behavior in employees is to:
  1. Avoid codifying organizational culture.
  2. Create a control system that encourages desired values.
  3. View clients as counter parties to transactions.
  4. Align the vision statement of the organization with its informal culture.
  1. Which of the following is an implication for the strategist in the context of corporate governance and a company’s success?
  1. Very few and specific corporate governance mechanisms can be effective in addressing the principal-agent problem.
  2. Effective corporate governance and solid business ethics are critical to gaining and sustaining competitive advantage.
  3. Leading by ethical example often has a less strong effect on employee behavior than words.
  4. A firm that restricts its responsiveness to stockholders (and no other stakeholders) and keeps them committed to its vision will be successful.