Chapter 1

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Chapter 01
The Corporation and Its Stakeholders

True / False Questions

1. General Motors has been called a "template for 21st century capitalism." True False

2. A business is any organization that is engaged in making a product or providing a service for a profit. True False

3. Businesses and society are independent of one another.
True False

4. The stakeholder theory of the firm argues that a firm's sole purpose is to create value for its shareholders. True False

5. The instrumental argument for the stakeholder theory of the firm says that companies perform better if they consider the rights and concerns of multiple groups in society. True False

6. The normative argument for the stakeholder theory of the firm says that the stakeholder view is simply a more realistic description of how companies really work. True False

7. Nonmarket stakeholders are those that engage in economic transactions with the company as it carries out its primary purpose of providing society with goods and services. True False

8. Market stakeholders include nongovernmental organizations and the media. True False

9. Each stakeholder group has only one source of power in relation to a firm. True False

10. The interests of different stakeholders often coincide. True False

11. Stakeholders involved with one part of a company often may have little or no involvement with another part of the company. True False

12. Some scholars have suggested that managers pay the most attention to stakeholders possessing the least salience. True False

13. Urgency refers to the extent to which a stakeholder's actions are seen as proper or appropriate by the broader society. True False

14. A stakeholder map is a useful tool, because it enables managers to see quickly how stakeholders feel about an issue and whether salient stakeholder tend to be in favor or opposed. True False

15. The external environment of business is static.
True False

Multiple Choice Questions

16. Which statement is not correct about the business-society interdependence? A. Business is a part of society.
B. Business is separated from the rest of society by clear boundaries. C. Business activities impact other activities in society.
D. Actions by governments rarely significantly affect business.
17. Which of the following examples best illustrates the boundary exchanges a company would encounter according to the general systems theory? A. An industrial company installs new equipment in its plant to comply with environmental regulations. B. A software company develops an application for a client.

C. A purchasing department employee negotiates a price on parts from a supplier. D. All of the above.

18. Which of the following is the result of an inseparable relationship between business and society? A. All business decisions have a social impact.
B. The vitality of business depends on society's actions and attitudes. C. The survival of business is independent of society.
D. Both A and B, but not C.

19. Which of the following statements is not true about the interactive social system? A. Business and society need, as well as influence, each other. B. The boundary between business and society is clear and distinct. C. Business is a part of society, and society penetrates far and often into the business. D. Business and society are both separate and connected.

20. A firm subscribing to the ownership theory of the firm would mainly be concerned with providing value for its: A. Shareholders.
B. Customers.
C. Board of Directors.
D. Community.

21. Corporations who run their operations according to the stakeholder theory of the firm create value by: A. Innovating new products.
B. Increasing their stock price.
C. Developing their employees' professional skills.
D. All of the above.

22. Which argument says that stakeholder...
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