Dr. MatherlyMAN4701STUDY GUIDE 3SPRING 2013Business & SocietyEXAM 3CHAPTER 6• Globalization: refers to the increasing movement of goods, services, and capital across national boarders. Globalization is a process- that is, an ongoing series of interrelated events. International trade and financial flows integrate the world economy, leading to the spread of technology, culture, and politics. • Factors of the Acceleration of Globalization:o Technological innovation: Sophisticated software, Internet, fiber optics, wireless, and satellite technologies, among others, have made it easier and faster for companies to communicate with employees, partners, and suppliers all over the globe in real time. In the words of Thomas Friedman, the world has become increasingly “flat,” as technology has leveled the playing field and allowed all to participate on the equal footing in global commerce. o Transportation systems: Improvements in transportation- from air freight, to high speed rail, to new generations of oceangoing vessels- enable the fast and cheap movement of goods and services from one place to another. o The rise of major transnational corporations: Big, well-capitalized firms are better equipped to conduct business across national borders than smaller, local companies. o Social and political reform: Critical changes, including the ride of dynamic growth economies on the Pacific Rim and the collapse of the former communist states of central and Eastern Europe, have opened new regions to world trade. • Benefits of Globalization: o Globalization tends to increase economic productivity; more is produced with the same effort. David Ricardo pointed out, productivity rises more quickly when counties produce goods and services for which they have a natural talent; this is called the theory of comparative advantage. o Globalization also tends to reduce process for consumers. If a shopper in the United States goes into Walmart to buy a shirt, he or she is likely to find oneDr. MatherlyMAN4701STUDY GUIDE 3SPRING 2013at a very reasonable price. Walmart sources its apparel from all over the world, enabling it to push down productions costs. o Globalization also benefits consumers by giving them access to a wide range of diverse goods and the latest “big thing” Teenagers in Malaysia can enjoy the latest Tom Cruise or Will Smith movie, while American children can play with the new Nintendo Wii games from Japan. o For the developing world, globalization also brings benefits.  It helps entrepreneurs the world over by giving them all countries access to foreign investment funds to support economic development.  Globalization also transfers technology. In a competitive world marketplace the best ideas and newest innovations spread quickly. o The futurist Allen Hammond identifies two additional benefits of globalization. First, he says that world trade has the potential of supporting the spread of democracy and freedom: “the very nature of economic activity in free markets requires broad access to information, the spread of competence, and exercise of individual decision making throughout the workforce- conditions that are more compatible with free societies and democratic forms of government than with authoritarian regimes.  Second, global commerce can reduce military conflict by acting as a force that binds disparate peoples together on the common ground of business interaction. “Nations that once competed for territorial dominance will now compete for market share, with money that once supported military forces.”• Costs of Globalization: o One of the costs of globalization is job insecurity. As businesses move manufacturing across national borders in search of cheaper labor, workers at home are laid off. Jobs in the domestic economy are lost as imports replace homemade goods and services. o Another cost of globalization is that the environment and labor standards may be weakened as companies seek manufacturing sites where regulations are most lax. Companies desire locations with few environmental protections, weak regulation of occupational health and safety, hours of work, and discrimination and few rights for unions.Dr. MatherlyMAN4701STUDY GUIDE 3SPRING 2013o Globalization prevents individual nations from adopting policies promoting environment or social objectives, if these discriminate against their products. o Another cost of globalization is that it erodes regional and national cultures and undermines cultural, linguistic, and religious diversity. Global commerce makes us all very much the same. o With respect to the point that globalization promotes democracy, critics charge that market capitalism is just as compatible with despotism as it is with freedom. Chapter 14• Rights Shareholders have in a Corporation : o To receive dividends, if declared.o To vote on:  Members of board of directors Major mergers and acquisitions Charter and bylaw changes Proposals by stockholderso To receive annual reports on the company’s financial condition.o To bring shareholder suits against the company and officers.o To sell their own shares of stock to others. • Ways Shareholder Activism attempted to influence the behavior of Corporate Boards:o Institutional Investors: have become more assertive in prompting the interests of their members. One reason institutions have become more active is that it is more difficult for them to sell their holdings if they become dissatisfied with management performance. o Social Investment: the use of stock ownership as a strategy for promoting social objectives. This can be done in two ways: through selecting stocks according to various social criteria, and by using the corporate governance process to raise issues of concern.Dr. MatherlyMAN4701STUDY GUIDE 3SPRING 2013 Stock Screening: Shareholders wish to choose stock based on social or environmental criteria often turn to screened funds. A growing number of mutual funds and pension funds use social screens to select companies in which to invest, weeding out ones that pollute the environment, discriminate against employees, make dangerous products like tobacco or weapons, or do business in countries with poor human rights records.  Social Responsibility Shareholder Resolutions: Another important way in which shareholders have been active is by sponsoring social responsibility shareholder resolutions, a resolution on an issue of corporate social