80 Cards in this Set
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Corporate Governance
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The system by which businesses are directed and controlled
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1. Shareholders
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a. decide who is to serve on the Board of Directors.
b. approve/reject bylaw changes
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2. Board of Directors
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a. creates/approves corporate policies
b. chooses Board Chair
c. approves/disapproves recommendations by the Audit, Compensation and Corporate Governance Committees
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3. Executive Committee
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a. chooses the agenda for Board meets.
b. approves major contracts
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Outside Board Member (director)
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One who owns stock but derives no income from the organization other than dividend income
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Inside Board Member (director)
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One who derives an income from the organization other than dividend income
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Two-Tiered Board
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One where the executive committee makes all the real decisions leaving the other members of the board with no real power
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Vested Stakeholder
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An organization or individual with a claim to the
organization's future earnings
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Stakeholders
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Vested interests as well as those who are or can be affected by the operations of the organization
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Say on Pay
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The right of shareholders to have a direct vote regarding executive compensation
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Special Purpose Entities (SPE)
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limited partnerships or companies created to fund or manage risks associated with specific assets
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The Sarbanes-Oxley Act
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Create a governmental accounting board and mandatory compliance with a broad range of accepted accounting procedures relating to the management, reporting, and auditing responsibilities of businesses and financial institutions
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The Problem of Agency
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the use of one's decision making power to direct the resources of an organization to one's personal interests
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Chinese Fire Wall
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Where one division in a firm cannot ethically reveal "material" information to another division
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Mosaic Analysis
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A method used by stock market analysts to gather information about a corporation's character and financial stability
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Passive Unethical Behavior
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The deliberate hiding of material financial or product information so as not to harm sales volume
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Deception
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This involves, misleading language, illusions, hidden costs, and the obscuring of disadvantages
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Caveat Emptor
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This makes consumers responsible for transactions on the grounds that they should know all vendors are dishonest
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Churning
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sales commissions are increased by a broker by buying and selling a client's assets more often than needed
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Planned Obsolescence
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a product's usage time is deliberately shortened
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Unsuitability
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a good or financial product is sold even though the seller knows it will not meet the buyer's needs
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Bundling
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high profit but less desired products and services are packaged with high demand goods
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Dependence Creation
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companies create a market instead of servicing an existing market
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Staple
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A product whose life cycle can span many generations
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Fad
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A public desire for product whose use is so superficial the desire is based more on whim than need
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Price Manipulation
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we encounter underpricing, discriminatory pricing, and price fixing
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Underpricing
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a large company engages in price manipulation to drive a smaller competitor out of business
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Discriminatory pricing
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an industry engages in price manipulation by lobbying for laws which allow them to sell their product to certain buyers at higher costs
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Price fixing
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a company engages in price manipulation by conspiring with a competitor to divide a market
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The marginal utility of money
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The increased quality to life, or financial return, brought on by the last dollar spent
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The marginal utility of a good
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The value to a consumer created by a good's last incremental unit of consumption
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Shadow pricing
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The comparing of free market purchasing practices in order to assign dollar values to quality-of-life goods or even to life itself
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Organization for Economic Cooperation and Development (OECD)
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Promotes ten elements common to many business codes of conduct
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UN Global Compact
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Promotes international "good corporate citizenship"
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Concepts and Principles
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Underlie a code's guidelines
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General Policies
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General recommendations that tell how, in general situations one is to apply the code's principles
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Specific Policies
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General recommendations are analyzed into specific activities and how they are to be handled
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Passive Corruption
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No acceptance of unsolicited gifts
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Active Corruption
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No giving of solicited or unsolicited gifts or a request made for a gift in a quid pro quo arrangement
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A failure in reliability
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a. skips meetings or is chronically late
b. can't get reports in on time
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A failure in initiative
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a. never supererogates
b. needs pushed even for the required
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Supererogation
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To do more than is required
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A failure in responsibility
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a. tends to blame others for all errors
b. contributes little to team assignments
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A failure in maturity
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a. more attracted to play than work
b. generally disorganized, messy
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A failure in sensitivity
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a. gossipy and critical of others
b. arrogant, rude, or disrespectful
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A failure in loyalty
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a. defiant to organizational rules
b. has a reputation as a job-jumper
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Teleological honor
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The view that businesses and professionals owe it to themselves and others to "be all they can be"
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Hedonism
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the view that pleasure and happiness are the highest goods
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Epicureanism
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The view that pleasure and happiness are best attained through friendship, liberty, and simplicity in the material goods of life
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Maximalism
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the view that any proper action is worthy of being carried out to its fullest extent
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Proactive CSR
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The actions of an organization that are targeted towards the achievement of a social benefit over and above maximizing profits for its shareholders and meeting all its legal obligations
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Passive CSR
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The perspective that the only obligation of a corporation is to maximize profits for its shareholders in the provision of goods and services that meet the needs of their customers
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Proactive Approach
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The perspective that a corporation has an obligation to society over and above the expectation of its shareholders
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Pre- Depression Model
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Pursuit of profit is constrained by an obligation to do no harm to others
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Market failure
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the inability of a sales transaction to include the full cost of a good or service
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Post-depression Model
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Producers are best viewed as social creations organized to serve social goals through government regulation (Friedman)
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Contemporary Model for CSR
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Producers should be proactive in making their community a better place to live
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Market failure awareness
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Companies often create profits from activities that create costs for third parties
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Changed corporate image
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More and more the public sees corporate profits as primarily going to its officers and the rich
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Sustainability
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There is now the realization that natural resources and habitats are being destroyed at a record pace by perfectly legal corporate activities
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Globalization
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There is now the realization that Western businesses potentially profit from foreign unprotected workers and environments
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Failure of the public sector
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The public is losing confidence in government's ability to correct local community problems
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Libertarianism
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the view that individuals should, as much as possible, be free of government and social initiatives
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Libertarian Robert Nozick's entitlement theory
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The distribution of goods should be made, not by a a princple, but by the validity of prior events
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Free Enterprise
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Economic system where the decision as to what is to be produced is determined by individual citizens allowed to own the tools of production
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Free markets
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Economic activity where the decision as to what is to be purchased is determined by individual citizens allowed to keep the major portion of their income
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Adam Smith's invisible hand
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The collective good is maximized when each individual is allowed to pursue his or her own self interest within the law
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Pareto Improvement
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Any free market exchange of goods which makes both parties better off
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Pareto Optimality
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That point in free markets where the exchange of goods is so efficient that one more exchange would make someone feel worse off
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Capitalism
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Free market system using money as an exchanged commodity
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Usury
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The rental of money at unfairly high interest rates
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The labor theory of value
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the view that profits generated by capitalism are unethical in that only labor creates wealth
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Socialism
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Economic system where the decision as to what is to be produced is determined by a government allocating the tools of production to itself and its own contractors
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Communism
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View that for socialism to work government must also direct individual career choices
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Zero-Sum Game
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An exchange of goods which makes one party better off and one worse off
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Karl Marx's
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According to ability to each according to need
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John Rawl's Veil of Ignorance
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One should promote a society in which he or she would want to live regardless of his or her status at birth
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Egalitarianism
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The view that society should promote the equal treatment of every citizen
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Social Justice Theory (generic)
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The view that government, business, and professional ethics should serve the goal of equal opportunity
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Social Justice Theory (managerial)
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The view that every economic right granted by a society carries with it an economic responsibility to that society
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BCOR 380: Exam 1