Business Ethics/Public Policy Try Out 3

Which of the following are implications of agency theory? Select all that apply.

• Stakeholder claims are determined through contractual arrangements

• Shareholders deserve priority because they contribute labor

• Fiduciary duty is justified by risk-bearing

• Stakeholder interests must always be equally weighted

• Corporate structure reflects voluntary agreements

Which of the following is the strongest version of the residual risk argument?

• Shareholders own the corporation and therefore deserve control

• Shareholders face unique vulnerability that cannot be mitigated contractually

• Shareholders invest more money than other stakeholders

• Shareholders are morally superior to other stakeholders

Which of the following most directly challenges the necessity of fiduciary duty?

• Shareholders are rational investors

• Stakeholders voluntarily enter contracts

• Shareholders can diversify their investments

• Firms operate in competitive markets

Which of the following best explains why “exit” is insufficient as a protection mechanism?

• It violates legal rules

• It occurs before harm happens

• It occurs after value has already been lost

• It requires government approval

Which of the following is the most accurate criticism of the “affected interests” argument?

• It ignores market efficiency

• It relies on an implausibly demanding moral premise

• It overemphasizes shareholders

• It assumes perfect competition

Which of the following scenarios would MOST strongly support normative stakeholder theory?

• A firm increases profits by cutting costs

• A firm respects contracts but ignores broader impacts

• A firm sacrifices profit to prevent serious harm to a community

• A firm maximizes shareholder value legally

Which of the following are consistent with Brennan et al.’s view? Select all that apply.

• Ethical evaluation should focus on production processes

• CSR can compensate for unethical practices

• Profit through voluntary exchange creates value

• Rent-seeking behavior is ethically problematic

• Donations define moral business

Which of the following is the most precise definition of a market failure?

• Any situation where firms lose profit

• Any government intervention

• A situation where markets fail to maximize aggregate welfare

• A situation where prices fluctuate

Indicate whether each statement is or is not a claim made by the residual risk argument:
1. Shareholders require fiduciary protection because they lack guaranteed returns (Yes/No)

2. 2. Employees should receive fiduciary protection due to job insecurity (Yes/No)

3. 3. Shareholders’ risk justifies special status (Yes/No)

4. 4. Shareholders are the only contributors to firm success (Yes/No)

Which of the following is the strongest objection to shareholder primacy from stakeholder theory?

• Shareholders lack legal rights

• Stakeholders voluntarily contract

• Excluding stakeholders undermines self-determination

• Markets are inefficient