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Questions and Answers
What is the primary difference between long-term and short-term shareholders?
Which of the following is NOT a legal right of shareholders?
What is the typical size range of a Board of Directors?
In a one-tier governance system, what roles are combined into a single board?
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What is one of the main duties of the Board of Directors?
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What is the main belief of stakeholders regarding corporations?
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Which of the following groups is NOT typically classified as a market stakeholder?
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What is one type of stakeholder power described in the content?
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How do shareholders view the purpose of an organization?
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Which question is NOT part of the Stakeholder Analysis?
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What is a characteristic of non-market stakeholders?
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What distinguishes market stakeholders from non-market stakeholders?
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Which group has the legal power to influence corporate decisions?
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What common interest do employees expect from their employers?
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What power do shareholders possess regarding company operations?
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Which of the following represents a key interest of suppliers?
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What is a primary way customers exert their power over companies?
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What type of investor is categorized as 'Main Street'?
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What do governments primarily seek from businesses?
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Which type of company issues shares to the general public?
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What is a common response from consumers towards environmentally irresponsible companies?
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What power do competitors primarily leverage in the market?
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What is a prevalent belief among consumers regarding corporate responsibilities?
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Study Notes
Business and Society
- Business is an organization that makes a product or service for profit.
- Society is formed by individuals and the structures they create.
- Companies like Amazon combine business and society for greater profits.
Stakeholders and Shareholders
- Stakeholders are individuals or groups affected by a company’s decisions, policies, or operations.
- Shareholders are a type of stakeholder who own shares in a company.
- Stakeholders believe companies should benefit society, fulfill societal needs, and be accountable to stakeholders.
- Shareholders believe the company is owned by its owners, the purpose is to make profit, managers are agents of shareholders, and shareholder interests are prioritized.
Types of Stakeholders
- Market Stakeholders: directly involved in the company’s operations, including employees, shareholders, customers, suppliers, retailers, and creditors.
- Non-market Stakeholders: indirectly involved in the company’s operations, including communities, government, competitors, the general public, business support groups, and NGOs.
- Internal Stakeholders: individuals within the organization, such as employees and managers.
- External Stakeholders: individuals or groups outside the organization, such as customers, suppliers, and government agencies.
Stakeholder Power
- Voting Power: Shareholders can influence decisions through voting rights.
- Economic Power: Suppliers, customers, etc. can leverage economic power by adjusting their engagement with the company.
- Legal Power: Government through regulation and laws.
- Informational Power: Customers, activists, etc. can wield influence via information and publicity.
Stakeholder Analysis
- Identify relevant stakeholders.
- Understand the interests of each stakeholder.
- Assess the power of each stakeholder.
- Determine the likelihood of stakeholder coalitions forming.
Stakeholder Interests and Power
- Employees (Market): Fair pay, safe work environment, secure employment. Power lies in publicity, strikes, and union bargaining.
- Shareholders (Market): Return on investment (ROI) and stock value. Power lies in voting rights and accessing company information.
- Suppliers (Market): Regular orders, prompt payment, ethical treatment. Power lies in withholding orders and supplying competitors.
- Customers (Market): Value for money, safe and reliable products, accurate information. Power lies in switching to competing brands.
- Government (Non-market): Economic development, social improvements, tax revenue. Power lies in regulation, laws, and permitting business activity.
- Competitors (Non-market): Fair competition, cooperation, and new customer acquisition. Power lies in government influence and legal actions.
- General Public (Non-market): Protection of social values and minimized risks. Power lies in public pressure, government influence, and social commentary.
Consumer Perception
- Many consumers believe businesses should achieve goals while improving society and the environment.
- 42% of consumers would avoid buying products from environmentally irresponsible companies (ESG rules).
- 65% of consumers would switch to a competitor that is environmentally friendly.
Shareholder Rights and Corporate Governance
- Shareholders are investors who own a corporation through stock ownership.
- Shareholders can be individual (Main Street investors) or institutional (Wall Street investors).
- Public Limited Company: Shares offered to the public, listed on stock exchanges, and subject to demanding document filing requirements.
- Private Limited Company: Shares not offered to the public, limited number of shareholders, less stringent document filing requirements.
Objectives and Legal Rights of Shareholders
- Objective: Increase in stock price (capital gain) and ROI through dividends.
- Legal Rights: Receiving dividends, voting on board members, major mergers/acquisitions, bylaw/charter changes, selling shares, receiving financial reports, and suing the company and officers.
Corporate Governance
- The process of controlling and governing a company through internal systems, balancing diverse interests.
- Shareholders → Board of Directors → Top Management
- Board of Directors: Typically 9-11 members, average tenure of 8-10 years, may include CEOs, major shareholders, bankers, etc.
- Board of Directors Duties: Establishing corporate decisions, developing strategies and policies, protecting stakeholder interests, evaluating management performance, and selecting top-level personnel.
Corporate Governance Systems
- One-tier system (common in US): One board combining executives and supervisors (e.g., Amazon).
- Two-tier system (common in some EU countries): Two separate boards, a supervisory board and an executive board.
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Description
Explore the relationship between business and society through stakeholders and shareholders. This quiz covers essential concepts, definitions, and types of stakeholders in a corporate context, providing insight into how companies interact with their environments.
