Chapter 1: Stakeholder and Shareholder Theories of the Firm
Multiple Choice
1. A ______ is legal entitlement or a right to be treated in a certain way.
a. stake
b. stakeholder
c. claim
d. shareholder
Ans: C
Learning Objective 1.1: Describe what is a stake and who is a stakeholder.
Cognitive Domain: Knowledge
Answer Location: Defining Stake and Stakeholder
Difficulty Level: Easy
AACSB Standard: Application of knowledge
2. A kind of interest in or claim on something of value is a ______.
a. claim
b. stake
c. stakeholder
d. shareholder
Ans: B
Learning Objective 1.1: Describe what is a stake and who is a stakeholder.
Cognitive Domain: Knowledge
Answer Location: Defining Stake and Stakeholder
Difficulty Level: Easy
AACSB Standard: Application of knowledge
3. ______ is any identifiable group or individual who can affect the achievement of an organization’s objectives or who is affected by the achievement of an organization’s objectives.
a. Shareholder
b. Claimant
c. Stake group
d. Stakeholder
Ans: D
Learning Objective 1.1: Describe what is a stake and who is a stakeholder.
Cognitive Domain: Knowledge
Answer Location: Defining Stake and Stakeholder
Difficulty Level: Easy
AACSB Standard: Application of knowledge
4. A ______ is a person, group, or organization owning one or more shares of stock in a corporation.
a. shareholder
b. stakeholder
c. claimant
d. stake group
Ans: A
Learning Objective 1.1: Describe what is a stake and who is a stakeholder.
Cognitive Domain: Knowledge
Answer Location: Defining Stake and Stakeholder
Difficulty Level: Easy
AACSB Standard: Application of knowledge
5. A shareholder could be defined as a group ______.
a. that does not interact with the organization
b. that has a purely social interest with the organization
c. with no claim on the organization
d. that is a stakeholder of the organization
Ans: D
Learning Objective 1.1: Describe what is a stake and who is a stakeholder.
Cognitive Domain: Comprehension
Answer Location: Defining Stake and Stakeholder
Difficulty Level: Medium
AACSB Standard: Application of knowledge
6. A(n) ______ is a set of propositions or concepts that seeks to explain or predict something.
a. shareholder
b. theory
c. explanation
d. hypothesis
Ans: B
Learning Objective 1.2: Explain the difference between shareholder and shareholder theories of the firm.
Cognitive Domain: Knowledge
Answer Location: Stakeholder Versus Shareholder Theories
Difficulty Level: Easy
AACSB Standard: Application of knowledge
7. Stakeholder theory is a theory because it has a ______.
a. set of proposals
b. the power to predict what a company can do
c. set of propositions or concepts that seeks to explain or predict something
d. the ability to be useful
Ans: C
Learning Objective 1.2: Explain the difference between shareholder and shareholder theories of the firm.
Cognitive Domain: Comprehension
Answer Location: Stakeholder Theory
Difficulty Level: Medium
AACSB Standard: Application of knowledge
8. Stakeholder- and shareholder-oriented theories are both what are called ______ theories because they state the way things should be and are idealistic.
a. associational
b. positive
c. normative
d. proscriptive
Ans: C
Learning Objective 1.2: Explain the difference between shareholder and shareholder theories of the firm.
Cognitive Domain: Comprehension
Answer Location: Stakeholder Theory
Difficulty Level: Medium
AACSB Standard: Application of knowledge
9. ______ stresses that there is a moral obligation for a firm to work toward addressing the needs of customers, employees, suppliers, the local community as well as shareholders.
a. Claim theory
b. Stakeholder theory
c. Shareholder theory
d. Stake theory
Ans: B
Learning Objective 1.2: Explain the difference between shareholder and shareholder theories of the firm.
Cognitive Domain: Comprehension
Answer Location: Stakeholder Theory
Difficulty Level: Medium
AACSB Standard: Application of knowledge
10. ______ claims that managers should act in the shareholders’ interests, minimizing other factors.
a. Shareholder theory
b. Claim theory
c. Stakeholder
d. Stake theory
Ans: A
Learning Objective 1.2: Explain the difference between shareholder and shareholder theories of the firm.
Cognitive Domain: Comprehension
Answer Location: Shareholder Theory
Difficulty Level: Medium
AACSB Standard: Application of knowledge
11. Some have claimed that managers have a ______ duty to shareholders and should loyally act in the best interests of shareholder.
a. fiscal
b. fiduciary
c. social
d. financial
Ans: B
Learning Objective 1.2: Explain the difference between shareholder and shareholder theories of the firm.
Cognitive Domain: Comprehension
Answer Location: Shareholder Theory
Difficulty Level: Medium
AACSB Standard: Application of knowledge
12. Fiduciary duty informs the premise of ______ in that an organization’s board of directors ensures accountability, fairness, and transparency among all parties with a claim in the organization.
a. social governance
b. financial governance
c. managerial governance
d. corporate governance
Ans: D
Learning Objective 1.2: Explain the difference between shareholder and shareholder theories of the firm.
Cognitive Domain: Comprehension
Answer Location: Shareholder Theory
Difficulty Level: Medium
AACSB Standard: Application of knowledge
13. The ______ view is based on the belief a firm is better able to achieve competitive advantage because it allows managers to be unencumbered by other stakeholders’ concerns.
a. shareholder
b. stakeholder
c. claimholder
d. corporate governance
Ans: A
Learning Objective 1.2: Explain the difference between shareholder and shareholder theories of the firm.
Cognitive Domain: Comprehension
Answer Location: Shareholder Theory
Difficulty Level: Medium
AACSB Standard: Application of knowledge
14. A reason why the shareholder theory of the firm has been so popular is related to managers wanting to ______.
a. exploit competitive advantages
b. exploit human resource
c. increase the cost of capital
d. lower the cost of capital
Ans: D
Learning Objective 1.2: Explain the difference between shareholder and shareholder theories of the firm.
Cognitive Domain: Comprehension
Answer Location: Shareholder Theory
Difficulty Level: Medium
AACSB Standard: Application of knowledge
15. In shareholder theory, managers must ask themselves which of the following questions?
a. How do we help stakeholders?
b. How do we prioritize which stakeholders address?
c. How do we measure a higher social impact?
d. How do we measure “better” versus “worse” with regard to what we are trying to do?
Ans: D
Learning Objective 1.2: Explain the difference between shareholder and shareholder theories of the firm.
Cognitive Domain: Comprehension
Answer Location: Shareholder Theory
Difficulty Level: Medium
AACSB Standard: Application of knowledge
16. ______ theory supports the idea that there is a moral obligation for a firm to work toward addressing the needs of customers, employees, suppliers, the local community as well as shareowners not simply so it will benefit the firm in the long run but because it is the right thing to do.
a. Shareholder
b. Normative
c. Positive
d. Stakeholder
Ans: D
Learning Objective 1.2: Explain the difference between shareholder and shareholder theories of the firm.
Cognitive Domain: Comprehension
Answer Location: Stakeholder Versus Shareholder Theories
Difficulty Level: Medium
AACSB Standard: Application of knowledge
17. ______ supports the idea that firms must put shareholders’ interests above all others because the firm is the property of its owners.
a. Shareholder theory
b. Stakeholder theory
c. Normative theory
d. Positive theory
Ans: A
Learning Objective 1.2: Explain the difference between shareholder and shareholder theories of the firm.
Cognitive Domain: Comprehension
Answer Location: Stakeholder Versus Shareholder Theories
Difficulty Level: Easy
AACSB Standard: Application of knowledge
18. Stakeholder theory requires managers to endorse the attitude that all stakeholders have a legitimate stake in the firm because they have ______ value.
a. extrinsic
b. positive
c. normative
d. intrinsic
Ans: D
Learning Objective 1.3: Articulate the main issues in the stakeholder and stakeholder debate.
Cognitive Domain: Comprehension
Answer Location: The Stakeholder Arguments
Difficulty Level: Medium
AACSB Standard: Application of knowledge
19. Stakeholder theory is fundamentally ______ because of its guidance about what are right and wrong behaviors.
a. positive
b. associational
c. normative
d. descriptive
Ans: C
Learning Objective 1.3: Articulate the main issues in the stakeholder and stakeholder debate.
Cognitive Domain: Comprehension
Answer Location: The Stakeholder Arguments
Difficulty Level: Medium
AACSB Standard: Application of knowledge
20. The description of ______ refers to a prioritization, a commitment to advancing the interests of that special group over those of another party.
a. shareholder theory
b. fiduciary duties
c. corporate governance
d. stakeholder
Ans: B
Learning Objective 1.3: Articulate the main issues in the stakeholder and stakeholder debate.
Cognitive Domain: Comprehension
Answer Location: The Shareholder Arguments
Difficulty Level: Medium
AACSB Standard: Application of knowledge
21. From the ______ perspective, a firm simply cannot have multiple fiduciary duties because if it did it would require trade-offs, compromises, and multiple loyalties that it cannot sustain because of the very meaning of the word fiduciary.
a. corporate governance
b. market stakeholders
c. stakeholder
d. shareholder
Ans: D
Learning Objective 1.3: Articulate the main issues in the stakeholder and stakeholder debate.
Cognitive Domain: Comprehension
Answer Location: The Shareholder Arguments
Difficulty Level: Medium
AACSB Standard: Application of knowledge
22. ______ engage with the firm through economic exchanges.
a. Market stakeholders
b. Nonmarket stakeholders
c. Stakeholders
d. Shareholders
Ans: A
Learning Objective 1.4: Describe stakeholders in terms of issues, powers, and interest.
Cognitive Domain: Comprehension
Answer Location: Market and Nonmarket Stakeholders
Difficulty Level: Easy
AACSB Standard: Application of knowledge
23. ______ do not engage in direct economic exchange with the firm but are affected by the firm or can affect the firm.
a. Stakeholders
b. Shareholders
c. Nonmarket stakeholders
d. Market stakeholders
Ans: C
Learning Objective 1.4: Describe stakeholders in terms of issues, powers, and interest.
Cognitive Domain: Comprehension
Answer Location: Market and Nonmarket Stakeholders
Difficulty Level: Easy
AACSB Standard: Application of knowledge
24. Workers, community, shareholders are examples of what?
a. nonmarket shareholders
b. stakeholders
c. market stakeholders
d. nonmarket stakeholders
Ans: B
Learning Objective 1.2: Explain the difference between shareholder and shareholder theories of the firm.
Cognitive Domain: Comprehension
Answer Location: Stakeholder Versus Shareholder Theories
Difficulty Level: Medium
AACSB Standard: Application of knowledge
25. Stakeholders do not have the same characteristics, especially in terms of their power, legitimacy, issues, and interests because they ______.
a. are dynamic
b. are powerful
c. vary in power
d. have different levels of wealth
Ans: A
Learning Objective 1.4: Describe stakeholders in terms of issues, powers, and interest.
Cognitive Domain: Comprehension
Answer Location: Stakeholder Interests and Power
Difficulty Level: Medium
AACSB Standard: Application of knowledge
26. What is a key question that managers should ask about stakeholders?
a. What are their levels of power?
b. What are the groups’ issues or concerns?
c. How much money do they give to the company?
d. Why should we care?
Ans: B
Learning Objective 1.4: Describe stakeholders in terms of issues, powers, and interest.
Cognitive Domain: Comprehension
Answer Location: Stakeholder Interests and Power
Difficulty Level: Easy
AACSB Standard: Application of knowledge
27. It is important to understand the ______ context in which the firm exists, addressing economic, social, political, or technological concerns for stakeholders.
a. political
b. economic
c. social
d. legal
Ans: C
Learning Objective 1.4: Describe stakeholders in terms of issues, powers, and interest.
Cognitive Domain: Comprehension
Answer Location: Stakeholder Interests and Power
Difficulty Level: Medium
AACSB Standard: Application of knowledge
28. One of the challenges of stakeholder analysis is ______.
a. avoiding overlapping groups
b. understanding that all shareholders have equal power
c. that power does not vary
d. each stakeholder always has an equal claim
Ans: A
Learning Objective 1.4: Describe stakeholders in terms of issues, powers, and interest.
Cognitive Domain: Comprehension
Answer Location: Stakeholder Interests and Power
Difficulty Level: Medium
AACSB Standard: Application of knowledge
29. ______ is a stakeholder group’s ability to gain recognition through having power, legitimacy, and urgency.
a. Stakeholder importance
b. Stakeholder power
c. Stakeholder values
d. Stakeholder salience
Ans: D
Learning Objective 1.4: Describe stakeholders in terms of issues, powers, and interest.
Cognitive Domain: Comprehension
Answer Location: Stakeholder Interests and Power
Difficulty Level: Easy
AACSB Standard: Application of knowledge
30. ______ is the ability or potential of a group to influence another and to secure a desired outcome.
a. Stakeholder salience
b. Power
c. Stakeholder influence
d. Contextual salience
Ans: B
Learning Objective 1.4: Describe stakeholders in terms of issues, powers, and interest.
Cognitive Domain: Knowledge
Answer Location: Stakeholder Interests and Power
Difficulty Level: Easy
AACSB Standard: Application of knowledge
31. Power emerges from ______ of relationships with others.
a. social factors
b. stakeholders’ salience
c. context
d. legitimacy
Ans: C
Learning Objective 1.4: Describe stakeholders in terms of issues, powers, and interest.
Cognitive Domain: Comprehension
Answer Location: What Is Stakeholder Power and Legitimacy?
Difficulty Level: Medium
AACSB Standard: Application of knowledge
32. ______ represents some form of acceptance of a stakeholder’s claim or of the group itself.
a. Power
b. Salience
c. Pragmatism
d. Legitimacy
Ans: D
Learning Objective 1.4: Describe stakeholders in terms of issues, powers, and interest.
Cognitive Domain: Knowledge
Answer Location: What Is Stakeholder Power and Legitimacy?
Difficulty Level: Easy
AACSB Standard: Application of knowledge
33. ______ legitimacy occurs when the audience’s self-interest is satisfied.
a. Salience
b. Pragmatic
c. Moral
d. Cognitive
Ans: B
Learning Objective 1.4: Describe stakeholders in terms of issues, powers, and interest.
Cognitive Domain: Knowledge
Answer Location: What Is Stakeholder Power and Legitimacy?
Difficulty Level: Easy
AACSB Standard: Application of knowledge
34. ______ legitimacy is when the concerns over what ought to be are satisfied.
a. Salience
b. Pragmatic
c. Moral
d. Cognitive
Ans: C
Learning Objective 1.4: Describe stakeholders in terms of issues, powers, and interest.
Cognitive Domain: Knowledge
Answer Location: What Is Stakeholder Power and Legitimacy?
Difficulty Level: Easy
AACSB Standard: Application of knowledge
35. ______ legitimacy is based on whether something is taken-for-granted and well known or accepted.
a. Cognitive
b. Power
c. Moral
d. Ethical
Ans: A
Learning Objective 1.4: Describe stakeholders in terms of issues, powers, and interest.
Cognitive Domain: Knowledge
Answer Location: What Is Stakeholder Power and Legitimacy?
Difficulty Level: Easy
AACSB Standard: Application of knowledge
36. ______ firms are more prone to exercise power over stakeholders to maintain their interests, they are also more responsive to stakeholders’ power stemming from resources that are essential to their firm’s operational performance.
a. Moral
b. Self-regarding
c. Ethical
d. Political
Ans: B
Learning Objective 1.4: Describe stakeholders in terms of issues, powers, and interest.
Cognitive Domain: Comprehension
Answer Location: What Is Stakeholder Power and Legitimacy?
Difficulty Level: Easy
AACSB Standard: Application of knowledge
37. When is stakeholder engagement is most likely?
a. The firm and stakeholder provide similar resources.
b. The firm and stakeholder share same powers.
c. The firm and stakeholder have similar ideas about legitimacy.
d. The firm and stakeholder share the same goal.
Ans: D
Learning Objective 1.5: Assess the issues that may arise when businessess try to manage various stakeholder interests.
Cognitive Domain: Comprehension
Answer Location: Managing Stakeholders
Difficulty Level: Easy
AACSB Standard: Application of knowledge
38. When is stakeholder engagement is most likely?
a. Motivation is high.
b. Goals are opposed.
c. Objectives do not align.
d. Motivation is low.
Ans: A
Learning Objective 1.5: Assess the issues that may arise when businessess try to manage various stakeholder interests.
Cognitive Domain: Comprehension
Answer Location: Managing Stakeholders
Difficulty Level: Easy
AACSB Standard: Application of knowledge
39. When is stakeholder engagement is most likely?
a. Knowledge is low.
b. Knowledge is medium.
c. knowledge is high.
d. There is a lack of knowledge.
Ans: C
Learning Objective 1.5: Assess the issues that may arise when businessess try to manage various stakeholder interests
Cognitive Domain: Comprehension
Answer Location: Managing Stakeholders
Difficulty Level: Medium
AACSB Standard: Application of knowledge
40. ______ is possible when there is a deep understanding of the power, legitimacy, interests, and issues of concern of the stakeholders
a. Value leadership
b. Stakeholder leadership
c. Ethical leadership
d. Legitimate leadership
Ans: C
Learning Objective 1.5: Assess the issues that may arise when businessess try to manage various stakeholder interests
Cognitive Domain: Comprehension
Answer Location: Managing Stakeholders
Difficulty Level: Easy
AACSB Standard: Application of knowledge
41. Basic value proposition asks what question?
a. What do we stand for?
b. What do our competitors stand for?
c. What resources should we have?
d. What markets can we compete in?
Ans: A
Learning Objective 1.5: Assess the issues that may arise when businessess try to manage various stakeholder interests.
Cognitive Domain: Comprehension
Answer Location: Managing Stakeholders
Difficulty Level: Medium
AACSB Standard: Application of knowledge
42. What are the principles or values on which we base our everyday engagement with stakeholders?
a. stakeholder integration
b. stakeholder analysis
c. corporate vision
d. sustained stakeholder cooperation
Ans: D
Learning Objective 1.5: Assess the issues that may arise when businessess try to manage various stakeholder interests.
Cognitive Domain: Comprehension
Answer Location: Managing Stakeholders
Difficulty Level: Medium
AACSB Standard: Application of knowledge
43. Stakeholders have issues of ______ that they bring to firms with the expectation that the firm will respond to them.
a. concern
b. power
c. value
d. vision
Ans: A
Learning Objective 1.5: Assess the issues that may arise when businessess try to manage various stakeholder interests.
Cognitive Domain: Comprehension
Answer Location: Managing Stakeholders
Difficulty Level: Medium
AACSB Standard: Application of knowledge
44. The question of do we understand how our basic value proposition and principles fit or contradict key trends and opinions in society suggests what?
a. an understanding of social culture
b. the importance of cooperative governance
c. a disregard for societal issues
d. an understanding of broader societal issues
Ans: D
Learning Objective 1.5: Assess the issues that may arise when businessess try to manage various stakeholder interests.
Cognitive Domain: Comprehension
Answer Location: Managing Stakeholders
Difficulty Level: Easy
AACSB Standard: Application of knowledge
45. Ethical leadership asks what question?
a. What is my sense of purpose?
b. What are our stakeholders needs?
c. Does corporate power matter?
d. How does strategy and stakeholders align?
Ans: A
Learning Objective 1.5: Assess the issues that may arise when businessess try to manage various stakeholder interests.
Cognitive Domain: Comprehension
Answer Location: Managing Stakeholders
Difficulty Level: Easy
AACSB Standard: Application of knowledge
46. It is vital that managers understand each ______ of the firm as a starting point for stakeholder management and engagement.
a. stakeholders’ vision
b. shareholders’ power
c. stakeholders’ interests
d. shareholders’ interest
Ans: C
Learning Objective 1.5: Assess the issues that may arise when businessess try to manage various stakeholder interests.
Cognitive Domain: Comprehension
Answer Location: Managing Stakeholders
Difficulty Level: Medium
AACSB Standard: Application of knowledge
47. Ethical leadership is possible when there is a deep ______ of the power, legitimacy, interests, and issues of concern of the stakeholders.
a. understanding
b. interest
c. concern
d. recognition
Ans: A
Learning Objective 1.5: Assess the issues that may arise when businessess try to manage various stakeholder interests.
Cognitive Domain: Comprehension
Answer Location: Managing Stakeholders
Difficulty Level: Medium
AACSB Standard: Application of knowledge
48. The relationship between ethical values and positive firm outcomes like long-term profitability is ______.
a. low
b. high
c. weak
d. nonexistent
Ans: B
Learning Objective 1.5: Assess the issues that may arise when businessess try to manage various stakeholder interests.
Cognitive Domain: Comprehension
Answer Location: Managing Stakeholders
Difficulty Level: Medium
AACSB Standard: Application of knowledge
49. A worker is a ______ stakeholder because they are vital for the survival of the firm.
a. nonmarket
b. market
c. primary
d. secondary
Ans: B
Learning Objective 1.5: Assess the issues that may arise when businessess try to manage various stakeholder interests.
Cognitive Domain: Comprehension
Answer Location: Managing Stakeholders
Difficulty Level: Medium
AACSB Standard: Application of knowledge
50. Stakeholder management involves constantly ______ processes to better serve multiple and conflicting stakeholders.
a. evaluating
b. designing
c. monitoring and redesigning
d. mentoring
Ans: C
Learning Objective 1.5: Assess the issues that may arise when businessess try to manage various stakeholder interests.
Cognitive Domain: Comprehension
Answer Location: Managing Stakeholders
Difficulty Level: Easy
AACSB Standard: Application of knowledge
Short Answer
1. Both the stakeholder and shareholder theories of corporate social responsibility are often compared and contrasted with each other. Most scholars believe they are complete opposites. Yet other scholars believe there is an overlap. Please describe how they are similar and how they are different. What lessons can a manger gain from the similarities and differences?
Ans: The difference is that stakeholder views ownership from a deeper viewpoint than does the shareholder perspective. Rather than viewing relations from the prism of legal ownership, the stakeholder viewpoint argues that firms should heed the impact that the firm has on other groups that it does business with. The shareholder perspective states that the one purpose of the firm is a fiduciary responsibility to act in the interest of the shareholder, since they actually own the firm.
The similarity is that they both state that managers must operate ethically, must produce a profit, and must adhere to the law. They are both normative.
However, the goal is a bit different. The stakeholder theory says that the firm must act in the interests of stakeholders. The shareholder states they must act for shareholders.
Learning Objective 1.1: Describe what is a stake and who is a stakeholder,1.2,1.3
Cognitive Domain: Application
Answer Location: The Stakeholder and Shareholder Debate
Difficulty Level: Medium
AACSB Standard: Application of knowledge
2. The Julius corporation is a pharmaceutical company that deals with propriety and sensitive information. They are concerned with leakages of corporate secrets. On company cars, they have made the decision to monitor employees by tracking where they go. However, they do not inform employees. Using a stakeholder analysis, identify the stakeholders of the case; and how the companies policy impacts them.
Ans: The workers would be a key stakeholder because the company has not informed them. The shareholders would be a key stakeholder because the company needs to keep important secrets.
Learning Objective 1.1: Describe what is a stake and who is a stakeholder.
Cognitive Domain: Application
Answer Location: The Stakeholder Arguments
Difficulty Level: Medium
AACSB Standard: Application of knowledge
3.Google is currently doing business in three different locales: the United States, Europe, and China. Using stakeholder theory, evaluate the different claims that stakeholders bring on Google. What are some ways for google to balance them?
Ans: Recognize that the different stakeholders are going to value different things. For example, the United States would prefer unfettered access to the information; China and Europe would oppose it.
Learning Objective 1.3: Articulate the main issues in the stakeholder and stakeholder debate.
Cognitive Domain: Application
Answer Location: Is One Right and One Wrong?
Difficulty Level: Medium
AACSB Standard: Application of knowledge
4. Describe and analyze the strengths and weaknesses of the stakeholder approach.
Ans: Stakeholders approach emphasizes the positive impact a firm could have on a business, while downplaying the negative impact. This means that various stakeholders will be more likely to exchange with the organization. A weakness of this approach.
Learning Objective 1.3: Articulate the main issues in the stakeholder and stakeholder debate.
Cognitive Domain: Application
Answer Location: Is One Right and One Wrong?
Difficulty Level: Medium
AACSB Standard: Application of knowledge
5 Describe and analyze the strengths and weaknesses of the shareholder approach.
Ans: The shareholder approach supports the actual owners of the organizations. This approach allows for the firm to turn a profit, since it aligns with the firm’s core competency. The weakness is that such an approach could be damaging to the firm’s long-term survival because other stakeholders may be burned. Secondly, there are legal arguments against shareholder being actual shareholders.
Learning Objective 1.3: Articulate the main issues in the stakeholder and stakeholder debate.
Cognitive Domain: Application
Answer Location: Is One Right and One Wrong?
Difficulty Level: Medium
AACSB Standard: Application of knowledge
6. What are some of the misrepresentations of stakeholder and shareholder theory.
Ans: Shareholder and stakeholder theory argue that firms should be ethical and profitable. The key difference is motivation in that stakeholder takes a broader view of the firm.
Learning Objective 1.3: Articulate the main issues in the stakeholder and stakeholder debate.
Cognitive Domain: Application
Answer Location: Is One Right and One Wrong?
Difficulty Level: Medium
AACSB Standard: Application of knowledge
7. What are some of the questions we ask in stakeholder analysis? Why do we ask them?
Ans: Who are our stakeholders? What do they want? How did we create value for them while creating value for our firm? We ask these questions to aid in maintaining a relationship with groups that aid the firm.
Learning Objective 1.4: Describe stakeholders in terms of issues, powers, and interest.
Cognitive Domain: Application
Answer Location: Stakeholder Types: Interests, Issues, Legitimacy, and Power
Difficulty Level: Medium
AACSB Standard: Application of knowledge
8. What factors lead to firms becoming engaging with stakeholders? Use Google as an example.
Ans: Desire to do right. The desire to keep a firm healthy. The desire to maintain profit. Engagement is most likely when—high goal congruence.
Engagement is most likely when—motivated to participate.
Engagement is most likely when—knowledge is high.
Learning Objective 1.4: Describe stakeholders in terms of issues, powers, and interest.
Cognitive Domain: Application
Answer Location: Stakeholder Types: Interests, Issues, Legitimacy, and Power
Difficulty Level: Medium
AACSB Standard: Application of knowledge
9. What is legitimacy? What are the types of legitimacy? Why is legitimacy important for firms? Provide a company as an example.
Ans: Legitimacy represents some form of acceptance of a stakeholder’s claim or of the group itself. Pragmatic legitimacy occurs when the audience’s self-interest is satisfied, moral is when the concerns over what ought to be are satisfied, and
cognitive is based on whether something is taken-for-granted and well known or accepted.
Learning Objective 1.4: Describe stakeholders in terms of issues, powers, and interest.
Cognitive Domain: Application
Answer Location: Stakeholder Types: Interests, Issues, Legitimacy, and Power
Difficulty Level: Medium
AACSB Standard: Application of knowledge
10. Why is the basic value proposition so important for a company? Use a company discussed in class to talk about their basic value proposition.
Ans: Asks the basic question: What do we stand for? Means how we are going to interact and create value for our stakeholders and provides a template.
Learning Objective 1.5: Assess the issues that may arise when businessess try to manage various stakeholder interests.
Cognitive Domain: Application
Answer Location: Managing Stakeholders
Difficulty Level: Medium
AACSB Standard: Application of knowledge
