Business Ethics Test 2 Exam Questions with
Correct Answers
1. Explain the concept of "managerial capitalism" and how it relates to
corporate social responsibility? correct answer: Managerial capitalism - system where
corporations whose ownership is so distant from the managers that managers act independently,
separation of ownership and management, managers are in control, owners cannot manage but
managers run the company
Aligns with Stakeholder theory and relates to CSR b/c more likely to invest in initiatives since actions
can enhance a company's reputation, seen as necessary for maintaining a good corporate image
2. Why is the title of Friedman's essay ironic? How does his argument
represent the Libertarian tradition? correct answer: Businesses cannot have responsibilities,
disregards potential negative ettects from actions
Friedman is a Libertarian (freedom from owners, market transactions - wages and benefits, employees
do work in interest of the owner, limited intervention of corporate practices)
3. According to Friedman, business cannot have any responsibilities at all.
Why? Explain his argument. correct answer: Businesses cannot have responsibilities but only
individuals who have a will and a mind can
Friedman believes that primary responsibility for business is to maximize profit, believes that
employer's role is to give employees opportunity to do their work and compensate employees,
employees should follow orders and do work well, actions aimed at social good are spending
shareholders' money, misallocation of resources
4. According to Friedman, real business responsibilities are created by
contract. What are managers responsibilities and why do mangers have a
duty not to do socially responsible acts? correct answer: Managers have a responsibility to
act in the best interest of shareholders, responsibilities are created when contract is made,
maximize profit and enhance value of shareholders
Duty not to do socially responsible acts b/c belief that managers misallocate resources when
attempting to do so, individuals and government should handle these issues
5. Compare and contrast Freeman's Stakeholder theory with Friedman's
Stock- holder theory on the issue of business's social responsibilities. correct
answer: Freeman Stakeholder Theory correct answer: managers should create value without
tradeotts among stakeholders, managers must see the business as fully
situated in the realm of humanity, see interest of stakeholders as joint and managers manage for all
stakeholders Responsibility Thesis correct answer: humans are responsible for their own actions and
have to be accountable for harm caused by actions
1/
5
,Business Ethics Test 2 Exam Questions with
Correct Answers
Friedman Stockholder Theory correct answer: business managers do not have the expertise to solve
social problems (use regulatory agencies, government), market don't fail but adjust and lead to the best
possible overall result, business has no social responsibility only humans do, do what owner wants
2/
5
Correct Answers
1. Explain the concept of "managerial capitalism" and how it relates to
corporate social responsibility? correct answer: Managerial capitalism - system where
corporations whose ownership is so distant from the managers that managers act independently,
separation of ownership and management, managers are in control, owners cannot manage but
managers run the company
Aligns with Stakeholder theory and relates to CSR b/c more likely to invest in initiatives since actions
can enhance a company's reputation, seen as necessary for maintaining a good corporate image
2. Why is the title of Friedman's essay ironic? How does his argument
represent the Libertarian tradition? correct answer: Businesses cannot have responsibilities,
disregards potential negative ettects from actions
Friedman is a Libertarian (freedom from owners, market transactions - wages and benefits, employees
do work in interest of the owner, limited intervention of corporate practices)
3. According to Friedman, business cannot have any responsibilities at all.
Why? Explain his argument. correct answer: Businesses cannot have responsibilities but only
individuals who have a will and a mind can
Friedman believes that primary responsibility for business is to maximize profit, believes that
employer's role is to give employees opportunity to do their work and compensate employees,
employees should follow orders and do work well, actions aimed at social good are spending
shareholders' money, misallocation of resources
4. According to Friedman, real business responsibilities are created by
contract. What are managers responsibilities and why do mangers have a
duty not to do socially responsible acts? correct answer: Managers have a responsibility to
act in the best interest of shareholders, responsibilities are created when contract is made,
maximize profit and enhance value of shareholders
Duty not to do socially responsible acts b/c belief that managers misallocate resources when
attempting to do so, individuals and government should handle these issues
5. Compare and contrast Freeman's Stakeholder theory with Friedman's
Stock- holder theory on the issue of business's social responsibilities. correct
answer: Freeman Stakeholder Theory correct answer: managers should create value without
tradeotts among stakeholders, managers must see the business as fully
situated in the realm of humanity, see interest of stakeholders as joint and managers manage for all
stakeholders Responsibility Thesis correct answer: humans are responsible for their own actions and
have to be accountable for harm caused by actions
1/
5
,Business Ethics Test 2 Exam Questions with
Correct Answers
Friedman Stockholder Theory correct answer: business managers do not have the expertise to solve
social problems (use regulatory agencies, government), market don't fail but adjust and lead to the best
possible overall result, business has no social responsibility only humans do, do what owner wants
2/
5
