Chapter 4 Key Terms

Key Terms

business judgment rule

the principle that officers, directors, and managers of a corporation are not liable for losses incurred when the evidence demonstrates that decisions were reasonable and made in good faith

cap and trade

a system that limits greenhouse gas emissions by companies while allowing them to buy and sell pollution allowances

carbon footprint

the amount of carbon dioxide and other carbon compounds released by the consumption of fossil fuels

carbon tax

a pay-to-pollute system in which those who discharge carbon into the air pay a fee or tax

Citizens United

a 2010 Supreme Court ruling in favor of unlimited spending by individuals and corporations on political campaigns

Commerce Clause

an enumerated power listed in the Constitution giving the federal government the right to regulate commerce between states

corporate personhood

the legal doctrine holding that a corporation, separate and apart from the people who are its owners and managers, has some of the same legal rights and responsibilities enjoyed by natural persons

fiduciary duty

a very high level of legal responsibility owed by those who manage someone else’s money, which includes the duties of care and loyalty

limited liability

a business owner’s protection against loss of personal assets, granted with corporate status

moral minimum

the minimal actions or practices a business must undertake to satisfy the base threshold for acting ethically

quid pro quo

the tradeoff someone makes in return for getting something of value; from the Latin meaning this for that

Sarbanes-Oxley

legislation passed in 2002 that mandates reporting transparency by businesses in areas ranging from finance to accounting to supply chain activities

shareholder primacy

a company’s duty to maximize profits for stockholders

states’ rights

a view that states should have more governing authority than the federal government, based on the Tenth Amendment, which reserves to the states any right not specifically delegated to the federal government

sustainability

a long-term approach to the interaction between business activity and societal impact on the environment and other stakeholders

tragedy of the commons

an economy theory highlighting the human tendency to use as much of a free natural resource as wanted without regard for others’ needs or for long-term environmental effects or issues