LAW 4870 Ch 3 Cases + Quiz + SB
Which of the following is not a component of the Framework for Understanding Ethical Decision Making in Business?
Internal controls
Which of the following might contribute to a weak board of directors?
(1) Interrelationships between board members and top management (2) Lack of independence from management
Which of the following is another way of saying that a moral meltdown has occurred at a company that has experienced an ethical collapse?
Good people in companies do really dumb things.
Which of the following are pillars of corporate governance?
(1) Accountability (2) Independence (3) Fairness (4) Transparency
Which of the following were findings in the KPMG Integrity Survey 2013 that looked at organization misconduct?
(1) Almost 75% of employees observed misconduct in their organization within the past 12 months. (2) A driving force behind misconduct was pressure to do whatever it takes to meet targets. (3) More than 50% of employees reported the observed misconduct could cause a loss of public trust.
Which of the following actions would be protected under the National Labor Relations Act?
(1) An employee who complains on behalf of coworkers about safety issues (2) Concerted efforts to improve conditions at work conducted on social media
Which of the following encourage ethical behavior in the workplace?
(1) An ethical climate in the organization (2) Support for ethical behavior from top management
Which of the following are important components of tone at the top?
(1) Communicating the importance of compliance to employees (2) Enforcing disciplinary actions (3) Reminding employees of a non-retaliation policy (4) Modeling company values
Which of the following promote ethical behavior in an organization?
(1) Ethical norms and standards within the organization (2) Rules of conduct within the organization (3) Effective leadership within the organization.
In the case of the Ford Pinto, ______.
(1) Ford complied with all the laws and safety issues (2) Ford relied completely on utilitarian thinking
Which of the following were findings in the KPMG Integrity Survey 2013 related to what employees would do if they observed a violation of their organization's standards of conduct?
(1) More than 50% would call the ethics hotline. (2) More than 75% of employees would notify their supervisor of violations.
Which of the following are components of the Cadbury Code?
(1) The audit committee should have a minimum of three non-executive directors. (2) A non-executive director should not engage in day to day operations of the company. (3) A majority of the board should be outside directors. (4) There should be a separation of duties between the chairman of the board and the CEO.
Why is the Giving Voice to Values technique critical in ethical decision making in business?
(1) The correct decision is often unclear. (2) Rules governing ethical dilemmas are often vague. (3) The results of the decision are unknown.
An ethical climate is enhanced through which of the following?
(1) Values-driven organization (2) Openness and transparency
Enron and WorldCom both failed as going concerns a result of ______.
(1) a tension between ethics and the bottom line (2) pressure to maintain the numbers (3) an excessive emphasis on financial results at all costs
Executive compensation packages can be used to alleviate the agency problem because ______.
(1) compensation packages can be used to link executive pay to company performance (2) compensation packages can be used to link executive pay to performance of the company's shares (3) stock option plans can be used to motivate executive performance in the best interests of the company
The common causes of ethical collapse include ______.
(1) conflicts of interest are ignored (2) overly rapid pace of innovation and change (3) loyalty to the boss
In the economic model of CSR, business exists to ______.
(1) create jobs (2) produce goods and services for society
Organizations can create an ethical workplace culture by ______.
(1) developing an ethics training program (2) rewarding ethical behavior and including it in employee performance evaluations (3) taking action against employees who violate ethics policies
The board of directors are responsible for ______.
(1) directing the business and affairs of the corporation (2) acting in the best interests of the corporation (3) acting in good faith of the organization
If management appears unconcerned about ethics and more focused on the bottom line, ______.
(1) employees are more prone to commit occupational fraud (2) employees are more prone to fraudulent financial reporting
Employees given the trappings of success who are then reluctant to speak up out of fear of losing their lavish lifestyles most likely do so because of ______.
(1) fear of reprisals (2) loyalty to the boss
Unethical behavior and financial collapse sometimes go hand and hand because of ______.
(1) intense pressure to maintain the numbers (2) loyalty to the boss (3) an unrealistic emphasis on meeting financial projections
Dennis Kozlowski, the CEO of Tyco, selected employees based on ______.
(1) lack of experience (2) reluctance to challenge authority (3) possible conflicts of interest
The intensity of an ethical situation is based on the ______.
(1) norms in common situations (2) situational pressures in the workplace (3) values of those involved
A company's reputation for trust is enhanced when ______.
(1) organizational values are supported by top management (2) organizational values guide actions by employees (3) employees follow through ethical intent with ethical action
A conflict of interests can occur when ______.
(1) personal interests do not match the interests of those that trust you (2) individuals make judgment calls on behalf of others
Corporate social responsibility involves ______.
(1) responsibility to prevent harm (2) ethical expectations that society has for business
The best way to gain trust through organizational decision making is that ______.
(1) senior managers should model the organization's values (2) employees should act in accordance with ethical intent (3) employees should act in accordance with established organization values
Which of the following is not an element of an ethical corporate culture?
Having an effective external audit
Compensation of executives has soared over the last forty plus years to more than 271 times the pay for average workers. Remedies to rein in executive compensation include all but:
Restrictions by the law as to the maximum total compensation allowable
Which of the following is not a mechanism of corporate governance?
AICPA Code of Conduct
Bowen H. McCoy Reprinted with permission from "The Parable of the Sadhu," by Bowen H. McCoy, Harvard Business Review. Copyright © Harvard Business Publishing. Last year, as the first participant in the new six-month sabbatical program that Morgan Stanley has adopted, I enjoyed a rare opportunity to collect my thoughts as well as do some traveling. I spent the first three months in Nepal, walking 600 miles through 200 villages in the Himalayas and climbing some 120,000 vertical feet. My sole Western companion on the trip was an anthropologist who shed light on the cultural patterns of the villages that we passed through. During the Nepal hike, something occurred that has had a powerful impact on my thinking about corporate ethics. Although some might argue that the experience has no relevance to business, it was a situation in which a basic ethical dilemma suddenly intruded into the lives of a group of individuals. How the group responded holds a lesson for all organizations, no matter how defined. The Sadhu The Nepal experience was more rugged than I had anticipated. Most commercial treks last two or three weeks and cover a quarter of the distance we traveled. My friend Stephen, the anthropologist, and I were halfway through the 60-day Himalayan part of the trip when we reached the high point, an 18,000-foot pass over a crest that we'd have to traverse to reach the village of Muklinath, an ancient holy place for pilgrims. Six years earlier, I had suffered pulmonary edema, an acute form of altitude sickness, at 16,500 feet in the vicinity of Everest base camp—so we were understandably concerned about what would happen at 18,000 feet. Moreover, the Himalayas were having their wettest spring in 20 years; hip-deep powder and ice had already driven us off one ridge. If we failed to cross the pass, I feared that the last half of our once-in-a-lifetime trip would be ruined. The night before we would try the pass, we camped in a hut at 14,500 feet. In the photos taken at that camp, my face appears wan. The last village we'd passed through was a sturdy two-day walk below us, and I was tired. During the late afternoon, four backpackers from New Zealand joined us, and we spent most of the night awake, anticipating the climb. Below, we could see the fires of two other parties, which turned out to be two Swiss couples and a Japanese hiking club. To get over the steep part of the climb before the sun melted the steps cut in the ice, we departed at 3.30 a.m. The New Zealanders left first, followed by Stephen and myself, our porters and Sherpas, and then the Swiss. The Japanese lingered in their camp. The sky was clear, and we were confident that no spring storm would erupt that day to close the pass. At 15,500 feet, it looked to me as if Stephen was shuffling and staggering a bit, which are symptoms of altitude sickness. (The initial stage of altitude sickness brings a headache and nausea. As the condition worsens, a climber may encounter difficult breathing, disorientation, aphasia, and paralysis.) I felt strong—my adrenaline was flowing—but I was very concerned about my ultimate ability to get across. A couple of our porters were also suffering from the height, and Pasang, our Sherpa sirdar (leader), was worried. Just after daybreak, while we rested at 15,500 feet, one of the New Zealanders, who had gone ahead, came staggering down toward us with a body slung across his shoulders. He dumped the almost naked, barefoot body of an Indian holy man—a sadhu—-at my feet. He had found the pilgrim lying on the ice, shivering and suffering from hypothermia. I cradled the sadhu's head and laid him out on the rocks. The New Zealander was angry. He wanted to get across the pass before the bright sun melted the snow. He said, "Look, I've done what I can. You have porters and Sherpa guides. You care for him. We're going on!" He turned and went back up the mountain to join his friends. I took a carotid pulse and found that the sadhu was still alive. We figured he had probably visited the holy shrines at Muklinath and was on his way home. It was fruitless to question why he had chosen this desperately high route instead of the safe, heavily traveled caravan route through the Kali Gandaki gorge. Or why he was shoeless and almost naked, or how long he had been lying in the pass. The answers weren't going to solve our problem. Stephen and the four Swiss began stripping off their outer clothing and opening their packs. The sadhu was soon clothed from head to foot. He was not able to walk, but he was very much alive. I looked down the mountain and spotted the Japanese climbers, marching up with a horse. Without a great deal of thought, I told Stephen and Pasang that I was concerned about withstanding the heights to come and wanted to get over the pass. I took off after several of our porters who had gone ahead. On the steep part of the ascent where, if the ice steps had given way, I would have slid down about 3,000 feet, I felt vertigo. I stopped for a breather, allowing the Swiss to catch up with me. I inquired about the sadhu and Stephen. They said that the sadhu was fine and that Stephen was just behind them. I set off again for the summit. Stephen arrived at the summit an hour after I did. Still exhilarated by victory, I ran down the slope to congratulate him. He was suffering from altitude sickness—walking 15 steps, then stopping, walking 15 steps, then stopping. Pasang accompanied him all the way up. When I reached them, Stephen glared at me and said, "How do you feel about contributing to the death of a fellow man?" I did not completely comprehend what he meant. "Is the sadhu dead?" I inquired. "No," replied Stephen, "but he surely will be!" After I had gone, followed not long after by the Swiss, Stephen had remained with the sadhu. When the Japanese had arrived, Stephen had asked to use their horse to transport the sadhu down to the hut. They had refused. He had then asked Pasang to have a group of our porters carry the sadhu. Pasang had resisted the idea, saying that the porters would have to exert all their energy to get themselves over the pass. He believed they could not carry a man down 1,000 feet to the hut, reclimb the slope, and get across safely before the snow melted. Pasang had pressed Stephen not to delay any longer. The Sherpas had carried the sadhu down to a rock in the sun at about 15,000 feet and pointed out the hut another 500 feet below. The Japanese had given him food and drink. When they had last seen him, he was listlessly throwing rocks at the Japanese party's dog, which had frightened him. We do not know if the sadhu lived or died. For many of the following days and evenings, Stephen and I discussed and debated our behavior toward the sadhu. Stephen is a committed Quaker with deep moral vision. He said, "I feel that what happened with the sadhu is a good example of the breakdown between the individual ethic and the corporate ethic. No one person was willing to assume ultimate responsibility for the sadhu. Each was willing to do his bit just so long as it was not too inconvenient. When it got to be a bother, everyone just passed the buck to someone else and took off. Jesus was relevant to a more individualistic stage of society, but how do we interpret his teaching today in a world filled with large, impersonal organizations and groups?" I defended the larger group, saying, "Look, we all cared. We all gave aid and comfort. Everyone did his bit. The New Zealander carried him down below the snow line. I took his pulse and suggested we treat him for hypothermia. You and the Swiss gave him clothing and got him warmed up. The Japanese gave him food and water. The Sherpas carried him down to the sun and pointed out the easy trail toward the hut. He was well enough to throw rocks at a dog. What more could we do?" "You have just described the typical affluent Westerner's response to a problem. Throwing money—in this case, food and sweaters—at it, but not solving the fundamentals!" Stephen retorted. "What would satisfy you?" I said. "Here we are, a group of New Zealanders, Swiss, Americans, and Japanese who have never met before and who are at the apex of one of the most powerful experiences of our lives. Some years the pass is so bad no one gets over it. What right does an almost naked pilgrim who chooses the wrong trail have to disrupt our lives? Even the Sherpas had no interest in risking the trip to help him beyond a certain point." Stephen calmly rebutted, "I wonder what the Sherpas would have done if the sadhu had been a well-dressed Nepali, or what the Japanese would have done if the sadhu had been a well-dressed Asian, or what you would have done, Buzz, if the sadhu had been a well-dressed Western woman?" "Where, in your opinion," I asked, "is the limit of our responsibility in a situation like this? We had our own well-being to worry about. Our Sherpa guides were unwilling to jeopardize us or the porters for the sadhu. No one else on the mountain was willing to commit himself beyond certain self-imposed limits." Stephen said, "As individual Christians or people with a Western ethical tradition, we can fulfill our obligations in such a situation only if one, the sadhu dies in our care; two, the sadhu demonstrates to us that he can undertake the two-day walk down to the village; or three, we carry the sadhu for two days down to the village and persuade someone there to care for him." "Leaving the sadhu in the sun with food and clothing—where he demonstrated hand-eye coordination by throwing a rock at a dog—comes close to fulfilling items one and two," I answered. "And it wouldn't have made sense to take him to the village where the people appeared to be far less caring than the Sherpas, so the third condition is impractical. Are you really saying that, no matter what the implications, we should, at the drop of a hat, have changed our entire plan?" The Individual versus the Group Ethic Despite my arguments, I felt and continue to feel guilt about the sadhu. I had literally walked through a classic moral dilemma without fully thinking through the consequences. My excuses for my actions include a high adrenaline flow, a superordinate goal, and a once-in-a-lifetime opportunity—common factors in corporate situations, especially stressful ones. Real moral dilemmas are ambiguous, and many of us hike right through them, unaware that they exist. When, usually after the fact, someone makes an issue of one, we tend to resent his or her bringing it up. Often, when the full import of what we have done (or not done) hits us, we dig into a defensive position from which it is very difficult to emerge. In rare circumstances, we may contemplate what we have done from inside a prison. Had we mountaineers been free of stress caused by the effort and the high altitude, we might have treated the sadhu differently. Yet isn't stress the real test of personal and corporate values? The instant decisions that executives make under pressure reveal the most about personal and corporate character. Among the many questions that occur to me when I ponder my experience with the sadhu are: What are the practical limits of moral imagination and vision? Is there a collective or institutional ethic that differs from the ethics of the individual? At what level of effort or commitment can one discharge one's ethical responsibilities? Not every ethical dilemma has a right solution. Reasonable people often disagree; otherwise there would be no dilemma. In a business context, however, it is essential that managers agree on a process for dealing with dilemmas. Our experience with the sadhu offers an interesting parallel to business situations. An immediate response was mandatory. Failure to act was a decision in itself. Up on the mountain, we could not resign and submit our résumés to a headhunter. In contrast to philosophy, business involves action and implementation—getting things done. Managers must come up with answers based on what they see and what they allow to influence their decision-making processes. On the mountain, none of us but Stephen realized the true dimensions of the situation we were facing. One of our problems was that as a group, we had no process for developing a consensus. We had no sense of purpose or plan. The difficulties of dealing with the sadhu were so complex that no one person could handle them. Because the group did not have a set of preconditions that could guide its action to an acceptable resolution, we reacted instinctively as individuals. The cross-cultural nature of the group added a further layer of complexity. We had no leader with whom we could all identify and in whose purpose we believed. Only Stephen was willing to take charge, but he could not gain adequate support from the group to care for the sadhu. Some organizations do have values that transcend the personal values of their managers. Such values, which go beyond profitability, are usually revealed when the organization is under stress. People throughout the organization generally accept its values, which, because they are not presented as a rigid list of commandments, may be somewhat ambiguous. The stories people tell, rather than printed materials, transmit the organization's conceptions of what is proper behavior. For 20 years, I have been exposed at senior levels to a variety of corporations and organizations. It is amazing how quickly an outsider can sense the tone and style of an organization and, with that, the degree of tolerated openness and freedom to challenge management. Organizations that do not have a heritage of mutually accepted, shared values tend to become unhinged during stress, with each individual bailing out for himself or herself. In the great takeover battles we have witnessed during past years, companies that had strong cultures drew the wagons around them and fought it out, while other companies saw executives—supported by golden parachutes—bail out of the struggles. Because corporations and their members are interdependent, for the corporation to be strong, the members need to share a preconceived notion of correct behavior, a "business ethic," and think of it as a positive force, not a constraint. As an investment banker, I am continually warned by well-meaning lawyers, clients, and associates to be wary of conflicts of interest. Yet if I were to run away from every difficult situation, I wouldn't be an effective investment banker. I have to feel my way through conflicts. An effective manager can't run from risk either; he or she has to confront risk. To feel "safe" in doing that, managers need the guidelines of an agreed-upon process and set of values within the organization. After my three months in Nepal, I spent three months as an executive-in-residence at both the Stanford Business School and the University of California at Berkeley's Center for Ethics and Social Policy of the Graduate Theological Union. Those six months away from my job gave me time to assimilate 20 years of business experience. My thoughts turned often to the meaning of the leadership role in any large organization. Students at the seminary thought of themselves as antibusiness. But when I questioned them, they agreed that they distrusted all large organizations, including the church. They perceived all large organizations as impersonal and opposed to individual values and needs. Yet we all know of organizations in which people's values and beliefs are respected and their expressions encouraged. What makes the difference? Can we identify the difference and, as a result, manage more effectively? The word ethics turns off many and confuses more. Yet the notions of shared values and an agreed-upon process for dealing with adversity and change—what many people mean when they talk about corporate culture—seem to be at the heart of the ethical issue. People who are in touch with their own core beliefs and the beliefs of others and who are sustained by them can be more comfortable living on the cutting edge. At times, taking a tough line or a decisive stand in a muddle of ambiguity is the only ethical thing to do. If a manager is indecisive about a problem and spends time trying to figure out the "good" thing to do, the enterprise may be lost. Business ethics, then, has to do with the authenticity and integrity of the enterprise. To be ethical is to follow the business as well as the cultural goals of the corporation, its owners, its employees, and its customers. Those who cannot serve the corporate vision are not authentic businesspeople and, therefore, are not ethical in the business sense. At this stage of my own business experience, I have a strong interest in organizational behavior. Sociologists are keenly studying what they call corporate stories, legends, and heroes as a way organizations have of transmitting value systems. Corporations such as Arco have even hired consultants to perform an audit of their corporate culture. In a company, a leader is a person who understands, interprets, and manages the corporate value system. Effective managers, therefore, are action-oriented people who resolve conflict, are tolerant of ambiguity, stress, and change, and have a strong sense of purpose for themselves and their organizations. If all this is true, I wonder about the role of the professional manager who moves from company to company. How can he or she quickly absorb the values and culture of different organizations? Or is there, indeed, an art of management that is totally transportable? Assuming that such fungible managers do exist, is it proper for them to manipulate the values of others? What would have happened had Stephen and I carried the sadhu for two days back to the village and become involved with the villagers in his care? In four trips to Nepal, my most interesting experience occurred in 1975, when I lived in a Sherpa home in the Khumbu for five days while recovering from altitude sickness. The high point of Stephen's trip was an invitation to participate in a family funeral ceremony in Manang. Neither experience had to do with climbing the high passes of the Himalayas. Why were we so reluctant to try the lower path, the ambiguous trail? Perhaps because we did not have a leader who could reveal the greater purpose of the trip to us. Why didn't Stephen, with his moral vision, opt to take the sadhu under his personal care? The answer is partly because Stephen was hard-stressed physically himself and partly because, without some support system that encompassed our involuntary and episodic community on the mountain, it was beyond his individual capacity to do so. I see the current interest in corporate culture and corporate value systems as a positive response to pessimism such as Stephen's about the decline of the role of the individual in large organizations. Individuals who operate from a thoughtful set of personal values provide the foundation for a corporate culture. A corporate tradition that encourages freedom of inquiry, supports personal values, and reinforces a focused sense of direction can fulfill the need to combine individuality with the prosperity and success of the group. Without such corporate support, the individual is lost. That is the lesson of the sadhu. In a complex corporate situation, the individual requires and deserves the support of the group. When people cannot find such support in their organizations, they don't know how to act. If such support is forthcoming, a person has a stake in the success of the group and can add much to the process of establishing and maintaining a corporate culture. Management's challenge is to be sensitive to individual needs, to shape them, and to direct and focus them for the benefit of the group as a whole. For each of us, the sadhu lives. Should we stop what we are doing and comfort him; or should we keep trudging up toward the high pass? Should I pause to help the derelict I pass on the street each night as I walk by the Yale Club en route to Grand Central Station? Am I his brother? What is the nature of our responsibility if we consider ourselves to be ethical persons? Perhaps it is to change the values of the group so that it can, with all its resources, take the other road. The Sadhu was handed off from one group to another due to what?
All of these choices are correct.
The 2013 Ethics Resource Center National Business Ethics Survey indicates each of the following results with respect to how employees view the ethics and ethical practices of organizations they work for except:
Ethical cultures are weaker
In the case of the Ford Pinto, the company applied which principle?
Ethical legalism
The role of a leader in an organization is to:
Determine organizational climate and define norms
An ethical climate is enhanced by all of the following except:
Fear of retaliation
One might say that each group was operating at which ethical level?
Kohlberg's Stage Two
Burchard's Ethical Dissonance Cycle Model suggests this was a failure of which of the following?
Low Organizational Ethics, High Individual Ethics Low High
Which author suggests that the social responsibility of business is to increase profits?
Milton Friedman
With respect to the importance of moral issues in business, Thomas Jones posited that:
Moral issues of high intensity are more pronounced than those of low intensity
A common ethical problem where there is an unrealistic expectation to meet expected results and the ends justifies the means can be best described as:
Pressure to maintain the numbers
Proper tone at the top includes all of the following except:
Rarely enforcing the code of conduct
A conflict of interest may occur when a person holds a position of trust that ______.
requires judgment on behalf of others
Which act protects the rights of employees to act together in a concerted manner to address conditions at work, with or without a union?
The National Labor Relations Act
In business, which has a greater influence on decision making?
The organization's values
What was an underlying theme in nearly all of the companies with major accounting frauds in the early 2000s?
Weak board of directors
The seven signs of a pending ethical collapse include all but:
Whistleblowing hotline
Fear of reprisals refers to ______.
a culture where employees hesitate to disclose issues of ethical concern
Directing the business and affairs of the corporation is the ultimate responsibility of the ______.
board of directors
The shared beliefs of top management about how they should manage themselves and other employees and how business should be conducted is known as ______.
corporate culture
Ethical expectations that society has for business can be referred to as ______.
corporate social responsibility
The moral atmosphere of the work environment and the level of ethics practiced within a company is referred to as
ethical climate
One of the biggest issues that corporate boards of directors face is, __ __ and it has been found that most boards spend more time on this than ensuring the integrity of financial reporting.
executive compensation
According to the 2013 NBES Survey of Reporting of Observed Misconduct, all instances of observed misconduct ______.
have declined
The person-organization fit in the Ethical Dissonance Model that creates the greatest likelihood of ethical behavior occurring is ______.
high organizational ethics, high individual ethics
Ethical decisions in the workplace are often made jointly in work groups or ______.
in organizational settings
Opportunity for unethical behavior results from conditions that ______.
increase rewards
Having the procedures and structures in place to minimize or avoid conflicts of interest is another way of describing ______.
independence
Principles people use to decide what is right and wrong in the ethical decision-making process are referred to as __ values
individual
When a company retaliates against an employee for bringing bad news to the attention of top management, a __ the __ syndrome exists
kill; messenger
The ethical person-organization fit option that is most likely to lead to unethical behavior occurring is ______.
low individual ethics, low organizational ethics
The conditions in an organization that limit or permit ethical or unethical behavior are referred to as
opportunity
The moral atmosphere of the work environment and the amount of ethics practiced is referred to as the __ ethical climate
organizational
Decision making in an organization is influenced by its culture through ______.
organizational relationships and expectations for behavior
The most frequently observed misconduct in organizations in the 2013 National Business Ethics Survey was ______.
stealing or theft
True or false: A corporate governance system includes mechanisms to ensure that management operates the organization in the interests of shareholders.
true
When people need to resolve issues in their daily lives, they often make decisions based on their own
values