Law Chapter 2

In 2013, the average CEO of a company in the Standard and Poors 500 Index took home more than _____ times as much as the average worker.

325

The main issue in CASE 2.1 Northeast General v. Wellington Advertising (1993) was whether:

A relationship of trust with fiduciary-like obligations was created under the parties' finder-seller agreement.

Which of the following is true regarding the relationship between law and ethics?

An action that is unethical may nonetheless be legal.

Which of the following is NOT a manner in which a company can promote ethical behavior?

Lobby legislators for more ethical guidelines

Which of the following is a psychological disorder referenced in the text resulting in a lack of empathy and the inability to recognize boundaries?

Narcissistic personality disorder

According to the Delaware Supreme Court, when does the role of a director shift from being a "protector of the corporation bastion" to being an "auctioneer" charged with obtaining the highest realizable short-term value for the shareholders?

Only when the breakup of the corporation or a change of control has become inevitable.

According to _____, social policies developed behind the veil of ignorance would create a system benefiting the _____.

Rawls, least well off

Milton Friedman argued that if a company decides to spend money for a social cause, it is in essence spending someone else's money for a general social interest.

True

Nobel Prize winner in economics Milton Friedman asserts that the only guiding criterion for the corporation should be profitability within the confines of the law.

True

Rawlsian moral theory seeks to maximize the condition of the worst off person in society.

True

Some companies, like Nike and Adidas, are now auditing supplier working conditions and posting the results at the Fair Labor Association website.

True

The two main schools of ethical thoughts are teleological and deontological

True

Under the Teleological theory, the ethical good of an action is judged by the effect of the action on others.

True

Immanuel Kant argued that spending money in ways that are not consistent with shareholder wishes is tantamount to imposing a tax and unilaterally deciding where the money will be spent.

False

Kantian theory examines the concepts of universalizability and reversibility.

False

Rawlsian moral theory seeks to develop principles behind a "feil of information."

False

Since 1990 until today, the compensation gap between the average worker and a CEO listed in Standard and Poors index has narrowed.

False

The Deontological theory focuses on the consequences of an action rather than the motivation of the individual.

False

Utilitarianism seeks to equalize the benefit to everyone.

False

Utiliterianism is a major deontological system that operates under the proposition that the ideal is to focus on motivation rather than on consequences .

False

Companies like _____ have suffered severe financial penalties as a result of decisions the public viewed in hindsight as _____.

General Motors, unethical

Which of the following is true regarding shareholder primacy?

It is legally mandated only in very narrow circumstances.

Customers can vote with their feet by boycotting unethical practices, such as clothing made in sweatshops.

True

Which of the following is true regarding the growth of socially responsible mutual funds?

Both America and Europe have seen growth in socially responsible funds.

Which of the following allows rights-based moral theories to be compared to other theories such as a utilitarian framrework?

Comparative justice

The Organization of Economic Cooperation and Development is:

Comprised of nations from North America, Europe, and Asia-Pacific

A _____ statute is a state statute authorizing boards of corporations to take into account all stakeholders and constituencies even when a change in control or breakup of the corporation has become inevitable.

Constitutency

The obligation of a company's directors to manage the corporation for the best interest of the _____ is recognized as the primary obligation of directors of a corporation.

Corporation

According to St. Thomas Aquinas, an unjust law:

Could not properly be considered law at all.

According to economist Michael C. Jensen, which of the following is a stakeholder of a corporation?

Customers, employees, and managers

Fact Pattern 2-1 Jack decides to donate leftover food from his restaurant to a homeless shelter. Brock, an employee who was angry with Jack over not getting a raise, claimed that Jack decided to donate the food only for publicity and that Jack did not really care about homeless people. Peggy, another employee disagreed, contending that regardless of his motivation, Jack was acting ethically because of the consequences involved and the number of people helped. Refer to Fact Pattern 2-1. Upon which of the following would Jack most likely rely in contending that he donated the food because he was motivated to help the poor?

Deontological theory

________ focuses on how the burden and benefits of a particular system are distributed.

Distributive Justice

Which of the following are the three main theories under the comparative justice framework?

Distributive, compensatory, and retributive

The ____ Act illustrates that corporate conduct violating society's expectations can result in new forms of regulation without regard for feasibility or cost.

Dodd-Frank Wall Street Reform and Consumer Protection

According to St. Thomas Aquinas, only laws that followed ______ were true and just.

Eternal law

Fact Pattern 2-2 Wally and Janice are both managers in a small corporation set up to manufacture sporting goods. They both receive bonuses for any ideas that benefit the company, although Janice's bonus is computed at a lower rate that Wally's because she has been at the company a shorter amount of time. Janice has a great marketing idea that would result in her receiving a bonus of $1,000. She has it all worked out on her computer. Unknown to her, one evening after business hours, Wally obtains the information from her computer and submits it himself the next day. He is immediately awarded a bonus of $2,000 for the information. Fortunately for Janice, Sally, a custodian, saw Wally in Janice's office and heard him calling his wife while he was there to brag about his misdoings. Sally informed Blaire, the CEO, of Wally's actions. Refer to Fact Pattern 2-2. Which of the following types of justice is involved if Blaire requires that Wally give Janice $1,000?

Fair

A company's CEO does not play a significant role in instilling a sense of ethics throughout the organization.

False

All business leaders and academics agree that the primary ethical and legal duty of corporations is to maximize shareholder value.

False

All fifty states have constituency statutes.

False

Employees can never be stakeholders of a corporation.

False

Ethics and law are unrelated.

False

If a company employee chooses to follow orders (and breaks the law) the fact that his supervisor ordered him to do so is a complete defense at a criminal trial.

False

Fact Pattern 2-2 Wally and Janice are both managers in a small corporation set up to manufacture sporting goods. They both receive bonuses for any ideas that benefit the company, although Janice's bonus is computed at a lower rate that Wally's because she has been at the company a shorter amount of time. Janice has a great marketing idea that would result in her receiving a bonus of $1,000. She has it all worked out on her computer. Unknown to her, one evening after business hours, Wally obtains the information from her computer and submits it himself the next day. He is immediately awarded a bonus of $2,000 for the information. Fortunately for Janice, Sally, a custodian, saw Wally in Janice's office and heard him calling his wife while he was there to brag about his misdoings. Sally informed Blaire, the CEO, of Wally's actions. Refer to Fact Pattern 2-2. Which of the following types of justice is involved if Blaire requires that Wally give Janice the entire $2,000 bonus he received?

Retributive

Which of the following is a term for the maximization of shareholder value?

Shareholder primacy

Which of the following is the group given the ultimate legal authority to change management?

Shareholders

Noble prize winner Milton Friedman assets that "social responsibility" is a fundamentally _____ doctrine.

Subversive

Fact Pattern 2-1 Jack decides to donate leftover food from his restaurant to a homeless shelter. Brock, an employee who was angry with Jack over not getting a raise, claimed that Jack decided to donate the food only for publicity and that Jack did not really care about homeless people. Peggy, another employee disagreed, contending that regardless of his motivation, Jack was acting ethically because of the consequences involved and the number of people helped.

Teleological theory

Which of the following statements regarding the teleological theory is NOT true?

Teleological theory focuses more on the motivation and principle behind an action.

Which of the following plays the most significant role in instilling a sense of ethics throughout an organization?

The CEO

Monica tells all her employees that she expects them to treat others as they would like to be treated. Which of the following is a descriptive term for Monica's requirement?

The Golden Rule

Which of the following international organizations adopted a convention criminalizing bribes to government officials and recommending a prohibition on the tax deductibility of bribes?

The Organization of Economic Cooperation and Development

Managers who create ethical solutions while maximizing shareholder value are said to find:

The Sweet Spot

Kant's categorical imperative states that:

The form of an action rather than the intended result determines the ethical worth.

Which of the following is NOT an example of St. Thomas Aquinas' requirements for a law to be just?

The law must be formed to promote a private benefit to the majority

Another way of saying maximization of shareholder value is shareholder primacy.

True

Compliance with the law is just the baseline for effective and responsible managerial action.

True

According to Exhibit 2.1 "Ethical Business LEader's DEcision Tree", which of the following is the first question managers should ask themselves when determining whether a proposed action is ethical?

Whether it is legal

According to Kant's theory of universalizability, the ethical worth of an act is determined by whether a person:

Would want everyone to perform in this manner.