Business Chapter 2: Business Ethics & Social Responsibility

True or False: "Everybody else does it" is not only a rationalization but also an analysis of the ethical issues involved in conduct.

False

True or False: The Wall Street Journal model for resolving ethical dilemmas is the same as the "front-page-of-the-newspaper" test.

False

True or False: Arthur Andersen, the accounting firm, met its demise because of its certification of the fraudulent financial statements of Enron.

True

True or False: Corruption hampers economic development.

True

True or False: Pressures with respect to goals and number quotas can cause employees to make ethical lapses.

True

ethical standards

a set of accepted rules of conduct that governs society

natural law

a system of moral standards that forms the basis for all human conduct

moral relativism

a system that establishes ethical standards according to the situation in which the dilemma is faced; also known as situational ethics

Which of the following questions is part of the Laura Nash perspective on resolving ethical dilemmas? a. "How would I view the issue if I stood on the other side of the fence?" b. "What is in my mind when I make decisions?" c. "To whom should I be responsive to be able to best serve my own interest?" d. "What was I thinking when I decided to engage in such bad behavior?"

a. "How would I view the issue if I stood on the other side of the fence?"

Maria and Mark are co-workers. Mark takes a long lunch almost every day and tells Maria that it is not a big deal because everyone does it. One day, while Mark is away at lunch, his boss comes looking for him. The boss asks Maria if she has seen Mark. Maria knows that if Mark loses his job, he will not be able to pay his son's hospital bills, but she does not want to lie to the boss as well. Using a standard of moral relativism, what would most likely be her response to the boss?Analysis: a. "No, I haven't seen him." b. "He's taking a long lunch and is not back yet." c. "I saw him in another part of the building a few minutes ago." d. "Mark has a right to do whatever he wants to as long as he gets his job done."

a. "No, I haven't seen him."

John Seagroves was a bully during his school days, often ridiculing his classmates and teasing them with tricks such as taking their clothes during gym class and hiding them. Years later John ran for public office and the New York Times did a profile of his behavior during his school years, interviewing many of his classmates who were his targets. What test could have helped John evaluate his treatment of others during school? a. "What if my actions were described on the front page of the newspaper, how would I feel?" b. "Is my conduct legal?" c. "Who's to know?" d. "Do I need to discuss my decision with my family, friends, and those closest to me?"

a. "What if my actions were described on the front page of the newspaper, how would I feel?"

Which of the following is a factor that reduces sentences and fines under the Federal Sentencing Commission? a. A code of ethics b. Terminations for those reporting company ethics violations c. Diversity in the workplace d. Low-ranking employees responsible for ethics training in a company

a. A code of ethics

Which of the following is an inherent value built into the global capitalistic economic system? a. Consumers are given value in exchange for the funds expended. b. Employees are penalized for failing to make significant contributions to production. c. Risk-takers are required to pay a return on their investments. d. Employees are mandated to furnish the capital necessary for production.

a. Consumers are given value in exchange for the funds expended.

Which of the following is a trait of the 100-years-of dividends companies? a. Cost consciousness b. Lack of home-grown management c. Absence of diversification d. Downsizing

a. Cost consciousness

Richard Martin owns and operates a Dalmatian breeding facility. The state regulations allow him to have up to 50 puppies at any given time for a property of his size. The West family visits the facility to purchase a puppy and sees that the puppies are in cramped cages despite the large property and most of the cages having very little food and water. What type of ethical standards, if any, has Richard Martin violated? a. Natural law b. Moral relativism c. Religious standards d. Statutory law

a. Natural law

You begin a summer job working as an assistant project manager with a residential construction company. The construction of a new home requires a city inspector from the city's development office to inspect and sign off on various phases of the home, such as the foundation, plumbing, framing, electrical, mechanical, etc. One of the final permits needed is the driveway permit, and it has become customary for the project managers in the city to give the city inspector a Starbucks gift card in the amount of $25 to $100 to expedite this permit. Most builders have a petty cash fund that is largely for this purpose. Which of the following is correct? a. The Starbucks gift card is a bribe, which makes it illegal. b. The Starbucks gift card is okay because it is only a nominal amount and would be the same as a project manager buying the inspector a cup of coffee. c. The Starbucks gift card is okay because the amount likely falls below the de minimus gift amount for the city. d. The Starbucks gift card violates the morality of the building industry.

a. The Starbucks gift card is a bribe, which makes it illegal.

Chao worked as an outside sales representative for a medical supply company, which has a Code of Ethics for employees. One provision of the ethics code states, "We expect you to keep accurate records and reports. . . . We do not permit . . . false or misleading entries in the company's books or records for any reason." The policy also stated that an employee would not be entitled to exercise any stock options if terminated for cause. Many of the outside sales representatives submitted inflated expense reports to make up for the lower commissions their company charged when compared to the commissions their competitors paid. Chao was fired for padding his expense accounts, and the company denied him his termination benefits for an employee in violation of its Code of Ethics. Which of the following statements is correct? a. The company had the right to fire Chao because he violated the company's Code of Ethics. b. Chao was entitled to his termination benefits, even if he violated the company's Code of Ethics. c. The company denied Chao his due process rights prior to terminating him. d. The company should have deducted the amount Chao oversubmitted in expense reports from his last paycheck.

a. The company had the right to fire Chao because he violated the company's Code of Ethics.

Which of the following is true of ethical choices? a. They give businesses the freedom to choose to avoid costly regulations. b. They give rise to liability issues, which may result in bankruptcy and reorganization of businesses. c. Allowing law and lawyers to control a business's destiny encourages wise and ethical choices. d. Managers need no guidelines for making ethical choices.

a. They give businesses the freedom to choose to avoid costly regulations.

According to Milton Friedman, when should executives reduce pollution emitted by the company's factories? a. When shareholders would lose dividends as a result b. When the government requires them to do so c. When protesters begin picketing d. When workers get less return for their labor

a. When shareholders would lose dividends as a result

Jayshawn Smith is the CEO of International Computer Corporation. Mr. Smith pays 25 cents to the company each time a personal fax comes to him at his office. Mr. Smith's actions: a. are meant to establish an effective tone at the top. b. are unnecessary because there is no ethical breach when you have no control over who sends faxes. c. are inconsequential for the company. d. are indicative of clear, available, and responsive reporting mechanisms.

a. are meant to establish an effective tone at the top.

When the savings and loan industry collapsed in the 1980s, all of the big accounting firms, except for Arthur Andersen, experienced heavy losses because of: a. their liability for audit work on the collapsed financial institutions. b. the unsound value of deferred taxes in their earnings. c. their organizational incentive systems and culture shifts. d. the absolute standards on which they relied.

a. their liability for audit work on the collapsed financial institutions.

Two 12-year-old boys were seriously injured when riding on a go-kart. The boys were riding on public streets, ran a stop sign, and were hit by a car that did not see them. The go-kart had clear warning labels on the sides stating that it was for off-road use only. The manual stated that the go-kart should not be used on public streets. The parents sued the go-kart manufacturer. One basic issue in this case would be: a. whether a manufacturer is liable when children are injured while riding one of its go-karts on a public road in violation of manufacturer and parental warnings. b. whether it is unethical to make products like go-karts that will be used by children when the manufacturer knows that accidents like this will happen. c. whether the parents failed to adequately supervise their children when using a dangerous product. d. whether the children, as 12-year-olds, should have known that riding a go-kart on the street was illegal and could result in injury.

a. whether a manufacturer is liable when children are injured while riding one of its go-karts on a public road in violation of manufacturer and parental warnings.

Which of the following questions influenced Gil Meche in deciding to walk away from a $12-million contract? a. "Is it legal?" b. "How does it make me feel?" c. "Is it balanced?" d. "How bad will it get?"

b. "How does it make me feel?"

Which of the following questions is part of the Blanchard/Peale model for resolving ethical dilemma? a. "Will I feel as comfortable about my decision over time as I do today?" b. "How does it make me feel?" c. "Could I discuss it with a family member?" d. "How bad will it get?"

b. "How does it make me feel?"

A law firm in the Phoenix area provides "sick care" for employees' children. Sick care can be used when the child is too ill to go to school or to its regular care facility. The law firm manager claims that the program has cut down on the number of sick days taken by employees to care for sick children. The program is an illustration of which type of social responsibility school? a. Inherence school b. Enlightened self-interest school c. Invisible hand school d. Social responsibility school

b. Enlightened self-interest school

An employer instituted a wellness program for all employees. The wellness program includes an exercise facility and several pay incentives for losing weight, quitting smoking, or beginning an exercise program. The program is not required under any state or national laws. Which of the following schools of social responsibility applies to this employer? a. Inherence school b. Enlightened self-interest school c. Invisible hand school d. Social responsibility school

b. Enlightened self-interest school

Which of the following is a cost to businesses with ethical problems? a. Long-standing profitability b. Loss of customer trust c. Presence of shareholder goodwill d. Reduced federal monitoring

b. Loss of customer trust

Jennifer has been waiting in line to purchase her tickets to the opening night of the newest blockbuster at the movie theatre. After 30 minutes, she is almost at the cashier's counter when a teenager cuts in front of her. What rules or laws has the teenager broken? a. Civil law b. Normative standards c. Statutory law d. Private laws

b. Normative standards

Select all of the following that are companies that paid dividends for 100 consecutive years. a. BP b. Stanley Works c. Corning Glass Works d. Pullman, Inc.

b. Stanley Works c. Corning Glass Works d. Pullman, Inc.

What is the goal of applying the "front-page-of-the-newspaper" test when trying to resolve an ethical dilemma? a. To determine how to handle an organization's public relations issues b. To determine how an individual's actions would be perceived by others c. To see if an individual is breaking any laws d. To see if an individual's decision is balanced

b. To determine how an individual's actions would be perceived by others

What does the acronym WBAWI mean? a. We believe and we implement b. What business are we in c. Work, Believe, Attitude, With Integrity d. What's best and what's integrity?

b. What business are we in

The literature in ethical decision making indicates that: a. the decline in ethical standards begins rapidly. b. the decline in ethical standards can consume those with track records of success. c. individual lapses do not affect an individual's reliance on absolute ethical standards. d. certain people are cut from a different ethical fabric altogether and hence more susceptible to the temptations of fraud.

b. the decline in ethical standards can consume those with track records of success.

Which of the following is true of individuals to whom everyone turns for problem resolution, outstanding work effort, and results? a. They are able to calmly accept the harsh reality of their human limitations. b. Pride drives them to make good ethical choices in high-pressure situations. c. Hubris consumes them when they find that eventual setback or obstacle they cannot conquer. d. They are willing to admit that there may not always be a legal or ethical fix.

c. Hubris consumes them when they find that eventual setback or obstacle they cannot conquer.

What is another name for the "Do unto others" test for resolving ethical dilemmas? a. Laura Nash's perspective b. The "front-page-of-the-newspaper" test c. Immanuel Kant's categorical imperative d. The Blanchard-Peale model

c. Immanuel Kant's categorical imperative

Which of the following is true of individuals suffering from "the Bathsheba Syndrome"? a. They pursue leadership to help society with their products or services or employees by assisting them advance. b. They become increasingly involved with their employees and have a 360-degree perspective to remedy. c. They have defined themselves by the trappings of their success. d. They have a sense of vulnerability and recognize their liabilities.

c. They have defined themselves by the trappings of their success.

The policy on travel reimbursement at Amco Consulting is that receipts for meals under $25.00 are not required. Internal auditors at Amco have recently discovered that 80 percent of all meal submissions are in a range from $12.50 to $12.99. When one manager is questioned about the manager's submissions and those of the manager's employees, the manager responds, "So, they make a little bit on meals—it helps their miserable salaries." The manager's evaluation: a. demonstrates an ethical commitment to employees. b. is ethical since no one is really harmed. c. demonstrates a lapse in the company's ethical culture. d. is an example of Christian consequentialism.

c. demonstrates a lapse in the company's ethical culture.

According to the constitution of a country, the people have the freedom to express themselves using symbolic speech. During a protest, Liam burns his country's national flag and uses the law of symbolic speech to defend his actions in court. The court, however, rules that desecrating a venerable object conflicts with the constitution's natural law. Therefore, the court deems the action of burning of the country's flag illegal. In the context, the court's decision is an example of: a. natural law. b. moral relativism. c. positive law. d. religious law.

c. positive law.

positive law

codified laws that establish standards for ethical behavior

Identify a true statement about anonymous reporting lines set up in organizations. a. It helps in examining the types of things companies could do that would improve the ethical culture. b. It deters employees from raising issues about their supervisors. c. It receives reports from employees and shares them with management. d. It is a minimum requirement for companies working to achieve and maintain an ethical culture.

d. It is a minimum requirement for companies working to achieve and maintain an ethical culture.

CVS drug stores decided to no longer carry tobacco products in their stores because of the health impact of tobacco on its users. Into which of the following groups does CVS fall? a. The inherence school of thought b. The enlightened self-interest school of thought c. The invisible hand school of thought d. The social responsibility school of thought

d. The social responsibility school of thought

British companies are considering giving employees "pawternity leave" for employees who adopt or purchase pets. The employees would receive time off to help their pets acclimate to their homes. One company has adopted the motto, "Happy pets. Happy employees." There is no law that requires companies to give such leaves. Why are the companies doing so? a. They are part of the inherence school of thought. b. They are part of the enlightened self-interest school of thought. c. They are part of the invisible hand school of thought. d. They are part of the social responsibility school of thought.

d. They are part of the social responsibility school of thought.

Mico Yakamoto works for MedCo, Inc. Mico is a physician-scientist who is responsible for running the pilot tests on MedCo's new oral spray medication for individuals with adult onset diabetes. Mico has discovered that if test participants spray the medicine incorrectly or for a too short period of time, the medicine will not be as effective as it should be and will lead to insulin shock in some of the participants. Mico talks to one of her colleagues who responds, "Look, there's no need to stop the testing or the drug's release. Just inform the test participants and print in the brochures accompanying the spray that users should spray correctly, because if they do not, they may not receive the necessary dose." Mico is unsure if anyone can be a 100 percent accurate in spraying all the time. Who is affected by Mico's decision, regardless of what decision she makes? a. MedCo's competition in the market for the oral spray medication b. MedCo's board members c. The reputation of Mico's colleague, who advised her d. Users of the new oral spray medication

d. Users of the new oral spray medication

Many news agencies recently shared a report that studies had shown that drinking a certain type of juice drink was shown to have reduced the incidence of cancer in the patients studied. What the reports did not say was that the company producing that juice drink was the company who sponsored the study. Is this study unethical? a. No, because the study was accurate, regardless of who sponsored it. b. Yes, because the company was acting illegally. c. No, because the study did show a reduction in cancer in the patients. d. Yes, because the company has a conflict of interest in the study.

d. Yes, because the company has a conflict of interest in the study.