Business Law Chapter 2 Business Ethics

A state government that raises taxes on the top two-percent income earners in order to help fund pre-kindergarten education for one million three-year-old children who are not currently receiving it is an example of:

Act Utilitarianism

Under the traditional "Loyal Agent's Argument," what should an agent do in order to satisfy his or her duty as a "loyal agent"?

Act egoistically for the best interests of the principal.

If an individual makes an ethical decision by examining the options and select the option that will maximize the goodness, which ethical theory best supports this decision?

Act utilitarianism.

Throughout the twentieth century, government regulation of business increased. According to social contract theory, why has this happened?

Business has failed to respond in a proactive manner to the changing demands of society. Consequently, government has stepped in with a reactive solution.

__________________ethics determine the ''rightness'' or the ''wrongness'' of any action by determining the ratio of good to evil that a given action will produce.

Consequential

When one society finds an act appropriate for enforcement under the law and another society finds the same act permissible and free from regulation, this exemplifies:

Cultural Relativism

An act utilitarian is driving a friend to the hospital. The friend has been seriously injured, and the time it will take to reach the hospital is critical. If the driver obeys the speed limits, the friend will probably not survive the trip. If the driver disobeys the speed limits, the friend will probably arrive at the hospital in time for emergency treatment. Under these circumstances, what is the driver most likely to do?

Decide how the greatest good will be served, and make the driving decision on the basis of the greatest good

The ethical theory of egoism is based on which of the following concepts?

Each person should act in the manner that will maximize his or her own self-interests.

A large automobile manufacturer discovered a defect in the construction design of one of its new models. The defect presents the possibility of a gas tank rupture, with a resulting fire hazard, in the event of a rear-end collision. However, management determined that it will be cheaper for the corporation in the long-term to pay damages in the lawsuits that will likely arise due to the design defect than it will be to recall the cars and correct the defect. Based on this reasoning, the company takes no action. What ethical theory best explains this decision?

Egoism

The Valley Wide Press Online, is the most trafficked website in Northern Iowa, with 75,000 hits per day. Valley Wide Press Online decided that it wanted to donate $50,000 to the restoration of the historical education building on Greenwood's campus in Iowa. By doing so, Valley Wide Press Online was able to place a prominent photo on their home page and have a large news article publicizing its efforts to raise money for Greenwood on the front page. This would be considered an act of

Egoism

According to "game theory," if lying is unethical, then "bluffing" is also unethical.

False

Business ethics involve only the ethics of the organization.

False

Consequential principles tend to focus on the concept of duty rather than on any concepts of right and/or wrong.

False

Deontological Ethics believes that ethical actions require that an individual focus on being caring and nurturing relationships.

False

Ethics refers to principles of right and wrong behavior as sanctioned by or operative on one's conscience.

False

Federal law now requires that businesses adopt a code of ethics.

False

Game theory" is the view of business ethics currently held by most of society.

False

If a business operates within the law, by definition it must be acting in an ethical manner.

False

Morals are guiding principles of conduct governing an individual or a group.

False

Nonconsequential ethics determine the ''rightness'' or the ''wrongness'' of any action by determining the ratio of good to evil that a given action will produce.

False

The ''categorical imperative'' advanced by John Rawls and the ''veil of ignorance''advocated by Immanuel Kant are two of the best-known theories in support of the nonconsequential principles of ethics.

False

The Cultural Relativism Theory is based upon the belief that some societies are better than others.

False

The terms "ethics" and "morality" are interchangeable.

False

Two business managers applying the same theory of ethics will always come to the same conclusion.

False

The ethical theory that finds that everyone is interdependent and gives high priority to empathy, healthy and harmonious relationships, caring for one another, and avoiding harm is:

Feminism

If a business obeyed the rules and stayed within the law, it was deemed to be acting in an ethical manner. This approach to business ethics led to the development of the ''______________________'' as a means of judging the ethical stance of the business.

Game theory

What is the basic flaw with the "game theory" of business ethics?

Game theory assumes that all participants know that a game is being played and what the rules are.

Garden Fresh, a grocery store chain in the upper Midwest, donated five tons of food to a Florida food bank. Garden Fresh was motivated to make the donation because of the devastation caused by a hurricane. In making the donation:

Garden Fresh is following the utilitarianism approach to ethics. The donation serves the interests of society by producing the greatest good for the greater number of people.

"Do unto others as you would have others do unto you" is known as the _____________ __________.

Golden Rule

Which of the following ethical theories is properly classified as a nonconsequential theory of ethics?

Kant's categorical imperative.

Which action would likely not be one taken by a follower of Egoism?

Lowering prices

_______________ approach refers to a corporate social responsibility belief that a business' sole responsibility is to follow the law and make money.

Maximize Profits

Historically, business was viewed by many people as an amoral institution. Why?

Morality and immorality were reserved for animate beings. Since any given business was inanimate, it could not be either moral or immoral.

__________________principles tend to focus on the concept of duty rather than on any concepts of right and/or wrong.

Nonconsequential

A rule utilitarian is driving a friend to the hospital. The friend has been seriously injured, and the time it will take to reach the hospital is critical. If the driver obeys the speed limits, the friend will probably not survive the trip. If the driver disobeys the speed limits, the friend will probably arrive at the hospital in time for emergency treatment. Under these circumstances, what is the driver most likely to do?

Obey the speed limits and hope for the best, since rules are to be obeyed in every circumstance.

Props, Inc. donated $10,000 for the renovation of a community theater. Props was motivated to make this charitable contribution because of the potential for future business with the theater. In making the donation:

Props is following the ethical theory of organizational egoism. The $10,000 donation promotes the long-term interests of Props.

A boat with 10 people is sinking. None of the passengers can swim and there are only 2 life jackets. Which ethical theory is most exhibited if you decide that you and your best friend should be the two that get the life jacket?

Rawlsianism

Your friends spent hours making you a welcome home dinner after you moved back into town. As you eat the food, it tastes horrible! When your friends ask how it tastes, you tell them it is one of the best meals you've ever had. In reality, you could barely swallow the food down and would have spit it out if no one was looking. This action of lying would likely be approved by

Rawlsianism

Under the "Social Contract Theory," what does society expect of a business enterprise?

Satisfying the demands of the society.

A businesswoman, who believes in egoism, has developed a new product. This new product is very effective in carrying out its function, but it has a very short life span. The businesswoman knows that she can sell the product for a very high price and make a large profit in the first two years, but will then be forced out of business as the public reacts to the short life span. Alternatively she can sell the product for a much lower price, make a moderate profit, and remain in business for a longer time period. If she stays in business long enough, the aggregate profits at the lower price will eventually be greater than the two-year profit at the higher price. As an egoist, what will this businesswoman decide to do?

Sell at the lower price to maximize long-term self-interests.

The "______________________________" asserts that a business must satisfy social desires and social demands in order to be allowed to operate.

Social Contract Theory

Kant's theory of ethics includes the concepts of perfect and imperfect duties. How does Kant define an imperfect duty?

Something a person should do, but not necessarily something a person must do.

According to the text authors, which of the following is the basic problem that business face in efforts to act ethically?

There are no fixed guidelines for business to follow in its efforts to act ethically.

A business must satisfy the social contract.

True

A number of people view ''business ethics'' as a contradiction in terms.

True

A rule utilitarian believes that strict adherence to the rules of the society will generally produce the greatest good for the greatest number.

True

According to Immanuel Kant, a "perfect" duty defines those things that a person must always do or refrain from doing, while an "imperfect" duty defines things that a person should do, but not necessarily things that a person must do.

True

According to the "Social Contract Theory," business only exists because society allows it to exist, and will cease to exist if society so decides.

True

An egoist focuses on the interest of the individual; whereas the utilitarian focuses on the interests of society.

True

An egoist may be willing to make a personal sacrifice today to receive some benefit in the future, and doing so is perfectly consistent with the doctrine of egoism.

True

Civil Rights movement ultimately changed the laws regarding equal rights and racial discrimination, thereby changing the social values reflected by the laws governing human rights in this country.

True

Consequential ethics attempts to measure "rightness" and "wrongness" by determining the ratio of good to evil that will result from any given action.

True

Different societies may have different ethics, but the morals of any given individual should remain relatively constant no matter which society that person should happen to be in at any point in time.

True

Egoism, from an organizational perspective, involves those actions that best promote the long-term interests of the organization

True

Ethical Egoism is an ethical theory that believes an action is ethical if it fulfills the self-interests of the actor.

True

Ethics and the law are interrelated.

True

Ethics refers to a guiding philosophy—the principles of conduct governing an individual or a group. By contrast, morals relate to principles of right and wrong behavior

True

Historically, businesses were viewed by many as amoral institutions.

True

Laws enacted by society establish a minimum standard of behavior that is expected from each member of that society.

True

Nonconsequential ethics tend to focus on concepts of duty, with adherence to one's duty being viewed as ethical conduct by definition.

True

Prohibition of alcohol sales and consumption in the United States was due to the ethical beliefs of some members of society.

True

Rawlsian Ethics believes that if people did not know exactly what lot in life they would be born into, people would ensure that the rules and the system is fair for everyone.

True

The "Social Contract Theory" asserts that a business must satisfy social desires and social demands in order to be allowed to operate.

True

The ''categorical imperative'' advanced by Immanuel Kant and the ''veil of ignorance'' advocated by John Rawls are two of the best-known theories in support of the nonconsequential principles of ethics.

True

The case of Dodge v. Ford Motor Co. resulted in a court opinion that defined the duty of a corporation. According to the court, a corporation has a primary duty to maximize profits and to protect the interests of its owners.

True

The informal Front Page Test essentially requires an actor to think about whether they would perform certain actions if they knew that everyone would be aware that they performed these actions.

True

Two broad categories of ethical theories exist, based on either consequential (deontological) principles or on nonconsequential (teleological) principles.

True

Under the social contract theory, a business manager must base decisions affecting the business, at least in part, on the impact the decisions will have on the business's various constituent groups.

True

Utilitarian Ethics believes the best action is the one that brings about the best results.

True

_______________ theory of ethics would say that Robinhood's motto of steal from the rich to give to the poor is ethical as long as it results in the most happiness.

Utilitarian

Liz believes that she should obey rules and laws at all times because this will produce the greatest good or the least harm for the greatest number of people. Liz is:

a rule utilitarian.

When a business is developing an ethical model, code, or framework, what is the advantage of relying on consequential ethical theories rather than nonconsequential ethical theories?

a. Consequential theories are more readily understood and more easily accepted by the public than nonconsequential approaches. Further, consequential theories are more flexible than duty-based ethics. Additionally, consequential theories give a measuring standard against which to base one's choice of rules. Nonconsequential theories tend to be absolute, even though there are several duty-based theories that do not all agree with each other. One therefore has difficulty choosing among them.

The extensive governmental regulation of business that exists today is the result of:

businesses' failure to voluntarily and adequately meet the demands of the public.

Ethical theories consistent with consequential principals include all EXCEPT:

categorical imperative.

Ethical principles that focus on the results of an action instead of duties that are required of actors, are said to be

consequential principles.

Nonconsequential principles tend to focus on the concept of _________ rather than on any concepts of right and/or wrong

duty

The doctrine which assumes that self-interest is the proper goal of all human action is known as___________.

egoism

When expanding operations into another country, it is recommended that a firm:

make an effort to learn about the cultural differences that exist between the two countries, and take steps to reduce any conflict prior to the expansion.

Immanuel Kant developed an ethical theory known as the categorical imperative. According to this theory, in order for a person to act ethically, a person must:

obey universal moral principles in order to act ethically.

In making a decision, the following factors should be considered except

the ability to protect your business from possible lawsuits from ethical theory of egoism

Apply the same scenario from Question 28. If you are a believer in act utilitarianism, then your decision whether to keep your promise or obey your boss will be influenced by

the likely consequences to you personally and the likely consequences to your friend, your boss, and others.

Again, apply the same scenario from Question 28. If you are a believer in egoism, then your decision about whether to keep your promise or obey your boss will be influenced by

the likely consequences to you personally.

The rule of caveat emptor (buyer beware) developed:

under the game theory.

Your friend of 20-years, Samantha, asks you to keep a secret, you agree, and she tells you that she is secretly planning to leave her current job for a job with a competing company. Samantha tells you that if you tell anyone her secret, she will discontinue being your friend. Unbeknownst to Samantha, you have entered into a written contract with your boss Albert to tell him any news regarding Samantha's job. If you are a believer in nonconsequentialist ethics, then your decision whether to tell Albert Samantha's secret will be influenced by

your contractual duty to Albert.

A What is the "social contract theory" of business? B According to the social contract theory, what must a business do to remain in existence? C How does a business manager make an ethical decision under the social contract theory of business?

. A The social contract theory posits that business is only allowed to exist as long as that business satisfies its "Social Contract" or satisfies the demands of society. B This social contract requires a business to meet the needs and demands of society in exchange for its being allowed to exist. If the business fails to uphold its end of the bargain, society can change the rules to force compliance, or can even force the business to cease operations entirely. C The businss manager must base decisions affecting the business, at least in part, on the impact that the decision will have on the various constituents. The constituents include the stakeholders, employees, customers, and the community. The manager must decide how each group will be affected and how much weight to give to each group. The manager must balance the competing interests in reaching a decision that reflects the best short-term and long-term interests of the firm.

A classical ethical test is the Trolley Problem. There are numerous variations but essentially, you are in charge of a section of train tracks. A train is coming down the track and the track turns into a Y, to where the train will veer left or right, based upon your selection. If you do nothing, the train will go to the right. You have a family member that is tied to the track on the right. If you force the train to switch tracks and go left, there are 5 strangers that you do not know and they are tied to the track. You have to choose: do nothing at let your family member die, or switch the track and cause the 5 strangers to die. Pick an ethical theory and explain what that theory would choose to do.

. Egoist- Switch the track to save the family member. The five strangers are unknown to you whereas saving your family member is very self serving. Utilitarian—Would likely leave the track to kill the family member. 5 people alive is likely to bring more happiness than one person alive. Rawlsian—Would likely leave the track to kill the family member. If you would be one of the 6 total people on the train, but didn't know if you'd be on the right side or left, you'd likely choose for just 1 person to die so that you'd have the best chances of survival in the life lottery. Kant—Would likely leave the track to kill the family member. By switching the track, you are affirmatively causing the death of the 5 strangers. By doing nothing, fate or luck is taking its place which may be unfortunate but not your fault. The best universal law that could be derived from this situation would be that you cannot kill 5 innocent people to save 1 innocent person.

Beta Company has a vice-president who is within a few years of retirement. Over the past several years the work and the productivity of this vice-president have been slipping, although not to such a degree as to harm the company. Three years ago a bright and energetic young assistant was hired for the vice-president, with the understanding that she will replace the vice-president upon his retirement. This assistant has been a tremendous asset to the firm, and has done more than her fair share to keep the vice-president's division operating efficiently. Last week the assistant told the president that unless she is promoted to the position of vice-president within the next six months, she will seek employment elsewher*e. What should the president of the company do if the firm follows egoism? Utilitarniasm? Explain and justify your answer.

. If the firm follows egoism, it will have to decide what conduct is in its best interests and then act accordingly. The short-term benefit of keeping the young assistant is obvious, but the long-term benefit is unclear. If the long-term benefit will be great, the firm should fire the senior vice president and promote the assistant. There is no guarantee that she will not make future demands regarding policy and/or personnel, nor that she will refrain from taking other actions that are unsettling to the firm. If the firm follows utilitarianism, it will have to decide which alternative is in the best interests of the most people. Promoting the assistant will send a positive message to some of the employees, telling them that productivity and effort can lead to company advancement. However it will also send a negative message to other employees, telling them that seniority and service count for little, and that loyalty will not be rewarded. The firm will not have an easy choice here, and no matter which decision it makes, there will be many people who will feel that it has chosen wrongly. All that the firm can do is decide which ethical theory it will follow, analyze the facts from that perspective, and decide on the basis of the analysis.

The loyal agent's argument presumes that the principal follows the ethical theory of egoism, and that the loyal agent must also act egoistically for the principal. What is not part of the argument?

If however, I choose to not disclose information that would help me in my venture, this would also be ethical from an egoist standpoint.

The ''categorical imperative'' advanced by whom? _____________

Immanuel Kant