Business Law Final Exam
Sports Equipment Corporation sells a profit-generating product that is capable of seriously injuring consumers who misuse it in a foreseeable way. The firm's managers are contemplating adding a warning to the product but that warning will increase the cost of the product, and they are worried that it may deter some potential customers from buying it. Thinking about the two main theories of the role of business in society, discuss whether the corporation would behave ethically by continuing to sell the product without warning.
The two main theories of the role of business in society are shareholder theory and stakeholder theory. Under shareholder theory, the primary responsibility of a corporation is to maximize profits for its shareholders. Under stakeholder theory, a corporation has a broader responsibility to consider the interests of all stakeholders, including employees, customers, suppliers, and the community in which it operates. From a shareholder theory perspective, the corporation may argue that it has a duty to maximize profits and that adding a warning to the product will increase costs and potentially reduce sales. Therefore, continuing to sell the product without warning may be viewed as the most ethical course of action, as it is in the best interests of the shareholders. However, from a stakeholder theory perspective, the corporation has a broader responsibility to consider the interests of all stakeholders. In this case, the potential harm to consumers who misuse the product is a foreseeable risk that the corporation has a responsibility to address. The corporation should prioritize the safety of its customers over its own profits, and adding a warning to the product would be the ethical course of action. While the shareholder theory may justify continuing to sell the product without warning, the broader responsibility of the corporation under stakeholder theory is to prioritize the safety of its customers and consider the interests of all stakeholders. Therefore, adding a warning to the product is the ethical course of action.
A foreign corporation that has not obtained a certificate of authority to do business in a state can nevertheless maintain an action in the state's courts.
F
An express employment contract cannot protect an employee from discharge without good cause.
F
An overemphasis on long-run profit maximization is a common reason for ethical problems that occur in business.
F
Constructive discharge occurs when an employer, to avoid conflict among workers, discharges an employee engaging in an unconventional act, such as wearing a hijab.
F
Many states have their own laws that protect employees against discrimination, but none provide more protection to employees than federal laws.
F
Once a company has investigated any foreign suppliers, it is unnecessary to continue to monitor those suppliers.
F
Once a law is passed to codify an ethical requirement, the ethical aspect of the action is no longer important.
F
The Age Discrimination in Employment Act prohibits employment discrimination on the basis of age against individuals up to forty years of age.
F
The Americans with Disabilities Act defines disability to include a physical or mental impairment that causes "undue hardship."
F
Under the Americans with Disabilities Act, employees with disabilities must reasonably accommodate the needs of their employers.
F
Most of the states and the federal government have enacted statutes to protect employees who report wrongdoing from employer retaliation.
T
One of the most important ways to maintain an ethical workplace is for management to set standards and expectations for ethical behavior.
T
Stocks, or equity securities, represent the purchase of ownership in a business corporation.
T
The term moral minimum is best defined as the highest degree of ethical behavior expected of a firm.
F
The use of interviews and tests, and minimum educational requirements, to choose among a large number of applicants for job openings is prima facie employment discrimination.
F
To pierce the corporate veil means to reveal the identity of its true owner.
F
The effectiveness of an industry code of ethics is partly determined by the commitment of the industry or company leadership to enforce it.
T
Kathy is a director of Line Production Inc. As a director, with respect to the corporation, Kathy is expected to subordinate
her personal interests to the corporation's welfare.
Masonry Inc.'s stated purpose is to perform the stonework on buildings and other structures. Masonry contracts with New Contracting to pour the pilings for a bridge's foundation despite lacking the skill and license to do the work. This is most likely
An ultra vires act
Vero is a repairperson for Wind Power Company. The job requires traveling to remote areas to make repairs to windmills, transmission towers, and power stations under any conditions. Vero has had the job longer than other employees. Vero applies for a promotion to a supervisory position that requires constant communication with others in the field. Wind Power rejects the application on the ground that Vero is hearing impaired. Wind Power acknowledges that Vero is otherwise qualified, but asserts that it "needs someone who does not have a hearing problem." Vero files a suit against Wind Power under the Americans with Disabilities Act. What is the issue, and what are the relevant considerations on which its resolution depends?
In this scenario, the issue is whether Wind Power Company violated the Americans with Disabilities Act (ADA) by denying Vero a promotion to a supervisory position based on her hearing impairment. To resolve this issue, relevant considerations include whether Vero's hearing impairment substantially limits a major life activity, whether the supervisory position is essential and whether constant communication is required, whether there are any reasonable accommodations that Wind Power could provide to enable Vero to perform the essential functions of the supervisory position, and whether Wind Power engaged in an interactive process with Vero to determine if there were any reasonable accommodations that would enable her to perform the essential functions of the job. If Vero's hearing impairment substantially limits a major life activity and if there are reasonable accommodations that Wind Power could provide to enable Vero to perform the essential functions of the supervisory position, Wind Power may have violated the ADA by denying Vero the promotion based on her disability.
What 7 protected classes does Title VII, the ADA and the ADEA prohibit employers from discriminating against?
Race, color, religion, sex, national origin, disability, age (for individuals aged 40 or older)
A business necessity is a defense against employment discrimination based on the genuine requirements of a business.
T
A corporate director is not liable to the corporation or its shareholders for an honest mistake of judgment.
T
A corporation needs to be careful about whom it hires because a firm may be liable for the misconduct of its employees.
T
What is the focus of the study of business ethics and how does it compare to the Moral Minimum?
The study of business ethics focuses on whether business decisions are morally right or wrong in their nature, whereas the Moral Minimum is a standard focused on the bare minimum that it takes to comply with the law.
Corporate social responsibility may increase a business's reputation or goodwill.
True
A corporate officer is liable to the corporation or its shareholders for a bad business decision.
F
A corporation is not liable for the misconduct of its agents or officers.
F
An employer may fire a worker for reasons that violate a fundamental public policy if that policy is clearly expressed in statutory law.
F
An employer must reasonably accommodate its employees' religious practices, but only if they are based on the doctrines of a traditionally recognized religion.
F
If an employer sued for an adverse employment action on the basis of discrimination articulates a legal reason for the action, the employer wins.
F
In states that require a minimum wage that is higher than the specified federal minimum wage, employees are entitled only to the lower federal amount.
F
The Americans with Disabilities Act permits employers to take adverse employment actions based on assumptions about individuals who associate with people who have disabilities.
F
The board of directors hires the corporation's officers, but normally can remove them only for cause.
F
The study of ethics goes no further than the requirements of the law to evaluate what is right for society.
F
Under federal law, the definition of gender discrimination has not been expanded to include discrimination based on pregnancy.
F
Under the principle of rights theory, the key factor in a decision is how the result may harm the rights of the company to make money.
F
A court will pierce the corporate veil of a corporation when the corporate privilege is abused for personal benefit.
T
A shareholder's right to transfer his or her shares to another party can be subject to restrictions set out in the bylaws or a shareholder agreement.
T
An employee's reasonable expectation in response to an employer's promise is key to a finding of an implied employment contract.
T
An employer cannot discharge a worker who, in good faith, refuses to work in a high-risk area if bodily harm or death might result.
T
Because state corporate laws differ, persons wishing to incorporate may look for the state that offers the most advantageous tax or other provisions.
T
Company codes of conduct outline company policies on particular issues and how employees are expected to act.
T
Corporate "citizenship" involves making decisions beyond just maximizing profits and dividends.
T
Corporate social responsibility links the responsibility of citizenship with the strategy and key principles of a business.
T
Duty-based ethics is based in the idea that every business has certain duties to others.
T
Federal wage-hour requirements apply to all employers engaged in interstate commerce, in producing goods for interstate commerce, and in certain other businesses.
T
If the procedures for incorporation are not followed precisely, others may be able to challenge the existence of the corporation.
T
Individual state laws should be relied on to determine corporate law because, despite the existence and use of model corporation acts, there is considerable variation among the states.
T
One view of the role of business in society is the perceived duty of a company only to generate revenue for its owners.
T
Outcome-based ethics determines what is ethical by looking at the potential benefits and harms of a given action.
T
Private employers are generally free to hire and fire workers at will, regardless of the employees' performance.
T
Punitive damages may be recovered in a case of discrimination against a private employer if the employer acted with malice or reckless indifference.
T
The laws designed to protect certain workers against discrimination are aimed at providing equal rights for all and eliminating special privileges for the few.
T
To make informed decisions and supervise corporate officers and employees, the directors need an unrestricted right to inspect corporate books and records.
T
When making ethical decisions, a business should evaluate the financial implications.
T
