Business Law - Chapter 1

The __________ theory describes the values at work within a social system.

Descriptive *A descriptive theory simply describes the values at work within a social system, rather than explaining how the values originated in the first place.

T or F: Utilitarianism produces consistent moral judgments.

False *Despite its systematic approach to ethical questions, utilitarianism often fails to produce consistent moral judgments.

__________ is a set of rules established by the government to maintain harmony, stability, and justice.

Law

__________ are values that govern a society's attitude toward right and wrong and toward good and evil.

Morals

__________ states that ethical values can be determined by a proper application of human reason.

Rational ethics *Rational ethics is a philosophical theory that says ethical values can be determined by a proper application of human reason. The theory assumes—and rightfully so—that, because all human beings are rational, all human beings ought to have the same ethical values.

__________ are followed by professionals, businesses, and organizations and are designed to be a guide to certain rules of behavior.

Rules of conduct *Some businesses, professions, and organizations develop guidelines usually called rules of conduct or canons of professional responsibility.

__________ holds that right and wrong are measured by the obligations imposed on each individual by an implied agreement among all the people within a particular social system.

Social contract theory

T or F: Nonjudgmentalism is associated with the statement "who am I to judge another person's morality."

True *Nonjudgmentalism, according to the authors, is illogical and self-contradictory. When people say, "Who am I to judge another person's morality," they are implying that anyone who decides to judge another person's morality is wrong to do so.

T or F: A corporation cannot be deprived of property without due process of law.

True *One reason that corporations have a great deal of influence over the economy of the community and the people is that they are legal persons, created under the authority of federal and state statutes. This status as a "legal person" gives the corporation certain rights and abilities that other business entities do not always have. For instance, as legal persons, they are accorded certain constitutional rights, such as the right not to be deprived of property without due process of law.

Some people say that they do not think about ethics, but instead, act instinctively when faced with a moral problem.

True *Some people say that they do not think about ethics, but instead, act instinctively when faced with a moral problem.

Using utility thinking, also known as cost-benefit thinking, a corporate manager making a corporate decision would ask which of the following? a. Can the corporation make a profit without harming the environment? b. Does the benefit to the shareholders outweigh the cost to the corporation? c. Does the benefit to the public outweigh the risks to the public? d. Is the law that the corporation is about to break a valid or invalid law?

b. Does the benefit to the shareholders outweigh the cost to the corporation? *As defined previously, the type of thinking promoted by the court is referred to as utility thinking or cost-benefit thinking. Using utility thinking, a corporate manager simply looks at the action he or she is about to take and asks whether the benefit to the shareholders will outweigh the cost to the corporation.

Which theory, for its proper application, requires consideration of good and bad consequences in relation to those people affected by it? a. Situational theory b. Prescriptive theory c. Utilitarianism d. Social contract theory e. Descriptive theory

c. Utilitarianism *One way to avoid mistakes that can result from an improper application of utilitarianism is to ensure that good and bad consequences, in relation to those people affected, are considered.

T or F: The social contract theory describes the values at work when people in society fend for themselves.

False *A prescriptive theory explains how to come up with the values that permit a society to run smoothly. Social contract theory holds that right and wrong are measured by the obligations imposed on each individual by an implied agreement among all the people within a particular social system.

T or F: Managers may only legally consider profit in making corporate decisions.

False *Although the primary role of a corporation is to make a profit for its shareholders, recent amendments to many corporate statutes have been designed to encourage corporate managers to make broader based decisions. Thus, some statutes now permit managers to consider factors beyond profit in making corporate decisions.

T or F: Market value ethics argues that right and wrong are measured by the obligations imposed on each individual by an implied agreement among all individuals within a particular social system.

False *Market value ethics uses quantification as the primary tool for determining value and, therefore, for determining whether an action is right or wrong.

T or F: Social contract ethics is based upon an implied agreement among all individuals in the world as a whole.

False *Social contract ethics holds that right and wrong are measured by the obligations imposed on each individual by an implied agreement among all the people within a particular social system.

T or F: Some professions, businesses, and organizations develop rules and guidelines usually called rules of engagement.

False *Some professions, businesses, and organizations develop guidelines, usually called rules of conduct or canons of professional responsibility.

T or F: The law stops a person from doing wrong.

False *The law usually cannot stop a person from doing wrong. The law draws a line between conduct that is permissible and that which is not allowed, so people—at the very least—know that they can be punished if they choose to disobey the law.

The directors of ABC Company decide to use recycled materials even though these materials are more costly than new raw materials. Shareholders threaten to sue the directors. The current legal position in the United States makes the directors

Immune from this suit. *Some statutes now permit managers to consider factors beyond profit in making corporate decisions. These factors include the economic well-being of the nation, the state, and the local community; the interests of employees, consumers, and suppliers; and the betterment of the environment, the economy, and the overall social structure. These statutes generally hold managers immune from shareholder lawsuits, which claim that the managers did not put the shareholders' profits first.

T or F: People make ethical decisions every day.

True *People make ethical decisions every day; however, how they make those decisions is not always clear.

Which of the following is a reason why corporations should accept social responsibility? a. Corporations work for the benefit of society, rather than the shareholders or employees. b. Corporations are granted certain legal advantages under provisions of the constitution. c. Corporate decision making impacts only the shareholders and not the community. d. It is socially unethical and immoral to make huge sums of profits for oneself.

b. Corporations are granted certain legal advantages under provisions of the constitution. *An argument supporting corporate social responsibility is based on the premise that corporations are granted certain rights as a result of the incorporation process.

Jamie believes that there is an ethical theory that can be determined by a proper application of human reason. Jamie is describing

rational ethics. *Rational ethics is a philosophical theory that says ethical values can be determined by a proper application of human reason.

Those who believe that each person must surrender some personal freedoms in order to have security in return are describing

social contract theory. *At the most fundamental level, Hobbes says that human beings have two core rights that cannot be sacrificed, traded, or relinquished in any way. Those two rights are (1) the right to live and (2) the right to live in peace and security. In order to protect those two rights, people enter a social contract under which they agree to limit all other "rights" and to establish a central governing authority whose job it is to protect those rights by establishing an orderly, safe, and secure governmental system.

T or F: Utilitarianism focuses on the good intentions that give rise to an action.

False *Utilitarianism is an ethical theory that says that the morality of an action is determined by its ultimate effects.

__________ is a philosophical theory that says that ethical values can be determined by a proper application of human reason.

Rational ethics *Rational ethics assumes that, because all human beings are rational, all human beings ought to have the same ethical values. Therefore, rational ethics ought to establish universal rules of behavior that apply to all people at all times.

Lillian argues that because all human beings are rational, all human beings will have the same ethical values. What type of ethical philosophy is Lillian discussing?

Rational ethics *Rational ethics, often referred to as objective ethics, is a philosophical theory that says ethical values can be determined by a proper application of human reason. The theory assumes—and rightfully so—that because all human beings are rational, all human beings ought to have the same ethical values. Therefore, rational ethics ought to establish universal rules of behavior that apply to all people at all times.

__________ ethics holds that right and wrong are measured by an implied agreement in a society.

Social contract *Social contract ethics holds that right and wrong are measured by the obligations imposed on each individual by an implied agreement among all the people within a particular social system. Although social contract theory has existed in one form or another for centuries, the English philosopher, Thomas Hobbes, is generally credited with formulating the modern version of the theory in his book, Leviathan (1651). At the most fundamental level, Hobbes says that human beings have two core rights that cannot be sacrificed, traded, or relinquished in any way: 1) the right to live, and 2) the right to live in peace and security.

T or F: Rational ethics says that ethical values can be determined by human reason.

True *Rational ethics is a philosophical theory that says ethical values can be determined by a proper application of human reason.

Some professions, businesses, and organizations develop guidelines, usually called:

Canons of professional responsibility. *Some professions, businesses, and organizations develop guidelines, usually called rules of conduct or canons of professional responsibility.

Russian intellectual, Peter Kropotkin, argues that society is dysfunctional because it ignores the fact that human nature is not competitive, but is, instead

Cooperative *Kropotkin, along with Jean Jacques Rousseau, argue that society is dysfunctional because it ignores the fact that human nature is not competitive, as Hobbes and Madison contend, but is—instead—cooperative.

__________ is the attempt to develop a means of determining what morals—the fundamental values that tell us the difference between right and wrong—ought to be and for formulating and applying rules that enforce those values.

Ethics *Ethics is the attempt to develop a means of determining what morals ought to be and for formulating and applying rules that enforce those values.

T or F: In traditional corporate culture, the decision of corporate managers must not be narrowly focused on the profits of the shareholders.

False *The traditional view says that privately owned corporations are created solely to make a profit for their shareholders. Consequently, the foremost job of any manager is to maximize those profits.

T or F: In utilitarianism, actions are always stated in terms that are emotional.

False *To avoid improper application of utilitarianism, the action to be evaluated should be stated in unemotional, general terms.

Emily believes that she should not judge another person's morality because doing so would be wrong. Emily is practicing

Nonjudgmentalism. *Nonjudgmentalism is when a person says that they will not judge another person's morality because they believe judging someone else is morally wrong.

The __________ theory explains how to come up with the values of a society.

Prescriptive *A prescriptive theory explains how to come up with the values that permit a society to run smoothly.

Which of the following theories states that a law must, at the very least, be morally neutral to have any integrity as a law? a. Positive law theory b. Natural law theory c. Utilitarianism d. Negative rights theory

b. Natural law theory *The natural law theorist would say that a law, if not moral in and of itself, must be—at the very least—morally neutral to have integrity as a law.

T or F: According to natural law, a law with an immoral purpose is no law at all.

True *According to natural law, there exists an unbreakable link joining morality to the law in a fundamental way. This link exists because a law must, in its most basic form, be moral. Otherwise, it is not lawful. A law with an immoral purpose is not a law at all.

T or F: Positive law depends on an outside force for understanding law, morality, and human rights.

True *Both natural law and positive law depend on an outside force for their understanding of law, morality, and human rights. The outside force for positive law is social institutions.

T or F: Morals are values that govern a society's attitude toward right and wrong.

True *Morals are values that govern a society's attitude toward right and wrong and toward good and evil.

T or F: Natural law sees law as originating from outside, superior forces.

True *Natural law sees law as originating from some objective, superior force—usually God—that stands outside the everyday experience of most people.

T or F: Nonjudgmentalism results from a good natured attempt to understand another person's behavior, especially if that behavior is difficult to talk about.

True *Nonjudgmentalism results from a good natured attempt to understand another person's behavior, especially when that behavior is difficult to talk about because it is embarrassing or controversial.

T or F: The theory of negative rights states that the rights themselves do not create the escape from responsibility that they permit.

True *Rights are a human invention designed to help people escape moral law. The theory of negative rights admits that the rights themselves do not create the escape from responsibility that they permit; these so-called rights give people an escape clause when they are caught doing something shameful.

T or F: "Ethic of ultimate ends" must be practiced by individuals, while "ethic of responsibility" must be practiced by national leaders.

True *The "ethic of ultimate ends" must be practiced by individuals, while the "ethic of responsibility" must be practiced by national leaders. Individuals must obey absolute moral principles, while national leaders must consider their responsibility to the people that depend on them for safety and security.

T or F: The government of a society establishes the law by defining the legal rights and duties of the people.

True *The law consists of rules of conduct established by the government of a society to maintain harmony, stability, and justice in that society. It does so by defining the legal rights and duties of the people.

T or F: Utilitarianism always focuses on consequences.

True *Utilitarianism is an ethical theory that says that the morality of an action is determined by its ultimate effects. The more good that results, the more ethical the action.

T or F: Utilitarianism seeks to determine the greatest good for the greatest number.

True *Utilitarianism seeks only one stable goal—the greatest good for the greatest number.

Which of the following is true of utilitarianism? a. It describes the values at work within a social system, rather than explaining how the values originated in the first place. b. It states that the morality of an action is determined by its ultimate effects. c. It considers only corporate benefits and problems, rather than the benefits and problems that will result for others. d. It states that right and wrong are measured by the obligations imposed on each individual by an implied agreement among all individuals within a particular social system.

b. It states that the morality of an action is determined by its ultimate effects. *Utilitarianism is an ethical theory that says that the morality of an action is determined by its ultimate effects. The more good that results, the more ethical the action. Utilitarianism seeks the greatest good for the greatest number of people.

Which of the following is true of laws governing a society? a. Laws guard property rights and discourage confiscation of privately owned land for community purposes. b. Laws advance social justice and guarantee personal freedom by granting people due process and equal protection. c. Laws control economic growth by levying heavy taxes on people from certain social classes. d. Laws are flawless and perfect, and hence, can ensure the smooth functioning of a society.

b. Laws advance social justice and guarantee personal freedom by granting people due process and equal protection. *The law is responsible for advancing social justice and guaranteeing personal freedom by granting all people due process and equal protection and providing a system by which legitimate grievances can be resolved in an orderly and timely fashion.

If corporations have the status of a "legal person," which of the following is true? a. They do not come under the authority of federal and state statutes. b. They cannot file lawsuits to vindicate their rights. c. They are entitled to certain constitutional rights. d. They cannot own property in their own name.

c. They are entitled to certain constitutional rights. *The status as a "legal person" gives corporations certain rights and abilities that other business entities do not always have. For instance, as legal persons they are accorded certain constitutional rights, such as the right not to be deprived of property without due process of law.

The concept of nonjudgmentalism originated from: a. from illogical persons who are trying to understand people. b. social media policies. c. a culture that wants tolerance to be one of its highest virtues. d. governmental rules and regulations on morality.

c. a culture that wants tolerance to be one of its highest virtues. *Nonjudgmentalism resulted from a good natured attempt to understand another person's behavior, especially when the behavior is controversial. Nonjudgmentalism also originates in a culture that wants tolerance to be one of its highest virtues.