Chapter 5 Business Ethics

Triple Bottom Line

a corporation's profits, its impact on people, and its impact on the planet.

Brewster, the chief executive officer of Cog & Gear Lubricants Corporation, wants to ensure that Cog & Gear's activities are legal and ethical. The best course for Brewster and Cog & Gear is to act a. in good faith. b. out of ignorance of the law. c. with regard for the firm's shareholders only. d. in their own self-interest.

A

GetTogether, A Social Media Company encourages its managers to behave ethically, reasoning that lower-level employees will take their cues from management. One of the most important ways to create and maintain an ethical workplace is for GetTogether's management to a. demonstrate a commitment to ethical decision making. b. discreetly engage in unethical or illegal acts. c. look the other way when an employee engages in an unethical act. d. direct employees to "do as we say, not as we do."

A

In studying the business law, students also review ethics in a business context. Ethics includes the study of what constitutes: a. right or wrong behavior. b. financially rewarding behavior. c. legal behavior. d. religious behavior.

A

Petro Refining Corporation makes payments to potential customers, suppliers, and others with whom they might do business, including foreign private companies and the representatives of foreign labor organizations. If Petro knows that these payments will be passed on to a foreign government, this practice is a. illegal if the payments violate the Foreign Corrupt Practices Act. b. legal if a third party acts as a "go-between." c. legal if private parties are involved on both sides of the deal. d. legal if the payments are intended to facilitate business.

A

Ricardo suspects his supervisor Simone of unethical accounting practices. But Ricardo does not want to report Simone if she will find out who reported her and fire Ricardo. An important feature of online reporting systems like EthicsPoint is that an employee reporting unethical behavior a. can do so anonymously. b. is financially compensated if he or she is fired as a result of a report. c. must fully identify themselves when making a report. d. must have additional employee support to make a report.

A

Corporate Security Company provides other firms with security services. Questions of what is ethical involve the extent to which Corporate Security has a. a legal duty beyond those duties mandated by ethics. b. an ethical duty beyond those duties mandated by law. c. any duty beyond those mandated by both ethics and the law. d. any duty when it is uncertain whether a legal duty exists.

B

Dyan, the owner of Expert Restoration Services, Inc., adheres to the "principle of rights" theory. Under this theory, a key factor in determining whether a business decision is ethical is how that decision a. compares to religious principles. b. affects the rights of others. c. effects consequences that would follow if everyone in society acted the same way. d. supports the right to make a profit.

B

Lowell runs Medical Debt Collection Agency. He collects debts by misrepresenting the facts and pretending to be licensed to perform various occupations. Lowell's conduct most likely warrants a. an admonition for unethical behavior but no other sanctions. b. an injunction plus other sanctions. c. no sanctions but no praise. d. praise for the aggressive approach to collecting debts.

B

Palette Paints, Inc. expends funds and takes steps to ensure that all employees are safe on the job, that all products are safe for consumers, and that the environmental impact of the corporation is minimal. Palette Paints appears to believe in the concept of a. the moral minimum. b. corporate social responsibility. c. "grey areas" in the law. d. government oversight.

B

Ryland, an officer for Sports Park, Inc., attempts to apply a duty-based approach to ethical reasoning in conflicts that occur on the job. This approach is based on the idea that a person must a. achieve the greatest good for the most people. b. avoid unethical behavior regardless of the consequences. c. conform to society's ethical standards. d. place his or her employer's interest first.

B

Digital Analytics, Inc., considers the impact of its corporate decisions on various groups and often acts in the interest of a group that has a greater stake in a decision than Digital's shareholders. This approach is most likely to attract potential employees who are a. investors focused on short-term profits. b. older professionals. c. information technology specialists. d. recent college graduates.

D

Discount Mart Corporation contracts with companies in developing nations to produce goods, because the wage rates in those nations are significantly lower than those in the United States. Discount Mart takes steps to avoid bad publicity by monitoring its suppliers' workplaces to make sure that the employees are not mistreated. Discount Mart is a. acting unethically in its pursuit of good publicity. b. acting unethically in its pursuit of profits. c. acting unethically by monitoring its suppliers. d. not acting unethically.

D

Green Hybrid Auto Corporation pays its executives an excessive amount relative to what lower-level employees at the company receive and to what executives at competitive companies are paid. Green Hybrid's pay scale is most likely to be challenged as a. illegal. b. unprofitable. c. unconscionable. d. unethical.

D

In making business decisions, Ridgeline Utility Service Company and other corporations should strive to be "good citizens" by evaluating: a. the legal implications of each decision. b. the public relations impact. c. the safety risks for consumers and employees. d. all of the choices.

D

Ross, a research manager for Stock & Bond Investments, Inc., adheres to utilitarian ethics. Ross will determine that an action is morally correct when it produces the greatest good for a. Ross. b. Stock & Bond Investments. c. the fewest people. d. the most people.

D

Situations in which employers face ethical issues with respect to social media platforms include a. conducting an Internet search to discover what a job candidate has posted. b. judging a job candidate based on what he or she does outside the work environment. c. rejecting a job candidate if he or she does not participate in any social media. d. all of the choices.

D

Steaks n' Fries Restaurant Company's decision makers view a particular risk in the consumption of Steaks n' Fries' products as open and obvious. Continuing to market the products without explicitly telling consumers of the risk could be justified from a perspective of a. duty-based ethics. b. corporate social responsibility. c. religious ethical principles. d. outcome-based ethics.

D

ethical behavior

Even where a contemplated action is legal (or, in some circumstances, illegal), business decisionmakers should also consider whether the action is "ethical." Certain professions such as Accountants have an ethical duty beyond those duties mandated by law. Persons posing as a Licensed Professional could be made to stop such unethical and possibly illegal activity via injunctive relief, plus other sanctions such as fines.

According to utilitarianism, it does not matter how many people suffer a negative effect from an act. T or F

F

An overemphasis on long-run profit maximization is the most common reason that ethical problems occur in business. T or F

F

Compared to business ethics, employee ethics is not an important issue. T or F

F

Ethics is as well defined as the law. T or F

F

Ethics is based more on research than judgment. T or F

F

Given today's global communications network, most companies can assume that their actions in other nations will go unnoticed. T or F

F

It is always clear what is ethical in a given situation. T or F

F

The concept of corporate social responsibility is imposed on corporations by law. T or F

F

Under the principle of rights theory, one person's principles are as "right" as another's. T or F

F

Unless a corporation violates a law, its actions do not raise questions about the role of corporations and the effect of corporate ethics on profit. T or F

F

Stakeholders

Groups affected by corporate decisions: employees, customers, creditors, suppliers, and the community in which it operates. This is a relatively new concept where previously only the 'shareholders' were considered.

Foreign Corrupt Practices Act

In response to numerous scandals involving U.S. companies paying bribes to foreign government officials in order to gain strategic concessions, Congress passed the Foreign Corrupt Practices Act (FCPA) in 1977, which: (1) prohibits any U.S. company, director, officer, shareholder, employee, or agent from bribing any foreign government official if the purpose of the payment is to get the official to act in her official capacity to provide business opportunities to the party offering the bribe; The FCPA does not prohibit bribery of minor officials whose acts are purely ministerial, as long as such payments are legal in the foreign country. (2) requires U.S. companies to keep detailed accounting records that "accurately and fairly" reflect all foreign activities; (3) prohibits anyone from making false statements or false entries in said records; and (4) provides sanctions against both companies and individual agents who violate the FCPA

Corporate Decision Making

The Business Process Pragmatism by Leonard Bucklin emphasizes five stages of decision making for corporations (1) Inquiry- a solid understanding of the facts, the parties and the issues. (2) Discussion- listing options and goals (3) Decision- selecting a consensus option (4) Justification- putting reasons on the consensus option and analyzing to determine if the stakeholders will accept the solution. (5) Evaluation- analyzing the solutions to see if they stand up to the moral scrutiny they may receive. This includes a values analysis of the solutions. Researching extensively to determine where, what and who could be potentially impacted - both positively and negatively - by your business practices and operations. Previous lawsuits and punitive damages are always a good source of information.

Sarbanes-Oxley Requirements

The Sarbanes-Oxley Act of 2002 requires publicly-traded corporations to set up programs to enable employees to confidentially report certain types of suspected illegal or unethical behavior. Some companies encourage employees to report illegal or unethical behavior that is outside the scope of Sarbanes-Oxley. Websites that allow for anonymous posts have also been set up for such purposes.

Corporate Social Responsibility

The idea that corporations should be accountable to society, not just their shareholders. There appears to be a corporate trend toward this ideal, which is bigger and more complex than just the Moral Minimum.

Ethical Decision Making

To promote ethical business decisionmaking, each employee should evaluate her actions in light of: applicable law (inquiry) internal rules and procedures (inquiry) societal values (discussion/decision) personal conscience (discussion/decision) promises and other commitments to others inside and outside an organization (discussion/decision)and how her hero, role model, or mentor would act (justification/evaluation)

Training

Businesses with and without formal codes of conduct should talk with their employees about the importance of behaving ethically and should consider in-house or out-sourced ethics training programs.

Comfort Foods Corporation makes and markets its products nationwide. To be considered socially responsible when making a business decision, Comfort Foods must take into account the needs of a. its customers and the community only. b. its employees and owners only. c. its employees, owners, customers, creditors, suppliers, and the community. d. no one.

C

Ronelle, the human resources director for Small Business Solutions, Inc., attempts to comply with the law in dealing with applicants and employees. One of the challenges Ronelle faces is that the legality of an action is a. always clear. b. never clear. c. only sometimes clear. d. usually clear.

C

Moral Minimum

The minimum degree of ethical behavior expected of a business firm, which is usually defined as compliance with the law. Corporate and professional codes of ethics and compliance programs. Public opinion and sentiment; and, of course, Personal morality. For businesses operating in more than one place, the moral minimum may vary from place to place - particularly when businesses operate abroad.

Legal Behavior

While certain actions are clearly legal or illegal, many decisions faced by businesses fall within one or more "gray areas" of the law, where probability, rather than certainty, will guide the decision makers. Consequently, predictions of certainty whether a given business action would be legal is only sometimes clear.

Companies are required to set up confidential systems so that employees and others can "raise red flags" about suspected illegal or unethical auditing and accounting practices. T or F

T

Company codes are not law. T or F

T

Corporations can demonstrate corporate social responsibility by promoting goals that society deems worthwhile. T or F

T

Managers must apply the same standards to themselves as they do to the company's employees. T or F

T

Originally, the only goal or duty of a corporation was to maximize profits. T or F

T

Religious rules generally are absolute with respect to the behavior of their adherents. T or F

T

Some provisions of U.S. bribery laws are directed toward accountants. T or F

T

The study of business ethics is concerned with the purposes of a business and how that business achieves those purposes. T or F

T

Codes of Conduct

Many businesses have formalized their ethical expectations in a written code of conduct. The most important code of conduct is the behavior of management.

Business Ethics

Moral principles and values applied to situations that arise in a business setting. A particular challenge facing businesses is ethically balancing the competing demands of multiple groups of stakeholders - e.g., shareholders, employees, retirees, suppliers, creditors, customers, the communities in which the business operates - whose lives are affected by business decisions. The best course of action is to operate in 'Good Faith' while taking into account the impact your business has on multiples fronts.

Ethics

Moral principles and values applied to social behavior. Although similar, Business Activities tend to involve more complex ethical issues than personal activities. These decisions involve "right or wrong" behavior based on moral and ethical principles.

Acting in good faith gives a business firm a better chance of defending its actions in court. T or F

T

An action may be legal but not ethical. T or F

T