Quiz 9 Study Guide
Which of the following is an intangible or invisible cost that companies incur when ethical wrongdoing is disclosed? Multiple Choice Legal and investigative costs incurred by the company Costs of taking corrective actions Sharp and sudden drops in the company's stock price Civil penalties arising from class-action lawsuits and other litigation aimed at punishing the company for its offense and the harm done to others Costs of complying with often harsher government regulations
Costs of complying with often harsher government regulations Explanation See Figure 9.1. Among the intangible or invisible costs that companies incur when ethical wrongdoings are discovered are the following: customer defections loss of reputation lost employee morale and higher degrees of employee cynicism higher employee turnover higher recruiting costs and difficulty in attracting talented employees adverse effects on employee productivity costs of complying with often harsher government regulations
Which of the following are not consequences of a company pursuing a strategy that has unethical or shady components? Multiple Choice Devastating public relations hits Sharp drops in stock price Sizable government fines and penalties Criminal indictments and convictions of company executives Intangible costs such as legal and investigative costs incurred by the company
Intangible costs such as legal and investigative costs incurred by the company Explanation The consequences of crafting strategies that cannot pass the test of moral scrutiny are manifested in sharp drops in stock price that cost shareholders billions of dollars, devastating public relations hits, sizable government fines and penalties, and criminal indictments and convictions of company executives. Legal and investigative costs are internal administrative costs and hence are not intangible costs. See Figure 9.1.
Which one of the following is not a part of the business case for why companies should act in a socially responsible manner? Multiple Choice A strong commitment to socially responsible behavior reduces the risk of reputation-damaging incidents. The aggressive pursuit of market share, revenues, and profits always puts the company in jeopardy of violating society's social responsibility expectations. Social responsibility strategies work to the advantage of shareholders. Socially responsible actions yield internal benefits (particularly for employee recruiting, workforce retention, and training costs) and can improve operational efficiency. Socially responsible actions can lead to increased buyer patronage.
The aggressive pursuit of market share, revenues, and profits always puts the company in jeopardy of violating society's social responsibility expectations. Explanation Several reasons why the exercise of corporate social responsibility is also good business include: (1) increased buyer patronage; (2) reducing the risk of reputation-damaging incidents; (3) internal benefits such as improved efficiency and workforce retention; and (4) shareholder benefits, based on apparent correlations between CSR and stock price and other measures of financial performance. Shareholders are likely to view the business case for social responsibility as a strong one, even though they certainly have a right to be concerned about whether the time and money their company spends to carry out its social responsibility strategy outweigh the benefits and reduce the bottom line by an unjustified amount. CSR encompasses the pursuit of market share, revenues, profits, etc., to the extent the other principles are not compromised.
Business ethics can be defined as Multiple Choice applying general ethical principles and standards to the various stakeholders of businesses. rules that each company makes about "what is right" and "what is wrong" for top management and the board of directors. the application of ethical principles and standards to the actions and decisions of business organizations and the conduct of their personnel. special standards and codes of conduct that are only present in business situations. adopting or rejecting various societal ethical standards to arrive at a set of standards for operating a business.
the application of ethical principles and standards to the actions and decisions of business organizations and the conduct of their personnel. Explanation Ethical principles in business consist of the application of ethical principals and standards to business activities, behavior, and decisions, and are not materially different from ethical principles in general.
The theory of corporate social responsibility concerns Multiple Choice a company's duty to maximize shareholder value. the blending of shareholder interests and employee interests. a company's duty to establish socially acceptable core values and to have a strictly enforced code of ethical conduct. the responsibility that top management has for ensuring that the company's actions and decisions are in the best interest of society at large. the company's responsibility to balance between strategic actions to benefit shareholders against the duty to be a good corporate citizen.
the company's responsibility to balance between strategic actions to benefit shareholders against the duty to be a good corporate citizen. Explanation The essence of socially responsible business behavior by businesses is that a company should balance strategic actions to benefit shareholders against the duty to be a good corporate citizen.
Integrated social contracts theory maintains that Multiple Choice all ethical standards are determined by societal norms and individuals have an implied social contract to live up to these standards. "first-order" universal ethical norms always take precedence over "second-order" local ethical norms. there should be no absolute limits put on what is ethically or morally right. few nations or cultures have common moral agreement on what is ethically right and wrong. each country/culture/society has commonly held views about what constitutes ethically appropriate actions/behaviors that all individuals in that country/culture/society are obligated to observe.
"first-order" universal ethical norms always take precedence over "second-order" local ethical norms. Explanation Integrative social contracts theory suggests that there is a "social contract" by which managers in all situations have a duty to serve, providing that "first-order" universal ethical norms always take precedence over "second-order" local ethical norms in circumstances where local ethical norms are more permissive. That is, universal ethical principles based on collective views of multiple cultures combine to form a "social contract" that all employees in all country markets have a duty to observe. Within the boundaries of this social contract, there is room for host-country cultures to exert some influence in setting their own moral and ethical standards. Integrative social contracts theory thus offers a middle ground between ethical universalism and ethical relativism, and can provide managers in multinational companies with guidance in resolving cross-country ethical differences.
Which of the following is not generally on a company's menu of actions to consider in crafting a strategy of social responsibility? Multiple Choice Efforts to employ an ethical strategy and observe ethical principles in operating the business Actions to provide suppliers, distributors, and other value chain partners with handsome profit margins Making charitable contributions, supporting community service endeavors, engaging in broader philanthropic initiatives, and reaching out to make a difference in the lives of the disadvantaged Actions to build a workforce that is diverse with respect to gender, race, national origin, and other aspects that different people bring to the workplace Actions to protect the environment and, in particular, to minimize or eliminate any adverse impact on the environment stemming from the company's own business activities
Actions to provide suppliers, distributors, and other value chain partners with handsome profit margins Explanation The CSR strategy does not include actions to provide value chain partners with handsome profit margins. It includes: (1) efforts to employ an ethical strategy and observe ethical principles in operating the business; (2) making charitable contributions, supporting community service endeavors, engaging in broader philanthropic initiatives, and reaching out to make a difference in the lives of the disadvantaged; (3) actions to protect the environment and, in particular, to minimize or eliminate any adverse impact on the environment stemming from the company's own business activities; (4) actions to create a work environment that enhances the quality of life for employees; and (5) actions to build a workforce that is diverse with respect to gender, race, national origin, and other aspects that different people bring to the workplace.
Which of the following is a condition that does not necessarily give rise to unethical business strategies and behavior? Multiple Choice Confusion over local ethical standards that conflict with those of the company Faulty oversight that implicitly allows the overzealous pursuit of personal gain, wealth, and self-interest An organizational culture that adheres to the philosophy of "the business of business is business, not ethics." A company mindset that puts profitability and business performance ahead of ethical behavior Constant heavy pressures on company managers to meet or beat short-term performance targets
Confusion over local ethical standards that conflict with those of the company Explanation The three major drivers of unethical strategies and unethical business behavior are (1) faulty oversight, (2) heavy pressures on managers to meet performance targets, and (3) company cultures that place profits and performance ahead of ethical behavior.
Which of the following statements is accurate concerning a company's environmental sustainability strategy? Multiple Choice Environmental sustainability consists of a corporate commitment to address the unmet noneconomic needs of society. Environmental sustainability consists of deliberate actions to protect the environment, provide for the longevity of natural resources, and maintain ecological support systems for future generations. Environmental sustainability consists of striking a balance between (1) the economic responsibility to reward shareholders with profits, (2) the legal responsibility by the company to laws in countries where it operates, (3) the ethical responsibility to abide by society's moral norms, and (4) the discretionary philanthropic responsibility to contribute to the noneconomic needs of society. Environmental sustainability consists of developing the resource strengths necessary to develop a sustainable competitive advantage. Environmental sustainability consists of business practices that meet the needs of the future by rationing what is provided to present-day customers.
Environmental sustainability consists of deliberate actions to protect the environment, provide for the longevity of natural resources, and maintain ecological support systems for future generations. Explanation Environmental sustainability involves deliberate actions to protect the environment, provide for the longevity of natural resources, maintain ecological support systems for future generations, and guard against the ultimate endangerment of the planet.
Which one of the following is not a part of the business case for why companies should act in a socially responsible manner? Multiple Choice Acting in a socially responsible manner is in the overall best interest of shareholders. Acting in a socially responsible manner can generate internal benefits (as concerns employee recruiting, workforce retention, training, and improved worker productivity). To the extent that a company's socially responsible behavior wins applause from consumers and fortifies its reputation, a company may win additional patronage. Acting in a socially responsible manner reduces the risk of reputation-damaging incidents. Every business has a moral duty to be a good corporate citizen.
Every business has a moral duty to be a good corporate citizen. Explanation While moral duty is important, it is not one of several business reasons why the exercise of corporate social responsibility is also good business, which are (1) increased buyer patronage; (2) reducing the risk of reputation-damaging incidents; (3) internal benefits such as improved efficiency and workforce retention; (4) shareholder benefits, based on apparent correlations between CSR and stock price and other measures of financial performance. Shareholders are likely to view the business case for social responsibility as a strong one, even though they certainly have a right to be concerned about whether the time and money their company spends to carry out its social responsibility strategy outweigh the benefits and reduce the bottom line by an unjustified amount.
Companies committed to environmental sustainability Multiple Choice make major contributions to local civic and charitable organizations. consider the commitment to the environment as a "first-order" priority, commitment to employees as a "second-order" priority, and commitment to shareholders as a "third-order" commitment. believe it is essential to strike a balance between shareholder interests and the interests of stakeholders such as suppliers, customers, employees, and the communities in which they operate. develop and market only products that are environmentally friendly. adopt sustainable business practices that meet the needs of the present without compromising the ability to meet the needs of the future.
adopt sustainable business practices that meet the needs of the present without compromising the ability to meet the needs of the future. Explanation Sustainable business practices are those that meet the needs of the present without compromising the ability to meet the needs of the future.
According to the triple bottom line, which of the following statements is not accurate? Multiple Choice The three dimensions of performance are often referred to in terms of the "three pillars" of people, planet, and profit. The term "planet" refers to the company's overriding legal obligation to incorporate protection of the environment into its mission. The term "people" refers to various social initiatives such as charitable contributions, serving endeavors, and engaging in broader philanthropic initiatives. The term "profit" not only encompasses the profit earned for its shareholders but also the economic impact that the company has on society more generally. The triple bottom line refers to three types of performance metrics: economic, social, and environmental.
The term "planet" refers to the company's overriding legal obligation to incorporate protection of the environment into its mission. Explanation Triple bottom line (TBL) refers to three types of performance metrics: economic, social, and environmental. The three dimensions of performance are often referred to in terms of the "three pillars" of "people, planet, and profit." The term "people" refers to the various social initiatives that make up CSR strategies, such as corporate giving, community involvement, and company efforts to improve the lives of its internal and external stakeholders. "Planet" refers to a firm's ecological impact and environmental practices. The term "profit" encompasses not only the profit a firm earns for its shareholders but also the economic impact that the company has on society more generally, in terms of the overall value that it creates and the overall costs that it imposes on society.
A company's strategy needs to be ethical because Multiple Choice of the potential for embarrassment to top management if the company's unethical behavior is publicly exposed. unethical strategies are inconsistent with or weaken the corporate culture. ethics watchdogs are sure to blow the whistle on the company's unethical behavior. of the risks of prosecution by governmental authorities if an unethical strategy is disclosed. a strategy that is unethical not only damages the company's reputation, but it also can have costly consequences.Correct
a strategy that is unethical not only damages the company's reputation, but it also can have costly consequences.Correct Explanation Shareholders suffer major damage when a company's unethical behavior is discovered and punished. Making amends for unethical business conduct is costly, and it takes years to rehabilitate a tarnished company reputation.
Ethical principles in business Multiple Choice concern the behavioral guidelines a company's top management and board of directors set for company personnel regarding "what is right" and "what is wrong" in conducting the company's business. deal chiefly with the actions and behaviors required to operate companies in a socially responsible manner. are arrived at by picking and choosing among the consensus ethical standards of society to come up with a set of ethical standards that apply directly to operating a business. are not materially different from ethical principles in general and have to be judged in the context of society's standards of right and wrong, not by a special set of rules that business people decide to apply to their own conduct. involve behavioral guidelines for balancing the interests of nonowner stakeholders (customers, employees, suppliers, and the communities in which the company has operations) against the interests of company shareholders.
are not materially different from ethical principles in general and have to be judged in the context of society's standards of right and wrong, not by a special set of rules that business people decide to apply to their own conduct. Explanation Ethical principles in business are not materially different from ethical principles in general.
Notions of right and wrong, fair and unfair, moral and immoral, ethical and unethical Multiple Choice ultimately depend on a person's own values and beliefs. ultimately depend on the circumstances; nothing is really black or white when it comes to ethical standards. are governed mainly by religious views held in different geographic regions of the world. are present in all societies, organizations, and individuals. vary enormously from country to country across the world.
are present in all societies, organizations, and individuals Explanation That norms are common to all cultures and societies, and those norms comprise honesty, trustworthiness, respecting the rights of others, practicing the Golden Rule and avoiding unnecessary harm to workers or to the users of a company's product or service is the concept of ethical universalism.
The thesis that because different societies and cultures have divergent values and standards of what is "ethically right" and "ethically wrong," it is appropriate to judge behavior as ethical/unethical in the light of local customs and social mores Multiple Choice is the basis for the theory of ethical variation. defines what is meant by "integrated social contracts theory. "characterizes the school of ethical relativism. accounts for why there is no such thing as ethical standards for business enterprises. is the reason codes of ethical and social morality have been established country by country.
characterizes the school of ethical relativism. Explanation Ethical relativism holds that when there are national or cross-cultural differences in what is deemed an ethical or unethical business situation, it is appropriate for local moral standards to take precedence over what the ethical standards may be in a company's home market.
According to the school of ethical universalism Multiple Choice what behaviors are "ethically right" and "ethically wrong" vary across religions, but the boundaries of what is ethical or not are universal within religions. concepts of right and wrong universally apply to all business situations within a given country but can vary across countries or cultures. ethical guidelines exist only when there is universal agreement as to what behaviors are "ethically right" and "ethically wrong"; anything not universally viewed as unethical is thus within the bounds of what is ethically permissible. all societies and countries have some definition of what is ethically permissible (in this sense, ethics are universal); however, the definitions of what is ethically permissible vary according to the prevailing religious doctrines in each country. many of the same standards of what is ethical and what is unethical resonate with peoples of most societies regardless of local traditions and cultural norms; hence, to the extent there is common moral agreement about right and wrong actions, common ethical standards can be used to judge the conduct of personnel at companies operating in a variety of country markets and cultural circumstances.
many of the same standards of what is ethical and what is unethical resonate with peoples of most societies regardless of local traditions and cultural norms; hence, to the extent there is common moral agreement about right and wrong actions, common ethical standards can be used to judge the conduct of personnel at companies operating in a variety of country markets and cultural circumstances. Explanation Ethical universalism considers all norms to be common to all cultures and societies, and that those norms comprise honesty, trustworthiness, respecting the rights of others, practicing the Golden Rule, and avoiding unnecessary harm to workers or to the users of a company's product or service.
Companies that adopt the principle of ethical relativism in providing ethical guidance to company personnel Multiple Choice are able to comply with the varying ethical standards of the world's different cultures. have no fair way to judge the ethical correctness of the conduct of company personnel. quickly find themselves on a slippery slope with no ethical standards or principles of their own. have a uniform code of ethical standards that is applied globally. end up allowing each company employee to determine what set of ethical standards to observe.
quickly find themselves on a slippery slope with no ethical standards or principles of their own. Explanation A company that adopts the principle of ethical relativism and holds company personnel to local ethical standards necessarily assumes that what prevails as local morality is an adequate guide to ethical behavior. This can be ethically dangerous; it leads to the conclusion that if a country's culture generally accepts bribery or environmental degradation or exposing workers to dangerous conditions, then managers working in that country are free to engage in such activities. Adopting such a position places a company in a perilous position—a slippery slope—if it is required to defend these activities to its stakeholders in countries with higher ethical expectations.
According to integrated social contracts theory, Multiple Choice the views and principles of the school of ethical universalism are definitely wrong; the correct view is that ethics is a matter of personal responsibility, not a matter of management concern. the ethical standards a company should try to uphold are governed both by (1) a limited number of universal ethical principles that are widely recognized as putting legitimate ethical boundaries on actions and behavior in all situations, and (2) the circumstances of local cultures, traditions, and shared values that further prescribe what constitutes ethically permissible behavior and what does not; however, universal ethical norms take precedence over local ethical norms. the standards of what is ethically permissible and what is not should be based on a code of ethical and moral conduct that each society/country/culture adopts and then enacts into law. the standards of what is ethically permissible should be determined by the terms of an "ethics contract" that each company employee signs as a condition of employment. the only valid ethical standards are those that are universal—and then only if the standards are not absolute and provide some wiggle room according to the circumstances of the each situation.
the ethical standards a company should try to uphold are governed both by (1) a limited number of universal ethical principles that are widely recognized as putting legitimate ethical boundaries on actions and behavior in all situations, and (2) the circumstances of local cultures, traditions, and shared values that further prescribe what constitutes ethically permissible behavior and what does not; however, universal ethical norms take precedence over local ethical norms. Explanation Integrative social contracts theory not only allows for managers to adhere to universal ethical principles but also provides managers with room to exert influence in setting their own moral and ethical standards, based on their host-country cultures. Integrative social contracts theory thus offers a "middle ground" between ethical universalism and ethical relativism, and can provide managers in multinational companies with guidance in resolving cross-country ethical differences.
If one adopts the thinking of the school of ethical relativism, then Multiple Choice there are multiple sets of ethical standards because what is ethical or unethical depends on local customs and social mores and can vary from one culture or nation to another. there is a "one-size-fits-all" set of authentic ethical standards. the preferred set of ethical standards is the one that society at large has put in place in the form of laws and regulations. the prevailing ethical standards are the product of a system of "integrated social contracts." no ethical standards are ever truly "authentic"—they exist only to the extent that there is a temporary shared conviction among company managers and company personnel that a particular behavior is either ethically permissible or ethically impermissible.
there are multiple sets of ethical standards because what is ethical or unethical depends on local customs and social mores and can vary from one culture or nation to another. Explanation Ethical relativism holds that that when there are national or cross-cultural differences in what is deemed an ethical or unethical business situation, it is appropriate for local moral standards to take precedence over what the ethical standards may be in a company's home market.
