Chapter 3—Ethics and Social Responsibility
TRUE/FALSE
1. Ethics is the set of moral principles or values that defines right and wrong for a person or group.
2. Under the U.S. Sentencing Commission Guidelines, companies can be prosecuted and punished for the
illegal or unethical actions of employees even if management didn’t know about the unethical
behavior.
3. Under the U.S. Sentencing Commission Guidelines, a culpability score is a way of assigning blame to
a company.
4. Under the U.S. Sentencing Commission Guidelines, companies without compliance programs can pay
fines many times larger than companies with established compliance programs.
5. The level of agreement on whether behavior is good or bad is defined as the level of ethical
acceptance.
6. The concept of magnitude of consequences is the total harm or benefit derived from an ethical
decision.
7. Proximity of effect is the time between an act and the consequences the act produces.
8. Probability of effect is the chance that something will happen and then result in harm to others.
9. Concentration of effect is how much an act affects the average person.
10. Kohlberg’s three phases of moral development (in the appropriate order) are law and order,
instrumental exchange, and universal principle.
11. People at the postconventional level of moral development make moral decisions based on selfish
reasons.
12. All adults reach the postconventional stage of morality.
13. The two types of integrity testing currently used by employers are overt integrity tests and
personality-based integrity tests.
14. In order to ensure that a company’s ethics code will encourage ethical decision making and behavior,
companies need to accomplish two objectives. The first is to communicate the codes to others both
within and outside the company. The second is to develop practical ethical standards and procedures
specific to the company’s line of business.
15. The first step in establishing an ethical climate in a company is for managers to act ethically
themselves.
16. There is general agreement regarding what is socially responsible corporate behavior.
17. The shareholder model and the stakeholder model are two techniques for determining to whom
organizations should be socially responsible.
18. The shareholder model holds that management’s most important responsibility is long-term survival
(not just maximizing profits). According to the shareholder model, long-term survival is achieved by
satisfying the interests of multiple corporate stakeholders (not just shareholders).
19. The stakeholder model holds that the only responsibility that businesses have is to maximize profits.
20. Stakeholders are people or groups with an interest in a company’s actions.
21. The categories of social responsibility for a company are economic, legal, ethical, and discretionary
22. According to the stakeholder model of social responsibility, no stakeholder groups are more or less
important than any other.
23. The media would be an example of a secondary stakeholder group for an organization.
24. All four areas of social responsibility for companies (economic, legal, ethical, and discretionary) are
equally important to a company’s overall level of social responsibility.
25. Companies will be considered unethical if they do not perform their discretionary responsibilities.
26. A company using a reactive strategy to respond to demands for social responsibility will do less than
society expects.
MULTIPLE CHOICE
1. Which of the following statements about ethics is true?
a.
Acting ethically is always easier than any other form of action.
b.
Employees assume no risk when they conduct themselves ethically.
c.
Ethics can be specifically defined, like other laws.
d.
If an act is legal, it must by definition be ethical.
e.
Ethics is the set of moral principles or values that defines right and wrong for a person or
group.
2. The ____ determined that companies can be prosecuted and punished for the illegal or unethical
actions of employees even if management didn’t know about the unethical behavior.
a.
U.S. Sentencing Commission Guidelines
b.
U.S. Supreme Court
c.
U.S. Department of Labor
d.
U.S. Equal Employment Opportunity Commission
e.
Federal Trade Commission
3. Which of the following organizations are covered by the U.S. Sentencing Commission Guidelines?
a.
a manufacturer of barbecue grills
b.
a natural gas supplier
c.
a chain of movie theaters
d.
a grocery wholesaler
e.
all of these
4. If a catalog retailer promised customers it would not sell their personal information (addresses, phone
numbers, e-mail addresses, etc.) to another direct marketing company, and it did, the catalog retailer
would be found guilty of invasion of privacy. Its sentence would be determined by ____.
a.
the Internet Compliancy Act
b.
specific Supreme Court rulings
c.
the Federal Trade Act
d.
the Cellar-Kefauver Act of 1995
e.
the U.S. Sentencing Commission Guidelines
5. The U.S. Sentencing Commission Guidelines impose smaller fines on companies that ____.
a.
have never before violated ethics principles
b.
have already established a specific type of compliance program
c.
have already established an affirmative action program
d.
were unaware of the unethical behavior of employees
e.
are not concerned with the ethical behavior of employees
6. According to the U.S. Sentencing Commission Guidelines, what is one method used to determine the
level of the offense (i.e., the seriousness of the problem)?
a.
examining the personal codes of ethics of top managers of offending companies
b.
examining the loss incurred by the victims
c.
determining how much competitive advantage was created
d.
looking at industry standards
e.
doing all of these
7. What does it mean when the text says that the U.S. Sentencing Guidelines use a “carrot and stick”
approach?
a.
The method of punishment is similar to Halloween “trick or treat” practices.
b.
The Guidelines reward quick-responding reactive organizations.
c.
The Guidelines offer lower fines to companies that take proactive steps.
d.
The Guidelines ask companies not to emphasize just one area of ethical behavior.
e.
none of these
8. To create a compliance program that is acceptable under the U.S. Sentencing Guidelines, a company
should ____.
a.
establish standards and procedures to meet the company’s business needs
b.
put upper-level managers in charge of the compliance program
c.
encourage employees to report violations
d.
train employees on standards and procedures
e.
do all of these
9. When addressing issues of high ____ , managers are more aware of the impact their decisions have on
others, they are more likely to view the decision as an ethical decision, and they are more likely to
worry about doing the right thing.
a.
social consensus
b.
ethical intensity
c.
temporal immediacy
d.
proximity of effect
e.
ethical temporality
10. What term describes the degree of concern people have about an ethical issue?
a.
ethical intensity
b.
social consensus
c.
temporal immediacy
d.
magnitude of consequences
e.
ethical valence
11. Ethical intensity depends on all of the following EXCEPT ____.
a.
temporal immediacy
b.
probability of effect
c.
proximity of effect
d.
social commitment
e.
concentration of effect
12. Ethical intensity depends in part upon ____.
a.
magnitude of dilemma
b.
social acceptance
c.
intent of the manager
d.
probability of synergy
e.
temporal immediacy
13. The Department of Defense doesn’t classify pilferage as a major problem, as its annual inventory
losses run $1-2 billion a year. The intentional theft and sale of defense secrets would have greater
ethical intensity than this pilferage due to ____.
a.
magnitude of consequences
b.
magnitude of influence
c.
location immediacy
d.
probability of response
e.
all of these
14. IAG (Individualized Apparel Group) formally closed its H. Freeman factory in Philadelphia in May.
Jim Brubaker, IAG’s division president of clothing, informed the workers of this closing one month
earlier, in April. Due to ____, this decision produced strong ethical intensity.
a.
resource consequences
b.
magnitude of influence
c.
temporal immediacy
d.
probability of response
e.
all of these
15. Due to ____ , the intentional pollution of a metropolitan water supply would have greater ethical
intensity than insider trading in which a few participants netted less than $10,000.
a.
social consensus
b.
magnitude of consequences
c.
temporal immediacy
d.
probability of effect
e.
All of the choices contribute to high ethical intensity in the situation described.
16. ____ is strong when decisions have large, certain, immediate consequences and when we are
physically or psychologically close to those affected by the decision.
a.
Ethical variance
b.
The level of ethical involvement
c.
Ethical intensity
d.
Norm compliance
e.
Situational morality
17. Shell Oil Company’s plan to sink an abandoned offshore oil-storage buoy had a massive effect on
employee motivation and recruitment. The number of qualified people applying for jobs at Shell
plummeted, and many employees looked for positions in other companies. The plan caused much
greater harm than Shell’s managers had ever imagined it would. In other words, the plan had a much
greater ____ than predicted.
a.
synergistic effect
b.
impact proximity
c.
concentration of synergy
d.
magnitude of consequences
e.
temporal munificence
18. The three stages of moral development identified by Kohlberg are ____.
a.
amoral level, moral level, and post-moral level
b.
preconventional level, conventional level, and postconventional level
c.
introductory stage, growth stage, and maturity stage
d.
individual stage, organizational stage, and industry-wide stage
e.
unconventional level, preconventional level, and postconventional level
19. Doug has a low-paying job for a telecommunications company. Every day when he goes home from
work, Doug puts a headset, a stapler, or something similar in his lunch box and takes it home with him.
Doug sees nothing wrong with his behavior since he feels he is being paid less than he should. In
terms of Kohlberg’s stages of moral development, Doug is operating at which level?
a.
conventional
b.
legally mandated
c.
preconventional
d.
postconventional
e.
internalization
20. According to Kohlberg’s model of moral development, people at the ____ make decisions that are
based on selfish reasons.
a.
amoral level
b.
preconventional level
c.
conventional level
d.
postconventional level
e.
unconventional level
21. According to Kohlberg’s model of moral development, people at the ____ make decisions that conform
to societal expectations.
a.
unconventional level
b.
preconventional level
c.
conventional level
d.
postconventional level
e.
amoral level
22. According to Kohlberg’s model of moral development, people at the ____ use internalized ethical
principles to solve ethical dilemmas.
a.
amoral level
b.
preconventional level
c.
unconventional level
d.
postconventional level
e.
conventional level
23. To encourage more ethical decision making in an organization, its managers should ____.
a.
carefully select and hire new employees
b.
establish a specific code of ethics
c.
create an ethical climate
d.
train employees in how to make ethical decisions
e.
Mangers should do all of the choices.
24. A(n) ____ is a written test that estimates employee honesty by directly asking job applicants what they
think or feel about theft or about punishment of unethical behaviors.
a.
situational-based integrity test
b.
personality-based integrity test
c.
behavioral integrity test
d.
framed integrity test
e.
overt integrity test
25. Managers can use integrity tests to _____.
a.
select and hire ethical employees
b.
force the use of the principle of distributive justice when dealing with customers
c.
differentiate primary and secondary stakeholders
d.
determine which principle of ethical decision making is most appropriate to the situation
e.
assess the ethical intensity of an issue
26. ____ integrity tests indirectly estimate employee honesty by measuring psychological traits.
a.
Overt
b.
Psychographic-based
c.
Covert
d.
Personality-based
e.
Attitudinal
27. When the Chicago-based Club Aluminum Company was facing bankruptcy, one of the changes its
new CEO made was to create a(n) ____ for all employees to follow in their business and professional
lives. It read, “Of the things we think, say, and do: (1) Is it the truth? (2) Is it fair to all concerned? (3)
Will it build goodwill and better friendships? (4) Will it be beneficial to all concerned?”
a.
overt statement of integrity
b.
new vision
c.
mission statement of principle
d.
statement of utilitarianism
e.
code of ethics
28. Which of the following is an objective of ethics training?
a.
develop employee awareness about ethics
b.
push ethics training throughout the entire organization
c.
teach employees a practical model of ethical decision making
d.
achieve credibility with employees
e.
achieve all of these
29. All of the following are important factors in the creation of an ethical business climate EXCEPT ____.
a.
personal examples set by company management
b.
official approval of the company’s ethics code by government regulators
c.
fair but consistent punishment of violators
d.
a reporting system that encourages whistleblowers to report potential ethics violations
e.
top management’s active involvement in ethics training program
30. The last step in the basic model of ethical decision making is to ____.
a.
monitor the results
b.
determine benchmarks
c.
act
d.
make a choice
e.
select an ethical leader
31. After identifying the problem in the basic model of ethical decision-making, the next step is to ____.
a.
diagnose the situation
b.
identify the constituents
c.
determine alternative solutions
d.
analyze your options
e.
create a forecast of what is to be accomplished
32. In May 2005, U.S. Attorney Michael J. Sullivan announced that the United States had settled civil
claims arising out of a suit that alleged Oracle Corporation had violated the False Claims Act in
connection with billing the federal government for software training services. The U.S. government
learned about the overcharging from a former Oracle vice president. The vice president acted as a(n)
____.
a.
whistleblower
b.
ethical ombudsman
c.
secondary stakeholder
d.
covert stakeholder
e.
secondary shareholder
33. The basic model of ethical decision-making ____.
a.
has five steps
b.
provides a method for analyzing the ethical climate
c.
can be used to determine which principle of ethical decision making is appropriate to the
situation
d.
begins with a diagnosis of the situation
e.
is not accurately described by any of these
34. Mark Graf, a security specialist at the Rocky Flats nuclear facility outside Denver, became alarmed
about the temporary removal of 450 kilograms of plutonium oxide from a vault-like room to a “soft
room” protected by drywall that you could punch a hole through. Graf eventually had to take his
concerns to the media before the plutonium was stored once again in a safe location. Graf actions can
be described as a(n) ____.
a.
whistleblower
b.
ethical ombudsman
c.
secondary stakeholder
d.
covert stakeholder
e.
secondary shareholder
35. Why is it often difficult for an employee to assume the role of whistleblower?
a.
because managers have such broad spans of management
b.
because employees fear that they will be punished
c.
because of organizational decentralization
d.
because of employee empowerment
e.
because of the U.S. Sentencing Commission Guidelines
36. Which of the following statements about whistleblowing is true?
a.
Whistleblowing refers to reporting others’ ethics violations.
b.
Whistleblowing is very difficult for most people to do.
c.
Potential whistleblowers often fear that they will be punished.
d.
Many federal and state laws protect the rights of whistleblowers.
e.
All of these statements about whistleblowing are true.
37. Historically, ____ responsibility means making a profit by producing a product valued by society. It
has been the most basic social responsibility of a business.
a.
discretionary
b.
ethical
c.
legal
d.
fiscal
e.
economic
38. What is social responsibility?
a.
a business’s obligation to pursue policies, make decisions, and take actions that benefit
society
b.
a business tactic used to create relationship bonds with customers
c.
what companies are obliged legally to do to protect their external environments
d.
a business’s responsibility to its shareholders
e.
the fact that businesses are responsible for monitoring their social environments so they
can satisfy the needs of their customers
39. Kowalski’s Markets, a local supermarket chain in Minneapolis, expanded by purchasing four existing
stores. One of the stores was located in Minneapolis’s Camden neighborhood, a lower-class
community unlike the store’s typical upscale customer demographic. Rather than sell the property, the
owners decided they had a(n) ____ to provide a neighborhood grocery store to that community.
a.
equitable responsibility
b.
legal stakeholder duty
c.
fiscal responsibility
d.
organizational responsibility
e.
social responsibility
40. In an article about BP Amoco, its CEO said that the company’s commitment to ____ is all about trying
to align its policies, values, and behavior with those of the societies in which it operates because,
ultimately, superior performance means being in touch.
a.
social consensus
b.
social munificence
c.
social responsibility
d.
shareholder responsibility
e.
social proximity
41. Bayer AG, Syndial SpA, Crompton Corp., DuPont Dow Elastomers, and Zeon Chemicals are all
international manufacturers of rubber chemicals. They have all been indicted as participants in a
price-fixing scheme that drove up the costs of chemicals used to make shoes, tires, and other products.
They would be most likely to use the ____ model to justify their actions.
a.
economic
b.
stakeholder
c.
shareholder
d.
accounting
e.
fiscal
42. The ____ model holds that the only social responsibility that businesses have is to maximize profit.
a.
economic
b.
stakeholder
c.
shareholder
d.
accounting
e.
fiscal
43. According to Milton Friedman, which of the following is a position opposing the stakeholder model of
corporate social responsibility?
a.
Organizations can act effectively as moral agents for all company shareholders.
b.
The time, money, and attention diverted to social causes undermine market efficiency.
c.
It is socially responsible for companies to divert their efforts to social causes.
d.
The marketplace will ultimately determine the importance of social causes.
e.
All of these positions are in accordance with the positions of Milton Friedman.
44. Various persons or groups with a legitimate interest in a company’s actions are called ____.
a.
stakeholders
b.
shareholders
c.
indirect investors
d.
boundary spanners
e.
gatekeepers
45. Which of the following is NOT an example of a stakeholder group that an organization must satisfy to
assure long-term survival?
a.
investors
b.
customers
c.
the media
d.
employees
e.
governments
46. In recent years Kowalski’s Markets expanded by purchasing four existing stores. One of the stores was
located in Minneapolis’s Camden neighborhood, a lower-class community unlike the store’s typical
upscale customer demographic. Rather than sell the property, the owners decided they had an
obligation to provide a neighborhood grocery store to that community. Which of the following is an
example of a primary stakeholder group for Kowalski’s markets?
a.
community activists
b.
city parks board
c.
customers in the Camden neighborhood
d.
newspapers that carry ads for stores
e.
all of these
47. The two general categories of stakeholders are ____ stakeholders and ____ stakeholders.
a.
primary; secondary
b.
reactive; proactive
c.
business; nonbusiness
d.
relevant; irrelevant
e.
pioneering; selective
48. ____ stakeholders are groups, such as shareholders, employees, customers, suppliers, governments,
and local communities, on which the organization depends for long-term survival.
a.
Primary
b.
Secondary
c.
Functional
d.
Conventional
e.
Proactive
49. When media in India informed the public that Coca-Cola products bottled in India contained a high
level of certain cancer-causing pesticides, the Indian government immediately ordered Coke to stop
production. The Indian government served as a(n) ____.
a.
primary shareholder
b.
primary stakeholder
c.
integrated stakeholder
d.
secondary stakeholder
e.
overt stakeholder
50. According to the ____ model, management’s most important responsibility is long-term survival (not
just maximizing profits). Long-term survival, according to this model, is achieved by satisfying the
interests of multiple corporate stakeholders.
a.
economic
b.
stakeholder