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Chapter 4—The Institutionalization of Business Ethics
MULTIPLE CHOICE
1. Which of the following is not an aspect of the institutionalization of social responsibility?
a.
Voluntary practices
b.
Legal responsibilities
c.
Core practices
d.
Familial responsibilities
e.
Strategic philanthropy
2. Which of the following acts can be classified as procompetitive legislation?
a.
Equal Pay Act of 1963
b.
Civil Rights Act of 1964
c.
McCarran-Ferguson Act of 1944
d.
Sherman Antitrust Act of 1890
e.
Occupational Safety and Health Act of 1970
3. Which of the following acts exempted the insurance industry from antitrust legislation?
a.
Equal Pay Act of 1963
b.
Civil Rights Act of 1964
c.
McCarran-Ferguson Act of 1944
d.
Sherman Antitrust Act of 1890
e.
Occupational Safety and Health Act of 1970
4. Which of the following acts, passed in response to public outrage over conditions described in Upton
Sinclair’s The Jungle, was the first consumer protection legislation?
a.
Civil Rights Act of 1964
b.
Sherman Antitrust Act of 1890
c.
Magnuson-Moss Warranty Act of 1974
d.
Consumer Product Safety Act of 1972
e.
Pure Food and Drug Act of 1906
5. The _____ was established after the latest financial crisis, in response to a situation that caused many
consumers to lose their homes.
a.
Environmental Protection Agency
b.
World Bank
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c.
Consumer Financial Protection Agency
d.
World Trade Organization
e.
Sarbanes-Oxley Act
6. Which of the following is not a provision of the Sarbanes-Oxley Act?
a.
Strengthens penalties for corporate fraud
b.
Discourages the creation of ethical and legal compliance programs
c.
Requires codes of ethics for financial reporting in corporations
d.
Makes fraudulent financial reporting a criminal offense
e.
Requires greater transparency in financial reporting
7. Which of the forces of the business environment involves the rivalry among businesses for customers
and profits?
a.
The economic dimension
b.
The legal dimension
c.
The competitive dimension
d.
The technological dimension
e.
The voluntary responsibilities dimension
8. The _____ regulates tobacco, dietary supplements, vaccines, veterinary drugs, medical devices,
cosmetics, products that give off radiation, and biological products.
a.
World Trade Organization
b.
Consumer Financial Protection Agency
c.
Department of Justice
d.
Environmental Protection Agency
e.
The Food and Drug Administration
9. Which of the following groups is not a group that receives special legal protections?
a.
The elderly
b.
Children
c.
Senior citizens
d.
The highly educated
e.
Young consumers
10. The _____ was called “a sweeping overhaul of the financial regulatory system…on a scale not seen
since the reforms that followed the Great Depression.”
a.
Equal Pay Act
b.
Americans with Disabilities Act
c.
Dodd-Frank Wall Street Reform and Consumer Protection Act
d.
Age Discrimination in Employment Act
e.
VII of the Civil Rights Act
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11. _____ law defines the rights and duties of individuals and organizations (including businesses).
a.
Civil
b.
Criminal
c.
Competitive
d.
Administrative
e.
Regulatory
12. _____ law not only prohibits specific actions in business such as fraud, theft, or securities trading
violations, but also imposes fines or imprisonment as punishment for breaking the law.
a.
Civil
b.
Criminal
c.
Competitive
d.
Administrative
e.
Regulatory
13. Which of the following is not a provision of the Dodd-Frank Wall Street Reform and Consumer
Protection Act?
a.
Increases the accountability and transparency of financial institutions
b.
Creates a bureau to educate consumers in financial literacy
c.
Creates an organization to pay the bills of low-income consumers
d.
Create incentives for whistle-blowers to come forward
e.
Increases oversight of the financial industry
14. _____ ties giving to a business’ overall strategy and objectives.
a.
Social responsibility
b.
Business ethics
c.
Corporate philanthropy
d.
Strategic philanthropy
e.
Cause-related marketing
15. Anticompetitive strategies that focus on weakening or destroying a competitor have spurred antitrust
legislation and include all of the following except
a.
sustained price cuts.
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b.
free samples.
c.
discriminatory pricing.
d.
price wars.
e.
corporate espionage.
16. Which is not one of the four sources of criminal and civil laws?
a.
Judicial law
b.
Common law
c.
Constitutional law
d.
Administrative law
e.
Statutory law
17. The _____ is an independent agency within the Federal Reserve System that “regulate[s] the offering
and provision of consumer financial products or services under the Federal consumer financial laws.”
a.
Consumer Financial Protection Agency
b.
Federal Reserve
c.
World Trade Organization
d.
Department of Justice
e.
Federal Trade Commission
18. The primary objective of U.S. antitrust laws is to
a.
protect consumers from high prices and foreign products.
b.
protect domestic businesses.
c.
protect employees.
d.
promote strategies that enhance business welfare over consumer welfare.
e.
distinguish competitive strategies that enhance consumer welfare from those that reduce it.
19. What is a primary reason why some small businesses resist the opening of large chain retailers like
Walmart or Home Depot?
a.
Because the large size creates economies of scale and they can charge lower prices
b.
Because the selection in the stores is too large
c.
Because large retailers attract crime to neighborhoods in which they are based
d.
Because community leaders do not like the top management
e.
Because large retailers almost never hire local workers as employees
20. _____ focus(es) on developing sound organizational practices and integrity for financial and
nonfinancial performance measures, rather than on an individual’s morals.
a.
The Dodd-Frank Wall Street Reform and Consumer Protection Act
b.
Compliance
c.
Organizational ethics
d.
Core practices
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e.
The Sarbanes Oxley Act
21. Which of the following is not one of the seven steps that the U.S. Sentencing Commission requires for
an effective compliance program?
a.
Develop a code of conduct
b.
Provide oversight by high-ranking personnel
c.
Create a communication system for disseminating standards and procedures
d.
Monitor and audit systems designed to detect misconduct
e.
Comply with ISO 14000 guidelines
22. The Sarbanes-Oxley Act created the _____ to oversee the accounting firms that audit public
corporations and to establish rules and standards for auditing.
a.
Public Company Accounting Oversight Board
b.
Corporate Accounting Oversight Commission
c.
Enron Accounting Fraud Administration
d.
Occupational Health and Safety Administration
e.
Equal Employment Opportunity Commission
23. _____ responsibilities relate to a business’s contributions to stakeholders.
a.
Economic
b.
Legal
c.
Ethical
d.
Voluntary
e.
Social responsiveness
24. Passed by Congress in 1991, the _____ created incentives for organizations to develop and implement
ethical compliance programs.
a.
Sarbanes-Oxley Act
b.
U.S. Sentencing Commission’s Guidelines for Ethical Compliance
c.
Ethical Compliance Act
d.
Social Responsiveness Compliance Act
e.
Federal Sentencing Guidelines for Organizations
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25. Donation of computer equipment to schools by Toshiba would be associated with _____
responsibilities.
a.
economic
b.
voluntary
c.
legal
d.
ethical
e.
minimum
26. By prohibiting accounting firms from providing both auditing and consulting services to the same
corporate clients without permission, the Sarbanes-Oxley Act is attempting to eliminate
a.
conflicts of interest.
b.
cronyism.
c.
reporting transparency.
d.
corporate espionage.
e.
dual reporting.
27. Which of the following is not a benefit to businesses of engaging in voluntary responsibilities?
a.
Help create an ethical culture and values that can act as a buffer to organizational
misconduct
b.
Reduce government involvement by providing assistance to stakeholders
c.
Develop employee leadership skills
d.
Improve employee compensation and retention
e.
Improve the quality of life in communities
28. Companies that _____ will most likely be found in violation of procompetitive legislation.
a.
pollute waterways
b.
knowingly harm consumers
c.
contract with sweatshops
d.
establish monopolies
e.
help consumers
29. _____ tie(s) an organization’s product(s) directly to a social concern through a marketing program.
a.
Voluntary contributions
b.
Cause-related marketing
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c.
Strategic philanthropy
d.
Corporate giving
e.
Employee benefits
30. Title VII of the Civil Rights Act of 1964
a.
prohibits discrimination on the basis of race, color, sex, religion, or national origin.
b.
penalizes the top executives in an organization for misconduct.
c.
is basically the same as the Sarbanes-Oxley Act.
d.
discourages whistle-blowers from reporting misconduct.
e.
prohibits pay discrimination on the basis of gender.
31. Cause related marketing can affect consumer _____, if consumers are sympathetic to the cause and the
brand and cause are seen as a good fit.
a.
individual ethics
b.
tastes
c.
perceptions
d.
budgets
e.
buying patterns
32. Who provides information to managers, investors, tax authorities, and other stakeholders who make
resource allocation decisions for corporations?
a.
Accountants
b.
Federal regulators
c.
The Securities and Exchange Commission
d.
The Department of Justice
e.
Human Resources departments
33. The _____ of ethics involves embedding values, norms, and artifacts in organizations, industries, and
society.
a.
institutionalization
b.
rationalization
c.
commercialization
d.
mobilization
e.
enforcement
34. Which of the following is not a reason why the institutionalization of business ethics has progressed in
recent decades?
a.
Institutionalization of ethics is now mandated for all organizations by governments around
the world
b.
Stakeholders have recognized the need for improving business ethics
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c.
The government has stepped in when scandals and misconduct have damaged key
constituents of businesses
d.
Gatekeepers have been questioned as to their contributions to major scandals
e.
Highly ethical companies tend to be more profitable than those suffering from misconduct
issues
35. Part of the reason why credit ratings firms did not catch major problems prior to the global financial
meltdown of 2008 was because they were paid by the firms that they rank, which creates
a.
economies of scale.
b.
synergy.
c.
a conflict of interest.
d.
cooperation.
e.
efficiency.
36. Investigations into the financial rating industry after the financial meltdown of 2008 found all of the
following except
a.
analysts cut corners when faced with less time to perform due diligence.
b.
analysts’ ratings were inaccurate.
c.
many high ratings were based on inadequate historical data.
d.
analysts were overwhelmed with the volume and complexity of trades.
e.
most analysts were completely untrained and unprepared to do their jobs.
37. Some, especially those in business, complain that the Sarbanes-Oxley Act and similar legislation
a.
is excessively complex and financially burdensome.
b.
is not necessary.
c.
is fair to all firms.
d.
has reduced restatements of financial reports.
e.
is too simplistic.
38. An ethical organizational culture creates an environment in which to structure behavior that is then
evaluated by stakeholders. The key elements of an organizational culture include all of the following
except
a.
values.
b.
norms.
c.
artifacts.
d.
legal compliance.
e.
employee compensation
39. Which of the following provide incentives for developing core practices within a firm that could help
ensure ethical and legal compliance?
a.
Department of Justice and Open Compliance Ethics Group
b.
Department of Justice and the Sarbanes-Oxley Act
c.
Federal Sentencing Guidelines for Organizations and the Sarbanes-Oxley Act
d.
Food and Drug Administration and the Sarbanes-Oxley Act
e.
Securities and Exchange Commission and the Sarbanes-Oxley Act
40. Laws and regulations change over time; however, in the United States the thrust of most business
legislation can be summed up as
a.
any practice is permitted.
b.
any practice is permitted that does not substantially reduce competition and harm
consumers or society.
c.
any practice is permitted that does not substantially harm consumers or society, but this
applies only within the United States.
d.
any practice is permitted that does not harm the environment.
e.
any practice is permitted that does not break the law.
ESSAY
41. Why do you think the costs of compliance with Sarbanes Oxley go down over time?
42. According to the text, the opinions of society, as expressed through legislation, can change over time
and different courts and government legislatures may take different views about the acceptability of
specific business activities. Why is this so?
43. What ethical issues affecting consumers and society as a whole are created by unfair competition?
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44. Society often expects a lot from business. Do you think that it is possible to balance profit and other
business objectives with the goals and desires of society? Why or why not?