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Business Ethics, 8e Jennings
UNIT NINE – ETHICS AND COMPETITION
True/False Questions
information is ethical so long as the employee has not breached an employment contract
with that competitor.
content.
competitor.
just wait and see if anything happens before taking any action.
help your next employer.
T 18. The types of ads a newspaper and TV network accept have social responsibility issues.
T 19. Prescription drug ads carry the additional issues of safety of the users.
T 20. Alcohol ads carry the additional issues of safety for the users.
royalties for use.
law.
employees.
Hilton’s files.
their tenants.
being sold by tenants.
employer is not a breach of trust.
trust.
Multiple Choice Questions
1. Who first raised the issue of cigarette advertising directed at children?
2. Because of advertising campaigns, with which of the following did children have equal familiarity?
3. What did internal documents at tobacco companies reveal?
4. What tobacco company is known for its phenomenal atmosphere for diversity?
5. Which company has a campaign directed at children and teens that warns them not to begin
smoking?
6. Where did spring-break alcohol advertisements and promotions recently shift to?
7. What was the inspiration for the invention of the intermittent windshield wiper?
8. When was the intermittent windshield wiper first installed in cars?
9. When did Kearns finally end his infringement case against Ford?
10. How much was Ford required to pay to Kearns?
11. How much had Ford offered to settle the case for?
12. How many law firms had represented Kearns?
13. What level of the federal court system did the Kearns case reach?
14. How much had Kearns originally asked for from the companies for infringement?
15. What were the personal costs to Kearns of the decades-long litigation?
16. Why did Kearns have to pay sanctions?
17. Why was it important for ASCAP to confront the children’s summer camps on the use of
members’ songs without license arrangements?
18. In The Theory of Moral Sentiments, Adam Smith:
19. Other forms of slotting fees include:
20. Profit margins at grocery stores are:
21. One resulting problem from slotting fees is:
22. Which company had to issue financial restatements because of promotional fees accounting?
23. Who said, “Competition can be fierce, but must also be fair and legal”?
24. Jeff Sanders, head of finance for Components, Inc. has just interviewed Laura Dern, an employee
from the finance department of InChip, Components’ chief competitor. Laura has explained that
she has been passed over one too many times for a promotion at InChip and is thus in the job
market. As Laura is leaving she whispers to Jeff, “Look, I have no contract at InChip that
obligates me in anyway. I can begin immediately. Further, I have been able to obtain copies of
our newest computer chip designs. You’ll have them before InChip even begins production.”
Business Ethics, 8e Jennings
25. What project were Boeing and Lockheed Martin competing for?
26. What was the effect of Boeing’s merger with McDonnell Douglas and Lockheed Martin’s merger
with Marietta?
27. Who is Kenneth Branch?
28. When did Boeing employees first see Lockheed Martin’s proposed bid for the project?
30. What happened to the Boeing employee who raised questions about the use of the Lockheed
Martin documents?
31. Who was fired when the company and government learned of the use of the Lockheed Martin
documents?
32. What happened to the suits for wrongful termination?
33. Who said, “I was hired to win . . . and I was going to do whatever it took to do it”?
34. How many Lockheed Martin documents did Boeing have?
35. What was the defense department penalty for Boeing for using the Lockheed Martin documents?
36. How much did Boeing pay to settle the criminal investigation into the use of the documents and
other issues?
37. How much did Boeing have to restate its earnings as a result of the document issue?
38. Who served as an ethics consultant to Boeing following the document issue coming to light?
39. Who eventually raised concerns about the documents at Boeing?
40. What was Marisa Baridis’s job at Morgan Stanley?
41. The “Chinese Wall” is:
42. Ms. Baridis compared herself to:
43. A professor for one of your courses has assigned reading materials from various publications. He
tells you that the materials are on reserve and that each student should go and copy the materials
individually. He notes that for him to copy the materials for students and then sell them or
distribute them would be a violation of copyright law. The professor's conduct:
44. Into which of the following categories do patent and copyright infringement fall?
45. Which of the following would be a breach of trust and ethics?
46. Stephen Ambrose, a popular historian with many books to his credit, admitted that some
segments of one of his recent books had language taken from the books of other historians that
was not in quotes. Mr. Ambrose did footnote the work of authors he relied upon in doing his book.
47. Steve has been disgruntled with his firm for some time and is secretly planning to leave and start
his own manufacturer representative firm with the contacts he has made. Steve has been making
copies of the firm’s file-secured customer lists, supplier lists, pricing guides, and financial
information which is routinely circulated to the staff.
48. A covenant not to compete is enforceable against an employee (except in California and North
Dakota) if:
49. Which of the following resulted when Mervyn’s was acquired by a private equity firm?
50. Which of the following occurred at Simmons?
51. The use of secret rooms for sales transactions by knock-off goods sellers:
52. Who recruited whom in the Starwood and Hilton case study?
53. How did the problems between Hilton and Starwood employee recruitment and use of records
come to light?
54. What type of clause did Starwood employees have in their employment contracts?
55. What actions did the Stevens-Henager employees take prior to leaving for their new jobs at Eagle
Gate College?
56. What was the outcome of the Mattel/MGA litigation?
Short Answer/Essay Questions
1. Discuss why Pepsi turned over the materials a Coke employee had tried to sell to it and then
cooperated with the FBI in catching the employee and her co-horts?
2. Joseph Horne Company, a Pittsburgh department store chain, was the target of a management
leveraged buyout in 1986 and was suffering with the resultant $160 million in debt.
Horne executives were relieved when, in 1988, Dillard Department Stores, Inc., and mall
developer Edward J. DeBartolo agreed to buy Horne’s stock for $74 million and to assume the
1986 buyout debt.
Business Ethics, 8e Jennings
As part of the deal, Dillard’s installed data lines and computers in Horne’s fourteen stores to
prepare for the consolidation. With the stores hooked into its Little Rock, Arkansas, headquarters,
Dillard’s assumed control of Horne’s merchandise purchasing.
Dillard’s executives wanted financial and purchasing control because the contract price was
contingent upon a finding that Horne’s financial statements were accurate. Horne’s CEO, Robert
A. O’Connell, voiced his concerns to E. Ray Kemp, Dillard’s vice chairman, about the extent and
speed of Dillard’s assumption of control. Kemp told O’Connell, “Trust me, it would take an act of
God for this deal not to go through.”
Dillard’s had been acquiring department stores like Horne’s all over the country, adding 196
stores in five years. From 1987-1991 Dillard’s earnings had gained 20 percent through its
strategy of taking over financially troubled firms.
In 1990, however, Dillard’s deal with Horne’s fell through, and Horne sued Dillard’s and DeBartolo
for breach of contract and fraud. Horne’s suit alleged that Dillard’s plan in taking over the buying
and data was to decrease the value of Horne’s to get a bargain price.
Experts in the industry indicate that Horne demonstrated inexperience by allowing Dillard’s rapid
infiltration. The contract provided that Horne could veto any proposal for Dillard activity in Horne’s
business.
Between the time the contract was negotiated and Dillard’s cancellation of the agreement,
Dillard’s executives found that some Horne accounting practices were questionable. But some
industry experts and Horne executives said Dillard’s often “nickels and dimes” sellers to bring
down the price.
Horne’s suit also alleged that Dillard’s told 500 employees that their jobs would be gone after the
takeover. Thirty percent of those employees quit before Dillard’s and DeBartolo withdrew.
Because Dillard’s took over merchandise buying, Horne maintained, merchandise deliveries were
late and the wrong merchandise was ordered for critical periods, such as the holiday season.
A Pittsburgh National Bank officer testified in his deposition in the suit that a Dillard’s executive
told him in 1988 that Dillard’s might wait until Horne’s bankruptcy to buy the company. Dillard’s
denies the statement and the plan. Dillard’s and Horne’s settled the suit in 1992.
a. Were the damages Horne’s experienced just a consequence of a failed business deal?
b. Did Dillard’s take advantage of a debt-ridden company?
c. What financial-disclosure obligations do takeover targets have?
d. Did Dillard’s have any special obligations because of its access to Horne’s data and
buying power?
e. Is it unethical to take advantage of a naive party in a commercial transaction?
SUGGESTED ANSWERS:
3. Why do companies refuse to use top-secret material from competitors that is brought to them?
4. Marc Anthony and Jennifer Lopez, the famous parents of twins have brought suit in California
against Silver Cross, LTD., a British company known for its expensive prams (baby carriages).
Mr. Anthony and Ms. Lopez allege that their images were used in connection with advertisements
for Silver Cross prams without their permission. They allege that the use of their pictures and
images with the carriages gives the impression that they are endorsing the product. They refer to
the use of their photos as “a brazen and intentional” violation of their rights. Evaluate the ethics of
Silver Cross.
SUGGESTED ANSWER:
5. Explain the impact of private equity firm acquisition of manufacturing and retail firms.
SUGGESTED ANSWER:
