CHAPTER 2 – BUSINESS ETHICS AND SOCIAL RESPONSIBILITY
TRUE/FALSE
1. Ethics is the study of how people should behave.
2. Life Principles are set by your parents and do not change over time.
3. There is strong evidence that ethical behavior pays off financially for businesses.
4. Unethical behavior is a barrier to financial success.
5. John Akers, former chairman of IBM, argues that ethics are not important to economic
competitiveness.
6. Society is hurt when business managers behave ethically.
7. Researchers who study happiness find that people expect money to make them happier than it actually
does.
8. Generally, ethical managers have happier, more satisfying lives.
9. The behavior of top executives regarding ethical issues has little effect on the behavior of the
employees of the organization.
10. A company that engages in unethical behavior may suffer severe consequences.
11. Wever, Inc. is considering relocating a facility to Mexico. The interests of the various stakeholders
affected by this decision may conflict.
12. Utilitarian ethics holds that decisions should be made on the basis of practicality, and whatever action
is most convenient should be favored.
13. Lying is always considered unethical, even if it seems to be justified by the ends.
14. Deontologists would agree that the increasing medical concern over obesity in the United States
justifies federal regulation of high fat, high sugar, low nutrition food advertising during children’s
television programs.
15. Immanuel Kant was a German philosopher who was a proponent of utilitarian ethics.
MULTIPLE CHOICE
1. In analyzing a situation to determine how to act ethically, a business manager should:
a.
gather background information by either talking firsthand with the people involved or by
talking to those who gained information informally through the company “grapevine.”
b.
narrowly focus on a single issue.
c.
determine whether an alternative violates important values.
d.
All of the answers are correct.
2. Zeno, Inc. is considering relocating its manufacturing facility from Illinois to Mexico City. The
stakeholders in this decision might include:
a.
Zeno’s shareholders.
b.
customers.
c.
the Illinois community in which Zeno operates.
d.
All of the above.
3. Ethics is the study of:
a.
sovereign immunity.
b.
how people should act.
c.
respondeat superior.
d.
victimization.
4. Does ethical behavior maximize profitability?
a.
Yes, there is concrete evidence that ethical behavior maximizes profitability.
b.
No, there is concrete evidence that unethical companies outperform ethical companies.
c.
Although there is no guarantee that ethical behavior pays in the short or long run, there is
evidence that the ethical company is more likely to win financially.
d.
There is strong evidence that ethical behavior pays financially in the long run, but not in
the short run.
5. Why should ethics be a concern to business?
a.
Society as a whole benefits from ethical behavior.
b.
People feel better when they behave ethically.
c.
Unethical behavior can be very costly.
d.
All of the above.
6. Warren Buffet is quoted as saying, “The five most dangerous words in business may be:
a.
‘Everyone else is doing it.’’
b.
‘It’s none of your business.’’
c.
‘We have always done this.’’
d.
‘Nobody will ever find out.’’
7. In 1919, Henry Ford was sued by the Dodge brothers for:
a.
supporting humanitarian projects instead of paying dividends with profits.
b.
theft of a design of a new automobile.
c.
luring a valuable employee away from Dodge to work for Ford.
d.
embezzlement of union dues.
8. A manager making a decision based on an idea such as, “I’m not really hurting anyone by this
action…” is engaging in:
a.
euphemisms.
b.
conformity.
c.
rationalization.
d.
embezzlement.
9. Research has shown that the least important motivation for managers in behaving ethically is:
a.
they want to feel good about themselves.
b.
they want to feel good about the decisions they make.
c.
they value their reputation.
d.
profitability.
10. Why do many major corporations actively encourage ethical behavior?
a.
Unethical behavior always damages a business.
b.
Unethical behavior can quickly destroy a business.
c.
Unethical acts are always illegal.
d.
All of the above are reasons that corporations actively encourage ethical behavior.
11. Unethical behavior in an organization can create:
a.
a cynical workforce.
b.
a resentful workforce.
c.
an unproductive workforce.
d.
All of the above.
12. The idea that corporations’ two primary responsibilities are to obey the law and make a profit is
attributed to:
a.
Justice Potter Stewart.
b.
John Akers.
c.
Milton Friedman.
d.
Jeffrey Sachs.
13. E-presto, Inc. has established an EthicsLine. EthicsLine is a toll-free phone number that employees can
call any time of the day, any day of the week to discuss ethics and report suspected unethical or
improper conduct. Why would E-presto establish the EthicsLine?
a.
Ethical behavior improves productivity.
b.
Ethical behavior increases job stability.
c.
Unethical behavior can destroy a business.
d.
All of the above are reasons that would justify establishing an EthicsLine.
14. Kent needed to reduce his workforce by five people. Before notifying them, he thought about how he
would feel if he were the one receiving the news and he tried to find ways to help the employees in
their transition. Kent was exercising the value of:
a.
courage.
b.
compassion.
c.
fairness.
d.
responsibility.
15. Charlie Sheen’s drug use and violent behavior:
a.
were bad enough to make CBS consider firing him from a hit TV show.
b.
have no impact on his job as an actor.
c.
enhance his reputation as a “tough guy” and should be tolerated.
d.
are false accusations.
16. Ethical companies:
a.
tend to earn higher returns than companies that engage in wrong-doing.
b.
tend to have more creative employees than companies that engage in wrong-doing.
c.
are guaranteed to be more profitable in the long run than companies that engage in
wrong-doing.
d.
All of the above.
e.
Both (a) and (b).
17. Chelvam is the director of quality control. Chelvam rejected some parts as non-conforming to the
specifications. Chelvam’s supervisor directs him to accept the parts. Which value might give Chelvam
the strength to oppose his supervisor?
a.
Consideration.
b.
Courage.
c.
Fairness.
d.
Ambition.
18. Paul decided he did not want the new jeans he had purchased from a large discount department store.
He had worn them three times and decided he just did not want them because his friends said they
weren’t “cool.” The jeans fit him fine and there is nothing wrong with them. He took the jeans back to
the store and requested a full refund of his money. Which statement is correct?
a.
Paul’s conduct was ethical as long as he was within the time frame for returns.
b.
Paul’s conduct was unethical unless the store’s policy included “satisfaction guaranteed”
and allowed returns for any reason.
c.
This is not an issue of ethics since people do this all the time.
d.
Paul’s conduct was ethical since the store has a legal duty to return his money when he
returned the jeans.
19. The Chief Executive Officer of Ticor, Inc. must decide about the disposal of toxic waste materials.
Which of the following considerations should help the CEO reach an ethical business decision?
a.
Toxic waste disposal law.
b.
The harm the disposal could cause to the environment.
c.
The impact on the business if the decision is publicly disclosed through the news media.
d.
All of the above.
20. Don runs a construction company. He hires people to work on his projects and tells them they are all
“independent contractors.” Legally, they are not independent contractors since Don tells the workers
when to come to work, how long to work, what days to work, what they are to do each day, and so
forth. At the end of each week, Don pays his workers in cash rather than with a check. Also, he does
not withhold any state, federal or local withholding tax (since he claims the workers are independent
contractors). Which statement is correct?
a.
Don has committed both unethical and illegal conduct.
b.
Don has committed unethical conduct, but it is legal.
c.
Don has committed ethical conduct but it is illegal.
d.
Don has committed both ethical and legal conduct.
21. Which of the following is NOT a stakeholder?
a.
a business competitor.
b.
shareholders.
c.
employees.
d.
the environment.
22. Nortron Corporation wants to be ethical and profitable. What arguments might it use to justify using
sweatshop factories in China?
a.
Sweatshops provide products at a very low cost to consumers.
b.
Sweatshop employees often ask for more hours, even though the work is hard.
c.
Countries that allow sweatshops have found that the increased output is the stepping stone
out of poverty.
d.
All of the above arguments are valid arguments in favor of sweatshops.
23. Lois is running for political office. She trails the incumbent and decides to start running a series of
“attack ads.” The attack ads are very effective and one week before the election it appears that she has
drawn even with her opponent. Lois admits that the attack ads were exaggerations and contained some
distortions. Which statement is correct?
a.
Lois has engaged in unethical behavior.
b.
Lois has engaged in ethical behavior since she has an obligation to her supporters to run a
campaign that will help her get elected.
c.
It is not possible to determine whether Lois’s attack ads were ethical or unethical.
d.
Assuming Lois’s attack ads were unethical, her conduct is justified and proper if she gets
elected.
24. Which of the following was true of public policy after the Dodge Brothers’ 1919 suit against Henry
Ford and up to World War II?
a.
Companies were legally required to follow the “shareholder model.”
b.
Companies were legally required to follow the “stakeholder model.”
c.
Companies were allowed to choose to follow either the “shareholder model” or the
“stakeholder model.”
d.
Companies were allowed to make charitable contributions only after paying at least a 10%
dividend to shareholders.
25. John discovered his company’s accountant was “skimming” money from the business. The accountant
agreed to pay John a one-time payment of $25,000 not to report the skimming to company officials.
The accountant promised she would pay the money back when she could. John accepted the money
and never reported what he knew. A year later the accountant was fired when the embezzlement was
discovered. She was also prosecuted for theft. The payment to John was never discovered. Which
statement is correct?
a.
John’s act was unethical and illegal.
b.
John’s act was unethical but not necessarily illegal.
c.
John’s act was ethical since he believed the accountant would return the money; however,
it was illegal.
d.
Based on the facts, John’s conduct was both ethical and legal given the special
circumstances of this case.
ESSAY
1. Oxtron, Inc. arranged for two employees, Kaiya and Gary, to attend “The Business Ethics 2008
Conference: Maintaining Credibility” in New York City. Although Gary goes to New York, he does
not participate in the conference. Instead, he takes in the local attractions. Kaiya fully participated in
the conference. Using ethical standards, describe what Kaiya should do about Gary’s failure to
participate in the conference.
2. Tianhui was recently hired as a sales representative by Oxtron, Inc. Before leaving on his first sales
trip, a number of the other sales representatives take Tianhui aside and tell him that it is customary for
the sales representatives to “pad” (increase) their expense reports each month by 20%. Use utilitarian
ethics to decide what Tianhui should do about the expense report he submits to Oxtron.
3. Many of America’s largest consumer product companies, such as Wal–Mart, Nike, and Land’s End,
buy fabric produced in China by Fountain Set Holdings Ltd. Chinese government investigators
recently discovered that Fountain Set has contaminated a local river by dumping dye waste into it.
What responsibility do U.S. companies have to ensure safe environmental practices by overseas
suppliers?
4. Li is the vice president of marketing for Felson, Inc., a manufacturer of children’s clothing Felson is
considering building a factory in a developing country, where there are few restrictions on working
conditions, wages, or maximum work hours. Which viewpoint: utilitarian or deontological would
support this move? Why?
5. Oxtron, Inc. is considering establishing a program that actively encourages ethical behavior. What
reasons would support Oxtron’s adoption of an ethics program?
