Multiple Choice Questions
1. Milton Friedman was a strong believer in the _____________ model. He _______________ argue
that a corporate leader’s sole obligation is to make money for the company’s owners.
(a) shareholder; did
(b) shareholder; did not
(c) stakeholder; did
(d) stakeholder; did not
2. Which of the following wrote the book Utilitarianism and believed that ethical actions should
“generate the greatest good for the greatest number”?
(a) Milton Friedman
(b) John Stuart Mill
(c) Immanuel Kant
(d) John Rawls
3. Which of the following believed that the dignity of human beings must be respected, and that the
most ethical decisions are made out of a sense of duty or obligation?
(a) Milton Friedman
(b) John Stuart Mill
(c) Immanuel Kant
(d) John Rawls
4. Kant believed that:
(a) it is ethical to tell a lie if necessary to protect an innocent person from great harm.
(b) it is ethical to tell a lie if the benefit of the lie outweighs the cost.
(c) it is ethical to make a true, but misleading, statement.
(d) it is wrong to tell an outright lie or to mislead.
5. The following statement is true:
(a) Most people are honest most of the time.
(b) Even people who do not believe in God are more likely to behave honestly after
reading the Ten Commandments.
(c) When confronted with wrongdoing, most people immediately recognize what is
happening.
(d) People make their best ethical decisions when in a hurry
Case Questions
1. The Senate recently released a report on wrongdoing at JPMorgan Chase & Co. It found that bank
executives lied to investors and the public. Also, traders, with the knowledge of top management,
changed risk limits to facilitate more trading and then violated even these higher limits. Executives
revalued the bank’s investment portfolio to reduce apparent losses. JPMorgan Chase & Co.’s
internal investigation failed to find this wrongdoing. Into what ethics traps did these JPMorgan
Chase & Co.’s employees fall? What options did the executives and traders have for dealing with
this wrong-doing?
Answer: JPMorgan Chase & Co.’s employees fell into the ethics traps of money, rationalization,
2. Located in Bath, Maine, Bath Iron Works builds high-tech warships for the Navy. Winning Navy
contracts is crucial to the company’s success—it means jobs for the community and profits for the
shareholders. Navy officials held a meeting at Bath’s offices with its executives and those of a
competitor to review the specs for an upcoming bid. Both companies desperately wanted to win
the contract. After the meeting, a Bath worker realized that one of the Navy officials had left a
folder on a chair labeled: “Business Sensitive.” It contained information about the competitors’ bid
that would be a huge advantage to Bath. William Haggett, the Bath CEO, was notified about the
file just as he was walking out the door to give a luncheon speech. What should he do? What
pitfalls did he face? What result if he considered Mill, Kant, or the Front Page test?
Answer: Haggett ordered the file to be copied. By the time he got back from lunch, the company
president had found out about the file and ordered the copy destroyed. But by then, other Bath
3. A group of medical schools conducted a study on very premature babies—those born between 24
and 27 weeks of gestation (instead of the normal 40 weeks). These children face a high risk of
blindness and death. The goal of the study was to determine which level of oxygen in a baby’s
incubator produced the best results. Before enrolling families in the study, the investigators did not
tell them that being in the study could increase their child’s risk of blindness or death. The study
made some important discoveries about the best oxygen level. These results could benefit many
children. What would Mill and Kant say about this decision not to tell the families?
4. I oversee the internal audit function at my company. Although we always use a Big Four
accounting firm, we have no loyalty to any one particular firm. We hold periodic bid competitions
to get the lowest price we can. At the moment, we are using Firm A. Recently, one of the partners
at A offered me box seats to a Red Sox game. I love the Red Sox, and even more importantly, I
could have taken my father who, even though he has always been a big Sox fan, has never been to
a game. However, I knew that we would soon be asking A to bid against the other Big Four firms
for the right to do next year’s audit. Needless to say, I was torn about what I should do.
What pitfalls does this person face? Would something as minor as Red Sox tickets affect his
decision about which audit firm to use?
Answer: This is a conflict of interest. The evidence is that we can be swayed by even small gifts.
5. Each year, the sale of Girl Scout cookies is the major fund-raiser for local troops. But because the
organization was criticized for promoting such unhealthy food, it introduced a new cookie, Mango
Cremes with Nutrifusion. It promotes this cookie as a vitamin-laden, natural whole food. “A
delicious way to get your vitamins.” But these vitamins are a minuscule part of the cookie. The
rest has more bad saturated fat than an Oreo. The Girl Scouts do much good for many girls. And
to do this good, they need to raise money. What would Kant and Mill say? What about the Front
Page test? What do you say?
Answer: Mill would say that the benefit of selling the cookie is greater than the harm. Kant would
6. In Japan, automobile GPS systems come equipped with an option for converting them into
televisions so that drivers can watch their favorite shows, yes, while driving. “We can’t help but
respond to our customers’ needs,” says a company spokesperson.1 Although his company does not
recommend the practice of watching while driving, he explained that it is the driver’s responsibility
to make this decision. Is it right to sell a product that could cause great harm to innocent
bystanders? Where does the company’s responsibility end and the consumer’s begin? What would
Mill and Kant say?
Answer: Answers will vary. Kant would say that selling the automobile is the wrong thing to do.
Discussion Questions
1<FTN>Chester Dawson, “Drivers Use Navigation Systems to Tune In,” The Wall Street Journal, April 23,
2013.</FTN>
1. While waiting in line in a supermarket, you observe a woman trying to pay with food stamps.
Under the law, food stamps cannot be used to pay for prepared items so the register would not
accept the stamps in payment for a $6 container of chicken noodle soup from the deli counter. The
woman explained that she was sick and did not have the energy to cook. She just wanted to go
home and get in bed. In general, you agree that this law is reasonable – people on limited budgets
should not be buying more expensive prepared food. But the woman is sick. Would it be ethical
for you to buy her chicken soup if she agreed to buy $6 worth of your grocery items?
Answer: What you would be doing would be illegal. But it is possible for an illegal act to be
2. Because Raina processes payroll at her company, she knows how much everyone earns, including
the top executives. This information could make for some good gossip, but she has kept it all
completely confidential. She just found out, however, that it is against company policy for her to
do payroll for C-level employees. And her boss knew it. Yesterday, the CEO went to her boss to
confirm that he, the boss, was personally doing the processing for top management. Her boss lied
to the CEO and said that he was. Then he begged Raina not to tell the truth if the CEO checked
with her. Raina just got a message that the CEO wants to see her. What does she say if he asks
about the payroll?
3. Darby has been working for 14 months at Holden Associates, a large management consulting firm.
She is earning $75,000 a year, which sounds good, but does not go very far in New York City. It
turns out that her peers at competing firms are typically paid 20% more and receive larger annual
bonuses. Darby works about 60 hours a week, more if she is traveling. A number of times she has
had to reschedule her vacation or cancel personal plans to meet client deadlines. She hopes to go
to business school in a year and has already begun the application process.
Holden has a policy that permits any employee who works as late as 8:00 P.M. to eat dinner at
company expense. The employee can also take a taxi home. Darby is in the habit of staying until
8:00 P.M. every night, whether or not her workload requires it. Then she orders enough food for
dinner, with leftovers for lunch the next day. She has managed to cut her grocery bill to virtually
nothing. Sometimes she invites her boyfriend to join her for dinner. As a student, he is always
hungry and broke. Darby often uses the Holden taxi to take them back to his apartment, although
the cab fare is twice as high as to her own place.
Sometimes Darby stays late to work on her business school applications. Naturally she uses
Holden equipment to print out and photocopy the finished applications. Darby has also been
known to return catalog purchases through the Holden mailroom on the company dime. Many
employees do that and the mailroom staff do not seem to mind.
Is Darby doing anything wrong? How would you behave in these circumstances?
4. Steve supervises a team of account managers. One night at a company outing, Lawrence, a visiting
account manager, made some wildly inappropriate sexual remarks to Maddie, who is on Steve’s
team. When she told Steve, he was uncertain what to do, so he asked his boss. She was concerned
that if Steve took the matter further and Lawrence was fired or even disciplined, her whole area
would suffer. Lawrence was one of the best account managers in the region, and everyone was
overworked as it was. She told Steve to get Maddie to drop the matter. Just tell her that these
things happen, and Lawrence did not mean anything by it.
What should Steve do? What ethics traps does he face? What would be your Life Principle in this
situation? What should Maddie do?
5. Many people enjoy rap music at least in part because of its edgy, troublemaking vibe. The problem
is that some of this music could cause real trouble. Thus, Ice-T’s song “Cop Killer” generated
significant controversy when it was released. Among other things, its lyrics celebrated the idea of
slitting a policeman’s throat. Rick Ross rapped about drugging and raping a woman. Time Warner
Inc. did not withdraw Ice-T’s song but Reebok fired Ross over his lyrics. One difference: Time
Warner was struggling with a $15 billion debt and a depressed stock price. Reebok at first refused
to take action but then singing group UltraViolet began circulating an online petition against the
song and staged a protest at the main Reebok store in New York.
What obligation do media companies have to their audiences? What factors matter when making a
decision about content?
6. You are negotiating a new labor contract with union officials. The contract covers a plant that has
experienced operating losses over the past several years. You want to negotiate concessions from
labor to reduce the losses. However, labor is refusing any compromises. You could tell them that,
without concessions, the plant will be closed, although that is not true.
Is bluffing ethical? Under what circumstances? What would Kant and Mill say? What result
under the Front Page test? What is your Life Principle?
7. When James Kilts became CEO of Gillette Co., the consumer products giant had been a mainstay of
the Boston community for 100 years. But the organization was going through hard times: Its stock
was trading at less than half its peak price, and some of its established brands of razors were
suffering under intense competitive pressure. In four short years, Kilts turned Gillette around
–strengthening its core brands, cutting jobs, and paying off debt. With the company’s stock up 61
percent, Kilts had added $20 billion in shareholder value.
Then Kilts suddenly sold Gillette to Procter & Gamble (P&G) for $57 billion. So short was Kilts’s
stay in Boston that he never moved his family from their home in Rye, New York. The deal was
sweet for Gillette shareholders – the company’s stock price went up 13 percent in one day. And
also for Kilts – his payoff was $153 million, including a $23.9 million reward from P&G for having
made the deal and for a “change in control” clause in his employment contract that was worth
$12.6 million. In addition, P&G agreed to pay him $8 million a year to serve as vice chairman after
the merger. When he retired, his pension would be $1.2 million per year. Moreover, two of his top
lieutenants were offered payments totaling $57 million.
Was there any downside to this deal? Four percent of the Gillette workforce – 6,000 employees –
were fired. If the payouts to the top three Gillette executives were divided among these 6,000,
each unemployed worker would receive $35,000. The loss of this many employees (4,000 of whom
lived in New England) had a ripple effect throughout the area’s economy. Although Gillette
shareholders certainly benefited in the short run from the sale, their profit would have been even
greater without this $210 million payout to the executives. Moreover, about half the increase in
Gillette revenues during the time that Kilts was running the show were attributable to currency
fluctuations. A cheaper dollar increased revenue overseas. If the dollar had moved in the opposite
direction, there might not have been any increase in revenue. Indeed, for the first two years after
Kilts joined Gillette, the stock price declined. It was not until the dollar turned down that the stock
price improved.
Do CEOs who receive incentives have too strong of a motivation to sell their companies? Is it
unseemly for them to be paid so much when many employees will lose their jobs?
8. Craig Newmark and Jim Buckmaster founded craigslist, the most popular website in the country
for classified ads. Rather than maximizing its profits, craigslist instead focused on developing a
community among its users. It was a place to find an apartment, a pet, a job, a couch, a date, a
babysitter and, it turned out, a prostitute. Most of the ads on craigslist were free, but blatant ads
for sex were not. Much of the company’s revenue was from these illegal services. Many of the
prostitutes available on craigslist were not independent entrepreneurs; they were women and girls
bought and sold against their will. To fight sex trafficking, craigslist required credit cards and
phone numbers, and it reported any suspicious ads. Law enforcement officials pressured craigslist
to close the sex section of its website. But some people argued that blocking these ads was a
violation of free speech and would just drive this business more underground where law
enforcement officials were less likely to be able to find it. Others said that banning these ads made
the business model of selling children for sex less profitable. Does it seem that trafficking women
and children was in keeping with the founder’s Life Principles? What were his options? Could he
have had any real impact on this thriving industry? What pitfalls did he face?
9. You are a president of a small, highly rated, liberal college in California. Many of the dining hall
workers are Latino. Some of these workers are trying to organize a union, which would
dramatically increase the college’s costs at a time of budget pressure. One of your vice presidents
suggests hiring a law firm to review the college’s employment records to make sure all employees
have the proper documentation showing that they are in the United States legally. It seems likely
that some of the rabble rousers will turn out to be illegal and could be deported, thereby solving
your union problem. What would you do?
Answer: Answers will vary. This is based on Pomona College, which ended up firing 17 workers,
10. Many socially responsible funds are now available to investors who want to make ethical choices.
For example, the Appleseed Fund avoids tobacco products, alcoholic beverages, gambling,
weapons systems or pornography while the TIAA-CREF Social Choice Equity Premier Fund
invests in companies that are “strong stewards of the environment,” devoted to serving local
communities and committed to high labor standards. Are socially responsible funds attractive to
you? Does it matter if they are less profitable than other alternatives? How much less profitable?
Do you now, or will you in the future, use them in saving for your own retirement?
11. David has just spoken with a member of his sales team who has not met her sales goals for some
months. She has also missed 30 days of work in the past six months. It turns out that she is in the
process of getting a divorce, and her teenage children are reacting very badly. Some of the missed
days have been for court; others because the children have refused to go to school. If David’s team
does not meet its sales goals, no one will get a bonus and his job may be at risk. What should he
do?