CHAPTER 2 - BUSINESS ETHICS

CHAPTER 2 - BUSINESS ETHICS AND SOCIAL

RESPONSIBILITY

Student: ____ __________________________________________________ _____________________

1. Ethics is the study of how people should act.

True False

2. An investor who wants to comply with her ethical choice to follow Islamic law could invest in the Amana

Fund, which will not invest in holdings that earn interest.

True False

3. There is strong evidence that ethical behavior pays off financially for businesses.

True False

4. Unethical behavior can be costly.

True False

5. The ethics checklist provided in the textbook serves two purposes: it helps clarify the issues and it produces

the one correct answer to an ethical dilemma.

True False

6. Society benefits when business managers behave ethically.

True False

7. Researchers who study happiness find that people expect material goods to make them happier than they

actually do.

True False

8. Generally, ethical managers have happier, more satisfying lives.

True False

9. The behavior of top executives regarding ethical issues has little effect on the behavior of the employees of

the organization.

True False

10. A company that engages in unethical behavior may suffer severe consequences.

True False

11. Wever, Inc. is considering relocating a facility to Mexico. The interests of the various stakeholders affected

by this decision may conflict.

True False

12. In analyzing ethical dilemmas using the ethics checklist presented in the textbook, it is best to narrow your

focus to encompass only one or two major issues.

True False

13. Compassion and integrity are generally not considered universal.

True False

14. Because of the increasing medical concern over obesity in the United States, federal regulation of

advertising has effectively reduced to one-tenth of all advertising during children

’

s television programs

advertisements for foods high in fat, sugar, and salt and low in nutrition.

True False

15. Advertising provides a good example of a sector where ethics is critical.

True False

16. 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

“

grapevi ne.

”

B. narrowly focus on a single issue.

C. determine whether an alternative violates important values.

D. All of the answers are correct.

17. 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.

18. Ethics is the study of:

A. how managers should act to maximize profits.

B. how people should act.

C. what employers should do to avoid liability.

D. all of the above

19. 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.

20. 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.

21. Which of the following values are considered almost universal?

A. Courage.

B. Compassion.

C. Integrity.

D. All of the above.

22. Which of the following are alternatives in dealing with issues of ethics in advertising?

A. Try, in a general way, to minimize racism, sexism, and other exploitation.

B. Include, as part of the development process, a systematic, focused review of the underlying messages

contained in advertisements.

C. Refuse to create ads that are potentially demeaning, insensitive, or dangerous, recognizing that such a stand

may lead to a loss of clients.

D. All of the above are alternatives in dealing with issues of ethics in advertising.

23. A manager making a decision without fraud, prejudice, or favoritism is exhibiting the value of:

A. compassion.

B. integrity.

C. fairness.

D. responsibility.

24. 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.

25. 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.

26. Stakeholders include:

A. Members of the community.

B. Customers.

C. Managers.

D. All of the above.

27. The observation that

n be

attributed to:

A. Justice Potter Stewart.

B. John Akers.

C. Milton Friedman.

D. Jeffrey Sachs.

28. 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.

29. Alternatives that advertising firms have when dealing with ethics include:

A. Ignore ethics.

B. Refuse to create harmful ads..

C. Try to minimize racism.

D. All of the above.

30. One result of the Gillette Co. sale to Procter & Gamble Co. discussed in the textbook was that:

A. four percent of the Gillette workforce, or about 6,000 employees, were fired.

B. ten percent of the Gillette workforce, or about 35,000 employees, were fired.

C. Gillette

’

s stock price went down 13 percent in one day when the sale was announced.

D. Kilts, the CEO of Gillette, became unemployed.

31. 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).

32. Frank is the director of quality control. He rejected some parts as non- conforming to the specifications.

However, he is told by his to accept the parts. Which value might give Frank the strength to oppose his

supervisor?

A. Consideration.

B. Courage.

C. Integrity.

D. Compassion.

33. 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 like them. The jeans fit him fine and there is nothing

wrong with them. He takes the jeans back to the store and, as is its policy, the store gave him a full refund of his

money. Which statement is correct?

A. Paul's conduct was not unethical since the store's policy of giving full cash funds applied.

B. Paul's conduct was unethical.

C. Paul's conduct was unethical, even though the store had a legal obligation to return his money.

D. Paul's conduct was ethical since the store has a legal duty to return his money when he returned the jeans.

34. 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.

35. Don runs a construction company. He hires people to work on his projects and tells them they are all

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.

36. Which of the following is NOT a question in the ethics checklist?

A. How much profit will an alternative earn for my company?

B. Who are the stakeholders?

C. Is more than one alternative right?

D. What are the facts?

37. Nortron Corporation wants to create an ethical environment in its company. Which of the following has

been found to help foster a sense of ethics within an organization?

A. The company may develop a formal, written ethics code.

B. The company may institute a formal ethics training program for the employees.

C. The top executives may provide good examples by behaving ethically themselves.

D. All of the above alternatives have been used by U.S. companies to create an ethical environment in their

organizations.

38. Arthur is running for political office. He trails the incumbent and decides to start running a series of

ads.

his opponent. Arthur admits that the attack ads were exaggerations and contained so

me distortions. Which

statement is correct?

A. Arthur has engaged in unethical behavior.

B. Arthur has not engaged in unethical behavior since ethics usually do not apply to political campaigns.

C. It is not possible to determine whether Arthur

’

s attack ads were ethical or unethical without seeing them.

D. Arthur

’

s attack ads would be unethical unless his opponent did the same.

39. Jeffrey Sachs, a leading economist and adviser to developing nations, has expressed concern that:

A. there are too few sweatshops.

B. there are too many sweatshops.

C. children are being forced to work in developing nations.

D. the United States is not involved enough in forcing developing nations to eliminate both child labor and

sweatshops.

40. John discovered his company's accountant was

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.

41. Oxtron, Inc. arranged for two employees, Kaiya and Gary, to attend

Maintaining Credibility

conference. Instead, he takes in the local attractions. Kaiya fully participated in the conference. Use the ethics

checklist to decide what Kaiya should do about Gary's failure to participate in the conference.

42. 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

what Tianhui should do about the expense report he submits to Oxtron.

43. Identify and discuss six values that are almost universal.

44. Li is the vice president of marketing for Felson, Inc., a manufacturer of alcoholic beverages. One of Li's

directors has suggested that a cartoon character be used to promote a new alcoholic beverage. Use the ethics

checklist to decide whether Li should follow the director's suggestion.

45. Define and discuss the concept of stakeholder.

CHAPTER 2 - BUSINESS ETHICS AND SOCIAL

RESPONSIBILITY

Key

1. Ethics is the study of how people should act.

TRUE

2. An investor who wants to comply with her ethical choice to follow Islamic law could invest in the Amana

Fund, which will not invest in holdings that earn interest.

TRUE

3. There is strong evidence that ethical behavior pays off financially for businesses.

FALSE

4. Unethical behavior can be costly.

TRUE

5. The ethics checklist provided in the textbook serves two purposes: it helps clarify the issues and it produces

the one correct answer to an ethical dilemma.

FALSE

6. Society benefits when business managers behave ethically.

TRUE

7. Researchers who study happiness find that people expect material goods to make them happier than they

actually do.

TRUE

8. Generally, ethical managers have happier, more satisfying lives.

TRUE

9. The behavior of top executives regarding ethical issues has little effect on the behavior of the employees of

the organization.

FALSE

10. A company that engages in unethical behavior may suffer severe consequences.

TRUE

11. Wever, Inc. is considering relocating a facility to Mexico. The interests of the various stakeholders affected

by this decision may conflict.

TRUE

12. In analyzing ethical dilemmas using the ethics checklist presented in the textbook, it is best to narrow your

focus to encompass only one or two major issues.

FALSE

13. Compassion and integrity are generally not considered universal.

FALSE

14. Because of the increasing medical concern over obesity in the United States, federal regulation of

advertising has effectively reduced to one-tenth of all advertising during children

’

s television programs

advertisements for foods high in fat, sugar, and salt and low in nutrition.

FALSE

15. Advertising provides a good example of a sector where ethics is critical.

TRUE

16. 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.

17. 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.

18. Ethics is the study of:

A.

how managers should act to maximize profits.

B.

how people should act.

C.

what employers should do to avoid liability.

D.

all of the above

19. 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.

20. 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.

21. Which of the following values are considered almost universal?

A.

Courage.

B.

Compassion.

C.

Integrity.

D.

All of the above.

22. Which of the following are alternatives in dealing with issues of ethics in advertising?

A.

Try, in a general way, to minimize racism, sexism, and other exploitation.

B.

Include, as part of the development process, a systematic, focused review of the underlying messages

contained in advertisements.

C.

Refuse to create ads that are potentially demeaning, insensitive, or dangerous, recognizing that such a stand

may lead to a loss of clients.

D.

All of the above are alternatives in dealing with issues of ethics in advertising.

23. A manager making a decision without fraud, prejudice, or favoritism is exhibiting the value of:

A.

compassion.

B.

integrity.

C.

fairness.

D.

responsibility.

24. 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.

25. 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.

26. Stakeholders include:

A.

Members of the community.

B.

Customers.

C.

Managers.

D.

All of the above.

27. The observation that

attributed to:

A.

Justice Potter Stewart.

B.

John Akers.

C.

Milton Friedman.

D.

Jeffrey Sachs.

28. 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.