Business: A Practical Introduction (Williams/Sawyer/Berston)Chapter 2 Ethics and Social Responsibility

1) The economic, legal, ethical, and philanthropic responsibilities that comprise Carroll's social responsibility pyramid apply only to organizations.Answer: FALSEExplanation: Organizations and their employees can and should demonstrate these themes in their behaviors. Page Ref: 35Learning Outcome: Discuss the roles of ethics and corporate responsibility in businessDifficulty: EasyObjective: 2.1 What is the order of priorities for a businessperson?Classification: ConceptAACSB: Ethical Understanding and Reasoning

2) Attitudes about ethical behaviors and practices are universal across cultures. Answer: FALSEExplanation: Cultural attitudes about ethical behavior vary; what is acceptable in one country may be unethical or even illegal in another country. Page Ref: 35Learning Outcome: Discuss the roles of ethics and corporate responsibility in businessDifficulty: EasyObjective: 2.1 What is the order of priorities for a businessperson?Classification: ConceptAACSB: Ethical Understanding and Reasoning

3) Ethics are principles of right and wrong that influence behavior. Answer: TRUEExplanation: Both ethics and laws address the concepts of "right" and "wrong."Page Ref: 35Learning Outcome: Discuss the roles of ethics and corporate responsibility in businessDifficulty: EasyObjective: 2.1 What is the order of priorities for a businessperson?Classification: ConceptAACSB: Ethical Understanding and Reasoning

4) A situation in which people have to decide whether to pursue an action that may benefit them or their organization but which is unethical or illegal is called double jeopardy.Answer: FALSEExplanation: This situation is known as an ethical dilemma.Page Ref: 36Learning Outcome: Discuss the roles of ethics and corporate responsibility in businessDifficulty: EasyObjective: 2.1 What is the order of priorities for a businessperson?Classification: ConceptAACSB: Ethical Understanding and Reasoning

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5) Illegal use of private company information to further one's own fortunes or those of family and friends is called backroom dealing. Answer: FALSEExplanation: This behavior is known as insider trading. Page Ref: 37Learning Outcome: Discuss the roles of ethics and corporate responsibility in businessDifficulty: EasyObjective: 2.1 What is the order of priorities for a businessperson?Classification: ConceptAACSB: Ethical Understanding and Reasoning

6) Enhancing your personal wealth through insider trading may be unethical, but it is not illegal.Answer: FALSEExplanation: Insider trading is both unethical and illegal. Many people have paid fines or served jail time for this behavior. Page Ref: 37Learning Outcome: Discuss the roles of ethics and corporate responsibility in businessDifficulty: EasyObjective: 2.1 What is the order of priorities for a businessperson?Classification: ConceptAACSB: Ethical Understanding and Reasoning

7) Signing the MBA oath is required of every U.S. student upon completion of graduate study in business.Answer: FALSEExplanation: The MBA oath is a voluntary student-led pledge to serve the greater good.Page Ref: 37Learning Outcome: Discuss the roles of ethics and corporate responsibility in businessDifficulty: EasyObjective: 2.1 What is the order of priorities for a businessperson?Classification: ConceptAACSB: Ethical Understanding and Reasoning

8) Written standards guiding employees on appropriate ways to treat stakeholders and prohibiting conflicts of interest are called a code of ethics.Answer: TRUEExplanation: A code of ethics is a set of standards for behavior that all employees must know. It helps employees to be aware of treating stakeholders ethically and to know what to do when conflicts of interest arise.Page Ref: 40Learning Outcome: Discuss the roles of ethics and corporate responsibility in businessDifficulty: EasyObjective: 2.2 What are four ways organizations can foster high ethical standards?Classification: ConceptAACSB: Ethical Understanding and Reasoning

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9) Compliance-based ethics codes enable responsible employee conduct mainly by creating a supportive environment for such behavior. Answer: FALSEExplanation: Integrity-based codes focus on creating supportive environments for appropriate behavior. Page Ref: 41Learning Outcome: Discuss the roles of ethics and corporate responsibility in businessDifficulty: EasyObjective: 2.2 What are four ways organizations can foster high ethical standards?Classification: ConceptAACSB: Ethical Understanding and Reasoning

10) Companies that prevent employee criminal misconduct through control and punishment often utilize compliance-based ethics codes. Answer: TRUEExplanation: Compliance-based ethics codes attempt to prevent criminal misconduct by increasing control and punishing violators. Page Ref: 41Learning Outcome: Discuss the roles of ethics and corporate responsibility in businessDifficulty: EasyObjective: 2.2 What are four ways organizations can foster high ethical standards?Classification: ConceptAACSB: Ethical Understanding and Reasoning

11) Marcia is the ethics officer at her company. Her job is to ensure that values initiatives and compliance activities take precedence in the company's decision-making processes.Answer: FALSEExplanation: The ethics officer works to integrate ethics, values, compliance, and business conduct activities into the organization's decision making.Page Ref: 41Learning Outcome: Discuss the roles of ethics and corporate responsibility in businessDifficulty: EasyObjective: 2.2 What are four ways organizations can foster high ethical standards?Classification: ApplicationAACSB: Ethical Understanding and Reasoning

12) A whistleblower who reports misconduct to authorities is someone within the offending organization.Answer: TRUEExplanation: A whistleblower is an employee of the offending organization.Page Ref: 42Learning Outcome: Discuss the roles of ethics and corporate responsibility in businessDifficulty: EasyObjective: 2.2 What are four ways organizations can foster high ethical standards?Classification: ConceptAACSB: Ethical Understanding and Reasoning

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13) An arrangement in which cash from newer investors is used to pay off older investors is called multilevel marketing.Answer: FALSEExplanation: This arrangement is known as a Ponzi scheme.Page Ref: 42Learning Outcome: Discuss the roles of ethics and corporate responsibility in businessDifficulty: EasyObjective: 2.2 What are four ways organizations can foster high ethical standards?Classification: ConceptAACSB: Ethical Understanding and Reasoning

14) Under the Sarbanes-Oxley Act of 2002, whistleblowers are protected from retaliation by their employers. Answer: TRUEExplanation: This is one of the nine principal provisions of the act.Page Ref: 43Learning Outcome: Discuss the roles of ethics and corporate responsibility in businessDifficulty: EasyObjective: 2.2 What are four ways organizations can foster high ethical standards?Classification: ConceptAACSB: Ethical Understanding and Reasoning

15) Only large corporations should be concerned with practicing social responsibility.Answer: FALSEExplanation: Companies aren't separate from society; businesses of every size benefit from being socially responsible.Page Ref: 44Learning Outcome: Discuss the roles of ethics and corporate responsibility in businessDifficulty: EasyObjective: 2.3 What are corporate social responsibility, blended value, and social auditing?Classification: ConceptAACSB: Ethical Understanding and Reasoning

16) A company cannot succeed by doing social good. Answer: FALSEExplanation: Many businesses have realized economic benefits through practicing social responsibility. Page Ref: 45Learning Outcome: Discuss the roles of ethics and corporate responsibility in businessDifficulty: EasyObjective: 2.3 What are corporate social responsibility, blended value, and social auditing?Classification: ConceptAACSB: Ethical Understanding and Reasoning

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17) Blended value measures the outcome of all business investments in both economic and social realms.Answer: TRUEExplanation: Both for-profit and nonprofit organizations can apply this measure of performance.Page Ref: 46Learning Outcome: Discuss the roles of ethics and corporate responsibility in businessDifficulty: EasyObjective: 2.3 What are corporate social responsibility, blended value, and social auditing?Classification: ConceptAACSB: Ethical Understanding and Reasoning

18) A systematic assessment of a company's performance in implementing socially responsible programs is called a blended value audit.Answer: FALSEExplanation: This type of assessment is a social audit.Page Ref: 47Learning Outcome: Discuss the roles of ethics and corporate responsibility in businessDifficulty: EasyObjective: 2.3 What are corporate social responsibility, blended value, and social auditing?Classification: ConceptAACSB: Ethical Understanding and Reasoning

19) The positions a company takes on political and social issues are documented in its code of ethics.Answer: FALSEExplanation: Positions on political and social issues are part of an organization's corporate policy.Page Ref: 47Learning Outcome: Discuss the roles of ethics and corporate responsibility in businessDifficulty: EasyObjective: 2.3 What are corporate social responsibility, blended value, and social auditing?Classification: ConceptAACSB: Ethical Understanding and Reasoning

20) Cause-related marketing involves a partnership between a business and a nonprofit organization. Answer: TRUEExplanation: Cause-related marketing is a commercial activity in which a business forms a partnership with a charity or nonprofit to support a worthy cause, product, or service.Page Ref: 47Learning Outcome: Discuss the roles of ethics and corporate responsibility in businessDifficulty: EasyObjective: 2.3 What are corporate social responsibility, blended value, and social auditing?Classification: ConceptAACSB: Ethical Understanding and Reasoning

21) Social entrepreneurship is limited to the nonprofit sector.

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Answer: FALSEExplanation: Social entrepreneurship is a social value-creating activity that occurs within or across for-profit or nonprofit sectors. Page Ref: 47Learning Outcome: Discuss the roles of ethics and corporate responsibility in businessDifficulty: EasyObjective: 2.3 What are corporate social responsibility, blended value, and social auditing?Classification: ConceptAACSB: Ethical Understanding and Reasoning

22) Sustainability focuses on both the present and the future.Answer: TRUEExplanation: Sustainability is economic development that meets the needs of the present without compromising the ability of future generations to meet their own needs. Page Ref: 48Learning Outcome: Discuss the roles of ethics and corporate responsibility in businessDifficulty: EasyObjective: 2.3 What are corporate social responsibility, blended value, and social auditing?Classification: ConceptAACSB: Ethical Understanding and Reasoning

23) Illegal behavior can impact a company's profits.Answer: TRUEExplanation: A company's illegal behavior can lower its stock price and sales. Employee fraud also costs companies about 5 percent of earnings. Page Ref: 49Learning Outcome: Discuss the roles of ethics and corporate responsibility in businessDifficulty: EasyObjective: 2.4 In what ways do customers, owners, employees, suppliers, and the community benefit from corporate social responsibility (CSR)?Classification: ConceptAACSB: Ethical Understanding and Reasoning

24) Business ethics do not impact investor behavior.Answer: FALSEExplanation: One survey found that 74 percent of people said their perception about a company's honesty influenced their decision to buy its stock.Page Ref: 49Learning Outcome: Discuss the roles of ethics and corporate responsibility in businessDifficulty: EasyObjective: 2.4 In what ways do customers, owners, employees, suppliers, and the community benefit from corporate social responsibility (CSR)?Classification: ConceptAACSB: Ethical Understanding and Reasoning

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25) Stockholders who resent a company's social responsibility activities are logically focused on maximizing their profits.Answer: FALSEExplanation: Studies show that profitability is enhanced by a company's reputation for honesty and corporate citizenship.Page Ref: 50Learning Outcome: Discuss the roles of ethics and corporate responsibility in businessDifficulty: EasyObjective: 2.4 In what ways do customers, owners, employees, suppliers, and the community benefit from corporate social responsibility (CSR)?Classification: ConceptAACSB: Ethical Understanding and Reasoning

26) Sweatshops do not exist in the United States.Answer: FALSEExplanation: Some U.S. garment factories, upholstery shops, and farms employing illegal immigrants operate under sweatshop conditions. Page Ref: 51Learning Outcome: Discuss the roles of ethics and corporate responsibility in businessDifficulty: EasyObjective: 2.4 In what ways do customers, owners, employees, suppliers, and the community benefit from corporate social responsibility (CSR)?Classification: ConceptAACSB: Ethical Understanding and Reasoning

27) Participating in community activities offers no marketing or promotional value for a business.Answer: FALSEExplanation: Donations of branded products, employee teams wearing company logos, and similar activities all offer promotional value while benefitting the community. Page Ref: 51Learning Outcome: Discuss the roles of ethics and corporate responsibility in businessDifficulty: EasyObjective: 2.4 In what ways do customers, owners, employees, suppliers, and the community benefit from corporate social responsibility (CSR)?Classification: ConceptAACSB: Ethical Understanding and Reasoning

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28) The Global Compact promoting social and environmental practices for business was established by the United Nations.Answer: TRUEExplanation: The Global Compact has ten principles addressing human rights, labor standards, anti-corruption, and the environment. Page Ref: 52Learning Outcome: Discuss the roles of ethics and corporate responsibility in businessDifficulty: EasyObjective: 2.4 In what ways do customers, owners, employees, suppliers, and the community benefit from corporate social responsibility (CSR)?Classification: ConceptAACSB: Ethical Understanding and Reasoning

29) Global climate change has no impact on economic development. Answer: FALSEExplanation: One economist reported that potential costs and risks of climate change are equivalent to losing at least 5 percent of global gross domestic product annually.Page Ref: 53Learning Outcome: Discuss the roles of ethics and corporate responsibility in businessDifficulty: EasyObjective: 2.4 In what ways do customers, owners, employees, suppliers, and the community benefit from corporate social responsibility (CSR)?Classification: ConceptAACSB: Ethical Understanding and Reasoning

30) Members of the Millennial generation are generally passive and uninvolved in social issues. Answer: FALSEExplanation: Members of the Millennial generation are considered the most activist generation since the 1930s and 1940s.Page Ref: 54Learning Outcome: Discuss the roles of ethics and corporate responsibility in businessDifficulty: EasyObjective: 2.4 In what ways do customers, owners, employees, suppliers, and the community benefit from corporate social responsibility (CSR)?Classification: ConceptAACSB: Ethical Understanding and Reasoning

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31) Which of the following is NOT a component of business-ethics scholar Archie B. Carroll's global social responsibility pyramid?A) to obey the lawB) to honor competitorsC) to make a profitD) to be ethicalE) to be a good global corporate citizenAnswer: BExplanation: B) Carroll's pyramid does not single out business perspectives toward competitors.Page Ref: 34Learning Outcome: Discuss the roles of ethics and corporate responsibility in businessDifficulty: ModerateObjective: 2.1 What is the order of priorities for a businessperson?Classification: ConceptAACSB: Ethical Understanding and Reasoning

32) How is making a profit incorporated into Carroll's global social responsibility pyramid?A) It is defined as shareholder responsibility.B) It is defined as legal responsibility.C) It is defined as economic responsibility. D) It is defined as philanthropic responsibility. E) It is defined as ethical responsibility. Answer: CExplanation: C) By being successful and profitable, businesses offer many benefits to society, such as employment and tax revenue. Page Ref: 34Learning Outcome: Discuss the roles of ethics and corporate responsibility in businessDifficulty: ModerateObjective: 2.1 What is the order of priorities for a businessperson?Classification: ConceptAACSB: Ethical Understanding and Reasoning

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33) Which of the following lists the elements of Carroll's global corporate social responsibility pyramid in order from highest to lowest priority?A) be a good corporate citizen > obey the law > make a profit > be ethicalB) make a profit > be ethical > obey the law > be a good corporate citizenC) make a profit > obey the law > be ethical > be a good corporate citizenD) obey the law > be ethical > be a good corporate citizen > make a profitE) make a profit > be a good corporate citizen > obey the law > be ethicalAnswer: CExplanation: C) Carroll's social responsibility obligations for organizations emphasize making profits, followed by legal responsibility, ethical responsibility, and good citizenship.Page Ref: 34Learning Outcome: Discuss the roles of ethics and corporate responsibility in businessDifficulty: ModerateObjective: 2.1 What is the order of priorities for a businessperson?Classification: ConceptAACSB: Ethical Understanding and Reasoning

34) Each of the following activities is considered both illegal and unethical EXCEPT which?A) consumer fraudB) cash payments to avoid taxesC) cancelling a company retirement planD) embezzlementE) sexual harassmentAnswer: CExplanation: C) Cancelling a company's retirement plan may be unethical, but it is legal.Page Ref: 34Learning Outcome: Discuss the roles of ethics and corporate responsibility in businessDifficulty: ModerateObjective: 2.1 What is the order of priorities for a businessperson?Classification: ConceptAACSB: Ethical Understanding and Reasoning

35) Which of the following is subject to formalized enforcement by a controlling authority?A) lawsB) ethicsC) moralsD) valuesE) social responsibilityAnswer: AExplanation: A) Laws are rules of conduct or action formally recognized as binding or enforced by a controlling authority.Page Ref: 35Learning Outcome: Discuss the roles of ethics and corporate responsibility in businessDifficulty: ModerateObjective: 2.1 What is the order of priorities for a businessperson?Classification: ConceptAACSB: Ethical Understanding and Reasoning

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36) What would be considered the most "personal" driver of appropriate behavior?A) lawsB) valuesC) ethicsD) corporate social responsibilityE) codesAnswer: BExplanation: B) Values are relatively permanent and deeply held underlying beliefs and attitudes guiding behavior. Each person has a distinct set of values; larger groups and cultures also have values.Page Ref: 35Learning Outcome: Discuss the roles of ethics and corporate responsibility in businessDifficulty: ModerateObjective: 2.1 What is the order of priorities for a businessperson?Classification: ConceptAACSB: Ethical Understanding and Reasoning

37) Which of the following is an example of enforcement of ethical business behavior by a controlling authority?A) company ethic guidelinesB) boycott by an interest groupC) newspaper editorial by church leadersD) child labor lawsE) concert promoting fair wagesAnswer: DExplanation: D) While all of the options exert varying degrees of behavior on a company's behavior, child labor laws formally enforce ethical treatment of children in the workplace. Page Ref: 35Learning Outcome: Discuss the roles of ethics and corporate responsibility in businessDifficulty: DifficultObjective: 2.1 What is the order of priorities for a businessperson?Classification: ApplicationAACSB: Ethical Understanding and Reasoning

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38) Jack and several of his workmates are wearing bright yellow shirts with their company's logo as they run a 10K team race to help raise money for cancer research. What is Jack's company demonstrating?A) compliance promotionB) corporate citizenshipC) ethical responsibilityD) family valuesE) stakeholder awarenessAnswer: BExplanation: B) Promoting visibility for the company's brand on a team running a charitable race benefits both society and the organization—the definition of corporate citizenship.Page Ref: 36Learning Outcome: Discuss the roles of ethics and corporate responsibility in businessDifficulty: ModerateObjective: 2.1 What is the order of priorities for a businessperson?Classification: ApplicationAACSB: Ethical Understanding and Reasoning

39) Being a good corporate citizen is at the top of Carroll's social responsibility pyramid. What does Carroll believe compels businesses to practice this behavior?A) legal requirements and regulationsB) ethical demandsC) societal expectationsD) opportunities for profitE) values-based interest groupsAnswer: CExplanation: C) Carroll believes that people today expect a business to engage in activities that benefit society.Page Ref: 36Learning Outcome: Discuss the roles of ethics and corporate responsibility in businessDifficulty: ModerateObjective: 2.1 What is the order of priorities for a businessperson?Classification: ConceptAACSB: Ethical Understanding and Reasoning

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40) Jiao found a competitor's proposal for a project her company is also bidding on. She knows using the information can help her team develop a winning proposal, and her company needs the project to avoid staff layoffs. What situation is Jiao facing?A) insider tradingB) devil's bargainC) ethical dilemmaD) economic responsibilityE) legal conundrumAnswer: CExplanation: C) Jiao must decide whether to use the information to benefit her company and coworkers even though it would be unethical.Page Ref: 36Learning Outcome: Discuss the roles of ethics and corporate responsibility in businessDifficulty: ModerateObjective: 2.1 What is the order of priorities for a businessperson?Classification: ApplicationAACSB: Ethical Understanding and Reasoning

41) Tim works at a fast-food restaurant and suspects that a coworker may be misreporting his hours worked. Yet one of the stated values of the company is team unity and cohesion, and Tim is afraid that reporting the misreported hours may cause his coworkers to have a poor opinion of him. What is this situation called?A) moral choiceB) ethical dilemmaC) test of valuesD) Hobson's choiceE) test of characterAnswer: BExplanation: B) The term for this situation is an ethical dilemma. Both options open to Tim seem defensible, yet both also seem to have ethically undesirable consequences.Page Ref: 36Learning Outcome: Discuss the roles of ethics and corporate responsibility in businessDifficulty: ModerateObjective: 2.1 What is the order of priorities for a businessperson?Classification: ApplicationAACSB: Ethical Understanding and Reasoning

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42) Martin and Helen are discussing their options if they learned private information about an unpopular coworker that would advance their careers at the colleague's expense. Martin says he might capitalize on the opportunity, but Helen says she wouldn't under any circumstances. Helen may be exhibiting what kind of behavior?A) some false bravadoB) self-righteousnessC) the holier-than-thou effectD) corporate social responsibilityE) ethical relativityAnswer: CExplanation: C) Under this effect, people overestimate their capacity for proper behavior until faced with an actual challenging situation.Page Ref: 37Learning Outcome: Discuss the roles of ethics and corporate responsibility in businessDifficulty: ModerateObjective: 2.1 What is the order of priorities for a businessperson?Classification: ApplicationAACSB: Ethical Understanding and Reasoning

43) Which of the following is NOT one of the primary strategies that organizations can use to foster high ethical standards?A) encourage an ethical climate through top management staffB) place covert whistleblowers on staffC) develop stringent codes for ethical behaviorD) hire trustworthy, responsible employeesE) provide training in ethical conductAnswer: BExplanation: B) Planting potential whistleblowers is not a formalized strategy for fostering ethical standards in an organization. Page Ref: 39Learning Outcome: Discuss the roles of ethics and corporate responsibility in businessDifficulty: ModerateObjective: 2.2 What are four ways organizations can foster high ethical standards?Classification: ConceptAACSB: Ethical Understanding and Reasoning

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44) Holly is a top manager at her company. What is likely to be the most effective way for Holly to support an ethical climate in her organization?A) hire an ethics officerB) establish compliance-based ethics codesC) establish integrity-based ethics codesD) hire reputable employeesE) lead by exampleAnswer: EExplanation: E) Policies and codes will lose effectiveness with employees if top managers don't play by the same rules.Page Ref: 39Learning Outcome: Discuss the roles of ethics and corporate responsibility in businessDifficulty: ModerateObjective: 2.2 What are four ways organizations can foster high ethical standards?Classification: ApplicationAACSB: Ethical Understanding and Reasoning

45) Who sets the tone for ethical behavior in the workplace?A) ethics officerB) rank-and-file employeesC) board of directorsD) human resources directorE) top managementAnswer: EExplanation: E) Top managers lead by example by practicing ethical behavior in an organization.Page Ref: 39Learning Outcome: Discuss the roles of ethics and corporate responsibility in businessDifficulty: ModerateObjective: 2.2 What are four ways organizations can foster high ethical standards?Classification: ConceptAACSB: Ethical Understanding and Reasoning

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46) Phyllis is the CEO of Marchland Communications. According to the corporate social responsibility pyramid, what should be the first priority for Phyllis to be working towards?A) demonstrating ethical behaviorB) making a profitC) encouraging good corporate citizenshipD) hiring responsible employeesE) complying with the lawAnswer: BExplanation: B) Top managers set the tone for ethical behavior in an organization, but the first priority in Carroll's pyramid is earning a profit.Page Ref: 39Learning Outcome: Discuss the roles of ethics and corporate responsibility in businessDifficulty: DifficultObjective: 2.2 What are four ways organizations can foster high ethical standards?Classification: ApplicationAACSB: Ethical Understanding and Reasoning

47) Georgia is the head of human resources at her company and wants to implement policies toward hiring honest, responsible employees. Which of the following is NOT a useful strategy for Georgia to implement to ensure this goal?A) limit candidates to referrals from existing employeesB) conduct a battery of personality tests with candidatesC) confirm details of candidate resumes D) follow up with candidates' referencesE) use government program tools such as E-VerifyAnswer: AExplanation: A) Although current employees may be trustworthy, they may not know all the details of candidates they refer.Page Ref: 40Learning Outcome: Discuss the roles of ethics and corporate responsibility in businessDifficulty: ModerateObjective: 2.2 What are four ways organizations can foster high ethical standards?Classification: ApplicationAACSB: Ethical Understanding and Reasoning

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48) When Mario was hired at a software company, he had to sign a nondisclosure agreement. Nondisclosure agreements are an example of what?A) ethical performance contractsB) incentive-based ethics codesC) compliance-based ethics codesD) integrity-based ethics codesE) whistleblower agreementsAnswer: CExplanation: C) Compliance-based ethics codes attempt to prevent criminal misconduct by increasing control and punishing violators. Page Ref: 41Learning Outcome: Discuss the roles of ethics and corporate responsibility in businessDifficulty: ModerateObjective: 2.2 What are four ways organizations can foster high ethical standards?Classification: ApplicationAACSB: Ethical Understanding and Reasoning

49) During orientation for his new job, Eduardo read and signed a document listing the company's principles supporting fair play, honesty, diversity, and shared accountability. What kind of ethics code does Eduardo's company have?A) legally groundedB) compliance-basedC) integrity-basedD) values-basedE) peer-enforcedAnswer: CExplanation: C) Integrity-based ethics codes strive to enable responsible conduct by creating an environment that supports appropriate behavior. Page Ref: 41Learning Outcome: Discuss the roles of ethics and corporate responsibility in businessDifficulty: ModerateObjective: 2.2 What are four ways organizations can foster high ethical standards?Classification: ApplicationAACSB: Ethical Understanding and Reasoning

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50) Which strategy for encouraging ethical behavior in an organization follows a more punitive approach?A) top managers supporting an ethical climateB) running background checks on job candidatesC) establishing integrity-based ethics codesD) establishing compliance-based ethics codesE) conducting ethics training for employeesAnswer: DExplanation: D) Compliance-based codes attempt to prevent criminal misconduct by increasing control and by punishing violators.Page Ref: 41Learning Outcome: Discuss the roles of ethics and corporate responsibility in businessDifficulty: ModerateObjective: 2.2 What are four ways organizations can foster high ethical standards?Classification: ConceptAACSB: Ethical Understanding and Reasoning

51) Which of the following is an example of the general public's outrage playing a role in curbing white-collar crime?A) conviction of former Enron chief Jeffrey SkillingB) passage of the Sarbanes-Oxley Act of 2002C) formation of the Bureau of Consumer Financial ProtectionD) proliferation of compliance- and integrity-based ethics codesE) increased number of corporate whistleblowersAnswer: BExplanation: B) Public outrage at the scope of crimes conducted at companies such as Enron and WorldCom prodded Congress to draft and pass this reform legislation.Page Ref: 42Learning Outcome: Discuss the roles of ethics and corporate responsibility in businessDifficulty: DifficultObjective: 2.2 What are four ways organizations can foster high ethical standards?Classification: ApplicationAACSB: Ethical Understanding and Reasoning

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52) Tayshaun has noticed accounting irregularities in his company's quarterly reports. Significant expenses are missing, making the company look highly profitable despite a dismal economy. After doing more research, he reports this to the state attorney general's office. What is the term applicable to Tayshaun?A) compliance officerB) ethics officerC) enforcerD) informantE) whistleblowerAnswer: EExplanation: E) A whistleblower is an employee who reports organizational misconduct to the government or the public.Page Ref: 42Learning Outcome: Discuss the roles of ethics and corporate responsibility in businessDifficulty: ModerateObjective: 2.2 What are four ways organizations can foster high ethical standards?Classification: ApplicationAACSB: Ethical Understanding and Reasoning

53) Jonathan is a new employee at McFarlin pharmaceuticals and has been informed that the company has a nonretaliation policy against whistleblowers. Which of the following would likely NOT warrant attention from Jonathan under this policy?A) corruptionB) noncompetitive wagesC) fraudD) safety problemsE) improper waste disposalAnswer: BExplanation: B) Paying noncompetitive wages may be unfair but generally is not a legal or ethical breach warranting whistleblower reports to the government or public.Page Ref: 42Learning Outcome: Discuss the roles of ethics and corporate responsibility in businessDifficulty: ModerateObjective: 2.2 What are four ways organizations can foster high ethical standards?Classification: ApplicationAACSB: Ethical Understanding and Reasoning

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54) Which of the following is NOT a principal provision of the Sarbanes-Oxley Act of 2002?A) Alteration or destruction of key audit documents is prohibited.B) Company CEOs and CFOs must personally certify financial reports.C) Whistleblowers punished by their employers receive back pay and job reinstatement.D) Companies must draft and all employees sign compliance-based ethics codes.E) Systems enabling anonymous reporting of accounting issues must be developed.Answer: DExplanation: D) Ethics codes are not a principal provision of Sarbanes-Oxley.Page Ref: 43Learning Outcome: Discuss the roles of ethics and corporate responsibility in businessDifficulty: ModerateObjective: 2.2 What are four ways organizations can foster high ethical standards?Classification: ConceptAACSB: Ethical Understanding and Reasoning

55) The Public Company Accounting Oversight Board created by the Sarbanes-Oxley Act is granted authority under what government entity?A) Department of CommerceB) Securities and Exchange CommissionC) Department of Homeland SecurityD) Consumer Protection and Safety CommissionE) Department of the TreasuryAnswer: BExplanation: B) The commission is charged with overseeing the accounting industry in the United States.Page Ref: 43Learning Outcome: Discuss the roles of ethics and corporate responsibility in businessDifficulty: ModerateObjective: 2.2 What are four ways organizations can foster high ethical standards?Classification: ConceptAACSB: Ethical Understanding and Reasoning

56) What is Sarbanes-Oxley an example of?A) compliance-based ethics codeB) integrity-based ethics codeC) state regulationD) federal lawE) federal regulationAnswer: DExplanation: D) The Sarbanes-Oxley Act is a law passed by Congress in 2002 to strengthen oversight of corporate practices.Page Ref: 43Learning Outcome: Discuss the roles of ethics and corporate responsibility in businessDifficulty: ModerateObjective: 2.2 What are four ways organizations can foster high ethical standards?Classification: ConceptAACSB: Ethical Understanding and Reasoning

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57) Under the Sarbanes-Oxley Act, who is required to personally certify the financial reports of an organization?A) chief executive officerB) chief financial officerC) chief executive officer and chief financial officerD) chief financial officer and board chairmanE) chief executive officer and board chairmanAnswer: CExplanation: C) This provision of Sarbanes-Oxley increases the accountability of top management for financial recordkeeping.Page Ref: 43Learning Outcome: Discuss the roles of ethics and corporate responsibility in businessDifficulty: ModerateObjective: 2.2 What are four ways organizations can foster high ethical standards?Classification: ConceptAACSB: Ethical Understanding and Reasoning

58) Which of the following statements is a logical argument in favor of corporate social responsibility?A) "Companies have no relation to society."B) "Companies are legally bound to support society."C) "Companies are not separate from society."D) "Companies are not a component of society."E) "Companies do not contribute to society."Answer: CExplanation: C) The business sector is deeply integrated into the U.S. social structure.Page Ref: 44Learning Outcome: Discuss the roles of ethics and corporate responsibility in businessDifficulty: ModerateObjective: 2.3 What are corporate social responsibility, blended value, and social auditing?Classification: ConceptAACSB: Ethical Understanding and Reasoning

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59) Which of the following is NOT an argument in favor of corporate social responsibility (CSR)?A) Businesses have resources unavailable to nonprofits. B) Business provides sufficient social value by creating jobs.C) Business creates social problems and should help solve them.D) Businesses are not separate from society. E) Businesses practicing CSR can limit government regulation.Answer: BExplanation: B) This argument supports the idea that economic development is an acceptable business contribution to society and no other efforts are necessary. Page Ref: 44Learning Outcome: Discuss the roles of ethics and corporate responsibility in businessDifficulty: ModerateObjective: 2.3 What are corporate social responsibility, blended value, and social auditing?Classification: ConceptAACSB: Ethical Understanding and Reasoning

60) Who argued against corporate social responsibility by contending that the only social responsibility of a business is to create jobs and expand economic growth?A) Alan GreenspanB) Andrew CarnegieC) Milton FriedmanD) Bill GatesE) Paul SamuelsonAnswer: CExplanation: C) In a famous 1970 article, the late economist Friedman wrote that "the social responsibility of business is to make profits."Page Ref: 45Learning Outcome: Discuss the roles of ethics and corporate responsibility in businessDifficulty: ModerateObjective: 2.3 What are corporate social responsibility, blended value, and social auditing?Classification: ConceptAACSB: Ethical Understanding and Reasoning

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61) The late economist Milton Friedman would eliminate all levels of Carroll's social responsibility pyramid EXCEPT which of the following?A) economic responsibilityB) legal responsibilityC) environmental responsibilityD) philanthropic responsibilityE) ethical responsibilityAnswer: AExplanation: A) Friedman wrote that "the social responsibility of business is to make profits." Making profit is the first priority in Carroll's triangle and is known as economic responsibility.Page Ref: 45Learning Outcome: Discuss the roles of ethics and corporate responsibility in businessDifficulty: DifficultObjective: 2.3 What are corporate social responsibility, blended value, and social auditing?Classification: ApplicationAACSB: Ethical Understanding and Reasoning

62) Who plays the most valuable role in supporting and implementing corporate social responsibility (CSR)?A) shareholdersB) human resources departmentsC) accountantsD) the governmentE) top managersAnswer: EExplanation: E) Primarily it's top managers who set CSR goals and promote participation.Page Ref: 46Learning Outcome: Discuss the roles of ethics and corporate responsibility in businessDifficulty: DifficultObjective: 2.3 What are corporate social responsibility, blended value, and social auditing?Classification: ConceptAACSB: Ethical Understanding and Reasoning

63) The nonprofit sector represents 7 percent of the U.S. gross domestic product. This is evidence that businesses in the nonprofit sector do what?A) make a profitB) contribute economic value to societyC) practice corporate social responsibilityD) have an unbalanced blended valueE) require less philanthropic supportAnswer: BExplanation: B) Nonprofit organizations create jobs and consume goods and services.Page Ref: 46Difficulty: ModerateObjective: 2.3 What are corporate social responsibility, blended value, and social auditing?Classification: Concept

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64) Assessing the outcome of an organization's investments in both the economic and social realms determines what for an organization?A) social diversityB) blended valueC) sustainabilityD) philanthropyE) profitabilityAnswer: BExplanation: B) Blended value offers a method to judge a business by criteria other than profits.Page Ref: 46Learning Outcome: Discuss the roles of ethics and corporate responsibility in businessDifficulty: ModerateObjective: 2.3 What are corporate social responsibility, blended value, and social auditing?Classification: ConceptAACSB: Ethical Understanding and Reasoning

65) Seth's workgroup is collecting data from various internal departments on financial performance and social responsibility activities. Seth will use the data to determine what attribute of the company?A) ethical responsibilityB) competitive advantageC) social entrepreneurshipD) blended valueE) sustainability policiesAnswer: DExplanation: D) Blended value measures the outcome of all business investments on both economic and social realms.Page Ref: 46Learning Outcome: Discuss the roles of ethics and corporate responsibility in businessDifficulty: ModerateObjective: 2.3 What are corporate social responsibility, blended value, and social auditing?Classification: ApplicationAACSB: Ethical Understanding and Reasoning

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66) What term describes a company's focus on earning profits, doing social good, and fostering environmental consciousness?A) blended valueB) ethical dilemmasC) triple bottom lineD) social entrepreneurshipE) social responsibility pyramidAnswer: CExplanation: C) This provides three criteria to measure a company's overall performance.Page Ref: 46Learning Outcome: Discuss the roles of ethics and corporate responsibility in businessDifficulty: ModerateObjective: 2.3 What are corporate social responsibility, blended value, and social auditing?Classification: ConceptAACSB: Ethical Understanding and Reasoning

67) Luisa runs a fleet of taxis. The company is being pressured by interest groups that believe it does not respect the environment. Luisa has shared anecdotal stories with group reps about the company's pro-environmental activities, but they aren't buying it. How might she best convince them that the company is already environmentally responsible?A) draft a code of environmental ethicsB) offer environmental training for driversC) donate funds to an environmental nonprofitD) conduct a social auditE) run a cause-related marketing campaignAnswer: DExplanation: D) A social audit will provide a formal assessment of the taxi company's socially responsible programs and activities. Page Ref: 46Learning Outcome: Discuss the roles of ethics and corporate responsibility in businessDifficulty: ModerateObjective: 2.3 What are corporate social responsibility, blended value, and social auditing?Classification: ApplicationAACSB: Ethical Understanding and Reasoning

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68) Paul is the CEO of a large technology company. Whenever his talented team proposes a new business initiative, he has the idea analyzed by the accounting department and by a social responsibility director. Paul is making use of what principle?A) social auditingB) sustainabilityC) blended valueD) social entrepreneurshipE) ethical corporate policyAnswer: CExplanation: C) Blended value measures the outcome of all business investments in terms of economic and social impact.Page Ref: 46Learning Outcome: Discuss the roles of ethics and corporate responsibility in businessDifficulty: ModerateObjective: 2.3 What are corporate social responsibility, blended value, and social auditing?Classification: ApplicationAACSB: Ethical Understanding and Reasoning

69) A U.S. company produces sports drinks with an image of a soccer ball under the bottle cap. For every cap returned to the company, it donates a specified amount to nonprofit youth fitness programs that have partnered with the company. Which term BEST describes this activity?A) philanthropyB) corporate social responsibilityC) cause-related marketingD) social entrepreneurshipE) sustainable businessAnswer: CExplanation: C) Cause-related marketing is a commercial activity in which a business forms a partnership with a charity or nonprofit to support a worthy cause, product, or service.Page Ref: 47Learning Outcome: Explain the role of marketing in organizationsDifficulty: ModerateObjective: 2.3 What are corporate social responsibility, blended value, and social auditing?Classification: Application

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70) Kiva operates a website that enables visitors to provide money to small business owners in developing countries. These microloans are used for buying equipment, enhancing facilities, and promoting other business development. Kiva retains a percentage of donations as revenue. The company is an example of which of the following?A) cause-related marketingB) social entrepreneurshipC) corporate philanthropyD) blended valueE) triple bottom lineAnswer: BExplanation: B) Kiva's primary focus is on creating social value, not shareholder wealth—a defining principle of social enterprise.Page Ref: 47Learning Outcome: Discuss the roles of ethics and corporate responsibility in businessDifficulty: ModerateObjective: 2.3 What are corporate social responsibility, blended value, and social auditing?Classification: ApplicationAACSB: Ethical Understanding and Reasoning

71) What activity deploys free-market principles to solve social problems?A) corporate social responsibilityB) cause marketingC) philanthropyD) social auditingE) social entrepreneurshipAnswer: EExplanation: E) Social entrepreneurs develop and deploy innovative business practices to create social value.Page Ref: 47Learning Outcome: Discuss the roles of ethics and corporate responsibility in businessDifficulty: ModerateObjective: 2.3 What are corporate social responsibility, blended value, and social auditing?Classification: ConceptAACSB: Ethical Understanding and Reasoning

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72) Corporate policy, sustainability, community activities, and cause marketing are all components of which of the following?A) blended valueB) integrity-based ethics codesC) social auditingD) economic responsibilityE) social entrepreneurshipAnswer: CExplanation: C) A social audit is a systematic assessment of a company's performance in implementing socially responsible programs. Page Ref: 47Learning Outcome: Discuss the roles of ethics and corporate responsibility in businessDifficulty: ModerateObjective: 2.3 What are corporate social responsibility, blended value, and social auditing?Classification: SynthesisAACSB: Ethical Understanding and Reasoning

73) The Book Nook is a store run by a nonprofit organization. It accepts donations of used books to sell. Disadvantaged teens run the store and learn firsthand about operating a business. Revenue from the store supports the organization's operations. What is this is an example of?A) social entrepreneurshipB) sustainabilityC) corporate social responsibilityD) cause-related marketingE) philanthropyAnswer: AExplanation: A) The nonprofit is operating an innovative business model to provide social value through youth development. Page Ref: 47Learning Outcome: Discuss the roles of ethics and corporate responsibility in businessDifficulty: ModerateObjective: 2.3 What are corporate social responsibility, blended value, and social auditing?Classification: ApplicationAACSB: Ethical Understanding and Reasoning

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74) Which of the following is NOT included in a social audit of a company?A) community activitiesB) sustainabilityC) cause-related marketingD) quarterly earningsE) corporate policyAnswer: DExplanation: D) A social audit only examines the performance of socially responsible programs; it does not look at economic performance.Page Ref: 48Learning Outcome: Discuss the roles of ethics and corporate responsibility in businessDifficulty: ModerateObjective: 2.3 What are corporate social responsibility, blended value, and social auditing?Classification: ConceptAACSB: Ethical Understanding and Reasoning

75) Marcia runs a foundation that is endowed by a large corporation. She reviews grant proposals from nonprofit organizations and distributes funds to them based on the corporation's social priorities. What activity best describes Marcia's work?A) sustainabilityB) cause marketingC) philanthropyD) corporate social responsibilityE) social entrepreneurshipAnswer: CExplanation: C) Philanthropy is the practice of making charitable donations to benefit humankind.Page Ref: 48Learning Outcome: Discuss the roles of ethics and corporate responsibility in businessDifficulty: ModerateObjective: 2.3 What are corporate social responsibility, blended value, and social auditing?Classification: ApplicationAACSB: Ethical Understanding and Reasoning

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76) The Snack-O Company redesigned its packaging to use 15 percent less paper. It also switched to a paper supplier that plants two trees for every one cut down. The company has decreased its paper costs and its use of natural resources. This is an example of what practice?A) philanthropyB) cause marketingC) value blendingD) sustainabilityE) social entrepreneurshipAnswer: DExplanation: D) Sustainability meets present economic needs without compromising the ability of future generations to meet their own needs. Page Ref: 48Learning Outcome: Discuss the roles of ethics and corporate responsibility in businessDifficulty: ModerateObjective: 2.3 What are corporate social responsibility, blended value, and social auditing?Classification: ApplicationAACSB: Ethical Understanding and Reasoning

77) Which of the following is likely the primary driver for a wealthy individual who practices large-scale philanthropy?A) ethicsB) valuesC) lawsD) social entrepreneurshipE) policyAnswer: BExplanation: B) Values are deeply held underlying beliefs and attitudes that determine people's behavior. Page Ref: 48Learning Outcome: Discuss the roles of ethics and corporate responsibility in businessDifficulty: DifficultObjective: 2.3 What are corporate social responsibility, blended value, and social auditing?Classification: SynthesisAACSB: Ethical Understanding and Reasoning

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78) All of the following are negative consequences suffered by a company's illegal behavior EXCEPT which?A) decreased stock valuesB) lower sales growthC) higher resource costsD) negative stock returnsE) expensive lawsuitsAnswer: CExplanation: C) Legal action filed by victims of illegal behavior may impact profits, and social perceptions may lower sales and share values, but supplier prices should not be impacted by corporate activities; these are market-driven.Page Ref: 49Learning Outcome: Discuss the roles of ethics and corporate responsibility in businessDifficulty: ModerateObjective: 2.4 In what ways do customers, owners, employees, suppliers, and the community benefit from corporate social responsibility (CSR)?Classification: ConceptAACSB: Ethical Understanding and Reasoning

79) What does employee fraud cost companies out of their earnings?A) 1 percentB) 3 percentC) 5 percentD) 8 percentE) 10 percentAnswer: CExplanation: C) Employee fraud costs companies 5 cents of every dollar in revenue, clearly impacting profits.Page Ref: 49Learning Outcome: Discuss the roles of ethics and corporate responsibility in businessDifficulty: ModerateObjective: 2.4 In what ways do customers, owners, employees, suppliers, and the community benefit from corporate social responsibility (CSR)?Classification: ConceptAACSB: Ethical Understanding and Reasoning

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80) How can bad behavior by a company impact the first priority in Carroll's corporate social responsibility triangle?A) Shady accounting practices are unethical.B) Underpayment of wages is illegal.C) Employee fraud lowers profits.D) Spoiling the environment shows poor values.E) Ignoring the community is poor corporate citizenship.Answer: CExplanation: C) The first priority of Carroll's model is to earn profits. Most bad behaviors by a business organization can impact its profits. Page Ref: 49Learning Outcome: Discuss the roles of ethics and corporate responsibility in businessDifficulty: ModerateObjective: 2.4 In what ways do customers, owners, employees, suppliers, and the community benefit from corporate social responsibility (CSR)?Classification: SynthesisAACSB: Ethical Understanding and Reasoning

81) Despite protests from shareholders, a large Southern manufacturing company hired Hannah for the new position of corporate social responsibility director. After three years on the job, what is the most likely impact of Hannah's work?A) Sales increased, but profitability and share value decreased.B) Sales stayed flat and employee satisfaction decreased.C) Profitability, share value, and employee satisfaction increased.D) Sales increased, but profits stayed flat.E) Profitability increased, but employee satisfaction decreased.Answer: CExplanation: C) A company's good behavior can increase profits, market value, and employee perceptions while improving the community.Page Ref: 50Learning Outcome: Discuss the roles of ethics and corporate responsibility in businessDifficulty: DifficultObjective: 2.4 In what ways do customers, owners, employees, suppliers, and the community benefit from corporate social responsibility (CSR)?Classification: ApplicationAACSB: Ethical Understanding and Reasoning

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82) Many companies are modifying recipes for children's foods and beverages to lower the amount of sugar and salt. How can this action serve the first priority of Carroll's social responsibility pyramid?A) It complies with some government guidelines for children's foods.B) It increases sales because parents want healthy children.C) It provides social value by helping to lower childhood obesity rates. D) It corrects the unethical practice of selling unhealthy children's foods.E) It enhances employees' perception of their company.Answer: BExplanation: B) Carroll's first priority is to make profit; increased sales of healthier foods will help achieve this goal.Page Ref: 50Learning Outcome: Discuss the roles of ethics and corporate responsibility in businessDifficulty: DifficultObjective: 2.4 In what ways do customers, owners, employees, suppliers, and the community benefit from corporate social responsibility (CSR)?Classification: SynthesisAACSB: Ethical Understanding and Reasoning

83) Which of the following is LEAST likely to give a business a competitive advantage?A) lowering product pricesB) increasing product qualityC) appealing ethics regulationsD) promoting its energy conservation effortsE) supporting community charitiesAnswer: CExplanation: C) A majority of people surveyed would switch to another brand if price and quality were equal. Price, quality, social good, and ethics all influence people's purchasing decisions. Page Ref: 50Learning Outcome: Discuss the roles of ethics and corporate responsibility in businessDifficulty: EasyObjective: 2.4 In what ways do customers, owners, employees, suppliers, and the community benefit from corporate social responsibility (CSR)?Classification: ConceptAACSB: Ethical Understanding and Reasoning

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84) A tornado levels a small town. Five big pizza companies take action to support the community. When the town is back on its feet, which company will residents MOST likely buy their pizza from? A) the company that placed an ad expressing support in the local newspaperB) the company that donated money to a rebuilding fundC) the company that delivered cases of generic bottled waterD) the company that provided stacks of pizzas in boxes with its logoE) the company that sent employee volunteers wearing shirts with its logoAnswer: DExplanation: D) Community activity builds goodwill; marketing can enhance customer loyalty. Donating the actual product with the company logo will be most effective in making an impression and extending customer loyalty. Page Ref: 51Learning Outcome: Discuss the roles of ethics and corporate responsibility in businessDifficulty: DifficultObjective: 2.4 In what ways do customers, owners, employees, suppliers, and the community benefit from corporate social responsibility (CSR)?Classification: ApplicationAACSB: Ethical Understanding and Reasoning

85) Which of the following is an example of rank-and-file employees being directly engaged with supporting a company's corporate social responsibility efforts?A) taking company-sponsored classes in ethical behaviorB) signing the company code of ethicsC) taking time off to perform their own volunteer workD) contributing to the company's annual charity fundE) staffing a charity event while wearing company team t-shirtsAnswer: EExplanation: E) Active participation in the community is the most direct form of engagement; the company t-shirts help promote the company's role.Page Ref: 51Learning Outcome: Discuss the roles of ethics and corporate responsibility in businessDifficulty: ModerateObjective: 2.4 In what ways do customers, owners, employees, suppliers, and the community benefit from corporate social responsibility (CSR)?Classification: ApplicationAACSB: Ethical Understanding and Reasoning

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86) Which of the following is NOT a characteristic of a sweatshop?A) low wagesB) long hoursC) white-collar environmentD) factory environmentE) child laborAnswer: CExplanation: C) A sweatshop is a shop, factory, or farm where employees work long hours for low or no wages under abusive conditions. Page Ref: 51Learning Outcome: Discuss the roles of ethics and corporate responsibility in businessDifficulty: ModerateObjective: 2.4 In what ways do customers, owners, employees, suppliers, and the community benefit from corporate social responsibility (CSR)?Classification: ConceptAACSB: Ethical Understanding and Reasoning

87) A famous New York apparel designer undertook several initiatives to improve its corporate social responsibility profile. Which of the following activities would be related to suppliers?A) installing energy-efficient lighting in its officesB) drafting an integrity-based ethics codeC) donating clothing samples to charitiesD) severing contracts with sewing sweatshopsE) running a cause-marketing campaignAnswer: DExplanation: D) Sewing shops provide labor for the design house, so they are suppliers. Page Ref: 51Learning Outcome: Discuss the roles of ethics and corporate responsibility in businessDifficulty: ModerateObjective: 2.4 In what ways do customers, owners, employees, suppliers, and the community benefit from corporate social responsibility (CSR)?Classification: ApplicationAACSB: Ethical Understanding and Reasoning

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88) Which area is the focus of the highest number of principles in the U.N. Global Compact?A) human rightsB) environmentC) anti-corruptionD) labor standardsE) healthAnswer: DExplanation: D) Four of the ten Global Compact principles address labor rights. Page Ref: 52Learning Outcome: Discuss the roles of ethics and corporate responsibility in businessDifficulty: ModerateObjective: 2.4 In what ways do customers, owners, employees, suppliers, and the community benefit from corporate social responsibility (CSR)?Classification: ConceptAACSB: Ethical Understanding and Reasoning

89) Which of the following is NOT a focus of the U.N. Global Compact?A) labor standardsB) worker educationC) environmentD) human rightsE) anti-corruptionAnswer: BExplanation: B) The Global Compact has no provisions for worker training and education.Page Ref: 52Learning Outcome: Discuss the roles of ethics and corporate responsibility in businessDifficulty: ModerateObjective: 2.4 In what ways do customers, owners, employees, suppliers, and the community benefit from corporate social responsibility (CSR)?Classification: ConceptAACSB: Ethical Understanding and Reasoning

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90) The FunLife Toy Company recently signed on to a document stipulating global business principles regarding human rights, labor practices, environmental protection, and corruption. Which document did the company sign?A) E-Verify contractB) MBA oathC) Global CompactD) Sarbanes-Oxley ActE) integrity-based ethics codeAnswer: CExplanation: C) Businesses from over 100 countries have signed the compact established by the United Nations in 2000.Page Ref: 52Learning Outcome: Discuss the roles of ethics and corporate responsibility in businessDifficulty: ModerateObjective: 2.4 In what ways do customers, owners, employees, suppliers, and the community benefit from corporate social responsibility (CSR)?Classification: ApplicationAACSB: Ethical Understanding and Reasoning

91) Which of the following is NOT addressed in the labor standards principles of the U.N. Global Compact?A) recognition of collective bargaining rightsB) payment of fair and living wagesC) elimination of forced and compulsory laborD) abolition of child laborE) elimination of discrimination in employmentAnswer: BExplanation: B) Wages are not specifically addressed in the Global Compact principles.Page Ref: 52Learning Outcome: Discuss the roles of ethics and corporate responsibility in businessDifficulty: ModerateObjective: 2.4 In what ways do customers, owners, employees, suppliers, and the community benefit from corporate social responsibility (CSR)?Classification: ConceptAACSB: Ethical Understanding and Reasoning

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92) Which of the following is NOT a major driver for businesses to become interested in global warming?A) desire to influence regulationB) gaining a competitive advantageC) lowering energy use costsD) awareness of the need for social responsibilityE) concern over public perceptionAnswer: EExplanation: E) Public perception of business response to climate change is not a key driver in the shifting attitudes; the potential to find new markets—and profits—is a driver. Page Ref: 53Learning Outcome: Discuss the roles of ethics and corporate responsibility in businessDifficulty: ModerateObjective: 2.4 In what ways do customers, owners, employees, suppliers, and the community benefit from corporate social responsibility (CSR)?Classification: ConceptAACSB: Ethical Understanding and Reasoning

93) Synthco Petrochemicals has become more aware of climate change in its corporate policies. Which of the following is likely the strongest driver for this change in the company?A) compliance-based ethics codesB) integrity-based ethics codesC) support from top managementD) pressure from responsible employeesE) ethics training programsAnswer: CExplanation: C) With the shift in attitude guided by large-scale issues such as influencing regulation and finding new markets, the change is likely driven by top management.Page Ref: 53Learning Outcome: Discuss the roles of ethics and corporate responsibility in businessDifficulty: ModerateObjective: 2.4 In what ways do customers, owners, employees, suppliers, and the community benefit from corporate social responsibility (CSR)?Classification: ApplicationAACSB: Ethical Understanding and Reasoning

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94) A Texas oil company had struggled to meet profit targets due to declining production. Five years ago, its CEO testified before Congress against climate change regulation. Today, the company is ramping up production of lithium fuel cells. This reflects what business community shift regarding climate change?A) demonstrating awareness of social responsibilityB) saving on labor expensesC) gaining competitive advantageD) finding new marketsE) wanting to influence regulationAnswer: DExplanation: D) The company realizes that use of alternative energy sources such as fuel cells offers greater profitmaking potential than fossil-based fuels.Page Ref: 53Learning Outcome: Discuss the roles of ethics and corporate responsibility in businessDifficulty: ModerateObjective: 2.4 In what ways do customers, owners, employees, suppliers, and the community benefit from corporate social responsibility (CSR)?Classification: ApplicationAACSB: Ethical Understanding and Reasoning

95) A commercial printing plant in Nevada recently installed high-efficiency LED lighting, painted the roof white, and purchased a fleet of hybrid delivery vehicles with the company's new "green" slogan. Which of the following is likely NOT a driver for the company's actions?A) gaining competitive advantageB) lowering costsC) increasing profitsD) supporting social goodE) finding new marketsAnswer: EExplanation: E) Although the company may gain new customers in response to its CSR activities, entering new markets related to climate change activities is unlikely for a printer.Page Ref: 53Learning Outcome: Discuss the roles of ethics and corporate responsibility in businessDifficulty: ModerateObjective: 2.4 In what ways do customers, owners, employees, suppliers, and the community benefit from corporate social responsibility (CSR)?Classification: ApplicationAACSB: Ethical Understanding and Reasoning

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96) What did a 2006 study estimate the potential annual impact of climate change on global GDP to be?A) 2 percent increaseB) 1 percent decreaseC) 5 percent decreaseD) 8 percent decreaseE) 12 percent decreaseAnswer: CExplanation: C) Economist Nicholas Stern's report said a 5 percent decrease in global GDP would occur each year forever.Page Ref: 53Learning Outcome: Discuss the roles of ethics and corporate responsibility in businessDifficulty: ModerateObjective: 2.4 In what ways do customers, owners, employees, suppliers, and the community benefit from corporate social responsibility (CSR)?Classification: ConceptAACSB: Ethical Understanding and Reasoning

97) Which of the following has been strongly resistant to legislation addressing the threat of global climate change?A) U.S. Environmental Protection AgencyB) U.S. Department of CommerceC) U.S. Department of LaborD) U.S. Chamber of CommerceE) United Auto WorkersAnswer: DExplanation: D) The U.S. Chamber of Commerce represents the interests of the business community. Its stance diverges from the shifting perspective of individual companies toward the issue. Page Ref: 53Difficulty: ModerateObjective: 2.4 In what ways do customers, owners, employees, suppliers, and the community benefit from corporate social responsibility (CSR)?Classification: Concept

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98) Many Harvard Business School graduates who created and signed the MBA oath are likely members of what generation?A) baby boomersB) Greatest generationC) Me generationD) Millennial generationE) Lost generationAnswer: DExplanation: D) Graduates who signed the 2009 oath were likely born during the early part of the Millennial generation, whose members have been described as "activist doers."Page Ref: 54Learning Outcome: Discuss the roles of ethics and corporate responsibility in businessDifficulty: ModerateObjective: 2.4 In what ways do customers, owners, employees, suppliers, and the community benefit from corporate social responsibility (CSR)?Classification: ConceptAACSB: Ethical Understanding and Reasoning

99) Which of the following concepts would likely NOT serve to guide members of the Millennial generation who enter the business world?A) Carroll's "profit is first priority" pyramidB) social entrepreneurshipC) Friedman's "profit is the only responsibility of business"D) blended valueE) sustainabilityAnswer: CExplanation: C) Millennials are typically committed to social good. Friedman's philosophy sees no value in business proactively supporting the community. Page Ref: 54Learning Outcome: Discuss the roles of ethics and corporate responsibility in businessDifficulty: DifficultObjective: 2.4 In what ways do customers, owners, employees, suppliers, and the community benefit from corporate social responsibility (CSR)?Classification: SynthesisAACSB: Ethical Understanding and Reasoning

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100) What is likely the foundation of the "doer activist" theme among the Millennial generation? A) valuesB) ethicsC) lawsD) educationE) profitAnswer: AExplanation: A) Values are relatively permanent and deeply held underlying beliefs and attitudes that help determine people's behavior.Page Ref: 54Learning Outcome: Discuss the roles of ethics and corporate responsibility in businessDifficulty: ModerateObjective: 2.4 In what ways do customers, owners, employees, suppliers, and the community benefit from corporate social responsibility (CSR)?Classification: SynthesisAACSB: Ethical Understanding and Reasoning

101) What does Carroll believe to be the fundamental responsibility of business?Answer: Carroll considers profit-making to be the economic responsibility of business and its top priority.Explanation: Earning a profit is at the fundamental level of Carroll's "pyramid." Page Ref: 34Learning Outcome: Discuss the roles of ethics and corporate responsibility in businessDifficulty: ModerateObjective: 2.1 What is the order of priorities for a businessperson?Classification: ConceptAACSB: Ethical Understanding and Reasoning

102) What is the role of values in a business setting?Answer: Values help determine personal behavior and serve as the foundation of ethical and legal systems. Explanation: Values are relatively permanent and deeply held underlying beliefs and attitudes that help determine people's behavior.Page Ref: 35Learning Outcome: Discuss the roles of ethics and corporate responsibility in businessDifficulty: ModerateObjective: 2.1 What is the order of priorities for a businessperson?Classification: ConceptAACSB: Ethical Understanding and Reasoning

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103) What is the fundamental goal of corporate social responsibility (CSR)?Answer: to maximize a company's positive impacts on society and minimize negative social impactsExplanation: CSR aims to increase social benefits and limit or decrease negative social impacts. The impacts of CSR activities on a company's image or overall success are secondary. Page Ref: 36Learning Outcome: Discuss the roles of ethics and corporate responsibility in businessDifficulty: DifficultObjective: 2.1 What is the order of priorities for a businessperson?Classification: ConceptAACSB: Ethical Understanding and Reasoning

104) People can enter into a business with the highest of intentions to act responsibly, yet may find themselves behaving unethically. Why?Answer: People overestimate their ability to act properly.Explanation: This is known as the "holier-than-thou" effect. People have good intentions in the abstract, but may act differently when faced with an actual challenging situation.Page Ref: 37Learning Outcome: Discuss the roles of ethics and corporate responsibility in businessDifficulty: ModerateObjective: 2.1 What is the order of priorities for a businessperson?Classification: ConceptAACSB: Ethical Understanding and Reasoning

105) What is E-Verify?Answer: a method to screen the legal status of job candidatesExplanation: This federal program allows companies to quickly check the legal status of candidates and identify illegal immigrants.Page Ref: 40Learning Outcome: Discuss the roles of ethics and corporate responsibility in businessDifficulty: ModerateObjective: 2.2 What are four ways organizations can foster high ethical standards?Classification: ConceptAACSB: Ethical Understanding and Reasoning

106) Compared to the nonprofit sector, how are businesses equipped to help solve social problems?Answer: For-profit businesses typically have more resources at their disposal to impact their community positively.Explanation: Business organizations often have money, staff, brand awareness, and other valuable resources that nonprofits may not have. Page Ref: 44Learning Outcome: Discuss the roles of ethics and corporate responsibility in businessDifficulty: ModerateObjective: 2.3 What are corporate social responsibility, blended value, and social auditing?Classification: ConceptAACSB: Ethical Understanding and Reasoning

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107) Explain how social entrepreneurship can be perceived as "flipping" Carroll's social responsibility pyramid upside down.Answer: Carroll's pyramid presents profitmaking as first priority and corporate citizenship as the last priority.Explanation: Social entrepreneurship emphasizes creating social good over shareholder wealth.Page Ref: 47Learning Outcome: Discuss the roles of ethics and corporate responsibility in businessDifficulty: DifficultObjective: 2.3 What are corporate social responsibility, blended value, and social auditing?Classification: SynthesisAACSB: Ethical Understanding and Reasoning

108) Explain how sustainability has a strong future-directed orientation.Answer: Sustainability is oriented towards making sure that current practices can be extended into the future.Explanation: Sustainability is economic development that meets the needs of the present without compromising the ability of future generations to meet their own needs. Page Ref: 48Learning Outcome: Discuss the roles of ethics and corporate responsibility in businessDifficulty: ModerateObjective: 2.3 What are corporate social responsibility, blended value, and social auditing?Classification: ConceptAACSB: Ethical Understanding and Reasoning

109) Explain how "cap and trade" emissions credits reflects a market-based approach to addressing global climate change.Answer: This system allows companies to sell their government-issued emissions credits to companies who cannot achieve government caps and need higher limits.Explanation: This system allows companies to sell their government-issued emissions credits to companies who cannot achieve government caps and need higher limits.Page Ref: 53Learning Outcome: Discuss the roles of ethics and corporate responsibility in businessDifficulty: DifficultObjective: 2.4 In what ways do customers, owners, employees, suppliers, and the community benefit from corporate social responsibility (CSR)?Classification: ConceptAACSB: Ethical Understanding and Reasoning

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Steve Beatty, the head salesperson of a computer company, contracts with a supplier for technical equipment. Just before the winter holiday, a greeting card comes to his home address from the president of the supplier. In it, he finds a Best Buy gift card worth $500, with a note that says, "Go buy some toys for the kids." His children are excited because they had been looking forward to getting some newly released video game equipment.

Beatty looks at his firm's formal code of ethics and finds that employees are cautioned not to receive gifts from suppliers for their own personal use. It does not specifically say that gifts for family members are included. He decides to keep the card.

110) Which of the following, if true, strengthens Beatty's ethical position?A) The gift card has no expiration date, so he can wait to use it later, when he has moved to another position in his company where no conflict of interest exists.B) The greeting and the gift card were received at his home residence, not at his place of work.C) The salesman has just spent $500 of his own money on video game equipment for his children at Best Buy, so he has no immediate reason to use the gift card.D) The president of the supplier is Beatty's father-in-law, so the gift is a personal one for his grandchildren.E) On checking, Beatty learns that the supplier sent gift cards of lower value to other salespersons in his company.Answer: DExplanation: D) Choice D introduces a personal relationship between Beatty and the president, thus making the $500 more truly a gift rather than a bribe. Ideally the president of the supplier should have sent the gift card to his daughter, Beatty's wife. Sending it to Beatty, a person with a professional relationship to the supply company, still introduces a conflict of interest that should be avoided by both parties. The other choices all more clearly compromise Beatty's ethical position. Choices A and C defer use of the card, but the unethical act is accepting it, just as taking a bribe in cash is immoral, regardless of whether the money is spent now or later. Choices B and E likewise do not affect the ethics of the situation as the conflict of interest still exists.Page Ref: 36Learning Outcome: Discuss the roles of ethics and corporate responsibility in businessDifficulty: ModerateObjective: 2.1 What is the order of priorities for a businessperson?Classification: Critical ThinkingAACSB: Reflective Thinking Skills

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111) Which of the following, if true, most clearly makes Beatty's action professionally unsupportable?A) The supplier's low prices have helped the computer company remain competitive with rival companies in its local market.B) The supplier needs continued business from the computer company to remain financially viable.C) Beatty is not the only person responsible for recommending which bids to accept from suppliers.D) Beatty's work contract states that employees must report all gifts from people associated with firms with which they do business.E) Rumor has it that other employees also received similar gift cards from the supplier and did not report them.Answer: DExplanation: D) Taking a gift from a supplier is morally suspect from the start, and work contracts or corporate policies often reinforce a firm's commitment to ethics. In this case, Choice D shows that Beatty's work contract explicitly addresses the issue of receiving gifts without reporting them, so accepting the card was unsupportable. Choices A and B offer motives for Beatty's company and the supplier to stay on good terms, but they don't ethically justify Beatty accepting the gift. Choice C makes the conflict of interest less direct by spreading responsibility for accepting bids, but the ethical issue still remains since Beatty is still part of the decision process. Choice E, if the rumor is true, simply offers an "everyone does it" excuse that has no moral standing.Page Ref: 36Learning Outcome: Discuss the roles of ethics and corporate responsibility in businessDifficulty: ModerateObjective: 2.1 What is the order of priorities for a businessperson?Classification: Critical ThinkingAACSB: Reflective Thinking Skills

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Suppose that every product in a grocery store contains a tiny transmitter, and that sensors on your shopping cart detect your selections in order to suggest additional purchases. When you leave the store, exit scanners total up your purchases and automatically charge them to your credit card. At home, readers track what goes into and out of your pantry, updating your shopping list when stocks run low.

112) Which of the following applications of the technology described above would likely be LEAST objectionable?A) comparing the prescriptions purchased at the grocery store's pharmacy with other purchases and alerting the consumer about possible side effects of consuming combinations of those productsB) monitoring the dollar value of the shopper's purchases and relaying that information to credit rating agencies in order to help determine the shopper's creditworthiness C) examining purchase patterns and sending political and religious messages to the people who are most likely to be receptive to those messagesD) requiring shoppers to view personalized advertisements before checking outE) charging shoppers for items automatically added to their shopping lists before the shopper re-enters the grocery storeAnswer: AExplanation: A) All of the choices present strong ethical problems except Choice A. Consumers would surely benefit from knowing about side effects, and alerting the consumer is a good way to do this. There's no evidence that anyone else would know about the prescriptions, so there is no real privacy objection here. Choice A is the least objectionable. Choice B has the system relaying the shopper's purchase information to credit agencies to see if he or she is spending too much. Most consumers would be enraged about that. Choice C involves potentially offensive messages, which sounds dangerous. Choice D involves an ad-viewing requirement. Who wants to be forced to see commercials just to shop for groceries? Choice E has the system doing the shopping for shoppers, which in this case might involve charging shoppers for things they never received. Sounds like trouble.Page Ref: 35Difficulty: DifficultObjective: 2.1 What is the order of priorities for a businessperson?Classification: Critical ThinkingAACSB: Ethical Understanding and Reasoning

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113) Which of the following questions is LEAST relevant to the ethical evaluation of the technology described above?A) Could the technology suggest age-inappropriate products to younger shoppers?B) Does the technology lower the cost of targeting the consumers who are likely to be interested in particular products?C) Can shoppers choose to not receive additional offers based on their shopping selections?D) Does the technology deliver offers based on the personal characteristics of the shopper, or are the offers determined only by the shopper's selections within the store?E) Other than the shopper who receives an offer, who else is aware which offers are made by the technology?Answer: BExplanation: B) All the questions are relevant except Choice B, which affects the economics of the decision but is not an ethical question. Choice A is an ethical question. If the technology could do things like suggest beer purchases to underage consumers, that would be a problem. Choice C is relevant because being forced to watch ads is offensive to most. Choice D examines whether the system bases its offers on personal characteristics, which brings up privacy issues. Choice E looks at who knows what offers are being made. This is important because while people may not care if others know that they are interested in orange juice, they may object to others knowing about offers for hemorrhoid medicine and other personal products.Page Ref: 35Difficulty: DifficultObjective: 2.1 What is the order of priorities for a businessperson?Classification: Critical ThinkingAACSB: Ethical Understanding and Reasoning

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At the end of an especially good year, a company decides to give bonuses to its sales employees. Two salespersons are included: Tracy shows a better-than-average sales record, whereas Colin was only an average salesperson.

Colin has a reputation for being a straight shooter who complies strictly with the company's ethical code. On the other hand, Tracy made some deals that, as coworkers confided to middle managers, were "on the edge" of dishonesty. When the company's ethics panel reviewed one such deal, it was found to have been compliant with the letter of the stated code.

Nevertheless, the financial officer recommends that both employees be given the same bonus.

114) Which of the following, if true, most strongly supports the financial officer's position?A) The employees had received and duly signed a statement agreeing to uphold the company's code of ethics.B) The coworkers who reported the alleged shady deals had ethical incidents in their own personnel files. C) The firm recently conducted a social audit, which revealed concern about the firm's tolerance of predatory practices by sales personnel and their impact on workplace morale.D) The company's code gives very detailed definitions of what separates a responsible business transaction from a dishonest one.E) The strong sales performance of this department was a major factor in improving the firm's viability during an economic downturn.Answer: CExplanation: C) The ethical issue in this situation is tricky: one needs to balance fairness to individuals against fairness to the entire community. In this case, Choice C explains and justifies the financial officer's position. At a time when the firm is trying to reduce potentially unethical behavior, giving the larger bonus to an employee known for "skirting the boundaries" suggests that the social audit was insincere. Choices A and D rely on the letter of the code, but increasingly ethical behavior is defined as going beyond the letter and honoring the spirit of such codes. Choice B weakens the financial officer's position by suggesting that the complaints may not have been made in good faith and that jealous coworkers may be unfairly targeting Tracy. Choice E simply justifies the overall decision to grant bonuses, but does not address the issue of whom to award more generously.Page Ref: 35Difficulty: ModerateObjective: 2.1 What is the order of priorities for a businessperson?Classification: Critical ThinkingAACSB: Ethical Understanding and Reasoning

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115) Which of the following, if true, might strengthen the ethical case for giving a larger bonus for Tracy?A) Asked to explain his tactics, Tracy said that sales work is an intrinsically competitive field, and coworkers should expect him to act in his own self-interest.B) One of the company's key policies involves tying bonuses strictly to sales records to ensure fairness to all personnel.C) The entire sales staff had recently undergone a thorough refresher course in ethical behavior in sales.D) Middle managers felt that most of the complaints were based on jealousy over Tracy's increased success rate.E) Providing a larger bonus to Tracy would give coworkers added incentive to increase their own sales records.Answer: BExplanation: B) The key ethical issue balances fairness to individuals against fairness to the entire workforce. If the company places primary value on individual performance, then it would be unfair to reduce a "better than average" worker's bonus based on complaints that are not actionable. So Choice B strengthens the argument to give Tracy a stronger bonus. Choice E might be a practical incentive for giving the higher bonus, but it has no ethical standing if workers feel the tactics used to increase sales were not strictly honest. Likewise, Choice A reflects a realistic but essentially amoral justification that does not strengthen the ethical case for the increased bonus. If the conclusion made by the managers in Choice D is well justified, then the company is right to ignore the complaints, but this does not in itself make awarding a higher bonus ethical. Choice C likewise does not affect the facts relating to this particular decision.Page Ref: 35Difficulty: ModerateObjective: 2.1 What is the order of priorities for a businessperson?Classification: Critical ThinkingAACSB: Ethical Understanding and Reasoning

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A plumbing supply firm can win a contract with a home-building business by promising to get 500 faucet assemblies of a certain make by Tuesday morning. Actually, the customer representative finalizing the deal knows that their supplier normally takes an extra day to get them to the firm. But lately, due to the housing slowdown, shipments have been arriving a day earlier.

The customer representative therefore promises Tuesday delivery to the home-building business, reasoning that if the faucets do come a day later, as they often do, he can come up with a plausible excuse.

116) Which of the following, if true, undermines the customer representative's ethical position?A) The representative knows that a snowstorm has disrupted travel at the hub through which the faucets will be shipped, so there is no way they will arrive by Tuesday.B) The contract with the home-building company is important to win, as the plumbing supply firm is short on cash and needs the proceeds of the deal to pay off some pressing debts.C) The home-building firm is notorious for finishing its units well after the scheduled date, so a delay in the faucets will not make that much difference.D) The housing slowdown seems likely to go on in the firm's area, so it's probable that shipments will continue to come in a day early.E) The customer representative and the head engineer for the home-building business play golf together regularly.Answer: AExplanation: A) If the customer representative promises the faucets on a given day while knowing that it's not possible they will arrive by then, then the promise is a lie, and his action is blatantly dishonest. Choice B is an increasingly common context for a dishonest act, but does not require the rep to lie to the customer. Choices C and D offer plausible reasons for the customer rep to assume that the delivery will be timely enough, but neither assumption constitutes a lie. The fact that the customer rep has a friendly relationship with an employee of the plumbing supply firm (Choice E) doesn't reduce the rep's duty to act in an ethical manner.Page Ref: 40Learning Outcome: Discuss the roles of ethics and corporate responsibility in businessDifficulty: ModerateObjective: 2.2 What are four ways organizations can foster high ethical standards?Classification: Critical ThinkingAACSB: Reflective Thinking Skills

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117) Which of the following, if true, justifies the customer representative's ethical position?A) The home-building firm sometimes picks up shipments of supplies several days after they arrive.B) The customer rep knows that if the faucets do come in early, the home-building firm will choose to do business with them more often.C) The home-building firm has a brief written code of ethics that has no statement that applies specifically to this situation.D) When phoned for advice, the plumbing supply firm's CEO told the customer rep that it was OK to "fib a little" to get a contract like this.E) The faucet shipment comes with a tracking number and goes to a distribution center within driving distance so that, if necessary, the plumbing firm can expedite its arrival.Answer: EExplanation: E) If the representative has thought out a "Plan B" by which he can guarantee delivery of the shipment on time, then the promise is morally supportable. So Choice E is correct. Otherwise, the promise is ethically suspect regardless of how it is justified. Choice A makes an assumption that cannot be guaranteed: if the contractors arrive Tuesday morning for the faucets and they are not there, the representative is caught in a lie. Choice B is a good motive for making sure the shipment arrives on time, but not for deceiving the customer. If the fib is exposed, it is unlikely that the event will in fact lead to more business. Choice C describes the code of ethics at the home-building firm, which may or may not be similar to what the customer rep is expected to follow at the plumbing supply firm. Choice D indicates that the overall demeanor of the plumbing supply firm is based on morally shaky grounds, which hardly justifies the ethics of lying to a customer.Page Ref: 40Learning Outcome: Discuss the roles of ethics and corporate responsibility in businessDifficulty: DifficultObjective: 2.2 What are four ways organizations can foster high ethical standards?Classification: Critical ThinkingAACSB: Reflective Thinking Skills

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An American oil company, Bexhill, is devising plans to drill for oil at a location it has scouted in Nigeria. Bexhill plans to enter into a business partnership with the Nigerian contracting firm Okoli Building Services Ltd. to run local operations. Executives at Bexhill are looking into the various ethical ramifications of the joint business operation in Nigeria.

118) Bexhill's CEO discovers that in short-term contracting with Okoli during survey activities but before Okoli had secured the long-term operations contract, Okoli made a payment to Bexhill. Which of the following, if true, best suggests that the payment was ethically acceptable?A) There are no laws against such payments in Nigeria.B) Okoli received the use of some of Bexhill's equipment in exchange.C) The payment was made via a third party affiliated with Bexhill.D) All the other top Bexhill executives were aware of the transaction.E) Bexhill had considered other contractors in Nigeria for its long-term operations.Answer: BExplanation: B) If the payments were made in exchange for services rendered, then that ensures that they were not made as a bribe to help Okoli secure the long-term contract. Choice A notes that the payment didn't violate Nigerian law. Such payments could still be illegal by U.S. law, and in any case, legality by itself cannot ensure ethicality. Choice C: The fact that the money was exchanged via an indirect route suggests that the payments may have been unethical in nature. Choice D: Because executives were aware of the transaction does not mean that it was ethical—there are many examples (Enron, WorldCom) of corporate ethical scandals that involved broad executive involvement. Choice E would tend to strengthen the case that the payment was a bribe to ensure that Okoli would receive the long-term contract.Page Ref: 40Learning Outcome: Discuss the roles of ethics and corporate responsibility in businessDifficulty: ModerateObjective: 2.2 What are four ways organizations can foster high ethical standards?Classification: Critical ThinkingAACSB: Reflective Thinking Skills

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119) When the CEO confronts the CFO about the possibility that the payment that Bexhill received from Okoli was unethical, the CFO responds by saying that nothing about the transaction was illegal. Which of the following assumptions does this defense rest on?A) Nigerian laws differ from U.S. laws covering cases like these.B) U.S. laws pertain only to transactions between U.S. companies.C) Bexhill's business dealings are always approved by one or more executives.D) Okoli's executives had full knowledge of the transaction.E) Any activity that is legal is also ethical.Answer: EExplanation: E) If legality were the only test for ethicality, then ensuring that the law is not broken would be all that it took to decide that a given activity was ethical. Choice A: This assumption is not necessary since the transaction could be both legal and ethical if U.S. and Nigerian laws on the subject were the same. Choice B: This assumption is not necessary since the transaction could be both legal and ethical even if U.S. laws covered it. Choice C: This assumption is not necessary since the transaction could be both legal and ethical even if executives had not specifically approved it. Choice D: This assumption is not necessary since the transaction could be both legal and ethical even if Okoli's executives did not have full knowledge of the transaction.Page Ref: 40Learning Outcome: Discuss the roles of ethics and corporate responsibility in businessDifficulty: ModerateObjective: 2.2 What are four ways organizations can foster high ethical standards?Classification: Critical ThinkingAACSB: Reflective Thinking Skills

120) As a cost-saving move, the CEO is considering having as much as possible of the labor in Nigeria be done by local workers. Which of the following, if true, most strengthens the case that Bexhill should look further into the ethical implications of that decision?A) Okoli is one of the largest employers in the region.B) The cost of living in Nigeria is much lower than in the United States.C) Bexhill cannot afford to pay Nigerian workers much more than Okoli.D) Working conditions in Nigeria are far below those legally required in the United States.E) This is Bexhill's first foreign venture.Answer: DExplanation: D) If Bexhill wants to save money by using cheaper labor, it should make sure that the working conditions are not unacceptably dangerous or unhealthful. Choices A (Okoli employs a lot of people) and E (Bexhill has previously only done business in the United States) are not directly relevant to whether it is ethical to use Nigerian workers. Choices B and C help justify using foreign labor that is cheaper.Page Ref: 40Learning Outcome: Discuss the roles of ethics and corporate responsibility in businessDifficulty: DifficultObjective: 2.2 What are four ways organizations can foster high ethical standards?Classification: Critical ThinkingAACSB: Reflective Thinking Skills

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The mobile phone company BrightLine is introducing a new smartphone model six months after the release of its previous model. The new release will make the older model unusable with the mobile carrier with whom the company has an exclusive contract.

121) Which of the following, if true, most strengthens the case that the timing of BrightLine's new model release may be unethical?A) The new model is priced the same as the old model.B) Smartphone users like their phones to have all of the latest features.C) Smartphone components contain toxic materials that end up in the environment when they are discarded.D) The smartphone market is highly competitive.E) Users had many complaints about BrightLine's previous smartphone model.Answer: CExplanation: C) If the new model of smartphone will render the old one obsolete, then it will require phones of the previous model to be thrown away. If smartphones contain environmentally toxic materials, then this new release has unethical ramifications. Choices A and D are not relevant to the question of whether the timing of BrightLine's new model release is ethical. Choices B and E only suggest that Brightline's release of a new smartphone model makes good business sense.Page Ref: 40Learning Outcome: Discuss the roles of ethics and corporate responsibility in businessDifficulty: ModerateObjective: 2.2 What are four ways organizations can foster high ethical standards?Classification: Critical ThinkingAACSB: Reflective Thinking Skills

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122) BrightLine has come under criticism for the way in which it has released its new smartphone, and has been charged with deceptive advertising. Which of the following, if true, most strengthens the case that the company is guilty of deceptive advertising?A) BrightLine's advertising campaign for the new model claimed that it had significant improvements over the previous one.B) BrightLine's advertising campaign for the new model claimed that its mobile carrier had broad coverage.C) BrightLine's advertising campaign for the previous model claimed that it had all of the smartphone features that had been developed at that time.D) BrightLine's advertising campaign for the previous model claimed that it had all of the features its competitors had.E) BrightLine's advertising campaign for the previous model proclaimed it as "the only smartphone you will ever need again."Answer: EExplanation: E) This is a deceptive statement in light of the fact that six months after the previous model's introduction, BrightLine released another model that made the old one obsolete. The claims made in choices A, B, C, and D could all be true based on the information given.Page Ref: 40Learning Outcome: Discuss the roles of ethics and corporate responsibility in businessDifficulty: ModerateObjective: 2.2 What are four ways organizations can foster high ethical standards?Classification: Critical ThinkingAACSB: Reflective Thinking Skills

123) Consumer advocacy groups have criticized BrightLine for not operating in a socially responsible manner. Which of the following, if true, most strengthens this case?A) In developing its latest smartphone model, BrightLine was mainly motivated by profits.B) BrightLine made business decisions without regard for their impact on consumers and the world.C) BrightLine makes its mobile devices with as much recyclable material as possible.D) BrightLine is not the current market leader in smartphone devices.E) Development of BrightLine's latest smartphone model was done with consultation of all of its customer feedback on the previous model.Answer: BExplanation: B) Making business decisions without regard for their impact on consumers and the world at large makes it highly likely that a business is not acting with social responsibility. Choice A is incorrect because the motive of profit-making is not necessarily incompatible with social responsibility. Choices C and E strengthen the case that BrightLine acted with social responsibility. Choice D is not relevant to whether or not BrightLine acted with social responsibility.Page Ref: 40Learning Outcome: Discuss the roles of ethics and corporate responsibility in businessDifficulty: ModerateObjective: 2.1 What is the order of priorities for a businessperson?Classification: Critical ThinkingAACSB: Reflective Thinking Skills

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Construction company Mitchell and Sons Inc. has been in business for only a few years, but so far has been successful. Some of the executives in the company want to hire a consulting company to ensure that Mitchell and Sons is operating in accordance with corporate social responsibility (CSR). The CEO of the company is skeptical that this will be worthwhile.

124) The CEO thinks that pursuing CSR is undesirable for the company because it will detract from the company's goal of making profits. Which of the following assumptions does the CEO's argument depend on?A) The pursuit of CSR in itself never helps a company make better profits.B) Mitchell and Sons lags behind its major competitors.C) Only the largest companies need to pursue CSR.D) Hiring the consulting company is hard to fit into Mitchell and Sons' current budget.E) The consulting company is relatively inexperienced with CSR.Answer: AExplanation: A) The CEO's argument would be valid if the pursuit of CSR and profit-making were mutually exclusive, but they're not. Choices B and C are incorrect because the assumptions are not required for the CEO's argument. Although Choices D and E weaken the case for hiring the consulting company, the CEO's argument does not depend on either one as an assumption.Page Ref: 44Learning Outcome: Discuss the roles of ethics and corporate responsibility in businessDifficulty: DifficultObjective: 2.3 What are corporate social responsibility, blended value, and social auditing?Classification: Critical ThinkingAACSB: Reflective Thinking Skills

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125) The Mitchell and Sons CEO makes the following argument against investing in CSR: "Shareholders and investors put money into the company in order to receive a return on their investment from the company's profits. The pursuit of CSR does not have a goal of maximizing profits. Therefore, investing in CSR-related measures would violate the company's primary responsibility." Which of the following, if true, most undermines the CEO's argument?A) There are other ways for a company to be ethical besides CSR.B) The law requires companies only to conduct business in a way that is not fraudulent.C) The company's shareholders come from a wide variety of social backgrounds.D) The company's shareholders want their investments to be put toward goals that are socially responsible as well as profit-making.E) The company's shareholders own stock in a wide variety of companies.Answer: DExplanation: D) If the shareholders want their investments to not only pay them back but to also support socially responsible goals, then this undermines the argument that investing in CSR would be irresponsible to the shareholders. Choice A does not weaken the argument that CSR will violate the company's responsibility to its shareholders. Choice B is incorrect because legal requirements do not spell out all that is required for CSR. Choice C does not relate to the argument about whether CSR would violate the company's responsibility to its shareholders. Choice E is incorrect because even if shareholders' investments are diversified, they could still presumably expect each company to pursue profits.Page Ref: 44Learning Outcome: Discuss the roles of ethics and corporate responsibility in businessDifficulty: ModerateObjective: 2.3 What are corporate social responsibility, blended value, and social auditing?Classification: Critical ThinkingAACSB: Reflective Thinking Skills

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126) Mitchell and Sons is greatly in need of getting more customers at this time. The CEO believes that investing in CSR would do nothing to help the company gain more customers. Which of the following, if true, most weakens his position?A) Construction customers require several contacts with companies before they choose to contract with one.B) Consumers and businesses prefer to work with construction companies that pay attention to the wider implications of their business.C) Construction companies lately have had to keep operating costs as low as possible in order to make a profit.D) The construction business has been extremely competitive over the past several years.E) Construction workers are represented by powerful labor unions.Answer: BExplanation: B) If customers are especially willing to hire construction companies that do business with social responsibility in mind, then pursuing CSR should actually help the company get more customers. Choices A and E say that Mitchell and Sons needs to deal with customers as well as workers in order to do business, but not how CSR will affect those dealings. Choices C and D may strengthen the case that a construction company needs to invest only in necessary business expenses in order to succeed.Page Ref: 44Learning Outcome: Discuss the roles of ethics and corporate responsibility in businessDifficulty: ModerateObjective: 2.1 What is the order of priorities for a businessperson?Classification: Critical ThinkingAACSB: Reflective Thinking Skills

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Macmoo Real Estate's annual report contains a section describing Macmoo's corporate culture. In it, Macmoo claims that its culture reflects the people-oriented values of Macmoo's founders, who placed people ahead of profits. As an example of these values in action, the report describes Macmoo's tuition reimbursement program, which pays the college bills of eligible employees. The report also describes Macmoo's focus on promoting an ethical culture, citing for support the fact that all executives have corporate responsibility goals each year.

127) The report's claim about Macmoo's tuition reimbursement program rests on which assumption?A) Tuition costs have risen dramatically in recent years.B) The cost of going to college is higher than the average salary of a Macmoo employee.C) Macmoo did not create the program primarily in order to attract top talent to the organization. D) Benefit programs provide a more cost-efficient way to provide benefits to employees because of tax advantages.E) The program is the only example of Macmoo's awareness of its founders' values.Answer: CExplanation: C) The annual report claims that the tuition reimbursement program is an example of how the company puts people ahead of profits, but if Choice C is false, then the program could be designed to improve profits by helping the company attract top talent. Choice C must be assumed, or the real motivation would be different than the report claims. Choices A and B make the program sound more generous but don't need to be true in order for the motivation to be the way the report describes. Choices D and E undercut the argument.Page Ref: 48Difficulty: DifficultObjective: 2.3 What are corporate social responsibility, blended value, and social auditing?Classification: Critical ThinkingAACSB: Ethical Understanding and Reasoning

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128) Which of the following, if true, strengthens the report's claims about the ethical culture at Macmoo?A) No employee who has failed to meet all of his or her corporate responsibility goals is eligible for promotion.B) Employees who apply for the tuition reimbursement program must agree to work at Macmoo for at least three years after their studies are completed.C) Determining the ethical culture in an organization is more difficult than determining that organization's culture with respect to risk and innovation.D) Macmoo's efforts toward establishing an ethical culture are similar to those taken by other organizations in Macmoo's industry.E) The real estate industry is subject to specific responsibilities that go beyond the normal client-agent relationship. Answer: AExplanation: A) Having goals is a good sign, but if Choice A is true, then Macmoo employees need to take those goals seriously and achieve them in order to be promoted. Choice A supports the belief that ethics really is important at Macmoo. Choice B makes Macmoo sound more mercenary, which weakens the argument. Choice C says it is difficult to tell whether an organization has an ethical culture, but that tells us nothing about Macmoo. Choice D says that Macmoo is typical, but we don't know if that's good or bad. Choice E says that the standards of acceptable behavior are relatively high, but we don't know if Macmoo meets them.Page Ref: 48Difficulty: ModerateObjective: 2.3 What are corporate social responsibility, blended value, and social auditing?Classification: Critical ThinkingAACSB: Ethical Understanding and Reasoning

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129) Which of the following, if true, most seriously weakens the report's claims about the ethical culture at Macmoo?A) Complaints about the ethics of those in the real estate industry often arise when agents pressure clients to accept deals that benefit the agent but damage the client.B) Corporate responsibility goals are considered achieved when the employee has not violated any legal standards.C) Real estate agents representing a buyer have a financial incentive to persuade the buyer to purchase a more expensive house.D) Macmoo has never received any positive publicity in reaction to its tuition reimbursement program.E) Macmoo encourages builders to use sustainable methods whenever possible. Answer: BExplanation: B) Having goals is nice, but how challenging are those goals? If Choice B is true, then the goals basically require the employees not to break the law, but they shouldn't do that anyway. So if Choice B is true, then the goals impose no real requirements, which undermines the claim about the ethical culture at Macmoo. Choices A and C describe common problems, but we don't know how bad those problems are at Macmoo. Choice D makes the employee reimbursement program sound well-intentioned, which only strengthens the case that Macmoo has an ethical culture. Choice E strengthens the argument. Page Ref: 48Difficulty: ModerateObjective: 2.3 What are corporate social responsibility, blended value, and social auditing?Classification: Critical ThinkingAACSB: Ethical Understanding and Reasoning

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A firm is considering opening a new plant in an existing building at a business park. It is located in the middle of a coal-producing region, which remains visibly blighted by the effects of strip mining. The plant's heating system is based on coal heat, which is locally produced and relatively cheap, reducing the plant's operating expenses significantly.

Company engineers note that the plant's roof is ideal for solar panels, which would reduce the firm's future dependence on coal, nuclear, and other conventional sources of energy. However, the cost of installing the panels is considerable and would mean that the new plant would not return a profit to the company for several years.

The CEO feels that the panels should be installed.

130) Which of the following, if true, tends to compromise the ethical standing of the CEO's position?A) The CEO was born and raised in the community where the new plant will be located.B) The CEO plans to purchase the solar energy panels for the new plant from an alternative energy business just started up by her grandson.C) The plant is located near a small lake that is heavily polluted by residue from strip mining.D) The firm recently instituted a policy of bonuses for environmentally responsible actions, which the managers assigned to the new plant would be certain to get.E) The CEO expects to sell some of the power generated by the solar panels back to the local energy grid, enhancing corporate profits.Answer: BExplanation: B) While the decision to move toward clean energy would benefit the community in which the plant is located, it also may introduce other ethical issues. Therefore, Choice B is the answer, as the CEO's decision to purchase the equipment from her grandson's firm constitutes a conflict of interest. Bids for supplying the solar panels should be part of a transparent decision process, not one based on family ties. Choice A indicates a personal reason for wanting to benefit the community, but does not in itself create an ethical issue. Similarly, Choices D and E are logical consequences of the company's policy, indicating that a socially responsible policy can and ought to be rewarded by bonuses and increased profits. Choice C shows a drawback to coal and thus tends to support the CEO's intention to use an alternative source of energy.Page Ref: 51Learning Outcome: Discuss the roles of ethics and corporate responsibility in businessDifficulty: ModerateObjective: 2.4 In what ways do customers, owners, employees, suppliers, and the community benefit from corporate social responsibility (CSR)?Classification: Critical ThinkingAACSB: Reflective Thinking Skills

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131) Which of the following, if true, strengthens the ethical standing of the CEO's position?A) Due to new federal "cap and trade" controls, the cost of coal is likely to increase sharply in the next decade, along with that of electricity generated by burning coal.B) The commitment to "green" and sustainable energy use would lower the company's emissions locally as well as support the development of an alternative power industry.C) Regulations require mining firms in the region to restore natural landscaping after operations are completed, including sections stripped before the new standards were adopted.D) Projections made by the firm's long-range planning team indicate that the market will support full use of the new location for at least twenty years, enough time to see savings accrue from the solar panels.E) The most economical source for purchasing the solar panel equipment is owned by the same corporation responsible for strip mining in the new location.Answer: BExplanation: B) The issue here is one of corporate social responsibility: how can the company's actions serve or protect the interests of parties other than those directly involved in its business? Therefore, Choice B is the answer, as the company's decision to move toward sustainable, renewable energy supports a cleaner local environment as well as national efforts to reduce overall dependency upon fossil fuels. Other choices suggest ways in which the decision will mainly profit the firm: Choice A suggests that the present cheapness of the energy source is likely to change soon, while Choice D shows that the firm would benefit in the long run. But neither choice directly relates to the corporate ethics of the decision—they show only that moral responsibility is not incompatible with corporate profits. Choice E instead weakens the CEO's corporate ethics by favoring a firm responsible for the area's pollution. On the other hand, Choice C reduces the company's accountability to further blighting of the area if coal were chosen as an energy source, but this is not what the CEO wants to do.Page Ref: 51Learning Outcome: Discuss the roles of ethics and corporate responsibility in businessDifficulty: ModerateObjective: 2.4 In what ways do customers, owners, employees, suppliers, and the community benefit from corporate social responsibility (CSR)?Classification: Critical ThinkingAACSB: Reflective Thinking Skills

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Kelly: Our company needs to be united in purpose if we are to achieve our goals. We are a financial firm, and so our complete focus needs to be on creating wealth for our shareholders.

Sharon: Making more money is important, but it should not be the only consideration. Given our positions of power, we also have a responsibility to promote the well-being of society.

Ozzie: When we are not sure what we should do, we should try to determine what our founders would advise us to do. Even though they started this firm over 100 years ago, we can determine what we ought to do by examining what they did.

132) Kelly and Sharon most likely disagree on which of the following questions? A) Are financial goals a significant consideration for the organization? B) Is there ever a conflict between the visions of the founders and the goal of improving society? C) Should the company promote the well-being of society when doing so will have no effect on financial performance? D) Should the company pursue financially rewarding actions that are not in the best interests of society?E) Which projects are most likely to be financially rewarding?Answer: DExplanation: D) Kelly says that financial goals should be the focus, and Sharon says that social responsibility is a consideration as well. So they disagree about Choice D. Kelly would like those projects, as long as they make money, but Sharon would object. Choice A: Kelly and Sharon agree that financial goals are one consideration. Choice B brings in Ozzie's point, but this is about Kelly and Sharon. Choice C: This one is tougher, because Kelly has no real interest in things that don't make money. But the projects described in Choice C have no effect on financial performance. So we know that Sharon would say yes to Choice C, but we don't know that Kelly would say no. More likely, she wouldn't care. Choice E: Neither speaker talks about how to find financially rewarding projects. This disagreement is about what the company should try to do, and not how to do it.Page Ref: 50Difficulty: DifficultObjective: 2.4 In what ways do customers, owners, employees, suppliers, and the community benefit from corporate social responsibility (CSR)?Classification: Critical ThinkingAACSB: Ethical Understanding and Reasoning

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133) Kelly is most likely to support Sharon's point of view if which of the following were shown to be true?A) The company's customers have become unwilling to do business with companies that focus exclusively on profits.B) Support for projects that promote the well-being of society have become more popular in the company.C) Other organizations in the company's industry adopted a code of ethics.D) The views of the company's founders were shown to be supportive of corporate social responsibility.E) Most of the company's projects promote the well-being of society.Answer: AExplanation: A) Sharon wants to look out for society, and Kelly wants to focus completely on financial goals. But those views don't have to conflict. If having a socially responsible image were necessary for financial success (Choice A), then Sharon and Kelly would have the same goals. The other choices would not motivate Kelly. Kelly doesn't seem to care about popularity (Choice B), other companies (Choice C), or what the founders thought (Choice D), and she wouldn't be convinced by learning about what actually happens now (Choice E). Kelly's concern is what ought to happen, not the way things go at present.Page Ref: 50Difficulty: ModerateObjective: 2.4 In what ways do customers, owners, employees, suppliers, and the community benefit from corporate social responsibility (CSR)?Classification: Critical ThinkingAACSB: Ethical Understanding and Reasoning

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134) All of the following, if true, make it more difficult to determine Ozzie's position on an issue EXCEPT which one?A) The company may be faced by the same question at different points in time. B) The founders did not face many of the questions that the current company faces.C) The reasoning behind the founders' decisions is often difficult to determine. D) The records of the founders' decisions are incomplete.E) The identity of the company's founders is itself a controversial question. Answer: AExplanation: A) Ozzie wants the company to do what the founders would have done. But that would be hard if it isn't clear who the founders really were (Choice E), if we don't know what they decided (Choice D), or if they never faced a decision like the ones the company faces today (Choice B). Even if we knew who they were and what they decided, and their decision is relevant to a current situation, we would still need to know why they did what they did (Choice C) in order to apply their thought process today. The one choice that doesn't point out a problem is Choice A. The founders' opinions aren't going to change, and so trying to find out their views were on something shouldn't yield a different result every time. The answer will be the same no matter when the question is asked, and so Choice A doesn't point out a difficulty in figuring out what Ozzie would think.Page Ref: 50Difficulty: DifficultObjective: 2.4 In what ways do customers, owners, employees, suppliers, and the community benefit from corporate social responsibility (CSR)?Classification: Critical ThinkingAACSB: Ethical Understanding and Reasoning

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