Understanding Business Ethics Peter Stanwick Test Bank

Understanding Business Ethics

By Peter A. Stanwick , Sarah D. Stanwick

Copyright © 2009 Pearson Education, Inc. publishing as Prentice Hall

Chapter 1 The Foundation of Ethical Thought Multiple Choice Questions Utilitarian Ethics: One Playground at a Time 1. Which country is the focus of “Utilitarian Ethics: One Playground at a Time”? a. India b. Bangladesh c. South Africa d. Nigeria Difficulty: Easy Page 1 2. “Utilitarian Ethics: One Playground at a Time” addresses what problem? a. not enough schools in the country b. not enough children going to school c. lack of clean drinking water in the community d. lack of shelter in the community Difficulty: Easy Page 1 3. What is one of the reasons why there was a lack of clean water in South Africa? a. Arid climate b. Original settlers had planted vegetation that was not indigenous to South Africa c. Rapid population growth d. Poor water management by the government Difficulty: Moderate Page 1-2 4. What is the weight that the buckets could weigh which the women had to carry back to their villages? a. 10 pounds b. 20 pounds c. 30 pounds d. 40 pounds Difficulty: Difficult Page 2 5. What did Trevor Field develop to help solve the problem of lack of clean water? a. a water filter b a water pump c a water pipeline d a lighter water carrier Difficulty: Easy Page 2

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6. What was the cost of the device used to solve the problem of lack of clean water? a. $7,000 b. $10,000 c. $20,000 d $50,000 Difficulty: Moderate Page 2 7. How did the play pump work in order to generate clean drinking water? a. It was designed like a teeter totter to create a pumping action b. It was designed like a merry-go-around to create a pumping action c. It was designed like a swing to create a pumping action d. It was designed like a slide to create a pumping action Difficulty: Moderate Page 2

Introduction 8. The values an individual uses to interpret whether any action is acceptable and appropriate is called: a. Ethics b. Business Ethics c. Group Ethics d. Integrity Difficulty: Easy Page 2 9. Ethics can be defined as: a. the ability to determine right from wrong b. the identification of the value used by an individual to interpret whether any action is acceptable and appropriate c. the ability to calculate whether the action is legal or illegal d. the ability to understand how human actions need to be accountable Difficulty: Easy Page 2 10. The collective values of a business organization that are used to evaluate the collective behavior of members of an organization is called: a. Ethics b. Business Ethics c. Group Ethics d. Integrity Difficulty: Easy Page 3

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11. Business ethics can be defined as: a. the determination of accountable behavior within an organization b. an evaluation of the ethical and legal conduct of employees within an organization c. the collective values of a business organization used to evaluate the collective behavior of members within an organization d. the collected values of the top decision makers within an organization Difficulty: Easy Page 3

The Foundation of Ethical Theory Types of Ethical Examinations 12. The presentation of the facts related to specific actions of an individual or organization is called: a. Analytical Ethics b. Descriptive Ethics c. Normative Ethics d. Narrative Ethics Difficulty: Moderate Page 4 13. Descriptive Ethics can be defined as: a. the ability to determine the facts of the ethical issue b. the ability to verify the facts of an ethical issue c. the presentation of the facts related to specific actions of an individual d. the presentation of opposing viewpoints related to an ethical issue Difficulty: Moderate Page 4 14. The process in order to understand the rationale of the actions made by the decision maker is called: a. Analytical Ethics b. Descriptive Ethics c. Normative Ethics d. Narrative Ethics Difficulty: Moderate Page 4 15. Analytical Ethics can be defined as: a. the ability to use facts in order to analyze the ethical issue b. the ability to have others analyze the facts of the ethical issue c. the ability to analyze how to obtain facts pertaining to an ethical issue d. the ability to understand the rationale of the action made by an individual Difficulty: Moderate Page 4

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16. A prescribed course of action used to help guide the ethical decision making process is called: a. Analytical Ethics b. Descriptive Ethics c. Normative Ethics d. Narrative Ethics Difficulty: Moderate Page 4 17. Normative Ethics can be defined as: a. using values and norms to determine what is ethical b. using the criteria of “what would a normal person do” in order to determine ethical behavior c. agreeing to the norms established by society in order to determine ethical behavior d. using a prescribed course of action to help foster ethical behavior Difficulty: Moderate Page 4

Teleological Frameworks 18. Teleological frameworks focus on: a. the communication of ethical beliefs b. the ability to rationalize unethical behavior c. the results of the conduct of the individual d. the ability to focus on the means instead of the ends of unethical conduct Difficulty: Moderate Page 4 19. Teleological comes from the Greek word “telos” which means: a. Truth b. Values c. Duty d. Fulfillment Difficulty: Difficult Page 4 20. Which of the following is not a Teleological framework? a Utilitarianism b. Sidgwick’s Dualism c. Ethical Egoism d. Kant’s Ethics Difficulty: Easy Page 4-6 21. In Ethical Egoism, “ego” is Latin for: a. one’s self b. one’s fulfillment c. one’s beliefs d. one’s goals Difficulty: Moderate Page 5

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22. Focusing on one’s own self interests is called: a. Utilitarianism b. Sidgwick’s Dualism c. Ethical Egoism d. Kant’s Ethics Difficulty: Moderate Page 4 23. Which of the following individualswas not a believer of Ethical Egoism? a. Ayn Rand b. Thomas Hobbes c. Plato d. Aristotle Difficulty: Difficult Page 4 24. The ethical theory that supports actions that provide the greatest good to the greatest number is called: a. Utilitarianism b. Sidgwick’s Dualism c. Ethical Egoism d. Kant’s Ethics Difficulty: Moderate Page 5 25. Utilitarianism is based on the word utility which is defined as: a. the ability to utilize facts to determine ethical values b. the accumulation of each person’s utility into a society based utility c. the ability to have alternative or utility actions considered when resolving an ethical issue d. the ability to recognize the value or utility of others Difficulty: Moderate Page 5 26. Which of the following individuals was not a believer of Utilitarianism? a. John Stuart Mills b. Jeremy Bentham c. Trevor Field d. Socrates Difficulty: Difficult Page 5 27. Sidgwick’s Dualism attempts to bridge the gap between: a. Existentialism and Utilitarianism b. Kant’s Ethics and Ethical Egoism c. Utilitarianism and Ethical Egoism d. Existentialism and Kant’s Ethics Difficulty: Moderate Page 6

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28. In Sidgwick’s Dualism, Sidgwick calls Utilitarianism: a. rational agreement b. rational collectivism c, rational utility d. rational benevolence Difficulty: Difficult Page 6 29. In Sidgwick’s Dualism, Sidgwick calls Ethical Egoism: a. selfishness b. prudence c. self-serving d. self-centered Difficulty: Difficult Page 6 30. Sidgwick’s Dualism tries to find a balance between: a. self-serving and rational utility b. prudence and rational benevolence c. rational agreement and self-centeredness c. rational collectivism and selfishness Difficulty: Difficult Page 6 31. Who of the following would be considered a supporter of Sidgwick’s Dualism? a. Plato b. Socrates c. Adam Smith d. Garrett Hardin Difficulty: Difficult Page 6

Deontological Frameworks 32. Deontological Frameworks focus on: a. whether the results are favorable or not b. the duty or obligation in determining whether the actions are wrong or right c. how individual beliefs must be reconciled with social beliefs d the benefit of the end result compared with the method needed to get to the end result Difficulty: Moderate Page 6 33. The Ethical framework which focuses on the duty or obligation in determining whether the actions are wrong or right is called: a. teleological b. duty based c. deontological d. mixed Difficulty: Moderate Page 6

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34. Which of the following is not a Deontological Framework? a. Intuitionism b. Existentialism c. Contractarianism d. Kant’s Ethics Difficulty: Easy Page 6-7 35. Deontological is derived from the Greek world “deon” which means: a. Truth b. Values c. Duty d. Fulfillment Difficulty: Difficult Page 6 36. The belief that decisions made by free will should be converted into universal beliefs underlies which theory? a. Intuitionism b. Existentialism c. Contractarianism d. Kant’s Ethics Difficulty: Moderate Page 7 37. The belief that all individuals agree to social contracts as members within a society underlies which theory? a. Intuitionism b. Existentialism c. Contractarianism d. Kant’s Ethics Difficulty: Moderate Page 7 38. The belief that the only person who can determine right and wrong is the person making the decision underlies which theory? a. Intuitionism b. Existentialism c. Contractarianism d. Kant’s Ethics Difficulty: Moderate Page 6 39. Which of the following individuals was not a follower of Existentialism? a. Soren Kierkegaard b. Friedrich Nietzsche c. John Locke d. Jean-Paul Sartre Difficulty: Moderate Page 6-7

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40. Which of the following individualswas not a follower of Contractarianism? a. Garrett Hardin b John Rawls c John Locke d. Jeremy Bentham Difficulty: Moderate Page 7 41. Which theory supports the advice given in Shakespeare’s Hamlet which states “This above all: to thine own self be true…”? a. Intuitionism b. Existentialism c. Contractarianism d. Kant’s Ethics Difficulty: Moderate Page 7 42. The title of Immanuel Kant’s book was: a. A Theory of Justice b. The Social Contract c. Foundations of the Metaphysics of Morals d. The Methods of Ethics Difficulty: Difficult Page 7 43. The title of Henry Sidgwick’s book was: a. A Theory of Justice b. The Social Contract c. Foundations of the Metaphysics of Morals d. The Methods of Ethics Difficulty: Difficult Page 6 44. The title of John Rawls’ book was: a. A Theory of Justice b. The Social Contract c. Foundations of the Metaphysics of Morals d. The Methods of Ethics Difficulty: Difficult Page 7 45. The title of Jean-Jacques Rousseau’s book was: a. A Theory of Justice b. The Social Contract c. Foundations of the Metaphysics of Morals d. The Methods of Ethics Difficulty: Difficult Page 7

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46. The Mixed Ethical Framework is a combination of: a. Principles and Love b. Intuitionism and Love c. Principles and Values d. Intuitionism and Values Difficulty: Easy Page 8 47. A main supporter of the Mixed Ethical Framework was: a. Immanuel Kant b. John Stuart Mill c. Thomas Hobbes d. W. D. Ross Difficulty: Moderate Page 8 48. Which of the following is not a guiding principle of the Mixed Ethical Framework? a. Fidelity b. Beneficence c. Self-Improvement d. Trustworthiness Difficulty: Moderate Page 8 49. Which guiding principle of the Mixed Ethical Framework could be considered a component of Existentialism? a. Justice b. Beneficence c. Self-Improvement d. Trustworthiness Difficulty: Difficult Page 8 50. Which guiding principle of the Mixed Ethical Framework could be considered a component of Ethical Egoism? a. Justice b. Beneficence c. Self-Improvement d. Trustworthiness Difficulty: Difficult Page 8 51. Which guiding principle of the Mixed Ethical Framework could be considered a component of Utilitarianism? a. Justice b. Beneficence c. Self-Improvement d. Trustworthiness Difficulty: Difficult Page 8

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52. Which guiding principle of the Mixed Ethical Framework could be considered a component of Contractarianism? a. Justice b. Beneficence c. Self-Improvement d. Trustworthiness Difficulty: Difficult Page 8 53. Which of the following is not a guiding principle of the Global Business Standards? a. Reliability Principle b. Responsiveness Principle c. Self-Respect Principle d. Transparency Principle Difficulty: Moderate Page 8 54. The employee’s responsibility to honor the commitment he or she has to the firm is called the: a. Reliability Principle b. Responsiveness Principle c. Self-Respect Principle d. Transparency Principle Difficulty: Moderate Page 9 55. The belief that every employee should conduct business in a truthful and open manner is called the: a. Reliability Principle b. Responsiveness Principle c. Self-Respect Principle d. Transparency Principle Difficulty: Moderate Page 10 56. The belief that employees have a responsibility to supply information when it is requested by various stakeholders is called the: a. Reliability Principle b. Responsiveness Principle c. Self-Respect Principle d. Transparency Principle Difficulty: Moderate Page 12

True/False Questions 57. Ethics can be defined as the values an individual uses to interpret whether any particular action or behavior is considered acceptable and appropriate. a. True b. False Difficulty: Easy Page 2

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58. Business ethics can be defined as the collective values of a business organization that can be used to evaluate whether the behavior of the collective members of the organization are considered acceptable and appropriate. a. True b. False Difficulty: Easy Page 3 59. Ethical Egoism is based on the belief that a person’s action will do the greatest good for the greatest number. a. True b. False Difficulty: Easy Page 4 60. Utilitarianism and Contractarianism are components of the same ethical framework. a. True b. False Difficulty: Moderate Page 5, 7 61. Existentialism is based on the underlying belief that the only person who can determine right and wrong is the person making the decisions. a. True b. False Difficulty: Easy Page 6 62. Existentialism and Kant’s Ethics are components of the same ethical framework a. True b. False Difficulty: Moderate Page 6-7 63. Shakespeare’s “This above all: to thine own self be true” is part of the Teleological framework. a. True b. False Difficulty: Moderate Page 7 64. Contractarianism could also be called social contract theory. a. True b. False Difficulty: Easy Page 7 65. Utilitarianism is based on the belief that all individuals agree to social contracts to be members within a society. a. True b. False Difficulty: Moderate Page 5, 7

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66. Noninjury is one of the guiding principles of the Mixed Ethical Framework. a. True b. False Difficulty: Moderate Page 8 67. Truthfulness is one of the guiding principles of the Mixed Ethical Framework. a. True b. False Difficulty: Moderate Page 8 68, Citizenship is one of the guiding principles of the Global Business Standards Codex. a. True b. False Difficulty: Moderate Page 8 69. Honesty is one of the guiding principles of the Global Business Standards Codex. a. True b. False Difficulty: Moderate Page 8

Short Answer Questions 70. Compare and contrast the Ethical Egoism and Utilitarianism frameworks.

Ethical Egoism focuses on the self interests of the individual and utilitarianism focuses on the greatest good. Some points to present would be whether individuals would always pick one or the other framework. It could be argued that the selection of the decision making which corresponds to the framework could be contingent on the type of decision to be made and the circumstances that lead up to the decision. Another point to address is to ask whether a capitalist free market system is always focused towards the self interests of the Ethical Egoism framework. Furthermore, another good discussion point is whether there could be a “hidden” ethical egoism agenda that is not revealed as part of a utilitarianism framework. Using the Simpson’s television show, a great example of this would be in the episode called Marge vs. the Monorail in the fourth season when Lyle Lanley convinces Springfield that the $3 million they had received from Mr. Burns as fine for the Nuclear plant dumping nuclear waster should be spent on a Monorail which would provide the greatest good for the great number, while Mr. Lanley’s own self interests of making money from selling the monorail were the real driving force. (http://en.wikipedia.org/wiki/Marge_vs._the_Monorail) 71. Is Sidgwick’s Dualism really a middle ground between Ethical Egoism and Utilitarianism?

Some would argue that Ethical Egoism and Utilitarianism are at two extreme ends of a continuum to be reconciled with any other framework. One argument is that Ethical Egoism is so self centered that it is only by luck that it would also support utilitarianism approach. Alternatively, supporters of Ethical Egoism would state that there has to be

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some type of self interest in all decisions even though they are presented as providing the greatest good for the greatest number. Sidgwick argues that there can be a common ground by examining the rational benevolence perspective of the utilitarianism approach and the prudence perspective of the ethical egoism approach. Adam Smith would be a good example of how the “invisible hand” guides financial and society based decisions.

His argument is that there is an opportunity to focus on both the self interests of the decision maker and what is best for society. However, an underlying assumption of Smith’s argument is that society and individuals will have the same goals and objectives.

If this assumption is true, then financial decisions by individuals will help guide societal decisions, which will produce actions that provide the greatest good for the greatest number.

72. Compare and contrast the Existentialism and Contractarianism framework.

Existentialism focuses on the duty each individual has to interpret and determine whether their actions are right or wrong. Contractarianism or social contract theory focuses on the underlying belief that each individual has a social contract on how to behave within society. Existentialism identifies the burden on the individual to determine right and wrong while contractarianism identifies the burden of society to determine right and wrong on the actions of individuals. Therefore, the core difference relates to who evaluates the ethical behavior of individuals within a society.

73. Is Kant’s Ethics really a middle ground between Existentialism and Contractarianism?

Kant’s Ethics presents a very strong argument for a middle ground between the two. Kant argues that individuals can make free will decisions about right and wrong but will look for guidance in how to focus that free will. As a result, individuals may either consciously or sub consciously draw on the universal will established by society to help guide their decision making process. As a result, individuals could certainly believe that their own free will also support the universal will of society.

74. Compare and contrast Teleological, Deontological and Mixed Frameworks.

Teleological frameworks focus on the results of an individual’s conduct while deontological frameworks focus on the duty to determine right from wrong. Mixed frameworks focus on certain underlying principles that must be considered when evaluating the action of an individual. The mixed framework could be considered an integration of the examination of the duty and the results of an individual’s actions. The seven guiding principles address both duty and results. Therefore, the mixed framework could be considered an implementation tool that captures the essence of the philosophical underpinnings of the teleological and deontological frameworks. The seven guiding principles in the mixed framework incorporate the beliefs of the other two frameworks which is highlighted on page 8 linking the guiding principles with ethical egoism, utilitarianism, existentialism and contractarianism.

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75. Compare and contract the guiding principles of the Global Business Standards Codex and the Mixed Framework principles.

Although normative in tone, the seven guiding principles of the mixed framework really focus more on a descriptive and analyzing ethics focus. The mixed framework principles examine the results of an individual actions and encourages self analysis of his or her actions. Alternatively, the global business standards codex is more of a pure normative ethics focus. Similar in tone to commandments, individuals are expected to consider the “advice” of the global business standards codex BEFORE any actions have taken place

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Chapter 2 Contemporary Issue in Business Ethics Multiple Choice Questions Bono: I Still Haven’t Found The Tax Rate That I’m Looking For 1. What is the name of the company that specializes in tax shelters for high income clients? a. Prontogroup b. Promogroup c. Presentogroup d. Placogroup Difficulty: Medium Page 14 2. Which country is the location of the company that specializes in tax shelters? a. Switzerland b. Cayman Islands c. Netherlands d. Ireland Difficulty: Easy Page 14 3. Which of the following musical artists did NOT use Promogroup to reduce their taxes? a. U2 b. The Rolling Stones c. Elvis Presley d. Kiss Difficulty: Easy Page 14 4. Bono wrote the forward to which book? a. The End of Hunger b. The End of Suffering c. The End of Poverty d. The End of Injustice Difficulty: Difficult Page 14 5. Approximately what percentage of U2’s revenue is generated outside their native Ireland? a. 65 % b. 75 % c. 85 % d. 95 % Difficulty: Medium Page 15

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History of Business Ethics 6. Ethos is Greek for: a. values b. morals c. character d. ethics Difficulty: Medium Page 15 7. Which ancient philosophy stated that a true friend would tell another friend when he or she is acting selfishly and foolhardily? a. Socrates b. Aristotle c. Plato d. Xenocrates Difficulty: Difficult Page 15 8. Which of the following companies was not given a monopolistic charter by the royalty of the United Kingdom? a. Hudson Bay Company b. Atlantic and Pacific Company c. East India Company d. Massachusetts Bay Company Difficulty: Difficult Page 15 9. Which decade was the first major ethical era of environmental issues? a. 1960s b. 1970s c. 1980s d. 1990s Difficulty: Medium Page 15 10. Which decade was the ethical era of social unrest? a. 1960s b. 1970s c. 1980s d. 1990s Difficulty: Easy Page 15 11. Which decade was the ethical era of the savings and loan scandal? a. 1960s b. 1970s c. 1980s d. 1990s Difficulty: Medium Page 15

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12. Which era was the ethical era of globalization issues? a. 1960s b. 1970s c. 1980s d. 1990s Difficulty: Medium Page 16

The Role of Integrity 13. “A firm adherence to a code of especially moral or artistic values” is the definition of: a. ethics b. scruples c. integrity d. creditability Difficulty: Easy Page 16 14. Integrity can be defined as: a. the ability to ensure that the decision maker considers what is best for the firm’s stakeholders b. the ability to ensure a firm adherence to specific moral values c. the ability to ensure that everyone who is impacted by a decision is satisfied with the final result d. the ability to ensure that a person’s individual ethical values are consistent with the firm’s ethical values.

Difficulty: Medium Page 16

15. Which of the following is not a test that can be used to validate the integrity of a decision maker’s actions? a. publicity b. stakeholder c. universality d. reciprocity Difficulty: Medium Page 16

Specific Behaviors of High Integrity 16. Which of the following is not a specific behavior of high integrity? a. humility b. truthful c. earnestness d. fairness Difficulty: Medium Page 17

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17. Which of the following is not a specific behavior of high integrity? a. takes responsibility b. develop others c. extend self for others d. consults others before making a decision Difficulty: Medium Page 18

The Ethical Cycle 18. Which is the correct sequence of steps in the ethical cycle? a. problem analysis; ethical judgment; options for actions b. ethical judgment; problem analysis; options for actions c. problem analysis; options for actions; ethical judgment d. ethical judgment; problem analysis; options for actions Difficulty: Medium Page 19 19. What step comes before ethical judgment in the ethical cycle? a. moral problem statement b. options for actions c. problem analysis d. reflection Difficulty: Medium Page 19 20. What step comes after problem analysis in the ethical cycle? a. moral problem statement b. reflection c. ethical judgment d. options for actions Difficulty: Medium Page 19

Using Ethical Decisions to Build Character 21. A “defining moment” refers to: a. the decision maker defining the different course of action b. the decision maker defining what is ethical and unethical c. the decision maker defining what is ethical based on a specific set of circumstances d. the decision maker choosing between two plausible and acceptable options.

Difficulty: Medium Page 20 22. Which of the following is not a question asked when developing defining moments? a. Who am I? b. Who are we? c. Who do we serve? d. Who is the company?

Difficulty: Medium Page 21

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23. “What creative ideas can I develop as a company executive to help convert my ethical vision into a personal and organizational reality” is based on which defining moment question? a. Who am I? b. Who are we? c. Who do we serve? d. Who is the company?

Difficulty: Difficult Page 21 24. “What point of view would be considered supportive to the general beliefs of other employees within the organization” is based on which defining moment question? a. Who am I? b. Who are we? c. Who do we serve? d. Who is the company?

Difficulty: Difficult Page 21

Ethical Managers Are Able to Make Their Own Rules 25. Which company refused to make a profit selling chocolate given to soldiers during a war? a. Cadbury b. Mars c. Roundtree d. Hershey Difficulty: Medium Page 21 26. What is the most realistic evaluation of the ethical conduct of a firm? a. examining their code of ethics b. examining how their image is presented in the media c. examining how they identify their critical stakeholders d. examining their everyday actions Difficulty: Medium Page 22

Is Everyone Unethical?

27. The question “Is Everyone Unethical?” is based on the concept that: a. Every human has a dark side which can lead to unethical activities b. Every human has done some unethical activities during his/her lifetime c. Every human may implement actions which he/she believes are ethical while others perceive the actions as unethical d. Every human must do unethical activities to survive.

Difficulty: Easy Page 22

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28. Which of the following is not one of the avenues in which unintentional unethical behavior may be developed? a. Implicit Prejudice b. In-Group Favoritism c. Irrational Selection d. Conflicts of Interest Difficulty: Medium Page 22 29. Which unintentional unethical behavior occurs when a decision maker supports a decision based on relying on unconscious stereotypes? a. Implicit Prejudice b. In-Group Favoritism c. Irrational Selection d. Conflicts of Interest Difficulty: Medium Page 22 30. Which unintentional unethical behavior occurs when the decision maker favors individuals with the same interests as the decision maker? a. Implicit Prejudice b. In-Group Favoritism c. Irrational Selection d. Conflicts of Interest Difficulty: Medium Page 22 31. Which unintentional unethical behavior occurs when the decision maker favors a solution in which there would be personal benefits? a. Implicit Prejudice b. In-Group Favoritism c. Irrational Selection d. Conflicts of Interest Difficulty: Medium Page 23 32. Which of the following is not one of the Ten Myths about Business Ethics (Table 21)? a. Business ethics equals corporate social responsibility b. Business ethics must be based on financial rewards c. Business ethics is based on legal compliance d. Business ethics is a theoretical and abstract philosophical concept Difficulty: Medium Page 23

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33. Which of the following is not on of the Ten Myths about Business Ethics (Table 2-1)? a. Business ethics is more of a focus on religion than on effective management. b. Companies assume that they select and train ethical employees who will always do the right thing. c. Business ethics is used by ethical people to correct what unethical people do. d. Business ethics is based on the premise that every employee is unethical at some point in their career.

Difficulty: Easy Page 23 34. Which of the following is not a benefit for firms to focus on ethical issues in the workplace? a. Attention to business ethics has substantially improved society b. Ethics programs promote a strong public image c. Ethics programs support employee growth and meaning d. Ethics programs guarantee better financial returns for the firm Difficulty: Easy Page 24 35. Which of the following is not a benefit for firms to focus on ethical issues in the workplace? a. Ethics programs help maintain a moral course in turbulent times b. Ethics programs cultivate strong teamwork and productivity c. Ethics programs are a requirement for international expansion of the firm d. Ethics programs help avoid criminal acts “of omission” and can lower fines.

Difficulty: Easy Page 24 36. Which of the following is not a current ethical issue facing Chinese firms? a. corruption b. labor disputes c. environmental hazards d. poor employee training Difficulty: Difficult Page 24

Knowing “Right” from “Wrong” 37. Which of the following is not a traditional stakeholder? a. suppliers b customers c. competitors d. investors Difficulty: Easy Page 24

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Rationalizing Unethical Behaviors 38. Which of the following is not one of the concepts used to determine ethical behaviors? a. Transparency b. Effect c. Fairness d. Equal Difficulty: Medium Page 25 39. Determining what is equal for everyone who is impacted by the decision is called: a. Transparency b. Effect c. Fairness d. Equal Difficulty: Medium Page 25 40. Making sure others know what one has decided is called: a. Transparency b. Effect c. Fairness d. Equal Difficulty: Medium Page 25 41. Which of the following is not one of the eight rationalizations for ethical compromise (Table 2-2)? a. I have to do questionable actions to achieve my objectives b. My competitors do unethical activities and I must compete against them c. I don’t have the time to follow an ethical course of action d. I am hesitant to take the right course of action Difficulty: Difficult Page 26 42. Which of the following is not one of the eight rationalizations for ethical compromise (Table 2-2)? a. I don’t have the resources to follow an ethical course of action b. My fellow colleagues expect me to behave in an unethical manner c. I am rewarded for unethical behavior d. I believe that my actions are neither wrong nor illegal Difficulty: Difficult Page 26

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43. Actions that a decision maker can compromise with established boundaries are called: a. Compromising actions b. Negotiated actions c. Discretionary actions d. Stakeholder actions Difficulty: Medium Page 26 44. Actions which the decision maker can not change are called: a. Rigid actions b. Inflexible actions c. Nondiscretionary actions d. Pre-set actions Difficulty: Medium Page 26 45. Which of the following is not one of the seven steps in the Texas Instruments test? a. Does it comply with our values? b. Did a manager agree with your actions? c. If you do it, will you feel bad? d. How will it look in the paper?

Difficulty: Difficult Page 26 46. Which of the following is not a red flag to spot an ethical dilemma (Table 2-3)? a. It is too insignificant a matter for anyone to notice. b. Since I was told what to do, I did it. c. Since I did it before without any problems, I can do it again. d. I am doing this because I don’t want to disappoint a specific person.

Difficulty: Difficult Page 27 47. Which of the following is not a red flag to spot an ethical dilemma (Table 2-3)? a. It is too insignificant a matter for anyone to be hurt by my actions. b. My actions will only have a short term impact on others. c. Everyone else is doing it, so why should I be the exception d. If I make this decision, I will not have to deal with this specific person again.

Difficulty: Difficult Page 27

Monitoring Reputations 48. Which of the following is not a question that is asked during an ethics selfassessment? In the past, have you: a. taken company property for your own personal use? b. not completed a task you promised to fulfill? c. knowingly let a colleague make mistakes that could have been avoided? d. knowingly disrupted the actions of a competitor?

Difficulty: Difficult Page 28

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49. Which of the following is not a question that is asked during an ethics selfassessment? In the past, have you: a. Violated a company rule or requirement? b. Sought out credit and recognition for actions that you did not do? c. Purposely charged a higher price for a product to only some of your customers? d. Sold a product that was poor quality and/or defective?

Difficulty: Difficult Page 28

Striving for Ethical Behavior 50. Which of the following is not a reason why a leader should support ethical behavior? a. Increases trust and respect at all levels b. Encourages early detection of problem areas and ethics violations c. Is mandated by the firm’s board of directors d. Helps ensure the long-term viability of the enterprise Difficulty: Medium Page 28 51. Which of the following is not a reason why a leader should support ethical behavior? a. Reduces pressure on employees to compromise ethical standards b. Increases employee willingness to report misconduct c. Is required before stock options can be issued to the individual d. Fosters a positive work culture and improved customer service Difficulty: Medium Page 28 52. Which of the following is not a reason why people make bad decisions? a. They feel entitled. b. They do not think they will be caught. c. They lack resources. d. They do not view the act as illegal.

Difficulty: Difficult Page 29 53. Which of the following is not a reason why people make bad decisions? a. They do not feel loyal to the organization. b. They feel pressure to succeed. c. They have not been long enough with the company to understand all the ethical standards of the company. d. They believe that the rules do not apply to them.

Difficulty: Difficult Page 29

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Internal and External Current Ethical Issues 54. Which of the following is not one of the five top reasons why managers try to make sure their firms operate in an ethical manner? a. They are protecting the brand and reputation of the company. b. It is the right thing to do. c. They could be fired if the firm doesn’t operate in an ethical manner. d. It increases the level of investor confidence.

Difficulty: Difficult Page 29 55. Which of the following was the number one ranked reason why firms wanted to have a strong ethical commitment in 2005? a. Pressure from customers b. Corporate scandals c. Marketplace competition d. Demands by Investors Difficulty: Moderate Page 30 56. Which of the following is predicted to be the number one ranked reason why firms will want to have a strong ethical commitment in 2010? a. Corporate Scandals b. Globalization c. Demand by Investors d. Market competition Difficulty: Moderate Page 31

True/False Questions 57. The name of the company that provides tax shelters in the Netherlands is called Phonogroup. a. True b. False Difficulty: Medium Page 14 58. All the members of the Rolling Stones used the tax shelter in the Netherlands to reduce their taxes on their royalties. a. True b. False Difficulty: Difficult Page 14 59. The Hudson Bay Company received a monopolistic charter to create an English colony. a. True b. False Difficulty: Medium Page 15

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60. Each of the past four decades has focused on some ethical issues that are the same and some that are different. a. True b. False Difficulty: Easy Page 15 61. Integrity can be defined as “a firm adherence to a code of especially moral values”. a. True b. False Difficulty: Easy Page 16 62. The trusted friend test is also called the Golden Rule. a. True b. False Difficulty: Medium Page 16 63. “Reproach Unjust Acts” is a specific behavior of high integrity. a. True b. False Difficulty: Medium Page 18 64. “Include Input from Stakeholders” is a step in the Ethical Cycle model a. True b. False Difficulty: Difficult Page 19 65. “What can we do?” is a question that is asked when managers determine defining moments. a. True b. False Difficulty: Medium Page 21 66. Cadbury refused to make a profit selling chocolate to soldiers during the Anglo-Boer war. a. True b. False Difficulty: Difficult Page 21 67. Claiming Credit for Others’ Actions is an unintentional unethical behavior. a. True b. False Difficulty: Easy Page 23

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68. Showing a colleague the data used to make a decision is an example of transparency a. True b. False Difficulty: Medium Page 25 69. Self-monitoring of ethical behavior is very easy to accomplish. a. True b. False Difficulty: Easy Page 27 70. In 2005, the number one reason why managers try to make sure their firms operate in an ethical manner is because it is the right thing to do. a. True b. False Difficulty: Difficult Page 29 71. Why has there been a shift in the focus of ethical issues over the past four decades?

The shift in focus is due primarily to the shift in the interests and needs of society. The 1960’s brought great social upheaval as civil rights, drug use and the environment moved to the forefront of the consciousness of society. As a result, firms had to respond to the new demands of society. Firms had to address these issues because their vested stakeholders: customers, suppliers, communicates, government and the overall society demanded it. The 1970’s can be identified with the end of the Vietnam War and the start of the Environmental Protection Agency. These two events helped drive the ethical focus of the decade. Defense contractors took advantage of the lack of government controls to profit handsomely and the EPA started to put environmental issues in the forefront of ethical discussions. However, overall, the limited level of government regulations to control unethical behavior allowed firms to believe they could get “away” with ethical wrongdoings. The 1980’s may be best represented by Gordon Gekko in Wall Street and Madonna’s “Material Girl”. The decade not only accepted individual self interests but encouraged and rewarded this behavior. As a result, individuals and firms focused on actions that yielded individual self interests. During the same period (maybe a backlash from the “Me” decade), business academic research refocused on the concept of stakeholders where firms and decision makers needed to consider the needs of all the vested parties instead of just themselves. With the international expansion of the 1990’s, stakeholder theory became a major focus as managers became concerned about their public image and reputation. Outsourcing to developing countries resulted in serving the needs of the investors but the customers were not happy about buying products made in sweatshop conditions with “underage” workers. The 1990’s also included the Internet bubble where companies with minimal sales and large losses had large market capitalizations based on “future” growth. These quick young millionaires also encouraged the climate of anything goes as it relates to viewing issues from an ethical standpoint. The net result was the major scandals at Enron, WorldCom and Tyco and the introduction in 2002 of the Sarbanes-Oxley Act.

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72. Can you teach integrity?

This question should yield lots of thought and discussion. There are those who believe that a trait such as integrity is something that develops as the individual matures and can not be changed once that person has become an adult. An opposing viewpoint would state that there are certain components of integrity that are highlighted on page 17 and 18 that can be taught. The simple answer is that it could depend on the individual. If the individual is not willing to incorporate the components of integrity in decision making then integrity can be taught. However, a more optimistic answer would be that integrity can be taught in the sense that the decision makers can use the components as a checklist when they self-monitor their own behavior to ensure that they have a high level of integrity.

73. You have received an anonymous tip that one of your subordinates is stealing office supplies from the storage cabinet. Use the Ethical Cycle to evaluate what you should do to resolve the issue.

Step 1: Moral Problem Statement-One of my employees has been accused by an unknown source of stealing office supplies. All the employees in my department will be directly impacted by the resolution of the problem and all the employees of the company will be indirectly impacted by the resolution of the problem. The moral issue is that stealing is morally wrong.

Step 2: Problem Analysis- Employees are impacted by the problem. The moral value is the unethical behavior of stealing. The relevant information includes only one source. As a result, additional information needs to be obtained which could include: obtaining information from other employees, trying to identify if a large quantity of office supplies have been taken, determining the reason for the employee to steal the office supplies.

Step 3: Options for Action-Options would be developed once the manager is comfortable with the level and quality of information pertaining to the issue. As this point, the manager could confront the employee if he or she believes there is enough evidence.

Alternatively, the manager may drop the issue if the evidence does not warrant any further investigation.

Step 4: Ethical Judgment- The ethical judgment in this scenario would be two steps which would be: whether to confront the employee or not and adjust the ethical training program and potentially the code of ethics to ensure that stealing office supplies is clearly considered to be unethical behavior by the firm.

Step 5: Reflection- The reflection stage would include the final determination as to what specifically needs to be done by the manager to resolve the issue. Again after the final determination is established as to whether to continue with the investigation, the manager needs to also consider whether these anonymous tips will take place in the future if he or she does not pursue the matter further.

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Step 6: Morally Acceptable Action- This is the final course of action taken by the decision maker.

74. Have you had a make a defining moment decision in the past?

Again, there could be multiple approaches to answer this question. Some students may write about deciding which College/University to attend. Some students may write about whether or not to be a whistle blower from their perspective as a student and/or an employee.

75. What are the four types of unintentional unethical behavior? Provide an example of when you may have had unintentional unethical behavior in the past.

The four types of unintentional unethical behavior are: implicit prejudice, in-group favoritism, claiming credit for others actions, and conflicts of interest. One question to ask is how do you make new friends. What determines whether they would be considered to be friends in your future? If the students state they “hang out” with people who have the same interests and same cultural background, they may be guilty of implicit prejudice and in-group favoritism. You can also ask those students in a sorority and fraternity would they also hire someone from their same Greek organization if they could. If you have graded group activities in the class, you can ask each member to evaluate their contribution to verify whether they are “Claiming Credit for Others’ Actions”. You can also ask whether they have ever made a decision that would ensure their own self interest was served first which is the case under “Conflicts of Interest”.

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Chapter 3 Stakeholders and Corporate Social Responsibility Multiple Choice Questions When Is Fair Trade Not Fair?

1. Fair trade can be defined as: a. Trade between two countries of similar size b. Trade between two countries of similar wealth c. Farmers receiving a fair wage for their work d. Farmers receiving a fair exchange for their goods Difficulty: Easy Page 33 2. From a farmer’s perspective, fair trade equals: a. fair access to crops b. fair access to markets c. fair wages for work d. fair consideration by the government Difficulty: Easy Page 33 3. In 2006, which fast food chain distributed Fair Trade products? a. McDonalds b. Burger King c. Wendy’s d. Subway Difficulty: Medium Page 33 4. Which of the following has not been certified as a Fair Trade product? a. Rice b. Sugar c. Coca d. Wheat Difficulty: Medium Page 33 5. In 2006, which company had 23 percent of its sales come from Fair Trade products? a. Starbucks b. Mountain People’s Co-Op c. Green Mountain Coffee Roasters d. Dunkin Donuts Difficulty: Difficult Page 33

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6. In 2006, what percentage of Green Mountain Coffee Roasters’ sales comes from Fair Trade products? a. 12 percent b. 18 percent c. 23 percent d. 30 percent Difficulty: Difficult Page 33 7. In the United States, what organization certifies companies that claim to have Fair Trade products? a. TransFair b. FairTrade c. WorldTrade d. WorldFair Difficulty: Medium Page 33 8. Why is the case scenario titled “When Is Fair Trade Not Fair?” a. because the farmers are not getting fair access to their land b. because the farmers are not getting the right equipment to farm the land c. because the farmers may not be getting all the benefits of a fair wage d. because the farmers are not allowed to negotiate the price of the crops Difficulty: Easy Page 33 9. Which coffee retailer in Great Britain took advantage of the Fair Trade image? a. UK Coffee b. British Brewing c. Costa Coffee d. Great Britain Tea and Coffee Difficulty: Difficult Page 33

What is a Stakeholder?

10. Which of the following people did not have an impact on the definition of a stakeholder? a. Milton Friedman b. E. Merrick Dodd c. A. A. Berle d. Paul Rice Difficulty: Difficult Page 34

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11. A stakeholder can be defined as: a. an individual who is part of a group whose support is necessary for the firm to survive b. an individual who has a financial interest in the firm c. an individual who has a financial or legal claim to money generated by the firm d. an individual who analyzes the financial performance of the firm.

Difficulty: Easy Page 34 12. Which of the following is not considered a traditional stakeholder? a. suppliers b. employees c. customers d. competitors Difficulty: Medium Page 35 13. Milton Friedman would rate which traditional stakeholder as the most important to the firm? a. stockholders b. the government c. local community d. employees Difficulty: Medium Page 34

Management’s Response to Stakeholders Moral Management and Stakeholders 14. Which of the following is not a classification of a type of manager based on moral values? a. immoral b. unmoral c. amoral d. moral Difficulty: Medium Page 35 15. Ken Lay and Bernie Ebbers would be examples of what type of manager? a. immoral b. unmoral c. amoral d. moral Difficulty: Easy Page 35

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16. A manager who is considered to be ethically neutral is what type of manager? a. immoral b. unmoral c. amoral d. moral Difficulty: Medium Page 35 17. What type of manager gives minimum attention to shareholders? a. immoral b. unmoral c. amoral d. moral Difficulty: Easy Page 36 18. What type of manager treats employees based on the legal standards and government requirements? a. immoral b. unmoral c. amoral d. moral Difficulty: Medium Page 36 19. What type of manager treats employees as human resources, not just a means of production? a. immoral b. unmoral c. amoral d. moral Difficulty: Easy Page 37

Which Stakeholders Are More “Important” 20. Which of the following attributes does not help identify the importance of stakeholders? a. Influence b. Power c. Legitimacy d. Urgency Difficulty: Easy Page 37

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21. In the Johnson & Johnson credo, who is the company’s first responsibility? a. stockholders b. government c. customers d. employees Difficulty: Medium Page 38 22. In the Johnson & Johnson credo, who is the company’s final responsibility? a. stockholders b. government c. customers d. employees Difficulty: Difficult Page 38 23. Which of the following is not a guiding principle used by General Electric to establish dialogue with all its stakeholders? a. Make compliance a core operating principle b. Give back to communities through philanthropy and volunteerism c. Develop great leaders with the right incentives d. Never challenge what the customers tell us Difficulty: Difficult Page 39

The Role of Stakeholder Communications 24. Triple Bottom Line reporting refers to: a. using a low, medium and high estimates for profitability forecasts b. measuring the impact of the firm on stockholders, customers and employees c. measuring the social, economic, and financial performance of the firm d. measuring the impact of local, state, and federal governments on the firm Difficulty: Medium Page 40 25. The Triple Bottom Line concept was developed by: a. Frederick Young b. Albert Mason c. Stephen Rout d. John Elkington Difficulty: Difficult Page 40 26. The name of the book that introduced the concept of Triple Bottom Line was called: a. The Benefits of Triple Bottom Line Reporting b. How to Triple Performance Easily c. Cannibals with Forks d. Stakeholders and performance: A Triple Bottom Line approach Difficulty: Difficult Page 40

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Employees As Stakeholders 27. Which company was recently involved in having an employee attempting to sell trade secrets? a. McDonalds b Coke c. Apple Computer d. Ford Difficulty: Medium Page 40 28. Based on previous research, what type of employee is more likely to engage in unethical behavior a. uninterested b. unmotivated c. dissatisfied d. unhappy Difficulty: Difficult Page 41 29. Which of the following is not an inconsistent message sent to employees about what the firm considers to be appropriate behavior? a. Avoiding taxes by using creative accounting techniques b. Making campaign contributions to gain access to decision makers c. Excessively compensating executives d. Developing a training program in which a majority of the applicants will fail Difficulty: Difficult Page 41 30. Which of the following was not legislation that was passed to help the treatment of employees in the United States? a. Civil Rights Act b. Equal Pay Act c. Age Discrimination Act d. Equal Training Act Difficulty: Medium Page 42 31. Which of the following is not an action a firm should have in place to help protect against retaliation if an employee files a sexual discrimination lawsuit? a. review management training programs b. establish strong consequences if another employee retaliates c. keeping the name of the employee filing the lawsuit anonymous as long as possible d. move the employee filing the lawsuit to another job position Difficulty: Medium Page 42

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32. What government agency was accused of having a hostile work environment? a. U.S. Post Office b. Department of Defense c. U.S. Mint d. FBI Difficulty: Difficult Page 43 33. “Ministerial exception” refers to: a. Allowing managers the ability to interpret “equal pay for equal work” b. Allowing managers to be exempted for ongoing employee based training c. Allowing religious organization the ability to “discriminate” in their selection practices d. Allowing firms under 10 employees to be exempt from yearly employee training Difficulty: Easy Page 43 34. The Age Discrimination Act example given in the textbook was based on what type of firm? a. law b. doctor c. accounting d. brokerage Difficulty: Difficult Page 44 35. The Americans with Disabilities Act example in the textbook referred to which firm? a. General Electric b. Merrill Lynch c. Wal-Mart d. Exxon Difficulty: Easy Page 45 36. Which country requires that companies hire mentally and physically challenged employees? a. Mexico b. Costa Rica c. Brazil d. Venezuela Difficulty: Difficult Page 45 37. Which university was accused of “image” discrimination in one of its sororities in the textbook? a. DePaul b. DePauw c. Indiana d. Indiana State Difficulty: Medium Page 45

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Suppliers As Stakeholders 38. Which of the following was not a company that used an electronics industry code of ethics to validate their level of corporate social responsibility? a. Apple b. Hewlett-Packard c. Dell Computer d. IBM Difficulty: Difficult Page 47 39. Which of the following is not part of Intel’s Supplier Ethics Expectations? a. suppliers must be in strict compliance with the law b. suppliers must have respect for competition c. suppliers must have mandatory safety training programs d. suppliers must not have any actual or perceived conflicts of interest Difficulty: Medium Page 47 40. A function or task that was previously done within a company to an external third party is called: a. External Transfer b Third party allocation c. Outsourcing d. Task Re-direction Difficulty: Easy Page 47 41. Which of the following was not a country that was mentioned in the textbook which had ethical outsourcing issues? a. Peru b. South Africa c. Sri Lanka d. Chile Difficulty: Difficult Page 48-49 42. Which country has a “caste” system in which the people in the lowest “caste” level would only do the most menial tasks? a. China b. Mexico c. Indonesia d. India Difficulty: Difficult Page 48

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43. What is the estimated number of part time workers in India who are children? a. 25 million b. 50 million c. 75 million d. 100 million Difficulty: Difficult Page 48 44. What is the injury rate for spice mill workers in Sri Lanka? a. 20 percent b. 30 percent c. 50 percent d. 60 percent Difficulty: Difficult Page 49

Customers As Stakeholders 45. Which of the following is not an ethical issue in the manufacturing process? a. safety b. quality c. price competitive d. authentic Difficulty: Easy Page 49 46. When a firm pays people who use word of mouth to artificially endorse a product, it is called: a. False marketing b. Secretive marketing c. Stealth marketing d. Word of mouth marketing Difficulty: Medium Page 50

The Role of Corporate Social Responsibility 47. The obligation companies have to develop and implement courses of action that aid in social issues is called: a. Corporate social obligation b. Corporate social responsibility c. Corporate social action d. Corporate social performance Difficulty: Easy Page 51

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48. Who described social responsibility as fundamentally subversive? a. Milton Friedman b. Howard Bowen c. Archie Carroll d. E. Merrick Dodd Difficulty: Difficult Page 51 49. Which of the following is not considered a component of corporate social responsibility? a. economic b. moral c. legal d. discretionary Difficulty: Medium Page 51 50. In Carroll’s pyramid of corporate social responsibility, what responsibility is at the top of the pyramid? a. ethical b. legal c. economic d. philanthropic Difficulty: Medium Page 53 51. In Carroll’s pyramid of corporate social responsibility, what responsibility is at the bottom of the pyramid? a. ethical b. legal c. economic d. philanthropic Difficulty: Medium Page 53 52. Which of the following is not a social responsiveness category? a. accommodation b. defense c. offense d. reaction Difficulty: Medium Page 53 53. Which of the following is not one of the overall areas of corporate social responsibility according to Richard Welford? a. accountability b. transparency c. citizenship d. internal aspects Difficulty: Difficult Page 54

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54. According to the textbook, which of the following is not one of the 10 Commandments of Social Responsibility? a. Thou shalt treat employees equally around the world b. Thou shalt admit to the public when mistakes have taken place c. Thou shalt be profitable to financially support the company’s social responsibility agenda d. Thou shalt be committed to publicly supporting social causes Difficulty: Difficult Page 56

The Role of Human Rights 55. Which oil company was used as an example of protecting human rights? a. Exxon b. Shell c. BP d. Mobil Difficulty: Medium Page 56 56. Which of the following areas is not included in the Social Accountability 8000 certification process for human rights? a. Child labor b. Performance appraisal c. Working hours d. Management systems Difficulty: Medium Page 57

True/False Questions 57. Fair trade issues focus on fair wages for farmers. a. True b. False Difficulty: Easy Page 33 58. Local government agencies monitor fair trade activities. a. True b. False Difficulty: Medium Page 33 59. The origins of stakeholder theory can be traced back to the early 1930s. a. True b. False Difficulty: Easy Page 34

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60. Milton Friedman is considered the “father” of stakeholder theory a. True b. False Difficulty: Medium Page 34 61. Political groups are considered to be stakeholders a. True b. False Difficulty: Difficult Page 35 62. Dennis Kozlowski would be considered to be an amoral manager. a. True b. False Difficulty: Easy Page 35 63. Legitimacy is considered a concept that is needed in order to identify which stakeholders are more important. a. True b. False Difficulty: Medium Page 37 64. The Johnson & Johnson credo is considered to be one of the oldest code of ethics. a. True b. False Difficulty: Medium Page 38 65. Environmental performance is included in the firm’s triple bottom line evaluation. a. True b. False Difficulty: Easy Page 40 66. Receiving “equal pay for equal work” is protected under the Civil Rights Act. a. True b. False Difficulty: Medium Page 42 67. A firm must have at least 50 employees before they must follow the regulations of the Americans with Disabilities Act. a. True b. False Difficulty: Medium Page 44 68. Outsourcing always results in difficult ethical decisions. a. True b. False Difficulty: Easy Page 47

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69. Legal responsibilities are at the bottom of the Corporate Social Responsibility. pyramid. a. True b. False Difficulty: Difficult Page 53 70. Transparency is one of the four social responsiveness categories a. True b. False Difficulty: Medium Page 53 71. Every worker in the workplace has been guaranteed certain human rights a. True b. False Difficulty: Easy Page 56 72. Even though stakeholder theory has been discussed since the 1930s, why has it only become a popular discussion point with firms since the 1980s?

There is a two part response to this question. After World War II, the world and the United States in particular experienced phenomenal growth in the economy. During this time period, individuals focused on self improvements due to the severe limitations that they had experienced during the Great Depression and World War II. As a result, people were interested in accumulating wealth and material goods to help them improve their standard of living. As the “me” decade of the 1980s evolved, the focus moved to not only material rewards but also social rewards. As a result, people realized that is was in their own self interests to become involved in social programs. The advent of the internet now allowed for real time communications with firms. As a result, individuals asked for transparency and asked for immediate adjustments to actions they did not agree with. It was during this same period that the Internet bubble continued to grow which reinforced the protection of self interests and the disregard of the interests of stakeholders by managers. As a result, the large increase in corporate scandals since a number of CEOs wanted “their piece of the pie”. As a result, both stockholders and other stakeholders demanded more accountability of management which led to the current intense interest in stakeholder theory.

73. Do you really believe that some stakeholders are more important?

The simple response to this question is that it all depends on the current set of circumstances. The increased and decreased level of importance of certain stakeholders relates directly to the issues which management is considering. As a result, if the employees are on strike, obviously the employees have become the number one priority.

If there are problems with the quality of the firm’s products, the customers become the number one priority. Within this framework, it would be safe to say that even is a crisis scenario; stockholders are usually near the top of the stakeholder priority list.

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74. After reviewing the conditions of the work environments in those countries that accept outsourced work, what is your reaction?

The first reaction should be one of shock and horror. A question that you could ask your students is whether firms that provide work in these environments are also outsourcing their ethics. It appears that even though firms may make a number of claims on their holistic approach to stakeholder theory, it is still the stockholders that will win priority. If only costs drive the decision making process, then there is no more discussion needed for firms that support these working conditions. However, if the firm truly believes in the value of stakeholders’ needs and expectations and believes that each human life is valuable and should be protected, there is a disconnect between their words and their actions. In actuality, the firms should view those children in India and Mexico not just as a means of production but a viable and important employee of the company. Even though they technically do not work for the firm, they indirectly work for the firm by providing goods and services for the firm. Isn’t that a standard description of an employee’s responsibilities?

75. Do you agree with Carroll’s pyramid of Corporate Social Responsibility?

Explain your answer.

The foundation of economic responsibilities could lead to some interesting discussion by your students if you ask the “chicken and the egg” question. What comes first, financial profitability or legal or ethical responsibilities? On the surface, it appears that Carroll is justifying the actions of the firm first based on the end result of being financially rewarding without regard of the means to achieve this end result. If that is the case, it certainly would open up new discussions pertaining to corporate social responsibility. As a result, it could be argued that the pyramid “ranking” of corporate social responsibility, while appealing visually, does not truly represent the complex interrelationships that occurred among those 4 components.

76. What is a good example of the inequitable level of human rights that are achieved throughout the world?

The example of the countries which use outsourcing as a main source of revenue highlight the challenges to human rights in other countries. Many students may not realize how unique government protection of human rights truly is. It appears that in some countries the government encourages the exploitation of its citizens by not only allowing these working conditions but also allowing the managers to “manage” their workers in such inhuman conditions.

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Chapter 4 Corporate Governance and Corporate Compliance Multiple Choice Questions But I Fired You First 1. What is the name of the company in the “But I Fired You First” scenario? a. Attwell b. Atmel c. Atlem d. Allmen Difficulty: Difficult Page 59 2. Who is being fired in “But I Fired You First” scenario? a. CEO and the Board of Directors a. CEO and the Chairman of the Board c. Chairman of the Board and the Board of Directors d. CEO and the CFO Difficulty: Medium Page 59 3. What does the company make in the “But I Fired Your First” scenario? a. computer software b. computer hardware c. computer chips d. computer servers Difficulty: Difficult Page 59 4. What is the major ethical issue in the “But I Fired You First” scenario? a. The CEO had misused company travel funds b. The CEO had given false information to the Board of Directors c. The CEO was illegally given stock options. d. The CEO ordered the CFO to change figures on the financial statements Difficulty: Medium Page 59 5. When an investigation recommended that the CEO be fired in “But I Fired You First”, what happened next? a. The CEO was fired b. The CEO was only fired after he received a severance package of $20 million c. The CEO stated the recommendation was not valid because he fired the Board of Directors first d. The CEO started his own investigation Difficulty: Easy Page 59

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Ethics and Corporate Governance 6. Corporate governance can be defined as: a. The system used by firms to control the actions of their employees b. The election process used to vote in a new Board of Director c. The corporate compliance system used by the firm d. The system used by firms to identify who the critical stakeholders are for the firm Difficulty: Easy Page 60 7. The system that is used by firms to control and direct their operations and the operations of their employees is called: a. Corporate Compliance b. Corporate Governance c. Corporate Control d. Corporate Directive Difficulty: Easy Page 60

Board of Directors 8. Traditionally, the board of directors is responsible for representing the interests of: a. stockholders b. management c. employees d. stakeholders Difficulty: Difficult Page 60 9. The relationship between board of directors and stockholders is based on which theory? a. management b. subordinate c. agency d. investor Difficulty: Easy Page 60 10. Agency theory relates to the board of directors because: a. the board of directors is an “agent” of the stockholder b. the board of directors requires advice from both internal and external agents c. the board of directors must meet certain criteria established by consulting agents d. the board of directors is responsible for determining external agents for the firm Difficulty: Easy Page 60

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11. Board members can be classified as either: a. internal and external b. inside and outside c. financial and non-financial d. compensated and non-compensated Difficulty: Easy Page 60 12. A board member who has direct financial ties to the firm is called what kind of board member? a. financial b. direct c. inside d. supportive Difficulty: Easy Page 60 13. A board member who has no direct financial ties to the firm is called what kind of board member? a. non-financial b. indirect c. outside d. non-supportive Difficulty: Easy Page 60 14. Which of the following is not a traditional responsibility of the board of directors? a. establishing and maintaining internal financial controls b. establishing and revising a firm’s code of ethics c. identifying the firm’s future critical competitors d. selecting the firm’s external auditor Difficulty: Medium Page 60 15. Which of the following is not considered a core value needed to help guide the behavior of members on the board of directors? a. integrity b. competence c. citizenship d. responsibility Difficulty: Medium Page 60-61 16. Which of the following board of director core values corresponds with considering the local community in the decision making process? a. corporate social responsibility b. social awareness c. citizenship d. responsibility Difficulty: Difficult Page 61

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17. Based on the recommendations of Wharton, Lorsch and Hanson, how often should the CEO be evaluated on achieving his or her goals by the board of members? a. monthly b. quarterly c. twice a year d. yearly Difficulty: Medium Page 61 18. Based on the recommendations of Wharton, Lorsch and Hanson, how often should the board of directors meet without the presence of the CEO? a. monthly b. quarterly c. twice a year d. yearly Difficulty: Difficult Page 61 19. Based on the recommendations of Wharton, Lorsch and Hanson, how should institutional shareholders view themselves? a. investors b. advisors c. active owners d. majority owners Difficulty: Medium Page 61 20. Which of the following is not a typical decision made by the board of directors? a. the annual business plan of the firm b. the hiring and compensation of the board members c. the issuance of stock options d. the type of computer software used by the firm Difficulty: Medium Page 62 21. Which of the following is not a typical decision made by the board of directors? a. the issuance of dividends b. litigation settlements greater than a certain amount c. contingent liabilities issues greater than a particular amount d. compensation levels for different management ranks Difficulty: Medium Page 62

Types of Board of Directors Committees 22. Which of the following is not a traditional board of directors committee? a. compensation b. legal c. succession d. nominating Difficulty: Easy Page 62-63

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23. Which board of directors committee is responsible for the decision to issue new stock? a. executive b. auditing c. finance d. equity Difficulty: Medium Page 63 24. Which board of directors committee is responsible for the top level decisions of the firm? a. executive b. strategic c. planning d. comprehensive Difficulty: Easy Page 62 25. Which board of directors committee is responsible for the appointment of new board members? a. appointment b. selection c. nominating d. placement Difficulty: Medium Page 62 26. Which board of directors committee is responsible for the guidelines on how the board of directors should operate? a. operating b. corporate governance c. corporate compliance d. guiding Difficulty: Medium Page 62 27. Which board of directors committee is responsible for determining the type of compensation given to top executives? a. salary b. compensation c. evaluation d reward Difficulty: Easy Page 63

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28. Which board of directors committee is responsible for determining the process to replace the CEO? a. selection b. placement c. succession d. nominating Difficulty: Easy Page 63 29. Which board of directors committee is responsible for monitoring the internal operations of the firm? a. corporate compliance b. corporate governance c. auditing d. evaluating Difficulty: Medium Page 63 30. Which board of directors committee is responsible for reviewing alternative financial plans? a. audit b. executive c. finance d. accounting Difficulty: Easy Page 63

The Role of the Board of Directors 31. Which of the following is not a type of board of directors? a. passive b. proactive c. intervening d. operating Difficulty: Medium Page 64 32. Which type of board of directors is considered a “rubber stamp” board? a. passive b. non-interest c. neutral d. un-motivating Difficulty: Easy Page 64

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33. Which type of board of directors verifies the activities of the CEO? a. verifying b. intervening c. certifying d. operating Difficulty: Medium Page 64 34. Which type of board of directors has a proactive role within the decision-making process? a. proactive b. operating c. intervening d. engaged Difficulty: Medium Page 64 35. Which type of board is actively involved in all the major decisions of the firm? a. proactive b. operating c. intervening d. engaged Difficulty: Medium Page 64 36. Which type of board actually makes the key decisions of the firm? a. proactive b. operating c. intervening d. engaged Difficulty: Medium Page 64

Role of CEO Compensation 37. What was the compensation ratio when comparing the CEO’s compensation and the average worker’s compensation in 1982? a. 21 times b. 28 times c. 36 times d. 42 times Difficulty: Difficult Page 66 38. What was the compensation ratio when comparing the CEO’s compensation and the average worker’s compensation in 2004? a. 103 times b. 207 times c. 365 times d. 431 times Difficulty: Difficult Page 66

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39. What was the average total compensation for a CEO in 2004? a. $2.3 million b. $6. 8 million c. $9.7 million d. $11.8 million Difficulty: Difficult Page 66 40. What was the compensation ratio when comparing the CEO’s compensation and the average worker’s compensation in 1982? a. 21 times b. 28 times c. 36 times d. 42 times Difficulty: Difficult Page 66 41. Carr and Valinezhad argue that high CEO compensation can be explained by which philosophical theory? a. ethical egoism b. utilitarianism c. Kant’s ethics d. Sidgwick’s dualism Difficulty: Difficult Page 66

Components of the Sarbanes-Oxley Act 42. The Sarbanes-Oxley Act was a direct response to which ethics scandals? a. Enron and Tyco b. Tyco and WorldCom c. Enron and WorldCom d. Enron, WorldCom and Tyco Difficulty: Medium Page 67 43. What accounting oversight board was established with the passage of SOX? a. Public Company Accounting Oversight Board b. Certified Public Accountant Oversight Board c. Public Company Auditing Oversight Board d. Certified Public Auditing Oversight Board Difficulty: Medium Page 67

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44. What function were auditing firms no longer allowed to do with the clients with the passage of SOX? a. advising b. consulting c. planning d. designing Difficulty: Difficult Page 68 45. Under SOX, how often do firms have to change their external auditors? a. every three years b. every five years c. every seven years d. every ten years Difficulty: Medium Page 68 46. Under SOX who must certify the financial statements of the firm? a. CEO and Head of Internal Auditing b. CEO and CFO c. CEO and Head of External Auditing d. CFO and Head of External Auditing Difficulty: Medium Page 68 47. The reporting of all off-balance sheet transactions is a requirement of SOX based on which corporate scandal? a. Tyco b. WorldCom c. Enron d. Parmalat Difficulty: Easy Page 68 48. Under SOX, how many days do top executives have to report stock transactions? a. one day b. two days c. five days d. thirty days Difficulty: Medium Page 68 49. Section 404 of SOX refers to: a. CEO compensation b. financial statement reporting c. internal controls d. role of external auditors Difficulty: Medium Page 69

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The Cadbury and Combined Code 50. Which of the following was not one of the recommendations made by the Cadbury Committee? a. separating the role of the CEO and the chairman of the board b. the audit committee would be composed exclusively of outside members c. the establishment of a maximum CEO to average worker compensation ratio d. board members would serve only a specific term without automatic reappointment Difficulty: Difficult Page 73 51. Which of the following was not one of the recommendations of the Combined Code? a. a formal rigorous and transparent process to select new board members b. no director should be involved in deciding his or her own level of compensation c. board members should be rotated off the board every 4 years d. the board should evaluate its own performance Difficulty: Difficult Page 73

Ethics and Corporate Compliance 52. Which of the following is not a step recommended by Deloitte & Touche to embed positive ethics and values with its compliance program? a. do a risk/assessment b. review the current ethical policies and procedures c. ask for feedback from the employees of the current value of ethics training d. review the current compliance program Difficulty: Medium Page 74

The U.S. Federal Sentencing Guidelines For Organizations 53. What is the most common criminal charge brought against a firm from the U.S. Federal Sentencing Guidelines For Organizations? a. violation of taxes b. environmental waste discharge c. fraud d. anti trust violations Difficulty: Difficult Page 75 54. What is one of the major components of the U.S. Federal Sentencing Guidelines For Organizations? a. a formal code of ethics b a formal corporate ethics training program c. a formal corporate compliance program d. a formal corporate governance program Difficulty: Difficult Page 75

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Corporate Compliance Systems and Global Corruption 55. The conscious abuse of public roles and resources for the private benefit of the firm or individual is defined as: a. corruption b. petty corruption c. grand corruption d. influence peddling Difficulty: Medium Page 76 56. When private individuals give illegal financial incentives to nonelected public officials in exchange for favorable dealings defines: a. corruption b. petty corruption c. grand corruption d. influence peddling Difficulty: Medium Page 76 57. When illegal financial incentives are given to higher-ranked public officials, it is defined as: a. corruption b. petty corruption c. grand corruption d. influence peddling Difficulty: Medium Page 76 58. When illegal transactions take place along with legal actions, it is defined as: a. corruption b. petty corruption c. grand corruption d. influence peddling Difficulty: Medium Page 77

The U.S. Foreign Corrupt Practices Act 59. The Act that forbids U.S. companies from giving bribes in other countries in return for business favors is called: a. Foreign Control Practices Act b. Foreign Corrupt Practices Act c. Foreign Currency Practices Act d. Foreign Country Practices Act Difficulty: Easy Page 79

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True/False Questions 60. “But I Fired You First” refers to a battle between the CEO and the board of directors. a. True b. False Difficulty: Easy Page 59 61. Corporate governance focuses on the relationship between firms and governments. a. True b. False Difficulty: Easy Page 60 62. Agency theory is the underlying philosophy pertaining to the relationship between the board of directors and investors. a. True b. False Difficulty: Easy Page 60 63. The planning committee is a traditional board of directors committee. a. True b. False Difficulty: Medium Page 62 64. An “Engaged” board is the most involved board of directors. a. True b. False Difficulty: Difficult Page 64 65. The CEO to average worker compensation ratio has increased by over ten times from 1982 to 2004. a. True b. False Difficulty: Difficult Page 66 66. Tyco was one of the corporate scandals which resulted in the passage of the SarbanesOxley Act. a. True b. False Difficulty: Difficult Page 66 67. Under SOX, the CFO of the firm must sign all financial statements a. True b. False Difficulty: Medium Page 68

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68. Section 204 of SOX refers to the internal control responsibilities of the firm. a. True b. False Difficulty: Medium Page 69 69. The Cadbury Code is the United Kingdom equivalent to SOX. a. True b. False Difficulty: Easy Page 73 70. Influence peddling occurs when private individuals give illegal financial incentives to highly ranked public officials. a. True b. False Difficulty: Difficult Page 77 71. Petty corruption occurs when illegal transactions take place along with legal transactions. a. True b. False Difficulty: Difficult Page 76

Short Answer Questions 72. Why is corporate governance such an important ethical issue?

Corporate governance is important in studying ethics from two perspectives. The first perspective is the fiduciary duty board members have to the owners of the firms. Since the board members are selected to serve the best interests of the stockholders, board members have a legal and ethical duty to make decisions that benefit the firm. The second perspective is to consider the firm’s stakeholders as the “owners” of the firm.

Based on stakeholder theory, the firm should identify and serve the needs of the various stakeholders. As a result, the board of directors should incorporate the needs and expectations of the stakeholders in their decision making process. By having a strong corporate governance structure, firms can guarantee that they effectively serve the needs of all the stakeholders.

73. Do you think there has been a general movement from passive boards to more involved operating board of directors?

Yes, this is the case. The passage of SOX has forced firms in the United States to reexamine their corporate governance structure. Due to the strict guidelines and severe potential penalties of non compliance highlighted in SOX, CEOs and other top level executives are acutely aware of what their legal requirements are for SOX compliance.

As a result, board members are now much more engaged and proactive in their commitment to the board since they can be held personally responsible if there are

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corporate governance failures. It can be safely stated that the role of the “rubber stamp” board is either in danger or is extinct.

74. Do you think SOX could have been passed in any previous time period?

No, SOX was passed during the perfect storm of corporate reform. Both Congress and the general public were fed up with consistent news related to one corporate scandal after another. In a previous era, the power of the industry lobbyists would ensure that SOX would not be passed due to the competitive “disadvantage” it would give U.S. based firms. Even after the passage of SOX, firms continued to complain about the high costs.

One factor the firms had omitted was that there could have been very high one time costs to get the firm in compliance with SOX but the maintenance costs would be much lower.

The net result is that firms do not discuss the cost of SOX implementation any longer and the United States has one of the most transparent corporate governance systems in the world.

75. Given the high level of corruption of some countries highlighted in Tables 4-6 and 4-7, why don’t these companies increase their level of government regulations to combat these corrupt activities?

The answer to this question is very complex. A number of countries with high corruption levels would be considered to be emerging or developing countries. Within this framework, these countries do not have the resources available to implement and monitor corporate compliance regulations as would be the case in developing countries, Furthermore, if government employees are paid very low wages because of the lack of resources within the country, it is very difficult to control corruption and bribery as supplements for the employee’s income. In addition, in a number of countries, financial transactions are not considered bribes but are considered an “expected” gift from one person to another.

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Chapter 5 Ethics and the Environment Multiple Choice Questions Is It Just Me Or Is It Getting Hotter In Here?

1. In the “Is It Just Me” scenario, which company is the focus of the scenario? a. Exxon b. BP c. Shell d. Chevron Difficulty: Easy Page 82 2. In the “Is It Just Me” scenario, what is Exxon’s primary contribution to reduce global warming? a. Investing in alternative fuels b. Investing in more efficient engines c. Investing in more efficient refining processes d. Selling the oil that is used to help operate wind turbines Difficulty: Moderate Page 82 3. In the “Is It Just Me” scenario, which oil company made the largest investment in alternative fuels? a. Exxon b. BP c. Shell d. Chevron Difficulty: Moderate Page 82 4. In the “Is It Just Me’ scenario, when Lee Raymond retired as CEO of Exxon, what was the value of his retirement package? a. $20 million b. $50 million c. $200 million d. $400 million Difficulty: Difficult Page 82

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The Tragedy Of the Commons 5. What is the tragedy of the commons? a. common mistakes are made all the time pertaining to environmental issues b. it is difficult to obtain a common commitment on any environmental issue c. free unrestricted access to any resource will ultimately ruin the resource d. common stakeholders do not always agree with the solution to an environmental issue Difficulty: Easy Page 83 6. Which historical philosopher established the basic tenet of the tragedy of the commons? a. Plato b. Aristotle c. Socrates d. Kant Difficulty: Difficult Page 83 7. Which modern author presents the current interpretation of the tragedy of the commons? a. Garrett Hardin b. John Elkington c. Milton Friedman d. Edward Freeman Difficulty: Difficult Page 83 8. What example is given in the textbook to demonstrate the tragedy of the commons? a. building near an ocean b. using more energy than is needed c. cows grazing on land d. continue to plant the same crops without rotating them Difficulty: Moderate Page 83 9. The tragedy of the commons refutes whose theory? a. John Stuart Mill b. Adam Smith c. Jeremy Bentham d. Henry Sidgwick Difficulty: Difficult Page 83

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Natural Environment As A Stakeholder 10. If the natural environment is considered a stakeholder, a stakeholder would be defined as: a. any individual that has a vested interest in the firm b. any individual that has a financial interest in the firm c. any entity that has a vested interest in the firm d. any special interest group that has a vested interest in the firm Difficulty: Easy Page 83

Natural Environment As A Competitive Advantage 11. Which of the following is a Generic Competitive Environmental Strategy? a. Ecoeffectiveness b. Ecoimprovement c. Ecoefficiency d. Ecoperformance Difficulty: Easy Page 84 12. Which Competitive Environmental Strategy focuses on low cost competitive advantage and organizational process competitive focus? a. Ecoefficiency b. Beyond Compliance Leadership c. Environmental Cost Leadership d. Ecobranding Difficulty: Moderate Page 84 13. Which Competitive Environmental Strategy focuses on differentiation competitive advantage and organizational processes competitive focus? a. Ecoefficiency b. Beyond Compliance Leadership c. Environmental Cost Leadership d. Ecobranding Difficulty: Moderate Page 84 14. Which Competitive Environmental Strategy focuses on low cost competitive advantage and products and services competitive focus? a. Ecoefficiency b. Beyond Compliance Leadership c. Environmental Cost Leadership d. Ecobranding Difficulty: Easy Page 84

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15. Which Competitive Environmental Strategy focuses on differentiation competitive advantage and products and services competitive focus? a. Ecoefficiency b. Beyond Compliance Leadership c. Environmental Cost Leadership d. Ecobranding Difficulty: Moderate Page 84 16. Which Competitive Environmental Strategy recommends having ISO 14000 certification? a. Ecoefficiency b. Beyond Compliance Leadership c. Environmental Cost Leadership d. Ecobranding Difficulty: Difficult Page 85 17. Which Competitive Environmental Strategy recommends focusing on ecodesign? a. Ecoefficiency b. Beyond Compliance Leadership c. Environmental Cost Leadership d. Ecobranding Difficulty: Difficult Page 85 18. Which Competitive Environmental Strategy corresponds with Timberland putting an environmental “nutrition label” on the boxes of their shoes? a. Ecoefficiency b. Beyond Compliance Leadership c. Environmental Cost Leadership d. Ecobranding Difficulty: Difficult Page 86

Voluntary Environmental Compliance 19. Which of the following was not recommended for a firm to implement from a voluntary environmental compliance perspective? a. Publish an annual report b. Implement a system to reduce toxic chemical use c. Implement a system to reduce sustainable products d. Ensure that the same environmental standards are consistent globally Difficulty: Easy Page 87

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The Cost of Noncompliance 20. In 2005, which company had the largest penalty ever levied by the EPA? a. Exxon b. Union Carbide c. DuPont d. General Electric Difficulty: Difficult Page 87 21. In 2005, what was the total fined levied on DuPont for hiding the dangers of one of its chemicals? a. $5.5 million b. $10.5 million c. $14.5 million d. $16.5 million Difficulty: Difficult Page 87

Examples of Environmental Commitments 22. Which of the following is not a reason why Johnson & Johnson has adopted a policy on climate friendly energy? a. reduce operating costs b. helps meet legal obligations c. improve the environment d. enhance their competitive advantage Difficulty: Difficult Page 89

Employees As Environmental Stakeholders 23. Which of the following is not an environmental initiative that could be generated by any employee within a firm? a. policies for reuse and recycling b. policies for hazardous substance reduction c. policies for environmental training d. policies for reduction of resources and energy use Difficulty: Difficult Page 89 24. The employees of which company in the Netherlands developed their own waste reduction and recycling program? a. Philips b. Nestle c. GE Plastics d. Ford Europe Difficulty: Difficult Page 90

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25. The employees of which company in Finland developed a cleaner diesel fuel? a. Shell b. BP c. Nestlé d. Finoil Difficulty: Difficult Page 90

NGOs As Environmental Stakeholders 26. Which author established the modern environmental movement? a. Al Gore b. Rachel Carson c. Jimmy Carter d. Garrett Hardin Difficulty: Easy Page 90 27. Which book established the modern environmental movement? a. The Tragedy of the Commons b. Silent Spring c. Inconvenient Truth d. The Benefits of Triple Bottom Line Reporting Difficulty: Moderate Page 90 28. Which environmental group has the slogan “When the last tree is cut, the last river poisoned, and the last fish dead, we will discover that we can’t eat money”? a. Sierra Club b. Greenpeace c. Environmental Defense Fund d. Friends of the Earth Difficulty: Moderate Page 90 29. Which environmental group has the largest membership in the United States? a. Sierra Club b. Greenpeace c. Environmental Defense Fund d. Friends of the Earth Difficulty: Moderate Page 90 30. What year was the first Earth Day celebration? a. 1970 b. 1977 c. 1980 d. 1982 Difficulty: Difficult Page 90

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31. Which environmental group was formed to address the issue of the pesticide DDT? a. Sierra Club b. Greenpeace c. Environmental Defense Fund d. Friends of the Earth Difficulty: Moderate Page 91 32. Which environmental group has economists, engineers, computer analysts and various PhDs on its staff? a. Sierra Club b. Greenpeace c. Environmental Defense Fund d. Friends of the Earth Difficulty: Difficult Page 91 33. Which environmental group identifies environmental accounting tricks that firms may play? a. Sierra Club b. Greenpeace c. Environmental Defense Fund d. Friends of the Earth Difficulty: Moderate Page 91

Communicating the Firm’s Environmental Commitment to Its Stakeholders 34. Stanwick and Stanwick found that: a. There was a positive relationship between a firm’s environmental disclosures and financial performance. b. There was a negative relationship between a firm’s environmental disclosures and financial performance. c. There was no significant relationship between a firm’s environmental disclosures and financial performance. d. There was not enough data to determine the relationship between a firm’s environmental disclosures and financial performance.

Difficulty: Easy Page 91

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35. Stanwick and Stanwick found that: a. firms with a low level of financial performance had the highest incidences of environmental policies. b. firms with a medium level of financial performance had the highest incidences of environmental policies. c. firms with a high level of financial performance had the highest incidences of environmental policies. d. they could not determine a relationship between level of financial performance and incidences of environmental policies.

Difficulty: Moderate Page 92

Government Regulations 36. Which of the following government regulations is the oldest? a. National Environmental Policy Act b Clean Air Act c. Clean Water Act d. Clean Ground Act Difficulty: Difficult Page 92 37. What was the first government regulation that protected the general public from environmental problems? a. Federal Food Drug, and Cosmetic Act b. Resource Conservation and Recovery Act c. Safe Drinking Water Act d. Resource Recovery Act Difficulty: Difficult Page 92

Environmental Accounting Issues 38. Which of the following accounting rules relates to environmental liabilities? a. FAS 1 – Accounting for Liabilities b. FAS 5- Accounting for Contingencies c. FAS 7 – Accounting for Reserves d. FAS 8 – Accounting for Environmental Investment Difficulty: Difficult Page 94

Environmental Justice 39. What does NIMBY stand for? a. New Independent Management BuyIn Yield b. Not In My Back Yard c. Negative Image Maintenance Bonus Yield d, No Initiative, Management By Young Views Difficulty: Easy Page 94

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40. The systematic equal allocation of environmental benefits and burdens is called: a. environnemental equity b. environnemental balance c. environnemental justice d. environmental cost/benefit Difficulty: Easy Page 94

Environmental Sustainability 41. The ability of an organization to protect the use of future resources is called: a. environmental proactiveness b. environmental sustainability c. environmental protection d. environmental responsibility Difficulty: Easy Page 95 42. Based on Grafe-Buckens and Beloe, which of the following is not a major component of sustainability a. a system to ensure the sustainable management of the earth’s natural resources b. the development of social and institutional structures that would support sustainable management c. changes in the legal framework to support sustainability d. changes in the economic framework to support sustainability Difficulty: Difficult Page 95 43. In the Major Challenges to Sustainability Table, what would be an example of depletion for developed economies? a. deforestation b. soil loss c. insufficient reuse and recycling d. overuse of water for irrigation Difficulty: Difficult Page 96 44. In the Major Challenges to Sustainability Table, what would be an example of poverty of a survival economy? a. urban and minority unemployment b. lack of skilled workers c. population growth d. income equality Difficulty: Difficult Page 96

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45. In the Major Challenges to Sustainability Table, what would be an example of pollution for emerging economies? a. dung and wood burning b use of toxic materials c. lack of sewage treatment d greenhouse gases Difficulty: Difficult Page 96

The Triple Bottom Line 46. The triple bottom line call also is described as: a. Population, Pollution, Profit b. People, Planet, Profit c. Prevention Protection Population d. Pollution Population Planet Difficulty: Moderate Page 96 47. 3BL stands for : a. 3 below level b. triple bottom line c. 3 times the business legislation d. business leverage cubed Difficulty: Easy Page 96 48. The three factors that relate to the triple bottom line are: a. social, ethical, environmental b. ethical environmental, financial c. social environmental financial d. stakeholder environmental financial Difficulty: Easy Page 96

Equator Principles 49. Equator Principles address: a. social and environmental issues when financial institutions consider project financing b. the principles used to help countries along the equator with global warming c. the principles used by developed countries to help survival economies d. the principles used by governments to develop global warming solutions Difficulty: Moderate Page 96

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50. Which of the following is not a member of the Equator Principles Financial Institutions? a. Barclays b Crédit Suisse c. Bank of America d. Citigroup Difficulty: Difficult Page 97

Ethics and Climate Change 51. The Greenhouse Gas Effect is: a. As Greenhouse Gases increase, more heat is trapped in Earth’s atmosphere b. As Greenhouse Gases increase, it replaces oxygen in the air c. Is completely man made since there are no natural Greenhouse Gases d. Not proven yet to impact the climate Difficulty: Easy Page 97 52. Which of the following is not a Greenhouse Gas? a. Méthane b. Nitrous Oxide c. Hydroflurocarbons d. Carbon Monoxide Difficulty: Difficult Page 98 53. What is the Kyoto Treaty? a. a treaty for countries to use alternative fuels b. a treaty focusing on environmental sustainability c. a treaty to reduce the level of Greenhouse Gases d. a treaty for countries to use more nuclear power Difficulty: Easy Page 98 54. From a GDP perspective which country would receive the largest negative impact if the levels of Carbon Dioxide were to double from 2002 to 2050? a. United States b. European Union c. Former Soviet d. China Difficulty: Difficult Page 98

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55. From a cost (in billions of dollars) perspective which country would receive the largest negative impact if the levels of Carbon Dioxide were to double from 2002 to 2050? a. United States b. European Union c. Former Soviet d. China Difficulty: Difficult Page 98

Climate Change As A Strategic Option 56. In the Strategic Options for Climate Change Table, what would be considered an internal company innovation? a. product development b. new product/market combinations c. process improvement d. internal transfer of emission reductions Difficulty: Difficult Page 100 57. In the Strategic Options for Climate Change Table, what would be considered a horizontal beyond the supply chain compensation? a. internal transfer of emission reductions b. acquisition of emission credits c. product development d. process development Difficulty: Difficult Page 100

True/False Questions 58. In the “Is It Just Me” scenario, Exxon showed their strong commitment to environmental sustainability. a. True b. False Difficulty: Easy Page 82 59. In the “Is It Just Me” scenario, Shell showed their strong commitment to environmental sustainability. a. True b. False Difficulty: Easy Page 82 60. In the “Is It Just Me” scenario, BP showed their strong commitment to environmental sustainability. a. True b. False Difficulty: Moderate Page 82

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61. The concept of the Tragedy of the Commons can be traced back to Aristotle. a. True b. False.

Difficulty: Moderate Page 83 62. The Tragedy of the Commons supports Adam Smith’s invisible hand theory. a. True b. False Difficulty: Moderate Page 83 63. Ecoeffectiveness is a Generic Competitive Environmental Strategy. a. True b. False Difficulty: Moderate Page 84 64. Organizational Processes is one of the categories to develop Generic Competitive Environmental Strategies. a. True b. False Difficulty: Easy Page 84 65. In 2005, DuPont received the largest fine ever levied by the EPA. a. True b. False Difficulty: Moderate Page 87 66. The Sierra Club is the largest environmental group in the world a. True b. False Difficulty: Easy Page 90 67. Greenpeace has over 4 million members. a. True b. False Difficulty: Moderate Page 90 68. The Silent Spring was written to address the issue of pesticides a. True b. False Difficulty: Easy Page 90

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69. Greenpeace was formed in response to the issue of using pesticides in the environment. a. True b. False Difficulty: Easy Page 90 70. The Clean Air Act was the first piece of legislation in the United States to protect the general public from environmental problems. a. True b. False Difficulty: Moderate Page 92 71. Environmental sustainability is best represented by NIMBY. a. True b. False Difficulty: Easy Page 94 72. Equator principles address environmental issues in the food service industry. a. True b. False Difficulty: Moderate Page 96 73. Methane is a Greenhouse Gas. a. True b. False Difficulty: Moderate Page 98

Short Answer Questions 74. Why is the natural environment such an important ethical issue?

The natural environmental is an important ethical issue for two major reasons. The first major reason is the impact the environment has on stakeholders. If a firm has a negative impact on the environment it could result in not only the stakeholders not having their needs met, but could result in permanent damage to stakeholders. If toxic material is leaked into the ground or billions of pollution participles are released into the area, it could impact the health of the members of the local community and could even ultimately lead to the death of many members in the local community.

The second major ethical issue related to the natural environment is sustainability. If firms do not think of resource allocation from a long term perspective, they will use the resources at a quicker pace than they can be replaced. This could have a negative financial impact of the firm and could negatively impact employees, investors, customers, suppliers, and the local community.

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75. How do you determine whether a community has been faced with “environmental injustice”?

There could certainly be some subjective measures into the negative short term and long term impacts a specific facility has in the neighborhood. However, when the costs outweigh the environmental benefits of the facility, it could be concluded that environmental injustice has taken place. NIMBY is an effective concept with the assumption that the neighborhood has the coordinating power to try to block negative environmental investments in the local community, As a result, in another level of environmental justice, those neighborhoods that have the resources to establish a protection campaign and threaten legal action if necessary have higher odds of winning the blockage of a facility which would result in a negative environmental impact.

Therefore, the neighborhoods that do not have the resources to mount an effective campaign will have these negative impact environmental facilities placed in their own backyards.

76. Is Al Gore the correct person to spearhead the environmental movement?

The simple answer is yes since he is the most recognized “celebrity” to warn against global warming. After winning an Academy Award and the sharing in the Nobel Peace Prize, people listen to what Al Gore has to say about global warming. However, he certainly had a major misstep when the energy consumption in his house was released to the public. When you become the spokesman of a particular cause, you need to make sure that your message can not be challenged. His message was challenged for a while based on his actions not corresponding with his words. It would have been better for Mr. Gore to have ordered the re-fitting of his house so that it would be more energy efficient. This would have been an effective ending to the Inconvenient Truth movie.

77. Can profitability and environmental sustainability co-exist?

Yes, they can co-exist and they better co-exist. It is the responsibility of the firms to address the long term environmental sustainability and climate change issues. One question that needs to be asked is why do cars continue to use technology that was patented in 1806 by Francois Isaac de Rivaz.1 As a result, society is using technology that is over 200 years old. You can ask your class if there is any other technology that is used to such extent globally that is two centuries old and results in a negative impact on the environment. Therefore, alternative fuels and alternative engine designs are long overdue.

At the time of this writing, a barrel of oil is over $110. As a result, these should be considered environmental opportunities instead of environmental costs. In order for a firm to survive in the long term, it must focus on both profit and environmental sustainability.

1

http://en.wikipedia.org/wiki/Internal_combustion_engine

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Chapter 6 Health-Care Ethics Multiple Choice Questions $50,000 A Day, Not a Bad Payday 1. Which company is the focus of the “$50,000 A Day, Not a Bad Payday” scenario? a. Medicatron b. Medtronic c. Meditrue d. Medisure Difficulty: Moderate Page 101 2. What type of medical products was the focus in the “$50,000 A Day, Not a Bad Payday” scenario? a. artificial hips b. heart pacemakers c. blood pressure machines d. products for back surgery Difficulty: Moderate Page 101 3. What type of work was performed which paid $50,000 a day? a. heart surgeries b. back surgeries c. teaching of new surgery techniques d. consulting Difficulty: Easy Page 101 4. To perform one type of back surgery, what was the annual revenue generated by doctors in the United States based on the “$50,000 A Day, Not a Bad Payday” scenario? a. $1 billion b. $2 billion c. $3 billion d. $4 billion Difficulty: Difficult Page 102 5. Which of the following was not included in the lawsuit filed against the medical device company? a. excessive remuneration b. fraud c. bribes d. illegal perks Difficulty: Difficult Page 102

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The Role of Medical Ethics 6. Which of the following is not an underlying value that should be followed by a health care professional? a. beneficence b. compassion c. dignity d. autonomy Difficulty: Moderate Page 102 7. Which underlying health-care value is based on the freedom for a patient to accept or refuse treatment? a. Justice b. Autonomy c. Dignity d. Truthfulness Difficulty: Moderate Page 103 8. Which underlying health-care value is based on the belief that decisions by the healthcare workers are fair? a. Justice b. Fairness c. Honesty d. Autonomy Difficulty: Moderate Page 103 9. Which underlying health-care value is based on the belief that the patient should be aware of the benefits and risks of all treatments being offered? a. Justice b. Nonmalfeasance c. Truthfulness c. Dignity Difficulty: Moderate Page 103 10. Which underlying health-care value is based on the belief that every action taken by a health-care worker would not cause harm to the patient? a. Justice b. Beneficence c. Nonmalfeasance d. Honesty Difficulty: Moderate Page 103

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11. Which underlying health-care value is based on the belief that every health-care worker always has the best interests of the patient in mind when decisions are made? a. Justice b. Beneficence c. Nonmalfeasance d. Dignity Difficulty: Moderate Page 103

Biomedical Ethics 12. Which of the following is not one of the principles of biomedical ethics? a. Autonomy b. Dignity c. Justice d. Beneficence Difficulty: Moderate Page 103

What Questions Should Be Asked Pertaining to Bioethics?

13. Which of the following is not a question that should be asked pertaining to bioethics? a. Ownership b. Commodification c. Truthfulness d. Reductionism Difficulty: Difficult Page 105

The Doctor-Patient Relationship 14. Which doctor-patient model describes when the patient and the doctor participate equally in all health-care decisions? a. engineering model b. priestly model c. collegial model d. contractual model Difficulty: Moderate Page 105 15. Which doctor-patient model describes when the doctor carries out the wishes of the patient? a. engineering model b. priestly model c. collegial model d. contractual model Difficulty: Difficult Page 105

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16. Which doctor-patient model describes the assumption that the doctor will always do what is in the patient’s best interest? a. engineering model b. priestly model c. collegial model d. contractual model Difficulty: Moderate Page 105 17. Which doctor-patient model describes when the patient and doctor enter an agreement which it is assumed that they both will be pursuing mutual goals? a. engineering model b. priestly model c. collegial model d. contractual model Difficulty: Easy Page 105

Health-Care Codes of Ethics 18. The General Medical Council regulates doctors in which country? a. Canada b. United States c. United Kingdom d. Australia Difficulty: Difficult Page 106 19. Which President established the President’s Advisory Commission on Health Care? a. Jimmy Carter b. Gerald Ford c. Bill Clinton d. George H. Bush Difficulty: Difficult Page 106 20. ACHE stands for: a. American Clinical Hospital Executives b. American College of Healthcare Executives c. American Continuous Health Execution d. American Classroom of Health Education Difficulty: Moderate Page 107 21. Which of the following is not a health-care ethics self-assessment statement? a. I ensure that the promises I make are fulfilled b. I demonstrate no tolerance for any form of staff harassment c. I verify the patient’s symptoms before I start treatment d. I demonstrate respect for employees within my work environment.

Difficulty: Difficult Page 108

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22. Which of the following is not a health-care ethics self-assessment statement? a. I promote community health status improvement when I have the opportunity. b. I will not refuse any individual emergency treatment c. I place the interests of the community and my patients above my own personal interests. d. I have ethical discussions on not only medical issues, but also management and/or financial issues.

Difficulty: Difficult Page 108 23. The American Medical Association code of ethics is based on: a. the Principles of Medical Ethics b. the Oath of Medical Principles c. the Principles of a Physician’s Obligations d. the Moral Standing of Physicians Difficulty: Difficult Page 109 24. In 2004, what company had it membership suspended by the British Pharmaceutical Industry? a. Merck b. Pfizer c. Abbott Laboratories d. GlaxoSmithKline Difficulty: Difficult Page 110 25. In 2004, which country industry association suspended Abbott Laboratories? a. Great Britain b. United States c. Canada d. France Difficulty: Difficult Page 110

Health Insurance Portability And Accountability Act 26. The Health Insurance Portability And Accountability Act was passed in which year? a. 1994 b. 1995 c. 1996 d. 1997 Difficulty: Difficult Page 110 27. HIPAA was passed to: a. protect patients’ personal health information b. protect physicians from being sued by insurance companies c. protect physician from being sued by their patients d. protect hospitals from financial bankruptcy Difficulty: Easy Page 110

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28. Which of the following is not a valid reason why patient’s personal information could be released to a third party? a. public health b. emergency circumstances c. requirements of foreign country d. oversight of health-care system Difficulty: Moderate Page 110-111 29. Which of the following is not one of HIPAA’s Physical Safeguards? a. electronic card system b. a physical barrier between the patient and administrator c. use alternative sources for backing up information d. have top management technology package match the firm’s needs Difficulty: Difficult Page 112

Pharmaceutical Issues 30. Which is considered an effective type of advertising by pharmaceutical companies? a. Direct-to-cost b. Direct-to-doctor c. Direct-to-consumer d. Direct-to-hospital Difficulty: Moderate Page 113 31. Which of the following would not be considered an appropriate gift for a doctor to consider a new drug? a. free lunch b. free dinner c. free sports tickets d. it depends on the ethical standards of the doctor Difficulty: Moderate Page 113

The Rise of E-Drugs 32. Which of the following is not an advantage of an Internet pharmacy as compared with a traditional pharmacy? a. There is less intimidation for patients in ordering sensitive medications b. Patients can find price comparison easier online c. Patients can pay for their medications with Paypal d. It is more convenient to use an Internet pharmacy.

Difficulty: Easy Page 113

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33. Which of the following is not a disadvantage of using an Internet pharmacy as compared with a traditional pharmacy? a. Some third party payers may limit participation in Internet pharmacies b. There may not be a pharmacist available to answer questions c. The patient can not return the drugs once they have been delivered d. There could be questions about the integrity of the drugs shipped to the patient Difficulty: Easy Page 113

Stakeholders And The Health-Care System 34. Which of the following is not considered a stakeholder in the health-care system? a. patient’s friends b. doctor’s union c. pharmaceutical companies d. hospitals where the patient is not located Difficulty: Moderate Page 114 35. Which of the following is the physician not accountable to when making health-care decisions? a. lawyers b. professional association c. pharmaceutical companies d. private payers Difficulty: Moderate Page 115

True/False Questions 36. Medicaltron is the name of the company in the opening scenario “$50,000 A Day, Not a Bad Payday”. a. True b. False Difficulty: Moderate Page 101 37. The annual sales of the company in the opening scenario “$50,000 A Day, Not a Bad Payday” is $10 billion. a. True b. False Difficulty: Moderate Page 101 38. In the opening scenario “$50,000 A Day, Not a Bad Payday” a doctor was paid $1 million for 20 days work. a. True b. False Difficulty: Moderate Page 101

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39. The doctors receiving the high levels of compensation in “$50,000 A Day, Not a Bad Payday” were performing organ transplants. a. True b. False Difficulty: Easy Page 101 40. The doctors receiving the high levels of compensation in “$50,000 A Day, Not a Bad Payday” were performing back surgeries. a. True b. False Difficulty: Easy Page 101 41. The lawsuit in “$50,000 A Day, Not a Bad Payday” claimed that Medtronic paid millions of dollars to doctors in return for the doctors using Medtronic devices in certain types of back surgeries a. True b. False Difficulty: Easy Page 101 42. The average cost of the back surgery discussed in “$50,000 A Day, Not a Bad Payday” was $10,000. a. True b. False Difficulty: Moderate Page 102 43. According to “$50,000 A Day, Not a Bad Payday”, from 2001 to 2005, Medtronic paid over $60 million to doctors for consulting services. a. True b. False Difficulty: Moderate Page 102 44. According to “$50,000 A Day, Not a Bad Payday”, Medtronic’s own ethics rules stated that the company would only pay for modest meals and receptions for marketing to doctors. a. True b. False Difficulty: Easy Page 102 45. Beneficence is an underlying value of medical ethics. a. True b. False Difficulty: Easy Page 102

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46. Compassion is an underlying value of medical ethics. a. True b. False Difficulty: Moderate Page 102 47. Explaining the benefits and costs of a treatment is considered the "complete informed patient" underlying value of medical ethics. a. True b. False Difficulty: Moderate Page 103 48. Always having the best interest of the patient in mind when decisions are made is the justice underlying value of medical ethics. a. True b. False Difficulty: Moderate Page 103 49. Autonomy is a basic principle of biomedical ethics. a. True b. False Difficulty: Easy Page 103 50. Dignity is a basic principle of biomedical ethics. a. True b. False Difficulty: Moderate Page 103 51. In bioethics, commodification refers to the patenting and commercial opportunities of genes research. a. True b. False Difficulty: Moderate Page 105 52. Determining the owner of DNA is can develop into a religious issue. a. True b. False Difficulty: Moderate Page 105 53. Reductionism refers to reducing DNA into a single cell analysis. a. True b. False Difficulty: Moderate Page 105

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54. The belief that the doctor always has the right answer is the collegial doctor-patient model. a. True b. False Difficulty: Moderate Page 105 55. The belief that doctors are only following God’s will is the priestly doctor-patient model. a. True b. False Difficulty: Moderate Page 105 56. The doctor carrying out the patient’s wishes is the engineering doctor-patient model. a. True b. False Difficulty: Moderate Page 105 57. ACHE stands for American College of Hospital Executives. a. True b. False Difficulty: Moderate Page 107 58. HIPAA stands for Health Insurance Patient and Accountability Act. a. True b. False Difficulty: Moderate Page 110 59. The U.S. Department of Health is responsible for overseeing the enforcement of HIPAA. a. True b. False Difficulty: Moderate Page 110 60. A pharmaceutical company giving a brochure to a doctor pertaining to a new drug is direct-to-consumer advertising. a. True b. False Difficulty: Easy Page 113 61. Re-ordering a drug on the Walgreen’s web site would be an example of an Internet pharmacy. a. True b. False Difficulty: Moderate Page 113

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62. The doctor’s union is considered a stakeholder in the health-care system. a. True b. False Difficulty: Moderate Page 114 63. Each stakeholder who a physician is accountable for having the same level of importance. a. True b. False Difficulty: Moderate Page 115 64. Does an apparent potential conflict exist among the six underlying values of medical ethics?

It could be argued that indeed there could be scenarios in which different underlying values may be in conflict. For example, autonomy states that each patient has the freedom to accept or reject treatment. However, beneficence states that every decision should be based on the best interests of the patient. What would happen if a patient who has a contagious disease refuses treatment? The net result would be that the patient’s decision would not only put his or her life in jeopardy, but, it could also put other lives in jeopardy. Justice and nonmalfeasance may also potentially conflict in the actions of the doctor. For example, under any rationed drug or treatment, there will be patients who may not receive the drug treatment needed to survive. As a result, any “just rationale” for limited resources will still result in direct harm impacting those patients who do not receive the treatment.

65. From a patient’s perspective which doctor-patient model would you consider the most effective? Which one would you consider the least effective?

It would appear that the collegial model would be the most effective from a patient’s perspective. The collegial model assumes an equal partnership between the doctor and the patient. While not a legal arrangement such as the contractual model, the collegial model assumes that there will be a give and take process in which each viewpoint is not only heard but is considered by the other party in the decision making process. Therefore, to fully understand the costs and benefits (truthfulness and honesty value) of a treatment or the guarantee that no harm will come to the patient (nonmalfeasance), a collegial model will help ensure that the best interests of the patient are considered (beneficence).

The least effective model from the patient’s perspective would be the priestly model. In this model, the patient plays a passive role in the decision making process. Therefore, the underlying assumption is that the doctor knows exactly what the patient wants and needs and without any guidance determines the course of action for the patient. As a result, this model would be the least likely model to protect the patient’s interests based on the all the underlying ethical values: beneficence, nonmalfeasance, autonomy, justice, dignity and truthfulness and honesty

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66. Is there any way to control the influence pharmaceutical companies have on the decisions made by doctors.

The simple answer to this question is no. Under the current health-care system in the United States, pharmaceutical companies will continue to have a heavy level of influence on the decision making process for doctors. The reason is that in order to help patients, doctors usually need to prescribe medications, in order to prescribe medications, doctors must know the relevant facts pertaining to the drug, in order for the doctor to obtain the facts, the doctor must allow pharmaceutical representatives to explain the drug and give free samples. Of course, doctors can refuse to see pharmaceutical representatives and they are under no obligation to recommend one specific drug over another. However, doctors also are under constant pressure by their patients to prescribe drugs that are “better” than others. In addition, doctors could be held legally liable if they do not prescribe the correct treatment and it is discovered that a more effective treatment would have been better for a patient. The only way the pharmaceutical companies influence could be weakened is if the United States incorporated a universal health-care system.

Under this system, the government becomes the customer of the drug and would have more bargaining power than the pharmaceutical companies.

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Chapter 7 Ethics and Information Technology Multiple Choice Questions We Thought You Wanted The Extra Pillow 1. What is the name of the Ritz Carlton program that collects information on its guests in “We Thought You Wanted The Extra Pillow”? a. Ritzview b. Hostlist c. Mystique d. Caritz Difficulty: Moderate Page 116 2. Where did an employee capture information pertaining to a guest’s room at the Orlando Peabody? a. in the lobby b. in the bar c. in the guest’s room d. in a bathroom Difficulty: Easy Page 117 3. Which hotel is experimenting with using a microchip in the guest room cards to store personal information? a. Marriott b. Ritz Carlton c. Hilton d. Hyatt Difficulty: Moderate Page 117

Why Are Information Technology Ethical Issues Important?

4. What percentage of the respondents of an information technology survey stated they had to fire an employee due to the employee’s misuse of the Internet? a. 12 percent b. 18 percent c. 22 percent d. 26 percent Difficulty: Difficult Page 117

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5. What percentage of the respondents of an information technology survey stated they had to fire an employee due to the employee’s misuse of his/her corporate e-mail accounts? a. 5 percent b. 10 percent c. 15 percent d. 25 percent Difficulty: Difficult Page 117 6. What percentage of the respondents of an information technology survey stated they monitored employees’ computer use to determine which web sites employees had selected? a. 51 percent b. 63 percent c. 71 percent d. 76 percent Difficulty: Difficult Page 118 7. What percentage of the respondents of an information technology survey stated they retained and reviewed e-mail messages send and received by their employees? a. 38 percent b. 43 percent c. 49 percent d. 55 percent Difficulty: Difficult Page 118 8. What percentage of the respondents of an information technology survey stated they had a formal e-mail policy in place? a. 80 percent b. 84 percent c. 92 percent d. 96 percent Difficulty: Difficult Page 118 9. . What percentage of the respondents of an information technology stated they used fingerprint scans for security? a. 0 percent b. 2 percent c. 4 percent d. 5 percent Difficulty: Difficult Page 119

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Four Schools of Ethical Thought 10. Phenomenologists believe that: a. doing well is based on the specific set of circumstances pertaining to that issue b. decision makers should observe the behavior of individuals to conclude what is good and ethical behavior c. decision makers need to gather information from multiple sources before a decision can be made d. doing well can only be evaluated if it satisfies the needs of all the critical stakeholders.

Difficulty: Moderate Page 119 11. Positivists believe that: a. doing well is based on the specific set of circumstances pertaining to that issue b. decision makers should observe the behavior of individuals to conclude what is good and ethical behavior c. decision makers need to gather information from multiple sources before a decision can be made d. doing good can only be evaluated if it satisfies the needs of all the critical stakeholders Difficulty: Moderate Page 119 12. Collective rule-based ethics corresponds with: a. ethical egoism b. utilitarianism c. Kant’s ethics d. Sidgwick’s dualism Difficulty: Moderate Page 120 13. Collective consequentialist corresponds with the philosophy of: a. Plato b Socrates c. Aristotle d. Thomas Hobbes Difficulty: Moderate Page 120 14. Individual consequentialist corresponds with the philosophy of: a. Adam Smith b. Jeremy Bentham c. John Stuart Mill d. John Locke Difficulty: Moderate Page 120

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Management Issues and Policy Areas For Information Technology 15. Which of the following is not a policy area that can address information technology management issues? a. Workers’ Competitiveness b. Intellectual Rights c. Communication Rights d. Data Policy Difficulty: Moderate Page 121 16. Which of the following is not a management issue for information technology? a. control b. speed c. accuracy d. control Difficulty: Moderate Page 121 17. Capturing, tracking and monitoring information flows is which management issue related to information technology? a. Ownership b. Control c. Accuracy d. Security Difficulty: Moderate Page 122

The Next Step: Critical Analysis 18. Which of the following is not included in the information technology critical analysis? a. Utilitarian Goal-based Analysis b. Ethical Egoism-based Analysis c. Rights-Based Analysis d. Duty-Based Analysis Difficulty: Easy Page 123 19. Which of the following analyzes the greatest good to the greatest number of stakeholders? a. Stakeholder analysis b. Utilitarian goal-based analysis c. Common good analysis d. Global good analysis Difficulty: Moderate Page 123

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20. Which of the following analyzes whether the information technology decision impacts a stakeholder’s individual freedoms? a. Stakeholder analysis b. Utilitarian goal-based analysis c. Rights-based analysis d. Duty-based analysis Difficulty: Moderate Page 123 21. Which of the following analyzes whether the manager is being honest and fair to anyone who is impacted by the decision? a. Stakeholder analysis b. Utilitarian goal-based analysis c. Rights-based analysis d. Duty-based analysis Difficulty: Moderate Page 123

Privacy of Employees 22. What act allows employers to consider employees’ e-mail corporate property? a. Electronic Communications Privacy Act b. Electronic Corporate Privacy Act c. Electronic Control Privacy Act d. Electronic Command Privacy Act Difficulty: Difficult Page 124 23. Which of the following is not a benefit of using e-mail? a. cost benefits b. efficiency c. effectiveness d. monitoring Difficulty: Easy Page 125 24. Which of the following is not a cost of using e-mail? a. frivolous use b. information overload c. transfer of inaccurate information d. offensive communications Difficulty: Easy Page 125

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Telephone Monitoring 25. Which act regulates telephone monitoring? a. Electronic Tele-Communication Privacy Act b. Electronic Telephone Privacy Act c. Electronic Communications Privacy Act d. Electronic Data Privacy Act Difficulty: Moderate Page 127

Privacy of Customers 26. What is information technology related “cookie”? a. Allows employers to monitor e-mail activity b. Allows employers to monitor Internet activity c. Allows a company’s website to gather information about their customers d. The nickname of the centrally controlled computer server Difficulty: Easy Page 128 27. Which of the following is not a tactic that is recommended to protect a customer’s data? a. when you buy items online, pay with a credit card b. pay attention c. use your common sense d. do not trust anyone with your data Difficulty: Easy Page 128 28. In the textbook, which company did not properly protect the data of its customers in 2001? a. Exxon b. Pfizer c. Eli Lilly d. Dupont Difficulty: Difficult Page 129 29. Which government act or agency was used to file a compliant against Eli Lilly when they failed to protect the privacy of the customer’s data? a. Electronic Communications Privacy Act b. Electronic Customer Protection Act c. Federal Trade Commission d. Securities and Exchange Commission Difficulty: Difficult Page 129

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30. In the textbook. which company paid a file of $10 million for violating consumer privacy rights? a. Exxon b. Choice Point c. Sears d. Ritz Carlton Difficulty: Difficult Page 129 31. Why was ChoicePoint fined $10 million for violating consumer privacy rights? a. personal information about customers was stolen b. personal information was sold by ChoicePoint without customer authorization c. personal information about customers was illegally available on the firm’s Website d. personal information about customers was e-mailed to other customers Difficulty: Difficult Page 129 32. In the textbook, which company lost customer information when a company computer was stolen? a. Merck b. Fidelity c. Bank of America d. K-Mart Difficulty: Difficult Page 130

The Challenge of Technology 33. Which of the following is not an ethical issue facing Internet usage? a. privacy b. plagiarism c. false advertising d. speed Difficulty: Easy Page 131 34. What percentage of online credit card purchases are fraudulent in Internet retailing? a. 3 percent b. 6 percent c. 11 percent d. 14 percent Difficulty: Difficult Page 131

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The Role of Government Regulations 35. What does WIPO stand for ? a. World Internet Property Organization b. World Intellectual Policing Organization c. World Intellectual Property Organization d. World Internet Policing Organization Difficulty: Difficult Page 133 36. What does the WIPO do? a. protect the copyrights of intellectual property worldwide b. protects customers from receiving fraudulent goods and services c. protects customers from having their information stolen from the Internet d. protects customers from illegal release of personal information from a company Difficulty: Moderate Page 133 37. What Act was passed by U.S. Congress to protect copyrights of intellectual property? a. Electronic Commerce Protection Act b. Digital Millennium Copyright Act c. Global Intellectual Rights Act d. Internet Property Control Act Difficulty: Moderate Page 133 38. What year was the Digital Millennium Copyright Act passed? a. 1997 b. 1998 c. 1999 d. 2000 Difficulty: Difficult Page 133

Technology-Based Fraud 39. Which of the following is not a type of Internet fraud? a. work at home scheme b. market manipulation scheme c. credit card scheme d. pay to protect your own data scheme Difficulty: Moderate Page 134 40. The use of e-mail to try to mimic a legal legitimate company to obtain personal information is called: a. Copying b. Mimicking c. Phishing d. Cookies Difficulty: Easy Page 135

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Internet Attacks 41. The use of computer technology to commit terrorism crimes is called: a. Internet terrorism b. Electronic terrorism c. Cyber terrorism d. Computer terrorism Difficulty: Easy Page 137 42. Software that can be loaded unto a computer without the consent of the computer user is called: a. Spyware b. Codeware c. Hiddenware d. Secretware Difficulty: Easy Page 137

The USA Patriot Act 43. The USA Patriot Act was passed in: a. 2000 b. 2001 c. 2002 d. 2003 Difficulty: Difficult Page 138 44. The USA Patriot Act focuses on: a. monitoring US commercial operations in other countries b. electronic monitoring of different types of communications c. Congressional funding for new military technology d. monitoring of US copyrighted material in other countries Difficulty: Easy Page 138

True/False Questions 45. The Hyatt hotel was one of the hotels discussed in “We Thought You Wanted The Extra Pillow”. a. True b. False Difficulty: Easy Page 116-117 46. In the bathroom of the Orlando Peabody, a guest complained about the loud noise coming from another guest’s room. a. True b. False Difficulty: Easy Page 117

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47. Over a quarter of the companies that responded to an information technology survey stated they fired an employee for misusing the Internet. a. True b. False Difficulty: Difficult Page 117 48. Over three quarter of the companies that responded to an information technology survey stated they monitor employees’ computers to determine which Web sites had been selected. a. True b. False Difficulty: Difficult Page 118 49. Over one half of the companies that responded to an information technology survey stated they monitor the amount of time employees spend on the telephone. a. True b. False Difficulty: Difficult Page 118 50. Phenomenologists believe that decision makers should observe the behavior of individuals to determine good and ethical behavior. a. True b. False Difficulty: Moderate Page 119 51. Positivists believe that doing good is based on a specific set of circumstances. a. True b. False Difficulty: Moderate Page 119 52. Collective rule-based ethics is based on the philosophy of Kant’s ethics. a. True b. False Difficulty: Moderate Page 120 53. Collective consequentialists based ethics is based on the work of Socrates. a. True b. False Difficulty: Moderate Page 120 54. Individual consequentialists based ethics is based on the work of Adam Smith. a. True b. False Difficulty: Moderate Page 120

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55. Organizing is a management issue in information technology. a. True b. False Difficulty: Moderate Page 121 56. Controlling is a management issue in information technology. a. True b. False Difficulty: Moderate Page 121 57. Workers’ competitiveness is a policy area for information technology. a. True b. False Difficulty: Moderate Page 121 58. Suppliers rights are a policy area for information technology. a. True b. False Difficulty: Easy Page 121 59. Stakeholder analysis is a step in the information technology critical analysis. a. True b. False Difficulty: Easy Page 123 60. Security-based analysis is a step in the information technology critical analysis. a. True b. False Difficulty: Moderate Page 123 61. Access to resources is a benefit of using e-mail a. True b. False Difficulty: Moderate Page 125 62. Loss of control is a cost of using e-mail. a. True b. False Difficulty: Moderate Page 125 63. According to the textbook, one company has electronically tagged their employees to monitor all their movements. a. True b. False Difficulty: Moderate Page 126

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64. The Electronic Communications Privacy Act allows firms to monitor business related phone calls. a. True b. False Difficulty: Moderate Page 127 65. Eli Lilly was fined for violating customer privacy laws by allowing unauthorized access to personal information. a. True b. False Difficulty: Moderate Page 129 66. ChoicePlus was charged for selling personal customer information to a third party. a. True b. False Difficulty: Moderate Page 129 67. Eleven percent of all retail credit card transactions on the Interest are fraudulent. a. True b. False Difficulty: Moderate Page 131 68. WIPO has two treaties that protect the copyrights of intellectual property worldwide. a. True b. False Difficulty: Moderate Page 133 69. Phishing is the use of mail to try to mimic a legal, legitimate company to obtain personal information. a. True b. False Difficulty: Easy Page 135 70. Cyberterrorism is the use of computer technology to commit terrorism crimes. a. True b. False Difficulty: Easy Page 137 71. Spyware is software that can be loaded onto a computer so the computer operations can be monitored by an outside party without the consent of the computer user. a. True b. False Difficulty: Easy Page 137

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72. The USA PATRIOT Act was passed in a response to the terrorist attack of 9/11. a. True b. False Difficulty: Easy Page 138

Short Answer Questions 73. How does a manager balance the freedom of the employees and the requirement to control their information technology?

This balancing act is a continuous challenge for every manager. It is expected and required that a manager manage his or her assets including the physical and human resources. The manager has a responsibility to his or her supervisor to ensure that no laws or ethical standards have been violated with the use of information technology. However, the manager must also work within the framework of the employee’s rights when determining what types of controls are appropriate for information technology monitoring.

74. What do you think the most critical information technology issue in the future will be for firms?

It could be argued that the most critical information technology issue has to relate to the continuous high level of security of confidential information pertaining to not only the firm’s customer and employees but also proprietary information pertaining to the firm’s competitive advantage. It is expected that rogue outsiders will continue to challenge any and all security systems in place at every firm in the world. As a result, information technology must continue to evolve from a security perspective in order to guarantee the protection of this sensitive information.

75. What should the role of the government be related to information technology issues?

The government will continue to play a critical role in the establishment of the acceptable and appropriate frameworks for information technology issues. The USA PATROIT Act highlights that a government can quickly seize control over areas which some people claim violate their individual rights and freedoms. As a result, governments participating in information technology issues continue to examine the balance between the safety of the majority while still protecting the rights and freedoms of all.

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Chapter 8 Strategic Planning and Corporate Culture Multiple Choice Questions When Ethics Drive a Change in Strategy 1. Which company is the focus of “When Ethics Drive a Change is Strategy”? a. Bank of America b. Merrill Lynch c. Citigroup d. Chase Manhattan Difficulty: Easy Page 141 2. Who was the new CEO that implemented the new corporate culture in “When Ethics Drive a Change is Strategy”? a. Charles Prince b. Sanford Weill c. Willard Butcher d. Robert Willlumstad Difficulty: Difficult Page 141 3. Which of the following was not a previous ethical issue Citigroup had to address before the new CEO took over in “When Ethics Drive a Change in Strategy”? a. lack of separation between financial analyst functions and investment bank functions b. aggressive bond trading strategies c. purposely misleading customers d. lack of control over rogue traders Difficulty: Difficult Page 141 4. What type of institution did the new CEO at Citigroup consider the company to be in “When Ethics Drive a Change in Strategy”? a. quadpublic institution b. quasipublic institution c. multipublic institution d. privatepublic institution Difficulty: Difficult Page 141 5. What is a quasipublic institution in “When Ethics Drive a Change in Strategy? a. an organization that is owned by both public and private investors b. an organization that focuses on different demographic groups c. an organization that focuses on all the firm’s stakeholders instead of just the investors d. an organization that has both private companies and the government as customers Difficulty: Moderate Page 141

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Ethics and Strategic Planning 6. The process in which future courses of action are developed to achieve the firm’s short and long-term goals is called: a. Strategic Goals b. Strategic Objectives c. Strategic Planning d. Strategic Implementation Difficulty: Easy Page 141 7. Strategic Planning is: a. the formal process developed by the CEO b. the process in which future courses of action are developed to achieve the firm’s goals c. the process in which a firm’s strategic plan is compared with its competitors d. the process in which a firm’s plan becomes strategic in nature Difficulty: Easy Page 141 8. Which of the following questions is not asked when deciding on how to resolve an ethical issue? a. Why is this bothering me? b. Is it my responsibility c. What will the estimated cost be? d. What do others think?

Difficulty: Moderate Page 141-142.

9. Am I being true to myself? is also called the: a. truthfulness test b. honesty test c. mirror test d. reflective test Difficulty: Easy Page 142.

10. In Sweden, what percentage of corporations referred to their code of ethics during the strategic planning process? a. 35 percent b. 55 percent c. 75 percent d. 85 percent Difficulty: Difficult Page 142.

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11. In Sweden, what percentage of public sector organizations referred to their code of ethics during the strategic planning process? a. 43 percent b. 63 percent c. 73 percent d. 85 percent Difficulty: Difficult Page 142.

12. In the Ethical Decision Tree model (Figure 8-1), what is the first step in the model? a. Would it be ethical or not to take the action? b. Does it maximize shareholder value? c. Do our ethical standards support this action? d. Is the proposed action legal?

Difficulty: Moderate Page 143.

13. In the Ethical Decision Tree model (Figure 8-1), what is the third step in the model? a. Would it be ethical or not to take the action? b. Does it maximize shareholder value? c. Do our ethical standards support this action? d. Is the proposed action legal?

Difficulty: Moderate Page 143

A Manager’s Ability To Develop Trust, Commitment, And Effort 14. In Hosmer’s Model of Trust, Commitment, and Effort (Figure 8-2), which of the following is not a question asked in the model? a. What is duty? b. What is truth? c. What is right? d. What is integrity?

Difficulty: Moderate Page 144 15. In Hosmer’s Model of Trust, Commitment, and Effort (Figure 8-2), which of the following is not a type of model issue? a. moral problems b. moral standards c. moral courage d. moral reasoning Difficulty: Moderate Page 144

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16. In Hosmer’s Model of Trust, Commitment, and Effort (Figure 8-2), which model issue corresponds with the question “What is duty?” a. moral problems b. moral standards c. moral courage d. moral reasoning Difficulty: Moderate Page 144 17. In Hosmer’s Model of Trust, Commitment, and Effort (Figure 8-2), which model issue corresponds with the question “What is integrity?” a. moral problems b. moral standards c. moral courage d. moral reasoning Difficulty: Moderate Page 144 18. In Hosmer’s Model of Trust, Commitment, and Effort (Figure 8-2), which model issue corresponds with the question “What is right?” a. moral problems b. moral standards c. moral courage d. moral reasoning Difficulty: Moderate Page 144 19. In Hosmer’s Model of Trust, Commitment, and Effort (Figure 8-2), which model issue corresponds with effort? a. moral problems b. moral standards c. moral courage d. moral reasoning Difficulty: Moderate Page 144 20. In Hosmer’s Model of Trust, Commitment, and Effort (Figure 8-2), which model issue corresponds with trust? a. moral problems b. moral standards c. moral courage d. moral reasoning Difficulty: Moderate Page 144

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21. In Hosmer’s Model of Trust, Commitment, and Effort (Figure 8-2), which model issue corresponds with commitment in the model? a. moral problems b. moral standards c. moral courage d. moral reasoning Difficulty: Moderate Page 144 22. “Power tends to corrupt, and… a. power corrupts absolutely.” b. absolute power corrupts absolutely.” c. corruptive power is absolute.” d. power absolutely corrupts.”

Difficulty: Moderate Page 144 23. Who said “Power tends to corrupt, and absolute power corrupts absolutely”? a. Aristotle b. Socrates c. William Shakespeare d. Lord Acton Difficulty: Difficult Page 144 24. Who said “With great power comes great responsibility”? a. Spider-man b. Uncle Ben Parker c. Peter Parker d. Batman Difficulty: Moderate Page 144 25. What was the Stanford Prison Experiment? a. State prisoners were given different mind altering drugs by Stanford professors b. Stanford California established a prison that did not have any fences blocking escapes c. Stanford survey participants pretended to be guards and prisoners so that the effect of power could be observed d. Prisoners were allowed to take classes at Stanford if they could negotiate with the university Difficulty: Moderate Page 144 26. According to the textbook, the ability to change the viewpoint of another person is called: a. Persuasion b. Influence c. Convince d. Negotiation Difficulty: Easy Page 145

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27. Niccolo Machiavelli wrote: a. The Leader b. The Prince c. The King d. The Negotiator Difficulty: Easy Page 145 28. Using whatever means possible to create and maintain power is called: a. Controlism b. Mainipulatism c. Machiavellianism d. Influencalism Difficulty: Easy Page 145 29. Mach-IV is: a. the independent variable used to study power b. a measurement survey of an individual’s Machiavellianism c. an analogy used to explain how quickly someone can seize power d. a machine that can be used to evaluate an individual’s ability to influence others Difficulty: Moderate Page 145

The Curse of Unethical Cultures 30. Which of the following is not a factor that would affect whether an employee will commit fraud or not? a. financial condition of the organization b. internal accounting controls c. the competitive pressure of the industry d. the state of the economy Difficulty: Moderate Page 146

The Responsibility of Managers 31. Which book first presented the moral responsibilities of a manager? a. The Morals of the Executive b. The Ethics of the Executive c. The Values of the Executive d. The Functions of the Executive Difficulty: Difficult Page 146 32. What was the title of the book written by Chester Barnard? a. The Morals of the Executive b. The Ethics of the Executive c. The Values of the Executive d. The Functions of the Executive Difficulty: Difficult Page 146

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33. Chester Barnard stated that what should executives inspire in the common purpose of the organization? a. values b. ethics c. faith d. morals Difficulty: Difficult Page 146 34. What is the process called that evaluates the ethical values within the firm? a. values analysis b. morals analysis c. ethical analysis d. integrity analysis Difficulty: Difficult Page 146

How To Address Ethical Decision Making From A Global Perspective 35. In Roberson and Crittenden’s Mapping of Ethical Philosophies (Figure 8-3), which ethical philosophy corresponds with an Eastern culture and a Socialist Economic Ideology? a. Egoism b. Formalism c. Moral Relativism d. Utilitarianism Difficulty: Moderate Page 148 36. In Roberson and Crittenden’s Mapping of Ethical Philosophies (Figure 8-3), which ethical philosophy corresponds with a Western culture and a Capitalist Economic Ideology? a. Egoism b. Formalism c. Moral Relativism d. Utilitarianism Difficulty: Easy Page 148 37. In Roberson and Crittenden’s Mapping of Ethical Philosophies (Figure 8-3), which ethical philosophy corresponds the closest with a Western culture and a Socialist Economic Ideology? a. Egoism b. Formalism c. Moral Relativism d. Utilitarianism Difficulty: Moderate Page 148

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38. In Roberson and Crittenden’s Mapping of Ethical Philosophies (Figure 8-3), which ethical philosophy is considered in-between a Capitalist and a Socialist Economic Ideology? a. Egoism b. Formalism c. Moral Relativism d. Utilitarianism Difficulty: Moderate Page 148

How To Address Ethical Crisis And Disaster Recovery 39. In the Typology of Ethical Crises Categories (Table 8-2), copyright infringement would be considered: a. Internal-Normal b. External-Normal c. Internal-Abnormal d. External-Abnormal Difficulty: Moderate Page 149 40. In the Typology of Ethical Crises Categories (Table 8-2), industrial espionage would be considered: a. Internal-Normal b. External-Normal c. Internal-Abnormal d. External-Abnormal Difficulty: Difficult Page 149 41. In the Typology of Ethical Crises Categories (Table 8-2), product recall would be considered: a. Internal-Normal b. External-Normal c. Internal-Abnormal d. External-Abnormal Difficulty: Moderate Page 149 42. In the Typology of Ethical Crises Categories (Table 8-2), reputation issues would be considered: a. Internal-Normal b. External-Normal c. Internal-Abnormal d. External-Abnormal Difficulty: Moderate Page 149

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43. Whether the crisis issue is internal or external is called the: a. Vortex of Crisis b. Center of Gravity c. Focus of Crisis d. Issue Determination Difficulty: Difficult Page 149

Ethical Leadership: A Link Between Strategic Planning And Corporate Culture 44. Which of the following is not a trait of a moral person? a. Integrity b. Honesty c Truthfulness d. Trustworthiness Difficulty: Moderate Page 150 45. Which of the following is not a behavior of a moral person? a. Do the Right Thing b. Being Open c. Presenting Your Values To Others d. Personal Morality Difficulty: Moderate Page 150 46. Which of the following is not a decision making issue of a moral person? a. Hold on to values b. Be objective/fair c. Ask others for input d. Concern for Society Difficulty: Moderate Page 150 47. Which of the following is not a role of a moral manager? a. Role modeling through visible action b. Rewards and discipline c. Report all problems to the ethics officer d. Communicating about ethics and values Difficulty: Easy Page 150 48. A Strong Moral Manager and a Weak Moral Person results in what kind of leader? a. Hypocritical b. Ethical c. Unethical d. Inconsistent Difficulty: Moderate Page 152

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49. A Weak Moral Manager and a Weak Moral Person results in what kind of leader? a. Hypocritical b. Ethical c. Unethical d. Inconsistent Difficulty: Easy Page 152 50. A Strong Moral Manager and a Strong Moral Person results in what kind of leader? a. Hypocritical b. Ethical c. Unethical d. Inconsistent Difficulty: Easy Page 152 51. A Weak Moral Manager and a Strong Moral Person results in what kind of leader? a. Hypocritical b. Ethical c. Unethical d. Inconsistent Difficulty: Moderate Page 152 52. The shared values and beliefs of employees within any given organization are called: a. Corporate climate b. Corporate values c. Corporate culture d. Corporate beliefs Difficulty: Easy Page 153 53. Factors such as what is seen and heard within a firm are called: a. symbols b. artifacts c. legacies d. identifiers Difficulty: Moderate Page 153 54. Which of the following is not one of Schein’s three levels of culture? a. symbols b. artifacts c. shared values d. basic assumptions Difficulty: Moderate Page 154

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55. What groups within the firm learn about what is acceptable and not acceptable is called: a. norms b. shared values c. cognitive learning d. corporate learning Difficulty: Moderate Page 154 56. The agreed starting point for decision making within the firm is called: a. strategic planning b. strategic decision making c. basic assumptions d. initial cognition Difficulty: Moderate Page 154

How Managers Can Change A Corporate Culture 57. The observation of the leader’s behavior as a role model is an example of: a. Primary Embedding Mechanisms b. Secondary Embedding Mechanisms c. Primary Articulation and Reinforcement Mechanisms d. Secondary Articulation and Reinforcement Mechanisms Difficulty: Difficult Page 155 58. The system and procedures of the organization is an example of: a. Primary Embedding Mechanisms b. Secondary Embedding Mechanisms c. Primary Articulation and Reinforcement Mechanisms d. Secondary Articulation and Reinforcement Mechanisms Difficulty: Difficult Page 155

True/False Questions 59. Charles Prince was the CEO who increased the ethical focus at Citigroup. a. True b. False Difficulty: Easy Page 141 60. Developing a financial forecast would be an example of strategic planning. a. True b. False Difficulty: Difficult Page 141

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61. “Is the proposed action legal” is the first decision in the Ethical Decision Tree. a. True b. False Difficulty: Moderate Page 143 62. “What is the truth?” is one of the questions asked in Hosmer’s Model of Trust, Commitment and Effort. a. True b. False Difficulty: Moderate Page 144 63. “What is integrity” corresponds with moral courage in Hosmer’s Model of Trust, Commitment and Effort. a. True b. False Difficulty: Moderate Page 144 64. According to the textbook, the ability to change the viewpoint of another person based on your actions is called persuasion. a. True b. False Difficulty: Moderate Page 145 65. Chester Barnard was the author of the book “The Values of the Executive” a. True b. False Difficulty: Difficult Page 146 66. Moral Relativism corresponds with an Eastern culture and a Capitalist ideology. a. True b. False Difficulty: Difficult Page 148 67. Formalism corresponds with an Eastern culture and a Socialist ideology. a. True b. False Difficulty: Difficult Page 148 68. Records tampering would be an example of an Internal-Normal crisis issue. a. True b. False Difficulty: Difficult Page 149

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69. A strike would be an example of an External-Normal crisis issue. a, True b. False Difficulty: Moderate Page 149 70. Truthfulness is a trait of a moral person a. True b. False Difficulty: Moderate Page 150 71. Rewards and Discipline is a characteristic of a moral manager a. True b. False Difficulty: Easy Page 150 72. A weak moral person and a strong moral manager is called an Inconsistent leader. a. True b. False Difficulty: Moderate Page 152 73. A strong moral person and a weak moral manager is called a Hypocritical leader. a. True b. False Difficulty: Moderate Page 152 74. The shared values and beliefs of employees within any given organization is called a corporate culture. a. True b. False Difficulty: Easy Page 153 75. Basic assumptions is par of Schein’s Three Levels of Culture. a. True b. False Difficulty: Easy Page 154 76. How is strategic planning relevant when corporate ethics are discussed?

Strategic planning is a critical step in both the formulation and implementation of the strategic ethical focus of the firm. It is through the strategic planning process that a firm establishes its short-term and long-term goals. As a result, it is imperative that ethical standards are integrated in the strategic planning process. Therefore, managers should not consider ethics as a stand alone decision. Ethics should be naturally integrated into the decision making process so that it is considered just one more variable to consider for ANY strategic decision made by the firm. If ethics is not incorporated in the strategic

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planning process the firm will be vulnerable for ethical lapses and the consequences of those lapses in the future.

77. From a firm perspective, how would you rank in order of desirability of the different types of leaders presented in the moral person and moral manager matrix?

Of course, the highest ranking order is the easiest since it would automatically be the ethical leader. One of the foundation points of this textbook is to stress to the students that they have the control over how they manage others. By assuming an ethical leadership role as is highlighted with the ethical leader, these managers guide both themselves and others by the ethical standards established within them.

The next most desirable leader would be the inconsistent leader. This type of leader could be considered a transition ethical leader. An inconsistent leader has the tools to become an ethical leader since he or she has the strong ethical values of a moral person. As a result, the only problem with the inconsistent leader is that he or she has not been able to transfer these traits to others via their management role. Therefore, it is desirable and feasible for an inconsistent leader to move and become an ethical leader.

The third most desirable leader would be the hypocritical leader. Although the hypocritical leader has strong ethical management skills, he or she does not have strong individual ethical skills needed to become a moral person. This type of leader is dangerous to a firm because a hypocritical leader is not trustworthy. As a result, creditability and believing the manager is telling the truth is met with skepticism.

Therefore, as was the case of Martha Stewart, a hypocritical leader must build back trust in their relationship with the subordinates before he/she could move to become an ethical leader.

The fourth and last most desirable leader would be the unethical leader. An unethical leader neither has the traits of a moral person nor the ethical management skills of a manager. As a result, it would be highly unlikely that an unethical leader would ever become an ethical leader.

78. Why is culture so important in the study of business ethics?

Corporate culture could be considered the glue that holds the organization together. As a result, corporate culture is critical for the implementation of any strategy within the firm.

Therefore, if the corporate culture supports strong ethical standards, it would be much easier for management to execute changes in their strategy. Furthermore, those values and beliefs of the firm’s culture, what is considered acceptable and unacceptable behavior is quickly filtered throughout the organization. Thirdly, an ethically favorable culture creates a more positive work environment for the firm which means that employees are proud to work for the firm and are excited about working for the company. Finally a strong ethical corporate culture can save the company money by reducing the legal and financial costs of having illegal activities occurring within the firm.

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Chapter 9 Ethics and Financial Reporting

Multiple Choice Questions When Is A Doughnut Hole A Real Doughnut Hole?

1. Which company is the focus of “When Is A Doughnut Hole A Real Doughnut Hole?” a. Dunkin Doughnuts b. Little Debbie Doughnuts c. Krispy Kreme Doughnuts d. Hostess Doughnuts Difficulty: Easy Page 160 2. Which state was Krispy Kreme established in? a. California b. New York c. Florida d. North Carolina Difficulty: Moderate Page 160 3. What was the chief reason why Krispy Kreme participated in illegal activities in “When Is A Doughnut Hole A Real Doughnut Hole?” a. they had to deal with undependable suppliers b. they had to meet their aggressive forecasts every quarter c. they had to manipulate the balance sheets in order to borrow money d. they had to change the ingredients in the doughnuts in exchange for bribes Difficulty: Moderate Page 160 4. How did Krispy Kreme manipulate their revenue in “When Is A Doughnut Hole A Real Doughnut Hole?” a. They “sold” doughnuts that did not exist b. They counted the sales to charity groups twice c. They sold doughnut making equipment to suppliers before they needed it. d. They recorded coffee sales at the same level as doughnut sales Difficulty: Easy Page 160

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The Role of Creative Accounting 5. The deviation from the traditional methods used to interpret an accounting rule or standard is called: a. Aggressive accounting b. Creative Accounting c. Interpretive Accounting d. Deviate Accounting Difficulty: Easy Page 161 6. The origin of creative accounting is claimed to have come from: a. Enron b. WorldCom c. Tyco d. The Producers Difficulty: Moderate Page 161

The Role of Financial Reporting 7. Which of the following is not a primary objective of financial reporting? a. makes financial decisions that relate to the firm b. help the reader determine the level of cash flows c. help the reader determine the strategic focus of the firm d. help identify the economic resources and obligations to the firm Difficulty: Moderate Page 161 8. Based on Table 9-1, the ethical perspective of utilitarian beliefs would correspond with which accounting application a. the gap between short-term and long-term benefits b. the financial records need to be accurate for everyone’s use c. each accounting decision must help the greatest number d. each accounting report must be acceptable based on accounting standards.

Difficulty: Difficult Page 162 9. Based on Table 9-1, the ethical perspective of personal virtues would correspond with which accounting application? a. courage and integrity protect accounting’s credibility b. each accountant must be able to be comfortable with the number presented in the statements c. the financial statements reflect the ethical beliefs of the firm d. the financial statements are accurate and timely Difficulty: Difficult Page 162

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10. Based on Table 9-1, the ethical perspective of individual rights would correspond with which accounting application? a. each investor has the right to review accurate financial statements b. each investor has the right to question the transparency of any financial transaction c. the firm must focus on stakeholders’ rights when making accounting decisions d. the firm must consider the impact of their employees when financial information is released Difficulty: Difficult Page 162 11. Based on Table 9-1, the ethical perspective of economic efficiency would correspond with which accounting application? a. accountants must focus on always reducing costs b. management must embrace total quality management in production and in developing financial information. c. accountants must understand the cost of inaccurate financial statements d. management must highlight efficiency benefits in the financial statements Difficulty: Difficult Page 162 12. Based on Table 9-2, External Realism makes what presupposition about external financial reporting? a. All conceptual frameworks are based on a human perspective, and therefore are socially constructed. b. The financial statements are independent of the actual items they represent. c. The accountants’ ability to make valid judgments about the economic reality of the financial statements is influenced by cultural, economic, political and psychological factors. d. Information and knowledge is epistemologically objective only to the point where society can agree.

Difficulty: Difficult Page 163 13. Based on Table 9-2, Subjective Judgment makes what presupposition about external financial reporting? a. All conceptual frameworks are based on a human perspective, and therefore are socially constructed. b. The financial statements are independent of the actual items they represent. c. The accountants’ ability to make valid judgments about the economic reality of the financial statements is influenced by cultural, economic, political and psychological factors. d. Information and knowledge is epistemologically objective only to the point where society can agree.

Difficulty: Difficult Page 163

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14. Based on Table 9-2, Conceptual Relativism makes what presupposition about external financial reporting? a. All conceptual frameworks are based on a human perspective, and therefore are socially constructed. b. The financial statements are independent of the actual items they represent. c. The accountants’ ability to make valid judgments about the economic reality of the financial statements is influenced by cultural, economic, political and psychological factors. d. Information and knowledge is epistemologically objective only to the point where society can agree.

Difficulty: Difficult Page 163 15. Based on Table 9-2, Commitment to Rationalism makes this presupposition about external financial reporting? a. All conceptual frameworks are based on a human perspective, and therefore are socially constructed. b. The financial statements are independent of the actual items they represent. c. The accountants’ ability to make valid judgments about the economic reality of the financial statements is influenced by cultural, economic, political and psychological factors. d. Information and knowledge is epistemologically objective only to the point where society can agree.

Difficulty: Difficult Page 163

Where Were The Auditors?

16. Which of the following is a not potential conflict of interest? a. Auditor-firm b. Firm-Professional Standards c. Shareholder-Management d. Self Interest-Professional Standards Difficulty: Difficult Page 164-165 17. If an auditor has a financial interest in the firm, it would correspond to which type of conflict of interest? a. Auditor-firm b. Firm-Professional Standards c. Shareholder-Management d. Self Interest-Professional Standards Difficulty: Moderate Page 165

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18. If management wanted, by any means, to make sure that a “clean audit” was presented in the firm’s annual report, it would correspond to which type of conflict of interest? a. Auditor-firm b. Firm-Professional Standards c. Shareholder-Management d. Self Interest-Professional Standards Difficulty: Moderate Page 165 19. If the CFO stated he needed to have a “clean audit” to keep his job, it would correspond to which type of conflict of interest? a. Auditor-firm b. Firm-Professional Standards c. Shareholder-Management d. Self Interest-Professional Standards Difficulty: Moderate Page 165

Steps Of An Audit 20. Which of the following is in the first step or the getting started stage of an audit? a. The audit firm performs a risk assessment test b. The audit firm inspects the company’s computer c. The audit firm inspects the firm’s internal accounts d. The audit firm reviews the firm’s previously reported financial statements Difficulty: Difficult Page 165 21. Which of the following occurs during the planning stage of an audit? a. The audit firm meets with the CEO b. The audit firm meets with the Board of Directors c. The audit firm inspects nonroutine transactions d. The audit firm reviews the strategic plan of the firm Difficulty: Difficult Page 165 22. Which of the following is not in the final review stage of an audit? a. The company gives the auditor a draft of the financial statements b. The auditor calls customers who owe the company money c. The audit firms tests the company’s accounting and inventory systems d. The auditor investigates related-party transactions.

Difficulty: Difficult Page 165

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Current Trends in Auditing 23. The founder of which CPA firm was the first well-known auditor to address fraud a. Arthur Andersen b. Deliotte and Touche c. KPMG d. PriceWaterhouseCoopers Difficulty: Difficult Page 167 24. When was the Securities and Exchange Commission established? a. 1929 b. 1930 c. 1931 d. 1934 Difficulty: Difficult Page 167 25. In what decade were external auditors allowed to solicit clients in the United States? a. 1950s b. 1960s c. 1970s d. 1980s Difficulty: Difficult Page 167 26. What type of audit model is based on the audit firm focusing a disproportionate amount of time on high-risk areas within the firm? a. high-risk model b. risk-adverse model c. risk-exception model d. risk-based model Difficulty: Moderate Page 167 27. Which of the following is not a question auditors should ask to help detect fraud? a. Why does the client use multiple banks? b. Why is there missing information, such as an address, on the work invoice? c. Why does the company use only cashiers’ checks for financial transactions? d. Why does the firm not rotate their suppliers?

Difficulty: Easy Page 168

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28. Which of the following is not a clue that may indicate financial trouble for a firm? a. Large financial gap between sales and receivables growth b. Large financial gap between domestic and international sales c. Large financial gap between sales and inventory growth d. Heavy deficit in cash as compared to their levels of net income Difficulty: Moderate Page 168

AICPA Code Of Professional Conduct 29. AICPA is the short form of: a. American Inquirers of Certified Public Accountants b. All Incidents of Creative Public Accountants c. American Institute of Certified Public Accountants d. American Institute of Chartered Public Accountants Difficulty: Easy Page 170 30. Which of the following is not one of the principles of the AICPA’s code of conduct? a. integrity b. due care c. scope d. trustworthiness Difficulty: Moderate Page 170

Gramm-Leach Bliley Act 31. The Gramm-Leach-Bliley Act has also been called: a. the Fannie Mae Relief Act b. the Merrill Lynch Relief Act c. the Citigroup Relief Act d. the Bank of America Relief Act Difficulty: Difficult Page 173 32. Which European country passed a law in 2005 that required board members to publicly disclose their salaries? a. England b. France c. Germany d. Italy Difficulty: Difficult Page 173

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Major Components Of A Firm’s Financial Statements 33. Which of the following is not a firm financial statement? a. Balance Sheet b. Income Statement c. Statement of Revenue d. Statement of Cash Flows Difficulty: Easy Page 175 34. The balance sheet is also called the a. Statement of financial performance b. Statement of assets and liabilities c. Statement of financial position d. Statement of financial security Difficulty: Moderate Page 175 35. The statement that provides information pertaining to the company’s cash receipts and payments is called: a. Balance Sheet b. Income Statement c. Statement of Revenue d. Statement of Cash Flows Difficulty: Easy Page 175-176 36. The statement that provides a summary of the firm’s net income is called: a. Balance Sheet b. Income Statement c. Statement of Revenue d. Statement of Cash Flows Difficulty: Easy Page 176 37. GAAP stands for: a. Greater American Accounting Practitioners b. Generally Accepted Accounting Principles c. Giant Applied Acceptable Principles d. Good Accountants Accept Punishment Difficulty: Easy Page 176

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Accounting Shenanigans Or Tricks Of The Trade 38. Which of the following is not a method that can be used to manipulated financial statements? a. revenue recognition b. lease accounting c. generally accepted auditing standards d. cookie jar accounting Difficulty: Moderate Page 176-177 39. In the beginning scenario when the corporate headquarters of Krispy Kreme shipped the doughnut making equipment to the franchise owners even when they didn’t need, this was an example of which ‘tricks of the trade’ method? a. revenue recognition b. lease accounting c. one-time charges d. cookie jar accounting Difficulty: Moderate Page 176 40. Smoothing the earnings could be an example of which ‘tricks of the trade’ method? a. revenue recognition b. earnings management c. one-time charges d. cookie jar accounting Difficulty: Difficult Page 178 41. When Enron CEO Jeff Skilling formed partnerships with Enron which were used to reduce Enron’s debt, this was an example of which manipulated method? a. revenue recognition b. off-balance sheet items c. one-time charges d. cookie jar accounting Difficulty: Difficult Page 178

True/False Questions 42. Krispy Kreme is the featured firm in “When Is A Doughnut Hole A Real Doughnut Hole?” a. True b. False Difficulty: Easy Page 160

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43. Krispy Kreme has their headquarters in Boston, MA. a True b. False Difficulty: Moderate Page 160 44. Krispy Kreme would always set a quarterly sales target which they would always have to achieve. a. True b. False Difficulty: Moderate Page 160 45. Krispy Kreme would try to increase revenue by forcing the franchise owners to buy dough and other ingredients before they were needed. a. True b. False Difficulty: Moderate Page 160 46. The origin of the term creative accounting can be linked to former Enron CEO, Ken Lay. a. True b. False Difficulty: Moderate Page 161 47. In a parody of the Nobel Prize awards, unethical managers from different firms were given awards for developing the concept of “imaginary numbers” a. True b. False Difficulty: Moderate Page 161 48. Identifying the economic resources and obligations to the firm is one of the primary objectives of financial reporting. a. True b. False Difficulty: Easy Page 162 49. Identifying the relative market share position of the firm is one of the primary objectives of financial reporting. a. True b. False Difficulty: Moderate Page 162 50. Having inaccurate financial statements that can harm society would correspond with the ethical perspective of distributive justice. a. True b. False Difficulty: Difficult Page 162

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51. Having rules and principles that are integrated to control self-interests corresponds with the ethical perspective of utilitarian beliefs. a. True b. False Difficulty: Difficult Page 162 52. The ability to apply the Golden Rule to accounting decisions corresponds with the ethical perspective of universal rules. a. True b. False Difficulty: Difficult Page 162 53. The Shareholder-Auditor relationship is a potential conflict of interest. a. True b. False Difficulty: Difficult Page 164-165 54. The Self-Interest-Professional Standards relationship is a potential conflict of interest. a. True b. False Difficulty: Moderate Page 165 55. The auditor investigating related-party transactions occurs during the final review stage of an audit. a. True b. False Difficulty: Difficult Page 166 56. Arthur Andersen was the first well-known auditor to address fraud. a. True b. False Difficulty: Moderate Page 167 57. The Securities and Exchange Commission was established during the 1940’s. a. True b. False Difficulty: Moderate Page 167 58. AICPA stands for American Institute of Certified Public Accountants. a. True b. False Difficulty: Easy Page 170

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59. The Gramm-Leach-Bliley Act is sometimes called the “Citigroup Relief Act” a. True b. False Difficulty: Moderate Page 173 60. The Statement of Revenue is one of the firm’s financial statements. a. True b. False Difficulty: Moderate Page 175 61. Raiding the Reserves is also called Cookie Jar Accounting. a. True b. False Difficulty: Moderate Page 177 62. Earnings management is also called Income Smoothing. a. True b. False Difficulty: Moderate Page 178

Short Essay Questions 63. Why do so many illegal activities that occur within a firm relate to the manipulation of the firm’s financial statements?

The firm’s financial statements are the most examined information that is released by any publicly traded firm. The firm’s financial statements highlight the financial health of the firm and can show how the firm’s current strategy is working. In addition, the firm’s financial statements can show what the firm can afford to do in the future. As a result, investors and other stakeholders put a significant weight on the information that is provided in the firm’s financial statements. When top managers are contemplating committing fraudulent acts, they always must figure a way to “get away with it”. The usual way in which they could “get away with it” is to make some kind of adjustments to the reporting of financial transactions that impact the firm’s financial statements. Therefore, in order to “cover up” the crime, the top managers must make adjustments to the firm’s financial reporting which results in misleading and inaccurate financial statements.

64. How has the role of the external auditor evolved over the years?

The first major event was allowing auditors to advertise for new clients. This shifted the focus of the auditing firm from a monitoring and control mechanism for the firm to identifying their clients as revenue generators. Therefore, explosive growth in the number of clients by the auditing firms allowed for large payouts for the partners and lots of work for the auditors. However, the auditing firms quickly depended on not only obtaining new clients but protecting their existing client base

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at any cost. Therefore, the auditing firm would do whatever it could to please its clients even if it resulted in “aggressive accounting” The second major event was the introduction of the risk audit model since it also had a negative significant impact on the auditing process by the accounting firms.

This model assumed that the majority of the operations were at a low risk and therefore the auditors would basically take the word of the management that everything was okay in these areas. Management would direct the auditors to the areas which had higher levels of risk. The underlying problem with this approach is if management was committing fraudulent acts and wanted to protect themselves, they would direct the auditors away from any transactions that could be linked to their fraudulent activities.

The third major event was the passage of the Sarbanes-Oxley Act in 2002. With the passage of SOX, auditing firms had their ability to voluntary control the activities of their members limited. With the formation of the Public Company Accounting Oversight Board, the auditing firms are now under direct jurisdiction of the United States government. As a result, much stricter rules and guidelines are in place.

65. What about financial statements of privately held firms? Does fraud occur in these firms.

The simple answer is that fraud can occur in any organization in which individuals have access to money or are responsible for financial transactions. It is true that privately held firms do not require external auditors for certification of their financial statements since they are not publicly traded companies. However, even though they are privately held, it does not mean that the firm does not have many stakeholders. As a result, from a stakeholder perspective, it should not matter whether the firm is publicly traded or privately held. It is the responsibility of the top mangers to present accurate, transparent financial information to those who have a vested interest in their operations.

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Chapter 10 Establishing A Code Of Ethics And Ethical Guidelines Multiple Choice Questions How We’re Fixing Up Tyco 1. What is Eric Pilmore’s position at Tyco? a. CEO b. CFO c. Vice President of Ethics d. Vice President of Corporate Governance Difficulty: Moderate Page 180 2. What is the major difference between the Tyco scandal and the Enron and WorldCom scandals? a. Enron and WorldCom were over longer time periods b. Enron and WorldCom operated in more countries than Tyco c. Enron and WorldCom went bankrupt and Tyco did not d. Enron and WorldCom’s CEOs were convicted but the Tyco CEO was not.

Difficulty: Moderate Page 180 3. Which of the following company’s code of ethics were not used as a starting point for Tyco’s new code of ethics? a. General Electric b. Johnson & Johnson c. Sony d. Coca-Cola Difficulty: Moderate Page 180

Role Of A Code Of Ethics 4. Which of the following is not the name of a type of statement which presents the firm’s view on ethics? a. Values statement b. Corporate credos c. Ethical Philosophies d. Codes of Ethics Difficulty: Moderate Page 181

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5. Based on Figure 10-1, which of the following is not a factor that impacts the development of ethical standards? a. Institutional b. Personal c. Operational d. Organizational Difficulty: Moderate Page 181

Code Of Ethics and Stakeholders 6. According to Raiborn and Payne, which of the following is not one of the values that should be considered when developing a code of ethics? a. Integrity b. Truthfulness c. Competence d. Utility Difficulty: Difficult Page 181 7. The presentation of the firm’s commitment to unbiased and good-faith interactions is a. Integrity b. Truthfulness c. Justice d. Utility Difficulty: Difficult Page 181 8. The duties and capabilities of the firm to execute its ethical vision is a. Integrity b. Truthfulness c. Competence d. Utility Difficulty: Difficult Page 181 9. Incorporating within the code of ethics values that will do the greatest good to the greatest number is a. Integrity b. Truthfulness c. Competence d. Utility Difficulty: Difficult Page 181 10. Who was one of the first retailers to develop a corporate code of ethics? a. Sears Roebuck b. Macys c. JC Penney d. Wal-mart Difficulty: Moderate Page 182

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Benefits of A Code Of Ethics 11. Which of the following is not a benefit of having a code of ethics? a. Employee loyalty increases b. Supplier loyalty increases c. Managers get more confident d. Competitive positions improve Difficulty: Moderate Page 182

The Role Of Total Responsibility Management And A Code Of Ethics 12. What does TRM stand for? a. Tell Relevant Management b. Total Responsibility Management c. Telephone, Report, Manage d. Total Relationship Management Difficulty: Moderate Page 184 13. TRM is an extension of: a. TRS b. TQS c. TQM d. TRC Difficulty: Moderate Page 184 14. TQM stands for: a. Total Quality Management b. Total Quotient Management c. Total Quality Manufacturing d. Top Quality Manufacturing Difficulty: Easy Page 184 15. Which of the following is not a major stage in the TRM process? a. Introduction Process b. Inspiration Process c. Integration Process d. Innovation Process Difficulty: Moderate Page 184 16. Which of the following is not part of the first stage in the TRM process? a. Stakeholder Engagement Processes b. Foundation Values c. Total Management Review d. Vision Setting and Leadership Commitment Difficulty: Moderate Page 184

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17. The identification of the relationship the firm has with its competitive advantage occurs at which stage of the TRM process? a. Stakeholder Engagement Processes b. Foundation Values c. Total Management Review d. Vision Setting and Leadership Commitment Difficulty: Moderate Page 184 18. The interaction with the stakeholders to ensure their needs are met occurs at which stage of the TRM process? a. Stakeholder Engagement Processes b. Foundation Values c. Total Management Review d. Vision Setting and Leadership Commitment Difficulty: Easy Page 184-185 19. The identification of the minimally acceptable ethical standards occurs at which stage of the TRM process? a. Stakeholder Engagement Processes b. Foundation Values c. Total Management Review d. Vision Setting and Leadership Commitment Difficulty: Difficult Page 185 20. Which of the following does not occur at the second stage of the TRM process? a. Strategy b. Building Human Resource Capacity c. Building Customer Relationships d. Integration into Management Systems Difficulty: Difficult Page 185 21. Which of the following does not occur at the third stage of the TRM process? a. The Responsibility Measurement System b. Top Management Execution c. Transparency and Accountability d. Innovation, Improvement, and Learning Systems Difficulty: Difficult Page 186

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Value Of A Code Of Ethics 22. Which of the following is not a reason why a firm adopts a code of ethics according to Bondy, Matten and Moon? a. Peer pressure within the same industry b. Improvement of customer relationships c. Maintenance of standards along the supply chain d. Employees demand a code of ethics Difficulty: Moderate Page 189 23. According to Table 10-1, which of the following is not good practice in making a firm’s code of conduct more effective? a. Distribute to everyone in the company b. Review and make adjustments to the code when necessary c. Make ethical commitment part of a contract for employment d. Make sure the CEO develops the code of conduct Difficulty: Moderate Page 190 24. According to Table 10-1, which of the following is not poor practice in making a firm’s code of conduct more effective? a. Post the code to the notice board without any action b. View the code as a confidential and/or internal document c. Make exceptions to the code’s application in certain circumstances d. Make sure the code is similar to a competitor’s code of conduct Difficulty: Moderate Page 190

Examples Of Codes Of Ethics 25. Which of the following was not a value in Enron’s code of ethics? a. Respect b. Trustworthiness c. Integrity d. Communication Difficulty: Moderate Page 191

Role of Government Regulations 26. What Section of the Sarbanes-Oxley Act requires companies to disclose whether or not they have a code of ethics? a. 204 b. 404 c. 406 d. 604 Difficulty: Difficult Page 192

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Global Code Of Ethics 27. Which of the following is not a set of Global Ethical Principles? a. Caux Round Table Principles b. OECD Guidelines c. Cadbury Principles d. United Nations Global Impact Difficulty: Difficult Page 194 28. Which of the following is not one of the CRT Principles? a. Businesses need to respect the global rules b. Businesses need to support multilateral trade c. Businesses need to support changes in government when necessary d. Businesses must respect the environment Difficulty: Moderate Page 195 29. Which of the following is not one of the OECD Guidelines for Multinational Enterprises? a. Organizations must respect human rights b. Organizations must start businesses in developing countries c. Organizations must develop and apply effective self-regulatory practices d. Organizations must not be involved in any discriminatory behavior Difficulty: Moderate Page 195 30. Which of the following is not one of the United Nations Global Impact Principles? a. Businesses should allow the freedom of association and recognize collective bargaining of their employees b. Businesses should support a precautionary approach to global environmental challenges c. Businesses should ensure employees around the world are paid a living wage d. Businesses should abolish all child labor Difficulty: Moderate Page 195 31. Which of the following is not a common mistake that companies make when developing global ethics programs? a. Not having consensus on objectives for globalization of their commitment b. Selecting only home country employees to fill any ethics-based positions c. Failing to acknowledge the many cultural differences related to business ethics d. Failing to consult with the firm’s foreign based subsidiaries before a new ethics policy is implemented Difficulty: Difficult Page 196

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True/False Questions 32. Eric Pillmore is the new vice president of ethical affairs at Tyco a. True b. False Difficulty: Moderate Page 180 33. Tyco went bankrupt based on the results of its scandal a. True b. False Difficulty: Moderate Page 180 34. It was Tyco’s former CEO that bought the $6,000 shower curtain. a. True b. False Difficulty: Easy Page 180 35. Social values can impact ethical standards. a. True b. False Difficulty: Moderate Page 181 36. Formalized factors can impact ethical standards. a. True b. False Difficulty: Moderate Page 181 37. A corporate credo is another name for a code of ethics. a. True b. False Difficulty: Easy Page 181 38. Employee guidelines is another name for a code of ethics. a. True b. False Difficulty: Easy Page 181 39. According to Raiborn and Payne, justice can be defined as presenting the firm’s commitment to unbiased and good-faith interactions with its stakeholders. a. True b. False Difficulty: Moderate Page 181

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40. According to Raiborn and Payne, competence is identified as the duties and capabilities of the firm to execute its ethical vision. a. True b. False Difficulty: Moderate Page 181 41. According to Raiborn and Payne, utility is incorporating with the code of ethics values and actions that will do the greatest good to the greatest number. a. True b. False Difficulty: Moderate Page 181 42. JC Penney was one of the first retailers to have a corporate code of ethics. a. True b. False Difficulty: Moderate Page 182 43. Enron’s code of ethics was 10 pages long. a. True b. False Difficulty: Difficult Page 182 44. A firm’s competitive position can improve when the firm has a code of ethics. a. True b. False Difficulty: Moderate Page 182 45. Managers get more confident when the firm has a code of ethics. a. True b. False Difficulty: Moderate Page 182 46. W. Edward Deming was the developer of Total Control Management. a. True b. False Difficulty: Moderate Page 183 47. TQM stands for Total Quality Management a. True b. False Difficulty: Easy Page 184 48. TRM stands for Total Responsibility Management a. True b. False Difficulty: Moderate Page 184

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49. Building Human Resource Capacity is part of the inspiration TRM process. a. True b. False Difficulty: Moderate Page 184-185 50. Stakeholder Engagement Process is part of the inspiration TRM process. a. True b. False Difficulty: Moderate Page 184 51. Strategy is part of the integration TRM process a. True b. False Difficulty: Moderate Page 184 52. Foundation Values is part of the integration TRM process a. True b. False Difficulty: Moderate Page 185 53. Transparency and Accountability is part of the innovation TRM process a. True b. False Difficulty: Moderate Page 186 54. Integration into management systems is part of the innovation TRM process. a. True b. False Difficulty: Moderate Page 186 55. Making sure senior staff set the correct example by “walking the talk” is a good practice in order to make codes of conduct more effective. a. True b. False Difficulty: Easy Page 190 56. Making it difficult for staff to have continuous access to the code of ethics is a poor practice in order to make codes of conduct more effective. a. True b. False Difficulty: Easy Page 190 57. Communication is a value stated in Enron’s code of ethics a. True b. False Difficulty: Moderate Page 191

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58. Section 404 of the Sarbanes-Oxley Act requires companies to disclose whether or not they have a code of ethics. a. True b. False Difficulty: Difficult Page 192 59. CRT stands for Canadian Regulations and Treatment. a. True b. False Difficulty: Moderate Page 194 60. United Nations Global Impact is a set of global ethical principles. a. True b. False Difficulty: Easy Page 194 61. OECD Guidelines for Multinational Enterprises is a set of global ethical principles. a. True b. False Difficulty: Easy Page 194 62. Not offering ethics training in languages other than English is a common mistake firms make when developing global ethics programs. a. True b. False Difficulty: Easy Page 196

Short Essay Questions 63. Why did SOX mandate firms to develop a code of ethics? Shouldn’t developing a code of ethics be an automatic action for all publicly traded companies?

The simple answer is yes. Firms should have from their origin a code of ethics to help their employees be able to determine what acceptable and unacceptable behavior is. This chapter highlighted a number of benefits of having a code of ethics yet some firms continue to resist developing a code. Why? It is difficult to assume the rationale for not having a code of ethics. However, one reason could be that the firms do not believe they need a formal document to help guide the behavior of their employees. Many assume the firm’s corporate culture is enough to help employees determine right from wrong. The problem with this assumption is that the firm believes that not only will employees always do the right thing but they do not have the capacity or desire to do the wrong thing. This oversimplification of human behavior is a dangerous game the firms are playing with their employees. It should not have taken an act of Congress for firms to develop a code of ethics.

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64. Why is a code of ethics important to stakeholders?

A code of ethics provides stakeholders with a written promise of the firm’s behavior.

Although not a legally binding document, a code of ethics outlines to everyone who has a vested interest in the firm what the firm’s ethical philosophy is pertaining to what is acceptable and what is unacceptable behavior. In addition, a code of ethics allows current and potential employees a window into the beliefs of the top level managers. What is included and maybe more importantly what is excluded from the code of ethics can give employees insight into how management views themselves and the world. For potential employees, a code of ethics could be considered one of the initial pieces of information that will be interpreted by the individual before he or she considers working for that firm.

The local community is very interested in a firm’s code of ethics to see what the firm’s beliefs are related to areas such as toxic dumping, releasing of chemicals and other environmental issues. Governments view the code of ethics as an opportunity to ensure the firm’s ethical standards are in line with the government’s legal standards. Suppliers would review the code of ethics to understand whether this firm could be considered a viable long-term business partner. Customers would examine the code of ethics to determine whether they are protected against product defects or other safety concerns.

65. How should firms use the global code of ethics?

The global code of ethics is a good starting point for any multinational firm that wants to be considered as having a positive ethical image globally. The CRT Principles, OECD Guidelines for Multinational Enterprises and the UN Global Impact Principles certainly have some overlap in their principles but that is not a negative point. The overlapping principles such as the treatment of labor underscore the seriousness of these specific principles from a global perspective. Therefore, any multinational firm should ensure that these overlapping principles are included in any global code of ethics. In addition, these global codes of ethics highlight that multinational firms must understand not only the similarities but also the differences between the ethical perspectives of different countries. As a result, any global code of ethics must include a level of flexibility to allow for not only the similarities but the differences as firms compete in multiple countries.

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Chapter 11 Evaluating Corporate Ethics Multiple Choice Questions 1. Which company is the focus of the opening scenario “But We Did Get the Red Eye Out”? a. Fuji b. Eastman Kodak c. Pentax d. Polaroid Difficulty: Moderate Page 197 2. What is the name of the online photo sharing Web site in “But We Did Get the Red Eye Out”? a. EasyView b. Easy File c. EasyShare d. EasyLink Difficulty: Moderate Page 197 3. What was the manager ordered to do to the pictures on the web site? a. Edit out offensive images b. Delete photos when customers did not pay c. Compressing the pictures d. Release pictures to the authorities without consent Difficulty: Moderate Page 198 4. What happened after the manager complained to the company? a. The company corrected the problem. b. She was the only person laid off during a restructuring. c. She was fired immediately. d. She resigned.

Difficulty: Moderate Page 198

Why Firms Need Ethics Training Programs 5. What percentage of firms in a survey done by PricewaterhouseCoopers had been a victim of economic crime from 2003 to 2005? a. 25 percent b. 30 percent c. 35 percent d. 45 percent Difficulty: Difficult Page 198

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6. Which size of firm had the highest percentage of fraud in the PricewaterhouseCoopers survey from 2003 to 2005? a. 1 to 200 employees b. 201 to 1,000 employees c. 1,001 to 5,000 employees d. more than 5,000 employees Difficulty: Difficult Page 198-199 7. What was the fraud percent for companies that had up to 200 employees in the PricewaterhouseCoopers survey from 2003 to 2005? a. 36 percent b. 42 percent c. 48 percent d. 62 percent Difficulty: Difficult Page 198 8. What was the fraud percent for companies that had over 5000 employees in the PricewaterhouseCoopers survey from 2003 to 2005? a. 36 percent b. 42 percent c. 48 percent d. 62 percent Difficulty: Difficult Page 199 9. What was the average financial cost of firms in the PricewaterhouseCoopers survey from 2003 to 2005? a. $520,000 b. $895,000 c. $1.26 million d. $1.7 million Difficulty: Difficult Page 199 10. Which region had the highest percentage of companies that reported fraud in the PricewaterhouseCoopers survey in 2003? a. Central & Eastern Europe b. South & Central America c. Asia-Pacific d. Africa Difficulty: Moderate Page 199

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11. Which region had the highest percentage of companies that reported fraud in the PricewaterhouseCoopers survey in 2005? a. Central & Eastern Europe b. South & Central America c. Asia-Pacific d. Africa Difficulty: Moderate Page 199 12. According to Table 11-2, which industry sector had the highest percentage of companies that reported fraud in the PricewaterhouseCoopers survey in 2005? a. Services b. Retail & Consumer c. Manufacturing d. Financial Services Difficulty: Moderate Page 200 13. Which type of fraud had the highest percentage for companies that reported fraud in the PricewaterhouseCoopers survey in 2003? a. Financial Misrepresentation b. Asset Misappropriation c. Corruption & Bribery d. False Pretences Difficulty: Moderate Page 200 14. Which type of fraud had the highest percentage for companies that reported fraud in the PricewaterhouseCoopers survey in 2005? a. Financial Misrepresentation b. Asset Misappropriation c. Corruption & Bribery d. False Pretences Difficulty: Moderate Page 200 15. Which of the following is not part of the common modus operandi of a typical fraud case? a. timing b. opportunity c. incentive d. rationalization Difficulty: Moderate Page 201 16. Which of the following is the most common way fraud is detected? a. internal controls b. informant c. by chance d. internal audits Difficulty: Moderate Page 201

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Establishing An Ethics Training Program 17. What type of ethics training program would focus on ensuring that the employees follow the rules, and explain what type of punishment would be implemented for employee misconduct? a. Control-oriented b. Compliance-oriented c. Values-oriented d. Monitor-oriented Difficulty: Difficult Page 202 18. What type of ethics training program would focus on the ethical aspirations of the employees as well as foster a forum to develop shared ethical values? a. Control-oriented b. Compliance-oriented c. Values-oriented d. Monitor-oriented Difficulty: Difficult Page 202 19. Based on the work of LeClair and Ferrell, which of the following is not one of the goals of an ethics training program? a. ensure the firm’s ethics values are integrated with the firm’s strategy b. enhance the employees’ knowledge of ethical issues c. develop skills to support a strong ethical climate d. ensures proper ethical decision making by the employees.

Difficulty: Difficult Page 202 20. In a recent study by the International Association of Business Communicators, which percentage of the respondents stated they had not received any formal ethics training? a. 25 percent b. 35 percent c. 45 percent d. 65 percent Difficulty: Difficult Page 202

Establishing A Global Ethics Training Program 21. Which of the following is not a recommended key element by Jackson for a global ethics training program? a. Try to get beyond “rule formalism” b. Realize that the training programs needs to be changed annually c. Provide education on international human rights d. Present a rational dialogue for important international issues when there is dissent Difficulty: Moderate Page 204-205

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22. Based on Table 11-4, which of the following is not a global cultural dimension? a. Individualism vs. Collectivism b. Capitalism vs. Socialism c. Masculinity vs. Femininity d. High Power Distance vs. Low Power Distance Difficulty: Difficult Page 205 23. What type of communication focuses primarily on the actual words spoken? a. High-Context b. Low-Context c. High-Literal d. Low-Literal Difficulty: Moderate Page 206 24. What type of communication focuses on the actual words spoken and also nonverbal cues such as body language? a. High-Context b. Low-Context c. High-Literal d. Low-Literal Difficulty: Moderate Page 206 25. What type of culture is based on the view that the individuals do not want any ambiguity in their jobs? a. High uncertainty avoidance b. Low uncertainty avoidance c. Low risk taking d. Low ambiguity taking Difficulty: Moderate Page 206 26. What type of culture embraces risk and ambiguity? a. High uncertainty avoidance b. Low uncertainty avoidance c. High risk taking d. High ambiguity taking Difficulty: Moderate Page 206 27. What type of culture focus on material goods, status, and accomplishment? a. free market b. capitalist c. masculine d. feminine Difficulty: Moderate Page 206

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28. What type of culture focus on human needs and supporting others? a. utilitarian b. socialist c. masculine d. feminine Difficulty: Moderate Page 206 29. What type of culture embraces the hierarchical relationship that occurs between the manager and the subordinate? a. hierarchical b. bureaucratic c. high power distance d. low power distance Difficulty: Moderate Page 206 30. What type of culture embraces challenging the hierarchical relationship that occurs between the manager and the subordinate? a. chaotic b. quantum change c. high power distance d. low power distance Difficulty: Moderate Page 206

Corporate Ethics Officers 31. Which Congressional Act first encouraged firms to have a corporate ethics officer? a. The Corporate Ethics Act b. The Federal Sentencing Guidelines for Organizations Act c. The Sarbanes-Oxley Act d. The Federal Corporate Compliance Act Difficulty: Moderate Page 209 32. Based on Figure 11-1, which of the following is not a role of an ethics officer? a. company security b. counselor c. whistleblower d. compliance officer Difficulty: Easy Page 209 33. Based on Figure 11-2, which of the following is not a role challenge of an ethics officer? a. Role responsibility b. Role conflict c. Role ambiguity d. Low Task visibility Difficulty: Moderate Page 210

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34. Based on Figure 11-2, which of the following in not an individual factor needed by an ethics officer to be able to have an effective performance? a. Tolerance for ambiguity b. Tolerance for risk taking c. Locus of control d. Individual orientation and leadership behavior Difficulty: Moderate Page 210 35. Based on Figure 11-2, which of the following is not an organization context that can impact the effectiveness of an ethics officer’s performance? a. Resistance to change b. Managerial hierarchy c. Autonomy d. Recruitment Difficulty: Difficult Page 210

Ethical Auditing 36. The regular comprehensive evaluation of the compliance of the firm’s ethical policies and procedures is called: a. ethics review b, ethical quality management c. ethical auditing d. ethical evaluation Difficulty: Easy Page 210 37. Based on Table 11-6, what type of test asks the question “Does this decision prevent or limit the possibility of this issue arising again?” a. Repeating b. Continuous loop c. Preventative d. Post hoc Difficulty: Moderate Page 211 38. Based on Table 11-6, which type of test asks the question “Could we defend this decision if our actions became public knowledge?” a. sunshine b. exposure c. light of day d. enlightening Difficulty: Moderate Page 211

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39. Based on Table 11-6, which type of test asks the question “Who will be significantly impacted by this decision”? a. stakeholder b. utilitarian c. consequentialist d. universal Difficulty: Moderate Page 211

Whistle-Blowing 40. What is the process in which an employee informs another responsible employee in the company about potentially unethical behavior? a. whistle-blowing b. purging and releasing c. identification d, information transfer Difficulty: Easy Page 212

Hotlines 41. Which of the following is not a type of hotline? a. In-house b. Outsourced c. Multiple d. Hybrid Difficulty: Easy Page 215 Evaluation of Ethics and Stakeholders 42. In Table 11-13, how many of the top ten false claims act settlements are not related to health care issues? a. 0 b. 2 c. 3 d. 5 Difficulty: Moderate Page 220

43. In Table 11-13, what was the highest settlement amount in dollars? a. $650 million b. $700 million c. $800 million d. $900 million Difficulty: Difficult Page 220

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44. In Table 11-13, which company had the highest settlement amount in dollars? a. Serono b. Taketa-Abbott c. Tenet Healthcare d. HCA Difficulty: Difficult Page 220 45. In Table 11-13, what was the lowest settlement amount in dollars? a. $75 million b. $125 million c. $240 million d. $310 million Difficulty: Difficult Page 220 46. In Table 11-13, which company had the lowest settlement amount in dollars? a. HealthSouth b. Gambro Healthcare c. Abbot Labs d, HCA Difficulty: Difficult Page 220 47. In Figure 11-3, which of the following is the first step in the framework of the evaluation of corporate ethics and stakeholders? a. Stakeholders b. Ethical monitoring mechanisms c. Strategic ethical formulation d. Strategic ethical implementation Difficulty: Moderate Page 221 48. In Figure 11-3, which step comes after “ethical monitoring mechanism” in the framework evaluation of corporate ethics and stakeholders? a. stakeholder b strategic ethical formulation c, strategic ethical implementation d. ethical performance Difficulty: Moderate Page 221 49. In Figure 11-3, which step comes after “stakeholders” in the framework evaluation of corporate ethics and stakeholders? a. ethical monitoring mechanisms b strategic ethical formulation c, strategic ethical implementation d. ethical performance Difficulty: Moderate Page 221

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50. In Figure 11-3, which step comes after “strategic ethical implementation” in the framework evaluation of corporate ethics and stakeholders? a. ethical monitoring mechanisms b strategic ethical formulation c, strategic ethical implementation d. ethical performance Difficulty: Moderate Page 221

True/False Questions 51. Eastman Kodak is the company featured in “But We Did Get The Red Eye Out”. a. True b. False Difficulty: Easy Page 197 52. EasyView is the name of the Web-see featured in “But We Did Get The Red Eye Out”. a. True b. False Difficulty: Easy Page 197 53. The ethical issue of the “But We Did Get The Red Eye Out” relates to whistleblowing. a. True b. False Difficulty: Easy Page 198 54. In a PricewaterhouseCoopers survey, firms that had between 201 and 1,000 employees had the highest incidences of fraud. a. True b. False Difficulty: Moderate Page 198 55. In a PricewaterhouseCoopers survey, firms with over 5,000 employees had the lowest incidences of fraud. a. True b. False Difficulty: Moderate Page 199 56. In the PricewaterhouseCoopers survey, the average financial cost of the fraud-related activities was $1.2 million. a. True b. False Difficulty: Difficult Page 199

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57. In the PricewaterhouseCoopers survey, South and Central America had the highest percentage of reported fraud worldwide. a. True b. False Difficulty: Moderate Page 199 58. In the PricewaterhouseCoopers survey in 2003, Western Europe had the lowest percentage of reported fraud worldwide. a. True b. False Difficulty: Moderate Page 199 59. In the PricewaterhouseCoopers survey, Asset Misappropriation had the highest percentage of type of fraud. a. True b. False Difficulty: Easy Page 200 60. In the PricewaterhouseCoopers survey, Insider Trading had the lowest percentage of type of fraud. a. True b. False Difficulty: Easy Page 200 61. In the PricewaterhouseCoopers survey, an internal audit had the highest percentage of detecting the fraud. a. True b. False Difficulty: Moderate Page 201 62. The counter dimension to individualism is collectivism in global cultural dimensions a. True b. False Difficulty: Easy Page 205 63. The culture that focuses primarily on actual words spoken is called high-context communication. a. True b. False Difficulty: Moderate Page 206 64. The culture based on the view that individuals do not want any ambiguity in their jobs is low uncertainty avoidance. a. True b. False Difficulty: Moderate Page 206

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65. The culture that focuses on material goods and status is masculine. a. True b. False Difficulty: Easy Page 206 66. The culture that embraces the hierarchical relationship that occurs between the manager and the subordinate is a low power distance culture. a. True b. False Difficulty: Moderate Page 206 67. Counselor is a role of an ethics officer. a. True b. False Difficulty: Moderate Page 209 68. Informant is a role of an ethics officer. a. True b. False Difficulty: Moderate Page 209 69. Role conflict is a role challenge for an ethics officer a. True b. False Difficulty: Moderate Page 210 70. Role rotation is a role challenge for an ethics officer. a. True b. False Difficulty: Moderate Page 210 71. Ethical auditing is the regular comprehensive evaluation of the compliance of the firm’s ethical policies and procedures. a. True b. False Difficulty: Easy Page 210 72. Whistle-blowing is the process in which an employee informs another responsible employee in the company about potentially unethical behavior. a. True b. False Difficulty: Easy Page 212

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73. Hybrid is a type of ethics hotline. a. True b. False Difficulty: Easy Page 215 74. One of the provisions in the Sarbanes-Oxley Act protects whistle-blowers. a. True b. False Difficulty: Easy Page 216 75. Stakeholders are the first step in Figure 11-3’s framework of the evaluation of corporate ethics and stakeholders. a. True b. False Difficulty: Moderate Page 221

Short Essay Questions 76. Based on the PricewaterhouseCoopers survey, how can so much fraud be committed if firms have the proper code of ethics and training programs?

The simple answer is that fraud can always be committed by some individuals regardless of the safeguards. As was mentioned at the beginning of the textbook, as long as there are a finite amount of resources, there will always be people who will do unethical and illegal activities in order to obtain these resources. Having a comprehensive code of ethics and having a comprehensive ethics training program does not guaranteed that any given employees of any given time will be stopped from committing fraud. The key is to not only have a code of ethics and training program in place but firms also need constant monitoring and have a corporate culture that has zero tolerance for unethical activity. If employees see first hand the consequences of unethical activities, this may be enough of a deterrent for them to become involved in unethical activities.

77. Why doesn’t every firm have an ethics officer?

The main reason is the financial cost of having an ethics officer. For many firms, they could not afford the salary of a full time ethics officer to help them with their ethical vision. However, many firms do not have an official ethics officer but a person can be assigned to be responsible for ethical issues as one component of their job description. If this is the case, the person usually is selected from either the human resources department or the legal department.

78. Explain the importance of the Framework presented in Figure 11-3.

The framework of the evaluation of corporate ethics and stakeholders is critical to understanding the direct link between the ethics vision of the top management of the firm

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and the needs and expectations of the firm’s stakeholders. It is important to note that the starting point of the framework is the stakeholders. The underlying assumption is that in order to satisfy the needs and expectations of the stakeholder the top managers must understand what those needs and expectations are. Based on a summary of those needs, the firms can then develop an ethical strategic focus which is first formulation and then implemented. After the implementation stage has taken place, the firm must monitor the effectiveness of the ethical strategic vision. After the monitoring process has taken place, the firm can evaluate how effective they were by serving the needs of the stakeholders from an ethical perspective.

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