Exam 1 Business Law – Chapter 2

Business ethics provides a guarantee of profitability.
False
Unethical behavior is not necessarily illegal behavior.
True
A lack of business ethics can result in a lack of business goodwill.
T
Business ethics is the application of standards for moral reasoning to business dilemmas.
T
Situational ethics is also known as moral relativism.
T
Natural law and positive law are one and the same theories of moral standards.
F
Milton Friedman’s standard for business social responsibility is one that requires a company to do all that it can for its community.
F
The inherence school is one that follows the standard of society’s interest coming first.
F
The enlightened self-interest school manager serves only the shareholder.
F
Invisible hand managers do not become involved in social issues.
T
The social-responsibility school holds that businesses profit by being responsive to society.
T
Business self-regulation has been effective in solving social problems.
F
Giving a false impression, although not actually an untruth, is still an ethical violation.
T
A code of ethics is an individual firm’s behavior standard for employees.
T
Most businesses today do not have a code of ethics.
F
Condoning unethical behavior is an ethical breach.
T
Personal choices and lifestyles have no impact on one’s business ethics.
F
The “front page of the newspaper test” is an application of whether conduct gives the appearance of impropriety.
T
The first question of the Blanchard/Peale model for resolving ethical dilemmas is whether the conduct is legal.
T
Whether everyone else does it is one method for evaluating the ethics of a particular course of action.
F
“I was just following orders,” is a defense in law and a test for ethical behavior.
F
Sexual harassment is a form of interpersonal as well as organizational abuse.
T
A relativist asks why someone is engaged in unethical or illegal conduct before determining whether the conduct is right or wrong.
T
“That’s the way it has always been done,” is a phrase that often signals ethical difficulties.
T
The first question of the Wall Street Journal model is whether the conduct complies with the law.
T
In the Parable of the Sadhu, the hikers are certain the religious pilgrim survived.
F
In the Parable of the Sadhu, the hikers’ climb is successful.
T
Ethics can provide a strategic advantage for companies.
T
A 2008 Joseph Institute study found nearly half of high school students copied homework from other students.
F
Rationalization is an effective means of analysis for ethical issues.
F
An ombudsperson and/or ethics hotline are both critical to an ethical culture in a company.
T
The least corrupt countries have the most stable economies.
F
“Everybody else does it” is a valid test for determining whether conduct is ethical.
F
Warren Buffett follows the Front-Page-of-the-Newspaper test as a guide for his businesses.
T
Compliance with the law meets all ethical standards.
F
The level of cheating in high schools and colleges is declining.
F
Sarbanes-Oxley is the most extensive regulation of companies since the 1933 and 1934 Securities laws.
T
An anonymous reporting system is a requirement for companies under Sarbanes-Oxley.
T
Having a code of ethics does not reduce a company’s sentence under the federal sentencing guidelines.
F
A company that self-reports a legal violation risks a higher penalty.
F
Training employees in ethics is a factor that reduces a company’s sentence under the federal sentencing guidelines.
T
The either/or conundrum is an example of moral relativism.
T
Pressure contributes to the use of the either/or test for resolving ethical dilemmas.
T
The 2009 corruption index shows that Iraq is considered the most corrupt country.
F
Trust is not critical to investment or economic success.
F
Ethics consists of the unwritten rules we apply in both business and personal lives.
T
“When in Rome, do as the Romans do,” is an example of moral relativism.
T
Conflicts of interest can result in the use of quid pro quo.
T
The 2009 Corruption Perceptions Index lists Denmark as the least corrupt country.
F
“It’s a gray area,” if it applies, means that the conduct you are evaluating is ethical, so long as you stay in the gray area.
F
Rationalization is one form of ethical analysis.
F
When Hilton Hotels hired Ross Klein and Amar Lalvani from Starwood Hotels, Klein and Lalvani took many electronic documents with them from Starwood. What they did was simply good business and presented no ethical problems.
F
The “Tony Bennett Factor” refers to the importance of adhering to values as a key to long-term success.
T
The regulatory cycle provides an opportunity for self-regulation during the latency stage.
F
Once a legal loophole has been used to the advantage of business and the disadvantage of a customer, the number of options for self-regulation declines.
T
When Danica Patrick stated she would take performance-enhancing drugs if she would never get caught, she was just saying what everyone else does in a highly competitive field, so it is not unethical.
F
To obtain the protections and benefits of the sentencing guidelines, companies must have a code of ethics.
T
To obtain the protections and benefits of the sentencing guidelines, companies must have some form of anonymous reporting.
T
Ethics are key to the success of economic systems.
T
Corruption impedes economic development.
T
The statement, “What’s good for GM is good for the country,” is an example of the thoughts of a manager from the:
a.
inherence school.
b.
enlightened self-interest school.
c.
social responsibility school.
d.
invisible hand school.
A
According to the 2009 Corruption Perception Index, which country is perceived as the least corrupt?
a.
Denmark
b.
Somalia
c.
New Zealand
d.
Iceland
C
Which of the following statements is true about an ethical business?
a.
It will always be profitable.
b.
It will always satisfy all stakeholders.
c.
It will always survive over the long run.
d.
It will avoid the consequences of unethical behavior.
D
Which of the following is not always a result of unethical behavior?
a.
loss of trust
b.
loss of goodwill
c.
loss of profits
d.
strained relations with regulators
C
A manager at a chemical weapons plant discovered that toxic by-products from chemical manufacturing at the plant are simply put in barrels and stacked near the boundary lines of the plant property. Children in the homes near these boundaries have an unusually high rate of kidney disease. The manager does not want to disclose the barrels’ contents because he will lose his job and the town will lose its major employer. Which of the following ethical tests would support the manager’s decision?
a.
Wall Street Journal model
b.
ethical relativism
c.
Blanchard/Peale model
d.
“front page of the newspaper test”
B
Which of the following models has a question that requires analysis of the effect of a decision on stakeholders?
a.
Blanchard/Peale
b.
Wall Street Journal model
c.
Does the conduct comply with the law?
d.
all of the above
B
Milton Friedman’s philosophy on corporate behavior is:
a.
a business serves its shareholders best by serving the community.
b.
a business serves its shareholders best by serving society at large.
c.
a business serves its shareholders best by serving regulatory interests.
d.
a business serves its shareholders best by serving shareholders.
D
An inherence school company would become involved in a residential property tax for schools only if:
a.
the community would benefit from the tax.
b.
government leaders are in favor of the tax.
c.
the issue would affect the company’s performance.
d.
community leaders favored it.
C
The invisible hand school and the inherence school:
a.
both serve society primarily.
b.
both refuse involvement in social issues.
c.
are proactive in legislation for social issues.
d.
believe long-term success comes from social responsibility.
B
Which of the following is not an ethical breach?
a.
taking things that do not belong to you
b.
giving or allowing false impressions
c.
perpetrating interpersonal abuse
d.
All of the above are ethical breaches.
D
Which of the following is not a consequence of poor ethical choices by company?
a.
loss of reputation
b.
loss of earning power
c.
additional regulation
d.
All of the above are consequences of poor ethical choices.
D
A parents’ group and the National Association of Teachers is concerned about the lyrics on the albums of some rock music groups and has expressed the concern publicly. Capitol Records adopted a voluntary labeling system that provides warning labels on albums that contain explicit lyrics about sex, drugs, or satanic worship. Capitol’s action is an example of a:
a.
nonmandated ethical response.
b.
waste of shareholder dollars according to Milton Friedman.
c.
violation of shareholder rights.
d.
none of the above
A
Which of the following is not a question for the Blanchard/Peale test for ethical behavior?
a.
Is it legal?
b.
Does it follow industry code?
c.
Is it balanced?
d.
How does it make me feel?
D
Which of the following actions would be permitted under the Friedman philosophy of business involvement in social issues?
a.
a corporate contribution to a shelter program for runaway teenagers
b.
a corporate contribution to a pro-choice organization
c.
a corporate contribution to Mother Teresa’s worldwide organization
d.
a corporate contribution to a mass transit system that will serve the offices of the company throughout the city
D
Under which of the schools is the corporation best served by serving only the shareholders?
a.
inherence school
b.
enlightened self-interest school
c.
invisible hand school
d.
social responsibility school
A
Which school most parallels the Friedman model for social responsibility?
a.
inherence school
b.
enlightened self-interest school
c.
invisible hand school
d.
social responsibility school
A
An employer instituted a wellness program for all employees. The wellness program includes an exercise facility and several pay incentives for losing weight, quitting smoking, or beginning an exercise program. The program is not required under any state or national laws. Which of the following schools of social responsibility applies to this employer?
a.
inherence school
b.
enlightened self-interest school
c.
invisible hand school
d.
social responsibility school
B
A law firm in the Phoenix area provides “sick care” for employees’ children. Sick care can be used when the child is too ill to go to school or its regular care facility. The law firm manager claims the program has cut down on sick days taken by employees to care for sick children. The program is an illustration of which type of social responsibility school?
a.
inherence school
b.
enlightened self-interest school
c.
invisible hand school
d.
social responsibility school
B
Which of the following is not an indication of a company environment ripe for unethical behavior?
a.
intense competition threatening survival
b.
employees with few or no personal values
c.
employees who are independent
d.
compensation incentive system tied only to sales
C
The policy on travel reimbursement at Public Service Company is that receipts for meals under $25.00 are not required. Internal auditors at Public Service have recently discovered that 80 percent of all meal submissions are in a range from $12.50 to $12.99. When one manager is questioned about his submissions and those of his employees he responds, “So, they make a little bit on meals – it helps their miserable salaries.” The manager’s evaluation:
a.
demonstrates an ethical commitment to his employees.
b.
is ethical since no one is really harmed.
c.
demonstrates a lapse in the company’s ethical culture.
d.
is an example of Christian consequentialism.
C
Which of the following is not a benefit of using ethics as a business strategy?
a.
firm’s profits increase
b.
affords opportunity for planning
c.
creates goodwill in the community
d.
All of the above are benefits.
A
The “front page of the newspaper test”:
a.
was developed by Laura Nash.
b.
is the same as the Wall Street Journal test.
c.
was developed by Blanchard/Peale.
d.
uses the perspective of an objective reporter.
D
In the Parable of the Sadhu:
a.
the lesson of personal values vs. organizational or group values is drawn.
b.
the lesson that the rules of business prevail over personal values is drawn.
c.
the lesson of survival of the fittest is given.
d.
the lesson of “every man for himself” is critical for business survival.
A
In international business:
a.
there are no ethical rules.
b.
corruption facilitates commerce.
c.
trust and honesty are required for investment and economic growth.
d.
a company must operate by a set of rules different from its U.S. rules.
C
Which of the following is not an element of the Nash test?
a.
Will I feel as good over the long term about this decision?
b.
Is it legal?
c.
How did I get into this situation in the first place?
d.
Could I discuss this decision with the affected parties?
B
Which of the following is not important for capitalism to function?
a.
consumer confidence
b.
absence of corruption
c.
grease payments
d.
risk takers comfortable with trustworthiness of government officials
e.
All of the above are necessary for capitalism.
C
Milton Friedman’s view of the social responsibility of business is best described as:
a.
the social responsibility of a business is to make money within the rules of the game.
b.
the social responsibility of a business should be dictated by its managers.
c.
the social responsibility of a business requires it to be environmentally clean.
d.
businesses have no social responsibility.
e.
none of the above
A
Which of the two following groupings of ethical thought would you describe as opposites?
a.
natural law and moral relativism
b.
moral relativism and situational ethics
c.
natural law and religious beliefs
d.
moral absolutes and natural law
e.
none of the above
A
Which of the following ethical models incorporates conscience into the decision-making process?
a.
Front-page-of-the-newspaper test
b.
Wall Street Journal test
c.
Blanchard and Peale model
d.
Positive law
e.
none of the above
C
Enron Corporation filed for bankruptcy following a number of revelations about its accounting procedures. Enron used a complex structure of corporations and off-the-books debt to mask its true financial picture from the markets. When asked about the propriety of Enron’s reporting methods, many analysts have responded, “They simply did what most corporations do.” Their comments:
a.
reflect analysis under the Nash model.
b.
reflect analysis under the Blanchard/Peale model.
c.
reflect rationalization.
d.
reflect Wall Street Journal analysis.
e.
none of the above
C
Enron’s failure to disclose its off-the-book debts was legal. Which of the following ethical categories do you think apply to that type of financial reporting?
a.
balancing ethical dilemmas
b.
giving or allowing a false impression
c.
taking unfair advantage
d.
both b and c
e.
none of the above
D
Which of the following statements best describes the ethical position of Enron executives?
a.
If it’s legal, its ethical.
b.
If we are under pressure to keep the stock price up, we do what it takes.
c.
Everybody does it.
d.
both a and b
D
Which of the following is not a requirement of Sarbanes-Oxley?
a.
code of ethics
b.
ethics hotline (anonymous)
c.
ethics officer
d.
both a and c
D
Sarbanes-Oxley is:
a.
a philosophical school that serves society first
b.
federal legislation that imposed ethics requirements on corporations
c.
an international accounting treaty
d.
the former CEO of World.Com
B
Which airline failed the Front-of-the-Newspaper Test by falsifying pilot records?
a.
Delta
b.
Jet Blue
c.
Gulfstream Air
d.
Southwest
C
The Corruptions Perceptions Index compiled by Transparency International:
a.
shows that all countries’ governments are corrupt.
b.
shows a correlation between corruption and the lack of economic development.
c.
shows corruption is acceptable in most countries.
d.
none of the above
B
An example of unethical behavior in the New York City and Boston marathon races was committed by:
a.
Elise McDonough
b.
Martha Stewart
c.
Rosie Ruiz
d.
Danica Patrick
C
Jane Eyring works for PharmaMeds, Inc. Jane is a physician-scientist who is responsible for running the pilot tests on PharmaMed’s new oral spray medication for individuals with adult onset diabetes. Jane has discovered that if those in the test group do not spray the medicine correctly or if they spray for too short of a time, the medicine is not effective, or as effective, and insulin shock has resulted in a few of the patients. Jane talks with one of her colleagues who responds, “Look, there’s no need to stop the testing or the drug’s release. Just tell them in the test and in the brochures that will be with the spray, ‘Spray correctly! If you do not, you may not receive your necessary dose.'” Jane is not sure anyone can be 100% accurate in spraying all the time. What risks does the company run if the spray doesn’t work for the patients?
a.
fines and penalties
b.
litigation by patients who become ill
c.
damage to its reputation
d.
all of the above
D
Jane Eyring works for PharmaMeds, Inc. Jane is a physician-scientist who is responsible for running the pilot tests on PharmaMed’s new oral spray medication for individuals with adult onset diabetes. Jane has discovered that if those in the test group do not spray the medicine correctly or if they spray for too short of a time, the medicine is not effective, or as effective, and insulin shock has resulted in a few of the patients. Jane talks with one of her colleagues who responds, “Look, there’s no need to stop the testing or the drug’s release. Just tell them in the test and in the brochures that will be with the spray, ‘Spray correctly! If you do not, you may not receive your necessary dose.'” Jane is not sure anyone can be 100% accurate in spraying all the time. Whom is affected by Jane’s decision, regardless of what decision she makes?
a.
shareholders
b.
customers
c.
Jane and her reputation
d.
all of the above
D
Why does the late Dr. Milton Friedman feel that managers should not involve their companies in social issues?
a.
they are agents of the shareholders and should act in their best interests
b.
companies lose money when they are socially responsible
c.
economic studies show businesses that are socially responsible make less money
d.
all of the above
A
Which country is perceived as the most corrupt country in the 2009 Corruption Perceptions Index?
a.
Iraq
b.
Iran
c.
Somalia
d.
Singapore
C
Tim Donaghy was a referee for the NBA. Mr. Donaghy began betting in 2003 on NBA games. He also provided tips to other gamblers on who would win games in which he was serving as a referee. Mr. Donaghy’s actions:
a.
were illegal under federal law, but not an ethical breach.
b.
were a conflict of interest.
c.
were not a breach of ethics because he used the money he made for a summer camp for underprivileged children.
d.
none of the above
D
Michael Chertoff is the head of the Department of Homeland Security. Mr. Chertoff pays 25 cents to the federal government each time a personal fax comes to him at his federal office. Mr. Chertoff’s actions:
a.
are meant to establish an effective tone at the top.
b.
are unnecessary because there is no ethical breach when you have no control over who sends faxes.
c.
are inconsequential for the agency.
d.
none of the above
A
“If you think what we’re doing now is bad, you should have seen 10 years ago at this company…” is an example of:
a.
ethical analysis.
b.
rationalization.
c.
comparative or relative ethics.
d.
both a and c
B
A relativist asks why someone is engaged in unethical or illegal conduct before determining whether the conduct is right or wrong.
T