Test Bank For Business Ethics Decision Making for Personal Integrity & Social Responsibility, 5th E by StudyGuide

Test Bank For Business Ethics Decision Making for Personal Integrity & Social Responsibility, 5th Edition By Laura Hartman, Joseph DesJardins and Chris MacDonald Chapter 1-10 Answers are at the End of Each Chapter Chapter 1

Student name:__________ TRUE/FALSE - Write 'T' if the statement is true and 'F' if the statement is false. 1) In a general sense, a business stakeholder is one who has made substantial financial investments in the business. ⊚ true ⊚ false 2) A firm’s ethical reputation can provide a competitive advantage in the marketplace with

customers, suppliers, and employees. ⊚ true ⊚ false 3) Ethics refers to how human beings should properly live their lives. ⊚ true ⊚ false 4) Norms appeal to certain values that would be promoted or attained by acting in a certain way. ⊚ true ⊚ false 5) Values are the only guidance individuals need to act in ways that are positive or ethical. ⊚ true ⊚ false 6) Ethical values are personal codes of ethics that ensure that a person meets his or her

individual standards of well-being. ⊚ true ⊚ false

7) The well-being promoted by ethical values is not a personal and selfish well-being. ⊚ true ⊚ false 8) Societies that value individual freedom legally stipulate codes of personal integrity and

common decency to safeguard this freedom. ⊚ true ⊚ false 9) In civil law, there is no room for ambiguity in applying the law because much of the law is

established by past precedent. ⊚ true ⊚ false 10) Ethical theories are patterns of thinking, or methodologies, to help us decide what to do. ⊚ true ⊚ false

MULTIPLE CHOICE - Choose the one alternative that best completes the statement or answers the question. 11) Which of the following represents the role of philosophical ethics in the field of business ethics? A) providing the fundamental language and categories of ethics B) understanding how business organizations fit into a broader social and political context C) recognizing how and why people behave as they do D) promoting a culture in which ethical behavior flourishes 12) Identify a true statement about the field of business ethics. A) It is rooted in the more general principle of social ethics. B) It is not a multidisciplinary field. C) It is mainly relevant to decision making within an organization. D) It involves decisions at the individual, at the organizational, and at a broader social

and governmental level. 13) Which of the following is a goal of a business ethics class? A) understanding how and why people behave unethically B) doing everything required to satisfy business stakeholders C) separating ordinary ethical consideration from business decisions D) recognizing that business has its own standards of good and bad

14) ________ is a theory of human motivation that claims that all human actions are selfish and

motivated by self-interest. A) Theoretical reasoning B) The stakeholder theory C) Psychological egoism D) The separation thesis 15) The ________ asserts that ordinary ethical standards should be kept separate from, and not

be used to judge, business decisions because business has its own standards of good and bad. A) scientific method B) separation thesis C) concept of theoretical reasoning D) social ethics model 16) In a general sense, anyone who affects or is affected by decisions made within a firm can be

called a business ________. A) nominee B) stakeholder C) analyst D) insider 17) Which of the following best describes a business stakeholder? A) only the minority shareholders in a business entity B) only those who have acquired significant shares in a firm C) anyone who audits a firm D) anyone who affects or is affected by decisions made within a firm 18) Which of the following best describes ethics? A) an academic discipline that originated in the early 1900s B) a descriptive approach that provides an account of how and why people do act the

way they do C) the study of how human beings should properly live their lives D) a descriptive approach such as psychology and sociology

19) Which of the following is an approach advocated while teaching ethics? A) Teachers should teach ethical dogma to a passive audience. B) Teachers should consider acceptance of customary norms as an adequate ethical

perspective. C) Teachers should understand that their role is only to tell the right answers to their students. D) Teachers should challenge students to think for themselves. 20) Philosophers often state that ethics is ________, which means that it focuses on people’s

reasoning about how they should act. A) normative B) derivative C) circumstantial D) clinical 21) Which of the following observations is true of ethics? A) It is descriptive in nature. B) It deals with our reasoning about how we should act. C) It provides an account of how and why people act the way they do. D) It is equivalent to law-abiding behavior. 22) Social sciences such as psychology and sociology are different from ethics owing to the fact

that they are ________. A) normative in nature B) descriptive in nature C) conjectural in nature D) clinical in nature 23) ________ seeks an account of the how and why people should act a certain way, rather than

how they do act. A) Sociology B) Psychology C) Ethics D) Anthropology

24) Which of the following is a factor that distinguishes social sciences, such as psychology and

sociology, from ethics? A) Unlike ethics, these disciplines inquire why people act the way they do. B) Unlike ethics, these disciplines are normative rather than descriptive. C) Unlike ethics, these disciplines provide an account of how people should act. D) Unlike ethics, these disciplines give directives about how people should act. 25) The ________ discipline provides an account of how and why people do act the way they do. A) descriptive B) supererogatory C) normative D) stipulative 26) Individual codes of conduct based on one’s value structures regarding how one should live,

how one should act, what one should do, and what kind of a person should one be is sometimes referred to as ________. A) morality B) independence C) leadership D) rationality 27) Morality is the aspect of ethics that we can refer to by the phrase "________." A) personal freedom B) individual rationality C) personal integrity D) persuasive rationality 28) Ethics refers to the applications of ________ on which people’s decisions are based. A) values B) morals C) etiquettes D) norms 29) Identify the area of ethics that raises questions about justice, law, civic virtues, and political

philosophy. A) stipulative ethics B) existential ethics C) virtue ethics D) social ethics

30) The aspect of business ethics that examines business institutions from a social rather than an

individual perspective is referred to as A) decision making for social responsibility. B) corporate cultural responsibility. C) organizational ethical responsibility. D) institutional morality. 31) ________ establish the guidelines or standards for determining what one should do, how one

should act, what type of person one should be. A) Roles B) Attitudes C) Norms D) Laws 32) Which of the following is a true statement about norms? A) They are underlying beliefs that cause people to choose one way or another. B) They are standards of appropriate and proper behavior. C) They provide benchmarks of desirable societal conditions. D) They consist of guidelines for bringing about positive behavioral change. 33) The crux of normative ethics is that these disciplines A) presuppose some underlying values. B) describe what people do. C) should always involve the study or discipline of ethics. D) branch away from social ethics to personal ethics. 34) Which of the following refers to an underlying belief that causes people to choose between

plausible courses of action? A) norms B) paradigms C) protocols D) values 35) Which of the following is true about values? A) Values are the highest standards of appropriate and proper behavior. B) Corporate scandals prove the fact that individuals have personal values, but

institutions lack values. C) Values cannot lead to unethical results. D) Values are underlying beliefs that cause us to act or to decide in a certain way.

36) ________ are beliefs and principles that provide the ultimate guide to a company’s decision

making. A) Mission statements B) Core values C) Historical milestones D) Vision statements 37) Which of the following is a way of saying that a corporation has a set of identifiable values

that establish the expectations for what is normal within the firm? A) organizational culture B) organizational policy C) organizational code D) organizational structure 38) Ethics requires that the promotion of human welfare be done A) based on the personal opinions of the decision maker. B) based on the level of need of the beneficiaries. C) understanding the religious beliefs of the beneficiary. D) in a manner that is acceptable and reasonable from all relevant points of view. 39) Dramatic examples of tyrannical regimes in history demonstrate that A) societies valuing freedom welcome laws that require more than the ethical minimum. B) just societies can only be achieved through strict enforcement of ethical codes. C) obedience to the law almost always makes people apathetic towards their ethical

duties. D) one’s ethical responsibility may run counter to the law. 40) Telling organizations that their ethical responsibilities end with obedience to the law A) is just inviting more legal regulation. B) is enough to maintain an ethical business environment. C) reduces the frequency of corporate scandals. D) eliminates ambiguity while making personal ethics-related decisions. 41) The failure of personal ethics among companies like Enron and WorldCom led to the

creation of the A) Brooks Act. B) Gramm-Leach-Bliley Act. C) Clinger-Cohen Act. D) Sarbanes-Oxley Act.

42) Which of the following observations is true? A) Obedience to the law is sufficient to fulfill one’s ethical duties. B) The law is very effective at promoting “goods.” C) The law cannot anticipate every new dilemma that businesses might face. D) An individual’s ethical responsibility can never run counter to the law. 43) Which of the following is a true statement about the Americans with Disabilities Act (ADA)? A) What counts as a disability remains ambiguous under the law. B) The law lays out clear-cut rules for reasonable accommodation. C) The law has not been put into practice till date. D) Mental disabilities have been left out of the purview of the law. 44) A process to identify potential events that may affect the entity, and manage risk to be within

its risk appetite, to provide reasonable assurance regarding the achievement of entity objectives is called ________. A) risk assessment B) practical reasoning C) theoretical reasoning D) risk pooling 45) Practical reasoning is reasoning about A) what we should think. B) what we should do. C) what we should believe. D) what we should share. 46) Reasoning about what should be done is known as ________ reasoning. A) practical B) objective C) theoretical D) predictive 47) Theoretical reasoning is reasoning about A) what we actually do. B) what we should do. C) what we should believe. D) what we should implement.

48) ________ reasoning is reasoning about what we should believe. A) Practical B) Abstract C) Theoretical D) Descriptive 49) Which of the following is the pursuit of the highest standard for what we should believe? A) theoretical reason B) notional reason C) emotional reason D) practical reason 50) Which of the following is the great arbiter of truth according to the tradition of theoretical

reason? A) religion B) customs C) science D) norms 51) Which of the following can be thought of as the answer to the fundamental questions of

theoretical reason? A) the scientific method B) the practical approach C) the contingency approach D) the normative model FILL IN THE BLANK. Write the word or phrase that best completes each statement or answers the question. 52) A ________ is anyone affected, for better or for worse, by the decisions made within a particular firm. 53) ________ is a theory of human motivation that claims that all human actions are selfish and

motivated by self-interest. 54) The ________ asserts that ordinary ethical standards should be kept separate from, and not

be used to judge, business decisions because business has its own standards of good and bad. 55) A process to identify potential events that may affect the entity, and manage risk to be within

its risk appetite, to provide reasonable assurance regarding the achievement of entity objectives is called ________.

56) As a discipline, ________ deals with norms and standards of appropriate and proper (normal)

behavior. 57) ________ is the aspect of ethics that is referred to by the phrase “personal integrity.” 58) Normative disciplines presuppose some underlying ________. 59) Acts and decisions that seek to promote human welfare are based on ________. 60) The aspect of business integrity that focuses on examining business institutions from a

collective rather than from an individual perspective falls under the area of ________. 61) ________ reasoning is reasoning about what we should believe.

ESSAY. Write your answer in the space provided or on a separate sheet of paper. 62) Explain how the study of ethics was viewed until recently, and what kind of shift in focus has occurred post the scandals.

63) Describe the advantages associated with ethical decision making.

64) Discuss the hesitation (that may be justified) associated with teaching ethics. Explain briefly

how the authors of this text believe that ethics can be taught constructively in a class.

65) Define ethics. How is it different from social sciences such as psychology and sociology?

66) Differentiate the concepts of morality and social ethics.

67) Why is "ethics" considered a normative discipline?

68) Define values and discuss the element of corporate culture in detail.

69) Describe the two elements of ethical values.

70) Discuss the impact of maintaining that holding to the law is sufficient to fulfill one's ethical

duties, and what it says about the law itself.

71) Explain the difficulties associated with telling a business that its ethical responsibilities end

with obedience to the law.

72) Discuss the importance of precedents for most laws concerning business.

73) Define risk assessment.

74) While using the risk assessment model, what might the decision makers include in their

assessment before taking action?

75) Differentiate between practical reason and theoretical reason.

Answer Key Test name: chapter 1 1) FALSE

In a general sense, a business stakeholder will be anyone who affects or is affected by decisions made within the firm, for better or worse. 2) TRUE

A firm’s ethical reputation can provide a competitive edge in the marketplace with customers, suppliers, and employees. 3) TRUE

Ethics refers not only to an academic discipline, but to that arena of human life studied by this academic discipline, namely, how human beings should properly live their lives. 4) TRUE

Norms establish the guidelines or standards for determining what we should do, how we should act, what type of person we should be. Another way of expressing this point is to say that norms appeal to certain values that would be promoted or attained by acting in a certain way. 5) FALSE

In general, values are those beliefs that incline us to act or to choose one way rather than another. One important implication of this guidance, of course, is that an individual’s or a corporation’s set of values may lead to either ethical or unethical results. 6) FALSE

It is important to know two elements of ethical values. First, ethical values serve the ends of human well-being. Second, the well-being promoted by ethical values is not a personal and selfish well-being. Thus, ethical values are those beliefs and principles that impartially promote human well-being. 7) TRUE

Liberal societies that value individual freedom will seek to legally prohibit the most serious ethical harms. However, they will not legally require acts of charity, common decency, and personal integrity that may otherwise comprise the social fabric of a developed culture. 9) FALSE

In civil law (as opposed to criminal law), where much of the law is established by past precedent, there is always room for ambiguity in applying the law. 10) TRUE

Ethical theories are patterns of thinking, or methodologies, to help us decide what to do. 11) A

The field of business ethics is rooted in the more general discipline of philosophical ethics. The role of philosophical ethics is to provide the fundamental language and categories of ethics. Learning about philosophical ethics provides a knowledge base for our own study of business ethics so that we will not have to start from scratch. 12) D

Business ethics involves decisions at the individual, at the organizational, and at a broader social and governmental level. The field of business ethics helps us analyze and evaluate decision making at all three of these levels. 13) A

A business ethics class has many goals, including helping us to develop the knowledge base and skills needed to identify ethical issues, understand how and why people behave unethically, decide how we should act, what we should do, and the type of person we should be as individuals, create ethical organizations, and think through the social, economic, and political policies that we should support as citizens. 14) C

Behind some skepticism about the relevance of ethics to business, and often part of the reasoning behind the separation thesis, lies a theory called psychological egoism. This theory purports to be an account of human motivation, asserting that humans are fundamentally and unavoidably motivated by self-interest. 15) B

The separation thesis asserts that ordinary ethical standards should be kept separate from, and not be used to judge, business decisions because business has its own standards of good and bad. It is fair to say that this separation thesis remains common in business circles. 16) B

In a general sense, a business stakeholder will be anyone who affects or is affected by decisions made within the firm, for better or worse. Failure to consider these additional stakeholders will have a detrimental impact on those stakeholders, on stockholders, specifically, and on the firm’s long-term sustainability as a whole. 17) D

In a general sense, a business stakeholder will be anyone who affects or is affected by decisions made within the firm, for better or worse. 18) C

Ethics refers not only to an academic discipline, but to that arena of human life studied by this academic discipline, namely, how human beings should properly live their lives. 19) D

Ethics teachers must challenge students to think for themselves. The teacher’s role should not be to preach ethical dogma to a passive audience, but instead to treat students as active learners and to engage them in an active process of thinking, questioning, and deliberating. 20) A

Philosophers often emphasize that ethics is normative, which means that it deals with our reasoning about how we should act. Social sciences, such as psychology and sociology, also examine human decision making and actions; but these sciences are descriptive rather than normative. 21) B

Philosophers often emphasize that ethics is normative, which means that it deals with our reasoning about how we should act. As a normative discipline, ethics seeks an account of how and why people should act a certain way, rather than how they do act. 22) B

Social sciences, such as psychology and sociology, also examine human decision making and actions; but these sciences are descriptive rather than normative. This is due to the fact that they provide an account of how and why people act the way they do—they describe; as a normative discipline, ethics seeks an account of how and why people should act a certain way, rather than how they act. 23) C

As a normative discipline, ethics seeks an account of how and why people should act a certain way, rather than how they do act. This is why philosophers often emphasize that ethics is normative. 24) A

Social sciences, such as psychology and sociology, provide an account of how and why people do act the way they. As a normative discipline, ethics seeks an account of how and why people should act a certain way, rather than how they do act. 25) A

Social sciences, such as psychology and sociology, examine human decision making and actions; but, unlike ethics, these sciences are descriptive rather than normative. When we say that they are descriptive, we refer to the fact that they provide an account of how and why people do act the way they do—they describe. 26) A

How should we live? This fundamental question of ethics can be interpreted in two ways. "We" can mean each one of us individually, or it might mean all of us collectively. In the first sense, this is a question about how I should live my life, how I should act, what I should do, and what kind of person I should be. This meaning of ethics is based on our value structures, defined by our moral systems; and, therefore, it is sometimes referred to as morality. 27) C

Morality is the aspect of ethics that we refer to by the phrase "personal integrity." 28) B

There will be many times within a business setting where an individual will need to step back and ask: What should I do? How should I act? If morals refer to the underlying values on which our decisions are based, ethics refers to the applications of those morals to the decisions themselves. So, an individual could have a moral value of honesty, which, when applied to her or his decisions, results in a refusal to lie on an expense report. 29) D

Social ethics raises questions of justice, public policy, law, civic virtues, organizational structure, and political philosophy. It delves into questions on how a society and social institutions, such as corporations, ought to be structured and about how we ought to live together. 30) A

Business ethics is concerned with how business institutions ought to be structured, about whether they have a responsibility to the greater society (corporate social responsibility or CSR), and about making decisions that will impact many people other than the individual decision maker. This aspect of business ethics asks people to examine business institutions from a social rather than from an individual perspective. This broader social aspect of ethics is referred to as decision making for social responsibility. 31) C

Norms establish the guidelines or standards for determining what we should do, how we should act, what type of person we should be. 32) B

Norms are standards of appropriate and proper (or “normal") behavior. They establish the guidelines or standards for determining what we should do, how we should act, what type of person we should be. 33) A

Normative disciplines presuppose some underlying values. 34) D

We can think of values as the underlying beliefs that cause us to act or to decide one way rather than another. Thus, the value that someone places on an education leads him or her to make the decision to study rather than indulge in some less productive activity. 35) D

We can think of values as the underlying beliefs that cause us to act or to decide one way rather than another. 36) B

A company’s core values are those beliefs and principles that provide the ultimate guide to its decision making. 37) A

Talk of a corporation’s “culture” is a way of saying that a corporation has a set of identifiable values that establish the expectations for what is “normal” within that firm. These norms guide employees, implicitly more often than not, to behave in ways that the firm values and finds worthy. 38) D

From the perspective of ethics, no one person’s welfare is more worthy than any other’s. Ethical acts and choices should be acceptable and reasonable from all relevant points of view. 39) D

Holding that obedience to the law is sufficient to fulfill one’s ethical duties begs the question of whether the law, itself, is ethical. Dramatic examples from history, including Nazi Germany and apartheid in South Africa, demonstrate that one’s ethical responsibility may run counter to the law. 40) A

Telling business that its ethical responsibilities end with obedience to the law is just inviting more legal regulation. 41) D

It was the failure of personal ethics among companies such as Enron and WorldCom that led to the creation of the Sarbanes-Oxley Act and many other legal reforms. 42) C

The law cannot possibly anticipate every new dilemma that businesses might face; so, often, there may not be a regulation for the particular dilemma that confronts a business leader. 43) A

The Americans with Disabilities Act (ADA) requires employers to make reasonable accommodations for employees with disabilities. What conditions are covered under the ADA depends on a number of factors, including the severity of the illness and the effect it has on the employee’s ability to work, among others. 44) A

Risk assessment is defined as a process to identify potential events that may affect the entity, and manage risk to be within its risk appetite, to provide reasonable assurance regarding the achievement of entity objectives. It is important to recognize that risk assessment is not simply a value-neutral process of professional judgment. While determining the likelihood of one particular outcome versus another can be a professional judgment for attorneys and accountants, deciding whether the risk is worth taking is not. 45) B

Practical reasoning is reasoning about what we should do. 46) A

Practical reasoning is reasoning about what we should do. 47) C

Theoretical reasoning is reasoning about what we should believe. 48) C

Theoretical reasoning is reasoning about what we should believe. 49) A

Theoretical reason is the pursuit of truth, which is the highest standard for what we should believe. According to this tradition, science is the great arbiter of truth. 50) C

According to the tradition of theoretical reason, science is the great arbiter of truth. Thus, theoretical reason is the pursuit of truth, which is the highest standard for what we should believe. 51) A

Theoretical reason is the pursuit of truth, which is the highest standard for what we should believe. According to this tradition, science is the great arbiter of truth. Thus, the scientific method can be thought of as the answer to the fundamental questions of theoretical reason: What should we believe? 52) stakeholder

In a general sense, a business stakeholder will be anyone who affects or is affected by decisions made within the firm, for better or worse. 53) Psychological egoism

As a normative discipline, ethics deals with norms and standards of appropriate and proper (normal) behavior. Norms establish the guidelines or standards for determining what we should do, how we should act, and what type of person we should be. 57) Morality

Morality is the aspect of ethics that we refer to by the phrase “personal integrity.” 58) values

Normative disciplines presuppose some underlying values. 59) ethical values

Acts and decisions that seek to promote human welfare are acts and decisions based on ethical values. Thus, ethical values serve the ends of human well-being. 60) social ethics

Social ethics involves questions of political, economic, civic, and cultural norms aimed at promoting human well-being. This aspect of business ethics asks us to examine business institutions from a social rather than from an individual perspective. 61) Theoretical

Theoretical reasoning is reasoning about what we should believe. It is the pursuit of truth, which is the highest standard for what we should believe. 62) Essay

As recently as the mid-1990s, articles in such major publications as The Wall Street Journal, the Harvard Business Review, and U.S. News and World Report questioned the legitimacy and value of teaching classes in business ethics. Few disciplines face the type of skepticism that commonly confronted courses in business ethics. Many students believed that “business ethics” was an oxymoron. Many also viewed ethics as a mixture of sentimentality and personal opinion that would interfere with the efficient functioning of business. Leaders realize that they can no longer afford this approach in contemporary business. The questions today are less about why or should ethics be a part of business, than they are about which values and principles should guide business decisions and how ethics should be integrated within business. Students unfamiliar with the basic concepts and categories of ethics will find themselves as unprepared for careers in business as students who are unfamiliar with accounting and finance. Indeed, it is fair to say that students will not be fully prepared, even within fields such as accounting, finance, human resource management, marketing, and management unless they are familiar with the ethical issues that arise within those specific fields. 63) Essay

Unethical behavior not only creates legal risks for a business, it creates financial and marketing risks as well. Managing these risks requires managers and executives to remain vigilant about their company’s ethics. It is now clearer than ever that a company can lose in the marketplace, go out of business, and its employees can go to jail if no one is paying attention to the ethical standards of the firm. A firm’s ethical reputation can provide a competitive advantage in the marketplace and with customers, suppliers, and employees. Managing ethically can also pay significant dividends in organizational structure and efficiency. Trust, loyalty, commitment, creativity, and initiative are just some of the organizational benefits that are more likely to flourish within ethically stable and credible organizations. 64) Essay

Part of the hesitation about teaching ethics involves the potential for abuse; expecting teachers to influence behavior may be viewed as permission for teachers to impose their own views on students. Many believe that teachers should remain value-neutral in the classroom and respect a student’s own views. Another part of this concern is that the line between motivating students and manipulating students is a narrow one. There are many ways to influence someone’s behavior, including threats, guilt, pressure, bullying, and intimidation. But not all forms of influencing behavior raise such concerns. There is a major difference between manipulating someone and persuading someone, between threatening and reasoning. The tension between knowledge and behavior can be resolved by emphasizing ethical judgment, ethical deliberation, and ethical decision making. The only academically and ethically legitimate way to do this is through careful and reasoned decision making. The fundamental assumption is that a process of rational decision making, a process that involves careful thought and deliberation, can and will result in behavior that is more reasonable, accountable, and ethical. 65) Essay

Ethics refers not only to an academic discipline, but to that arena of human life studied by this academic discipline, namely, how human beings should properly live their lives. Philosophers often emphasize that ethics is normative, which means that it deals with our reasoning about how we should act. Social sciences such as psychology and sociology also examine human decision making and actions, but these sciences are descriptive rather than normative. They provide an account of how and why people do act the way they do; as a normative discipline, ethics seeks an account of how and why people should act a certain way, rather than how they do act. 66) Essay

The fundamental question of ethics “How should we live?” can be interpreted in two ways. "We” can mean each one of us individually, or it might mean all of us collectively. In the first sense, this is a question about how I should live my life, how I should act, what I should do, and what kind of person I should be. This meaning of ethics is sometimes referred to as morality, and it is the aspect of ethics that we refer to by the phrase “personal integrity.” There will be many times within a business setting where an individual will need to step back and ask: “What should I do? How should I act?” In the second sense, “How should we live?” refers to how we live together in a community. This is a question about how a society and social institutions such as corporations ought to be structured and about how we ought to live together. This area is sometimes referred to as social ethics and it raises questions of justice, public policy, law, civic virtues, organizational structure, and political philosophy. In this sense, business ethics is concerned with how business institutions ought to be structured, about corporate social responsibility, and about making decisions that will impact many people other than the individual decision maker. This aspect of business ethics asks us to examine business institutions from a social rather than an individual perspective. This broader social aspect of ethics is referred to as decision making for social responsibility. 67) Essay

To say that ethics is a normative discipline is to say that it deals with norms: those standards of appropriate and proper (or "normal") behavior. Norms establish the guidelines or standards for determining what we should do, how we should act, what type of person we should be. 68) Essay

In general, values were earlier thought of as those beliefs that incline us to act or to choose one way rather than another. A company's core values, for example, are those beliefs and principles that provide the ultimate guide in its decision making. Individuals can have their own personal values and, importantly, institutions also have values. A corporation's "culture" is a way of saying that a corporation has a set of identifiable values that establish the expectations for what is "normal" within that firm. These norms guide employees, implicitly more often than not, to behave in ways that the firm values and finds worthy. One important implication of this is that an individual or a corporation's set of values may lead to either ethical or unethical result. The corporate culture at Enron, for example, seems to have been committed to pushing the envelope of legality as far as possible in order to get away with as much as possible in pursuit of as much money as possible. 69) Essay

First, ethical values serve the ends of human well-being. Acts and choices that aim to promote human welfare are acts and choices based on ethical values. Second, the well-being promoted by ethical values is not a personal and selfish well-being. Ethical values are those beliefs and principles that impartially promote human well-being. 70) Essay

Holding that obedience to the law is sufficient to fulfill one's ethical duties begs the question of whether or not the law itself is ethical. Examples from history, Nazi Germany and apartheid in South Africa being the most obvious, demonstrate that one's ethical responsibility may run counter to the law. On a more practical level, this question can have significant implications in a global economy in which businesses operate in countries with legal systems different from those of their home country. For instance, some countries permit discrimination on the basis of gender; but businesses that choose to adopt such practices remain ethically accountable to their stakeholders for those decisions. 71) Essay

Telling a business that its ethical responsibilities end with obedience to the law is just inviting more legal regulation. The difficulty of trying to create laws to cover each and every possible business challenge would be enormous. The task would require such specificity that the number of regulated areas would become unmanageable. Additionally, it was the failure of personal ethics among such companies as Enron and WorldCom, after all that led to the creation of the Sarbanes-Oxley Act and many other legal reforms. If business restricts its ethical responsibilities to obedience to the law, it should not be surprising to find a new wave of government regulations that require what were formerly voluntary actions. 72) Essay

Most of the laws that concern business are based on past cases that establish legal precedents. Each precedent applies general rules to the specific circumstances of an individual case. In most business situations, asking "Is this legal?" is really asking "Are these circumstances similar enough to past cases that the conclusions reached in those cases will also apply here?" Since there will always be some differences between cases, the question will always remain somewhat open. 73) Essay

Risk assessment is defined as a process to identify potential events that may affect the entity and manage risk to be within its risk appetite, to provide reasonable assurance regarding the achievement of entity objectives. 74) Essay

Using the risk assessment model, decision makers might include in their assessment before taking action: the likelihood of being challenged in court the likelihood of losing the case the likelihood of settling for financial damages a comparison of those costs the financial benefits of taking the action the ethical implication of the options available 75) Essay

Practical reason is described as reasoning about what we should do, whereas theoretical reason involves reasoning about what we should believe.

Student name:__________ TRUE/FALSE - Write 'T' if the statement is true and 'F' if the statement is false. 76) The first step in making decisions that are ethically responsible is to consider all of the people affected by a decision, the people often called stakeholders. ⊚ true ⊚ false 77) There is a role for science and theoretical reason in any study of ethics. ⊚ true ⊚ false 78) A person's understanding of facts does not affect the degree of reasonability of his ethical

judgements. ⊚ true ⊚ false 79) Issue identification becomes the first step of the ethical decision-making process when no

ethical issue or dilemma is known to the decision maker at the beginning. ⊚ true ⊚ false 80) Ethical decisions cannot be made on economic grounds. ⊚ true ⊚ false 81) Inattentional blindness is the inability to recognize ethical issues. ⊚ true ⊚ false 82) Normative myopia occurs only in business. ⊚ true ⊚ false 83) Stakeholders include only those groups and/or individuals who take calls on internal

decisions, policies, or operations. ⊚ true ⊚ false

84) Trying to understand another person's perspective of a situation usually leads to poor

comparisons of alternatives for ethical decision making. ⊚ true ⊚ false 85) A critical element of comparing and weighing the alternatives is the consideration of ways to

mitigate, minimize, or compensate for any possible harmful consequences. ⊚ true ⊚ false 86) Consequences or justifications always override every other consideration when comparing

alternatives for ethical decision making. ⊚ true ⊚ false 87) Within business, an organization's context sometimes makes it difficult for even the well-

intentioned person to act ethically. ⊚ true ⊚ false 88) Responsibility for the circumstances that can encourage ethical behavior and can discourage

unethical behavior falls predominantly to the business management and executive team. ⊚ true ⊚ false 89) Within a business setting, only the ethical implications of professional decision making

should be considered. ⊚ true ⊚ false MULTIPLE CHOICE - Choose the one alternative that best completes the statement or answers the question. 90) Which of the following is the first step in making an ethically responsible decision? A) determining the facts of the situation B) considering the available alternatives C) monitoring and learning from the outcomes D) comparing and weighing alternatives

91) Which of the following is the second step of the ethical decision-making process? A) considering available alternatives B) making the decision C) identifying the ethical issues involved D) considering the impact of the on stakeholders 92) Kathy, your best friend and classmate, asks you to help her with a challenging ethical

dilemma. Which of the following would be your first step in the decision-making process? A) identifying the ethical issue B) considering the available alternatives C) determining the facts of the situation D) making the decision 93) Which of the following conditions makes issue identification the first step in the ethical

decision-making process? A) when the ethical predicament of the situation is hard to determine B) when the responsibility for the decision lies with one person C) when the issue is presented from the start D) when the stakeholders in the decision cannot be determined 94) In the ethical decision-making process, identify the steps that might arise in reverse order,

depending on the circumstances. A) identifying relevant ethical issues; considering the impact of a decision on stakeholders B) determining the facts of the situation; identifying the impact of the decision on stakeholders C) identifying the impact of the decision on stakeholders; considering available alternatives D) determining the facts of the situation; identifying relevant ethical issues 95) ________ refers to shortsightedness about values. A) Inattentional blindness B) Normative myopia C) Change blindness D) Descriptive myopia

96) Which of the following is the reason why normative myopia is especially liable to occur in a

business context? A) The fast-paced world of business allows little time for contemplation on ethics. B) Business attracts people from diverse backgrounds, which makes it difficult to identify ethical standards agreeable to everybody. C) People are more likely to focus on the technical aspects of the task at hand in a business context, and thus, fail to recognize the ethical aspect. D) Ethics can justifiably be allowed to take a backseat in a business context. 97) Identify the true statement about normative myopia. A) It occurs when decision makers fail to notice gradual changes over time. B) It refers to the shortsightedness about values. C) It has only been observed to occur in business. D) It only results from focusing failures. 98) Which of the following statements commits the ethical oversight known as normative

myopia? A) "I skipped the red light because I was so involved in our debate." B) "The only reason they did not notice the pilferage happening is because it involved the theft of such small quantities of goods over a long period of time." C) "I hope Brad has learnt his lesson after getting drunk and crashing his car." D) "I strongly believe in the saying, ‘finders keepers, losers weepers.'" 99) If we are told specifically to pay attention to a particular element of a decision or event, we

are likely to miss all of the surrounding details, no matter how obvious. According to Bazerman and Chugh, this phenomenon is known as ________. A) inattentional blindness B) descriptive ignorance C) change blindness D) normative myopia 100)

Focusing failures result in moments where we ask ourselves, "How could I have missed that?" According to Bazerman and Chugh, this phenomenon is known as A) change blindness. B) descriptive ignorance. C) inattentional blindness. D) normative myopia.

101)

Which of the following causes inattentional blindness according to Bazerman and Chugh? A) perceptual differences B) moral exclusions C) perceptual barriers D) focusing failures

102)

Which of the following is true of inattentional blindness? A) It occurs when someone deliberately avoids taking a decision about an unpleasant ethical issue. B) It refers to the shortsightedness about values. C) It distinguishes good people who make ethically responsible decisions from good people who do not. D) It occurs when people pay specific attention to a particular element of a decision, while losing sight of other aspects of it.

103)

Missing a highway turn-off as a result of speaking on a cell phone while driving is an example of ________. A) normative myopia B) inattentional blindness C) rational ignorance D) change blindness

104)

The Arthur Andersen auditors did not notice how low Enron had fallen in terms of its unethical decisions over a period of time. According to Bazerman and Chugh, this omission is an example of ________. A) inattentional blindness B) descriptive ignorance C) change blindness D) normative myopia

105)

The omission known as change blindness occurs when ________. A) decision makers fail to notice gradual changes over time B) a sudden change is overlooked by decision makers C) decision makers are adamant on maintaining status quo due to a fear of change D) a decision maker wants to bring about a change on a whim

106)

The failure of decision makers to notice gradual variations over time is known as ________. A) inattentional blindness B) conscious incompetence C) change blindness D) rational ignorance

107)

In the ethical decision-making process, once one examines the facts and identifies the ethical issues involved, one should next ________. A) make the decision B) consider the available alternatives C) monitor and learn from the outcomes D) identify the stakeholders

108)

"________" include all of the groups and/or individuals affected by a decision, policy, or operation of a firm or individual. A) Stakeholders B) Shareholders C) Employees D) Owners

109)

Jim resides close to Bunton Steel Co., a steel factory. The company has recently implemented changes to its pollution control policy that has adversely affected Jim and his family. This makes Jim a(n) ________ in the company's pollution control policy. A) associate B) stockholder C) partner D) stakeholder

110)

In an ethical decision-making process, moral imagination helps individuals make ethically responsible decisions. Identify the step in which moral imagination is critical. A) determining the facts B) considering the available alternatives C) identifying the ethical issues D) identifying and considering impact of decision on stakeholders

111)

In the ethical decision making process, moral imagination is used by decision makers while ________. A) considering the available alternatives B) identifying the stakeholders C) identifying the ethical issues involved D) determining the facts of the situation

112)

In the ethical decision-making process, creativity in identifying options is also known as ________. A) moral imagination B) descriptive imagination C) intentional deliberation D) normative imagination

113)

________ is one element that distinguishes good people who make ethically responsible decisions from good people who do not. A) Normative myopia B) Inattentional blindness C) Change blindness D) Moral imagination

114)

115)

Which of the following is true of moral imagination? A) It occurs when decision makers fail to notice gradual variations over time. B) It denotes reasonable ethical judgments that a person makes without regard for facts. C) It distinguishes good people who make ethically responsible decisions from good people who do not. D) It refers to the positive impact a hypothetical decision is projected to have on the stakeholders involved in the decision.

Which of the following qualities would an effective decision maker display when considering the available alternatives for ethical decision making? A) reciprocal obligation B) servant leadership C) social entrepreneurship D) moral imagination

116)

Which of the following elements is important not only to consider the obvious options with regard to a particular dilemma, but also the much more subtle ones that might not be evident at first glance? A) intentional deliberation B) descriptive imagination C) moral imagination D) normative imagination

117)

Identify the step of the ethical decision-making process that involves predicting the likely, foreseeable, and the possible consequences to all the relevant stakeholders. A) comparing and weighing the alternatives B) making the decision C) identifying the ethical issues D) monitoring and learning from the outcomes

118)

A critical element of this step in the ethical decision-making process will be the consideration of ways to mitigate, minimize, or compensate for any possible harmful consequences or to increase and promote beneficial consequences. Which step is this? A) monitoring the outcomes B) considering available alternatives C) identifying the ethical issues D) comparing and weighing alternatives

119)

Which of the following considerations can sometimes override consequences when comparing and weighing alternatives for ethical decision making? A) ideas B) apprehensions C) principles D) assumptions

120)

Which step in the ethical decision-making process occurs once you have considered how a decision affects stakeholders by comparing and weighing the alternatives? A) identifying the ethical issues involved B) monitoring and learning from outcomes C) making a decision D) identifying key stakeholders

121)

Identify the final step in the ethical decision-making process. A) listing out the eventualities that may result from the decision B) monitoring and learning from outcomes C) corresponding with the stakeholders D) identifying new ethical dilemmas to tackle

122)

Which of the following is true of an ethical decision-making process? A) It designs a person's conceptual framework. B) It facilitates the flow of information and intelligence. C) It requires a persuasive and rational justification for a decision. D) It requires making operational decisions based on intelligence.

123)

Which of the following is part of the final step in an ethical decision-making process? A) evaluating the implications of a decision B) ensuring that the decision taken is a simple "yes" or "no" decision C) assessing the transparency of a decision D) engaging in moral imagination

124)

When faced with a situation that suggests two clear alternative ways forward, we often consider only those two clear paths, missing the fact that other alternatives might be possible. Considering limited alternatives is a stumbling block to responsible action that can be categorized as a(n) ________. A) personality barrier B) perceptual barrier C) cognitive barrier D) individuality barrier

125)

126)

Which of the following is a cognitive barrier to responsible, ethical decision making? A) choosing the alternative that meets maximum decision criteria B) considering unlimited alternatives C) following simplified decision rules D) selecting only the best option

Identify the cognitive barrier which might appear to relieve us of accountability for a decision. A) looking for creative alternatives B) considering unlimited alternatives C) satisfying the maximum decision criteria D) using a simplified decision rule

127)

Which of the following explains the term "satisficing"? A) striving to select only the best alternative B) following simplified decision rules C) selecting the alternative simply because it is the easy way out D) selecting the alternative that meets minimum decision criteria

128)

When making a decision, selecting the alternative that meets the minimum decision criteria is selected is known as ________. A) normalcy bias B) satisficing C) optimism bias D) flipism

129)

Identify the attitude which leads to an unexamined life not worth living according to Socrates. A) marcissism B) passivity C) cynicism D) satisficing

130)

Which of the following is a cognitive barrier to responsible decision making and behavior? A) complex decision rules B) lack of transparency C) morality D) ignorance

131)

According to the Greek philosopher Aristotle, ________ explains why some people act unethically even when they know what is right. A) normative myopia B) change blindness C) weakness of will D) moral imagination

132)

Identify the institutional role from the following. A) spouse B) citizen C) sibling D) teacher

133)

Identify the social role from the following. A) student-body president B) manager C) citizen D) librarian

134)

Individuals within a business setting are often in situations in which they must reach an agreement using their own point of view and the perspective of the specific role they fill within an institution. This best describes the term ________. A) practical and theoretical reasoning B) critical thinking C) personal and professional decision making D) risk assessment

135)

In the context of ethical decision making in managerial roles, ________ lies at the heart of an individualized ethical decision-making process. A) theoretical reasoning B) personal integrity C) lack of transparency D) inattentional blindness

FILL IN THE BLANK. Write the word or phrase that best completes each statement or answers the question. 136) In the context of ethical decision-making process, ________ are developed through a logical process of decision making that gives proper attention to such things as facts, alternative perspectives, consequences to all stakeholders, and ethical principles. 137)

According to business scholars Chugh and Bazerman, ________ results from focusing on too narrow a range of questions.

138)

________ surrounding how individuals experience and understand situations can explain many ethical disagreements.

139)

Some writers have called the inability to recognize ethical issues while dealing with the financial aspect of business decisions ________.

140) 141)

________ occurs when decision makers fail to notice gradual changes over time.

A long tradition in philosophical ethics argues that a key test for ________ is whether or not a decision would be acceptable from the point of view of all parties involved.

142)

In an ethical decision-making process, creativity in identifying options is called "________."

143)

Responsible decision making involves identifying and considering all of the people affected by a decision, the people often called ________.

144)

Selecting the alternative that meets minimum decision criteria is known as ________.

145)

We tend to give in to ________ in our professional environments, both because we want to "fit in" and to achieve success in our organizations, and also because our actual thinking is influenced by our peers.

ESSAY. Write your answer in the space provided or on a separate sheet of paper. 146) Explain the importance of determining the facts when making a responsible ethical decision.

147)

Elaborate on the concept of perceptual differences in ethics.

148)

Explain the role of the sciences in the study of ethics.

149)

How does a business decision become an ethical one?

150)

What is normative myopia?

151)

What are the consequences of not looking at various perspectives and the interests of other people involved while making a responsible ethical decision?

152)

What is the test for ethical legitimacy in philosophical ethics?

153)

What is moral imagination? How is it important?

154)

Explain the importance of moral imagination with an example.

155)

Outline the importance of "walking a mile in another's shoes" and associate it with the fifth step of the ethical decision-making process.

156)

Identify the means for comparing and weighing alternatives.

157)

Outline the thought process of responsible persons comparing and weighing alternatives while considering the effects of a decision on their own integrity and character.

158)

Explain how the ethical decision-making process does not end with making a decision.

159)

Identify and describe the intellectual or cognitive stumbling blocks that can come in the way of responsible ethical decision.

160)

Give three examples each of social and institutional roles.

Answer Key Test name: chapter 2 1) FALSE

The first step in making decisions that are ethically responsible is to determine the facts of the situation. 2) TRUE

Given the general importance of determining the facts, there is a role for science (and theoretical reason) in any study of ethics. 3) FALSE

Issue identification becomes the first step of the ethical decision-making process when the decision maker is presented with an ethical issue or dilemma from the start. This is because the step of determining the facts of the situation becomes unnecessary since the facts that have given rise to the particular ethical dilemma are already known to the decision maker. 5) FALSE

It needs to be recognized that "business" or "economic" decisions and ethical decisions are not mutually exclusive. Just because a decision is made on economic grounds does not mean that it does not involve ethical considerations as well. 6) FALSE

Inattentional blindness results from focusing failures. 7) FALSE

Normative myopia does not occur only in business. 8) FALSE

Stakeholders include all of the groups and/or individuals affected by a decision, policy, or operation of a firm or individual. They are identified in the third stage of the ethical decisionmaking process. 9) FALSE

Understanding a situation from another's point of view, making an effort to "walk a mile in their shoes," contributes significantly to responsible ethical decision making. Weighing the alternatives will involve predicting the likely, the foreseeable, and the possible consequences to all the relevant stakeholders. 10) TRUE

The next step in the decision-making process after considering all available alternatives is to compare and weigh the alternatives. A critical element of this evaluation will be the consideration of ways to mitigate, minimize, or compensate for any possible harmful consequences or to increase and promote beneficial consequences. 11) FALSE

Sometimes, matters of principles, rights, or duties override consequences when comparing alternatives for ethical decision making. In a business setting, the duties associated with a decision maker's position in the company can sometimes be the priority when comparing alternatives. 12) TRUE

Within business, an organization's context sometimes makes it difficult for even a wellintentioned person to act ethically. 13) TRUE

Responsibility for the circumstances that can encourage ethical behavior and can discourage unethical behavior falls predominantly to the business management and executive team. 14) TRUE

Within a business setting, individuals must consider the ethical implications of both personal and professional decision making. Decision making in professional contexts raise broader questions of social responsibilities and social justice. 15) A

The second step in responsible ethical decision making requires the ability to recognize a decision or issue as an ethical decision or ethical issue. 17) A

There may be times when you are presented with an issue from the start, say, when a colleague asks you for guidance with a challenging ethical predicament. The issue identification, therefore, becomes the first step, while fact gathering is a necessary step number two. 18) C

There may be times when a person is presented with an issue from the start, say, when a colleague asks her for guidance with a challenging ethical predicament. The issue identification, therefore, becomes the first step, while fact gathering is a necessary step number two. 19) D

The first step in making decisions that are ethically responsible is to determine the facts of the situation. Identifying the ethical issues involved is the next step in making responsible decisions. Certainly, the first and second steps might arise in reverse order, depending on the circumstances. 20) B

Some writers have called the inability to recognize ethical issues normative myopia, or shortsightedness about values. Normative myopia does not occur only in business, but in a business context, people may be especially likely to focus on the technical aspects of the task at hand, and thus fail to recognize the ethical aspect. 21) C

In a business context, people may be especially likely to focus on the technical aspects of the task at hand and experience normative myopia in the process. Chugh and Bazerman similarly warn of inattentional blindness, which they suggest results from focusing failures. 22) B

The statement "I strongly believe in the saying, ‘finders keepers, losers weepers'" commits an ethical oversight. It does not take into account the fact that the object that was found may actually belong to someone else. In business contexts, it can be easy to become so involved in the financial aspects of decisions that one loses sight of the ethical aspects. Some writers have called this inability to recognize ethical issues normative myopia, or shortsightedness about values. 24) A

Bazerman and Chugh warn of inattentional blindness, which they suggest results from focusing failures. If we happen to focus—or if we are told specifically to pay attention to a particular element of a decision or event—we are likely to miss all of the surrounding details, no matter how obvious. 25) C

Bazerman and Chugh warn of inattentional blindness, which they suggest results from focusing failures. If people happen to focus on a particular element of a decision or event, they are likely to miss all of the surrounding details, no matter how obvious. 27) D

Inattentional blindness occurs when people focus on a particular element of a decision or event, while ignoring the surrounding details. This phenomenon was termed as focusing failure by Bazerman and Chugh. 28) B

Bazerman and Chugh warn of inattentional blindness, which they suggest results from focusing failures. These focusing failures then result in a moment where we ask ourselves, "How could I have missed that?" You may recall speaking on a cell phone while driving and perhaps missing a highway turn-off by mistake. 29) C

According to Bazerman and Chugh, change blindness is one of the means by which ethical issues might go unnoticed. This omission occurs when decision makers fail to notice gradual changes over time, and they offer the example of the Arthur Andersen auditors who did not notice how low Enron had fallen in terms of its unethical decisions. 30) A

According to Bazerman and Chugh, change blindness is one of the means by which ethical issues might go unnoticed. This omission occurs when decision makers fail to notice gradual changes over time and they offer the example of the Arthur Andersen auditors who did not notice how low Enron had fallen in terms of its unethical decisions. 32) D

The third step involved in ethical decision making involves one of its more critical elements. We are asked to identify and to consider all of the people affected by a decision, the people often called stakeholders. 33) A

"Stakeholders" include all of the groups and/or individuals affected by a decision, policy, or operation of a firm or individual. 34) D

Jim is a stakeholder in Bunton Steel Co.'s pollution control policy. "Stakeholders" include all of the groups and/or individuals affected by a decision, policy, or operation of a firm or individual. 35) B

Creativity in identifying ethical options—also called moral imagination—is one element that distinguishes good people who make ethically responsible decisions from good people who do not. It is important not only to consider the obvious options with regard to a particular dilemma, but also the much subtler ones that might not be evident at first glance. 37) A

Creativity in identifying options—also called "moral imagination"—is one element that distinguishes good people who make ethically responsible decisions from good people who do not. 38) D

When considering the available alternatives in the ethical decision-making process, moral imagination is important not only to consider the obvious options with regard to a particular dilemma, but also the much subtler ones that might not be evident at first glance. This is the one element that distinguishes good people who make ethically responsible decisions from good people who do not. 41) C

Creativity in identifying options—also called "moral imagination"—is one element that distinguishes good people who make ethically responsible decisions from good people who do not. It is important not only to consider the obvious options with regard to a particular dilemma, but also the much more subtle ones that might not be evident at first glance. 42) A

Weighing the alternatives involves predicting the likely, the foreseeable, and the possible consequences to all the relevant stakeholders. 43) D

A critical element of weighing the alternatives will be the consideration of ways to mitigate, minimize, or compensate for any possible harmful consequences or to increase and promote beneficial consequences. 44) C

Sometimes matters of principles, rights, or duties might override consequences when comparing and weighing alternatives for ethical decision making. For example, how an employee compares and weighs alternatives for ethical decision making could depend on the duties associated with his position. 45) C

Once you have considered how a decision affects stakeholders by comparing and weighing the alternatives, you make the required decision. 46) B

Once you have explored the variables, it is time to make a decision. However, the process is not yet complete. To be accountable in our decision making, it is not sufficient to deliberate over this process, only to later throw up our hands once the decision is made: "It's out of my hands now!" Instead, we have the ability as humans to learn from our experiences. That ability creates a responsibility to evaluate the implications of our decisions, to monitor and learn from the outcomes, and to modify our actions accordingly when faced with similar challenges in the future. 47) C

An ethical decision-making process requires a persuasive and rational justification for a decision. Rational justifications are developed through a logical process of decision making that gives proper attention to such things as facts, alternative perspectives, consequences to all stakeholders, and ethical principles. 48) A

The ability we have as humans to learn from our experiences implies a responsibility to complete an ethical decision-making process by proceeding to the final step: evaluate the implications of our decisions, monitor and learn from the outcomes, and modify our actions accordingly when faced with similar challenges in the future. 49) C

Some stumbling blocks to responsible action are cognitive or intellectual. One cognitive barrier is that we sometimes consider only limited alternatives. When faced with a situation that suggests two clear alternative ways forward, we often consider only those two clear paths, missing the fact that other alternatives might be possible. 50) C

Following simplified decision rules is a cognitive barrier. 51) D

Using a simple decision rule might appear to relieve us of accountability for the decision (you did not "make" the decision; the rule required the decision to be made), even if it may not be the best possible decision. 52) D

We often select the alternative that satisfies minimum decision criteria, otherwise known as satisficing. 53) B

We often select the alternative that satisfies minimum decision criteria, otherwise known as "satisficing." We select the option that suffices, the one that people can live with, even if it might not be the best. 54) B

Passivity is exactly the sort of unexamined life that Socrates claimed was not worth living. To live a meaningful human life, we must step back and reflect on our decisions, taking responsibility as autonomous beings. 55) D

Some stumbling blocks standing in the way of responsible action are cognitive or intellectual. A certain type of ignorance can account for bad ethical choices. Sometimes that ignorance can be almost willful and intentional. 56) C

Some stumbling blocks to responsible decision making and behavior are less intellectual or cognitive than they are a question of motivation and willpower. The Greek philosopher Aristotle referred to this as weakness of will in explaining why some people act unethically even when they know what is right. 57) D

Some of our roles are social: friend, son or daughter, spouse, citizen, neighbor. Some are institutional: manager, teacher, student-body president. 58) C

Some of our roles are social: friend, son or daughter, spouse, citizen, neighbor. Some are institutional: manager, teacher, student-body president. 59) C

Within a business setting, individuals must consider the ethical implications of both personal and professional decision making. Individuals within a business setting are often in situations in which they must reach an agreement using their own point of view and the perspective of the specific role they fill within an institution. 60) B

An ethical decision-making model starts from the point of view of an individual who finds herself in a particular situation. Personal integrity lies at the heart of such individual decision making: What kind of person am I or do I want to be? What are my values? What do I stand for? 61) rational justifications

Business scholars Chugh and Bazerman warn of inattentional blindness, which they suggest results from focusing on too narrow a range of questions. If we happen to focus on—or if we are told specifically to pay attention to—only one particular element of a decision or event, we are likely to miss many of the surrounding details, no matter how obvious. 63) Perceptual differences

Perceptual differences surrounding how individuals experience and understand situations can explain many ethical disagreements. 64) normative myopia

Some writers call the inability to recognize ethical issues normative myopia, or shortsightedness about values. Normative myopia does not occur only in business, but in a business context, people may be especially likely to focus on the technical aspects of the task at hand, and thus fail to recognize the ethical aspect. 65) Change blindness

Change blindness occurs when decision makers fail to notice gradual changes over time. 66) ethical legitimacy

A long tradition in philosophical ethics argues that a key test of ethical legitimacy is whether a decision would be acceptable from the point of view of all parties involved. 67) moral imagination

Responsible decision making expects us to identify and to consider all of the people affected by a decision, the people often called stakeholders. "Stakeholders," in this general sense, include all of the groups and/or individuals affected by a decision, policy, or operation of a firm or individual. 69) satisficing

We often select the alternative that satisfies minimum decision criteria, otherwise known as "satisficing." 70) peer pressure

We tend to give in to peer pressure in our professional environments, both because we want to "fit in" and to achieve success in our organizations, and also because our actual thinking is influenced by our peers. 71) Essay

The first step in making decisions that are ethically responsible is to determine the facts of the situation. Making an honest effort to understand the situation, to distinguish facts from mere opinion, is essential. Perceptual differences in how individuals experience and understand situations can explain many ethical disagreements. Knowing the facts and carefully reviewing the circumstances can go a long way in resolving disagreements at an early stage. 72) Essay

Perceptual differences in how individuals experience and understand situations can explain many ethical disagreements. Knowing the facts and carefully reviewing the circumstances can go a long way toward resolving disagreements at an early stage. 73) Essay

An ethical judgment made in light of a diligent determination of the facts is a more reasonable ethical judgment that one made without regard for the facts. A person who acts in a way that is based upon a careful consideration of the facts has acted in a more ethically responsible way than a person who acts without deliberation. The sciences, and perhaps especially the social sciences, can help us determine the facts surrounding our decisions. For a business example, consider what facts might be relevant for making a decision regarding child labor. Consider how the social sciences of anthropology and economics, for example, might help us understand the facts surrounding employing children in the workplace within a foreign country. 74) Essay

The first step in ensuring that a business decision becomes an ethical one is that we need to recognize that "business" or "economic" decisions and ethical decisions are not mutually exclusive. Just because a decision is made on economic grounds does not mean that it does not involve ethical considerations, as well. Being sensitive to ethical issues is an important characteristic that needs to be cultivated in ethically responsible people. Beyond sensitivity, we also need to ask how our decisions will impact the well-being of the people involved. 75) Essay

In business contexts, it can be easy to become so involved in the financial aspects of decisions that one loses sight of the ethical aspects. Some writers have called this inability to recognize ethical issues normative myopia, or shortsightedness about values. 76) Essay

The third step involved in ethical decision making involves one of its more critical elements. We are asked to identify and consider all of the people affected by a decision; the people often called stakeholders. "Stakeholders," in this general sense, include all of the groups and/or individuals affected by a decision, policy, or operation of a firm or individual. Examining issues from a variety of perspectives other than one's own, and other than what local conventions suggest, helps make one's decisions more reasonable and responsible. And, to the contrary, thinking and reasoning from a narrow and personal point of view virtually guarantees that we will not understand the situation fully. Making decisions from a narrow and personal point of view likewise guarantees that we are liable to make a decision that does not give due consideration to other persons and perspectives. 77) Essay

A long tradition in philosophical ethics argues that a key test of ethical legitimacy is whether or not a decision would be acceptable from the point of view of all parties involved. 78) Essay

Creativity in identifying options—also called "moral imagination"—is one element that distinguishes good people who make ethically responsible decisions from good people who do not. 79) Essay

Once we have examined the facts, identified the ethical issues involved, and identified the stakeholders, we need to consider the available alternatives. Creativity in identifying options— also called "moral imagination"—is one element that distinguishes good people who make ethically responsible decisions from good people who do not. It is important not only to consider the obvious options with regard to a particular dilemma, but also the much more subtle ones that might not be evident at first glance. For example, if an iPod gets lost, one person might decide to keep it because she judges that the chances of discovering the true owner are slim and that, if she doesn't keep it, the next person to discover it will make that decision. Another person might be able to think of some alternatives beyond those choices. For example, she could return early for the next class to see who is sitting at the desk, or she could find out who teaches the previous class and ask that teacher for help in identifying the owner. Moral imagination might be something as simple as checking in a lost and found department. 80) Essay

The step of comparing and weighing the alternatives involves creating a mental spreadsheet that evaluates the impact of each alternative you have devised on each stakeholder you identified. The most helpful way to accomplish this is to try to place oneself in the other person's position. Understanding a situation from another's point of view, making an effort to "walk a mile in their shoes," contributes significantly to responsible ethical decision making. Weighing the alternatives will involve predicting the likely, the foreseeable, and the possible consequences to all the relevant stakeholders. A critical element of this evaluation will be the consideration of ways to mitigate, minimize, or compensate for any possible harmful consequences or to increase and promote beneficial consequences. 81) Essay

Consequences, justifications, matters of principles, rights or duties, and the consideration of the effects of a decision on one's own integrity and character are all means for comparing and weighing alternatives. 82) Essay

Comparing and weighing alternatives requires consideration of the effects of a decision on one's own integrity and character. Understanding one's own character and values should play a role in decision making. A responsible person will ask: "What type of person would make this decision? What kind of habits would I be developing by deciding in one way rather than another? What type of corporate culture am I creating and encouraging? How would I, or my family, describe a person who decides in this way? Is this a decision that I am willing to defend in public?" Such questions truly go to the heart of ethical business leadership. 83) Essay

Once one has explored the other variables of the ethical decision-making process, it is time to make a decision. However, the process is not yet complete. To be accountable in our decision making, it is not sufficient to deliberate over this process, only to throw up our hands. Instead, we have the ability as humans to learn from our experiences. That ability creates a responsibility to evaluate the implications of our decisions, to monitor and learn from the outcomes, and to modify our actions accordingly when faced with similar challenges in the future. 84) Essay

Some stumbling blocks to responsible action are cognitive or intellectual. The model of ethical decision making suggests that a certain type of ignorance can account for bad ethical choices. Sometimes that ignorance can be almost willful and intentional. Another cognitive barrier is that we sometimes only consider limited alternatives. When faced with a situation that suggests two clear alternative resolutions, we often consider only those two clear paths, missing the fact that other alternatives might be possible. Responsible decision making would require that we discipline ourselves to explore additional methods of resolution. We also generally feel most comfortable with simplified decision rules. Having a simple rule to follow can be reassuring to many decision makers. Using a simple decision rule might appear to relieve us of accountability for the decision even if it may not be the best possible decision. We also often select the alternative that satisfies minimum decision criteria, otherwise known as "satisficing." We select the option that suffices, the one that people can live with, even if it might not be the best. The very fact that a decision was reached by consensus can convince everyone involved that it must be the most reasonable decision. 85) Essay

Some of our roles are social: friend, son or daughter, spouse, citizen, neighbor. Some are institutional: manager, teacher, student-body president.

Student name:__________ TRUE/FALSE - Write 'T' if the statement is true and 'F' if the statement is false. 161) Ethics attempts to answer the question of how we should live, but it does not give reasons to support its answers. ⊚ true ⊚ false 162)

Ethics offers prescriptions for what a person should do while not seeking to provide justifications for such recommendations. ⊚ true ⊚ false

163)

Principle-based ethics direct us to consider the moral character of individuals and how various character traits can contribute to, or obstruct, a happy and meaningful human life. ⊚ true ⊚ false

164)

Utilitarianism has been called a virtue-based approach to ethics and social policy. ⊚ true ⊚ false

165)

Utilitarianism is a social philosophy that promotes the welfare of well-informed political minorities. ⊚ true ⊚ false

166)

The "administrative" version of utilitarianism considers competitive markets to be the most efficient means of maximizing happiness. ⊚ true ⊚ false

167)

The "market" version of utilitarianism argues that questions of safety and risk should be determined by experts who establish standards that the business is required to meet. ⊚ true ⊚ false

168)

Utilitarians would object to child labor as a matter of principle. ⊚ true ⊚ false

169)

A principle-based framework defines a set of rules that enforces us to act or decide in certain ways. ⊚ true ⊚ false

170)

According to a principle-based ethical framework, social contract functions to organize and ease relations between individuals. ⊚ true ⊚ false

171)

The concept of a human or moral right is central to the utilitarian ethical tradition. ⊚ true ⊚ false

172)

The rights of employees to minimum wage, equal opportunity, and to bargain collectively as part of a union are examples of their rights grounded in moral entitlements. ⊚ true ⊚ false

173)

One of the major challenges to an ethics based on rights points to practical problems in applying a theory of rights to real-life situations. ⊚ true ⊚ false

174)

An ethics of virtue focuses on the actions of a person rather than the person's characteristics. ⊚ true ⊚ false

175)

Virtue ethics directs us to act on the basis of moral principles such as respecting human rights. ⊚ true ⊚ false

MULTIPLE CHOICE - Choose the one alternative that best completes the statement or answers the question. 176) The three major categories of an ethical framework are A) utility, virtue, and values. B) universal rights, values, and moral principles. C) universal rights, cultural norms, and morals. D) consequences, principles, and personal character. 177)

________ directs us to decide based on overall consequences of our acts. A) Deontology B) Role ethics C) Utilitarianism D) Virtue ethics

178)

________ typically assert that individual rights and duties are fundamental and thus can also be referred to as a rights-based, or duty-based approach to ethics. A) Principle-based ethics B) Role ethics C) Virtue-based ethics D) Pragmatic ethics

179)

The study of various character traits that can contribute to, or obstruct, a happy and meaningful human life is part of ________. A) Kantian tradition B) virtue ethics C) principle-based ethics D) utilitarianism

180)

Which of the following is true of philosophical ethics? A) It provides justifications that must be applicable to all people regardless of their religious starting points. B) It tends to disconnect the "oughts" and "shoulds" of ethics from the underlying account of human well-being. C) It is concerned with how business institutions ought to be structured. D) It explains human well-being in religious terms.

181)

________ holds that ethical values are dependent on particular people, cultures, or times. A) Theoretical reasoning B) Psychological egoism C) Business ethics D) Ethical relativism

182)

Utilitarianism's fundamental insight is that we should decide what to do by A) considering the moral character of individuals. B) following the rules, regardless of consequences. C) acting only out of a self-interest. D) considering the consequences of our actions.

183)

Utilitarianism has been called a(n) A) commonsensical approach to ethics. B) behavioral approach to ethics. C) consequentialist approach to ethics. D) intuitive approach to ethics.

184)

What is the difference between a principle-based framework of ethics and utilitarianism? A) Ethics of principles is based on self-interest, whereas utilitarianism is based on human rights. B) Ethics of principles is based on human rights, whereas utilitarianism is based on selfinterest. C) Ethics of principles is based on rules, whereas utilitarianism is based on consequences. D) Ethics of principles is based on consequences, whereas utilitarianism is based on rules.

185)

________ is commonly identified with the policy of "maximizing the overall good." A) Stoicism B) Deontology C) Pragmatism D) Utilitarianism

186)

Which of the following principles does utilitarianism emphasize? A) producing the greatest good for the greatest number B) acting only out of self-interest C) ensuring that a fair decision is an impartial decision D) obeying the law and keeping promises

187)

Amanda and Jeremy argue about the employment of children in tobacco farms in a certain part of the world. Jeremy is of the view that this practice is ethical. He supports this view by stating facts about how the economic and social gains from employing children in these farms outweigh the long-term economic losses due to the health problems and lack of education suffered by these children. Jeremy is most likely an adherent of ________. A) virtue ethics B) deontological ethics C) utilitarianism D) classicism

188)

The utilitarian tradition relies on ________ for deciding on the ethical legitimacy of alternative decisions. A) intuition B) experience C) variable analysis D) social sciences

189)

Free market economics is grounded in the ________. A) rights-based framework of ethics B) principle-based framework of ethics C) utilitarian framework of ethics D) legal framework of ethics

190)

Which of the following is true of a market version of utilitarianism? A) Questions of safety and risk are determined by experts. B) Social science determines policies to maximize the overall good. C) Individuals calculate for themselves what risks they wish to take. D) A government regulator determines the safety standards in the marketplace.

191)

Which of the following would be advocated by the "administrative" version of utilitarianism? A) deregulation of advertising standards B) reliance on free and competitive markets C) risk-taking by consumers D) government regulation of business

192)

Identify the statement that most accurately describes the difference between the market and the administrative versions of utilitarianism. A) The administrative version of utilitarianism promotes policies that protect property rights and encourage competition. B) The administrative version of utilitarianism uses social sciences to predict consequences. C) The administrative version of utilitarianism turns to policy experts for the design and implementation of policies. D) The administrative version produces those goods that the consumers want.

193)

Utilitarianism determines ethical and unethical acts by their ________. A) legality B) consequences C) fairness D) nuances

194)

One of the problems of the utilitarian tradition of ethics is A) its need to count, measure, compare, and quantify consequences. B) its lack of focus on the possible results of actions. C) its tendency to excessively focus on individual welfare. D) its reliance on unmeasurable and abstract actions.

195)

The ________ goes against the ethical principle of obeying certain duties or responsibilities, no matter the end result. A) rights-based framework of ethics B) duty-based framework of ethics C) deontological framework of ethics D) utilitarian framework of ethics

196)

The emphasis on producing the greatest good for the greatest number makes utilitarianism a ________. A) social philosophy B) separation thesis C) legal right D) moral imagination

197)

People endorsing child labor by justifying that it brings foreign investment into poor countries are ________. A) utilitarians B) humanitarians C) relativists D) egoists

198)

________ are ethical rules that put values into action. A) Morals B) Attitudes C) Virtues D) Principles

199)

Which of the following statements reflects the approach of a principle-based ethical tradition? A) obey the law B) ends justify the means C) maximize the overall good D) survival of the fittest

200)

Which of the following approaches emphasizes the need to follow legal rules regardless of unfavorable consequences? A) virtue ethics B) utilitarianism C) principle-based ethics D) egoism

201)

"We ought to stop at a red light, even if no cars are coming and I could get to my destination that much sooner." Identify the ethical approach that follows this line of thought. A) virtue ethics B) utilitarianism C) role ethics D) ethics of principles

202)

________ ensure the integrity and proper functioning of the economic, legal, or financial systems. A) Social functions B) Administrative functions C) Marketing functions D) Gatekeeper functions

203)

No group could function if members were free at all times to decide for themselves what to do and how to act. Which of the following functions to organize and ease relations between individuals? A) autocracy B) self-rule C) social contract D) personal norms

204)

Which of the following is a fundamental moral duty according to Immanuel Kant? A) to place principles over morals B) to ponder over the nuances of ethics C) to treat each person as an end in themselves D) to continuously set moral examples for everyone to follow

205)

Which of the following is a reason why a rights-based framework of ethics would object to child labor? A) Such practices violate laws that are widely accepted in developed countries. B) Such practices are not economically feasible in the modern era. C) Such practices violate our duty to treat children with respect. D) Such practices do not produce beneficial consequences to children.

206)

207)

The concept of human rights is central to which of the following ethical traditions? A) virtue-based ethical tradition B) consequence-based ethical tradition C) role-based ethical tradition D) principle-based ethical tradition

The ________ tradition claims that our fundamental human rights, and the duties that follow from them, are derived from our nature as free and rational beings. A) utilitarian B) virtue-based C) role-based D) Kantian

208)

The Kantian tradition claims that humans do not act only out of instinct and conditioning; they make free choices about how they live their lives, about their own ends. In this sense, humans are said to have a fundamental human right of A) dignity. B) rationality. C) autonomy. D) dependency.

209)

________ understandings of social justice argue that freedom from coercion by others is the most central element of social justice. A) Anarchist B) Egalitarian C) Libertarian D) Conservative

210)

________ are fundamental to theories of social justice upon which capitalist economies have been built. A) Liberty and equality B) Fraternity and autocracy C) Kinship and cooperation D) Consideration and kindness

211)

Which of the following is a right granted to an employee on the basis of legislation or judicial rulings? A) the right to a specific health care package B) the right to bargain as part of a union C) the right to pension funds D) the right to a bonus

212)

Identify the true statement about ethics based on rights. A) Rights and duties can be easily defined. B) There is no agreement on the scope and range of rights. C) Application of theory to real-life situations is easy. D) There exists a well-defined line between rights and desires.

213)

Which of the following is a true statement in the context of the libertarian understandings of social justice? A) Individual liberty is the least important element of social justice. B) Individuals should be restricted from engaging in any voluntary economic exchange. C) Businesses should be free to pursue profit in any voluntary and nondeceptive manner. D) All government regulation would be seen as just interference in the market.

214)

What is the difference between virtue ethics and principle-based ethics? A) Virtue ethics is based on character traits, whereas principle-based ethics is based on a set of rules. B) Virtue ethics is based on the consequences of actions, whereas principle-based ethics is based on character traits. C) Virtue ethics is based on set of rules, whereas principle-based ethics is based on consequences of actions. D) Virtue ethics is based on producing the greater good, whereas principle-based ethics is based on self-interest.

215)

________ recognizes that our motivations are not the sorts of things that each of us chooses anew each morning. A) Principle-based ethics B) Pragmatic ethics C) Role-based ethics D) Virtue ethics

216)

________ is a tradition within philosophical ethics that seeks a full and detailed description of those character traits that would constitute a good and full human life. A) Kantian ethics B) Deontological ethics C) Role ethics D) Virtue ethics

217)

Identify the view which holds that people act only out of a self-interest. A) altruism B) egoism C) utilitarianism D) libertarianism

218)

Which of the following approaches shifts the focus from questions about what a person should do, to a focus on who that person is? A) altruism B) principle-based ethics C) utilitarianism D) virtue ethics

219)

The sum of relatively set traits, dispositions, and habits of an individual is defined as the individual's ________. A) character B) moral imagination C) principle D) psychological egoism

FILL IN THE BLANK. Write the word or phrase that best completes each statement or answers the question. 220) ________ is an important perspective within the philosophical study of ethics that holds that ethical values and judgments are ultimately dependent on one's culture, society, or personal feelings. 221)

Virtue ethics directs us to consider the ________ of individuals and how various character traits can contribute to, or obstruct a happy, meaningful life.

222)

________ is commonly identified with the principle of "maximize the overall good" or, in a slightly different version, of producing "the greatest good for the greatest number."

223)

Ethical theories, such as utilitarianism, that determine right and wrong by calculating the consequences of actions are called ________.

224)

The ________ version of utilitarianism would be sympathetic with government regulation of business on the grounds that such regulation will ensure that business activities do contribute to the overall good.

225)

________ are those obligations that one is bound to perform, regardless of consequences, and might be derived from basic ethical principles, from the law, or from one's institutional or professional role.

226)

In the language of many philosophers, ethical duties should be ________ rather than hypothetical.

227)

________ protect individuals from being treated in ways that would violate their dignity and that would treat them as mere objects or means.

228)

From the Greek for "self-ruled," ________ is the capacity to make free and deliberate choices.

229)

________ is a view that holds that people act only out of self-interest.

ESSAY. Write your answer in the space provided or on a separate sheet of paper. 230) What is an ethical framework? What does it address?

231)

Explain how child labor may be justified in the eyes of a utilitarian.

232)

How does utilitarianism have a strong impact on business and business ethics?

233)

How does a free and competitive market help in attaining utilitarian goals?

234)

How does utilitarianism contradict the fundamental ethical principle: the end does not justify the means?

235)

Briefly highlight the challenges associated with utilitarian thinking.

236)

What do principle-based, ethical frameworks address?

237)

How do legal rules and principles bind us to act and take decisions in certain ways?

238)

What is a social contract?

239)

What is a moral right?

240)

Explain Immanuel Kant's view on the ethical principles of human rights.

241)

How is the concept of moral right central to the principle-based ethical tradition?

242)

Distinguish between legal and employee rights.

243)

Briefly explain the concept of virtue ethics.

244)

What is the biggest challenge posed by "egoism"?

Answer Key Test name: chapter 3 1) FALSE

Ethics attempts to answer the question of how we should live, but it also gives reasons to support its answers. 2) FALSE

Ethics seeks to provide a rational justification for why we should act and decide in a particular prescribed way. Anyone can offer prescriptions for what you should do and how you should act, but a philosophical and reasoned ethics must answer the "why?" question as well. 3) FALSE

Virtue ethics directs us to consider the moral character of individuals and how various character traits can contribute to, or obstruct, a happy and meaningful human life. 4) FALSE

Utilitarianism has been called a consequentialist approach to ethics and social policy. It would consider a decision that promotes the greatest amount of these values for the greatest number of people as the most reasonable decision. 5) FALSE

The emphasis on producing the greatest good for the greatest number makes utilitarianism a social philosophy that opposes policies that aim to benefit only a small social, economic, or political minority. Historically, utilitarianism has provided strong support for democratic institutions and policies. 6) FALSE

The "market" version of utilitarianism considers competitive markets to be the most efficient means of maximizing happiness. 7) FALSE

The "administrative" version of utilitarianism argues that questions of safety and risk should be determined by experts who then establish standards that the business is required to meet. 8) FALSE

Utilitarians would object to child labor, not as a matter of principle, but only if and to the degree that it detracts from the overall good. 9) TRUE

Rules or principles create ethical duties that bind us to act or decide in certain ways. 10) TRUE

Rules can be thought of as part of a social agreement, or social contract, which functions to organize and ease relations between individuals. 11) FALSE

The concept of a human or moral right is central to the principle-based ethical tradition. 12) FALSE

Employees' rights to a minimum wage, equal opportunity, or to bargain collectively as part of a union are examples of the rights granted to them on the basis of legislation and judicial rulings. The other two kinds of employee rights common in business are their rights to those goods that they are entitled to on the basis of contractual agreements with employers and their rights grounded in moral entitlements. 13) TRUE

One of the major challenges to an ethics based on rights points to practical problems in applying a theory of rights to real-life situations. 14) FALSE

An ethics of virtue shifts the focus from questions about what a person should do, to a focus on who that person is. 15) FALSE

Virtue ethics tells us to consider the moral character of individuals and how various character traits can contribute to, or obstruct, a happy and meaningful human life. Virtues provide answers to the basic ethical question "What kind of person should I be?" 16) D

The three major categories of an ethical framework are consequences, principles, and personal character. 17) C

Utilitarianism is an ethical tradition that directs us to decide based on overall consequences of our acts. Its fundamental insight is that outcomes matter, and so we should decide what to do by considering the overall consequences of our actions. 18) A

Principle-based ethics typically assert that individual rights and duties are fundamental and thus can also be referred to as a rights-based, or duty-based (deontological) approach to ethics. It is often distinguished from consequentialist frameworks, which determine ethical decisions based on the consequences of our acts. 19) B

Virtue ethics directs us to consider the moral character of individuals and how various character traits can contribute to, or obstruct, a happy and meaningful human life. 20) A

Unlike religious ethics that explains human well-being in religious terms, philosophical ethics provides justifications that must be applicable to all people regardless of their religious starting points. The justifications of philosophical ethics tend to connect the "oughts" and "shoulds" of ethics to some underlying account of human well-being. 21) D

Ethical relativism holds that ethical values are relative to particular people, cultures, or times. Relativism denies that there can be any rationally justified or objective ethical judgments. 22) D

Utilitarianism's fundamental insight is that we should decide what to do by considering the consequences of our actions. 23) C

Utilitarianism has been called a consequentialist approach to ethics and social policy. 24) C

Ethics of principles is based on rules, whereas utilitarianism is based on consequences. 25) D

Utilitarianism is commonly identified with the principle of producing "the greatest good for the greatest number." It states that people should act in ways that produce better consequences than the alternatives they have considered. 26) A

The emphasis on the overall good, and upon producing the greatest good for the greatest number, makes utilitarianism a social philosophy that opposes policies that aim to benefit only a small social, economic, or political minority. In this way, utilitarianism provides strong support for democratic institutions and policies. 27) C

Utilitarian thinking would advise us to consider all the likely consequences of a practice of employing young children in factories. Thus, one might argue on utilitarian grounds that child labor is ethically permissible because it produces better overall consequences than the alternatives. 28) D

Deciding on the ethical legitimacy of alternative decisions requires that we make judgments about the likely consequences of our actions. Within the utilitarian tradition, there is a strong inclination to turn to social science for help in making such predictions. 29) C

With roots in Adam Smith, the ethical view that underlies much of 20th-century economics— essentially what we think of as the free market—is decidedly utilitarian. In this way, utilitarianism continues to have a very strong impact on business and business ethics. 30) C

A free and competitive consumer market will insure that people will get the level of safety that they want. Individuals calculate for themselves what risks they wish to take and what trade-offs they are willing to make in order to attain safety. 31) D

The "administrative" approach to public policy underlies one theory of the entire administrative and bureaucratic side of government and organizations. This utilitarian approach would be sympathetic with government regulation of business on the grounds that such regulation will ensure that business activities do contribute to the overall good. 32) C

The administrative version of utilitarianism turns to policy experts who have insight into the outcome of various policies and design and implement policies that will attain utilitarian ends. Experts in predicting the consequences of human action, usually trained in the social sciences such as economics, political science, and public policy, are familiar with the specifics of how society works and they therefore are in a position to determine which policy will maximize the overall good. 33) B

Utilitarianism determines ethical and unethical acts by their consequences. Thus, the end justifies the means according to utilitarians. 34) A

A set of problems concerns the need for utilitarian reasoning to count, measure, compare, and quantify consequences. If utilitarianism advises that we make decisions by comparing the consequences of alternative actions, then we must have a method for making such comparisons. 35) D

The utilitarian framework of ethics goes against the ethical principle of obeying certain duties or responsibilities, no matter the end result. The essence of utilitarianism is its reliance on consequences. Ethical and unethical acts are determined by their consequences. In short, the end justifies the means. 36) A

The emphasis on producing the greatest good for the greatest number makes utilitarianism a social philosophy that provides strong support for democratic institutions and policies and opposes those policies that aim to benefit only a small social, economic, or political minority. Historically, utilitarianism has provided strong support for democratic institutions and policies. 37) A

People endorsing child labor by justifying that it brings foreign investment and money into poor countries are utilitarians. In the opinion of some observers, allowing children to work for pennies a day under sweatshop conditions produces better overall consequences than the available alternatives. Thus, one might argue on utilitarian grounds that such labor practices are ethically permissible because they produce better overall consequences than the alternatives. 38) D

Principles are ethical rules that put values into action. We may value honesty but disagree as to how to put that into action. It is only once we have stated a principle—"never lie," or "never lie except to prevent great harm," for example—that we know what valuing honesty means in practical terms. 39) A

Ethical principles can simply be thought of as a type of rule, and the principle-based approach to ethics tells us that there are some rules that we ought to follow even if doing so prevents good consequences from happening or even if it results in some bad consequences. 40) C

Ethical principles can simply be thought of as a type of rule, and this approach to ethics that tells us that there are some rules that we ought to follow even if doing so prevents good consequences from happening or even if it results in some bad consequences. Rules or principles (e.g., "obey the law," "keep your promises," "uphold your contracts") create duties that bind us to act or decide in certain ways.

41) D

The ethical principles approach to ethics tells us that there are some rules that we ought to follow even if doing so prevents good consequences from happening or even if it results in some bad consequences. 42) D

Professionals within business have important roles to play within political and economic institutions. Many of these roles, often described as "gatekeeper functions," ensure the integrity and proper functioning of the economic, legal, or financial system. 43) C

Legal rules, organizational rules, role-based rules, and professional rules can be thought of being a part of a social agreement, or social contract, which functions to organize and ease relations between individuals. No group could function if members were free at all times to decide for themselves what to do and how to act. 44) C

According to Immanuel Kant, the fundamental duty of a human being is to treat each person as an end in themselves and never only as means to our own ends. In other words, our fundamental duty is to treat people as subjects capable of living their own lives and not as mere objects that exist for our purposes. 45) C

A rights-based framework of ethics would object to child labor because such practices violate our duty to treat children with respect. The rights of children are violated when they are treated as mere means to the ends of production and economic growth. 46) D

The concept of a human or moral right is central to the principle-based ethical tradition. Unlike utilitarianism, this framework of ethics would object to child labor because such practices violate our duty to treat children with respect. 47) D

The Kantian tradition claims that our fundamental human rights, and the duties that follow from them, are derived from our nature as free and rational beings. 48) C

The Kantian tradition claims that our fundamental human rights, and the duties that follow from them, are derived from our nature as free and rational beings. Humans do not act only out of instinct and conditioning; they make free choices about how they live their lives, about their own ends. In this sense, humans are said to have a fundamental human right of autonomy, or "selfrule." 49) C

Libertarian understandings of social justice argue that individual liberty—freedom from coercion by others—is the most central element of social justice. This means that a just society is one in which individuals are free from governmental intrusion as long as they are not harming others. 50) A

Liberty and equality are fundamental to theories of social justice upon which democratic societies and capitalist economies have been built and, thus, are crucial to an understanding of business ethics. They are also the core elements of most modern conceptions of social justice. 51) B

Legal rights granted to employees on the basis of legislation or judicial rulings are a right to a minimum wage, equal opportunity, to bargain collectively as part of a union, to be free from sexual harassment, and so forth. The other two categories of employee rights common in business are entitlements on the basis of contractual agreements and rights grounded in moral entitlements. 52) B

The first major challenge to an ethics based on rights is that there is no agreement about the scope and range of such rights. Which good things qualify as rights, and which are merely things that people want? Critics charge that there is no way to answer this. 53) C

From this libertarian perspective, businesses should be free to pursue profit in any voluntary and nondeceptive manner. From this libertarian perspective, businesses should be free to pursue profit in any voluntary and nondeceptive manner. 54) A

Virtue ethics recognizes that our motivations—our interests, wants, desires—are not the sorts of things that each of us chooses anew each morning. Instead, human beings act according to who they are, according to their character. 56) D

Egoism is a view which holds that people act only out of a self-interest. 58) D

An ethics of virtue shifts the focus from questions about what a person should do, to a focus on who that person is. 59) A

The sum of relatively set traits, dispositions, and habits of an individual is defined as the individual's character. A person's character—those dispositions, relationships, attitudes, values, and beliefs that popularly might be called a "personality"—is not some feature that remains independent of that person's identity. 60) ethical relativism

Ethical Relativism is an important perspective within the philosophical study of ethics that holds that ethical values and judgments are ultimately dependent on, or relative to, one's culture, society, or personal feelings. Relativism denies that we can make rational or objective ethical judgments. 61) moral character

Virtue ethics directs us to consider the moral character of individuals and how various character traits can contribute to, or obstruct, a happy and meaningful human life. 62) Utilitarianism

Utilitarianism is commonly identified with the principle of "maximize the overall good" or, in a slightly different version, of producing "the greatest good for the greatest number." 63) consequentialist theories

Utilitarianism's fundamental insight is that outcomes matter, and so we should decide what to do by considering the overall consequences of our actions. In this sense, utilitarianism has been called a consequentialist approach to ethics and social policy.

64) administrative

The administrative version of utilitarianism would be sympathetic with government regulation of business on the grounds that such regulation will ensure that business activities do contribute to the overall good. 65) Duties

Duties are those obligations that one is bound to perform, regardless of consequences. Duties might be derived from basic ethical principles, from the law, or from one's institutional or professional role. 66) categorical imperatives

In the language of many philosophers, ethical duties should be categorical imperatives rather than hypothetical. Categorical duties do not contain an "if" clause and must be obeyed no matter what. 67) Human rights

Human rights protect individuals from being treated in ways that would violate their dignity and that would treat them as mere objects or means. 68) autonomy

From the Greek for "self-ruled," autonomy is the capacity to make free and deliberate choices. The capacity for autonomous action is what explains the inherent dignity and intrinsic value of individual human beings. 69) Egoism

Egoism is a view that holds that people act only out of self-interest. 70) Essay

An ethical framework is nothing more than an attempt to provide a systematic answer to the fundamental ethical question: How should human beings live their lives? Not only do ethics attempt to answer the question of how we should live, but they also provide reasons to support their answer. Ethical frameworks seek to provide a rational justification for why we should act and decide in a particular way. 71) Essay

Utilitarianism's fundamental insight is that we should decide what to do by considering the consequences of our actions. One might argue on utilitarian grounds that child labor practices are ethically permissible because they produce better overall consequences than the alternatives. 72) Essay

Utilitarianism answers the fundamental questions of ethics—What should we do?—by reference to a rule: maximize the overall good. This rule is reminiscent of the financial practice of conducting a cost-benefit analysis and making a decision based on maximizing net benefits over costs. 73) Essay

Utilitarianism answers the fundamental questions of ethics—what should we do?—by reference to a rule: maximize the overall good. One movement within utilitarian thinking invokes the tradition of Adam Smith, claiming that free and competitive markets are the best means for attaining utilitarian goals. This version would promote policies that deregulate private industry, protect property rights, allow for free exchanges, and encourage competition. In such situations, decisions of rationally self-interested individuals would result, as if led by "an invisible hand" in Adam Smith's terms, in the maximum satisfaction of individual happiness. Current free-market economics advises us that the most efficient economy is structured according to the principles of free market capitalism. This requires that business managers, in turn, should seek to maximize profits. This idea is central to one common perspective on corporate social responsibility. By pursuing profits, business ensures that scarce resources go to those who most value them and thereby ensures that resources will provide optimal overall satisfaction. Thus, these economists see competitive markets as the most efficient means to the utilitarian end of maximizing happiness. 74) Essay

The essence of utilitarianism is its reliance on consequences. Ethical and unethical acts are determined by their consequences. In short, the end justifies the means. But this seems to deny one of the earliest ethical principles that many of us have learned: the end does not always justify the means. There are certain duties or responsibilities that we ought to obey even when doing so does not produce a net increase in overall happiness. Examples of such duties are those required by such principles as justice, loyalty, and respect. 75) Essay

If utilitarianism advises that decisions be made by comparing the consequences of alternative actions, then we must have a method for making such comparisons. In practice, however, some comparisons and measurements are very difficult. A second challenge goes directly to the core of utilitarianism. The essence of utilitarianism is its reliance on consequences. Ethical and unethical acts are determined by their consequences. In short, the end justifies the means. But this seems to deny one of the earliest ethical principles that many of us have learned: the ends do not justify the means. Utilitarian reasoning demands rigorous work to calculate all the beneficial and harmful consequences of our actions. Perhaps more important, utilitarian reasoning does not exhaust the range of ethical concerns. Consequences are only a part of the ethical landscape. Responsible ethical decision making also involves matters of duties, principles, and personal integrity. 76) Essay

Making decisions based upon the consequences certainly should be a part of responsible ethical decisions making. But this approach must be supplemented with the recognition that some decisions should be a matter of principle, not consequences. In other words, the ends do not always justify the means. But how do people know what principles they should follow and how do they decide when a principle should trump beneficial consequences? Principle-based, ethical frameworks work out the details of such questions. 77) Essay

We have a duty to pay our taxes even if the money might be more efficiently spent on our children's college education. We have to stop at a red light, even if no cars are coming. Decision making within a business context will involve many situations in which one ought to obey legal rules even when the consequences, economic and otherwise, seem to be undesirable. 78) Essay

Legal rules, organizational rules, role-based rules, and professional rules can be thought of as part of a social agreement, or social contract, which functions to organize and ease relations between individuals. 79) Essay

A moral right is the right to be treated with respect. This right creates duties on the part of every human to respect the rights of others. Humans have their own ends and purposes and therefore should not be treated simply as a means to the ends of others. 80) Essay

German philosopher Immanuel Kant argued that there is essentially one fundamental ethical principle: to respect the dignity of each individual human being. One way to do so requires us to treat all persons as ends in themselves and never only as means to our own ends. In other words, our fundamental duty is to treat people as subjects capable of living their own lives and not as mere objects that exist for our purposes. 81) Essay

The concept of a moral right is central to the principle-based ethical tradition since the inherent dignity of each individual means that we cannot do just anything we choose to another person. Moral rights protect individuals from being treated in ways that would violate their dignity and that would treat them as mere objects or means. Moral rights imply that some acts and some decisions are "off-limits." Accordingly, our fundamental moral duty (the "categorical imperative") is to respect the fundamental moral rights of others. Our rights establish limits on the decisions and authority of others. 82) Essay

Legal rights are those granted to employees on the basis of legislation or judicial rulings. Thus, employees have a right to a minimum wage, equal opportunity, to bargain collectively as part of a union, to be free from sexual harassment, and so forth. Employee rights might refer to those goods that employees are entitled to on the basis of contractual agreements with employers. In this sense, a particular employee might have a right to a specific health care package, a certain number of paid holidays, pension funds, and the like. 83) Essay

Virtue ethics is a tradition within philosophical ethics that seeks a full and detailed description of those character traits, or virtues, that would constitute a good and full human life. An ethics of virtue shifts the focus from questions about what a person should do, to a focus on who that person is. It recognizes that our motivations—our interests, wants, desires—are not the sorts of things that each one of us chooses anew each morning. Instead, human beings act in and from character. Virtue ethics reminds us to look to the actual practices we find in the business world and ask what types of people are being created by these practices. Many individual moral dilemmas that arise within business ethics can best be understood as arising from a tension between the type of person we seek to be and the type of person business expects us to be. 84) Essay

The biggest challenge posed by egoism and, according to some, the biggest challenge to ethics, is the apparent gap between self-interest and altruism, or between motivation that is "selfregarding" and motivation that is "other-regarding." Ethics requires us, at least at times, to act for the well-being of others.

Student name:__________ TRUE/FALSE - Write 'T' if the statement is true and 'F' if the statement is false. 245) Due to diverse employee groups and management styles, the work culture of a large global firm in one country will differ significantly from the work culture of the same firm halfway around the world. ⊚ true ⊚ false 246)

No culture, in business or elsewhere, is static. ⊚ true ⊚ false

247)

Differing individual perception of culture makes it easier to define the specific culture within an organization. ⊚ true ⊚ false

248)

An ethical environment, or culture, would be one in which employees are expected to act by the rules in spite of unethical conditions. ⊚ true ⊚ false

249)

The cultivation of habits, including the cultivation of ethical virtue, is greatly shaped by the culture in which one lives. ⊚ true ⊚ false

250)

Organizations that have a traditional approach to culture can be classified as compliancebased cultures. ⊚ true ⊚ false

251)

A values-based culture recognizes that where rules do not apply the firm must rely on the personal integrity of its workforce during decision making. ⊚ true ⊚ false “Quietly ethical” executives within the confines of the top management team are likely to be perceived as ethical leaders because they have the support of the top management. ⊚ true ⊚ false

252)

253)

Ethically appropriate methods of leadership are central to becoming an ethical leader. ⊚ true ⊚ false

254)

A firm must first determine its mission before impacting the culture through a code of conduct. ⊚ true ⊚ false

255)

The first step in the construction of a code or mission is to articulate a clear vision regarding the firm’s direction. ⊚ true ⊚ false

256)

One of the most determinative elements of integration is communication. ⊚ true ⊚ false

257)

Whistle-blowing to external groups is usually preferred over internal mechanisms for reporting wrongdoing. ⊚ true ⊚ false

258)

Lack of any generally accepted fundamental values for the organization is a clear sign of a “toxic” culture. ⊚ true ⊚ false

259)

MULTIPLE CHOICE - Choose the one alternative that best completes the statement or answers the question. 260) Identify a true statement about corporate cultures. A) Corporate cultures remain unaffected even in the presence of strong business leaders. B) Corporate cultures are static in nature. C) Corporate cultures influence, limit, and shape the decision making within a firm. D) Corporate cultures in a global firm differ significantly across different countries. 261)

A true statement about corporate culture is that ________. A) it provides stability that can be a benefit at one time and can be a barrier to success at another B) it is unlikely to play any role in determining or influencing the decision making within a firm C) it differs significantly across different countries in a global firm D) is generally easy to modify

262)

Identify a true statement about culture. A) The specific culture within an organization can be defined easily and objectively. B) Culture, in business and elsewhere, is considered static in nature. C) Attitude and behavior comprise the biggest fraction of the elements that determine culture. D) A firm’s culture can be its sustaining value, offering it direction and stability during challenging times.

263)

In the context of corporate culture, ________ is defined as the gap between individuals at different levels of a hierarchy. A) categorical imperative B) power distance index C) uncertainty avoidance index D) moral free space

264)

Which of the following situations could result in the business culture becoming a determining factor in ethical decision making? A) lack of competition B) law providing incomplete answers C) lack of strong leadership D) stagnant or decreasing profits

265)

Which of the following statements is true about ethical cultures? A) Workplace ethical cultures have no impact on decision making. B) Subordinates are expected not to act unless directed by superior authorities. C) Decisions are expected to be taken based on laws and not on ethical values. D) Employees are expected to act in responsible ways, even when the law does not require it.

266)

According to the ________ ethics tradition, people act out of habit than out of deliberations. A) Kantian B) virtue C) utilitarian D) principle-based

267)

Which of the following is a traditional approach to corporate culture? A) values-based B) integrity-based C) customer-based D) compliance-based

268)

Which of the following statements is true about value-based cultures? A) They emphasize obedience to the rules as the primary responsibility of ethics. B) They are only as strong and as precise as the rules with which workers are expected to comply. C) They reflect the traditional approach of classifying corporate culture. D) These cultures are perceived to be more flexible and far-sighted corporate environments.

269)

Which of the following is emphasized by a compliance-based culture? A) reliance on personal integrity of employees for decision making B) use of values as the principle for decision making C) obedience to rules as the primary responsibility of ethics D) reinforcement of a set of values rather than a set of rules

270)

Which of the following cultures will empower legal counsel and audit offices to mandate and to monitor conformity with the law and with internal codes? A) a customer-based culture B) an integrity-based culture C) a values-based culture D) a compliance-based culture

271)

Which of the following is true about an integrity-based culture? A) It reinforces a particular set of rules. B) It reinforces a particular set of values. C) It empowers legal bodies to monitor compliance. D) It emphasizes rules as the primary responsibility of ethics.

272)

In which of the following situations is the distinction between compliance-based and values-based corporate cultures most evident? A) advertising B) accounting and auditing C) packaging and labeling D) printing

273)

274)

Identify a true statement about a compliance-based culture. A) A compliance-based culture recognizes that where a rule does not apply, a firm must rely on the personal integrity of its workforce when decisions need to be made. B) A compliance-based culture is one that reinforces a particular set of values rather a particular set of rules. C) A compliance-based culture is only as strong and as precise as the rules which workers are expected to follow. D) A compliance-based culture is perceived to have a more flexible and far-sighted corporate environment.

Unlike the goals of a more evolved and inclusive ethics program, the goals of a traditional compliance-oriented program include A) maintaining brand and reputation. B) minimizing the risks of litigation and indictment. C) recruiting and retaining desirable employees. D) helping unify a firm’s global operations.

275)

Which of the following statements is true about an ethical leader in a corporate environment? A) An ethical leader agrees to conduct that would be inconsistent with her or his own personal values. B) An ethical leader refrains from placing her or his own ethical behavior above any other consideration. C) An ethical leader shirks her or his duties in the corporate structure. D) An ethical leader allocates corporate resources to support and promote ethical behavior.

276)

Which of the following is a necessary part of being an ethical business leader? A) achieving goals through threats, intimidation, harassment, and coercion B) guiding, directing, and escorting followers to their common destination, even if it means employing unfair methods C) refraining from placing her or his own ethical behavior above any other consideration D) creating a corporate culture in which employees are empowered and expected to make ethically responsible decisions

277)

When firms are effective in enacting ethics programs, ________. A) employees are less likely to have sufficient time for reflection in order to reach responsible decisions B) employees are more likely to believe that the culture of their firm impedes integrity C) employees are more likely to see themselves as participants in an ethical workplace culture D) employees are less likely to perceive the style of decision making as collaborative

278)

How is an ethical, effective leader different from an effective leader? A) An ethical, effective leader takes decisions based only on a set of rules unlike an effective leader. B) An ethical, effective leader follows a set of rules regardless of consequences unlike an effective leader. C) An ethical, effective leader empowers the employees in decision making unlike an effective leader. D) An ethical, effective leader achieves her or his goals through intimidation unlike an effective leader.

279)

The means used to motivate others and achieve one’s goals plays a key role in distinguishing between A) silent leaders and visible leaders. B) effective leaders and ethical leaders. C) informal leaders and formal leaders. D) silent leaders and ethical leaders.

280)

Which of the following is an essential element in establishing an ethical leadership? A) the end or objective toward which the leader leads B) the prevailing culture in the external environment C) the ethical nature of the team members D) the personality traits of the team members

281)

If we judge a leader solely by the results produced, we are following the ________ ethical tradition. A) deontological B) virtual C) Kantian D) utilitarian

282)

283)

Which of the following is true of effective leaders? A) They are always ethical in their leadership styles. B) They might be able to achieve their goals through threats, intimidation, harassment, and coercion. C) They employ methods that empower subordinates to take the initiative and to solve problems for themselves. D) They are unlikely to lead using more amenable interpersonal means such as modeling ethical behavior or persuading.

Which of the following is a value that will impact the culture of an organization in the absence of any other established values? A) profit—at any cost B) ethical behavior C) legal compliance D) customer satisfaction

284)

A(n) ________ provides concrete guidance for internal decision making creating a builtin risk management system. A) code of conduct B) organization vision C) income statement D) ombudsperson

285)

The ________ serves as an articulation of the fundamental principles at the heart of the organization and should guide all decisions without abridgment. A) annual report B) vision statement C) mission statement D) income statement

286)

The first step in constructing a personal code or mission for a firm is to A) articulate a clear vision regarding the firm’s direction. B) ask oneself what one stands for or what the firm stands for. C) believe that the culture is actually possible and achievable. D) identify clear steps as to how the cultural shift will occur.

287)

The second step in the development of guiding principles for a firm is to A) ask oneself what one stands for or what the company stands for. B) articulate a clear vision regarding the firm’s direction. C) identify clear steps as to how the cultural shift will occur. D) believe that the culture is actually possible and achievable.

288)

The final step in the development of corporate codes of conduct or mission statements is

to A) B) C) D)

ask oneself what one stands for or what the company stands for. articulate a clear vision regarding the firm’s direction. identify clear steps as to how the cultural shift will occur. believe that the culture is actually possible and achievable.

289)

Which of the following is true about communicating unethical behavior in a corporate structure? A) Reporting ethically suspect behavior is a simple thing to do. B) Employees are always comfortable in raising questions against superiors. C) Reporting individuals can face retaliation from superiors. D) Whistle-blowing is the most preferred mechanism for communicating ethical behavior.

290)

Which of the following involves the disclosure of unethical or illegal activities to someone who is in a position to take action to prevent or punish the wrongdoing? A) whistle-blowing B) redlining C) gentrification D) flyposting

291)

A true statement about an effective internal mechanism of whistle-blowing is that A) it occurs when employees report wrongdoing to legal authorities. B) it must expose unethical behaviors to the press. C) it should disallow confidentiality and anonymity. D) it must strive to protect the rights of the accused party.

292)

Which of the following statements is true about whistle-blowing? A) It involves the disclosure of ethical activities. B) It occurs internally when stakeholders report wrongdoing to legal authorities. C) It can expose and end unethical activities. D) It is safe and seldom causes any harm to the whistle-blower or the business.

293)

Identify a mechanism that allows employees to report wrongdoing and to create further mechanisms for follow-up and enforcement. A) accountability B) ethics hotlines C) mission statement D) code of conduct

294)

Identify an effective way of creating clear and successful reporting schemes. A) leaders empowering subordinates to take decisions without providing guidance B) managers ignoring the risk and taking a wait-and-see attitude C) reinforcing the organization’s values through its compensation and reward structure D) discouraging running drills or rehearsals of challenging events

295)

________ and an ongoing ethics audit allow organizations to uncover silent vulnerabilities that could pose challenges later to the firm, thus serving as a vital element in risk assessment and prevention. A) A mission statement B) Monitoring C) Statements of values D) Ombudsperson

296)

What is the term used to describe a potentially damaging or ethically challenged corporate culture? A) caustic B) pyrophoric C) corrosive D) toxic

297)

Identify a true statement about the Federal Sentencing Guidelines for Organizations. A) They were updated in 2004 to include references to both compliance programs and “ethics and compliance” programs. B) They are used to provide arbitrary punishments. C) They were updated in 2004 and excluded the requirement that organizations periodically measure the effectiveness of their programs. D) They assign most federal crimes to one of 57 “offense levels.”

The Supreme Court separated the “mandatory” element of the Federal Sentencing Guidelines for Organizations from their advisory role, holding that their mandatory nature A) was only applicable to individuals and not to organizations. B) provided arbitrary punishments. C) violated the Sixth Amendment right to a jury trial. D) encouraged internal whistle-blowing.

298)

299)

Which of the following statements is true about the revised Federal Sentencing Guidelines for Organizations? A) It included the criteria for an effective program, which is included in the guidelines’ commentary. B) It included the requirement that organizations periodically measure the effectiveness of their program. C) It excluded the requirement that organizations assess areas of risk for ethics and compliance. D) It excluded references to ethics and compliance programs.

300)

According to the 2010 amendments to the Federal Sentencing Guidelines for Organizations (FSGO), which of the following is a condition that an organization guilty of compliance violations should meet to face lower penalties? A) The compliance and ethics program detected the offense after discovery outside the organization. B) The organization promptly reported the offense to appropriate governmental authorities. C) The individual with operational responsibility neither participated in nor condoned the offense. D) The individual with operational responsibility for the compliance program has restricted or no reporting obligations to a governing authority.

301)

Which of the following should an organization do in order to have an effective compliance and ethics program? A) The organization should refrain from promoting and consistently enforcing its compliance and ethics program. B) It should ensure that people who have previously engaged in unethical activities are placed in charge of programs. C) The organization should establish standards and procedures to prevent and detect criminal conduct. D) Low-level personnel must be assigned to have responsibility for the program.

302)

According to the 2004 updated guidelines of the United States Sentencing Commission (USSC), firms that do not have effective ethics and compliance systems will be sentenced to an additional term of probation and ordered to develop a program during that time. This is known as a(n) ________. A) inattentional blindness B) aggravated penalty C) mitigated penalty D) change blindness

303)

In the United States, the ________ was created in 1984 to regulate sentencing policy in the federal court system. A) United States Commission on Civil Rights (USCCR) B) Federal Judicial Center (FJC) C) United States Sentencing Commission (USSC) D) Federal Sentencing Guidelines for Organizations (FSGO)

FILL IN THE BLANK. Write the word or phrase that best completes each statement or answers the question. 304) A shared pattern of beliefs, expectations, and meanings that influences and guides the thinking and behaviors of the members of a particular group is called ________. 305)

Defining the specific culture within an organization is not an easy task since it is partially based on each participant’s ________ of the culture.

306)

A ________ environment is one in which employees act in responsible ways, even when the law does not require it.

307)

The ________ tradition reminds us that we are as likely to act out of habit and based on character as we are to act after careful deliberations. Those perceived as ethical leaders do many of the things “traditional leaders” do (e.g., reinforce the conduct they are looking for, create standards for behavior, and so on), but they do that within the context of a(n) ________.

308)

309)

Individuals within an organization charged with managerial oversight of ethical compliance and enforcement within the organization are called ________.

310)

One of the key manifestations of ethical leadership is the articulation of ________ for the organization.

311)

A formal summary statement that describes the goals, values, and institutional aim of an organization is called a(n) ________.

312)

A potentially damaging or ethically challenged corporate culture is sometimes referred to as a(n) ________.

313)

Based on the severity of a crime, the Federal Sentencing Guidelines for Organizations (FSGO) assigns most federal crimes to one of forty-three ________.

ESSAY. Write your answer in the space provided or on a separate sheet of paper. 314) What is corporate culture? How does it shape an employee?

315)

How does perception affect the culture within an organization?

316)

In addition to attitudes and behaviors, list the other determinants of culture within an organization.

317)

How are the corporate culture and ethics related in an organization?

318)

Explain how corporate culture and virtue ethics are related.

319)

How can an ethical culture have a direct effect on the bottom line of an organization?

320)

Describe how a values-based culture works.

321)

How does a compliance-based structure work?

322)

Explain the reasoning behind the popularity of the values-based culture.

323)

How are leaders responsible for supporting ethical decision making?

324)

Which traits should a leader possess so that he or she can be perceived as being ethical?

325)

What are the differences between an effective leader and an ethical leader?

326)

What is a code of conduct? What is its role within an organization?

327)

328)

What is the last step in the development of guiding principles for a firm?

How is communication important for the integration of an ethical culture? What is whistle-blowing?

Answer Key Test name: chapter 4 1) FALSE

Despite the fact that corporations have many locations, with diverse employee groups and management styles, an individual working for a large global firm in one country will share various aspects of her or his working culture with someone working for the same firm halfway around the world. 2) TRUE

No culture, in business or elsewhere, is static. Cultures change; but modifying culture—indeed, having any impact on it at all—is a bit like moving an iceberg. 3) FALSE

Defining the specific culture within an organization is not an easy task since it is partially based on each participant’s perception of the culture. 4) FALSE

An ethical environment, or culture, would be one in which employees are empowered and expected to act in ethically responsible ways, even when the law does not require it. 5) TRUE

The cultivation of habits, including the cultivation of ethical virtue, is greatly shaped by the culture in which one lives. When an individual talks about decision making, it is easy to think in terms of a rational, deliberative process in which the person consciously deliberates about and weighs each alternative before acting. 6) TRUE

In the 1990s, a distinction came to be recognized in types of corporate culture: some firms were classified as compliance-based cultures (the traditional approach) while others were considered to be values-based or integrity-based cultures. 7) TRUE

A values-based culture recognizes that where a rule does not apply the firm must rely on the personal integrity of its workforce when decisions need to be made. 8) FALSE

If an executive is “quietly ethical” within the confines of the top management team, but more distant employees do not know about her or his ethical stance, they are not likely to be perceived as an ethical leader. 9) TRUE

Ethically appropriate methods of leadership are central to becoming an ethical leader. Creating a corporate culture in which employees are empowered and expected to make ethically responsible decisions is a necessary part of being an ethical business leader. 10) TRUE

Before impacting the culture through a code of conduct or statement of values, a firm must first determine its mission so that decision makers have direction when determining dilemmas. 11) FALSE

In the construction of a personal code or mission, it is critical to first ask yourself what you stand for or what the company stands for. The second step is the articulation of a clear vision regarding the firm’s direction. 12) TRUE

One of the most determinative elements of integration is communication because without it there is no clarity of purpose, priorities, or process. 13) FALSE

Because whistle-blowing to external groups, such as the press and the legal authorities, can be so harmful to both the whistle-blower and to the firm itself, internal mechanisms for reporting wrongdoing are preferable for all concerned. 14) TRUE

The first clear sign of a “toxic” culture would be a lack of any generally accepted fundamental values for the organization. 15) TRUE

In 2010, the United States Sentencing Commission (USSC) adopted amendments to the Federal Sentencing Guidelines for Organizations (FSGO) to lower the penalties for compliance violations if the organization promptly reported the offense to appropriate governmental authorities. The amendments to the FSGO also lower the penalties for compliance violations if compliance and ethics program detected the offense before discovery outside the organization or before such discovery was reasonably likely. 16) C

Decision making within a firm is influenced, limited, shaped and, in some cases, virtually determined by the corporate culture of the firm. Individuals can be helped—or hindered—in making the “right” or “wrong” decision (according to their own values) by the expectations, values, and structure of the organization in which they live and work. 17) A

The stability that a corporate culture provides can be a benefit at one time can be a barrier to success at another. A firm’s culture can be its sustaining value, offering it direction and stability during challenging times, or it can prevent a firm from responding to challenges in creative and timely ways. 18) D

A firm’s culture can be its sustaining value, offering it direction and stability during challenging times, or it can prevent a firm from responding to challenges in creative and timely ways. The stability that a corporate culture provides can be a benefit at one time can be a barrier to success at another. 19) B

In the context of corporate culture, power distance index is defined as the distance between individuals at different levels of a hierarchy (more equal = low power distance). 20) B

In situations where the law provides an incomplete answer for ethical decision making, the business culture is likely to be the determining factor in the decision. 21) D

An ethical environment, or culture, would be one in which employees are empowered and expected to act in ethically responsible ways, even when the law does not require it. 22) B

The virtue ethics tradition reminds us that our decisions and our actions are very often less deliberate than that. We are as likely to act out of habit and based on character as we are to act after careful deliberations. 23) D

Compliance-based culture is a traditional approach to corporate culture. 24) D

A compliance-based culture emphasizes obedience to the rules as the primary responsibility of ethics. 26) D

A compliance-based culture will empower legal counsel and audit offices to mandate and to monitor compliance with the law and with internal codes. 27) B

A values-based or integrity-based culture is one that reinforces a particular set of values rather than a particular set of rules. 28) B

The distinction between compliance-based and values-based cultures perhaps is most evident in accounting and auditing situations, but it can also be used more generally to understand wider corporate cultures. A compliance-based culture emphasizes obedience to the rules as the primary responsibility of ethics. 29) C

The argument in favor of a values-based culture is that a compliance culture is only as strong and as precise as the rules with which workers are expected to comply. A firm can only have a certain number of rules and the rules can never unambiguously apply to every conceivable situation. 30) B

The goals of a traditional compliance-oriented program may include meeting legal and regulatory requirements, minimizing risks of litigation and indictment, and improving accountability mechanisms. The goals of a more evolved and inclusive ethics program may entail a broader and more expansive application to the firm, including maintaining brand and reputation, recruiting and retaining desirable employees, helping to unify a firm’s global operations, creating a better working environment for employees, and doing the right thing in addition to doing things right. 31) D

Ethical business leaders not only talk about ethics and act ethically on a personal level, but they also allocate corporate resources to support and to promote ethical behavior. There is a longstanding credo of management: “budgeting is all about values.” 32) D

Creating a corporate culture in which employees are empowered and expected to make ethically responsible decisions is a necessary part of being an ethical business leader. But, while some means may be ethically more appropriate than others (e.g., persuasion rather than coercion), it is not the method alone that establishes a leader as ethical. 33) C

When firms are effective in enacting ethics programs, employees are more likely to see themselves as participants in an ethical workplace culture. In a nationwide survey completed in 2013, almost three-quarters of workers who reported receiving positive feedback from a supervisor for engaging in ethical conduct also reported unethical conduct when they observed it in their workplace. 34) C

Creating a corporate culture in which employees are empowered and expected to make ethically responsible decisions is a necessary part of being an ethical business leader. 35) B

One key difference between effective leaders and ethical leaders lies with the means used to motivate others and achieve one’s goals. 36) A

While some means may be ethically more appropriate than others (e.g., persuasion rather than coercion), it is not the method alone that establishes a leader as ethical. The other element of ethical leadership involves the end or objective toward which the leader leads. 37) D

If we judge a leader solely by the results produced—the utilitarian greatest good for the greatest number—we may ignore the mistreatment of workers that was necessary to achieve that end. 38) B

Effective leaders are able to get followers to their common destination. Not every effective leader is an ethical leader, however. Effective leaders might be able to achieve their goals through threats, intimidation, harassment, and coercion. 39) A

Before impacting the culture through a code of conduct or statement of values, a firm must first determine its mission so that decision makers have direction when determining dilemmas. In the absence of other values, the only value is profit—at any cost. 40) A

The code has the potential to both enhance corporate reputation and to provide concrete guidance for internal decision making, thus creating a built-in risk management system. 41) C

The mission statement or corporate credo serves as an articulation of the fundamental principles at the heart of the organization and those that should guide all decisions, without abridgment. 42) B

As with the construction of a personal code or mission, it is critical to first ask yourself what you stand for or what the company stands for. 43) B

The second step in the development of guiding principles for the firm is the articulation of a clear vision regarding the firm’s direction. 44) D

To have an effective code that will successfully impact culture, there must be a belief throughout an organization that this culture is actually possible and achievable. If conflicts remain that will prevent certain components from being realized, or if key leadership is not on board, no one will have faith in the changes articulated. 45) C

Individuals often pay a real cost when they report on unethical behavior (such as retaliation), especially if workplace superiors are involved in the report of wrongdoing. 46) A

Whistle-blowing refers to situations where an employee discloses unethical or illegal activities to someone who is in a position to take action to prevent or punish the wrongdoing. 47) D

The internal mechanisms must be effective, must allow confidentiality, if not anonymity, and must strive to protect the rights of the accused party. Because whistle-blowing to external groups, such as the press and the legal authorities, can be so harmful to both the whistle-blower and to the firm itself, internal mechanisms for reporting wrongdoing are preferable for all concerned.

48) C

Whistle-blowing can expose and end unethical activities. But it can also seem disloyal; it can harm the business; and, sometimes, it can exact significant costs on the whistle-blower. 49) B

In addition to or as part of ethics and compliance officers’ responsibilities, many firms have created ethics ombudspersons and internal or external ethics hotlines. These mechanisms allow employees to report wrongdoing and to create mechanisms for follow-up and enforcement. 50) C

The most effective way to ensure clarity and thereby ensure a successful reporting scheme is to consistently and continuously communicate the organization’s values and expectations to all stakeholders. In addition, a culture that allows sufficient time for reflection in order to reach responsible decisions is most likely to encourage consideration of appropriate implications. 51) B

Monitoring and an ongoing ethics audit allow organizations to uncover silent vulnerabilities that could pose challenges later to the firm, thus serving as a vital element in risk assessment and prevention. By engaging in an ongoing assessment, organizations are better able to spot these areas before other stakeholders (both internal and external) spot them. 52) D

A potentially damaging or ethically challenged corporate culture is sometimes referred to as a “toxic” culture. 53) A

The United States Sentencing Commission (USSC) updated the Federal Sentencing Guidelines for Organizations in 2004 to include a requirement that organizations assess areas of risk for ethics and compliance, and periodically measure the effectiveness of their programs. The revision also includes references not only to compliance programs but also to “ethics and compliance” programs and, further, required that organizations promote “an organizational culture that encourages ethical conduct and commitment to compliance with the law.” 54) C

In its 2005 decision in U.S. v. Booker, the Supreme Court separated the “mandatory” element of the Federal Sentencing Guidelines for Organizations from their advisory role, holding that their mandatory nature violated the Sixth Amendment right to a jury trial. 55) B

In recognition of the significant impact of corporate culture on ethical decision making, the United States Sentencing Commission (USSC) updated the guidelines in 2004 to include a requirement that organizations assess areas of risk for ethics and compliance, and periodically measure the effectiveness of their programs. In addition, the criteria for an effective program, which used to be outlined just in the guidelines’ commentary, are now found in a separate specific guideline. 56) B

In 2010, the United States Sentencing Commission (USSC) adopted amendments to the Federal Sentencing Guidelines for Organizations (FSGO) to lower the penalties for compliance violations if the organization meets the condition that the organization promptly reported the offense to appropriate governmental authorities. 57) C

For an effective compliance and ethics program, the organization should communicate its standards and procedures to prevent and detect criminal conduct. The organization shall communicate its standards and procedures to all members of the organization through training or other means appropriate to such individuals’ respective roles and responsibilities. 58) B

In the United States, the United States Sentencing Commission (USSC) was created in 1984 to create more consistency in sentences in the federal court system. Before the USSC, the U.S. Congress had been struggling to resolve issues relating to differences in sentencing, arbitrary punishments, and crime control. 60) culture

Every organization has a culture fashioned by a shared pattern of beliefs, expectations, and meanings that influences and guides the thinking and behaviors of the members of that organization. 61) perception

Defining the specific culture within an organization is not an easy task since it is partially based on each participant’s perception of the culture.

62) ethical

An ethical environment, or culture, would be one in which employees are empowered and expected to act in ethically responsible ways, even when the law does not require it. 63) virtue ethics

When we talk about decision making, it is easy to think in terms of a rational, deliberative process in which a person consciously deliberates about and weighs each alternative before acting. But the virtue ethics tradition reminds us that our decisions and our actions are very often less deliberate than that. We are as likely to act out of habit and based on character as we are to act after careful deliberations. 64) ethics agenda

Those perceived as ethical leaders do many of the things “traditional leaders” do (e.g., reinforce the conduct they are looking for, create standards for behavior, and so on), but they do that within the context of an ethics agenda. People perceive that the ethical leader’s goal is not simply job performance, but performance that is consistent with a set of ethical values and principles. 65) ethics officers

Ethics officers are individuals within an organization charged with managerial oversight of ethical compliance and enforcement within the organization. 66) values

One of the key manifestations of ethical leadership is the articulation of values for the organization. 67) mission statement

A mission statement is a formal summary statement that describes the goals, values, and institutional aim of an organization. In fact, the mission statement or corporate credo serves as an articulation of the fundamental principles at the heart of the organization and those that should guide all decisions, without abridgment. 68) toxic culture

A potentially damaging or ethically challenged corporate culture is sometimes referred to as a toxic culture. 69) offense levels

Beginning in 1987, the United States Sentencing Commission (USSC) prescribed mandatory Federal Sentencing Guidelines for Organizations (FSGO) that apply to individual and organizational defendants in the federal system, bringing some amount of uniformity and fairness to the system. These directions, based on the severity of the offense, assign most federal crimes to one of forty-three offense levels. 70) Essay

Every organization has a culture, fashioned by a shared pattern of beliefs, expectations, and meanings that influence and guide the thinking and behaviors of the members of that organization. While culture shapes the people who are members of the organization, it is also shaped by the people who comprise it. Even in this age of decentralized corporations and other institutions, there remains a sense of culture in organizations. This is especially true in small local firms, but it is just as true of major global corporations. Despite the fact that corporations have many locations, with diverse employee bases and management styles, an individual working for a large global firm in one country will share various aspects of her or his working culture with someone working for the same firm halfway around the world. This is not to say that their working environments cannot be wholly different in many regards; the corporate culture, however, survives the distance and differences. Businesses also have unspoken yet influential standards and expectations. If one joins a firm with a culture that supports other values than those with which one is comfortable, there will be values conflicts—for better or worse. 71) Essay

Defining the specific culture within an organization is not an easy task since it is partially based on each participant’s perception of the culture. In fact, perception may actually impact the culture in a circular way—a culture exists, people perceive it to be a certain type of culture, people respond to the culture on the basis of their perception, and people thereby impact others’ experience of the culture. 72) Essay

Several of the elements that are easiest to perceive, such as attitudes and behaviors, are only a small fraction of the elements that comprise the culture. In addition, culture is present in and can be determined by exploring any of the following, among others: tempo of work, the organization’s approach to humor, methods of problem solving, the competitive environment, incentives, individual autonomy, and hierarchical structure. Even with this list of cultural elements, it can be difficult for individuals in a firm to identify the specific characteristics of the culture within which they work. Culture becomes so much a part of the environment that participants do not even notice its existence. 73) Essay

The law can be ambiguous in determining if a business should make a reasonable accommodation for an employee with allergies, arthritis, dyslexia, hearing loss, or high blood pressure. In situations where the law is an incomplete answer for ethical decision making, the business culture is likely to be the determining factor in the decision. Ethical businesses must find ways to encourage, to shape, and to allow ethically responsible decisions. An ethical culture would be one in which employees are empowered and expected to act in ethically responsible ways even when the law does not require it. 74) Essay

The cultivation of habits, including the cultivation of ethical virtue, is greatly shaped by the culture in which one lives. When we talk about decision making, it is easy to think in terms of a rational, deliberative process in which a person consciously deliberates about and weighs each alternative before acting. But the virtue ethics tradition reminds us that our decisions and our actions are very often less deliberate than that. We are as likely to act out of habit and based on character than we are to act after careful deliberations. It is also clear that people’s habits are shaped and formed by education and training—by culture. It also takes place in the workplace, where individuals quickly learn appropriate and expected behaviors. Intentionally or not, business institutions provide an environment in which habits are formed and virtues, or vices, are created. 75) Essay

If attended to and supported, a strong ethical culture can serve as a deterrent to stakeholder damage and improve bottom line sustainability. If ignored, the culture could instead reinforce a perception that “anything goes,” and “any way to a better bottom line is acceptable,” destroying long-term sustainability. 76) Essay

A values-based culture is one that reinforces a particular set of values rather than a particular set of rules. Certainly, these firms may have codes of conduct; but those codes are predicated on a statement of values and it is presumed that the code includes mere examples of the values’ application. Integrating these values into the firm’s culture encourages a decision making process that uses the values as underlying principles to guide employee decisions rather than as hard-andfast rules. The argument in favor of a values-based culture is based on the fact that a compliance culture is only as strong and as precise as the rules with which workers are expected to comply. A firm can only have a certain number of rules and the rules can never unambiguously apply to every conceivable situation. A values-based culture recognizes that where a rule does not apply, the firm must rely on the personal integrity of its workforce when decisions need to be made. This is not to say that values-based organizations do not include a compliance structure.

77) Essay

A compliance-based culture emphasizes obedience to the rules as the primary responsibility of ethics. A compliance-based culture will empower legal counsel and audit offices to mandate and monitor compliance with the law and with internal codes. 78) Essay

The argument in favor of a values-based culture is based on the fact that a compliance culture is only as strong and as precise as the rules with which workers are expected to comply. A valuesbased culture recognizes that where a rule does not apply, the firm must rely on the personal integrity of its workforce when decisions need to be made. 79) Essay

If the goal of corporate culture is to cultivate values, expectations, beliefs, and patterns of behavior that best and most effectively support ethical decision making, it becomes the primary responsibility of corporate leadership to steward this effort. Leaders are charged with this duty in part because stakeholders throughout the organization are guided to a large extent by the “tone at the top.” If a leader is perceived to be shirking her or his duties, misusing corporate assets, misrepresenting the firm’s capabilities, or engaging in other inappropriate behavior, stakeholders receive the message that this type of behavior is not only acceptable, but perhaps expected and certainly the way to get ahead in that organization. Instead, if a leader is clearly placing her or his own ethical behavior above any other consideration, stakeholders are guided to follow that role model and to emulate that priority scheme. Beyond personal behavior, leadership sets the tone through other mechanisms such as the dedication of resources. Ethical business leaders not only talk about ethics and act ethically on a personal level, but they also allocate corporate resources to support and promote ethical behavior. 80) Essay

One study of the nature of ethical leadership emphasized the importance of being perceived as a people-oriented leader, as well as the importance of leaders engaging in visible ethical action. Traits that were also important included receptivity, listening, and openness, in addition to the more traditionally considered traits of integrity, honesty, and trustworthiness. Finally, being perceived as having a broad ethical awareness, showing concern for multiple stakeholders, and using ethical decision processes are also important. Those perceived as ethical leaders do many of the things “traditional leaders” do (e.g., reinforce the conduct they are looking for, create standards for behavior, and so on), but they do that within the context of an ethics agenda. People perceive that the ethical leader’s goal is not simply job performance, but performance that is consistent with a set of ethical values and principles. Finally, ethical leaders demonstrate caring for people (employees and external stakeholders) in the process. 81) Essay

Leaders guide, direct, and escort others toward a destination. An effective leader is someone who does this successfully and, presumably, efficiently. Effective leaders are able to get followers to their common destination. But not every effective leader is an ethical leader. One key difference lies with the means used to motivate others and achieve one’s goals. Effective leaders might be able to achieve their goals through threats, intimidation, harassment, and coercion. One can also lead using more attractive means such as modeling ethical behavior, persuasion, or simply using one’s institutional role. Certainly, ethically appropriate methods of leadership are central to becoming an ethical leader. Creating a corporate culture in which employees are empowered and expected to make ethically responsible decisions is a necessary part of being an ethical business leader. But, while some means may be ethically better than others (e.g., persuasion rather than coercion), it is not the method alone that establishes a leader as ethical. While perhaps necessary, ethical means of leading others are not sufficient for establishing ethical leadership. The other element of ethical leadership involves the end or objective toward which the leader leads. 82) Essay

A code of conduct is a set of statements or principles designed by an organization to aid in the process of decision making. The code has the potential to both enhance corporate reputation and provide concrete guidance for internal decision making, thus creating a built-in risk management system. By establishing the core tenets on which a company is built, corporate leadership is effectively laying down the law with regard to the basis and objectives for all future decisions. 83) Essay

To have an effective code that will successfully impact culture, there must be a belief throughout the organization that this culture is actually possible and achievable. If conflicts remain that will prevent certain components from being realized, or if key leadership is not on board, no one will have faith in the changes articulated. 84) Essay

Integrating an ethical culture throughout a firm and providing means for enforcement is vitally critical both to the success of any cultural shift and to the impact on all stakeholders. One of the most decisive elements of integration is communication because without it there is no clarity of purpose, priorities, or process. Communication of culture must be incorporated into the firm’s vocabulary, habits, and attitudes to become an essential element in the corporate life, decision making, and determination of success. Whistle-blowing refers to situations where an employee discloses unethical or illegal activities to someone who is in a position to take action to prevent or punish the wrongdoing. Whistleblowing can expose and end unethical activities, but it can also seem disloyal; it can harm the business; and it can extract significant costs on the whistle-blower.

Student name:__________ TRUE/FALSE - Write 'T' if the statement is true and 'F' if the statement is false. 329) Legislators created a form of business called corporations to encourage people to engage in business activities. ⊚ true ⊚ false 330)

The economic model of corporate social responsibility (CSR) holds that businesses should integrate social goals and economic goals. ⊚ true ⊚ false

331)

Volunteering and charitable work are examples of the most demanding social responsibilities of a business. ⊚ true ⊚ false

332)

The philanthropic perspective of the economic model holds that business has no strict obligation to contribute to social causes. ⊚ true ⊚ false

333)

Within the philanthropic perspective of the economic model, socially responsible activities are never done for building the reputation of a firm. ⊚ true ⊚ false

334)

The stakeholder model of corporate social responsibility (CSR) views business as a citizen of the society in which it operates and, like all members of a society, business must conform to the normal range of ethical duties and obligations that all citizens face. ⊚ true ⊚ false

335)

Stakeholder theory recognizes the fact that every business decision affects a wide variety of people, benefiting some and imposing costs on others. ⊚ true ⊚ false

336)

Philosopher Norman Bowie identifies his approach as a "Kantian" theory of business ethics. ⊚ true ⊚ false

337)

Philosopher Norman Bowie rejected the economic view that managers are the agents of stockholder-owners and thus they also have a duty to further the interests of stockholders. ⊚ true ⊚ false

338)

Stakeholder theory states that a firm should be managed for the sole benefit of stockholders. ⊚ true ⊚ false

339)

The sustainability version of corporate social responsibility (CSR) suggests that the longterm financial well-being of every firm is directly tied to questions of how the firm both affects and is affected by the natural environment. ⊚ true ⊚ false

340)

A firm that is environmentally unsustainable is also a firm that is, in the long-term, financially unsustainable. ⊚ true ⊚ false

341)

Reputation management refers to the practice of caring for the "image" of a firm. ⊚ true ⊚ false

342)

Corporate social responsibility (CSR)-related activities can improve profitability by enhancing a company's standing among its stakeholders, including consumers and employees. ⊚ true ⊚ false

343)

According to David Vogel, investing in corporate social responsibility (CSR) when consumers are not willing to pay higher prices to support that investment improves the profit levels of the firm. ⊚ true ⊚ false

MULTIPLE CHOICE - Choose the one alternative that best completes the statement or answers the question. 344) Corporate social responsibility (CSR) refers to the A) dedication that businesses show in expanding their market share. B) accountability that a manager has to his subordinates. C) ethical expectation that society has for business. D) actions that maximize the profit of an organization. 345)

Identify a true statement about social responsibility. A) It refers to what a business should or ought to do for the sake of the society, even if it comes with an economic cost. B) It refers to the responsibility of an organization to fulfill the terms of contract with its employees and lenders. C) It refers to the steps taken by an organization to avoid internal malpractices or misconduct. D) It refers to the responsibility that society has to ensure a business's success.

346)

Which of the following is the most demanding social responsibility? A) A business should prevent harm even in those cases where it is not the cause. B) A business should volunteer for society or environment-friendly work. C) A business should engage in charitable work for the development of the society. D) A business should not sell a product that causes harm to consumers.

347)

Which of the following ethical requirements is the type of responsibility established by the precedents of tort law? A) duty to not cause avoidable harm to the society B) duty to find employment for employees injured at work C) duty to engage in charitable work D) duty to volunteer for causes related to the environment

348)

Every year, Tech Beats Inc. organizes a competition in various universities wherein its representatives assess student project proposals and offer to sponsor the projects of three students. From the information given in this scenario, we can say that Tech Beats Inc. engages in ________. A) corporate philanthropy B) normative myopia C) theoretical reasoning D) sustainable business practice

349)

A beverage manufacturing company proceeds to launch its latest energy drink in the market in spite of research findings that suggest that the drink could result in nausea, dizziness, and vomiting after considerable consumption. In this example, the beverage manufacturing company is failing to fulfill its responsibility to ________. A) support charities B) do volunteer work C) discourage corporate philanthropy D) not cause harm to others

350)

The form of business that limits the liability of individuals for the risks involved in business activities is known as ________. A) corporation B) partnership C) joint proprietorship D) sole proprietorship

351)

Legislators created a form of business called corporations because they thought that businesses could be more efficient in raising the capital necessary for producing goods, services, jobs, and wealth if A) multiple owners were involved in the strategic decision-making process of the firm. B) there was transparency among all stakeholders. C) firms had the obligation to justify bad decisions. D) investors were protected from undue personal risks.

352)

According to the economic model of corporate social responsibility (CSR), the sole social responsibility of a business is to A) go beyond legal responsibilities to cater to the needs of the society. B) fulfill the economic functions that it was designed to serve. C) think beyond economic ends that have to be met to help society. D) analyze the defects in society and design products to overcome these defects.

353)

Identify a true statement about the economic model of corporate social responsibility (CSR). A) It shifts focus from pursuit of profit to environment sustainability. B) It has its roots in the Kantian tradition of ethics. C) It has direct implications for the proper role of business management. D) It holds that social goals should be at the heart of a firm's mission.

354)

Matthew manages the sales team at an information technology (IT) firm. His focus is to conduct business in accordance with his firm's mission and vision, while making as much money as possible for the firm and conforming to the basic rules of the society. He ensures that his actions embody ethical custom. In this scenario, Matthew's view of corporate social responsibility is most likely rooted in the ________ tradition. A) consequential B) Keynesian C) utilitarian D) virtue

355)

Which of the following statements is true of the common view of corporate social responsibility (CSR)? A) It has its roots in the deontological tradition and Keynesian economics. B) It holds that the primary responsibility of managers is to serve shareholders. C) It holds that profit is independent of optimal allocation of resources. D) It states that business has a strict obligation to contribute to social causes.

356)

Which of the following is a feature of the economic model of corporate social responsibility (CSR)? A) Corporations are understood to be a particular legal form of property that the owners get to use for their own ends. B) Shareholders are not at the center of a corporation. C) Managers are not employees who must work to further the owners' interests, primarily by maximizing profits. D) Managers have a primary responsibility to pursue profit outside the limitations of the law.

357)

Which of the following statements is true about the economic model of corporate social responsibility (CSR)? A) It recognizes that every business decision imposes costs on someone and mandates that those costs be acknowledged. B) It holds that businesses should fully integrate economic and social goals by bringing social responsibilities into the core of their business model. C) It places shareholders at the center of the corporation and suggests that the ethical responsibility of management is to serve those shareholders. D) It holds that businesses have social responsibilities beyond the economic and legal ends for which they were created.

358)

The ________ of corporate social responsibility (CSR) holds that just as individuals have no ethical obligation to contribute to charity or to do volunteer work in their community, business has no strict ethical responsibility to serve wider social goods. A) philanthropic model B) legal model C) ethical model D) integrative model

359)

Identify a true statement about the philanthropic perspective of the economic model of corporate social responsibility. A) It argues that business has an ethical duty to respect the rights of consumers to such things as safe products and truthful advertising, even when not specified in law. B) This approach holds that as long as managers comply with the moral minimum and cause no harm, they have a responsibility to maximize profits. C) This approach is especially common with small, privately owned businesses where the owners also often play a prominent leadership role within their local community. D) It recognizes that every business decision imposes costs on someone and mandates that those costs be acknowledged.

360)

The ________ holds that just as charity is a good thing and something that should be encouraged, business should be encouraged to contribute to society in ways that go beyond the narrow obligations of law and economics. A) integrative model B) stakeholder theory C) philanthropic model D) legal model

361)

The ________ directs managers to maximize profit and shareholder wealth and recognizes only legal limitations on the pursuit of profit. A) economic model of corporate social responsibility (CSR) B) stakeholder theory of corporate social responsibility (CSR) C) integrative model of corporate social responsibility (CSR) D) sustainability theory of corporate social responsibility (CSR)

362)

The philanthropic perspective of the economic model in which business support for a social cause is done because it is the right thing to do differs from the reputational version only in terms of the A) level of social good done. B) underlying motivation. C) reach of the social good done. D) medium used.

363)

Which of the following is true of philanthropy in accordance with the economic model of corporate social responsibility? A) Philanthropy done for reputational reasons is not fully ethical. B) Philanthropy done for solely financial benefits is not truly an act of social responsibility. C) Philanthropy done for reputational reasons and financial ends is ethically responsible. D) Philanthropy is considered a social contribution rather than an investment.

364)

The theory of ________ states that the primary obligation of business leaders is to serve the interests of stockholders by maximizing profits. A) ethical relativism B) categorical imperative C) managerial capitalism D) risk assessment

365)

Which of the following models of corporate social responsibility (CSR) considers business as a citizen of the society that it operates in? A) philanthropic model B) economic model C) altruistic model D) stakeholder model

366)

According to Norman Bowie, the "moral minimum" that we expect of every person— either acting as individuals or within corporate institutions—is A) basic spirituality. B) respect for human rights. C) contribution to charity. D) accountability.

367)

According to philosopher Norman Bowie, managers have a responsibility to maximize profits as long as they A) respect human rights and cause no harm. B) contribute to charitable organizations. C) are confident and do charitable work. D) adhere to rules and regulations.

368)

According to the philosopher Norman Bowie, the contractual duty that managers have to stockholder-owners A) makes them focus on philanthropy. B) makes them feel obliged to perform social good and prevent harm to the society. C) overrides their responsibility to prevent harm or to do good. D) leads them to take environment-conscious managerial decisions.

369)

Which of the following statements is true about the stakeholder theory? A) It begins with the recognition that every business decision affects a wide variety of people, benefiting some and imposing costs on others. B) It argues that the narrow economic model successfully provides an accurate descriptive and a reasonable normative account of business management. C) It holds that business firms should fully integrate economic and social goals by bringing social responsibilities into the core of their business model. D) It suggests that the long-term financial well-being of every firm is directly tied to questions of how the firm both affects and is affected by the natural environment.

370)

________ recognizes that every business decision imposes costs on someone and mandates that those costs be acknowledged. A) Integrative theory B) Stakeholder theory C) Keynesian theory D) Institutional theory

371)

The ________ asserts that neither a business nor the individuals who work for it are exempt from the ordinary ethical responsibilities that everyone has to cause no harm, to prevent harm, and to sometimes do good. A) philanthropic model of corporate social responsibility (CSR) B) stakeholder model of corporate social responsibility (CSR) C) integrative model of corporate social responsibility (CSR) D) economic model of corporate social responsibility (CSR)

372)

Identify a true statement about the stakeholder theory. A) It holds that a firm's financial goals must be balanced against, and perhaps even overridden by, environmental considerations. B) It argues that the narrow economic model fails both as an accurate descriptive and as a reasonable normative account of business management. C) It suggests that the long-term financial well-being of every firm is directly tied to questions of how the firm both affects and is affected by the natural environment. D) It suggests that firms should fully integrate economic and social goals by bringing social responsibilities into the core of their business model.

373)

Which of the following is a similarity between utilitarianism and stakeholder theory? A) Both place organizational benefits above other considerations. B) Both consider the consequences of management decisions for the well-being of all affected groups. C) Both contribute to society in ways that go beyond the narrow obligations of law and economics. D) Both strive to focus only on consumers.

374)

Corporate managers who fail to give due consideration to the rights of employees and other concerned groups in the pursuit of profit are treating these groups as means to the ends of stockholders. This is unjust according to the ________. A) financial framework B) classical tradition C) rights-based ethical framework D) stockholder theory

375)

The ________ recognizes that organizations have distinct missions, priorities, and values affecting its final decisions. A) stakeholder theory B) separation thesis C) concept of categorical imperative D) concept of ethical payoff

376)

Identify a true statement about the integrative model of corporate social responsibility (CSR). A) It suggests that firms should fully combine economic and social goals by bringing social responsibilities into the core of their business model. B) It recognizes that every business decision imposes costs on someone and mandates that those costs be acknowledged. C) It recognizes that some stakeholders have different power and impact on decisions than others. D) It argues that every business should adopt the principles of benefit corporations and devote all their activities to service of social goals.

377)

The tension that prevails when an organization tries to meet both social and economic responsibilities is generally overcome by A) utilizing a small percentage of profit on social causes. B) doing charitable work to build a good reputation within the community. C) pursuing social ends as the very core of an organization's mission. D) emphasizing the importance of achieving the desired economic goals.

378)

The defenders of the sustainability approach toward corporate social responsibility (CSR) point out that ________. A) all economic activity exists within a biosphere that supports all life B) the success of a business must be judged only against profitability C) people have a strong ethical duty to cause no harm, and only a prima facie duty to prevent harm D) businesses' sole social responsibility is to fulfill the economic functions they were designed to serve

379)

Sustainability holds that A) a firm's financial goals must be balanced against environmental considerations. B) a firm must place social considerations below tasks beneficial to its growth. C) a firm must not prioritize social goals at the expense of economic growth. D) a firm's sustenance is affected by overemphasis on environmental considerations.

380)

Which of the following is an example of a firm that is failing its fundamental social responsibility? A) a firm that has its loss margins exceeding its profit margins B) a firm that uses resources at unsustainable rates C) a firm that is financially unstable D) a firm that prioritizes environmental sustainability

381)

Which of the following versions of corporate social responsibility (CSR) suggests that the long-term financial well-being of every firm is directly tied to questions of how the firm both affects and is affected by the natural environment? A) stakeholder B) philanthropic C) social entrepreneurship D) sustainability

382)

When a firm engages in socially responsible activities with a prime focus on reputation A) social responsibility tends to become a form of social marketing. B) the measure of positive reputation gained is impossible to calculate. C) profits have to be sacrificed for social causes. D) it always loses employee loyalty.

383)

The practice of attending to the "image" of a firm is sometimes referred to as A) reputation management. B) branding. C) crisis management. D) gentrification.

384)

Which of the following is a benefit of a firm having a good reputation? A) It has no impact within the firm's community of stakeholders. B) It begins viewing social responsibility as a mere social marketing tool. C) It ensures that stakeholders never hear something negative about the firm. D) It builds a type of trust bank with its consumers, employees, and other stakeholders.

385)

Enlightened self-interest, an important justification offered for corporate social responsibility (CSR), presumes that A) measurement of bottom-line impact of ethical decision making is unimportant. B) profits are independent of ethics. C) bottom-line impact of ethical decision making can be measured and compared. D) good ethics can also be good business.

386)

Which of the following is a challenge associated with ethical pay offs? A) It ruins the reputation that triggered it. B) It is very small in comparison to profits. C) It is very difficult to measure ethical pay offs. D) It can easily be duplicated by competitors.

387)

According to David Vogel, which of the following should a firm be most cautious about when engaging in corporate social responsibility (CSR) activities? A) Investing in corporate social responsibility (CSR) when consumers are not willing to pay higher prices to support that investment. B) Employees may become over-indulgent in activities related to social causes. C) Attrition levels may rise because of indifference among employees engaging in activities related to social responsibility. D) The easily measurable ethical payoff can turn out to be lower than the anticipated levels.

FILL IN THE BLANK. Write the word or phrase that best completes each statement or answers the question. 388) In the context of corporate social responsibility, a business sponsoring a charity event or contributing to a school project is engaging in corporate ________. 389)

According to the ________ model of corporate social responsibility (CSR), the social responsibility of business managers is simply to pursue profit within the law.

390)

According to the economic model of corporate social responsibility (CSR), ________ is a direct measure of how well a business firm is meeting society's expectations.

391)

The philanthropic perspective of the economic model in which business support for a social cause is done simply because it is the right thing to do differs from the reputational version of the philanthropic model only in terms of the underlying ________.

392)

The theory that the primary obligation of business managers is to serve the interests of stockholders by maximizing profits is referred to as ________.

393)

Philosopher Norman Bowie identifies his approach as a ________ theory of business ethics.

394)

The ________ understands that business exists within a web of social and ethical relationships.

395)

The ________ is a model of corporate social responsibility that holds that business managers have ethical responsibilities to a range of stakeholders that go beyond a narrow view that the primary responsibility of managers is to stockholders.

396)

The corporate ________ provides all stakeholders with financial and other information regarding a firm's economic, environmental, and social performance.

397)

In the ________ model of corporate social responsibility (CSR), social goals are brought into the core of a firm's business model, and economic goals are balanced against social goals.

398)

The ________ version of corporate social responsibility (CSR) suggests that the longterm financial well-being of every firm is directly tied to questions of how the firm both affects and is affected by the natural environment.

ESSAY. Write your answer in the space provided or on a separate sheet of paper. 399) Philosophers distinguish between three different types of responsibilities on a scale from more to less demanding or binding. Explain these responsibilities.

400)

401)

How can corporations encourage people to engage in business activities?

"The social responsibility of business managers is simply to pursue profit within the law." How does the economic model of corporate social responsibility (CSR) justify this statement?

402)

The economic model is a narrow view of corporate social responsibility (CSR). What are the alternative broader models of CSR?

403)

Discuss the philanthropic perspective of the economic model of corporate social responsibility (CSR).

404)

405)

How does the stakeholder model of corporate social responsibility (CSR) view businesses?

406)

How does philosopher Norman Bowie defend the version of corporate social responsibility (CSR) that would fall within the social web model?

407)

"People have a strong ethical duty to cause no harm, and only a prima facie duty to prevent harm or to do good." Discuss Norman Bowie's view on this statement.

408)

What is stakeholder theory?

409)

Discuss the arguments between the economic model and stakeholder theory.

410)

Can non-profit organizations be categorized under the integrative model of corporate social responsibility (CSR)? Elaborate.

411)

What are the implications of sustainability in the integrative model of corporate social responsibility (CSR)?

412)

Explain the concept of reputation management and discuss the controversies associated with publicizing corporate good deeds.

413)

What are some of the precautions that a firm must take when investing in corporate social responsibility (CSR)?

Answer Key Test name: chapter 5 1) TRUE

The law has created a form of business called corporations, which limits the liability of individuals for the risks involved in business activities. Legislatures thought that businesses could be more efficient in raising the capital necessary for producing goods, services, jobs, and wealth if investors were protected from undue personal risks. 2) FALSE

The economic model of corporate social responsibility (CSR) holds that businesses' sole duty is to fulfill the economic functions businesses were designed to serve. On this narrow view, the social responsibility of business managers is simply to pursue profit within the law. 3) FALSE

Volunteering and charitable work are typical examples of responsibilities to do good. 4) TRUE

In the philanthropic perspective of the economic model, there are occasions in which charity work is done because it brings the firm good public relations, provides a helpful tax deduction, builds goodwill and/or a good reputation within the community. 6) TRUE

Stakeholder theory begins with the recognition that every business decision affects a wide variety of people, benefiting some and imposing costs on others. 8) TRUE

Philosopher Norman Bowie identifies his approach as a "Kantian" theory of business ethics. 9) FALSE

Norman Bowie accepts the economic view that managers are the agents of stockholder-owners and thus they also have a duty (derived from the contract between them) to further the interests of stockholders. Bowie would argue that business has a social responsibility to respect the rights of its employees, even when not specified or required by law. 10) FALSE

The economic model argues that a firm should be managed for the sole benefit of stockholders. The stakeholder theory argues, on factual, legal, economic, and ethical grounds, that this is an inadequate understanding of business. 11) TRUE

The sustainability version of corporate social responsibility (CSR) suggests that the long-term financial well-being of every firm is directly tied to questions of how the firm both affects and is affected by the natural environment. 12) TRUE

A firm that is environmentally unsustainable is also a firm that is, in the long-term, financially unsustainable. 13) TRUE

The practice of caring for the "image" of a firm is sometimes referred to as reputation management. 14) TRUE

Activities related to corporate social responsibility can improve profitability by enhancing a company's standing among its stakeholders, including consumers and employees. For example, some evidence suggests that employees who are well treated in their work environments may prove more loyal, more effective, and more productive in their work. 15) FALSE

David Vogel, a political science professor at Berkeley, cautions against investing in corporate social responsibility (CSR) when consumers are not willing to pay higher prices to support that investment. 16) C

Corporate social responsibility (CSR) refers to the ethical expectations that society has for business. Social responsibility is what a business should or ought to do for the sake of the society, even if this comes with an economic cost. 17) A

Social responsibility is what a business should or ought to do for the sake of the society, even if this comes with an economic cost. Corporate social responsibility (CSR) refers the ethical expectations that society has for business. 18) D

The strongest sense of responsibility is the duty not to cause harm. Even when not explicitly prohibited by law, ethics would demand that we not cause avoidable harm. If a business causes harm to someone and, if that harm could have been avoided by exercising due care or proper planning, then both the law and ethics would say that business should be held liable for violating its responsibilities. In practice, this ethical requirement is the type of responsibility established by the precedents of tort law. 20) A

While doing a good thing is ethically responsible and something that ethics encourages, we normally do not fault someone for choosing not to contribute to charity. To call an act volunteer work is precisely to suggest that it is optional; one does not have a duty to do it, but it is still a good thing to do. Examples of corporate philanthropy, as when a business sponsors a charity event or contributes to a school project, fit this sense of social responsibility. 21) D

The most demanding sense of responsibility is the responsibility not to cause harm to others. Often called a duty or an obligation to indicate that they oblige us in the strictest sense, responsibilities in this sense bind, or compel, or require us to act in certain ways. Thus, a business ought not to sell a product that causes harm to consumers, even if there would be a profit in doing so. 22) A

The law has created a form of business called corporations, which limits the liability of individuals for the risks involved in business activities. 23) D

The law has created a form of business called corporations, which limits the liability of individuals for the risks involved in these activities. Legislators thought that businesses could be more efficient in raising the capital necessary for producing goods, services, jobs, and wealth if investors were protected from undue personal risks.

24) B

The economic model of corporate social responsibility (CSR) holds that businesses' sole social responsibility is to fulfill the economic functions they were designed to serve. On this narrow view, the social responsibility of business managers is simply to pursue profit within the law. 25) C

The economic model of corporate social responsibility (CSR) holds that businesses' sole social responsibility is to fulfill the economic functions they were designed to serve. This general model has direct implications for the proper role of business management. 26) C

Milton Friedman explains that a corporate executive has a "responsibility to conduct business in accordance with [his or her employer's] desires, which generally will be to make as much money as possible while conforming to the basic rules of the society, both those embodied in law and those embodied in ethical custom." This common view of corporate social responsibility (CSR) has its roots in the utilitarian tradition and in neoclassical economics. 27) B

The common view of corporate social responsibility (CSR) has its roots in the utilitarian tradition and in neoclassical economics. As agents of business owners, the contention is that managers do have social responsibilities, but their primary responsibility is to serve shareholders. 28) A

The economic model of CSR holds that businesses' sole social responsibility is to fulfill the economic functions they were designed to serve. This general model has direct implications for the proper role of business management. Corporations are understood to be a particular legal form of property that the owners get to use for their own ends. 29) C

The economic model of corporate social responsibility (CSR) places shareholders at the center of the corporation and, from this point of view, the ethical responsibility of management is to serve those shareholders. Specifically, managers have a primary responsibility to pursue profit within the law. 30) A

The philanthropic perspective of the economic model of corporate social responsibility holds that, like individuals, business is free to contribute to social causes as a matter of philanthropy. This approach is especially common with small, privately owned businesses where the owners also often play a prominent leadership role within their local community. 32) C

The philanthropic perspective of the economic model holds that just as charity is a good thing and something that we should be encouraged, business should be encouraged to contribute to society in ways that go beyond the narrow obligations of law and economics. Just as individuals have no ethical obligation to contribute to charity or to do volunteer work in their community, business has no ethical obligations to serve wider social goods. 33) A

The narrow economic model of corporate social responsibility (CSR) directs managers to maximize profit and shareholder wealth and recognizes only legal limitations on the pursuit of profit. A variation of this model acknowledges that philanthropy is an ethically good thing that can indirectly contribute to profit by improving reputation and brand recognition. 34) B

From the perspective of the narrow view of economic model of corporate social responsibility (CSR), only philanthropy done for reputational reasons and financial ends is ethically responsible. Because business managers are the agents of owners, they have no right to use corporate resources except to earn owners greater returns on their investment. 36) C

The theory of managerial capitalism states that the primary obligation of business managers is to serve the interests of stockholders by maximizing profits. 37) D

The stakeholder model views business as a citizen of the society in which it operates and, like all members of a society, business must conform to the normal range of ethical duties and obligations that all citizens face. The stakeholder model holds that businesses exist to create value for a range of stakeholders, including employees, customers, suppliers, and local communities as well as investors and stockholders. 38) B

According to philosopher Norman Bowie, as long as managers comply with the moral minimum and cause no harm, they have a responsibility to maximize profits. 40) C

According to the philosopher Norman Bowie, the contractual duty that managers have to stockholder-owners overrides the responsibility to prevent harm or to do (philanthropic) good. 41) A

Stakeholder theory begins with the recognition that every business decision affects a wide variety of people, benefiting some and imposing costs on others. Stakeholder theory recognizes that every business decision imposes costs on someone and mandates that those costs be acknowledged. 42) B

Stakeholder theory recognizes that every business decision imposes costs on someone and mandates that those costs be acknowledged. A manager who seeks to maximize profit is imposing costs on employees, consumers, and suppliers. 43) B

The stakeholder model asserts that neither a business nor the individuals who work for it are exempt from the ordinary ethical responsibilities that everyone has to cause no harm, to prevent harm, and to sometimes do good. It recognizes that there is a wide range of ethical responsibilities and duties that are owed to others and that management must balance these responsibilities against the responsibility to shareholders. 44) B

Stakeholder theory argues that the narrow economic model fails both as an accurate descriptive and as a reasonable normative account of business management. While it might have been true over a century ago that management had an overriding obligation to stockholders, the law now recognizes a wide range of managerial obligations to such stakeholders as consumers, employees, competitors, the environment, and individuals with disabilities. 45) B

Utilitarianism requires management to consider the consequences of its decisions for the wellbeing of all affected groups. Stakeholder theory requires the same. 46) C

Corporate managers who fail to give due consideration to the rights of employees and other concerned groups in the pursuit of profit are treating these groups as means to the ends of stockholders. This, in the rights-based ethical framework, is unjust. 47) A

Firms exist in a web of relationships with many stakeholders, and these relationships can create a variety of responsibilities. But the stakeholder theory recognizes that some stakeholders have different power and impact on decisions than others—that organizations have distinct missions, priorities, and values affecting the final decisions. 48) A

Firms that fully integrate economic and social goals by bringing social responsibilities into the core of their business model follow the integrative model of corporate social responsibility (CSR). At first glance, firms that adopt the integrative model raise no particular ethical issues. 49) C

Much of the corporate social responsibility (CSR) literature assumes a tension between the pursuit of profit and social responsibility. But, of course, there have always been organizations that turn this tension around, organizations that pursue social ends as the very core of their mission. 50) A

Defenders of the sustainability approach toward corporate social responsibility (CSR) point out that all economic activity exists within a biosphere that supports all life. They argue that the present model of economics, and especially the macroeconomic goal of economic growth, is already running up against the limits of the biosphere's capacity to sustain life. 51) A

Sustainability holds that a firm's financial goals must be balanced against, and perhaps even overridden by, environmental considerations. 52) B

A business or industry that is financially profitable, but that uses resources (e.g., fossil fuels) at unsustainable rates and that creates wastes (e.g., carbon dioxide) at rates that exceed the earth's capacity to absorb them, is a business or industry that is failing its fundamental social responsibility.

53) D

The problem with a focus on reputation is that social responsibility then can become merely social marketing. That is, a firm may use the image of social responsibility to garner customer support or employee loyalty while the facts do not evidence a true commitment. 55) A

The practice of attending to the "image" of a firm is sometimes referred to as reputation management. 56) D

A firm can be well-respected for its products and services, for its financial performance, as a good place to work, and as a good corporate citizen. If a firm creates a good self-image, it builds a type of trust bank—consumers, employees, and other stakeholders seem to give it some slack if they then hear something negative about the firm that otherwise has a good reputation. 57) D

A big question in corporate social responsibility (CSR) involves the possible correlation between profits and ethics. Is good ethics also good business? One important justification offered for corporate social responsibility (CSR), what is often called enlightened self-interest, presumes that it is, or at least it can be. 58) C

There is general agreement that, in the long run, ethics pays off. However, it is the measurement of that payoff that is the challenge. 59) A

According to the economic model of corporate social responsibility (CSR), profit is an indication that business is efficiently and successfully producing the goods and services that society demands; profit is a direct measure of how well a business firm is meeting society's expectations. 63) motivation

The philanthropic perspective of the economic model in which business support for a social cause is done simply because it is the right thing to do differs from the reputational version only in terms of the underlying motivation. 64) managerial capitalism

The theory that the primary obligation of business managers is to serve the interests of stockholders by maximizing profits is referred to as managerial capitalism. 65) Kantian

Bowie identifies his approach as a "Kantian" theory of business ethics. 66) stakeholder model

The stakeholder model understands that business exists within a web of social and ethical relationships. The stakeholder model holds that businesses exist to create value for a range of stakeholders, including employees, customers, suppliers, and local communities as well as investors and stockholders. 67) stakeholder theory

The stakeholder theory is a model of corporate social responsibility that holds that business managers have ethical responsibilities to a range of stakeholders that go beyond a narrow view that the primary responsibility of managers is to stockholders. 68) sustainability report

The corporate sustainability report provides all stakeholders with financial and other information regarding a firm's economic, environmental, and social performance. 69) integrative

Because some for-profit firms bring social goals into the core of their business model, and fully integrate economic and social goals, we refer to this as the integrative model of corporate social responsibility (CSR). 70) sustainability

First, the most demanding responsibility, often called duty or obligation in order to indicate that they oblige us in the strictest sense, is the responsibility not to cause harm to others. Thus, a business ought not to sell a product that causes harm to consumers, even if there would be a profit in doing so. A second, less binding, responsibility is to prevent harm even in those cases where one is not the cause. The so-called "Good Samaritan" cases are examples of people acting to prevent harm, even though they have no strict duty or obligation to do so. Finally, there might be responsibilities to do good. Volunteering and charitable work are typical examples of responsibilities in this sense. To call an act volunteer work is precisely to suggest that it is optional; one does not have a duty to do it, but it is still a good thing to do. 72) Essay

Corporations are a form of business that limits the liability of individuals for the risks involved in business activities. Legislatures thought that businesses could be more efficient in raising the capital necessary for producing goods, services, jobs, and wealth if individuals were protected from undue personal risks. 73) Essay

According to the economic model of corporate social responsibility (CSR), profit is an indication that business is efficiently and successfully producing the goods and services that society demands. Profit is, therefore, a direct measure of how well a business firm is meeting society's expectations. 74) Essay

The alternative models to the economic model of corporate social responsibility (CSR) include the philanthropic perspective of the economic model of CSR, the stakeholder model of CSR, and the integrative model of CSR. The philanthropic perspective of the economic model holds that, like individuals, business is free to contribute to social causes as a matter of philanthropy. From this perspective, business has no strict obligation to contribute to social causes, but it can be a good thing when it does so. Just as individuals have no ethical obligation to contribute to charity or to do volunteer work in their community, business has no strict ethical responsibility to serve wider social goods. The stakeholder model of CSR understands that business exists within a web of social and ethical relationships. The stakeholder model holds that businesses exist to create value for a range of stakeholders, including employees, customers, suppliers, and local communities as well as investors and stockholders. Business managers have responsibilities to all those who have a stake in the success or failure of the company, not only to those who have invested financially. The integrative model of CSR holds that firms should fully integrate economic and social goals by bringing social responsibilities into the core of their business model. At first glance, firms that adopt the integrative model raise no particular ethical issues. Even advocates of the narrow economic model of CSR such as Milton Friedman would agree that owners of a firm are free to make the pursuit of social goals a part of their business model. They would just disagree that these social goals should be part of every business's mission. 75) Essay

The philanthropic perspective of the economic model holds that, like individuals, business is free to contribute to social causes as a matter of philanthropy. From this perspective, business has no strict obligation to contribute to social causes, but it can be a good thing when they do so. Just as individuals have no ethical obligation to contribute to charity or to do volunteer work in their community, business has no ethical obligations to serve wider social goods. But, just as charity is a good thing and something that we all want to encourage, business should be encouraged to contribute to society in ways that go beyond the narrow obligations of law and economics. This approach is especially common in small, locally-owned businesses where the owners also often play a prominent leadership role within their local community. 76) Essay

According to the narrow view of economic model of corporate social responsibility (CSR), only philanthropy done for reputational reasons and financial ends is ethically responsible because business managers are the agents of owners. They have no right to use corporate resources except to earn owners greater returns on their investment. 77) Essay

The stakeholder model of corporate social responsibility (CSR) views business as a citizen of the society in which it operates and, like all members of a society, business must conform to the normal ethical duties and obligations that all citizens face. 78) Essay

Philosopher Norman Bowie argues that, beyond the economic view's duty to obey the law, business has an equally important ethical duty to respect human rights. Respecting human rights is the "moral minimum" that we expect of every person, whether they are acting as individuals or within corporate institutions. To explain this notion of a "moral minimum," Bowie appeals to the framework for distinguishing responsibilities that was described earlier and that is derived from the principle-based traditional ethics. 79) Essay

Norman Bowie distinguishes between the ethical imperatives to cause no harm, to prevent harm, and to do good. The obligation to cause no harm, in Bowie's view, overrides other ethical considerations. The pursuit of profit legitimately can be constrained by this ethical duty. On the other hand, Bowie accepts the economic view that managers are the agents of stockholderowners and thus they also have a duty to further the interests of stockholders. Thus, while it is ethically good for managers to prevent harm or to do good, their duty to stockholders overrides these concerns. As long as managers comply with the moral minimum and cause no harm, they have a responsibility to maximize profits. 80) Essay

Stakeholder theory begins with the recognition that every business decision affects a wide variety of people, benefiting some and imposing costs on others. It recognizes that every business decision imposes costs on someone and mandates that those costs be acknowledged. In other words, any theory of corporate social responsibility (CSR) must then explain and defend answers to the questions: for whose benefit and at whose costs should the business be managed? 81) Essay

The economic model argues that the firm should be managed for the sole benefit of stockholders. This view is justified by appeal to the rights of owners, the fiduciary duty of managers, and the social benefits that follow from this arrangement. Stakeholder theory argues, on factual, legal, economic, and ethical grounds, that this is an inadequate understanding of business. Stakeholder theory argues that the narrow economic model fails both as an accurate descriptive and as a reasonable normative account of business management. As a descriptive account of business, the classical model ignores over a century of legal precedent arising from both case law and legislative enactments. While it might have been true over a century ago that management had an overriding obligation to stockholders, the law now recognizes a wide range of managerial obligations to such stakeholders as consumers, employees, competitors, the environment, and the disabled. Thus, as a matter of law, it is simply false to claim that management can ignore duties to everyone but stockholders. 82) Essay

Much of the corporate social responsibility (CSR) literature assumes a tension between the pursuit of profit and social responsibility. But there have always been organizations that turn this tension around, organizations that pursue social ends as the very core of their mission. Nonprofits, such as hospitals, NGOs, foundations, professional organizations, schools, colleges, and government agencies, have social goals at the center of their operations. Because these firms bring social goals into the core of their business model, and fully integrate economic and social goals, they are referred to as the integrative model of CSR. 83) Essay

Sustainability holds that a firm's financial goals must be balanced against, and perhaps even overridden by, environmental considerations. Defenders of this approach point out that all economic activity exists within a biosphere that supports all life. They argue that the present model of economics, and especially the macroeconomic goal of economic growth, is already running up against the limits of the biosphere's capacity to sustain life. Fundamental human needs for goods such as clean air, water, nutritious food, and a moderate climate are threatened by the present dominant model of economic activity. From this perspective, the success of a business must be judged not only against the financial bottom line of profitability, but also against the ecological and social bottoms lines of sustainability. A business or industry that is financially profitable, but that uses resources (for example, fossil fuels) at unsustainable rates and that creates wastes (for example, carbon dioxide) at rates that exceed the earth's capacity to absorb them, is a business or industry that is failing its fundamental social responsibility. Importantly, a firm that is environmentally unsustainable is also a firm that is, in the long-term, financially unsustainable. The sustainability version of corporate social responsibility (CSR) suggests that the long-term financial well-being of every firm is directly tied to questions of how the firm both affects and is affected by the natural environment. A business model that ignores the biophysical and ecological context of its activities is a business model doomed to failure. 84) Essay

The practice of attending to the "image" of a firm is sometimes referred to as reputation management. There is nothing inherently wrong with managing a firm's reputation, and in fact the failure to do so might be a poor business decision, but observers might challenge firms for engaging in corporate social responsibility (CSR) activities solely for the purpose of affecting their reputations. The challenge is based on the fact that reputation management often works! If a firm creates a good self-image, it builds a type of trust bank—consumers or other stakeholders seem to give it some slack if they then hear something negative about the firm. Similarly, if a firm has a negative image, that image may stick, regardless of what good the corporation may do. Plato explored this issue when he asked whether one would rather be an unethical person with a good reputation or an ethical person with a reputation for injustice. One may find that, if given the choice between the two, companies are far more likely to survive under the first conception than under the second. 85) Essay

David Vogel, a political science professor at Berkeley, contends that while there is a market for firms with strong corporate social responsibility (CSR) missions, it is a niche market and one that therefore caters to only a small group of consumers or investors. He argues that, contrary to a global shift in the business environment, CSR instead should be perceived as just one option for a business strategy that might be appropriate for certain types of firms under certain conditions, such as those with well-known brand names and reputations that are subject to threats by activists. He warns of the exposure a firm might suffer if it then does not live up to its CSR promises. He also cautions against investing in CSR when consumers are not willing to pay higher prices to support that investment.

Student name:__________ TRUE/FALSE - Write 'T' if the statement is true and 'F' if the statement is false. 414) Companies that place employees at the core of their strategies produce lower long-term returns to shareholders than do industry peers. ⊚ true ⊚ false 415)

Employees have a universal right to a “happy” workplace. ⊚ true ⊚ false

416)

Rewards and compensation structures have no impact on the emotions of workers. ⊚ true ⊚ false

417)

Fundamental questions of justice arise because employees are subject to considerable harms from a lack of security in their jobs and do not have much power to create security. ⊚ true ⊚ false

418)

In legal contexts, due process is the right to be protected against the arbitrary use of authority. ⊚ true ⊚ false

419)

A mistreatment needs to be physically threatening to be termed as “bullying.” ⊚ true ⊚ false

The doctrine of “employment at will” (EAW) holds that, unless an agreement specifies otherwise, employers are free to fire an employee at any time and for any reason. ⊚ true ⊚ false

420)

421)

Even if private property rights grant managers authority over employees, the right of private property itself is limited by other rights and duties. ⊚ true ⊚ false

422)

In the context of downsizing, if a firm retains employees on the basis of longevity with the firm and the retained employees are mostly of the male gender, the firm is not violating any regulations legally. ⊚ true ⊚ false

423)

“Sweatshops” lack even the most basic health and safety protections. ⊚ true ⊚ false

424)

The life of one who dies in a workplace accident has instrumental value that can be measured, in part, by the lost wages that would have been earned had that person lived. ⊚ true ⊚ false “Relative risks” are determined by comparing the probabilities of harm involved in various activities. ⊚ true ⊚ false

425)

426)

Rejecting cost-benefit analysis in setting standards is not the same as rejecting costeffective strategies in implementing those standards. ⊚ true ⊚ false

427)

428)

Nation-specific studies show that high levels of child labor are associated with high literacy levels. ⊚ true ⊚ false

MULTIPLE CHOICE - Choose the one alternative that best completes the statement or answers the question. 429) Some employers might decide to treat employees well as a means to produce greater workplace harmony and productivity. This approach is reminiscent of ________ ethics. A) deontological B) utilitarian C) normative D) Kantian 430)

431)

In legal contexts, due process refers to ________. A) the process of comparing the probabilities of harm involved in various activities B) the high instrumental value of health and safety C) the procedures that police and courts must follow in exercising their authority over citizens D) the ability to control the manner in which work is performed

Philosophically, the right of ________ is the right to be protected against the arbitrary use of authority. A) continuance B) freedom of association C) due process D) self-determination

432)

Identify a true statement about the right of due process. A) In the employment context, due process specifies the conditions for basic fairness within the scope of an employer’s authority over its employees. B) Few dispute that the state, through its police and courts, has the authority to punish citizens and this authority of the state is the right of due process. C) Due process in the legal context acknowledges the indisputable authority of the judicial system over a citizen. D) In legal contexts, due process refers to the unlimited authority that police and courts have over citizens to create a safe and orderly society.

433)

Which of the following is true of “bullying” in the workplace? A) The mistreatment of an employee needs to be physically threatening to be termed bullying. B) Bullying can involve a boss who is constantly yelling dictates at workers because that is his job. C) When a coworker spreads rumors about another in order to sabotage his position, he is not regarded a bully as he is not higher than the other employee in the hierarchy of authority. D) Bullying is independent of emotional abuse that results in a complete loss of personal dignity.

434)

The issue of workplace bullying is more predominant in the service sector because A) it lacks the right of due process. B) that work relies significantly on interpersonal relationships and interaction. C) of its strong hierarchy of authority. D) most of the organizations in this sector are decentralized.

435)

Identify the doctrine which holds that employers are free to fire an employee at any time and for any reason unless an agreement specifies otherwise. A) the doctrine of estoppel B) the doctrine of constructive notice C) the doctrine of constructive dismissal D) the doctrine of employment at will

436)

Identify a true statement about the doctrine of employment at will (EAW). A) Employment at will holds that employers can fire an employee at any time but have to provide them with a valid reason. B) The freedom to terminate the employer-employee relationship is mutual, both theoretically and practically. C) Until and unless an exception can be demonstrated, courts will rely on employment at will as the default position. D) An employment at will worker may decide to quit a job at any time and for any reason only if he or she is ready to offer notice.

437)

Under the ________ approach, the employer need not actually control the work but must merely have the right or ability to control the work for a worker to be classified an employee. A) caveat emptor B) principle-based C) common-law agency D) virtue ethics

438)

In the context of downsizing in an organization, allowing a worker to remain in a position for a period of time after she or he has been informed of impending termination might not be the best course of action. Identify a supporting argument for this statement. A) Workers are less likely to interpret early notice as an effort to allow them time to come to grips with the loss of their jobs. B) Terminated workers are more likely to be inclined to put their best effort, which might result in temporary improvement in customer service. C) Workers who are not terminated are likely to have a very bad impression about the organization for terminating their coworkers. D) Terminated workers rarely interpret early notice as a measure to get the most out of them before departure.

439)

According to John Rawl’s ________, managers are likely to consider what decision they would make if they did not know what role they would be playing following the decision. A) categorical imperative thesis B) integrative theory of corporate social responsibility C) separation thesis D) theory of distributive justice

440)

The term “sweatshops” refers to workplaces where A) employers constantly supervise and evaluate employees. B) employee interests are protected by rights from being subjected to utilitarian and financial calculations. C) employers treat employees well as a means to produce greater workplace harmony. D) employees lack even the most basic health and safety protections.

441)

The life of one who dies in a workplace accident has ________ value that can be measured, in part, by the lost wages that would have been earned had that person lived. A) absolute B) instrumental C) intrinsic D) extrinsic

442)

A true statement about health and safety at a workplace is that ________. A) they can be completely replaced by financial compensation B) they have low instrumental value C) they have intrinsic value in addition to their instrumental value D) they are interpreted as ideals that are impossible to realize

443)

Identify a true statement about health and safety at a workplace. A) Health and safety are “goods” that are valued both as a means for attaining other valuable ends and as ends in themselves. B) Employers are responsible for providing a completely safe and healthy workplace. C) Financial compensation can replace the value of life lost due to lack of health and safety measures. D) Health and safety have a very low instrumental value.

444)

With regard to health and safety at a workplace, ________ can be defined as the probability of harm. A) obstacles B) impediments C) risks D) barriers

445)

With regard to health and safety at a workplace, ________ can be determined by comparing the probabilities of harm involved in various activities. A) variable obstacles B) absolute impediments C) relative risks D) comparative barriers

446)

Discussions in ethics about employee health and safety tend to focus on the relative risks workers face and the level of acceptable workplace risk because A) workers’ compensation is easier to calculate. B) employers cannot be responsible for providing an ideally safe and healthy workplace. C) insurance laws mandate the focus on relative risks and acceptability of workplace risk. D) they results in a completely safe and healthy workplace.

447)

Comparison of the probabilities of harm involved in various activities would determine the ________. A) acceptable level of risks B) absolute risks C) speculative risks D) relative risks

448)

449)

When can we conclude that an activity has an “acceptable level of risk?” A) if it can be determined that the probability of harm involved in a specific work activity is manageable B) if the probability of harm involved in a specific work activity is acceptable by insurance and workers’ compensation laws C) if it can be determined that the probability of harm involved in a specific work activity is equal to or less than the probability of harm of some more common activity D) if the employers are willing to compensate the harm caused to workers for a specific activity

Which of the following approaches to health and safety at a workplace can be considered paternalistic decision making which treats employees like children and makes crucial decisions for them? A) government-regulated ethics approach B) diversifiable risk approach C) acceptable level of risk approach D) market controlled approach

450)

One of the challenges in the acceptable risk approach to workplace health and safety is that it A) is a liberal approach to workplace health and safety that allows employees to recognize the risk they are likely to face. B) involves the determination of “relative risks,” the calculation of which is a complicated process and not always reliable. C) assumes an equivalency between workplace risks and other types of risks when there are significant differences between them. D) It treats health and safety merely as an instrumental value and denies its intrinsic value.

451)

Which of the following is a challenge faced by the acceptable risk approach to health and safety? A) It is a liberal approach to health and safety that allows employees to recognize the risk they are likely to face. B) It involves the determination of “relative risks,” the calculation of which is a complicated process and not always reliable. C) It does not assume equivalency between workplace risks and other types of risks when there are significant similarities between them. D) It improperly places incentives because the risks faced at work could be controlled by others who might stand to benefit by not reducing them.

452)

A true statement about the market-controlled approach to health and safety is that in this approach A) employers treat their employees disrespectfully by ignoring their inputs as stakeholders. B) can support compensation to injured workers when it can be shown that employers were responsible for causing the harm. C) assumes an equivalency between workplace risks and other types of risks when there are actually significant differences between them. D) ignores the utilitarian concern for the consequences of an unsafe working environment on the social fabric.

453)

Enlightened self-interest would be a valuable theory to introduce and apply in the ________ approach to health and safety. A) market-controlled B) integrative C) acceptable risk D) government-regulated

454)

Identify a challenge associated with the market-controlled approach to health and safety. A) Employees lack the kinds of free choices that the free-market theory would require in order to attain optimal satisfactions. B) This approach ignores the fundamental deontological right an employee might have to a safe and healthy working environment. C) This approach assumes an equivalency between workplace risks and other types of risks when there are significant differences between them. D) Employees in a free market are treated disrespectfully by ignoring their inputs as stakeholders.

455)

In the context of government-regulated ethics approach to health and safety, a true statement about government standards is that A) they address the “first generation” problem of the market-controlled approach to health and safety by focusing on compensation rather than prevention. B) they favor individual bargaining between employers and employees as the approach to workplace health and safety. C) they prevent employees from having to face the fundamentally coercive choice between job and safety. D) they are set based on assumptions rather than best available scientific knowledge and thus add to market failures that result from insufficient information.

456)

Identify a true statement about the Occupational Safety and Health Administration (OSHA) established by the U.S. Congress in 1970. A) When OSHA was first established, regulations were aimed at achieving the safest feasible standards. B) The integrative approach allowed OSHA to make trade-offs between health and economics. C) It takes away the burden of proof of high health standards from industries. D) It holds that health and safety standards are required irrespective of the economic feasibility.

457)

Critics in both industry and government argue that OSHA should aim to achieve the optimal, rather than highest feasible, level of safety. Which of the following can be used to achieve this goal? A) cost-utility analysis B) cost-minimization analysis C) cost-benefit analysis D) cost-effectiveness analysis

458)

Which of the following is a distinguishing feature between cost-benefit analysis and costeffectiveness? A) Cost-effectiveness requires that an economic value be placed on one’s life and bodily integrity. B) Cost-benefit analysis adopts the most efficient means available to achieve a particular standard. C) Cost-benefit analysis treats health and safety merely as an instrumental value and denies its intrinsic value. D) Cost-effectiveness uses economic criteria before setting the standards.

459)

________ requires that an economic value be placed on one’s life and bodily integrity. A) Cost-effectiveness analysis B) Cost-benefit analysis C) Cost margin analysis D) Cost variance analysis

460)

The ________ is an agency of the federal government that publishes and enforces safety and health regulations for U.S. businesses. A) Occupational Safety and Health Administration (OSHA) B) Environmental Protection Agency (EPA) C) U.S. Department of Health & Human Services (HHS) D) U.S. Chemical Safety and Hazard Investigation Board

461)

462)

Which of the following statements is true about child labor? A) The risk that child labor will be passed on to the next generation increases because children who work are more likely to earn low wages as adults. B) Research suggests that legalizing child labor will result in an increased number of children who work. C) Regions with a high prevalence of child labor are characterized by low levels of childhood morbidity associated with HIV/AIDS and malaria. D) Nation-specific studies show that high levels of child labor are associated with high literacy levels.

The country of ________ allows children to work legally from the youngest age of 10 years old. A) Bolivia B) Colombia C) Peru D) Ecuador

463)

The Ethical Trade Initiative (ETI), an alliance of corporations, trade unions, and voluntary organizations dedicated to improving the conditions of workers, has established a ________ of ethical standards that all signatories commit to uphold. A) Conduct Canon B) principle-based framework C) Base Code D) categorical imperative

464)

The Title VII of the ________, passed in 1964, created the prohibited classes of discrimination. A) International Labor Act B) United States Civil Rights Act C) Equal Employment Opportunity Commission Act D) Uniform Employment Termination Act

465)

Jason, a Caucasian in his mid-thirties, is a high-ranking manager at an insurance firm. He is well qualified and has received multiple accolades for his good work. When the firm receives news of potential business from a corporation that has primarily African American stakeholders, Jason gets overlooked and the opportunity to handle this account is given to his colleague, Dwayne, who is of African American descent. In this scenario, Jason is a victim of ________. A) reverse discrimination B) affirmative action C) inverse discrimination D) backward discrimination

466)

467)

Which of the following is an example of reverse discrimination in America? A) An African American interviewer rejects an African American interviewee based on ethnicity. B) A female interviewer rejects a male interviewee because of gender. C) A white interviewer rejects an African American interviewee based on ethnicity. D) A female interviewer rejects a female interviewee because of gender.

An organization hires a lot of African American women and a few disabled people in an attempt to avoid discrimination suits filed against it. Which of the following is most likely to occur? A) The performance of the organization will increase. B) The organization will win an award for equity. C) There will be an increase in the number of diversity training sessions. D) A white man or a woman will file a reverse discrimination suit.

468)

Which of the following refers to a policy or a program that tries to respond to instances of past discrimination by implementing proactive measures to ensure equal opportunity today? A) gentrification B) bully broads C) just cause D) affirmative action

469)

All of the following are ways through which affirmative action can arise at the workplace except A) legal requirements. B) judicial affirmative action. C) consultant based affirmative action. D) voluntary affirmative action plans.

470)

The law relating to affirmative action applies only to about 20 percent of the workforce who are subject to Executive Order 11246, which requires affirmative action efforts to ensure equal opportunity. Which of the following is required by courts in order to remedy a finding of past discrimination when Executive Order 11246 is not applicable? A) voluntary affirmative action B) judicial affirmative action C) quasi-affirmative action D) executive affirmation action

471)

Which of the following affirmative action plans would include training plans and programs, focused recruiting activity, or the elimination of discrimination? A) quasi-affirmative action B) executive affirmation action C) judicial affirmative action D) voluntary affirmative action A claim which states that people who “pay” for wrongs are unfairly burdened and should not bear the responsibility for the acts of others is opposing ________. A) reverse discrimination B) judicial activity within organizations C) affirmative action D) authoritative leadership

472)

FILL IN THE BLANK. Write the word or phrase that best completes each statement or answers the question. 473) Employment at will (EAW) is the default position on which courts will rely until and unless an exception can be demonstrated. The burden of proof lies with the dismissed employee to show that she or he was unjustly or illegally fired. Due process and ________, whether instituted as part of internal corporate policy or through legislation, would reverse this burden of proof and require employers to show cause to justify the dismissal of an employee. 474)

The ________ test is a test by which courts consider whether a worker is economically dependent on a business or is in business for himself or herself.

475)

The process of ________ is the reduction of human resources at an organization through terminations, retirements, corporate divestments, or other means.

476)

The life of one who dies in a workplace accident has ________ value that can be measured, in part, by the lost wages that would have been earned had that person lived.

477)

For employee health and safety in the workplace, ________ are determined by comparing the probabilities of harm involved in various activities.

478)

The definition of ________ has taken on the meaning of exploitative work that involves some harm to a child who is not of an age to justify his or her presence in the workplace.

479)

________ is discrimination against those traditionally considered to be in power or the majority.

480)

________ refers to the presence of differing cultures, languages, ethnicities, races, affinity orientations, genders, religious sects, abilities, social classes, ages, and national origins of the individuals in a firm.

481)

________ refers to the principle of tolerance and inclusion that supports the coexistence of multiple cultures while encouraging each to retain that which is unique or individual about that particular culture.

482)

The term ________ refers to a policy or a program that tries to respond to instances of past discrimination by implementing proactive measures to ensure equal opportunity today.

ESSAY. Write your answer in the space provided or on a separate sheet of paper. 483) Describe in brief the two approaches to employee treatment discussed in this chapter.

484)

Correlate the right of due process to the workplace.

485)

Discuss the various aspects associated with employment at will (EAW).

486)

Discuss the crucial aspect of employment at will (EAW) where it is given first preference.

487)

Discuss in brief the guidelines suggested for tackling downsizing within an organization.

488)

Discuss the issue of giving notice to the employees about organizational downsizing.

489)

Correlate health and safety issues at workplace with ideals.

490)

Explain the various problems associated with workplace health and safety as a marketcontrolled approach.

491)

How do mandatory government standards work?

492)

Explain the concept of standards and cost-benefit analysis. Discuss the advantages of cost-effectiveness as against the cost-benefit analysis.

493)

Contrast the two dominant perspectives on sweatshops.

494)

What are the different ways in which women experience discrimination at the workplace?

495)

Summarize the influences of diversity within a workplace.

496)

What is affirmative action?

497)

Discuss the various ways through which affirmative action can arise within a workplace.

Answer Key Test name: chapter 6 1) FALSE

Research demonstrates that companies that place employees at the core of their strategies produce higher long-term returns to shareholders than do industry peers. The same holds true for interpersonal relationships. 2) FALSE

While no one is claiming that employees have some universal right to a “happy” workplace, a comprehensive review of research by Jeffrey Pfeffer suggests that effective firms are characterized by a set of common practices, all of which involve treating employees in humane and respectful ways. 3) FALSE

Rewards and compensation structures can clearly impact the emotions of workers, as can the composition of teams or the power relationships within a workplace. 4) TRUE

Fundamental questions of justice arise because employees are subject to considerable harms from a lack of security in their jobs and do not have much power to create security. Employment security—getting and keeping a job—is perhaps the most significant aspect of work from the employee’s ethical perspective. 5) FALSE

In legal contexts, due process refers to the procedures that police and courts must follow in exercising their authority over citizens. Philosophically, the right of due process is the right to be protected against the arbitrary use of authority. 6) FALSE

“Bullying” in the workplace is defined as “the repeated, malicious, health-endangering mistreatment of one employee... by one or more employees.” The mistreatment need not be physically threatening but might simply involve a boss who is constantly yelling dictates at workers, or a coworker who spreads rumors about another in order to sabotage his position. 7) TRUE

Employment at will holds that, in the absence of a particular contractual or other legal obligation that specifies the length or conditions of employment, all employees are employed “at will.” This means that, unless an agreement specifies otherwise, employers are free to fire an employee at any time and for any reason. 8) TRUE

Even if private property rights grant managers authority over employees, the right of private property itself is limited by other rights and duties. Further, even if employment at will (EAW) proved to be an effective management tool, justice demands that such tools not be used to harm other people. 9) FALSE

From a legal perspective, the decision about whom to include in a downsizing effort must be carefully planned. If the firm’s decision is based on some criterion that seems to be neutral on its face, such as seniority, but the plan results in a different impact on one group than another, the decision may be suspect. In this case of retention based on longevity, the effort may violate Title VII’s prohibition against discrimination based on gender because the termination policy has a more significant—and negative—impact on women. 10) TRUE

In some regions, employees lack even the most basic health and safety protections, such as in working environments that are often termed “sweatshops.” 11) TRUE

The life of one who dies in a workplace accident has instrumental value that can be measured, in part, by the lost wages that would have been earned had that person lived. 12) TRUE

“Risks” can be defined as the probability of harm, and we determine “relative risks” by comparing the probabilities of harm involved in various activities. 13) TRUE

Rejecting cost-benefit analysis in setting standards is not the same as rejecting cost-effective strategies in implementing those standards. A commitment to cost-effectiveness would require that, once the standards are set, we adopt the least expensive and most efficient means available for achieving those standards. 14) TRUE

If the risks in a workplace have been reduced to the lowest feasible level and employees are fully aware of them, then a society that respects its citizens as autonomous decision makers has done its duty. Recognizing that most mandatory standards reduce rather than eliminate risks, employees should have the right to be informed about workplace risks. 15) FALSE

Because work takes children out of school, nation-specific studies show that high levels of child labor are associated with low literacy levels. The harmful effects are not limited to child laborers themselves; because children who work are more likely to earn low wages as adults, the risk that poverty and child labor will be passed to the next generation increases. 16) B

There are two very distinct, and sometimes competing, perspectives on the ethics of workplace relationships. Some employers might decide to treat employees well as a means to produce greater workplace harmony and productivity. This consequentialist approach could be reminiscent of the utilitarian ethics. 17) C

Due process in the workplace acknowledges an employer’s authority over employees. Employers can tell employees what to do, and when, and how to do it. 20) B

“Bullying” in the workplace is defined as “the repeated, malicious, health-endangering mistreatment of one employee by one or more employees.” The mistreatment need not be physically threatening but might simply involve a boss who is constantly yelling dictates at workers, or a coworker who spreads rumors about another in order to sabotage his position. These behaviors lead not only to emotional abuse but a complete loss of personal dignity, intimidation, and fear. 21) B

The issue of workplace bullying is more predominant in the service sector because that work relies significantly on interpersonal relationships and interaction. 22) D

Employment at will (EAW) holds that, in the absence a particular contractual or other legal obligation that specifies the length or conditions of employment, all employees are employed “at will.” This means that, unless an agreement specifies otherwise, employers are free to fire an employee at any time and for any reason. 23) C

Under the common-law agency approach, a persuasive indicator of independent contractor status is the ability to control the manner in which the work is performed. Under this analysis, the employer need not actually control the work but must merely have the right or ability to control the work for a worker to be classified an employee. 25) A

Allowing a worker to remain in a position for a period of time once she or he has been notified of impending termination might not be the best option. Workers may interpret early notice as an effort to get the most out of them before departure rather than an effort to allow them time to come to grips with the loss of their jobs. 26) D

One of the most effective philosophical theories to employ in downsizing decisions is John Rawls’s theory of distributive justice. Under a formulation he developed called the “veil of ignorance,” managers would consider what decision they would make (such as whether to downsize or how to downsize) if they did not know what role they would be playing following the decision. 27) D

The term “sweatshops” refers to working environments where employees lack even the most basic health and safety protections. Within the United States and throughout many other countries with developed economies, there is a broad consensus that employees have a fundamental right to a safe and healthy workplace. 28) B

The life of one who dies in a workplace accident has instrumental value that can be measured, in part, by the lost wages that would have been earned had that person lived. But these lost wages do not measure the intrinsic value of the life, something that financial compensation simply cannot replace. 29) C

Health and safety are also valuable in and of themselves. They have intrinsic value in addition to their instrumental value. To understand this distinction, consider how one might respond to the question of how much her or his life is worth. 30) A

Like work itself, health and safety are “goods” that are valued both as a means for attaining other valuable ends and as ends in themselves. Health and safety have a very high instrumental value because part of their value derives from the fact that we use them to attain other things of value. 31) C

Employers cannot be responsible for providing an ideally safe and healthy workplace. Instead, discussions in ethics about employee health and safety will tend to focus on the relative risks workers face and the level of acceptable workplace risk. “Risks” can be defined as the probability of harm, and we determine “relative risks” by comparing the probabilities of harm involved in various activities. 32) C

“Risks” can be defined as the probability of harm, and we determine “relative risks” by comparing the probabilities of harm involved in various activities. 35) C

If it can be determined that the probability of harm involved in a specific work activity is equal to or less than the probability of harm of some more common activity, then we can conclude that this activity faces an “acceptable level of risk.” 36) C

Acceptable level of risk approach treats employees disrespectfully by ignoring their input as stakeholders. Such paternalistic decision making effectively treats employees like children and makes crucial decisions for them, ignoring their role in the decision-making process. 37) C

One of the challenges to the acceptable risk approach to health and safety is that it assumes an equivalency between workplace risks and other types of risks when there are significant differences between them. Another challenge is that it treats employees disrespectfully by ignoring their inputs as stakeholders. 38) D

One of the challenges faced by the acceptable risk approach to health and safety is that it improperly places incentives because the risks faced at work could be controlled by others who might stand to benefit by not reducing them. Another challenge is that it ignores the fundamental deontological right an employee might have to a safe and healthy working environment. 39) B

The market approach can support compensation to injured workers when it can be shown that employers were responsible for causing the harms. So, an employer who fails to install firefighting equipment in the workplace can be held liable for burns an employee suffers during a workplace fire. 40) A

The free market approach has a number of serious problems. Employees do not have the kinds of free choices that the free market theory would require in order to attain optimal satisfactions— though enlightened self-interest would be a valuable theory to introduce and apply in this environment, it is unrealistic to presume employees always have the choices available to them that make it possible. 41) A

One of the challenges associated with the market-controlled approach to health and safety is that employees do not have the kinds of free choices that the free-market theory would require in order to attain optimal satisfactions. 42) C

Government standards prevent employees from having to face the fundamentally coercive choice between job and safety. These standards also address the first-generation problem by focusing on prevention rather than compensation after the fact. 43) A

When OSHA was first established, regulations were aimed at achieving the safest feasible standards. This “feasibility” approach allows OSHA to make trade-offs between health and economics. 44) C

Critics in both industry and government have argued that OSHA should be required to use costbenefit analysis in establishing health and safety standards. These critics argue that OSHA should aim to achieve the optimal, rather than highest feasible, level of safety. 45) C

Cost-benefit analysis treats health and safety merely as an instrumental value and denies its intrinsic value. It requires that an economic value be placed on one’s life and bodily integrity. 46) B

Cost-benefit analysis requires that an economic value be placed on one’s life and bodily integrity. Typically, this would follow the model used by the insurance industry (where it is used in wrongful death settlements, for example) in which one’s life is valued in terms of one’s earning potential. 47) A

In 1970, the U.S. Congress established the Occupational Safety and Health Administration (OSHA) and charged it with establishing workplace health and safety standards. OSHA is an agency of the federal government that publishes and enforces safety and health regulations for U.S. businesses. 48) A

The harmful effects are not limited to child laborers themselves; because children who work are more likely to earn low wages as adults, the risk that poverty and child labor will be passed to the next generation increases. Because work takes children out of school, nation-specific studies show that high levels of child labor are associated with low literacy levels. 49) A

Bolivia allows children to work legally from the youngest age of 10 years old. While this may seem unconscionable to certain readers throughout the world, lawmakers argue that this law is meant to protect children who are going to be in the workplace—whether it is legal or not. 50) C

Almost 100 companies (including Burberry, Gap Inc., and The Body Shop International) have joined the Ethical Trade Initiative (ETI), an alliance of corporations, trade unions, and voluntary organizations dedicated to improving the conditions of workers. The ETI has established a Base Code of ethical standards that all signatories commit to uphold. 51) B

The courts have carefully construed legal precedent in the decades since Title VII of the United States Civil Rights Act was passed in 1964 and created the prohibited classes of discrimination. 52) A

In this scenario, Jason is a victim of reverse discrimination. Reverse discrimination is discrimination against those traditionally considered to be in power or the majority, such as white men. 53) B

Reverse discrimination is discrimination against those traditionally considered to be in power or the majority, such as white men. 54) D

Discrimination against those traditionally considered to be in power or the majority, such as white men, is termed reverse discrimination. A business that intentionally seeks to hire a candidate from an underrepresented group might be seen as discriminating against white males, for example. 55) D

The term affirmative action refers to a policy or a program that tries to respond to instances of past discrimination by implementing proactive measures to ensure equal opportunity today. 56) C

Affirmative action arises in the workplace in three ways. The first way is through legal requirements. Courts may also require what is termed “judicial affirmative action” in order to remedy a finding of past discrimination. A third form of affirmative action involves voluntary affirmative action plans. 57) B

Much of the law relating to affirmative action applies only to about 20 percent of the workforce; however, those employees of federal contractors with 50 or more employees are subject to Executive Order 11246, which requires affirmative action efforts to ensure equal opportunity. Where Executive Order 11246 does not apply, courts may also require what is termed “judicial affirmative action” in order to remedy a finding of past discrimination. 58) D

A form of affirmative action involves voluntary affirmative action plans employers undertake to overcome barriers to equal opportunity. These might include training plans and programs, focused recruiting activity, or the elimination of discrimination that might be caused by hiring criteria that exclude a particular group. 59) C

Opponents to affirmative action argue that it translates into current punishment of past wrongs and therefore is inappropriately placed because those who “pay” for the wrongs are unfairly burdened and should not bear the responsibility for the acts of others. 60) just cause

Employment at will (EAW) is the default position on which courts will rely until and unless an exception can be demonstrated. The burden of proof lies with the dismissed employee to show that she or he was unjustly or illegally fired. Due process and just cause, whether instituted as part of internal corporate policy or through legislation, would reverse this burden of proof and require employers to show cause to justify the dismissal of an employee. 61) economic realities

An economic realities test is a test by which courts consider whether a worker is economically dependent on a business or is in business for himself or herself. 62) downsizing

Downsizing is the reduction of human resources at an organization through terminations, retirements, corporate divestments, or other means. 63) instrumental

For employee health and safety in the workplace, “risks” can be defined as the probability of harm, and “relative risks” is determined by comparing the probabilities of harm involved in various activities. 65) child labor

Though the term “child labor” literally signifies children who work, it has taken on the meaning of exploitative work that involves some harm to a child who is not of an age to justify his or her presence in the workplace. 66) Reverse discrimination

Reverse discrimination is discrimination against those traditionally considered to be in power or the majority, such as white men. 67) Diversity

Multiculturalism refers to the principle of tolerance and inclusion that supports the coexistence of multiple cultures while encouraging each to retain that which is unique or individual about that particular culture. 69) affirmative action

The term affirmative action refers to a policy or a program that tries to respond to instances of past discrimination by implementing proactive measures to ensure equal opportunity today. 70) Essay

There are two very distinct, and sometimes competing, perspectives on the ethics of workplace relationships. On one hand, employers might decide to treat employees well as a means to produce greater workplace harmony and productivity. This approach, focusing on end results, could be reminiscent of the utilitarian ethics. Research suggests that effective firms are characterized by a set of common practices, all of which involve treating employees in humane and respectful ways. Though it is a relatively new area of research, studies suggest that managers can have a significant impact on the emotions of their workers, and this impact can greatly affect productivity and loyalty, as well as perceptions of fairness, care, and concern. On the other hand, of course, employers might treat employees well out of a Kantian sense of duty and rights, regardless of the either utilitarian or self-interested productivity consequences. This deontological approach emphasizes the rights and duties of all employees, and treating employees well simply because “it is the right thing to do.” Defenders of employee rights argue that rights should protect important employee interests from being constantly subjected to utilitarian and financial calculations. This sense of duty might stem from the law, professional codes of conduct, corporate codes of conduct, or such moral principles as fairness, justice, or human rights on the part of the organization’s leadership. 71) Essay

Philosophically, the right of due process is the right to be protected against the arbitrary use of authority. In legal contexts, due process refers to the procedures that police and courts must follow in exercising their authority over citizens. Few dispute that the state, through its police and courts, has the authority to punish citizens. This authority creates a safe and orderly society in which we all can live, work, and do business. But that authority is not unlimited; it can be exercised only in certain ways and under certain conditions. Due process rights specify these conditions. Similarly, due process in the workplace acknowledges an employer’s authority over employees. Employers can tell employees what to do and when and how to do it. They can exercise such control because they retain the ability to discipline or fire an employee who does not comply with their authority. Because of the immense value that work holds for most people, the threat of losing one’s job is a powerful motivation to comply. However, basic fairness—implemented through due process—demands that this power be used justly. 72) Essay

Employment at will (EAW) holds that, in the absence of a particular contractual or other legal obligation that specifies the length or conditions of employment, all employees are employed “at will.” In the same manner, an EAW worker may opt to leave a job at any time for any reason, without offering any notice at all; so, the freedom is theoretically mutual. The ethical rationale for EAW, both historically and among contemporary defenders, has both utilitarian and deontological elements. EAW was thought to be an important management tool. Total discretion over employment gives managers the ability to make efficient decisions that should contribute to the greater overall good. It was thought that the manager would be in the best position to know what was best for the firm and that the law should not interfere with those decisions. Another basis for EAW was the rights of private property owners to control their property by controlling who works for them. Both legal and ethical analyses of these claims, however, demonstrate that there are good reasons to limit EAW. Even if EAW proved to be an effective management tool, justice demands that such tools not be used to harm other people. Further, even if private property rights grant managers authority over employees, the right of private property itself is limited by other rights and duties. Also, though the freedom to terminate the relationship is theoretically mutual, the employer is often responsible for the employee’s livelihood, while the opposite is unlikely to be true; the differential creates an unbalanced power relationship between the two parties. 73) Essay

EAW has priority unless the employee can prove that her or his case falls under one of the exceptions. That is, EAW is the default position on which courts will rely until and unless an exception can be demonstrated. The burden of proof lies with the dismissed employee to show that she or he was unjustly or illegally fired. Due process and just cause, whether instituted as part of internal corporate policy or through legislation, would reverse this burden of proof and require employers to show cause to justify the dismissal of an employee. 74) Essay

First, the decision regarding downsizing should be made by a representative group so that all stakeholder interests can be considered and to earn the trust of those who will be impacted. The facts should be collected, and issues should be determined. Since employees should be kept aware of business conditions, the need for a downsizing effort should not come as a great surprise. However, the question of notice is debatable. Once the stakeholders are identified, it will be vital to enumerate any and all possible options with regard to the downsizing efforts and to catalog the impact of each option on each group of stakeholders. When a firm decides to downsize, as with any other termination it is critical to lessen the impact as much as possible and to allow the terminated employees to depart with dignity. Above all, during a time when relationships might be strained, it is critical to be honest and forthright and to be sensitive to the experiences of those who will be affected. From a legal perspective, the decision about whom to include in a downsizing effort must be carefully planned. If the firm’s decision is based on some criterion that seems to be neutral on its face, such as seniority, but the plan results in a different impact on one group than another, the decision may be suspect. 75) Essay

It can be argued that a firm should give notice of an intent to downsize as soon as the need is determined, and let those who will be impacted know who will be let go as soon as that list is devised. On the other hand, the uncertainty and rumors that are sure to develop between the announcement of downsizing and the decision about who will be terminated may outweigh the benefits gained in early notification. In addition, workers may interpret early notice as an effort to get the most out of them before departure rather than an effort to allow them time to come to grips with the loss of their jobs. 76) Essay

Like work, health and safety are “goods” that are valued both as a means for attaining other valuable ends and as ends in themselves. Whatever else we desire out of life, being healthy and safe makes it much more likely that we will be capable of attaining our ends. In this sense, health and safety have a very high instrumental value since part of their value derives from the fact that we use them to attain other things of value. Insurance therefore seeks to compensate workers for injuries they incur by paying the employees for the wages they lost as a result of being unable to work. Yet health and safety are also valuable in and of themselves. They have intrinsic value in addition to their instrumental value. To understand this distinction, consider how one might respond to the question of how much her or his life is worth. The life of one who dies in a workplace accident has instrumental value that can be measured, in part, by the lost wages that would have been earned had that person lived. But these lost wages do not measure the intrinsic value of the life, something that financial compensation simply cannot replace. If “healthy” is taken to mean a state of flawless physical and psychological well-being, arguably no one is perfectly healthy. If “safe” means completely free from risk, certainly no workplace is perfectly safe. If health and safety are interpreted as ideals that are impossible to realize, then it would be unreasonable to claim that employees have a right to a healthy and safe workplace. 77) Essay

The free market approach has a number of serious problems. First, labor markets are not perfectly competitive and free. Employees do not have the kinds of free choices that the free market theory would require in order to attain optimal satisfactions—though enlightened selfinterest would be a valuable theory to introduce and apply in this environment, it is unrealistic to presume employees always have the choices available to them that make it possible. Second, employees seldom, if ever, possess the kind of complete information efficient markets require. If employees do not know the risks involved in a job, they will not be in a position to freely bargain for appropriate wages and therefore they will not be in a position to effectively protect their rights or ensure the most ethical consequences. This is a particular concern when we recognize that many workplace risks are in no sense obvious. Such market failures can have deadly consequences when they involve workplace health and safety issues. Another issue is the aspect of the “first-generation” problem. The means by which the market gathers information is by observing the harms done to the first generation exposed to imperfect market transactions. In effect, markets sacrifice the first generation in order to gain information about safety and health risks. To the degree that these are important questions that ought to be asked, individual bargaining will fail as an ethical public policy approach to worker health and safety. 78) Essay

Mandatory government standards address most of the problems raised against market strategies. Standards can be set according to the best available scientific knowledge and thus overcome market failures that result from insufficient information. Standards prevent employees from having to face the fundamentally coercive choice between job and safety. Standards also address the first-generation problem by focusing on prevention rather than compensation after the fact. Finally, standards are fundamentally a social approach that can address public policy questions ignored by markets. 79) Essay

In 1970, the U.S. Congress established the Occupational Safety and Health Administration (OSHA) and charged it with establishing workplace health and safety standards. The “feasibility” approach allows OSHA to make trade-offs between health and economics, but it is prejudiced in favor of health and safety by placing the burden of proof on industry to show that high standards are not economically feasible. Some critics charge that this approach does not go far enough and unjustly sacrifices employee health and safety. From that perspective, industries that cannot operate without harming the health and safety of its employees should be closed. But the more influential business criticism has argued that these standards go too far. Critics in both industry and government have argued that OSHA should be required to use cost-benefit analysis in establishing such standards. From this perspective, even if a standard is technologically and economically feasible, it would still be unreasonable and unfair if the benefits did not outweigh the costs. Using cost-benefit analysis to set standards, in effect, returns us to the goals of the market-based, individual bargaining approach. Rejecting cost-benefit analysis in setting standards is not the same as rejecting cost-effective strategies in implementing those standards. A commitment to cost-effectiveness would require that, once the standards are set, we adopt the least expensive and most efficient means available for achieving those standards. Cost-benefit analysis, in contrast, uses economic criteria in setting the standards in the first place. It is cost-benefit, not cost-effectiveness, analysis that is ethically problematic. The use of cost-benefit analysis in setting workplace health and safety standards commits us to treating worker health and safety as commodity, another individual preference, to be traded off against competing commodities. Cost-benefit analysis requires that an economic value be placed on one’s life and bodily integrity. 80) Essay

Some contend that the exploitation of cheap labor allows developing countries to expand export activities and to improve their economies. This economic growth brings more jobs, which will cause the labor market to tighten, which in turn will force companies to improve conditions in order to attract workers. Several commentators argue that encouraging greater global production will create additional opportunities for expansion domestically, providing a positive impact on more stakeholders. Though it is an unpopular sentiment with the general consuming public, many economists argue that the maintenance of sweatshops is therefore supported by economic theory. Indeed, even the term “sweatshops” remains open to debate. On the other hand, opponents to this perspective argue that allowing this process to take its course will not necessarily lead to the anticipated result, just as voluntarily improving legal compliance, wages, and working conditions will not inevitably lead to the negative consequences the free market advocates threaten. 81) Essay

Women often face challenges that are distinct from those faced by men. For instance, women and men are both subject to gender stereotyping, but suffer from different expectations in that regard. Unemotional men are viewed in positive terms: going after what they want, not letting anything get in their way, and so on. 82) Essay

Diversity refers to the presence of differing cultures, languages, ethnicities, races, affinity orientations, genders, religious sects, abilities, social classes, ages, and national origins of the individuals in a firm. Diversity has brought benefits to the workplace, but diversity efforts have also created new conflicts. Keeping in mind the definition of diversity, it is important to realize that when a firm brings together individuals with these (or other) differences—often exposing these individuals to such differences for the first time—areas of tension and anxiety may emerge. In addition, the organization is likely to ask its employees to work together toward common goals, on teams, in supervisory or subordinate roles, and in power relationships, all requests that might lead to conflicts or tension even without additional stressors such as cultural challenges. Diversity can potentially increase several areas of values tension. Where differences are new or strong and where negative stereotypes previously ruled interaction between particular groups, sensitivity to the potential for conflict is necessary. Another concern involves integrating diverse viewpoints with a preexisting corporate culture. It is not discriminatory to refuse to hire someone about whom you simply have a “bad feeling,” unless that bad feeling is based on their difference in race or gender. On the other hand, it is vital to be wary of prejudgments based solely on differences in interpretations of culturally based standards. The cost of ignoring diversity is high, not only in terms of losses of productivity, creativity, and other performance-based measures, but also in terms of legal liability. 83) Essay

The term affirmative action refers to a policy or a program that tries to respond to instances of past discrimination by implementing proactive measures to ensure equal opportunity today. It may take the form of intentional inclusion of previously excluded groups in employment, education, or other environments. 84) Essay

Affirmative action arises in the workplace in three ways. The first way is through legal requirements. Much of the law relating to affirmative action applies only to about 20 percent of the workforce; however, those employees of federal contractors with 50 or more employees are subject to Executive Order 11246, which requires affirmative action efforts to ensure equal opportunity. Second, where Executive Order 11246 does not apply, courts may require what is termed “judicial affirmative action” in order to remedy a finding of past discrimination. A third form of affirmative action involves voluntary affirmative action plans employers undertake to overcome barriers to equal opportunity. These might include training plans and programs, focused recruiting activity, or the elimination of discrimination that might be caused by hiring criteria that exclude a particular group. A demonstrated underrepresentation of a particular group or a finding of past discrimination is required to justify affirmative action efforts under either of these latter two options.

Student name:__________ TRUE/FALSE - Write 'T' if the statement is true and 'F' if the statement is false. 498) Privacy is important because it serves to define one's individuality. ⊚ true ⊚ false 499)

A social contract restricts the right to privacy by preventing people from infringing on someone else's right to his or her personal autonomy. ⊚ true ⊚ false

500)

501)

Values that are fundamental across culture and theory are not hypernorms. ⊚ true ⊚ false

According to Donaldson and Dunfee, the right to personal freedom is an example of a hypernorm. ⊚ true ⊚ false

502)

The value of privacy to civilized society is as great as the value of hypernorms to civilized existence. ⊚ true ⊚ false

503)

The concept of property rights excludes personal information. ⊚ true ⊚ false

504)

The Constitution's Fourth Amendment protection against an unreasonable search and seizure governs only the private-sector workplace. ⊚ true ⊚ false

505)

The "invasion of privacy" claim developed through case law called intrusion into seclusion. ⊚ true ⊚ false

506)

The European Union's Directive on Personal Data Protection does not in any way prohibit EU firms from transferring personal information to a non-EU country. ⊚ true ⊚ false

507)

Monitoring allows a manager to ensure effective, productive performance by preventing the loss of productivity to inappropriate technology use. ⊚ true ⊚ false

508)

Health Insurance Portability and Accountability Act (HIPAA) stipulates that employers can use "protected health information" in making employment decisions without prior consent. ⊚ true ⊚ false

509)

According to the "Hawthorne Effect," merely knowing one is being studied might make one a better worker. ⊚ true ⊚ false

510)

Employers in all parts of the United States are prohibited from making employment decisions on the basis of weight, even if they are not in violation of the Americans with Disabilities Act (ADA). ⊚ true ⊚ false

511)

Discrimination laws do not necessarily protect workers against adverse action based on the identity of the person they married. ⊚ true ⊚ false

MULTIPLE CHOICE - Choose the one alternative that best completes the statement or answers the question. 512) Two general and connected understandings of privacy have been identified: privacy as a right to be "left alone" within a personal zone of solitude, and privacy as the A) right to understand one's emotions. B) right to understand others' emotions. C) right to control information about others. D) right to control information about oneself. 513)

________ is an individual's right to be "let alone" within a personal zone of solitude and the right to control information about himself or herself. A) Autonomy B) Privacy C) Morality D) Psychological egoism

514)

Identify a true statement about hypernorms. A) They are values that are determined within free moral space. B) They are values that are fundamental across culture and theory. C) They determine who maintains control over tangibles and intangibles. D) They are limited to an individual's property rights.

515)

Which of the following is at the core of many of the examples of hypernorms? A) moral free space B) public information C) individual privacy D) transparency

516)

According to ethicists Thomas Donaldson and Thomas Dunfee, the right to ________ is an example of a hypernorm. A) armed protest B) public information C) intelligence gathering D) physical movement

517)

In the context of the approach to ethical analysis developed by Donaldson and Dunfee, as long as a decision is not in conflict with a hypernorm, it rests within ________, and reasonable minds may differ as to what is ethical. A) the exclusion zone B) the zone of proximal development C) moral free space D) moral imagination

518)

Identify a true statement about privacy. A) The right to privacy is not restricted by any social contract. B) Privacy is not related to liberty and autonomy. C) Privacy can be legally protected by the constitution. D) The right to privacy is provided only for certain sections of society.

519)

________ refers to the body of law comprised of the decisions handed down by courts, rather than specified in any particular statutes or regulations. A) Statutory law B) Common law C) Civil law D) Constitutional law

520)

The Constitution's Fourth Amendment protection against an unreasonable search and seizure governs only the public sector workplace because A) unions exist only in public sector organizations. B) the private sector does not cater to appeals of unreasonable search or seizure. C) the Constitution applies only to state action. D) only public sector organizations deal with classified information.

521)

Which of the following prohibits the "interception" or unauthorized access of stored communications? A) the Electronic Communications Privacy Act of 1986 B) the Computer Security Act of 1987 C) the Privacy Act of 1974 D) the Computer Fraud and Abuse Act of 1986

522)

In the context of the Electronic Communications Privacy Act (ECPA) of 1986, interception applies only A) to employees who work part time. B) when monitoring is done without consent. C) when employees resign from a company. D) to messages in transit.

523)

Which of the following statements about the Electronic Communications Privacy Act of 1986 is true? A) Courts have ruled that the "interception" of stored communications applies only to messages that have actually reached company computers. B) A firm that secures employee consent to monitoring at the time of hire is immune from ECPA liability. C) The impact of the ECPA is to punish electronic monitoring only by employers. D) The ECPA does not allow interception even when consent has been granted.

524)

Identify a legal violation that occurs when someone intentionally interferes in the private affairs of another when the interference would be "highly offensive to a reasonable person." A) battery B) conflict of interest C) intrusion into seclusion D) defamation

525)

If the basis for finding an invasion of privacy is often an employee's legitimate and reasonable expectation of privacy, then a situation where there is no real expectation of privacy occurs when the A) employee has actual notice. B) work involves handling huge amounts of money. C) work requires complete transparency from the employee. D) employee belongs to a minority group.

526)

Which of the following statements is true regarding the laws on employer monitoring? A) Increasingly, states in the United States are enacting laws to limit employer monitoring powers. B) All states in the United States require employers to notify workers when they are being monitored. C) The U.S. Supreme Court has prohibited employers from monitoring their employees. D) The U.S. Supreme Court has prohibited employers from reviewing employees' Internet use.

527)

Which of the following is true about the European Union's Directive on Personal Data Protection? A) It prohibits EU firms from transferring personal information to a non-EU country unless that country maintains "adequate protections" of its own. B) It is also known as the European Union Safe Harbor Act. C) It encourages member countries to maintain myriad standards for information gathering and protection. D) It states that United States is the only non-member country that maintains "adequate protection" of personal data.

528)

Which of the following is true of the European Union's General Data Protection Regulation (GDPR)? A) It provides that personal information cannot be collected or shared by companies without individuals' permission. B) It impacts electronic monitoring only by third parties and not by employers. C) It provides worldwide service of search warrants for electronic evidence. D) It denies the government from regulating small companies.

529)

According to economist Antonio Argandona, which of the following elements would include issues relating to company secrets, espionage, and intelligence gathering? A) truthfulness and accuracy B) respect for property and safety rights C) respect for privacy D) accountability

530)

Fitbits and Nike+ FuelBands are examples of ________ that allow employers to gather employee information, such as the number of steps they take in a day, their heart rate, and even their hormone levels, and incorporate this information into employee wellness programs. A) biotracking technology B) surveillance technology C) biofeedback mechanism D) reverse charge mechanism

531)

One of the attributes of technology and its usage is that it A) prohibits access to any information that was once easily accessible. B) ensures that the lines between people's personal lives and professional lives are not blurred. C) keeps employees within the boundaries of their workplace even in the outside world. D) reduces the privacy concerns of individuals.

532)

When we do not get to know someone because we do not have to see that person in order to do our business, we often do not take into account the impact of our decisions on him or her. This is a challenge posed by the A) facelessness that results from the use of new technology accessible in the workplace. B) knowledge gap that exists between people who understand the technology and others who do not understand it. C) lack of clear boundaries between people's personal and professional lives. D) assumption by users of technology that the Internet is safe.

533)

534)

Which of the following statements is true of monitoring? A) Monitoring enables employers to legally access confidential medical information about their employees. B) Monitoring tends to create a friendly workplace without any suspicions. C) Monitoring allows workers to control their environment. D) Monitoring ensures effective performance by preventing the loss of productivity to inappropriate technology use.

The desire to place workers in appropriate positions, to ensure compliance with affirmative action requirements, or to administer workplace benefits is sufficient reason for employers to undertake employee ________. A) training B) orientation C) monitoring D) drug testing

535)

The utilitarian view holds that individual rights to privacy or right to control information about oneself may be outweighed in cases where A) public safety is at risk. B) an employee has prior notice on possible privacy invasion. C) an employee has access to his or her employer's money. D) employee productivity is low.

536)

Which of the following statements is true of the Genetic Information Nondiscrimination Act (GINA) of 2008? A) It makes it legal to discriminate against applicants because of genetic information. B) It limits the disclosure of genetic information. C) It contains a tenuous confidentiality provision. D) It became effective in December 2008.

537)

Which of the following acts stipulates that employers cannot use "protected health information" in making employment decisions without prior consent? A) the Personal Information Protection and Electronic Documents Act B) the Federal Information Security Management Act C) the Personal Information and Health Documents Act D) the Health Insurance Portability and Accountability Act

538)

Identify a true statement about the Genetic Information Non-Discrimination Act (GINA) of 2008. A) It mandates all employees to disclose their genetic information to their employers. B) It does not include the family medical history of a person. C) It prevents employers from monitoring their employees. D) It prohibits discriminatory treatment in employment based on genetic information.

539)

Identify a true statement about the Genetic Information Non-Discrimination Act (GINA) of 2009. A) It allows employers to collect genetic information from employees in order to monitor the biological effects of toxic substances in the workplace. B) It excludes family medical history from one's genetic information. C) It prevents employers from collecting genetic information in order to comply with the Family Medical Leave Act. D) It prevents employers from releasing genetic information about an employee to a public health agency.

540)

Which of the following is a disadvantage of monitoring? A) Monitoring tends to constrain effective performance since it can cause increased stress and pressure. B) Monitoring prevents employers from managing their workplaces to place workers in appropriate positions. C) Monitoring does not allow managers to ensure compliance with affirmative action requirements. D) Monitoring cannot be utilized to prevent the loss of productivity due to inappropriate technology use.

541)

Which of the following statements is true about monitoring? A) It improves workers' right to control their work environment. B) It has the potential to cause physical disorders such as carpal tunnel syndrome. C) It improves the level of worker autonomy and respect. D) It can lead to mental pressures, but health problems have not been reported.

542)

Which of the following parameters is likely to be included in an employee monitoring policy? A) No advance notice is required for secret monitoring. B) Employer is allowed to collect personal and job-related information. C) No monitoring in private areas. D) Monitoring should be extended to areas outside of the workplace.

543)

544)

Identify a true statement about the "Hawthorne Effect." A) It maintains that workers' productivity improves when they are singled out. B) It holds that workers show poor performance when they know that they are being monitored. C) It holds that managers should not monitor their employees in any situations. D) It occurs only when the mechanisms used to monitor employees are unethical.

Employees will be on their best behavior during phone calls if they know that those calls are being monitored. This can be attributed to the A) placebo effect. B) observer-expectancy effect. C) Hawthorne effect. D) halo effect.

545)

An employer can resolve the concerns related to the "Hawthorne Effect" through A) notified, random monitoring. B) consented, selective monitoring. C) selective, notified monitoring. D) random, anonymous monitoring.

546)

Some companies have a(n) ________ policy under which an employer refuses to hire or terminates a worker on the basis of the spouse's working at the same firm. A) antinepotism B) conflict-of-interest C) anti-fraternization D) antitrust

547)

Which of the following statements about the regulation of off-work acts in the United States is true? A) Many states ban discrimination on the basis of weight. B) Laws that protect employees against discrimination based on marital status exist in just under half of the states. C) Only a small minority of states protect employees against discrimination on the basis of political involvement. D) Lifestyle discrimination tends to be lawful if the imposition of the rule treats one protected group differently than another.

548)

Identify a policy under which an employer refuses to hire or terminates a worker whose spouse works at a competing firm. A) anti-nepotism policy B) antitrust policy C) affirmative action policy D) conflict-of-interest policy

549)

Most statutes or common law decisions provide for employer defenses for all of the following EXCEPT those rules that A) are reasonable and rationally related to the employment activities of a particular employee. B) treat one group differently from another considering lifestyle practices. C) are necessary to avoid a conflict of interest or the appearance of conflict of interest. D) constitute a "bona fide occupational requirement."

550)

Identify an act that expanded states' rights with regard to Internet surveillance technology, including workplace surveillance, and amended the Electronic Communications Privacy Act. A) the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism (USA PATRIOT) Act B) the USA Freedom Act C) the Federal Information Security Management Act D) the Personal Information Protection and Electronic Documents Act

551)

Which of the following acts grants access to sensitive data with only a court order rather than a judicial warrant and imposes or enhances civil and criminal penalties for knowingly or intentionally aiding terrorists? A) the Federal Information Security Management Act B) the USA Freedom Act C) the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism (USA PATRIOT) Act D) the Personal Information Protection and Electronic Documents Act

552)

Title II of the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism (USA PATRIOT) Act provides roving surveillance authority under the A) Federal Information Security Management Act to track website access of individuals. B) Foreign Intelligence Surveillance Act to track individuals. C) Electronic Communications Surveillance Act to track business transactions. D) International Surveillance of Terrorists Act to track individuals in countries with diplomatic relations.

553)

Which of the following is true about the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism (USA PATRIOT) Act? A) The act does not grant access to sensitive data with only a court order. B) The act expands states' rights with regard to Internet surveillance technology. C) The act excludes provisions designed to combat money laundering activity. D) The act does not enhance civil and criminal penalties for intentionally aiding terrorists.

FILL IN THE BLANK. Write the word or phrase that best completes each statement or answers the question. 554) The legal and ethical sources of protection for privacy in personal data are called ________.

555)

According to philosopher Patricia Werhane, for an individual to expect respect for her or his personal autonomy, that individual has a ________ to respect the autonomy of others.

556)

Private ________ depend on the existence and enforcement of a set of rules that define who has a right to undertake which activities on their own initiative and how the returns from those activities will be allocated.

557)

The impact of the Electronic Communications Privacy Act (ECPA) is to punish electronic monitoring only by ________ and not by employers.

558)

The maintenance and either periodic or random review of email communications of employees or others for a variety of business purposes is called ________.

559)

According to the ________, merely knowing one is being studied might make one a better worker.

560)

Philosopher William Parent conceives the right to privacy as the right to ________.

561)

New York's ________ statute prohibits employment decisions or actions based on four categories of off-duty activity.

562)

An impairment that substantially limits a major life activity is called a(n) ________.

563)

In the context of the Americans with Disabilities Act (ADA), ________ is the only U.S. state that has banned discrimination on the basis of weight.

ESSAY. Write your answer in the space provided or on a separate sheet of paper. 564) How do privacy issues at the workplace raise ethical issues involving individual rights as well as those involving utilitarian consequences?

565)

Summarize how the definition of privacy gives rise to two streams of thought about rights.

566)

Describe "reciprocal obligation" as an ethical source of the right to privacy.

567)

Explain the concept of hypernorms and moral free space.

568)

Explain the ethical source of privacy using the perspective of property rights.

569)

Explain how privacy can be legally protected. Summarize the Electronic Communications Privacy Act of 1986 (ECPA). Discuss the "intrusion into seclusion" concept.

570)

Explain the implications of giving "notice" about monitoring.

571)

Briefly discuss the circumstances which violate an employee's privacy rights.

572)

Summarize what economist Antonio Argandona says about information and data in the age of technology, and the moral requirements associated with that information.

573)

Briefly outline the challenges of technology discussed in the text.

574)

Why do firms monitor technology usage?

575)

Discuss the nuances associated with drug testing and outline the arguments for and against it.

576)

Describe the Health Insurance Portability and Accountability Act (HIPAA). Discuss the use of genetic information as a form of monitoring.

577)

Outline the business reasons to limiting monitoring.

578)

Discuss the facts pertaining to laws against discrimination based on marital status.

579)

Briefly discuss the USA PATRIOT Act with regard to September 11, 2001.

Answer Key Test name: chapter 7 1) TRUE

Privacy is important because it serves to establish the boundary between individuals and thereby serves to define one's individuality. 2) TRUE

The right to privacy is restricted by a social contract in our culture that prevents us from infringing on someone else's right to her or his personal autonomy. 3) FALSE

Donaldson and Dunfee include as examples of hypernorms freedom of speech, the right to personal freedom, the right to physical movement, and informed consent. 5) TRUE

The value of privacy to civilized society is as great as the value of the various hypernorms to civilized existence. 6) FALSE

The concept of property rights involves a determination of who maintains control over tangibles and intangibles, including, therefore, personal information. 7) FALSE

The Constitution's Fourth Amendment protection against an unreasonable search and seizure governs only the public sector workplace. 8) TRUE

The "invasion of privacy" claim developed through case law called intrusion into seclusion. 9) FALSE

The European Union's Directive on Personal Data Protection prohibits EU firms from transferring personal information to a non-EU country unless that country maintains "adequate protections" of its own; in other words, protections equivalent to those the directive guarantees in EU countries. 10) TRUE

Monitoring allows a manager to ensure effective, productive performance by preventing the loss of productivity to inappropriate technology use. 11) FALSE

Health Insurance Portability and Accountability Act (HIPAA) stipulates that employers cannot use "protected health information" in making employment decisions without prior consent. 12) TRUE

One of the problems associated with giving prior notice of monitoring is the "Hawthorne Effect." Workers are found to be more productive based on the psychological stimulus of being singled out, which makes them feel more important. Merely knowing one is being studied might make one a better worker. 13) FALSE

Employers are not prohibited from making employment decisions on the basis of weight, as long as they are not in violation of the Americans with Disabilities Act (ADA) when they do so. 14) TRUE

Privacy is an individual's right to be "let alone" within a personal zone of solitude and/or the right to control information about himself or herself. 17) B

Ethicists Thomas Donaldson and Thomas Dunfee include as examples of hypernorms freedom of speech, the right to personal freedom, the right to physical movement, and informed consent. Individual privacy is at the core of many of these basic minimal rights and is, in fact, a necessary prerequisite to many of them. 19) D

Donaldson and Dunfee include as examples of hypernorms freedom of speech, the right to personal freedom, the right to physical movement, and informed consent. 20) C

Moral free space is that environment where hypernorms or universal rules do not govern or apply to ethical decisions, but instead culture or other influences govern decisions, as long as they are not in conflict with hypernorms. In other words, as long as a decision is not in conflict with a hypernorm, it rests within moral free space, and reasonable minds may differ as to what is ethical. 21) C

Privacy can be legally protected in three ways: by the constitution (federal or state), by federal and/or state statutes, and by the common law. 22) B

Common law refers to the body of law comprised of the decisions handed down by courts, rather than specified in any particular statutes or regulations. 23) C

The Constitution's Fourth Amendment protection against an unreasonable search and seizure governs only the public sector workplace because the Constitution applies only to state action. 24) A

The Electronic Communications Privacy Act of 1986 (ECPA) prohibits the "interception" or unauthorized access of stored communications. 25) D

The Electronic Communications Privacy Act (ECPA) of 1986 prohibits the interception or unauthorized access of stored communications. However, courts have ruled that interception applies only to messages in transit and not to messages that have actually reached company computers. Therefore, the impact of the ECPA is to punish electronic monitoring only by third parties and not by employers. 26) B

A firm that secures employee consent to monitoring at the time of hire is immune from ECPA liability. 27) C

The "invasion of privacy" claim with which most people are familiar is one that developed through case law called intrusion into seclusion. This legal violation occurs when someone intentionally intrudes on the private affairs of another when the intrusion would be "highly offensive to a reasonable person." 28) A

Since the basis for finding an invasion of privacy is often the employee's legitimate and reasonable expectation of privacy, if an employee has actual notice, then there truly is no real expectation of privacy. 29) A

Only two states in the United States, Connecticut and Delaware, require employers to notify workers when they are being monitored. Increasingly, however, states are enacting laws to limit employer monitoring powers. 30) A

The European Union's General Data Protection Regulation (GDPR) provides that personal information cannot be collected or shared by companies without individuals' permission. Information about who is using the data and for what purpose it is being collected must be provided in a clear, easily understandable manner. 32) C

According to economist Antonio Argandona, respect for privacy would include issues relating to company secrets, espionage, and intelligence gathering. 33) A

Employee monitoring has crossed the threshold from computer use to body autonomy. Biotracking technology, such as Fitbits or Nike+ FuelBands, allow employers to record the number of steps that employees take in a day, their heart rate, what they eat and drink, how much sleep they get, and even their hormone levels. The information gathered from this technology often is incorporated into employee wellness programs. 34) C

Because technology allows us to work from almost anywhere on this planet, we are seldom out of the boundaries of our workplace. Our total accessibility creates new expectations, and therefore conflicts. 35) A

A challenge posed by the new technology accessible in the workplace is the facelessness that results from its use. When we do not get to know someone because we do not have to see that person in order to do our business, we often do not take into account the impact of our decisions on him or her. 36) D

Monitoring allows a manager to ensure effective, productive performance by preventing the loss of productivity to inappropriate technology use. 37) C

Monitoring allows employers to manage their workplaces to place workers in appropriate positions, to ensure compliance with affirmative action requirements, or to administer workplace benefits. 38) A

Where public safety is at risk, there is arguably a compelling public interest claim from a utilitarian perspective that may be sufficiently persuasive to outweigh any one individual's right to privacy or right to control information about oneself. 39) B

The Genetic Information Nondiscrimination Act (GINA) of 2008 prohibits the use of genetic information in making employment decisions; it restricts employers, employment agencies, labor organizations, and other covered entities from requesting, requiring, or purchasing genetic information. It also limits the disclosure of genetic information.

40) D

The Health Insurance Portability and Accountability Act (HIPAA) stipulates that employers cannot use "protected health information" in making employment decisions without prior consent. Protected health information includes all medical records or other individually identifiable health information. 41) D

The Genetic Information Non-Discrimination Act (GINA) of 2008 became effective in November 2009 and prohibits discriminatory treatment in employment based on genetic information. GINA presents interesting questions because it defines genetic information in a more broad sense than one might imagine. 42) A

Under GINA, an employer can collect genetic information in order to comply with the Family Medical Leave Act or to monitor the biological effects of toxic substances in the workplace. 43) A

Monitoring may arguably constrain effective performance since it can cause increased stress and pressure, negatively impacting performance and having the potential to cause physical disorders such as carpal tunnel syndrome. 44) B

A monitoring program that includes parameters such as no monitoring in private areas, no secret monitoring, monitoring limited to within the workplace, and prohibition of discrimination by employers based on off-work activities allow the employer to effectively and ethically supervise the work employees do, to protect against misuse of resources, and to have an appropriate mechanism by which to evaluate each worker's performance, thus respecting the legitimate business interest of the employer. 46) A

Workers are found to be more productive based on the psychological stimulus of being singled out, which makes them feel more important. In other words, merely knowing one is being studied might make one a better worker. This effect of employer monitoring is termed the "Hawthorne Effect." 47) C

By telling the employees which calls are being monitored, they may be sure to be on their best behavior during those calls. This effect of employer monitoring is termed the "Hawthorne Effect": Workers are found to be more productive based on the psychological stimulus of being singled out, which makes them feel more important. 48) D

Workers are found to be more productive based on the psychological stimulus of being singled out, which makes them feel more important. This effect of employer monitoring is termed the "Hawthorne Effect." Random, anonymous monitoring resolves these employers' concerns (but not those of the worker). 49) A

Though workers might be protected based on marital status, they are not necessarily protected against adverse action based on the identity of the person they married. For instance, some companies might have an antinepotism policy under which an employer refuses to hire or terminates a worker on the basis of the spouse's working at the same firm. 50) B

Laws that protect against discrimination based on marital status exist in just under half of the states. 51) D

Some companies might have a conflict-of-interest policy under which the employer refuses to hire or terminates a worker whose spouse works at a competing firm. 52) B

Most statutes or common law decisions provide for employer defenses for those rules that (a) are reasonably and rationally related to the employment activities of a particular employee, (b) constitute a "bona fide occupational requirement," meaning a rule that is reasonably related to that particular position, or (c) are necessary to avoid a conflict of interest or the appearance of conflict of interest. 53) A

The most public and publicized of these modifications was the adoption and implementation of the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism (USA PATRIOT) Act of 2001. The USA PATRIOT Act expanded states' rights with regard to Internet surveillance technology, including workplace surveillance, and amended the Electronic Communications Privacy Act. 54) C

The Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism (USA PATRIOT) Act of 2001grants access to sensitive data with only a court order rather than a judicial warrant and imposes or enhances civil and criminal penalties for knowingly or intentionally aiding terrorists. 55) B

Title II of the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism (USA PATRIOT) Act provides roving surveillance authority under the Foreign Intelligence Surveillance Act of 1978 (FISA) to track individuals. (FISA investigations are not subject to Fourth Amendment standards but are instead governed by the requirement that the search serve "a significant purpose.") 56) B

The Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism (USA PATRIOT) Act of 2001 expanded states' rights with regard to Internet surveillance technology, including workplace surveillance, and amended the Electronic Communications Privacy Act. 57) privacy rights

With the tremendous increase in computer technology in recent decades, calls for greater protection of privacy rights have increased. Privacy rights are the legal and ethical sources of protection for privacy in personal data. 58) reciprocal obligation

According to philosopher Patricia Werhane, for an individual to expect respect for her or his personal autonomy, that individual has a reciprocal obligation to respect the autonomy of others. 59) property rights

Private property rights depend on the existence and enforcement of a set of rules that define who has a right to undertake which activities on their own initiative and how the returns from those activities will be allocated. In other words, whether an individual has the exclusive right to her or his personal information depends on the existence and enforcement of a set of rules giving the individual that right. 60) third parties

The Electronic Communications Privacy Act of 1986 (ECPA) prohibits the "interception" or unauthorized access of stored communications. However, courts have ruled that "interception" applies only to messages in transit and not to messages that have actually reached company computers. Therefore, the impact of the ECPA is to punish electronic monitoring only by third parties and not by employers.

61) email monitoring

Email monitoring is defined as the maintenance and either periodic or random review of email communications of employees or others for a variety of business purposes. 62) Hawthorne effect

According to the Hawthorne effect, workers are found to be more productive based on the psychological stimulus of being singled out, which makes them feel more important. In other words, merely knowing one is being studied might make one a better worker. 63) liberty

Philosopher William Parent conceives the right to privacy more appropriately as a right to liberty and therefore seeks to determine the potential affront to liberty from the employer's actions. 64) lifestyle discrimination

New York's lifestyle discrimination statute prohibits employment decisions or actions based on four categories of off-duty activity: legal recreational activities, consumption of legal products, political activities, and membership in a union. 65) disability

In order to qualify as a disability, an impairment must substantially limit a major life activity. 66) Michigan

Compared to smoking, employment decisions on the basis of one's size and weight is handled in an entirely different manner by the states. Only one state (Michigan) and six U.S. cities ban discrimination on the basis of weight. In all other U.S. regions, employers are permitted to make employment decisions on the basis of weight, as long as those decisions do not violate the Americans with Disabilities Act (ADA). 67) Essay

Workplace privacy issues evoke an inherent conflict between what some may consider to be a fundamental right of the employer to protect its interests and the similarly grounded right of the employee to be free from wrongful intrusions into her or his personal affairs. This conflict can arise in the workplace environment through the regulation of personal activities or personal choices, or through various forms of monitoring. Some forms of monitoring, such as drug testing, may occur after a job offer has been made but even before the individual begins working. Other forms might also occur once the individual begins to work, such as electronic surveillance of e-mail. Similarly, contrasting utilitarian arguments can be offered on the ethics of monitoring employees. The employer can argue that the only way to manage the workplace effectively and efficiently is to maintain knowledge about and control over all that takes place within it. The employee can simultaneously contend that she or he will be most productive in a supportive environment based on trust, respect, and autonomy. In any case, the question of balance remains. It remains to be addressed whose rights should prevail or which consequences take precedent. 68) Essay

Two general and connected understandings of privacy can be found in the legal and philosophical literature on this topic: privacy as a right to be "left alone" within a personal zone of solitude, and privacy as the right to control information about oneself. It is valuable to consider the connection between these two senses of privacy. Certain decisions that we make about how we live our lives, as well as the control of personal information, play a crucial role in defining our own personal identity. Privacy is important because it serves to establish the boundary between individuals and thereby defines one's individuality. The right to control certain extremely personal decisions and information helps determine the kind of person we are and the person we become. To the degree that we value the inherent dignity of each individual and the right of each person to be treated with respect, we must recognize that certain personal decisions and information is rightfully the exclusive domain of the individual. Many people believe that a right to be left alone is much too broad to be recognized as a moral right. This has led some people to conclude that a better understanding focuses on privacy as involving the control of personal information. From this perspective, the clearest case of an invasion of privacy occurs when others come to know personal information about us, as when a stranger reads your e-mail or eavesdrops on a personal conversation. Yet, the claim that a right of privacy implies a right to control all personal information might also be too broad. There are many occasions when others, particularly within an employment context, can legitimately know or need to know even quite personal information about us. 69) Essay

The right to privacy is founded in the individual's fundamental, universal right to autonomy, in our right to make decisions about our personal existence without restriction. This right is restricted by a social contract in our culture that prevents us from infringing on someone else's right to her or his personal autonomy. Philosopher and academic Patricia Werhane describes this boundary as a "reciprocal obligation"; that is, for an individual to expect respect for her or his personal autonomy, that individual has a reciprocal obligation to respect the autonomy of others. 70) Essay

Ethicists Thomas Donaldson and Thomas Dunfee have developed an approach to ethical analysis that seeks to differentiate between those values that are fundamental across culture and theory ("hypernorms") and those values that are determined within "moral free space" and that are not hypernorms. Donaldson and Dunfee propose that we look to the convergence of religious, cultural, and philosophical beliefs around certain core principles as a clue to the identification of hypernorms. Donaldson and Dunfee include as examples of hypernorms freedom of speech, the right to personal freedom, the right to physical movement, and informed consent. Individual privacy is at the core of many of these basic minimal rights and is, in fact, a necessary prerequisite to many of them. Accordingly, the value of privacy to civilized society is as great as the value of the various hypernorms to civilized existence. Ultimately, the failure to protect privacy may lead to an inability to protect personal freedom and autonomy. 71) Essay

"Property" is an individual's life and all non-procreative derivatives of her or his life. Derivatives may include thoughts and ideas, as well as personal information. The concept of property rights involves a determination of who maintains control over tangibles and intangibles, including, therefore, personal information. Property rights relating to personal information thus define actions that individuals can take in relation to other individuals regarding their personal information. If one individual has a right to her or his personal information, someone else has a commensurate duty to observe that right. 72) Essay

Privacy can be legally protected in three ways: by the constitution (federal or state), by federal and/or state statutes, and by the common law. Common law refers to the body of law comprised of the decisions handed down by courts, rather than specified in any particular statutes or regulations. The Constitution's Fourth Amendment protection against an unreasonable search and seizure governs only the public-sector workplace because the Constitution applies only to state action. Therefore, unless the employer is the government or other representative of the state, the Constitution generally will not apply. Statutes offer little, if any, protection from workplace intrusions. The Electronic Communications Privacy Act of 1986 (ECPA) prohibits the "interception" or unauthorized access of stored communications. However, courts have ruled that "interception" applies only to messages in transit and not to messages that have actually reached company computers. Therefore, the impact of the ECPA is to punish electronic monitoring only by third parties and not by employers. Moreover, the ECPA allows interception where consent has been granted. Therefore, a firm that secures employee consent to monitoring at the time of hire is immune from ECPA liability. The "invasion of privacy" claim with which most people are familiar is one that developed through case law called "intrusion into seclusion." This legal violation occurs when someone intentionally intrudes on the private affairs of another when the intrusion would be "highly offensive to a reasonable person." As we begin to live more closely with technology, and the intrusions it allows, we begin to accept more and more intrusions in our lives as reasonable; as privacy invasions become more common, they begin to be closer to what is normal and expected. It may no longer be reasonable to be offended by intrusions into one's private life that used to be considered unacceptable. 73) Essay

Many recent court decisions with regard to monitoring specifically seem to depend on whether the worker had notice that the monitoring might occur. Since the basis for finding an invasion of privacy is often the employee's legitimate and reasonable expectation of privacy, if an employee has actual notice, then there truly is no real expectation of privacy. This conclusion was supported inK-Mart v. Trotti, where the court held that search of an employee's company-owned locker was unlawful invasion because the employee used his own lock. However, in a later landmark case,Smyth v. Pillsbury, Smyth sued after his manager read his e-mail, even though Pillsbury had a policy saying that e-mails would not be read. The court concluded, "we do not find a reasonable expectation of privacy in the contents of e-mail communications voluntarily made by an employee to his supervisor over the company e-mail system, notwithstanding any assurances that such communications would not be intercepted by management." The end result of Smyth, then, is to allow for monitoring even when a firm promises not to monitor. Evidence of the impact of this decision is the fact that only two states, Connecticut and Delaware, require employers to notify workers when they are being monitored.

74) Essay

Employee privacy is violated whenever (a) employers infringe upon personal decisions that are not relevant to the employment contract (whether the contract is implied or explicit); or (b) personal information that is not relevant to that contract is collected, stored, or used without the informed consent of the employee. Further, since consent plays a pivotal role in this understanding, the burden of proof rests with the employer to establish the relevancy of personal decisions and information at issue. 75) Essay

Economist Antonio Argandona contends that, if new technology is dependent on and has as its substance information and data, significant moral requirements should be imposed on that information. He suggests the following as necessary elements: Truthfulness and accuracy: The person providing the information must ensure that it is truthful and accurate, at least to a reasonable degree. Respect for privacy: The person receiving or accumulating information must take into account the ethical limits of individuals' (and organizations') privacy. This would include issues relating to company secrets, espionage, and intelligence gathering. Respect for property and safety rights: Areas of potential vulnerability, including network security, sabotage, theft of information and impersonation, are enhanced and must therefore be protected. Accountability: Technology allows for greater anonymity and distance, requiring a concurrent increased exigency for personal responsibility and accountability. 76) Essay

Technology allows for access to information that was never before possible. However, it is not always possible to determine whether the information has been accessed by someone or not. Access can take place unintentionally as well. Also, because technology allows us to work from almost anywhere on this planet, we are seldom out of the boundaries of our workplace. Continuous accessibility blurs the lines between our personal and professional lives. Another challenge posed by the new technology accessible in the workplace is the facelessness that results from its use. If we have to face someone as we make our decisions, we are more likely to care about the impact of that decision on that person. Conversely, when we don't get to know someone because we don't have to see that person in order to do our business, we often don't take into account the impact of our decisions on him or her. It is merely a name at the other end of an e-mail correspondence, rather than another human being's name. Given the ease and informality of electronic communications, we also often "say" (write, e-mail, and the like) things to each other that we would never say to someone's face, precisely because we do not have to consider the impact of what we are saying. We are more careless with our communications because they are easier to conduct—just hit a button and they are sent.

77) Essay

A firm chooses to monitor its employees and collect the information discussed above for numerous reasons. Employers need to manage their workplaces to place workers in appropriate positions, to ensure compliance with affirmative action requirements, or to administer workplace benefits. Monitoring also allows the manager to ensure effective, productive performance by preventing the loss of productivity to inappropriate technology use. Research evidences a rise in personal use of technology. Beyond the management of its human resources, monitoring offers an employer a method by which to protect its other resources. Employers use monitoring to protect proprietary information and to guard against theft, to protect their investment in equipment and bandwidth, and to protect against legal liability. 78) Essay

Drug testing is one area in which employers have a longer history of monitoring employees. The employer has a strong argument in favor of drug or other substance testing based on the law. Since the employer is often responsible for legal violations its employees committed in the course of their job, the employer's interest in retaining control over every aspect of the work environment increases. On the other hand, employees may argue that their drug usage is only relevant if it impacts their job performance. Until it does, the employer should have no basis for testing. Though drug testing may provide a productivity benefit for companies, such policies may introduce legal and ethical challenges for employers. The Americans with Disabilities Act prohibits employers from inquiring about an employee's use of prescription drugs unless the employer has a reasonable basis for believing that the worker poses a safety threat or is unable to do his or her job. Where public safety is at risk, there is arguably a compelling public interest claim from a utilitarian perspective that may be sufficiently persuasive to outweigh any one individual's right to privacy or right to control information about oneself. However, this is not clear for jobs in which public safety is not at risk. 79) Essay

Employers are limited in their collection of information through other various forms of testing, such as polygraphs or medical tests. Employers are constrained by a business necessity and relatedness standard or, in the case of polygraphs, by a requirement of reasonable suspicion. With regard to medical information specifically, employers' decisions are not only governed by the Americans with Disabilities Act but also restricted by the Health Insurance Portability and Accountability Act (HIPAA). HIPAA stipulates that employers cannot use "protected health information" in making employment decisions without prior consent. Protected health information includes all medical records or other individually identifiable health information. In recent years, polygraph and drug testing, physical and electronic surveillance, third-party background checks, and psychological testing have all been used as means to gain information about employees. One area that is sure to provide new questions about privacy is genetic testing. Genetic testing and screening, of both employees and consumers, is a new technology that will offer businesses a wealth of information about potential employees and customers. The Genetic Information Non-Discrimination Act (GINA) 2008 became effective in November 2009 and prohibits discriminatory treatment in employment based on genetic information. GINA presents interesting questions since it defines "genetic information" in a more broad sense than one might imagine. Under GINA, one's genetic information is not merely information about him, but also his family's medical history, including any disease or disorder, or genetic test results of a family member. The term "family member" includes a person's dependents and relatives all the way to the fourth degree of kinship. In addition, GINA mandates that employers be extremely careful in terms of how they gather and manage employee genetic information as they are subject to similar conditions to the Americans with Disabilities Act. GINA does provide for exceptions. For instance, an employer can collect genetic information in order to comply with the Family Medical Leave Act or to monitor the biological effects of toxic substances in the workplace. The employer may also gather publicly available genetic information, from public sources such as newspapers. Finally, though GINA contains a strict confidentiality provision, an employer may release genetic information about an employee under certain specific circumstances: 1. To the employee or member upon request; 2. To an occupational or other health researcher; 3. In response to a court order; 4. To a government official investigating compliance with this Act if the information is relevant to the investigation; 5. In connection with the employee's compliance with the certification provisions of the Family and Medical Leave Act of 1993 or such requirements under state family and medical leave laws; or 6. To a public health agency. 80) Essay

First, there is a concern that monitoring may create a suspicious and hostile workplace. By reducing the level of worker autonomy and respect, as well as workers' right to control their environment, the employer has neglected to consider the key stakeholder critical to business success in many ways—the worker. Another concern demonstrates the problem. Monitoring may arguably constrain effective performance since it can cause increased stress and pressure, negatively impacting performance and having the potential to cause physical disorders such as carpal tunnel syndrome. One study found monitored workers suffered more depression, extreme anxiety, severe fatigue or exhaustion, strain injuries, and neck problems than unmonitored workers. Stress might also result from a situation where workers do not have the opportunity to review and correct misinformation in the data collected. These elements will lead not only to an unhappy, disgruntled worker who perhaps will seek alternative employment but also to lower productivity and performance that will lead to higher costs and fewer returns to the employer. Finally, employees claim that monitoring is an inherent invasion of privacy that violates their fundamental human right to privacy. 81) Essay

Laws that protect against discrimination based on marital status exist in just under half of the states. However, though workers might be protected based on marital status, they are not necessarily protected against adverse action based on the identity of the person they married. For instance, some companies might have an anti-nepotism policy under which an employer refuses to hire or terminates a worker on the basis of the spouse's working at the same firm, or a conflictof-interest policy under which the employer refuses to hire or terminates a worker whose spouse works at a competing firm. 82) Essay

The events of September 11, 2001, have a major impact on privacy within the United States and on the employment environment in particular. The federal government has implemented widespread modifications to its patchwork structure of privacy protections since the terror attacks of September 11, 2001. In particular, proposals for the expansion of surveillance and information gathering authority were submitted and, to the chagrin of some civil rights attorneys and advocates, many were enacted. The most public and publicized of these modifications was the adoption and implementation of the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism (USA PATRIOT) Act of 2001. The USA PATRIOT Act expanded states' rights with regard to Internet surveillance technology, including workplace surveillance, and amended the Electronic Communications Privacy Act. The act also grants access to sensitive data with only a court order rather than a judicial warrant and imposes or enhances civil and criminal penalties for knowingly or intentionally aiding terrorists. In addition, the new disclosure regime increased the sharing of personal information between government agencies in order to ensure the greatest level of protection.

Student name:__________ TRUE/FALSE - Write 'T' if the statement is true and 'F' if the statement is false. 580) The “Four Ps” of marketing include product, price, promotion, and placement. ⊚ true ⊚ false 581)

While approaching an ethical issue in marketing, the utilitarian tradition would ask to what degree the participants are respected as free and autonomous agents rather than treated simply as means to the end of making a sale. ⊚ true ⊚ false

582)

A condition for respect requires that consent be not only voluntary, but also informed. ⊚ true ⊚ false

583)

The condition where lesser consumption leads to unhappiness is termed “affluenza.” ⊚ true ⊚ false

584)

Unsafe products do not further the utilitarian goal of maximizing overall happiness. ⊚ true ⊚ false

585)

A transaction is ethically legitimate as long as someone wants to buy something and someone else is willing to sell it. ⊚ true ⊚ false

586)

Externalities show that even if both parties to an exchange receive actual benefits from the exchange, other parties external to the exchange might be adversely affected. ⊚ true ⊚ false

587)

In a strict liability case, if it can be proved that a business was as careful as possible about its product or service, it is not held liable for the harm that results from its use. ⊚ true ⊚ false

588)

The implied warranty of merchantability holds that in selling a product a business implicitly offers assurances that the product is reasonably suitable for its purpose. ⊚ true ⊚ false

589)

Most courts allow a business to completely disclaim the implied warranty of merchantability. ⊚ true ⊚ false

590)

Under a contract model, the duties that a person owes are not merely those explicitly promised to another party, but also those that are implied. ⊚ true ⊚ false

591)

Negligence involves the ability to foresee the consequences of one’s acts and failing to take steps to avoid the likely harmful consequences. ⊚ true ⊚ false

592)

When consumers are injured by a product and no one is at fault, the legal doctrine of strict product liability holds manufacturers accountable. ⊚ true ⊚ false

593)

The utilitarian tradition in ethics would have the strongest objections to manipulation. ⊚ true ⊚ false

594)

Consumer vulnerability occurs when a person has an impaired ability to make an informed consent to the market exchange. ⊚ true ⊚ false

MULTIPLE CHOICE - Choose the one alternative that best completes the statement or answers the question. 595) Which of the following is a set of processes for creating, communicating, and delivering value to customers and for managing customer relationships in ways that benefit an organization and its stakeholders? A) procuring B) branding C) marketing D) copywriting 596)

Which of the following is one of the “Four Ps” of marketing? A) purpose B) planning C) promotion D) people

597)

The ________ ethical tradition would see a simple situation of an agreement for an exchange between two parties as upholding respect for individuals by treating them as autonomous agents capable of pursuing their own ends. A) role-based B) rights-based C) rules-based D) strategy-based

598)

The ________ ethical tradition would take an agreement between two parties as evidence that both are better off than they were prior to the exchange and thus conclude that overall happiness has been increased by any exchange freely entered into. A) utilitarian B) hedonic C) consequential D) deontological

599)

A simple situation in which two parties come together and freely agree to an exchange is only prima facie ethically legitimate because A) research studies prove that a simple exchange does not involve unethical situations. B) it involves the consent of both parties involved and leaves no room for unethical acts. C) certain conditions must be met before it can be concluded that autonomy has been respected and mutual benefit has been achieved. D) it rejects the assumption that individuals are capable of pursuing their own ends.

600)

Which of the following is true of the rights-based tradition while approaching an ethical issue in marketing? A) It asks to what degree the participants are respected as free and autonomous agents rather than treated simply as means to the end of making a sale. B) It focuses on the benefits and costs of each exchange. C) It attempts to find out about other values that are affected by an exchange. D) It focuses on knowing the degree to which a transaction provided actual as opposed to merely apparent benefits for each participant.

601)

While approaching an ethical issue in marketing, the utilitarian tradition would want to know A) the degree to which individuals freely participate in an exchange. B) the degree to which a transaction provided actual as opposed to merely apparent benefits. C) about other values that are affected by the exchange. D) about the personal characters of the parties that are involved in the exchange.

602)

603)

A consumer’s consent to purchase a product is not informed if that consumer is A) unwilling to listen to the product details from the salesperson. B) injured after using the product and filed a product liability suit. C) asked to buy the product without a warranty. D) being misled or deceived about the product.

According to empirical studies, greater consumption is likely to lead to unhappiness. This condition is called ________. A) affluenza B) caveat emptor C) caveat lector D) merchantability

604)

Identify a true statement about the legal doctrine of strict liability. A) It frees manufacturers from any kind of liability as soon as a product is sold to a consumer. B) It allows consumers to assume that products are safe for use. C) It is favored by business corporations in the United States. D) It holds a business accountable for paying damages whether or not it was at fault.

605)

Which of the following approaches holds that the only responsibility of a business is to provide a good or service at an agreed-upon price? A) the merchantability approach B) the implied warranty approach C) the caveat emptor approach D) the caveat venditor approach

606)

In selling a product, a business offers tacit assurances that the product is reasonably suitable for its purpose. The law refers to this as the A) doctrine of caveat emptor. B) implied warranty of merchantability. C) doctrine of caveat lector. D) implied warranty of productivity.

607)

608)

Identify a true statement about the implied warranty of merchantability. A) It assumes that every purchase involves the informed consent of a buyer. B) It shifts the burden of proof from producers to consumers. C) It allows a business to completely disown any promise or warranty. D) It holds that a business has a duty to ensure that its products will accomplish their purpose.

The ethics implicit within the ________ approach assumes that when consumers adequately understand products well enough, they can reasonably be expected to protect themselves. A) contract B) caveat venditor C) tort D) caveat lector

609)

The implied warranty of merchantability shifts the burden of proof from A) producers to consumers. B) producers to suppliers. C) consumers to producers. D) suppliers to consumers.

610)

Which of the following is the ethical basis for implied warranty of merchantability? A) Manufacturers would not sell a product if they had reason to believe that their product would harm consumers during normal use. B) Consumers would not consent to purchase a product if they had reason to believe that they would be harmed by it during normal use. C) Consumers understand products fully, and they are free to choose not to purchase certain things. D) A prudent business will never seek to limit its liability by explicitly disowning any promise or warranty.

611)

Unlike tort law, contract law states that A) the only duties that a person owes are those that have been explicitly promised to another party. B) one owes other people certain general duties, even if one has not voluntarily assumed them. C) no matter how careful a business is in its product, if harm results from use, the business is liable. D) the reasonable person standard can be interpreted in various ways.

612)

________, a concept of tort law, provides an avenue for consumers to hold producers responsible for their products. A) Extortion B) Negligence C) Malpractice D) Battery

613)

Tort law holds that A) the only duties that a person owes are those that have been explicitly promised to another party. B) manufacturers are accountable in cases where consumers are injured by products and no one is at fault. C) consumers need complex contracts to protect themselves from all harms that products might cause. D) people do not owe other people any general duties, if they have not voluntarily assumed them.

614)

Which of the following statements is true about negligence? A) It is not a central component of tort law. B) One can be negligent by doing something that one should not. C) One cannot be held negligent by failing to do something that one should have done. D) It excludes acts of both commission and omission.

615)

In the context of negligence, by applying the standard of ________, a person could escape liability by not actually thinking about the consequences of his or her acts. A) caveat emptor B) strict liability C) respondeat superior D) actual foresight

616)

Which of the following is the ethical perspective that underlies tort law? A) If it is unfair to hold businesses accountable for harms caused by their products, it is equally unfair to hold injured consumers accountable. B) Every purchase involves the informed consent of the buyer, and, therefore, it is assumed to be ethically legitimate. C) We all owe other people certain general duties, even if we have not explicitly and voluntarily assumed them. D) Consumers would not give their consent to a purchase if they had reason to believe that they would be harmed by it when used in a normal way.

617)

BuildWell Constructions Co. is in the process of building a road through a suburb. While building the road, the crew comes across a rocky promontory and decides to blast it irrespective of being aware of a nearby housing district. Flying debris from the blast hit a child playing in a nearby yard and cause a deep laceration on his face. Although BuildWell Constructions was responsible enough to take the usual precautions for such blasting, the child’s parents sue the company for the medical bills, as well as for the child’s distress and misery. Since BuildWell Constructions is held accountable in this scenario, which of the following is the legal approach to product safety that is exemplified here? A) caveat emptor B) normative myopia C) moral imagination D) strict liability

618)

Identify a true statement about strict product liability laws in the United States. A) They are highly favored by the business community. B) They hold that the government must pay consumers in situations where neither the producer nor the consumer is at fault. C) They hold a business responsible for any harm from product use, even if it is not the result of business negligence. D) They are similar to the strict liability standards adopted by the European Union.

619)

Society creates a strong incentive for businesses to produce safer goods and services by holding them responsible for any harm their products cause. This claim supports the A) strict product liability standard. B) actual foreseeability standard. C) reasonable person standard. D) consent and informed decision standard.

620)

Along with product safety, ________ is another area of marketing that has received significant legal and philosophical attention within business ethics. A) customer service B) distribution C) advertising D) manufacturing

621)

Manipulation focuses on ________. A) total control of direction or management B) deceiving a person C) taking total control over an individual’s actions D) guiding or directing the behavior of something

622)

A major element of marketing is ________, the attempt to influence a buyer to complete a purchase. A) sales promotion B) marketing automation C) lead nurturing D) attribution reporting

623)

Which of the following are important elements of product placement that seek to determine which audience is most likely to buy and which audience is mostly likely to be influenced by product promotion? A) lead management and marketing automation B) target marketing and marketing research C) pricing strategy and price mix D) sales pitch and sales promotion

624)

625)

The strongest objections to manipulation come from A) pragmatic ethics. B) virtue-based ethics. C) principle-based ethics. D) consequential ethics.

Which of the following statements about manipulation would a strong believer of the principle-based ethical tradition most likely support? A) Cases of paternalistic manipulation, in which someone is manipulated for their own good, are acceptable. B) Manipulation executed without deception is acceptable. C) Even unsuccessful manipulations are guilty of ethical wrong. D) The ethical consequence of manipulation depends on the personal characteristics of the manipulator.

626)

Marketing practices targeted at elderly individuals for goods, such as supplemental health insurance, and funerals, are subject to criticism because A) that population is vulnerable. B) interest gained on such investments are not highly profitable. C) they target the considered and rational desires of the consumers. D) they do not abide by the principles of welfare economics.

627)

In the context of ethical issues in advertising, which of the following is true of manipulation? A) Utilitarians would be inclined to think that manipulation increases overall happiness. B) It is mainly done to further the needs of those manipulated at the expense of the manipulator. C) It can undermine the very social practices that it is thought to promote as the reputation of sales is lowered. D) The principle-based tradition in ethics would have the least strong objections to manipulation.

628)

According to economist John Kenneth Galbraith, advertising and marketing were creating the very consumer demand that production then aimed to satisfy. The assertion that consumer demand relies upon what producers have to sell is termed A) the Hawthorne effect. B) the dependence effect. C) the reverse channel effect. D) the supplemental effect.

629)

Which of the following is an implication of the “dependence effect"? A) Advertising and marketing create consumer wants that result in supply being a function of demands. B) Advertising and marketing create consumer wants that support the entire economy. C) Consumer autonomy is being improved by advertising. D) Consumers are being manipulated by advertising.

630)

By creating consumer wants, advertising and other marketing practices violate A) rights-based ethical tradition. B) consumer autonomy. C) free market economy. D) consumer demand.

631)

Advertising distorts the economy by A) manipulating prices for promotion to gain a foothold in a market. B) preventing free market economy. C) internalizing market externalities. D) creating irrational and trivial consumer wants.

632)

A behavioral psychologist is most likely to claim that advertising A) cannot create non-autonomous behavior in consumers. B) cannot violate consumer autonomy by controlling consumer behavior. C) can control consumer behavior by providing them with all the relevant information. D) can control consumer behavior by controlling their choices.

633)

Consumer vulnerability occurs when A) a person has an impaired ability to make an informed consent to the market exchange. B) a person has access to too much information about a product and the market exchange process. C) the consumer is treated as an end in itself. D) there are too many manufacturers in the market.

634)

Identify an example of consumer vulnerability. A) Elderly people are susceptible to expensive health care bills. B) Alcoholics are susceptible to alcohol abuse. C) Children are susceptible to any bright, attractive items of no practical value. D) Single women walking alone at night are susceptible to sexual assault.

635)

Which of the following is true of general vulnerability? A) It occurs when a person has an impaired ability to make an informed consent to the market exchange. B) It occurs when a person is susceptible to some specific physical, psychological, or financial harm. C) It results from an unsatisfactory market exchange. D) It results from manufacturers’ inability to satisfy consumer desires.

636)

Consumers are vulnerable when they are not aware that they are subject to a marketing campaign. This type of campaign is called A) imminent marketing. B) word-of-mouth marketing. C) network marketing. D) undercover marketing.

637)

Stealth marketing occurs when A) consumers receive too much information about a product or service. B) consumers are subjected to directed commercial activity without their knowledge. C) consumers fail to properly respond to advertising. D) consumers understand the true marketing element of an interaction.

638)

Marketing experts consider stealth marketing extraordinarily effective because A) a consumer does not question the message as she might challenge a traditional advertising campaign. B) a consumer’s guard is not down while accepting a message. C) consumers do not see the communication as too personal and often tend to trust an advertisement or other marketing material much more than they would trust the communicator. D) consumers seek out the communicator’s vested interest.

639)

An employer is held liable for damages caused by an accident involving an employee driving the company car on company business. Identify the law underlying this decision. A) the doctrine of caveat emptor B) the doctrine of respondeat superior C) implied warranty of merchantability D) the doctrine of caveat lector

640)

UniCo—a multinational corporation that specializes in designing, developing, and selling consumer electronics—outsources manufacturing products to a third-world country company. Human rights activists have criticized UniCo for operating inhumane sweatshops at the manufacturing plants to gain profits. Although UniCo is not directly liable for the labor exploitation, it threatens to pull out its business from the contracted company if the laborers are not provided with dignified wages and good working conditions. Which of the following responsibilities did the company fulfill in this scenario? A) caveat emptor B) implied merchantability C) respondeat superior D) strict liability

FILL IN THE BLANK. Write the word or phrase that best completes each statement or answers the question. 641) ________ is an organizational function and a set of processes for creating, communicating, and delivering value to customers and for managing customer relationships in ways that benefit the organization and its stakeholders.

642)

While approaching an ethical issue in marketing, the ________ tradition would want to know the degree to which a transaction provided actual as opposed to merely apparent benefits.

643)

________ has received a great deal of attention in the medical ethics literature because patients are at a distinct informational disadvantage when dealing with health care professionals.

644)

An adequate ethical analysis of marketing must consider ________, those costs that are not integrated within the exchange of the buyer and the seller.

645)

According to the ________ approach, every purchase involves the informed consent of the buyer and therefore it is assumed to be ethically legitimate.

646)

In a(n) ________ case, no matter how careful the business is in its product or service, if harm results from use, the individual or business is liable.

647)

The ________ standard of tort law focuses on the sense of responsibility that involves liability or fault.

648)

Economist John Kenneth Galbraith claimed that advertising and marketing were creating the very consumer demand that production then aimed to satisfy. Dubbed the ________, this assertion held that consumer demand relied on what producers had to sell.

649)

________ occurs when the harm is other than the financial harm of an unsatisfactory market exchange.

650)

Marketing campaigns that are based on environments or activities where the subject is not aware that he or she is the target of a marketing campaign are included under ________ marketing.

ESSAY. Write your answer in the space provided or on a separate sheet of paper. 651) List out all the factors considered and the decisions made in the process of marketing.

652)

Identify the “Four Ps” of marketing.

653)

Explain the rights-based and the utilitarian perspectives on the situation of an exchange between two parties coming together freely.

654)

Summarize the three issues pertaining to marketing ethically.

655)

Outline the implication of the social contract tradition within business.

656)

Explain the contractual standards for product safety.

657)

Describe the ethical manifestations associated with a contractual standard of product safety.

658)

Outline the duties under a contract model, and the ethical perspective that underlies tort law.

659)

Explain the concept of negligence.

660)

Discuss the constraints of the concept of negligence and explain the reasonable person concept.

Outline how the “reasonable person” concept can be interpreted in different ways. How can it lead to one interpreting this concept normatively?

661)

662)

Discuss the claims made by the defenders of the strict product liability standard to justify strict product liability.

663)

Explain what the ethical and the unethical means of influencing others include. What is its impact in advertising?

664)

Explain the utilitarian perspective of manipulation.

665)

Discuss the ethical issues associated with advertising.

Answer Key Test name: chapter 8 1) TRUE

Four general categories—product, price, promotion, placement—are sometimes referred to as the “Four Ps” of marketing. 2) FALSE

While approaching an ethical issue in marketing, the rights-based ethical tradition would ask to what degree the participants are respected as free and autonomous agents rather than treated simply as means to the end of making a sale. 3) TRUE

A condition for respect requires that consent be not only voluntary, but also informed. 4) FALSE

Empirical studies provide evidence that suggests that greater consumption can lead to unhappiness, a condition called “affluenza.” 5) TRUE

Unsafe products do not further the utilitarian goal of maximizing overall happiness. 6) FALSE

Just because someone wants to buy something and someone else is willing to sell it does not mean that the transaction is ethically legitimate. 7) TRUE

Externalities show that even if both parties to an exchange receive actual benefits from the exchange, other parties external to the exchange might be adversely affected. 8) FALSE

In a strict liability case, no matter how careful the business is in its product or service, if harm results from use, the business is liable. 9) TRUE

The implied warranty of merchantability holds that in selling a product a business implicitly offers assurances that the product is reasonably suitable for its purpose. 10) FALSE

Most courts will not allow a business to completely disclaim the implied warranty of merchantability. 11) FALSE

Under a contract model, the only duties that a person owes are those that have been explicitly promised to another party. 12) TRUE

Negligence involves the ability to foresee the consequences of one’s acts and failing to take steps to avoid the likely harmful consequences. In many ways, negligence simply codifies two fundamental ethical precepts: “ought implies can” and “one ought not harm others.” 13) TRUE

There are cases in which consumers can be injured by a product and no one is at fault. The legal doctrine of strict product liability holds manufacturers accountable in such cases. 14) FALSE

The principle-based tradition in ethics would have the strongest objections to manipulation. 15) TRUE

Consumer vulnerability occurs when a person has an impaired ability to make an informed consent to the market exchange. 16) C

The American Marketing Association defines marketing in a way that also suggests that it is at the heart of business activity, “an organizational function and a set of processes for creating, communicating, and delivering value to customers and for managing customer relationships in ways that benefit the organization and its stakeholders.” 17) C

The four general categories—product, price, promotion, placement—are sometimes referred to as the “Four Ps” of marketing. 18) B

The rights-based ethical tradition would see a simple situation of an agreement for an exchange between two parties as upholding respect for individuals by treating them as autonomous agents capable of pursuing their own ends. 19) A

The utilitarian ethical tradition would take an agreement between two parties as evidence that both are better off than they were prior to the exchange and thus conclude that overall happiness has been increased by any exchange freely entered into. 20) C

The simple situation in which two parties come together and freely agree to an exchange is prima facie ethically legitimate. This assessment is only prima facie because, like all agreements, certain conditions must be met before we can conclude that autonomy has in fact been respected and mutual benefit has been achieved. 21) A

When approaching any ethical issue in marketing, the rights-based ethical tradition would ask to what degree the participants are respected as free and autonomous agents rather than treated simply as means to the end of making a sale. 22) B

When approaching any ethical issue in marketing, the utilitarian tradition would want to know the degree to which a transaction provided actual as opposed to merely apparent benefits. 23) D

A consumer’s consent to purchase a product is not informed if that consumer is being misled or deceived about the product. 24) A

Empirical studies provide evidence that suggests that greater consumption can lead to unhappiness, a condition called “affluenza.” 25) D

The legal doctrine of strict liability is ethically controversial exactly because it holds a business accountable for paying damages whether or not it was at fault. 26) C

The caveat emptor approach assumes that every purchase involves the informed consent of the buyer; therefore, it is assumed to be ethically legitimate. 27) B

Implied warranty of merchantability holds that in selling a product a business implicitly offers assurances that the product is reasonably suitable for its purpose. 28) D

Many businesses issue a disclaimer of liability (e.g., products are sold “as is"), or offer an expressed and limited warranty (e.g., the seller will replace the product but neither offers any other guarantees nor seeks to cap liability damages) to limit their liabilities by explicitly disowning any promise or warranty. 29) A

The ethics implicit within the contract approach assumes that when consumers adequately understand products well enough, they can reasonably be expected to protect themselves. But consumers don’t always understand products fully and they are not always free to choose not to purchase some things. 30) C

The implied warranty standard shifts the burden of proof from consumers to producers by allowing consumers to assume that products are safe for ordinary use. By bringing goods and services to the market, producers are implicitly promising that their products are safe under normal use. 31) B

By bringing goods and services to the market, producers were implicitly promising that their products were safe under normal use. The ethical basis for this decision is the assumption that consumers would not give their consent to a purchase if they had reason to believe that they would be harmed by it when used in a normal way. 32) A

Unlike tort law, contract law states that the only duties that a person owes are those that have been explicitly promised to another party. Otherwise, that person owes nothing to anyone. The ethical perspective that underlies tort law holds that one owes other people certain general duties, even if one has not explicitly and voluntarily assumed them. 33) B

Negligence, a concept from the area of law known as torts, provides a second avenue for consumers to hold producers responsible for their products. 34) B

The negligence standard of tort law focuses on the sense of responsibility that involves liability or fault. There are cases in which consumers can be injured by a product in which no negligence was involved. In such cases where no one was at fault, the question of accountability remains. The legal doctrine of strict product liability holds manufacturers accountable in such cases. 35) B

One can be negligent by doing something that one should not (e.g., speeding in a school zone). 36) D

Negligence involves having the ability to foresee the consequences of our acts and failing to take steps to avoid the likely harmful consequences. The standards of what can be foreseen, however, raise interesting ethical challenges. One standard would hold people liable only for those harms they actually foresaw occurring. But this standard of actual foresight is too narrow because it would imply that unthoughtful people cannot be negligent. By applying this standard, a person could escape liability by not actually thinking about the consequences of his or her acts. 37) C

The ethical perspective that underlies tort law holds that we all owe other people certain general duties, even if we have not explicitly and voluntarily assumed them. Specifically, I owe other people a general duty not to put them at unnecessary and avoidable risk. 38) D

Strict liability is a legal doctrine that holds an individual or business accountable for damages whether or not it was at fault. In a strict liability case, no matter how careful the business is in its product or service, if harm results from use, the individual or business is liable. 39) C

Strict product liability laws in the United States hold a business responsible for any harm from product use, even if it is not the result of business negligence. It raises unique ethical questions. Within the United States, calls to reform product liability laws, and in particular to ease or eliminate the strict product liability standard, have been common. 40) A

Defenders of the strict product liability standard claim that by holding businesses strictly liable for any harm their products cause, society creates a strong incentive for businesses to produce safer goods and services. 41) C

Along with product safety, advertising is a second area of marketing that has received significant legal and philosophical attention within business ethics. The goal of all marketing is the sale, the eventual exchange between seller and buyer. 42) D

To manipulate something is to guide or direct its behavior. Manipulation need not involve total control, and in fact it more likely suggests a process of subtle direction or management. 43) A

The goal of all marketing is the sale, the eventual exchange between seller and buyer. A major element of marketing is sales promotion, the attempt to influence the buyer to complete a purchase. 44) B

Target marketing and marketing research are two important elements of product placement, seeking to determine which audience is most likely to buy and which audience is mostly likely to be influenced by product promotion. 45) C

The strongest objections to manipulation come from principle-based ethics. This is because when a person manipulates someone, he or she treats him or her as a means to one’s own ends, as an object to be used rather than as an autonomous person in his or her own right. 46) C

The principle-based tradition in ethics would have the strongest objections to manipulation. Because the evil rests with the intention to use another as a means, even unsuccessful manipulations are guilty of this ethical wrong. 47) A

Marketing practices targeted at elderly individuals for goods, such as supplemental health insurance, and funerals, are subject to criticism because that segment of the population is vulnerable. 48) C

In general, because most manipulation is done to further the manipulator’s own ends at the expense of the manipulated, utilitarians would be inclined to think that manipulation lessens overall happiness. A general practice of manipulation, as critics claim often occurs in many sales practices, can undermine the very social practices (e.g., sales) that it is thought to promote as the reputation of sales is lowered. 49) B

In his book, The Affluent Society, economist John Kenneth Galbraith claimed that advertising and marketing were creating the very consumer demand that production then aimed to satisfy. Dubbed the “dependence effect,” this assertion held that consumer demand depended upon what producers had to sell. 50) D

One of the three implications of the “dependence effect” is that by creating consumer wants, advertising and other marketing practices violate consumer autonomy. Consumers who consider themselves free because they are able to purchase what they want are not in fact free if those wants are created by marketing. In short, consumers are being manipulated by advertising. 51) B

By creating consumer wants, advertising and other marketing practices violate consumer autonomy. Consumers who consider themselves free because they are able to purchase what they want are not in fact free if those wants are created by marketing. 52) D

Advertising and marketing tend to create irrational and trivial consumer wants and this distorts the entire economy. The “affluent” society of consumer products and creature comforts is in many ways worse off than so-called undeveloped economies because resources devoted to contrived, private consumer goods are therefore denied to more important public goods and consumer needs. 53) D

Psychological behaviorists and critics of subliminal advertising, for example, would claim that advertising can control consumer behavior by controlling their choices. But this is an empirical claim and the evidence suggests that it is false. 54) A

Consumer vulnerability occurs when a person has an impaired ability to make an informed consent to the market exchange. A vulnerable consumer lacks the intellectual capacities, psychological ability, or maturity to make informed and considered consumer judgments. 55) C

A vulnerable consumer lacks the intellectual capacities, psychological ability, or maturity to make informed and considered consumer judgments. Children would be the paradigmatic example of consumer vulnerability. 56) B

General vulnerability occurs when someone is susceptible to some specific physical, psychological, or financial harm. 57) D

Consumers are vulnerable when they are not aware that they are subject to a marketing campaign. This type of campaign is called stealth or undercover marketing and refers to those situations where we are subject to directed commercial activity without our knowledge.

58) B

Marketing experts consider stealth marketing extraordinarily effective because a consumer does not question the message as she might challenge a traditional advertising campaign. 60) B

The doctrine of respondeat superior, Latin for “let the master answer,” holds a principal (e.g., an employer) responsible for the actions of an agent (e.g., an employee) when that agent is acting in the ordinary course of his or her duties to the principal. 61) C

There is a legal parallel to the idea that a business should be held responsible for the actions of its suppliers. The doctrine of respondeat superior, Latin for “let the master answer,” holds a principal (e.g., an employer) responsible for the actions of an agent (e.g., an employee) when that agent is acting in the ordinary course of his or her duties to the principal. 62) Marketing

According to the American Marketing Association (AMA), marketing is an organizational function and a set of processes for creating, communicating, and delivering value to customers and for managing customer relationships in ways that benefit the organization and its stakeholders. 63) utilitarian

While approaching an ethical issue in marketing, the utilitarian tradition would want to know the degree to which a transaction provided actual as opposed to merely apparent benefits. 64) Informed consent

Informed consent has received a great deal of attention in the medical ethics literature because patients are at a distinct informational disadvantage when dealing with health care professionals. Similar disadvantages can occur in marketing situations. Outright deception and fraud clearly violate this condition and are unethical. 65) externalities

An adequate ethical analysis of marketing must consider externalities, those costs that are not integrated within the exchange between buyer and seller. 66) caveat emptor

In a strict liability case, no matter how careful the business is in its product or service, if harm results from use, the individual or business is liable. 68) negligence

The negligence standard of tort law focuses on the sense of responsibility that involves liability or fault. 69) dependence effect

In his 1958 book, The Affluent Society, economist John Kenneth Galbraith claimed that advertising and marketing were creating the very consumer demand that production then aimed to satisfy. Dubbed the dependence effect, this assertion held that consumer demand depended upon what producers had to sell. 70) General vulnerability

General vulnerability occurs when someone is susceptible to some specific physical, psychological, or financial harm. 71) stealth

We are each vulnerable when we are not aware that we are subject to a marketing campaign. This type of campaign is called stealth or undercover marketing and refers to those situations where we are subject to directed commercial activity without our knowledge. Stealth or undercover marketing includes marketing campaigns that are based on environments or activities where the subject is not aware that he or she is the target of a marketing campaign. 72) Essay

Even before a product is created, a producer might first consider who, if anyone, is interested in purchasing it. The product might then be redesigned or changed in light of what is learned about potential buyers from market research. Once the product is ready for market, the producer must decide on a price that will be mutually acceptable. At first glance, the minimal asking price should be the production cost plus some reasonable profit. But the producer might also consider who the buyers are and what they can afford, how price might influence future purchases, how the price might affect distributors and retailers, and what competitors are charging before settling on a price. The producer might also consider advertising the product to attract new potential purchasers and offer incentives to promote the product among buyers. The producer might also consider the lost production that results from the trip to the market and therefore consider hiring someone else, a salesperson, or delegating someone, a “retailer,” to handle the actual exchange itself. Producers might be more concerned with cash flow than profit and therefore be willing to ask a price that is below production costs. They might consider where and under what conditions the product is sold, and they might decide that the best chance for a sale will occur only among certain people. The producer might also consider issues of volume and price the product in such a way to ensure profit only after certain sales targets are met. The producer might also consider how such factors as price, convenience, reliability, and service might contribute to sustaining an ongoing relationship with the customer. Finally, throughout this entire process the producer might conduct market research to gather information and use that information in production, pricing, promotion, and placement decisions. 73) Essay

All of the factors considered and each decision made throughout this process are elements of marketing. What, how, why, and under what conditions is something produced? What price is acceptable, reasonable, fair? How can the product be promoted to support, enhance, and maintain sales? Where, when, and under what conditions should the product be placed in the marketplace? These four general categories—product, price, promotion, placement—are sometimes referred to as the “Four Ps” of marketing. 74) Essay

The simple situation in which two parties come together and freely agree to an exchange is prima facie ethically legitimate. The rights-based ethical tradition would see it as upholding respect for individuals by treating them as autonomous agents capable of pursuing their own ends. This tradition presumes that each individual will abide by fundamental principles. The utilitarian ethical tradition would take the two parties’ agreement as evidence that both are better off than they were prior to the exchange and thus conclude that overall happiness has been increased. This assessment is only prima facie because, like all agreements, certain conditions must be met before we can conclude that autonomy has in fact been respected and mutual benefit has been achieved. 75) Essay

It will be helpful to keep three concerns in mind as one approaches any ethical issue in marketing: The rights-based ethical tradition would ask to what degree the participants are respected as free and autonomous agents rather than treated simply as means to the end of making a sale. It is not always easy to determine if someone is being treated with respect in marketing situations. As a first approximation there are two conditions. First, the person must freely consent to the transaction. A second condition for respect requires that the consent be not only voluntary, but also informed. The utilitarian tradition would want to know the degree to which the transaction provided actual as opposed to merely apparent benefits. This looks to the alleged benefits obtained through market exchanges. Economics textbooks commonly assume that consumers benefit whenever they make an exchange in the marketplace. But this assumption won’t bear up under close scrutiny. Both parties to the marketing exchange are also not benefited in situations in which one party is injured by the product. Unsafe products do not further the utilitarian goal of maximizing overall happiness. It would also be the case that consumers are not benefited if the desires that they seek to satisfy in the market are somehow contrived or manipulated by the seller. Every ethical tradition would also wonder what other values might be at stake in the transaction. Such primary social values as fairness, justice, health, and safety are just some of the values that can be jeopardized by some marketing practices. An adequate ethical analysis of marketing must ask who else might be affected by the transaction. One must also ask what the true costs of production are. An adequate ethical analysis of marketing must consider externalities, those costs that are not integrated within the exchange between buyer and seller. Externalities show that even if both parties to the exchange receive actual benefits from the exchange, other parties external to the exchange might be adversely affected. 76) Essay

The social contract tradition in ethics holds that all ethical responsibilities can be understood with this contractual model, and that the only duties we have are those that we have freely taken on within a social contract. Individual contracts and promises are the basis of ethical duties. The implication of this within the business sphere is that unless a seller explicitly warrants a product as safe, unless, in other words, the seller promises otherwise, buyers are liable for any harm they suffer. 77) Essay

The caveat emptor approach understands marketing on a simple model of a contractual exchange between a buyer and seller. This perspective assumes that every purchase involves the informed consent of the buyer and therefore it is assumed to be ethically legitimate. Buyers have the responsibility to look out for their own interests and protect their own safety when buying a product. From this perspective, business has only the responsibility to provide a good or service at an agreed-upon price. The social contract tradition in ethics holds that all ethical responsibilities can be understood with this contractual model, and that the only duties we have are those that we have freely taken on within a social contract. Individual contracts and promises are the basis of ethical duties. The implication of this within the business sphere is that unless a seller explicitly warrants a product as safe, unless, in other words, the seller promises otherwise, buyers are liable for any harm they suffer. In the United States, courts moved away from this caveat emptor approach and recognized an implicit promise, or implied warranty, that accompanies any product that is marketed. What the law refers to as the implied warranty of merchantability holds that in selling a product a business implicitly offers assurances that the product is reasonably suitable for its purpose. Even without a verbal or written promise or contract, the law holds that business has a duty to ensure that its products will accomplish their purpose. In effect, the implied warranty standard shifts the burden of proof from consumers to producers by allowing consumers to assume that products were safe for ordinary use. 78) Essay

Even the simple model of a contractual market exchange would place ethical constraints on the seller. Sellers have a duty not to coerce, defraud, or deceive buyers, for example. Consumers who were injured by a product that was deceptively or fraudulently marketed would have legal recourse to recover damages from the seller. In the United States, courts moved away from this caveat emptor approach and recognized an implicit promise, or implied warranty, that accompanies any product that is marketed. What the law refers to as the “implied warranty of merchantability” holds that in selling a product a business implicitly offers assurances that the product is reasonably suitable for its purpose. Even without a verbal or written promise or contract, the law holds that business has a duty to ensure that its products will accomplish their purpose. The ethics implicit within the contract approach assumes that consumers adequately understand products well enough that they can reasonably be expected to protect themselves. But consumers don’t always understand products fully and they are not always free to choose not to purchase some things. In effect, the implied warranty standard shifts the burden of proof from consumers to producers by allowing consumers to assume that products were safe for ordinary use. By bringing goods and services to the market, producers were implicitly promising that their products were safe under normal use. The ethical basis for this decision is the assumption that consumers would not give their consent to a purchase if they had reason to believe that they would be harmed by it when used in a normal way. If law will hold business liable for implicit promises, most businesses will seek to limit its liability by explicitly disowning any promise or warranty. Thus, many businesses will issue a disclaimer of liability (e.g., products are sold “as is"), or offer an expressed and limited warranty (e.g., the seller will replace the product but neither offers any other guarantees nor seeks to cap liability damages). Most courts will not allow a business to completely disclaim the implied warranty of merchantability. 79) Essay

Under a contract model, the only duties that a person owes are those that have been explicitly promised to another party. Otherwise, one owes nothing to anyone. The ethical perspective that underlies tort law holds that we all owe other people certain general duties, even if we have not explicitly and voluntarily assumed them. 80) Essay

Negligence is a central component of tort law. As the word suggests, negligence involves a type of ethical neglect, specifically neglecting one’s duty to exercise reasonable care not to harm other people. Many of the ethical and legal issues surrounding manufacturers’ responsibility for products can be understood as the attempt to specify what constitutes negligence in their design, production, and sale. Negligence can be characterized as a failure to exercise reasonable care or ordinary vigilance that results in an injury to another. In many ways, negligence simply codifies two fundamental ethical precepts: “ought implies can” (we cannot reasonably oblige someone to do what they cannot do) and “one ought not harm others.” People have done an ethical wrong when they cause harm to others in ways that they can reasonably be expected to have avoided. Negligence includes acts of both commission and omission. One can be negligent by doing something that one ought not or by failing to do something that one ought to have done. Negligence involves the ability to foresee the consequences of our acts and failing to take steps to avoid the likely harmful consequences. 81) Essay

The standards of foreseeability raise interesting challenges. One standard would hold people liable only for those harms they actually foresaw occurring (actual foreseeability). Thus, for example, a company would be acting negligently if it brought to market a car that it knew, on the basis of engineering tests, had a fuel tank that would puncture and explode during crashes at speeds below 30 miles per hour. But this standard would also imply that unthoughtful people cannot be negligent, since one escapes liability by not actually thinking about the consequences of one’s acts. “I never thought about that” would be an adequate defense if we used this standard of negligence. Yet this surely is not an ethically adequate excuse for harming innocent people. A preferable standard would require people to avoid harms that, even if they haven’t actually thought about, they should have thought about had they been reasonable. This “reasonable person” standard is the one most often used in legal cases and seems to better capture the ethical goals of the very concept of negligence. People are expected to act reasonably and are held liable when they are not. 82) Essay

We expect people will act in ways that would be normal or average. A “reasonable” person does what we could expect the ordinary, average person to do. But the average person doesn’t always read, or understand, warning labels or terms of service. The average person standard when applied to consumers might exempt too many consumers from responsibility for their own acts. Especially when applied to producers, the average person standard sets the bar too low. We can expect more from a person who designs, manufacturers, and sells a product than average, especially if the product is intended to an adolescent or teen consumer. These factors lead many to interpret the reasonable person standard as a standard of thoughtful, reflective, and judicious decision making. The problem with this, of course, is that we might be asking more of average consumers than they are capable of giving. Particularly if we think that vulnerable consumers deserve greater protection from harm, we might conclude that this sense of reasonable is too stringent a standard to be applied to consumer behavior. On the other hand, given the fact that producers do have more expertise than the average person, this stronger standard seems more appropriate when applied to producers than to consumers. 83) Essay

Critics single out the strict product liability standard as especially unfair to business because it holds business responsible for harms that were not the result of business negligence. The rationale often used to justify strict product liability is problematic. Defenders of the strict product liability standard, including juries who decide in favor of injured consumers, often reply with two major claims. First, by holding business strictly liable for any harm their products cause, society creates a strong incentive for business to produce safer goods and services. Second, given that someone has to be accountable for the costs of injuries, holding business liable allocates the costs to the party best able to bear the financial burden. 84) Essay

There are ethically good and bad ways for influencing others. Among the ethically commendable ways to influence another are persuading, asking, informing, and advising. Unethical means of influence would include threats, coercion, deception, manipulation, and lying. Unfortunately, all too often sales and advertising practices employ deceptive or manipulative means of influence or are aimed at audiences that are susceptible to manipulation or deception. 85) Essay

The utilitarian tradition would offer a conditional critique of manipulation, depending on the consequences. According to this tradition, there can be cases of paternalistic manipulation, in which someone is manipulated for their own good. But even in such cases, unforeseen harms can occur. Manipulation tends to erode bonds of trust and respect between persons. It can erode one’s self-confidence and hinder the development of responsible choice among those manipulated. In general, because most manipulation is done to further the manipulator’s own ends at the expense of the manipulated, utilitarians would be inclined to think that manipulation lessens overall happiness. 86) Essay

Advertising provides information for market exchanges and therefore contributes to market efficiency and to overall happiness. Advertising information also contributes to the information necessary for autonomous individuals to make informed choices. But each of these rationales assumes that the information is true and accurate. The principle-based tradition in ethics would have the strongest objections to manipulation. Manipulation is a clear example of disrespect for persons since it bypasses their own rational decision making. Because the evil rests with the intention to use another as a means, even unsuccessful manipulations are guilty of this ethical wrong. The utilitarian tradition would offer a more conditional critique of manipulation, depending on the consequences. There surely can be cases of paternalistic manipulation, in which someone is manipulated for their own good. But even in such cases, unforeseen harms can occur. In general, because most manipulation is done to further the manipulator’s own ends at the expense of the manipulated, utilitarians would be inclined to think that manipulation lessens overall happiness. A particularly egregious form of manipulation occurs when vulnerable people are targeted for abuse. Cigarette advertising aimed at children and marketing practices targeted at elderly populations for such goods and services as insurance, nursing homes etc. are examples.

Student name:__________ TRUE/FALSE - Write 'T' if the statement is true and 'F' if the statement is false. 666) The economic development approach to the natural world suggests that sustainable business and sustainable economic development seek to create new ways of doing business in which business success is measured in terms of economic, ethical, and environmental sustainability. ⊚ true ⊚ false

667)

According to the conservation movement, the natural world was valued as a resource, providing humans with both direct and indirect benefits. ⊚ true ⊚ false

668)

The conservation movement advocated a restrained and prudent approach to the natural world. ⊚ true ⊚ false

669)

According to the conservation movement, businesses that use animals for food, entertainment, or pets violate the ethical rights of these animals. ⊚ true ⊚ false

670)

A market-based approach to resolving environmental challenges denies that environmental problems are economic problems that deserve economic solutions. ⊚ true ⊚ false

671)

According to William Baxter, there is an optimal level of pollution that would best serve society’s interests. ⊚ true ⊚ false From a strict market economic perspective, resources are “finite” and have to be used efficiently to gain maximum economic benefits. ⊚ true ⊚ false

672)

673)

According to the market approach to resolving environmental challenges, standards like corporate average fuel economy that address pollution and pollution-related disease are considered mainly because of people’s reliance on market solutions to sustain the environment. ⊚ true ⊚ false

674)

Internalizing external costs and assigning property rights to unowned goods are responses to market failures. ⊚ true ⊚ false

675)

People learn about market failures and thereby prevent harms in the future only by sacrificing a first generation as a means of gaining information. ⊚ true ⊚ false

676)

Before the introduction of the environmental legislation in the 1970s, the primary legal avenue open for addressing environmental concerns was contractual law. ⊚ true ⊚ false

677)

From an environmental standpoint, the regulatory model assumes that economic growth is environmentally and ethically benign. ⊚ true ⊚ false

678)

The three pillars of sustainability include an organization’s competitive sustainability. ⊚ true ⊚ false

679)

The circular flow model differentiates natural resources from the other factors of production. ⊚ true ⊚ false

680)

The ultimate goal of biomimicry is to eliminate waste altogether rather than reducing it. ⊚ true ⊚ false

MULTIPLE CHOICE - Choose the one alternative that best completes the statement or answers the question. 681) The triple bottom line approach involves measuring business success of sustainable businesses and sustainable economic development in terms of A) economic, legal, and environmental sustainability. B) economic, ethical, and environmental sustainability. C) economic, legal, and competitive sustainability. D) legal, competitive, and environmental sustainability. 682)

Knowing what the future must be, creative businesses look backward to the present and determine what must be done to arrive at that future. This process is known as A) backward integration. B) forecasting. C) forward integration. D) backcasting.

683)

Which of the following is true of the conservation movement? A) It advocated that the natural world should not be used as a capital resource. B) It considered natural resources to be able to provide an inexhaustible supply of material. C) It recommended a restrained and prudent approach to the natural world. D) It argued against the natural world being used to provide indirect benefits.

684)

Identify a true statement about the conservation movement. A) It considered natural resources to be able to provide an inexhaustible supply of material. B) It argued that the natural world is available only for the exploitation of human beings. C) It argued that the natural world was valued as a resource, providing humans with both direct benefits and indirect benefits. D) It believed that the natural world does not have the productive capacity to produce long-term income.

685)

Reminiscent of the ________ tradition, a view supporting animal rights suggests that some animals have the cognitive capacity to possess a conscious life of their own and people have a duty not to treat these animals as mere objects and means to their own ends. A) Kantian B) virtue ethic C) neoclassical D) social web

686)

According to the market-based approach, environmental problems A) are caused by conservationists. B) are caused by the inexhaustible supply of resources. C) deserve economic solutions. D) need to be solved through corporate social responsibility.

687)

Which of the following is involved in environmental problems according to the marketbased approach to resolving environmental challenges? A) lack of knowledge of producing renewable resources B) inability of businesses to produce and sell limited resources C) limited use of appropriate substitutes for limited resources D) allocation and distribution of limited resources

688)

Which of the following environmental legislations was enacted in the United States in the 1970s? A) the Humane Slaughter Act B) the Wilderness Act C) the Federal Coal Mine Health and Safety Act D) the Federal Water Pollution Act

689)

William Baxter argued that A) there is an optimal level of pollution that can be achieved through competitive markets. B) the natural world is still valued as a resource, providing humans with both direct benefits and indirect benefits. C) there is a legal solution for every economic problem. D) all resources can be replaced by substitutes.

690)

In economic terms, all resources A) are infinite because they can be replaced by substitutes. B) are distributed fairly by the government. C) can be made available everywhere. D) are distributed efficiently in the market.

691)

In economic terms, resources that are not being used to satisfy consumer demand A) are being conserved. B) are being wasted. C) can be used to preserve the environment. D) can be used for animal welfare.

692)

Market failure occurs when A) no markets exist to create a price for important social goods. B) manufacturers use substitutes for certain resources. C) businesses conform to regulatory requirements. D) no economic solutions are used to address environmental problems.

693)

Market failure can lead to serious environmental harm by A) creating a price for important social goods. B) making no distinction between individual decisions and group consequences. C) eliminating all kinds of externalities in the economic exchange system. D) internalizing external costs.

694)

Which of the following is a reason for the inadequacy in ad hoc attempts—internalizing external costs and assigning property rights to unowned goods such as wild species—to repair market failures? A) the backcasting problem B) the fungibility problem C) the biomimicry problem D) the first-generation problem

695)

Markets can work to prevent harm only through information supplied by the existence of market failures. This is better known as the A) biomimicry effect. B) backcasting problem. C) first-generation problem. D) primary market effect.

696)

Which of the following legal avenues was primarily used for addressing environmental concerns before the environmental legislation was enacted in the 1970s? A) tort law B) contract law C) commercial law D) criminal law

697)

Identify a true statement about the environmental legislation enacted in the 1970s. A) It overestimated the influence that businesses can have in establishing a law. B) It focused mainly on providing compensation after the occurrence of pollution or any other environmental harm. C) It shifted the burden from those threatened with harm to those who would cause the harm. D) It primarily addressed environmental concerns using tort law.

698)

Established by the U.S. Energy Policy Conservation Act of 1975, ________ is the salesweighted average fuel economy, expressed in miles per gallon (mpg), of a manufacturer’s fleet of passenger cars or light trucks. A) mean fuel economy (MFE) B) corporate average fuel economy (CAFE) C) adjusted average fuel economy (AAFE) D) graduated fuel efficiency (GFE)

699)

Which of the following is a problem associated with the regulatory approach to environmental challenges? A) The regulatory model assumes that economic growth is environmentally and ethically benign. B) If people rely on the law to protect the environment, environmental protection will extend beyond the law. C) Business passively responds to consumer desires, and consumers are unaffected by the messages that business conveys. D) National regulations are the only means to effectively address international environmental challenges.

700)

Which of the following is true about the concept of sustainable development and sustainable business practice? A) It suggests a radically new vision for integrating financial and environmental goals, compared with the growth model that preceded it. B) According to this concept, only individuals who can prove that they had been harmed by pollution can raise legal challenges. C) According to this concept, any harm to the environment can be adequately compensated. D) It focuses only on the costs that businesses incur in pursuing environmental goals.

701)

The three goals of sustainable development that include economic, environmental, and ethical sustainability are referred to as the A) tripartite goals. B) three pillars of sustainability. C) three-pronged charter. D) shoulders of sustainability.

702)

Which of the following was charged with developing recommendations for paths toward economic and social development that would not achieve short-term economic growth at the expense of long-term environmental and economic sustainability? A) the Bluewash Commission B) the Binding Commission C) the Barentsburg Commission D) the Brundtland Commission

703)

Which of the following is true of the Brundtland Commission? A) It was named after the place in Norway where the summit was conducted for the first time. B) It was charged with developing recommendations for paths toward economic and social development at the expense of underdeveloped and developing countries. C) It defined sustainable development as development that meets the needs of the present without compromising the ability of future generations to meet their own needs. D) It criticized the report from the United Nations’ World Commission on Environment and Development published in 1987 .

704)

Which of the following models explains the nature of economic transactions in terms of a flow of resources from businesses to households and back again? A) the circular flow model B) the triple bottom line model C) the pyramidal flow model D) the neoclassical model

705)

Which of the following is true of the circular flow model? A) It differentiates natural resources from the other factors of production. B) It suggests that to keep up with the economy, the population must grow. C) It treats economic growth as both the solution to all social ills and also as boundless. D) It argues that the economy cannot grow indefinitely.

706)

The possibility that the economy cannot grow indefinitely is simply not part of the A) three pillars of sustainability approach. B) circular flow model. C) triple bottom line approach. D) bilinear model.

707)

According to economist Herman Daly, neoclassical economics, with its emphasis on economic growth as the goal of economic policy, will inevitably fail to meet sustainability challenges A) if it suggests that the population of the world needs to be controlled. B) unless it recognizes that the economy is but a subsystem within earth’s biosphere. C) unless it recognizes that resources are infinite. D) if it focuses on recycling and reusing the by-products of the production process.

708)

According to the ________ law of thermodynamics (the conservation of matter/energy), neither matter nor energy can truly be “created,” but can only be transferred from one form to another. A) first B) second C) third D) fourth

709)

Over the long term, resources and energy cannot be used, nor waste produced, at rates at which the biosphere cannot replace or absorb them without jeopardizing its ability to sustain life. These are what Herman Daly calls the A) “economic limitations.” B) “backcasting effect.” C) “biophysical limits to growth.” D) “un-expandable boundaries.”

710)

Identify a true statement about the circular flow model. A) It differentiates natural sources from other factors of production. B) It does not explain the origin of resources. C) It does not treat economic growth as a solution to all social ills. D) It highlights the possibility that the economy cannot grow indefinitely.

711)

Identify a true statement about Herman Daly’s model of the economy as a subset of the biosphere. A) It does not differentiate natural resources from other factors of production. B) It treats economic growth both as the solution to all social ills and also as boundless. C) It recognizes that wastes are produced at each stage of economic activity. D) It treats natural resources as an undifferentiated and unexplained factor of production emerging from households.

712)

One of the attributes of sustainability is that it A) reduces competitive advantage. B) cannot be used in the long term. C) is a good risk management strategy. D) can lead to huge expenses.

“Doing more with less” has been an environmental guideline for decades. This can be achieved through the first principle of sustainability known as A) eco-diversity. B) eco-efficiency. C) the cradle-to-cradle responsibility. D) the take-make-waste model.

713)

714)

715)

“Closed-loop” production seeks to A) integrate what is presently waste back into production. B) reduce waste rather than eliminating it totally. C) double the existing productivity from one-half the resource use. D) dispose waste with minimal damage to the environment.

In an ideal situation, the waste of one firm becomes the resource of another, and such synergies can create eco-industrial parks. This principle is often referred to as A) biomimicry. B) eco-efficiency. C) open-loop production. D) bioinspiration.

716)

Business takes resources, makes products out of them, and discards whatever is left over. This approach is known as A) cradle-to-grave approach. B) take-make-waste. C) open-loop production. D) closed-loop production.

717)

Which of the following holds that a business is responsible for the entire life of its products, including the ultimate disposal even after the sale? A) the cradle-to-grave model B) the take-make-waste approach C) the cradle-to-cradle model D) the eco-efficiency principle

718)

Identify the sustainability model that would hold a business liable for groundwater contamination caused by its products even years after they had been buried in a landfill. A) the bioinspiration model B) the open-loop production model C) the take-make-waste model D) the cradle-to-grave model

719)

According to the cradle-to-cradle model, a business should A) take resources, make products out of them, and discard whatever is left over. B) incorporate the end results of its products back into the productive cycle. C) find effective ways to dispose waste with minimal damage to the environment. D) double its existing productivity from one-half the resource use.

720)

Which of the following is true of a service-based economy? A) A service-based economy tends to consumers’ demands for clothes cleaning, floor covering, illumination, entertainment, and so forth. B) A service-based economy interprets consumer demand as a demand for washing machines, carpets, lights, consumer electronics, and so forth. C) A service-based economy weakens the production efficiencies. D) A service-based economy increases material and energy costs significantly.

721)

Introduced at the Rio Earth Summit in 1992, the concept of ________ is a way business can contribute to sustainability by reducing resource usage in its production cycle. A) categorical imperative B) eco-efficiency C) average fuel economy D) insider trading

722)

An often-overlooked aspect of advertising is its A) pricing function. B) planning function. C) educational function. D) legal function.

723)

________ is the practice of promoting a product by misleading consumers about the environmentally beneficial aspects of the product. A) Greenwashing B) Redlining C) Biomimicry D) Backcasting Labeling products with such terms as “environmentally friendly,” “natural,” “eco,” “energy efficient,” “biodegradable,” and the like can help promote products that have little or no environmental benefits. This practice is known as A) greenskinning. B) redlining. C) gentrification. D) greenwashing.

724)

725)

________ refers to the growing marketing practice of taking back one’s products after their useful life. A) Rebranding B) Reverse channels C) Disintermediation D) Vertical channels

726)

In the context of green marketing, ________ provides strong incentives for redesigning products in ways that make it easier to reuse and recycle. A) take-back legislation B) hypernorms C) due process D) categorical imperative

FILL IN THE BLANK. Write the word or phrase that best completes each statement or answers the question. 727) The Natural Step challenges businesses to imagine what a sustainable future must hold. From that vision, creative businesses then look backward to the present and determine what must be done to arrive at that future. This is called ________. 728)

The ________ movement made the case that business had good reasons for conserving natural resources, reasons that paralleled the rationale to conserve financial resources.

729)

In economic terms, all resources are ________, that is, they can be replaced by substitutes, and in this sense resources are infinite.

730)

Before the environmental legislation was enacted during the 1970s, the primary legal avenue open for addressing environmental concerns was ________ law.

731)

The concept of ________ can be traced to a 1987 report from the United Nations’ World Commission on Environment and Development (WCED), more commonly known as the Brundtland Commission.

732)

The ________ model treats economic growth as both the solution to all social ills and also as boundless.

733)

While the regulatory and compliance model tends to interpret environmental responsibilities as constraints upon business, the ________ model is more forward looking and may present business with greater opportunities than burdens.

734)

The marketing of products on the basis of their environmentally friendly nature is called ________ marketing.

735)

________ is the practice of promoting a product by misleading consumers about the environmentally beneficial aspects of the product.

736)

The term ________ refers to the growing marketing practice of taking back one’s products after their useful life.

ESSAY. Write your answer in the space provided or on a separate sheet of paper. 737) Explain how business understands the opportunities available in the age of sustainability.

738)

Elaborate on the conservation movement.

739)

Discuss the view of the free-market approach on resource conservation.

740)

What is an optimal level of pollution?

741)

Discuss the challenges associated with the efficient market approach to environmental responsibilities.

742)

What do defenders of the market approach to environmental responsibilities state about the ability of economic markets to achieve a sound environmental policy? Discuss if their responses are environmentally adequate.

743)

List the various laws related to governmental regulation of the environment. Describe the method of addressing environmental concerns prior to the establishment of laws.

744)

Describe the challenges associated with the regulatory approach to environmental concerns.

745)

Why was the Brundtland Commission formed?

Describe Herman Daly’s concepts of sustainable development and the “circular flow model.”

746)

747)

Explain Herman Daly’s economic system model, also known as the sustainable model.

748)

Briefly describe the reasons supporting the practice of sustainability within businesses.

749)

What are the general principles that will guide the movement of businesses toward sustainability?

750)

Explain, with an example, how eco-efficiency can be implemented on an individual and a business scale.

751)

Explain the concepts of eco-efficiency, biomimicry, and cradle-to-cradle responsibility.

Answer Key Test name: chapter 9 1) FALSE

Sustainable business and sustainable economic development seek to create new ways of doing business in which business success is measured in terms of economic, ethical, and environmental sustainability, often called the triple bottom line approach. 2) TRUE

According to the conservation movement, the natural world was valued as a resource, providing humans with both direct benefits (air, water, and food) and indirect benefits (the goods and services produced by business). 3) TRUE

The conservation movement, the first phase of modern environmentalism, advocated a restrained and prudent approach to the natural world. 4) TRUE

Some animals have the cognitive capacity to possess a conscious life of their own. The Kantian ethical tradition asserts that we have a duty not to treat these animals as mere objects and means to our own ends. Businesses that use animals for food, entertainment, or pets violate the ethical rights of these animals. 5) FALSE

A market-based approach to resolving environmental challenges contends that environmental problems are economic problems that deserve economic solutions. 6) TRUE

From a strict market economic perspective, resources are “infinite.” As the supply of any resources decreases, the price increases, thereby providing a strong incentive to supply more or provide a less costly substitute. In economic terms, all resources are “fungible.” They can be replaced by substitutes, and in this sense resources are infinite. 8) FALSE

The market approach to resolving environmental challenges holds that a number of alternative policies like corporate average fuel economy standards that can address pollution and pollutionrelated disease would never be considered if we relied only on market solutions to sustain the environment. 9) TRUE

Internalizing external costs and assigning property rights to unowned goods such as wild species are two responses to market failures. 10) TRUE

People learn about market failures and thereby prevent harms in the future only by sacrificing a first generation as a means of gaining information. When public policy involves irreplaceable public goods such as endangered species, rare wilderness areas, and public health and safety, such a reactionary strategy is ill advised. 11) FALSE

Before the environmental legislation was enacted during the 1970s, the primary legal avenue open for addressing environmental concerns was tort law. 12) TRUE

From an environmental standpoint, the regulatory model assumes that economic growth is environmentally and ethically benign. Regulations establish side constraints on business’s pursuit of profits and, as long as they remain within those constraints, accept as ethically legitimate whatever road to profitability management chooses. 13) FALSE

The three goals of economic, environmental, and ethical sustainability are often referred to as the three pillars of sustainability. 14) FALSE

The circular flow model explains the nature of economic transactions in terms of a flow of resources from businesses to households and back again. It does not differentiate natural resources from the other factors of production. 15) TRUE

The ultimate goal of biomimicry is to eliminate waste altogether rather than reducing it. 16) B

Backcasting examines what the future will be when people emerge through the Natural Step’s funnel. Knowing what the future must be, creative businesses then look backward to the present and determine what must be done to arrive at that future. 18) C

The conservation movement, the first phase of modern environmentalism, advocated a restrained and prudent approach to the natural world. 19) C

The conservation movement argued that the natural world was valued as a resource, providing humans with both direct benefits and indirect benefits. 20) A

An approach supporting animal rights argues that at least some animals have the cognitive capacity to possess a conscious life of their own. Reminiscent of the Kantian ethical tradition, this view asserts that we have a duty not to treat these animals as mere objects and means to our own ends. 21) C

Defenders of the market approach contend that environmental problems are economic problems that deserve economic solutions. 22) D

Defenders of the market-based approach contend that environmental problems are economic problems that deserve economic solutions. Fundamentally, environmental problems involve the allocation and distribution of limited resources. 23) D

Much of the most significant environmental legislation in the United States, and in other countries, was enacted during the 1970s. In the United States, the Clean Air Act of 1970 (amended and renewed in 1977), the Federal Water Pollution Act of 1972 (amended and renewed as the Clean Water Act of 1977), and the Endangered Species Act of 1973 were part of this national consensus for addressing environmental problems. 24) A

William Baxter argued that there is an optimal level of pollution that would best serve society’s interests. This optimal level is best attained, according to Baxter, by leaving it to a competitive market. 25) A

In economic terms, all resources can be replaced by substitutes, and in this sense resources are infinite. 26) B

In economic terms, all resources are “fungible.” They can be replaced by substitutes, and in this sense resources are infinite. Resources that are not being used to satisfy consumer demand are being wasted. 27) A

Market failure occurs when no markets exist to create a price for important social goods. Endangered species, scenic vistas, rare plants and animals, and biodiversity are just some environmental goods that typically are not traded on open markets. 28) B

Market failures can lead to serious environmental harm if no distinction is made between individual decisions and group consequences. We can miss important ethical and policy questions if we leave policy decisions solely to the outcome of individual decisions. 29) D

Internalizing external costs and assigning property rights to unowned goods such as wild species are two responses to market failures. But there are good reasons for thinking that such ad hoc attempts to repair market failures are environmentally inadequate. One important reason is what has been called the first-generation problem. That is, we learn about market failures and thereby prevent harms in the future only by sacrificing the “first generation” as a means of gaining this information. 30) C

Markets can work to prevent harm only through information supplied by the existence of market failures. This is known as the first-generation problem. 31) A

Much of the most significant environmental legislation in the United States was enacted during the 1970s. Before this legislation was enacted, the primary legal avenue open for addressing environmental concerns was tort law.

32) C

The environmental regulation enacted during the 1970s established standards that effectively shifted the burden from those threatened with harm to those who would cause the harm. 33) B

Established by the U.S. Energy Policy Conservation Act of 1975, corporate average fuel economy (CAFE) is the sales-weighted average fuel economy, expressed in miles per gallon (mpg), of a manufacturer’s fleet of passenger cars or light trucks. The U.S. federal government establishes CAFE standards as a means of increasing fuel efficiency of automobiles. 34) A

The most troubling problem from an environmental standpoint is that the regulatory model assumes that economic growth is environmentally and ethically benign. 35) A

The concept of sustainable development and sustainable business practice suggests a radically new vision for integrating financial and environmental goals, compared to the growth model that preceded it. 36) B

The three goals of economic, environmental, and ethical sustainability are often referred to as the three pillars of sustainability. 37) D

The Brundtland Commission was charged with developing recommendations for paths toward economic and social development that would not achieve short-term economic growth at the expense of long-term environmental and economic sustainability. 38) C

The Brundtland Commission offered what has become the standard definition of sustainable development. Sustainable development is development that meets the needs of the present without compromising the ability of future generations to meet their own needs. 39) A

An observation of the circular flow model is that it treats economic growth as both the solution to all social ills and also as boundless. 41) B

An observation about the circular flow model is that it treats economic growth as both the solution to all social ills and also as boundless. To keep up with population growth, the economy must grow. To provide for a higher standard of living, the economy must grow. To alleviate poverty, hunger, and disease, the economy must grow. The possibility that the economy cannot grow indefinitely is simply not part of this model. 42) B

Daly argues that neoclassical economics, with its emphasis on economic growth as the goal of economic policy, will inevitably fail to meet these challenges unless it recognizes that the economy is but a subsystem within earth’s biosphere. 43) A

The sustainable model recognizes that the economy exists within a finite biosphere that encompasses a band around the earth that is little more than a few miles wide. From the first law of thermodynamics (the conservation of matter/energy), we recognize that neither matter nor energy can truly be “created,” but can only be transferred from one form to another. 44) C

Over the long term, resources and energy cannot be used, nor waste produced, at rates at which the biosphere cannot replace or absorb them without jeopardizing its ability to sustain (human) life. These are what Daly calls the “biophysical limits to growth.” 45) B

One aspect of the circular flow model that is worth noting is that it does not differentiate natural resources from the other factors of production. This model does not explain the origin of resources. 46) C

Herman Daly’s model of the economy as a subset of the biosphere recognizes that wastes are produced at each stage of economic activity, and these wastes are dumped back into the biosphere. 47) C

Sustainability is a good risk management strategy . Refusing to move toward sustainability offers many downsides that innovative firms avoid.

48) B

The first principle of sustainability is sometimes known as eco-efficiency. Eco-efficiency has long been a part of the environmental movement. “Doing more with less” has been an environmental guideline for decades. Some estimates suggest that with present technologies alone, business could readily achieve at least a fourfold increase in efficiency and perhaps as much as a tenfold increase. 49) A

In an ideal situation, the waste of one firm becomes the resource of another, and such synergies can create eco-industrial parks. Just as biological processes such as photosynthesis cycle the “waste” of one activity into the resource of another, this principle is often referred to as biomimicry. 50) A

“Closed-loop” production seeks to integrate what is presently waste back into production. In an ideal situation, the waste of one firm becomes the resource of another, and such synergies can create eco-industrial parks. Just as biological processes such as photosynthesis cycle the “waste” of one activity into the resource of another, this principle is often referred to as biomimicry. 51) B

The evolution of business strategy toward biomimicry can be understood along a continuum. The earliest phase has been described as “take-make-waste.” Business takes resources, makes products out of them, and discards whatever is left over. 52) A

The “cradle to grave” or “life-cycle” model holds that a business is responsible for the entire life of its products, including the ultimate disposal even after the sale. 53) D

Cradle-to-grave or life-cycle responsibility holds that a business is responsible for the entire life of its products, including the ultimate disposal even after the sale. Thus, for example, a cradle-tograve model would hold a business liable for groundwater contamination caused by its products even years after they had been buried in a landfill. 54) B

Cradle-to-cradle responsibility holds that a business should be responsible for incorporating the end results of its products back into the productive cycle. 55) A

A service-based economy interprets consumer demand as a demand for services—for clothes cleaning, floor covering, illumination, entertainment, cool air, transportation, word processing, and so forth. 56) B

Introduced at the Rio Earth Summit in 1992, the concept of eco-efficiency is a way business can contribute to sustainability by reducing resource usage in its production cycle. 57) C

An often-overlooked aspect of advertising is its educational function. Consumers learn from advertising, and marketers have a responsibility as educators. Helping consumers learn the value of sustainable products, helping them become sustainable consumers, is an important role for sustainable marketing. 58) A

“Greenwashing” is the practice of promoting a product by misleading consumers about the environmentally beneficial aspects of the product. Labeling products with such terms as “environmentally friendly,” “natural,” “eco,” “energy efficient,” “biodegradable,” and the like can help promote products that have little or no environmental benefits. 59) D

“Reverse channels” refers to the growing marketing practice of taking back one’s products after their useful life. 61) A

In the context of green marketing, take-back legislation provides strong incentives for redesigning products in ways that make it easier to reuse and recycle. 62) backcasting

The Natural Step challenges businesses to imagine what a sustainable future must hold. From that vision, creative businesses then look backward to the present and determine what must be done to arrive at that future. This is called backcasting. 63) conservation

Conservationists or the supporters of the conservation movement, the first phase of modern environmentalism, made the case that business had good reasons for conserving natural resources, reasons that paralleled the rationale to conserve financial resources. 64) fungible

In economic terms, all resources are “fungible.” They can be replaced by substitutes, and in this sense resources are infinite. 65) tort

The circular flow model treats economic growth as both the solution to all social ills and also as boundless. 68) sustainability

While the regulatory and compliance model tends to interpret environmental responsibilities as constraints upon business, the sustainability model is more forward looking and may present business with greater opportunities than burdens. 69) green

Sustainable or green marketing is the marketing of products on the basis of their environmentally friendly nature. 70) Greenwashing

Greenwashing is the practice of promoting a product by misleading consumers about the environmentally beneficial aspects of the product. 71) reverse channels

The term reverse channels refers to the growing marketing practice of taking back one’s products after their useful life. 72) Essay

The environmental research and consulting group The Natural Step uses an image of a funnel, with two converging lines, to help business understand the opportunities available in the age of sustainability. The resources necessary to sustain life are on a downward slope. While there is disagreement about the angle of the slope, there is widespread consensus that available resources are in decline. The second line represents aggregate worldwide demand, accounting for both population growth and the increasing demand of consumerist lifestyles. Barring an environmental catastrophe, many but not all industries will emerge through the narrowing funnel into an era of sustainable living. 73) Essay

By the late 19th century, humans came to recognize the self-interested reasons for protecting the natural environment. The conservation movement, the first phase of modern environmentalism, advocated a restrained and prudent approach to the natural world. From this perspective, the natural world was still valued as a resource, providing humans with both direct benefits (air, water, and food) and indirect benefits (the goods and services produced by business). Conservationists argued against the exploitation of natural resources as if they could provide an inexhaustible supply of material. They made the case that business had good reasons for conserving natural resources, reasons that paralleled the rationale to conserve financial resources. The natural world, like capital, had the productive capacity to produce long-term income but only if managed and used prudently. Besides the self-interested reasons to protect human life and health, the natural environment is essential and valuable for many other reasons. Often, these other values conflict with the more direct instrumental value that comes from treating the natural world as a resource. The beauty and grandeur of the natural world provide great aesthetic and inspirational value. Many people view the natural world as a manifestation of religious and spiritual values. Parts of the natural world can have symbolic value, historical value, and such diverse psychological values as serenity and exhilaration. These values can clearly conflict with the use of the earth itself as a resource to physically, as opposed to spiritually, sustain those who live on it. 74) Essay

The free market provides an answer for resource conservation. From a strict market economic perspective, resources are “infinite.” Julian Simon, for example, has argued that resources should not be viewed as material objects but simply as a means to our ends. History has shown that human ingenuity and incentive have always found substitutes for any shortages. As the supply of any resources decreases, the price increases, thereby providing a strong incentive to supply more or provide a less costly substitute. In economic terms, all resources are “fungible.” They can be replaced by substitutes, and in this sense resources are infinite. Resources that are not being used to satisfy consumer demand are being wasted. 75) Essay

In his well-known book People or Penguins: The Case for Optimal Pollution, William Baxter argued that there is an optimal level of pollution that would best serve society’s interests. This optimal level is best attained, according to Baxter, by leaving it to a competitive market. Denying that there is any “natural” or objective standard for clean air or water (as this view would deny there is an objective state of perfect health), Baxter begins with a goal of “safe” air and water quality and translates this goal to a matter of balancing risks and benefits. A more reasonable approach is to aim for air and water quality that is safe enough to breathe and drink without costing too much. This balance, the “optimal level of pollution,” can be achieved through competitive markets. 76) Essay

A variety of market failures involving environmental issues point to the inadequacy of market solutions. One example is the existence of externalities, the textbook example of which is environmental pollution. Since the “costs” of such things as air pollution, groundwater contamination and depletion, soil erosion, and nuclear waste disposal are typically borne by parties “external” to the economic exchange (e.g., people downwind, neighbors, and future generations), free-market exchanges cannot guarantee optimal results. A second type of market failure occurs when no markets exist to create a price for important social goods. Endangered species, scenic vistas, rare plants and animals, and biodiversity are just some environmental goods that typically are not traded on open markets. Public goods such as clean air and ocean fisheries also have no established market price. With no established exchange value, the market approach cannot even pretend to achieve its own goals of efficiently meeting consumer demand. Markets alone fail to guarantee that such important public goods are preserved and protected. A third way in which market failures can lead to serious environmental harm involves a distinction between individual decisions and group consequences. We can miss important ethical and policy questions if we leave policy decisions solely to the outcome of individual decisions. Because these are important ethical questions and they remain unasked from within market transactions, we must conclude that markets are incomplete (at best) in their approach to the overall social good. Internalizing external costs and assigning property rights to unowned goods such as wild species are two responses to market failures. But there are good reasons for thinking that such ad hoc attempts to repair market failures are environmentally inadequate. One important reason is what has been called the first-generation problem. Markets can work to prevent harm only through information supplied by the existence of market failures. That is, we learn about market failures and thereby prevent harms in the future only by sacrificing the “first generation” as a means of gaining this information. When public policy involves irreplaceable public goods such as endangered species, rare wilderness areas, and public health and safety, such a reactionary strategy is ill advised.

77) Essay

Defenders of a narrow economic view of corporate social responsibility have responses to the challenges associated with market failures. Internalizing external costs and assigning property rights to unowned goods such as wild species are two responses to market failures. But there are good reasons for thinking that such ad hoc attempts to repair market failures are environmentally inadequate. One important reason is what has been called the first-generation problem. Markets can work to prevent harm only through information supplied by the existence of market failures. Only when fish populations in the North Atlantic collapsed, for example, did we learn that free and open competition among the world’s fishing industry for unowned public goods failed to prevent the decimation of cod, swordfish, Atlantic salmon, and lobster populations. That is, we learn about market failures and thereby prevent harms in the future only by sacrificing the “first generation” as a means of gaining this information. When public policy involves irreplaceable public goods such as endangered species, rare wilderness areas, and public health and safety, such a reactionary strategy is ill advised. 78) Essay

Compared with unregulated markets, governmental regulations were seen as a better way to respond to environmental problems. Much of the most significant environmental legislation in the United States was enacted during the 1970s. The Clean Air Act of 1970 (amended and renewed in 1977), Federal Water Pollution Act of 1972 (amended and renewed as the Clean Water Act of 1977), and the Endangered Species Act of 1973 were part of this national consensus for addressing environmental problems. Each law was originally enacted by a Democratic Congress and signed into law by a Republican president. These laws share a common approach to environmental issues. Before this legislation was enacted, the primary legal avenue open for addressing environmental concerns was tort law. Only individuals who could prove that they had been harmed by pollution could raise legal challenges to air and water pollution. That legal approach placed the burden on the person who was harmed and, at best, offered compensation for the harm only after the fact. Except for the incentive provided by the threat of compensation, U.S. policy did little to prevent the pollution in the first place. Absent any proof of negligence, public policy was content to let the market decide environmental policy. Because endangered species themselves had no legal standing, direct harm to plant and animal life was of no legal concern and previous policies did little to prevent harm to plant and animal life. 79) Essay

Several problems suggest that the regulatory approach to environmental concerns will prove inadequate over the long term. First, it underestimates the influence that business can have in establishing the law. The Corporate Automotive Fuel Efficiency (CAFE) standards provide a good example of how this can occur. A reasonable account of this law suggests that the public very clearly expressed a political goal of improving air quality by improving automobile fuel efficiency goals (and thereby reducing automobile emissions). However, the automobile industry was able to use its lobbying influence to exempt light trucks and SUVs from these standards. Second, this approach also underestimates the ability of business to influence consumer choice. To conclude that business fulfills its environmental responsibility when it responds to the environmental demands of consumers is to underestimate the role that business can play in shaping public opinion. The best example would be the advertising industry. Assuming that business is not going to stop advertising its products or lobbying government, this model of corporate environmental responsibility is likely to prove inadequate for protecting the natural environment. Further, if we rely on the law to protect the environment, environmental protection will extend only as far as the law extends. Yet, most environmental issues, pollution problems especially, do not respect legal jurisdictions. Similarly, national regulations will be ineffective for international environmental challenges. Finally, and perhaps most troubling from an environmental standpoint, this regulatory model assumes that economic growth is environmentally and ethically benign. Regulations establish side constraints on business’s pursuit of profits and, as long as they remain within those constraints, accept as ethically legitimate whatever road to profitability management chooses. 80) Essay

The concept of sustainable development can be traced to a 1987 report from the United Nations’ World Commission on Environment and Development (WCED), more commonly known as the Brundtland Commission, named for its chair Gro Harlem Brundtland. The commission was charged with developing recommendations for paths toward economic and social development that would not achieve short-term economic growth at the expense of long-term environmental and economic sustainability. The Brundtland Commission offered what has become the standard definition of sustainable development. According to the commission, “sustainable development is development that meets the needs of the present without compromising the ability of future generations to meet their own needs.” 81) Essay

Economist Herman Daly has been among the leading thinkers who have advocated an innovative approach to economic theory based on the concept of sustainable development. Daly makes a convincing case for an understanding of economic development that transcends the more common standard of economic growth. Unless we make significant changes in our understanding of economic activity, unless quite literally we change the way we do business, we will fail to meet some very basic ethical and environmental obligations. According to Daly, we need a major paradigm shift in how we understand economic activity. We can begin with the standard understanding of economic activity and economic growth found in almost every economics textbook. What is sometimes called the “circular flow model” explains the nature of economic transactions in terms of a flow of resources from businesses to households and back again. Two aspects of this circular flow model are worth noting. First, it does not differentiate natural resources from the other factors of production. This model does not explain the origin of resources. They are simply owned by households from which they, like labor, capital, and entrepreneurial skill, can be sold to business. Services can be provided in many ways and by substituting different factors of production. In Simon’s terms, resources can therefore be treated as “infinite.” A second observation is that this model treats economic growth as both the solution to all social ills and also as boundless. To keep up with population growth, the economy must grow. To provide for a higher standard of living, the economy must grow. To alleviate poverty, hunger, and disease, the economy must grow. The possibility that the economy cannot grow indefinitely is simply not part of this model. 82) Essay

First, the sustainable model recognizes that the economy exists within a finite biosphere that encompasses a band around the earth that is little more than a few miles wide. From the first law of thermodynamics (the conservation of matter/energy), we recognize that neither matter nor energy can truly be “created,” but can only be transferred from one form to another. Second, energy is lost at every stage of economic activity. Consistent with the second law of thermodynamics (entropy increased within a closed system), the amount of usable energy decreases over time. “Waste energy” is continuously leaving the economic system, and thus new low-entropy energy must constantly flow into the system. Third, this model no longer treats natural resources as an undifferentiated and unexplained factor of production emerging from households. Finally, it recognizes that wastes are produced at each stage of economic activity and these wastes are dumped back into the biosphere. 83) Essay

First, sustainability is a prudent long-term strategy. Business will need to adopt sustainable practices to ensure long-term survival. Firms that fail to adapt to the converging lines of decreasing availability of resources and increasing demand risk their own survival. Second, the huge unmet market potential among the world’s developing economies can only be met in sustainable ways. Enormous business opportunities exist in serving the billions of people who need, and are demanding, economic goods and services. The base of the economic pyramid represents the largest and fastest-growing economic market in human history. Yet, the sheer size of these markets alone makes it impossible to meet this demand with the environmentally damaging industrial practices. It is obvious that new sustainable technologies and products will be required to meet this demand. Third, significant cost savings can be achieved through sustainable practices. Business stands to save significant costs in moves toward eco-efficiency. Savings on energy use and materials will reduce not only environmental wastes but spending wastes as well. Minimizing wastes makes sense on financial grounds as well as on environmental grounds. Fourth, competitive advantages exist for sustainable businesses. Firms that are ahead of the sustainability curve will both have an advantage serving environmentally conscious consumers and enjoy a competitive advantage attracting workers who will take pride and satisfaction in working for progressive firms. Finally, sustainability is a good risk management strategy. Refusing to move toward sustainability offers many downsides that innovative firms will avoid. Avoiding future government regulation is one obvious benefit. Avoiding legal liability for unsustainable products is another potential benefit. Consumer boycotts of unsustainable firms are also a risk to be avoided. 84) Essay

The precise implications of sustainability will differ for specific firms and industries, but three general principles will guide the move toward sustainability. Firms and industries must become more efficient in using natural resources, they should model their entire production process on biological processes, and they should emphasize the production of services rather than products. 85) Essay

“Doing more with less” has been an environmental guideline for decades. On an individual scale, it is environmentally better to ride a bike than to ride in a bus, to ride in a fuel-cell or hybridpowered bus than in a diesel bus, to ride in a bus than to drive a personal automobile, and to drive a hybrid car than an SUV. Likewise, business firms can improve energy and materials efficiency in such things as lighting, building design, product design, and distribution channels. 86) Essay

Eco-efficiency has long been a part of the environmental movement. “Doing more with less” has been an environmental guideline for decades. Some estimates suggest that with present technologies alone, business could readily achieve at least a fourfold increase in efficiency and perhaps as much as a tenfold increase. Consider that a fourfold increase, called “Factor Four” in the sustainability literature, would make it possible to achieve double productivity from one-half the resource use. Just as biological processes such as photosynthesis cycle the “waste” of one activity into the resource of another, this principle is often referred to as biomimicry. The ultimate goal of biomimicry is to eliminate waste altogether rather than reducing it. If we truly mimic biological processes, the end result of one process (e.g., leaves and oxygen produced by photosynthesis) is ultimately reused as the productive resources (e.g., soil and water) of another process (plant growth) with only solar energy added. The evolution of business strategy toward biomimicry can be understood along a continuum. The earliest phase has been described as “take-make-waste.” Business takes resources, makes products out of them, and discards whatever is left over. A second phase envisions business taking responsibility for its products from “cradle to grave.” Sometimes referred to as “life-cycle” responsibility, this approach has already found its way into both industrial and regulatory thinking. Cradle-to-grave, or life cycle, responsibility holds that a business is responsible for the entire life of its products, including the ultimate disposal even after the sale. Cradle-to-cradle responsibility extends this idea even further and holds that a business should be responsible for incorporating the end results of its products back into the productive cycle. This responsibility, in turn, would create incentives to redesign products so that they could be recycled efficiently and easily.

Student name:__________ TRUE/FALSE - Write 'T' if the statement is true and 'F' if the statement is false. 752) Financial analysts rely on gatekeepers but are not gatekeepers themselves. ⊚ true ⊚ false 753)

The most basic ethical issue facing professional gatekeepers and intermediaries in business contexts involves conflicts of interest. ⊚ true ⊚ false

754)

A large boost in share price increases a firm’s equity leverage for external expansion. ⊚ true ⊚ false

755)

The Sarbanes-Oxley Act is intended to provide protection where oversight did not previously exist. ⊚ true ⊚ false

756)

While the Sarbanes-Oxley Act is an internal mechanism to ensure ethical corporate governance, the Committee of Sponsoring Organizations (COSO) is an external mechanism. ⊚ true ⊚ false

757)

Risk assessment provides assessment capabilities to uncover vulnerabilities of a firm. ⊚ true ⊚ false

758)

Risk assessment and ongoing monitoring are elements that comprise the control structure of the Sarbanes-Oxley Act. ⊚ true ⊚ false

759)

COSO is one of the first efforts to address corporate culture in a quasi-regulatory framework in recognition of its significant impact on the satisfaction of organizational objectives. ⊚ true ⊚ false

760)

The COSO controls and the Sarbanes-Oxley requirements must be supported by a culture of accountability. ⊚ true ⊚ false

761)

A board member has the right to use information obtained through her or his position as a board member for personal gain. ⊚ true ⊚ false

762)

A board has no right to prohibit actions to protect the long-term sustainability of a firm. ⊚ true ⊚ false

763)

Since audits are paid for by audited clients, there is an inherent conflict found in that financial arrangement. ⊚ true ⊚ false

764)

In terms of ethical theory, lofty compensation packages have a utilitarian function when they act as incentives for executives to produce greater overall results. ⊚ true ⊚ false

765)

One of the fastest ways to increase stock price is through layoffs of employees. ⊚ true ⊚ false

766)

Insider trading is considered patently fair and ethical because it encourages employees to work hard to get access to company information. ⊚ true ⊚ false

MULTIPLE CHOICE - Choose the one alternative that best completes the statement or answers the question. 767) Gatekeepers are professionals who A) decide the board members of a company. B) hold private inside information about a company. C) serve as intermediaries between market participants. D) are employed by the government to ensure fair marketplace activities. 768)

________ rely on gatekeepers for fair and effective functioning of economic markets. A) Bankers B) Politicians C) District attorneys D) Financial analysts

769)

The function of auditors as gatekeepers is to A) verify a company’s financial statements so that investors’ decisions are free from fraud and deception. B) evaluate a company’s financial prospects or creditworthiness, so that banks and investors can make informed decisions. C) ensure that decisions and transactions conform to the law. D) function as intermediaries between a company’s stockholders and its executives.

770)

Identify the role of analysts as “gatekeepers.” A) They function as intermediaries between a company’s stockholders and its executives. B) They verify a company’s financial statements. C) They ensure that decisions and transactions conform to the law. D) They evaluate a company’s financial prospects or creditworthiness.

771)

Which of the following is the role of attorneys as “gatekeepers"? A) verifying a company’s financial statements B) ensuring that a company’s decisions and transactions conform to the law C) evaluating a company’s financial prospects or creditworthiness D) functioning as intermediaries between a company’s stockholders and its executives

772)

Identify the gatekeepers who function as intermediaries between a company’s stockholders and its executives. A) accountants B) auditors C) board of directors D) financial analysts

773)

Identify the gatekeepers who guarantee that executives act on behalf of the stockholders’ interests. A) underwriters B) board of directors C) auditors D) district attorneys

774)

A ________ exists where a person holds a position of trust that requires that he exercise judgment on behalf of others, but where his personal concerns are in dispute with those of others. A) duty of care B) community of interest C) conflict of interest D) duty of loyalty

775)

A professional is said to have ________ if he has a professional and ethical obligation to clients rooted in trust that overrides his personal interests. A) statutory duties B) executive rights C) creditor claims D) fiduciary duties

776)

Which of the following statements is true of conflicts of interests? A) Self-interest makes it easy for individuals to fulfill their gatekeeper duties. B) Legal protection cannot shield professionals from conflicts of interests. C) Cross-selling of consulting services reduces conflicts of interests. D) Excessive executive compensation involves conflicts of interests.

777)

________ refers to situations in which economic winners and losers are determined by collusion between business and government officials. A) Insider trading B) Positional trading C) Managerial capitalism D) Crony capitalism

778)

Which of the following statements is true of the Sarbanes-Oxley Act? A) It is also known as the Financial Services Modernization Act of 2002. B) It is enforced by the Financial Accounting Standards Board. C) It was passed by Congress because corporate boards failed to police themselves. D) It fails to provide oversight in terms of direct lines of accountability and responsibility.

779)

Unlike the Sarbanes-Oxley Act, the European Union 8th Directive ________. A) does not contain a whistle-blower protection section B) does not provide for cooperation with regulators in other countries C) does not mandate external quality assurances through audit committee requirements D) does not allow greater auditing transparency

780)

Which of the following statements is true of Section 201 of the Sarbanes-Oxley Act? A) It prohibits various forms of professional services that are determined to be consulting rather than auditing. B) It requires a company’s management to file an internal control report with its annual report each year. C) It provides the codes of ethics for senior financial officers. D) It mandates that members of public company audit committees should be independents with a total absence of current or prior business relationships.

781)

Which of the following provisions of the Sarbanes-Oxley Act addresses the services outside the scope of auditors? A) Section 201 B) Section 301 C) Section 404 D) Section 407

782)

Identify a true statement about Section 301 of the Sarbanes-Oxley Act. A) It prohibits various forms of professional services that are determined to be consulting rather than auditing. B) It mandates that a majority of a public company’s board should be independents. C) It outlines the rules of professional responsibility for attorneys. D) It outlines the codes of ethics for senior financial officers.

783)

Which of the following provisions of the Sarbanes-Oxley Act addresses the rules of professional responsibility for attorneys? A) Section 201 B) Section 307 C) Section 406 D) Section 407

784)

Section 307 of the Sarbanes-Oxley Act requires A) disclosure of audit committee financial expert. B) management assessment of internal controls. C) corporates to disclose codes of ethics for senior financial officers. D) lawyers to report concerns of wrongdoing if not addressed.

785)

Which of the following provisions of the Sarbanes-Oxley Act addresses the management assessment of internal controls? A) Section 201 B) Section 301 C) Section 307 D) Section 404

786)

Which of the following is addressed by Section 406 of the Sarbanes-Oxley Act? A) the tone or culture of a firm B) codes of ethics for senior financial officers C) management assessment of internal controls D) policies and procedures that support the control environment

787)

Which of the following statements is true of Section 407 of the Sarbanes-Oxley Act? A) It mandates that all members of a public company audit committee must be independents. B) It requires that management file an internal control report with its annual report each year. C) It addresses the disclosure of audit committee financial expert. D) It outlines the codes of ethics for senior financial officers.

788)

Which of the following statements is true of the Sarbanes-Oxley Act? A) It includes requirements for certification of documents by officers. B) It focuses mainly on the tone or culture of a firm. C) It does not require lawyers to report concerns of wrongdoing if not addressed. D) It does not require codes of ethics for senior financial officers.

789)

Identify an external mechanism that seeks to ensure ethical corporate governance. A) the Sarbanes-Oxley Act B) the COSO framework C) the European Union 7th Directive th D) the European Union 4 Directive

790)

Which of the following is an internal mechanism that seeks to ensure ethical corporate governance? th A) European Union 8 Directive B) the Sarbanes-Oxley Act C) the COSO framework D) European Union 7th Directive

791)

Which of the following statements is true of the Committee of Sponsoring Organizations? A) It improves financial reporting through a combination of controls and governance standards called the External Control—Integrated Framework. B) It is an external mechanism that seeks to ensure ethical corporate governance. C) It describes control as encompassing those elements of an organization that, taken together, support people in the achievement of an organization’s objectives. D) It replaces the Sarbanes-Oxley Act to ensure ethical corporate governance.

792)

In the context of elements of the Committee of Sponsoring Organizations, which of the following statements is true of control environment? A) It focuses on uncovering vulnerabilities. B) It focuses on providing assessment capabilities. C) It addresses the risks that may hinder the achievement of corporate objectives. D) It sets the tone or culture of a firm.

793)

Which of the following elements of the Committee of Sponsoring Organizations refers to policies and procedures that support the cultural issues such as integrity, ethical values, competence, philosophy, and operating style? A) ongoing monitoring B) information and communications C) control environment D) risk assessment

794)

In the context of elements of the Committee of Sponsoring Organizations, identify a true statement about information and communications. A) They address the policies and procedures that support the control environment. B) They are directed at supporting the control environment through fair and truthful transmission of information. C) They set the tone of an organization, influencing the control consciousness of its people. D) They are directed at providing assessment capabilities and uncovering vulnerabilities.

795)

Which of the following elements of the Committee of Sponsoring Organizations provides assessment capabilities and uncovers vulnerabilities? A) risk assessment B) information and communications C) control activities D) ongoing monitoring

796)

Which of the following statements is true of the Committee of Sponsoring Organizations standards for internal controls? A) It prohibited various forms of professional services that are determined to be consulting rather than auditing. B) It ensured ethical corporate governance by establishing regulations enforced by laws. C) It was passed by the U.S. Congress as a response to the string of corporate scandals that occurred since the beginning of the millennium. D) It moved audit, compliance, and governance from a numbers orientation to concern for the organizational environment.

797)

Which of the following is true of the Committee of Sponsoring Organizations controls and the Sarbanes-Oxley requirements? A) They result in less transparency in ensuring ethical corporate governance. B) They encourage greater accountability for financial stewardship. C) They result in a lesser emphasis to prevent any financial misconduct. D) They do not impact executives, boards, and internal audits.

798)

Which of the following is true of the Enterprise Risk Management–Integrated Framework published in 2004? A) It does not contain a whistle-blower protection section. B) It assists an organization in resolving ethical dilemmas based on the organization’s mission, its culture, and its appetite and tolerance for risk. C) It assumes that individuals can put their own interests on hold and be sufficiently motivated to act on behalf of another. D) It was developed by the Financial Accounting Standards Board (FASB).

799)

Which of the following legal duties of board members suggests that a director does not need to be an expert or actually run the company? A) duty of care B) duty of good faith C) duty of candor D) duty of loyalty

800)

Identify the duty of obedience according to which board members should strive toward corporate objectives and are not permitted to act in a way that is inconsistent with the central goals of an organization. A) duty of care B) duty of good faith C) duty of candor D) duty of loyalty

801)

Which of the following duties of board members suggests that conflicts of interest are always to be resolved in favor of the corporation? A) duty of care B) duty of good faith C) duty of candor D) duty of loyalty

802)

According to the Federal Sentencing Guidelines (FSG) for boards, a board must A) work with executives to analyze the incentives for ethical behavior. B) avoid exercising reasonable oversight with respect to the effectiveness and implementation of an ethics program. C) leave the evaluation of all board policies, procedures, governance structure, and position descriptions to the executives. D) always resolve conflicts of interest in favor of an individual board member.

803)

Which of the following statements is true of additional ethical responsibilities board members should have beyond legal obligations? A) They should maintain closed conversations within the firm. B) They should refrain from providing oversight. C) They should be critical in their inquiries about corporate vulnerabilities. D) They should pay out a significant amount of the company’s sustainable growth dollars to its chief executives in compensation.

804)

In the context of corporate boards, which of the following is true of board members? A) Board members are denied the legal right to question the ethics of their firm’s executives and others. B) Board members should continually engage in closed conversations to determine what they do or do not know. C) Board members need to understand where the company is heading and whether it is realistic that it will get there. D) Board members have a fiduciary duty to each other by U.S. law.

805)

Identify a true statement about accounting. A) It includes those elements of an organization that support people in the achievement of the organization’s objectives. B) It is a system of principles applied to present the ethical and environmental position of a business. C) It offers corporate boards some specifics regarding ways to mitigate eventual fines by paying attention to ethics and compliance. D) It offers a system of rules and principles that govern the format and content of financial statements.

806)

Tom, an employee of Electronixx, adjusted credits and debits of the company’s ledger to show high profits. He also created false documents, underreported the company’s income, and evaded paying taxes for a year. Tom can be convicted for ________. A) unethical insider trading B) conflicts of interest in corporate governance C) conflicts of interest in accounting D) unfair executive excessive compensation

807)

According to Kevin Bahr, which of the following is a cause for conflicts in the financial markets? A) the independence and expertise of audit committees B) the presence of shareholder activism C) long-term executive greed versus short-term shareholder wealth D) self-regulation of the accounting profession

808)

Which of the following is true of excessive compensation packages? A) When executive compensation is tied to stock price, executives have a strong incentive to focus on long-term corporate interests rather than short-term stock value. B) When huge amounts of compensation depend on quarterly earnings reports, there is a strong incentive to manipulate those reports in order to achieve the money. C) Economic fairness and personal morality always exists in executives receiving lofty compensation packages. D) Excessive compensation packages serve corporate interests when they provide an incentive that is not based on executive performance or accomplishments.

809)

Which of the following scenarios gives rise to conflicts of interests in corporate governance? A) senior executives determining the compensation received by board members B) board members hand-selecting employees in their company C) a CEO not chairing the board of directors D) the absence of cross-fertilization of boards

810)

Misappropriation of proprietary knowledge is an example of ________. A) corporate espionage B) asset overstating C) insider trading D) inventory theft

811)

Sara, an employee of PentaComp Inc., passed on confidential information of her company to her friend. Her friend benefitted from selling PentaComp’s stock based on the information shared by Sara. In this scenario, Sara can be convicted of ________. A) insider trading B) falsifying documents C) underreporting income D) evading taxes

812)

________ undermines investor confidence in the fairness and integrity of the securities markets. A) Insider trading B) Crony capitalism C) Categorical imperative D) Psychological egoism

FILL IN THE BLANK. Write the word or phrase that best completes each statement or answers the question. 813) The role of ________ is to ensure that those who enter into the marketplace are playing by the rules and conforming to the very conditions that ensure the market functions as it is supposed to function. 814)

________ are legal duties, grounded in trust, to act on behalf of or in the interests of another.

815)

Section 307 of the Sarbanes-Oxley Act includes rules of professional responsibility for ________.

816)

The Committee of Sponsoring Organizations (COSO) describes ________ as encompassing “those elements of an organization that, taken together, support people in the achievement of the organization’s objectives.”

817)

________ mechanisms are processes established internally, by boards and management, to ensure compliance with financial reporting laws and regulations.

818)

________ refers to cultural issues such as integrity, ethical values, competence, philosophy, and operating style.

819)

The Enterprise Risk Management–Integrated Framework, developed in 2004, intentionally includes ________ as one of its interrelated components, recognizing that both the culture and the propensity toward risk are determined by a firm’s overarching mission and objectives.

820)

The ________ Guidelines offer boards some specifics regarding ways to mitigate eventual fines and sentences in carrying out duties by paying attention to ethics and compliance.

821)

________ is often defined as the process by which any business keeps track of its financial activities by recording its debits and credits and balancing its accounts.

822)

The definition of ________ is trading by shareholders who hold private inside information that would materially impact the value of the stock and that allows them to benefit from buying or selling stock.

ESSAY. Write your answer in the space provided or on a separate sheet of paper. 823) Explain the significance of gatekeepers.

824)

Discuss how conflicts of interests can arise in a profession.

825)

Which provisions of the Sarbanes-Oxley Act have the most impact on corporate governance and boards?

826)

What are the requirements of and the most significant criticism of the Sarbanes-Oxley Act?

827)

Discuss the control structure elements of the COSO framework.

828)

What is control environment?

829)

Explain Enterprise Risk Management–Integrated Framework.

830)

Discuss the duties of care and good faith.

831)

Explain the Federal Sentencing Guidelines for boards.

832)

What are the ethical responsibilities of board members?

833)

Discuss the significance of accounting.

834)

How does the lack of shareholder activism and the conflicts between services offered by public accounting firms cause conflicts in financial markets?

835)

How can lofty executive compensation serve corporate interests?

836)

Briefly discuss the conflicts of interests involved in excessive executive compensation.

837)

What is insider trading?

Answer Key Test name: chapter 10 1) FALSE

Several important business professions, for example, attorneys, auditors, accountants, and financial analysts function as gatekeepers. 2) TRUE

The most basic ethical issue facing professional gatekeepers and intermediaries in business contexts involves conflicts of interest. 3) TRUE

A large boost in share price—even for the short term—serves as an effective defense to hostile takeovers and boosts a firm’s equity leverage for external expansion. 4) TRUE

Sarbanes-Oxley strived to respond to the scandals by regulating safeguards against unethical behavior. Because one cannot necessarily predict each and every lapse of judgment, no regulatory “fix” is perfect. However, the act is intended to provide protection where oversight did not previously exist. 5) FALSE

Sarbanes-Oxley and the European Union 8th Directive are external mechanisms that seek to ensure ethical corporate governance, but there are internal mechanisms as well. One way to ensure appropriate controls within the organization is to utilize a framework advocated by the Committee of Sponsoring Organizations (COSO). 6) FALSE

Risk assessment addresses risks that may hinder the achievement of corporate objectives. 7) TRUE

The elements that comprise the control structure of the COSO framework are control environment, risk assessment, control activities, information and communications, and ongoing monitoring. 8) TRUE

COSO is one of the first efforts to address corporate culture in a quasi-regulatory framework in recognition of its significant impact on the satisfaction of organizational objectives. 9) TRUE

Both internal factors such as the COSO controls and external factors such as the Sarbanes-Oxley requirements must be supported by a culture of accountability. 10) FALSE

A board member may never use information obtained through her or his position as a board member for personal gain. The duty of loyalty requires faithfulness; a board member must give undivided allegiance when making decisions affecting the organization. 11) FALSE

The board can prohibit actions to protect the long-term sustainability of a firm. Notwithstanding the form of the unethical behavior, unethical acts can negatively impact stakeholders such as consumers or employees, who can, in turn, negatively impact the firm, which could eventually lead to a firm’s demise. 12) TRUE

Because audits are paid for by audited clients, there is an inherent conflict found simply in that financial arrangement. 13) TRUE

In terms of ethical theory, lofty compensation packages have a utilitarian function when they act as incentives for executives to produce greater overall results, and they are a matter of ethical principle when they compensate individuals on the basis of what they have earned and deserve. 14) TRUE

One of the fastest ways to increase stock price is through layoffs of employees. However, this may not always be in the best interests of the firms, and there is something perverse about basing the salary of an executive on how successful they can be in putting people out of work. 15) FALSE

Insider trading is considered patently unfair and unethical because it precludes fair pricing based on equal access to public information. 16) C

Gatekeepers can be understood as intermediaries, acting between the various parties in the market, and they are bound to ethical duties in this role as well. Their role is to ensure that those who enter into the marketplace are playing by the rules and conforming to the very conditions that ensure the market functions as it is supposed to function. 17) A

All the participants in the market, especially investors, boards, management, and bankers, rely on gatekeepers to ensure that those who enter into the marketplace are playing by the rules and conforming to the very conditions that ensure the market functions as it is supposed to function. 18) A

Auditors verify a company’s financial statements so that investors’ decisions are free from fraud and deception. 19) D

Analysts evaluate a company’s financial prospects or creditworthiness, so that banks and investors can make informed decisions. 20) B

Attorneys ensure that decisions and transactions conform to the law. 21) C

Boards function as intermediaries between a company’s stockholders and its executives and should guarantee that executives act on behalf of the stockholders’ interests. 22) B

Boards function as intermediaries between a company’s stockholders and its executives and should guarantee that executives act on behalf of the stockholders’ interests. 23) C

The most basic ethical issue facing professional gatekeepers and intermediaries in business contexts involves conflicts of interest. A conflict of interest exists where a person holds a position of trust that requires that she or he exercise judgment on behalf of others, but where her or his personal interests and/or obligations conflict with those of others. 24) D

Conflicts of interest can arise when a person’s ethical obligations in her or his professional duties clash with personal interests. Such professionals are said to have fiduciary duties—a professional and ethical obligation—to their clients, duties that override their own personal interests. 25) D

Self-interest can make it difficult for individuals to fulfill their gatekeeper duties. Perhaps legal protection or sanctions ought to be created to shield professionals from conflicts of interests. Critics argue that extraordinary executive compensation and conflicts within the accounting and financial industries have created an environment where the watchdogs have little ability to prevent harm. 26) D

Crony capitalism refers to situations in which economic winners and losers are determined by collusion between business and government officials. Crony capitalism can occur on many levels, ranging from systemic to individual corruption. 27) C

Because reliance on corporate boards to police themselves did not seem to be working, Congress passed the Public Accounting Reform and Investor Protection Act of 2002, commonly known as the Sarbanes-Oxley Act, which is enforced by the Securities and Exchange Commission (SEC). It seeks to provide oversight in terms of direct lines of accountability and responsibility. 28) A

The European Union 8th Directive, effective in 2005, covers many of the same issues as Sarbanes-Oxley. However, contrary to Sarbanes-Oxley, the directive does not contain a whistleblower protection section, does not require similar reporting to shareholders, and has less detailed requirements compared to Sarbanes-Oxley’s section 404. 29) A

Section 201 of the Sarbanes-Oxley Act prohibits services outside the scope of auditors—it prohibits various forms of professional services that are determined to be consulting rather than auditing. 30) A

Section 201 of the Sarbanes-Oxley Act addresses services outside the scope of auditors (prohibits various forms of professional services that are determined to be consulting rather than auditing). 31) B

Section 301 of the Sarbanes-Oxley Act deals with public company audit committees (requires independence), mandating majority of independents on any board (and all on audit committee) and total absence of current or prior business relationships. 32) B

Section 307 of the Sarbanes-Oxley Act deals with rules of professional responsibility for attorneys (requires lawyers to report concerns of wrongdoing if not addressed). 33) D

Section 307 of the Sarbanes-Oxley Act addresses rules of professional responsibility for attorneys and requires lawyers to report concerns of wrongdoing if not addressed. 34) D

Section 404 of the Sarbanes-Oxley Act addresses the management assessment of internal controls. It requires that management file an internal control report with its annual report each year in order to delineate how management has established and maintained effective internal controls over financial reporting. 35) B

Section 406 of the Sarbanes-Oxley Act deals with the codes of ethics for senior financial officers. 36) C

Section 407 of the Sarbanes-Oxley Act addresses the disclosure of audit committee financial expert (requires that they actually have an expert). 37) A

Sarbanes-Oxley includes requirements for certification of the documents by officers. When a firm’s executives and auditors are required to literally sign off on these statements, certifying their veracity, fairness, and completeness, they are more likely to personally ensure their truth. 38) A

The Sarbanes-Oxley Act is an external mechanism that seeks to ensure ethical corporate governance. 39) C

The Committee of Sponsoring Organizations (COSO) is an internal mechanism that seeks to ensure ethical corporate governance. 40) C

COSO is a voluntary collaboration designed to improve financial reporting through a combination of controls and governance standards called the Internal Control—Integrated Framework. COSO describes “control” as encompassing “those elements of an organization that, taken together, support people in the achievement of the organization’s objectives.”

41) D

The element of control environment sets the tone or culture of a firm—"the control environment sets the tone of an organization, influencing the control consciousness of its people.” 42) C

Control environment of COSO deals with policies and procedures that support the control environment. The control environment refers to cultural issues such as integrity, ethical values, competence, philosophy, and operating style. 43) B

Information and communications, an element of COSO, are directed at supporting the control environment through fair and truthful transmission of information. 44) D

Ongoing monitoring, an element of COSO, helps to provide assessment capabilities and to uncover vulnerabilities. 45) D

The COSO standards for internal controls moved audit, compliance, and governance from a numbers orientation to concern for the organizational environment. Both internal factors as the COSO controls and external factors such as the Sarbanes-Oxley requirements must be supported by a culture of accountability. 46) B

Both internal factors as the COSO controls and external factors such as the Sarbanes-Oxley requirements must be supported by a culture of accountability. In fact, these shifts impact not only executives and boards; internal audit and compliance professionals also are becoming more accountable for financial stewardship, resulting in greater transparency, greater accountability, and a greater emphasis on effort to prevent misconduct. 47) B

Enterprise risk management assists an organization or its governing body in resolving ethical dilemmas based on the organization’s mission, its culture, and its appetite and tolerance for risk. 48) A

In duty of care, board members are directed to use their “business judgment as prudent caretakers": the director is expected to be disinterested and reasonably informed, and to rationally believe the decisions made are in the firm’s best interest. The bottom line is that a director does not need to be an expert or actually run the company!

49) B

The duty of good faith is one of obedience, which requires board members to be faithful to the organization’s mission. In other words, they are not permitted to act in a way that is inconsistent with the central goals of the organization. 50) D

The duty of loyalty requires faithfulness; a board member must give undivided allegiance when making decisions affecting the organization. This means that conflicts of interest are always to be resolved in favor of the corporation. 51) A

According to The Federal Sentencing Guidelines (FSG), a board must work with executives to analyze the incentives for ethical behavior. It must also be truly knowledgeable about the content and operation of the ethics program rather than simply the mere contents of a training session. The board should exercise “reasonable oversight” with respect to the implementation and effectiveness of the ethics/compliance program. In order to assess their success, boards should evaluate their governance structure and position descriptions, all board policies, procedures, and processes, including a code of conduct and conflicts policies. 52) C

Board members have additional responsibilities beyond the law to explore and to investigate the organizations that they represent. An open conversation is the best method for understanding, not just what board members know, but also what they do not know. They should be aware of the financial flow within the firm and also be critical in their inquiries about corporate vulnerabilities and need to understand where the company is heading and whether it is realistic that it will get there. 53) C

Board members need to understand where the company is heading and whether it is realistic that it will get there. This is less likely if it is not living within its means or if it is paying out too much of its sustainable growth dollars to its chief executives in compensation. 54) D

The ethical issues and potential for conflicts surrounding accounting practices go far beyond merely combining services. They may include underreporting income, falsifying documents, allowing or taking questionable deductions, illegally evading income taxes, and engaging in fraud. 56) D

According to Kevin Bahr, the causes for conflicts in the financial markets are the financial relationship between public accounting firms and their audit clients, conflicts between services offered by public accounting firms, the lack of independence and expertise of audit committees, self-regulation of the accounting profession, lack of shareholder activism, short-term executive greed versus long-term shareholder wealth, executive compensation schemes, compensation schemes for security analysts. 57) B

Lofty compensation packages provide an incentive for executive performance and they serve as rewards for accomplishments. When huge amounts of compensation depend on quarterly earnings reports, there is a strong incentive to manipulate those reports in order to achieve the money. 58) A

Excessive executive compensation can involve a variety of conflicts of interests and cronyism. The board’s duties should include ensuring that executives are fairly and not excessively paid. However, all too often, the executive being evaluated and paid also serves as chair of the board of directors. The board is often comprised of members hand-selected by the senior executives. In addition, the compensation board members receive is determined by the chief executive officer, creating yet another conflict of interest. One of the larger concerns to have arisen in recent years has been the cross-fertilization of boards. 59) C

Insider trading may be based on a claim of unethical misappropriation of proprietary knowledge, that is, knowledge only those in the firm should have, knowledge owned by the firm and not to be used by abusing one’s fiduciary responsibilities to the firm. Ethical issues in accounting involve underreporting income, falsifying account documents, and illegally evading income taxes. 60) A

“Insider trading” refers generally to buying or selling a security, in breach of a fiduciary duty or other relationship of trust and confidence, while in possession of material, nonpublic information about the security. It may also include “tipping” such information, securities trading by the person “tipped” and securities trading by those who misappropriate such information. 61) A

Insider trading undermines investor confidence in the fairness and integrity of the securities markets. Hence, the Securities and Exchange Commission has treated the detection and prosecution of insider trading violations as one of its enforcement priorities. 62) gatekeepers

Several important business professions, for example, attorneys, auditors, accountants, and financial analysts can be thought of as “gatekeepers” or “watchdogs” in that their role is to ensure that those who enter into the marketplace are playing by the rules and conforming to the very conditions that ensure the market functions as it is supposed to function. 63) Fiduciary duties

Fiduciary duties represent a legal duty, grounded in trust, to act on behalf of or in the interests of another. 64) attorneys

Section 307 of the Sarbanes-Oxley Act includes rules of professional responsibility for attorneys (requires lawyers to report concerns of wrongdoing if not addressed). 65) control

The Committee of Sponsoring Organizations (COSO) describes control as encompassing “those elements of an organization that, taken together, support people in the achievement of the organization’s objectives.” 66) Internal control

Internal control mechanisms are processes established internally, by boards and management, to ensure compliance with financial reporting laws and regulations. 67) Control environment

Control environment refers to cultural issues such as integrity, ethical values, competence, philosophy, and operating style. 68) objective setting

In 2004, the Committee of Sponsoring Organizations (COSO) developed a new system, Enterprise Risk Management–Integrated Framework, to serve as a framework for management to evaluate and improve their firms’ prevention, detection, and management of risk. This system intentionally includes objective setting as one of its interrelated components, recognizing that both the culture and the propensity toward risk are determined by the firm’s overarching mission and objectives. 69) Federal Sentencing

The Federal Sentencing Guidelines (FSG) offer boards some specifics regarding ways to mitigate eventual fines and sentences in carrying out duties by paying attention to ethics and compliance. 70) Accounting

Accounting is often defined as the process by which any business keeps track of its financial activities by recording its debits and credits and balancing its accounts. 71) insider trading

It is universally recognized that markets must function within the law; they must assume full information; and they must be free from fraud and deception. Some argue that only government regulation can ensure that these rules will be followed. Others argue that enforcement of these rules is the responsibility of important internal controls that exist within market-based economic systems. Several important business professions, for example, attorneys, auditors, accountants, and financial analysts, function in just this way. These professions can be thought of as “gatekeepers” or “watchdogs” in that their role is to ensure that those who enter into the marketplace are playing by the rules and conforming to the very conditions that ensure the market functions as it is supposed to function. These professions can also be understood as intermediaries, acting between the various parties in the market, and they are bound to ethical duties in this role. All the participants in the market, especially investors, boards, management, and bankers, rely on gatekeepers. 73) Essay

A conflict of interest exists where a person holds a position of trust that requires that she or he exercise judgment on behalf of others, but where her or his personal interests and/or obligations conflict with those of others. Conflicts of interest can also arise when a person’s ethical obligations in her or his professional duties clash with personal interests. Such professionals are said to have fiduciary duties—a professional and ethical obligation—to their clients, duties rooted in trust that override their own personal interests. Unfortunately, many of these professional intermediaries are paid by the businesses over which they keep watch, and perhaps are also employed by yet another business. 74) Essay

The following provisions have the most significant impact on corporate governance and boards: Section 201: Services outside the scope of auditors (prohibits various forms of professional services that are determined to be consulting rather than auditing) Section 301: Public company audit committees (requires independence), mandating majority of independents on any board (and all on audit committee) and total absence of current or prior business relationships Section 307: Rules of professional responsibility for attorneys (requires lawyers to report concerns of wrongdoing if not addressed) Section 404: Management assessment of internal controls (requires that management file an internal control report with its annual report each year in order to delineate how management has established and maintained effective internal controls over financial reporting) Section 406: Codes of ethics for senior financial officers (required) Section 407: Disclosure of audit committee financial expert (requires that they actually have an expert) 75) Essay

The Sarbanes-Oxley Act includes requirements for certification of the documents by officers. When a firm’s executives and auditors are required to literally sign off on these statements, certifying their veracity, fairness, and completeness, they are more likely to personally ensure their truth. One of the most significant criticisms of the act is that it imposes extraordinary financial costs on the firms; and the costs are apparently even higher than anticipated. 76) Essay

The elements that comprise the control structure include: (1) Control environment—the tone or culture of a firm: “the control environment sets the tone of an organization, influencing the control consciousness of its people.” (2) Risk assessment—risks that may hinder the achievement of corporate objectives. (3) Control activities—policies and procedures that support the control environment. (4) Information and communications—directed at supporting the control environment through fair and truthful transmission of information. (5) Ongoing monitoring—to provide assessment capabilities and to uncover vulnerabilities. 77) Essay

Control environment refers to cultural issues such as integrity, ethical values, competence, philosophy, and operating style. COSO (Committee of Sponsoring Organizations) is one of the first efforts to address corporate culture in a quasi-regulatory framework in recognition of its significant impact on the satisfaction of organizational objectives. Control environment can also refer to more concrete elements (that can better be addressed in an audit) such as the division of authority, reporting structures, roles and responsibilities, the presence of a code of conduct, and a reporting structure. 78) Essay

COSO (Committee of Sponsoring Organizations) developed a new system, Enterprise Risk Management–Integrated Framework, to serve as a framework for management to evaluate and improve their firms’ prevention, detection, and management of risk. This system expands on the prior framework in that it intentionally includes “objective setting” as one of its interrelated components, recognizing that both the culture and the propensity toward risk are determined by the firm’s overarching mission and objectives. Enterprise risk management, therefore, assists an organization or its governing body in resolving ethical dilemmas based on the firm’s mission, its culture, and its appetite and tolerance for risk. 79) Essay

The duty of care involves the exercise of reasonable care by a board member to ensure that the corporate executives with whom she or he works carry out their management responsibilities and comply with the law in the best interests of the corporation. Directors are permitted to rely on information and opinions only if they are prepared or presented by corporate officers, employees, a board committee, or other professionals the director believes to be reliable and competent in the matters presented. Board members are also directed to use their “business judgment as prudent caretakers": the director is expected to be disinterested and reasonably informed, and to rationally believe the decisions made are in the firm’s best interest. Ultimately, it indicates that a director does not need to be an expert or actually run the company. The duty of good faith is one of obedience, which requires board members to be faithful to the organization’s mission. In other words, they are not permitted to act in a way that is inconsistent with the central goals of the organization. Their decisions must always be in line with organizational purposes and direction, strive towards corporate objectives, and avoid taking the organization in any other direction. 80) Essay

The Federal Sentencing Guidelines (FSG), promulgated by the United States Sentencing Commission and (since a 2005 Supreme Court decision) discretionary in nature, offer boards some specifics regarding ways to mitigate eventual fines and sentences in carrying out their duties by paying attention to ethics and compliance. In particular, the board must work with executives to analyze the incentives for ethical behavior. It must also be truly knowledgeable about the content and operation of the ethics program. “Knowledgeable” would involve a clear understanding of the process by which the program evolved its objectives, its process and next steps, rather than simply the mere contents of a training session. The FSG also suggest that the board exercise “reasonable oversight” with respect to the implementation and effectiveness of the ethics/compliance program by ensuring that the program has adequate resources, appropriate level of authority, and direct access to the board. In order to ensure satisfaction of the FSG and the objectives of the ethics and compliance program, the FSG discuss periodic assessment of risk of criminal conduct and of the program’s effectiveness. In order to assess their success, boards should evaluate their training and development materials, their governance structure and position descriptions, their individual evaluation processes, their methods for bringing individuals onto the board or removing them, and all board policies, procedures, and processes, including a code of conduct and conflicts policies. Though the above FSG recommendations seem intuitive to some extent, see the following Reality Check for the actual numbers of firms that implement training on these issues for their boards of directors. 81) Essay

Fortune journalists Ram Charan and Julie Schlosser suggest that board members have additional responsibilities beyond the law to explore and to investigate the organizations that they represent, and they suggest that an open conversation is the best method for understanding, not just what board members know, but also what they do not know. They suggest that board members often ignore even the most basic questions such as how the firm actually makes its money and whether customers and clients truly do pay for products and services. That is rather basic, but the truth is that the financial flow can explain a lot about what moves the firm. Board members should also be critical in their inquiries about corporate vulnerabilities—what could drag the firm down and what could competitors do to help it along that path? Ensuring that information about vulnerabilities is constantly and consistently transmitted to the executives and the board creates effective prevention. Board members need to understand where the company is heading and whether it is realistic that it will get there. This is less likely if it is not living within its means or if it is paying out too much of its sustainable growth dollars to its chief executives in compensation. Failing in any of these areas creates pressures on the firm and on the board to take up the slack, to manage problems that do not have to exist, to be forced to make decisions that might not have had to be made if only the information systems were working as they should. It is the board members’ ultimate duty to provide oversight, which is impossible without knowing the answers to the preceding questions. 82) Essay

Accounting offers us a system of rules and principles that govern the format and content of financial statements. Accounting, by its very nature, is a system of principles applied to present the financial position of a business and the results of its operations and cash flows. It is hoped that adherence to these principles will result in fair and accurate reporting of this information. Now, would you consider an accountant to be a watchdog or a bloodhound? Does an accountant stand guard or instead seek out problematic reporting? The answer to this question may depend on whether the accountant is employed internally by a firm or works as outside counsel. 83) Essay

Scholar Kevin Bahr identified a number of causes for conflicts in financial markets: Conflicts between services offered by public accounting firms: Because many public accounting firms offer consulting services to their clients, there are conflicts in the independence of the firm’s opinions and incentives to generate additional consulting fees. Lack of shareholder activism: Given the diversity of ownership in the market based on individual investors, collective efforts to manage and oversee the board are practically nonexistent. 84) Essay

In theory, lofty compensation packages are thought to serve corporate interests in two ways. They provide an incentive for executive performance (a consequentialist justification), and they serve as rewards for accomplishments (a deontological justification). In terms of ethical theory, they have a utilitarian function when they act as incentives for executives to produce greater overall results, and they are a matter of ethical principle when they compensate individuals on the basis of what they have earned and deserve. In practice, reasonable doubts exist about both of these rationales. There is much less correlation between pay and performance than one would expect. At least in terms of stock performance, executives seem to reap large rewards regardless of business success. Of course, it might be argued that in difficult financial times, an executive faces greater challenges and therefore perhaps deserves his salary more than in good times. 85) Essay

Excessive executive compensation can involve a variety of conflicts of interests and cronyism. The board’s duties should include ensuring that executives are fairly and not excessively paid. They also have a responsibility to evaluate the executive’s performance. However, all too often, the executive being evaluated and paid also serves as chair of the board of directors. The board is often comprised of members hand-selected by the senior executives. In addition, the compensation board members receive is determined by the chief executive officer, creating yet another conflict of interest. The cronyism does not end at the boardroom door. One of the larger concerns to have arisen in recent years has been the cross-fertilization of boards. It lends itself to the appearance of impropriety and gives rise to a question of conflicts. Cronyism or basic occurrences of overlapping board members might occur, of course, simply because particular individuals are in high demand as a result of their expertise. However, where the overlap results in a failure of oversight and effective governance—the primary legal and ethical responsibility of board members—the implications can be significant to all stakeholders involved. 86) Essay

The definition of insider trading is trading by shareholders who hold private inside information that would materially impact the value of the stock and that allows them to benefit from buying or selling stock. Illegal insider trading also occurs when corporate insiders provide “tips” to family members, friends, or others and those parties buy or sell the company’s stock based on that information. “Private information” would include privileged information that has not yet been released to the public. That information is deemed material if it could possibly have a financial impact on a company’s short- or long-term performance or if it would be important to a prudent investor in making an investment decision. Insider trading may also be based on a claim of unethical misappropriation of proprietary knowledge, that is, knowledge only those in the firm should have, knowledge owned by the firm and not to be used by abusing one’s fiduciary responsibilities to the firm. Insider trading is considered patently unfair and unethical because it precludes fair pricing based on equal access to public information. If market participants know that one party may have an advantage over another via information that is not available to all players, pure price competition will not be possible and the faith upon which the market is based will be lost.