Deck 2: Ethics and the Law.

Question 1

All business leaders and academics agree that the primary ethical and legal duty of corporations is to maximize shareholder value.

Answer 1

False

Question 2

All fifty states have constituency statutes.

Answer 2

False

Question 3

If a company employee chooses to follow orders (and breaks the law)the fact that his supervisor ordered him to do so is a complete defense at a criminal trial.

Answer 3

False

Question 4

A company's CEO does not play a significant role in instilling a sense of ethics throughout the organization.

Question 5

Ethics and law are unrelated.

Question 6

Since 1990 until today,the compensation gap between the average worker and a CEO listed in Standard and Poors Index has narrowed.

Question 7

Customers can vote with their feet by boycotting unethical practices,such as clothing made in sweatshops.

Question 8

Rawlsian moral theory seeks to develop principles behind a "veil of information."

Question 9

Under the Teleological theory,the ethical good of an action is judged by the effect of the action on others.

Question 10

Kantian theory examines the concepts of universalizability and reversibility.

Question 11

The two main schools of ethical thought are teleological and deontological.

Question 12

Utilitarianism is a major deontological system that operates under the proposition that the ideal is to focus on motivation rather than on consequences.

Question 13

Rawlsian moral theory seeks to maximize the condition of the worst off person in society.

Question 14

Employees can never be stakeholders of a corporation.

Question 15

Utilitarianism seeks to equalize the benefit to everyone.

Question 16

Another way of saying maximization of shareholder value is shareholder primacy.

Question 17

Nobel Prize winner in economics Milton Friedman asserts that the only guiding criterion for the corporation should be profitability within the confines of the law.

Question 18

Compliance with the law is just the baseline for effective and responsible managerial action.

Question 19

Some companies,like Nike and Adidas,are now auditing supplier working conditions and posting the results at the Fair Labor Association website.

Question 20

The Deontological theory focuses on the consequences of an action rather than on the motivation of the individual.

Question 21

Which of the following is the group given the ultimate legal authority to change management?

A) Shareholders
B) Human resource managers
C) The mayor in the applicable jurisdiction
D) The city council in the applicable jurisdiction

Question 22

Which of the following is true regarding shareholder primacy?

A) It is never legally mandated.
B) It is always legally mandated.
C) It is legally mandated only in very narrow circumstances.
D) There is no such thing.

Question 23

The __________ Act illustrates that corporate conduct violating society's expectations can result in new forms of regulation without regard for feasibility or cost.

A) White-Rush Dow Jones Conciliatory
B) Dodd-Frank Wall Street Reform and Consumer Protection
C) Corporate and Securities Reform and Retribution Consumer Protection
D) Securities and Oversight

Question 24

According to Exhibit 2.1 "Ethical Business Leader's Decision Tree",which of the following is the first question managers should ask themselves when determining whether a proposed action is ethical?

A) Whether it will result in a loss of profits
B) Whether stockholders would approve
C) Whether the CEO would approve
D) Whether it is legal

Question 25

Which of the following allows rights-based moral theories to be compared to other theories such as a utilitarian framework?

A) Deontology
B) Teleological theory
C) Comparative justice
D) Rawlsian moral theory

Question 26

Immanuel Kant argued that spending money in ways that are not consistent with shareholder wishes is tantamount to imposing a tax and unilaterally deciding where the money will be spent.

Question 27

According to economist Michael C.Jensen,which of the following is a stakeholder of a corporation?

A) Customers only
B) Employees and customers, but not managers
C) Managers and employees, but not customers
D) Customers, employees, and managers

Question 28

Which of the following is true regarding the relationship between law and ethics?

A) The law attempts to prohibit all "bad" behavior.
B) An action that is unethical is also considered illegal in the U.S.
C) The law prohibits all "morally objectionable" behavior.
D) An action that is unethical may nonetheless be legal.

Question 29

Which of the following are the three main theories under the comparative justice framework?

A) Retributive, Kantian, and Rawlsian
B) Compensatory, comparative, and retributive
C) Distributive, compensatory, and retributive
D) Utilitarianism, teleological, and compensatory

Question 30

Which of the following is true regarding the growth of socially responsible mutual funds?

A) Such funds have remained flat with little change in America, but they have grown significantly in Europe.
B) Such funds have remained flat with little change in Europe, but they have grown significantly in America.
C) Both America and Europe have seen a decline in interest in socially responsible funds.
D) Both America and Europe have seen growth in socially responsible funds.

Question 31

Which of the following international organizations adopted a convention criminalizing bribes to government officials and recommending a prohibition on the tax deductibility of bribes?

A) The Foreign Corrupt Practices Consortium
B) The Organization of Economic Cooperation and Development
C) The International Business Legal and Ethical Revision Association
D) Transparency International

Question 32

Nobel prize winner Milton Friedman asserts that "social responsibility" is a fundamentally __________ doctrine.

A) positive
B) risky
C) good
D) subversive

Question 33

A __________ statute is a state statute authorizing boards of corporations to take into account all stakeholders and constituencies even when a change in control or breakup of the corporation has become inevitable.

A) corporate control
B) break-up
C) constituency
D) protection

Question 34

Milton Friedman argued that if a company decides to spend money for a social cause,it is in essence spending someone else's money for a general social interest.

Question 35

Which of the following is a term for the maximization of shareholder value?

A) Shareholder importance
B) Shareholder primacy
C) Value of shares maximization
D) Corporate allocation

Question 36

The obligation of a company's directors to manage the corporation for the best interest of the __________ is recognized as the primary obligation of directors of a corporation.

A) corporation
B) officers
C) employees
D) community

Question 37

In 2013,the average CEO of a company in the Standard and Poor's 500 Index took home more than _____ times as much as the average worker.

A) 50
B) 150
C) 325
D) 500

Question 38

According to St Thomas Aquinas,an unjust law:

A) could not properly be considered law at all.
B) is defective and morally objectionable.
C) must be obeyed even if it is morally objectionable.
D) must be overturned by a supermajority of the legislature.

Question 39

__________ focuses on how the burden and benefits of a particular system are distributed.

A) Compensatory Justice
B) Retributive Justice
C) Distributive Justice
D) Rawlsian Justice

Question 40

Which of the following is a psychological disorder referenced in the text resulting in a lack of empathy and the inability to recognize boundaries?

A) Prevalent personality disorder
B) Narcissistic personality disorder
C) Corporate phenomena disorder
D) Trial disorder

Question 41

Managers who create ethical solutions while maximizing shareholder value are said to find:

A) the Universalizability Principle.
B) Distributive Justice.
C) the Sweet Spot.
D) the Shareholder Primacy.

Question 42

Fact Pattern 2-1
Jack decides to donate leftover food from his restaurant to a homeless shelter. Brock, an employee who was angry with Jack over not getting a raise, claimed that Jack decided to donate the food only for publicity and that Jack did not really care about homeless people. Peggy, another employee disagreed, contending that regardless of his motivation, Jack was acting ethically because of the consequences involved and the number of people helped.
Refer to Fact Pattern 2-1.Upon which of the following would Jack most likely rely in contending that he donated the food because he was motivated to help the poor?

A) Rawlsian moral theory
B) Teleological theory
C) Artificial person application
D) Deontological theory

Question 43

Discuss and explain the ethical business leader's decision tree referenced in the text.

Question 44

Monica tells all her employees that she expects them to treat others as they would like to be treated.Which of following is a descriptive term for Monica's requirement?

A) The Required Rule
B) The Accepted Rule
C) The Golden Rule
D) The Advanced Rule

Question 45

Which of the following statements regarding the teleological theory is NOT true?

A) Teleological theory is concerned with consequences.
B) Teleological theory judges the ethical good of an action by the effect of the action on others.
C) Teleological theory focuses more on the motivation and principle behind an action.
D) Both that teleological theory is concerned with consequences and that teleological theory judges the ethical good of an action by the effect of the action on others.

Question 46

According to __________,social policies developed behind the veil of ignorance would create a system benefiting the __________.

A) Rawls, majority
B) Rawls, minority
C) Rawls, least well off
D) Kant, most well off

Question 47

According to Kant's theory of universalizability,the ethical worth of an act is determined by whether a person:

A) would want such a rule applied to minority members of society.
B) would want everyone to perform in this manner.
C) could get away with such an action.
D) could live with the results of such an action.

Question 48

Which of the following plays the most significant role in instilling a sense of ethics throughout an organization?

A) The CEO
B) The human resources manager
C) Each employee's immediate supervisor
D) The employees themselves

Question 49

According to the Delaware Supreme Court,when does the role of a director shift from being a "protector of the corporate bastion" to being an "auctioneer" charged with obtaining the highest realizable short-term value for the shareholders?

A) Only when the breakup of the corporation or a change of control has become inevitable
B) Whenever a yearly loss is reflected
C) At the point that a yearly loss has been reflected for three straight years
D) When the CEO and the board of directors are in disagreement, and there has also been a yearly loss reflected for three straight years

Question 50

The Organization of Economic Cooperation and Development (OECD)is:

A) comprised of nations form North America, Europe, and Asia-Pacific.
B) a subsidiary of the European Union.
C) comprised of nations who entered into the North American Free Trade Agreement.
D) comprised of states inside the U.S.

Question 51

The main issue in CASE 2.1 Northeast General v.Wellington Advertising(1993)was whether:

A) the finder's fee agreement was valid and enforceable.
B) the CEOs had conspired to deny a finder's fee to Sternau.
C) a relationship of trust with fiduciary-like obligations was created under the parties' finder-seller agreement.
D) Margolis engaged in fraud when he signed the agreement without his employer's permission.

Question 52

Fact Pattern 2-2
Wally and Janice are both managers in a small corporation set up to manufacture sporting goods. They both receive bonuses for any ideas that benefit the company, although Janice's bonus is computed at a lower rate than Wally's because she has been at the company a shorter amount of time. Janice has a great marketing idea that would result in her receiving a bonus of $1,000. She has it all worked out on her computer. Unknown to her, one evening after business hours, Wally obtains the information from her computer and submits it himself the next day. He is immediately awarded a bonus of $2,000 for the information. Fortunately for Janice, Sally, a custodian, saw Wally in Janice's office and heard him calling his wife while he was there to brag about his misdoings. Sally informed Blaire, the CEO, of Wally's actions.
Refer to Fact Pattern 2-2.Which of the following types of justice is involved if Blaire requires that Wally give Janice $1,000?

A) Compensatory
B) Retributive
C) Fair
D) Justifiable

Question 53

Which one of the following is NOT a manner in which a company can promote ethical behavior?

A) Lobby legislators for more ethical guidelines
B) Craft an ethical mission statement
C) Provide ethics training
D) Adopt a Code of Ethics

Question 54

According to St.Thomas Aquinas,only laws that followed __________ were true and just.

A) reasoned law
B) customary law
C) eternal law
D) localized law

Question 55

Fact Pattern 2-2
Wally and Janice are both managers in a small corporation set up to manufacture sporting goods. They both receive bonuses for any ideas that benefit the company, although Janice's bonus is computed at a lower rate than Wally's because she has been at the company a shorter amount of time. Janice has a great marketing idea that would result in her receiving a bonus of $1,000. She has it all worked out on her computer. Unknown to her, one evening after business hours, Wally obtains the information from her computer and submits it himself the next day. He is immediately awarded a bonus of $2,000 for the information. Fortunately for Janice, Sally, a custodian, saw Wally in Janice's office and heard him calling his wife while he was there to brag about his misdoings. Sally informed Blaire, the CEO, of Wally's actions.
Refer to Fact Pattern 2-2.Which of the following types of justice is involved if Blaire requires that Wally give Janice the entire $2,000 bonus he received?

A) Compensatory
B) Retributive
C) Fair
D) Justifiable

Question 56

Which of the following is NOT an example of St.Thomas Aquinas' requirements for a law to be just?

A) The law must be within the power of individuals to fulfill it.
B) The law must be consonant with a reasoned determination of the universal good.
C) The law must be formed to promote a private benefit to the majority.
D) The law must be widely promulgated.

Question 57

Companies like __________ have suffered severe financial penalties as a result of decisions the public viewed in hindsight as __________.

A) Quaker Oats Company, unethical
B) General Motors, criminal
C) General Motors, unethical
D) General Motors, unjust

Question 58

Fact Pattern 2-1
Jack decides to donate leftover food from his restaurant to a homeless shelter. Brock, an employee who was angry with Jack over not getting a raise, claimed that Jack decided to donate the food only for publicity and that Jack did not really care about homeless people. Peggy, another employee disagreed, contending that regardless of his motivation, Jack was acting ethically because of the consequences involved and the number of people helped.
Refer to Fact Pattern 2-1.Upon which of the following would Peggy most likely rely to support her contention?

A) Rawlsian moral theory
B) Teleological theory
C) Artificial person application
D) Deontological theory

Question 59

Art,the sole shareholder of ABC Company,got a ticket for reckless driving because he was speeding through a school zone at 85 miles per hour.Sue,the wife of the officer who gave Art the ticket,was an employee of ABC Company.Art asked her if she could get the ticket "fixed" for him.Sue indeed talked to her husband,but he was unwilling to tear up the ticket.Art was incensed and fired Sue on the spot saying that she could not be counted upon to do anything the right way.Discuss the pros and cons of whether Sue should prevail in an action against ABC Company alleging a violation of public policy.

Question 60

Kant's categorical imperative states that:

A) the form of an action rather than the intended result determines the ethical worth.
B) no one person's interest is given more weight than another.
C) distribution favors the person getting the worst share.
D) morally objectionable actions can never be in the best interests of society.

Question 61

Set forth the ways described in the text in which ethics and law are related.

Question 62

You are the owner of a small Internet company.You are planning a public offering in 12 months.You ask your accountant to prepare an optimistic business model that shows a greater profitability potential than a conservative estimate would produce.When the accountant questions your profitability assumptions,you remind him that he has been given 10,000 shares of the company stock at a low price.A public offering would dramatically increase the value of those shares.Discuss the ethical issues faced by the owner and the accountant.How should they be resolved?

Question 63

Discuss why Enron failed and who should be held responsible for the failure.

Question 64

You are the CEO of a multi-billion dollar company.Your company employs over 75,000 people.The company is being sued for $100 million dollars as the result of racial discrimination against your customers.Your investigation reveals that some of your managers are actively violating the law.Discuss the steps you would take to ensure your company's compliance with ethical norms and legal requirements.

Question 65

Your company has grown from a national to a multi-national entity.How have your ethical responsibilities changed? To whom do you owe these responsibilities?

Question 66

Your company has asked you to write a code of ethics.What should you include and why?

Question 67

List the two main schools of ethical thought and their main focus.