Deck 5: Business, Societal, and Ethical Contexts of Law

Question 1

People and companies that are directly and indirectly affected by another company's decisions are called _______.

Answer 1

stakeholders

Question 2

The ________-based standard requires that the majority good be placed ahead of the individual good when faced with a moral dilemma.

Answer 2

utilitarian

Question 3

As a result of the Enron scandal, Congress passed the ________ Act, increasing management responsibilities and liabilities regarding those involved in the finances of public companies.

Answer 3

Sarbanes-Oxley

Question 4

A company's environmental policy and employee expectations regarding protection of the environment would be found in the company's code of _______.

Question 5

Business ethics is a recent phenomenon not recognized or considered prior to the mid- to late 1900s.

Question 6

A particular act can be deemed unethical yet still be legal.

Question 7

Enron Corporation was a private corporation dealing in a governmentally regulated market.

Question 8

The notion of ________ is a central theme in Immanuel Kant's work.

Question 9

Ethical misconduct not only includes illegal and unethical practices but also includes questionable practices of managers and organizations.

Question 10

Ethical problems faced by managers almost always come down to a clear choice, with one option clearly the most ethical choice.

Question 11

The terms morals and ethics are synonymous.

Question 12

Treasury Secretary Geitner had knowledge of the AIG bonuses but failed to stop them because they were ________ obligations between a private company and its employees.

Question 13

Prioritizing moral values for an organization and ensuring that behaviors are aligned with those values is known as _______.

Question 14

Generally accepted standards of right and wrong in a given society are called _______.

Question 15

Religious teachings and ethics are separate and distinct and rarely if ever overlap.

Question 16

That society is best served when companies aggressively seek a competitive advantage and that ethical violations will eventually harm companies reflects the narrow view, or ________ hand theory, of corporate social responsibility.

Question 17

Altering people's values is one of the objectives of an organizational ethics program.

Question 18

________ refers to having a conscious system in use for deciding moral dilemmas.

Question 19

What is considered an ethical practice, once established, remains constant and acceptable unless specifically preempted by statute.

Question 20

A company's code of conduct and code of ethics may be combined into a single document.

Question 21

Leah has just handed in a major required report to her professor, and after careful scrutiny the professor finds numerous instances of plagiarism. If the school policy and the professor's personal perspective follow a principles-based approach, Leah should be charged and suffer whatever penalty is prescribed by school policy.

Question 22

Immanuel Kant is credited with developing the utilitarian stream of moral reasoning.

Question 23

A comprehensive values management program may be used in managing a corporation's diversity program.

Question 24

Honoring ethical values and respecting communities and the environment while recognizing the interests of shareholders are elements of corporate citizenship.

Question 25

As of today, the Enron bankruptcy remains the largest corporate bankruptcy in America's history.

Question 26

In the early part of the 2000s, Wall Street analysts rated Enron's stock risk as "staggeringly low."

Question 27

Corporations, as business entities, cannot be charged with a crime; only the individuals who make up the company's officers and board can be charged.

Question 28

AIG caused a major political firestorm when, after receiving taxpayer bailout money, it distributed $165 million in performance bonuses to executive employees.

Question 29

The final result of the AIG bonusgate scandal was that no new laws or taxes were enacted, nor were there any additional official actions taken by Congress or the president.

Question 30

One of the major reasons that Enron failed was that it did not have an articulated code of ethics to guide the company.

Question 31

Tom's company has a code of ethics and a separate code of conduct. If he would like to find out about the company's expectations or requirements regarding community service, he would reference the code of ethics.

Question 32

Arthur Andersen, as a result of its conviction following the Enron scandal, is now completely out of business.

Question 33

Grimshaw v. Ford Motor Company is often cited as a failing of the management's hand approach to corporate social responsibility.

Question 34

Enron profits showed that first-quarter revenues rose from $12 billion in 2000 to $84 billion in 2001.

Question 35

The fundamental underlying concept of corporate social responsibility is that conscience resides in individuals but not in a corporation itself.

Question 36

Social responsibility is at its highest when the moderate view, or government's hand theory, of corporate social responsibility is utilized.

Question 37

Advocates of the invisible hand theory do not trust corporate leaders with stewardship over noneconomic values.

Question 38

Linda's company has a code of ethics and a separate code of conduct. If she wants to be sure that she complies with the company dress code, she would reference the code of ethics.

Question 39

Kenneth Lay, Enron's CEO, is currently serving a prison sentence as a result of his fraudulent dealings that led to the Enron scandal.

Question 40

Codes of ethics are insufficient and do not serve their proper purpose if they are intended only to ensure that company policies are legal.

Question 41

Which of the following was not an argument made by recipients of AIG bonuses who were defending their right to receive and retain the bonus money?

A) The bonuses were negotiated into their contracts prior to the AIG collapse.
B) The bonuses were based on meeting individual goals that the employees did meet.
C) The bonuses were needed to retain AIG's top talent, who were necessary as the company rebuilt.
D) The bonuses came from money AIG had on hand at the time of the collapse and did not come from the taxpayer-supplied funds.

Question 42

The categorical imperative test consists of:

A) individuals making ethical decisions with an eye toward potential consequences if everyone in society acted similarly.
B) individuals making ethical decisions with an eye toward potential consequences if only some in society acted similarly but not all.
C) individuals making ethical decisions with an eye toward potential consequences if no one else in society acted similarly.
D) individuals making ethical decisions with an eye toward potential consequences if most in society benefit even if some in society are harmed.

Question 43

Mighty Motors is a major automobile manufacturer with assembly plants in small towns throughout the United States. Mighty Motors is suffering losses in the current economy and has decided to stop manufacturing the Mighty Brute, an SUV with horrible gas mileage that simply isn't selling. The company will also be closing the only plant that is exclusively dedicated to manufacturing the Brute. This particular assembly plant is the primary employer in the town that it is located in. Who, among the following, would be considered a secondary stakeholder in this decision?

A) Ed, who has been working at the factory for ten years
B) See Through Glass, which manufactures the windshields and side windows exclusively used in the Brute
C) Mike, a town resident who teaches elementary school and drives a Hyundai Sonata
D) Tony, who runs a pizza shop that many of the plant employees go to for lunch and sometimes dinner

Question 44

When Enron's top executives were subpoenaed to testify before Congress, all of them exercised their constitutional right against self-incrimination except:

A) Kenneth Lay, founder and chief executive officer.
B) Jeffrey Skilling, chief operating officer.
C) Andrew Fastow, chief financial officer.
D) Rick Clausey, chief accounting officer.

Question 45

"What if everyone took these same actions" is a question sometimes called the:

A) universalization approach.
B) utilitarian approach.
C) functionality approach.
D) morality approach.

Question 46

Shelly is a state legislator. A bill to legalize gambling has been introduced in her state, and she is deciding how to vote on it. Shelly owns 10,000 shares of stock in a company that manufactures slot machines. She wants to remain ethical and is not sure if she should disclose her holdings and disqualify herself from the vote.

A) Shelly need not disclose her holdings and disqualify herself if her vote is based on what is best for the state and not for her.
B) Shelly need not disclose her holdings and disqualify herself from voting as long as she has nothing to do with negotiating the contract for the slot machine provider.
C) Shelly should disclose her holdings but not disqualify herself from voting because as long as she doesn't hide anything she can't be faulted.
D) Shelly should disclose her holdings and disqualify herself from voting because her potential conflict of interest, real or not, would make her actions ethically questionable.

Question 47

The moderate view of assessing corporate citizenship holds that:

A) corporate officers and boards of directors should provide the exclusive view of corporate responsibility.
B) corporate employees below the senior executive level should provide the exclusive view of corporate responsibility.
C) community groups where the corporation is located should provide the exclusive view of corporate responsibility.
D) the government should provide the exclusive view of corporate responsibility.

Question 48

The utilitarian approach to moral philosophy was founded by:

A) Jeremy Bentham.
B) Immanuel Kant.
C) Cicero.
D) Kenneth Lay.

Question 49

KAM Corp. has separate codes of ethics and conduct. Each of the following would likely be included in its code of ethics except:

A) expectations of privacy and dignity to be afforded others.
B) expectations of an individual's community service.
C) avoidance of conflicts of interest.
D) requirements of procedural due process and impartiality.

Question 50

In Grimshaw v. Ford Motor Company, if Ford had made the repairs to the cars, diminishing profit but enhancing customer safety, which theory of corporate social responsibility would Ford have been exhibiting?

A) the narrow view, or invisible hand theory
B) the moderate view, or government's hand theory
C) the hybrid view, or citizen's hand theory
D) the broad view, or management's hand theory

Question 51

After numerous threats from the federal government to enact laws and taxes to recoup bonus money paid to executive employees at AIG, of the reported $165 million paid out, how much was returned by those receiving bonuses?

A) approximately $50 million
B) approximately $75 million
C) approximately $100 million
D) approximately $120 million

Question 52

Modern Corporation operates a steel mill. It has never contributed anything to the local community, and it knowingly pollutes both the air and the river that runs by its mill. The corporation's reasoning is that the cost of installing pollution control devices would diminish its profits, and it doesn't support the community because it provides jobs and doesn't think it owes anything else to the citizens in its area. Donating to the community would also diminish profits. Which theory of corporate social responsibility is Modern Corporation exhibiting?

A) the narrow view, or invisible hand theory
B) the moderate view, or government's hand theory
C) the hybrid view, or citizen's hand theory
D) the broad view, or management's hand theory

Question 53

Arthur Andersen was:

A) Enron's largest customer.
B) Enron's largest supplier.
C) Enron's auditing firm.
D) Enron's largest competitor.

Question 54

AIG received a government bailout to save the company because:

A) had the company gone bankrupt, too many employees would have become unemployed without sufficient unemployment insurance to aid them.
B) had the company gone bankrupt, the effect on New York City, where it was situated, would have been a catastrophe, so the bailout was actually in part to keep New York City solvent.
C) had the company gone bankrupt, money already owed to the U.S. government prior to the collapse would never have been recovered, so the bailout was necessary to keep AIG in operation until it was solvent enough to repay the government.
D) had the company gone bankrupt, the U.S. financial infrastructure would have been severely or even irreparably damaged.

Question 55

Nobel Prize-winning economist Milton Friedman believed that:

A) managers who pursue social initiatives with corporate funds are morally correct and are pursuing a path that is required regarding their fiduciary duties owed to stakeholders.
B) Adam Smith's belief - that the common good is best served when economic institutions don't pursue a common good but instead pursue an economic advantage - is wrong and misguided.
C) the only responsibility a business has is to maximize shareholder wealth.
D) a deliberate amorality in corporate decision making is discouraged.

Question 56

Big Bucks Bank has published a detailed company ethical code based on an extensive values management process. The code specifies that all dealings with customers are to be fully documented and all dealings with the public not only are to be legal but should be based on what is best for the consumer. Everyone who deals with a customer is responsible for what he or she advises and must document conversations. Promotions and rewards will be based not only on productivity but also on fairness and how the customer is dealt with. At the weekly mortgage department meeting, Bill, the supervisor, informs his department that the loan production is way down and that they need to do whatever is necessary to step up the amount of loans granted. As a result, a number of questionable loans are granted that make money for Big Bucks but result in families being foreclosed on. Assuming the questionable loans to be unethically given, which trait of an ethical company has been breached?

A) Senior management has not articulated a clear vision of integrity.
B) Policies and practices of the mortgage department are not aligned with those of the organization.
C) Responsibility is collective rather than individual.
D) Nothing has been breached as this is common among even the most ethical of companies.

Question 57

Sara is broke but needs a gown to go to a formal dance sponsored by her company. She goes to a local dress shop and purchases an expensive gown she cannot afford. She wears the gown to the event, tucking in and hiding the price tag rather than removing it. She dances all night and the next day goes back to the shop and returns the dress. The store's policy is that it will accept returns for 30 days as long as the price tag is still attached.

A) Sara has not acted unethically because she complied with the store's policy.
B) Sara has not acted unethically because she got the idea from an article in a magazine that said that celebrities do things like this all the time.
C) Sara has not acted ethically because this is not an accepted act in the general society.
D) Sara has not acted ethically if she returns the dress without cleaning it but has acted ethically if it is cleaned and sanitized before returning it.

Question 58

Enron Corporation was a multinational conglomerate with a core business of:

A) oil and gas exploration and production.
B) energy trading.
C) insurance and stock speculation.
D) banking and mortgage lending.

Question 59

In Arthur Andersen LLP v. United States, Andersen's previous conviction was overturned by the Supreme Court because it was determined that:

A) the trial court's jury instructions were defective.
B) the government had not met its burden of proof.
C) Andersen was acting solely on Enron's directions and that only Enron could be held responsible.
D) no law existed at the time that Andersen acted that prohibited the shredding of corporate documents and that such law was passed after the scandal and could not be enforced retroactively.

Question 60

Fly High Aviation provides maintenance for executive jets based on private contracts with corporations that maintain airplanes for company use. Which of the following is least likely to be a Fly High stakeholder?

A) the mechanics who work for Sky High
B) the corporations that contract with Sky High for their services
C) the citizens who live near the airports that planes maintained by Sky High fly into
D) individuals who own Sky High stock

Question 61

Faber College, founded in 1904, is an integral part of its surrounding community. Which of the following is a primary stakeholder in Faber College?

A) the students
B) the authors of the textbooks sold to the bookstore for student purchase
C) the local bar that students frequent when they are not studying
D) the community newspaper that runs a weekly column discussing the events at Faber

Question 62

What ethical lapses was Arthur Andersen guilty of in its involvement in the Enron scandal? Explain.

Question 63

Each of the following is a key component in the creation and implementation of a company's values management program except:

A) identifying the values that the company should promote.
B) identifying the values that the company's peer competitors promote.
C) developing written policies and procedures to align behaviors with the company's preferred values.
D) training personnel about the policies and procedures implemented.

Question 64

Name the five-step process that a manager should use for ethical decision making.

Question 65

When a company is developing a code of ethics, what are the four key points that must be followed to create a usable and effective document?

Question 66

You are the CEO of a major corporation that is suffering financially in the current economy. Your board has tasked you with cutting employee-related costs by 5 percent. Recognizing and referencing the pros and cons of alternative approaches you could take and the ethical theories that apply, what would you do?

Question 67

Mike's Bikes is a bicycle sales and repair shop in a small city. It sells new and used bikes with a narrow profit margin and does repairs at minimal costs. Frequently, if a child comes into the shop with a broken part or a flat tire, Mike's makes the repair for free if the child has no money. Mike's also provides a free one-hour repair class for those who want to learn how to fix their bikes. At large local organized bike rides Mike's provides free services, asking only for voluntary donations. Which theory of corporate social responsibility is Mike's exhibiting?

A) the narrow view, or invisible hand theory
B) the moderate view, or government's hand theory
C) the hybrid view, or citizen's hand theory
D) the broad view, or management's hand theory

Question 68

The triple bottom line in the perspective of corporate social responsibility emphasizes each of the following except:

A) creation of profit.
B) creation or destruction of environmental value.
C) creation of social value.
D) creation of private value.

Question 69

Why is the case of Grimshaw v. Ford Motor Company looked at as an example of the failing of the invisible hand and government's hand approaches to corporate social responsibility?

Question 70

George is 85 years old and Grace, his wife, is 83. They are on a fixed retirement budget and have no disposable income and no savings. Grace's doctor informs her that she requires a particular medicine that costs $84. They don't have money to buy the medicine, there are no relatives or friends to ask, and there are no programs that can provide them with the medicine money. Feeling he has no choice, George goes to the local bank and robs it, handing the teller a note demanding $84 in small bills. Discuss George's action from a moral and ethical point of view.
This is an example of a situation in which someone acted illegally but it could be argued that the act was indeed ethical. From a morals perspective, George broke the law and therefore violated standards, the criminal code, set by society. From an ethical perspective, some could argue that even under the circumstances a criminal act cannot be ethical; however, many would argue that the ethical nature of the act should be reviewed based on the motivation for the act. Is it ethical to steal to save a loved one's life if there is no alternative?

Question 71

In Grimshaw v. Ford Motor Company, Ford was found liable because:

A) Ford ignored a government recall warning to the detriment of its customers.
B) Ford placed profit over the potential impact to customers, including potential loss of customers' lives.
C) Ford improperly designed the Pinto and did few, if any, safety tests, so the flaw wasn't uncovered until accidents started occurring.
D) Ford acted unethically by hiding the fact that lawsuits were being filed for the Pinto's defect from the government and the general public.

Question 72

Assume that you have money you'd like to invest in stock. Would you prefer to invest in a company that evidences values based on the invisible hand theory, the government's hand theory, or the management's hand theory of operations? Explain reasons for your choice, and indicate why the rejected choices were not chosen.

Question 73

The reputed mastermind of the Enron business model was:

A) Kenneth Lay, founder and chief executive officer.
B) Jeffrey Skilling, chief operating officer.
C) Andrew Fastow, chief financial officer.
D) Rick Clausey, chief accounting officer.

Question 74

That corporations have a social responsibility and that profitability should be secondary reflects:

A) the narrow view, or invisible hand theory.
B) the moderate view, or government's hand theory.
C) the hybrid view, or citizen's hand theory.
D) the broad view, or management's hand theory.

Question 75

Which of the following is not a challenge a common challenge to business ethics and values management?

A) Ethics cannot be taught.
B) Complying with the law is all that a corporation needs to do to remain ethical.
C) Ethics cannot be managed.
D) Success is measured in profits and losses, not in ethical conduct.

Question 76

What is the difference between ethics and morals?

Question 77

As a result of the AIG bailout, the U.S. government received a(an) ________ stake in the company.

A) 50 percent
B) 60 percent
C) 70 percent
D) 80 percent

Question 78

Valarie is employed as a sales representative at a major corporation. On occasion she feels that the men at her office stare at her, and they occasionally make suggestive comments that upset her and make her uncomfortable. When she complains to her human resource department, the department informs her that it will send out a memo asking the male employees to start acting more professionally but it doesn't feel that the conduct has broken any laws. When she says the company and the male employees are not acting ethically, that implies that this is a legal but not an ethical matter. Do you agree or disagree, and why?

Question 79

Harry seeks to implement a policy of enhanced values management in his office. Which of the following is not a direct outcome of values management in the workplace that Harry can expect?

A) Managing values in Harry's workplace will legitimize managerial actions.
B) Managing values in Harry's workplace will strengthen the cohesiveness and balance of his organization's culture.
C) Managing values in Harry's workplace will enhance profit and profitability.
D) Managing values in Harry's workplace will cultivate greater sensitivity to the impact of the company's values and messages.

Question 80

What were the reasons offered to defend the fact that AIG had paid $165 million in bonuses to certain employees?