Understanding Business 11th Edition Nickels Test Bank 1

Chapter 04 - Demanding Ethical and Socially Responsible Behavior
Understanding Business 11th

Edition Nickels Test Bank
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TEST PLANNING TABLE FOR CHAPTER 4
LL:1 LL:2 LL:3

Knows Basic Understands Applies Principles
Learning Objective
Terms and Facts Concepts and
Principles
1. Explain why obeying 1,2,3,4,5,6,7, 8,9,10,11,12,13,14,15, 17,18,

the law is only the first 145,146,147,148 16, 157,158,159,160,161,
step in behaving 149,150,151,152,153, 162
ethically. 154,155,156~
2. Ask the three 19,20,21,22,23,24,25,26, 27,28,29,30,31,32,33~, 34,35,36,37,38,

questions you need to 163,164,165,166,167 168,169,170 171,172,173,
answer when faced with 264,
a potentially unethical 270*
action.
3. Describe 39,40,41,42,43,44,45,46, 53,54,55,56,57,58, 59,

management’s role in 47,48,49,50,51,52. 179,180,181,182 183,184,185
setting ethical standards. 174,175,176,177,178
4. Distinguish between 60,61,62,63,64,65,66,67, 69,70,71,72,73,74, 75,76,77,78,79,

compliance-based and 68, 195,196,197,198,199, 201,202,203,204,205,
integrity-based ethics 186,187,188,189,190,191, 200 206,
codes, and list the six 192,193,194 261,263,
steps in setting up a 267*
corporate ethics code.
4-1
5. Define corporate 80,81,82,83,84,85,86,87, 109,110,111,112,113, 120,121,122,123,124,

social responsibility and 89,90,91,92,93,94,95,96, 114,115,116,117,118, 125,
compare corporations’ 97,98,99,100,101,102,103, 119, 239,240,241,242,243,
responsibilities to various 104,105,106,107,108, 227,228,229,230,231, 244,245,246,247,248,
stakeholders. 207,208,209,210,211,212, 232,234,235,236,237, 249,
213,214,215,216,217,218, 238 262,265,266,
219,220,221,222,223,224, 268*,269*,271*
225,226
6. Analyze the role of 126,127,128,129,130,131, 134,135,136,137,138,] 141,142,143~,144~,

U.S. businesses in 132,133, 139,140~, 259,260
influencing ethical 250,251,252,253,254 255,256,257~,258~
behavior and social
responsibility in global
markets.
Total number of test items: 271
True/false questions are in plain text.

Multiple choice questions are in bold text.
Questions on boxed material are in bold text with a tilde~.
Essay questions are in bold underlined text.
Minicase questions are in bold with an asterisk*.
4-2
Chapter 04
Demanding Ethical and Socially Responsible Behavior and Answer Key
True / False Questions
1. The Enron scandal illustrates the difference between unethical behavior and illegal
behavior.
Answer: False
AACSB: Ethics
Bloom’s: Remember
Learning Objective: 04-01 Explain why obeying the law is only the first step in behaving ethically
Level of Difficulty: 1 Easy
Topic: The Ethical Concerns that Affect Business
2. Ethical behavior requires more than following the law.
Answer: True
AACSB: Ethics
Bloom’s: Remember
3. Legal behavior and ethical behavior are basically the same.
Answer: False
AACSB: Reflective Thinking
Bloom's: Ethics
4. A society gets into trouble when people consider only what is illegal and not also what is
ethical or unethical.
Answer: True
AACSB: Ethics
Bloom’s: Remember
Topic: Ethics for the Individual
4-3
5. Ethical behavior refers to the standards that are accepted by society as right or wrong.
Answer: True
AACSB: Ethics
Bloom’s: Remember
6. People should look at each situation individually and decide for themselves if it is right or
wrong.
Answer: False
AACSB: Ethics
Bloom’s: Remember
7. Given the level of diversity within the United States, agreement on common standards of
ethical behavior is unachievable.
Answer: False
AACSB: Ethics
Bloom’s: Remember
8. An accurate statement regarding this chapter is: "Business law establishes ethical
behavior."
Feedback: The most basic step in ethical behavior is the law, but ethics go far beyond
legality.
Answer: False
AACSB: Ethics
Bloom’s: Understand
Level of Difficulty: 2 Medium
4-4
9. Legal behavior is directly related to our relationships with others, while ethical behavior is
not.
Feedback: Legal behavior and ethical behavior are directly related to our relationships with
others.
Answer: False
AACSB: Ethics
10. Legal behavior is a first step toward ethical behavior.
Feedback: Ethical behavior requires more than following the law, but following the law is an
important first step.
Answer: True
AACSB: Ethics
11. Laws that protect us from fraud, theft and violence determine ethical behavior.
important first step. Legality is narrower.
Answer: False
AACSB: Ethics
12. Moral behavior refers to behavior that is accepted by society as right versus wrong.
Feedback: Ethics defines the standards of moral behavior, or the attempt to live by certain
values and standards of conduct accepted by society as right rather than wrong.
Answer: True
AACSB: Ethics
4-5
13. Ethical behavior focuses on treating others fairly.
Feedback: Ethical behavior focuses on proper relations with other people. An ethical person
will treat others with honesty and sincerity. Perhaps the essence of this behavior is the Golden
Rule, "Do unto to others as you would have them do unto you."
Answer: True
AACSB: Ethics
14. Making accounting records more transparent may help restore trust in the free-market
system and leaders in general.
Feedback: Given the ethical lapses that are so prevalent today, several things can be done to
restore trust in the free-market system and leaders in general: (1) those who have broken the
law need to be punished accordingly, including religious people, government people, and
businesspeople; (2) new laws making accounting records more transparent should be passed;
and (3) making businesspeople and others more accountable may help.
Answer: True
AACSB: Ethics
15. Punishing business leaders who have broken the law may help restore trust in the free-
market system and leaders in general.
Answer: True
AACSB: Ethics
4-6
16. Making businesspeople more accountable for company actions may help restore trust in
the free-market system and leaders in general.
Answer: True
AACSB: Ethics
17. People involved in business may be tempted to do something unethical in order to

increase sales and profits, but rarely do because if they are caught, our legal system will
deal harshly with them.
Feedback: Many immoral and unethical acts fall well within our laws, but "white collar"
crime has not always been harshly punished.
Answer: False
AACSB: Ethics
Bloom’s: Apply
Level of Difficulty: 3 Hard
18. Jake and his college friends frequent a small pub on weekends. Last weekend, after a few
beers, one of his friends decided to take the salt and pepper shakers from their table
because they needed a set at their apartment. In this situation, this was not a particularly
questionable activity because it was a restaurant where one pays for these extras.
Feedback: Ethical behavior should not be situationally based. If the act is appropriate
behavior, then it is probably appropriate all of the time. This behavior in this situation,
however, is clearly inappropriate behavior.
Answer: False
AACSB: Ethics
Bloom’s: Apply
4-7
19. Ethical behavior involves the clear and easy choice of right and wrong actions toward
others.
Answer: False
AACSB: Reflective Thinking
Bloom’s: Remember
Learning Objective: 04-02 Ask the three questions you need to answer when faced with a potentially unethical action
20. Both managers and workers cite low managerial ethics as a major cause of American
businesses' competitive woes.
Answer: True
AACSB: Ethics
Bloom’s: Remember
21. A common form of cheating in schools today is plagiarizing online material.
Answer: True
AACSB: Ethics
Bloom’s: Remember
22. Making ethical choices is always easy.
Answer: False
AACSB: Ethics
Bloom’s: Remember
23. Two recent studies found a strong correlation between academic dishonesty among
undergraduates and dishonesty at work.
Answer: True
AACSB: Ethics
Bloom’s: Remember
4-8
24. The question "Is it legal?" establishes ethical behavior.
Answer: False
AACSB: Ethics
Bloom’s: Remember
25. It can be very difficult to maintain a balance between ethics and goals such as pleasing
stakeholders.
Answer: True
AACSB: Ethics
Bloom’s: Remember
26. Trying to make decisions that will benefit all parties involved is consistent with the
question "How will it make me feel about myself?"
Answer: False
AACSB: Ethics
Bloom’s: Remember
27. While telling an abusive joke about an ethnic group may not be unlawful, it is unethical.
Feedback: Humor at someone else's expense is an example of unfair treatment of others.
Answer: True
AACSB: Ethics
Bloom’s: Remember
4-9
28. An ethical manager's decisions are based only on the following questions: "Is it legal?"
and "Is it profitable?"
Feedback: Ethics-based managers ask themselves the following questions when faced with a
potentially ethical dilemma: "Is it legal?" "Is it balanced?" and "How will it make me feel
about myself?"
Answer: False
AACSB: Ethics
29. Behavior that is in conflict with your values and sense of right and wrong can damage
your self-esteem.
Feedback: Ethics-based managers do what is proper as well as what is profitable. Decisions

that go against their sense of right and wrong corrode their self-esteem.
Answer: True
AACSB: Ethics
30. When facing an ethical dilemma, it is often helpful to discuss the situation with your
supervisor because ethical decisions will always withstand scrutiny.
Feedback: The ethics check question "How will it make me feel about myself?" focuses our
attention on the impact of decisions that go against our sense of right and wrong. Decisions
that corrode our self-esteem will ultimately injure the organization.
Answer: True
AACSB: Ethics
4-10
31. Business behavior determines the ethics of society. We can improve society's moral and
ethical behavior by first making a commitment to improving business's moral and ethical
behavior.
Feedback: Ethical behavior begins with you and me. We cannot expect society to become
more moral and ethical unless we as individuals commit to becoming more moral and ethical
ourselves.
Answer: False
AACSB: Ethics
32. Utilizing the phrase "the ends justify the means" as a corporate value system can
negatively impact company morale and competitiveness.
Feedback: In a recent study, both managers and workers cited low managerial ethics as a
major cause of our competitive woes. Employees reported that they often violate safety
standards and goof off as much as seven hours a week.
Answer: True
AACSB: Ethics
4-11
33. According to the Making Ethical Decisions box, after ex-cons have completed their
sentences, they should not be allowed to start their own businesses.
Feedback: The box profiles Catherine Rohr, an entrepreneur and activist who helps ex-cons
get back on their feet after leaving prison. She founded the Prisoner Entrepreneurship
Program (PEP) in 2004 and assists ex-cons in starting their own businesses.
Answer: False
AACSB: Ethics
Topic: How to Promote and Maintain an Ethical Environment
34. Barney extends his lunch break beyond the allotted time. Wilma uses the office telephone
for unauthorized personal phone calls. Fred misrepresents his product to a potential
customer. All of these are examples of unethical behavior.
Feedback: All three situations violate the ethics-check questions of "Is it legal?" "Is it
balanced?" and "How will it make me feel about myself?"
Answer: True
AACSB: Ethics
Bloom’s: Apply
35. In reality, ethical behavior depends on the situation. For example, in negotiating a contract
with your employees, the way they win higher wages is by your losing the fight to hold
down labor costs. You realize it is a win-lose relationship.
Feedback: Every situation cannot be completely balanced, but it is important to the health of
our relationships that we avoid major imbalances over time. An ethics-based manager has a
win-win attitude.
Answer: False
AACSB: Ethics
Bloom’s: Apply
4-12
36. You are in a business meeting at work that requires your group to make an ethical
decision. Your willingness to post the final decision on the bulletin board in the break
room for all to see passes the test: "How will it make me feel about myself?"
Feedback: By posting the decision on the company bulletin board, you are demonstrating that
you stand behind the decision that was made, that you believe it is an ethical decision, and
that you do not need to hide your actions from your co-workers.
Answer: True
AACSB: Ethics
Bloom’s: Apply
37. As the human resources director for your company, it is your job to evaluate the
company's benefits plan. Although several workers utilize the company day care facility,
the facility costs the firm considerably more than another benefit might cost, such as
having an on-site physician. The on-site physician services are supported by insurance,
and the physician actually rents space from the company. Under these circumstances,
eliminating the day care is a balanced decision.
Feedback: Winning at the expense of others is not a balanced decision. The health of our
relationships with our co-workers is very important. We should avoid major imbalances and
strive to make decisions that benefit all employees.
Answer: False
AACSB: Ethics
Bloom’s: Analyze
4-13
38. On her company website, Ali asks customers who fill orders to place a check-mark in a
box if they are willing to let her share their information with her suppliers. By asking this
question, Ali is addressing privacy issues, and covering her actions in case someone
should try to sue her for sharing private information. She is responding to the question,
"Are my proposed actions legal?"
Feedback: Asking the question, "Are my proposed actions legal?" is the first step toward
addressing ethical concerns. By asking and answering this question, the business owner takes
the first step in determining if the action is acceptable behavior.
Answer: True
AACSB: Ethics
Bloom’s: Apply
39. Trust between workers and managers must be based on a foundation of fairness, honesty,
openness, and moral integrity.
Answer: True
AACSB: Ethics
Bloom’s: Remember
Learning Objective: 04-03 Describe management’s role in setting ethical standards
40. A growing number of people feel that an employee's ethics are a personal matter, and have
nothing to do with management.
Answer: False
AACSB: Ethics
Bloom’s: Remember
41. The majority of CEOs believe that employee misconduct results from the failure of
organizational leadership to establish ethical standards.
Answer: True
AACSB: Ethics
Bloom’s: Remember
4-14
42. Management can create an environment in which unethical behavior can develop.
Answer: True
AACSB: Ethics
Bloom’s: Remember
43. Corporate values, like personal values, are learned by observing what others do.
Answer: True
AACSB: Ethics
Bloom’s: Remember
44. Effective corporate values start with employees and develop throughout the organization
to include top management.
Answer: False
AACSB: Ethics
Bloom’s: Remember
45. In order to maintain a good reputation, it is good strategy to manage your business
ethically.
Answer: True
AACSB: Ethics
Bloom’s: Remember
46. A business should be managed ethically to keep existing customers and attract new
customers.
Answer: True
AACSB: Ethics
Bloom’s: Remember
4-15
47. One good reason for managing a business ethically is to help reduce employee turnover.
Answer: True
AACSB: Ethics
Bloom’s: Remember
48. In order to do the right thing for all stakeholders, a business should be managed ethically.
Answer: True
AACSB: Ethics
Bloom’s: Remember
49. Overly ambitious business goals and employee incentives can lead to unethical behavior.
Answer: True
AACSB: Ethics
Bloom’s: Remember
50. An ethic of justice is based on a sense of responsibility to reduce actual harm or suffering.
Answer: False
AACSB: Ethics
Bloom’s: Remember
51. An ethic of care is based on a sense of responsibility to reduce actual harm or suffering.
Answer: True
AACSB: Ethics
Bloom’s: Remember
4-16
52. An ethic of care is based on principles like justice, fairness, equality, or authority.
Answer: False
AACSB: Ethics
Bloom’s: Remember
53. Employers should proceed cautiously when designing an employee incentive program that
rewards employees strictly on increased sales.
Feedback: Increased pressure on employees to meet sales quotas can create an environment
where management is insensitive to ethical considerations. The text presents an example of
this issue with cell phone reps.
Answer: True
AACSB: Ethics
Bloom’s: Remember
54. "Do what I say, not what I do" can be an effective code of conduct to instill corporate
values.
Feedback: People learn their standards and values from observing what others do. They
seldom adopt values strictly from what others say.
Answer: False
AACSB: Ethics
Bloom’s: Remember
55. Employees observe behavior and adopt standards of right and wrong.
Feedback: People learn their standards of values from observing what others do, but not
particularly from hearing what they say.
Answer: True
AACSB: Ethics
4-17
56. "Actions speak louder than words!" is an old saying that refers to the fact that people's
actions—how they act as opposed to what they say—are often testament to their true
ethical values.
Feedback: People adopt values from observing what others do, not particularly from hearing
what they say, making the actions of others more important in framing ethical behavior than
what people say.
Answer: True
AACSB: Ethics
57. As a manager, you have a responsibility for the unethical behavior of your employees.
Feedback: Individuals do not usually act alone. They need the implied, if not the direct,
cooperation of others to behave unethically in a corporation.
Answer: True
AACSB: Ethics
58. In order to avoid the costly act of being sued in court, it makes good sense to manage your
business ethically.
Feedback: There are many reasons why a business should be managed ethically: (1) to
maintain a good reputation; (2) to keep existing customers; (3) to attract new customers; (4) to
avoid lawsuits; (5) to reduce turnover; (6) to avoid government intervention; (7) to please
customers, employees, and society; and (8) because it is the right thing to do.
Answer: True
AACSB: Ethics
4-18
59. Several years ago, the garment and soft goods industry agreed to adopt higher ethical
standards with respect to contract manufacturers that produce their goods. The leadership
agreed that this was a good approach in order to avoid the U.S. government’s intervening
and creating new laws to force the industry to only work with foreign manufacturers who
operate with high ethical standards. This was sensible strategy on the part of the garment
and soft goods industry.
Feedback: A business should manage ethically for many reasons. Managers will often
evaluate the cost of ignoring poor ethical behavior in light of the fact that government will
often create laws that punish companies that misbehave.
Answer: True
AACSB: Ethics
60. Integrity-based ethics codes are based on avoiding legal punishment.
Answer: False
AACSB: Ethics
Bloom’s: Remember
Learning Objective: 04-04 Distinguish between compliance-based and integrity-based ethics codes, and list the six steps in setting up a
corporate ethics code
61. Compliance-based ethics codes are based on preventing unlawful behavior.
Answer: True
Page: 96
AACSB: Ethics
Bloom’s: Remember
62. Businesses with a formal code of ethics are less common now than in the past.
Answer: False
AACSB: Ethics
Bloom’s: Remember
4-19
63. Compliance-based ethics codes focus on preventing unlawful behavior by increasing

control and by penalizing wrongdoers.
Answer: True
AACSB: Ethics
Bloom’s: Remember
64. In order to be successful, efforts to improve the ethical behavior of businesses must begin
with top management's support of a corporate code of conduct.
Answer: True
AACSB: Ethics
Bloom’s: Remember
65. People who report illegal or unethical behavior are called whistleblowers.
Answer: True
AACSB: Ethics
Bloom’s: Remember
66. As a result of pressure from business lobbyists, Congress failed to pass legislation
protecting whistleblowers.
Answer: False
AACSB: Ethics
Bloom’s: Remember
4-20
67. The job of an ethics officer is to serve as a counselor for employees and as an investigator
for the company.
Answer: True
AACSB: Ethics
Bloom’s: Remember
68. Enforcement is perhaps the most important step in an effective code of ethics.
Answer: True
AACSB: Ethics
Bloom’s: Remember
69. A code of ethics designed to avoid criminal misconduct is an example of a compliance-

based ethics code.
Feedback: Compliance-based ethics codes emphasize the prevention of unlawful behavior by

increasing control and by penalizing wrongdoers.
Answer: True
AACSB: Ethics
70. An integrity-based ethics code moves beyond legal compliance in order to create a "do-
the-right-thing" climate.
Feedback: An integrity-based ethics code emphasizes ethically sound behavior and shared
accountability among employees.
Answer: True
AACSB: Ethics
4-21
71. To be effective, an organization's code of ethics needs to be communicated to outsiders

such as suppliers, subcontractors, and customers.
Feedback: Often pressure to violate ethical standards comes from the outside.
Communicating the organization's code of ethics to outsiders will help employees resist
temptation.
Answer: True
AACSB: Ethics
72. Since most ethics violations are small and rather insignificant in nature, employees need
to understand that addressing these issues is secondary to making profits. CEOs may be
justified in putting these on the back-burner, waiting for more convenient moments to
address them.
Feedback: Ethics violations should be addressed in a timely manner, and with timely action.
By enforcing the ethics code with timely action, leadership impresses upon all employees that
the code is serious.
Answer: False
AACSB: Ethics
4-22
73. America's business ethics can improve simply by requiring written contracts with
employees, customers, and owners. This alone will do the job!
Feedback: Six steps can help improve America's business ethics: (1) top management must
adopt and unconditionally support an explicit corporate code of conduct; (2) employees must
understand that expectations for ethical behavior begin at the top and that senior management
expects all employees to act accordingly; (3) managers and others must be trained to consider
the ethical implications of all business decisions; (4) an ethics office must be set up; (5)
outsiders must be told about the ethics program; (6) the ethics code must be enforced. Written
contracts alone will not improve America's business ethics.
Answer: False
AACSB: Ethics
74. An important step in improving U.S. business ethics is for companies to hire
whistleblowers.
Feedback: Whistleblowers report illegal or unethical behavior. They are not purposefully
hired by firms. However, legislation now protects employees who act as whistleblowers from
corporate retaliation in the event that the company is convicted of illegal or harmful activity.
Answer: False
AACSB: Ethics
75. Dewy Cheatum encourages his employees to create and use legal loopholes to gain a
competitive advantage. In keeping within the legal limits of the law, the employees are
within their compliance-based ethics rights.
Feedback: The objective of a compliance-based ethics code is to avoid criminal misconduct.
Answer: True
AACSB: Ethics
Bloom’s: Apply
4-23
76. The brewers of Budweiser beer encourage their customers to drink responsibly. This
reflects a compliance-based approach to ethics.
Feedback: A compliance-based approach focuses on avoiding criminal misconduct. It is an

integrity-based code of ethics, on the other hand, that encourages social responsibility in the
use of the firm's products.
Answer: False
AACSB: Ethics
Bloom’s: Apply
77. Cigarette producers label their products with warnings of potential health hazards. Due to
the fact that this is a government-mandated disclosure, it is part of the industry's
compliance-based ethics.
Feedback: Compliance-based ethics emphasize preventing unlawful behavior. Government

regulations require health warnings on cigarette packages and advertisements.
Answer: True
AACSB: Ethics
Bloom’s: Apply
78. In light of the fact that over 60% of all theft in retail stores is committed by employees,
New Generations Clothier, Inc., requires that managers personally unlock fitting rooms
for all sales associates and count the number of items associates take to the fitting rooms.
This policy is written in the company manual. Breaking with the policy is grounds for
dismissal. It is correct to say that this is part of New Generations' compliance-based
ethics.
Feedback: Compliance-based ethics are internal rules and policies that govern the way a
company operates. Noncompliant employees are breaking the law and subject to reprimand.
In some cases they can lose their jobs.
Answer: True
AACSB: Ethics
Bloom’s: Apply
4-24
79. At Fast-Track Financial Services, it is not unusual for a financial consultant to lose a
client to another consultant working out of the same office. Clients have a right to do
business with whomever they choose. If it is a high–net worth client, with the potential for
high commissions on sales, the incentive to steal a fellow worker's client exists because
the firm's culture has not established integrity-based ethics to deter this activity.
Feedback: Integrity-based ethics refers to the organization's guiding values. These ethics
create an environment of ethically sound behavior. By law, the client may do business and/or
solicit the services of any consultant at the company, and overzealous consultants who want to
increase their commissions may be tempted to convince others' clients that they have better
ideas for making money.
Answer: True
AACSB: Ethics
Bloom’s: Apply
80. Corporate social responsibility refers to the concern businesses have for the welfare of
society.
Answer: True
AACSB: Ethics
Bloom’s: Remember
Learning Objective: 04-05 Define corporate social responsibility and compare corporations’ responsibilities to various stakeholders
Topic: Corporate Social Responsibility
81. Corporate philanthropy refers to the position a firm takes on issues that affect society.
Answer: False
AACSB: Ethics
Bloom’s: Remember
82. A charitable donation contributed by a corporation is an example of corporate

philanthropy.
Answer: True
AACSB: Ethics
Bloom’s: Remember
4-25
83. Business issues such as minority hiring practices and pollution control fall under the
umbrella of corporate responsibility.
Answer: True
AACSB: Ethics
Bloom’s: Remember
84. As a show of corporate responsibility to your customers, your firm may elect to provide
more information regarding your product than the law demands.
Answer: True
AACSB: Ethics
Bloom’s: Remember
85. Corporate philanthropy refers to the position a firm takes on social and political issues.
Answer: False
AACSB: Ethics
Bloom’s: Remember
86. When stating a firm position on various social and political issues, corporate policies
often commit company profits to back these positions.
Answer: True
AACSB: Ethics
Bloom’s: Remember
87. Recent surveys indicate that students are willing to agree to lower salaries if they know
their employer is participating in socially responsible activities.
Answer: True
AACSB: Ethics
Bloom’s: Remember
4-26
88. In the discussion of corporate social responsibility, stakeholders and stockholders refer to
the same group.
Answer: False
AACSB: Ethics
Bloom’s: Remember
89. One responsibility of business is to satisfy customers by offering them goods and services
with real value.
Answer: True
AACSB: Ethics
Bloom’s: Remember
Topic: Responsibilities to a Firm's Stakeholders
90. Studies show that consumers are not concerned about the socially conscious behavior of
the firms with which they do business.
Answer: False
AACSB: Ethics
Bloom’s: Remember
91. Customers learn to trust companies that consistently demonstrate good behavior. Those
same companies can lose this position with one socially irresponsible activity.
Answer: True
AACSB: Ethics
Bloom’s: Remember
92. Some investors believe it makes financial as well as moral sense to invest in companies
whose practices promote sensitivity toward the environment.
Answer: True
AACSB: Ethics
Bloom’s: Remember
4-27
93. "Fair disclosure" refers to a Securities and Exchange Commission rule that states when a
publicly traded firm discloses information, it must share it with everyone.
Answer: True
AACSB: Ethics
Bloom’s: Remember
94. Insider trading occurs when employees of publicly traded companies use private company
information to profit in the stock market.
Answer: True
AACSB: Ethics
Bloom’s: Remember
95. Insider trading provides the information needed for the securities markets to operate fairly
and efficiently.
Answer: False
AACSB: Ethics
Bloom’s: Remember
96. Businesses have a social responsibility to create jobs.
Answer: True
AACSB: Ethics
Bloom’s: Remember
97. Promoting social justice is a responsibility of society, but not business.
Answer: False
AACSB: Ethics
Bloom’s: Remember
4-28
98. In the long run, a firm's loyalty to their employees can pay off financially.
Answer: True
AACSB: Ethics
Bloom’s: Remember
99. Getting even is one of the most powerful incentives for good people to do bad things.
Answer: True
AACSB: Ethics
Bloom’s: Remember
100. A recent study revealed that employee fraud causes 30% of all business failures.
Answer: True
AACSB: Ethics
Bloom’s: Remember
101. The green movement has turned the heads of very few firms.
Answer: False
AACSB: Ethics
Bloom’s: Remember
102. A social audit is a systematic evaluation of an organization's progress toward

implementing programs that are profitable.
Answer: False
AACSB: Ethics
Bloom’s: Remember
4-29
103. The green movement has resulted in a positive impact on U.S. jobs.
Answer: True
AACSB: Ethics
Bloom’s: Remember
104. A firm's net social contribution is a company report that measures the difference
between its positive social contributions and its negative social impact.
Answer: True
AACSB: Ethics
Bloom’s: Remember
105. A public good is one that everyone gets to enjoy regardless of who pays for it.
Answer: True
AACSB: Ethics
Bloom’s: Remember
106. When it comes to ethics and social responsibility, the public's perception of a firm is
as important as what the firm does.
Answer: True
AACSB: Ethics
Bloom’s: Remember
107. A social audit measures a firm's progress in the area of worker-management relations.
Answer: True
AACSB: Ethics
Bloom’s: Remember
4-30
108. A list of "watchdogs" (including customers, socially conscious investors, and

environmentalists) monitor how well firms enforce their ethical and social responsibility
policies.
Answer: True
AACSB: Ethics
Bloom’s: Remember
109. A business that takes a public position on a political issue that affects the welfare of
society is exercising corporate social responsibility.
Feedback: Corporate policy is one dimension of social responsibility. It refers to the position
a firm takes on issues that affect the firm and society, including political issues.
Answer: True
AACSB: Ethics
110. Defining a socially responsible company is complicated. Businesses differ from other
businesses, as well as the people they serve, on what we mean by "socially responsible."
Feedback: The majority of MBA students surveyed said that they would take a lower salary to
work for a socially responsible company. But when asked to define a socially responsible
company, things got complicated. It appears we want to be socially responsible; we just can't
agree on what it involves.
Answer: True
AACSB: Ethics
4-31
111. Opponents of corporate social responsibility argue that firms which use their profits to
promote social causes are not being fair to investors who provided the funds for the
purpose of financial gain.
Feedback: Critics, including the late Milton Friedman, believe that a firm is first and foremost
responsible to its owners (investors) who provided the funds for growth and financial gain.
Some go so far as to say that the act is essentially "stealing from investors."
Answer: True
AACSB: Ethics
112. A corporate policy should never make a value statement about the environment or
other social and political issues, because it is doubtful the company can live up to the
proclamation.
Feedback: Corporate policies refer to the position a firm takes on social and political issues.
As part of being socially responsible, firms make policy and commit to actively participating
in activities that promote the welfare of society.
Answer: False
AACSB: Ethics
113. Corporate social responsibility covers all those social issues outside our businesses
that affect customers and the environment, but not internal issues such as employee
considerations and work safety. Internal issues are covered by business laws.
Feedback: Corporate responsibility includes everything from hiring minority workers to

making safe products, minimizing pollution, using energy wisely, and providing a safe work
environment.
Answer: False
AACSB: Ethics
4-32
114. Some experts feel that corporate social responsibility means solely making money for
stockholders.
Feedback: Milton Friedman, a Nobel laureate in economics, said that corporate social
responsibility means making money for your stockholders. He thought that doing anything
else was moving dangerously toward socialism.
Answer: True
AACSB: Ethics
115. As a response to the Enron scandal, the federal government now requires social audits
of all U.S. businesses.
Feedback: A social audit is a response to an integrity-based approach to ethics, which goes

beyond what is required by law. Firms voluntarily prepare a self-evaluation of the progress
made in implementing socially responsible and responsive programs.
Answer: False
AACSB: Ethics
116. In a famous speech, former President John F. Kennedy proposed that businesses had
four basic rights, and in his own words, he proclaimed that "each one of them leads us
back to the right to keep the profits from one's business."
Feedback: Kennedy's four basic rights proposal was directed toward the rights of consumers.
They are (1) the right to safety, (2) the right to be informed, (3) the right to choose, and (4) the
right to be heard.
Answer: False
AACSB: Ethics
4-33
117. Often it is the threat of negative publicity that pressures businesses to enforce their
corporate code of ethics.
Feedback: One important thing to remember is that it isn't enough for a company to be right
when it comes to ethics and social responsibility. It also has to convince its customers that it's
right.
Answer: True
AACSB: Ethics
118. Although the green movement is a social trend, it is difficult to predict its future
contributions to society.
Feedback: Currently renewable-energy and energy-efficiency industries account for 9 million

jobs and by 2030, the prediction is that this figure will jump to 40 million more jobs in
engineering, manufacturing, construction, accounting, and management.
Answer: False
AACSB: Ethics
119. Out-Tel, a computer chip manufacturer, knowingly sold defective chips and failed to
notify customers of the potential problems. When the problem became public knowledge,
the firm's stock price fell dramatically. This illustrates the value that investors place on the
ethical behavior of businesses.
Feedback: The perception of unethical business practices will cause profit-seeking, socially
conscious investors to react to ethically unfavorable circumstances.
Answer: True
AACSB: Ethics
Bloom’s: Apply
4-34
120. At a recent town hall meeting, citizens expressed concern regarding the impact of a
proposed new gambling casino. The owner of the proposed casino responded, "I don't
know what all of this fuss is about. I'm just a businessman trying to earn a profit, provide
new jobs, and pay taxes." His response reflects an overall commitment to corporate social
responsibility.
Feedback: Corporate social responsibility is the concern businesses have for the welfare of
society. While a firm's primary orientation may be toward the interests of investors, the
welfare of all stakeholders should be considered.
Answer: False
AACSB: Ethics
Bloom’s: Apply
121. Recently, a large insurance company in the Midwest made a public commitment
toward corporate philanthropy when it dedicated 3% of its profits toward the cultural and
environmental concerns of the large metropolitan area that houses its corporate
headquarters. The CEO stated, "In honor of several hundred employees that come to work
here every day, we want to give something back." In light of the fact that this is only
helping one metropolitan area, the donation falls outside the realm of corporate social
responsibility.
Feedback: This is clearly corporate philanthropy, a form of corporate social responsibility.

The firm is committed toward acting responsibly within society. These acts have no physical
or political boundaries.
Answer: False
AACSB: Ethics
Bloom’s: Apply
4-35
122. Fresh Walls Paint Company promotes its products as nontoxic and made from natural,
organic substances that are safe for all persons including those with asthma and other lung
conditions. In order to live up to customer expectations, it must walk the walk and not just
talk the talk! If consumers learn that Fresh Walls' paints do not meet their expectations,
their reaction is likely to tarnish the company's image.
Feedback: It's not enough for companies to brag about their social responsibility efforts. They
must live up to the expectations they raise or face the consequences. Customers want to do
business with companies they can trust.
Answer: True
AACSB: Ethics
Bloom’s: Apply
123. About 10 years ago, there were several bank mergers. Shortly after Big Bucks Bank
bid on The Bank of Plenty, a story hit the local newspapers about the investigation into the
purchase of several thousand shares of stock of the Bank of Plenty by three of its top
executives, just prior to the announcement that Big Bucks Bank planned to buy Bank of
Plenty. Upon close examination by the SEC (Securities and Exchange Commission) it was
determined that the stock purchases were an illegal maneuver on the part of these
executives. This is an example of insider trading. The executives were "banking" on the
stock price rising sharply when the purchase announcement was made public.
Feedback: Insider trading uses private company information to further insiders' own fortunes
or those of family and friends. Regulation FD, the fair disclosure rule, now stipulates that
companies must provide the same information to everyone.
Answer: True
AACSB: Ethics
Bloom’s: Apply
4-36
124. Abby is a stockbroker for a large financial services company. A client who works at
Sixth Generation Software, Ltd., just called to purchase several thousand shares of his
company's stock. He reveals to her that the company is about to announce the appointment
of a new CEO. Abby asks her client if this information is public knowledge. The reason
she asks is to make certain that her client, her company, and she remain in compliance
with Regulation FD, the Fair Disclosure rule.
Feedback: The Securities and Exchange Commission, the organization that monitors all
publicly traded companies, created Regulation FD, the fair disclosure rule, which says that
companies that release any information must share it with everyone, and not just a few.
Everyone has the same opportunity to use the information to make financial decisions.
Answer: True
AACSB: Ethics
Bloom’s: Apply
125. Recently, Bob was trying to choose among three mutual fund investments for his
retirement account. As a socially conscious investor, he will prefer to invest in funds that
hold the stocks of oil and coal companies, as opposed to wind-turbine and renewable
energy companies.
Feedback: Socially conscious investors make an effort to invest in companies that show high
levels of social responsibility. One aspect of social responsibility deals with being green, or
environmentally conscious. Companies involved with new and renewable energy sources,
including the use of wind and solar energy, are considered green companies.
Answer: False
AACSB: Ethics
126. U.S. businesses claim that unethical business practices are common outside the U.S.
Answer: True
AACSB: Ethics
Bloom’s: Remember
Learning Objective: 04-06 Analyze the role of U.S. businesses in influencing ethical behavior and social responsibility in global markets
4-37
127. The ethical standards by which international political leaders are judged are more
lenient today than they were in years past.
Answer: False
AACSB: Ethics
Bloom’s: Remember
128. Many U.S. companies are demanding socially responsible behavior from their
international suppliers.
Answer: True
AACSB: Ethics
Bloom’s: Remember
129. Due to the fact that American ethical standards are very clear-cut, international
suppliers do not have difficulty adhering to them.
Answer: False
AACSB: Ethics
Bloom’s: Remember
130. The objective of the Inter-American Convention Against Corruption document

formulated and signed by the Organization of American States is to identify common
global ethics.
Answer: True
AACSB: Ethics
Bloom’s: Remember
131. The International Organization for Standardization (ISO) plans to publish a standard
on social responsibility called ISO 26000.
Answer: True
AACSB: Ethics
Bloom’s: Remember
4-38
132. U.S. businesses consider The Foreign Corrupt Practices Act as legislation that has
helped increase their profits abroad.
Answer: False
AACSB: Ethics
Bloom’s: Remember
133. All U.S. companies practice the same ethical standards when dealing with suppliers
and contract manufacturers abroad.
Answer: False
AACSB: Ethics
Bloom’s: Remember
134. Due to their significant economic power, large multinational firms can ignore the
ethical standards of a society without consequences.
Feedback: Nike and McDonald's are both international firms that have been criticized for
actions that some view as unethical.
Answer: False
AACSB: Ethics
135. U.S. businesses have little influence over the behavior of businesses from other
countries.
Feedback: American businesses are demanding socially responsible behavior of their

international suppliers.
Answer: False
AACSB: Ethics
4-39
136. Applying the ethical standards of the U.S. to foreign firms is a difficult process for
U.S. firms.
Feedback: Requiring international suppliers to adhere to American ethical standards is not as

clear-cut as you might think. Is it always ethical for American companies to demand
compliance with our moral standards? What about countries where child labor is an accepted
part of their society?
Answer: True
AACSB: Ethics
137. "Hear no evil, see no evil, speak no evil" is the best policy for U.S. firms to follow in
their dealings with corrupt foreign suppliers.
Feedback: American businesses will be judged by the company they keep. Sears, for
example, will not import products made by Chinese prison labor. To do so would tarnish the
corporate image of Sears.
Answer: False
AACSB: Ethics
138. While "doing the right thing" is an admirable code of ethics, there are no international
organizations dealing with global ethics and corruption.
Feedback: Several international organizations have entered into agreements to identify

common global ethics and to fight corruption. The Organization of American States, the
European Union, and the Organization for Economic Cooperation and Development have
entered into anti-corruption agreements.
Answer: False
AACSB: Ethics
4-40
139. Due to the complicated laws and ethical standards abroad, U.S. businesses are
encouraged to adopt a "don't ask, don't tell" policy.
Feedback: U.S. businesses are held to high ethical standards, whether they are dealing with
customers in the U.S. or internationally. Large and small companies are scrutinized by "watch
dog" groups. International bodies such as the Organization of American States, the European
Union, and the Organization for Economic Cooperation and Development have adopted
global ethical policies.
Answer: False
AACSB: Ethics
140. According to the Reaching Beyond Our Borders box, corporate ethics can clash with
cultural ethics, especially in global business.
Feedback: The box tells the story of Joe, a telecommunications employee. Joe used his
residential reimbursement in a way the company had not intended or backed.
Answer: True
AACSB: Ethics
141. A few years ago, several U.S. clothing manufacturers were sued in Los Angeles courts
by watchdog groups who learned of poor working conditions in manufacturing plants on a
U.S. territory known as the Marianas Islands. Customers are concerned with human rights
abuses and other problems with supplier relationships abroad.
Feedback: Companies who contract manufacturing abroad are subject to watchdog groups
and others who expect them to be socially responsible when partnering with low cost labor
manufacturers abroad. These organizations are watching; the companies are starting to make
ethical decisions about working conditions in third world countries before the government
interferes.
Answer: True
AACSB: Ethics
Bloom’s: Apply
4-41
142. Olivia is ordering trendy necklaces and earrings made with semi-precious stones from
a supplier in Belize, for her city boutique. Due to low paying wages in Belize, the supplier
has promised an excellent wholesale price for these goods. You concur with Olivia when
she explains to you that international business law is very clear-cut with these dealings. As
long as the supplier is not breaking any labor laws in his country, Olivia's social
responsibility is covered.
Feedback: The fairness of requiring international suppliers to adhere to U.S. ethical standards
is not as clear-cut as we would like it to be. U.S. businesses will be held to a higher standard
by their customers and watchdogs. Particularly, the issue of low wages and child-labor laws in
foreign countries is of great concern to socially conscious investors and customers.
Answer: False
AACSB: Ethics
Bloom’s: Apply
143. In the Reaching Beyond Our Borders box, the story proves that a large multi-national
company can ask its employees to follow, and should expect them to follow, the same
ethical standards they would practice if living and working within the U.S. borders.
Feedback: The story demonstrates how one company's belief that their employee policies are
reasonable may not span continents and across borders. The employee wanted the same
housing allowance as other employees who live and work in South America, but did not want
to spend the entire housing allowance on his living quarters, as stipulated by the employer.
Answer: False
AACSB: Ethics
Bloom's: Analysis
4-42
144. In the Reaching Beyond Our Borders box, the story demonstrates the many ethical
similarities between North and South American businesses. This is fortunate for large
firms that do business south of the U.S. border. They can depend on their subsidiary firms
to have no problems when implementing U.S. company employee policies.
Feedback: The story demonstrates how one company's belief that their employee policies are
reasonable may not span continents and across borders. The employee wanted the same
housing allowance as other employees who live and work in South America, but did not want
to spend the entire housing allowance on his living quarters, as stipulated by the employer.
Answer: False
AACSB: Ethics
Bloom's: Analysis
Topic: Reaching Beyond Our Borders box
4-43
Multiple Choice Questions
145. Obeying the law is ________ ethical behavior.

A. essentially the same as
B. the first step toward
C. the opposite of
D. unlikely to lead to
Answer: B
AACSB: Ethics
Bloom’s: Remember
146. ________ refers to standards of moral behavior.

A. Legality
B. Responsibility
C. Integrity
D. Ethics
Answer: D
AACSB: Ethics
Bloom’s: Remember
147. A recent study revealed that most Americans have:

A. strong moral values.
B. a strong desire to do what is right.
C. few moral absolutes.
D. a great desire to help their community.
Answer: C
AACSB: Ethics
Bloom’s: Remember
4-44
148. Which of the following statements describes ethical behavior in the U.S.?
A. Due to the diverse cultures that make up the U.S. it is difficult to identify common
standards of ethical behavior.
B. The only common standards of ethical behavior in the U.S. are reflected in religious
teachings.
C. We can find common moral values that many Americans uphold, including respect for
human life, self-control, honesty, integrity, and courage.
D. Americans will generally describe the golden rule as the only statement of value that
they uphold.
Answer: C
AACSB: Ethics
Bloom’s: Remember
149. The danger in writing new laws to correct behavior is that:

A. people may begin to think that any behavior that is legal is acceptable.
B. people will see the difference between ethics and legality.
C. legal behavior will reflect the totality of people's relations with one another.
D. there will not be enough jails to house those who break the law.
Feedback: The danger in writing new laws to correct behavior is that people may think that
any behavior that is within the law is acceptable. The measure of behavior, then, becomes "Is
it legal?" Ethics and legality are two very different things.
Answer: A
AACSB: Ethics
4-45
150. Given the ethical lapses that are prevalent today in our businesses, which of the
following can be done to restore trust in the free-market system and leaders in general?
A. Business leaders that have broken the law should be given another chance.
B. New laws making accounting records transparent may help restore trust.
C. Making the government accountable for business leader behavior will restore trust.
D. It's up to the government to pass laws requiring ethical behavior of all leaders, business
and otherwise.
Feedback: Those that have broken the law need to be punished accordingly. New laws
making accounting records more transparent (easy to read and understand) and making
businesspeople and others more accountable may help restore trust in the free-market system.
But laws don't make people honest, reliable, or truthful.
Answer: B
AACSB: Ethics
151. Laws represent the standards of ________ behavior.

A. ethical
B. legal
C. moral
D. socially responsible
Feedback: Laws are written to protect ourselves from fraud, theft, and violence. Ethics go
beyond the law. Many immoral and unethical acts are well within the law.
Answer: B
AACSB: Ethics
4-46
152. Ethical behavior covers a ________ range of conduct than legal behavior.
A. wider
B. more limited
C. smaller
D. less demanding
important first step. A society gets into trouble when people consider only what is illegal and
not also what is unethical.
Answer: A
AACSB: Ethics
153. Many individuals today believe that ethical behavior is determined by what is best for
them at the time. This is an example of:
A. situational ethics.
B. moral absolutes.
C. the Golden Rule.
D. new age realism.
Feedback: Many individuals look at each situation before deciding whether it's right to steal,
lie, or drink and drive. They seem to think that what is right is whatever works best for the
individual and that each person has to work out for himself or herself the difference between
right and wrong. That is the kind of thinking that has led to the recent scandals in government
and business.
Answer: A
AACSB: Ethics
4-47
154. Considering the potential impact on others prior to making a decision is consistent
with ________ behavior.
A. legal
B. anti-social
C. ethical
D. self-motivated
Feedback: Ethics reflects people's proper relations with one another.
Answer: C
AACSB: Ethics
155. Many Americans define ethical behavior according to the situation in which they find
themselves. This suggests that there may be situations where ________ to cheat, steal, or
lie.
A. it is absolutely wrong
B. it might be okay
C. business people are expected
D. capitalism forces people
Feedback: A recent study revealed that Americans have few moral absolutes. Depending
upon the situation, many individuals decide whether it is right to steal, lie, cheat, or even
drink and drive. They believe that each person should work out what is right or wrong for
him/herself. This kind of thinking has led to recent scandals in government and business.
Answer: B
AACSB: Ethics
4-48
156. Bernie Madoff’s Ponzi scheme swindled about $65 million from customers who
invested with his firm. Enron and WorldCom participated in inappropriate accounting
methods. According to the Making Ethical Decisions box:
A. The notion that the financial system is complicated and difficult to understand often
perpetuates these crimes.
B. Madoff was convicted for his crime because he was a “lone ranger” in white-collar
crime, whereas Enron and WorldCom were part of the “too big to fail” corporations. The
government was compelled to protect them due to the fact that too many people would
lose their jobs.
C. Ponzi schemes are not illegal. This was a case of “buyer beware.” The investor must
take the majority of the responsibility for not performing due diligence prior to investing
with Madoff.
D. Enron’s and WorldCom’s executives were acquitted of crime because they were using
generally accepted accounting principles, and no whistleblowers came forward to attest to
any wrongdoing.
Feedback: The complexity of the financial system provides a false sense of security for those
committing white-collar crimes. Eventually, these illegal and inappropriate actions catch up
with individuals and companies that are directly involved.
Answer: A
AACSB: Ethics
157. Purposefully understating your firm's income to avoid paying higher taxes is an
example of:
A. an accepted business practice.
B. tax accountants doing their job.
C. illegal behavior.
D. a firm's responsibility to its owners.
Feedback: The first standard in business ethics is the legality of the activity. Tax evasion is
illegal.
Answer: C
AACSB: Ethics
Bloom’s: Apply
4-49
158. The purpose of sobriety checkpoints that are set up by community and state police is
to deter drunk driving and ultimately save lives. While not mandated, the makers of
Blackberry have complied with the public request of several legislators and have
obediently removed apps that permit smartphone users to navigate around the
checkpoints. Google and Apple have elected not to honor such requests. After studying
about ethics and social responsibility, which of the following statements applies to this
situation?
A. Laws represent the minimum guidelines that companies must follow, whereas a firm’s
ethical stance may venture beyond the minimum level of compliance.
B. Google and Apple are showing corporate social responsibility because they
demonstrate concern for their investors, which is exactly where their focus should be.
C. Blackberry is acting philanthropically toward government.
D. Google and Apple are showing their distrust for big government, and their avoidance
of contributing toward philanthropic causes.
Feedback: Laws represent the minimum level of compliance required by citizens and
businesses. A society may falter if businesses consider only “what is legal” when making
company decisions. Behaving ethically requires more than just following the law.
Answer: A
AACSB: Ethics
Bloom’s: Apply
159. When WorldCom used intentional accounting irregularities to make the company look
more profitable than it actually was, it:
A. provided its stockholders profit through a tax loophole.
B. acted in an acceptable business manner.
C. engaged in illegal behavior.
D. executed its responsibility to its owners.
Feedback: The first standard in business ethics is the legality of the activity. Engaging in
accounting irregularities is illegal.
Answer: C
AACSB: Ethics
Bloom’s: Apply
4-50
160. Cigarette producers refused to voluntarily place health warnings on their packages. In
response, the federal government passed laws requiring health warnings on all cigarette
packages. With respect to ethical behavior, this sequence of events is:
A. the intended approach.
B. the desired approach.
C. not the desired approach.
D. not really a concern.
Feedback: Ethical behavior by businesses is a reflection of a concern for the welfare of

society as a whole. Many different sources give the following statements of basic moral
values: integrity, respect for human life, self-control, honesty, courage, and self-sacrifice are
right; cheating, cowardice, and cruelty are wrong.
Answer: C
AACSB: Ethics
Bloom’s: Analyze
161. When Angela graduated with a degree in computer science and started her software
company, she posted a sign that read, "This company will always operate within the legal
limits of the law." Posted where all employees could clearly see it each day, this
demonstrated:
A. her commitment to high ethical standards of behavior.
B. her commitment to respect the law.
C. her expectation that all employees follow the laws that apply to the business.
D. her aversion to cheating, stealing, and dishonesty.
Feedback: Following the laws that apply to her business, and expecting employees to do the
same, will protect the firm from paying the price of convictions for crimes that are clearly
against the law; however, operating within a legal framework is only the first step toward
behaving as an ethical company.
Answer: C
AACSB: Ethics
Bloom’s: Apply
4-51
162. After a few years of being in business, employees who worked for a start-up software
company noticed that the owner overlooked certain questionable actions of high billing
associates, versus other employees who worked hard but only brought in an average
number of new clients each month. With respect to what you learned in this chapter about
the ethical behavior of many Americans, which of the following statements applies here?
A. This story indicates that moral absolutes are very prevalent today in business settings.
B. The owner will continue to operate this way until someone blows the whistle.
C. We cannot expect people in the U.S. to all follow similar ethical patterns because there
are too many cultures to deal with. Businesses are no different.
D. As is often the case today, some leaders will look at each situation individually when
making value judgments.
Feedback: Although not recommended, some leaders will evaluate each action situationally.
This has dramatically decreased moral absolutes.
Answer: D
AACSB: Ethics
Bloom’s: Apply
163. Which of the following questions will help individuals and organizations when
deciding if their decisions are ethical?
A. Can I do this without getting caught?
B. Is it balanced?
C. Has it been done before?
D. Is there a desirable alternative?
Answer: B
AACSB: Ethics
Bloom’s: Remember
164. When discussing moral and ethical issues, it is helpful to remember that ethical
behavior begins with ___________________.
A. schools
B. religious institutions
C. law enforcement officers
D. each of us
Answer: D
AACSB: Ethics
Bloom’s: Remember
4-52
165. The first step when facing an ethical dilemma is to ask:

A. "Is it legal?"
B. "Is it balanced?"
C. "How will it make me feel about myself?"
D. "Is it ethical?"
Answer: A
AACSB: Ethics
Bloom’s: Remember
166. Which of the following questions can help us avoid a decision that would injure our
self-esteem?
A. Is it legal?
B. Is it balanced?
C. How will it make me feel about myself?
D. How can I avoid taking the blame?
Answer: C
AACSB: Ethics
Bloom’s: Remember
167. Ethical dilemmas in business:

A. force us to make poor choices.
B. always end up bringing out the best in us.
C. often force us to choose between equally unsatisfactory alternatives.
D. define us as being moral absolutists or moral situationalists.
Answer: C
AACSB: Ethics
Bloom’s: Remember
4-53
168. Ethical behavior will result in which of the following?

A. Mistrust between employees and managers.
B. Agreements that create benefits for only the shareholders.
C. Negative publicity from the news media.
D. Improved self-esteem making us feel good about our decision.
Feedback: Decisions that go against our sense of right and wrong make us feel bad—they
corrode our self-esteem. Following an ethics-based approach to decision making will result in
improved self-esteem.
Answer: D
AACSB: Ethics
169. Business relationships often present ethical dilemmas that are:

A. not easily resolved.
B. easily resolved by following the relevant laws.
C. best resolved by creating a win-lose situation.
D. irrelevant and therefore require no action.
Feedback: The textbook describes an ethical dilemma as a problem without a satisfactory

solution. Sometimes you must choose between equally unsatisfactory alternatives. Even for
companies and individuals with a strong code of ethics, there are still no easy solutions to
ethical problems.
Answer: A
AACSB: Ethics
4-54
170. An ethical dilemma refers to a situation where you must:

A. treat someone unfairly.
B. choose between equally unsatisfactory alternatives.
C. choose between a correct and an incorrect option.
D. balance the concerns of profit and legality.
Feedback: Sometimes situations leave no desirable alternative. It can be very difficult to

maintain a balance between ethics and other factors such as pleasing stakeholders.
Answer: B
AACSB: Ethics
171. A U.S. government official has indicated that for a generous contribution to his
reelection fund, he would ignore your firm's apparent violation of several anti-pollution
laws. Which of the following "ethics check questions" would you consider first?
A. Is it legal?
B. Is it fair and balanced?
D. Is it a generous amount?
Feedback: Agreeing to this offer would be (1) illegal, (2) unfair to other involved parties, and
(3) damaging to your self-esteem. However, the most basic ethics check question is "Is it
legal?"
Answer: A
AACSB: Ethics
Bloom’s: Apply
4-55
172. A friend offers to share with you a term paper previously prepared for her Introduction
to Business class last semester. When you tell her that it wouldn't be fair, she reminds you
of your habit of reading an entire Harry Potter book at the local bookstore without paying
for the book. Which ethics-based question would be most helpful in evaluating these
situations?
A. Is it legal?
B. Is it balanced?
C. Who wins and who loses?
D. Will I get caught?
Feedback: The question in these situations is one of fairness rather than legality. Balancing
self-interests with the interests of others creates a win-win environment.
Answer: B
AACSB: Ethics
Bloom's: Analyze
173. A high-level manager gathers his team of supervisors together to create a new office
policy that will affect all employees at the company. After receiving a verbal okay from
the supervisors, he then proceeds to pass around a written form of the new policy and asks
all members of the team to initial it. He explains to the supervisors that the new policy
will be posted in the break rooms on each floor of corporate headquarters. If you were a
part of this work team, which question would you ultimately ask yourself before initialing
your approval of this policy?
A. Is it legal?
B. Is it balanced?
D. Is it a lose-lose situation?
Feedback: By initialing this document, the supervisor is confident that it is the right decision
and is proud to share the decision with friends and co-workers. He/she is willing to show
everyone that he/she believes it is the ethical way to operate.
Answer: C
AACSB: Ethics
Bloom’s: Apply
4-56
174. The majority of CEOs blame unethical employee conduct on:

A. the breakdown of traditional religious institutions.
B. a failure of leadership to establish ethical standards.
C. the increase in lawsuits used to avoid personal responsibility.
D. the nation's business schools that tolerate unethical behavior in students.
Answer: B
AACSB: Ethics
Bloom’s: Remember
175. Ethical behavior at work is learned by:

A. attending corporate responsibility seminars.
B. tracking the failures of those who are caught in business scandals.
C. reading about why others were fired from the job.
D. observing the actions of others.
Answer: D
AACSB: Ethics
Bloom’s: Remember
176. Which of the following is a reason why a business should be managed ethically?
A. It is the right thing to do.
B. Strict global regulations require it.
C. It is the law in the U.S.
D. Employees demand it.
Answer: A
AACSB: Ethics
Bloom’s: Remember
4-57
177. Relationships between businesses and among nations:

A. should be based on international law, exclusively.
B. should be based on fairness, honesty, openness, and moral integrity.
C. should be scrutinized carefully to make some determination as to whether both sides
have the same type of leader behavior when it comes to assigning work.
D. will be adversarial because seldom does either side believe in win-win situations.
Answer: B
AACSB: Ethics
Bloom’s: Remember
178. Corporate values are:

A. a personal matter to be determined by each employee.
B. taught by attending company-sponsored seminars.
C. instilled by the leadership of outside consultants.
D. learned by observing the actions of others in the organization.
Feedback: Ethics is caught more than it is taught. That is, people learn their standards and
values from observing what others do, not what they say.
Answer: D
AACSB: Ethics
179. When managers disregard ethical concerns, the likely result is:
A. a reduction in employee turnover.
B. an improvement in overall manager morale.
C. a reduction in lawsuits.
D. a general mistrust between workers and management.
Feedback: Corporate standards demonstrated by top management impact the values of the rest
of the organization. People learn their standards and values from observing others. Any trust
and cooperation between workers and managers must be based on fairness, honesty, openness,
and moral integrity.
Answer: D
AACSB: Ethics
4-58
180. Creating competition between employees within the corporation:

A. can encourage employees to deceive customers.
B. should focus on improving corporate profit.
C. must be ignored when corporate ethics are developed.
D. can bring out the best in employees.
Feedback: The text refers to cell phone representatives. Poorly designed incentive programs
led employees to deceive their customers.
Answer: A
AACSB: Ethics
181. Following an ethics-based approach to decision making will normally lead to higher:
A. profits.
B. trust and cooperation.
C. prices.
D. employee turnover.
Feedback: Trust and cooperation must be based on a foundation of fairness, honesty,

openness, and moral integrity. These are the characteristics of an ethics-based approach to
decision making.
Answer: B
AACSB: Ethics
4-59
182. Following an ethics-based approach to decision making will normally lead to:
A. higher profits.
B. lower employee turnover.
C. lower prices.
D. more competition.
Feedback: Trust and cooperation must be based on a foundation of fairness, honesty,

openness, and moral integrity. A business should be managed ethically for many reasons: to
maintain a good reputation; to keep existing customers; to attract new customers; to avoid
lawsuits; to reduce employee turnover; to avoid government intervention; to please customers,
employees and society; and simply to do the right thing.
Answer: B
AACSB: Ethics
183. The Hum-dinger Corporation recently instituted a corporate ethics code. The president
of the company realizes that ethical relationships are based on:
A. fairness and honesty.
B. strict penalties for illegal activities.
C. a full-time compliance officer monitoring employee behavior.
D. watchdogs and whistleblowers.
Feedback: Ethical relationships with a spirit of trust and cooperation are based on fairness,
honesty, openness, and moral integrity.
Answer: A
AACSB: Ethics
Bloom’s: Apply
4-60
184. Which of the following would most likely involve ethical concerns?
A. Overstating an expense report.
B. Forecasting sales for the next year.
C. Developing the marketing plan for the next year.
D. Improving working conditions.
Feedback: Ethics reflects proper relations with one another. Overstating an expense report is
not honest.
Answer: A
AACSB: Ethics
Bloom’s: Apply
185. With respect to business ethics, it can be said that "it takes two to tango." This
indicates that:
A. dancing around issues should be part of a firm's code of ethics.
B. an individual's behavior is influenced by the behavior of others.
C. teamwork eliminates a need for personal ethics.
D. management is insensitive to ethical issues.
Feedback: Individuals do not usually act alone. They need the implied, if not the direct,
cooperation of others to behave unethically in a corporation. In addition, the leadership and
example of strong top managers instill positive corporate values.
Answer: B
AACSB: Ethics
Bloom’s: Apply
186. Establishing a formal code of ethics is:

A. more common with small businesses than large businesses.
B. unnecessary given the level of government regulation.
C. growing in popularity.
D. mandated by the Corporate and Criminal Fraud Accountability Act.
Answer: C
AACSB: Ethics
Bloom’s: Remember
4-61
187. A(n) ________-based ethics code emphasizes the prevention of unlawful behavior by
increasing control and penalizing wrongdoers.
A. legal
B. corporate responsibility
C. compliance
D. integrity
Answer: C
AACSB: Ethics
Bloom’s: Remember
188. Which of the following terms describes someone who reports illegal or unethical
behavior?
A. whistleblower
B. horn blower
C. watch tower sentinel
D. integrity watchdog
Answer: A
AACSB: Ethics
Bloom’s: Remember
189. A(n) ________-based ethics code defines corporate values; creates a supportive
environment, and, stresses shared accountability among employees.
A. social
C. compliance
D. integrity
Answer: D
AACSB: Ethics
Bloom’s: Remember
4-62
190. Compliance-based ethics codes:

A. conform to laws and regulations.
B. enable responsible employee conduct.
C. use education, leadership, and accountability to reinforce the code.
D. create a "do-it-right" climate that emphasizes core values.
Answer: A
AACSB: Ethics
Bloom’s: Remember
191. To improve America's business ethics:

A. Congress must pass an ethics bill.
B. ethics must be taught in every business school around the globe.
C. a company's suppliers must be thoroughly investigated for ethical violations.
D. company leaders should adopt and support a corporate code of ethics.
Answer: D
AACSB: Ethics
Bloom’s: Remember
192. After developing a code of ethics, it should be communicated to:

A. everyone with whom the business has dealings.
B. the Attorney General in jurisdictions where the business has operations.
C. all levels of management.
D. stockholders.
Answer: A
AACSB: Ethics
Bloom’s: Remember
4-63
193. A whistleblower is a person who:

A. monitors employees who work overtime.
B. reports illegal or unethical behavior in the corporation.
C. reports health or other corporate emergencies to 911.
D. works in the human resource department.
Answer: B
AACSB: Ethics
Bloom’s: Remember
194. Which of the following is a characteristic of an effective ethics officer?

A. (S)he has a background in human resource management.
B. (S)he is exceptionally organized.
C. (S)he has a capacity to serve as a counselor and an investigator.
D. (S)he communicates primarily via e-mail.
Answer: C
AACSB: Ethics
Bloom’s: Remember
195. Compliance-based ethics codes typically:

A. rely on laws and regulations outside the firm for guidance.
B. have a strong affinity for shared accountability among employees.
C. promote a "do-it-right" climate.
D. enable responsible employee conduct.
Feedback: Compliance-based ethics codes prevent unlawful behavior by increasing control

and by penalizing wrongdoers.
Answer: A
AACSB: Ethics
4-64
196. A very critical last step in the process of establishing an ethics code is __________.
A. middle management support
B. training
C. enforcement
D. identification of the organizational ethics officer
Feedback: Enforcement of the ethics code is critical and timely. When management ignores a
written code of ethics, it becomes a worthless, shelf document.
Answer: C
AACSB: Ethics
197. Which of the following would be a unique focus of an integrity-based ethics code?
A. Increased control over employee actions.
B. Shared accountability among employees.
C. Increased penalties for code violators.
D. Improved awareness of the relevant laws.
Feedback: Integrity-based ethics codes define the organization's core values, create an
environment that supports ethical behavior, and stress a shared accountability among
employees.
Answer: B
AACSB: Ethics
4-65
198. Which of the following statements is not one of the six steps recommended by experts
for improving ethical behavior at work?
A. Management should be trained to always consider the ethical implications of decisions.
B. Top management should unconditionally support a company's corporate code of ethics.
C. Whistleblowers should be protected from retaliation.
D. Outsiders should be kept outside. There is no reason to share your firm's corporate
code of ethics. It is an internal and private document.
Feedback: In addition to (1) the training of management, (2) the unconditional support of top
management, and (3) the protection of whistleblowers, (4) ethics codes should be publicized
to all business partners including suppliers and customers, (5) employees should always
understand that management takes the firm's ethics code very seriously, and (6) enforcement
of the code should be timely.
Answer: D
AACSB: Ethics
4-66
199. In the past, whistleblowers were known as persons with a universal moral calling.
However, seldom did these individuals receive tangible rewards for their efforts. When it
was all said and done, they often fell into hard times. Whistleblowers got a boost in 2010,
with the passage of the Dodd-Frank Wall Street Reform and Consumer Protection Act. A
provision of this act permits whistleblowers to_____________________.
A. remain at their jobs, after reporting a securities violation.
B. receive up to 30% of the penalty funds that exceed $1 million that the courts recover
from companies proven to be in violation.
C. represent securities violations only in the companies where they are employed.
D. automatically receive up to a $1 million dollar reward for reporting a securities
violation, as well as retain his/her job.
Feedback: The Dodd-Frank Wall Street Reform and Consumer Protection Act resulted from
Wall Street bailouts and other questionable government bailouts of large corporations, who
many claimed were too big to fail. In the past, employees of organizations who knew their
employers were committing illegal and unethical actions were afraid to speak out for fear of
reprisal. This legislation provides the potential for extrinsic rewards for employees who report
questionable actions committed by their employers. If the courts recover funds from illegal
transactions, the employee is promised a share these funds, 30% of any amount recovered
after $1 million
Answer: B
AACSB: Ethics
4-67
200. What is the benefit of employing an ethics officer?

A. This professional serves as a law-enforcement officer, with the authority to arrest
employees who do not abide by the ethics code.
B. This individual writes the ethics code and keeps this document current. He has sole
authority to change the document as he sees fit.
C. This professional has the responsibility to make certain that the ethics code remains a
private company document; however, since the position has very little authority, it
becomes a token job with high turnover.
D. This individual's job is dedicated to objectively investigating ethics breaches. If
necessary, employees feel comfortable with communicating confidentially to this
professional.
Feedback: An ethics officer is equally comfortable with serving as a counselor or an ethics

investigator for the firm. It requires a person who can maintain a high level of confidentiality
and carry out an objective investigation.
Answer: D
AACSB: Ethics
201. While speaking with his sales force, the director of sales explains, "Anyone caught
violating a sales law will be fired." After studying business ethics, you recognize this
remark as a reference to the firm's __________ ethics.
A. technology-based
B. personal responsibility-based
C. compliance-based
D. integrity-based
Feedback: A compliance-based ethics code emphasizes the prevention of unlawful behavior

by penalizing wrongdoers.
Answer: C
AACSB: Ethics
Bloom’s: Apply
4-68
202. In an effort to promote the importance of a valuable education, the faculty and staff at
the local community college are trained to ask each student about their career preferences,
rather than suggest courses that may not benefit the student's future goals. Although it
would be tempting to suggest courses just to increase the college's enrollment, employees
know that it is more important to serve each student well, even if it means suggesting
courses and/or degrees offered at other institutions. This approach is consistent with:
A. an integrity-based ethics code.
B. a compliance-based ethics code.
C. a response to a government mandate.
D. a personal responsibility commitment.
Feedback: An integrity-based ethics code defines and communicates the organization's

guiding values and creates an environment supportive of ethically sound behavior.
Answer: A
AACSB: Ethics
203. Sharon, a CPA for a large firm, noticed that the company's accounting records
drastically overstated the amount of inventory on hand, which led to overstating the assets
of the firm. Initially, she brought it to the attention of her supervisor, but when nothing
was done to correct the mistake in a timely manner, she decided the best course of action
was to report it to the appropriate government official. Although her actions took her
outside the company, she was counting on current law, under the ____________, to
protect her against company retaliation.
A. Cellar-Kefauver Act
B. Sarbanes-Oxley Act
C. Robinson-Patman Act
D. Sherman Act
Feedback: The Sarbanes-Oxley Act was passed in 2002 to protect whistleblowers from
intentional company retaliation when reporting illegal and/or unethical accounting concerns to
government authorities.
Answer: B
AACSB: Ethics
Bloom’s: Analyze
4-69
204. A phone call to a government official by an employee of the Enron Corporation

disclosed the deception and dishonesty of the firm's accounting records. This employee
played the role of a:
A. whistleblower.
B. horn blower.
C. cheerleader.
D. moral policeman.
Feedback: People who report illegal or unethical behavior are known as whistleblowers.
Answer: A
AACSB: Ethics
Bloom’s: Apply
205. Zach spent several months developing a good relationship with a business client. The
client is now buying a significant amount of product from Zach's company, resulting in
high commissions for Zach, personally. After checking the sales records for the past six
months, a colleague of Zach's started visiting the same client in the hopes of capturing
some of the client's business too. Although he considers it "legal and fair game," sales reps
in his firm have begun to avoid him because they consider it a violation of:
A. company-based ethics.
B. compliance-based ethics.
C. integrity-based ethics.
D. whistleblowing-based ethics.
Feedback: Integrity-based ethics define the organization's guiding values and standards of
conduct. These create an environment that supports sound ethical behavior.
Answer: C
AACSB: Ethics
Bloom’s: Apply
4-70
206. John was recently hired by Backstreet Books. At the beginning of the first day on the
job, his store manager handed him a small booklet consisting of company rules. He was
asked to read it and sign and submit the last page, before starting work. Among other
things, the rules explicitly discussed reprimands for grievous behavior and dismissal if the
firm could prove that the employee was stealing product from the store. This booklet
represented the ___________ of the store.
A. company-based ethics
B. compliance-based ethics
C. integrity-based ethics
D. whistleblowing-based ethics
Feedback: Compliance-based ethics represent unlawful standards that may justify a company
in reprimanding the employee or even dismissing the employee. These standards indicate that
the employer has the right to punish the employee for wrongful acts.
Answer: B
AACSB: Ethics
Bloom’s: Apply
207. Corporate social responsibility describes the firm's:

A. exclusive responsibility to its stockholders.
B. ability to plan for the unexpected.
C. commitment to a management training program.
D. concern for the welfare of society.
Answer: D
AACSB: Ethics
Bloom’s: Remember
208. All else held equal, socially responsible firms:

A. are viewed more favorably by consumers.
B. enjoy significantly higher profits.
C. often experience customer loyalty problems.
D. fail to earn sufficient profits for their owners.
Answer: A
AACSB: Ethics
Bloom’s: Remember
4-71
209. We describe charitable donations by corporations to nonprofit organizations as

__________.
A. corporate philanthropy
C. corporate strategy
D. structural commitment
Answer: A
AACSB: Ethics
Bloom’s: Remember
210. The position a firm takes on issues that affect the corporation as well as society is
known as its:
A. political philanthropy.
B. corporate policy.
C. target posturing.
D. structural positioning.
Answer: B
AACSB: Ethics
Bloom’s: Remember
211. In recent years, progressive firms have embarked upon ____________, where they
will commit company resources and expertise toward helping out in emergency type
situations.
B. corporate social activism
C. social civility
D. corporate social initiatives
Answer: D
AACSB: Ethics
Bloom’s: Remember
4-72
212. Corporate ________ covers issues such as setting minority hiring practices,
manufacturing safe products, and minimizing pollution.
A. responsibility
B. philanthropy
C. diversity
D. structure and strategy
Answer: A
AACSB: Ethics
Bloom’s: Remember
213. Determining what is involved for a firm to be socially responsible:

A. is easy.
B. varies even among those who are interested in corporate responsibility.
C. helps government officials develop appropriate legislation.
D. varies from industry to industry due to different laws.
Answer: B
AACSB: Ethics
Bloom’s: Remember
214. Which of the following is not a basic right proposed by former President John F.
Kennedy?
A. The right to be heard
B. The right to be informed
C. The right to a discount
D. The right to safety
Answer: C
AACSB: Ethics
Bloom’s: Remember
4-73
215. A payoff for socially conscious behavior is:

A. new and loyal customers.
B. a large pool of investors.
C. a large pool of talented employees.
D. longevity due to a stable external environment.
Answer: A
AACSB: Ethics
Bloom’s: Remember
216. Which of the following statements best describes a firm's commitment to its
customers?
A. The firm is responsible for offering domestic products to foreign customer markets.
B. One's social responsibility to customers is clear-cut.
C. Customers will only support companies who make a visible effort to keep prices low.
D. Firms that offer real value will develop a competitive advantage and gain customer
trust.
Answer: D
AACSB: Ethics
Bloom’s: Remember
4-74
217. Companies are using _____________ to communicate their corporate social

responsibility actions to their customers.
A. sales promotion
B. traditional advertising on television and radio
C. social media
D. their employees, word of mouth
Answer: C
AACSB: Ethics
Bloom’s: Remember
218. Investors, today are realizing financial benefit by:

A. investing in companies that only operate in stable environments.
B. investing in firms that have abundant resources for social initiatives.
C. investing in companies that are committed to a better environment.
D. investing in companies that are leaving a sizeable carbon footprint.
Answer: C
AACSB: Ethics
Bloom’s: Remember
219. Insider trading involves:

A. an Internet activity that establishes a barter exchange system between businesses.
B. investors using private company information to further their own fortunes.
C. the exchange of assets between companies in the same industry.
D. a payment or reward for socially conscious behavior.
Answer: B
AACSB: Ethics
Bloom’s: Remember
4-75
220. If a business fails to meet its responsibilities to its employees, which of the following
is likely to occur?
A. There is reduced employee turnover.
B. Employees believe it is easier to get ahead.
C. More jobs are created.
D. Employees do the minimum needed to get by.
Answer: D
AACSB: Ethics
Bloom’s: Remember
221. In order to avoid insider trading, the SEC (Securities and Exchange Commission) has
adopted a new rule called _____________ that requires publicly traded companies to
release information to everyone in a timely manner, rather than just to a few persons.
A. Insider Trading Phenomenon
B. Regulation FD (Fair Disclosure)
C. Red Herring Regulation
D. PDI (Public Display of Information Act)
Answer: B
AACSB: Ethics
Bloom’s: Remember
222. People need to make a living. Under this circumstance, one of the best social programs
a firm can offer is:
A. a job.
B. a commitment to programs that promote green living.
C. a high-end product line.
D. flexible work hours.
Answer: A
AACSB: Ethics
Bloom’s: Remember
4-76
223. The difference between an organization's positive social contributions and its negative
social impacts is called their:
A. social scorecard.
B. responsibility impact report.
C. net social contribution.
D. community commitment level.
Answer: C
AACSB: Ethics
Bloom’s: Remember
224. The purpose of a(n) ________ is to evaluate an organization's progress toward

implementing programs that are socially responsible and responsive.
A. accountability review
B. social audit
C. federal disclosure statement
D. annual report
Answer: B
AACSB: Ethics
Bloom’s: Remember
225. Going green means:

A. increased global warming.
B. increasing one's bottom line, before any other social considerations.
C. increasing one's carbon footprint
D. increasing one's initiatives toward a concern for the environment.
Answer: D
AACSB: Ethics
Bloom’s: Remember
4-77
226. The green movement:

A. is not a good strategic consideration for contemporary firms.
B. will never benefit a firm financially.
C. is benefiting all firms financially.
D. has created jobs.
Answer: D
AACSB: Ethics
Bloom’s: Remember
227. Business is under pressure from society to be more socially responsible. However,
even the strongest advocates for corporate responsibility can't seem to agree:
A. on what social responsibility involves.
B. who should be policing businesses' behavior.
C. if all businesses, large and small, should be held to the same standards.
D. if politicians should be held to the same standards of behavior.
Feedback: Society is demanding more ethical and moral leadership from business. However,
there is uncertainty as to what being socially responsible involves.
Answer: A
AACSB: Ethics
228. One factor causing businesses to vigorously enforce ethical standards is the:
A. desire to eliminate employee turnover.
B. fear of negative publicity.
C. focus on criminal penalties.
D. evasion of social audit measurements.
Feedback: Union officials, environmentalists, and socially conscious investors put pressure
on companies to comply with ethical guidelines or face negative publicity.
Answer: B
AACSB: Ethics
4-78
229. When it comes to social responsibility, some people feel that "before you can do good,
you must do well." This reflects a firm's primary responsibility to its:
A. customers.
B. investors.
C. employees.
D. community.
Feedback: Milton Friedman made a classic statement when he said that corporate social
responsibility means making money for stockholders.
Answer: B
AACSB: Ethics
230. Some critics of corporate social responsibility view spending money on CSR as:
A. a necessary evil.
B. stealing from investors.
C. important for America.
D. moving toward capitalism.
Feedback: CSR critics believe that managers who pursue CSR are doing so with other
people's money—money they invested to make more money, not to improve society. They
view spending money on CSR activities as stealing from their investors.
Answer: B
AACSB: Ethics
4-79
231. When a firm undertakes corporate social initiatives it is:

A. Making donations that are directly related to a firm's corporate competency.
B. Making long-term commitments to one cause.
C. Hiring minority workers.
D. Making safe products.
Feedback: Corporate social initiatives are actions where a company offers its distinctive
competencies and deploys resources to help in emergency situations. Some companies
maintain emergency response teams that are ready for deployment when global crises call for
quick action.
Answer: A
AACSB: Ethics
232. Although college graduates would prefer to work for socially responsible companies,
A. they would not consider less pay to do so.
B. they are not interested in companies that spend resources for corporate social
initiatives.
C. they are not in agreement as to what it means to be socially responsible.
D. they favor Milton Friedman's philosophy on the subject.
Feedback: Recent graduates with MBA degrees were surveyed about working for socially
responsible companies. While they were willing to consider lower salaries in order to
associate themselves with socially responsible businesses, they were not in agreement as to a
clear-cut definition of what it meant.
Answer: C
AACSB: Ethics
4-80
233. Environmental quality is considered to be a public good. This means that:

A. ultimately it is the public that pays for environmental clean-up.
B. businesses have a responsibility to minimize their environmental pollution.
C. everyone enjoys a cleaner environment regardless of who pays for it.
D. society places a higher value on private goods and services.
Feedback: Environmental quality is a public good; that is, everyone gets to enjoy it regardless
of who pays for it. The trick for companies is to find the right public good that will appeal to
their customers.
Answer: C
AACSB: Ethics
234. Many businesses have developed internal procedures to enforce their ethical policies.
Which of the following is an example of an outside group urging ethical behavior in
businesses?
A. management teams
B. union officials
C. suppliers
D. foreign trade representatives
Feedback: Investors, environmentalists, customers and union officials apply pressure to firms
via a threat of negative publicity.
Answer: B
AACSB: Ethics
4-81
235. A firm's carbon footprint is:

A. the number of employees it hires in a specific community.
B. its legacy in terms of how much public good it dispersed over its lifetime.
C. the amount of carbon it releases in its effort to do business.
D. its participation in local fund-raising events.
Feedback: A firm's carbon footprint is the amount of carbon it releases during production,
distribution, consumption, and disposal, as it goes about creating products and services.
Answer: C
AACSB: Ethics
236. One problem with conducting a social audit is:

A. that most businesses are really not very concerned with these issues.
B. how to determine what should be measured and how to calculate the effect on society.
C. that the primary focus of management is on the interests of stakeholders.
D. governmental "red-tape."
Feedback: One of the more difficult problems with social auditing is how to define and
measure what is meant exactly by "socially responsible and responsive."
Answer: B
AACSB: Ethics
4-82
237. The social audit is:

A. a company report that always includes a net social contribution.
B. a government-mandated report required of all firms that have a business license.
C. a company report that measures the firm's social contributions inside and outside of the
firm.
D. a recent development that creates a ratio to compare a firm's corporate philanthropy to
its profits.
Feedback: A social audit is a firm's systematic evaluation of its progress toward socially
responsible and responsive programs.
Answer: C
AACSB: Ethics
238. An important source of public scrutiny is "watchdogs." These are:

A. the efforts of a firm's competitors, including how often the competitors attack the firm's
strategies.
B. taxpayer-supported government agencies that limit a firm's ability to compete in
foreign markets.
C. companies designated by the government to only produce products that support the
government defense program.
D. socially conscious groups that make it their mission to measure the social responsibility
levels of businesses, and provide consumers with their opinions about the level of
corporate responsibility of various companies.
Feedback: Groups serve as watchdogs to monitor how well companies enforce their ethical
and social responsibility policies.
Answer: D
AACSB: Ethics
4-83
239. When Donut Plaza employs in-store recycling and composting, and uses nontoxic
cleaners, Donut Plaza is participating in:
A. corporate philanthropy.
B. corporate social initiatives.
C. corporate responsibility.
D. corporate policy.
Feedback: Corporate responsibility includes everything from hiring minority workers to

making safe products, minimizing pollution, using energy wisely, and providing a safe work
environment—essentially everything that has to do with acting responsibly within society.
Answer: C
AACSB: Ethics
Bloom’s: Apply
240. Top management at Big Bend Motorcycle Company is convinced that the company
has a social responsibility to its community. Management believes that the firm can have
the greatest impact in this area through cash contributions to nonprofit organizations. This
is an example of:
A. graduated payments.
B. corporate philanthropy.
C. structure and strategy.
D. short-run profit maximization.
Feedback: Corporate philanthropy includes charitable donations to nonprofit groups of all

kinds.
Answer: B
AACSB: Ethics
Bloom’s: Apply
4-84
241. Hendry HVAC, a heating and cooling company headquartered in Milwaukee,

Wisconsin, permits its employees to volunteer for nonprofit organizations, as part of their
paid company time. According to recent findings, which of the following statements best
explains this company’s action?
A. Several smaller firms do not have enough work to keep employees busy. They fear that
employees will quit and go to work elsewhere during a time of low unemployment. They
protect their pool of skilled labor.
B. Employers are learning that millennial employees are physically stronger. They would
rather permit them to work on nonprofit construction sites and other laborious projects,
than build them a gym at the company site.
C. Companies find it less costly to permit employees to volunteer for food pantries and
other nonprofit organizations in their area of operation, rather than make large
philanthropic contributions.
D. Employee time is measured as going further for social causes than monetary
contributions.
Feedback: As a strategy for acting socially responsibly and meeting their corporate
philanthropic obligations, employers are finding it less costly to allow employees to volunteer
on company time.
Answer: C
AACSB: Ethics
Bloom’s: Analyze
242. Before it was publicly known that IBM was going to take over Lotus Development, an
IBM secretary told her husband, who told two co-workers, who told friends, relatives,
business associates, and even a pizza delivery man. A total of 25 people received the
information and traded on this tip to make a profit. These people were:
A. acting really smart.
B. engaging in insider trading.
C. stealing from IBM.
D. acting fairly.
Feedback: Insider trading involves insiders (such as the secretary) using private company
information to further their own fortunes or those of their family and friends.
Answer: B
AACSB: Ethics
Bloom’s: Apply
Topic: Responsibility to Investors
4-85
243. Blake Mycoskie started a shoe business known as TOMS. As a social entrepreneur,
Mr. Mycoskie takes the concept of ___________________ to a new level. TOMS social
causes are directly related to the firm’s expertise: selling shoes.
A. social auditing
B. corporate social initiative
C. corporate policy
D. corporate philanthropy
Feedback: Corporate social initiative differs from traditional philanthropy because it utilizes
the competencies of a business to provide help in emergency situations.
Answer: B
AACSB: Ethics
Bloom’s: Apply
244. Management's philosophy at Apple, Inc., has often stated that a fit body contributes to
more productivity at work. Apple provides exercise facilities at most of its sites across
America, and permits employees to use a half-hour of work time each day to relieve stress
through exercise. This serious position on physical fitness is part of Apple's
___________.
B. corporate policy
C. community mediation services
D. participative funding
Feedback: Corporate policy is the dimension of social responsibility that refers to a firm's
position on a social and/or political issue.
Answer: B
AACSB: Ethics
Bloom’s: Apply
4-86
245. Idle Time Gaming, Inc., would like its employees, customers, and the general public
to be aware of the activities and programs it has achieved for the community over the past
year. The company might consider performing a:
A. contributory analysis.
B. responsibility review.
C. social audit.
D. annual payment report.
Feedback: A social audit is a systematic evaluation of an organization's progress toward

Answer: C
AACSB: Ethics
Bloom’s: Apply
246. Several outside groups regularly monitor the activities of Metro Chemical
Corporation. These groups are interested in the firm's involvement and enforcement of
their ethical and social responsibility policies. Who of the following is the least likely to
be among the "watchdog" groups?
A. The financial officer of a church with funds invested in the chemical company.
B. Overseers from the World Trade Organization (WTO).
C. A student in environmental engineering attending a local college.
D. The president of the union representing the workers at the chemical company.
Feedback: The five types of groups that serve as "watchdogs" are (1) socially conscious
investors, (2) socially conscious research organizations, (3) environmentalists, (4) union
officials, and (5) customers.
Answer: B
AACSB: Ethics
Bloom’s: Analyze
4-87
247. Last week, the Local Citizens for a Greener America sent a formal document to
Chipper's Golf Resort asking the private club to measure its carbon footprint and publicly
disclose the amount of fertilizer and other carbon-emitting substances that it uses on its
two award-winning golf courses. LCGA is an example of ___________.
A. an employee organization that has emerged at the resort.
B. a watchdog group.
C. a disgruntled nonprofit organization that has a beef against golfers.
D. a public interest group that is demonstrating social responsibility.
Feedback: Watchdog groups monitor how well businesses enforce their ethical and social
responsibilities. Environmentalist groups are one type of watchdog group that is gaining in
popularity.
Answer: B
AACSB: Ethics
Bloom’s: Apply
248. Last year the Bank of Plenty, Inc., made an all-out effort to go paperless. The bank's
public relations arm promoted the strategy both internally and externally. Customers were
strongly encouraged to utilize the bank's online banking for all their banking needs.
Customers could sign up for local workshops where employees were dedicated to showing
them how to navigate the bank's new website and find the information they required. The
bank's initiative demonstrates:
A. a gimmick for cutting costs that watchdogs will soon uncover.
B. an effort to not be left in the lurches by its competitors who are using state-of-the-art
website technology.
C. an area where the firm can contribute to the green effort, as well as cut costs.
D. a costly effort because at least 50% of all customers still prefer a paper trail due to
safety concerns such as identity theft, when it comes to online banking.
Feedback: Socially conscious companies realize that the green movement is a serious social
initiative that merits everyone's attention. Both product-intensive and service-oriented firms
are looking for ways to increase profits through green initiatives. Customers appreciate
companies that demonstrate a concern for our natural resources. The bank's efforts emphasize
the need to protect the growth of trees and all things green. It is also a cost-cutting measure
because in the past, the cost of paper and mailings for banking institutions was a sizeable
expense.
Answer: C
AACSB: Ethics
Bloom’s: Apply
4-88
249. Enrollment at Tradewinds College has increased by about 3% each year for three
years, even though tuition and fees have gone up to help defray the cost of new wind
turbines installed on campus to generate enough power to serve the campus buildings and
to sell to local business establishments. As a recent student of contemporary corporate
social responsibility, you conclude:
A. new technology such as wind turbines is a huge capital investment for a college. The
effort demonstrates the high cost of environmental programs.
B. although it is a trendy social cause, this effort is not showing good long-term social
responsibility toward the students who will end up with sizeable future debt.
C. this is a demonstration of corporate philanthropy.
D. students are willing to pay the extra tuition in the short term because they believe that
the means (the use of innovative technology) will justify the end (a better environment).
Feedback: Environmental quality is a public good that everyone gets to enjoy regardless of
who pays for it. The challenge is for companies and institutions to find the public good that
appeals to their constituents (customers, students, patients, clients).
Answer: D
AACSB: Ethics
Bloom’s: Apply
250. Ethical problems and issues of social responsibility are:

A. unique to firms involved in global trade.
B. unique to the United States.
C. not unique to the United States.
D. less important now than in the past.
Answer: C
AACSB: Ethics
Bloom’s: Remember
251. When working with international firms, U.S. businesses:

A. tend to ignore the ethics of their international partners.
B. expect socially responsible behavior from their business partners.
C. feel that their responsibility is limited to the United States.
D. try to avoid judging our international business partners by U.S. standards.
Answer: B
AACSB: Ethics
Bloom’s: Remember
4-89
252. Top leaders in government and business today are:

A. held to higher ethical standards than in the past.
B. held to less strict moral standards than in the past.
C. less interested in social responsibility than in the past.
D. at odds with the general public in regard to ethical issues.
Answer: A
AACSB: Ethics
Bloom’s: Remember
253. Which of the following is an unresolved ethical issue that surrounds global trade?
A. Product quality
B. Labor standards
C. Transportation issues
D. Time to market issues
Answer: B
AACSB: Ethics
Bloom’s: Remember
254. The Foreign Corrupt Practices Act deals with:

A. prison labor involved in international trade.
B. high seas piracy that has had a resurgence in the past five years.
C. bribery to obtain business.
D. product safety concerns such as the dog food scare of 2008.
Answer: C
AACSB: Ethics
Bloom’s: Remember
4-90
255. International issues of social responsibility and ethical behavior are:

A. the result of greed found in capitalist countries.
B. found primarily in countries with a low standard of living.
C. a concern only of business professors.
D. difficult and not as clear-cut as U.S. firms would like them to be.
Feedback: Ethical problems and issues of social responsibility are not unique to an economic
system or level of income. Although U.S. businesses demand socially responsible behavior
from their international suppliers, ethical standards are not as clear-cut as they would like
them to be. Some question whether U.S. businesses should expect or require international
suppliers to adhere to U.S. law.
Answer: D
AACSB: Ethics
256. Which of the following indicates that U.S. businesses are demanding socially
responsible behavior from their international suppliers?
A. The establishment of the Equal Opportunity Employment Commission
B. The decision of Walmart to open stores globally
C. The decision of Phillips-Van Heusen to cancel orders from suppliers that violate its
ethics code
D. The creation of the North American Free Trade Zone (NAFTA) between the U.S.,
Canada, and Mexico
Feedback: U.S. businesses are demanding that their international suppliers not violate human
rights and environmental standards. Sears, Nike, Dow Chemical, and McDonald's have all had
social responsibility issues with their international suppliers.
Answer: C
AACSB: Ethics
4-91
257. According to the Reaching Beyond Our Borders box, which of the following is true?
A. Corporate ethics are intended to be consistent with cultural ethics.
B. Corporate ethics have priority over corporate profit.
C. Corporate profits have priority over corporate ethics.
D. Corporate ethics can clash with cultural ethics.
Feedback: Joe falsified receipts for living expenses in order to be able to provide money for
his family's education. Joe felt that this was necessary to honor the memory of his late father.
The company was concerned about Joe's apparent lack of integrity.
Answer: D
AACSB: Ethics
258. The boxed material entitled Reaching Beyond Our Borders that told the story about
Joe, the telecommunication employee, suggests that U.S. firms operating overseas are:
A. not as flexible on social issues as local employees would like them to be.
B. exploiting employees by working them long hours at low pay.
C. complying with the ethical standards of the people they employ, in the countries in
which they are operating.
D. responding to their stockholders’ desire for profits.
Feedback: The story demonstrates a culture clash between business ethics abroad and
business ethics practiced in the U.S. Joe, a telecommunication employee, used the housing
allowance provided by his employer for other expenses that did not fall under the area of
living accommodations. If Joe worked in the U.S., it would be highly unethical to falsify
expense reports in order to receive the housing stipend. Joe did not consider it an offense in
South America.
Answer: A
AACSB: Ethics
4-92
259. J. D. started working for an export trading company right out of college. His job took
him to Asia on several occasions, where he interacted with manufacturers and got to
practice his limited Chinese. He was amazed to see the difference in working conditions in
the developing nations where he visited, compared to similar operations in the U.S. The
expectations of workers were not the same. J.D.'s experience is an example of:
A. corporate philanthropy differences in different countries.
B. social responsibility differences between similar firms, but in different countries.
C. differences in corporate social initiatives in foreign nations.
D. the need for whistleblowers abroad.
Feedback: Developing nations do not have the same labor standards as well-developed
nations. In order to get ahead, employees in developing nations are willing to work in what
would be considered poor working conditions in the U.S. Job choices are meager. Workers
are willing to work for long hours, in poor conditions, for a few cents more each hour.
Answer: B
AACSB: Ethics
Bloom’s: Apply
4-93
260. As the number of multinational corporations increases, we are experiencing

international ethical dilemmas. One very real concern during the past decade is the human
rights abuses in sweatshops where several multinationals contract manufacture their
products, in exchange for cheap labor. Several retailers have banned together to set ethical
standards in foreign factories. Which of the following statements summarizes the
challenges of companies doing business in developing countries and the concerns of their
customers?
A. Multinationals must subjectively determine the local “living wage,” which is usually
more than the local legal wage in developing countries. Customers surveyed say they are
willing to pay a few dollars more to improve working conditions in sweatshops.
B. Economically sensitive customers want companies to pass along cost savings to them,
at all costs, even if the products are made through offshore outsourcing. Companies want
to please customers, first!
C. Most multinational corporations have made no attempt to improve working standards at
sweatshop factories. They will turn a blind eye to the problem unless U.S. law is passed to
force the issue. Customers understand that legal limits come before ethical standards.
D. Multinationals cannot be expected to demand socially responsible behavior from their
supplier, including foreign sweatshops. When doing business abroad, the U.S. company
need not comply with U.S. law when its supplier(s) is not in the U.S. or on U.S. territory.
Feedback: Companies must act ethically and responsibly toward employees who produce
their goods and services. They must make certain that foreign producers agree to a living
wage—a wage that is enough for employees to provide for themselves and their families.
Customers claim they will pay a higher price if they know the difference is passed on to the
employees who made the goods.
Answer: A
AACSB: Ethics
4-94
Essay Questions
261. Explain the difference between a compliance-based ethics code and an integrity-based
ethics code.
Answer: Compliance-based ethics codes emphasize preventing unlawful behavior by

increasing control and penalizing wrongdoers. The primary focus is to conform to outside
standards (laws and regulations), and avoid criminal misconduct.
An integrity-based code of ethics defines the organization's guiding values, creates an
environment that supports ethically sound behavior, and stresses shared accountability among
employees. There is still a requirement to conform to outside standards, but that is just a
starting point. Integrity-based ethics codes move beyond legal compliance to create a "do-it-
right" climate that emphasizes core values, such as honesty and fair play.
AACSB: Ethics
Bloom’s: Apply
262. Identify and discuss the five types of groups that serve as watchdogs regarding how
well companies enforce their ethical and social responsibility policies.
Answer:
1. Socially conscious investors who insist that a company extend the firm's own high
standards to all its suppliers.
2. Socially conscious research organizations that analyze and report on corporate social
responsibility efforts.
3. Environmentalists who apply pressure by naming names of companies that don't abide by
the environmentalists' standards.
4. Union officials who hunt down violations and force companies to comply to avoid negative
publicity.
5. Customers who take their business elsewhere if a company demonstrates unethical and
socially irresponsible practices.
AACSB: Ethics
Bloom’s: Apply
4-95
263. Identify the six-step approach to achieve a long-term improvement of business ethics.
Answer:
1. Top management must adopt and unconditionally support an explicit corporate code of
conduct.
2. Employees must understand that expectations for ethical behavior begin at the top and that
senior management expects all employees to act accordingly.
3. Managers and others must be trained to consider the ethical implications of all business
decisions.
4. An ethics office must be set up with phone lines to allow employees to report questionable
activities.
5. Suppliers, subcontractors, distributors, and customers must be told about the ethics
program. Often pressure to put aside ethical considerations comes from outsiders, and it helps
employees resist such pressure when everyone knows what the ethical standards are.
6. The ethics must be strictly enforced with timely action if any rules are broken.
AACSB: Ethics
Bloom’s: Apply
4-96
264. Identify the three questions that an ethics-based manager should ask when facing a
potentially unethical action, and provide an example of a situation where you would use
these questions to evaluate a decision.
Answer: Is it legal? Am I violating any law or company policy? Regardless of the situation,
this is the most basic step in an ethics-based management system.
Is it balanced? Am I acting fairly? Would I want to be treated this way? If a situation
arises where one party wins everything at the expense of another party, the future may bring
retaliation from the loser. While every situation cannot be completely balanced, it is important
for the health of business relationships that we avoid major imbalances over time. An ethics-
based manager maintains a win-win attitude.
How will it make me feel about myself? Will I feel proud when my family learns of my
decision? Decisions that go against our sense of right and wrong make us feel bad and cause
us to lose our self-esteem.
The examples will vary but should include a discussion of the legality of the situation, for
starters. Then proceed with determining if the decision is balanced. Do both sides stand to
gain something, or is it a lose situation for only one side? Do you feel good about the
decision? Will others believe that you did the best you could in this situation?
AACSB: Ethics
Bloom's: Apply
4-97
265. Identify and discuss the social responsibilities of a firm to three of the four stakeholder
groups described in your textbook.
Answer:
Customers: Businesses are responsible for satisfying customers by offering them goods and
services of real value. One of the surest ways of failing to please customers is to be less than
totally honest with them.
Investors: According to Milton Friedman, businesses are responsible for generating profits
for their owners and investors. Some people believe that before “you can do good, you must
do well”; others believe that by doing good, you can also do well. Many people believe that it
makes financial as well as moral sense to invest in companies that are planning ahead to
create a better environment. By choosing to put their money into companies whose goods and
services benefit the community and the environment, investors can improve their own
financial health while improving society's health.
Employees: Firms have several responsibilities to employees. First, they have a responsibility
to create jobs if they want to grow. Once a company creates jobs, it has the responsibility to
see to it that hard work and talent are respected and fairly rewarded. Employees need realistic
hope of a better future, which comes only through a chance for upward mobility. Companies
can demonstrate commitment and caring by giving employees salaries and benefits that help
them reach their personal goals.
Society and the Environment: One of business's major responsibilities to society is to create
new wealth. Businesses are also partly responsible for promoting social justice. Businesses
are also taking responsibility for helping to make their own environment a better place.
Environmental efforts may increase the company's costs, but they also may allow the
company to charge higher prices, to increase market share, or both. The environmental
movement is a social trend that all generations have embraced. Businesses which show a
concern for the environment may increase their costs, but customers are willing to pay higher
prices if they know that the business is environmentally conscious.
AACSB: Ethics
Bloom’s: Apply
4-98
266. Provide examples that serve to explain the differences among the following terms: (1)
corporate responsibility; (2) corporate social initiatives; (3) corporate philanthropy.
Answer: Corporate responsibility refers to a firm's commitment toward a number of social

issues that range from the hiring of minorities to making safe products. Examples will vary.
Corporate social initiatives refer to a firm taking its distinct competencies and using them
in a socially responsible way. For example, TNT keeps a 50-person response team on standby
to be involved in emergency response activities.
Corporate philanthropy is the donating of important resources to a cause, usually
donations of money and time. Providing money for local youth programs and then asking
employees to utilize an hour each week to work with local youth are examples of corporate
philanthropy.
AACSB: Ethics
Bloom’s: Apply
4-99
Multiple Choice Questions
Mini-Case
Harry, Sirly, and Bo are in the midst of a heated discussion. As the chief operating officers of
the U-Scream Ice Cream Corporation, they are reviewing the latest financial reports. Intense
competition has resulted in deceased profits. Each of the three officers has his own view of
how to reverse the current trend.
Harry suggests cutting costs by firing union employees and hiring replacement workers at
lower wages. He has directed the firm's attorney to find a loophole in the contract that will
allow for this action. Sirly protests, stating that Harry's proposal is unethical and unfair. Sirly
feels that every stakeholder should be treated equally, and that profiting at the expense of
others is foolhardy.
Bo, agreeing in part with Sirly, states, "We must be sensitive to all affected parties, but
clearly our primary goal is to make a profit for our owners." In an attempt to resolve the
conflict between Harry and Sirly, Bo offers an alternative suggestion: reduce the firm's
charitable contributions until acceptable profit levels are realized. Sirly is outraged and
reminds Bo of the social responsibilities that U-Scream Ice Cream has to the community,
environment, suppliers, employees, and stockholders.
267. Harry is concerned about the legality of his idea of firing union workers in order to
hire workers willing to work for less pay. Harry values ______________ ethics, but has
little concern for other types.
A. integrity-based
B. compliance-based
C. socially based
D. policy-based
Feedback: A compliance-based ethics code emphasizes preventing unlawful behavior by

seeking legal advice and following the letter of the law.
Answer: B
AACSB: Ethics
Bloom’s: Analyze
4-100
268. If management adopts Bo's suggestion of reducing U-Scream Ice Cream's charitable
donations until profits stabilize, the company will essentially reduce its ___________.
A. corporate citizenship
B. nonprofit volunteerism
C. corporate philanthropy
D. RF factor
Feedback: Corporate philanthropy involves charitable donations to nonprofit groups.
Answer: C
AACSB: Ethics
Bloom’s: Analyze
269. Sirly recommends a marketing strategy aimed at increasing sales through the
development of a positive corporate image. He suggests the first step toward this goal is to
identify and evaluate the firm's programs for community involvement. Sirly is calling for
a ________ to be completed.
A. strategic plan
B. social audit
C. socialist review
D. corporate contribution index
Feedback: A social audit is a systematic evaluation of an organization's progress toward

Answer: B
AACSB: Ethics
Bloom’s: Analyze
4-101
270. On which of the three ethics check questions would Harry primarily focus?
A. Is it legal?
B. Is it fair and balanced?
D. Is this a win-win situation?
Feedback: Harry's concern is compliance with the law.
Answer: A
AACSB: Ethics
Bloom’s: Analyze
271. Bo's view tends to lean toward the concerns of investors, first and foremost. This is the
view taken by __________________.
A. corporate philanthropists
B. the view of Franklin D. Roosevelt
C. the late Milton Friedman, famous economist
D. the view of a watchdog such as an environmentalist
Feedback: The late Milton Friedman, famous economist, proclaimed in a well-known speech
that the only social responsibility of business was to make money for stockholders.
Answer: C
AACSB: Ethics
Bloom’s: Analyze
4-102

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Chapter 04 - Demanding Ethical and Socially Responsible Behavior

Understanding Business 11th

TEST PLANNING TABLE FOR CHAPTER 4

LL:1 LL:2 LL:3

1. Explain why obeying 1,2,3,4,5,6,7, 8,9,10,11,12,13,14,15, 17,18,

2. Ask the three 19,20,21,22,23,24,25,26, 27,28,29,30,31,32,33~, 34,35,36,37,38,

3. Describe 39,40,41,42,43,44,45,46, 53,54,55,56,57,58, 59,

4. Distinguish between 60,61,62,63,64,65,66,67, 69,70,71,72,73,74, 75,76,77,78,79,

5. Define corporate 80,81,82,83,84,85,86,87, 109,110,111,112,113, 120,121,122,123,124,

6. Analyze the role of 126,127,128,129,130,131, 134,135,136,137,138,] 141,142,143~,144~,

Total number of test items: 271

True/false questions are in plain text.

True / False Questions

2. Ethical behavior requires more than following the law.

3. Legal behavior and ethical behavior are basically the same.

10. Legal behavior is a first step toward ethical behavior.

13. Ethical behavior focuses on treating others fairly.

17. People involved in business may be tempted to do something unethical in order to

21. A common form of cheating in schools today is plagiarizing online material.

22. Making ethical choices is always easy.

24. The question "Is it legal?" establishes ethical behavior.

Feedback: Humor at someone else's expense is an example of unfair treatment of others.

Feedback: Ethics-based managers do what is proper as well as what is profitable. Decisions

60. Integrity-based ethics codes are based on avoiding legal punishment.

61. Compliance-based ethics codes are based on preventing unlawful behavior.

63. Compliance-based ethics codes focus on preventing unlawful behavior by increasing

69. A code of ethics designed to avoid criminal misconduct is an example of a compliance-

Feedback: Compliance-based ethics codes emphasize the prevention of unlawful behavior by

71. To be effective, an organization's code of ethics needs to be communicated to outsiders

Feedback: The objective of a compliance-based ethics code is to avoid criminal misconduct.

Feedback: A compliance-based approach focuses on avoiding criminal misconduct. It is an

Feedback: Compliance-based ethics emphasize preventing unlawful behavior. Government

82. A charitable donation contributed by a corporation is an example of corporate

96. Businesses have a social responsibility to create jobs.

97. Promoting social justice is a responsibility of society, but not business.

102. A social audit is a systematic evaluation of an organization's progress toward

108. A list of "watchdogs" (including customers, socially conscious investors, and

Feedback: Corporate responsibility includes everything from hiring minority workers to

Feedback: A social audit is a response to an integrity-based approach to ethics, which goes

Feedback: Currently renewable-energy and energy-efficiency industries account for 9 million

Feedback: This is clearly corporate philanthropy, a form of corporate social responsibility.

130. The objective of the Inter-American Convention Against Corruption document

Feedback: American businesses are demanding socially responsible behavior of their

Feedback: Requiring international suppliers to adhere to American ethical standards is not as

Feedback: Several international organizations have entered into agreements to identify

Multiple Choice Questions

145. Obeying the law is ________ ethical behavior.

146. ________ refers to standards of moral behavior.

147. A recent study revealed that most Americans have:

149. The danger in writing new laws to correct behavior is that:

151. Laws represent the standards of ________ behavior.

Feedback: Ethics reflects people's proper relations with one another.

Feedback: Ethical behavior by businesses is a reflection of a concern for the welfare of

165. The first step when facing an ethical dilemma is to ask:

167. Ethical dilemmas in business:

168. Ethical behavior will result in which of the following?

169. Business relationships often present ethical dilemmas that are:

Feedback: The textbook describes an ethical dilemma as a problem without a satisfactory