Business ethics

Question 1

Ethics

Answer 1

“Doing the right thing.”
- Business ethics: Doing the right thing in business dealings

Question 2

Morals

Answer 2

refer to personal philosophical choices, i.e., what is right and
wrong in intentions, decisions, and actions

Question 3

Virtue

Answer 3

Demonstration of moral practice

Question 4

Ethos

Answer 4

reflects an individual’s attitude toward values: “Doing the right
thing when no one is watching

Question 5

Individualistic culture

Answer 5

Significant emphasis on individual
interests and independence
Prefer individuals to make decisions
Examples: Americans, Australians,
Canadians, Dutch, Scandinavians,
Anglo-Europeans

Question 6

Group-oriented culture

Answer 6

Value groups’ collective beliefs and practices
Strong and dependable relationships critically
important
Decisions usually collective process to reach
group consensus
Examples: Turks, Chinese, Indians,
Indonesians, Japanese, Malaysians,
Philippines

Question 7

“Corporate governance

Answer 7

involves a set of relationships between a
company’s management, its board, its shareholders and other stakeholders.
Corporate governance also provides the structure through which the
objectives of the company are set and the means of attaining those
objectives and monitoring performance are determined

Question 8

International Organization for Standardization

Answer 8

has been guiding organizations in mediating ethical and corporate governance risks since 2009
- develops and publishes international quality management standards, environmental standards, and information security management standard

Question 9

Ethics Theories

Answer 9

Ethical theories are frameworks that guide moral decision-making and are often embedded in our practices without explicit awareness. Understanding these theories can help clarify personal ethics and improve interactions with those who hold different ethical perspectives

Question 10

Ethics

Answer 10

Ethics refers to having appropriate morals, values, and conduct that are accepted by society and individuals.
Moral development, like cognitive development, progresses over time with experience and practice.

Question 11

Meta-Ethics

Answer 11

Meta-ethics examines the nature, foundations, and meaning of ethical concepts

Question 12

Applied Ethics

Answer 12

Applied ethics addresses practical ethical questions in specific contexts, such as personal behavior and business.
Focuses on actions: “Is stealing ethical?” or “Is lying ethical?”

Question 13

Act Utilitarianism

Answer 13

Focuses on evaluating each individual action based on its consequences.

Question 14

Rule Utilitarianism

Answer 14

Advocates following general rules that are likely to produce the greatest happiness over time.

Question 15

Universal Law

Answer 15

Act only according to maxims that can be willed as a universal law.

Question 16

Humanity Principle

Answer 16

Treat people as ends in themselves, not merely as means to an end.

Question 17

Kingdom of Ends

Answer 17

Act as if your actions establish universal laws in a community of rational beings.

Question 18

Ethics from a Macroeconomic Perspective

Answer 18

Ethics at this level looks at the broader socio-economic system and how it influences business behavior and policies.

Question 19

Ethics within a Mesosystem

Answer 19

This level focuses on ethical standards within organizations and businesses, addressing the roles of leaders, employees, stakeholders, and business operations.

Question 20

Ethics of Micro-Conduct

Answer 20

Ethics at this level pertain to the individual actions and decision-making processes of leaders and professionals within an organization.

Question 21

Accountability in Business Transactions

Answer 21

Duties include:
Legitimate sourcing, product safety, quality assurance, timely delivery and payments.
Failing duties often stems from financial motives.

Question 22

Corporate Accountability in Human Rights

Answer 22

UN Guiding Principles (2011): Both governments and corporations must respect human rights.
Corporations must:
Avoid causing harm.
Mitigate adverse impacts related to their operations, even if not directly responsible.

Question 23

Corporate Ethics Program (CEP)

Answer 23

A CEP is a proactive organizational measure to address ethics challenges comprehensively and mitigate potential harm.

Key Components (Ferrell et al., 2017):

Policies and procedures.
Appointment of an ethics officer.
Internal systems for monitoring, auditing, and reporting misconduct.
Communication and training programs for ethics.

Question 24

Code of Conduct (COC)

Answer 24

Broad, high-level document detailing company values, principles, and societal relationships.

Question 25

Code of Ethics (COE)

Answer 25

OC: Practical guide outlining specific expected behaviors in ethical dilemmas.

Question 26

Consequentialism

Answer 26

Decisions focus on outcomes, aiming to maximize benefits and minimize harm for all stakeholders

Question 27

Deontological Ethics

Answer 27

Emphasizes duties, obligations, and principles.
Example: Immanuel Kant’s Categorical Imperative: If an action can become a universal law (applicable to everyone), it is ethical.

Question 28

Virtue Ethics

Answer 28

Focuses on personal character and the aspiration to be virtuous rather than the actions themselves.

Question 29

Whistleblowing

Answer 29

Encourages raising concerns about unethical conduct when internal mechanisms fail.

Question 30

False Claims Act

Answer 30

Reports government contractor fraud.
Fines: 3-5x the fraud amount.
Whistleblowers receive 15-30% of fines collected.

Question 31

Dodd-Frank Act

Answer 31

Focuses on the financial industry.
Awards 10-30% of recoveries exceeding $10 million for original information provided.

Question 32

Cyberspace Ethics

Answer 32

Ethics in online environments focuses on balancing freedom of expression with responsibilities and rights:

Key Issues:
Social media platforms (e.g., Facebook, Twitter, Google) face criticism for moderating content.
CEO Mark Zuckerberg defended Facebook, stating, “Real disagreements exist about where limits of online speech should be” (Romm et al., 2020).

Question 33

Consumer Protection

Answer 33

Safeguard personal information unless users consent to sharing.

Question 34

Privacy Rights

Answer 34

Uphold users’ rights “to be forgotten” and to avoid interference

Question 35

Corporate Governance

Answer 35

A framework used by boards of directors to balance economic and social goals within organizations.
Purpose:
Ensure alignment with shareholder and societal expectations.
Prevent abuse of power by corporate leaders.
Regulate growing businesses and safeguard minority shareholder interests.

Question 36

OECD Principle

Answer 36

Aimed at developing and improving the legal, institutional, and regulatory frameworks globally.
Encourages transparency, accountability, and sustainability.

Question 37

ICGN Principles

Answer 37

Focuses on high standards of professional practice and investor stewardship.
Represents global investors managing $54 trillion in assets.

Question 38

Control in Corporate Governance

Answer 38

Corporate governance encompasses both directive and controlling frameworks.

Question 39

Family Governance Structure (Direct Control)

Answer 39

Family holds majority board and executive roles.

Encourages dynamic capabilities but may limit external input.

Question 40

Corporate Governance Structure (Mixed Control

Answer 40

Shared leadership between family and external managers.

Promotes participation and improves organizational outcomes.

Question 41

Governance Mechanisms

Answer 41

The formal and informal rules, practices, and processes from inside and outside a firm to direct and control firm behavior, aligning stakeholder interests”

Question 42

Appointment of Directors

Answer 42

Shareholders formally elect directors, but the chairman often wields significant influence over nominations.

Limited diversity due to reliance on personal networks.

Potential alignment with chairman’s agenda, reducing independence.

Question 43

Preventable Risks

Answer 43

Internal and controllable, e.g., defective products or safety lapses.

Managed through internal controls and training.

Question 44

External Risks

Answer 44

Beyond organizational control, e.g., political turmoil or economic crises.

Mitigated through foresight and data analysis.

Question 45

Strategic Risk

Answer 45

Deliberately undertaken risks, minimized via proactive strategies (e.g., credit checks).

Question 46

Internal Control

Answer 46

Ensures financial reporting reliability through monitoring, risk assessment, and control activities (COSO, 2013).

Activities include:

Proper employee placement.

Authorization hierarchies.

Segregation of duties to prevent conflicts.

Documentation.

Question 47

Surveillance

Answer 47

Defined as data collection for control and influence (Büchi et al., 2019).

Examples:

Cameras above cash registers.

Monitoring customer calls.

Perception:

Internal control is neutral and necessary.

Surveillance implies distrust but offers broader organizational insights for policy evaluation.

Question 48

One-Tier System

Answer 48

Common in Anglo-American countries. Boards consist of executive and non-executive directors, who jointly oversee and manage the company.

Question 49

Two-Tier System

Answer 49

Found mainly in Germany and the Netherlands. Separate supervisory and management boards provide oversight and execution functions.

Question 50

Outsider System

Answer 50

External directors dominate governance; suited to markets with mature capital structures and limited employee participation.

Question 51

Insider System

Answer 51

Internal directors or stakeholders play a dominant role in governance.

Question 52

Tax Control Framework

Answer 52

Monitors tax risks, strategies, and compliance.

Question 53

G20/OECD Principles of Corporate Governance

Answer 53

Published by the OECD in 1999, updated in 2015.
Focuses on financial and non-financial public companies.
Widely used globally but adapted differently in each country, leading to limited convergence.

Question 54

ICGN Global Governance Principles (GGP):

Answer 54

Builds on the OECD Principles but emphasizes the interests of major investment firms.
Targets institutional investors managing assets exceeding $26 trillion.
Applicable in over 45 countries.

Question 55

IFC Corporate Governance Practices in the European Union Guide:

Answer 55

Targets EU member states and affiliated countries.
Aims to harmonize governance across European nations.

Question 56

Country-Specific Governance Codes

Answer 56

Countries adapt governance frameworks to suit their unique cultural, legal, and market environments.

Question 57

Mandatory Compliance

Answer 57

Adopted by the US, UK, India, and UAE.

Question 58

Comply or Explain

Answer 58

Common in France, Germany, the Netherlands, Norway, Switzerland, Australia, Brazil, China, and Russia. Firms disclose or voluntarily comply with governance standards.

Question 59

Internal Governance:

Answer 59

Firms need to establish ethical connections within their governance frameworks, regardless of the system (e.g., one-tier, two-tier, French four-pillar system).
Power and hierarchy play significant roles in ensuring ethically oriented governance.
Compliance should be mandatory and embedded into organizational culture through:
Communication
Training
Demonstration by leadership
Regular evaluation

Question 60

External Governance:

Answer 60

Firms interact with external stakeholders (e.g., auditors, environmental agencies) based on laws, contracts, and socio-economic expectations.
External collaborations should align with the company’s ethical standards and value propositions.

Question 61

Expanding Corporate Governance to the Global Value Chain (GVC)

Answer 61

GVC encompasses all activities performed by multiple firms across countries to deliver a product or service from conception to end use.