Ch 3 - Ethics in Business

Question 1

Pilz, Inc. is manufacturing a drug that will cure a particular disease in 97% of patients, but the other 3% of patients will experience agonizing side effects and a certain painful death. Applying a strict approach of utilitarianism to the decision of whether to market the drug

A.) would invoke religious ethical principles.

B.) is based on duty-based ethical principles.

C.) is in line with the research of German philosopher Immanuel Kant.

D.) is most likely not ethical, because it does not account for the terrible consequences for 3% of patients.

Answer 1

D.) is most likely not ethical, because it does not account for the terrible consequences for 3% of patients.

Question 2

_________-based ethics determines what is ethical by looking at the consequences of any given action.

A.) Duty

B.) Theory

C.) Law

D.) Outcome

Answer 2

D.) Outcome

Question 3

ProEngineering Inc., like other corporations, is subject to laws that are broad in their purpose and their scope. Compliance with these laws is not always sufficient to determine “right” behavior because

A.) the law is the moral minimum.

B.) company codes are also primary sources of law.

C.) company codes are the moral minimum.

D.) all of the other responses.

Answer 3

A.) the law is the moral minimum.

Question 4

When the narcotic painkiller OxyContin was first marketed by Purdue Pharma, Purdue claimed it was unlikely to lead to drug addiction or abuse. Later it was determined that company executives knew about the addictive qualities of the drug, but kept it a secret in order to increase sales. The decision in United States v. Purdue Frederick Co., 495 F.Supp.2d 569 (W.D.Va.2007), included criminal convictions for the executives, fines, and a ban from doing business with federal health programs. A major takeaway from this case for business students is to understand

A.) that a company’s focus on short-term profits can lead to unethical conduct that hurts business in the long run.

B.) that attorneys, and not managers should draft business contracts.

C.) that the First Amendment’s right to Free Speech does not always protect you.

D.) the power of the National Labor Relations Board.

Answer 4

A.) that a company’s focus on short-term profits can lead to unethical conduct that hurts business in the long run.

Question 5

n the past, the only perceived duty of a corporation was to maximize profit. In the present day, investors and others are interested in the “triple bottom line” which includes a company’s

A.) profit, profit, and more profit.

B.) profit, its impact on people, and its impact on the planet.

C.) employer rights, employee rights, and shareholder rights.

D.) in-person impact, online impact, and international impact.

Answer 5

B.) profit, its impact on people, and its impact on the planet.

Question 6

Diane, the owner of XYZ, Inc., adheres to the “principle of rights” theory. Under this theory, a key factor in determining whether a business decision is ethical is how that decision

A.) complies with religious principles.

B.) affects the rights of others.

C.) causes consequences that would follow if everyone acted the same way.

D.) supports the right to make a profit.

Answer 6

B.) affects the rights of others.

Question 7

Bob, research manager for CornAgri Products, Inc., applies utilitarian ethics to determine that an action is morally correct when it produces the greatest good for

A.) Bob

B.) CornAgri employees.

C.) CornAgri shareholders.

D.) the most people.

Answer 7

D.) the most people.

Question 8

Corporate social responsibility (CSR) is a concept in which a corporation must not only follow the law but also demonstrate

A.) ethical decisions.

B.) environmental stewardship.

C.) improvements to society.

D.) all of the other responses.

Answer 8

D.) all of the other responses.

Question 9

Transport Trucking, Inc. transports hazardous waste. Paula is a Transport driver, who feels so tired at the beginning of her driving shift that she calls her boss, Pat, to let him know her situation. Pat said that since Paula has not exceeded federal limitations on driving hours, she must continue her route. Paula falls asleep at the wheel and has an accident. She is seriously injured, and the accident caused spilled chemicals to contaminate the city’s water. Transport Trucking / Pat

A.) acted unethically due to reckless disregard for Paula and for city residents only.

B.) acted unethically due to reckless disregard for the environment only.

C.) both 1. acted unethically due to reckless disregard for Paula and for city residents AND 2. acted unethically due to reckless disregard for the environment.

D.) did not act unethically because Pat was following federal the law with regard to Paula’s driving hours.

Answer 9

C.) both 1. acted unethically due to reckless disregard for Paula and for city residents AND 2. acted unethically due to reckless disregard for the environment.

Question 10

Widgets, Inc. makes and markets its products nationwide. Under the stakeholder approach, to be considered socially responsible when making a business decision, Widgets, Inc. must take into account the needs of

A.) its shareholders only.

B.) its employees and shareholders only.

C.) its employees, shareholders, and consumers only.

D.) its employees, shareholders, consumers, creditors, suppliers, community and the environment

Answer 10

D.) its employees, shareholders, consumers, creditors, suppliers, community and the environment

Question 11

Are ethical standards subjective or objective?

Answer 11

Subjective - they come from personal beliefs

Question 12

Define ethics.

Answer 12

Moral principles and values applied to social behavior.

- The study of right and wrong behavior.

Question 13

Define business ethics.

Answer 13

The application of moral and ethical principles in a business context.

Question 14

How has the government institutionalized some ethical rights and duties?

Answer 14

Through the passage of laws and regulations.

i.e. The Sarbanes-Oxley Act

Question 15

What is meant by the “moral minimum?”

Answer 15

Compliance with the law is the minimum, but actions that are legal are not always ethical.

If people and entities merely comply with the law, they are acting at the lowest ethical level that society will tolerate.

Question 16

What are Private Company Codes of Ethics?

Answer 16

Not law, but rules a company can enforce.

Question 17

What is the “Triple Bottom Line?”

Answer 17

profits + impact on people + impact on planet

Question 18

Business practitioners can use what criteria to help make ethical decisions?

Answer 18

1. Legal implications of each decision
2. The public relations impact
3. The safety risks for consumers and employees
4. The financial implications

Question 19

What is a fundamental ethical issue for business?

Answer 19

Developing integrity and trust

Question 20

What is ethical reasoning?

Answer 20

A reasoning process in which an individual links his or her moral convictions or ethical standards to the situation at hand.

Question 21

What are the two major categories ethics is generally divided into?

Answer 21

Duty-Based Ethics and Outcome-

based Ethics.

Question 22

What is Duty-Based Ethics?

Answer 22

Every person has duties to others and the planet.

The focus is on right and wrong.

Question 23

What is Outcome-Based Ethics?

Answer 23

Ethical behavior is determined by looking at the consequences of actions.

Question 24

What are the 3 types of Duty-Based Ethics?

Answer 24

1. Religious Ethical Principles
2. Principle of Rights
3. Kantian Ethical Principles

Question 25

What is are religious ethical principles?

Answer 25

Religious rules that are generally absolute with respect to the behavior of their adherents.

Question 26

What is the principle of rights?

Answer 26

The belief that human beings have certain rights and that a key factor in determining if a decision is ethical is how that decision affects the rights of others.

– Life, Liberty, and the Pursuit of Happiness

Question 27

What are Kantian ethical principles?

Answer 27

Ethical guidelines under which individuals should evaluate their actions in light of the consequences that would follow if everyone in society acted in the same way.

Example:
CHS Fertilizer is deciding whether to invest in expensive equipment that will decrease profits but will also reduce pollution from its factories. If CHS has adopted Kant’s categorical imperative, the decision-makers will consider the consequences if every company invested in the equipment (or if no company did so). If the result would make the world a better place (less polluted), CHS’s decision would be clear.

Question 28

What is utilitarianism?

Answer 28

An action is evaluated in terms of its impacts on society or key stakeholders.

“The greatest good for the greatest number of people”

Question 29

What is the cost-benefit analysis?

Answer 29

An action is “right” when it produces the greatest amount of good for the greatest number of people.

Question 30

What are the 3 steps required to apply the utilitarian theory?

Answer 30

1. ) A determination of which individuals will be affected by the action in question.
2. ) A cost-benefit analysis, which involves an assessment of the negative and positive effects of alternative actions on these individuals.
3. ) A choice among alternative actions that will produce maximum societal utility (the greatest positive net benefits for the greatest number of individuals).

Question 31

What are the problems with the utilitarianism approach?

Answer 31

In some situations, an action that produces the greatest good for the most people may not seem to be the most ethical.

Example:
Phazim Company is producing a drug that will cure a disease in 99 percent of patients, but the other 1 percent will experience agonizing side effects and horrible, painful death. A quick utilitarian analysis would suggest that the drug should be produced and marketed because the majority of patients will benefit. Many people, however, have significant concerns about manufacturing a drug that will cause serious harm to anyone.

Question 32

What is Corporate Social Responsibility (CSR)?

Answer 32

The idea that corporations can and should act ethically and be accountable to society for their actions.

Question 33

Corporate Social Responsibility (CSR) combines a commitment to:

Answer 33

Making ethical decisions, improving society, and minimizing environmental impact.

Question 34

Is Corporate Social Responsibility (CSR) imposed on corporations by law?

Answer 34

No, it is instead a form of self-regulation by the company.

Question 35

Is Corporate Social Responsibility (CSR) outcome-based or duty-based?

Answer 35

It is a combination of both outcome-based and duty-based concepts.

Question 36

What are the social aspects of Corporate Social Responsibility (CSR)?

Answer 36

They require that corporations demonstrate that they are promoting goals that society deems worthwhile and are moving toward solutions to social problems.

i.e. how much they donate to social causes, as well as how they conduct their operations with respect to employment discrimination, human rights, environmental concerns, and similar issues

Question 37

What are the corporate aspects of Corporate Social Responsibility (CSR)?

Answer 37

A corporation that is viewed as a good citizen may see a rise in sales.

i.e. Seeing an increase in goodwill from the local community for creating a sports park

It may cost more initially to construct a new plant that meets the high standards necessary to be certified as environmentally friendly by the LEED program. Nevertheless, over the life of the building, the savings in maintenance and utilities may more than make up for the extra cost of construction.

Question 38

One view of Corporate Social Responsibility (CSR) stresses that corporations have a duty not just to shareholders, but also to:

Answer 38

Stakeholders.

Question 39

Who are stakeholders?

Answer 39

Groups of people that are affected by corporate decisions.

Employees, customers, creditors, suppliers, and the community in which the corporation operates.

Under the stakeholder approach, a corporation considers the impact of its decision on these stakeholders, which helps it to avoid making a decision that may appear unethical and may result in negative publicity.

Question 40

What is short-term profit maximization, and why does it lead to ethical problems?

Answer 40

Businesspersons often commit ethical violations because they are too focused on one issue or one needed result, such as increasing profits or outperforming the competition. Some studies indicate that top-performing companies may actually be more likely to behave unethically than less successful companies because employees feel they are expected to continue performing at a high level. Thus, abnormally high profits and stock prices may lead to unethical behavior.

In attempting to maximize profits, corporate executives and employees have to distinguish between short-run and long-run profit maximization. In the short run, a company may increase its profits by continuing to sell a product even though it knows that the product is defective. In the long run, though, because of lawsuits, large settlements, and bad publicity, such unethical conduct will cause profits to suffer. An overemphasis on short-run profit maximization is perhaps the most common reason that ethical problems occur in business.

Question 41

The use of social media to make hiring decisions:

Answer 41

On the one hand, job candidates may be judged by what they post on social media. On the other hand, though, they may be judged because they do not participate in social media. Given that the vast majority of younger people use social media, some employers have decided that the failure to do so raises a red flag. In either case, many people believe that judging a job candidate based on what she or he does outside the work environment is unethical.

Question 42

The use of social media to discuss work-related issues:

Answer 42

Because so many Americans use social media daily, they often discuss work-related issues there. Numerous companies have strict guidelines about what is appropriate and inappropriate for employees to say when posting on their own or others’ social media accounts. A number of companies have fired employees for such activities as criticizing other employees or managers through social media outlets. Until recently, such disciplinary measures were considered ethical and legal.

Question 43

What is the issue of awareness regarding ethical decision-making?

Answer 43

Regardless of the context in which a decision is called for, sometimes businesspersons are not even aware that the decision has ethical implications. Perhaps they are focused on something else, for instance, or perhaps they do not take the time to think through their actions.

Question 44

What is the issue of rationalization regarding ethical decision-making?

Answer 44

Sometimes, businesspersons make a decision that benefits them or their company that they know is ethically questionable. Afterward, they rationalize their bad behavior. For instance, an employee might rationalize that it is acceptable to take company property for personal use or to lie to a client just this one time because she or he normally does not steal and is usually honest.

Question 45

What is the issue of uncertainty regarding ethical decision-making?

Answer 45

Facing ethical problems, businesspersons may be uncertain as to what they should do, what they should have done, or whether there was even an ethical issue or ethical breach involved. Such uncertainty is practically unavoidable, but it should be treated as an indicator of a potential ethical problem.

Question 46

What is the IDDR (“I Desire to Do Right”) approach?

Answer 46

Inquiry: Begin with an understanding of the facts

Discussion: Develop a list of action options

Decision: Work together with those others participating in the discussion to reach a consensus on a justified solution

Review: Consider whether the implementation of the solution was effective

Question 47

What is outsourcing?

Answer 47

The practice by which a company hires an outside firm or individual to perform work rather than hiring employees to do it.

Question 48

What is the Foreign Corrupt Practices Act?

Answer 48

U.S. businesses are prohibited from making payments to (bribing) foreign officials to secure beneficial contracts, with certain exceptions.