Ch 4 Practical Ethical Decision Making

Question 1

Who is the face of egoism?

Answer 1

Rand

Question 2

Who is the face of utilitarianism?

Answer 2

Bentham

Question 3

Who is the face of deontology?

Answer 3

Kant

Question 4

What were the key facts in the Sunbeam case?

Answer 4

• Chainsaw Al hired as CEO
• Al cut employees and products
• Sales went up
• Al got a huge bonus
• Got caught for bad accounting practices
• Charged

Question 5

Why didn’t Sunbeam’s BOD catch on to the manipulations?

Answer 5

• Chainsaw Al was chairperson of the board

- He gave everyone stock options (conflict of interest)

Question 6

How should a BOD make sure that it gets the information it needs to monitor management actions and accounting policies?

Answer 6

Have a whistleblowing mechanism

Question 7

If you are a professional accountant who reports an ethical problem to your superior who does nothing, what more should you do?

Answer 7

• Talk to another senior exec you trust
• Talk to company ethics committee
• Talk to audit committee of BOD
• Contact Chair of BOD
• IMA hotline
• Get a lawyer

Question 8

What problems can you identify with Arthur Andersen’s work as auditor of Sunbeam?

Answer 8

• Failed to verify reasonability of reserves and ultimate use of cookie jar reserves used
• Didn’t exercise enough professional skepticism
• Lack of independence

Question 9

How should a Board assess the performance of their company’s auditors?

Answer 9

• Question them on their audit approach
• Assess them on their knowledge of company
• Compare the auditor’s performance w/ that of other auditors that board members have encountered
• Periodically ask for bids from other firms

Question 10

Can a Board effectively monitor a CEO who is also the Chair of the Board?

Answer 10

• Need to have a “Lead Director” who acts as a quasi-chair so that CEO
• AND Chair is invited to leave the room for open discussion by rest of Board

Question 11

What ethical paradigm did Al Dunlap follow at Sunbeam?

Answer 11

Ethical egoism

Question 12

According to the authors, do any of the traditional decision-making approaches incorporate a thorough review of the motivations for the decisions involved?

Answer 12

NO (needs to include virtue)

Question 13

What does mens rea mean?

Answer 13

Guilty mind

Question 14

What five questions are asked about a proposed decision in the “Modified 5-Question Approach to Ethical Decision Making”?

Answer 14

Is the decision:

1) Profitable?
2) Legal?
3) Fair?
4) Right?
5) Demonstrating expected motivation, virtues and character?

Question 15

The authors suggest that the “Modified 5-Question Approach to Ethical Decision Making” is better suited to what types of decisions?

Answer 15

Better suited to decisions

1) W/o externalities and
2) Where a specific focus is desired by decision maker

Question 16

Which modified approach to ethical decision making do the authors suggest is better suited to decisions that have considerable impacts outside the organization?

Answer 16

Modified Moral Standards Approach

Question 17

What four moral standards does the “Modified Moral Standards” approach look at?

Answer 17

1) Utilitarian
2) Individual rights
3) Justice
4) Virtues

Question 18

The following standards make up the Modified Moral Standards approach:

a) Utilitarian, Individual rights, Justice & Virtues

b) Utilitarian, Individual rights, Fairness & Justice
c) Legal, Individual rights, and Justice & Virtues
d) Utilitarian, Moral rights, Justice & Legal
e) Legal, Moral rights, Justice & Virtues

Answer 18

a) Utilitarian, Individual rights, Justice & Virtues

Question 19

What concepts does the “Modified Pastin Approach” use?

Answer 19

1) Ground rule ethics
2) End point ethics
3) Rule ethics
4) Social contract ethics
5) Virtue ethics

Question 20

Modified Pastin Approach. What is purpose for examining ground rule ethics?

Answer 20

To illuminate an organization’s and/or an individual’s rules and values

Question 21

Modified Pastin Approach. What is purpose for examining end point ethics?

Answer 21

To determine the greatest net good for all concerned

Question 22

Modified Pastin Approach. What is purpose for examining rule ethics?

Answer 22

To determine what boundaries a person or organization should take into account according to ethical principles

Question 23

Modified Pastin Approach. What is purpose for examining social contract ethics?

Answer 23

To determine how to move the boundaries to remove concerns or conflicts

Question 24

Modified Pastin Approach. What is purpose for examining virtue ethics?

Answer 24

To determine if motivations, virtues, character traits demonstrated in the decision are ethical

Question 25

True or false.

The modified Pastin’s approach adds the concept of Ground Rule Ethics to ethical decision making.

Answer 25

True

Question 26

Is the modified 5-question approach to ethical decision making superior to the modified moral standards or modified Pastin approach?

Answer 26

Not really. Author suggests:

- Circumstances will dictate the approach which is most attractive/suitable

Question 27

What does the commons problem refer to?

Answer 27

Refers to inadvertent or knowing overuse of jointly owned assets or resources

Question 28

Give an example of a commons problem.

Answer 28

• Grazing livestock on land owned in common.

- Polluting the environment

Question 29

Which of the following is a common ethics decision-making pitfall?

a) Conforming to an unethical culture
b) Misinterpreting public expectations
c) Focusing on ST profit and shareholder impacts only
d) Focusing only on legalities
e) Two of the above
f) All of the above

Answer 29

f) All of the above

Question 30

Give an example of behavior that might be unethical even though ‘‘everyone is doing it’’

Answer 30

Bribery of foreign officials while doing business overseas