Exam 2

Question 1

Divine Command Theory

Answer 1

The resolution of dilemmas is based upon religious beliefs and resolved according to the tenants of faith

Question 2

Natural Law

Answer 2

There are certain rights and conduct controlled by God and no matter what a society or government does those rights and law remain supreme.

Question 3

Ethical Egoism

Answer 3

Make decisions that maximize their own self interest

Question 4

Enlightened Egoists

Answer 4

Take a long range perspective and allow for the well being of others although always with their own self interest in mind

Question 5

Utilitarian Theory

Answer 5

Provides the greatest good to the greatest number of people. Cost/benefit analysis compares all the alternatives and choosing the one that results in the greatest benefit to the most people

Question 6

Categorical Imperative

Answer 6

Individuals should evaluate their actions in light of consequences that would follow if everyone in society acted the same way

Question 7

Contractarians and Justice

Answer 7

Finding the most fair and equitable resolution. Veil of ignorance is what rules would you impose if you had no idea whether you would be a prince a pauper

Question 8

Rights Theory

Answer 8

Everyone has a set of rights and its the governments job to protect those rights

Question 9

Moral Relativists

Answer 9

Definition of ethical behavior are derived from the experiences of individuals and groups

Question 10

Virtue Ethics

Answer 10

An acquired set of virtues is used to make decisions

Question 11

Laura Nash 12 Questions

Answer 11

12 Questions to be asked in evaluating an ethical dilemma

Question 12

Wall Street Journal Model

Answer 12

Am I in compliance with the law? What contribution does this choice of action make to the company, the shareholders, the community? What are the short and long term consequences?

Question 13

Warren Buffet

Answer 13

What decision would I make if it was in the newspaper for everyone to see

Question 14

Resolving Ethical Dilemmas

Answer 14

1) Make sure you have a grasp of all the facts available and be sure to familiarize yourself with them.
2) List any information you would like to have but don’t and what assumptions you would have to make
3) Take each person involved and list the concerns they could face. Be sure to consider the impact on those not specifically mentioned in the case.
4) Develop a list of resolutions for the problem and apply the various models to reaching a resolution.
5) Evaluate the resolutions for costs, legalities, and impact.
6) Make a recommendation on the actions that should be taken.

Question 15

Moving Line

Answer 15

Set absolute rule (the line you will not cross). “Move the line” ever so gradually, withe subtle moves and in gradual increments (rationalizing why it’s okay to move the line). Comfort level adjusts because the line is moved gradually and you can rationalize the moves.

Question 16

Ethical/Moral Development

Answer 16

Ethically Clueless- Unaware of the rules. George Costanza
Ethically superior/moral egoist- Rules made for other less gifted. Jeff Skilling
Inherently Ethical- Always do the right thing. Mother Teresa
Amoral Technician- Finds out rules and laws and functions within their parameters. Andrew Fastow
Ethical Schizophrenic- One set of ethics at work and another set at home. Rigas family of Adelphia
Ethical procrastinator/postponer- Know the rules, but decides to worry about ethical rules in the future. Andrew Carnegie
Ethical Compartmentalizer/rationalizer- Everybody does this. Willy Loman
Ethically Desensitized- Give up raising ethical concerns. Watergate
Ethically Detached- Go along in a depressed manner. Hewlett-Packard pretexting plan
Ethical Chameleon- One’s ethics depends on situation. Price fixing
Ethical Sycophant- Adopts ethics of those in charge. Subprime mortgage scandal

Question 17

What is a Trade Secret?

Answer 17

Information of any sort that is valuable to its owner, not generally known, and that has been kept secret by the owner.

Question 18

Six Factors to determine what a trade secret is

Answer 18

1) The extent to which the information is known outside the claimant’s business
2) The extent to which the information is known by the claimant’s employees
3) The extent of measures taken by the claimant to guard the secrecy of the information
4) The value of the information to the claimant and the claimant’s competitors
5) The amount of effort or money expended by the claimant in developing the information
6) The ease with which the information could be acquire by others

Question 19

What material can be a trade secret

Answer 19

Customer lists
Designs
Instructional methods
Manufacturing processes
Document tracking processes
Formulas for producing processes
Inventions and processes that are not patentable

Question 20

Wrongful interference torts

Answer 20

1) Tort that interferes with a contractual relationship occurs when defendant knows about contract between A and B and intentionally induces either A or B to break the contract and then benefits from that breach.
2) Tort with a business relationship occurs when an established business relationship using predatory methods causes relationship to end and the plaintiff suffers damages.

Question 21

Earnings Management

Answer 21

A process in which a business uses accounting rules and financial manipulations to meet goals or make their earnings seem smooth

Question 22

Types of Earnings Management in Al Dunlap Case

Answer 22

Agreement to agree- Purchase $2 million worth of parts for $11 million
Channel Stuffing- Inventory was shipped out before delivery is required so it can be reflected as sales for that quarter

Question 23

How do accountants and managers perceive earnings management

Answer 23

Seasoned auditors and managers are more likely to accept earnings management in a wide variety of circumstances and will use a wide variety of methods of earnings management. Believe it is necessary to increase the value of stock of the company.

Question 24

The effect of Earnings Management

Answer 24

Very effective at increasing shareholder value
Firms that break patterns of consistent earnings experience an average 14% decline in stock returns for the year in which the earnings pattern is broken. Discovery of earnings manipulation results in stock price drop of 9%

Question 25

Al Dunlap’s Operating Philosophy

Answer 25

To make extreme cuts in all areas of operation, including layoffs, to return a business to profitability

Question 26

Sarbanes Oxley Act

Answer 26

Created public company accounting oversight board to oversee the audit of public companies, establish audit report standards and investigate compliance. Auditors must be independent from the companies. Executives must certify financial statements, companies maintain internal controls to prevent fraud, criminal penalties, and whistleblower protection.

Question 27

Tax Avoidance

Answer 27

A taxpayer may lawfully arrange their affairs to minimize taxes by deferring income from one year to the next

Question 28

Tax Evasion

Answer 28

Involves failing to report income or improperly claiming deductions that are not authorized

Question 29

Securities Exchange Act of 1934

Answer 29

Regulates secondary financial markets to ensure a transparent and fair environment for investors

Question 30

Foreign Corrupt Practices Act

Answer 30

Was enacted for the purpose of making it unlawful for certain entities to make payments to foreign government officials to assist in obtaining business

Question 31

International Code for business ethics

Answer 31

Outsourcing, working standards and conditions are different, workplace diversity and equal opportunity are different, child labor and human rights