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ANSWERS
LEARNING THE LANGUAGE
1.
2.
3.
4.
5.
6.
7.
Compliance based ethics codes
Social audit
Corporate policy
Ethics
Integrity based ethics codes
Corporate philanthropy
Corporate social responsibility
8.
9.
10.
11.
12.
13.
Corporate responsibility
Insider trading
Whistleblowers
Pension
Sarbanes-Oxley Act
Illegal
ASSESSMENT CHECK
Learning Goal 1
Ethics Defined
1.
According to the text, many Americans have no moral absolutes. Many decide according to the
situation whether it’s all right to steal, lie, or drink and drive. It appears that these people think that
what is right is whatever works best for the individual, and that each person works out for him or
herself the difference between right and wrong. This thinking has led to recent business scandals.
2.
In a country like the United States it is often difficult to determine the ethical course of action
because there are so many diverse cultures, and religion and culture, two of the sources of ethical
behavior, vary among people. As members of society we are individuals with our own personal
culture backgrounds. However there is a similarity of values and standards for what is “right and
wrong” among many religious sources.
3.
Ethics and legality are very different things. Being legal means following the laws and avoiding
actions that could result in being fined or imprisoned. Ethical standards are right versus wrong
behavior according to society. One can act unethically and still be within the limits of the law.
Learning Goal 2
Personal Ethics
4.
The five sources of ethical standards are:
a.
the Utilitarian Approach
b.
the Rights Approach
c. the Fairness or Justice Approach
d.
the Common Good Approach
e.the Virtue Approach
5.
The basic idea of the Utilitarian Approach is the idea that the ethical action should be the one that
produces the greatest good and does the least harm to all affected. In the case of a business that
would consist of all the organization’s stakeholders.
6.
Proponents of the Rights Approach suggest that the ethical action is the one that best protects and
respects the moral rights of those affected. This approach starts from the belief that humans have a
dignity based upon human nature, or on their ability to choose freely, and should not be used as
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means to an end.
7.
The Fairness or Justice Approach stems from the idea that all people should be treated equally, or if
unequally, then fairly, based on some standard that is defensible.
8.
The Common Good Approach suggests that the interlocking relationships of society are the basis of
ethical reasoning, and that respect and compassion for all others is required.
9.
The Virtue Approach is an ancient approach that suggests that ethical actions ought to be consistent
with virtues that provide for the full development of our humanity. Examples of virtues include
honesty, courage, compassion, generosity, tolerance, love, fidelity, integrity, fairness, self-control
and prudence.
10.
According to the Center for Applied Ethics, the eight main principles for determining our own
personal ethics are:
a.
concern for the well being of others
b.
respect for the autonomy of others
c. trustworthiness and honesty
d.
willing compliance with the law
e.basic justice; being fair
f. refusing to take unfair advantage
g.
benevolence; doing good
h.
preventing harm to others and the world around us
11.
The five step process to ethical decision making includes:
a.
Recognize an ethical issue – legality, and the impact on individuals.
b. Get the facts – important aspects, who is impacted, people with a personal stake in the
outcome.
c. Evaluate alternative actions – using the five sources of ethical standards.
d. Act on your decision, using ethical decision making as best you know how.
e. Reflect on your decision – was it the right thing to do? Did you feel comfortable with the
decision?
Learning Goal 3
Corporate Ethics
12.
Compliance based ethics codes emphasize preventing unlawful behavior by increasing control and by
penalizing wrongdoers. This type of ethics code is based on avoiding legal punishment. Integrity
based ethics codes define the organization’s guiding values, create an environment that supports
ethically sound behavior, and stress a shared accountability among employees.
13.
a.
b.
c.
a.
e.
Top management must adopt and support an explicit code of conduct.
Employees must understand that top management expects ethical behavior.
Managers and employees must be trained to consider ethical implications of business
decisions.
Outsiders must be told about the ethics program.
The ethics code must be enforced with timely action if rules are broken. An ethics office must
be set up.
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14.
The components of the Sarbanes-Oxley Act of 2002 are:
a.
Whistleblowers receive greater protections from retaliation.
b. New penalties are set forth for boards of directors, accounting firms and management if
inaccurate or fraudulent reporting is found.
c. The CEO must sign off on all financials.
d. The act founded a new public agency which oversees, regulates, and inspects accounting
firms.
15.
Some people feel that the flaws with the Sarbanes-Oxley Act are:
a.
that it only applies to publicly traded companies so private companies are not held to the
same practices.
b.
that the financial and time cost to business to implement the act’s provisions are too high.
Learning Goal 4
Corporate Social Responsibility Defined
16.
Corporate philanthropy includes charitable donations to nonprofit groups of all kinds.
Corporate responsibility includes everything that has to do with acting responsibly within society.
This includes everything from hiring minority workers to making safe products, minimizing
pollution, using energy wisely, and providing a safe work environment.
Corporate policy refers to the position a firm takes on social and political and internal business ethics
issues.
Learning Goal 5
Responsibility to Stakeholders
17.
Four stakeholder groups are:
a.
Customers
b.
Investors
18.
c.
d.
Employees
Society and the environment
One responsibility of business is to satisfy customers by offering them goods and services that have
a real value to the customer.
One of the surest ways of failing to please customers is not being totally honest with them
19.
The payoff for socially conscious behavior could result in new business as customers switch from
rival companies simply because they admire a company’s social efforts. This can become a powerful
competitive edge because customers prefer to do business with companies they trust.
20.
Ethical and socially responsible behavior is good for shareholder wealth and adds to the bottom
line. Many people believe 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.
Overall, social responsibility to investors means doing the right thing to make money for
stockholders and avoiding potential legal issues by trading stocks fairly and keeping accurate
financial records.
21.
Business’ responsibility to employees includes:
a.
a responsibility to create jobs.
b.
an obligation to fairly reward hard work and talent.
c.
treating employees with respect.
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d.
employee pensions
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22.
When employees feel they have been treated unfairly they will strike back, and get even in such
ways as:
a. blaming mistakes on others.
b. not accepting responsibility for decision making.
c. manipulating budgets and expenses.
d. making commitments they intend to ignore.
e. doing the minimum needed to get by.
f. making results look better than they are.
23.
Four areas of responsibility to society are:
a. to create wealth.
b. to promote social justice.
c. employees being active in politics, law, churches and temples, arts, charities and so on.
d. to help to make the environment a better place.
Learning Goal 6
Measuring Social Responsibility
24.
In conducting a social audit, the challenge is how to measure a company’s performance.
25.
One way to calculate social responsibility is by adding all positive social actions, and then
subtracting negative effects such as layoffs and pollution. Another way to measure social
responsibility is to just record positive actions.
26.
Four watchdog groups are:
a.
Socially conscious investors, who insist that companies extend the company’s high
standards to all their suppliers.
b.
Environmentalists, who apply pressure by naming companies that don’t abide by
environmentalists’ standards.
c.
Union officials, who force companies to comply with standards to avoid negative
publicity.
d.
Customers who take their business elsewhere if a company demonstrates unethical
and socially irresponsible practices.
Learning Goal 7
Ethics and Social Responsibility Globally
27.
No, ethical problems are not unique to the U.S. What is new about the moral and ethical standards
by which government leaders are being judged is that the standards are much stricter now. In other
words, government leaders are now being held to a higher standard than in the past.
28.
Many American businesses are demanding socially responsible behavior from their international
suppliers by making sure their suppliers do not violate U.S. human rights and environmental
standards.
29.
Examples of the questions surrounding the issues of international ethics are:
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 society?
What about foreign companies doing business in the U.S.?
Should foreign companies expect American companies to comply with their ethical standards?
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30.
To what country’s standards should multinational companies adhere?
Why are companies applauded for not importing goods made in prisons overseas, when there are
prison based enterprises in the United States?
The partners in the OAS have signed the Inter-American convention Against Corruption. The 29
member states of the OECD and five other states have signed a similar anticorruption convention.
CRITICAL THINKING EXERCISES
Learning Goal 1
1.
As is the case when it comes to discussing ethics there is no “right” or “wrong” answer, or at least
not one that would be clear. In many people’s opinion, this situation would be an ethical dilemma
because you are deciding between essentially violating company policy and not having a nice place
for you and your family to stay in L.A. Both of these are unsatisfactory options. At issue are the
ethical dilemma of violation of company policy and your own personal wants. There are some of
you who will feel that it’s o.k. as long as you don’t let this influence your decision making in the end
– situational ethics, in a sense. The sense of “legal” versus “ethical” comes from company policy,
which isn’t very well defined.
Learning Goals 1, 2
2.
This is a difficult problem, but ethically it's not really too hard to figure out what to do. The decision
about going to the boss is an individual one, but using the secretary and the interns for personal
business, particularly to the extent that Daryl is using, is probably unethical. A review of the five
sources of personal ethics will suggest what your solution indicates in terms of your own ethics.
Learning Goal 3
3.
A.
a. Integrity-based ethics code.
b. Compliance-based ethics code.
B
As a company’s Ethics Officer, the first step you would probably take is to set up a meeting
with the company’s top executives to ensure their support of any actions you want to take
regarding setting up a code of conduct. The unconditional support of top management is
vital to the success of a corporate ethics code. The next step most likely is to develop a set of
standards of acceptable behavior, and to make sure that employees understand the
expectations of those standards. Employees must be trained to consider the ethical
implications of their decisions, so there must be explicit standards and guidelines to follow.
Further, as the Ethics Officer, your office must set up a system so that employees can report
and discuss ethical issues anonymously, and whistleblowers must feel protected. Your office
must also inform outsiders such as suppliers, subcontractors, distributors, and customers of
the ethics code. This can be done easily on your company’s web site.
Lastly, the ethics code must be enforced by taking timely action when a violation has
occurred.
Learning Goals 4, 5, 6
4.
a. Social responsibility includes providing a safer work environment, good benefits, a safe,
high quality product line, prompt complaint handling, and honest pricing policies. The result
of a social audit would indicate that Mr. Furlong is running his business in a socially
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responsible manner, as far as he goes.
b.
Mr. Furlong's stakeholders would be his boss, the stockholders, employees, customers,
competitors, suppliers and the general public.
c.
Although he would get fairly high scores from his employees in the area of social
responsibility, Mr. Furlong doesn't appear to have any involvement with the community in
which he operates. Of the four dimensions of corporate social performance, he addresses only
the corporate responsibility issue; those of corporate philanthropy, corporate social initiatives
and corporate policy appear to be ignored. He could improve community relations (and even
increase his customer base) by encouraging his employees to get involved in community
related projects, donating time and/or money to local charities, developing a stand on local
issues, improving employee-related benefits with job enrichment and employee
development, and making opportunities for members of ethnic and minority groups.
d. Any of the four watchdog groups may take a look at this company and question its
policies. A union may come in and try to organize the employees, to be sure that they are
indeed being paid fairly and above the area average. Customers may not believe that this
company is socially responsible, and may look to see if the company acts in a socially
responsible manner. These are only examples – you may find other issues that would concern
any of the four watchdog groups.
Learning Goal 7
7.
In the past, officials of foreign firms have been judged by standards that were less harsh than those
used in the United States. More recently, it seems that top leaders in some parts of the world are
being judged by stricter standards. This could stem from the fact that American businesses have
begun to demand more socially responsible behavior from international suppliers. As the business
sector becomes increasingly globalized, international suppliers will be expected to conform to U.S.
standards concerning ethics, human rights codes and the environment.
The justness of requiring international suppliers to adhere to American ethical standards is not
clear-cut. There are questions such as: Is it always ethical for companies to demand compliance with
the standards of their own countries? What about countries where child labor is an accepted part of
the society and families depend on the children’s earnings for survival? Should foreign companies
doing business in the United States expect American companies to comply with their ethical
standards? To which society’s standards should multinational companies conform? None of these
questions have easy answers, but demonstrate the complexity of social responsibility issues in
international markets.
PRACTICE TEST
MULTIPLE CHOICE
1.
2.
3.
4.
5.
6.
TRUE-FALSE
c
b
a
b
a
b
6.
1.
2.
3.
4.
5.
T
T
F
F
T
T
7
7.
8.
9.
10.
11.
12.
a
d
7. F
8.
b
b
d
d
T
9.
10.
11.
12.
F
F
T
F
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