BUSFIN 3500 FINAL EXAM QUESTIONS AND
ACCURATE ANSWERS
How do law and ethics relate to each other? - Answers - They interconnect.
Law = Rules of Human behavior and Justice.
- Law Reflects Social Value
Ethics = Rationally justified views about what is right/wrong, moral/immoral, just/unjust
Law often effects the opinion of what is ethical
What is considered ethical often finds expression in governmental law
Ethical Business Practices often equal Law
Five Fundamental Ethical Principals Reflected in the Law - Answers - 1. Maintain
fiduciary standards to act solely for the benefit of the person whose property or interests
you are entrusted
2. Avoid the appearance of conflicts of interest
3. Respect confidential relationships
4. Exercise due care and diligence in the performance of your duties
5. Act in good faith and deal fairly with others
Maintain fiduciary standards to act solely for the benefit of the person whose property or
interests you are entrusted - Answers - The highest legal duty and standard for ethical
business is the Fiduciary Rule
*** Must act solely in the interest of the other persons properties and interests
Avoid the appearance of conflicts of interest - Answers - A conflict of interest exists
when your personal interest or duty conflicts with a professional interest or duty
"One cannot serve two masters"
Options when in a conflict of interest:
- Disclosure and consent: tell them what
happened let them judge
- Disqualification: Drop out
Respect confidential relationships - Answers - This protects certain situations and
conditions that call for a legal duty to maintain confidentiality.
, Example: Attorney Client Privilege
Gramm -Leach -Bliley Act : Requires all financial institutions to safeguard customer
information
Exercise due care and diligence in the performance of your duties - Answers - "Basically
Due Care means that people and companies must be careful not to injure others.
Act in good faith and deal fairly with others - Answers - Good Faith means honest in fact
in the conduct or transaction concerned. The idea is business should tell the truth.
Uniform Commercial Code (UCC)
What is fiduciary? - Answers - Someone who occupies a position of power, trust, and
confidence regarding the property of another.
Ex: real estate agents, business partners, directors of corporations
What is the fiduciary rule? When does it apply? - Answers - Requires the fiduciary to act
solely in the interest of that other person's property and interest.
Undivided loyalty to another
The example Meinhard v. Salmon in 1928 involved the duties owed by partners and
those engaged in joint business ventures.
Design Strategies vs. Davis, What did Davis do that breached his fiduciary obligation to
Design S? What remedy did the court award Design? - Answers - He violated good faith
and loyalty to his employer by pursuing the Microsoft Deal. He broke his fiduciary duty
by not seeking designs sole interest.
Court said: Davis' had to forfeit both pay periods plus interest for the period (2 months)
that he was unloyal.
When does a conflict of interest exist? - Answers - When your personal interest or duty
conflicts with professional interest or duty.
Options when in s conflict of interest:
- Disclosure and consent: tell them what
happened let them judge
- Disqualification: Drop out
What are some of the reasons that companies have published ethics policies? -
Answers - To receive favorable treatment under the federal sentencing guidelines if
their employee is convicted of a federal corporate crime. They are responsible when
their employee is convicted. It permits a dramatic reduction in penalties for companies
ACCURATE ANSWERS
How do law and ethics relate to each other? - Answers - They interconnect.
Law = Rules of Human behavior and Justice.
- Law Reflects Social Value
Ethics = Rationally justified views about what is right/wrong, moral/immoral, just/unjust
Law often effects the opinion of what is ethical
What is considered ethical often finds expression in governmental law
Ethical Business Practices often equal Law
Five Fundamental Ethical Principals Reflected in the Law - Answers - 1. Maintain
fiduciary standards to act solely for the benefit of the person whose property or interests
you are entrusted
2. Avoid the appearance of conflicts of interest
3. Respect confidential relationships
4. Exercise due care and diligence in the performance of your duties
5. Act in good faith and deal fairly with others
Maintain fiduciary standards to act solely for the benefit of the person whose property or
interests you are entrusted - Answers - The highest legal duty and standard for ethical
business is the Fiduciary Rule
*** Must act solely in the interest of the other persons properties and interests
Avoid the appearance of conflicts of interest - Answers - A conflict of interest exists
when your personal interest or duty conflicts with a professional interest or duty
"One cannot serve two masters"
Options when in a conflict of interest:
- Disclosure and consent: tell them what
happened let them judge
- Disqualification: Drop out
Respect confidential relationships - Answers - This protects certain situations and
conditions that call for a legal duty to maintain confidentiality.
, Example: Attorney Client Privilege
Gramm -Leach -Bliley Act : Requires all financial institutions to safeguard customer
information
Exercise due care and diligence in the performance of your duties - Answers - "Basically
Due Care means that people and companies must be careful not to injure others.
Act in good faith and deal fairly with others - Answers - Good Faith means honest in fact
in the conduct or transaction concerned. The idea is business should tell the truth.
Uniform Commercial Code (UCC)
What is fiduciary? - Answers - Someone who occupies a position of power, trust, and
confidence regarding the property of another.
Ex: real estate agents, business partners, directors of corporations
What is the fiduciary rule? When does it apply? - Answers - Requires the fiduciary to act
solely in the interest of that other person's property and interest.
Undivided loyalty to another
The example Meinhard v. Salmon in 1928 involved the duties owed by partners and
those engaged in joint business ventures.
Design Strategies vs. Davis, What did Davis do that breached his fiduciary obligation to
Design S? What remedy did the court award Design? - Answers - He violated good faith
and loyalty to his employer by pursuing the Microsoft Deal. He broke his fiduciary duty
by not seeking designs sole interest.
Court said: Davis' had to forfeit both pay periods plus interest for the period (2 months)
that he was unloyal.
When does a conflict of interest exist? - Answers - When your personal interest or duty
conflicts with professional interest or duty.
Options when in s conflict of interest:
- Disclosure and consent: tell them what
happened let them judge
- Disqualification: Drop out
What are some of the reasons that companies have published ethics policies? -
Answers - To receive favorable treatment under the federal sentencing guidelines if
their employee is convicted of a federal corporate crime. They are responsible when
their employee is convicted. It permits a dramatic reduction in penalties for companies
