Test Bank For Anderson's Business Law and the Legal Environment Standard Volume, 22nd Edition by David P. Twomey

Chapter 3—BUSINESS ETHICS, SOCIAL FORCES, AND THE LAW TRUE/FALSE 1. Ethics is a philosophical concept that deals with values related to the nature of human conduct. ANS: T MSC: AACSBAnalytic 2. The field of business ethics recognizes that social values typically must yield to the profitability motive. ANS: F MSC: AACSBAnalytic 3. Moral standards based on positive law may allow businesses to conduct themselves unfairly so long as their actions are not illegal. ANS: T MSC: AACSBAnalytic 4. Civil disobedience is the remedy natural law proponents use to change positive law. ANS: T MSC: AACSBAnalytic 5. Kant’s theory understood that sometimes you have to use someone to achieve a one-sided benefit. ANS: F MSC: AACSBAnalytic 6. The theory of justice is based on the concept that if there were no laws or rules reasonable people would develop fair rules and standards. ANS: T MSC: AACSBAnalytic 7. Ethical egoism believes that feeling guilty about poor ethical decisions will lead to better future decisions. ANS: F MSC: AACSBAnalytic 8. Moral relativists believe that ethical decisions will differ based on circumstances. ANS: T MSC: AACSBAnalytic 9. In applying the stakeholder model of business ethics, only the interests of important constituencies affected by an action need to be satisfied. ANS: F MSC: AACSBAnalytic 10. There is often a conflict between the goal of making money for shareholders and the goal of solving social problems through business. ANS: T MSC: AACSBAnalytic 11. In addition to issues of social responsibility, business values and ethics play an important role in the success or failure of a business. ANS: T MSC: AACSBAnalytic 12. Trust is a fundamental basis of the capitalist system that is central to the expectations of investors, customers, and other firm stakeholders. ANS: T MSC: AACSBAnalytic 13. Unfortunately, there is no evidence that commitment to ethical values is linked with financial performance of business organizations. ANS: F MSC: AACSBAnalytic 14. Ethical violations can cause lasting detriment to a company's ability to do business through impacts on the company's reputation. ANS: T MSC: AACSBAnalytic 15. An accumulation of complaints from employees, customers, or investors can lead to imposition of restrictive new regulations and laws. ANS: T MSC: AACSBAnalytic 16. Unwillingness of businesses to voluntarily improve the ethics of their practices has little practical effect on the regulatory environment. ANS: F MSC: AACSBAnalytic 17. Under United States law, the legal owner (titleholder) of property is free to engage in any use of the property that he or she may desire. ANS: F MSC: AACSBAnalytic 18. Freedom from economic domination is a personal right protected under United States law. ANS: T MSC: AACSBAnalytic 19. Individual intentions, as expressed in contracts and wills, will not be given effect in the United States unless expressly authorized by law. ANS: F MSC: AACSBAnalytic 20. Federal laws on the disclosure in the sales of securities and shareholder relations were developed following the stock market crash of 1929. ANS: T MSC: AACSBAnalytic 21. Credit laws and laws regarding checks, notes and drafts were developed to help facilitate trade. ANS: T MSC: AACSBAnalytic 22. The often competing rights of both debtors and creditors are balanced and protected from excesses under United States law. ANS: T MSC: AACSBAnalytic 23. Mortgages, security interests, and surety relationships are legal mechanisms created primarily to promote stability and flexibility in trade. ANS: F MSC: AACSBAnalytic 24. Courts look at each case at a given point in time and are not concerned with former cases and rulings when making current decisions. ANS: F MSC: AACSBAnalytic 25. United States common law requires that case precedents be followed under all circumstances. ANS: F MSC: AACSBAnalytic 26. Despite the importance of ethical behavior for business success, few Fortune 500 companies have codes of ethics to resolve ethical dilemmas. ANS: F MSC: AACSBAnalytic 27. Differences among businesses preclude the development of any universal categories of ethical behavior. ANS: F MSC: AACSBAnalytic 28. Over half of all Fortune 500 firms train their employees to recognize and deal with particular types of behavior that breach their ethical codes. ANS: T MSC: AACSBAnalytic 29. Maintaining confidentiality is an ethical issue for both employees and company management. ANS: T MSC: AACSBAnalytic 30. Recognizing that an ethical dilemma exists is usually far more difficult than resolving the dilemma once its existence is recognized. ANS: F MSC: AACSBAnalytic MULTIPLE CHOICE 1. 2. 3. 4. 5. Positive law: a. is enacted by government authority. b. ensures that businesses will follow a high level of ethical standards. c. is also known as natural law. d. all of the above. ANS: A MSC: AACSBAnalytic Immanuel Kant’s categorical imperative theory: a. requires that we avoid one-sided benefits as a result of ethical decisions. b. makes it easier to settle international business ethical decisions. c. believes you have to be fair and ethical whether you want to be or not. d. all of the above. ANS: A MSC: AACSBAnalytic Rights theory: a. is also known an entitlement theory. b. states that everyone has a set of rights. c. believes that it is the government’s responsibility to protect our rights. d. all of the above. ANS: D MSC: AACSBAnalytic The Utilitarian Theory: a. holds that we all act in our own self-interest. b. is based on doing the most good for the most people. c. resolves ethical dilemmas according to time and place. d. believes that solving ethical dilemmas requires training ANS: B MSC: AACSBAnalytic Among the guidelines for balancing the interests of various stakeholders to resolve ethical dilemmas in business are: a. identify potential parties who could be injured by the proposed action. b. define the problem from both the decision maker's and opposing viewpoints. c. ask whether you would be willing to describe a proposed action to your family, the board 6. 7. of directors, a congressional hearing, or other public forum. d. all of the above. ANS: D MSC: AACSBAnalytic Companies with 100 years of consistent dividends: a. use positive laws as a guide for ethical decisions. b. have a goal of profitability no matter what the cost. c. have a strong commitment to values. d. all of the above. ANS: C MSC: AACSBAnalytic The importance of trust as a fundamental principle underlying business transactions is illustrated by expectations that: a. investors will be able to earn a return on their investments. b. employees may be discharged at any time for any reason without notice. c. litigation is inevitable because parties to agreements usually break promises. d. insider trading proves that the economic system underlying business is flawed. ANS: A MSC: AACSBAnalytic Voluntary improvements in the fairness and ethics of business behavior are: a. less effective than those brought about by government regulation. b. less costly and intrusive than those brought about by government regulation. c. virtually nonexistent in corporate America. d. more common in third-world countries than in the United States. ANS: B MSC: AACSBAnalytic The U.S. Patriot Act and airport security regulations were enacted for the protection of: a. the person. b. public, health, safety and morals. c. the state. d. personal rights. ANS: C MSC: AACSBAnalytic Laws that prohibit defamation, invasions of privacy, and reputation exist primarily: a. for protection of the person. b. for protection of public health, safety, and morals. c. for protection of property. d. for protection of the state. ANS: A MSC: AACSBAnalytic Laws that prohibit mislabeling of food, speeding, and sale of alcohol to minors exist primarily: a. for protection of the person. 8. 9. 10. 11. 12. 13. 14. b. for protection of public health, safety, and morals. c. for protection of property. d. for protection of the state. ANS: B MSC: AACSBAnalytic Laws that prohibit theft, operation of a factory in areas zoned residential, and copyright infringement exist primarily: a. for protection of the person. b. for protection of public health, safety, and morals. c. for protection of property. d. for protection of the state. ANS: C MSC: AACSBAnalytic The passage of federal securities disclosure laws occurred largely as the result of: a. voluntary self-regulation by ethics experts in the securities industry. b. the stock market crash of 1929. c. changes in the international market for securities and negotiable instruments. d. all of the above. ANS: B MSC: AACSBAnalytic The ethical category of integrity and truthfulness is best expressed as maintaining one’s values and principles: a. so long as profits can be maintained. b. so long as the costs are not great. c. unless deviating will go unnoticed. d. despite the consequences or costs. ANS: D MSC: AACSBAnalytic Which of the following situations reflects a possible conflict of interest? a. You offer a company contract to a friend without checking competing bids. b. You hire a relative for a company position although another candidate is more qualified. c. You buy a piece of realty that would be suitable for a planned company project. d. All of the above. ANS: D MSC: AACSBAnalytic "Primum non nocere" is Latin for: a. Above all, do no harm. b. Let the buyer beware. c. Hear no evil, see no evil, and speak no evil. 15. 16. 17. 18. 19. d. No news is good news. ANS: A MSC: AACSBAnalytic An ethical duty of confidentiality could be breached where: a. information obtained through research of the employer is disclosed. b. customer lists or leads are disclosed to a competitor. c. proprietary information or technology of a business is disclosed. d. all of the above. ANS: D MSC: AACSBAnalytic The Blanchard and Peale three-part test for resolving ethical dilemmas consists of the following questions: a. Is it legal? Is it ethical? Is it moral? b. Is it legal? Is it balanced? How does it make me feel? c. Is it ethical? Is it right? Does it pass the “front page of the newspaper” test? d. Is it right? Is it balanced? Is it fair? ANS: B MSC: AACSBAnalytic In applying the “front-page-of-the-newspaper” test to a contemplated course of conduct one should ask: a. Would I be found criminally liable if this winds up on the front page of the newspaper? b. Would I be liable for monetary damages if this winds up on the front page of the newspaper? c. Would I be willing to have my spouse, friends, and children read about this if it winds up on the front page of the newspaper? d. Would I be able to explain this to the authorities if it winds up on the front page of the newspaper? ANS: C MSC: AACSBAnalytic Which of the following is not a question business ethicist Laura Nash has developed to help businesspeople reach the right decision in ethical dilemmas? a. Have you defined the problem accurately? b. How would you define the problem if you stood on the other side of the fence? c. How did the situation occur in the first place? d. Does your proposed solution to the problem effectively balance the competing objectives of ethical decision-making and corporate profitability? ANS: D MSC: AACSBAnalytic 20. CASE 1. John Harrington operates a business that almost always hires skilled workers who are college graduates; currently, however, his business does have a part-time opening for an unskilled worker. Harrington is considering hiring an uneducated welfare recipient instead of a student from the local university. Apply the "Guidelines for Analyzing a Contemplated Action" to this problem. ANS: From the decision-maker's point of view, there is greater risk in hiring an uneducated welfare recipient instead of a college student. If an uneducated welfare recipient is hired, there may be disruption in the workplace resulting from skilled, educated employees working with an unfamiliar type of co-worker. The value of hiring an uneducated welfare recipient is twofold: First, there may be a greater likelihood of assisting someone with a family (i.e., more individuals would benefit); and, second, the firm would further the current governmental and societal initiative to move individuals from "Welfare to Work." MSC: AACSBReflectiveThinking|AACSBAnalytic 2. Thomas works for an internationally-renowned computer company. As a condition of his employment, Thomas signed a confidentiality agreement, in which he agreed not to disclose any trade secrets of the firm. The company has been researching a new computer advancement, and is on the brink of introducing this product to the buying public. Before the official product release, Thomas is considering offering information related to this new advancement to one of his company’s competitors for a price. What categories of ethical behavior might be impacted by Thomas’ decision to disclose this information to his employer’s competitor? ANS: All of the categories of ethical behavior would be impacted by Thomas’ decision to sell his employer’s proprietary information to a competitor. The categories of ethical behavior include: 1) Integrity and Truthfulness; 2) Promise-Keeping; 3) Loyalty-Avoiding Conflicts of Interest; 4) Fairness; 5) Doing No Harm; and 6) Maintaining Confidentiality. In terms of the first category of ethical behavior, Thomas would compromise his integrity by disclosing corporate trade secrets, and he would be untruthful in the sense that he would violate the confidentiality agreement with his firm in doing so. Second, his promise related to the confidentiality agreement would be broken. Third, selling such proprietary information would be a classic conflict of interest, in the sense that he would be benefiting himself (financially) to the detriment of his employer. Fourth, disclosure would not be fair, as it would breach the confidentiality agreement with his employer and deprive his employer of its diligently-worked-for competitive advantage. Fifth, disclosure would harm his employer and other stakeholders of the firm, since it would deprive the firm of its competitive advantage and the financial benefits of such an advantage. Finally, confidentiality would be violated. MSC: AACSBReflectiveThinking|AACSBAnalytic