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BusiLaw 240 Ch 2

Ethics
study and practice of decisions about what is good, or right
– business ethics: application of ethics to the special problems and opportunities experienced by business people
Ethical dilemma
problem in which there is no clear, right decision available
Social responsibility
expectations that the community imposes on firms doing business inside its borders
– AIG: largest bail out $182 billion
The WPH process of ethical decision making
1. WHO will it affect? (stakeholders)
2. What is the PURPOSE/end goal? (values)
3. HOW can we make the decision with doable guidelines? (guidelines)
Who are the relevant stakeholders?
many groups of people affected by the firms decisions
– owners or shareholders, employees, customers, management, the general community where the firm operates, and future generations
What are the ultimate purposes of the decision?
– values: positive abstractions that capture our sense of what is good or desirable
1. freedom
2. security
3. justice
4. efficiency
How do we make ethical decisions?
– The Golden Rule: we should interact with other people in a manner consistent with the way we would like them to interact with us
– Public Disclosure Test: what if everyone found out? How others perceive us
– Universalization Test: what would the world be like if everyone else did it?
The Sarbanes-Oxley Act (SOX)
promote high ethical standards among business managers and employees through a series of rules that regulate different facets of corporate operation
Why is ethical fundamentalism difficult to follow?
a) It provides a rigid set of rules to follow regardless of the situation.
b) It promotes high levels of moral tolerance.
c) It denies the existence of any fixed moral standards.
d) It holds that morality depends on the consequences.
a) it provides a rigid set of rules to follow regardless of the situation
For a firm to be an ethical business, the minimum standard to be met would be:
a) selling its products and services below cost price.
b) paying bribes if other firms are paying too.
c) exceeding the industry standards in terms of paying wages and salaries.
d) choosing a lawful way to compete against rival firms.
d) choosing a lawful way to compete against rival firms
Which of the following is a way to take the universalization test for a business owner making a decision?
a) Informing the public of the business decision before it is implemented
b) Putting herself in the position of the shareholder and judging the decision
c) Taking into account whether God would judge the decision to be correct or not
d) Considering the impact on the world if the decision were adopted by all businesses
d) considering the impact on the world if the decision were adopted by all businesses
The human resource policy of a company states that the company aims to treat all humans identically, regardless of race, class, gender, age, and sexual preference. Which of the following values influencing business ethics does this best illustrate?
a) Freedom
b) Security
c) Justice
d) Efficiency
c) justice
Acme Foods Inc. manufactures food products and is opening a subsidiary in United Cadvia. The firm discovers that to obtain raw materials it has to make some facilitating payments to the local officials and businesses in the host country. The second option is to import raw materials from its own country, which will be expensive in the long-run. The managers at Acme are unable to decide which of the two options would be a better choice. Which of the following terms would best describe the situation Acme Foods Inc. is experiencing?
a) Ethical dilemma
b) Causal ambiguity
c) Moral lapse
d) Culture shock
a) ethical dilemma
The _____ of a firm are best described as the many groups of people affected by the firm’s decisions.
a) creditors
b) mediators
c) category captains
d) stakeholders
d) stakeholders
_____ are best described as positive abstractions that capture our sense of what is good or desirable.
a) Laws
b) Statutes
c) Values
d) Norms
c) values
The _____ is also called the “television test,” for it requires us to imagine that our actions are being broadcast on national television.
a) universalization test
b) public disclosure test
c) golden rule test
d) ethical relativism test
b) public disclosure test
Businesses have social responsibilities that they need to honor because they:
a) are legally mandated by the government to fulfill all their social obligations.
b) operate in a community that has expectations from the businesses.
c) would always be able to maximize economic profits by honoring their social responsibilities.
d) are operating in an environment where the needs of all communities are the same.
b) operate in a community that has expectations from the businesses
The _____ holds that the right course of action is the option most consistent with the building and maintaining of human relationships.
a) theory of ethical relativism
b) absolutism approach
c) ethics of care
d) utilitarianism approach
c) ethics of care

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