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Business Law – Ch. 4 & 5

Steve, a citizen of New York, wants to obtain a business license in Illinois. The Illinois legislature passed a law requiring nonresidents to pay a $1,500 fee to apply for business licenses in the state of Illinois. Illinois residents pay nothing for a business license. This discrepancy in the fees between the residents of Illinois and other states may violate
the privileges and immunities clause
The 1st Amendment guarantees the freedoms of religion, ___, and press and the right to assemble peacefully and to ___ the government.
speech; petition
The 4th Amendment prohibits unreasonable ___ and seizures or persons or property.
searches
The 9th Amendment establishes that the ___ have rights in addition to those specified in the Constitution.
people
As originally intended, the first ten amendments to the Constitution limited only the power of
the federal government
Whenever the language in the Bill of Rights describing a right is overly broad or unclear in a particular situation, what does NOT occur:
a. One of the parties involved may bring a lawsuit.
b. The individual state legislatures interpret the unclear language.
c. Ultimately, the Supreme Court decides what the language means.
b. The individual state legislatures interpret the unclear language.
Symbolic speech is NOT covered by the Bill of Rights. T/F?
False; it is.
Your state passes a law prohibiting businesses from supporting political candidates. You go to court and challenge the law’s constitutionality. Will the law be upheld?
No, because the law is an unconstitutional restriction of free speech.
The compelling government interest test is used by the courts to determine whether a law regulating the content of speech will be permissible. T/F?
True
The Free Exercise Clause is
the provision in the 1st Amendment the US Const. that prohibits Congress from making any laws “prohibiting the free execise” of religion.
The Establishment Clause is
the provision in the 1st Amendment to the US Const. that prohibits Congress from creating any law “respecting an establishment of religion”.
The ___ protects the “right of the people to be secure in their persons, houses, papers, and affects.”
4th Amendment
Usually law officers must obtain a ___ before searching or seizing private property.
search warrant
Search warrants typically are given when there is
probable cause
Ethics can be defined as the study of
what constitutes right and wrong behavior
Business ethics does NOT focus on:
a. How businesspersons apply moral and ethical principles in making their decisions.
b. The decisions businesses must make and whether they are right or wrong.
c. How businesses are treated under international law.
c. How businesses are treated under international law.
Investors dissatisfied with profit-maximization theory look beyond profits to consider the triple bottom line. The 3 aspects of this concept are:
Corporate profits, the impact of profits on the people, and the impact of profits on the planet
When making decisions, a business should evaluate the following:
1. The legal implications of each decision.
2. The public relations impact.
3. The safety risks for consumers and employees.
4. The financial implications.
Business ethics are consistent only with short-run profit maximization. T/F?
False; mainly in long-run profit max.
Compliance with the law is sometimes called the
moral minimum
You are starting a new company. You want your employees to act ethically. What will you NOT do?
Let employees know that only short-run profits matter.
Olivia makes a statement on her Twitter account that casts a negative light on her employer. Her manager fires her for violating her company’s social media policy. Olivia claims that federal law prohibits her from being fired. Does she have a valid argument?
Yes, because federal labor law protects the employee’s right to engage in “concerted activities”.
The application of morals and ethics to a situation is usually called ethical
reasoning
Outcome-based ethics looks at the impact of decisions on key
stakeholders
Every person has certain duties to others, including humans and the planet. ___ ethics is rooted in this principle.
duty-based
Religious ethical principles allow managers to make decisions with few possible negative consequences. T/F?
False; 1st Amend.
One view of duty-based ethics focuses on the principle of rights. Which groups whose rights can be affected by business decisions?
1. the consumers of a firm’s products and services,
2. a firm’s suppliers
3. a firm’s owners (shareholders)
4. a firm’s employees
The application of the principle of rights, or rights theory, often involves conflicting rights.
True
You have to decide how to reduce labor costs by firing some of your workers, who will certainly be harmed. You must balance the interests of employees who have been loyal to the firm for a long time against the interests of
your firm’s shareholders
Which of the following philosophers is most associated with general guiding principles for moral behavior?
Immanuel Kent
Individuals should evaluate their actions in light of the consequences that would follow if everyone in society acted in the same way. This is called the
categorical imperative
___ is a philosophical theory developed by two British philosophers, Bentham and Mill.
Utilitarianism
A major premise of the ___ approach to ethics is “the greatest good for the greatest number.”
utilitarian
An action is morally correct when it creates the least amount of harm for the ___ people.
fewest
A ___ analysis involves assessing the negative and positive affects of alternative actions.
cost-benefit
Whenever an action affects the majority adversely, it is morally ___.
wrong
Upper management wants to fire Gary because he is nonproductive. Using the utilitarian approach to business ethics, management would probably NOT consider
a. the costs and benefits of retaining a nonproductive employee.
b. how the action of firing Gary would affect the productivity of other workers.
c. Gary’s fundamental rights.
c. Gary’s fundamental rights.
Corporate social responsibility combines a commitment to good corporate citizenship with a commitment to improving society and minimizing environmental impact. T/F?
True
Corporate social responsibility is typically imposed on corporations by state laws. T/F?
False
The correct order for the following lists of steps involved in a systematic approach to implementing ethical concerns in business is:
Inquiry >> Discussion >>Decision >> Justification >> Evaluation
Managers who set unrealistic production or sales goals decrease the probability that employees will act unethically. T/F?
False
Lisa owns and manages a small auto-parts store. She hesitates to discuss business ethics with her employees because she wants them to spend more time with the customers and she also doesn’t think she should tell them how to behave. Is Lisa going to create an ethical workplace? Why or why not?
Lisa’s attitude will not affect workplace ethics because management has little ability to affect employee behavior.
What is the act that requires companies to set up confidential systems so that “red flags” can be raised about suspected illegal and unethical business practices.
The Sarbanes – Oxley Act
Why is it important to monitor the employment practices of foreign suppliers?
Because many corporate watch groups will discover and publicize the unethical behavior of your company’s foreign suppliers.
Since the late 1970s, the Foreign Corrupt Practices Act has prohibited U.S. businesspersons from bribing foreign officials to secure beneficial contracts.
True
Under the Foreign Corrupt Practices Act, some payments to minor foreign government officials are allowed to accelerate the performance of administrative services.
True
Under corporate social responsibility theory, to who(m) does the chairman and CEO of the company owe an ethical duty?
The workers, the community and the shareholders.
When the CEO of the company decides that he wants to pay the workers while the plant is closed, because “it is the right thing to do” regardless of the consequences, what ethical philosophy is he likely using?
duty-based ethics
Which of the following would be the best argument to the shareholders that paying the workers while the plant is under construction is the correct decision?
a. That not paying them is illegal, and therefore it does not meet the standards of a moral minimum.
b. That short-term profit maximization would be benefitted by this move.
c. That long-term profit maximization would be benefitted by this move.
d. That the triple bottom line would be hurt by this move.
c. That long-term profit maximization would be benefitted by this move.
Jeff believes in the principle of rights theory and uses it to make ethical decisions for his business. He must decide whether to expand his business into Asia. Several key employees do not want the business to expand overseas and have threatened to quit if Jeff makes this move. Under the principle of rights theory, he will make this decision by considering
how the expansion will affect the rights of his employees, his consumers, and the community into which he wishes to expand.
Marshall owns and operates a construction firm. He uses inexpensive and low-grade building products and accepts inferior carpentry work from his subcontractors. Nevertheless, Marshall complies with all the city building codes as well as all state and federal laws. Has he fulfilled all of his ethical obligations?
No, because legal compliance is regarded as the moral minimum.
Ted is the owner and chief executive officer of a business. He recently began an advertising campaign to promote a new product that is regulated by state law. The law is somewhat unclear. Before launching the campaign, he researched the relevant law and consulted with his attorney in an effort to comply with the law. Nevertheless, the attorney general of his state has filed a lawsuit against him for deceptive advertising. Ted’s best defense is that
he acted in good faith
Regan owns and manages The Coffee Shoppe. She likes to experiment with different management styles and life philosophies. She recently studied Kantian ethics and asks her employees to begin following Kant’s categorical imperative at work. This means that the employees should
consider their actions in light of the consequences if everyone in society acted the same way.
The upper-level management of Nationwide Sales Corporation wants to fire Andy because he is a nonproductive employee. Using a utilitarian approach to business ethics, management would probably consider
the costs and benefits of retaining a nonproductive employee.
Bernard is the owner and manager of a small auto-parts store. He thinks that talking about business ethics with employees takes time that would be better spent paying attention to customers. He also does not believe that he has a right to tell other people how they should behave. Is Bernard likely to create an ethical workplace with this way of thinking? Why or why not?
Bernard is unlikely to create an ethical workplace, because the attitude of top management influences employee ethics.

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