The Legal Environment of Business: Ethics and Business Decision Making Ch 4

What is ethics?
The study of what constitutes right and wrong behavior. (Ethic focuses on morality and the application of moral principles in everyday life. Business ethics focuses on what constitutes ethical behavior in the world of business.)

Why is business ethics important?
An understanding of business ethics is important to the long-run viability of the business, the well being of its officers and directors, and the welfare of its employees.

Define: Business ethics
Ethics in business context; a consensus of what constitutes right and wrong behavior in the world of business and the application of moral principles to situations that arise in a business setting.

Define: Categorical imperative
A concept developed by the philosopher Immanuel Kant as an ethical guideline for behavior. In deciding whether an action is right or wrong, or desirable or undesirable, a person should evaluate the action in terms of what would happen if everybody else in the same situation, or category, acted the same way.

Define: Corporate social responsibility
The concept that corporations can and should act ethically and be accountable to society for their actions.

Define: Cost-benefit analysis
A decision-making technique that involves weighing the costs of a given action against the benefits of the action.

Define: Duty-based ethics
An ethical philosophy rooted in the idea that every person has certain duties to others, including both humans and the planet. Those duties may be derived from religion principles or from other philosophical reasoning.

Define: Ethical reasoning
A reasoning process in which an individual links his or her moral convictions or ethical standards to the particular situation at hand.

Define: Ethics
Moral principles are values applied to social behavior.

Define: Moral Minimum
The minimum degree of ethical behavior expected of a business from, which is usually defined as compliance with the law.

Define: Outcome-based ethics
An ethical philosohpy that focuses on the impacts of a decision on society or on key stakeholders

Define: Principle of rights
How that decision affects the rights of others, including employees, customers and society.

Define: Stakeholders
Groups, other than the company’s shareholders, that are affected by the corporate decisions. Stakeholders include employees, customers, creditors, suppliers, and the community in which the corporation operates.

Define: Triple bottom line
The idea that investors and others should consider not only corporate profits, but also the corporation’s impact on people and on the planet in assessing the firm. (The bottom line is people, planet, and profits.)

Define: Utilitarianism
In utilitarian reasoning, a “good” decision is one that results in the greatest good for the greatest number of people affected by the decision.

T/F: Ethics is the study of what constitutes right and wrong behavior.
True

T/F: A background in business ethics is as important as knowledge of specific laws
True

T/F: The minimal acceptable standard for ethical behavior is compliance with the law
True

T/F: According to utilitarianism, it does not matter how many people benefit from an act.
False

T/F: The best course towards accomplishing legal and ethical behavior is to act responsibly and in good faith
True

T/F:The ethics of a particular act is always clear
False

T/F: To Foster ethical behavior among employees, managers should apply ethical standards to which they are committed
True

T/F: If an act is legal, it is ethical
False

T/F: The roles that women play in other countries can present ethical problems for U.S. firms doing business internationally.
True

T/F: Bribery of public officials is an ethical issue only
False

Trent is a marketing executive for Unique Appliance Company. Compared to Trent’s personal choices, is actions in the business world require the application of

a. more complex ethical standards.
b. simpler ethical standards.
c. the same ethical standards.
d. no ethical standards.

c. the same ethical standards.

Darby, an employee of Equipment Sales, Inc., takes a duty-based approach to ethics. Under this standard, Darby believes that she must

a. achieve the greatest good for the most people.
b. avoid unethical behavior. regardless of the consequences.
c. conform to society’s standards.
d. place Equipment Sale’s interests first.

b. avoid unethical behavior regardless of the consequences.

Mikayla, chief financial officer of Napoli Chocolate Company, adopts religious ethical standards. These involve an element of

a. compassion.
b. cost-benefit analysis.
c. discretion.
d. utilitarianism.

a. compassion.

Reba, an employee of Sterling Credit Bank, takes an outcome-based approach to ethics. With this approach, Eve believes that she must

a. achieve the greatest good for the most people.
b. avoid unethical behavior regardless of the consequences.
c. conform to society’s standards.
d. place Sterling Credit’s interest first.

a. achieve the greatest good for the most people.

Don is a manger with Engineering Aviation Systems. At a company ethics meeting, Don’s most effective argument against utilitarianism is that it

a. gives profits priority over costs.
b. ignores the practical costs of a given set of circumstances.
c. justifies human costs that many persons find unacceptable.
d. requires complex cost-benefit analyses of simple situations.

c. justifies human costs that many persons find unacceptable.

In resolving an ethical problem, in most cases a decision by Oil Production Services, or any business firm, will have a negative effect on

a. one group as opposed to another.
b. the firm’s competitors
c. the government.
d. none of the choices.

a. one group as opposed to another.

Ethical standards would most likely be considered violated if Light & Sound Services, Inc., represents to Studio Film Production Company that certain services will be performed for a stated fee, but it is apparent at the time of the representation that

a. Light & Sound cannot perform the services alone.
b. the actual charge will be substantially higher.
c. b. the actual charge will be substantially lower.
d. the fee is a competitive bid.

b. the actual charge will be substantially higher.

Stefanie, the president of Hiway Trucking, Inc., tries to ensure that Hiway’s actions are legal and ethical. To ensure this result, the best course of Stefanie and Hiway is to act in

a. good faith.
b. ignorance of the law.
c. regard for the firm’s shareholders only.
d. their won self interest.

a. good faith.

Pew, an executive with Black Spot Corporation, follows the “principle of rights” theory, under which an action may be ethical depending on how it affects

a. the right determination under a cost-benefit analysis.
b. the right of Pew to maintain his dignity.
c. the right of Black Spot to make a profit.
d. the rights of others.

d. the rights of others.

Treasure Trove, Inc., a U.S. corporation, makes a side payment to the minister of commerce of Tuvalu for a favorable business contract. in the U.S. this payment would be considered

a. illegal and unethical.
b. illegal only.
c. neither illegal nor unethical.
d. unethical only.

a. illegal and unethical.

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