Question 1

Enron Corporation filed for bankruptcy following a number of revelations about its accounting procedures. Enron used a complex structure of corporations and off-the-books debt to mask its true financial picture from the markets. When asked about the propriety of Enron's reporting methods, many analysts have responded, "They simply did what most corporations do." Their comments:

Accepted Answer

The analysts' comments reflect rationalization, as they justify Enron's actions by suggesting that similar practices are common among other corporations.

Question 2

Jane Eyring works for PharmaMeds, Inc. Jane is a physician-scientist who is responsible for running the pilot tests on PharmaMed's new oral spray medication for individuals with adult onset diabetes. Jane has discovered that if those in the test group do not spray the medicine correctly or if they spray for too short of a time, the medicine is not effective, or as effective, and insulin shock has resulted in a few of the patients. Jane talks with one of her colleagues who responds, "Look, there's no need to stop the testing or the drug's release. Just tell them in the test and in the brochures that will be with the spray, 'Spray correctly! If you do not, you may not receive your necessary dose.'" Jane is not sure anyone can be 100% accurate in spraying all the time. Jane's ethical dilemma is:

Accepted Answer

Jane's ethical dilemma involves giving or allowing false impressions because the instructions may not be sufficient to ensure proper use, leading to potential harm.

Question 3

In international business:

Accepted Answer

Trust and honesty are essential for investment and economic growth in international business. Without these values, businesses would face difficulties in building relationships and partnerships, leading to a decline in commerce. Furthermore, unethical behavior may cause reputational damage for the company, hindering future business opportunities. While corruption may exist in certain countries, this does not make it acceptable or ethical for businesses to engage in it. Additionally, companies must adhere to the laws and regulations of the countries they operate in, but this does not necessarily mean they must abide by a completely different set of rules.

Question 4

In the Parable of the Sadhu:

Accepted Answer

The Parable of the Sadhu is about a group of hikers who encounter a wounded and dying Sadhu on their trek in the Himalayas. The hikers face a moral dilemma of how to help the Sadhu while also risking their own safety and completion of their journey. The parable explores the conflict between personal values of compassion and group values of achievement and success. Ultimately, the lesson drawn is that personal values should prevail over organizational or group values in situations where human life and morality are at stake.

Question 5

"If you think what we're doing now is bad, you should have seen 10 years ago at this company..." is an example of:

Accepted Answer

The answer of "If you think what we're doing now...

Question 6

Colleges and universities are given complimentary trips, staff assistance, marketing stipends and other in-kind materials by companies that provide study-abroad programs for students in exchange for the colleges and universities marketing the programs exclusively to their student bodies. Students are not aware of the benefits the travel-abroad companies provide to their colleges and universities. Which category of ethical dilemma applies here?

Accepted Answer

This situation involves a conflict of interest (A) because colleges may prioritize their benefits over students' best interests, hiding information (B) as students are unaware of the incentives, and taking unfair advantage (C) of students' trust.

Question 7

Which of the following is not important for capitalism to function?

Accepted Answer

Grease payments, which are essentially bribes, are not necessary for capitalism to function. In fact, they can distort market operations and lead to inefficiencies.

Question 8

Sarbanes-Oxley is:

Accepted Answer

Sarbanes-Oxley (also known as SOX) refers to federal legislation passed in the United States in 2002 that imposes requirements for ethical behavior and financial oversight on corporations. It was named after its sponsors, Senator Paul Sarbanes and Representative Michael Oxley.

Question 9

Which of the following ethical models incorporates conscience into the decision-making process?

Accepted Answer

The Blanchard and Peale model incorporates conscience into the decision-making process by asking whether the decision is legal, balanced, and how it makes one feel, thus involving personal conscience.

Question 10

Which of the following statements best describes the ethical position of Enron executives?

Accepted Answer

Enron executives often justified their actions by focusing on legality rather than ethics and were known to manipulate financial statements to maintain stock prices.

Question 11

Why does the late Dr. Milton Friedman feel that managers should not involve their companies in social issues?

Accepted Answer

Dr. Milton Friedman believed that the primary responsibility of managers is to maximize shareholder value, as they are agents of the shareholders. Engaging in social issues diverts from this primary goal.

Question 12

Jane Eyring works for PharmaMeds, Inc. Jane is a physician-scientist who is responsible for running the pilot tests on PharmaMed's new oral spray medication for individuals with adult onset diabetes. Jane has discovered that if those in the test group do not spray the medicine correctly or if they spray for too short of a time, the medicine is not effective, or as effective, and insulin shock has resulted in a few of the patients. Jane talks with one of her colleagues who responds, "Look, there's no need to stop the testing or the drug's release. Just tell them in the test and in the brochures that will be with the spray, 'Spray correctly! If you do not, you may not receive your necessary dose.'" Jane is not sure anyone can be 100% accurate in spraying all the time. What risks does the company run if the spray doesn't work for the patients?

Accepted Answer

The company risks fines and penalties, litigation by patients who become ill, and damage to its reputation if the spray doesn't work effectively for patients.

Question 13

Enron's failure to disclose its off-the-book debts was legal. Which of the following ethical categories do you think apply to that type of financial reporting?

Accepted Answer

Enron's failure to disclose its off-the-book debts falls under "giving or allowing a false impression" because it misled stakeholders about the company's financial health, and "taking unfair advantage" because it exploited loopholes for its benefit at the expense of others.

Question 14

Which of the following countries is one of the best examples of the long-term impact of foreign business corruption?

Accepted Answer

The answer of Which of the following countries is one...

Question 15

Milton Friedman's view of the social responsibility of business is best described as:

Accepted Answer

Milton Friedman argued that the primary responsibility of a business is to maximize profits for its shareholders, as long as it operates within the legal and ethical boundaries, which he referred to as "the rules of the game."

Question 16

Dennis Kozlowski, the former CEO of Tyco, who was famous for this lavish party and decorating expenses, said that he asked that all of his pay packages, loans, and expenditures be authorized by the board and company policy.

Accepted Answer

Mr. Kozlowski could have taken advantage of his position and the board, and procedural correctness does not necessarily equate to ethical behavior.

Question 17

Tim Donaghy was a referee for the NBA. Mr. Donaghy began betting in 2003 on NBA games. He also provided tips to other gamblers on who would win games in which he was serving as a referee. Mr. Donaghy's actions:

Accepted Answer

The answer of Tim Donaghy was a referee for the...

Question 18

Which of the following is not a requirement of Sarbanes-Oxley?

Accepted Answer

The Sarbanes-Oxley Act does not require both a code of ethics and an ethics officer.

Question 19

Which of the two following groupings of ethical thought would you describe as opposites?

Accepted Answer

Natural Law is based on universal moral principles inherent in human nature, while Moral Relativism suggests that moral principles are not universal and can vary based on culture or individual choice, making them opposites.

Question 20

Which of the following is not an element of the Nash test?

Accepted Answer

The Nash test includes evaluating the long-term satisfaction of the decision (A), the goal or objective of the decision (C), and the potential for communication with affected parties (D). However, legality (B) is not a factor in the Nash test.

Quiz 2: Business Ethics and Social Responsibility