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Business in Action, 6e (Bovee/Thill)Chapter 4 Business Ethics and Corporate Social Responsibility

1) Ethics are principles and standards of moral behavior that are accepted by society as "right" or "wrong."

2) All businesses have the capacity to cause harm to employees, customers, other companies, their communities, and investors.

3) The degree to which information flows freely within an organization is termed as insider trading.

4) Culture is not a determinant of ethical behavior.

5) Whistle-blowing is illegal.

6) Making a morally wrong decision is not the same thing as an ethical lapse.

7) A situation in which an individual makes a decision that is morally wrong or illegal is an ethical dilemma.

8) Conflicts of interest involve business decisions that might be influenced by the potential for personal gain.

9) Seeking the greatest good for the most people is utilitarianism.

10) The concept that a business has obligations to society beyond the pursuit of profit is called corporate social responsibility (CSR).

11) Philanthropy involves social contributions that are directly aligned with a company's business strategy.

12) Business and society are mutually dependent, therefore choices that weaken one or the other will ultimately weaken both.

1Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall

13) According to what might be termed the minimalist view, businesses should be involved in making social policy and spending the public's money.

14) NGOs are nonprofit groups that provide charitable services or promote causes such as workers' rights and environmental protection.

15) Companies that engage in cynical CSR believe that the only social responsibility of business is to pay taxes and obey the law.

16) A company accused of irresponsible behavior that promotes itself as being socially responsible without improving its business practices is said to have a cynical CSR.

17) In proactive CSR, company leaders believe they have responsibilities beyond making a profit, and they back up their beliefs and proclamations with actions taken on their own initiative.

18) "Environmental" causes are often as much about human health and safety as they are about forests, rivers, and wildlife.

19) Widespread concern for the environment dates to the 1960s when ecology entered mainstream discussion.

20) Cap and trade programs try to balance free-market economics with government intervention.

21) President John F. Kennedy announced a "bill of rights" for consumers, laying the foundation for a wave of consumer-oriented legislation.

22) One of the fundamental consumer rights that form the basis of much of the consumer-related legislation in the United States is the right to know the lowest available price of a good in the local market.


23) In 1965, the Federal Cigarette Labeling and Advertising Act was passed, requiring all cigarette packs to carry the Surgeon General's warnings.

24) The term "disability," as used in the federal Americans with Disabilities Act, means only those people with physical handicaps, such as hearing or vision loss or loss of mobility.

25) The Occupational Safety and Health Act of 1970 set mandatory standards for safety and health and established the Occupational Safety and Health Administration (OSHA) to enforce them.

26) ________ are the principles and standards of moral behavior that are accepted by society as right versus wrong. A) Mandates B) EthicsC) Business mindsetD) EtiquetteE) Philanthropy

27) ________ refers to the degree to which information flows freely within an organization, among managers and employees, and outward to stakeholders.A) PhilanthropyB) MaterialismC) Whistle-blowingD) TransparencyE) Utilitarianism

28) A leading pharmaceutical company found that a newly launched, over-the-counter drug might have certain negative side effects such as mood changes, that were not identified during the clinical trials. To avoid unnecessary losses, the company does not inform public about the probable side effects. In this example, the company ________.


A) was involved in insider tradingB) lacked transparencyC) had a consumerist approachD) had a utilitarian approachE) failed to take affirmative action

29) Facebook was criticized for a behind-the-scenes attempt to generate public outrage regarding alleged privacy violations by Google. The company used a public relations agency to encourage bloggers and the news media to write critical stories about Google. In this example, Facebook was criticized because ________. A) it was involved in insider tradingB) it lacked transparencyC) of its consumerist approachD) of its utilitarian approachE) it failed to take affirmative action

30) The use of unpublicized information that an individual gains from the course of his or her job to benefit from fluctuations in the stock market is called ________. A) a code of ethicsB) whistle-blowingC) insider tradingD) utilitarianism E) strategic CSR

31) The CEO of a pharmaceutical firm learns that the FDA is going to deny approval for one of the company's drugs. He knows this will have a negative effect on the company's stock, so he quickly tells his broker to sell all of his shares of stock in the company before the news is announced. This is an example of ________.A) strategic CSRB) whistle-blowingC) utilitarianism D) a code of ethics


E) insider trading

32) Which of the following is an example of insider trading?A) The marketing manager of a company is accused of using company resources for personal use. B) An executive receives a compensation comprising of cash, paid expenses, and shares of the company. C) An employee hacks the firm's computer networks, systems, and databases to obtain customer records so that he can sell the information to rival firms. D) The chief executive officer of an IT company purchases shares in the company as he learns that the company is being taken over by a leading, global IT firm. E) A firm disseminates fraudulent information in chat rooms, forums, Internet boards, and via email, with the purpose of causing a dramatic price increase in thinly traded stocks of the company.

33) ________ refers to a written statement setting forth the principles that guide an organization's decisions.A) Code of ethicsB) Limited liability agreementC) Employee procedure policyD) Statement of sustainable developmentE) Statement of corporate opportunity

34) A company insider's disclosure that exposes illegal or unethical behavior by others within the organization is ________. A) illegalB) insider trading C) unethicalD) philanthropic E) whistle-blowing

35) Which of the following statements is true regarding whistle-blowing?


A) Whistle-blowing is the normal channel through which employees can address issues involving unethical or illegal behavior within their companies.B) Whistle-blowing refers to the use of unpublicized information that an individual gains from the course of his or her job to benefit from fluctuations in the stock market.C) Whistle-blowing occurs when employees share confidential company information with external agents for personal gain. D) The federal and state laws governing whistle-blowing are simple and clear, so that they can be easily used by employees and employers to navigate through.E) Although whistle-blowing is sometimes characterized as "ratting on" colleagues or managers, it has an essential function.

36) An employee at Cleveland Medical Center informs the media of certain health law violations and negligence that lead to documented illness and even death in certain cases. This is an example of ________. A) insider tradingB) whistle-blowingC) affirmative actionD) consumerismE) strategic CSR

37) Which of the following is an example of whistle-blowing?A) An employee discloses confidential information about the company to a rival firm for personal gain. B) An employee suggests some process changes to his manager, that he claims will increase the productivity of the team. C) An employee avoids taking ownership of his mistakes by blaming it on his co-workers. D) An employee informs the manager that some of his team members are misusing confidential customer details from the company database. E) An employee who is unsatisfied with his performance appraisal requests his manager for a re-evaluation of his performance.


38) Which of the following statements is true regarding ethical decision making?A) When an employee is unable to make a decision because more than one side of an issue can be supported with valid arguments, it is called an ethical lapse.B) The disclosure of information by a company insider that exposes unethical behavior by others within the organization is called an ethical lapse.C) Stakeholders' needs often conflict, requiring managers to make tough decisions about resource allocation.D) Making objective decisions will lead to ethical lapses. E) When the question of what is right and what is wrong is clear, ethical decisions are easy to implement.

39) A situation in which you must choose between two conflicting but arguably valid alternatives would be known as a(n) ________.A) insider tradingB) ethical lapseC) corporate opportunityD) ethical dilemmaE) conflict of interest

40) The CEO of a company considers offshoring some of its production to another country with lower labor costs. This decision would favor the company's customers who will benefit from lower prices. The shareholders also stand to benefit from lower production costs, which could increase sales, profits, or both, probably leading to increases in share prices. However, some employees will lose their jobs, and morale is likely to suffer among those employees who keep theirs. In this situation, the CEO faces a(n) ________. A) ethical dilemmaB) ethical lapseC) strategic CSRD) defensive CSRE) cognitive dissonance


41) The manager of a golf course awards a landscaping contract to his brother-in-law's company, even though another company was willing to do the same work for less money. This is an example of ________.A) defensive CSRB) code of ethicsC) conflict of interestD) strategic CSRE) ethical dilemma

42) Which of the following approaches to resolving ethical dilemmas advocates choosing the option that delivers the most good for the most people?A) individual rightsB) utilitarianismC) strategic CSRD) sustainable developmentE) Kantian ethics

43) The products of Sports Center, an international sports footwear and apparel chain, are manufactured in sweat factories in China. According to the company president, using sweatshop labor is justified because it delivers the most good for the most people. He mentions that it offers a means of livelihood to children and young adults, as well as supplies good quality apparel to customers at a lower cost. In this example, the president of Sports Center uses which of the following ethical approaches to decision making?A) affirmative actionB) Kantian ethicsC) individual rightsD) utilitarianismE) deontological ethics

44) Which of the following ethical approaches emphasizes desirable character traits such as integrity and compassion?


A) utilitarianismB) Kantian ethicsC) deontological ethicsD) affirmative actionE) virtue

45) Which of the following is true regarding the justice approach to ethics?A) It refers to treating people equally, or at least fairly, in a way that makes rational and moral sense.B) It refers to choosing the option that delivers the most good for the most people.C) It involves making social contributions that are directly aligned with a company's overall business strategy.D) It emphasizes qualities and conditions that benefit the community as a whole, such as peace and public safety.E) It refers to the movement that pressures businesses to consider consumer needs and interests.

46) Corporate social responsibility refers to ________. A) the rules or standards governing the conduct of a person or groupB) a written statement setting forth the principles that guide an organization's decisionsC) the notion that business has obligations to society beyond the pursuit of profitsD) business that operates in a manner that minimizes pollution and resource depletion, ensuring that future generations will have vital resourcesE) the movement that pressures businesses to consider consumer needs and interests

47) The idea that a business has obligations to society beyond the pursuit of profits is ________.A) corporate social responsibility B) utilitarianism


C) philanthropic sustainabilityD) ethical minimizationE) opportunistic responsibility

48) ________ involves donating money, employee time, or other resources to various causes without regard for any direct business benefits for the company. A) PhilanthropyB) Strategic CSR C) Cap and tradeD) Sustainable developmentE) Affirmative action

49) LK Manufacturing Group, a company that manufactures home appliances, supports a community sports center to nurture the city's athletic talent as well as promote fitness activities, without regard for any direct business benefits. This exemplifies ________. A) strategic CSR B) cap and tradeC) sustainable developmentD) philanthropyE) affirmative action

50) Which of the following is an example of philanthropy?A) An IT company donates money to an orphanage without expecting any business benefits. B) A niche gourmet retail store holds free-for-all bakery classes by celebrity chefs in its store. C) A bookstore arranges free-for-all book reading and autograph session with authors of newly published books in stores. D) A sporting goods retail store holds a sports competition in the neighborhood community center to generate interest in athletics. E) A pharmaceutical company sponsors a blood donation camp, where it also advertises some of its products.


51) A company helps develop the workforce by supporting job training efforts. This is an example of ________. A) strategic CSR B) cap and tradeC) sustainable developmentD) philanthropyE) affirmative action

52) Which of the following is true about strategic CSR?A) It involves donating money, employee time, or other resources to various causes without regard for any direct business benefits for the company. B) It is an attempt to balance free-market economics with government intervention.C) It refers to organizational growth that meets the needs of the present without compromising the ability of future generations to meet their own needs.D) It involves social contributions that are directly aligned with a company's overall business plans.E) It refers to the argument that firms should indulge in philanthropy only when there is no conflicts of interest with the profitability of the firm.

53) Unlike general philanthropy, strategic CSR ________.A) promotes an antagonistic business-versus-society mindsetB) leads to weakening of both the business and the societyC) refers to CSR activities that are mandatory according to lawD) is aimed at specific sections of the society that have been historically discriminated againstE) is more likely to be sustained over time

54) The British firm Thames Water helped develop markets for its goods and services by assisting groups trying to improve water supplies in Africa. This is an example of ________. A) cap and trade


B) the minimalistic viewC) strategic CSR D) philanthropyE) affirmative action

55) Aston Products Inc., a cosmetic research, development, and manufacturing firm, conducts a cost-benefit analysis that identifies an underdeveloped area which has cheap labor and low land costs. The firm decides to set up a factory in that area to take advantage of the lower land and labor costs. While setting up the factory, the company also develops infrastructure such as building roads, hospitals, and primary schools. This is an example of ________. A) philanthropyB) the minimalistic viewC) affirmative actionD) strategic CSRE) cap and trade

56) According to the ________ view, the only social responsibility of business is to pay taxes and obey the law.A) defensiveB) minimalistC) cynicalD) proactiveE) strategic

57) John, a business owner, refuses to contribute to social causes. He argues that he is an honest, law abiding businessman who never evades his taxes. He states that by providing good quality products at a fair price, he has fulfilled his company's obligation to society. John would be said to have a ________ approach to CSR. A) defensiveB) minimalistC) cynicalD) proactive


E) strategic

58) Nongovernmental organizations are ________. A) publicly traded and owned entitiesB) firms that apply sustainable business strategies to achieve their business goalsC) nonprofit groups that provide charitable services or promote causesD) firms that derive a substantial portion of their income from tradeE) composed primarily of sovereign states (referred to as member states), or of other intergovernmental organizations

59) A ________ CSR is one in which a company accused of irresponsible behavior promotes itself as being socially responsible without making significant improvements in its business practices. A) minimalistB) philanthropicC) strategicD) proactiveE) cynical

60) A company that takes positive steps to address a particular issue, but only because it has been embarrassed into action by negative publicity, has a ________ CSR. A) minimalistB) defensiveC) strategicD) proactiveE) cynical

61) Shopper's Paradise, a department store chain, was accused of working with contractors who use sweatshop labor in their manufacturing units. The company was labeled as promoting unethical business policies. To deal with these criticisms, the company decides to make a large donation to a cancer research foundation, as well as sponsor a health awareness program in the community. Shopper's


Paradise would be said to have a ________ approach to CSR. A) minimalistB) strategicC) proactiveD) defensiveE) philanthropic

62) Publicity efforts that portray a company as being environmentally friendly when its actions speak otherwise are called ________. A) environmental minimalismB) quasi-environmentalismC) greenwashingD) collectivismE) proactivism

63) Toy Land Inc. was criticized for selling toys that had lead paint and were proven to be harmful for children. The company recalled several batches of toys. It responded to these accusations by changing its logo to include a recycle theme, using advertisements that promoted waste management and recycling, and providing Toy Land Inc. branded reusable shopping bags at their store. However, the firm did not undertake any specific measures to avoid using toxic materials in its products. This is an example of ________. A) proactive CSRB) cynical CSRC) minimalistic CSRD) primary CSRE) philanthropic CSR

64) An eco-friendly health resort claims to be environment friendly, and markets itself as an eco-resort. However, it engages in irresponsible activities such as wastage of water, disposal of plastic and other untreated wastes into the water bodies, and cutting trees in protected areas to expand its facilities. This is an example of ________. A) environmental minimalism


B) quasi-environmentalismC) greenwashingD) collectivismE) proactivism

65) In ________ CSR, company leaders believe they have responsibilities beyond making a profit, and they back up their beliefs and proclamations with actions taken on their own initiative. A) proactive B) cynical C) minimalistic D) primary E) philanthropic

66) Since its inception, Whole Foods Market has contributed 5% of its profits to charitable endeavors. At Whole Foods Market, company leaders believe they have responsibilities beyond making a profit. The firm has a ________ approach to CSR. A) cynical B) minimalistic C) primary D) philanthropic E) proactive

67) Most of the electricity generated in the United States is produced by ________. A) burning fossil fuelsB) from nuclear powerC) from hydroelectric power D) from solar powerE) harnessing wind power

68) Which of the following statements is true?A) The creation, delivery, use, and disposal of products that society values can be carried out without generating any pollution and


consuming any natural resources.B) Web-based businesses are "clean" because there is no pollution associated with them.C) Environmental issues are easy and simple, and companies can easily make decisions when faced with such issues. D) Environmental issues faced by businesses are about forests, rivers, and wildlife; and not about human health and safety.E) Dealing with environmental issues often requires tough trade-offs, occasional sacrifice, and disruptive change.

69) ________ is the study of the relationship between organisms and the natural environment.A) EnvironmentalismB) EcologyC) Energy conservationD) ErgonomicsE) Sustainability

70) The ________ establishes procedures for creating geologic repositories of radioactive waste. A) Clean Air Act B) Solid Waste Disposal ActC) Toxic Substances Control ActD) Nuclear Waste Policy ActE) Resource Recovery Act

71) The Resource Recovery Act (1970) ________. A) subsidizes pilot recycling plantsB) regulates treatment, storage, transportation, and disposal of hazardous wasteC) establishes a structure for coordinating all federal environmental programsD) authorizes grants to states for water-pollution controlE) prohibits ocean dumping that could threaten human health or the marine environment


72) Under ________, lawmakers establish maximum allowable amounts of a pollutant that an industry is allowed to emit and distribute individual allowances to all companies in that industry.A) sustainable developmentB) cap and tradeC) ecological barterD) environmental controlE) carbon offset projects

73) Which of the following statements is true about cap and trade programs?A) They promote an anti-business perspective.B) They provide technological solutions to reduce pollution and resource consumption.C) They force companies to choose the highest-cost means of taking responsibility for their emissions.D) They try to balance free-market economics with government intervention. E) They put pressure on businesses to consider consumer needs and interests.

74) ________ is defined as meeting the needs of the present without compromising the ability of future generations to meet their own needs. A) GreenwashingB) ConsumerismC) MaterialismD) Sustainable developmentE) Cap and trade

75) American Housing Inc., a construction firm, uses innovative home designs that use insulating building materials aimed at reducing the energy consumption of the apartments and homes it builds. This gives it an edge over other businesses, and is environment friendly as well. This is an example of ________.


A) cap and tradeB) greenwashingC) consumerismD) affirmative actionE) sustainable development

76) What is the meaning of the term "consumerism"?A) overspending by customers B) overspending by corporations C) pressuring businesses to consider consumer needs D) pressuring consumers to consider business needs E) unexpected demand by buyers

77) Which of the following federal legislations limits cardholder liability for unauthorized use?A) Magnuson-Moss Warranty Act (1975)B) Fair Credit Reporting Act (1970)C) Truth in Lending Act (Consumer Protection Credit Act) (1968)D) Deceptive Mail Prevention and Enforcement Act (1999)E) Fair Packaging and Labeling Act (1966, 1972)

78) The Magnuson-Moss Warranty Act (1975) requires complete written warranties in ordinary language and requires warranties to be ________. A) applicable for minimum one yearB) supported by the manufacturerC) supported by the retailer D) available before purchase E) contained on package labeling

79) Mark hacks into the database of an e-commerce firm and steals the social security numbers of many of its customers. He then uses these numbers to take loans. This is an example of ________. A) phishingB) identity theftC) spamming


D) brandjackingE) cybersquatting

80) Which of the following regulatory agencies is responsible for monitoring the hiring practices of companies and can require them to compensate individuals who have been victimized by unfair hiring practices. A) Federal Employment Commission (FEC)B) Civil Rights Commission (CRC)C) Employee Protection Commission (EPC)D) Employment Regulatory Commission (ERC)E) Equal Employment Opportunity Commission (EEOC)

81) Activities undertaken by businesses to recruit and promote members of groups whose economic progress had been hindered through either legal barriers or established practices are known as ________.A) greenwashingB) sustainable developmentC) multiculturismD) affirmative actionE) selective recruiting

82) The Civil Rights Act of 1991 amended the original act, and ________. A) provided for unlimited amount of damage awardsB) made it mandatory for private firms to employ persons from minority groupsC) made it tougher to sue for discriminationD) gave employees the right to have a trial by jury in discrimination casesE) made it mandatory for the government to subsidize programs based on race

83) Which of the following is true about the Americans with Disabilities Act (ADA)?


A) It allows employers to ask job applicants to pass a physical examination as a condition of employment.B) It protects only those individuals who have physical handicaps.C) It guarantees equal opportunities in housing, transportation, education, employment, and other areas for people with disabilities.D) It excludes people with drug addiction, alcoholism, emotional illness, and other conditions.E) It subsidizes modifications to work stations or schedules undertaken by firms to make the workplace more accessible to people with disabilities.

84) ________ is the study of how people interact with computers and other machines.A) ConsumerismB) ErgonomicsC) Systems psychologyD) Environmental designE) Anthropometry

85) Production facilities that treat workers poorly are referred to as ________.A) ergonomic unitsB) maquiladoraC) contingent work D) warehousesE) sweatshops

86) What is ethics? List the components of good business ethics?

87) Compare and contrast insider trading and whistle-blowing.

88) Compare and contrast ethical lapse and ethical dilemma?

89) What is a conflict of interest? How is it related to ethical decision making?


90) Compare and contrast the various approaches used to resolve ethical dilemmas.

91) Compare and contrast philanthropy and strategic CSR.

92) Compare and contrast the minimalist and the purely cynical perspective on corporate social responsibility.

93) What is defensive CSR? How is it different from proactive CSR?

94) Discuss the two-tiered approach to CSR.

95) What are cap and trade programs?

96) Compare and contrast cap and trade programs and sustainable development.

97) What is consumerism? List the fundamental consumer rights.

98) Compare and contrast discrimination and affirmative action.

99) Discuss some of the key responsibilities that employers have regarding employees. Compare them with the responsibility they have toward consumers.

100) Discuss the functions of the Equal Employment Opportunity Commission (EEOC).


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