Strategic Management & Business Policy, 14e (Wheelen)

Chapter 3 Ethics and Social Responsibility in Strategic Management

1) The theory of vital responsibility proposes that a private corporation has responsibilities to society that
extend beyond making a profit.
Answer: FALSE
2) Friedman referred to the social responsibility of business as a "fundamentally subversive doctrine."
Answer: TRUE
3) Archie Carroll contends that the primary goal of business is profit maximization.
Answer: FALSE
4) Archie Carroll proposes that managers in companies have only a discretionary responsibility.
Answer: FALSE
5) According to Carroll, legal responsibilities are defined by governments in laws that management is expected
to obey.
Answer: TRUE
6) The difference between ethical and discretionary responsibilities is that few people expect an organization to
fulfill ethical responsibilities.
Answer: FALSE
7) Discretionary responsibilities are voluntary obligations a corporation assumes.
Answer: TRUE
8) Being known as a socially responsible firm may provide a company with social capital, the goodwill of key
stakeholders, that can be used for competitive advantage.
Answer: TRUE
9) A study concerning social responsibility indicates that socially-responsible firms are more likely to be
welcomed into another country.
Answer: TRUE
10) The broader concept of sustainability is closely aligned with Friedman's view of social responsibility.
Answer: FALSE
11) Corporation stakeholders are all constituencies that are affected by the achievement of the firm's objectives.
Answer: TRUE
12) In any one strategic decision, the interests of one stakeholder group can conflict with another.
Answer: TRUE
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13) The first step in stakeholder analysis is identifying those who have only an indirect stake in the corporation.
Answer: FALSE
14) Primary stakeholders have a direct connection with the corporation and have sufficient bargaining to
directly affect corporate activities.
Answer: TRUE
15) A company may have some stakeholders of which it is only marginally aware.
Answer: TRUE
16) There is no truth to the comment that "business ethics" is an oxymoron.
Answer: TRUE
17) Cultural norms and values can guide ethical behavior.
Answer: TRUE
18) "Let the buyer beware" is a traditional saying in free market capitalism.
Answer: TRUE
19) Relationship-based countries tend to be more transparent and have a lower degree of corruption than do
rule-based countries.
Answer: FALSE
20) Cultural relativism is reflected in the statement, "When in Rome, do as the Romans do."
Answer: FALSE
21) Kohlberg's preconventional level is characterized by a person's adherence to an internal moral code.
Answer: FALSE
22) Moral relativism could enable a person to justify almost any sort of decision or action, so long as it is not
declared illegal.
Answer: TRUE
23) According to Kohlberg's levels of moral development, the conventional level is characterized by
considerations of society's laws and norms.
Answer: TRUE
24) Kohlberg places 80 percent of U.S. adults in the principled level of development.
Answer: FALSE
25) A code of ethics denotes how employees should behave on the job.
Answer: TRUE

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26) Research indicates that when faced with a question of ethics, managers tend to ignore codes of ethics and
try to solve their dilemma on their own.
Answer: TRUE
27) Law refers to formal codes that permit or forbid certain behaviors and may or may not enforce ethics or
morality.
Answer: TRUE
28) The justice approach to ethics proposes that actions and plans should be judged by their consequences.
Answer: FALSE
29) A problem with the utilitarian approach to ethics is the difficulty in recognizing all the benefits and the costs
of any particular decision.
Answer: FALSE
30) The Golden Rule is the essence of one of Immanuel Kant's approaches to resolving ethical dilemmas.
Answer: TRUE
31) The concept that proposes private corporations have responsibilities to society that extend beyond making a
profit is known as
B) social responsibility.
32) Which one of the following is NOT one of the arguments against social responsibility as used by economist
Milton Friedman?
B) Businesses can actually do very little in terms of social responsibility.
33) Who said that the social responsibility of business is a "fundamentally subversive doctrine" and that the one
social responsibility of business is "to use its resources and engage in activities designed to increase its profits
so long as it stays with the rules of the game..."?
E) Milton Friedman
34) Economist Milton Friedman has argued that a business's only responsibility is to
A) maximize profits and stay within the rules of the game.
35) According to Carroll, the responsibility that management of a business organization has to produce goods
and services of value to society so that the firm may repay its creditors and stockholders is called
D) economic responsibilities.
36) According to Carroll, the responsibilities defined by government in laws for management to obey are
A) legal responsibilities.
37) According to Carroll, the responsibility that management of a business organization assumes which are
E) discretionary responsibilities.
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38) The term "social responsibility" , according to Carroll, can be viewed as a combination of an
A) organization's ethical and discretionary responsibilities.
39) Carroll's four responsibilities listed in order of priority are
C) economic, legal, ethical, and discretionary.
40) Society generally expects firms to work with employees and the company to plan for layoffs. This is an
example of which of Carroll's responsibilities?
D) ethical
41) Providing day-care centers to employees is an example of which of Carroll's responsibilities?
E) discretionary
42) Friedman's position on social responsibility
B) appears to be losing traction with business executives.
43) As societal values evolve, it is likely that the _________ responsibilities of today may become the
_________ responsibilities to tomorrow.
C) discretionary; ethical.
44) Being socially responsibility
A) provides a company with a more positive overall reputation.
B) has opened doors in local communities.
C) has enhanced the company's reputation with consumers.
D) has resulted in cost savings to firms.
E) all of the above.
45) Which of the following is NOT one of the examples provided as an organizational benefit received from
being socially responsible?
D) They are guaranteed to maximize resource productivity and reduce the average payback
period of investment.
46) According to a recent Harris Poll what percentage of U.S. adults believe that U.S. corporations owe
something to their workers and the communities in which they operate and that they should sometimes sacrifice
some profit for making things better for their workers and communities?
A) 95%
47) In order for a business to be sustainable, it must satisfy which of Carroll's responsibilities?
E) all of the above
48) The Dow Jones Sustainability Index includes
C) environmental, economic, and social sustainability.
49) The first step in stakeholder analysis is to
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A) identify primary stakeholders.

50) All of the following are considered primary stakeholders EXCEPT
B) governments.
51) All of the following are considered secondary stakeholders EXCEPT
C) suppliers.
52) Which of the following statements is true concerning secondary stakeholders?
A) Secondary stakeholders are those who have only an indirect stake in the corporation, but who
are affected by corporate activities.
B) Secondary stakeholders usually include non-governmental organizations (like Greenpeace)
and trade associations.
C) Because the corporation's relationship with each of these stakeholders is usually not covered
by any written or verbal agreement, there is room for misunderstanding.
D) Aside from competitors, secondary stakeholders are not usually monitored by the corporation
in any systematic fashion.
E) all of the above
53) Which of the following companies was cited by the text as an example of a company which does its best to
consider its responsibilities to its primary and secondary stakeholders when making strategic decisions?
B) Johnson & Johnson
54) The Ethics Resource Center found that the percentage of employees who had engaged in one or more
unethical and/or illegal actions during the past year was
C) 48%.
55) According to a survey by the Ethics Resource Center, which was not cited as one of the most common
questionable behaviors that employees engage in?
D) surfing the web on company time
56) As opposed to rule-based countries, relationship-based countries tend to
D) be less transparent and have a higher degree of corruption.
57) Of the six values measured by the Allpot-Vernon-Lindzey Study of Values test, both U.S. and British
executives consistently score highest on ________ values and lowest on ________ values.
C) economic and political; social and religious
58) Rule-based governance
B) relies on publicly verifiable information.
59) Which of the following is one of the most common reasons given by surveyed executives for bending the
rules to attain their objectives?
A) organizational performance required it
B) rules were ambiguous or out of date
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C) everyone does it
D) pressure from others
E) all of the above
60) Vice President Sherron Watkins used the ________ analogy to explain why executives at Enron engaged in
unethical and illegal actions.
D) Frogs in boiling water
61) Some people claim that morality is relative to some personal, social, or cultural standard and that there is no
method for deciding whether one decision is better than another. This is called
D) cultural imperialism.
62) All of the following reasons provide rationale for unethical behavior EXCEPT
D) agreement among stakeholders and business people about what is ethical.
63) All of the following are one of the four types of moral relativism EXCEPT
B) principled relativism.
64) Role relativism is based on the belief that
C) social roles carry with them certain obligations.
65) "When in Rome, do as the Romans do" reflects which type of moral relativism?
D) cultural relativism
66) Blindly following orders reflects which type of moral relativism?
B) role relativism
67) According to Kohlberg, the first level of moral development, characterized by concern for self, is called
D) preconventional.
68) According to Kohlberg, the second level of moral development, characterized by considerations of society's
laws and norms, is called
B) conventional.
69) According to Kohlberg, the third level of moral development, characterized by a person's adherence to an
internal moral code, is called
A) principled.
70) According to Kohlberg, in what stage of moral development do the majority of people in the U.S. occupy?
B) conventional stage
71) A code of ethics was important for two reasons. The first reason is that it clarifies company expectations of
employee conduct in various situations, and the second reason is
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B) that it makes clear that the company expects its people to recognize the ethical
dimensions in decision and actions.
72) Managers who want to improve ethical behavior should take actions such as
A) communicate the code of ethics in training programs.
B) emphasize the code of ethics in performance appraisal systems.
C) follow a code of ethical behavior themselves.
D) communicate the code of ethics in policies and procedures.
E) all of the above
73) Specific changes reported by CEOs in a survey by the Business Roundtable Institute for Corporate Ethics
included all of the following EXCEPT
D) decreased number of whistleblowers.
74) Ethics is defined as
C) consensually accepted standards of behavior for an occupation, trade, or profession.
75) Employees who report illegal or unethical behavior on the part of others are known as
B) whistleblowers.
76) Which company cancelled contracts with 23 factories that did not meet its child-labor standards for
suppliers?
B) Gap International
77) Morality is defined as
B) a general rule of conduct of personal behavior, based on religious or philosophical
grounds.
78) Law is defined as
A) formal codes that permit or forbid certain behaviors.
79) The approach to ethical behavior which proposes that actions and plans should be judged by their
consequences, thus producing the greatest benefit to society with the least harm or the lowest cost is called
C) utilitarian approach.
80) The approach to ethical behavior which proposes that human beings have certain fundamental rights that
should be respected in all decisions, thus avoiding interfering with the rights of others is called
A) individual rights approach.
81) According to the utilitarian approach, the ability to affect the company is known as
A) power.
82) According to the utilitarian approach, legal or moral claim on company resources can stand for
B) legitimacy.
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83) The approach to ethical behavior which proposes that decision makers be equitable, fair, and impartial in the
distribution of costs and benefits to individuals and groups is called
D) justice approach.
84) A problem with the utilitarian approach is
E) that it is difficult to recognize all the benefits and costs of any particular decision.
85) Which approach to ethical behavior can encourage selfish behavior when a person defines a personal need
or want as a "right"?
B) individual rights
86) People who are similar on relevant dimensions such as job seniority should be treated in the same way, is an
example of
D) distributive justice.
87) The principle which proposes that punishment should be determined on a proportional basis to the "crime"
is called
B) retributive justice.
88) The principle which argues that wrongs should be compensated in proportion to the offense suffered is
called
A) compensatory justice.
89) Issues in affirmative action such as reverse discrimination are examples of conflicts between
C) distributive and compensatory justice.
90) According to Cavanagh, using the ________ criterion, to determine if padding an expense account is ethical
or not one would ask if it optimizes the satisfactions of all stakeholders.
B) utility
91) Using the Golden Rule and never treating another human being simply as a means but always as an end are
the categorical imperatives of
D) Immanuel Kant.
92) Explain the difference between Milton Friedmans and Archie Carrolls approaches to the responsibilities of
business.
Both Milton Friedman and Archie Carroll argue their positions based on the impact of socially
responsible actions on a firms profits. Friedman says that socially responsible actions hurt a
firms efficiency. Carroll proposes that a lack of social responsibility results in increased
government regulations, which reduce a firms efficiency. Friedman argues that profit
maximization is the firms primary responsibility. Carroll argues that firms have economic, legal,
ethical, and discretionary responsibilities.
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93) What is stakeholder analysis? List the three-step process.

Stakeholder analysis is the identification and evaluation of corporate stakeholders. The first step
of the process is to identify the primary stakeholders (those who have a direct connection with the
corporation and who have sufficient bargaining power to directly affect corporate activities). The
second step is to identify the secondary stakeholders (those who have only an indirect stake in the
corporation, but who are also affected by corporate activities). The third step is to estimate the
effect on each stakeholder group from any particular strategic decision.
94) Discuss some reasons for unethical behavior by business people.
There are a number of reasons proposed for the unethical behavior by business people. It may be
that the involved people are not even aware that they are doing something questionable. There is
no worldwide standard of conduct for business people. Cultural norms and values vary between
countries and even between different geographic regions and ethnic groups within a country.
Another possible reason for what is often perceived to be unethical behavior lies in differences in
values between business people and key stakeholders. Some business people may believe profit
maximization is the key goal of their firm, whereas concerned interest groups may have other
priorities. This difference in values can make it difficult for one group of people to understand
anothers actions.
95) What is moral relativism?
Moral relativism claims that morality is relative to some personal, social, or cultural standard and
that there is no method for deciding whether one decision is better than another. Moral relativism
could enable a person to justify almost any sort of decision or action, so long as it is not declared
illegal.
96) Discuss Kohlbergs levels of moral development.
Kohlberg proposes that a person progresses through three levels of moral development. The first
level is preconventional. This level is characterized by a concern for self. The second level is the
conventional which is characterized by consideration of societys laws and norms. The principled
level is the third. This level is characterized by a persons adherence to an internal moral code.
The individual at this level looks beyond norms or laws to find universal values or principles.
97) Discuss the three basic approaches to ethical behavior.
The three basic approaches to ethical behavior are the utilitarian approach, the individual rights
approach, and the justice approach. The utilitarian approach proposes that actions and plans
should be judged by their consequences. People should therefore behave in such a way that will
produce the greatest benefit to society and produce the least harm or the lowest cost. The
individual rights approach proposes that human beings have certain fundamental rights that
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should be respected in all decisions. The justice approach proposes that decision makers be
equitable, fair, and impartial in the distribution of costs and benefits to individuals and groups.

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