Chapter 04 Test Bank

Chapter 04 Test Bank
Student: ___________________________________________________________________________
1. Steve works in the accounting department for a large manufacturing company. His manager
instructed him to record a transaction in an incorrect manner to increase the revenue for the
fiscal year. Steve is pondering whether to report this issue to a higher-level manager. This is an
example of an ethical dilemma.
True
False
2. Stockholders seek to maximize the return on their investment and therefore show interest in
the ethical practices of a company.
True
False
3. Stakeholders benefit in the long run if companies make the right choices.
True
False
04-1
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4. Under the moral rights rule, an ethical decision is one that distributes benefits and harms
among people and groups in an equitable way.
True
False
5. From a moral rights perspective, managers should consider courses of action that respect the
fundamental rights of others.
True
False
6. Decisions that managers take to protect the rights of some stakeholders often hurt the rights of
others.
True
False
7. Under the justice rule, managers should determine fair rules and procedures for distributing
outcomes to stakeholders.
True
False
04-2
8. "An ethical decision is one that a typical person in a society would think is acceptable" is a
statement that reflects the practical rule.
True
False
9. Jim is comfortable with his decision and would have no problem with people reading about it on
the front page of a morning paper. This indicates that he is following the practical rule.
True
False
10. When one person starts to profit by behaving unethically, it encourages other people to act in
the same way.
True
False
11. Websites that allow free downloading of songs and movies illustrate the "tragedy of the
commons" because there is pursuit of self-interest with no consideration for societal interest.
True
False
04-3
12. Organizational ethics are the standards that govern how members of a profession should
conduct themselves.
True
False
13. Organizational ethics are the way a company's managers view their duty to make decisions
that enhance the well-being of stakeholders.
True
False
14. People typically confront ethical issues when weighing their personal interests against the
effects of their actions on others.
True
False
15. If a company's top managers consistently endorse the ethical principles in its corporate credo,
they can prevent employees from going astray.
True
False
04-4
16. Dianna has witnessed her manager harassing a coworker on multiple occasions. Dianna knows
that she should report the incidents to a superior manager, but she is hesitant to report the
inappropriate behavior because she thinks she could lose her job. This example illustrates a(n)
A. justice rule.
B. ethical dilemma.
C. moral dilemma.
D. utilitarian rule.
E. moral rights rule.
17. _____ are the moral principles and beliefs about what is the right or appropriate way to behave.
A. Societal norms
B. Laws and regulations
C. Ethics
D. Values and norms
E. Individual values
18. _____ are thoughts and feelings that tell people what is right or wrong.
A. Moral scruples
B. Ethical dilemmas
C. Practical rules
D. Norms
E. Individual rights
04-5
19. Which of the following statements is true about ethics?
A. Ethics and laws are fixed principles.

B. Ethical beliefs remain constant as time passes.
C. Laws change to reflect the changing ethical beliefs of a society.
D. Absolute and indisputable rules and principles can be developed to decide whether an action is
ethical or unethical.
E. Ethics evolve over time, but laws related to ethical beliefs remain constant.
20. Which of the following statements is true about stockholders?
A. They are often regarded as the most critical stakeholder group because if a company cannot
attract them to buy its products, it cannot stay in business.
B. They are least interested in the company's profits.
C. They bear the responsibility to decide which goals an organization should pursue to most
benefit stakeholders and how to make the most efficient use of resources to achieve those goals.
D. They are responsible for using a company's financial, capital, and human resources to increase
its performance and thus its stock price.
E. They have a claim on a company because when they buy its stock or shares, they become its
owners.
21. _____ watch the company and its managers closely to ensure that management is working
diligently to increase the company's profitability.
A. Community members
B. Suppliers
C. Stockholders
D. Customers
E. Distributors
04-6
22. _____ have the right to expect a good return or reward by investing their human capital to
improve a company's performance.
A. Customers
B. Distributors
C. Suppliers
D. Distributors
E. Managers
23. _____ have a claim on an organization because they bring to it their skills, expertise, and
experience.
A. Customers
B. Distributors
C. Suppliers
D. Local communities
E. Managers
24. ______ are the stakeholder group with the most responsibility for deciding the goals of the
organization.
A. Stockholders
B. Customers
C. Managers
D. Operational-level employees
E. Consultants
04-7
25. _____ are frequently in the position of having to juggle the interests of different stakeholders,
including themselves.
A. Stockholders
B. Customers
C. Contractors
D. Managers
E. Suppliers
26. Which of the following is a method by which a company can act ethically toward employees
and meet their expectations?
A. by improving their products over time and providing guarantees to customers about the
integrity of their products
B. by selling customers quality products at a fair price and providing good after-sales service.
C. by maximizing the stockholders' return on investments
D. by creating an occupational structure that fairly and equitably rewards organization members
for their contributions
E. by implementing a high power distance culture and discouraging decentralized decision making
27. Simon was confronted with a serious ethical dilemma. He responded with a solution that
created the greatest good for the greatest number of people. Which ethical rule best describes his
response?
A. justice
B. moral rights
C. utilitarian
D. practical
E. moral scruples
04-8
28. Which of the following statements is true of ethical decision making?
A. Customers are often regarded as the least important stakeholder group.

B. Communities, societies, and nations are independent of the effects of the decisions made by
companies.
C. The failure of a company can have catastrophic effects on a community since a general decline
in business activity can affect a whole nation.
D. The results of ethical behavior are loss of reputation and resources, and skilled managers and
employees leaving the company.
E. When making business decisions, managers must exclusively consider the claims of
stockholders.
29. The utilitarian rule states that an ethical decision is a decision that
A. best protects the rights of people affected.

B. produces the greatest good for the greatest number of people.
C. distributes benefits and harms in an impartial manner.
D. can be communicated with no reluctance.
E. increases the financial effectiveness of the organization.
30. Under the _____ rule, an ethical decision is one that best maintains people's fundamental
privileges.
A. justice
B. moral rights
C. utilitarian
D. practical
E. moral scruples
31. The _____ rule is that an ethical decision is one that distributes rewards and harms in a fair
way.
04-9
A. justice
B. moral rights
C. utilitarian
D. practical
E. moral scruples
32. When Bob was calculating the yearly bonuses for his employees, he paid particular attention
to the individual employee scores to ensure that they were based on performance and not
favoritism. Which ethical rule was Bob following?
A. practical
B. moral scruples
C. utilitarian
D. justice
E. moral rights
33. Under the practical rule, a manager would not be reluctant to communicate a decision to
people outside the company when
A. the decision, although unethical, would increase shareholders' wealth.

B. a typical person would consider the decision acceptable.
C. a typical person wouldn't care about the decision.
D. a typical person would be unaware of the harmful implications of the decision.
E. he/she could blame the top management of the firm.
34. The practical rule states that an ethical decision is one that

C. distributes benefits and harms in a fair way.
E. is relevant to the financial effectiveness of the organization.
04-10
35. Samantha made some changes in the production process to make sure employees could
perform tasks without endangering their health and safety. Samantha was employing the moral
rights rule to
A. seek to protect the rights and privileges of people affected.

B. maximize the greatest good for the greatest number of people.
C. distribute benefits in fair ways, but ignore harm.
D. hesitate to communicate to people outside the company for fear of them criticizing her
decision.
E. randomly distribute harms and benefits.
36. One managerial implication of the justice model is that managers should base their decisions
on
A. the effects the decision can have on stakeholders' rights.

B. what provides maximum profits to the company.
C. whatever promotes a fair distribution of outcomes.
D. the personal situation of employees.
E. the greatest good for the greatest number of people.
37. Which of the following statements is true of the practical rule of ethical decision making?
A. This rule emphasizes distributing benefits and harms in an equitable way.

B. This rule states that it is acceptable for a company to choose an unethical action if the action
provides the greatest good for the greatest number of people.
C. This rule requires managers to determine the fair or unfair rules and procedures for distributing
D. This rule states that an ethical decision is one that a manager will be hesitant or reluctant to
communicate to people outside the company because the typical person in a society would think
it is unacceptable.
E. This rule ensures that managers will take into account the interests of all the stakeholders.
04-11
38. Some websites offer free streaming and downloading of movies, games, and music. Websites
like these demonstrate that the pursuit of self-interest can lead to a collective disaster when one
or more people start to profit from being unethical because this encourages other people to act in
the same way. This exemplifies a situation known as the
A. moral dilemma.
B. "tragedy of the commons."
C. ethical dilemma.
D. credo.
E. war of attrition.
39. ________ is the idea that the pursuit of self-interest with no consideration for societal interests
leads to disaster.
A. The "tragedy of the commons"

B. The ethical dilemma
C. The moral dilemma
D. The "credo"
E. The concept of individual ethics
40. ______ is a person's confidence and faith in another person's goodwill.
A. Trust
B. Reputation
C. Social responsibility
D. Moral standing
E. Emotional value
41. _______ is the esteem or high repute that individuals or organizations gain when they behave
ethically.
04-12
A. Trust
B. Reputation
D. Moral standing
E. Emotional value
42. Unethical behavior
A. reduces a company's inefficiency.

B. decreases a company's ineffectiveness.
C. reduces a company's performance.
D. increases the national standard of living.
E. increases national well-being and prosperity.
43. ______ ethics are the standards that govern how members of a society should deal with one
another in matters involving issues such as fairness, justice, poverty, and individual rights.
A. Societal
B. Occupational
C. Individual
D. Organizational
E. Governmental
44. Bob gave a talk to his employees about standards that govern how members of their
profession should conduct themselves. He was talking about ______ ethics.
A. societal
B. occupational
C. individual
D. organizational
E. governmental
04-13
45. After a lengthy investigation, Larry lost his license to practice law on charges of accepting
bribes. In all likelihood, Larry probably violated his _____ ethics.
A. environmental
B. occupational
C. individual
D. organizational
E. governmental
46. When faced with an ethical dilemma as a manager, Sam tries to reflect on his upbringing to
decide between right and wrong. Sam is reflecting on ______ ethics.
A. societal
B. occupational
C. individual
D. organizational
E. religious
47. ______ ethics are standards that determine how people view their responsibilities to others and
how they should act in situations when their own self-interest is at stake.
A. Societal
B. Occupational
C. Individual
D. Organizational
E. Governmental
48. Which of the following is least likely to be a source of individual ethics?
A. family
B. friends
C. church
D. teachers
E. supervisors
04-14
49. ______ ethics are the guiding practices and beliefs through which a particular firm and its
managers view their responsibilities to stakeholders.
A. Societal
B. Occupational
C. Individual
D. Organizational
E. Governmental
50. Which of the following stakeholder group's individual ethics are important in shaping the
organizational code of ethics?
A. employees
B. customers
C. community
D. founders
E. stockholders
51. Which of the following statements is true of organizational ethics?
A. Employees are much more likely to act unethically when a credo exists.
B. Employees are more likely to act unethically when the company's top managers consistently
endorse the ethical principles in its corporate credo.
C. Top managers play the least important role in determining a company's ethics.
D. The individual ethics of a company's founders and top managers are especially important in
shaping the organization's code of ethics.
E. They are standards that govern how members of a profession, trade, or craft should conduct
themselves when performing work-related activities.
04-15
52. Which of the following approaches to a commitment to social responsibility is characterized by
low levels of socially responsible behavior?
A. accommodative
B. proactive
C. defensive
D. obstructionist
E. obligatory
53. The managers of Lehman Brothers, whose bankruptcy helped propel the 2008–2009 financial
crisis, used loopholes in U.K. law to hide billions of dollars of worthless assets in its balance sheet
to disguise its poor financial condition. Which of the following approaches to how to be socially
responsible is illustrated from this example?
A. accommodative
B. proactive
C. defensive
D. obstructionist
E. obligatory
54. Managers at Enron prevented employees from selling Enron shares in their pension funds while
they sold hundreds of millions of dollars' worth of their own Enron stock. This illustrates the_____
approach to social responsibility.
A. accommodative
B. proactive
C. defensive
D. obstructionist
E. offensive
04-16
55. Managers who sell their stock in advance of other stockholders because they know that their
company's performance is about to fall demonstrate the _____ approach to social responsibility.
A. accommodative
B. proactive
C. defensive
D. obstructionist
E. reactive
56. Which of the following approaches is characterized by the highest degree of social
responsibility?
A. accommodative
B. proactive
C. defensive
D. obstructionist
E. offensive
57. When tobacco companies sought to hide evidence that cigarette smoking causes lung cancer,
they were exhibiting a(n) _____ approach to social responsibility.
A. accommodative
B. proactive
C. defensive
D. obstructionist
E. offensive
58. A company that expects its managers to behave ethically to the degree that they stay within
the law is acting with a(n) _____ approach.
A. accommodative
B. proactive
C. defensive
D. obstructionist
E. offensive
04-17
59. WorldCom gave managers stock options and bonuses even when the company performance
was declining, and managers sold their stock in advance of other stockholders. This illustrates
the_____ approach.
A. accommodative
B. proactive
C. defensive
D. obstructionist
E. offensive
60. According to the_____ approach, companies and their managers behave legally and ethically
and try to balance the interests of different stakeholders as the need arises.
A. accommodative
B. proactive
C. defensive
D. obstructionist
E. offensive
61. The president at Protector's Insurance takes pride in the fact that his organization strives to
behave legally and ethically. The company advocates an approach that tries to balance the
interests of different stakeholders in relation to the claims of other stakeholders. What approach
to social responsibility is the organization implementing?
A. accommodative
B. proactive
C. defensive
D. obstructionist
E. offensive
04-18
62. The _______ approach to social responsibility is most likely to be taken by a typical large U.S.
company.
A. accommodative
B. proactive
C. defensive
D. obstructionist
E. offensive
63. Companies that go out of their way to learn about the needs of different stakeholders and use
organizational resources to promote their interests are using the _____ approach.
A. accommodative
B. proactive
C. defensive
D. obstructionist
E. offensive
64. Companies that use the _______ approach are often at the forefront of campaigns for causes
such as a pollution-free environment; recycling and conservation of resources; the minimization or
elimination of the use of animals in drug and cosmetics testing; and the reduction of crime,
illiteracy, and poverty.
A. accommodative
B. defensive
C. reactive
D. proactive
E. obstructionist
65. Which approach to social responsibility is being implemented by a company that actively
embraces the need to behave in socially responsible ways?
04-19
A. proactive
B. accommodative
C. obstructionist
D. defensive
E. assertive
66. The _____ has organization-wide authority. Hence, organization members in any department can
communicate instances of unethical behavior by their managers or coworkers without fear of
retribution.
A. manager
B. stakeholder
C. stockholder
D. nation
E. ethics ombudsperson
67. A(n) ________ is a manager responsible for communicating and teaching ethical standards to all
employees and monitoring their conformity to those standards.
A. ethics director
B. ethics manager
C. ethics interpreter
D. ethics ombudsperson
E. stockholder
68. _____ can provide guidance when organization members are uncertain about whether an action
is ethical.
A. The communications manager

B. An ethics philosopher
C. The ethics ombudsperson
D. The personnel manager
E. The accommodative manager
04-20
69. Which of the following statements is true about the role of organizational culture?
A. The limited authority of ethics ombudsperson restricts organization members in any

department to communicate instances of unethical behavior by their managers or coworkers for
fear of retribution.
B. Ethics ombudspeople can provide guidance when organization members are uncertain about
whether an action is ethical.
C. If top managers are perceived as being self-interested and not ethical, their subordinates are
more likely to behave in an ethical manner.
D. When ethical values and norms are part of an organization's culture, they help organization
members focus mainly on self-interested action.
E. The actions of top managers such as CEOs are seldom scrutinized for ethical improprieties, as
their actions are independent of the values of their organizations.
70. David is trying to provide a visible means of support to develop an ethical culture in his
company. He can do so by creating
A. an ethics ombudsperson position.

B. ethical beliefs that remain rigidly constant.
C. strict leadership rules for the top management.
D. a plan for minimum compensation benefits.
E. a strong HR team.
71. Demonstrating its social responsibility helps a company build a good
A. infrastructure.
B. production unit.
C. selection process.
D. reputation.
E. organizational hierarchy.
04-21
72. _____ encourage employees to behave in a socially responsible manner.
A. Stakeholder claims
B. Conflicting interpersonal relations
C. Tougher selection processes
D. Ethical organizational cultures
E. High compensation benefits
73. Bryan is the manager of a company which has been judged as having the best corporate
reputation for two years in a row, based on a survey of countrywide consumers. This company is
well known for its
A. compensation benefits.
B. ethical culture.
D. goal-setting process.
E. strong leadership.
74. Phil has noticed that his operations manager has been practicing unethical means to reap
personal benefits at the expense of the company's customers. He will most likely approach the
_____ to report the matter without fear of retribution.
A. CEO
B. HR manager
C. consumer court
D. legal advisor
04-22
75. Robert and his HR team have adapted several existing company policies. He is unsure if all
these policies can be implemented on ethical grounds. His team can approach a(n) _____ to resolve
the matter.
A. consumer court
B. legal advisor
C. ethics ombudsperson
D. HR manager
E. ethical philosopher
76. Bank of America’s plan to reduce the workforce in its consumer banking unit by thousands
will
A. have a negative effect on managers.

B. result in a gain in company assets.
C. take a heavy toll on individual workers and local communities.
D. have a positive effect on individual workers and local communities.
E. take a heavy toll on stockholders.
77. In 2016, the average pay for a CEO was
A. $8.5 million.
B. $7.5 million.
C. $10.8 million.
D. $11.1 million.
E. $9.8 million.
04-23
78. Tiffany & Co. has a deep moral commitment to act responsibly in its sourcing of precious
metals and gemstones. This is an example of ______ ethics.
A. societal
B. individual
C. organizational
D. occupational
E. governmental
79. Paul works in the billing department for a medical center. He reports to his manager that some
patients’ bills include additional fees for which they should not be charged. His manager tells him
to ignore the issue and keep processing the bills. This is an example of a(n) ______ approach.
A. defensive
B. accommodative
C. reactive
D. obstructionist
E. proactive
80. Nancy wants to report some unethical behavior among colleagues in her department, but she
doesn’t want to her colleagues to know she is the whistle-blower. Nancy should talk to
A. her manager.
B. the ethics manager.
C. the ethics ombudsperson.
D. the ethics philosopher.
E. the ethics interpreter.
81. Stockholders are interested in how a company operates because
A. they are responsible for the organization’s capital resources.

B. they are responsible for the organization’s financial resources.
C. they want to maximize the return on their investment.
D. they provide input for the goals of the organization.
E. they want to make sure the organization makes the most efficient use of resources.
04-24
82. The board and top managers of a nonprofit organization have considerable latitude to decide
how they will spend the organization’s resources because
A. they are a private foundation.

B. the organization does not have stockholders.
C. they are typically small organizations.
D. they receive contributions and government grants.
E. all monies earned are pumped back into the business.
83. The _____ stakeholder group is considered to be the most critical.
A. managers
B. employees
C. customers
D. stockholders
E. suppliers
84. The influence of one’s family, peers, and upbringing in general can affect a person’s ________
ethics.
A. occupational
B. organizational
C. societal
D. business
E. individual
04-25
85. Companies and managers that take a(n) _____ approach go out of their way to learn about the
needs of different stakeholder groups.
A. accommodative
B. defensive
C. proactive
D. obstructionist
E. reactive
86. Define ethical dilemma, moral scruples, and ethics, and explain how they are related.
87. Discuss the relationship between ethics and laws.
88. Ethical beliefs change over time. Give an example of an ethical belief that may be changing in
the culture in which you presently live, and explain whether existing laws are still appropriate for
that behavior.
04-26
89. Give specific examples of stakeholders of each major type that exist in your school system.
90. In today's business world, top executives are receiving large salaries and unbelievable stock
options. Is it ethical for managers to receive these amounts? Argue both sides of this question.
91. Discuss how the community, society, and nation-state stakeholders benefit from the TOMS
Company.
92. Suppose you are an accountant for a large publicly traded company. You have discovered an
error in the financial records that makes the company look more profitable. Your manager tells you
to correct the error and reissue a financial statement for the stockholders. Which of the four
ethical rules did the manager apply to this situation? Explain the reason for your answer.
04-27
93. Describe the four rules of ethical decision making and discuss their managerial implications.
94. Identify and describe the approaches to how to be socially responsible, from the lowest to the
highest. Give an example of a real company to illustrate each.
95. What products does TOMS provide? Explain why Blake Mycoskie, the founder of TOMS, chose
to create each of these products.
96. Jackie’s computer at work was not working properly, so without permission, Jackie used her
coworker’s computer to complete some administrative tasks. While she was logged into the
coworker’s computer, Jackie noticed that her coworker was using the computer for personal use
to get emails, download files, and visit social media sites. Jackie wants to warn her coworker
about the strict rule in the department that employees cannot use company computers for
personal use, but she is hesitant to say something. Explain how this situation is an ethical
dilemma for Jackie.
04-28
97. Explain how an organization affects the prosperity of a local community. Provide an example of
a local organization that contributes to the local community.
98. Describe the results when a company makes unethical decisions and managers lead the
company with unethical behavior. Provide an example of a company that showed unethical
behavior.
99. Brandon frequently streams movies from a website that offers free programs. Brandon doesn’t
realize that the website doesn’t have permission to make the copyrighted content available and
that he is illegally using copyrighted content. Explain how this behavior could lead to a tragedy of
the commons if Brandon encourages others to stream movies from the website.
04-29
100. Describe why employees and managers choose to act unethically instead of following the
company’s code of ethics. What people are most likely to act unethically?
04-30
Chapter 04 Test Bank Key
1. Steve works in the accounting department for a large manufacturing company. His manager
instructed him to record a transaction in an incorrect manner to increase the revenue for the
fiscal year. Steve is pondering whether to report this issue to a higher-level manager. This is an
example of an ethical dilemma.
TRUE
One type of ethical dilemma is the quandary people find themselves in when they have to decide if they
should act in a way that might help another person or group and is the right thing to do, even though doing so
might go against their own self-interest.
AACSB: Ethics
Accessibility: Keyboard Navigation
Blooms: Apply
Difficulty: 2 Medium
Learning Objective: 04-01 Explain the relationship between ethics and the law.
Topic: Ethical dilemma
2. Stockholders seek to maximize the return on their investment and therefore show interest in
the ethical practices of a company.
TRUE
Stockholders are interested in how a company operates because they want to maximize the return on their
investment.
AACSB: Ethics
Blooms: Understand
Learning Objective: 04-02 Differentiate between the claims of the different stakeholder groups that are affected by
managers and their companies’ actions.
Topic: External stakeholders
04-1
3. Stakeholders benefit in the long run if companies make the right choices.
TRUE
If all companies make the right choices, all stakeholders will benefit in the long run.
AACSB: Ethics
Blooms: Understand
Learning Objective: 04-03 Describe four rules that can help companies and their managers act in ethical ways.
4. Under the moral rights rule, an ethical decision is one that distributes benefits and harms
among people and groups in an equitable way.
FALSE
Under the moral rights rule, an ethical decision is one that best maintains and protects the fundamental or
inalienable rights and privileges of the people affected by it.
AACSB: Ethics
Blooms: Remember
Difficulty: 1 Easy
04-2
5. From a moral rights perspective, managers should consider courses of action that respect the
fundamental rights of others.
TRUE
From a moral rights perspective, managers should choose the course of action that best protects and
upholds the rights of all stakeholders.
AACSB: Ethics
Blooms: Remember
Difficulty: 1 Easy
6. Decisions that managers take to protect the rights of some stakeholders often hurt the rights of
others.
TRUE
The ethical dilemma for managers is that decisions that will protect the rights of some stakeholders often
will hurt the rights of others.
AACSB: Ethics
Blooms: Understand
7. Under the justice rule, managers should determine fair rules and procedures for distributing outcomes to
stakeholders.
04-3
TRUE
The ethical dilemma for managers is to determine the fair rules and procedures for distributing outcomes to
stakeholders.
AACSB: Ethics
Blooms: Remember
Difficulty: 1 Easy
8. "An ethical decision is one that a typical person in a society would think is acceptable" is a
statement that reflects the practical rule.
TRUE
The practical rule states that an ethical decision is one that a manager has no hesitation or reluctance about
communicating to people outside the company because the typical person in a society would think it is
acceptable.
AACSB: Ethics
Blooms: Remember
Difficulty: 1 Easy
Topic: Caux principles
04-4
9. Jim is comfortable with his decision and would have no problem with people reading about it on
the front page of a morning paper. This indicates that he is following the practical rule.
TRUE
The practical rule is that an ethical decision is one that a manager has no hesitation or reluctance about
acceptable.
AACSB: Ethics
Blooms: Apply
Topic: Ethical behavior
10. When one person starts to profit by behaving unethically, it encourages other people to act in
the same way.
TRUE
The relentless pursuit of self-interest can lead to a collective disaster when one or more people start to
profit from being unethical, because this encourages other people to act in the same way.
AACSB: Ethics
Blooms: Understand
Learning Objective: 04-04 Discuss why it is important for managers to behave ethically.
04-5
11. Websites that allow free downloading of songs and movies illustrate the "tragedy of the
commons" because there is pursuit of self-interest with no consideration for societal interest.
TRUE
This is an example of digital piracy. The tragedy that would result if all people were to steal digital media
would be the disappearance of music, movie, and book companies as creative people decided there was no
point in working hard to produce original songs, stories, and so on.
AACSB: Ethics
Blooms: Understand
Topic: Utilitarian approach
12. Organizational ethics are the standards that govern how members of a profession should
conduct themselves.
FALSE
The standards that govern how members of a profession should conduct themselves are called occupational
ethics.
AACSB: Ethics
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 04-05 Identify the four main sources of managerial ethics.
Topic: Code of ethics
04-6
13. Organizational ethics are the way a company's managers view their duty to make decisions
that enhance the well-being of stakeholders.
TRUE
Organizational ethics are the guiding practices and beliefs through which a particular company and its
managers view their responsibility toward their stakeholders.
AACSB: Ethics
Blooms: Remember
Difficulty: 1 Easy
Topic: Corporate social responsibility
14. People typically confront ethical issues when weighing their personal interests against the
effects of their actions on others.
TRUE
People typically confront ethical issues when weighing their personal interests against the effects of their
actions on others.
AACSB: Ethics
Blooms: Remember
Difficulty: 1 Easy
04-7
15. If a company's top managers consistently endorse the ethical principles in its corporate credo,
they can prevent employees from going astray.
TRUE
If a company's top managers consistently endorse the ethical principles in its corporate credo, they can
prevent employees from going astray.
AACSB: Ethics
Blooms: Remember
Difficulty: 1 Easy
16. Dianna has witnessed her manager harassing a coworker on multiple occasions. Dianna knows
that she should report the incidents to a superior manager, but she is hesitant to report the
inappropriate behavior because she thinks she could lose her job. This example illustrates a(n)
A. justice rule.
B. ethical dilemma.
C. moral dilemma.
D. utilitarian rule.
E. moral rights rule.
An ethical dilemma is the quandary people find themselves in when they have to decide if they should act in
a way that might help another person or group and is the right thing to do, even though doing so might go
against their own self-interest.
AACSB: Ethics
Blooms: Apply
Difficulty: 3 Hard
04-8
17. _____ are the moral principles and beliefs about what is the right or appropriate way to behave.
A. Societal norms
B. Laws and regulations
C. Ethics
D. Values and norms
E. Individual values
Ethics are the inner guiding moral principles, values, and beliefs that people use to analyze or interpret a
situation and then decide what is the right or appropriate way to behave.
AACSB: Ethics
Blooms: Remember
Difficulty: 1 Easy
18. _____ are thoughts and feelings that tell people what is right or wrong.
A. Moral scruples
B. Ethical dilemmas
C. Practical rules
D. Norms
E. Individual rights
Moral scruples are thoughts and feelings that tell a person what is right or wrong; they are a part of a
person's ethics.
AACSB: Ethics
Blooms: Remember
Difficulty: 1 Easy
04-9
19. Which of the following statements is true about ethics?
A. Ethics and laws are fixed principles.

B. Ethical beliefs remain constant as time passes.
C. Laws change to reflect the changing ethical beliefs of a society.
D. Absolute and indisputable rules and principles can be developed to decide whether an action is
ethical or unethical.
E. Ethics evolve over time, but laws related to ethical beliefs remain constant.
Laws change to reflect the changing ethical beliefs of a society.
AACSB: Ethics
Blooms: Understand
20. Which of the following statements is true about stockholders?
A. They are often regarded as the most critical stakeholder group because if a company cannot
attract them to buy its products, it cannot stay in business.
B. They are least interested in the company's profits.
C. They bear the responsibility to decide which goals an organization should pursue to most
benefit stakeholders and how to make the most efficient use of resources to achieve those goals.
D. They are responsible for using a company's financial, capital, and human resources to increase
its performance and thus its stock price.
E. They have a claim on a company because when they buy its stock or shares, they become its
owners.
Stockholders have a claim on a company because when they buy its stock or shares, they become its
owners.
AACSB: Ethics
Blooms: Understand
04-10
21. _____ watch the company and its managers closely to ensure that management is working
A. Community members
B. Suppliers
C. Stockholders
D. Customers
E. Distributors
investment. Thus, they watch the company and its managers closely to ensure that management is working
AACSB: Ethics
Blooms: Remember
Difficulty: 1 Easy
22. _____ have the right to expect a good return or reward by investing their human capital to
improve a company's performance.
A. Customers
B. Distributors
C. Suppliers
D. Distributors
E. Managers
Managers have a claim on an organization because they bring to it their skills, expertise, and experience.
They have the right to expect a good return or reward by investing their human capital to improve a
company's performance.
AACSB: Ethics
Blooms: Remember
Difficulty: 1 Easy
Topic: Internal stakeholders
04-11
23. _____ have a claim on an organization because they bring to it their skills, expertise, and
experience.
A. Customers
B. Distributors
C. Suppliers
D. Local communities
E. Managers
Managers have a claim on an organization because they bring to it their skills, expertise, and experience.
AACSB: Ethics
Blooms: Remember
Difficulty: 1 Easy
24. ______ are the stakeholder group with the most responsibility for deciding the goals of the
organization.
A. Stockholders
B. Customers
C. Managers
D. Operational-level employees
E. Consultants
Managers are the stakeholder group that bears the responsibility to decide which goals an organization
should pursue to most benefit stakeholders and how to make the most efficient use of resources to achieve
those goals.
AACSB: Ethics
Blooms: Remember
Difficulty: 1 Easy
25. _____ are frequently in the position of having to juggle the interests of different stakeholders,
including themselves.
04-12
A. Stockholders
B. Customers
C. Contractors
D. Managers
E. Suppliers
Managers are the stakeholder group that bears the responsibility to decide which goals an organization
should pursue to most benefit stakeholders and how to make the most efficient use of resources to achieve
those goals. In making such decisions, managers are frequently in the position of having to juggle the
interests of different stakeholders, including themselves.
AACSB: Ethics
Blooms: Remember
Difficulty: 1 Easy
26. Which of the following is a method by which a company can act ethically toward employees
and meet their expectations?
A. by improving their products over time and providing guarantees to customers about the
integrity of their products
B. by selling customers quality products at a fair price and providing good after-sales service.
C. by maximizing the stockholders' return on investments
D. by creating an occupational structure that fairly and equitably rewards organization members
for their contributions
E. by implementing a high power distance culture and discouraging decentralized decision making
One principal way that a company can act ethically toward employees and meet their expectations is by
creating an occupational structure that fairly and equitably rewards employees for their contributions.
AACSB: Ethics
Blooms: Understand
04-13
27. Simon was confronted with a serious ethical dilemma. He responded with a solution that
created the greatest good for the greatest number of people. Which ethical rule best describes his
response?
A. justice
B. moral rights
C. utilitarian
D. practical
E. moral scruples
The utilitarian rule is that an ethical decision is a decision that produces the greatest good for the greatest
number of people.
AACSB: Ethics
Blooms: Apply
Difficulty: 1 Easy
28. Which of the following statements is true of ethical decision making?
A. Customers are often regarded as the least important stakeholder group.

B. Communities, societies, and nations are independent of the effects of the decisions made by
companies.
C. The failure of a company can have catastrophic effects on a community since a general decline
in business activity can affect a whole nation.
D. The results of ethical behavior are loss of reputation and resources, and skilled managers and
employees leaving the company.
E. When making business decisions, managers must exclusively consider the claims of
stockholders.The failure of a company can have catastrophic effects on a community since a general
decline in business activity can affect a whole nation.
AACSB: Ethics
Blooms: Understand
04-14
29. The utilitarian rule states that an ethical decision is a decision that

C. distributes benefits and harms in an impartial manner.
E. increases the financial effectiveness of the organization.
The utilitarian rule states that an ethical decision is a decision that produces the greatest good for the
greatest number of people.
AACSB: Ethics
Blooms: Remember
Difficulty: 1 Easy
30. Under the _____ rule, an ethical decision is one that best maintains people's fundamental
privileges.
A. justice
B. moral rights
C. utilitarian
D. practical
E. moral scruples
AACSB: Ethics
Blooms: Remember
Difficulty: 1 Easy
04-15
31. The _____ rule is that an ethical decision is one that distributes rewards and harms in a fair
way.
A. justice
B. moral rights
C. utilitarian
D. practical
E. moral scruples
The justice rule is that an ethical decision distributes benefits and harms among people and groups in a fair,
equitable, or impartial way.
AACSB: Ethics
Blooms: Remember
Difficulty: 1 Easy
Topic: Justice approach
32. When Bob was calculating the yearly bonuses for his employees, he paid particular attention
to the individual employee scores to ensure that they were based on performance and not
favoritism. Which ethical rule was Bob following?
A. practical
B. moral scruples
C. utilitarian
D. justice
E. moral rights
AACSB: Ethics
Blooms: Apply
04-16
33. Under the practical rule, a manager would not be reluctant to communicate a decision to
people outside the company when
A. the decision, although unethical, would increase shareholders' wealth.

B. a typical person would consider the decision acceptable.
C. a typical person wouldn't care about the decision.
D. a typical person would be unaware of the harmful implications of the decision.
E. he/she could blame the top management of the firm.
acceptable.
AACSB: Ethics
Blooms: Remember
Topic: Ethical climate
34. The practical rule states that an ethical decision is one that

C. distributes benefits and harms in a fair way.
E. is relevant to the financial effectiveness of the organization.
acceptable.
AACSB: Ethics
Blooms: Remember
Difficulty: 1 Easy
04-17
35. Samantha made some changes in the production process to make sure employees could
perform tasks without endangering their health and safety. Samantha was employing the moral
rights rule to
A. seek to protect the rights and privileges of people affected.

B. maximize the greatest good for the greatest number of people.
C. distribute benefits in fair ways, but ignore harm.
D. hesitate to communicate to people outside the company for fear of them criticizing her
decision.
E. randomly distribute harms and benefits.
AACSB: Ethics
Blooms: Apply
36. One managerial implication of the justice model is that managers should base their decisions
on
A. the effects the decision can have on stakeholders' rights.

B. what provides maximum profits to the company.
C. whatever promotes a fair distribution of outcomes.
D. the personal situation of employees.
E. the greatest good for the greatest number of people.
AACSB: Ethics
Blooms: Remember
37. Which of the following statements is true of the practical rule of ethical decision making?
04-18
A. This rule emphasizes distributing benefits and harms in an equitable way.
B. This rule states that it is acceptable for a company to choose an unethical action if the action
provides the greatest good for the greatest number of people.
C. This rule requires managers to determine the fair or unfair rules and procedures for distributing
D. This rule states that an ethical decision is one that a manager will be hesitant or reluctant to
communicate to people outside the company because the typical person in a society would think
it is unacceptable.
E. This rule ensures that managers will take into account the interests of all the stakeholders.
Applying the practical rule to analyze a business decision ensures that managers are taking into account the
interests of all stakeholders.
AACSB: Ethics
Blooms: Understand
38. Some websites offer free streaming and downloading of movies, games, and music. Websites
like these demonstrate that the pursuit of self-interest can lead to a collective disaster when one
or more people start to profit from being unethical because this encourages other people to act in
the same way. This exemplifies a situation known as the
A. moral dilemma.
B. "tragedy of the commons."
C. ethical dilemma.
D. credo.
E. war of attrition.
This situation is an example of “tragedy of the commons.” The tragedy that would result if all people were to
steal digital media would be the disappearance of music, movie, and book companies as creative people
decided there was no point in working hard to produce original songs, stories, and so on.
AACSB: Ethics
Blooms: Apply
04-19
39. ________ is the idea that the pursuit of self-interest with no consideration for societal interests
leads to disaster.
A. The "tragedy of the commons"

B. The ethical dilemma
C. The moral dilemma
D. The "credo"
E. The concept of individual ethics
The "tragedy of the commons" is the idea that the pursuit of self-interest with no consideration for societal
interests leads to disaster.
AACSB: Ethics
Blooms: Remember
Difficulty: 1 Easy
40. ______ is a person's confidence and faith in another person's goodwill.
A. Trust
B. Reputation
D. Moral standing
E. Emotional value
Trust is the willingness of one person or group to have faith or confidence in the goodwill of another person,
even though this puts them at risk.
AACSB: Ethics
Blooms: Remember
Difficulty: 1 Easy
04-20
41. _______ is the esteem or high repute that individuals or organizations gain when they behave
ethically.
A. Trust
B. Reputation
D. Moral standing
E. Emotional value
Reputation, the esteem or high repute that people or organizations gain when they behave ethically, is an
important asset.
AACSB: Ethics
Blooms: Remember
Difficulty: 1 Easy
42. Unethical behavior
A. reduces a company's inefficiency.

B. decreases a company's ineffectiveness.
C. reduces a company's performance.
D. increases the national standard of living.
E. increases national well-being and prosperity.
Unethical behavior reduces a company's performance.
AACSB: Ethics
Blooms: Remember
Difficulty: 1 Easy
04-21
43. ______ ethics are the standards that govern how members of a society should deal with one
another in matters involving issues such as fairness, justice, poverty, and individual rights.
A. Societal
B. Occupational
C. Individual
D. Organizational
E. Governmental
Standards that govern how members of a society should deal with one another in matters involving issues
such as fairness, justice, poverty, and individual rights are called societal ethics.
AACSB: Ethics
Blooms: Remember
44. Bob gave a talk to his employees about standards that govern how members of their
profession should conduct themselves. He was talking about ______ ethics.
A. societal
B. occupational
C. individual
D. organizational
E. governmental
The standards that govern how members of a profession should conduct themselves when performing work-
related activities are called occupational ethics.
AACSB: Ethics
Blooms: Apply
Difficulty: 3 Hard
04-22
45. After a lengthy investigation, Larry lost his license to practice law on charges of accepting
bribes. In all likelihood, Larry probably violated his _____ ethics.
A. environmental
B. occupational
C. individual
D. organizational
E. governmental
The standards that govern how members of a profession should conduct themselves are called occupational
ethics.
AACSB: Ethics
Blooms: Apply
Difficulty: 3 Hard
46. When faced with an ethical dilemma as a manager, Sam tries to reflect on his upbringing to
decide between right and wrong. Sam is reflecting on ______ ethics.
A. societal
B. occupational
C. individual
D. organizational
E. religious
Standards that determine how people view their responsibilities to others and how they should act in
situations when their own self-interest is at stake are called individual ethics. Sources of individual ethics
include the influence of one's family, peers, and upbringing in general.
AACSB: Ethics
Blooms: Apply
04-23
47. ______ ethics are standards that determine how people view their responsibilities to others and
how they should act in situations when their own self-interest is at stake.
A. Societal
B. Occupational
C. Individual
D. Organizational
E. Governmental
Standards that determine how people view their responsibilities to others and how they should act in
situations when their own self-interest is at stake are called individual ethics.
AACSB: Ethics
Blooms: Remember
Difficulty: 1 Easy
48. Which of the following is least likely to be a source of individual ethics?
A. family
B. friends
C. church
D. teachers
E. supervisors
Sources of individual ethics include the influence of one's family, peers, and upbringing in general.
AACSB: Ethics
Blooms: Remember
Difficulty: 1 Easy
49. ______ ethics are the guiding practices and beliefs through which a particular firm and its
managers view their responsibilities to stakeholders.
04-24
A. Societal
B. Occupational
C. Individual
D. Organizational
E. Governmental
The guiding practices and beliefs through which a particular firm and its managers view their responsibilities
to stakeholders are called organizational ethics.
AACSB: Ethics
Blooms: Remember
Difficulty: 1 Easy
50. Which of the following stakeholder group's individual ethics are important in shaping the
organizational code of ethics?
A. employees
B. customers
C. community
D. founders
E. stockholders
The individual ethics of a company's founders and top managers are especially important in shaping the
organization's code of ethics.
AACSB: Ethics
Blooms: Remember
Difficulty: 1 Easy
04-25
51. Which of the following statements is true of organizational ethics?
A. Employees are much more likely to act unethically when a credo exists.
B. Employees are more likely to act unethically when the company's top managers consistently
endorse the ethical principles in its corporate credo.
C. Top managers play the least important role in determining a company's ethics.
D. The individual ethics of a company's founders and top managers are especially important in
shaping the organization's code of ethics.
E. They are standards that govern how members of a profession, trade, or craft should conduct
themselves when performing work-related activities.
The individual ethics of a company's founders and top managers are especially important in shaping the
organization's code of ethics.
AACSB: Ethics
Blooms: Understand
52. Which of the following approaches to a commitment to social responsibility is characterized

by low levels of socially responsible behavior?
A. accommodative
B. proactive
C. defensive
D. obstructionist
E. obligatory
At the low end of the social responsibility range is an obstructionist approach, in which companies and their
managers choose not to behave in a socially responsible way.
AACSB: Ethics
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 04-06 Distinguish among the four main approaches toward social responsibility that a company can
take.
04-26
53. The managers of Lehman Brothers, whose bankruptcy helped propel the 2008–2009 financial
crisis, used loopholes in U.K. law to hide billions of dollars of worthless assets in its balance sheet
to disguise its poor financial condition. Which of the following approaches to how to be socially
responsible is illustrated from this example?
A. accommodative
B. proactive
C. defensive
D. obstructionist
E. obligatory
AACSB: Ethics
Blooms: Apply
take.
54. Managers at Enron prevented employees from selling Enron shares in their pension funds while
they sold hundreds of millions of dollars' worth of their own Enron stock. This illustrates the_____
approach to social responsibility.
A. accommodative
B. proactive
C. defensive
D. obstructionist
E. offensive
Top managers at Enron acted in an obstructionist way when they prevented employees from selling Enron
shares in their pension funds while they sold hundreds of millions of dollars' worth of their own Enron stock.
AACSB: Ethics
Blooms: Apply
take.
04-27
55. Managers who sell their stock in advance of other stockholders because they know that their
company's performance is about to fall demonstrate the _____ approach to social responsibility.
A. accommodative
B. proactive
C. defensive
D. obstructionist
E. reactive
Defensive companies and managers stay within the law and abide strictly by legal requirements but make no
attempt to exercise social responsibility beyond what the law dictates; thus they can and often do act
unethically. These managers are the kind who sell their stock in advance of other stockholders because they
know their company's performance is about to fall.
AACSB: Ethics
Blooms: Remember
Difficulty: 1 Easy
take.
56. Which of the following approaches is characterized by the highest degree of social
responsibility?
A. accommodative
B. proactive
C. defensive
D. obstructionist
E. offensive
See Figure 4.6. A proactive approach is the approach with the highest social responsibility.
AACSB: Ethics
Blooms: Remember
Difficulty: 1 Easy
take.
04-28
57. When tobacco companies sought to hide evidence that cigarette smoking causes lung cancer,
they were exhibiting a(n) _____ approach to social responsibility.
A. accommodative
B. proactive
C. defensive
D. obstructionist
E. offensive
AACSB: Ethics
Blooms: Understand
take.
58. A company that expects its managers to behave ethically to the degree that they stay within
the law is acting with a(n) _____ approach.
A. accommodative
B. proactive
C. defensive
D. obstructionist
E. offensive
attempt to exercise social responsibility beyond what the law dictates.
AACSB: Ethics
Blooms: Remember
Difficulty: 1 Easy
take.
04-29
59. WorldCom gave managers stock options and bonuses even when the company performance
was declining, and managers sold their stock in advance of other stockholders. This illustrates
the_____ approach.
A. accommodative
B. proactive
C. defensive
D. obstructionist
E. offensive
attempt to exercise social responsibility beyond what the law dictates.
AACSB: Ethics
Blooms: Apply
take.
60. According to the_____ approach, companies and their managers behave legally and ethically
and try to balance the interests of different stakeholders as the need arises.
A. accommodative
B. proactive
C. defensive
D. obstructionist
E. offensive
An accommodative approach acknowledges the need to support social responsibility. Accommodative
companies and managers agree that organization members ought to behave legally and ethically, and they
try to balance the interests of different stakeholders so the claims of stockholders are seen in relation to the
claims of other stakeholders.
AACSB: Ethics
Blooms: Remember
Difficulty: 1 Easy
take.
04-30
61. The president at Protector's Insurance takes pride in the fact that his organization strives to
behave legally and ethically. The company advocates an approach that tries to balance the
interests of different stakeholders in relation to the claims of other stakeholders. What approach
to social responsibility is the organization implementing?
A. accommodative
B. proactive
C. defensive
D. obstructionist
E. offensive
An accommodative approach acknowledges the need to support social responsibility. Accommodative
companies and managers agree that organization members ought to behave legally and ethically, and they
try to balance the interests of different stakeholders so the claims of stockholders are seen in relation to the
claims of other stakeholders.
AACSB: Ethics
Blooms: Apply
Difficulty: 1 Easy
take.
62. The _______ approach to social responsibility is most likely to be taken by a typical large U.S.
company.
A. accommodative
B. proactive
C. defensive
D. obstructionist
E. offensive
The accommodative approach is the one taken by the typical large U.S. company, which has the most to lose
from unethical or illegal behavior.
AACSB: Ethics
Blooms: Remember
Difficulty: 1 Easy
take.
04-31
63. Companies that go out of their way to learn about the needs of different stakeholders and use
organizational resources to promote their interests are using the _____ approach.
A. accommodative
B. proactive
C. defensive
D. obstructionist
E. offensive
Companies and managers taking a proactive approach actively embrace the need to behave in socially
responsible ways.
AACSB: Ethics
Blooms: Remember
Difficulty: 1 Easy
take.
64. Companies that use the _______ approach are often at the forefront of campaigns for causes
such as a pollution-free environment; recycling and conservation of resources; the minimization or
elimination of the use of animals in drug and cosmetics testing; and the reduction of crime,
illiteracy, and poverty.
A. accommodative
B. defensive
C. reactive
D. proactive
E. obstructionist
Proactive companies are often at the forefront of campaigns for causes such as a pollution-free environment;
recycling and conservation of resources; the minimization or elimination of the use of animals in drug and
cosmetics testing; and the reduction of crime, illiteracy, and poverty.
AACSB: Ethics
Blooms: Remember
Difficulty: 1 Easy
take.
04-32
65. Which approach to social responsibility is being implemented by a company that actively
embraces the need to behave in socially responsible ways?
A. proactive
B. accommodative
C. obstructionist
D. defensive
E. assertive
Companies and managers taking a proactive approach actively embrace the need to behave in socially
responsible ways.
AACSB: Ethics
Blooms: Remember
Difficulty: 1 Easy
take.
66. The _____ has organization-wide authority. Hence, organization members in any department can
communicate instances of unethical behavior by their managers or coworkers without fear of
retribution.
A. manager
B. stakeholder
C. stockholder
D. nation
Because the ethics ombudsperson has organization-wide authority, organization members in any department
can communicate instances of unethical behavior by their managers or coworkers without fear of retribution.
AACSB: Ethics
Blooms: Remember
Difficulty: 1 Easy
take.
04-33
67. A(n) ________ is a manager responsible for communicating and teaching ethical standards to all
employees and monitoring their conformity to those standards.
A. ethics director
B. ethics manager
C. ethics interpreter
D. ethics ombudsperson
E. stockholder
The ethics ombudsperson is responsible for communicating ethical standards to all employees, designing
systems to monitor employees' conformity to those standards, and teaching managers and employees at all
levels of the organization how to respond to ethical dilemmas appropriately.
AACSB: Ethics
Blooms: Remember
Difficulty: 1 Easy
take.
68. _____ can provide guidance when organization members are uncertain about whether an action
is ethical.
A. The communications manager

B. An ethics philosopher
C. The ethics ombudsperson
D. The personnel manager
E. The accommodative manager
The ethics ombudsperson can provide guidance when organization members are uncertain about whether an
action is ethical.
AACSB: Ethics
Blooms: Remember
Difficulty: 1 Easy
take.
04-34
69. Which of the following statements is true about the role of organizational culture?
A. The limited authority of ethics ombudsperson restricts organization members in any

department to communicate instances of unethical behavior by their managers or coworkers for
fear of retribution.
B. Ethics ombudspeople can provide guidance when organization members are uncertain about
whether an action is ethical.
C. If top managers are perceived as being self-interested and not ethical, their subordinates are
more likely to behave in an ethical manner.
D. When ethical values and norms are part of an organization's culture, they help organization
members focus mainly on self-interested action.
E. The actions of top managers such as CEOs are seldom scrutinized for ethical improprieties, as
their actions are independent of the values of their organizations.
Ethics ombudspeople can provide guidance when organization members are uncertain about whether an
action is ethical.
AACSB: Ethics
Blooms: Understand
take.
70. David is trying to provide a visible means of support to develop an ethical culture in his
company. He can do so by creating
A. an ethics ombudsperson position.
B. ethical beliefs that remain rigidly constant.
C. strict leadership rules for the top management.
D. a plan for minimum compensation benefits.
E. a strong HR team.
Managers can provide a visible means of support to develop an ethical culture. Increasingly, organizations
are creating the role of ethics officer, or ethics ombudsperson, to monitor their ethical practices and
procedures.
AACSB: Ethics
Blooms: Apply
take.
04-35
71. Demonstrating its social responsibility helps a company build a good
A. infrastructure.
B. production unit.
D. reputation.
E. organizational hierarchy.
Several advantages result when companies and their managers behave in a socially responsible manner.
First, demonstrating its social responsibility helps a company build a good reputation.
AACSB: Ethics
Blooms: Remember
Difficulty: 1 Easy
take.
72. _____ encourage employees to behave in a socially responsible manner.
A. Stakeholder claims
B. Conflicting interpersonal relations
C. Tougher selection processes
D. Ethical organizational cultures
E. High compensation benefits
Ethical organizational cultures encourage organization members to behave in a socially responsible manner.
AACSB: Ethics
Blooms: Remember
Difficulty: 1 Easy
take.
04-36
73. Bryan is the manager of a company which has been judged as having the best corporate
reputation for two years in a row, based on a survey of countrywide consumers. This company is
well known for its
A. compensation benefits.
B. ethical culture.
D. goal-setting process.
E. strong leadership.
Demonstrating social responsibility helps a company build a good reputation.
AACSB: Ethics
Blooms: Apply
take.
74. Phil has noticed that his operations manager has been practicing unethical means to reap
personal benefits at the expense of the company's customers. He will most likely approach the
_____ to report the matter without fear of retribution.
A. CEO
B. HR manager
C. consumer court
D. legal advisor
Because the ethics ombudsperson has organization-wide authority, organization members in any department
can communicate instances of unethical behavior by their managers or coworkers without fear of retribution.
This arrangement makes it easier for everyone to behave ethically.
AACSB: Ethics
Blooms: Apply
Difficulty: 3 Hard
take.
04-37
75. Robert and his HR team have adapted several existing company policies. He is unsure if all
these policies can be implemented on ethical grounds. His team can approach a(n) _____ to resolve
the matter.
A. consumer court
B. legal advisor
C. ethics ombudsperson
D. HR manager
E. ethical philosopher
Ethics ombudspeople can provide guidance when organization members are uncertain about whether an
action is ethical.
AACSB: Ethics
Blooms: Apply
Difficulty: 3 Hard
take.
76. Bank of America’s plan to reduce the workforce in its consumer banking unit by thousands
will
A. have a negative effect on managers.

B. result in a gain in company assets.
C. take a heavy toll on individual workers and local communities.
D. have a positive effect on individual workers and local communities.
E. take a heavy toll on stockholders.
Bank of America’s plan to reduce the workforce in its consumer banking unit by thousands will take a heavy
toll on individual workers and local communities. Layoff decisions affect workers, their families, and local
communities.
AACSB: Ethics
Blooms: Apply
04-38
77. In 2016, the average pay for a CEO was
A. $8.5 million.
B. $7.5 million.
C. $10.8 million.
D. $11.1 million.
E. $9.8 million.
In 2016, the median CEO compensation was $10.8 million.
AACSB: Ethics
Blooms: Remember
Difficulty: 1 Easy
78. Tiffany & Co. has a deep moral commitment to act responsibly in its sourcing of precious
metals and gemstones. This is an example of ______ ethics.
A. societal
B. individual
C. organizational
D. occupational
E. governmental
One issue for societal ethics is how an organization uses the resources of another country. Tiffany & Co. has
a stated commitment to “obtaining precious metals and gemstones and crafting our jewelry in ways that are
socially and environmentally responsible.”
AACSB: Ethics
Blooms: Apply
79. Paul works in the billing department for a medical center. He reports to his manager that
some patients’ bills include additional fees for which they should not be charged. His manager
tells him to ignore the issue and keep processing the bills. This is an example of a(n) ______
approach.
04-39
A. defensive
B. accommodative
C. reactive
D. obstructionist
E. proactive
Paul's manager is exhibiting an obstructionist approach to business ethics.
AACSB: Ethics
Blooms: Apply
Difficulty: 1 Easy
take.
80. Nancy wants to report some unethical behavior among colleagues in her department, but she
doesn’t want to her colleagues to know she is the whistle-blower. Nancy should talk to
A. her manager.
B. the ethics manager.
C. the ethics ombudsperson.
D. the ethics philosopher.
E. the ethics interpreter.
Ethics ombudspeople can provide guidance when organizational members are uncertain about whether an
action is ethical.
AACSB: Ethics
Blooms: Apply
take.
04-40
81. Stockholders are interested in how a company operates because
A. they are responsible for the organization’s capital resources.

B. they are responsible for the organization’s financial resources.
C. they want to maximize the return on their investment.
D. they provide input for the goals of the organization.
E. they want to make sure the organization makes the most efficient use of resources.
investment.
AACSB: Ethics
Blooms: Apply
Difficulty: 3 Hard
take.
82. The board and top managers of a nonprofit organization have considerable latitude to decide
how they will spend the organization’s resources because
A. they are a private foundation.

B. the organization does not have stockholders.
C. they are typically small organizations.
D. they receive contributions and government grants.
E. all monies earned are pumped back into the business.
For-profit organizations are required by law to provide detailed reports of their operations to their
shareholders. Nonprofit organizations do not have stockholders, and therefore the laws for governing
disclosure are far weaker.
AACSB: Ethics
Blooms: Apply
Difficulty: 3 Hard
take.
04-41
83. The _____ stakeholder group is considered to be the most critical.
A. managers
B. employees
C. customers
D. stockholders
E. suppliers
The customer stakeholder group is often regarded as the most critical stakeholder group because if a
company cannot attract them to buy its products, it cannot stay in business.
AACSB: Ethics
Blooms: Understand
84. The influence of one’s family, peers, and upbringing in general can affect a person’s ________
ethics.
A. occupational
B. organizational
C. societal
D. business
E. individual
Sources of individual ethics include the influence of one’s family, peers, and upbringing in general.
AACSB: Ethics
Blooms: Understand
85. Companies and managers that take a(n) _____ approach go out of their way to learn about the
needs of different stakeholder groups.
04-42
A. accommodative
B. defensive
C. proactive
D. obstructionist
E. reactive
Companies and their managers that take a proactive approach actively embrace socially responsible
behavior, going out of their way to learn about the needs of different stakeholder groups and using
organizational resources to promote the interest of all stakeholders.
AACSB: Ethics
Blooms: Apply
Difficulty: 3 Hard
take.
86. Define ethical dilemma, moral scruples, and ethics, and explain how they are related.
An ethical dilemma is the quandary people find themselves in when they have to decide if they
should act in a way that might help another person or group and is the right thing to do, even
though doing so might go against their own self-interest. Moral scruples are thoughts and feelings
that tell a person what is right or wrong; they are part of a person's ethics. Ethics are the inner
guiding moral principles, values, and beliefs that people use to analyze or interpret a situation and
then decide what is the right or appropriate way to behave. Ethics also indicate what is in
appropriate behavior and how a person should behave to avoid harming another person. People
often know they are confronting an ethical dilemma when their moral scruples come into play; and
they use ethics to analyze or interpret a situation and then decide what is the right or appropriate
way to behave.
AACSB: Ethics
Blooms: Apply
Difficulty: 1 Easy
04-43
87. Discuss the relationship between ethics and laws.
Neither laws nor ethics are fixed principles that do not change over time. Ethical beliefs change
as time passes; and as they do so, laws change to reflect the changing ethical beliefs of a society.
While ethical beliefs lead to the development of laws and regulations to prevent certain behaviors
or encourage others, laws themselves change or even disappear as ethical beliefs change. Thus
both ethical and legal rules are relative: No absolute or unvarying standards exist to determine
how individuals should behave, and they are caught up in moral dilemmas all the time. Because of
this, individuals have to make ethical choices.
AACSB: Ethics
Blooms: Understand
88. Ethical beliefs change over time. Give an example of an ethical belief that may be changing in
the culture in which you presently live, and explain whether existing laws are still appropriate for
that behavior.
Ethical beliefs change because ethics are relative. That is, no absolute or unvarying standards
exist to determine how we should behave. Students' examples will vary.
AACSB: Ethics
Blooms: Apply
04-44
89. Give specific examples of stakeholders of each major type that exist in your school system.
The major types of stakeholders are employees (teachers, staff, administrators, etc.), suppliers
(for a college, high schools and junior colleges; for a high school, middle and elementary schools;
also, book publishers and other suppliers of physical goods), stockholders (for public schools,
these would be citizens), managers (deans, principals, other administrators), customers (students,
potential employers), and community (local town, state, nation).
AACSB: Ethics
Blooms: Apply
90. In today's business world, top executives are receiving large salaries and unbelievable stock
options. Is it ethical for managers to receive these amounts? Argue both sides of this question.
Some people feel these large amounts are warranted, based on the important role these managers
play in building a company's capital and wealth. Others feel that the money these executives
receive is excessive and detracts from money that might have gone to other stakeholders in the
form of dividends to stockholders, increased wages and benefits to employees, or lower prices to
customers.
AACSB: Ethics
Blooms: Evaluate
Difficulty: 3 Hard
04-45
91. Discuss how the community, society, and nation-state stakeholders benefit from the TOMS
Company.
For every pair of shoes purchased, TOMS gives a pair of new shoes to a person in need. For every
pair of sunglasses and optical frames purchased, TOMS donates a pair of glasses. For every bag of
coffee purchased, TOMS donates one week of water to one person. For each backpack sold, TOMS
gives a donation to its social partners to help provide training for school staff and crisis
counselors to help prevent and respond to instances of bullying.
AACSB: Ethics
Blooms: Apply
92. Suppose you are an accountant for a large publicly traded company. You have discovered an
error in the financial records that makes the company look more profitable. Your manager tells you
to correct the error and reissue a financial statement for the stockholders. Which of the four
ethical rules did the manager apply to this situation? Explain the reason for your answer.
The manager applied the practical rule, which states that an ethical decision is one that a
manager has no hesitation or reluctance about communicating to people outside the company
because the typical person in a society would think it is acceptable. The manager’s decision was
within the accepted values or standards that typically apply in business activity, and the manager
was willing to communicate his/her decision to all people and groups affected by it.
AACSB: Ethics
Blooms: Apply
Difficulty: 3 Hard
04-46
93. Describe the four rules of ethical decision making and discuss their managerial implications.
The four rules of ethical decision making are utilitarian, moral rights, justice, and practical. The
utilitarian model proposes that decisions should favor the greatest good for the greatest number
of people. Under this model, a manager should choose the course of action that provides the most
benefits and the least harm. The moral rights model proposes that decisions should protect the
basic rights and privileges of people affected by the decision. In this model, the manager would
compare alternatives based on their effects on stakeholders' rights. The justice model focuses on
decisions that distribute benefits and harms among people in an equitable way. Under this
philosophy, managers should compare courses of action based on the fairness of distribution of
outcomes. The practical model suggests that an ethical decision is one that a manager has no
hesitation about communicating to people outside the company because the typical person in a
society would think it is acceptable.
AACSB: Ethics
Blooms: Understand
94. Identify and describe the approaches to how to be socially responsible, from the lowest to the
highest. Give an example of a real company to illustrate each.
1. The obstructionist approach is one in which companies choose not to behave in

socially responsible ways and behave unethically and illegally.
2. The defensive approach is one in which companies behave ethically to the degree
that they stay within the law.
3. The accommodative approach is one in which companies behave legally and

ethically and try to balance the interests of different stakeholders as the need arises.
04-47
4. The proactive approach is one in which companies actively embrace socially
responsible behavior, going out of their way to learn about the needs of stakeholders and
using organizational resources to promote their interests.
Students' examples of real companies that illustrate each approach will vary.
AACSB: Ethics
Blooms: Understand
take.
95. What products does TOMS provide? Explain why Blake Mycoskie, the founder of TOMS, chose
to create each of these products.
TOMS sells shoes, sunglasses and optical frames, coffee, and Standup backpacks. Mycoskie
chose the products he would create based on global needs. When he traveled in Argentina he saw
that many children had no shoes, so he created and started selling shoes. He identified vision as a
global need, so he created and started selling sunglasses and optical frames. When he identified
clean drinking water as a global need, he went into the coffee business and sold coffee beans. He
also identified bullying as a social need, so he created and started selling Standup backpacks.
AACSB: Ethics
Blooms: Apply
04-48
96. Jackie’s computer at work was not working properly, so without permission, Jackie used her
coworker’s computer to complete some administrative tasks. While she was logged into the
coworker’s computer, Jackie noticed that her coworker was using the computer for personal use
to get emails, download files, and visit social media sites. Jackie wants to warn her coworker
about the strict rule in the department that employees cannot use company computers for
personal use, but she is hesitant to say something. Explain how this situation is an ethical
dilemma for Jackie.
An ethical dilemma is the quandary people find themselves in when they have to decide if they
should act in a way that might help another person or group and is the right thing to do, even
though doing so might go against their own self-interest. Jackie wants to give her coworker
advice, but then she will also have to confess to her coworker that she used her coworker’s
computer without permission.
AACSB: Ethics
Bloom's: Analyze
97. Explain how an organization affects the prosperity of a local community. Provide an example of
a local organization that contributes to the local community.
Through the salaries, wages, and taxes it pays, a company contributes to the economy of its town
or region and often determines whether the community prospers or declines. Examples provided
by the student will vary.
AACSB: Ethics
Bloom's: Analyze
04-49
98. Describe the results when a company makes unethical decisions and managers lead the
company with unethical behavior. Provide an example of a company that showed unethical
behavior.
The results of unethical behavior are loss of reputation and resources, shareholders selling their
shares, skilled managers and employees leaving the company, and customers turning to the
products of more reputable companies. Enron, WorldCom, Tyco, and Siemens are examples of
companies that repeatedly engaged in unethical and illegal business activities. Examples provided
by the student will vary.
AACSB: Ethics
Blooms: Apply
99. Brandon frequently streams movies from a website that offers free programs. Brandon doesn’t
realize that the website doesn’t have permission to make the copyrighted content available and
that he is illegally using copyrighted content. Explain how this behavior could lead to a tragedy of
the commons if Brandon encourages others to stream movies from the website.
This is an example of digital piracy, which is a continuous problem that undermines many
corporate sectors, such as the movie, music, gaming, and software industries. The tragedy that
would result if all people were to steal digital media would be the disappearance of music, movie,
and book companies as creative people decided there was no point in working hard to produce
original songs, stories, and so on.
AACSB: Ethics
Blooms: Apply
04-50
100. Describe why employees and managers choose to act unethically instead of following the
company’s code of ethics. What people are most likely to act unethically?
Managers or workers may behave unethically if they feel pressured to do so by the situation they
are in and by unethical top managers. Research seems to suggest that people who realize they
have the most at stake in a career sense or a monetary sense are the ones most likely to act
unethically.
AACSB: Ethics
Blooms: Remember
Difficulty: 1 Easy
04-51
Chapter 04 Test Bank Summary
Category # of Que
stions
AACSB: Ethics 100
Accessibility: Keyboard Navigation 85
Bloom's: Analyze 2
Blooms: Apply 33
Blooms: Evaluate 1
Blooms: Remember 46
Blooms: Understand 18
Difficulty: 1 Easy 47
Difficulty: 2 Medium 43
Difficulty: 3 Hard 10
Learning Objective: 04-01 Explain the relationship between ethics and the law. 11
Learning Objective: 04-02 Differentiate between the claims of the different stakeholder groups t 16
hat are affected by managers and their companies’ actions.
Learning Objective: 04-03 Describe four rules that can help companies and their managers act i 19
n ethical ways.
Learning Objective: 04-04 Discuss why it is important for managers to behave ethically. 8
Learning Objective: 04-05 Identify the four main sources of managerial ethics. 16
Learning Objective: 04-06 Distinguish among the four main approaches toward social responsibi 30
lity that a company can take.
Topic: Caux principles 1
Topic: Code of ethics 7
Topic: Corporate social responsibility 24
Topic: Ethical behavior 15
Topic: Ethical climate 13
Topic: Ethical dilemma 7
Topic: External stakeholders 15
Topic: Internal stakeholders 8
Topic: Justice approach 3
Topic: Utilitarian approach 6
04-1

Chapter 04 Test Bank

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Chapter 04 Test Bank

A. Ethics and laws are fixed principles.

20. Which of the following statements is true about stockholders?

A. Customers are often regarded as the least important stakeholder group.

A. best protects the rights of people affected.

A. the decision, although unethical, would increase shareholders' wealth.

A. best protects the rights of people affected.

A. seek to protect the rights and privileges of people affected.

A. the effects the decision can have on stakeholders' rights.

A. This rule emphasizes distributing benefits and harms in an equitable way.

A. The "tragedy of the commons"

40. ______ is a person's confidence and faith in another person's goodwill.

42. Unethical behavior

A. reduces a company's inefficiency.

48. Which of the following is least likely to be a source of individual ethics?

51. Which of the following statements is true of organizational ethics?

A. The communications manager

A. The limited authority of ethics ombudsperson restricts organization members in any

A. an ethics ombudsperson position.

71. Demonstrating its social responsibility helps a company build a good

A. have a negative effect on managers.

77. In 2016, the average pay for a CEO was

81. Stockholders are interested in how a company operates because

A. they are responsible for the organization’s capital resources.

A. they are a private foundation.

83. The _____ stakeholder group is considered to be the most critical.

87. Discuss the relationship between ethics and laws.

A. Ethics and laws are fixed principles.

Laws change to reflect the changing ethical beliefs of a society.

20. Which of the following statements is true about stockholders?

28. Which of the following statements is true of ethical decision making?

A. Customers are often regarded as the least important stakeholder group.

A. best protects the rights of people affected.

A. the decision, although unethical, would increase shareholders' wealth.

A. best protects the rights of people affected.

A. seek to protect the rights and privileges of people affected.

A. the effects the decision can have on stakeholders' rights.

A. The "tragedy of the commons"

40. ______ is a person's confidence and faith in another person's goodwill.

42. Unethical behavior

A. reduces a company's inefficiency.

Unethical behavior reduces a company's performance.

48. Which of the following is least likely to be a source of individual ethics?

52. Which of the following approaches to a commitment to social responsibility is characterized

A. The communications manager

A. The limited authority of ethics ombudsperson restricts organization members in any

72. _____ encourage employees to behave in a socially responsible manner.

Demonstrating social responsibility helps a company build a good reputation.

A. have a negative effect on managers.

In 2016, the median CEO compensation was $10.8 million.

Paul's manager is exhibiting an obstructionist approach to business ethics.

A. they are responsible for the organization’s capital resources.

A. they are a private foundation.

1. The obstructionist approach is one in which companies choose not to behave in

3. The accommodative approach is one in which companies behave legally and

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