Title: Ethics in Business
Course: Question Banks

Q: Business Ethics
- is for senior management, not junior employees.
- mostly concerns discrimination and is the responsibility of the Human Resources department.
- benefits the organization internally by helping to ensure its success.
A: benefits the organization internally by helping to ensure its success.

Q: A broad survey of consumers shows that many factors affect reputation but that ________ is the primary concern. Customers will switch to other brands when a company appears in headlines reporting bad behavior.
- perception of quality in products
- media reports
- ethics
A: ethics

Q: An unethical management will pay the price in various ways including
- light fines and penalties.
- more applications for employment.
- poor reputation.
A: poor reputation.

Q: The Association of Certified Fraud Examiners estimates that fraud costs US companies
- about 0.5 percent of their profits, or $90 billion per year across the US.
- about 7 percent of their revenues, or $1.3 trillion per year across the US.
- about 5 percent of their revenues, or $900 billion per year across the US.
A: about 5 percent of their revenues, or $900 billion per year across the US.

Q: If an employee’s actions go against company policy, the company
- is not legally responsible, as long as the employee signed a copy of the company policies.
- must fire the employee but bears no other responsibility.
- can be held legally responsible, despite its best efforts to prevent unethical behavior.
A: can be held legally responsible, despite its best efforts to prevent unethical behavior.

Q: The US Sentencing Commission Guidelines require most companies to create an ethics program. This can be challenging, so most companies
- use a generic plan offered by McKinsey and Company, a consulting firm.
- follow a religious injunction in designing their ethics program.
- follow the 7 broad compliance steps created by the Commission.
A: follow the 7 broad compliance steps created by the Commission.

Q: The compliance steps of the US Sentencing Guidelines include
- firing anyone engaging in unethical or illegal behavior.
- a fine or penalty on the manager of anyone engaging in unethical or illegal behavior.
- enforcing the program with disciplinary actions for anyone engaging in unethical behavior.
A: enforcing the program with disciplinary actions for anyone engaging in unethical behavior.

Q: The key to an ethical company is strong communication of the expectations. One recommended method, also required by the US Sentencing Guidelines, is
- to speak to large assemblies of employees.
- to send emails disseminating relevant information.
- to conduct regular training classes.
A: to conduct regular training classes.

Q: The degree of importance of an ethical decision depends, in part, on
- the probability that any harm will come to the decision maker.
- the amount of media attention on the decision maker.
- the proximity of consequence—that is, the distance between the decision maker and the person affected.
A: the proximity of consequence—that is, the distance between the decision maker and the person affected.

Q: The factors affecting ethical intensity of a decision include
- the probability that the decision maker understands the consequences of his decision.
- the length of time between when a decision is made and the resulting media attention.
- the significance of the consequences and the number of people affected.
A: the significance of the consequences and the number of people affected.

Q: Tom must decide between two employees for a promotion. One is struggling financially and needs the raise. The other is more competent and enthusiastic. In making a decision, he might consider
- distributive justice.
- individual rights.
- the long-term interest of the company.
A: the long-term interest of the company.

Q: Allison has been working long hours on a difficult assignment. Her boss won’t know the difference if she lets the quality slip a bit and goes home to her children. What principle might help Allison in this decision?
- legal requirements
- distributive justice
- personal virtue
A: personal virtue

Q: Luke and John disagree about the new smoking policy. Luke says the company should not employ smokers. They cost about $6,000 per year more than non-smokers, on average. John disagrees. What principles might cause them to disagree?
- Luke is looking at the long-term interest of the firm. John may be considering utilitarianism, the greatest good to the greatest number.
- Luke is looking at the distributive justice. John may be relying on individual rights—to choose to smoke or not.
- Luke is looking at the long-term interest of the firm. John may be relying on individual rights—to choose to smoke or not.
A: Luke is looking at the long-term interest of the firm. John may be relying on individual rights—to choose to smoke or not.

Q: Francis worked for GM for 39.9 years, but died 1 month short of retirement. Since he did not retire, his family normally receives nothing from the retirement funds. His widow petitions Mark, his manager, to make an exception and allow the retirement benefits. Mark wants to say no because if this were a regular policy, it would hurt stockholders and draw down retirement funds for the true retirees. But he is sympathetic to the family. What principles is Mark struggling between?
- The legal requirement and the harm to this one family.
- The greater good for all employees and his personal virtue.
- The greater good for all employees and the harm to this one family.
A: The greater good for all employees and the harm to this one family.

Q: A code of ethics is
- a restatement of religious injunctions.
- a summary of legal requirements.
- essentially a moral compass.
A: essentially a moral compass.

Q: The US Congress passed the Sarbanes-Oxley Act (SOX) in 2002 in reaction to accounting abuses. It requires that public companies establish and enforce a code of ethics. SOX ________ .
- does not require a company to disclose its code to the public, but most companies do.
- requires that specific values be included. For example, do not commit fraud.
- also requires that any changes to an established code of ethics be disclosed to the public.
A: also requires that any changes to an established code of ethics be disclosed to the public.

Q: To meet the standards of the Sarbanes-Oxley Act (SOX), a code of ethics must include standards to promote
- “honest and ethical conduct.”
- “compliance with applicable governmental rules and regulations.”
- "honest and ethical conduct; full, fair, accurate, timely and understandable disclosure in periodic reports” and "compliance with applicable governmental rules and regulations."
A: "honest and ethical conduct; full, fair, accurate, timely and understandable disclosure in periodic reports” and "compliance with applicable governmental rules and regulations."

Q: The US Sentencing Commission recommends that senior management “periodically communicate the aspects of the compliance and ethics program to its members ________.”
- by sending email or printed notices about the ethics program
- by speaking directly to employees in departmental meetings
- by conducting training programs and disseminating relevant information
A: by conducting training programs and disseminating relevant information

Q: ________ improves employee morale and productivity. It convinces employees that the company is committed to ethical treatment for all stakeholders including themselves. Employees internalize the mission and values of the company more.
- Offering high salaries relative to the market
- A news report about the company
- Ethics training
A: Ethics training

Q: It is better to
- rely on a company code of ethics to encourage an unethical employee to make ethical choices.
- use company monitoring and enforcement activities to control unethical employees.
- hire someone who is naturally inclined to behave in an ethical manner
A: hire someone who is naturally inclined to behave in an ethical manner

Q: Best practices in the selection and hiring of ethical employees involve including the company’s most ethical employees in the interview process. Interviewers already doing the job
- can judge a candidate's trustworthiness.
- can administer personality tests to reveal a candidate’s ethics.
- can ask relevant questions that can lead to answers that reveal a lot about the candidate.
A: can ask relevant questions that can lead to answers that reveal a lot about the candidate.

Q: A whistleblower hotline is
- an overloaded electrical circuit.
- a phone number of the local news service who will report on incidents of suspected fraud, waste, or misconduct.
- a phone number for employees to anonymously report suspected acts of impropriety such as fraud, waste, abuse, misconduct or violations of policy or any law or regulation.
A: a phone number for employees to anonymously report suspected acts of impropriety such as fraud, waste, abuse, misconduct or violations of policy or any law or regulation.

Q: In 2011, the SEC issued new whistleblower rules required by the Dodd-Frank Act. Under the new rules, a whistleblower is eligible for a bounty equal to 10 percent to 30 percent of monetary sanctions resulting from an enforcement action. The largest reward to date under this law was
- over $600,000.
- over $6 million.
- over $60 million.
A: over $60 million.

Q: In addition to hiring ethical employees and offering ethics training, it is also important for senior management to model ethical behavior. The responsibilities of senior management include
- putting stockholders first in their decisions.
- putting the long-term interests of the company first.
- acting ethically and making this visible to employees.
A: acting ethically and making this visible to employees.

Q: Wells Fargo was fined for customer fraud in 2016. They ignored employee reports of fraud. But they did some things right: they had a code of ethics, investigated when customers reported fraud, and enforced the ethics program by
- retaliating against employees who reported fraud.
- blackballing employees from the industry.
- punishing violators caught defrauding customers.
A: punishing violators caught defrauding customers.

Q: Consumers today expect a lot out of companies. According to a study by Cone Communications, 84 percent of consumers actually ________ .
- boycott products from companies that don’t share their personal beliefs
- are unwilling to pay more for responsible products
- seek out responsible products
A: seek out responsible products

Q: Michael Porter of Harvard Business School developed a concept of “shared value.” The central premise behind creating shared value is that the competitiveness of a company and the health of the communities around it are mutually dependent. Shared value is similar to
- unconscious capitalism.
- corporate global citizenship.
- corporate social responsibility.
A: corporate social responsibility.

Q: The relationship between communities and local employers is complex. President Trump and Governor Scott Walker announced in 2017 that Foxconn, a Chinese firm, would build a plant in Wisconsin and employ 13,000 people in the state. Wisconsin offered tax breaks that totaled $230,000 per job. Another CSR concern is
- long-term profitability.
- relations with the national politicians like President Trump.
- environmental pollution.
A: environmental pollution.

Q: ________ benefit from healthy competition between businesses. But sometimes companies will drive prices below costs to win market share and put competitors out of business. This is called predatory pricing. In the short run, customers benefit from lower prices, but in the long run, the predator can raise prices.
- Suppliers
- Communities
- Consumers
A: Consumers

Q: General Motors, a car manufacturer, has a tight relationship with its parts supplier, Delta. GM and Delta coordinate on engineering designs and share inventory information. When GM does well, Delta
- must constantly compete with Chinese manufacturers offering lower prices.
- must compete with online suppliers offering lower prices.
- benefits from having a steady, profitable outlet for their products.
A: benefits from having a steady, profitable outlet for their products.

Q: The St. Louis Federal Reserve reports that “firms can strategically engage in socially responsible activities to increase private profits.” The firm’s stakeholders value the firm’s social efforts, and the firm can obtain additional benefits from these activities, including
- attracting personnel focused on profits and bonuses.
- distracting customers from environmental pollution with fair-trade suppliers.
- enhancing the firm’s reputation and the ability to generate profits by differentiating its product.
A: enhancing the firm’s reputation and the ability to generate profits by differentiating its product.

Q: Investors will punish companies that suffer bad news. For example, if a restaurant reports contamination, investors will sell the stock. But economic studies suggest that some activities can mitigate the market reaction. Institutional investors will act more cautiously if the company has a good ________ reputation.
- ROE
- EPA
- CSR
A: CSR