Ch04 The Institutionalization of Business Ethics

1. Which of the following is not an aspect of the institutionalization of social responsibility?
a. Voluntary practices
b. Legal responsibilities
c. Core practices
d. Familial responsibilities
e. Strategic philanthropy
ANSWER: d
POINTS: 1
DIFFICULTY: Easy
REFERENCES: p. 94
LEARNING OBJECTIVES: 4.1 - Distinguish between the voluntary and mandated boundaries of ethical conduct.
NATIONAL STANDARDS: United States - BUSPROG: Ethics
STATE STANDARDS: United States - NONE - DISC: Ethical Responsibilities - Ethical Responsibilities
KEYWORDS: Bloom's: Knowledge
2. Which of the following acts can be classified as procompetitive legislation?

a. Equal Pay Act of 1963
b. Civil Rights Act of 1964
c. McCarran-Ferguson Act of 1944
d. Sherman Antitrust Act of 1890
e. Occupational Safety and Health Act of 1970
ANSWER: d
POINTS: 1
DIFFICULTY: Moderate
REFERENCES: p. 100, Table 4-2 Laws Regulating Competition
p. 99
LEARNING OBJECTIVES: 4.2 - Provide specific mandated requirements for legal compliance in specific subject
matter areas related to competition, consumers, and safety.
3. Which of the following acts exempted the insurance industry from antitrust legislation?
a. Equal Pay Act of 1963
b. Civil Rights Act of 1964
c. McCarran-Ferguson Act of 1944
d. Sherman Antitrust Act of 1890
e. Occupational Safety and Health Act of 1970
ANSWER: c
POINTS: 1
DIFFICULTY: Easy
REFERENCES: p. 99
LEARNING OBJECTIVES:4.2 - Provide specific mandated requirements for legal compliance in specific subject
4. Which of the following acts, passed in response to public outrage over conditions described in Upton Sinclair's The
Jungle, was the first consumer protection legislation?
a. Civil Rights Act of 1964
b. Sherman Antitrust Act of 1890
c. Magnuson-Moss Warranty Act of 1974
d. Consumer Product Safety Act of 1972
e. Pure Food and Drug Act of 1906
ANSWER: e
POINTS: 1
DIFFICULTY: Easy
REFERENCES: p. 101 - 102
p. 101, Table 4-3 Laws Protecting Consumers
5. The was established after the latest financial crisis, in response to a situation that caused many consumers
to
lose their homes.
a. Environmental Protection
Agency b. World Bank
c. Consumer Financial Protection
Bureau d. World Trade Organization
e. Sarbanes-Oxley Act
ANSWER: c
POINTS: 1
DIFFICULTY: Easy
REFERENCES: p. 110
LEARNING OBJECTIVES: 4.4 Describe the passage of the Dodd–Frank Wall Street Reform and Consumer
Protection Act along with some of its major provisions.
6. Which of the following is not a provision of the Sarbanes-Oxley Act?

a. Strengthens penalties for corporate fraud
b. Discourages the creation of ethical and legal compliance
programs c. Requires codes of ethics for financial reporting in
corporations
d. Makes fraudulent financial reporting a criminal
offense e. Requires greater transparency in financial
reporting
ANSWER: b
POINTS: 1
DIFFICULTY: Easy
REFERENCES: p. 106
LEARNING OBJECTIVES:4.3 Specifically address the requirements of the Sarbanes– Oxley legislation and
implementation by the Securities and Exchange Commission.
7. Which of the forces of the business environment involves the rivalry among businesses for customers and profits?
a. The economic dimension
b. The legal dimension
c. The competitive dimension
d. The technological dimension
e. The voluntary responsibilities dimension
ANSWER: c
POINTS: 1
REFERENCES: p. 97
8. The regulates tobacco, dietary supplements, vaccines, veterinary drugs, medical devices, cosmetics, products
that give off radiation, and biological products.
a. World Trade Organization
b. Consumer Financial Protection Agency
c. Department of Justice
d. Environmental Protection Agency
e. The Food and Drug Administration
ANSWER: e
POINTS: 1
DIFFICULTY: Easy
REFERENCES: p. 103
9. Which of the following groups is not a group that receives special legal protections?
a. The elderly
b. Children
c. Senior citizens
d. The highly educated
e. Young consumers
ANSWER: d
POINTS: 1
DIFFICULTY: Easy
REFERENCES: p. 102
10. The was called “a sweeping overhaul of the financial regulatory system…on a scale not seen since the
reforms that followed the Great Depression.”
a. Equal Pay Act
b. Americans with Disabilities Act
c. Dodd-Frank Wall Street Reform and Consumer Protection Act
d. Age Discrimination in Employment Act
e. VII of the Civil Rights Act
ANSWER: c
POINTS: 1
DIFFICULTY: Easy
REFERENCES: p. 109
LEARNING OBJECTIVES:4.4 Describe the passage of the Dodd–Frank Wall Street Reform and Consumer
11. law defines the rights and duties of individuals and organizations (including businesses).
a. Civil
b. Criminal
c. Competitive
d. Administrative
e. Regulatory
ANSWER: a
POINTS: 1
DIFFICULTY: Easy
REFERENCES: p. 97
12. law not only prohibits specific actions in business such as fraud, theft, or securities trading violations, but also
imposes fines or imprisonment as punishment for breaking the law.
a. Civil
b. Criminal
c. Competitive
d. Administrative
e. Regulatory
ANSWER: b
POINTS: 1
DIFFICULTY: Easy
REFERENCES: p. 97
13. Which of the following is not a provision of the Dodd-Frank Wall Street Reform and Consumer Protection Act?
a. Increases the accountability and transparency of financial institutions
b. Creates a bureau to educate consumers in financial literacy
c. Creates an organization to pay the bills of low-income consumers
d. Create incentives for whistle-blowers to come forward
e. Increases oversight of the financial industry
ANSWER: c
POINTS: 1
REFERENCES: p. 109
LEARNING OBJECTIVES:4.4 Describe the passage of the Dodd–Frank Wall Street Reform and Consumer
KEYWORDS: Bloom's: Comprehension
14. is the synergistic and mutually beneficial use of an organization’s core competencies and resources to deal
with key stakeholders so as to bring about organizational and societal benefits.
a. Social responsibility
b. Business ethics
c. Corporate philanthropy
d. Strategic philanthropy
e. Cause-related marketing
ANSWER: d
POINTS: 1
DIFFICULTY: Easy
REFERENCES: p. 117
LEARNING OBJECTIVES:4.7 - Provide an overview of highly appropriate core practices and their relationship to
social responsibility.
15. Anticompetitive strategies that focus on weakening or destroying a competitor have spurred antitrust legislation and
include all of the following except
a. sustained price cuts.
b. free samples.
c. discriminatory pricing.
d. price collusion.
e. corporate espionage.
ANSWER: b
POINTS: 1
REFERENCES: p. 99
16. Which is not one of the four sources of criminal and civil laws?
a. Judicial law
b. Common law
c. Constitutional law
d. Administrative law
e. Statutory law
ANSWER: a
POINTS: 1
DIFFICULTY: Easy
REFERENCES: p. 97
17. The is an independent agency within the Federal Reserve System that “regulate[s] the offering and provision
of consumer financial products or services under the Federal consumer financial laws.”
a. Consumer Financial Protection
Bureau b. Federal Reserve
c. World Trade
Organization d. Department
of Justice
e. Federal Trade Commission
ANSWER: a
POINTS: 1
DIFFICULTY: Easy
REFERENCES: p. 110
LEARNING OBJECTIVES: 4.4 Describe the passage of the Dodd–Frank Wall Street Reform and Consumer
Protection Act along with some of its major
provisions.
18. The primary objective of U.S. antitrust laws is to

a. protect consumers from high prices and foreign
products. b. protect domestic businesses.
c. protect employees.
d. promote strategies that enhance business welfare over consumer welfare.
e. distinguish competitive strategies that enhance consumer welfare from those that reduce it.
ANSWER: e
POINTS: 1
DIFFICULTY: Easy
REFERENCES: p. 99
LEARNING OBJECTIVES:4.2 - Provide specific mandated requirements for legal compliance in specific
subject matter areas related to competition, consumers, and safety.
19. What is a primary reason why some small businesses resist the opening of large chain retailers like Walmart or
Home Depot?
a. Because the large size creates economies of scale and they can charge lower prices
b. Because the selection in the stores is too large
c. Because large retailers attract crime to neighborhoods in which they are based
d. Because community leaders do not like the top management
e. Because large retailers almost never hire local workers as employees
ANSWER: a
POINTS: 1
DIFFICULTY: Easy
REFERENCES: p. 98
20. focus(es) on developing sound organizational practices and integrity for financial and nonfinancial
performance measures, rather than on an individual’s morals.
a. The Dodd-Frank Wall Street Reform and Consumer Protection Act
b. Compliance
c. Organizational ethics
d. Core practices
e. The Sarbanes Oxley Act
ANSWER: d
POINTS: 1
REFERENCES: p. 115
LEARNING OBJECTIVES: 4.7 - Provide an overview of highly appropriate core practices and their relationship to
21. Which of the following is not one of the seven steps that the U.S. Sentencing Commission requires for an effective
compliance program?
a. Develop a code of conduct
b. Provide oversight by high-ranking personnel
c. Create a communication system for disseminating standards and procedures
d. Monitor and audit systems designed to detect misconduct
e. Comply with ISO 14000 guidelines
ANSWER: e
POINTS: 1
REFERENCES: p. 112
LEARNING OBJECTIVES:4.6 - Provide an overview of the recommendations and incentives for developing an
ethical corporate culture contained in the Federal Sentencing Guidelines for
Organizations.
22. The Sarbanes-Oxley Act created the to oversee the accounting firms that audit public corporations and to
establish rules and standards for auditing.
a. Public Company Accounting Oversight Board
b. Corporate Accounting Oversight Commission
c. Enron Accounting Fraud Administration
d. Occupational Health and Safety Administration
e. Equal Employment Opportunity Commission
ANSWER: a
POINTS: 1
DIFFICULTY: Easy
REFERENCES: p. 107
23. responsibilities relate to a business’s contributions to stakeholders.
a. Economic
b. Legal
c. Ethical
d. Voluntary
e. Social responsiveness
ANSWER: d
POINTS: 1
DIFFICULTY: Easy
REFERENCES: p. 116
24. Passed by Congress in 1991, the created incentives for organizations to develop and implement ethical
compliance programs.
a. Sarbanes-Oxley Act
b. U.S. Sentencing Commission's Guidelines for Ethical Compliance
c. Ethical Compliance Act
d. Social Responsiveness Compliance Act
e. Federal Sentencing Guidelines for Organizations
ANSWER: e
POINTS: 1
DIFFICULTY: Easy
REFERENCES: p. 112
LEARNING OBJECTIVES:4.6 - Provide an overview of the recommendations and incentives for developing an
Organizations.
25. Donation of computer equipment to schools by Toshiba would be associated with responsibilities.
a. economic
b. voluntary
c. legal
d. ethical
e. minimum
ANSWER: b
POINTS: 1
DIFFICULTY: Easy
REFERENCES: p. 116
26. By prohibiting accounting firms from providing both auditing and consulting services to the same corporate clients
without permission, the Sarbanes-Oxley Act is attempting to eliminate
a. conflicts of interest.
b. cronyism.
c. reporting transparency.
d. corporate espionage.
e. dual reporting.
ANSWER: a
POINTS: 1
REFERENCES: p. 107
27. Which of the following is not a benefit to businesses of engaging in voluntary responsibilities?
a. Help create an ethical culture and values that can act as a buffer to organizational misconduct
b. Reduce government involvement by providing assistance to stakeholders
c. Develop employee leadership skills
d. Improve employee compensation and retention
e. Improve the quality of life in communities
ANSWER: d
POINTS: 1
DIFFICULTY: Easy
REFERENCES: p. 116
28. Companies that will most likely be found in violation of procompetitive legislation.
a. pollute waterways
b. knowingly harm consumers
c. contract with sweatshops
d. establish monopolies
e. help consumers
ANSWER: d
POINTS: 1
DIFFICULTY: Easy
REFERENCES: p. 99
29. tie(s) an organization’s product(s) directly to a social concern through a marketing program.
a. Voluntary contributions
b. Cause-related marketing
c. Strategic philanthropy
d. Corporate giving
e. Employee benefits
ANSWER: b
POINTS: 1
DIFFICULTY: Easy
REFERENCES: p. 116
30. Title VII of the Civil Rights Act of 1964

a. prohibits discrimination on the basis of race, color, sex, religion, or national origin.
b. penalizes the top executives in an organization for misconduct.
c. is basically the same as the Sarbanes-Oxley Act.
d. discourages whistle-blowers from reporting misconduct.
e. prohibits pay discrimination on the basis of gender.
ANSWER: a
POINTS: 1
DIFFICULTY: Easy
REFERENCES: p. 103
31. Cause related marketing can affect consumer , if consumers are sympathetic to the cause and the brand and
cause are seen as a good fit.
a. individual ethics
b. tastes
c. perceptions
d. budgets
e. buying patterns
ANSWER: e
POINTS: 1
DIFFICULTY: Easy
REFERENCES: p. 117
32. Who provides information to managers, investors, tax authorities, and other stakeholders who make resource
allocation decisions for corporations?
a. Accountants
b. Federal regulators
c. The Securities and Exchange Commission
d. The Department of Justice
e. Human Resources departments
ANSWER: a
POINTS: 1
REFERENCES: p. 105
33. The of ethics involves embedding values, norms, and artifacts in organizations, industries, and society.
a. institutionalization
b. rationalization
c. commercialization
d. mobilization
e. enforcement
ANSWER: a
POINTS: 1
DIFFICULTY: Easy
REFERENCES: p. 118
34. Which of the following is not a reason why the institutionalization of business ethics has progressed in recent
decades?
a. Institutionalization of ethics is now mandated for all organizations by governments around the world
b. Stakeholders have recognized the need for improving business ethics
c. The government has stepped in when scandals and misconduct have damaged key constituents of businesses
d. Gatekeepers have been questioned as to their contributions to major scandals
e. Highly ethical companies tend to be more profitable than those suffering from misconduct issues
ANSWER: a
POINTS: 1
REFERENCES: p. 118
35. Part of the reason why credit ratings firms did not catch major problems prior to the global financial meltdown of
2008 was because they were paid by the firms that they rank, which creates
a. economies of scale.
b. synergy.
c. a conflict of interest.
d. cooperation.
e. efficiency.
ANSWER: c
POINTS: 1
DIFFICULTY: Easy
REFERENCES: p. 106
36. Investigations into the financial rating industry after the financial meltdown of 2008 found all of the following except
a. analysts cut corners when faced with less time to perform due diligence.
b. analysts’ ratings were inaccurate.
c. many high ratings were based on inadequate historical data.
d. analysts were overwhelmed with the volume and complexity of trades.
e. most analysts were completely untrained and unprepared to do their jobs.
ANSWER: e
POINTS: 1
DIFFICULTY: Easy
REFERENCES: p. 106
37. Some, especially those in business, complain that the Sarbanes-Oxley Act and similar legislation
a. is excessively complex and financially burdensome.
b. is not necessary.
c. is fair to all firms.
d. has reduced restatements of financial reports.
e. is too simplistic.
ANSWER: a
POINTS: 1
DIFFICULTY: Easy
REFERENCES: p. 107
38. An ethical organizational culture creates an environment in which to structure behavior that is then evaluated by
stakeholders. The key elements of an organizational culture include all of the following except
a. values.
b. norms.
c. artifacts.
d. legal compliance.
e. employee compensation
ANSWER: e
POINTS: 1
REFERENCES: p. 95
p. 96, Figure 4-1 Elements of an Ethical Culture
LEARNING OBJECTIVES: 4.1 - Distinguish between the voluntary and mandated boundaries of ethical conduct.
39. Which of the following provide incentives for developing core practices within a firm that could help ensure
ethical and legal compliance?
a. Department of Justice and Open Compliance Ethics Group
b. Department of Justice and the Sarbanes-Oxley Act
c. Federal Sentencing Guidelines for Organizations and the Sarbanes-Oxley Act
d. Food and Drug Administration and the Sarbanes-Oxley Act
e. Securities and Exchange Commission and the Sarbanes-Oxley Act
ANSWER: c
POINTS: 1
DIFFICULTY: Easy
REFERENCES: p. 119
LEARNING OBJECTIVES: 4.6 - Provide an overview of the recommendations and incentives for developing an
Organizations.
40. Laws and regulations change over time; however, in the United States the thrust of most business legislation can be
summed up as
a. any practice is permitted.
b. any practice is permitted that does not substantially reduce competition and harm consumers or society.
c. any practice is permitted that does not substantially harm consumers or society, but this applies only within the
United States.
d. any practice is permitted that does not harm the environment.
e. any practice is permitted that does not break the law.
ANSWER: b
POINTS: 1
DIFFICULTY: Easy
REFERENCES: p. 96
41. Why do you think the costs of compliance with Sarbanes Oxley go down over time?
ANSWER: Companies have reported their compliance costs decreasing by 50% since
implementation. One reason could be experience with the systems and regulations
makes compliance go more swiftly, decreasing costs. Another could be initial costs of
establishing internal systems for compliance decrease after implementation.
POINTS: 1
REFERENCES: p. 109
LEARNING OBJECTIVES: 4.3 Specifically address the requirements of the Sarbanes– Oxley legislation and
42. According to the text, the opinions of society, as expressed through legislation, can change over time and different
courts and government legislatures may take different views about the acceptability of specific business activities.
Why is this so?
ANSWER: The role of laws is not so much to determine what is ethical or unethical as to
determine the appropriateness of specific activities or situation. In other words, laws
establish the basic ground rules for responsible business activities. Laws, or public
policy, is dynamic and changes in response to business abuses and consumer demands
for safety and equality.
POINTS: 1
43. What ethical issues affecting consumers and society as a whole are created by unfair competition?
ANSWER: When businesses compete unfairly, legal and social responsibility issues can result.
Competing to harm a competitor results in reduced product choices for consumers.
Price collusion by large companies results in higher prices for consumers.
POINTS: 1
DIFFICULTY: Easy
44. Society often expects a lot from business. Do you think that it is possible to balance profit and other business
objectives with the goals and desires of society? Why or why not?
ANSWER: Students can draw from the entire chapter to answer this question.
POINTS: 1
REFERENCES: Chapter 4

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1. Which of the following is not an aspect of the institutionalization of social responsibility?

2. Which of the following acts can be classified as procompetitive legislation?

6. Which of the following is not a provision of the Sarbanes-Oxley Act?

18. The primary objective of U.S. antitrust laws is to

30. Title VII of the Civil Rights Act of 1964

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