Chapter 05

International Business: Environments and Operations, 16e (Daniels et al.
)
Chapter 5 Globalization and Society
1) According to the text, which of the following has resulted from GE's Ecomagination
initiative?
A) rising profitability for many GE products
B) increasing doubt among GE's foreign partners
C) reducing investments by GE due to poor returns
D) improving pollution levels near GE plants in China
Answer: A
Diff: 2
Learning Outcome: Discuss the role of ethics and social responsibility in international business
Skill: Concept
Objective: 5-1 Describe the trade-offs among different stakeholders in MNE activities
AACSB: Ethical understanding and reasoning
2) Which of the following statements about GE and its "Green is Green" movement is true?
A) GE is responding in part to the fact that it is operating in many countries which require
compliance with higher environmental standards than exist in the United States.
B) GE has decided to develop new products that are environmentally friendly rather than adopt
internal policies to reduce greenhouse gas emissions.
C) GE has moved aggressively to reduce greenhouse gas usage internally but has not been able
to develop commercially viable "clean" technologies.
D) GE considered joining the U.S. Climate Action Partnership but decided the group was too
radical in its approach to reducing greenhouse gas emissions.
Answer: A
Diff: 3
Skill: Concept
AACSB: Diverse and multicultural work environments
3) Which of the following is NOT a key stakeholder group that a company must work to satisfy
in order to survive in a global environment?
A) employees
B) competitors
C) shareholders
D) customers
Answer: B
Diff: 2
Skill: Concept
1
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4) Which stakeholder group primarily wants additional sales and increased productivity?
A) customers
B) shareholders
C) society at large
D) government
Answer: B
Diff: 2
Skill: Concept
AACSB: Analytical thinking
5) Which stakeholder group is most interested in trustworthy behavior by corporate executives

and increased corporate taxes?
A) shareholders
B) society
C) employees
D) customers
Answer: B
Diff: 2
Skill: Concept
6) Which of the following statements is most likely true regarding relationships between MNEs
and stakeholders?
A) An MNE typically serves all stakeholder groups equally at any given time.
B) No individual stakeholder group is powerful enough to cause the demise of an MNE.
C) All stakeholders of an MNE have the same short-term and long-term goals and interests.
D) The inability to adequately meet the long-term needs of all stakeholders increases the
probability of an MNE failing.
Answer: D
Diff: 3
Learning Outcome: Define the fundamental concepts of international business
Skill: Application
AACSB: Application of knowledge
2
7) Which of the following is one of the primary business objectives for pursuing ethical
behavior?
A) avoiding industrial sanctions
B) developing competitive advantages
C) developing creative advertisements
D) discouraging false commitments to the firm
Answer: B
Diff: 2
Skill: Concept
8) ________ is one of the primary business objectives for pursuing ethical behavior.
A) Replacing home-country technology with host-country technology
B) Minimizing federal investigations into corporate finances
C) Avoiding being perceived as a socially irresponsible firm
D) Imposing home-country behavior on the host country
Answer: C
Diff: 2
Skill: Concept
9) Which of the following is a primary business objective for pursuing ethical behavior?
A) avoiding industrial sanctions
B) developing competitive advantages
C) developing creative advertisements
D) discouraging false commitments to the firm
Answer: B
Diff: 2
Skill: Concept
3
10) Bantam Enterprises, a multinational enterprise, makes significant efforts to avoid being
perceived as socially irresponsible. What is the most likely reason for this?
A) Social irresponsibility can lead to labor strikes by international unions.
B) Socially irresponsible companies usually have fewer exports and more imports.
C) Cultural barriers increase for companies that are socially irresponsible, which hinders
expansion into additional countries.
D) Social irresponsibility can lead to negative publicity from nongovernmental organizations,
which could hurt a company's reputation.
Answer: D
Diff: 3
Skill: Application
11) General Electric's Ecomagination initiative is responding in part to the fact that it is operating
in many countries that require compliance with higher environmental standards than exist in the
United States.
Answer: TRUE
Diff: 2
Skill: Concept
12) In the long run, MNEs must adequately meet the needs of all stakeholders in order to prosper
and survive.
Answer: TRUE
Diff: 2
Skill: Concept
13) Stockholders are typically more interested in corporate social responsibility than in earning
profits.
Answer: FALSE
Diff: 1
Skill: Concept
4
14) GE's Ecomagination program has enabled the firm to develop a competitive advantage over
its competitors.
Answer: TRUE
Diff: 2
Skill: Concept
AACSB: Reflective thinking
15) Which stakeholders must companies satisfy? What role should stakeholders play in a firm's
internal code of conduct?
Answer: Stakeholders include stockholders, employees, customers, and society at large. In the
short term, the aims of these groups conflict. Stockholders want additional sales and increased
productivity, which result in higher profits and larger returns going to them. Employees want
additional compensation. Customers want lower prices. And society at large would like to see
increased corporate taxes or corporate involvement in social functions. In the long term, all of
these aims must be achieved adequately, or none will be attained at all because each stakeholder
group is powerful enough to cause the company's demise. When developing an internal code of
conduct, firms need to communicate company policies to employees, suppliers, and
subcontractors to ensure that everyone involved understands what behavior is acceptable.
External stakeholders should receive reports of how the code of conduct is functioning.
Diff: 3
Skill: Synthesis
16) According to Transparency International, companies from which of the following countries
are more likely to pay bribes?
A) China
B) Japan
C) Singapore
D) Belgium
Answer: A
Diff: 1
Learning Outcome: Explain how differences in culture affect the international business
environment
Skill: Concept
Objective: 5-2 Evaluate the major economic effects of MNEs on home and host countries
17) An important business objective for pursuing ethical behavior is to create a better
relationship with corrupt politicians and customers.
Answer: FALSE
Diff: 1
Skill: Concept
5
18) Under the practice of extraterritoriality, legal and ethical values in a country may cause its
companies to operate abroad according to home country laws rather than host country laws.
Answer: TRUE
Diff: 1
Skill: Concept
19) Explain why the argument that "anything that is legal is ethical" is insufficient.
Answer:
a. The law is not appropriate for regulating all business activity because not everything that is
unethical is illegal.
b. The law is slow to develop in emerging areas of concern. Laws take time to be legislated and
tested in courts. Further, they cannot anticipate all future ethical dilemmas; basically, they are a
reaction to issues that have already surfaced.
c. The law often is based on moral concepts that are not precisely defined and that cannot be
separated from legal concepts. Moral concepts must be considered along with legal ones.
d. The law is often in need of testing by the courts. This is especially true of case law, in which
the courts establish precedent.
e. The law is not very efficient. Efficiency in this case implies achieving ethical behavior at a
very low cost, and it would be impossible to solve every ethical behavioral problem with a law.
Diff: 3
Skill: Critical Thinking
20) What types of payments are legal and illegal under the Foreign Corrupt Practices Act
(FCPA) of the United States? Provide an example.
Answer: Payments to officials to expedite otherwise legitimate transactions (officially called
"facilitation payments" but sometimes referred to as "speed money" or "grease money") are
legal, but payments to other officials who are not directly responsible for carrying out the
transaction are not. Facilitation payments take many forms. For example, payment to a customs
official to clear legitimate merchandise is legal, whereas a payment to a government minister to
influence the customs official is illegal. The FCPA allows the former payment because
governmental officials in many countries delay compliance of laws indefinitely until they do
receive payments, even though such payments may be illegal in those countries.
Diff: 3
Skill: Application
6
21) How have sustainability demands and the Kyoto Protocol affected international business?
Discuss the controversies surrounding each.
Answer: Sustainability refers to the concept of meeting the needs of the present without
compromising the ability of future generations to meet their own needs. Proponents of the
concept argue that sustainability considers what's best for both people and the environment.
However, the concept is controversial because sustainability can be interpreted differently by
environmentalists and businesspeople. The Kyoto Protocol, which requires the reduction of the
emission of green-house gases, has not been adopted by all countries and is therefore still limited
in its total global impact. However, companies must adapt to countries that have implemented
the Protocol. Countries that have not signed the Kyoto Protocol argue that the mandatory
restrictions may reduce economic growth.
Diff: 3
Skill: Synthesis
22) General Electric has focused on being more "green" in recent years most likely because
________.
A) the industry has always looked to GE as a trend setter in green technology
B) GE executives believe the firm can strategically align investor and environmental interests
C) GE executives realize that the firm can save significant money through the use of solar
technology
D) the U.S. government has decided to use GE as a test case to see if the adoption of the Kyoto
Protocol can actually work for a U.S. firm
Answer: B
Diff: 3
Skill: Concept
Objective: 5-3 Explain the broad foundations of ethical behavior
23) Which level of moral development involves an individual learning role-conformity from
peers, parents, and laws?
A) conventional
B) principled
C) autonomous
D) preconventional
Answer: A
Diff: 2
Skill: Concept
7
24) Which of the following statements is most likely true about the postconventional level of
moral development?
A) Individuals learn what is moral but not why such behavior is moral.
B) Individuals behave morally because they fear negative repercussions.
C) Individuals learn how to conform to society's values through observation.
D) Individuals behave morally because they believe such actions are right.
Answer: D
Diff: 2
Skill: Concept
25) According to the teleological approach, individuals base moral decisions on ________.
A) personal and social responsibilities
B) consequences of an action
C) cultural value systems
D) opinions of peers
Answer: B
Diff: 2
Skill: Concept
26) Encouraging ethical behavior for the purpose of developing competitive advantages will
most likely result in all of the following for a firm EXCEPT ________.
A) strategic accomplishment
B) consumer commitment
C) industry resolutions
D) financial success
Answer: C
Diff: 2
Skill: Concept
8
27) What is the primary problem associated with Anglo American PLC's ART program?
A) unknown side effects to drugs and treatment
B) rising costs of medications and procedures
C) poor treatment adherence by employees
D) lack of sufficient insurance coverage
Answer: C
Diff: 2
environment
Skill: Concept
28) What is the primary reason that Anglo American PLC developed its ART program?
A) comply with government standards
B) maintain a healthy workforce
C) abide by union demands
D) reduce employee benefits
Answer: B
Diff: 2
Skill: Concept
29) The teleological approach asserts that individuals make moral judgments independent of
consequences.
Answer: FALSE
Diff: 2
Skill: Concept
30) According to utilitarianism, actions are moral if they produce the greatest amount of good for
the greatest number of people.
Answer: TRUE
Diff: 2
Skill: Concept
9
31) A manager practicing relativism would most likely ________.
A) adapt to local conditions instead of implementing home-country practices
B) enforce home-country laws on host-country employees and suppliers
C) refuse to change company policies and procedures to comply with local norms
D) apply universal laws to each country despite local customs and traditions
Answer: A
Diff: 3
Skill: Application
Objective: 5-4 Identify the cultural foundations of ethical behavior
32) The belief that there are universal standards of behavior that all cultures should follow is
called ________.
A) humanism
B) relativism
C) normativism
D) naturalism
Answer: C
Diff: 1
Skill: Concept
33) A manager who refuses to bribe customs officials in a foreign country, even though it is
morally acceptable in that country, is most likely to believe in which of the following
perspectives on ethics?
A) relativism
B) normativism
C) humanism
D) existentialism
Answer: B
Diff: 2
Skill: Application
10
34) Which of the following is NOT an example of normativism?
A) A U.S. subsidiary operating in China that is forced to follow some U.S. laws, even though
China has no comparable laws
B) A U.S. sweatshop operating in Thailand that does not follow U.S. labor laws but allows
children to work 60 hours a week
C) An MNE manager who, after working in the host country, tries to implement foreign practices
in the home-country office
D) A British subsidiary operating in Indonesia that maintains the same health and safety
standards for its foreign factories that are required in Great Britain, even though the British
government does not require it to use those standards
Answer: B
Diff: 3
Skill: Application
35) The saying "When in Rome, do as the Romans do" applies to the ________ approach.
A) teleological
B) relativism
C) normativism
D) deontological
Answer: B
Diff: 2
Skill: Concept
36) Pursuing responsible behavior for strategic and financial success is an example of relative
behavior.
Answer: FALSE
Diff: 2
Skill: Application
37) Relativism is the theory that ethical truths depend on the values of the groups holding them;
thus, MNEs should adhere to or adopt the cultures of the countries in which they are located.
Answer: TRUE
Diff: 1
environment
Skill: Concept
11
38) Normativism asserts that universal standards of behavior exist and should be accepted in all
cultures.
Answer: TRUE
Diff: 2
Skill: Concept
39) What is the difference between relativism and normativism? How do these concepts relate to
ethical behavior in international business?
Answer: Relativism affirms that ethical truths depend on the groups holding them. This makes
intervention by outsiders unethical. The idea of relativism can be expressed by the statement
"When in Rome, do as the Romans do." Normativism holds that there are universal standards of
behavior (based on people's own values) that all cultures should follow, making nonintervention
unethical. Managers thus struggle with implementing a "universal" set of truths versus adapting
to local conditions on the assumption that every place is different and should be treated
differently. Often, a company faces certain pressures to comply with local norms. These may
take the form of laws that permit—or even require—only certain practices that grant competitive
advantages to firms accepting local norms while throwing up roadblocks in front of companies
that try to impose home-country practices in the local arena. Conversely, firms may face certain
pressures not to comply from its home-country government, or even from constituencies that
threaten retaliatory action if it submits to objectionable foreign practices.
Diff: 3
Skill: Synthesis
12
40) What ethical and labor-related issues are a major challenge to footwear and clothing MNEs
that operate in developing countries? What guidelines are provided by the Ethical Trading
Initiative?
Answer: The many labor issues that companies must deal with include fair wages, child labor,
working conditions, working hours, and freedom of association. These issues are especially
critical in retail, clothing, footwear, and agriculture where MNEs outsource production to
independent companies abroad, usually in developing countries. The challenge for MNEs is that
they work in an environment with different cultural, legal, and political rules than what they are
used to in their home countries. The objective of ETI is to get companies to adopt ethical
employment policies and then monitor compliance with their overseas suppliers. ETI's trading
initiative base code identifies the following issues:
a. Employment is freely chosen.
b. Freedom of association and the right to collective bargaining are respected.
c. Working conditions are safe and hygienic.
d. Child labor shall not be used.
e. Living wages are paid.
f. Working hours are not excessive.
g. No discrimination is practiced.
h. Regular employment is provided.
i. No harsh or inhumane treatment is allowed.
Diff: 3
41) Which of the following most likely complicates ethical behavior for firms that expand
overseas?
A) local laws and values
B) expatriate management
C) unstable financial settings
D) international codes of conduct
Answer: A
Diff: 2
environment
Skill: Concept
Objective: 5-5 Illustrate how ethical behavior is affected by different legal attitudes
13
42) Ethical dilemmas tend to be ________ for MNE managers than for domestic managers.
A) more complicated
B) less controversial
C) easier to decide
D) less common
Answer: A
Diff: 1
environment
Skill: Concept
43) Why is the argument that "anything legal is ethical" most likely insufficient?
A) Everything that is unethical is also illegal.
B) The law is an extremely efficient way to solve ethical dilemmas.
C) Laws are frequently based on imprecisely defined moral concepts.
D) Laws can never be changed; thus, rules for all possible ethical dilemmas are found in the law.
Answer: C
Diff: 3
Skill: Concept
44) Which of the following is a reason for an MNE to base its standards for ethical behavior on a
country's laws?
A) The law embodies many of a country's moral beliefs but is an inadequate guide for proper
conduct.
B) The law contains unenforceable rules that are impossible for society to follow.
C) The law represents a consensus derived from significant deliberation.
D) The law is based on precisely defined moral concepts.
Answer: C
Diff: 3
Skill: Concept
14
45) An advocate of the legal-justification standard would most likely assert that the law
________.
A) develops slowly in response to evolving societal dilemmas
B) protects business activities that are unethical but not illegal
C) contains enforceable rules that apply to everyone
D) offers necessary moral flexibility for a society
Answer: C
Diff: 3
Skill: Application
46) Which of the following is most important when designing an internal code of conduct?
A) requesting U.N. oversight and intervention when necessary
B) communicating the code of conduct only to employees
C) reporting results to external stakeholders
D) forming local policies for each subsidiary
Answer: C
Diff: 3
Skill: Concept
47) The law is often based on imprecisely defined moral concepts that cannot be separated from
legal concepts.
Answer: TRUE
Diff: 2
Skill: Concept
48) The argument that "anything legal is ethical" is insufficient as a basis for ethical behavior
because the law usually does not apply to everyone and does not have enforceable rules.
Answer: FALSE
Diff: 2
Skill: Concept
15
49) What is the primary concern regarding anti-corruption measures in the EU?
A) resistance to an official anti-fraud commission
B) inability to adopt a corruption definition
C) lack of uniform laws across nations
D) failure to conduct internal auditing
Answer: C
Diff: 2
Skill: Concept
Objective: 5-6 Show how corruption and bribery affect and are affected by cultural, legal, and
political forces
50) Which of the following is NOT affected by the Foreign Corrupt Practices Act?
A) companies registered in the United States
B) foreign firms operating in U.S. territory
C) foreign firms quoted on a U.S. stock exchange
D) foreign companies managed by U.S. expatriates
Answer: D
Diff: 2
Skill: Concept
political forces
51) Which of the following statements describes an inconsistency of the Foreign Corrupt
Practices Act (FCPA)?
A) Facilitation payments are classified as bribery.
B) Facilitation payments are excluded from the FCPA's definition of bribery.
C) Payments to officials who are not directly responsible for carrying out the law are legal.
D) Payments to foreign officials who carry out the law are considered illegal by provisions of the
FCPA.
Answer: B
Diff: 2
Skill: Concept
political forces
16
52) A 1977 U.S. law that outlaws bribery payments by U.S. firms to foreign government officials
is known as the ________.
A) Anti-Bribery Act of 2004
B) Foreign Corrupt Practices Act
C) Zero Tolerance Initiative
D) Sarbanes-Oxley Act
Answer: B
Diff: 1
Skill: Concept
political forces
53) Which of the following is permitted by the Foreign Corrupt Practices Act?
A) a bribe paid by foreign firms operating in U.S. territories
B) a bribe paid by a U.S. firm operating in a foreign country that permits bribes to be paid
C) a payment to a foreign government official to influence a customs official
D) a payment to a customs official to clear legitimate merchandise
Answer: D
Diff: 2
Skill: Concept
political forces
54) The OECD Convention against bribery is an example of a(n) ________.

A) bilateral agreement developed for the EU
B) agreement that targets the demand side of bribery
C) agreement that targets the supply side of bribery
D) UN Convention dominated by developing countries
Answer: C
Diff: 2
Skill: Concept
political forces
17
55) In which of the following countries would there be the highest likelihood of encountering a
bribery situation?
A) Germany
B) United States
C) South Korea
D) Russia
Answer: D
Diff: 1
Skill: Concept
political forces
56) Which of the following is NOT one of the issues surrounding high levels of bribery and
corruption?
A) high poverty rates
B) regional conflict
C) political unrest
D) high per capita income
Answer: D
Diff: 2
Skill: Concept
political forces
57) The Foreign Corrupt Practices Act applies only to companies registered in the United States.
Answer: FALSE
Diff: 2
Skill: Concept
political forces
58) A payment to a customs official to clear legitimate merchandise is permitted by the Foreign
Corrupt Practices Act.
Answer: TRUE
Diff: 2
Skill: Concept
political forces
18
59) Transparency International, the OECD, and the ICC are all working to stop bribery around
the world.
Answer: TRUE
Diff: 1
Skill: Concept
political forces
60) The OECD Convention against bribery is an example of an agreement that targets the
demand side of bribery.
Answer: FALSE
Diff: 2
Skill: Concept
political forces
61) The Petrobras oil company scandal involved companies outside Brazil.
Answer: TRUE
Diff: 1
Skill: Concept
political forces
62) What is the Foreign Corrupt Practices Act? How has this law affected ethical behavior
among international businesses?
Answer: The FCPA outlaws bribery payments by U.S. firms to foreign officials, political
parties, political officials, and political candidates. According to the act, it is illegal to make
payments to government officials to directly engage in illegal activity to benefit the briber.
However, it is possible for U.S. companies to make facilitating payments to foreign government
officials to expedite legitimate transactions, in other words, doing what they should be doing, not
doing something wrong. The FCPA is directed toward U.S. companies operating abroad,
although the provisions of the FCPA were extended in 1998 to include bribery by foreign firms
operating in the United States or one of its territories. The U.S. government and other
governments world-wide are starting to crack down harder on bribery. Governments want to
ensure that individual and corporate behavior are consistent with the best interest of the broader
community and also want to be sure that laws are being followed.
Diff: 3
Skill: Synthesis
political forces
19
63) Meeting the needs of the present without compromising the ability of future generations to
meet their own needs is known as ________.
A) competitive advantage
B) the Kyoto Protocol
C) sustainability
D) externality
Answer: C
Diff: 1
Skill: Concept
Objective: 5-7 Summarize what the roles are of governments and companies in resolving
environmental issues
64) The 1997 Kyoto Protocol is best described as an agreement that requires ________.
A) all members of the United Nations to reduce their greenhouse gas emissions by 5.2 percent
B) the United States and Japan to control greenhouse gas emissions by 8% below 1995 levels
C) the signatory countries to cut greenhouse gas emissions to 5.2 percent below 1990 levels
D) the signatory countries to reduce greenhouse gas emissions by 80% by 2050
Answer: C
Diff: 2
Skill: Concept
65) Firms that operate in countries that have adopted the Kyoto Protocol are required to either
reduce emissions or ________.
A) purchase carbon credits from other firms
B) file petitions to appeal the requirement
C) cease manufacturing operations
D) pay fines to the UN
Answer: A
Diff: 2
Skill: Concept
20
66) How has the Kyoto Protocol affected U.S. companies operating in Europe?
A) U.S. companies are changing the way they do business in order to comply with new
emissions standards in Europe.
B) The Kyoto Protocol has not affected U.S. companies with subsidiaries in Europe because the
U.S. has not signed the Kyoto Protocol.
C) Before U.S. companies can open any more European subsidiaries, the U.S. government must
sign the Kyoto Protocol.
D) Because the United States is not a party to the Kyoto Protocol, U.S. companies may not
operate in European countries that have signed the Kyoto Protocol.
Answer: A
Diff: 3
Skill: Concept
67) Governmental agencies and nongovernmental organizations monitor the behavior of

companies and their employees to ensure that laws are being followed.
Answer: TRUE
Diff: 1
Skill: Concept
68) Meeting the needs of the present without compromising the ability of future generations to
meet their own needs is known as sustainability.
Answer: TRUE
Diff: 1
Skill: Concept
69) U.S. MNEs that operate in Europe are under pressure to conform to the emissions standards
of the Kyoto Protocol.
Answer: TRUE
Diff: 2
Skill: Concept
21
70) The issues that are the foundation of the Ethical Trading Initiative (ETI) include all of the
following EXCEPT ________.
A) employment is freely chosen
B) working conditions are safe and hygienic
C) child labor shall not be used
D) workers receive hourly wages that are consistent around the world
Answer: D
Diff: 2
Skill: Concept
Objective: 5-8 Demonstrate how global labor issues need to be addressed by MNEs to their
stakeholders
71) Which of the labor issues identified by the Ethical Trading Initiative (ETI) receives the most
attention?
A) safe and hygienic working conditions
B) reasonable living wages
C) inhumane treatment
D) child labor
Answer: D
Diff: 1
Skill: Concept
stakeholders
72) The Ethical Trading Initiative (ETI) is primarily focused on ________.

A) fair trade laws for undeveloped countries
B) tiered pricing by pharmaceutical firms
C) greenhouse gas emission reduction
D) employment practices of MNEs
Answer: D
Diff: 2
Skill: Concept
stakeholders
22
73) According to the Ethical Trading Initiative (ETI), ________.
A) child labor cannot be used unless there are no suitable alternatives
B) employment need not be freely chosen in order to be acceptable
C) no harsh or inhumane treatment of workers should be allowed
D) MNEs are not responsible for establishing codes of conduct
Answer: C
Diff: 2
Skill: Concept
stakeholders
74) Which of the following best supports the idea that MNEs should remain in countries that
allow child labor?
A) MNEs have a positive influence on government employment policies in most foreign
countries.
B) Many MNEs have substantially improved the working conditions of their foreign plants.
C) MNEs are required to pay child workers more than local companies.
D) Most MNEs employ local managers to handle cultural differences.
Answer: B
Diff: 3
environment
Skill: Application
stakeholders
75) Which of the following best explains Nike's quick response to criticism of unfair
employment practices in developing countries?
A) retaining employees
B) improving public relations
C) addressing product safety concerns
D) cutting costs in order to improve profits
Answer: B
Diff: 3
Skill: Concept
stakeholders
23
76) Quantum Footwear is an MNE that manufactures inexpensive shoes. Quantum outsources
portions of its production to independent companies located in Bangladesh and India, where
child labor is common. Other clothing and footwear firms have recently faced criticism regarding
the use of child labor, and Quantum executives want to avoid similar problems. Which of the
following would be the best approach for Quantum?
A) improving conditions at the subcontract facilities
B) developing an external ethics code for foreign partners and letting them worry about
compliance
C) requiring local governments to alter their labor policies
D) leaving the market and focusing on domestic production
Answer: A
Diff: 3
environment
stakeholders
77) Quantum Footwear is an MNE that manufactures inexpensive shoes. Quantum outsources
portions of its production to independent companies located in Bangladesh and India, where
child labor is common. Other clothing and footwear firms have recently faced criticism regarding
the use of child labor, and Quantum executives want to avoid similar problems. Which of the
following guidelines enforced by Quantum would LEAST likely be supported by the
International Labor Organization?
A) establishing bridge schools
B) monitoring workplace safety
C) allowing children ages 10-15 to work a maximum of 4 hours per day
D) prohibiting abusive labor conditions
Answer: C
Diff: 3
stakeholders
78) According to the Ethical Trading Initiative, child labor cannot be used unless there are no
suitable alternatives for employees.
Answer: FALSE
Diff: 2
Skill: Concept
stakeholders
24
79) How can an MNE operating in a developing country have a positive influence on labor
policies? Illustrate your answer with an example.
Answer: MNEs operating in countries with very different labor policies succumb to the pressure
to simply leave the market. Usually, this turns out to be a shortsighted decision. Research shows,
for instance, that companies like Nike have substantially improved the conditions of workers in
overseas facilities.
Granted, MNEs are in no position to revolutionize the employment practices of the countries in
which they operate, but they can improve conditions at subcontract facilities and even influence
the guidelines set by other foreign investors. In the case of IKEA, carpets make up a small
percentage of sales, and it would have been easy to simply give up the product line and move out
of India. But officials at IKEA felt a responsibility to the children and decided to do as much as
possible to make a difference. As IKEA got more involved in India, it set up the IKEA
Foundation and partnered with UNICEF, contributing over $190 million in cash and in-kind
donations to UNICEF programs to help children and their families. IKEA's work with UNICEF
went beyond the issues of the supply chain and moved more into the humanitarian aspect of how
to help the children. The IKEA Foundation targets South Asia, especially India, because of its
supply chain issues, but it also targets that region because of the tremendous need that exists to
help the children.
Diff: 3
Skill: Application
stakeholders
80) Monique has recently been hired as an accounts supervisor at Ballston Enterprises. She
wants to understand Ballston's values and its expectations for employee behavior. Which of the
following would most likely provide Monique with this information?
A) mission statement
B) code of conduct
C) vision statement
D) employee contract
Answer: B
Diff: 2
Skill: Application
Objective: 5-9 Restate how codes of conduct can help MNEs respond to concerns by
stakeholders over responsible corporate behavior
25
81) Which of the following is NOT a likely reason for companies to act more ethically?
A) Consumer boycotts may result from unethical corporate behavior.
B) Irresponsible and unethical actions may lead to legal problems for MNEs.
C) Unethical or irresponsible behavior can negatively impact employee morale.
D) The company would like to raise its ranking on the Transparency International scale.
Answer: D
Diff: 3
Skill: Concept
82) A guideline for responsible action by a firm in its operations worldwide is a(n) ________.
A) code of conduct
B) corporate monitoring policy
C) education program
D) honor code
Answer: A
Diff: 1
Skill: Concept
83) The UN Global Compact is best described as a(n) ________.

A) corruption mandate
B) environmental initiative
C) external code of conduct
D) international trade guideline
Answer: C
Diff: 1
Skill: Concept
26
84) Which of the following is most important to the effectiveness of an internal code of conduct?
A) ensuring that employees understand the code by requiring confirmation in writing
B) paying bonuses to suppliers and distributors that agree to the code
C) relying on nonprofit NGOs to develop guidelines
D) adhering to industry standards and norms
Answer: A
Diff: 2
Skill: Concept
85) The UN Global Compact is a legally binding document that requires MNEs to establish
codes of conduct.
Answer: FALSE
Diff: 2
Skill: Concept
86) Studies indicate that employee morale is largely unaffected by a company's corporate
behavior.
Answer: FALSE
Diff: 1
Skill: Concept
87) An effective code of conduct reports results to external stakeholders.

Answer: TRUE
Diff: 1
Skill: Application
27
88) An internal code of conduct is a set of guidelines, recommendations, and rules issued by
entities within society but outside the firm with the intent of affecting the behavior of
international business entities in order to enhance corporate responsibility.
Answer: FALSE
Diff: 1
Skill: Concept
89) The creation of a code of conduct includes steps such as establishing a global policy,
communicating the code to employees, ensuring that the policies are followed, and reporting
results to external stakeholders.
Answer: TRUE
Diff: 1
Skill: Concept
90) HIV/AIDS is affecting the operations of Anglo American PLC by forcing the company to
invest outside of South Africa to avoid having to deal with workforce health issues.
Answer: FALSE
Diff: 2
environment
Skill: Concept
28
91) What motivations do companies have to act responsibly? How can codes of conduct help
firms to act ethically?
Answer:
a. Unethical and irresponsible behavior could result in legal sanctions, especially in the areas of
bribery and product safety.
b. Unethical and irresponsible behavior could also result in consumer boycotts.
c. Unethical behavior can affect employee morale. Good behavior can positively influence both
the workers in the developing countries as well as those in corporate headquarters back home
who are proud of their company's behavior.
d. Companies never know when bad publicity is going to cost them sales. A major component
of most companies' strategies for ethical and socially responsible behavior is a code of conduct.
External codes of conduct are useful only insofar as they give companies some general guidance
on how to operate.
The practical challenge for the company is familiarizing itself with the codes of many different
organizations and using them to fashion its own internal code of conduct. A code of conduct that
is clearly communicated to all employees, suppliers, and subcontractors should provide global
policies that help guide decisions.
Diff: 3
Skill: Synthesis
29

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International Business: Environments and Operations, 16e (Daniels et al.

5) Which stakeholder group is most interested in trustworthy behavior by corporate executives

54) The OECD Convention against bribery is an example of a(n) ________.

67) Governmental agencies and nongovernmental organizations monitor the behavior of

72) The Ethical Trading Initiative (ETI) is primarily focused on ________.

83) The UN Global Compact is best described as a(n) ________.

87) An effective code of conduct reports results to external stakeholders.

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