Chapter 4—The Institutionalization of Business Ethics

MULTIPLE CHOICE

1. Which of the following is not cited in your text as a dimension of the institutionalization of social
responsibility?
a. Voluntary responsibilities
b. Legal responsibilities
c. Core practices
d. Familial responsibilities
ANS: D PTS: 1
2. Which of the following 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
ANS: D PTS: 1
3. Which of the following 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
ANS: C PTS: 1

4. Which of the following, 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
ANS: E PTS: 1

5. The disposal of computer hardware is an ethical issue related to laws

a. promoting equity and safety.
b. protecting consumers.
c. protecting the environment.
d. regulating competition.
e. protecting business.
ANS: C PTS: 1
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
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 e. Requires greater transparency in financial reporting
ANS: B PTS: 1

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 philanthropic dimension
ANS: C PTS: 1

8. Corporate espionage is an ethical issue encountered in the

a. technological dimension.
b. legal dimension.
c. philanthropic dimension.
d. economic dimension.
e. competitive dimension.
ANS: E PTS: 1

9. Which of the following groups is not a group that receives special legal protections?
a. The elderly
b. Children
c. Teenagers
d. The highly educated
ANS: D PTS: 1

10. Of the laws promoting equity and safety in the workplace, which is probably the most important to
business?
a. Equal Pay Act
b. Americans with Disabilities Act
c. Title VII of the Civil Rights Act
d. Age Discrimination in Employment Act
e. Pregnancy Discrimination Act
ANS: C PTS: 1

11. ____ law defines the rights and duties of individuals and organizations (including businesses).
a. Civil
b. Criminal
c. Competitive
d. Administrative
e. Regulatory
ANS: A PTS: 1

12. ____ law not only prohibits specific actions such as fraud, theft, or securities trading violations, but
also imposes fines or imprisonment as punishment for breaking the law.
a. Civil
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from the U.S. Edition. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.
 b. Criminal
c. Competitive
d. Administrative
e. Regulatory
ANS: B PTS: 1

13. The primary methods for resolving conflicts and serious business ethics disputes is through
a. criminal law.
b. a Federal Trade Commission arbitration panel.
c. lawsuits using civil laws.
d. the Resolution Panel of the Department of Justice.
e. Better Business Bureaus.
ANS: C PTS: 1
14. ____ ties philanthropic giving to overall strategy and objectives.
a. Social responsibility
b. Business ethics
c. Corporate philanthropy
d. Strategic philanthropy
e. Deontological philanthropy
ANS: D PTS: 1
15. Anticompetitive strategies, which have spurred antitrust legislation, that focus on weakening or
destroying a competitor include all of the following except
a. sustained price cuts.
b. offering free samples.
c. discriminatory pricing.
d. price wars.
e. corporate espionage.
ANS: B PTS: 1

16. Which is not one of the four sources of criminal and civil laws cited in your text?
a. Zoological law
b. Common law
c. Constitutional law
d. Administrative law
e. Statutory law
ANS: A PTS: 1

17. Which of the following dimensions of business ethics involves business's contributions to the local
community and to society?
a. The philanthropic dimension
b. The economic dimension
c. The competitive dimension
d. The ethical dimension
e. The moral dimension
ANS: A PTS: 1
18. The primary objective of U.S. antitrust laws is to
a. protect consumers.
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from the U.S. Edition. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.
 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.
ANS: E PTS: 1

19. What is a primary reason why some communities resist the opening of large chain retailers like
Walmart or Home Depot?
a. Because large size creates economies of scale that all large retailers to charge lower prices
than small businesses
b. Because consumers do not like these stores
c. Because large retailers create too much traffic
d. Because they do not like the top management.
ANS: A PTS: 1

20. The most common way that businesses exercise their community responsibility is
a. by obeying the law.
b. by being ethical.
c. through fair competition.
d. through donations to local and national charitable organizations.
e. by hiring more women and minorities.
ANS: D PTS: 1

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. Oversight by high-ranking personnel
c. Communication system for disseminating standards and procedures
d. Monitoring and auditing systems designed to detect misconduct
e. Compliance with ISO 14000 guidelines
ANS: E PTS: 1

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
ANS: A PTS: 1
23. Which of the following is not a law protecting the environment?
a. Clean Air Act
b. National Environmental Policy Act
c. Federal Water Pollution Act
d. Toxic Substances Control Act
e. Occupational Safety and Health Act
ANS: E PTS: 1
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from the U.S. Edition. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.
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
ANS: E PTS: 1

25. Donation of computer equipment to schools by Dell would be associated with ____ responsibilities.
a. economic
b. philanthropic
c. legal
d. ethical
e. minimum
ANS: B PTS: 1

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. unethical conduct.
c. reporting transparency.
d. corporate espionage.
e. dual reporting.
ANS: A PTS: 1
27. Improving the quality of life, reducing government involvement, development of staff leadership
skills, and building staff morale are benefits provided by the ____ dimension.
a. economic
b. legal
c. ethical
d. philanthropic
e. social responsiveness
ANS: D PTS: 1

28. Companies that ____ will most likely be found in violation of precompetitive legislation.
a. pollute waterways
b. knowingly harm consumers
c. contract with sweatshops
d. establish monopolies
e. help consumers
ANS: D PTS: 1

29. The majority of executives and board members want to measure nonfinancial performance, but
a. employees do not want to sacrifice their work hours for this research.
b. no standards currently exist.
c. no company has enough resources to do so.
d. legislation prevents them from it
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from the U.S. Edition. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.
 e. None of these statements is correct.
ANS: B PTS: 1
30. The White-Collar Crime Penalty Enhancements Act of 2002
a. doubled the maximum amount of jail time for mail and wire fraud.
b. only penalizes the top executives in an organization.
c. is basically the same as the Sarbanes-Oxley Act.
d. discourages whistleblowers from reporting misconduct.
e. has been deemed largely ineffective.
ANS: A PTS: 1
31. Which of the following is not considered a gatekeeper as it relates to the financial meltdown of 2008-
2009?
a. Accountants
b. Lawyers
c. Financial rating companies
d. Financial reporting agencies
e. All of these are gatekeepers.
ANS: E PTS: 1

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 SEC
d. The DOA
e. Human Resources departments
ANS: A PTS: 1

33. A critical group of gatekeepers that bear responsibility for the 2008-2009 financial meltdown were the
a. risk assessors of financial products.
b. Republican party.
c. stock brokers.
d. bank tellers.
e. journalists.
ANS: A PTS: 1
34. Years before the 2008 financial meltdown, a major risk assessor realized there was a profound problem
with the financial markets risk decisions
a. because the risk assessment algorithms were flawed.
b. because of SEC investigations.
c. from watching television news financial experts.
d. because he did not trust Bernard Madoff .
e. no one realized there was a problem before 2008.
ANS: A PTS: 1
35. Part of the reason why credit ratings firms did not catch major problems was because they were paid
by the firms that they rank, which creates
a. economies of scale.
b. synergy.
c. a conflict of interest.
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 d. cooperation.
e. All of these statements are true.
ANS: C PTS: 1
36. Investigations into the financial rating industry found
a. analysts cut corners when faced with less time to perform due diligence.
b. their ratings were inaccurate.
c. that many high ratings were based on inadequate historical data.
d. that analysts were overwhelmed with the volume and complexity of trades.
e. All of these were factors.
ANS: E PTS: 1
37. Some argue that the Sarbanes-Oxley Act
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.
ANS: A PTS: 1

38. The key elements of an organizational culture include

a. values.
b. norms.
c. artifacts.
d. organizational behavior.
e. All of these are key elements of an organizational culture.
ANS: E PTS: 1
39. Which of the following provide incentives for developing core practices within a firm that could help
ensure ethical and legal compliance?
a. DOJ and OCEG Act
b. DOJ and Sarbanes-Oxley Act
c. FSGO and Sarbanes-Oxley Act
d. DOS and Sarbanes-Oxley Act
e. SEC and Sarbanes-Oxley Act
ANS: C PTS: 1
40. Laws and regulations change over time; however, in the U.S. 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 lessen or reduce competition and harm
consumers or society.
c. any practice is permitted that does not substantially harm consumers or society, but only
within the U.S.
d. any practice that does not harm the environment.
e. any practice is permitted that does not break the law.
ANS: B PTS: 1

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from the U.S. Edition. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.
ESSAY

41. Discuss several economic or other business ethical issues that may arise during a crisis or disaster,
such as the crisis on Wall Street of 2008, or some political or business disaster that has occurred in
your area.

ANS:
Pages 147-149

PTS: 1
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?

ANS:
Pages 147-149

PTS: 1

43. What ethical issues affecting consumers and society as a whole are created by unfair competition?

ANS:
Pages 150-152

PTS: 1
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?

ANS:
Students can draw from the entire chapter to answer this question.

PTS: 1 4

8
© 2011 Cengage Learning. All Rights Reserved. This edition is intended for use outside of the U.S. only, with content that may be different
from the U.S. Edition. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.