Chapter 7: Common Unethical Practices of Business Establishment

REVIEW QUESTIONS

1. What are the two most common types of unethical practices of business establishments as far as
the products or customers are concerned?

The most common types of unethical practices of business establishments are misrepresentation and
over-persuasion.

2. Give and explain briefly at least three ways of directly misrepresenting products.

 Deceptive Packaging – establishing a notion wherein the consumers will see any development to
either the size or weight but without any change in its price.
 Adulteration – corrupting a genuine commodity by imitating or adding something to increase its
bulk volume or even by substituting an inferior product for a superior one for the purpose of
gaining profit.
 Short numbering – giving the buyer a quantity less than what he has paid for

3. How is indirect misrepresentation of a product undertaken?

Indirect misrepresentation of a product is undertaken by omitting adverse or unfavorable information

about the product or service.

4. What does “caveat emptor” mean?

Caveat emptor is another term for “let the buyer beware”.

5. When does over-persuasion become unethical?

Over-persuasion become unethical from the moment the persuasion is used just for the sole benefit of
selling a product without taking into consideration the interest of the consumer.

6. What is “inter-locking directorship” and why could it lead to unethical actions of a member of the
board of directors?

Inter-locking directorship refers to the situation in which a member of the board of directors of one
corporation also serves as a member of the board of directors of another corporation. Moreover, since
such member serves two corporations, it could lead to unethical actions. Accordingly, if such member
practiced disloyal selling, he betrays the trust reposed on him by the shareholders of either of the two
corporations.

7. Insider trading is considered an unethical practice. Why?

 Insider trading is the illegal practice of trading to one's own advantage through having access to
confidential information. And such is unethical because it is contrary to principles under personal,
professional, and business ethics such as fairness, professional behavior and competence,
confidentiality, and integrity.

8. What are some of the unethical practices that executive officers may be guilty of?

 Claiming a vacation trip to be a business trip.

 Having employees do work unrelated to the business.
 Loose or ineffective controls.
 Unfair labor practices.
 Making false claims about losses to free themselves from paying the compensation and benefits
provided by law.
 Making employees sign documents showing that they are receiving fully what they are entitled to
under the law when in fact they are obly receiving a fraction of what they are supposed to get.
 Sexual harassment.

9. Cite some of the unethical practices of employees to their employers.

 Conflict of interest such as when the employee uses or disclose confidential company
information for his or someone else’s gain or when the employee engages in the same tye of
business as his employer.

 Dishonesty such as taking credit for another employee’s idea or taking office supplies home for
personal use.

10. Distinguish between direct misrepresentation and indirect misrepresentation.

Direct misrepresentation is when the business actively misrepresenting about the product or customers
while indirect misrepresentation is when the business omits adverse or unfavorable information about
the product or service.

MULTIPLE CHOICES

1. D
2. D
3. D
4. B
5. D
6. D
7. A