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Chapter 5—Managing Ethics and Social Responsibility
TRUE/FALSE
1. A public poll finds that 79 percent of respondent believe questionable business practices are
widespread.
ANS: T PTS: 1 DIF: 2 REF: 129

NAT: AACSB Analytic | Ethical Responsibilities TYP: F
2. The domain of codified law pertains to behavior about which the law has no say and for which an
individual or organization enjoys complete freedom.
ANS: F PTS: 1 DIF: 1 REF: 130

NAT: AACSB Ethics | Ethical Responsibilities TYP: F
3. Ethics, found between the domains of law and free choice, is the code of moral principles that
governs any individual or groups.

4. Free choice lies between the domains of codified law and ethics.

5. If something is ethical, it must not be illegal.

6. An ethical dilemma arises in a situation when each alternative choice or behavior is undesirable
because of potentially harmful ethical consequences.
138
Chapter 5/Managing Ethics and Social Responsibility 139

7. The moral agent is an individual who must make an ethical choice in an organization.

8. Utilitarian, individualism, moral-rights, and objective dualism are the four approaches that guide
ethical decision-making.

9. The basis for the recent trend among companies to police employee personal habits such as alcohol
and tobacco consumption on the job is called the utilitarian ethic.

10. Monitoring the Internet to maintain the company's ethical climate and workplace productivity
could be considered part of an individualistic approach.

11. The ethical concept that acts are moral when they promote the individual's best long term interests,
which ultimately leads to the greater good, is known as the moral rights approach.

12. The ethical concept that argues that moral behaviors produce the greatest good for the greatest
number of people is objective dualism.

13. In the individualism approach, the right of free speech must be considered.

14. Individualism is popular in the highly organized society of today because it supports immediate
self-gain.

140 Chapter 5/Managing Ethics and Social Responsibility
15. The right of free consent, the right to privacy, and the right of freedom of conscience are rights that
should be considered in the moral rights approach.

16. Procedural justice requires that different treatment of people not be based on arbitrary
characteristics.

17. The justice approach is closest to the thinking underlying the domain of free choice.

18. Procedural justice requires that rules be stated clearly, consistently and impartially enforced, and
administered fairly.

19. The Preconventional level of Personal Moral Development lives up to expectations of others,
upholds laws, and fulfills duties and obligations of the social system.

20. Level 3 of the Personal Moral Development model is Conventional.

21. Most of the laws guiding human resource management are based on the individualism approach.

22. Individuals, at the preconventional level, are concerned with external rewards and punishments and
obey authority to avoid detrimental personal consequences.

23. Individuals are concerned with external rewards and punishments at the principled level.

24. An individual at the postconventional level lives up to expectations of others, fulfills duties and
obligations of social systems, and upholds law.

25. Principled level of moral development is also referred to as the postconventional level.

26. The majority of managers operate at the preconventional level of personal moral development.

27. Approximately 20% of American adults, according to your text, ever reach the postconventional
level of moral development.

28. The great majority of managers operate at level two, the conventional level.

29. MANAGER'S SHOPTALK in Chapter 5 recommends that when challenging your boss on ethical
issues you do not demand a resolution on the spot.

30. The NEW MANAGER SELF-TEST in Chapter 5 suggests that displaying courage in a group
situation often reflects a person's level of moral development.

31. Businesses based in countries such as Russia and China, according to a study by Transparency
International, were found to be using bribes on an exceptional scale.

32. Social responsibility is management's obligation to make choices and take actions that will
contribute to the welfare and interests of society as well as the organization.

33. France is ranked number 1 on the Transparency International Bribe Payers Index.

34. Social responsibility covers a narrow range of issues, many of which are unambiguous with respect
to right or wrong.

35. Important stakeholders in corporations include the government and the community.

36. A stakeholder is any group within or outside the organization that has a stake in the organization's
performance.

37. All stakeholders of an organization are its stockholders but not all stockholders are its stakeholders.

38. Special interest groups include trade associations, political action committees and consumerists.

39. The bottom of the pyramid concept proposes that corporations can alleviate poverty and other
social ills by selling to the world's poorest people.

40. Advocates of bottom-of-the-pyramid thinking believe it does not work because corporations do not
have a heart.

41. Economic development that generates wealth and meets the needs of the current population while
preserving the environment for the needs of future generations refers to sustainability.

42. Surveys show that American consumers find nonprofit green groups more credible than businesses.

43. Economic, legal, ethical, and discretionary responsibilities are the four areas of social responsibility
which can be used to evaluate corporate social performance.

44. Economic responsibility defines what society deems as important with respect to appropriate
corporate behavior.

45. Ethical responsibility includes behaviors that are not necessarily codified into law and may not
serve the corporation's direct economic interests.

46. Ethical behavior occurs when decisions enable an individual or company to gain at the expense of
society.

47. Unfortunately, discretionary responsibility is involuntary and is mandated by economics, law, or

ethics.

48. A formal statement of the organization's values regarding moral principles and governing its
response to social values is called a code of ethics.

49. Managers who are essentially ethical individuals make up the first pillar of an ethical organization.

50. Principle-based statements define fundamental values and contain general language about company
responsibilities, quality of products, and treatment of employees.

51. Policy-based statements generally outline the procedure to be used in specific ethical situations.

52. One of the newest positions in organizations is the chief ethics officer, a response to widespread
financial wrongdoing in recent years.

53. A group of executives appointed to oversee company ethics is an ethics committee.

54. A chief ethics officer is a company executive who oversees all aspects of ethics and legal
compliance.

55. Ethics training programs are not an important supplement as long as a well-written code of ethics
exists.

56. The disclosure by an employee of illegal, immoral, or illegitimate practices by the organization is
called whistle-blowing.

57. The Sarbanes-Oxley Act provides some safety for whistle-blowers.

58. Managers are often concerned good citizenship will hurt performance.

MULTIPLE CHOICE
1. Which of the following refers to the code of moral principles and values that govern behaviors with
respect to what is right and wrong?
a. Social responsibility
b. Free domain
c. Ethics
d. Codified law
e. Discretionary responsibility
ANS: C PTS: 1 DIF: 1 REF: 130
NAT: AACSB Analytic | Ethical Responsibilities TYP: F
2. An organization's decision to produce a new product is in the

a. domain of codified law.
b. domain of free choice.
c. domain of ethics.
d. domain of compensatory justice.
e. domain of social responsibility.
ANS: B PTS: 1 DIF: 2 REF: 130
NAT: AACSB Ethics | Ethical Responsibilities TYP: A
3. The decision by the CSX to downsize and reduce its labor force is in the
a. domain of codified law.
b. domain of free choice.
c. domain of ethics.
d. social responsibility.
e. none of these.
4. A new drug has not been approved by the FDA to sell in the U.S. because further testing is needed.
The company has a chance to sell its product in another country immediately to start recovering the
costs of R & D and production three years ahead of time. This example places the decision in
which of the categories from the text?
a. The ethical domain
b. The domain of free choice
c. The legal domain
d. The obstructive category
e. The protective domain
ANS: A PTS: 1 DIF: 3 REF: 130
5. Which of the following is a(n) is the individual who must make an ethical choice in an
organization?
a. The symbolic leader
b. An obstructive manager
c. The defensive individual
d. The moral agent
e. An authoritarian manager
ANS: D PTS: 1 DIF: 1 REF: 131
6. Sharon is a manager at Softest Tissue Corporation. She is faced with an interesting problem. One
of her employees has been cheating the company out of expense money. Sharon must decide
whether or not to fire this employee. In this role, Sharon is acting as
a. a moral agent.
b. an ethical theorist.
c. a symbolic leader.
d. an authoritarian leader.
e. an obstructive manager.
7. The assumption that "If it's not illegal, it must be ethical," ignores which of the following?
a. Domain of codified law
b. Domain of ethics
c. Domain of free choice
d. Discretionary responsibility
e. Domain of symbolism
8. A situation that arises when all alternative choices or behaviors have been deemed undesirable
because of the potentially negative ethical consequences, making it difficult to distinguish right
from wrong, is considered
a. a moral agent.
b. a social responsibility.
c. an ethical dilemma.
d. an ethical standard.
e. discretionary responsibility.
9. A normative approach to ethical decision making

a. reduces ethical dilemmas to easy-to-understand formulas.
b. uses various approaches to describe guiding values for decisions.
c. states that everyone must use their employer's value system at work.
d. dictates only one way to choose to resolve dilemmas.
e. none of these.
10. Which approach is the ethical concept that moral behaviors produce the greatest good for the
greatest number?
a. Defensive
b. Justice
c. Utilitarian
d. Individualism
e. Moral-rights
11. Robbie's Robots decided to continue operations at one plant while shutting down another. The
decision was justified on the basis of what was best for the total corporation. This is an example of
the
a. utilitarian approach.
b. individualism approach.
c. moral-justice approach.
d. justice approach.
e. illegal approach.
12. Caleb is a manager at Computer-Care Company. He is expected to consider the effort of each
decision alternative on all parties and select the one that optimizes the satisfaction for the greatest
number of people. This is an example of the
c. moral-justice approach.
e. soft-line managerial approach.
13. Which ethical approach are companies citing to justify their policing of employee's personal habits
on and off the job, such as alcohol and tobacco consumption?
a. Justice approach
b. Utilitarian approach
c. Individualism approach
d. Moral-justice approach
e. Discretionary responsibility
14. The ____ ethic was the basis for the state of Oregon's decision to extend Medicaid to 400,000
previously ineligible recipients by refusing to pay for high-cost, high-risk procedures.
a. justice
b. moral-rights
c. obstructive
d. individualism
e. utilitarian
ANS: E PTS: 1 DIF: 2 REF: 132
15. When everyone is pursuing self-direction, the greater good is ultimately served because people
learn to accommodate each other in their own long-term interest is an example of ____.
a. utilitarian approach
b. individualism approach
c. moral-justice approach
d. justice approach
e. social responsibility
16. Which of the following is NOT a normative ethics approach?

a. Utilitarian approach
b. Individualism approach
c. Social responsibility approach
d. Moral-rights approach
e. All of these are normative approaches as described in the text.
17. The golden rule "do unto others as they would do unto you" is
a. an example of the utilitarian approach to ethical behavior.
b. representative of the moral-justice approach to moral decision making.
c. an example of the values that guide the individualism approach to ethical behavior.
d. silly and outdated.
e. an example of the justice approach to ethical behavior.
18. Human beings have fundamental rights and liberties that cannot be taken away by another
individual's decision. This ethical decision making approach is known as the
c. moral-rights approach.
d. dualism approach.
e. None of these.
19. The ____ refers to the ethical concept that moral decisions are those that best maintain the rights of
those people affected by them.
a. individualism approach
b. justice approach
c. utilitarian approach
d. moral-rights approach
e. discretionary responsibility approach
20. Which of the following is NOT one of the moral rights that could be considered during decision-
making?
a. The right to free consent
b. The right to invade privacy
c. The right to free speech
d. The right of freedom of conscience
e. The right to life and safety
21. ____ refers to the concept that different treatment of people should not be based on arbitrary
characteristics.
a. Procedural justice
b. Compensatory justice
c. Distributive justice
d. Organizational justice
e. Moral-justice
22. Individualism is most closely related to

a. social responsibility.
b. free choice.
c. economic responsibility.
d. codified law.
e. togetherness.
23. ____ to ethical decision-making is consistent with due process, free consent, privacy, freedom of
conscience and free speech.
a. Moral-rights approach
b. Individualism approach
c. Utilitarian approach
d. Justice approach
e. Dual-economic approach
24. Sexual harassment is unethical because it violates an important part of which approach to ethical
behavior?
a. The utilitarian approach
b. The individualism approach
c. The justice approach
d. The moral-rights approach
e. The defensive approach
25. The ethical decision approach that requires persons to be guided by standards of equity, fairness
and impartiality is the
a. moral-rights approach.
c. utilitarian approach.
e. discretionary responsibility.
26. The moral rights approach that deals with individuals refraining from carrying out any order that
violates their moral or religious norms is the
a. right of free consent.
b. right to privacy.
c. right of freedom of conscience.
d. right of free speech.
e. right of due process.
27. Sexual harassment is unethical because it violates the

a. right of free consent.
b. right to privacy.
c. right of freedom of conscience.
d. right of free speech.
e. right of due process.
28. Which of the following is not a concern to managers under the justice approach?
a. Compensatory justice
b. Distributive justice
c. Procedural justice
d. Obstructive justice
e. All of these
29. Disk Replacement Services has just completed a procedure manual to handle employee grievances.
One of the main criteria is to make it clear to employees that rules will be administered fairly and
consistently. Disk Replacement operates on
a. the procedural justice approach.
b. the utilitarian approach.
c. the individual approach.
d. the defensive approach.
e. the free-choice approach.
30. Which of these refers to procedural justice?

a. The concept that different treatment of people should not be based on arbitrary
characteristics
b. The concept that rules should be clearly stated and consistently and impartially enforced
c. The concept that individuals should be compensated for the cost of their injuries by the
party responsible
d. The concept that people should be treated differently
e. None of these
31. The concept that the party responsible should compensate individuals for the cost of their injuries is
referred to as
a. distributive justice.
b. injury justice.
c. procedural justice.
d. organizational justice.
e. compensatory justice.
32. The thinking underlying the domain of ____ is the closest to the justice approach.
a. social responsibility
b. free choice
c. law
d. discretionary responsibility
e. ethics
33. Most of the laws guiding human resource management are based on the
b. moral-rights approach.
c. individualism approach.
e. collectivism approach.
34. ____ is NOT included in the model of personal moral development described in your text.
a. Preconventional level
b. Conventional level
c. Principled level
d. Postconventional level
e. All of these are included in the model
35. In what stage of personal moral development is a person mostly concerned with external rewards
and personal consequences of an action?
a. Preconventional
b. Conventional
c. Principled
d. Discretionary
e. None of these
36. Most people have learned to conform to expectations of good behavior expected by colleagues,
family, friends, and society. They are in what stage of moral development?
a. Preconventional
b. Conventional
c. Discretionary
d. Principled
e. Traditional
37. Which of these best illustrates the preconventional stage of moral development?
a. Everybody else is doing it, so it must be okay.
b. What would my boss think if I did this?
c. I know this is not right, and I will not do it, even if everyone else is.
d. What am I going to get from making this decision?
e. All of these
38. The conventional stage of moral development is best described by which of the following
statements?
a. I won't do that because the boss will be upset with me.
b. Everybody else is doing it, so it must be okay.
c. I know this is not right, and I will not do it, even if everyone else is.
d. What am I going to get from making this decision?
e. All of these
39. The ____ leadership style matches with the preconventional level of personal moral development.
a. autocratic
b. team oriented
c. servant leadership
d. guiding/encouraging
e. transforming
40. ____ matches with the preconventional level of personal moral development.
a. Work group collaboration
b. Task accomplishment
c. Empowered employees
d. Full participation
e. Transforming
41. Which of these employee behaviors matches with the conventional level of personal moral
development?
a. Task accomplishment
b. Empowered employees
c. Work group collaboration
d. Full participation
e. Act in own interest
42. Which of the following stages is the stage of personal moral development in which an individual
develops an internal set of standards and values?
a. Preconventional
b. Conventional
c. Principled
d. Discretionary
e. Social
43. People making decisions based on an internal set of beliefs that has more meaning to them than the
expectations of others
a. are in the preconventional level of moral development.
b. are in the conventional level of moral development.
c. are in the principled level of moral development.
d. do not care what people think of them.
e. none of these.
44. ____ matches with the postconventional level of personal moral development.
a. Team oriented
b. Autocratic
c. Guiding/encouraging
d. Coercive
e. Servant leadership
45. Which of these employee behaviors matches with the postconventional level of personal moral
development?
a. Empowered employees, full participation
b. Task accomplishment
c. Act in own interest
d. Work group collaboration
e. Autocratic
46. The great majority of managers operate at the

a. preconventional level.
b. principled level.
c. conventional level.
d. postconventional level.
e. autocratic level.
47. Only about ____ percent of American adults reach the level-three stage of moral development.
a. two
b. four
c. eleven
d. fifteen
e. twenty
48. Regarding the levels of personal moral development, the majority of managers operate at the ____
level.
a. preconventional
b. autocratic
c. postconventional
d. conventional
e. transformative
49. MANAGER'S SHOPTALK in Chapter 5 suggests all of the following when challenging the boss
on ethical issues EXCEPT:
a. do your research
b. begin the meeting by taking the floor
c. pay attention to your word choice and demeanor
d. take care how you suggest your alternative solution
e. be patient
50. The obligation of organization management to make decisions and take actions that will enhance
the welfare and interests of society as well as the organization is referred to as
a. organizational responsibility.
b. social responsibility.
c. discretionary responsibility.
d. economic responsibility.
e. none of these.
51. Which of these is true about the policy a bank adopts toward its investing of depositor's money?
a. It is an expression of its philosophy of social responsibility.
b. It is important only to the community.
c. It has no ethical implications.
d. It would represent its personal state of moral development.
e. All of these.
52. Which of the following countries is ranked in the top three for their low propensity to pay bribes?
a. Russia
b. Mexico
c. France
d. Sweden
e. United States
53. Any group within or outside the organization that has a stake in the organization's performance is
called
a. a supplier.
b. an international customer.
c. a stakeholder.
d. OPEC.
e. a trade association.
54. Primary stakeholders of an organization include

a. employees.
b. customers.
c. investors and shareholders.
d. suppliers.
e. all of these.
55. An organization's performance affects stakeholders, but stakeholders can also have a tremendous
effect on the organization's ____.
a. performance and success
b. profitability and perception
c. bottom-line development and Greenfield growth
d. competitive intelligence and top-line performance
e. effectiveness and domestic affordability
56. All of the following are examples of special interest groups EXCEPT
a. professional associations.
b. trade associations.
c. political action committees.
d. courts.
e. consumerists.
57. What type of a stakeholder would a nature conservation group be for a paper manufacturing
company?
a. Supplier
b. Competitor
c. Employee
d. Special interest group
e. None of these
58. Which of the following concepts proposes that corporations can alleviate poverty and other social
ills, as well as make significant profits, by selling to the world's poorest people?
a. The foundation concept
b. The bottom of the pyramid concept
c. The poverty concept
d. The social class concept
e. The hierarchy of needs concept
59. With a philosophy of ____, managers weave environmental and social concerns into every strategic
decision, revise policies and procedures to support these efforts and goals.
a. sustainability
b. conservation
c. ethics
d. preservation
e. human concerns
60. ____ is economic development that generates wealth and meets the needs of their current
generation while focusing on future generations.
a. Ethical management
b. Activist strategy
c. Sustainability
d. Market strategy
e. Future management
61. Which of the following concepts argues that organizations can find innovative ways to create
wealth at the same time they are preserving natural resources?
a. Preservation
b. Conservation
c. Environmentalism
d. Protectionism
e. Sustainability
62. According to the book's model for judging corporate social performance, social responsibility is
divided into what into four sections?
a. Ethical, legal, technical, and rational
b. Mandatory, technical, discretionary, and economic
c. Legal, mandatory, economic, and ethical
d. Discretionary, legal, economic, and ethical
e. None of these
63. ____ is considered a decision that enables an individual or company to benefit at society's expense.
a. A legal behavior
b. An unethical behavior
c. An economic responsibility
d. A discretionary responsibility
e. A responsible behavior
64. ____ includes behavior that is not always written down and may actually not serve an
organization's bottom-line.
a. Legal responsibility
b. Economic responsibility
c. Ethical responsibility
d. Discretionary responsibility
e. None of these
65. With respect to appropriate corporate behavior, what society deems ____ as important.
a. ethical responsibility
b. discretionary responsibility
c. economic responsibility
d. legal responsibility
e. moral responsibility
66. Which of the following responsibilities is purely voluntary and is guided by a company's desire to
make social contributions not mandated by economics, law, or ethics?
a. Ethical
b. Economic
c. Legal
d. Discretionary
e. Stakeholder
67. ____ is the responsibility that goes beyond societal expectations to contribute to the community
welfare.
a. Ethical responsibility
b. Discretionary responsibility
c. Economic responsibility
d. Legal responsibility
e. Technical responsibility
68. ____ means that managers are honest and trustworthy, fair in their dealings with employees and
customers, and behave ethically in both their personal and professional lives.
a. Ethical leadership
b. Followership
c. Corporate espionage
d. Command-and-control approach
e. Concern for production leadership
69. A code of ____ is a formal statement of the company's values concerning ethics and social issues.
a. integrity
b. trust
c. citizenship
d. ethics
e. honesty
70. Statements that define fundamental values and reference organizational responsibilities, products
and employees are often called ____.
a. principle-based
b. policy-based
c. ethically-based
d. codified
e. codes of organizational integrity
71. An example of an ethical structure is

a. chief ethics officer.
b. a formal statement of company values.
c. an equal opportunity policy.
d. whistle-blowing.
e. corporate speech.
72. When an official is given the responsibility of overseeing all aspects of ethics and legal
compliance. S/he is referred to as
a. a whistle-blower.
b. a chief ethics officer.
c. vice-president of human resource management.
d. a yes-man.
e. a political play.
73. Which of these is the disclosure by an employee of an illegal activity?

a. Tattling
b. Whistle-blowing
c. Organizational communication
d. The filing of a disclosure statement
e. Snooping
74. ____ is not part of the structures and systems pillar of an ethical organization.
a. Corporate culture
b. Code of ethics
c. Ethics committee
d. Whistle-blowing mechanisms
e. Rewarding ethical behavior
75. Many stakeholders are requiring organizations to report the triple bottom line, which refers to
____, ____, and ____.
a. economic, social, environmental
b. economic, environmental, ethical
c. environmental, social, ethical
d. social, economic, ethical
e. ethical, environmental, legitimate
76. The relationship between social responsibility and financial performance has been shown to be
____.
a. non-existent
b. positive
c. negative
d. not important
e. a reflection of top leadership
CASE
Scenario - Larry Campbell
The pressure was on again. Larry Campbell, the Vice President at ToolTime Hardware, Inc., was
receiving requests from men and women inside the firm and outside the firm, asking him to review
the company's promotion policies. Of the 52 middle and high level executives, only three were
women. The pressure was to review the policies that had led to this perceived imbalance and, if
appropriate, take the steps necessary for correction.
1. The decision to recruit, hire, train and promote both men and women equally is based on the ethical
approach of
c. moral rights approach.
d. all of these provide the basis.
e. none of these.
ANS:
d
PTS: 1 DIF: 2 REF: 132-133

NAT: AACSB Ethics | Ethical Responsibilities KEY: Scenario Questions
TYP: A
2. Using the justice approach for ethical decision-making, the logic of promoting qualified men and
women would be supported by
a. equal rights justice.
b. distributive justice.
c. procedural justice.
d. compensatory justice.
e. all of these.
ANS:
b
PTS: 1 DIF: 2 REF: 133

TYP: A
3. A(n) _______ would outline the procedures Larry should use in this and other ethical situations.
a. principle-based statement
b. code of ethics
c. corporate credo
d. policy-based statement
e. ethics committee
ANS:
d

TYP: A
COMPLETION
1. ____________________ is the code of moral principles and values that govern the behaviors of a
person or group with respect to what is right or wrong.
ANS: Ethics

2. When values and standards are written into the legal system, it is referred to as
____________________.
ANS: codified law

3. A(n) ____________________ arises in a situation when each alternative choice or behavior is

undesirable because of potentially harmful ethical consequences.
ANS: ethical dilemma

4. The ____________________ is an individual responsible for making an ethical choice.
ANS: moral agent

5. The ethical concept that moral behaviors produce the greatest good for the greatest number is
referred to as ____________________ approach.
ANS: utilitarian

6. The ____________________ approach contends that acts are moral when they promote the
individual's best long-term interests.
ANS: individualism

7. The ____________________ approach assets that human beings have fundamental rights and
liberties that cannot be taken away by an individual's decision.
ANS:
moral-rights
moral rights

8. The ____________________ approach holds that moral decisions must be based on standards of
equity, fairness, and impartiality.
ANS: justice

9. ____________________ justice requires that different treatment of people not be based on

arbitrary characteristics.
ANS: Distributive

10. ____________________ justice requires that rules should be clearly stated and consistently and
impartially enforced.
ANS: Procedural

11. ____________________ justice argues that individuals should be compensated for the cost of their
injuries by the party responsible.
ANS: Compensatory

12. At the ____________________ level of personal moral development, individuals are most
concerned with external rewards and punishments.
ANS: preconventional

13. People learn to conform to the expectations of good behavior that are set by peers and society at the
____________________ level.
ANS: conventional

14. Individuals at the ____________________ level are guided by an internal set of values and
standards and will even disobey rules or laws that violate these principles.
ANS: postconventional principled

15. Most managers operate at the ____________________ level.
ANS:
conventional
second

16. Management's obligation to make choices that will contribute to the well being of both the
organization and society is known as ____________________.
ANS: social responsibility

17. A(n) ____________________ is any group within or outside the organization that has a stake in the
organization's performance.
ANS: stakeholder

18. Organizations that are ____________________ responsible consider the effects of their actions on
all stakeholder groups and may invest in a number of philanthropic causes that benefit
stakeholders.
ANS: socially

19. ____________________ refers to interacting with the community in which a company does
business in a way that makes money for the company but also improves the long-term well-being
of the community.
ANS: social sustainability

20. When a company does just what is necessary to satisfy legal requirements, it falls under the
____________________ approach in shades of green.
ANS: legal

21. ____________________ responsibility is purely voluntary and guided by a company's desire to

make social contributions not mandated by economics, law, or ethics.
ANS: Discretionary

22. A(n) ____________________ is a formal statement of the company's values concerning ethics and
social issues; it communicates to employees what the company stands for.
ANS: code of ethics

23. ____________________ generally outline the procedures to be used in specific ethical situations,
such as marketing practice, conflicts of interest, and observance of laws.
ANS: Policy-based statements

24. A group of executives assigned to oversee the organization's ethics by ruling on questionable issues
and disciplining violators is referred to as a(n) ____________________.
ANS: ethics committee

25. ____________________ programs help employees deal with ethical questions and translate the
values stated in a code of ethics into everyday behavior.
ANS: Ethics training

26. Employee disclosure of illegal organization activities is known as ____________________.
ANS: whistle-blowing

27. The relationship between social responsibility and financial performance has been shown to be
____________________.
ANS: positive

SHORT ANSWER
1. List the four criteria for ethical decision-making described in the book.
ANS:
Utilitarianism, individualism, moral-rights, and justice.

2. List three of the six moral rights that should be considered during decision making.
ANS:
Students can list any three of the following: the right of free consent, the right to privacy, the right
of freedom of conscience, the right of free speech, the right to due process, and the right to life and
safety.

3. List three examples of primary stakeholders.
ANS:
Investors, shareholders, employees, customers, and suppliers are all examples of primary
stakeholders.

4. List the four responsibilities of corporate social performance.
ANS:
economic responsibility, legal responsibility, ethical responsibility, and discretionary responsibility

ESSAY
1. Define ethics and explain how the domain of ethics relates to law and free choice.
ANS:
Ethics is the code of moral principles and values that govern the behaviors of a person or a group
with respect to what is right or wrong. In Codified Law, the values and standards are written into
the legal system and enforceable in the courts. In free choice, the law has no say and the individual
or group has complete freedom. The domain of ethics is found between Codified Law and free
choice. While written laws do not bind ethics, still there are standards of conduct based upon
shared principles and values.
PTS: 1 DIF: 2 REF: 130-131

2. List the four approaches that are used to describe values for guiding ethical decision making.
Briefly describe each.
ANS:
Utilitarian approach is the ethical concept that moral behaviors produce the greatest good for the
greatest number.
Individualism approach is the ethical concept that acts are moral when they promote the
individual's best long-term interests. This will eventually lead to the greatest good.
Moral-rights approach is the ethical concept that moral decisions are those that best maintain the
rights of those people affected by them.
Justice approach is the ethical concept that moral decisions must be based on standards of equity,
fairness, and impartiality.
PTS: 1 DIF: 2 REF: 132-134

3. Briefly explain the justice approach to ethics and then explain the three types of justice.
ANS:
The justice approach is the ethical concept that moral decisions must be based on standards of
equity, fairness, and impartiality. Distributive justice requires that different treatment of people be
based only on substantive differences and not be based on arbitrary characteristics. Procedural
justice requires that all rules be administered fairly. Rules should be clearly stated and consistently
enforced. Compensatory justice requires that individuals should be compensated for the cost of
their injuries by the party responsible and that individuals not be held responsible for matters over
which they have no control.
PTS: 1 DIF: 2 REF: 133-134

4. List and define the stages of moral development.
ANS:
According to the model in the book, there are three stages of moral development. During the
preconventional stage (level 1), individuals are mostly concerned with external rewards and
punishments. They obey authority in order to avoid punishment. Individuals conforming to the
expectations of others characterize the second level, the conventional stage. Fulfilling social and
interpersonal obligations is important. At the postconventional/principled stage (level 3), an
individual's behavior is directed by an internal set of values and beliefs. These values are more
important than the expectations of others.
PTS: 1 DIF: 2 REF: 134-135

5. What is social responsibility? Why is it considered a difficult concept to grasp?
ANS:
Social responsibility is management's obligation to make choices and take actions that will
contribute to the welfare and interests of society as well as the organization.
It can be a difficult concept to grasp because different people have different beliefs as to what will
improve society's well being and it covers a range of ambiguous issues with respect to right or
wrong.

6. Explain the concept of a stakeholder and list five common stakeholders.
ANS:
A stakeholder is any individual or group of people, inside the organization or outside the
organization, that has a stake or direct interest in that organization's performance. Stakeholders
inside the organization include the employees, the managers, and the stockholders. Stakeholders
outside the organization include customers, suppliers, regulatory agencies, and creditors.

7. List and define the criteria of corporate social responsibility.
ANS:
There are four criteria of corporate social responsibility. The first criterion of social responsibility
is economic responsibility. The organization's basic responsibilities are to produce the goods and
provide the services that society wants, while at the same time maximizing profits and wealth for
owners and stockholders. The second criterion is legal responsibilities. Through its laws, each
society has defined what it considers to be appropriate corporate behavior. According to this
criterion, businesses are expected to fulfill their economic goals within the law. Ethical
responsibilities make up the third criterion. These include behaviors not necessarily codified into
law, nor do they necessarily serve the organization's direct economic interests. Discretionary
responsibilities, the fourth criterion, are entirely voluntary and are guided by the organization's
desire to make a social contribution not mandated by economics, law, and/or ethics.
PTS: 1 DIF: 3 REF: 142-143

8. Explain the differences between principle-based statements and policy-based statement in an

organization's code of ethics.
ANS:
Principle-based statement are designed to affect corporate culture; they define fundamental values
and contain general language about company responsibilities, quality of products, and treatment of
employees. General statements of principle are often called corporate credos. Policy-based
statements generally outline the procedures to be used in specific ethical situations. These
situations include marketing practices, conflicts of interest, observance of laws, proprietary
information, political gifts, and equal opportunities.
PTS: 1 DIF: 3 REF: 144-145


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Chapter 5—Managing Ethics and Social Responsibility

ANS: T PTS: 1 DIF: 2 REF: 129

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5. If something is ethical, it must not be illegal.

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20. Level 3 of the Personal Moral Development model is Conventional.

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47. Unfortunately, discretionary responsibility is involuntary and is mandated by economics, law, or

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53. A group of executives appointed to oversee company ethics is an ethics committee.

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