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Strategic Management and Business Policy, 14e (Wheelen)

Chapter 3 Ethics and Social Responsibility in Strategic Management

1. The theory of vital responsibility proposes that a private corporation has responsibilities to
society that extend beyond making a profit.
Answer: FALSE

2. Friedman referred to the social responsibility of business as a “fundamentally subversive


doctrine.”
Answer: TRUE

3. Archie Carrol contends that the primary goal of business is profit maximization.
Answer: FALSE

4. Archie Carroll proposes that managers in companies have only a discretionary responsibility.
Answer: FALSE

5. Legal responsibilities are defined by governments in laws that management is expected to


obey.
Answer: FALSE

6. The difference between ethical and discretionary responsibilities is that few people expect an
organization to fulfill ethical responsibilities.
Answer: FALSE

7. Being known as a socially responsible firm may provide a company with social capital, the
goodwill of key stakeholders, that can be used for competitive advantage.
Answer: TRUE

8. Discretionary responsibilities are voluntary obligations a corporation assumes.


Answer: TRUE

9. A study concerning social responsibility indicates that socially-responsible firms


are more likely to be welcomed into another country.
Answer: TRUE

10. Corporation stakeholders are all constituencies that are affected by the achievement of the
firm’s objectives.
Answer: TRUE

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11. In any one strategic decision, the interests of one stakeholder group can conflict with another.
Answer: TRUE

12. The first step in stakeholder analysis is identifying those who have only an indirect stake in the
corporation.
Answer: FALSE

13. Primary stakeholders have a direct connection with the corporation and have sufficient
bargaining to directly affect corporate activities.
Answer: TRUE

14. A company may have some stakeholders of which it is only marginally aware.
Answer: TRUE

15. There is no truth to the comment that “business ethics” is an oxymoron.


Answer: TRUE

16. Cultural norms and values can guide ethical behavior.


Answer: TRUE

17. “Let the buyer beware” is a traditional saying in free market capitalism.
Answer: TRUE

18. Relationship-based countries tend to be more transparent and have a lower degree of corruption
than do rule-based countries.
Answer: FALSE

19. Cultural relativism states that morality is relative to some personal, social, and cultural
standard.
Answer: FALSE

20. Kohlberg’s preconventional level is characterized by a person’s adherence to an internal moral


code.
Answer: FALSE

21. Moral relativism could enable a person to justify almost any sort of decision or action, so long
as it is not declared illegal.
Answer: TRUE

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22. According to Kohlberg’s levels of moral development, the conventional level is characterized
by considerations of society’s laws and norms.
Answer: TRUE

23. Kohlberg places 80 percent of U.S. adults in the principled level of development.
Answer: FALSE

24. A code of ethics denotes how employees should behave on the job.
Answer: TRUE

25. Research indicates that when faced with a question of ethics, managers tend to ignore codes of
ethics and try to solve their dilemma on their own.
Answer: TRUE

26. Law refers to formal codes that permit or forbid certain behaviors and may or may not enforce
ethics or morality.
Answer: TRUE

27. The justice approach to ethics proposes that actions and plans should be judged by their
consequences.
Answer: FALSE

28. A problem with the utilitarian approach to ethics is the difficulty in recognizing all the benefits
and the costs of any particular decision.
Answer: FALSE

29. The Golden Rule is the essence of one of Immanuel Kant’s approaches to resolving ethical
dilemmas.
Answer: TRUE

30. The concept that proposes corporations have responsibilities to society that extend beyond
making a profit is known as
a. flexible responsibility.
b. social responsibility.
c. social flexibility.
d. managerial responsibility.
e. Profit maximization

31. Which one of the following is NOT one of the arguments against social responsibility as used
by economist Milton Friedman?

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a. Spending money for social responsibility is spending the stockholder's money for a
general social interest.
b. Businesses can actually do very little in terms of social responsibility.
c. Spending money on social responsibility is acting from motives other than economic
and may, in the long-run, cause harm to the very society the firm is trying to help.
d. There is one and only one social responsibility of business -- to use its resources and
engage in activities designed to increase its profits so long as it stays within the rules of
the game.
e. Through taking on the burden of social costs, the organization becomes less efficient,
causing price increases or postponement of growth.

32. Who said that the social responsibility of business is a "fundamentally subversive doctrine" and
that the one social responsibility of business is "to use its resources and engage in activities
designed to increase its profits so long as it stays with the rules of the game..."?
a. Adam Smith
b. Edward Freeman
c. Archie Carroll
d. William C. Norris
e. Milton Friedman

33. Economist Milton Friedman has argued that a business's only responsibility is to
a. maximize profits and stay within the rules of the game.
b. sustain its market share.
c. promote the welfare of society.
d. satisfy its employees.
e. satisfy its customers.

34. According to Carroll, the responsibility that management of a business organization has to
produce goods and services of value to society so that the firm may repay its creditors and
stockholders is called
a. legal responsibilities.
b. ethical responsibilities.
c. financial responsibilities.
d. economic responsibilities.
e. discretionary responsibilities.

35. According to Carroll, the responsibilities defined by government in laws for management to
obey are
a. legal responsibilities.

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b. ethical responsibilities.
c. financial responsibilities.
d. economic responsibilities.
e. discretionary responsibilities.

36. According to Carroll, the responsibility that management of a business organization assumes
which are purely voluntary obligations are
a. legal responsibilities.
b. ethical responsibilities.
c. financial responsibilities.
d. economic responsibilities.
e. discretionary responsibilities.

37. The term "social responsibility" can be viewed as a combination of an


a. organization's ethical and discretionary responsibilities.
b. organization's legal and ethical responsibilities.
c. organization's economic and ethical responsibilities.
d. organization's financial and economic responsibilities.
e. organization's legal and discretionary responsibilities.

38. Which of the following is NOT one of the examples provided as an organizational benefit
received from being socially responsible?
a. They can attract outstanding employees who prefer working for a
responsible firm.
b. They are more likely to be welcomed into a foreign country.
c. They are more likely to attract capital infusions from investors who view
reputable companies as desirable long-term investment.
d. They are guaranteed to maximize resource productivity and reduce
the average payback period of investment.
e. Their environmental concerns may enable them to charge premium prices
and gain brand loyalty.

39. According to a recent Harris Poll what percentage of U.S. adults believe that U.S. corporations
owe something to their workers and the communities in which they operate and that they
should sometimes sacrifice some profit for making things better for their workers and
communities?
a. 95%.
b. 5%.
c. 50%.
d. 75%.

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e. 25%.

40. Which of the following statements is true concerning secondary stakeholder?


a. Secondary stakeholders are those who have only an indirect stake in the corporation,
but who are affected by corporate activities.
b. Secondary stakeholders usually include non-governmental organizations (like
Greenpeace) and trade associations.
c. Because the corporation’s relationship with each of these stakeholders is usually not
covered by any written or verbal agreement, there is room for misunderstanding.
d. Aside from competitors, secondary stakeholders are not usually monitored by the
corporation in any systematic fashion.
e. All of the above.

41. Which of the following companies was cited by the text as an example of a company, which
does its best to consider its responsibilities to its primary and secondary stakeholders when
making strategic decisions?
a. McDonald’s
b. Johnson & Johnson
c. Maytag
d. Microsoft
e. Enron

42. The Ethics Resource Center found that the percentage of employees who had engaged in one or
more unethical and/or illegal actions during the past year was
a. less than 1%.
b. 21%.
c. 48%.
d. 76%.
e. over 98%.

43. According to a survey by the Ethics Resource Center, which was not cited as one of the most
common questionable behaviors that employees engage in?
a. cutting corners on quality
b. covering up incidents
c. abusing or lying about sick days
d. surfing the web on company time
e. lying to or deceiving customers

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44. Of the six values measured by the Allpot-Vernon-Lindzey Study of Values test, both U.S. and
British executives consistently score highest on ___________ values and lowest on _________
values.
a. religious and theoretical; economic and social
b. religious and economic; political and social
c. economic and political; social and religious
d. social and religious; aesthetic and political
e. religious; economic

45. Which of the following is one of the most common reasons given by surveyed executives for
bending the rules to attain their objectives?
a. organizational performance required it
b. rules were ambiguous or out of date
c. everyone does it
d. pressure from others
e. all of the above

46. Vice President Sherron Watkins used the ________ analogy to explain why executives at
Enron engaged in unethical and illegal actions.
a. borrowing earnings
b. Napoleon complex
c. Moral relativism
d. Frogs in boiling water
e. All of the above

47. Some people claim that morality is relative to some personal, social, or cultural standard and
that there is no method for deciding whether one decision is better than another. This is call
a. ethical relativity.
b. moral philosophy.
c. comparative ethics.
d. cultural imperialism.
e. moral relativism.

48. All of the following reasons provide rationale for unethical behavior EXCEPT
a. the impact of cultural norms and values.
b. differences in values between business people and key stakeholders.
c. relativity with regard to morality.
d. agreement among stakeholders and business people about what is
ethical.
e. difficulty of one group to understand another’s actions.

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49. According to Kohlberg, the first level of moral development, characterized by concern for self,
is called
a. principled.
b. conventional.
c. essential.
d. preconventional.
e. fundamental.

50. According to Kohlberg, the second level of moral development, characterized by


considerations of society's laws and norms, is called
a. principled.
b. conventional.
c. essential.
d. preconventional.
e. fundamental.

51. According to Kohlberg, the third level of moral development, characterized by a person's
adherence to an internal moral code, is called
a. principled.
b. conventional.
c. essential.
d. preconventional.
e. fundamental.

52. According to Kohlberg, in what stage of moral development do the majority of people in the
U.S. occupy?
a. principled stage
b. conventional stage
c. essential stage
d. preconventional stage
e. fundamental stage

53. A code of ethics was important for two reasons. The first reason is that it clarifies company
expectations of employee conduct in various situations, and the second reason is
a. to reduce the burden on the judicial system.
b. that it makes clear that the company expects its people to recognize the ethical
dimensions in decision and actions.
c. to promote a high level of societal norms.
d. that it encourages individuals to strive for good citizenship and corporations to
contribute positively to society.

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e. that it minimizes the possibility of mandatory regulations.

54. Managers who want to improve ethical behavior should take actions such as
a. communicate the code of ethics in training programs.
b. emphasize the code of ethics in performance appraisal
systems.
c. follow a code of ethical behavior themselves.
d. communicate the code of ethics in policies and procedures.
e. all of the above

55. Ethics is defined as


a. formal codes that permit or forbid certain behaviors.
b. a general rule of conduct of personal behavior, based on religious or philosophical
grounds.
c. consensually accepted standards of behavior for an occupation, trade, or
profession.
d. imposing one's morality upon another.
e. voluntary obligations assumed by an individual or organization.

56. Morality is defined as


a. formal codes that permit or forbid certain behaviors.
b. a general rule of conduct of personal behavior, based on religious or philosophical
grounds.
c. consensually accepted standards of behavior for an occupation, trade, or profession.
d. imposing one's morality upon another.
e. voluntary obligations assumed by an individual or organization.

57. Law is defined as


a. formal codes that permit or forbid certain behaviors.
b. a general rule of conduct of personal behavior, based on religious or philosophical
grounds.
c. consensually accepted standards of behavior for an occupation, trade, or profession.
d. imposing one's morality upon another.
e. voluntary obligations assumed by an individual or organization.

58. The approach to ethical behavior which proposes that actions and plans should be judged by
their consequences, thus producing the greatest benefit to society with the least harm or the
lowest cost is called
a. individual rights approach.
b. mercantilism approach.

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c. utilitarian approach.
d. justice approach.
e. moral imperialism approach.

59. The approach to ethical behavior which proposes that human beings have certain fundamental
rights that should be respected in all decisions, thus avoiding interfering with the rights of
others who might be affected by a particular decision or behavior is called
a. individual rights approach.
b. mercantilism approach.
c. utilitarian approach.
d. justice approach.
e. moral imperialism approach.

60. According to the utilitarian approach, the ability to affect the company is known as
a. power.
b. legitimacy.
c. urgency.
d. stability.
e. utility.

61. According to the utilitarian approach, legal or moral claim on company resources can stand for
a. power.
b. legitimacy.
c. urgency.
d. utility.
e. stability.

62. The approach to ethical behavior which proposes that decision makers be equitable, fair, and
impartial in the distribution of costs and benefits to individuals and groups is called
a. individual rights approach.
b. mercantilism approach.
c. utilitarian approach.
d. justice approach.
e. moral imperialism approach.

63. A problem with the utilitarian approach is


a. that it assumes all countries subscribe to the same definition of "fundamental rights."
b. that it imposes a set of mandatory values and behaviors on all entities in society.
c. that it encourages selfish behavior.

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d. that it imposes one's morality upon others and judges them by standards they may or
may not accept.
e. that it is difficult to recognize all the benefits and costs of any particular decision.

64. People who are similar on relevant dimensions such as job seniority should be treated in the
same way, is an example of
a. compensatory justice.
b. retributive justice.
c. relevant justice.
d. distributive justice.
e. punitive justice.

65. The principle which proposes that punishment should be determined on a proportional basis to
the "crime" is called
a. compensatory justice.
b. retributive justice.
c. relevant justice.
d. distributive justice.
e. punitive justice.

66. The principle which argues that wrongs should be compensated in proportion to the offense
suffered is called
a. compensatory justice.
b. retributive justice.
c. relevant justice.
d. distributive justice.
e. punitive justice.

67. Issues in affirmative action such as reverse discrimination are examples of conflicts between
a. compensatory and punitive justice.
b. retributive and distributive justice.
c. distributive and compensatory justice.
d. retributive and compensatory justice.
e. punitive and retributive justice.

68. According to Cavanagh, using the ___________ criterion, to determine if padding an expense
account is ethical or not one would ask if it optimizes the satisfactions of all stakeholders.
a. morality
b. utility
c. rights

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d. justice
e. relativism

69. Using the Golden Rule and never treating another human being simply as a means but always
as an end are the categorical imperatives of
a. Archie Carroll
b. L. Kohlberg
c. Joseph Badaracco
d. Immanuel Kant
e. All of the above

70. Explain the difference between Milton Friedman’s and Archie Carroll’s approaches to the
responsibilities of business.

Both Milton Friedman and Archie Carroll argue their positions based on the impact of
socially responsible actions on a firm’s profits. Friedman says that socially responsible
actions hurt a firm’s efficiency. Carroll proposes that a lack of social responsibility
results in increased government regulations, which reduce a firm’s efficiency. Friedman
argues that profit maximization is the firm’s primary responsibility. Carroll argues that
firms have economic, legal, ethical, and discretionary responsibilities.

71. What is stakeholder analysis? List the three-step process.

Stakeholder analysis is the identification and evaluation of corporate stakeholders. The


first step of the process is to identify the primary stakeholders (those who have a direct
connection with the corporation and who have sufficient bargaining power to directly
affect corporate activities). The second step is to identify the secondary stakeholders
(those who have only an indirect stake in the corporation, but who are also affected by
corporate activities). The third step is to estimate the effect on each stakeholder group
from any particular strategic decision.

72. Discuss some reasons for unethical behavior by business people.

There are a number of reasons proposed for the unethical behavior by business people. It
may be that the involved people are not even aware that they are doing something
questionable. There is no worldwide standard of conduct for business people. Cultural
norms and values vary between countries and even between different geographic regions
and ethnic groups within a country.

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Another possible reason for what is often perceived to be unethical behavior lies in
differences in values between business people and key stakeholders. Some business
people may believe profit maximization is the key goal of their firm, whereas concerned
interest groups may have other priorities. This difference in values can make it difficult
for one group of people to understand another’s actions.

73. What is moral relativism?

Moral relativism claims that morality is relative to some personal, social, or cultural
standard and that there is no method for deciding whether one decision is better than
another. Moral relativism could enable a person to justify almost any sort of decision or
action, so long as it is not declared illegal.

74. Discuss Kohlberg’s levels of moral development.

Kohlberg proposes that a person progresses through three levels of moral development.
The first level is preconventional. This level is characterized by a concern for self. The
second level is the conventional which is characterized by consideration of society’s laws
and norms. The principled level is the third. This level is characterized by a person’s
adherence to an internal moral code. The individual at this level looks beyond norms or
laws to find universal values or principles.

75. Discuss the three basic approaches to ethical behavior.

The three basic approaches to ethical behavior are the utilitarian approach, the
individual rights approach, and the justice approach. The utilitarian approach proposes
that actions and plans should be judged by their consequences. People should therefore
behave in such a way that will produce the greatest benefit to society and produce the
least harm or the lowest cost. The individual rights approach proposes that human
beings have certain fundamental rights that should be respected in all decisions. The
justice approach proposes that decision makers be equitable, fair, and impartial in the
distribution of costs and benefits to individuals and groups.

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