Strategic Management and Business Policy - Chapter 3

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Ethics and Social Responsibility in Strategic Management
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1

The concept of social responsibility proposes that a corporation has responsibilities to society that extend beyond making a profit.

TRUE

2

Friedman referred to the social responsibility of business as a "fundamentally subversive doctrine."

TRUE

3

Archie Carroll contends that the primary goal of business is profit maximization.

FALSE

4

Archie Carroll proposes that managers in companies have four responsibilities: economic, legal, ethical, and discretionary.

TRUE

5

According to Carroll, legal responsibilities are defined by governments in laws that management is expected to obey.

TRUE

6

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

FALSE

7

Ethical responsibilities are voluntary obligations a corporation assumes.

FALSE

8

Being known as a socially responsible firm may provide a company with social capital that can be used for competitive advantage.

TRUE

9

A study concerning social responsibility indicates that socially responsible firms are more likely to be welcomed into another country.

TRUE

10

The broader concept of sustainability is closely aligned with Carroll's view of social responsibility.A study concerning social responsibility indicates that socially responsible firms are more likely to be welcomed into another country.

TRUE

11

Stakeholders are all constituencies that affect and are affected by the achievement of the firm's objectives.

TRUE

12

In any one strategic decision, the interests of one stakeholder group seldom conflict with another.

FALSE

13

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

FALSE

14

Secondary stakeholders have a direct connection with the corporation and have sufficient bargaining to directly affect corporate activities.

FALSE

15

A company may have some stakeholders of which it is only marginally aware.

TRUE

16

There is no truth to the comment that "business ethics" is an oxymoron.

FALSE

17

Cultural norms and values seldom guide ethical behavior in business.

FALSE

18

"Let the buyer beware" is a traditional saying in free market capitalism that argues customers have the right to choose how they spend their money.

TRUE

19

Relationship-based countries tend to be less transparent and have a higher degree of corruption than do rule-based countries.

TRUE

20

The statement, "When in Rome, do as the Romans do," reflects the essence of cultural relativism.

TRUE

21

Kohlberg's pre-conventional level is characterized by a person's adherence to an internal moral code.

FALSE

22

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

TRUE

23

According to Kohlberg's levels of moral development, the conventional level is characterized by considerations of society's laws and norms.

TRUE

24

Kohlberg places 80 percent of U.S. adults in the principled level of development.

FALSE

25

A code of ethics is a useful way to promote ethical behavior.

TRUE

26

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.

TRUE

27

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

TRUE

28

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

FALSE

29

A problem with the individual rights approach to ethics is the difficulty in defining fundamental rights.

TRUE

30

The Golden Rule is the essence of one of Immanuel Kant's categorical imperatives to resolve ethical dilemmas.

TRUE

31

The concept that proposes private 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.

Answer: B

32

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

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.

Answer: B

33

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 within the rules of the game..."?

A) Adam Smith

B) Edward Freeman

C) Archie Carroll

D) William C. Norris

E) Milton Friedman

Answer: E

34

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.

Answer: A

35

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) economic responsibilities.

D) financial responsibilities.

E) discretionary responsibilities.

Answer: C

36

According to Carroll, the responsibilities defined by government in laws for management to obey are

A) legal responsibilities.

B) ethical responsibilities.

C) financial responsibilities.

D) economic responsibilities.

E) discretionary responsibilities.

Answer: A

37

According to Carroll, the responsibilities 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.

Answer: E

38

The term "social responsibility," according to Carroll, 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.

Answer: A

39

Carroll's four responsibilities listed in order of priority are

A) legal, economic, ethical, and discretionary.

B) legal, ethical, discretionary, and economic.

C) economic, legal, ethical, and discretionary.

D) economic, ethical, discretionary, and legal.

E) ethical, economic, legal, and discretionary.

Answer: C

40

Society generally expects firms to work with employees and the company to plan for layoffs. This is an example of which of Carroll's responsibilities?

A) economic

B) legal

C) justice

D) ethical

E) discretionary

Answer: D

41

Providing daycare centers to employees is an example of which of Carroll's responsibilities?

A) economic

B) legal

C) justice

D) ethical

E) discretionary

Answer: E

42

Friedman's position on social responsibility

A) proposes that a lack of social responsibility results in increased government regulations.

B) appears to be losing traction with business executives.

C) suggests that a lack of social responsibility reduces a firm's efficiency.

D) explains why firms are using their socially responsible actions for competitive advantage.

E) mirrors Carroll's position.

Answer: B

43

As societal values evolve, it is likely that the ________ responsibilities of today may become the ________ responsibilities to tomorrow.

A) economic; ethical

B) legal; ethical

C) discretionary; ethical

D) discretionary; economic

E) legal; discretionary

Answer: C

44

Being socially responsible

A) provides a company with a more positive overall reputation.

B) has opened doors in local communities.

C) has enhanced the company's reputation with consumers.

D) may have a positive effect on the firm's financial performance.

E) all of the above

Answer: E

45

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 socially 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 investments.

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.

Answer: D

46

A 2012 survey of 169 CFOs at publicly traded companies in the United States found what percent intentionally misrepresented their economic performance primarily to influence stock price?

A) 1%

B) 20%

C) 40%

D) 60 %

E) 90%

Answer: B

47

In order for a business to be sustainable, it must satisfy which of Carroll's responsibilities?

A) economic

B) legal

C) ethical

D) discretionary

E) all of the above

Answer: E

48

The Dow Jones Sustainability Index includes

A) environmental, economic, and quality sustainability.

B) industry, environmental, and economic sustainability.

C) environmental, economic, and social sustainability.

D) ethical, economic, and social sustainability.

E) environmental, ethical, and quality sustainability.

Answer: C

49

The first step in stakeholder analysis is to

A) identify primary stakeholders.

B) monitor what all the stakeholders want.

C) identify the stakeholders with an indirect stake in the corporation.

D) estimate the effect on each stakeholder group from any particular strategic decision.

E) identify the influence of each stakeholder group.

Answer: A

50

All of the following are considered primary stakeholders EXCEPT

A) customers.

B) governments.

C) employees.

D) shareholders.

E) creditors.

Answer: B

51

All of the following are considered secondary stakeholders EXCEPT

A) governments.

B) suppliers.

C) competitors.

D) trade associations.

E) activists.

Answer: B

52

Which of the following statements is true concerning secondary stakeholders?

A) Secondary stakeholders are those who have only an indirect stake in the corporation, but who are affected by corporate activities.

B) Secondary stakeholders may 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.

Answer: E

53

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) Maytag

C) Johnson & Johnson

D) Microsoft

E) Enron

Answer: C

54

In 2011, the Ethics Resource Center found that ________ percent of employees surveyed had witnessed misconduct at work and ________ percent had reported it.

A) 65; 45

B) 65; 65

C) 60; 20

D) 45; 65

E) 45; 45

Answer: D

55

According to a 2011 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) misusing company time

C) lying to employees

D) engaging in abusive behavior

E) violating Internet use policies

Answer: A

56

As opposed to rule-based countries, relationship-based countries tend to

A) be more transparent and have a higher degree of corruption.

B) be more transparent and have a lower degree of corruption.

C) be less transparent and have a lower degree of corruption.

D) be less transparent and have a higher degree of corruption.

E) have the same transparency and same degree of corruption.

Answer: D

57

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

Answer: C

58

Rule-based governance

A) is generally found in developing nations.

B) relies on publicly verifiable information.

C) relies on implicit agreement.

D) is inherently nontransparent.

E) requires an investment in time and money to build relationships.

Answer: B

59

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 too rigid

C) no one will know

D) no oversight

E) all of the above

Answer: A

60

Former Enron 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) distributive justice

Answer: D

61

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 called

A) ethical relativity.

B) moral philosophy.

C) comparative ethics.

D) cultural imperialism.

E) moral relativism.

Answer: E

62

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) ambiguous rules.

D) agreement among stakeholders and business people about what is ethical.

E) difficulty of one group to understand another's actions.

Answer: D

63

All of the following are one of the four types of moral relativism EXCEPT

A) naive relativism.

B) role relativism.

C) principled relativism.

D) social group relativism.

E) cultural relativism.

Answer: C

64

Role relativism is based on the belief that

A) morality is relative to a particular culture.

B) all moral decisions are deeply personal and each person should be allowed to interpret situations and act on his own moral values.

C) social roles carry with them certain obligations.

D) morality is simply a matter of following the norms of an individual's peer group.

E) a decision is legitimate if it is common practice.

Answer: C

65

"When in Rome, do as the Romans do" reflects which type of moral relativism?

A) naive relativism

B) role relativism

C) principled relativism

D) cultural relativism

E) social group relativism

Answer: D

66

Blindly following orders reflects which type of moral relativism?

A) naive relativism

B) role relativism

C) principled relativism

D) cultural relativism

E) social group relativism

Answer: B

67

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.

Answer: B

68

According to Kohlberg, the second level of moral development, characterized by considerations of society's laws and norms, is called

A) principled.

B) essential.

C) conventional.

D) preconventional.

E) fundamental.

Answer: C

69

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.

Answer: A

70

According to Kohlberg, in what stage of moral development do the vast majority of people in the United States occupy?

  1. A) principled stage
  2. B) conventional stage
  3. C) essential stage
  4. D) preconventional stage
  5. E) fundamental stage

Answer: B

71

A code of ethics is important to clarify company expectations of employee conduct in various situations and to

A) reduce the burden on the judicial system.

B) make it clear that the company expects its people to recognize the ethical dimensions in decision and actions.

C) promote a high level of societal norms.

D) encourage individuals to strive for good citizenship and corporations to contribute positively to society.

E) minimize the possibility of mandatory regulations.

Answer: B

72

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

Answer: E

73

According to a 2011 National Business Ethics survey, what percent of respondents who observed corporate misconduct rated their cultures as weak?

A) 90

B) 70

C) 50

D) 30

E) 10

Answer: A

74

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.

Answer: C

75

Employees who report illegal or unethical behavior on the part of others are known as

A) stakeholders.

B) whistleblowers.

C) moral relativists.

D) retaliators.

E) outside directors.

Answer: B

76

A code of conduct that regulates supplier conduct

A) is never enforced.

B) almost always protects a corporation's reputation if an offshore supplier conceals abuses.

C) is recommended if the company outsources manufacturing to a company in another country.

D) is rarely used.

E) has always been found to be legally enforceable.

Answer: C

77

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.

Answer: B

78

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.

Answer: A

79

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.

C) utilitarian approach.

D) justice approach.

E) moral imperialism approach.

Answer: C

80

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 is called

A) individual rights approach.

B) mercantilism approach.

C) utilitarian approach.

D) justice approach.

E) moral imperialism approach.

Answer: A

81

According to the utilitarian approach, CEOs give priority to the stakeholders who have the most

A) power and largest holdings.

B) legitimacy and the best PR.

C) power, legitimacy, and urgency.

D) stability and legitimacy.

E) utility and power.

Answer: C

82

According to the utilitarian approach, stakeholders who have a legal or moral claim on company resources have

A) power.

B) legitimacy.

C) urgency.

D) utility.

E) stability.

Answer: B

83

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.

Answer: D

84

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.

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.

Answer: E

85

Which approach to ethical behavior can encourage selfish behavior when a person defines a personal need or want as a "right"?

A) utilitarian

B) individual rights

C) justice approach

D) categorical imperative

E) moral relativism

Answer: B

86

Treating people in the same way who are similar on relevant dimensions such as job seniority, is an example of

A) compensatory justice.

B) retributive justice.

C) relevant justice.

D) distributive justice.

E) punitive justice.

Answer: D

87

The principle which proposes that punishment should be determined on a proportional basis to the "crime" is called

  1. A) compensatory justice.
  2. B) retributive justice.
  3. C) relevant justice.
  4. D) distributive justice.
  5. E) punitive justice.

Answer: B

88

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.

Answer: A

89

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.

Answer: C

90

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

D) justice

E) relativism

Answer: B

91

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) Milton Friedman.

Answer: D

92

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

Answer: 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.

93

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

Answer: 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.

94

Discuss some reasons for unethical behavior by business people.

Answer: 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.

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.

95

What is moral relativism? What are the four types of moral relativism?

Answer: 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. The four types of moral relativism are naïve relativism, role relativism, social group relativism, and cultural relativism.

96

Discuss Kohlberg's levels of moral development.

Answer: 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.

97

Discuss the three basic approaches to ethical behavior.

Answer: 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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