BUE-chap678910

Chapter 06 - Ethical Decision-Making: Employer Responsibilities and Employee Rights

Chapter 06Ethical Decision-Making: Employer Responsibilities and Employee

Rights

True/False Questions

1. The most important influence on workers’ commitment is salary. FAnswer: False

2. Employees have a universal right to a “happy” workplace. F

3. Rewards and compensation structures have no impact on the emotions of workers. F

4. Employment security is the most significant aspect of work from the employee’s ethical perspective. T

5. In legal contexts, due process is the right to be protected against the arbitrary use of authority. F

6. A mistreatment needs to be physically threatening to be termed as “bullying.” F

7. The doctrine of ‘employment at will’(EAW) holds that unless an agreement specifies otherwise, employers are free to fire an employee at any time and for any reason. T

8. When the employer is the government, constitutional limitations on government authority are extended into the workplace to protect employees. T

9. If a firm decides to retain employees on the basis of longevity with the firm, and the retained employees are mostly of the male gender, then legally, the firm will not be violating any regulations. F

10. “Sweatshops” lack even the most basic health and safety protections. T

11. The life of one who dies in a workplace accident has instrumental value that can be measured, in part, by the lost wages that would have been earned had that person lived. T

12. “Relative risks” is determined by comparing the probabilities of harm involved in various activities. T

13. Standards are fundamentally a social approach that can address public policy questions ignored by markets. T

14. The “feasibility” approach to standards allows OSHA to make tradeoffs between health and economics. T

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15. It is discriminatory to refuse to hire someone about whom you simply have a “bad feeling,” even if that bad feeling is not based on their difference in race or gender. F

Multiple Choice Questions

16. Some employers might decide to treat employees well as a means to produce greater workplace harmony and productivity. This approach is reminiscent of _____ ethics.a. deontologicalb. utilitarianc. normatived. Kantian

17. Some employers emphasize the rights and duties of all employees, and treat employees well simply because “it is the right thing to do.” Identify the ethical approach for this perspective.a. Prescriptive ethicsb. Utilitarianismc. Deontological ethicsd. Classicism

18. Philosophically, the right of _____ is the right to be protected against the arbitrary use of authority.a. continuanceb. freedom of association c. due processd. self-determination

19. Which of the following statements is true about the right of due process?a. In legal contexts, due process refers to the procedures that police and courts must follow in exercising their authority over citizens.b. Few dispute that the state, through its police and courts, has the authority to punish citizens. This authority of the state is the right of due process.c. Due process in the workplace acknowledges employees’ authority over an employer.d. In legal contexts, due process refers to the unlimited authority that police and courts have over citizens, to create a safe and orderly society.

20. Identify the correct statement about “bullying.”a. The mistreatment of an employee needs to be physically threatening to be termed as bullying.b. Bullying does not involve a boss who is constantly yelling dictates at workers because that is his job.c. When a coworker spreads rumors about another in order to sabotage his position, he is not regarded as bullying as he is not higher than the other employee in the hierarchy of authority.d. Bullying can lead to a complete loss of personal dignity, intimidation, and fear.

21. The issue of workplace bullying is more predominant in the service sector because:




a. it lacks the right of due process.b. that work relies significantly on interpersonal relationships and interaction.c. of its strong hierarchy of authority.d. most of the organizations in this sector are decentralized.

22. Identify the doctrine học thuyết which holds that employers are free to fire an employee at any time and for any reason, unless an agreement specifies otherwise.a. The doctrine of estoppelb. The doctrine of constructive noticec. The doctrine of constructive dismissald. The doctrine of employment at will

23. Which of the following statements about the doctrine of employment at will (EAW) is true?a. Employment at will holds that employers can fire an employee at any time, but have to provide them with a valid reason.b. The freedom to terminate the employer-employee relationship is mutual, both theoretically and practically.c. The ethical rationale for EAW has both utilitarian and deontological elements.d. Civil rights laws are not an exception to the EAW because it prohibits firing someone on the basis of membership in certain prohibited classes.

24. During the process of downsizing, allowing a worker to remain in a position for a period of time once she or he has been notified of impending termination might not be the best option. Identify the correct justification for this statement.a. Workers will interpret early notice as an effort to allow them time to come to grips with the loss of their jobs.b. Terminated workers will not be inclined to put their best effort, which might result in lost revenues.c. Workers who are not terminated will have a bad impression about the organization for terminating their coworkers. d. Terminated workers may interpret early notice as an effort to get the most out of them before departure.

25. In some regions, employees lack even the most basic health and safety protections in their workplaces. Such work environments are termed as _____. a. op shopsb. holes-in-the-wallsc. haberdasheries d. sweatshops

26. The life of one who dies in a workplace accident has _____ value that can be measured, in part, by the lost wages that would have been earned had that person lived.a. absoluteb. instrumentalc. intrinsic




d. extrinsic

27. The _____ value of the life is something that financial compensation cannot replace.a. absoluteb. instrumentalc. intrinsicd. extrinsic

28. Which of the following is true of health and safety at the workplace?a. Health and safety have instrumental value and intrinsic value.b. Employers are responsible to provide a completely safe and healthy workplace.c. Financial compensation can replace the value of life lost due to lack of health and safety measures.d. Employers do not have the right to fire employees on grounds of health and safety.

29. With regard to health and safety at workplace, _____ can be defined as the probability of harm.a. obstaclesb. impedimentsc. risks d. barriers

30. With regard to health and safety at workplace, _____ can be determined by comparing the probabilities of harm involved in various activities.a. variable obstaclesb. absolute impedimentsc. relative risks d. comparative barriers

31. Discussions in ethics about employee health and safety tend to focus on the relative risks workers face and the level of acceptable workplace risk because: a. workers’ compensation is easier to calculate.b. employers cannot be responsible for providing an ideally safe and healthy workplace.c. insurance laws mandate the focus on relative risks and acceptability of workplace risk.d. it results in a completely safe and healthy workplace.

32. Comparison of the probabilities of harm involved in various activities would determine the _____.a. acceptable level of risksb. absolute risksc. speculative risksd. relative risks

33. When can we conclude that an activity has an “acceptable level of risk?”a. If it can be determined that the probability of harm involved in a specific work activity is manageable.




b. If the probability of harm involved in a specific work activity is acceptable by insurance and workers’ compensation laws.c. If it can be determined that the probability of harm involved in a specific work activity is equal to or less than the probability of harm of some more common activity.d. If the employers are willing to compensate the harm caused to workers for a specific activity.

34. Which of the following approaches to health and safety at the workplace can be considered paternalistic decision making which treats employees like children and makes crucial decisions for them?a. Government-regulated ethics approachb. Diversifiable risk approachc. Acceptable level of risk approachd. Market controlled approach

35. Which of the following is true of the acceptable risk approach to health and safety?a. It is a liberal approach to health and safety that allows employees to recognize the risk they are likely to face. b. It involves the determination of “relative risks,” the calculation of which is a complicated process and not always reliable.c. It treats employees disrespectfully by ignoring their input as stakeholders.d. It assumes differences between workplace risks and other types of risks when there are significant similarities between them.

36. Identify the challenge faced by the acceptable risk approach to health and safety.a. It is a liberal approach to health and safety that allows employees to recognize the risk they are likely to face. b. It involves the determination of “relative risks,” the calculation of which is a complicated process and not always reliable.c. It assumes differences between workplace risks and other types of risks when there are significant similarities between them.d. It ignores the fundamental deontological right an employee might have to a safe and healthy working environment.

37. Which of the following statements is true about the market controlled approach to health and safety?a. It treats employees disrespectfully by ignoring their input as stakeholders.b. In this approach, employees are free to choose the risks they are willing to face by bargaining with employers.c. It assumes an equivalency between workplace risks and other types of risks when there are significant differences between them.d. It calls for the determination of comparison of probabilities of harm involved in various activities.

38. Enlightened self-interest would be a valuable theory to introduce and apply in the _____ approach to health and safety.




a. market controlledb. integrativec. acceptable riskd. government-regulated

39. Which of the following problems are associated with the market controlled approach to health and safety?a. Employees do not know the risks involved in a job and therefore are not in a position to freely bargain for appropriate wages.b. It ignores the fundamental deontological right an employee might have to a safe and healthy working environment.c. It assumes an equivalency between workplace risks and other types of risks when there are significant differences between them.d. It treats employees disrespectfully by ignoring their input as stakeholders.

40. Identify the correct statement about government standards in the government-regulated ethics approach to health and safety.a. Due to its focus on prevention rather than compensation, standards cannot address the “first generation” problem of the market controlled approach to health and safety.b. Standards would favor individual bargaining between employers and employees as the approach to workplace health and safety.c. Standards can overcome market failures that result from insufficient information.d. Standards call for the determination of comparison of probabilities of harm involved in various activities.

41. Identify the approach that allows the Occupational Safety and Health Administration (OSHA) to make tradeoffs between health and economics.a. Sustainability approachb. Integrative approachc. Market controlled approachd. Feasibility approach

42. Critics in both industry and government argue that OSHA should aim to achieve the optimal, rather than highest feasible, level of safety. Which of the following can be used to achieve this goal? a. Cost-utility analysisb. Cost-minimization analysisc. Cost-benefit analysisd. Cost-effectiveness analysis

43. Identify the distinguishing feature between cost-benefit analysis and cost-effectiveness. a. Cost-effectiveness is ethically problematic.b. Cost-benefit analysis adopts the most efficient means available to achieving a particular standard.c. Cost-benefit analysis is ethically problematic.d. Cost-effectiveness uses economic criteria before setting the standards.




44. Which of the following statements is true about cost-benefit analysis?a. It treats health and safety merely as an intrinsic value and denies its instrumental value. b. It requires that an economic value be placed on one’s life and bodily integrity.c. It adopts the least expensive and most efficient means available to achieve existing standards.d. It uses ethical criteria in setting standards.

45. According to the universal principle of Kantian philosophy, the ethical obligation of _____ should guide employment interactions. a. family responsibilitiesb. respect for peoplec. religion d. core customs

46. The ‘Tripartite’ part of the Tripartite Declaration of Principles Concerning Multinational Enterprises and Social Policy refers to critical cooperation necessary from all of the following except: a. governments.b. employers’ and workers’ organizations.c. multinational enterprises involved.d. the suppliers and agents associated with the firm.

47. The Title VII of the _____, passed in 1964, created the prohibited classes of discrimination. a. International Labour Actb. United States Civil Rights Actc. Equal Employment Opportunity Commission Act d. Uniform Employment Termination Act

48. Which of the following is discrimination against those traditionally considered to be in power or the majority?a. Reverse discriminationb. Affirmative actionc. Inverse discriminationd. Backward discrimination

49. Which of the following is an example of reverse discrimination in America?a. An African-American interviewer rejects another African-American based on ethnicity.b. A female interviewer rejects a male interviewee because of gender.c. A white interviewer rejects an African-American based on ethnicity.d. A female interviewer rejects another female interviewee because of gender.

50. An organization, in an attempt to avoid discrimination suits filed against it, intentionally hires a lot of African-American women, and a few disabled people. Which of the following is most likely to occur?




a. The performance of the organization will increase.b. The organization will win an award for equity.c. There will be an increase in the number of diversity training sessions.d. A white man or a woman will file a reverse discrimination suit.

51. Which of the following refers to a policy or a program that tries to respond to instances of past discrimination by implementing proactive measures to ensure equal opportunity today?a. Gentrificationb. Bully Broadsc. Just caused. Affirmative action

52. All of the following are ways through which affirmative action can arise at the workplace except: a. through legal requirements.b. through judicial affirmative action.c. consultant based affirmative action.d. voluntary affirmative action plans.

53. The law relating to affirmative action applies only to about 20 percent of the workforce who are subject to Executive Order 11246, which requires affirmative action efforts to ensure equal opportunity. Which of the following is required by courts in order to remedy a finding of past discrimination, when Executive Order 11246 is not applicable?a. Voluntary affirmative actionb. Judicial affirmative actionc. Quasi-affirmative actiond. Executive affirmation action

54. Which of the following affirmative action plans would include training plans and programs, focused recruiting activity, or the elimination of discrimination?a. Quasi-affirmative action b. Executive affirmation actionc. Judicial affirmative action d. Voluntary affirmative action

55. A claim which states that people who ‘pay’ for wrongs are unfairly burdened and should not bear the responsibility for the acts of others, is opposing _____. a. reverse discriminationb. judicial activity within organizationsc. affirmative actiond. authoritative leadership

Fill in the Blank Questions

56. The doctrine of employment at will holds that, unless an agreement specifies otherwise, employers are free to fire an employee at any time and for any reason.




57. EAW is the default position on which courts will rely until and unless an exception can be demonstrated. The burden of proof lies with the dismissed employee to show that she or he was unjustly or illegally fired. Due process and just cause, whether instituted as part of internal corporate policy or through legislation, would reverse this burden of proof and require employers to show cause to justify the dismissal of an employee.

58. The life of one who dies in a workplace accident has instrumental value that can be measured, in part, by the lost wages that would have been earned had that person lived.

59. For employee health and safety in the workplace, relative risks is determined by comparing the probabilities of harm involved in various activities.

60. In 1970, the U.S. Congress established the Occupational Safety and Health Administration (OSHA) and charged it with establishing workplace health and safety standards.

61. A commitment to using cost-effectiveness for setting standards would require that, once the standards are set, we adopt the least expensive and most efficient means available for achieving those standards.

62. The use of cost-benefit analysis in setting workplace health and safety standards commits us to treating worker health and safety as just another commodity, another individual preference, to be traded off against competing commodities.

63. Diversity refers to the presence of differing cultures, languages, ethnicities, races, affinity orientations, genders, religious sects, abilities, social classes, ages, and national origins of the individuals in a firm.

64. Reverse discrimination is discrimination against those traditionally considered to be in power or the majority.

65. The term affirmative action refers to a policy or a program that tries to respond to instances of past discrimination by implementing proactive measures to ensure equal opportunity today.

Chapter 07Ethical Decision-Making: Technology and Privacy in the Workplace

True/False Questions 1. Privacy is important because it serves to define one’s individuality. T

2. The right to privacy is restricted by a social contract in our culture that prevents us from infringing on someone else’s right to her or his personal autonomy. T




3. Values that are fundamental across culture and theory are not hypernorms. F

4. According to Donaldson and Dunfee, the right to personal freedom is an example of a hypernorm. T

5. The value of privacy to civilized society is as great as the value of hypernorms to civilized existence. T

6. The concept of property rights excludes personal information. F

7. The Constitution’s Fourth Amendment protection against an unreasonable search and seizure governs only the private sector workplace. F

8. The “invasion of privacy” claim developed through case law called intrusion into seclusion. T

9. The European Union’s Directive on Personal Data Protection does not in any way prohibit E.U. firms from transferring personal information to a non-E.U. country. F

10. Internet use monitoring is evolving with the rise of social media and social networking use in recent years. T

11. Monitoring allows the manager to ensure effective, productive performance by preventing the loss of productivity to inappropriate technology use. T

12. Health Insurance Portability and Accountability Act (HIPAA) stipulates that employers can use “protected health information” in making employment decisions without prior consent. F

13. One of the problems associated with giving prior notice of monitoring is the “Hawthorne Effect.” T

14. Employers in all parts of the U.S.A. are prohibited from making employment decisions on the basis of weight, even if they are not in violation of the Americans with Disabilities Act (ADA). F

15. Discrimination laws do not necessarily protect workers against adverse action based on the identity of the person they married. T


16. Two general and connected understandings of privacy have been identified: privacy as a right to be ‘left alone’ within a personal zone of solitude, and privacy as the: a. right to understand one’s emotions.b. right to understand others’ emotions.




c. right to control information about others.d. right to control information about oneself.

17. Values that are fundamental across culture and theory are called: a. authentic norms.b. hypernorms.c. ethnocentric norms.d. executive norms.

18. According to Donaldson and Dunfee, examples of hypernorms include the right to:a. a safe workplace.b. public information.c. personal freedom.d. vote.

19. According to Donaldson and Dunfee, the right to _____ is an example of a hypernorm.a. a safe workplace.b. public information.c. voted. physical movement

20. Which of the following is true about privacy? a. The right to privacy is not restricted by any social contract.b. Privacy cannot be legally protected by common law.c. Privacy can be legally protected by the constitution.d. The right to privacy is unrelated to the universal right to autonomy.

21. _____ refers to the body of law comprised of the decisions handed down by courts, rather than specified in any particular statutes or regulations.a. Statutory lawb. Common lawc. Civil lawd. Constitutional law

22. The Constitution’s Fourth Amendment protection against an unreasonable search and seizure governs only the public sector workplace because:a. unions exist only in public sector organizations.b. the private sector does not cater to appeals of unreasonable search or seizure.c. the Constitution applies only to state action.d. only public sector organizations deal with classified information.

23. Which of the following prohibits the “interception” or unauthorized access of stored communications? a. The Electronic Communications Privacy Act of 1986b. The Computer Security Act of 1987c. The Privacy Act of 1974




d. The Computer Fraud and Abuse Act of 1986

24. The impact of the ECPA is to punish electronic monitoring only by third parties and not by employers because courts have ruled that “interception” applies only:a. to access of messages by employers.b. when monitoring is done without consent.c. when employees file a case.d. to messages in transit.

25. Which of the following statements about the Electronic Communications Privacy Act of 1986 is true?a. Courts have ruled that the “interception” of stored communications applies only to messages that have actually reached company computers.b. A firm that secures employee consent to monitoring at the time of hire is immune from ECPA liability.c. The impact of the ECPA is to punish electronic monitoring only by employers.d. The ECPA does not allow interception even when consent has been granted.

26. Name the legal violation that occurs when someone intentionally interferes on the private affairs of another when the interference would be “highly offensive to a reasonable person.”a. Calumnyb. Vilificationc. Intrusion into seclusiond. Defamation

27. If the basis for finding an invasion of privacy is often the employee’s legitimate and reasonable expectation of privacy, then a situation where there is no real expectation of privacy occurs when the:a. employee has actual notice.b. employer is covered under the ECPA.c. work requires transference of sensitive data.d. employee belongs to a minority group.

28. Which of the following states in the U.S. requires employers to notify workers when they are being monitored? a. Ohiob. Illinoisc. Michigand. Connecticut

29. Which of the following is true about the European Union’s Directive on Personal Data Protection?a. It prohibits EU firms from transferring personal information to a non-EU country unless that country maintains “adequate protections” of its own.b. It is also known as the European Union Safe Harbor Act.c. It encourages member countries to maintain myriad standards for information gathering and




protection.d. It states that United States in the only non-member country that maintains “adequate protection” of personal data.

30. The U.S. Department of Commerce negotiated a Safe Harbor exception:a. because the U.S. would not qualify as having adequate protection.b. so that the European Union could get access to personal information.c. so that each European country could maintain its own standard of information gathering and protection while trading with the U.S.d. because the law required that all imports to the European Union meet the Safe Harbor standards.

31. According to economist Antonio Argandona, which of the following elements would include issues relating to company secrets, espionage, and intelligence gathering? a. Truthfulness and accuracyb. Respect for property and safety rightsc. Respect for privacyd. Accountability

32. Which of the following is true about technology and its usage? a. It prohibits access to any information that was once easily accessible.b. It ensures that the lines between people’s personal lives and professional lives are not blurred. c. It tends to cause facelessness that is a challenge that has to be met.d. It allows users to be much more careful with their communications.

33. When we do not get to know someone because we do not have to see that person in order to do our business, we often do not take into account the impact of our decisions on him or her. This is the challenge posed by the: a. facelessness that results from the use of new technology accessible in the workplace.b. knowledge gap that exists between people who understand the technology and others who do not understand it.c. lack of clear boundaries between people’s personal and professional lives.d. assumption by users of technology that the Internet is safe.

34. Which of the following is an advantage of monitoring?a. Monitoring tends to promote effective performance since it reduces employees’ stress and pressure.b. Monitoring tends to create a friendly workplace without any suspicions.c. Monitoring increases the level of worker autonomy and respect, as well as workers’ right to control their environment.d. Monitoring allows to ensure effective performance by preventing the loss of productivity to inappropriate technology use.

35. The desire to place workers in appropriate positions, to ensure compliance with affirmative action requirements, or to administer workplace benefits is sufficient reason for




employers to undertake employee _____.a. trainingb. orientationc. monitoringd. drug testing

36. Which of the following is an advantage of drug testing? a. Drug testing does not present any ethical challenges for employers. b. Drug testing tends to provide a productivity benefit for companies.c. There are no possibilities of incorrect presumptions in connection with drug testing. d. There are no legal issues relating to monitoring employees through drug testing.

37. From a utilitarian perspective, individual rights to privacy or right to control information about oneself may be outweighed in cases where: a. public safety is at risk.b. the employee compensation package is very high.c. the proposed benefit to the employer is high.d. employee productivity depends directly on the number of hours they put in.

38. Which of the following acts stipulates that employers cannot use “protected health information” in making employment decisions without prior consent?a. The Personal Information Protection and Electronic Documents Actb. The Federal Information Security Management Actc. The Personal Information and Health Documents Actd. The Health Insurance Portability and Accountability Act

39. Identify the situation prohibited by The Genetic Information Non-Discrimination Act of 2008 (GINA).a. An employer releases genetic information about an employee in response to a court order.b. An employer releases genetic information about an employee in connection with the employee’s compliance to the certification provisions of the Family and Medical Leave Act.c. An employer releases genetic information about an employee to a health researcher.d. An employer releases genetic information about an employee to the human resource department differentiate among employees.

40. Which of the following statements about the Genetic Information Non-Discrimination Act of 2009 (GINA) is true?a. Under GINA, an employer can collect genetic information in order to monitor the biological effects of toxic substances in the workplace.b. Under GINA, an employer is subject to the same conditions as under the Health Insurance Portability and Accountability Act (HIPAA).c. Under GINA, an employer cannot collect genetic information in order to comply with the Family Medical Leave Act.d. Under GINA, an employer cannot release genetic information about an employee to a public health agency.




41. Which of the following is a disadvantage of monitoring? a. Monitoring tends to constrain effective performance since it can cause increased stress and pressure.b. Monitoring prevents employers from managing their workplaces to place workers in appropriate positions. c. Monitoring does not allow managers to ensure compliance with affirmative action requirements.d. Monitoring cannot be utilized to prevent the loss of productivity due to inappropriate technology use.

42. Which of the following statements is true about monitoring? a. It reduces workers’ right to control their environment without reducing the level of worker autonomy and respect.b. It has the potential to cause physical disorders such as carpal tunnel syndrome.c. It does not have a negative impact on performance.d. It can lead to mental pressures, but health problems have not been reported.

43. Which of the following is true about the “Hawthorne Effect”?a. According to the Hawthorne effect, workers’ productivity improves when they are singled out.b. According to the Hawthorne effect, workers show poor performance when they know that they are being monitored.c. The Hawthorne effect allows managers to monitor their employees effectively.d. The Hawthorne effect only occurs when the mechanisms used to monitor employees are unethical.

44. Employees will be on their best behavior during phone calls if they know that those calls are being monitored. Identify this effect of employee monitoring.a. The placebo effectb. The observer-expectancy effectc. The Hawthorne effectd. The halo effect

45. An employer can resolve the concerns related to the “Hawthorne Effect” through:a. notified, random monitoring.b. consented, selective monitoring.c. selective, notified monitoring.d. random, anonymous monitoring.

46. If an employee’s weight is evidence of or results from a disability, the employer must explore whether the worker is otherwise qualified for the position. Under the Americans with Disabilities Act (ADA), the individual is considered “otherwise qualified” if she or he:a. has prior work experience relevant to the position, even if she or he is not able to perform the functions of the position due to the disability.b. can perform normal daily activities like taking a bath and eating.c. can perform the functions of the position with or without reasonable accommodations.




d. has a good academic record and good conduct.

47. Some companies have a(n) _____ policy under which an employer refuses to hire or terminates a worker on the basis of the spouse’s working at the same firm.a. anti-nepotismb. conflict-of-interestc. anti-fraternizationd. antitrust

48. Which of the following about the regulation of off-work acts in the U.S. is true?a. Many states ban discrimination on the basis of weight.b. Laws that protect employees against discrimination based on marital status exist in just under half of the states.c. Only a small minority of states protect employees against discrimination on the basis of political involvement.d. Lifestyle discrimination tends to be lawful if the imposition of the rule treats one protected group differently than another.

49. Identify the policy under which an employer refuses to hire or terminates a worker whose spouse works at a competing firm.a. Anti-nepotism policyb. Antitrust policyc. Affirmative action policyd. Conflict-of-interest policy

50. Most statutes or common law decisions provide for employer defenses for all of the following EXCEPT: a. those rules that are reasonable and rationally related to the employment activities of a particular employee.b. those rules that treat one group differently from another considering lifestyle practices.c. those rules that are necessary to avoid a conflict of interest or the appearance of conflict of interest.d. those rules that constitute a “bona fide occupational requirement.”

51. Identify the act that expanded states’ rights with regard to Internet surveillance technology, including workplace surveillance, and amended the Electronic Communications Privacy Act.a. The USA PATRIOT Actb. The Sarbanes-Oxley Actc. The Federal Information Security Management Actd. The Personal Information Protection and Electronic Documents Act

52. Which of the following acts grants access to sensitive data with only a court order rather than a judicial warrant and imposes or enhances civil and criminal penalties for knowingly or intentionally aiding terrorists?




a. The Federal Information Security Management Act b. The Sarbanes-Oxley Actc. The USA PATRIOT Actd. The Personal Information Protection and Electronic Documents Act

53. Title II of the USA PATRIOT Act provides roving surveillance authority under the:a. Federal Information Security Management Act to track website access of individuals.b. Foreign Intelligence Surveillance Act to track individuals.c. Electronic Communications Surveillance Act to track business transactions.d. International Surveillance of Terrorists Act to track individuals in countries with diplomatic relations.

54. Which of the following is true about the USA PATRIOT Act?a. The act does not grant access to sensitive data with only a court order.b. The act expands states’ rights with regard to Internet surveillance technology.c. The act excludes provisions designed to combat money laundering activity.d. The act does not enhance civil and criminal penalties for intentionally aiding terrorists.


55. According to philosopher Patricia Werhane, for an individual to expect respect for her or his personal autonomy, that individual has a reciprocal obligation to respect the autonomy of others.

56. The impact of ECPA is to punish electronic monitoring only by third parties and not by employers.

57. “invasion of privacy” claim developed through case law called intrusion into seclusion

58. The advent of new technology challenges privacy in ways that people could never before imagine.

59. The rise of social media and social networking use in recent years has given rise to the evolution of Internet use monitoring.

60. With regard to medical information specifically, employers’ decisions are not only governed by the Americans with Disabilities Act but also restricted by the Health Insurance Portability and AccountabilityAct.

61. Philosopher William Parent conceives the right to privacy as the right to privacy

62. New York’s lifestyle discrimination statute prohibits employment decisions or actions based on four categories of off-duty activity.

63. Most statutes or common law decisions provide for employer defenses for those rules that




are necessary to avoid a conflict of interest

64. The USA PATRIOT Act expanded states’ rights with regard to Internet surveillance technology, including workplace surveillance, and amended the Electronic Communications Privacy Act.

Chapter 08Ethics and Marketing


1. The ‘Four Ps’ of marketing include product, price, promotion, and placement. T

2. While approaching an ethical issue in marketing, the utilitarian tradition would ask to what degree the participants are respected as free and autonomous agents rather than treated simply as means to the end of making a sale. F

3. A condition for respect requires that consent be not only voluntary, but also informed. T

4. The condition where lesser consumption leads to unhappiness is termed “affluenza”. F

5. Unsafe products do not further the utilitarian goal of maximizing overall happiness. T

6. On the sole basis that someone wants to buy something and someone else is willing to sell it, a transaction is ethically legitimate. F

7. Externalities show that even if both parties to the exchange receive actual benefits from the exchange, other parties external to the exchange might be adversely affected. T

8. In a strict liability case, if it can be proved that a business was as careful as possible about its product or service, it is not held liable for the harm that results from its use. F

9. The implied warranty of merchantability holds that in selling a product, a business implicitly offers assurances that the product is reasonably suitable for its purpose. T

10. Most courts allow a business to completely disclaim the implied warranty of merchantability. F

11. Under a contract model, the duties that a person owes are not merely those explicitly promised to another party, but also those that are implied. F

12. Negligence involves the ability to foresee the consequences of our acts. T




13. When consumers are injured by a product in which no negligence is involved and no one is at fault, the legal doctrine of strict product liability holds manufacturers accountable. T

14. The utilitarian tradition in ethics would have the strongest objections to manipulation. F

15. Consumer vulnerability occurs when a person has an impaired ability to make an informed consent to the market exchange. T


16. Which of the following is a set of processes for creating, communicating, and delivering value to customers and for managing customer relationships in ways that benefit the organization and its stakeholders?a. Procuringb. Brandingc. Marketingd. Copywriting

17. Which of the following is one of the “Four Ps” of marketing? a. Purposeb. Planningc. Promotiond. People

18. The _____ ethical tradition would see a simple situation of an agreement for an exchange between two parties as upholding respect for individuals by treating them as autonomous agents capable of pursuing their own ends.a. role-basedb. rights-basedc. rules-basedd. strategy-based

19. The _____ ethical tradition would take the two parties’ agreement as evidence that both are better off than they were prior to the exchange and thus conclude that overall happiness has been increased by any exchange freely entered into.a. utilitarianb. virtual c. Kantiand. deontological

20. The simple situation in which two parties come together and freely agree to an exchange is ethically legitimate only prima facie because:a. investigation proves that a simple exchange does not involve unethical situations.b. a simple exchange involves the consent of both parties involved, which leaves no room for unethical acts.c. certain conditions must be met before it can be concluded that autonomy has been




respected and mutual benefit has been achieved.d. exchange occurs on mutual consent and for mutual benefit, parties get involved in an exchange only if they see their benefit.

21. While approaching an ethical issue in marketing, the rights-based tradition would:a. ask to what degree the participants are respected as free and autonomous agents rather than treated simply as means to the end of making a sale.b. calculate the benefits and costs of each exchange.c. attempt to find out about other values that are affected by the exchange.d. want to know the degree to which the transaction provided actual as opposed to merely apparent benefits for each participant.

22. While approaching an ethical issue in marketing, the utilitarian tradition would want to know:a. the degree to which individuals freely participate in an exchange.b. the degree to which the transaction provided actual as opposed to merely apparent benefits.c. about other values that are affected by the exchange.d. about the personal characters of the parties that are involved in the exchange.

23. A consumer’s consent to purchase a product is not informed if that consumer is:a. unwilling to listen to the product details from the sales person.b. injured after using the product and filed a product liability suit.c. asked to buy a product without a warranty.d. being misled or deceived about the product.

24. Greater consumption is likely to lead to unhappiness, a condition termed _____.a. affluenzab. caveat emptor c. influenzad. insomnia

25. The legal doctrine of strict liability is ethically controversial because:a. it assumes informed consent of the buyer and therefore it is assumed to be ethically legitimate.b. it allows consumers to assume that products are safe for use.c. it holds that consumer demand depends upon what producers sell.d. it holds a business accountable for paying damages whether or not it was at fault.

26. Identify the approach that assumes that every purchase involves the informed consent of the buyer and is ethically legitimate.a. Res ipsa loquitur approachb. Prima facie approachc. Caveat emptor approachd. Caveat venditor approach



http://en.wikipedia.org/wiki/Res_ipsa_loquitur


27. In selling a product, a business offers tacit assurances that the product is reasonably suitable for its purpose. The law refers to this as the:a. doctrine of caveat emptor.b. implied warranty of merchantability.c. doctrine of caveat lector.d. implied warranty of productivity.

28. Which of the following statements is correct about the implied warranty of merchantability?a. It refers to the caveat emptor approach.b. This standard shifts the burden of proof from producers to consumers.c. Most courts allow a business to completely disclaim the implied warranty of merchantability.d. Many businesses issue a disclaimer of liability, or offer an expressed and limited warranty to limit their liability

29. The implied warranty of merchantability shifts the burden of proof from:a. producers to consumers.b. producers to suppliers.c. consumers to producers.d. suppliers to consumers.

30. A business will seek to limit its liability by explicitly disowning any promise or warranty by:a. using the caveat venditor principle.b. issuing a disclaimer of liability.c. completely disclaiming the implied warranty of merchantability.d. denying responsibility for the behavior of its suppliers.

31. How did the use of an implied warranty of merchantability solve a set of problems with the contract law approach to product liability?a. Consumers do not need complex contracts in order to protect themselves from all possible harms that products might cause.b. The burden of proof has shifted from producers to consumers as consumers are allowed to assume that products are safe for ordinary use.c. It has forced businesses to issue a disclaimer of liability and offer limited warranties to limit its liability.d. Buyers have the responsibility to look out for their own interests and protect their own safety when buying a product.

32. Which of the following is true about tort law?a. Tort law holds that the only duties that a person owes are those that have been explicitly promised to another party.b. Tort law holds manufacturers accountable in cases when consumers are injured by products and no one is at fault.c. Tort law holds a principal responsible for the actions of an agent when that agent is acting




in the ordinary course of his or her duties to the principal.d. Tort law holds that people do not owe other people any general duties, if they have not voluntarily assumed them.

33. Which of the following statements is true about negligence?a. It is not a central component of tort law.b. One can be negligent by doing something that one should not.c. One cannot be held negligent by failing to do something that one should have done.d. It excludes acts of both commission and omission.

34. Which of the following is true about strict product liability?a. The United States has adopted clear strict liability standards.b. It holds that the government must pay consumers where neither the producer nor the consumer is at fault.c. It insures that society creates a strong incentive for business to produce safer goods and services by holding business strictly liable for any harm their products cause.d. It is the same as negligence, and it suggests that holding business liable for harms caused due to negligence provides an incentive to better protect products in the future.

35. Society creates a strong incentive for businesses to produce safer goods and services by holding them responsible for any harm their products cause. This claim supports the:a. strict product liability standard.b. actual foreseeability standard.c. reasonable person standard.d. consent and informed decision standard.

36. Which of the following statements is true about manipulation?a. It involves total control of direction or management.b. A person cannot manipulate someone without deception.c. It implies guiding people’s behavior with their conscious understanding.d. To manipulate something is to guide or direct its behavior.

37. Which of the following ethical traditions would have the strongest objections to manipulation?a. Economicb. Virtue-basedc. Principle-basedd. Utilitarian

38. Which of the following statements about manipulation would a strong believer of the principle-based ethical tradition most likely support?a. Cases of paternalistic manipulation, in which someone is manipulated for their own good, are acceptable.b. Manipulation executed without deception is acceptable. c. Even unsuccessful manipulations are guilty of ethical wrong.d. The ethical consequence of manipulation depends on the personal characteristics of the




manipulator.

39. Marketing practices targeted at elderly populations for goods such as supplemental health insurance, funerals etc. are subject to criticism because:a. that population is vulnerable.b. interest gained on such investments are not highly profitable.c. they target the considered and rational desires of the consumers.d. they do not abide by the principles of welfare economics.

40. According to economist John Kenneth Galbraith, advertising and marketing were creating the very consumer demand that production then aimed to satisfy. The assertion that consumer demand relies upon what producers have to sell is termed: a. the Hawthorne effect.b. the dependence effect.c. the reverse channel effect.d. the supplemental effect.

41. Identify one of the implications of the “dependence effect.”a. Unless a seller explicitly warrants a product as safe, buyers are liable for any harm they suffer.b. Advertising and marketing create consumer wants that support the entire economy.c. The court’s ruling on product liability cases is dependent on the extent of manipulation.d. By creating consumer wants, advertising and other marketing practices violate consumer autonomy.

42. Which of the following do advertising and other marketing practices violate by creating consumer wants?a. Right to free speechb. Consumer autonomyc. Right to privacyd. Consumer demand

43. How does advertising distort the economy?a. It manipulates prices for promotion to gain a foothold in a market.b. It results in supply becoming a function of demand.c. It is not able to create nonautonomous desires.d. It creates irrational and trivial consumer wants.

44. Consumer vulnerability occurs when:a. a person has an impaired ability to make an informed consent to the market exchange.b. a person is susceptible to injuries from falls and medical emergencies.c. the consumer is treated as an end in itself.d. the law of supply and demand is reversed.

45. Which of the following is an example of consumer vulnerability?




a. Elderly people susceptible to expensive health care bills b. Poor people susceptible to bankruptcyc. Children susceptible to any bright, attractive items of no practical valued. Single women walking alone at night susceptible to sexual assault

46. General vulnerability occurs when:a. a person has an impaired ability to make an informed consent to the market exchange.b. a person is susceptible to some specific physical, psychological, or financial harm.c. children are shown commercials in and around schools.d. people are susceptible to the harm of not satisfying their consumer desires and/or losing their money.

47. Consumers are vulnerable when they are not aware that they are subject to a marketing campaign. This type of campaign is called:a. imminent marketing.b. word-of-mouth marketing.c. network marketing.d. undercover marketing.

48. Which of the following statements is true about stealth marketing?a. It occurs when consumers are aware that they are subject to a marketing campaign. b. It refers to situations where consumers are subject to directed commercial activity without their knowledge.c. It occurs when consumers pay little or no attention to billboards while speeding past a highway.d. It is not an intentional effort to hide the true marketing element of the interaction.

49. Marketing experts consider stealth marketing extraordinarily effective because:a. a consumer does not question the message as she might challenge a traditional advertising campaign.b. the consumer’s guard is not down while accepting the message.c. consumers do not see the communication as too personal and often tend to trust an advertisement or other marketing material much more than they would trust the communicator.d. consumers seek out the communicator’s vested interest.

50. An employer is held liable for damages caused by an accident involving an employee driving the company car on company business. Identify the law underlying this decision.a. The doctrine of caveat emptorb. The doctrine of respondent superior c. Implied warranty of merchantabilityd. The doctrine of caveat lector

51. UniCo—a multinational corporation that specializes in designing, developing, and selling consumer electronics—outsources manufacturing products to a third-world country company. Human rights activists have criticized UniCo for operating inhumane sweatshops at the




manufacturing plants to gain profits. Although UniCo. is not directly liable to the labor exploitation, it threatens to pull out its business from the contracted company if the laborers are not provided with dignified wages and good working conditions. Which of the following responsibilities did the company fulfill in this scenario?a. Caveat emptorb. Implied merchantabilityc. Respondent superiord. Strict liability

52. Which of the following is an often overlooked aspect of advertising?a. Pricing functionb. Evaluation functionc. Educational functiond. Watchdog function

53. Identify the practice of promoting a product by misleading consumers about the environmentally beneficial aspects of the product.a. Greenwashingb. Redliningc. Gentrificationd. Greenskinning

54. Labeling products with such terms as “environmentally friendly,” “natural,” “eco,” “energy efficient,” “biodegradable” and the like can help promote products that have little or no environmental benefits. This practice is known as:a. greenskinning.b. redlining.c. gentrification.d. greenwashing.

55. Which of the following refers to the growing marketing practice of taking back one’s products after their useful life?a. Reintermediationb. Reverse channelsc. Disintermediationd. Forward integration

Fill in the Blank Questions 56. While approaching an ethical issue in marketing, the utilitarian tradition would want to know the degree to which the transaction provided actual as opposed to merely apparent benefits.

57. It is not always easy to determine if someone is being treated with respect in marketing situations. A condition for respect requires that customer consent be not only voluntary, but also informed




58. An adequate ethical analysis of marketing must consider externalities those costs that are not integrated within the exchange of the buyer and the seller.

59. The legal doctrine of strict liability is ethically controversial because it holds a business accountable for paying damages whether or not it was at fault.

60. According to the caveat emptor approach, every purchase involves the informed consent of the buyer and therefore it is assumed to be ethically legitimate.

61. The actual foreseeability standard implies that unthoughtful people cannot be negligent, since one escapes liability by not actually thinking about the consequences of one’s act.

62. The negligence standard of tort law focuses on the sense of responsibility that involves liability or fault.

63. The utilitarian tradition offers a conditional critique of manipulation, depending on the consequences.

64. Economist John Kenneth Galbraith claimed that advertising and marketing were creating the very consumer demand that production then aimed to satisfy. Dubbed the dependence effect this assertion held that consumer demand relied on what producers had to sell.

65. General vulnerability occurs when someone is susceptible to some specific physical, psychological, or financial harm.

Chapter 09Business and Environmental Sustainability


1. The Economic Development Approach suggests that sustainable business and sustainable economic development seek to create new ways of doing business in which business success is measured in terms of economic, ethical, and environmental sustainability. F

2. According to the conservation movement, the natural world was valued as a resource, providing humans with both direct and indirect benefits. T

3. The conservation movement advocated a more restrained and prudent approach to the natural world. T

4. Businesses that use animals for food, entertainment, or pets violate the ethical rights of these animals. T

5. The market-based approach to resolving environmental challenges denies that




environmental problems are economic problems that deserve economic solutions. F

6. According to William Baxter, the optimal level of pollution is best attained by leaving it to a competitive market. T

7. From a strict market economic perspective, resources are “finite,” and have to be used efficiently to gain maximum economic benefits. F

8. Standards like Corporate Automotive Fuel Efficiency that address pollution and pollution-related disease are considered essentially because of our reliance on market solutions to sustain the environment. F

9. Internalizing external costs and assigning property rights to unowned goods are responses to market failures. T

10. A “first generation” approach is ill advised when public policy involves irreplaceable public goods. T

11. Before the introduction of environmental legislation in the 1970’s, the primary legal avenue open for addressing environmental concerns was contractual law. F

12. The regulatory model assumes that economic growth is environmentally and ethically benign. T

13. The goal of competitive sustainability is referred to as one of the three pillars of sustainability. F

14. The “circular flow model” differentiates natural resources from the other factors of production. F

15. The ultimate goal of biomimicry is to eliminate waste altogether rather than reducing it. T


16. The Triple Bottom Line approach involves measuring business success of sustainable businesses and sustainable economic development in terms of:a. economic, legal, and environmental sustainability.b. economic, ethical, and environmental sustainability.c. economic, legal, and competitive sustainability.d. legal, competitive, and environmental sustainability.

17. Knowing what the future must be, creative businesses then look backwards to the present and determine what must be done to arrive at that future. This process is known as:a. backward integration.b. forecasting.




c. forward integration.d. backcasting.

18. Which of the following is true of the conservation movement?a. It advocated that the natural world should not be used as a capital resource.b. It regarded natural resources as being able to provide an inexhaustible supply of material. c. It recommended a more restrained and prudent approach to the natural world.d. It argued against the natural world being used to provide indirect benefits.

19. The conservation movement: a. regarded natural resources as being able to provide an inexhaustible supply of material. b. advocated that the natural world should not be used as a capital resource.c. argued that the natural world was valued as a resource, providing humans with both direct benefits and indirect benefits.d. believed that business does not good reasons for conserving natural resources.

20. Reminiscent of the _____ tradition, it is suggested that some animals have the cognitive capacity to possess a conscious life of their own and people have a duty not to treat these animals as mere objects and means to their own ends.a. Kantianb. virtue ethicc. neoclassicald. social web

21. Which of the following is true of a market-based approach to resolving environmental challenges?a. It is critical of the narrow, philanthropic view of corporate social responsibility (CSR).b. It asserts that limited resources should not be distributed in the market. c. It suggests that environmental problems deserve economic solutions.d. It conveys that resources are infinite and fungible.

22. Which of the following is involved in environmental problems according to the market-based approach to resolving environmental challenges?a. Lack of knowledge of producing renewable resourcesb. Inability of businesses to produce and sell limited resourcesc. Lack of use of appropriate substitutes for limited resourcesd. Allocation and distribution of limited resources

23. Which of the following was suggested by William Baxter?a. An optimal level of pollution can be achieved through competitive markets.b. Society can strive for pure air and water at a very low cost.c. From a strict market economic perspective, resources are infinite. d. All resources can be replaced by substitutes.

24. In economic terms, all resources:a. are infinite because they can be replaced by substitutes.




b. are distributed fairly by the government.c. can be made available everywhere.d. are distributed efficiently in the market.

25. Which of the following explains the statement “All resources are fungible”?a. It means that all resources can be regulated by the government.b. It means that all resources can be replaced by substitutes.c. It means that all resources cannot be duplicated.d. It means that all resources cannot be recycled and reused.

26. Which of the following is true about the market-based approach to environmental responsibility?a. Market failure occurs when no markets exist to create a price for important social goods.b. Free market exchanges can guarantee optimal results for addressing issues related to externalities.c. The market-based approach always ensures that what is good and rational for a collection of individuals is also good and rational for a society.d. Markets can be very successful if important ethical and policy questions and policy decisions are left solely to the outcome of individual decisions.

27. Which of the following ways can lead market failure to serious environmental harm?a. Creating abundant markets to create a price for important social goodsb. Making no distinction between individual decisions and group consequencesc. Inexistence of externalities in the economic exchange systemd. Assigning property rights to unowned goods

28. Which of the following causes inadequacy in ad hoc attempts—internalizing external costs and assigning property rights to unowned goods such as wild species—to repair market failures?a. The backcasting problemb. The fungibility problemc. The biomimicry problemd. The first-generation problem

29. Markets can work to prevent harm only through information supplied by the existence of market failures. This is better known as the: a. biomimicry effect.b. backcasting problem.c. first-generation problem.d. primary market effect.

30. Before environmental legislation was enacted, the primary legal avenue open for addressing environmental concerns was:a. tort law.b. international law.




c. public law.d. criminal law.

31. Which of the following is true about the regulatory approach to environmental challenges?a. It overestimates the influence that business can have on establishing the law.b. The government established regulatory standards to offer compensation after the occurrence of pollution or any other environmental harm.c. It shifted the burden from those threatened with harm to those who would cause the harm.d. This approach ensures that business does not pursue any financial opportunities that cause harm to the environment.

32. Which of the following is a problem associated with the regulatory approach to environmental challenges?a. The regulatory model assumes that economic growth is environmentally and ethically benign.b. If people rely on the law to protect the environment, environmental protection will extend beyond the law.c. Business passively responds to consumer desires and consumers are unaffected by the messages that business conveys. d. National regulations are the only means to effectively address international environmental challenges.

33. Which of the following is true about the concept of sustainable development and sustainable business practice?a. It suggests a radically new vision for integrating financial and environmental goals, compared to the growth model that preceded it.b. According to this concept, only individuals who can prove that they had been harmed by pollution can raise legal challenges.c. According to this concept, an economic solution to compensation should be offered for the harm only after the harm has been done.d. It focuses only on the costs that businesses incur in pursuing environmental goals.

34. The three goals of sustainable development that include economic, environmental, and ethical sustainability are referred to as the:a. tripartite goals.b. three pillars of sustainability.c. three pronged charter.d. shoulders of sustainability.

35. Which of the following was charged with developing recommendations for paths toward economic and social development that would not achieve short-term economic growth at the expense of long-term environmental and economic sustainability?a. The Bluewash Commissionb. The Binding Commissionc. The Barentsburg Commission




d. The Brundtland Commission

36. Which of the following is true of the Brundtland Commission?a. It was named as the Brundtland Commission after the place in Norway, where the summit was conducted for the first time.b. It was charged with developing recommendations for paths toward economic and social development at the expense of underdeveloped and developing countries.c. It defined sustainable development as development that meets the needs of the present without compromising the ability of future generations to meet their own needs.d. It criticized the report from the United Nations’ World Commission on Environment and Development published in 1987.

37. Which of the following models does not differentiate natural resources from the other factors of production and does not explain the origin of resources?a. The circular flow modelb. The triple bottom line model c. The bilinear modeld. The sustainability model

38. Which of the following is true of the circular flow model?a. It differentiates natural resources from the other factors of production.b. It suggests that to keep up with the economy, the population must grow.c. It treats economic growth as both the solution to all social ills and also as boundless.d. It argues that the economy cannot grow indefinitely.

39. The possibility that the economy cannot grow indefinitely is simply not part of the:a. three pillars of sustainability approach.b. circular flow model.c. triple bottom line approach.d. bilinear model.

40. According to economist Herman Daly, neoclassical economics, with its emphasis on economic growth as the goal of economic policy will inevitably fail to meet these challenges: a. if it suggests that the population of the world needs to be controlled.b. unless it recognizes that the economy is but a subsystem within earth’s biosphere.c. unless it recognizes that resources are infinite.d. if it focuses on recycling and reusing the by-products of the production process.

41. According to the _____ law of thermodynamics (the conservation of matter/energy), neither matter nor energy can truly be “created,” it can only be transferred from one form to another.a. first b. second c. thirdd. fourth




42. The model of economy, in consistency with the second law of thermodynamics, implies that: a. the amount of re-usable products decreases with an increase in production.b. the economy exists beyond a finite biosphere.c. wastes are not produced at each stage of economic activity.d. the amount of usable energy decreases over time.

43. Over the long term, resources and energy cannot be used, nor waste produced, at rates at which the biosphere cannot replace or absorb them without jeopardizing its ability to sustain life. These are what Herman Daly calls the:a. “economic limitations.”b. “backcasting effect.”c. “biophysical limits to growth.”d. “un-expandable boundaries.”

44. Which of the following is true of the sustainability model in terms of environmental responsibilities?a. Sustainability need not be a long-term strategy.b. The huge unmet market potential among the world’s developing economiescan only be met in sustainable ways.c. Sustainable practices lead to reduced cost savings.d. Firms that follow sustainable practices lose competitive advantage.

45. Which of the following is true of the sustainability model in terms of environmental responsibilities?a. Sustainability reduces competitive advantage.b. Sustainability is not a prudent long-term strategy.c. Sustainability is a good risk management strategy.d. Sustainability leads to reduced cost-savings.

46. Estimates suggest that with present technologies, businesses can readily achieve at least a fourfold increase in efficiency, and perhaps as much as a tenfold increase. This can be achieved through the first principle of sustainability known as:a. biomimicry.b. eco-efficiency.c. the cradle-to-cradle responsibility.d. the take-make-waste model.

47. Which of the following recommends cycling the waste of one activity into the resource of another?a. The biomimicry principleb. The cradle-to-grave modelc. The cradle-to-cradle modeld. The eco- efficiency principle

48. “Closed-loop” production seeks to integrate what is presently waste, back into production.




In an ideal situation, the waste of one firm becomes the resource of another, and such synergies can create eco-industrial parks. This principle is often referred to as:a. biomimicry.b. eco-efficiency.c. biosynergy.d. backcast.

49. Which of the following suggests that a business takes resources, makes products out of them, and discards whatever is left over?a. The cradle-to-grave modelb. The take-make-waste approachc. The Cradle-to-cradle modeld. The eco-efficiency principle

50. Which of the following holds that a business is responsible for the entire life of its products, including the ultimate disposal even after the sale?a. The cradle-to-grave modelb. The take-make-waste appoachc. The cradle-to-cradle modeld. The eco-efficiency principle

51. Cradle-to-grave and cradle-to-cradle responsibilities are part of the _____ sustainable business principle.a. eco-efficiencyb. backcastingc. biomimicryd. take-make-waste

52. Which of the following would hold a business liable for groundwater contamination caused by its products even years after they had been buried in a landfill?a. “Backcast” modelb. “Eco-efficiency” modelc. “Take-make-waste” modeld. “Cradle-to-grave” model

53. Which of the following holds that a business should be responsible for incorporating the end results of its products back into the productive cycle?a. Backcastingb. Cradle-to-cradlec. Take-make-wasted. Cradle-to-grave

54. Which of the following responsibilities entail an incentive to redesign products so that they can be recycled efficiently and easily? a. Cradle-to-graveb. Backcasting




c. Cradle-to-cradle d. Eco-efficiency

55. Which of the following is true of a service-based economy?a. A service-based economy tends to the consumers’ demand for clothes cleaning, floor covering, illumination, entertainment, and so forth.b. A service-based economy interprets consumer demand as a demand for washing machines, carpets, lights, consumer electronics, and so forth.c. A service-based economy weakens the production efficiencies.d. A service-based economy increases material and energy costs significantly.


56. The conservation movement made the case that business had good reasons for conserving natural resources, reasons that paralleled the rationale to conserve financial resources.

57. A market-based approach to resolving environmental challenges suggests that environmental problems are economic problems that deserve economic solutions.

58. In economic terms, all resources are fungible that is, they can be replaced by substitutes, and in this sense resources are infinite.

59. Before environmental legislation was enacted, the primary legal avenue open for addressing environmental concerns was tort law.

60. The concept of sustainable development can be traced to a 1987 report from the United Nations’ World Commission on Environment and Development (WCED), more commonly known as the Brundtland Commission.

61. The circular flow model does not differentiate natural resources from the other factors of production.

62. While the regulatory and compliance model tends to interpret environmental responsibilities as constraints upon business, the sustainability model is more forward looking and may present business with greater opportunities than burdens.

63. The ultimate goal of biomimicry is to eliminate waste altogether rather than reducing it.

64. The cradle-to-cradle responsibility holds that a business should be responsible for incorporating the end results of its products back into the productive cycle.

65. A service-based economy interprets consumer demand as a demand for services—for clothes cleaning, floor covering, illumination, entertainment, cool air, transportation, word processing, and so forth.

Chapter 10




Ethical Decision-Making: Corporate Governance, Accounting, and Finance

True/False Questions 1. Financial analysts rely on gatekeepers but are not gatekeepers themselves. F

2. The most basic ethical issue facing professional gatekeepers and intermediaries in business contexts involves conflicts of interest. T

3. A large boost in share price decreases a firm’s equity leverage for external expansion. F

4. The Sarbanes-Oxley Act is intended to provide protection where oversight did not previously exist. T

5. While the Sarbanes-Oxley Act is an internal mechanism to ensure ethical corporate governance, the Committee of Sponsoring Organizations (COSO) is an external mechanism. F

6. Risk assessment provides assessment capabilities to uncover vulnerabilities of a firm. F

7. Risk assessment and ongoing monitoring are elements that comprise the control structure of the Sarbanes-Oxley Act. F

8. COSO is one of the first efforts to address corporate culture in a quasi-regulatory framework in recognition of its significant impact on the satisfaction of organizational objectives. T

9. The COSO controls and the Sarbanes-Oxley requirements must be supported by a culture of accountability. T

10. Board members are permitted to act in a way that is inconsistent with the central goals of the organization. F

11. The board can prohibit actions to protect the long-term sustainability of a firm. T

12. Since audits are paid for by audited clients, there is an inherent conflict found in that financial arrangement. T

13. In terms of ethical theory, lofty compensation packages have a utilitarian function when they act as incentives for executives to produce greater overall results. T

14. Laying-off of employees is one of the slowest ways to increase stock price. F




15. Insider trading is considered patently fair and ethical because it encourages employees to work hard to get access to company information. F


16. Which of the following is true of gatekeepers?a. They are not bound to ethical duties.b. Investors and boards are examples of gatekeepers.c. They serve as intermediaries between market participants.d. They are not responsible for ensuring conformance to fairness in the marketplace.

17. Which of the following rely on gatekeepers for fair and effective functioning of economic markets?a. Bankersb. Auditorsc. Accountantsd. Financial analysts

18. The function of auditors as gatekeepers is to: a. verify a company’s financial statements so that investors’ decisions are free from fraud and deception.b. evaluate a company’s financial prospects or creditworthiness, so that banks and investors can make informed decisions.c. ensure that decisions and transactions conform to the law.d. function as intermediaries between a company’s stockholders and its executives.

19. Identify the gatekeepers who evaluate a company’s financial prospects or creditworthiness, so that banks and investors can make informed decisions.a. Investorsb. Attorneysc. Auditorsd. Analysts

20. Identify the gatekeepers who ensure that decisions and transactions conform to the law.a. Accountantsb. Attorneysc. Auditorsd. Analysts

21. Identify the gatekeepers who function as intermediaries between a company’s stockholders and its executives.a. Accountantsb. Auditorsc. Board of directorsd. Financial analysts




22. Which of the following gatekeepers guarantee that executives act on behalf of the stockholders’ interests?a. Accountantsb. Board of directors c. Auditorsd. Analysts

23. A _____exists where a person holds a position of trust that requires that he exercise judgment on behalf of others, but where his personal interests conflict with those of others.a. duty of careb. community of interestc. conflict of interestd. duty of loyalty

24. A professional is said to have _____ if he has a professional and ethical obligation to clients rooted in trust that overrides his personal interests.a. statutory dutiesb. executive rightsc. creditor claimsd. fiduciary duties

25. Which of the following statements is true of conflicts of interests?a. Self-interest makes it easy for individuals to fulfill their gatekeeper duties. b. Legal protection cannot shield professionals from conflicts of interests.c. Cross-selling of consulting services reduces conflicts of interests.d. Excessive executive compensation involves conflicts of interests.

26. Which of the following statements is true of the Sarbanes-Oxley Act?a. It is also known as the Financial Services Modernization Act of 2002.b. It is enforced by the Financial Accounting Standards Board.c. It was passed by Congress because corporate boards failed to police themselves.d. It fails to provide oversight in terms of direct lines of accountability and responsibility.

27. Which provision of the Sarbanes-Oxley Act prohibits various forms of professional services that are determined to be consulting rather than auditing?a. Section 201b. Section 301c. Section 307d. Section 404

28. Section 201 of the Sarbanes-Oxley Act addresses the: a. rules of professional responsibility for attorneys.b. codes of ethics for senior financial officers.c. management assessment of internal controls.d. services outside the scope of auditors.




29. Which of the following provisions of the Sarbanes-Oxley Act mandates majority of independents on any board and total absence of current or prior business relationships?a. Section 407b. Section 301c. Section 406d. Section 307

30. Section 307 of the Sarbanes-Oxley Act addresses the:a. rules of professional responsibility for attorneys.b. codes of ethics for senior financial officers.c. management assessment of internal controls.d. services outside the scope of auditors.

31. Which of the following provisions of the Sarbanes-Oxley Act requires lawyers to report concerns of wrongdoing if not addressed?a. Section 407b. Section 301c. Section 406d. Section 307



34. _____ of the Sarbanes-Oxley Act addresses the disclosure of audit committee financial expert. a. Section 404b. Section 301c. Section 407d. Section 307

35. Which of the following is a criticism of the Sarbanes-Oxley Act?a. It excludes requirements for certification of documents by officers.b. It imposes extraordinary financial costs on the firms.c. It does not require lawyers to report concerns of wrongdoing if not addressed.d. It does not require codes of ethics for senior financial officers.

36. Identify the external mechanism that seeks to ensure ethical corporate governance.




a. The Sarbanes-Oxley Actb. The COSO frameworkc. The European Union 7th Directived. The European Union 4th Directive

37. Which of the following is an internal mechanism that seeks to ensure ethical corporate governance?a. European Union 8th Directiveb. The Sarbanes-Oxley Actc. The COSO frameworkd. European Union 7th directive

38. Which of the following statements is true of the Committee of Sponsoring Organizations?a. It improves financial reporting through a combination of controls and governance standards called the External Control—Integrated Framework.b. It is an external mechanism that seeks to ensure ethical corporate governance.c. It describes control as encompassing those elements of an organization that, taken together, support people in the achievement of the organization’s objectives.d. It replaced the Sarbanes-Oxley Act to ensure ethical corporate governance.

39. Which of the following elements of COSO sets the tone or culture of a firm? a. Ongoing monitoringb. Information and communicationsc. Risk assessmentd. Control environment

40. Which of the following elements of COSO refers to policies and procedures that support the cultural issues such as integrity, ethical values, competence, philosophy, and operating style?a. Ongoing monitoringb. Information and communicationsc. Control activitiesd. Risk assessment

41. Identify the COSO element that is directed at supporting the control environment through fair and truthful transmission of facts.a. Risk assessmentb. Information and communicationsc. Control activitiesd. Ongoing monitoring

42. Which of the following COSO elements provides assessment capabilities and uncovers vulnerabilities?a. Risk assessmentb. Information and communicationsc. Control activities




d. Ongoing monitoring

43. According to the COSO framework, which of the following is true of internal control?a. It is not geared to the achievement of objectives in overlapping categories.b. It can provide absolute assurance to an entity’s board.c. It is an end in itself, not a means to an end.d. It is affected by people at every level of an organization.

44. Which of the following is true of the COSO controls and the Sarbanes-Oxley requirements? a. They result in less transparency in ensuring ethical corporate governance.b. They encourage greater accountability for financial stewardship.c. They result in a lesser emphasis to prevent any financial misconduct.d. They do not impact executives, boards, and internal audits.

45. Which of the following legal duties of board members suggests that a director does not need to be an expert or actually run the company?a. Duty of careb. Duty of good faithc. Duty of candord. Duty of loyalty

46. Identify the duty of obedience according to which board members should strive toward corporate objectives, and are not permitted to act in a way that is inconsistent with the central goals of the organization?a. Duty of careb. Duty of good faithc. Duty of candord. Duty of loyalty

47. Which of the following duties of board members suggests that conflicts of interest are always to be resolved in favor of the corporation?a. Duty of careb. Duty of good faithc. Duty of candord. Duty of loyalty

48. Which of the following is true of Federal Sentencing Guidelines for boards?a. The board must be knowledgeable about the objectives and process of the ethics program rather than simply the mere contents of a training session.b. The board should avoid exercising reasonable oversight with respect to the effectiveness and implementation of the ethics program.c. The board should leave the evaluation of all board policies, procedures, governance structure, and position descriptions to the executives.d. The board need not work with executives to analyze the incentives for ethical behavior.




49. Which of the following are additional ethical responsibilities board members should have beyond legal obligations?a. They should maintain closed conversations within the firm.b. They should refrain from providing oversight.c. They should be critical in their inquiries about corporate vulnerabilities.d. They should pay out a significant amount of the company’s sustainable growth dollars to its chief executives in compensation.

50. Tom, an employee of Electronixx, adjusted credits and debits of the company’s ledger to show high profits. He also created false documents, underreported his income, and evaded paying taxes for a year. Tom can be convicted for _____.a. unethical insider tradingb. conflicts of interest in corporate governancec. conflicts of interest in accountingd. unfair executive excessive compensation

51. According to Kevin Bahr, which of the following is a cause for conflicts in the financial markets?a. The independence and lack of expertise of audit committeesb. The presence of shareholder activismc. Long-term executive greed versus short-term shareholder wealthd. Self-regulation of the accounting profession

52. Which of the following is true of excessive compensation packages?a. When executive compensation is tied to stock price, executives have a strong incentive to focus on long-term corporate interests rather than short-term stock value.b. When huge amounts of compensation depend on quarterly earnings reports, there is a strong incentive to manipulate those reports in order to achieve the money.c. Economic fairness and personal morality always exists in executives receiving lofty compensation packages.d. Excessive compensation packages serve corporate interests when they provide an incentive that is not based on executive performance or accomplishments.

53. Which of the following scenarios gives rise to conflicts of interests in corporate governance?a. Senior executives determining the compensation received by board membersb. Board members hand-selecting employees in their companyc. A CEO not chairing the board of directorsd. The absence of cross-fertilization of boards

54. Which of the following exemplifies insider trading?a. Underreporting incomeb. Falsifying account documentsc. Misappropriation of proprietary knowledged. Illegally evading income taxes




55. Sara, an employee of PentaComp Inc., passed on confidential information of her company to her friend. Her friend benefitted from selling PentaComp’s stock based on the information shared by Sara. In this scenario, Sara can be convicted of _____.a. insider tradingb. falsifying documentsc. underreporting incomed. evading taxes


56. The role of gatekeepers is to ensure that those who enter into the marketplace are playing by the rules and conforming to the very conditions that ensure the market functions as it is supposed to function.

57. Executive compensation packages based on stock options create huge incentives to artificially inflate stock value.

58. The Public Accounting Reform and Investor Protection Act of 2002 is commonly known as the Sarbanes-Oxley Act

59. Committee of Sponsoring Organizations (COSO)is a voluntary collaboration designed to improve financial reporting through a combination of controls and governance standards called the Internal Control—Integrated Framework.

60. Control environment refers to cultural issues such as integrity, ethical values, competence, philosophy, and operating style.

61. The COSO standards for internal controls moved audit, compliance, and governance from a numbers orientation to concern for the organizational environment.

62. COSO developed Enterprise Risk Management—Integrated Framework to serve as a framework for management to evaluate and improve their firms’ prevention, detection, and management of risk.

63. The Federal Sentencing Guidelines offer boards some specifics regarding ways to mitigate eventual fines and sentences in carrying out duties by paying attention to ethics and compliance.

64. In order to prevent accountants from being put into conflicts, the American Institute of CPAs publishes professional rules.

65. Insider trading may be based on a claim of unethical misappropriation of proprietary knowledge that is, knowledge only those in the firm should have.

