Rutgers NB Giordano Ethics Concept quiz 3

Corporate Social Responsibility (CSR)

The responsibilities that a business has to the society in which it operates.

Economic Model of CSR

The view that the only responsibility of business is to maximize profits within the law; social responsibility is voluntary and may be done for reputation or the 'right thing to do.'

Stakeholder Model of CSR

The model that recognizes broader responsibilities to all stakeholders, including customers, employees, suppliers, communities, and shareholders.

Integrative Model of CSR

A model in which social responsibility is integrated into the mission of the firm and becomes part of the company's core purpose.

Reputation Management

The practice of attending to the 'image' of a firm; failure to manage reputation can be a poor business decision.

Is Good Ethics Good Business

Theorists debate whether ethical decisions lead to more profits; general agreement is that ethics pays off in the long run though the payoff is difficult to measure.

Gatekeepers

Business professionals such as lawyers, auditors, accountants, and financial analysts who act as 'watchdogs' to ensure that participants in the marketplace play by the rules.

Role Identities

Professional roles that determine ethical duties and provide rules for how professionals ought to act.

Conflict of Interest

When a person holds a position of trust requiring judgment on behalf of others, but personal interest conflicts with proper judgment.

Fiduciary Duties

A legal duty, grounded in trust, to act on behalf of or in the interests of another.

Sarbanes-Oxley Act (SOX)

The Public Accounting Reform and Investor Protection Act of 2002, enforced by the SEC, intended to provide protection where oversight did not exist in publicly held companies.

SOX Section 201

Prohibits auditors from providing consulting services outside the scope of auditing.

SOX Section 301

Requires public company audit committees with a majority of independent directors and no prior or current business relationships.

SOX Section 307

Establishes rules of professional responsibility for attorneys.

SOX Section 404

Requires management assessment of internal controls.

SOX Section 406

Requires codes of ethics for senior financial officers.

SOX Section 407

Requires disclosure of whether the audit committee has a financial expert.

COSO (Committee of Sponsoring Organizations)

A private-sector initiative intended to improve the quality of financial reporting through corporate governance, ethical practices, and internal control.

Control Environment

The tone or culture of the firm including integrity, ethical values, competence, philosophy, and operating style.

Elements of an Internal Control Structure

Control environment, risk assessment, control activities, information and communications, and ongoing monitoring.

Duty of Care

The exercise of reasonable care by ensuring executives carry out responsibilities and comply with the law.

Duty of Loyalty

Faithfulness to the organization by giving undivided allegiance when making decisions; conflicts of interest must be resolved in favor of the organization.

Duty of Good Faith

Obedience and faithfulness to the organization's mission.

Conflicts of Interest in Accounting

Conflicts arising from financial relationships, combined auditing and consulting, lack of independent audit committees, lack of self-regulation, lack of shareholder activism, and short-term executive greed.

Insider Trading

Trading securities using private inside information that would materially impact the stock's value and allow the trader to benefit.

Shadow Insider Trading

Trading based on proprietary knowledge of competitor firms; considered unethical due to misappropriation of knowledge.

Executive Compensation

The significant growth of CEO pay relative to worker pay, raising ethical concerns about greed, distributive justice, fairness, and corporate governance failures.

Marketing (AMA Definition)

An organizational function and a set of processes for creating, communicating, and delivering value to customers and managing customer relationships in ways that benefit the organization and its stakeholders.

Four Ps of Marketing

Product, Price, Promotion, and Placement.

Prima Facie Legitimacy of Market Exchange

Market exchanges are ethically legitimate when they involve respect for autonomy and mutual benefit.

Voluntary Exchange

The transaction must be truly voluntary; real alternative choices must exist.

Informed Consent (Marketing)

Consumers must have enough information to understand what they are purchasing; deception, lack of information, and complexity undermine consent.

Product Safety Responsibility

Business has an ethical responsibility to design, manufacture, and promote products in ways that avoid causing harm.

Caveat Emptor

"Let the buyer beware." Assumes informed consent; the seller's responsibility is limited to providing the product at the agreed price without coercion, fraud, or deception.

Implied Warranty of Merchantability

The implicit assurance that a product is suitable for its intended purpose.

Negligence (Tort Law)

Uses the "reasonable person" standard; harm must be foreseeable and preventable by reasonable care.

Strict Product Liability

Holds manufacturers accountable for harms even when no negligence was involved; raises questions of foreseeability, accountability, and fairness.

Financial Burden Argument

Claims business is best able to pay for damages, though liability has bankrupted many companies.

Supply Chain Responsibility

Businesses may be responsible for harms caused by suppliers when suppliers act at the direction of or are influenced by the business.

Respondeat Superior

A doctrine holding employers responsible for the actions of their employees when performing ordinary duties.

Manipulation (Marketing)

Guiding consumer behavior by bypassing autonomy; may occur with or without deception.

Ethical Issues in Advertising

Includes deception, manipulation, targeting vulnerable populations, and appealing to irrational motivations.

Dependence Effect (Galbraith)

The assertion that advertising creates consumer wants that production then satisfies, reversing supply and demand and violating autonomy.

Consumer Vulnerability

Occurs when a person lacks the capacity, experience, or maturity to make informed consumer judgments.

General Vulnerability

Occurs when someone is susceptible to specific physical, psychological, or financial harm.

Stealth Marketing

Directed commercial activity without consumer knowledge, including undercover marketing, buzz marketing, and unlabelled influencer promotion.