Ethics Exam 1 Study Guide

What is the study of right and wrong?

Ethics — the manner by which one tries to live according to a standard of right or wrong behavior.

How do we define society?

A structured community of people bound together by similar traditions and customs.

What influences your moral standards?

Religious beliefs, cultural beliefs, and philosophical beliefs

What are morals and values?

A set of personal principles by which one aims to live one’s life.

What is an intrinsic value?

Something that is good in itself and is pursued for its own sake.

What is an instrumental value?

A value pursued because it is a good way to reach another value.

How do intrinsic and instrumental values differ?

Intrinsic value is good in itself; instrumental value helps you reach another value.

Honesty, awareness, and sensitivity to others could represent what?

Personal integrity — ethical behavior demonstrated through one’s character and actions.

What are the basic categories used to classify ethics?

Simple truth, personal integrity, rules of individual behavior, and rules for society.

What is a problem with virtue ethics?

Different societies may place different emphasis on different virtues.

What is a problem with utilitarian ethics?

It can lead to the idea that “the ends justify the means.”

What does universal ethics state?

Moral actions come from duty and obligation, and universal principles apply to everyone, everywhere, all the time.

What is the application of ethical standards to business behavior?

Business ethics.

What is true of business ethics?

It can be descriptive, describing what is happening, or normative, recommending what should happen.

What is a stakeholder?

Someone with a share or interest in a business enterprise.

What system directs and controls business corporations?

Corporate governance.

What are standard parts of corporate governance?

The board of directors, audit committee, compensation committee, and corporate governance committee.

What is true of corporate governance?

Good governance supports financial-market integrity; poor governance can cause financial difficulty and fraud

Why can business ethics be considered an oxymoron?

Major companies once viewed as successful were later found to have serious ethical flaws.

What does a code of ethics do?

Gives written standards of ethical behavior to guide managers and employees.

What is true of a code of ethics?

It serves both as a message to stakeholders and as an internal decision-making guide.

What major change has occurred in business ethics over the past six decades?

Business ethics has grown from concerns such as pollution and worker rights to CSR, transparency, sustainability, and compliance.

What is true of corporate ethics?

Ethical conduct increasingly involves formal codes, regulation, corporate responsibility, and accountability.

What dramatic changes have affected business ethics over the past six decades?

Scandals, globalization, technology, regulation, CSR, sustainability, privacy, and transparency.

What is organizational culture?

The values, beliefs, and norms shared by all employees of an organization.

What is a value chain?

Key functional inputs used to transform raw materials into a delivered product or service.

What activities are part of a company’s value chain?

Supply chain, operations, distribution, sales and marketing, service, R&D, HR, and administration.

What should R&D do to help a company maintain a leading market position?

Maintain a commitment to product quality, safety, reliability, and effective product development.

What is true of marketing ethics?

Marketing can satisfy customer needs, but ethical problems arise when customers are misled into purchases.

Why does a company need certified financial statements?

To have an impartial third-party professional certify that the financial statements are accurate

Why should a company have internal auditors?

To objectively assess operations and improve controls, procedures, performance, and risk management.

An employee bribes someone to change a contract date. What has happened?

Fraudulent and unethical conduct involving falsification of company documents.

What is the relationship between HR and ethical conduct?

HR should make ethics a top priority and ensure ethical policies, programs, leadership selection, and development.

When a company must choose between competing stakeholder interests, what can occur?

An ethical dilemma or conflict of interest.

What is true of ethical challenges in an organization?

They can occur in every function, including R&D, manufacturing, marketing, HR, finance, accounting, and auditing.

When are conflicts of interest most likely to happen?

When one relationship or obligation directly conflicts with an existing relationship or obligation.

What is an example of corporate social responsibility?

An action designed to create a social benefit beyond maximizing profit and meeting legal obligations.

What shows that a company has failed at CSR?

Employees see it as insincere, the public sees it as publicity, or the company sees no real benefit.

CSR assumes a company is what?

A corporate citizen with responsibilities to society beyond its shareholders.

What is true of CSR?

It involves actions that seek social benefit above maximizing profits and meeting legal obligations.

What is the instrumental approach to CSR?

The corporation’s only obligation is to maximize shareholder profit while providing goods and services customers need.

Which view reflects Milton Friedman’s approach?

The instrumental view — a corporation’s obligation is to maximize profits for shareholders.

What is the social contract approach to CSR?

A corporation has obligations to society beyond the expectations of its shareholders.

What is the difference between the instrumental and social contract approaches?

Instrumental focuses on shareholder profit; social contract adds obligations to society.

What is true of CSR initiatives?

They can produce social benefits, but poorly executed initiatives may appear insincere or self-serving.

Can Corporate Social Responsibility create adverse results?

Yes — employees may distrust it, the public may see it as publicity, and the company may see little benefit.

What does the triple bottom line measure?

Economic, environmental, and social performance.

How do checks and balances help reduce fraud?

They separate authority and oversight so that one person does not control the entire governance process.

What can poor corporate governance lead to?

Weakened company potential, financial difficulties, and fraud.

Why are outside directors used on boards and committees?

To provide independent oversight alongside members of the board.

What does an audit committee do?

Monitors the organization’s financial policies and procedures.

What does a compensation committee do?

Sets compensation for the CEO and other senior executives.

What did the King One Report emphasize?

High corporate-governance standards and involvement of all corporate stakeholders.

What did the King Two Report emphasize?

The stakeholder model, triple bottom line, sustainability, fairness, accountability, responsibility, and transparency.

What is the “comply or explain” approach?

Follow operating standards or explain why the company chooses not to.

What is the “comply or else” approach?

Follow operating standards or face stiff financial penalties.

What is an advantage of merging the CEO and chairperson roles?

Higher efficiency, less potential conflict, and leadership from someone familiar with the organization.

What does CRAFTED stand for in corporate governance?

Consistency, Responsibility, Accountability, Fairness, Transparency, Effectiveness, Deployed.

What is a step toward running a company successfully through effective governance?

Use a properly constituted board with authority, professional conduct, oversight, guidance, and timely feedback.