Practice Test

Module 1: Introduction to Business EthicsKey Term: Ethics

Principles, values, and standards of conduct that guide individual and group behavior.

Why Study Business Ethics?

  • Helps managers make better decisions in complex situations.

  • Builds trust with employees and customers.

  • Prevents legal and reputation problems.

  • Companies with strong ethics often perform better long-term.

Individual vs. Professional Ethics

  • Individual ethics: your personal moral values.

  • Professional ethics: rules and standards of your profession (e.g., SHRM Code of Ethics).

Ethics vs. Law

  • Law: what is legally required.

  • Ethics: what is morally right.
    👉 Something can be legal but still unethical.

Can Business Ethics Be Taught?

  • People’s character can be influenced by their environment (bad barrels), not just personal morals (bad apples).

  • Ethics training helps increase moral awareness and decision-making skills.

Are Ethical Businesses More Profitable?

  • Usually yes, in the long run.

  • Ethical companies gain loyal customers, good employees, and fewer scandals.

Generative AI in Business

  • Strengths: efficiency, creativity, problem-solving.

  • Weaknesses: bias, inaccuracy, overreliance on technology.

Module 2: Ethical Theories and Decision MakingStakeholder

Any group or individual affected by or able to affect the organization (employees, customers, shareholders, community, etc.).

Major Ethical Theories

Theory

Focus

Key Idea

Example

Utilitarianism (Teleology/Consequentialism)

Outcomes

Choose the action that creates the greatest good for the greatest number.

Firing one worker to save 100 jobs.

Deontology (Duty-Based Ethics)

Rules / Duties

Follow moral rules regardless of the result. Based on Kant’s Categorical Imperative.

Always tell the truth, even if it hurts profits.

Virtue Ethics

Character

Do what a person with good moral character would do. Focus on integrity.

Acting honestly because it’s who you are.

Other Normative Theories

  • Justice Theory (Weiss):

    • Distributive: fairness in outcomes

    • Procedural: fairness in process

    • Interactional: respectful treatment

    • Retributive: fair punishment

  • Rights Theory: people have moral and legal rights that must be respected.

Eight Steps to Sound Ethical Decision Making

  1. Gather the facts

  2. Define the ethical issue

  3. Identify affected parties (stakeholders)

  4. Identify consequences

  5. Identify obligations or duties

  6. Consider your integrity and character

  7. Think creatively about actions

  8. Check your gut

Snap Decisions

When under time pressure, rely on your core values or your organization’s code of ethics.

Hippocratic Oath for Managers

“Do no harm.” Make decisions that avoid harming others or society.

Module 3: Ethical Awareness and Moral DevelopmentEthical Awareness

Recognizing that a situation involves an ethical issue.

Normative Myopia

Failure to see the ethical aspect of a situation — focusing only on business goals.

Facilitators and Barriers to Ethical Judgment

  • Facilitators: moral awareness, ethical culture, time to think.

  • Barriers: pressure, goals, obedience to authority, peer influence.

Kohlberg’s Levels of Moral Development

Level

Stage

Description

I. Preconventional

1. Obedience/Punishment – avoid trouble.
2. Instrumental Purpose – what’s in it for me?

II. Conventional

3. Interpersonal Accord – want approval.
4. Social Accord/System Maintenance – follow laws and rules.

III. Postconventional (Principled)

5. Social Contract – consider fairness and rights.
6. Universal Ethical Principles – follow moral ideals even against laws.

Locus of Control

  • Internal: you believe you control your actions → more ethical behavior.

  • External: you believe fate or others control outcomes → less responsibility.

Personality Traits

  • Honesty-Humility: sincere, fair, modest.

  • Machiavellianism: manipulative, self-interested.

Moral Disengagement Mechanisms

  1. Reframing/Recategorizing –

    • Euphemistic language: “creative accounting” instead of lying.

    • Moral justification: “It helps the company.”

    • Advantageous comparison: “It’s not as bad as what others do.”

  2. Reducing Responsibility –

    • Displacement: “I was told to.”

    • Diffusion: “Everyone was doing it.”

  3. Distorting Consequences – downplaying harm.

  4. Reducing Identification with Victims – dehumanization, victim blaming.

Module 4: Fairness, Diversity, and Workplace ValuesAbove/Below the Water Line

  • Above: visible behaviors, policies.

  • Below: hidden culture, values, and beliefs.

Why Everyone Thinks They’re Getting a Raw Deal

People judge fairness based on their own perspective.

Equity vs. Equality

  • Equality: everyone gets the same.

  • Equity: fairness based on individual needs or circumstances.

Diverse Leadership

Increases innovation, better decision-making, and higher profitability.

Responding to Inequity

Encourage open communication, fairness, and inclusivity.

Other Key Issues

  • Identifying Values: clarify what you personally and professionally stand for.

  • Conflicts of Interest: personal interest vs. professional duty.

  • Customer Confidence Issues: truth in advertising, data protection, product safety.

  • Social Media Issues: maintain professionalism and privacy.

  • Whistleblowing: reporting unethical behavior; protected by law if done in good faith.

Module 5: Organizational Culture and ValuesOrganizational Factors that Shape Behavior

Leaders, peers, reward systems, and ethical culture.

Lencioni’s Five Types of Values

  1. Core Values – deeply held beliefs.

  2. Aspirational Values – what the company wants to develop.

  3. Permission-to-Play Values – minimum behavior standards.

  4. Accidental Values – habits that develop unintentionally.

  5. Core Values Gone Bad – overused or misapplied.

“Are Your Values Off the Wall?”

Check if company lives its stated values, not just displays them.

Ethical Culture

Shared beliefs about what is ethically correct and how to act.

Socialization and Internalization

  • Socialization: how employees learn expected behavior.

  • Internalization: when those values become part of personal beliefs.

Multisystem Ethical Culture Framework

  • Formal Systems: policies, training, rewards, rules.

  • Informal Systems: role models, norms, rituals, stories.

Ethical Leadership

Leaders model ethical behavior, talk about ethics, and make ethics part of daily operations.

Developing/Changing Ethical Culture

  1. Assess the current culture.

  2. Identify misalignments.

  3. Communicate clear values.

  4. Reinforce through training, leadership, and rewards.

Auditing the System

Check if formal (rules) and informal (culture) systems match — ethics must be consistent.

Module 6: Managing and Communicating EthicsCompliance-Based vs. Values-Based Systems

Type

Focus

Pros

Cons

Compliance-Based

Rules, laws, punishments

Clear, legal protection

Fear-based, doesn’t build moral reasoning

Values-Based

Shared values, ethical culture

Builds trust, loyalty

May lack clear boundaries

Best approach → combine both.

Communicating Ethics

Different employee types:

  • Good Soldiers: understand and follow rules.

  • Loose Cannons: well-intentioned but unaware; need training.

  • Grenades: don’t care about ethics; need strict control.

Structuring Ethics Management

The U.S. Sentencing Guidelines encourage organizations to create effective ethics and compliance programs to reduce penalties.

Reward Systems

Use positive reinforcement to reward ethical behavior, not just financial results.

Evaluating the Program

Regularly review:

  • Employee surveys

  • Reporting systems

  • Outcomes
    Check if employees trust and use ethics resources.