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TEST BANK FOR FOUNDATIONS
OF BUSINESS 5TH EDITION BY
PRIDE
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Foundations of Business 5th Edition Pride Test Bank
Chapter 02 Being Ethical and Socially Responsible
ESSAY
1. Define business ethics.
Graders Info :
Ethics is the study of right and wrong and of the morality of the choices individuals make. Business ethics, more
specifically defined, is the application of moral standards to business situations.
2. Why are fairness and honesty in business important ethical concerns? Give examples.
Graders Info :
Fairness and honesty in business are considered as two important ethical concerns. In addition to obeying all laws
and regulations, businesspeople are expected to refrain from knowingly deceiving, misrepresenting, or
intimidating others. The PricewaterhouseCoopers LLP and Anderson's Ark and Associates cases prove that the
lack of fairness and honesty also is an expensive proposition.
3. What are the major ethical issues businesspeople face?
Graders Info :
Challenges to being fair and honest, temptations of placing personal welfare above the welfare of the
organization, and conflicts of interest are among common ethical issues that businesspeople may regularly face.
Business communications, especially advertising, can also present ethical questions for employees within
organizations.
4. What are the three major sets of factors believed to affect ethical behavior in an organization?
Graders Info :
Individual factors such as individual knowledge of issues, personal values, and personal goals influence the level
of ethical behavior in an organization. Social factors such as cultural norms, actions and decisions of co-workers,
significant others, and the use of the Internet affect ethical behavior. Also, the amount of freedom an
organization gives an employee to behave unethically affects ethical behavior in an organization.
5. What are some of the social factors that affect ethical decisions?
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Cultural norms is an important factor in considering ethical decision making. The actions and decisions of co-
workers impact other employees' sense of business ethics. Significant others-spouses, friends, and relatives--also
can affect an employee's perception of ethical and unethical decisions in the workplace. Also, the use of the
Internet by employees in a business setting is also an important social factor that affects ethical decision making.
6. How can the government encourage ethical behavior? Give an example.
Graders Info :
The government encourages ethical behavior by legislating regulations. One of the important landmark
regulations that the government has created is the Sarbanes-Oxley Act of 2002 which deals with corporate
responsibility, conflicts of interest, and corporate accountability.
7. Define a code of ethics. Do codes cover every business situation?
Graders Info :
A code of ethics is a written guide to acceptable and ethical behavior in an organization. A code outlines uniform
policies, standards, and punishments for violations. A code of ethics cannot possibly cover every situation that
might arise in an organization. An environment in which employees recognize the importance of complying with
the written code must also be in place.
8. What might be the personal and social consequences of whistle-blowing within one's own firm?
Graders Info :
Whistle-blowing, the practice of informing the press or government officials about unethical practices within
one's organization, could impact the employee who blew the whistle through loss of his or her job even though
the Sarbanes-Oxley Act of 2002 protects whistle-blowers who report corporate misconduct. Retaliation by
executives is a criminal offense but, nevertheless, retaliation does occur.
9. What are a few examples of companies acting socially responsible?
Graders Info :
Student answers will vary. Some possible answers include Walmart's donation of $20 million in cash,
100 truckloads of free merchandise, and food for 100,000 meals after Hurricane Katrina, General Mills'
foundation that awards millions of dollars in grants to community organizations, and Dell's foundation that
supports a wide range of programs that benefit children in Dell's principal U.S. locations.
10. Define the doctrine of caveat emptor.
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Caveat emptor is a Latin phrase meaning "let the buyer beware." During the early 1900s, business acted primarily
without oversight by government regulation and consumers were left to their own devices to determine if a
product or service was what was expected and what was portrayed.
11. How does the economic model of social responsibility differ from the socioeconomic model of social
responsibility?
Graders Info :
The economic model of social responsibility ascribes that society benefits most when business is left alone to
produce and market profitable products that society needs. This contrasts sharply with the socioeconomic model
of social responsibility which places emphasis not only on profits but also on the impact of business decisions on
society.
12. What would proponents of the socioeconomic model argue to support their position?
Graders Info :
Since a corporation is a creation of society and is deemed a part of society, a corporation must act as a good
citizen or society has the right to demand changes by that entity. Businesses have a responsibility to not only
stockholders but also to customers, employees, suppliers, and the general public.
13. What would opponents of the socioeconomic model argue to support their position?
Graders Info :
Businesses are most functional and successful and of most benefit to society when left alone to produce and
market profitable products and services that society needs and wants. Social responsibility is someone else's job
and is not a primary responsibility of a business. A firm is legally obligated to act in the economic interest of its
stockholders and successful businesses pay taxes that are used to meet the needs of society.
14. Define consumerism. How have the rights of consumers changed since 1930?
Graders Info :
Consumerism consists of all activities undertaken to protect the rights of consumers. The three primary categories
of the consumer movement include environmental protection, product performance and safety, and information
disclosure. Before the 1930s, workers, consumers, and government had very little influence on business activities.
Consumerism since the 1930s has shown consumers that they do have rights and can expect businesses to meet
environmental, safety, as well as other expectations.
15. Explain the six basic rights of consumers.
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