Chapter 10, Ethical Problems of Organizations
Matching
Reference: Matching Key Terms and Definitions
a) Stake
b) Primary stakeholder
c) Secondary stakeholder
1. Business partners, customers, and employees.
Ans: b
Response: See page 356.
2. An interest, claim, or right to something.
Ans: a
Response: See page 355.
3. Opinion formers, community, and authorities.
Ans: c
Response: See page 356.
Reference: Matching Key Stakeholders and Regulatory Agencies
a) Guard rights of shareholders
b) Guard rights of consumers
c) Guard rights of employees
d) Guard rights of the community
4. Occupational Safety and Health Administration (OSHA)
Ans: c
Response: See page 374.
5. The Federal Trade Commission
Ans: b
Response: See page 388.
6. The Federal Reserve Board
Ans: a
Response: See page 388.
7. The Environmental Protection Agency (EPA)
Ans: d
Response: See page 386.
8. The Federal Communication Commission (FCC)
Ans: b
Response: See page 388.
True/False
9. Before the beginning of the twentieth century, consumers did not have the right to sue
manufacturers for a defective product.
Ans: True
Response: See pages 356-357.
10. One of the most common faults in ethical decision making is to ignore the long-term
consequences of a decision.
Ans: True
Response: See page 381.
11. In the past five-to-ten years, most lawsuits filed against pharmaceuticals are related to the
companies’ advertising and marketing practices.
Ans: True
Response: See page 372.
12. Because stakeholders’ interests frequently do not overlap, an organization is able to focus on
one stakeholder at a time.
Ans: False
Response: See pages 355 ; 389.
13. Only since Enron’s collapse have ethicists and business professionals really been concerned
about the increasing focus on “short-term” earnings.
Ans: False
Response: See page 354.
14. The real proportion of wrong-doers is probably quite small.
Ans: True
Response: See page 355.
17. Ethical disasters in corporations often start as small issues and it is either denial or
mismanagement that cause seemingly minor situations to mushroom into huge legal, ethical,
and public relations nightmares.
Ans.: True
Response: See page 355
18. Conflicts involving organizations are more damaging than those who involve individuals.
Ans. True
Response: See page 357
19. The definition of conflict for an organization is similar to that for an individual ; that is, if a
stakeholder thinks that an organization’s judgment is biased because of a relationship it has
with another firm, a conflict could exist.
Ans.: True
Response: See page 364
20. Nothing will put a company out of business faster than offering a product that is dangerous,
poorly produced, or of inferior quality.
Ans.: True
Response: See page 365
21. Despite Johnson & Johnson’s best efforts to respond to its customers by pulling Tylenol off
shelves, the product has never regained its market share.
Ans.: False
Response: See page 366
22. Toyota, like Johnson & Johnson, halted production in response to its concerns for its
customers.
Ans. False
Response: See page 368
29. In ethical decision-making and particularly in cases dealing with product safety, firms are
best served when they consider the long-term consequences of a decision.
Ans.: True
Response: See page 369
30. The pharmaceutical industry has found that advertising directly to the consumer minimizes
problems experienced earlier with consumers regarding their confidence in products.
Ans.: False
Response: See page 372
Multiple Choice
31. The idea that consumers have the right to safety, right to be heard, right to choose, and right
to be informed came from ____________ in ________.
a) Theodore Roosevelt; 1930.
b) The Food and Drug Act; 1906.
c) John F. Kennedy; 1962.
d) George W. Bush; 2004.
Ans: c
Response: See page 357.
32. In this example of a conflict of interest, ________ conducted a series of off-the-books
partnerships that were used to hide the organization’s debt and inflate its stock price. The
partnerships were managed by the company’s executives who stood to profit the most from
the transactions.
a) Merrill Lynch
b) Enron
c) Citicorp
d) Adelphia
Ans: b
Response: See page 358.
33. In a classic example of failing to protect its employees, ___________ knew asbestos caused
cancer as early as 1930. However, the company lied to its employees and used several tactics
to cover-up the product’s effects.
a) Johnson & Johnson
b) A.H. Robbins
c) Manville Corporation
d) McWane, Inc.
Ans: c
Response: See pages 374-376.
34. In this classic example of a company treating its employees responsibly, ____________ was
the first company to offer company-paid vacations, stock ownership plans, employee
suggestion program, and the guaranteed employment plan. This company has not laid off
employees in the United States since 1948.
a) McWane, Inc.
b) Lincoln Electric
c) Scott Paper Company
d) Manville Corporation
Ans: b
Response: See page 380.
35. In a 2002 poll, _________ ranked last on the “who do you trust scale.”
a) Lawyers
b) Politicians
c) Chief executive officers
d) Accountants
Ans: c
Response: See page 364.
36. Organizations have many ethical obligations to their employees including
a. right to privacy, right to a safe workplace, right to promotional opportunities
b. right to privacy, right to a safe workplace, right to freedom of speech
c. right to a safe workplace, right to freedom of speech, right to promotional opportunities
d. right to a safe workplace, right to freedom of speech, right to three weeks vacation
e. right to fair treatment, right of privacy, right to c-level opportunities if they earned their MBA
Ans.: b
Response: See page 374
Difficulté: Difficult
37. For the public, the top three factors in corporate reputation are :
a. transparent and honest practices, trustworthiness, and high-quality products and services
b. transparent and honest practices, community philanthropy, and high quality products and
services
c. trustworthiness, high-quality products, and a no-layoff policy
d. trustworthiness, high-quality products, and a 90-day customer return policy
Ans.: a
Response: See page 389
38. The due care theory involves at least the elements set out below.
a. products and services meet all government regulations and specifications
b. ability to return the product if dissatisfied for any reason
c. products should be inspected regularly for quality
d. manufacturers should institute a system to recall products that prove dangerous after
distribution
e. a & b
f. a, c, & d
g. all of the above
Ans.: f
Response: See page 357
Short Answer
39. Companies face a myriad of stakeholders that often have conflicting interests. Briefly
describe a company or an incident that demonstrates how stakeholders’ conflicting interests
can lead to unethical behavior.
Ans: For example, students may describe how shareholders and stock analysts demand strong
performance and can punish a company severely who does not meet these expectations. On the
other hand, to meet the shareholder’s expectations, a company may need to sacrifice other
stakeholders’ rights (such as product safety, truth in advertising, etc.).
Response: see pages 355-357