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Chapter 10 Establishing A Code Of Ethics And Ethical Guidelines 1. What is Eric Pilmore’s position at Tyco? a. CEO b. CFO c. Vice President of Ethics d. Vice President of Corporate Governance Answer: d. Vice President of Corporate Governance 2. What is the major difference between the Tyco scandal and the Enron and WorldCom scandals? a. Enron and WorldCom were over longer time periods b. Enron and WorldCom operated in more countries than Tyco c. Enron and WorldCom went bankrupt and Tyco did not d. Enron and WorldCom’s CEOs were convicted but the Tyco CEO was not. Answer: c. Enron and WorldCom went bankrupt and Tyco did not 3. Which of the following company’s code of ethics were not used as a starting point for Tyco’s new code of ethics? a. General Electric b. Johnson & Johnson c. Sony d. Coca-Cola Answer: c. Sony 4. Which of the following is not the name of a type of statement which presents the firm’s view on ethics? a. Values statement b. Corporate credos c. Ethical Philosophies d. Codes of Ethics Answer: c. Ethical Philosophies 5. Based on Figure 10-1, which of the following is not a factor that impacts the development of ethical standards? a. Institutional b. Personal c. Operational d. Organizational Answer: c. Operational 6. According to Raiborn and Payne, which of the following is not one of the values that should be considered when developing a code of ethics? a. Integrity b. Truthfulness c. Competence d. Utility Answer: b. Truthfulness 7. The presentation of the firm’s commitment to unbiased and good-faith interactions is a. Integrity b. Truthfulness c. Justice d. Utility Answer: c. Justice 8. The duties and capabilities of the firm to execute its ethical vision is a. Integrity b. Truthfulness c. Competence d. Utility Answer: c. Competence 9. Incorporating within the code of ethics values that will do the greatest good to the greatest number is a. Integrity b. Truthfulness c. Competence d. Utility Answer: d. Utility 10. Who was one of the first retailers to develop a corporate code of ethics? a. Sears Roebuck b. Macys c. JC Penney d. Wal-mart Answer: c. JC Penney 11. Which of the following is not a benefit of having a code of ethics? a. Employee loyalty increases b. Supplier loyalty increases c. Managers get more confident d. Competitive positions improve Answer: b. Supplier loyalty increases 12. What does TRM stand for? a. Tell Relevant Management b. Total Responsibility Management c. Telephone, Report, Manage d. Total Relationship Management Answer: b. Total Responsibility Management 13. TRM is an extension of: a. TRS b. TQS c. TQM d. TRC Answer: c. TQM 14. TQM stands for: a. Total Quality Management b. Total Quotient Management c. Total Quality Manufacturing d. Top Quality Manufacturing Answer: a. Total Quality Management 15. Which of the following is not a major stage in the TRM process? a. Introduction Process b. Inspiration Process c. Integration Process d. Innovation Process Answer: a. Introduction Process 16. Which of the following is not part of the first stage in the TRM process? a. Stakeholder Engagement Processes b. Foundation Values c. Total Management Review d. Vision Setting and Leadership Commitment Answer: c. Total Management Review 17. The identification of the relationship the firm has with its competitive advantage occurs at which stage of the TRM process? a. Stakeholder Engagement Processes b. Foundation Values c. Total Management Review d. Vision Setting and Leadership Commitment Answer: d. Vision Setting and Leadership Commitment 18. The interaction with the stakeholders to ensure their needs are met occurs at which stage of the TRM process? a. Stakeholder Engagement Processes b. Foundation Values c. Total Management Review d. Vision Setting and Leadership Commitment Answer: a. Stakeholder Engagement Processes 19. The identification of the minimally acceptable ethical standards occurs at which stage of the TRM process? a. Stakeholder Engagement Processes b. Foundation Values c. Total Management Review d. Vision Setting and Leadership Commitment Answer: b. Foundation Values 20. Which of the following does not occur at the second stage of the TRM process? a. Strategy b. Building Human Resource Capacity c. Building Customer Relationships d. Integration into Management Systems Answer: c. Building Customer Relationships 21. Which of the following does not occur at the third stage of the TRM process? a. The Responsibility Measurement System b. Top Management Execution c. Transparency and Accountability d. Innovation, Improvement, and Learning Systems Answer: b. Top Management Execution 22. Which of the following is not a reason why a firm adopts a code of ethics according to Bondy, Matten and Moon? a. Peer pressure within the same industry b. Improvement of customer relationships c. Maintenance of standards along the supply chain d. Employees demand a code of ethics Answer: d. Employees demand a code of ethics 23. According to Table 10-1, which of the following is not good practice in making a firm’s code of conduct more effective? a. Distribute to everyone in the company b. Review and make adjustments to the code when necessary c. Make ethical commitment part of a contract for employment d. Make sure the CEO develops the code of conduct Answer: d. Make sure the CEO develops the code of conduct 24. According to Table 10-1, which of the following is not poor practice in making a firm’s code of conduct more effective? a. Post the code to the notice board without any action b. View the code as a confidential and/or internal document c. Make exceptions to the code’s application in certain circumstances d. Make sure the code is similar to a competitor’s code of conduct Answer: d. Make sure the code is similar to a competitor’s code of conduct 25. Which of the following was not a value in Enron’s code of ethics? a. Respect b. Trustworthiness c. Integrity d. Communication Answer: b. Trustworthiness 26. What Section of the Sarbanes-Oxley Act requires companies to disclose whether or not they have a code of ethics? a. 204 b. 404 c. 406 d. 604 Answer: c. 406 27. Which of the following is not a set of Global Ethical Principles? a. Caux Round Table Principles b. OECD Guidelines c. Cadbury Principles d. United Nations Global Impact Answer: c. Cadbury Principles 28. Which of the following is not one of the CRT Principles? a. Businesses need to respect the global rules b. Businesses need to support multilateral trade c. Businesses need to support changes in government when necessary d. Businesses must respect the environment Answer: c. Businesses need to support changes in government when necessary 29. Which of the following is not one of the OECD Guidelines for Multinational Enterprises? a. Organizations must respect human rights b. Organizations must start businesses in developing countries c. Organizations must develop and apply effective self-regulatory practices d. Organizations must not be involved in any discriminatory behavior Answer: b. Organizations must start businesses in developing countries 30. Which of the following is not one of the United Nations Global Impact Principles? a. Businesses should allow the freedom of association and recognize collective bargaining of their employees b. Businesses should support a precautionary approach to global environmental challenges c. Businesses should ensure employees around the world are paid a living wage d. Businesses should abolish all child labor Answer: c. Businesses should ensure employees around the world are paid a living wage 31. Which of the following is not a common mistake that companies make when developing global ethics programs? a. Not having consensus on objectives for globalization of their commitment b. Selecting only home country employees to fill any ethics-based positions c. Failing to acknowledge the many cultural differences related to business ethics d. Failing to consult with the firm’s foreign based subsidiaries before a new ethics policy is implemented Answer: d. Failing to consult with the firm’s foreign based subsidiaries before a new ethics policy is implemented 32. Eric Pillmore is the new vice president of ethical affairs at Tyco a. True b. False Answer: b. False 33. Tyco went bankrupt based on the results of its scandal a. True b. False Answer: b. False 34. It was Tyco’s former CEO that bought the $6,000 shower curtain. a. True b. False Answer: a. True 35. Social values can impact ethical standards. a. True b. False Answer: a. True 36. Formalized factors can impact ethical standards. a. True b. False Answer: b. False 37. A corporate credo is another name for a code of ethics. a. True b. False Answer: a. True 38. Employee guidelines is another name for a code of ethics. a. True b. False Answer: b. False 39. According to Raiborn and Payne, justice can be defined as presenting the firm’s commitment to unbiased and good-faith interactions with its stakeholders. a. True b. False Answer: a. True 40. According to Raiborn and Payne, competence is identified as the duties and capabilities of the firm to execute its ethical vision. a. True b. False Answer: a. True 41. According to Raiborn and Payne, utility is incorporating with the code of ethics values and actions that will do the greatest good to the greatest number. a. True b. False Answer: a. True 42. JC Penney was one of the first retailers to have a corporate code of ethics. a. True b. False Answer: a. True 43. Enron’s code of ethics was 10 pages long. a. True b. False Answer: b. False 44. A firm’s competitive position can improve when the firm has a code of ethics. a. True b. False Answer: a. True 45. Managers get more confident when the firm has a code of ethics. a. True b. False Answer: a. True 46. W. Edward Deming was the developer of Total Control Management. a. True b. False Answer: b. False 47. TQM stands for Total Quality Management a. True b. False Answer: a. True 48. TRM stands for Total Responsibility Management a. True b. False Answer: a. True 49. Building Human Resource Capacity is part of the inspiration TRM process. a. True b. False Answer: b. False 50. Stakeholder Engagement Process is part of the inspiration TRM process. a. True b. False Answer: a. True 51. Strategy is part of the integration TRM process a. True b. False Answer: a. True 52. Foundation Values is part of the integration TRM process a. True b. False Answer: b. False 53. Transparency and Accountability is part of the innovation TRM process a. True b. False Answer: a. True 54. Integration into management systems is part of the innovation TRM process. a. True b. False Answer: b. False 55. Making sure senior staff set the correct example by “walking the talk” is a good practice in order to make codes of conduct more effective. a. True b. False Answer: a. True 56. Making it difficult for staff to have continuous access to the code of ethics is a poor practice in order to make codes of conduct more effective. a. True b. False Answer: a. True 57. Communication is a value stated in Enron’s code of ethics a. True b. False Answer: a. True 58. Section 404 of the Sarbanes-Oxley Act requires companies to disclose whether or not they have a code of ethics. a. True b. False Answer: b. False 59. CRT stands for Canadian Regulations and Treatment. a. True b. False Answer: b. False 60. United Nations Global Impact is a set of global ethical principles. a. True b. False Answer: a. True 61. OECD Guidelines for Multinational Enterprises is a set of global ethical principles. a. True b. False Answer: a. True 62. Not offering ethics training in languages other than English is a common mistake firms make when developing global ethics programs. a. True b. False Answer: a. True 63. Why did SOX mandate firms to develop a code of ethics? Shouldn’t developing a code of ethics be an automatic action for all publicly traded companies? Answer: The simple answer is yes. Firms should have from their origin a code of ethics to help their employees be able to determine what acceptable and unacceptable behavior is. This chapter highlighted a number of benefits of having a code of ethics yet some firms continue to resist developing a code. Why? It is difficult to assume the rationale for not having a code of ethics. However, one reason could be that the firms do not believe they need a formal document to help guide the behavior of their employees. Many assume the firm’s corporate culture is enough to help employees determine right from wrong. The problem with this assumption is that the firm believes that not only will employees always do the right thing but they do not have the capacity or desire to do the wrong thing. This oversimplification of human behavior is a dangerous game the firms are playing with their employees. It should not have taken an act of Congress for firms to develop a code of ethics. 64. Why is a code of ethics important to stakeholders? Answer: A code of ethics provides stakeholders with a written promise of the firm’s behavior. Although not a legally binding document, a code of ethics outlines to everyone who has a vested interest in the firm what the firm’s ethical philosophy is pertaining to what is acceptable and what is unacceptable behavior. In addition, a code of ethics allows current and potential employees a window into the beliefs of the top level managers. What is included and maybe more importantly what is excluded from the code of ethics can give employees insight into how management views themselves and the world. For potential employees, a code of ethics could be considered one of the initial pieces of information that will be interpreted by the individual before he or she considers working for that firm. The local community is very interested in a firm’s code of ethics to see what the firm’s beliefs are related to areas such as toxic dumping, releasing of chemicals and other environmental issues. Governments view the code of ethics as an opportunity to ensure the firm’s ethical standards are in line with the government’s legal standards. Suppliers would review the code of ethics to understand whether this firm could be considered a viable long-term business partner. Customers would examine the code of ethics to determine whether they are protected against product defects or other safety concerns. 65. How should firms use the global code of ethics? Answer: The global code of ethics is a good starting point for any multinational firm that wants to be considered as having a positive ethical image globally. The CRT Principles, OECD Guidelines for Multinational Enterprises and the UN Global Impact Principles certainly have some overlap in their principles but that is not a negative point. The overlapping principles such as the treatment of labor underscore the seriousness of these specific principles from a global perspective. Therefore, any multinational firm should ensure that these overlapping principles are included in any global code of ethics. In addition, these global codes of ethics highlight that multinational firms must understand not only the similarities but also the differences between the ethical perspectives of different countries. As a result, any global code of ethics must include a level of flexibility to allow for not only the similarities but the differences as firms compete in multiple countries. Test Bank For Understanding Business Ethics Peter Allen Stanwick, Sarah D. Stanwick 9780131735422, 9788131755365, 9781506303239, 9781452256559

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