Test Bank for Ethics and the Conduct of Business, 8th Edition

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1Chapter 1Ethics in the World of BusinessChapter SummaryBusiness ethics is concerned with identifying and understanding the ethical issues that arise inbusiness, along with the development of knowledge and skills needed by a practicing manager toaddress these issues and to make sound business decisions. Ethical issues are an inevitableelement of business decision making, and they are deeply intertwined with managerial practiceand economic activity in general. The success of individual managers, business organizations,and the whole economic system depend upon sound ethical decision making. Althougheconomics and law are important guides for business decision making, they are not entirelysufficient. Organizational research conducted by psychologists and sociologists further show thatthe treatment of business ethics from a purely philosophical perspective is likewise aninsufficient approach. Organizational misconduct is often the result of flaws in individual andorganizational decision making that can be corrected only by changing the overall decisionmaking process. Practicing managers can promote an ethical organizational culture by activelydiscouraging misconduct and rewarding ethical decision making and conduct.CHAPTER OBJECTIVES1.1: Identify ethical issues created by diverse business situations and relationships and thelevel of decision making required to address them1.2: Recognize the role of ethics in the conduct of business, with respect to economicprinciples and the law1.3: Distinguish between ethical management and the management of ethics, and each of thethree main roles of a manager1.4: Analyze how ethical business conduct is challenged by decision making on individualand organizational levelsSUGGESTED DISCUSSION PROMPTS1.What types of ethical concerns do decision-makers at the management level need totake into account?2.What types of ethical concerns do decision-makers at lower organizational levelsneed to take into account?3.How would you respond to someone who says that a business should always dowhatever is in its economic interests?4.What is wrong with the thought that abiding by the law is all the ethics that abusinessperson needs to worry about?5.How does specialized knowledge come into play in the management of ethics?

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2ASSESSMENT FOR IN-CLASS USEMultiple Choice QuestionsChoose the BEST possible answer for each of the following.1.In many cases, rules of business ethics can be determined by _________ .A.applicable lawsB.company guidelinesC.economic requirementsD.rules of conduct that apply in everyday lifeCorrect Answer: D1.1: Identify ethical issues created by diverse business situations and relationships andthe level of decision making required to address themTopic/Concept: Business Decision MakingDifficulty Level: EasySkill Level: Understanding2.The economic character of business can be seen in its_________ .A.trading characteristicsB.ethical dimensionsC.personal aspectsD.legal guidelinesCorrect Answer: A1.1: Identify ethical issues created by diverse business situations and relationships andthe level of decision making required to address themTopic/Concept: Business Decision MakingDifficulty Level: EasySkill Level: Understanding3.Organization in business is characterized mainly by its ________ .A.rulesB.hierarchyC.profitsD.productsCorrect Answer: B1.1: Identify ethical issues created by diverse business situations and relationships andthe level of decision making required to address themTopic/Concept: Business Decision Making

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3Difficulty Level: EasySkill Level: Understanding4.Decision making in business occurs at various distinctive________ .A.placesB.levelsC.objectivesD.profitsCorrect Answer: B1.1: Identify ethical issues created by diverse business situations and relationships andthe level of decision making required to address themTopic/Concept: Business Decision MakingDifficulty Level: EasySkill Level: Understanding5.If a business manager decides to proceed with a course of action although the managerhas information that suggests the need to rethink the decision, the manager is beinginfluenced byA.anchor heuristicB.confirmation biasC.sunk cost biasD.adjustment heuristicCorrect Answer: C1.4: Analyze how ethical business conduct is challenged by decision making onindividual and organizational levelsTopic/Concept: Ethics in OrganizationsDifficulty Level: ModerateSkill Level: Application6.Economic reasoning describes how we _________.A.ought to reasonB.prioritize our desiresC.reason when pursuing our goalsD.would reason if we could have whatever we wantedCorrect Answer: C1.2: Recognize the role of ethics in the conduct of business, with respect to economicprinciples and the lawTopic/Concept: Ethics, Economics, and LawDifficulty Level: EasySkill Level: Understanding

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47.Adam Smith's economic theory is based on which of the following assumptions?A.People want to promote each others' interests.B.Morality is not relevant to economic concerns.C.Free markets will fix their own ethical problems.D.People will behave rationally as they pursue their interests.Correct Answer: D1.2: Recognize the role of ethics in the conduct of business, with respect to economicprinciples and the lawTopic/Concept: Ethics, Economics, and LawDifficulty Level: ModerateSkill Level: Analysis8.What fact does the "ultimatum bargaining game" demonstrate?A.It is often rational to price products below their market value.B.Free markets will usually self-regulate.C.Many people do not understand economics.D.Many people would rather not trade than be treated unfairly.Correct Answer: D1.2: Recognize the role of ethics in the conduct of business, with respect to economicprinciples and the lawTopic/Concept: Ethics, Economics, and LawDifficulty Level: ModerateSkill Level: Analysis9.The school of thought that says that law and ethics govern two different realms is wrongbecause ____________A.ethics applies to every field of lifeB.anything that is legal is also ethicalC.anything that is illegal is also unethicalD.the law governs every aspect of lifeCorrect Answer: A1.2: Recognize the role of ethics in the conduct of business, with respect to economicprinciples and the lawTopic/Concept: Ethics, Economics, and LawDifficulty Level: EasySkill Level: Understanding10.It is not ethically sufficient to obey the law because ___________A.the law does not apply to business in generalB.ethical constraints sometimes require that the law be ignoredC.ethics goes beyond what can be legally codified

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5D.the law itself is stricter than ethicsCorrect Answer: C1.2: Recognize the role of ethics in the conduct of business, with respect to economicprinciples and the lawTopic/Concept: Ethics, Economics, and LawDifficulty Level: ModerateSkill Level: ApplicationEssay Questions1.Identify two dangers of rationalization which can lead an individual to make unethicaldecisions.1.4: Analyze how ethical business conduct is challenged by decision making onindividual and organizational levelsTopic/Concept: Ethics in OrganizationsDifficulty Level: ModerateSkill Level: Analysis2.Describe and explain an example of a business decision that would be unethical eventhough it is legal.1.2: Recognize the role of ethics in the conduct of business, with respect to economicprinciples and the lawTopic/Concept: Ethics, Economics, and LawDifficulty Level: ModerateSkill Level: Analysis3.Examine one way in which a manager's role (job obligations) may conflict with his orher moral obligations.1.3: Distinguish between ethical management and the management of ethics, and each ofthe three main roles of a managerTopic/Concept: Ethics and ManagementDifficulty Level: ModerateSkill Level: Analysis4.What is wrong with the thought that abiding by the law is all the ethics that abusinessperson needs to worry about?1.2: Recognize the role of ethics in the conduct of business, with respect to economicprinciples and the lawTopic/Concept: Ethics, Economics, and Law

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6Difficulty Level: ModerateSkill Level: Evaluation5.How does specialized knowledge come into play in the management of ethics?1.3: Distinguish between ethical management and the management of ethics, and each ofthe three main roles of a managerTopic/Concept: Ethics and ManagementDifficulty Level: ModerateSkill Level: Analysis

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7Chapter 2Ethical Decision MakingCHAPTER SUMMARYEthical decision making in business is often difficult and complex. Some situations areeasilyhandled because what one ought to do or what is right and wrong are evident.Thosesituations that give us pause or produce moral anguish require careful thoughtandultimately an ability to engage in ethical reasoning. This chapter contributes to anunderstanding of ethical decision making by offering a division of business ethics into twoparts: an ethics of the market and an ethics of roles and relationships, including firms. Inbusiness, we deal with some parties purely as market actors who are on the other side of amarket transaction or exchange. For such market activity, certain moral rules or standardsapply.These relationships are governed by professional ethics, a prime example being the legalprofession. In addition to the law, an attorney must follow professional codes of ethicsestablished by the state bar and/or professional association he or she belongs to. These codes canimpose a greater obligation to act in the best interests of the client. For example, the attorney-client relationship imposes on the attorney a duty to avoid conflicts of interests, to protect clientproperty, and to closely guard confidential information. Other professional relationshipsinvolving business dealings can also take the form of an agency. These relationships are built ontrust and confidence so the principal’s interests must be protected. The agent owes the principal aduty of loyalty to act in the principal’s best interest in all business dealings involving the agency.When we attempt to think through the ethical issues that arise in business, we are engagingin ethical reasoning, which may be conducted on different levels. Ethical theories, which arepresented in the next chapter, can guide ethical reasoning on the highest level by providingthe most comprehensive and fundamental grounds for our moral beliefs and judgments.Fortunately, substantial moral arguments that do not require anunderstanding of thesetheories can be constructed. Most of our everyday ethical reasoning employs familiarethical concepts and principles that can be readily understood and applied. Accordingly, thischapter provides a framework of seven basic ethical principles that are sufficient for mostbusiness decision making. For those who seek more, though, the next chapter provides asurvey of the main philosophical theories of ethics.CHAPTER OBJECTIVES2.1: Recognize the features of the market system, the ethics of market transactions, andthe problems created by imperfect market conditions2.2: Identify the duties and obligations associated with fundamental business roles andrelationships in markets and firms2.3: Describe the philosophical and psychological approaches to ethical reasoning andthe principles that constitute a moral framework for business conduct

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8SUGGESTED DISCUSSION PROMPTS1.What is ethically required of participants in a market economic system?2.In what ways do participants in a market system have to depend upon each other?3.In what ways do ethical considerations work against perfect operation of a marketeconomy?4.How does the prisoner’s dilemma reflect the limitations of a free market system?5.What capacities are required of an agent to engage in ethical reasoning?ASSESSMENT FOR IN-CLASS USEMultiple Choice QuestionsChoose the BEST possible answer for each of the following.1.A market economy is based fundamentally on____.A.ethicalmotivationsB.the profit motiveC.humanwelfareD.manufacturingCorrect Answer: B2.1: Recognize the features of the market system, the ethics of market transactions, andthe problems created by imperfect market conditionsTopic/Concept: Market EthicsDifficulty Level: EasySkill Level: Understanding2.A market with perfect competition would require.A.agents to not be rationalB.that there be no contractsC.that ethics not be necessaryD.ethical guidelines to be legally codifiedCorrect Answer: C2.1: Recognize the features of the market system, the ethics of market transactions, andthe problems created by imperfect market conditionsTopic/Concept: Market EthicsDifficulty Level: EasySkill Level: Understanding3.Fraud is unethical because ______.A.all parties must have access to pertinent informationB.no one may be permitted to profit too muchC.market economies require freedom of action

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9D.the market requires everyone to further their own interestsCorrect Answer: A2.1: Recognize the features of the market system, the ethics of market transactions, andthe problems created by imperfect market conditionsTopic/Concept: Market EthicsDifficulty Level: EasySkill Level: Understanding4.The difference betweenHomo economicusand actual people is that.A.Homo economicusis capable of making any decisionB.Homo economicuspursues many different interestsC.actual people pursue their own self-interestD.actual people are less than perfectly rationalCorrect Answer: D2.1: Recognize the features of the market system, the ethics of market transactions, andthe problems created by imperfect market conditionsTopic/Concept: Market EthicsDifficulty Level: ModerateSkill Level: Analysis5.A market economy alone cannot sustain public goods because.A.no one would want to take advantage of public goodsB.people would be free riders if they could beC.people would try to sell each other public goodsD.participants in a market economy are imperfectly rationalCorrect Answer: B2.1: Recognize the features of the market system, the ethics of market transactions, andthe problems created by imperfect market conditionsTopic/Concept: Market EthicsDifficulty Level: ModerateSkill Level: Application6.Market outcomes lead to unequal outcomes mainly because______.A.it involves random processesB.participants have differing levels of skillC.free markets are inherently unjustD.there is government interferenceCorrect Answer: B2.1: Recognize the features of the market system, the ethics of market transactions, andthe problems created by imperfect market conditions

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10Topic/Concept: Market EthicsDifficulty Level: ModerateSkill Level: Analysis7.A fiduciary has the special responsibility to _________.A.care for another’s financial interestsB.sell goods as efficiently as possibleC.provide as much information as possibleD.take a professional interest in another’s successCorrect Answer: A2.2: Identify the duties and obligations associated with fundamental business roles andrelationships in markets and firmsTopic/Concept: Roles, Relationships, and FirmsDifficulty Level: EasySkill Level: Understanding8.Professions have a contract with society whereby they _____ in exchange forsharing the many benefits of their specialized knowledge.A.submit to total government regulationB.relinquish control over their workC.forgo licensing requirementsD.are granted self-regulationCorrect Answer: D2.2: Identify the duties and obligations associated with fundamental business roles andrelationships in markets and firmsTopic/Concept: Roles, Relationships, and FirmsDifficulty Level: EasySkill Level: Understanding9.From a traditional economic point of view, a firm was viewed as _____ whichsought to maximize its profits.A.a combination of markets and relationshipsB.a series of relationships, roles, and marketsC.a moral actorD.a market actorCorrect Answer: D2.2: Identify the duties and obligations associated with fundamental business roles andrelationships in markets and firmsTopic/Concept: Roles, Relationships, and FirmsDifficulty Level: EasySkill Level: Understanding

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1110.The ethical concept of dignity most centrally involves.A.treating all persons equallyB.disclosing all information that is needed by othersC.recognizing the intrinsic value of persons or other entitiesD.behaving with high standards of virtueCorrect Answer: C2.3: Describe the philosophical and psychological approaches to ethical reasoning andthe principles that constitute a moral framework for business conductTopic/Concept: Ethical ReasoningDifficulty Level: EasySkill Level: UnderstandingEssay Questions1.What are the basic components of a market system, and what assumptions are madeabout human behavior?2.1: Recognize the features of the market system, the ethics of market transactions, andthe problems created by imperfect market conditionsTopic/Concept: Market EthicsDifficulty Level: ModerateSkill Level: Application2.What is the difference between a fiduciary and an agent? What specialobligationsare characteristic of a fiduciary that is not an agent?2.2: Identify the duties and obligations associated with fundamental business roles andrelationships in markets and firmsTopic/Concept: Roles, Relationships, and FirmsDifficulty Level: ModerateSkill Level: Analysis3.What are the required components of the moral point of view, and how are theyexercised in a business setting?2.3: Describe the philosophical and psychological approaches to ethical reasoning andthe principles that constitute a moral framework for business conductTopic/Concept: Ethical ReasoningDifficulty Level: ModerateSkill Level: Analysis4.What are some basic questions that should be asked when making a decision that posesan ethical dilemma?

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122.3: Describe the philosophical and psychological approaches to ethical reasoning andthe principles that constitute a moral framework for business conductTopic/Concept: Ethical ReasoningDifficulty Level: ModerateSkill Level: Application5.Describe "context" and how it affects ethics and the decision-making process.2.3: Describe the philosophical and psychological approaches to ethical reasoning andthe principles that constitute a moral framework for business conductTopic/Concept: Ethical ReasoningDifficulty Level: EasySkill Level: Understanding

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13Chapter 3EthicalTheoriesCHAPTER SUMMARYThis chapter presents the main concepts and theories of ethics developedover centuriesby major moral philosophers. The value of any theory for business ethics isits usefulnessin evaluating business practices, institutional arrangements, and economicsystems.Teleological theory examines the outcome stemming from a decision or behavior. Deontologicaltheory is more concerned with the actual decision or behavior but not with the consequencestemming from the decision or behavior.In general, all of these theories justify mostprevailing business practices, theinstitution of the modern corporation, and capitalism orthe market system, but they alsoprovide the basis for some criticism and improvement.In the subsequent chapters, thistheoretical foundation is used to explore a wide range ofpractical business ethics topics.CHAPTER OBJECTIVES3.1: Describe the four theses of classical utilitarianism, the utilitarian approach todecision making, and the main criticisms of the cost-benefit analysis method3.2: Summarize the two intuitive principles of Kantian ethics and their implications formoral reasoning3.3: Define virtue and explain how virtues and principles of virtue ethics are relevant tobusiness3.4: Identify the meaning and importance of rights and the types of rights that apply indifferent situations3.5: Explain the role of justice in business ethics, the three kinds of justice outlined byAristotle, and the contemporary principles of justice offered by Rawls and NozickSUGGESTED DISCUSSION PROMPTS1.What would an act utilitarian and a rule utilitarian say differently when evaluating thesame case?2.What specific problem is posed to utilitarianism by its economic application?3.What is the major contrast between utilitarianism and Kantian ethics?4.What are the attractive features of virtue theory? What are its limitations inapplication to business?5.In what ways is the rights and justice perspective a fitting ethical theory for businessethics?

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14ASSESSMENT FOR IN-CLASS USEMultiple Choice QuestionsChoose the BEST possible answer for each of the following.1.What does the P&G case show about the applicability of ethics to business?A.When a company makes unethical decisions, it is usually breaking the law.B.Ethics in business applies differently from how it does in the rest of the world.C.A company’s behavior many be unethical even if no harm is done.D.A company’s ethical decisions should always affect its bottom line.Correct Answer: C3.1: Describe the four theses of classical utilitarianism, the utilitarian approach todecision making, and the main criticisms of the cost-benefit analysis methodTopic/Concept: UtilitarianismDifficulty Level: EasySkill Level: Understanding2.Teleological theories of ethics locate goodness in_____.A.the outcome of actionsB.the intentions of the agentC.the obligations of people to each otherD.the maximization of economic opportunityCorrect Answer: A3.1: Describe the four theses of classical utilitarianism, the utilitarian approach todecision making, and the main criticisms of the cost-benefit analysis methodTopic/Concept: UtilitarianismDifficulty Level: EasySkill Level: Understanding3.Rule utilitarianism favors rules that_____.A.always benefit the most peopleB.everyone agrees withC.utilitarians think are good rulesD.would maximize goodness if everyone followed themCorrect Answer: D3.1: Describe the four theses of classical utilitarianism, the utilitarian approach todecision making, and the main criticisms of the cost-benefit analysis method.Topic/Concept: UtilitarianismDifficulty Level: EasySkill Level: Understanding

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154.What is the most fundamental drawback of having cost-benefit analyses serve as thebasis for ethical decisions in business?A.Some things do not really have value.B.A determinate value must be placed on things that have incalculable value.C.Cost-benefit analyses are time-consuming and require specialized skill.D.Cost-benefit analyses require a commitment to consequentialism.Correct Answer: B3.1: Describe the four theses of classical utilitarianism, the utilitarian approach todecision making, and the main criticisms of the cost-benefit analysis methodTopic/Concept: UtilitarianismDifficulty Level: EasySkill Level: Understanding5.A “maxim,” according to Kant’s terminology, is____.A.the outcome of an actionB.the reason that one undertakes an actionC.the moral principle that one has in mindD.that which would make an action moralCorrect Answer: B3.2: Summarize the two intuitive principles of Kantian ethics and their implications formoral reasoningTopic/Concept: Kantian EthicsDifficulty Level: EasySkill Level: Understanding6.Kant’s rule requiring respect for persons asks that we________.A.not use people as means to an endB.view each person as a moral agentC.view each person as an end unto himselfD.only use another person if we have sufficient reason for doing soCorrect Answer: C3.2: Summarize the two intuitive principles of Kantian ethics and their implications formoral reasoningTopic/Concept: Kantian EthicsDifficulty Level: EasySkill Level: Understanding7.Virtue ethics defines a moral action as that which______.A.a wise person would doB.leads to the most virtue overallC.is done with the most virtuous intentions

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16D.is done according to the proper rulesCorrect Answer: A3.3: Define virtue and explain how virtues and principles of virtue ethics are relevant tobusinessTopic/Concept: Virtue EthicsDifficulty Level: EasySkill Level: Understanding8.A drawback to theorizing about business ethics in terms of rights is that__.A.not everyone has rightsB.people’s rights may conflictC.it is hard to draw the line between different types of rightsD.conceptions of rights differ between culturesCorrect Answer: B3.4: Identify the meaning and importance of rights and the types of rights that apply indifferent situationsTopic/Concept: RightsDifficulty Level: EasySkill Level: Understanding9.The notion of justice is most basically concerned with__________.A.fairnessB.equalityC.rightsD.economicsCorrect Answer: A3.5: Explain the role of justice in business ethics, the three kinds of justice outlined byAristotle, and the contemporary principles of justice offered by Rawls and NozickTopic/Concept: JusticeDifficulty Level: EasySkill Level: UnderstandingEssay Questions1.In what ways is the need to calculate utility a problem for utilitarianism?3.1: Describe the four theses of classical utilitarianism, the utilitarian approach todecision making, and the main criticisms of the cost-benefit analysis methodTopic/Concept: UtilitarianismDifficulty Level: ModerateSkill Level: Analysis

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172.What is Kant’s categorical imperative? Explain its two formulations.3.2: Summarize the two intuitive principles of Kantian ethics and their implications formoral reasoningTopic/Concept: Kantian EthicsDifficulty Level: EasySkill Level: Understanding3.Describe how rights and justice can be explained in terms of one another.3.4: Identify the meaning and importance of rights and the types of rights that apply indifferent situationsTopic/Concept: RightsDifficulty Level: ModerateSkill Level: Analysis4.What is virtue? Explain how principles of virtue ethics are relevant to business.3.3: Define virtue and explain how virtues and principles of virtue ethics are relevant tobusinessTopic/Concept: Virtue EthicsDifficulty Level: EasySkill Level: Understanding5.Explain the contemporary justice principles according to Rawls and Nozick.3.5: Explain the role of justice in business ethics, the three kinds of justice outlined byAristotle, and the contemporary principles of justice offered by Rawls and NozickTopic/Concept: JusticeDifficulty Level: EasySkill Level: Understanding

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18Chapter 4Whistle-BlowingCHAPTER SUMMARYWhether or not to blow the whistle on misconduct in an organization is one of the mostdifficultdecisions that some people will ever have to make. The decision is wrenchingpersonally becausethe stakes are so high. Yet many whistle-blowers say that they couldnot have lived withthemselves if they had stayed silent. The decision is also difficultethically, because whistle-blowing involves a conflict between two competing duties: toprotect the public and to beloyal to an organization. Although loyalty is not alwaysoverriding, as the loyal agentargument holds, neither is it inconsequential. Decidingbetween these duties often requiresthat an employee exercise very careful judgment.The one certain conclusion of this chapter is that whistle-blowing is ethically permissibleunder certain carefully specified conditions. (Whether it can ever be ethically required is adifferent question that seldom arises. Everyone has an obligation not to be a part of illegaland immoral activity, but exposing it at great risk to oneself is usually regarded as beyondwhat duty requires.) Blowing the whistle is only one response that an employee can make toreport misconduct; however, the act of whistle-blowing itself can take on many differentforms. So in addition to decidingwhetherto become a whistle-blower, employees are facedwith the further question ofhowto blow the whistle in a justified manner. Finally, it isevident that employees who are justified in blowing the whistle ought not to sufferretaliation. What ought to be done to protect whistle-blowers from this fate is less clear. Aplausible case can be made for legislation in this area, but the difficulty is drafting laws thatachieve the desired result without interfering unduly in the legitimate conduct of business.CHAPTER OBJECTIVES4.1: Define the significance of whistle-blowing and the act itself according to sevencriteria4.2: Assess situations where whistle-blowing may or may not be justified, given the dutiesand obligations of all parties and the potential consequences of the act4.3: Describe the characteristics and importance of laws designed to protect whistle-blowers and key points in the debate over the moral justification of these laws4.4: Identify the importance of developing an effective whistle-blowing policy for anorganization and the key components of such a policySUGGESTED DISCUSSION PROMPTS1.Why do employees want to blow the whistle?2.Do employers have valid reasons to frown on whistle-blowing?3.What must employees do to ensure that they blow the whistle properly?4.What are the objectives of legal protection for whistle-blowers?5.Why would a company develop a whistle-blowing policy?

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19ASSESSMENT FOR IN-CLASS USEMultiple Choice QuestionsChoose the BEST possible answer for each of the following.1.A whistle-blower is primarily motivated by_.A.retaliationB.ethicalconcernC.personalgainD.fear of retributionCorrect Answer: B4.1: Define the significance of whistle-blowing and the act itself according to sevencriteriaTopic/Concept: What Is Whistle-Blowing?Difficulty Level: EasySkill Level: Understanding2.Which of the following is necessary for whistle-blowing to occur?A.informationB.legalprotectionC.a nondisclosure agreementD.managingauthorityCorrect Answer: A4.1: Define the significance of whistle-blowing and the act itself according to sevencriteriaTopic/Concept: What Is Whistle-Blowing?Difficulty Level: EasySkill Level: Understanding3.Some corporations have anombudsman,whose role is to.A.blow the whistleB.release information to the publicC.report on employeesD.hearcomplaintsCorrect Answer: D4.1: Define the significance of whistle-blowing and the act itself according to sevencriteriaTopic/Concept:What Is Whistle-Blowing?Difficulty Level: EasySkill Level: Understanding

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204.Why is the loyal agent argument supported by the law?A.The argument is supported because of the agent dictates the principal's jobduties.B.The argument is supported because the agent is morally but not contractuallyobligated to follow the principal's directions.C.The argument is supported because the agent is not an employee of theprincipal.D.The argument is supported because the agent is contractually obligated toperform his or her duty.Correct Answer: D4.2: Assess situations where whistle-blowing may or may not be justified, given theduties and obligations of all parties and the potential consequences of the actTopic/Concept: Justification of Whistle-BlowingDifficulty Level: EasySkill Level: Understanding5.The twoChallengerspacecraft engineers who were concerned about possible O-ring failure were unsuccessful at whistleblowing because they ________.A.tried to resolve the matter internally at Morton ThiokolB.refused to use Morton Thiokol internal channels to address the matterC.did not document problems with the O-ringD.opted to contact the press before speaking with their superiors about potentialproblems with the O-ringCorrect Answer: A4.2: Assess situations where whistle-blowing may or may not be justified, given theduties and obligations of all parties and the potential consequences of the actTopic/Concept: Justification of Whistle-BlowingDifficulty Level: EasySkill Level: Understanding6.Loyalty to a corporation can sometimesleadto whistleblowing if_____.A.the corporation is a large oneB.the whistleblower enjoys legal protectionC.the whistleblower wants to see change in the corporationD.the government is paying the employee for the informationCorrect Answer: C4.2: Assess situations where whistle-blowing may or may not be justified, given theduties and obligations of all parties and the potential consequences of the actTopic/Concept: Justification of Whistle-BlowingDifficulty Level: EasySkill Level: Understanding

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217.Employees who are most upset with a company will most often_____.A.write to the CEOB.simply leave the companyC.go public with their complaintsD.hope the company will reform from withinCorrect Answer: B4.2: Assess situations where whistle-blowing may or may not be justified, given theduties and obligations of all parties and the potential consequences of the actTopic/Concept: Justification of Whistle-BlowingDifficulty Level: EasySkill Level: Understanding8.The main motivation for there to be whistleblower-protection laws is thatwhistleblowers_______.A.represent a minorityB.are likely to be oppressedC.benefitsocietyD.should enjoy freedom of speechCorrect Answer: C4.3: Describe the characteristics and importance of laws designed to protect whistle-blowers and key points in the debate over the moral justification of these lawsTopic/Concept: Right to Blow the WhistleDifficulty Level: EasySkill Level: Understanding9.The main reason that companies should have a whistle-blowing policy is that.A.it avoids tension and strifeB.whistle-blowinghelpsbusinessC.it enhances employee satisfactionD.wrongdoing harms themCorrect Answer: D4.4: Identify the importance of developing an effective whistle-blowing policy for anorganization and the key components of such a policyTopic/Concept: Developing a PolicyDifficulty Level: EasySkill Level: Understanding10.All whistle-blowing policies should include_____.A.a guarantee against retaliationB.a guarantee of continued employmentC.a way for employees to go public

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22D.specific monetary awardsCorrect Answer: A4.4: Identify the importance of developing an effective whistle-blowing policy for anorganization and the key components of such a policyTopic/Concept: Developing a PolicyDifficulty Level: EasySkill Level: UnderstandingEssay Questions1.Describe ways in which employers can deal with potential cases of whistle-blowing.How do they further their interests in this regard?4.2: Assess situations where whistle-blowing may or may not be justified, given theduties and obligations of all parties and the potential consequences of the actTopic/Concept: Justification of Whistle-BlowingDifficulty Level: ModerateSkill Level: Evaluation2.Explain the ironic dimension of whistle-blowing with respect to employee loyalty.4.2: Assess situations where whistle-blowing may or may not be justified, given theduties and obligations of all parties and the potential consequences of the actTopic/Concept: Justification of Whistle-BlowingDifficulty Level: EasySkill Level: Understanding3.Describe the pros and cons of legal protection for whistle-blowing.4.3: Describe the characteristics and importance of laws designed to protect whistle-blowers and key points in the debate over the moral justification of these lawsTopic/Concept: Right to Blow the WhistleDifficulty Level: ModerateSkill Level: Analysis4.Describe the criteria for whistle-blowing.4.1: Define the significance of whistle-blowing and the act itself according to sevencriteriaTopic/Concept: 4.1: What Is Whistle-Blowing?Difficulty Level: EasySkill Level: Understanding

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235.Why is it important to develop an effective whistle-blowing policy? What are some keycomponents of an effective whistle-blowing policy?4.4: Identify the importance of developing an effective whistle-blowing policy for anorganization and the key components of such a policyTopic/Concept: 4.4: Developing a PolicyDifficulty Level: EasySkill Level: Understanding

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24Chapter 5Business Information and Conflict of InterestCHAPTER SUMMARYLike whistle-blowing, trade secrets and conflicts of interest involve a delicate balancing oftherights and interests of employers and employees, as well as the public at large.As amatter of public policy, trade secrets are protected through the implementation of laws thatencourage conformance to rules of commercial morality. Trade secret protection can takemany forms—arguments for property rights, fair competition, and a duty of confidentiality.For example, ownership protection is necessary because disputes can arise where anemployee claims rights to a product developed during the course of employment.Noncompete clauses are highly favored by employers, but they are often struck down bythe courts as a matter of public policy. Employers typically make the argument thatnoncompete clauses are necessary to protect trade secrets; however, fair competition issuesoften result from noncompete employment contracts that are overly broad and placeunreasonable restrictions on competition. In reference to confidentiality, it is imperative fortrade secret protection. Conflict of interest disputes occur when an employee breachesconfidentiality and uses trade secret information to his/her advantage without permissionfrom the employer.CHAPTER OBJECTIVES5.1: Identify the competing rights and considerations of fairness for employers andemployees seeking to protect or use confidential information5.2: Explain the concepts of intellectual property and trade secrets; the argumentssurrounding questions of ownership, protection, and collection; and how theseissues affect the employer-employee relationship5.3: Describe the meaning of conflict of interest, the different types of conflict ofinterest, and ways by which business firms can manage these situationsSUGGESTED DISCUSSION PROMPTS1.What are the reasons for thinking of trade secrets as property?2.What does a company have to show to have its trade secrets protected asproperty?3.What can companies do within legal and ethical bounds to learn from othercompanies?4.How might considerations of fair competition be used either for or against theprotection of intellectual property?5.How did conflicts of interest arise in the Enron situation?

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