Question 1

The single most important thing the founders of an entrepreneurial venture can do to avoid ethical misconduct is to establish a strong ethical culture for their firms.

Accepted Answer

Establishing a strong ethical culture sends a clear message to employees about what is and is not acceptable behavior, and helps to prevent ethical misconduct before it occurs.

Question 2

Most founders' agreements include a ________ clause, which legally obligates the departing founder to sell to the remaining founders his or her interest in the firm if the remaining founders are interested.

Accepted Answer

A buyback clause is specifically designed to allow the remaining founders or the company itself to buy back the shares of a departing founder, ensuring that control of the company can be maintained among the existing members.

Question 3

What is a founders' agreement? Describe the purpose of a buyback clause and why it's important?

Accepted Answer

A founders' (or shareholders') agreement is a written document that deals with issues such as the relative split of the equity among the founders of the firm, how individual founders will be compensated for the cash or the "sweat equity" they put into the firm, and how long the founders will have to remain with the firm for their shares to fully vest. An important issue addressed by most founders' agreements is what happens to the equity of a founder if the founder dies or decides to leave the firm. Most founders' agreements include a buyback clause, which legally obligates the departing founders to sell to the remaining founders their interest in the firm if the remaining founders are interested. In most cases, the agreement also specifies the formula for computing the dollar value to be paid. The presence of a buyback agreement is important for at least two reasons. First, if a founder leaves the firm, the remaining founders may need the shares to offer to a replacement person. Second, if founders leave because they are disgruntled, the buyback clause provides the remaining founders a mechanism to keep the shares of the firm in the hands of people who are fully committed to a positive future for the venture.

Question 4

The advantage of having a code of conduct is that it provides specific guidance to entrepreneurs, managers, and ________ regarding expectations of them in terms of ethical behavior.

Accepted Answer

A code of conduct provides guidance to employees regarding expectations of ethical behavior. While suppliers, customers, outsiders, and lenders may also interact with a company, they are not typically held to the same standards of conduct as employees.

Question 5

The most important thing that any entrepreneur, or team of entrepreneurs, can do to build a strong ethical culture in their organization is to hire an aggressive attorney.

Accepted Answer

While having a good attorney can certainly be helpful in ensuring legal compliance and addressing ethical concerns, it is not the most important thing for building a strong ethical culture. Instead, entrepreneurs should prioritize setting a strong example of ethical behavior themselves, creating clear ethical policies and guidelines for employees, and fostering a culture of open communication and accountability.

Question 6

Facebook's Code of Conduct has ________ sections.

Accepted Answer

Facebook's Code of Conduct, as of my last update, consists of 13 sections. These sections cover various aspects of behavior and expectations for those who are part of the Facebook community.

Question 7

Describe the purpose of a nondisclosure agreement. Provide an example of when a nondisclosure agreement kicks in.

Accepted Answer

The answer of Describe the purpose of a nondisclosure agreement....

Question 8

A(n) ________ is a written document that deals with issues such as the relative split of the equity among the founders of the firm, how individual founders will be compensated for the cash or the "sweat equity" they put into the firm, and how long the founder will have to remain with the firm for their shares to fully vest.

Accepted Answer

A founders' agreement is a written document that addresses various aspects related to the equity split, compensation, and vesting period for founders of a firm. This agreement helps mitigate potential conflicts and misunderstandings that may arise among the founders in the future. The other options (A, B, D, and E) do not accurately describe the document in question.

Question 9

Which of the following is the most important thing that an entrepreneur, or team of entrepreneurs, can do to build a strong ethical culture in their organization?

Accepted Answer

Leading by example is the most important thing that an entrepreneur or team of entrepreneurs can do to build a strong ethical culture in their organization. By modeling ethical behavior and decision-making, they establish a culture of integrity that is essential to the success and sustainability of the organization. While ethics training programs, mission statements, codes of conduct and ethics compliance officers are all important, they are ineffective if not supported by leadership that actively upholds ethical standards.

Question 10

According to the textbook, the single most important thing the founders of an entrepreneurial venture can do is ________.

Accepted Answer

Establishing a strong ethical culture is important for the long-term success and sustainability of the venture. It helps attract and retain customers, employees, investors, and other stakeholders. While the other options are important, they are not as critical as establishing a strong ethical culture.

Question 11

According to the 2016 Global Business Ethics Survey, ________ percent of U.S. respondents indicated that they reported observed misconduct in their workplace.

Accepted Answer

According to the 2016 Global Business Ethics Survey, 76 percent of U.S. respondents indicated that they reported observed misconduct in their workplace.

Question 12

Billy Goat Ice Cream, the company profiled in the opening feature in Chapter 7, is a ________.

Accepted Answer

Billy Goat Ice Cream is a limited liability corporation, which provides its owners with limited liability protection.

Question 13

A situation that involves doing something that is beneficial to oneself or the organization, but may be unethical, is called a(n) ________.

Accepted Answer

A situation that involves doing something that is beneficial to oneself or the organization, but may be unethical, is called an ethical dilemma. It involves a conflict between personal or organizational interests and ethical principles or societal norms. It requires careful consideration and balancing of competing interests and values.

Question 14

A(n) ________ agreement binds an employee or another party to not disclose a company's trade secret. A ________ agreement prevents an individual from competing against a former employer for a specific period of time.

Accepted Answer

A nondisclosure agreement specifically pertains to trade secrets and confidential information, while a noncompete agreement pertains to competition against a former employer. The other answer choices do not accurately describe these agreements.

Question 15

An ethical dilemma is a situation that involves doing something that is beneficial to oneself or the organization, but may be unethical.

Accepted Answer

An ethical dilemma is a situation where one is presented with two or more conflicting moral choices and choosing one option would make one feel guilty for disregarding the other. It often involves doing what is expedient or what would bring benefits but may not be ethical.

Question 16

List and briefly describe three specific steps that an entrepreneurial organization can take to build a strong ethical culture.

Accepted Answer

The answer of List and briefly describe three specific steps...

Question 17

The Savvy Entrepreneurial Firm feature in Chapter 7 focuses on the topic of vesting company stock. According to the feature, a typical startup's vesting schedule lasts ________ and includes a 12-month cliff.

Accepted Answer

According to the Savvy Entrepreneurial Firm feature in Chapter 7, a typical startup's vesting schedule lasts 36 months and includes a 12-month cliff.

Question 18

Which of the following is typically NOT included in the founders' agreement for a firm?

Accepted Answer

The founders' agreement typically focuses on the internal governance of the firm, such as ownership, decision-making, and dispute resolution. A marketing plan, while important for the success of the business, is not typically included in the founders' agreement.

Question 19

A code of ________ is a formal statement of an organization's values on certain ethical and social issues.

Accepted Answer

A code of conduct is a formal document that outlines a company's expectations and standards regarding employee behavior and ethical decisions.

Question 20

According to the 2016 Global Business Ethics Survey, a total of ________ percent of U.S. employees surveyed report observing misconduct.

Accepted Answer

The answer of According to the 2016 Global Business Ethics...

Quiz 7: Preparing the Proper Ethical and Legal Foundation