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Quiz 2 :

Business Ethics and Corporate Social Responsibility

Quiz 2 :

Business Ethics and Corporate Social Responsibility

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When James Kilts became CEO of Gillette Co., the consumer products giant had been a mainstay of the Boston community for 100 years. But the organization was going through hard times: Its stock was trading at less than half its peak price, and some of its established brands of razors were suffering under intense competitive pressure. In four short years, Kilts turned Gillette around-strengthening its core brands, cutting jobs, and paying off debt. With the company's stock up 61 percent, Kilts had added $20 billion in shareholder value. Then Kilts suddenly sold Gillette to Procter Gamble (P G) for $57 billion. So short was Kilts's stay in Boston that he never moved his family from their home in Rye, New York. The deal was sweet for Gillette shareholders-the company's stock price went up 13 percent in one day. And also for Kilts-his payoff was $153 million, including a $23.9 million reward from P G for having made the deal and a "change in control" clause in his employment contract that was worth $12.6 million. In addition, P G agreed to pay him $8 million a year to serve as vice chairman after the merger. When he retired, his pension would be $1.2 million per year. Moreover, two of his top lieutenants were offered payments totaling $57 million. Was there any downside to this deal? Four percent of the Gillette workforce- 6,000 employees-were fired. If the payouts to the top three Gillette executives were divided among these 6,000, each unemployed worker would receive $35,000. The loss of this many employees (4,000 of whom lived in New England) had a ripple effect throughout the area's economy. Although Gillette shareholders certainly benefited in the short run from the sale, their profit would have been even greater without this $210 million payout to the executives. Moreover, about half the increase in Gillette revenues during the time that Kilts was running the show were attributable to currency fluctuations. A cheaper dollar increased revenue overseas. If the dollar had moved in the opposite direction, there might not have been any increase in revenue. Indeed, for the first two years after Kilts joined Gillette, the stock price declined. It was not until the dollar turned down that the stock price improved. Do CEOs who receive incentives have too strong of a motivation to sell their companies? Should their incentives be based on factors that they do not control or even affect (such as the strength of the dollar)? Is it unseemly for them to be paid so much when many employees will lose their jobs?
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In the present case a company by the name of G was suffering losses. The company was handed over to a new CEO by the name of JK, who turned around the company in just four years.
The CEO of the company sold the company to another renowned company PG for a substantial amount. The CEO of the company and other people of the companies as well received substantial amount of money. The company also downsized which resulted in job cuts for 6,000 employees.
It was said that the company made profit primarily due to the fluctuation in currencies. The dollar was weak at that time which resulted in more sales abroad and therefore the fortune of the company changed substantially.
There are cases where CEOs sell their companies where they think that they have achieved the desired results. After achieving the results they find it less motivating to continue with the company.
At the same time CEOs also sell their companies in cases where they find a good deal related with the company. In case a company offers substantially more than the market value of a company, the CEOs are often inclined to sell their companies.
The decisions taken by the CEOs could be based on the factors that are not within their control. Factors such as currency fluctuations sometimes increase the market value and revenue of a firm. A CEO could sell the company in case a good offer is made. The selling of the company eventually is beneficial for all the stakeholders.
It does seem unfair to see many employees losing their jobs and the CEOs and other top executives receiving huge amount of money as incentives. But since the executives at the top are the ones who are held for the decisions taken by them, it becomes ethical in case they receive huge amount of money.
At the same time many CEOs of various companies are receiving huge amount of money and there are no laws and rules that is prohibiting such behaviors. Thus, such a trend has become acceptable in the society.

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You are a president of a small, highly rated, liberal college in California. Many of the dining hall workers are Latino. Some of these workers are trying to organize a union, which would dramatically increase the college's costs at a time of budget pressure. One of your vice presidents suggests hiring a law firm to review the college's employment records to make sure all employees have the proper documentation showing that they are in the United States legally. It seems likely that some of the rabble rousers will turn out to be illegal and could be deported, thereby solving your union problem. What would you do?
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Hiring a law firm would also result into higher cost. There is no need to hire a law firm to review the college's employment record to make sure all employees are legally residing in the US. As the college is small therefore, it is difficult to hire a law firm as that would result in the increase in the college's cost and is liberal in approach.
Therefore, the idea of the Latino's worker should be welcomed to constitute a committee to check the record of legality of the residential proof of the employees.

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A group of medical schools conducted a study on very premature babies-those born between 24 and 27 weeks of gestation (instead of the normal 40 weeks). These children face a high risk of blindness and death. The goal of the study was to determine which level of oxygen in a baby's incubator produced the best results. Before enrolling families in the study, the investigators did not tell them that being in the study could increase their child's risk of blindness or death. The study made some important discoveries about the best oxygen level. These results could benefit many children. What would Mill and Kant say about this decision not to tell the families?
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According to the Mill, a correct decision was one that would maximize overall happiness and minimize overall pain, thereby producing the greatest net benefit. One's goal was to produce the greatest good for the greatest number of people. Therefore, if the study was conducted by the group of medical school on very premature babies to discover the level of oxygen in the baby's incubator then it is for the betterment of the future of babies and would benefit the large segment of the society. The decision of not telling the families enrolled in the study that such type of study would increase their child's risk of blindness or death is not unethical as such study would help in future for the premature babies to survive and according to Mill if by sacrificing the life of few babies in the study would give better results for the large number of people then it is ethical to perform study without telling the parents of the premature babies.
According to the Kant, the results of a decision are not as important as the reason for which it is made. It is important to do right things no matter what the result is. Therefore, according to him, it is highly unethical to conduct such survey or study without telling the families of such premature babies that there is high risk of blindness or death in the study.

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I oversee the internal audit function at my company. Although we always use a Big Four accounting firm, we have no loyalty to any one particular firm. We hold periodic bid competitions to get the lowest price we can. At the moment, we are using Firm A. Recently, one of the partners at A offered me box seats to a Red Sox baseball game. I love the Red Sox, and even more important, I could have taken my father who, even though he has always been a big Sox fan, has never been to a game. However, I knew that we would soon be asking A to bid against the other Big Four firms for the right to do next year's audit. Needless to say, I was torn about what I should do. What traps does this person face? Would something as minor as Red Sox tickets affect his decision about which audit firm to use?
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The following statement is true: (a) Most people are completely honest most of the time. (b) Even people who do not believe in God are more likely to behave honestly after reading the Ten Commandments. (c) When confronted with the option of engaging in wrongdoing, most people accurately evaluate the ethics of these situations. (d) People make their best ethical decisions when in a hurry.
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Darby has been working for 14 months at Holden Associates, a large management consulting firm. She is earning $85,000 a year, which sounds good but does not go very far in New York City. It turns out that her peers at competing firms are typically paid 20 percent more and receive larger annual bonuses. Darby works about 60 hours a week-more if she is traveling. A number of times, she has had to reschedule her vacation or cancel personal plans to meet client deadlines. She hopes to go to business school in a year and has already begun the application process. Holden has a policy that permits any employee who works as late as 8:00 p.m. to eat dinner at the company's expense. The employee can also take a taxi home. Darby is in the habit of staying until 8:00 p.m. every night, whether or not her workload requires it. Then she orders enough food for dinner, with leftovers for lunch the next day. She has managed to cut her grocery bill to virtually nothing. Sometimes she invites her boyfriend to join her for dinner. As a student, he is always hungry and broke. Darby often uses the Holden taxi to take them back to his apartment, although the cab fare is twice as high as to her own place. Sometimes Darby stays late to work on her business school applications. Naturally, she uses Holden equipment to print out and photocopy the finished applications. Darby has also been known to return online purchases through the Holden mailroom on the company dime. Many employees do that, and the mailroom workers do not seem to mind. Is Darby doing anything wrong? What ethics traps is she facing? What would your Life Principle be in this situation?
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The Senate recently released a report on wrongdoing at JPMorgan Chase Co. It found that bank executives lied to investors and the public. Also, traders, with the knowledge of top management, changed risk limits to facilitate more trading and then violated even these higher limits. Executives revalued the bank's investment portfolio to reduce apparent losses. The bank's internal investigation failed to find this wrongdoing. Into what ethics traps did these JPMorgan employees fall? What options did the executives and traders have for dealing with this wrongdoing?
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Because Raina processes payroll at her company, she knows how much everyone earns, including the top executives. This information could make for some good gossip, but she has kept it all completely confidential. She just found out, however, that it is against company policy for her to do payroll for C-level employees. And her boss knew it. Yesterday, the CEO went to her boss to confirm that he, the boss, was personally doing the processing for top management. Her boss lied to the CEO and said that he was. Then he begged Raina not to tell the truth if the CEO checked with her. Raina just got a message that the CEO wants to see her. What does she say if he asks about the payroll?
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Kant believed that: (a) it is ethical to tell a lie if necessary to protect an innocent person from great harm. (b) it is ethical to tell a lie if the benefit of the lie outweighs the cost. (c) it is ethical to make a true, but misleading, statement. (d) it is wrong to tell an outright lie or to mislead.
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Which of the following believed that the dignity of human beings must be respected, and that the most ethical decisions are made out of a sense of obligation? (a) Milton Friedman (b) John Stuart Mill (c) Immanuel Kant (d) John Rawls
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While waiting in line at a supermarket, you observe a woman trying to pay with food stamps. Under the law, food stamps cannot be used to pay for prepared items so the register would not accept the stamps in payment for a $6 container of chicken noodle soup from the deli counter. The woman explained that she was sick and did not have the energy to cook. She just wanted to go home and get in bed. In general, you agree that this law is reasonable-people on limited budgets should not be buying more expensive prepared food. But the woman is sick. Would it be ethical for you to buy her chicken soup if she agreed to buy $6 worth of your grocery items?
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Located in Bath, Maine, Bath Iron Works builds high-tech warships for the Navy. Winning Navy contracts is crucial to the company's success-it means jobs for the community and profits for the shareholders. Navy officials held a meeting at Bath's offices with its executives and those of a competitor to review the specs for an upcoming bid. Both companies desperately wanted to win the contract. After the meeting, a Bath worker realized that one of the Navy officials had left a folder on a chair labeled: "Business Sensitive." It contained information about the competitors' bid that would be a huge advantage to Bath. William Haggett, the Bath CEO, was notified about the file just as he was walking out the door to give a luncheon speech. What should he do? What ethics traps did he face? What result if he considered Mill, Kant, or the Front Page test?
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In Japan, automobile GPS systems come equipped with an option for converting them into televisions so that drivers can watch their favorite shows, yes, while driving. "We can't help but respond to our customers' needs," says a company spokesperson.34 Although his company does not recommend the practice of watching while driving, he explained that it is the driver's responsibility to make this decision. Is it right to sell a product that could cause great harm to innocent bystanders? Where does the company's responsibility end and the consumer's begin? What would Mill and Kant say?
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Steve supervises a team of account managers. One night at a company outing, Lawrence, a visiting account manager, made some wildly inappropriate sexual remarks to Maddie, who was on Steve's team. When she told Steve, he was uncertain what to do, so he asked his boss. She was concerned that if Steve took the matter further and Lawrence was fired or even disciplined, her whole area would suffer. Lawrence was one of the best account managers in the region, and everyone was overworked as it was. She told Steve to get Maddie to drop the matter. Just tell her that these things happen, and Lawrence did not mean anything by it. What should Steve do? What ethical traps does he face? What would be your Life Principle in this situation?
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You are negotiating a new labor contract with union officials. The contract covers a plant that has experienced operating losses over the past several years. You want to negotiate concessions from labor to reduce the losses. However, labor is refusing any compromises. You could tell them that, without concessions, the plant will be closed, although that is not true. Is bluffing ethical? Under what circumstances? What would Kant and Mill say? What result under the Front Page test? What is your Life Principle?
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Each year, the sale of Girl Scout cookies is the major fund-raiser for local troops. But because the organization was criticized for promoting such unhealthy food, it introduced a new cookie, Mango Cremes with Nutrifusion. It promotes this cookie as a vitamin-laden, natural whole food. "A delicious way to get your vitamins." But these vitamins are a minuscule part of the cookie. The rest has more bad saturated fat than an Oreo. The Girl Scouts do much good for many girls. And to do this good, they need to raise money. What would Kant and Mill say about Mango Cremes? What about the Front Page test? What do you say?
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Milton Friedman was a strong believer in the __________model. He _________argue that a corporate leader's sole obligation is to make money for the company's owners. (a) Shareholder; did (b) Shareholder; did not (c) Stakeholder; did (d) Stakeholder; did not
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Craig Newmark founded craigslist, the most popular website in the country for classified ads. Rather than maximizing its profits, craigslist instead focused on developing a community among its users. It was a place to find an apartment, a pet, a job, a couch, a date, a babysitter, and, it turned out, a prostitute. Most of the ads oncraigslist were free, but blatant ads for sex were not. Much of the company's revenue was from these illegal services. Many of the prostitutes available on craigslist were not independent entrepreneurs; they were women and girls bought and sold against their will. To fight sex trafficking, craigslist required credit cards and phone numbers, and it reported any suspicious ads. Law enforcement officials pressured craigslist to close the sex section of its website. But some people argued that blocking these ads was a violation of free speech and would just drive this business more underground where law enforcement officials were less likely to be able to find it. Others said that banning these ads made the business model of selling children for sex less profitable. Does it seem that trafficking women and children was in keeping with the founder's Life Principles? What were his options? Could he have had any real impact on this thriving industry? What traps did he face?
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Many people enjoy rap music at least in part because of its edgy, troublemaking vibe. The problem is that some of this music could cause real trouble. Thus, Ice-T's song "Cop Killer" generated significant controversy when it was released. Among other things, its lyrics celebrated the idea of slitting a policeman's throat. Rick Ross rapped about drugging and raping a woman. Time Warner Inc. did not withdraw Ice-T's song but Reebok fired Ross over his lyrics. One difference: Time Warner was struggling with a $15 billion debt and a depressed stock price. Reebok at first refused to takeaction but then singing group UltraViolet began circulating an online petition against the song and staged a protest at the main Reebok store in New York. What obligation do companies have to their customers? What factors matter when making a decision about the content of entertainment.
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Which of the following wrote the book Utilitarianism and believed that ethical actions should "generate the greatest good for the greatest number"? (a) Milton Friedman (b) John Stuart Mill (c) Immanuel Kant (d) John Rawls
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