New Venture Creation International Edition 6th Edition by Kathleen R. Allen – Test Bank

New Venture Creation International Edition 6th Edition by Kathleen R. Allen – Test Bank

Chapter 11—Establishing an Ethical and Socially Responsible Business

TRUE/FALSE

1. Following the Golden Rule that says “Do unto others as you would have them do unto you,” is a comprehensive answer to ethical dilemmas in the workplace.

ANS: F PTS: 1

2. Entrepreneurs should wait until the venture is profitable before making an investment in social responsibility.

ANS: F PTS: 1

3. A company’s core values derive from the personal values and beliefs of the founder.

ANS: T PTS: 1

4. The mission statement loosely identifies the company’s objectives.

ANS: F PTS: 1

5. Strategies are the plans for achieving the goals, and ultimately the mission, of the company.

ANS: T PTS: 1

6. An effective ethics program may protect a company from criminal penalties.

ANS: T PTS: 1

7. Ethics derives from the cultural, social, political, and ethnic norms with which we were raised as children.

ANS: T PTS: 1

8. Ethical issues are the same for managers and leaders regardless of the size of the company.

ANS: F PTS: 1

9. E-commerce minimizes conflicts of interests.

ANS: F PTS: 1

10. Meeting ethical expectations is part of social responsibility.

ANS: T PTS: 1

MULTIPLE CHOICE

1. Recent research has identified four categories of ethical decision making that entrepreneurs face on a daily basis, including individual values, organization values, external accountability, and ____.

a.

core values

b.

social responsibility

c.

corporate vision

d.

customer satisfaction

e.

None of these choices

ANS: D PTS: 1

2. The work of Paul Adler has determined that ____ is/are a critical first step in identifying and assessing an ethical dilemma.

a.

accountability

b.

awareness

c.

legality

d.

values

e.

None of these choices

ANS: B PTS: 1

3. In ethics theory, there are generally three broad categories of perspectives about an ethical dilemma: ____, obligations, and utility.

a.

accountability

b.

awareness

c.

ideals

d.

values

e.

actions

ANS: C PTS: 1

4. In ethics theory, ____ analyzes the costs and benefits of potential alternative consequences of action or inaction.

a.

obligation

b.

ideal

c.

utility

d.

value

e.

outcome

ANS: C PTS: 1

5. ____ in ethical decision making says that “Everyone needs to look out for himself.”

a.

Dogmatism

b.

Egoism

c.

Utility

d.

Relativism

e.

Subjectivism

ANS: B PTS: 1

6. A conflict of interest occurs when a person’s private or personal interests clash with ____.

a.

professional obligations

b.

professional ethics

c.

personal ethics

d.

corporate vision

e.

social responsibility

ANS: A PTS: 1

7. Aristotle, the Greek philosopher, said that ____ is the first of the human virtues because without it, the others are not possible.

a.

responsibility

b.

vision

c.

courage

d.

hope

e.

None of these choices

ANS: C PTS: 1

8. The process of developing a ____ begins with a company’s self examination to identify values held by individuals and alert everyone to inconsistencies in how people deal with particular issues.

a.

strategy

b.

vision

c.

value statement

d.

mission statement

e.

code of ethics

ANS: C PTS: 1

9. The question, “Would I be proud if my actions were announced in my local newspaper?” is part of the ____ approach to ethical decision making.

a.

Adler

b.

Kantian

c.

Greek

d.

utilitarian

e.

subjective

ANS: B PTS: 1

10. ____ means operating a business in a way that exceeds the ethical, legal, commercial, and public expectations that society has of the business.

a.

Ethics

b.

Social responsibility

c.

Vision

d.

BHAG

e.

Mission

ANS: B PTS: 1

11. ____ is/are the fundamental beliefs that a company holds about what is important in business and in life in general.

a.

A code of ethics

b.

Social responsibility

c.

Vision

d.

Core values

e.

None of these choices

ANS: D PTS: 1

12. A ____ precisely identifies the environment in which the company operates and communicates the company’s fundamental philosophy.

a.

code of ethics

b.

mission statement

c.

vision

d.

purpose

e.

strategy

ANS: B PTS: 1

13. Peter Drucker always asserted that a company’s ____ should “fit on a t-shirt.”

a.

code of ethics

b.

mission

c.

vision

d.

purpose

e.

strategy

ANS: B PTS: 1

14. Both mission and purpose are derived directly from a company’s vision and ____.

a.

ethics

b.

goals

c.

core values

d.

purpose

e.

strategy

ANS: C PTS: 1

15. An entrepreneur’s personal ____ is really a function of the core values and vision that an entrepreneur has for his or her life.

a.

code of ethics

b.

mission

c.

strategy

d.

purpose

e.

definition of success

ANS: E PTS: 1

16. The vision that guides a company in the right direction is expressed through its ____.

a.

core values

b.

purpose

c.

mission

d.

goals

e.

All of these choices

ANS: E PTS: 1

17. Which of the following is not an area where ethical dilemmas are typically found?

a.

Conflict of interest

b.

Survival tactics

c.

Stakeholder pressure

d.

Pushing the legal limit

e.

None of these choices; that is, ethical dilemmas arise in all these areas.

ANS: E PTS: 1

18. In order to answer the question “Why does the business exist?” you need to know its ____.

a.

purpose

b.

mission

c.

strategies and tactics

d.

core values

e.

All of these choices

ANS: A PTS: 1

19. A company’s ____ is/are what brings everyone together to achieve a common objective.

a.

vision and values

b.

mission

c.

purpose

d.

strategies and tactics

e.

code of ethics

ANS: B PTS: 1

20. The moral code by which we live and conduct business comes from cultural, social, political, and ethnic norms with which we were raised as children and is called ____.

a.

ethics

b.

social responsibility

c.

social obligations

d.

corporate policy

e.

vision

ANS: A PTS: 1

21. ____ which is/are the means to execute the strategies, should also be put in place.

a.

Capitalization

b.

Some good tactics or action plans

c.

Employees

d.

A board of directors

e.

A purpose

ANS: B PTS: 1

22. It is important to stick to your ethical code because ____.

a.

the law requires it

b.

that is always the easiest way to do business

c.

an entrepreneur’s reputation is critical to success

d.

an ethical code drives the company’s vision

e.

All of these choices

ANS: C PTS: 1

23. Entrepreneurs who play too close to the edge of legality are in danger of ____.

a.

pushing the limits of the law

b.

running into conflicts of interest

c.

using survival tactics

d.

peer pressure

e.

None of these choices

ANS: A PTS: 1

24. Research has shown that the ethical behavior of employees is very much influenced by ____.

a.

the Golden Rule

b.

the justice approach

c.

a code of ethics

d.

social responsibility

e.

societal norms

ANS: C PTS: 1

25. To ensure that the standards established for the company become part of its culture, you should do all of the following except ____.

a.

educating employees through workshops.

b.

publically reporting ethical lapses

c.

sharing your code of ethics with customers

d.

modeling ethical behavior

e.

developing a strong ethical code

ANS: B PTS: 1

26. Through giving something back to the community or communities in which it does business, and thus to society as a whole, a business holds itself to a higher standard of ____.

a.

social responsibility

b.

business ethics

c.

corporate culture

d.

social ventures

e.

core values

ANS: A PTS: 1

27. Paul Brainerd of the Brainerd Foundation in Seattle, Washington, suggests following which socially responsible rule?

a.

Wait until you are older to become socially responsible

b.

Don’t wait until later in life to begin giving back

c.

Wait until the venture is well established

d.

Go for something huge

e.

None of these choices

ANS: B PTS: 1

28. Entrepreneurs are goal-oriented and tend to cite which of the following as a reason for going into business?

a.

Money

b.

Prestige

c.

Personal values

d.

Control

e.

Peer pressure

ANS: D PTS: 1

29. All of the following are examples of poor ethics except ____.

a.

not reporting all cash receipts

b.

cheating customers on price

c.

failing to pay bills on time

d.

getting to work late

e.

lying to customers, employees, and suppliers

ANS: D PTS: 1

30. A small company can have a socially responsible impact on its community if it does a few things by way of preparation. First, the company needs to ____.

a.

create a mission statement

b.

set goals

c.

partner with a for-profit organization

d.

involve only a few people in the organization

e.

None of these choices

ANS: B PTS: 1

SHORT ANSWER

1. Define ethics.

ANS:

Ethics, or the moral code by which we live and conduct business, comes from the cultural, social, political, and ethnic norms with which we were raised as children.

PTS: 1

2. Define conflict of interest.

ANS:

Conflict of interest occurs when a person’s private or personal interests clash with his or her professional obligations such that an independent observer might reasonably question whether the individual’s professional actions or decisions are influenced by personal or financial gain.

PTS: 1

3. Define stakeholders.

ANS:

Stakeholders include any person or organization that has an interest in seeing the company succeed, such as investors, shareholders, suppliers, customers, and employees. Every business, no matter how small, has stakeholders.

PTS: 1

4. List some ways in which a company can become socially responsible.

ANS:

Donate products or services. Put together a group of small businesses whose combined efforts will produce results with more impact. Offer company expertise free of charge. Contribute to your community by making donations to local charities, and allow employees to volunteer on company time.

PTS: 1

5. Describe the four categories of ethical decision making that entrepreneurs face every day.

ANS:

(1) individual values, such as integrity and honesty; (2) organization values concerning employee well-being; (3) customer satisfaction, as reflected in the value provided to the customer; and (4) external accountability, or how the company relates to the community and the environment.

PTS: 1

6. Discuss the process of developing a code of ethics.

ANS:

It begins with a company’s self-examination to identify values held by individuals and alert everyone to inconsistencies in how people deal with particular issues. For a new company, this means getting the founding team together to discuss how certain issues should be dealt with. For a larger company, forming a committee to oversee the process may be appropriate. The elements that should be included in the process are trustworthiness, respect, responsibility, caring, justice and fairness, civil virtue, and citizenship.

PTS: 1

7. Discuss the characteristics that are part of an effective code of ethics.

ANS:

The code and its policies will be clear and easy to understand. Details about special situations that need further explanation will be included (for example, political factors in particular countries). In cases where employee judgment may be required, descriptions and examples will make it easier for the employee to make decisions. All employees should be aware of and understand the code, as well as the values and culture of the company.

PTS: 1

8. Define core values.

ANS:

Core values are the fundamental beliefs that a company holds about what is important in business and life in general. They are based on the personal values and beliefs of the founder, so they are not something that can be created or invented for the company out of thin air. They tell the world who the company is and what it stands for. They rarely change over time, and they endure beyond the tenure of the founder.

PTS: 1

9. Define mission statement.

ANS:

A mission statement precisely identifies the environment in which the company operates and communicates the company’s fundamental philosophy. The best mission statements are simple, are precise, and use clear words. The mission statement should address the company’s opportunities, match the company’s competence, and inspire the company’s commitment.

PTS: 1

10. Define the constants of success.

ANS:

Purpose – entrepreneurs need to know that what they are doing is taking them in the direction of a goal they wish to achieve. Failure – life has its ups and downs. Failure is the other half of success, and most entrepreneurs have experienced several failures of one sort or another along the way. Sense of satisfaction – most entrepreneurs love what they are doing, so their satisfaction level is usually very high. No free lunch – success rarely comes without hard work. Entrepreneurs do not have the luxury of a 9-to-5 workday; they are usually married to their businesses 24 hours a day.

PTS: 1