Chap 004

Chapter 04 - Ethics in International Business
Chapter 04
Ethics in International Business
True / False Questions
1. (p. 124) The term ethics refers to accepted principles of right or wrong that govern the conduct
of a person, the members of a profession or the actions of an organization.
TRUE
Difficulty: Easy
2. (p. 124) Ethical strategies are the accepted principles of right or wrong governing the conduct
of businesspeople.
FALSE
Difficulty: Easy
3. (p. 124) Business ethics are the accepted principles of right or wrong governing the conduct of
businesspeople.
TRUE
Difficulty: Easy
4. (p. 124) What is considered normal business practice in one country may be considered
unethical in others.
TRUE
Difficulty: Medium
4-1
5. (p. 124) In an international business setting, the most common ethical issues involve
employment practices, human rights, environmental regulations, corruption and the moral
obligation of multinational companies.
TRUE
Difficulty: Medium
6. (p. 125) The Sullivan principles mandated that GM could operate in South Africa as long as
the company complied with the apartheid laws.
FALSE
Difficulty: Hard
7. (p. 126) Myanmar has one of the worst human rights records in the world.
TRUE
Difficulty: Easy
8. (p. 127) Nearly all developing nations have substantial regulations governing the emission of
pollutants, the dumping of toxic chemicals, the use of toxic materials in the workplace and so
on.
FALSE
Difficulty: Medium
9. (p. 128) The tragedy of the commons occurs when a resource held in common by all, but
owned by no one is overused by individuals, resulting in its degradation.
TRUE
Difficulty: Medium
4-2
10. (p. 128) Corporations can contribute to the global tragedy of the commons by not pumping
pollutants into the atmosphere or dumping them in oceans or rivers.
FALSE
Difficulty: Medium
11. (p. 128) International businesses cannot gain economic advantages by making payments to
corrupt government officials.
FALSE
Difficulty: Medium
12. (p. 129) The foreign corrupt practices act outlawed the paying of bribes to foreign
government officials to gain business.
TRUE
Difficulty: Medium
13. (p. 129) The Foreign corrupt practices act originally allowed, "facilitating payments" to
secure contracts that would not otherwise be secured.
FALSE
Difficulty: Medium
14. (p. 129) Facilitating payments are also known as speed money or grease money.
TRUE
Difficulty: Medium
4-3
15. (p. 129) The convention on combating bribery of foreign public officials in international
business transactions obliges member states to make the bribery of foreign public officials a
criminal offense.
TRUE
Difficulty: Medium
16. (p. 130) Noblesse oblige refers to payments that ensure receiving the standard treatment that
a business ought to receive from a foreign government.
FALSE
Difficulty: Easy
17. (p. 130) Social responsibility refers to the idea that businesspeople should consider the social
consequences of economic actions when making business decisions and that there should be a
presumption in favor of decisions that have both good economic and social consequences.
TRUE
Difficulty: Medium
18. (p. 130) When multinationals use their power in a positive way to increase social welfare, it
is ethical.
TRUE
Difficulty: Medium
19. (p. 131) The ethical obligations of a multinational corporation toward employment
conditions, human rights, environmental pollution and the use of power are always clear cut.
FALSE
Difficulty: Medium
4-4
20. (p. 132) Ethical dilemmas are situations in which none of the available alternatives seems
ethically acceptable.
TRUE
Difficulty: Easy
21. (p. 132-133) An individual with a strong sense of personal ethics is less likely to behave in an
unethical manner in a business setting.
TRUE
Difficulty: Medium
22. (p. 133) Expatriate managers may experience more than the usual degree of pressure to
violate their personal ethics.
TRUE
Difficulty: Medium
23. (p. 134) A firm's organizational culture refers to the values and norms that are shared among
employees of an organization.
TRUE
Difficulty: Easy
24. (p. 135) The Enron debacle indicates that an organizational culture can legitimize behavior
that a society would judge as unethical.
TRUE
Difficulty: Medium
4-5
25. (p. 136) According to the Friedman doctrine, the only social responsibility of business is to
increase profits, so long as the company stays within the rules of law.
TRUE
Difficulty: Medium
26. (p. 137) The Friedman doctrine is the belief that ethics are nothing more than a reflection of
culture and therefore, a firm should adopt the ethics of the culture in which it is operating.
FALSE
Difficulty: Easy
27. (p. 137) Cultural relativism is the belief that ethics are nothing more than a reflection of
culture and therefore, a firm should adopt the ethics of the culture in which it is operating.
TRUE
Difficulty: Easy
28. (p. 137) According to the righteous moralist if a manager of a multinational sees that firms
from other nations are not following ethical norms in a host nation, that manager should not
either.
FALSE
Difficulty: Easy
29. (p. 138) The naive immoralist claims that a multinational's home country standards of ethics
are the appropriate ones for companies to follow in foreign countries.
FALSE
Difficulty: Easy
4-6
30. (p. 138) Most moral philosophers see value in utilitarian and Kantian approaches to business
ethics.
TRUE
Difficulty: Medium
31. (p. 138) The utilitarian approaches to ethics hold that the moral worth of actions or practices
is determined by their consequences.
TRUE
Difficulty: Easy
32. (p. 139) It, typically is fairly easy to measure the benefits, costs and risks of a course of
action.
FALSE
Difficulty: Medium
33. (p. 139) An advantage of utilitarianism is that the philosophy allows for the consideration of
justice.
FALSE
Difficulty: Medium
34. (p. 139) Rights theories recognize that human beings have fundamental rights and privileges
that transcend national boundaries and cultures.
TRUE
Difficulty: Medium
4-7
35. (p. 140) A just distribution is one that is considered fair and equitable.
TRUE
Difficulty: Medium
36. (p. 141) According to Rawls, inequalities can be just if the system that produces inequalities
is to the advantage of everyone.
TRUE
Difficulty: Medium
37. (p. 142) Talking with prior employers regarding someone's reputation is a good way to
discern a potential employee's ethical predisposition.
TRUE
Difficulty: Medium
38. (p. 143) Building an organization culture that places a high value on ethical behavior requires
incentive and reward systems.
TRUE
Difficulty: Easy
39. (p. 144) A firm's stakeholders are individuals or groups that have an interest, claim or stake
in the company, what it does and how well it performs.
TRUE
Difficulty: Easy
4-8
40. (p. 145-146) Companies can strengthen the moral courage of employees by committing
themselves to retaliate against employees who exercise moral courage, say no to superiors or
otherwise complain about unethical actions.
FALSE
Difficulty: Easy
Multiple Choice Questions

41. (p. 124) The accepted principles of right or wrong governing the conduct of businesspeople
are best known as
A. Business measures
B. Business ethics
C. Business attitudes
D. Business standards
Difficulty: Easy
42. (p. 124) Identify the incorrect statement regarding ethical issues in international business.
A. They are often rooted in the fact that political systems, law, economic development and
culture of nations vary significantly
B. Human rights and environmental regulations are some of the common ethical issues
C. Ethical practices of all nations are similar in nature
D. Managers in multinational firms need to be particularly sensitive to differences in business
practices because they work across national borders
Difficulty: Medium
4-9
43. (p. 125) To guard against abuse of employment practices in other nations, multinationals
should do all of the following except
A. Establish minimal acceptable standards that safeguard the basic rights and dignity of
employees
B. Adhere to working conditions of the host country if they are clearly inferior to those in a
multinational's home nation
C. Audit foreign subsidiaries and subcontractors on a regular basis to make sure established
standards are met
D. Take action to correct unacceptable behavior
Difficulty: Medium
44. (p. 125) This denied basic political rights to the majority nonwhite population of South
Africa until 1994.
A. Noblesse oblige
B. Kantian approach
C. Apartheid system
D. Friedman doctrine
Difficulty: Easy
45. (p. 125) The _____ was designed to allow GM to operate ethically in South Africa as long as
the company did not obey the apartheid laws in its own South African operations.
A. Righteous moral system
B. Sullivan principle
C. Noblesse oblige
D. Cultural relativism
Difficulty: Medium
4-10
46. (p. 126) Identify the incorrect statement pertaining to foreign multinationals doing business
in countries with repressive regimes.
A. Inward investment by multinationals can be a force for economic, political and social
progress that ultimately improves the rights of people in repressive regimes
B. No multinational does business with nations that lack the democratic structures and human
rights records of developed nations
C. Multinational investment cannot be justified on ethical grounds in some regimes due to
their extreme human rights violations
D. Multinationals adopting an ethical stance can, at times, improve human rights in repressive
regimes
Difficulty: Hard
47. (p. 127) Identify the incorrect statement about environmental regulations.
A. Environmental regulations are often lacking in developing nations
B. Environmental regulations are similar across developed and developing nations
C. Developed nations have substantial regulations governing the emission of pollutants, the
dumping of toxic chemicals, etc
D. Inferior environmental regulations in host nations, as compared to home nation, can lead to
ethical issues
Difficulty: Medium
48. (p. 128) Everyone benefits from the atmosphere and oceans but no one is specifically
responsible for them. In this sense, the atmosphere and oceans can be referred to as a(n)
A. Greenhouse
B. Global commons
C. Joint asset
D. Global reserve
Difficulty: Medium
4-11
49. (p. 128) The _____ occurs when a resource is shared by all, but owned by no one is overused
by individuals, resulting in its degradation.
A. Tragedy of the commons
B. Noblesse oblige
C. Ethical dilemma
D. Friedman system
Difficulty: Medium
50. (p. 129) Which of the following observations is true of the Foreign Corrupt Practices Act?
A. The act outlawed the paying of bribes to foreign government officials to gain business
B. There is enough evidence that it put U.S. firms at a competitive disadvantage
C. The act originally allowed for "facilitating payments."
D. The Nike case was the impetus for the 1977 passage of this act
Difficulty: Medium
51. (p. 129) The Convention on Combating Bribery of Foreign Public Officials in International
Business Transactions excludes
A. Speed payments to secure contracts that would otherwise not be secured
B. Grease payments to gain exclusive preferential treatment
C. Facilitating payments made to expedite routine government action
D. Payments to government officials for special privileges
Difficulty: Medium
52. (p. 129) Grease payments

A. Are not the same as facilitating payments or speed money
B. are facilitating payments made to expedite routine government action
C. Are payments to gain exclusive preferential treatments
D. Can be used to secure contracts that would otherwise not be secured
Difficulty: Medium
4-12
53. (p. 129) Facilitating payments are

A. Permitted under the amended Foreign Corrupt Practices Act
B. A direct violation of the Foreign Corrupt Practices Act
C. Permitted so long as they designed only to gain exclusive preferential treatment
D. Used to secure contracts that would otherwise not be secured
Difficulty: Medium
54. (p. 130) The idea that businesspeople should consider the social consequences of economic
actions when making business decisions and that there should be a presumption in favor of
decisions that have both good economic and social consequences is known as
A. Business ethics
B. Noblesse oblige
C. Ethical dilemma
D. Social responsibility
Difficulty: Easy
55. (p. 130) Which of the following, in a business setting is taken to mean benevolent behavior
that is the responsibility of successful enterprises.
A. Sullivan's principles
B. Ethical dilemma
C. Tragedy of the commons
D. Noblesse oblige
Difficulty: Hard
56. (p. 132) A(n) _____ is a situation in which none of the available alternatives seems ethically
acceptable.
A. Value conflict
B. Ethical dilemma
C. Noblesse oblige
D. Moral error
Difficulty: Easy
4-13
57. (p. 132) _____ are generally accepted principles of right and wrong governing the conduct of
individuals.
A. Ethical dilemmas
B. Noblesse obliges
C. Personal ethics
D. Business measures
Difficulty: Easy
58. (p. 132) Ethical dilemmas exist because of all of the following reasons except
A. Many real-world decisions are complex and difficult to frame
B. Decisions may involve first, second and third-order consequences that are hard to quantify
C. Doing the right thing or knowing what the right thing might be is often far too easy
D. They are situations in which none of the available alternatives seem ethically acceptable
Difficulty: Hard
59. (p. 132) Which of the following is not likely to lead to unethical behavior?
A. An organizational culture that de-emphasizes business ethics
B. A process that does not incorporate ethical considerations into business decision-making
C. A strong personal ethical code governing the conduct of an individual
D. Pressure from the parent company to meet unrealistic performance goals
Difficulty: Medium
60. (p. 133) Ethical behavior is likely to be determined by all of the following, except
A. Decision making processes
B. Organization culture
C. Leadership
D. Realistic performance goals
Difficulty: Medium
4-14
61. (p. 133) Expatriate managers may experience more than the usual degree of pressure to
violate their personal ethics because of all of the following reasons except
A. They are away from their ordinary social context and supporting culture
B. They are psychologically and geographically closer to the parent company
C. They may be based in a culture that does not place the same value on ethical norms
important in the manager's home country
D. They may be surrounded by local employees who have less rigorous ethical standards
Difficulty: Medium
62. (p. 134) Which term refers to the values and norms that employees of an organization share?
A. Vision statement
B. Cultural relativism
C. Organization culture
D. Power orientation
Difficulty: Easy
63. (p. 136) All of the following approaches to business ethics are discussed by scholars
primarily to demonstrate that they offer inappropriate guidelines for ethical decision making
in a multinational enterprise except
A. Friedman doctrine
C. Kantian ethics
D. Naive moralist
Difficulty: Easy
64. (p. 136) According to _____ the social responsibility of business is to increase profits, so
long as the company stays within the rules of law.
A. The naive immoralist
B. The righteous moralist
C. Cultural relativism
D. The Friedman doctrine
Difficulty: Easy
4-15
65. (p. 136) The Friedman doctrine suggests that

A. Ethics are nothing more than the reflection of culture
B. A multinational's home-country standards of ethics are inappropriate to follow in foreign
countries
C. Businesses should not undertake social expenditures beyond those mandated by the law
and required for the efficient running of a business
D. If a manager of a multinational sees that firms from other nations are not following ethical
norms in a host nation, that manager should not either
Difficulty: Medium
66. (p. 136) Identify the incorrect statement pertaining to the Friedman doctrine.
A. It states that the only social responsibility of business is to increase profits, so long as the
company stays within the rules of law
B. It argues that businesses should undertake social expenditures beyond those mandated by
the law
C. It believes that maximizing profits is the way to maximize the returns that accrue to firms
stockholders
D. Managers of the firm should not make decisions regarding social investments on behalf of
the stockholders
Difficulty: Hard
67. (p. 137) Cultural relativism suggests that

A. Ethics are nothing more than the reflection of culture and that a firm should adopt the
ethics of the culture in which it is operating
B. The only social responsibility of business is to increase profits
C. Managers of a firm should not make decisions regarding social investments
D. A multinational's home-country standards of ethics are always appropriate to follow in
foreign countries
Difficulty: Medium
4-16
68. (p. 137) Identify the incorrect statement pertaining to cultural relativism.
A. It argues that a firm should adopt the ethics of the culture in which it is operating
B. At its extreme, it suggests that if a culture supports slavery, it is OK to use slave labor in a
country
C. It embraces the idea that universal notions of morality transcend different cultures
D. It believes that ethics are nothing more than the reflection of a culture
Difficulty: Hard
69. (p. 137) Child labor is permitted and widely employed in Country X. A multinational
company entering Country X decides to employ minors in its subsidiary, even though it is
against the multinational's home country ethics. Which of the following approaches to
business ethics would justify the actions of the multinational company?
A. Righteous moralist
C. The justice theory
D. The rights theory
Difficulty: Hard
70. (p. 137) The idea that universal notions of morality transcend different cultures is implicitly
rejected by
A. The righteous moralist
B. The naive immoralist
C. The Friedman doctrine
D. Cultural relativism
Difficulty: Medium
4-17
71. (p. 137) The righteous moralist suggests that

B. A multinational's home-country standards of ethics are the appropriate ones for companies
to follow in foreign countries
C. The social responsibility of business is to increase profits, so long as the company stays
within the rules of law
D. If a manager of a multinational sees that firms from other nations are not following ethical
norms in a host nation, that manager should not either
Difficulty: Medium
72. (p. 137) Which of the following statement about the righteous moralist approach is not true?
A. It claims that a multinational's home-country standards of ethics are the appropriate ones
for companies to follow in foreign countries
B. It is typically associated with managers from developing nations
C. Its proponents often go too far in advocating that the appropriate thing to do is adopt homecountry standards
D. It can create practical problems
Difficulty: Medium
73. (p. 137) The righteous moralist approach to business ethics is typically associated with
managers from
A. Third world nations
B. Underdeveloped nations
C. Developing nations
D. Developed nations
Difficulty: Easy
4-18
74. (p. 138) The _____ approach asserts that if a manager of a multinational sees that firms from
other nations are not following ethical norms in a host nation, that manager should not either.
A. Cultural relativism
B. Friedman doctrine
C. Righteous moralist
D. Naive immoralist
Difficulty: Easy
75. (p. 138) The naive immoralist suggests that

B. A multinational's home-country standards of ethics are the appropriate ones for companies
to follow in foreign countries
C. The social responsibility of business is to increase profits, so long as the company stays
within the rules of law
D. If firms in a host nation do not follow ethical norms then the manager of a multinational
should also not follow ethical norms there
Difficulty: Medium
76. (p. 138) According to the _____ approach to business ethics, the moral worth of actions or
practices is determined by their consequences.
A. Utilitarian
C. Friedman doctrine
D. Naive immoralist
Difficulty: Easy
77. (p. 138) The utilitarian approach to business ethics suggests that
A. People should be treated as ends and never purely as means to the ends of others
B. The moral worth of actions or practices is determined by their consequences
C. People have dignity and need to be treated as such
D. Human beings have fundamental rights and privileges that transcend national cultures
Difficulty: Medium
4-19
78. (p. 138) Which of the following approaches is committed to the maximization of good and
the minimization of harm?
A. The righteous moralist
D. Utilitarianism
Difficulty: Easy
79. (p. 139) Tools to assess actions such as cost-benefit analysis and risk assessment are rooted
in the _____ philosophy.
A. Utilitarian approach
B. Kantian approach
D. Naive immoralist
Difficulty: Medium
80. (p. 139) According to the _____ approach, the best decisions are those that produce the
greatest good for the greatest number of people.
A. Naive immoralist
C. Utilitarian
D. Kantian
Difficulty: Medium
81. (p. 139) The Kantian approach to ethics suggests that

A. Human beings have fundamental rights and privileges that transcend national boundaries
C. People should be treated as ends and never purely as means to the ends of others
D. Ethics are nothing more than the reflection of culture
Difficulty: Medium
4-20
82. (p. 139) The utilitarian approach to business ethics has been criticized because of all of the
following reasons, except
A. The measurement of benefits, costs and risks is often not possible due to limited
knowledge
B. The philosophy omits the consideration of justice
C. The philosophy advocates the greatest good for the greatest number of people, but such
actions may result in the unjustified treatment of a minority
D. It holds that the moral worth of actions or practices is determined by their consequences
Difficulty: Medium
83. (p. 139) Rights theories suggest that

A. Human beings have fundamental rights and privileges that transcend national boundaries
C. People should be treated as ends never purely as means to the ends of others
D. Minimum levels of morally acceptable behavior should be established
Difficulty: Medium
84. (p. 140) Identify the approach that most moral philosophers favor and that forms the basis for
current models of ethical behavior in international businesses.
A. Friedman doctrine
C. The righteous moralist
D. Rights theory
Difficulty: Medium
85. (p. 140) The Universal Declaration of Human Rights, related to employment, upholds all of
the following, except
A. Just and favorable work conditions
B. Equal pay for equal work
C. Prohibition of trade unions
D. Protection against unemployment
Difficulty: Medium
4-21
86. (p. 140) Article 1 of the United Nations' Universal Declaration of Human Rights states: "All
human beings are born free and equal in dignity and rights." This best echoes
A. Cultural relativism
C. The righteous moralist approach
D. Kantian ethics
Difficulty: Hard
87. (p. 140) A(n) _____ is any person or institution that is capable of moral action such as a
government or corporation.
A. Moral agent
B. Utilitarian
C. Righteous moralist
D. Naive immoralist
Difficulty: Hard
88. (p. 140) Justice theories of business ethics focus on

A. The moral worth of actions or practices
B. Minimum levels of morally acceptable behavior
C. Fundamental rights and privileges that transcend national boundaries
D. The attainment of a just distribution of economic goods and services
Difficulty: Medium
89. (p. 141) The notion that all economic goods and services should be distributed equally except
when an unequal distribution would work to everyone's advantage was developed by
A. David Hume
B. John Rawls
C. Jeremy Bentham
D. John Stuart Mill
Difficulty: Hard
4-22
90. (p. 141) Under the veil of ignorance, everyone is imagined to be ignorant of
A. All of his or her particular characteristics
B. Fundamental rights and privileges
C. The moral worth of actions or practices
D. The minimum levels of morally acceptable behavior
Difficulty: Medium
91. (p. 141) According to John Rawls,

A. Each person be permitted the maximum amount of basic liberty compatible with a similar
liberty for others
B. Freedom of speech and assembly is the single most important component in a justice
system
C. Equal basic liberty is only possible in a pure market economy
D. Inequalities in a justice system are not to be tolerated under any circumstance
Difficulty: Medium
92. (p. 141) Rawls' philosophy that inequalities are justified if they benefit the position of the
least-advantaged person is known as the
A. Inequality principle
B. Equity principle
C. Difference principle
D. Indifference principle
Difficulty: Medium
93. (p. 142) Managers of international business can do all of the following to make sure ethical
issues are considered in business decisions, except
A. Favor hiring and promoting people with a well-grounded sense of personal ethics
B. Build an organizational culture that places a high value on ethical behavior
C. Make sure that leaders within the business do not articulate the rhetoric of ethical behavior
D. Develop moral courage
Difficulty: Medium
4-23
94. (p. 142) The UN Universal Declaration of Human Rights is grounded in

A. Utilitarian and justice theories
B. Kantian and rights based theories of moral philosophy
C. Ethics and utilitarian theories
D. Kantian and justice theories
Difficulty: Medium
95. (p. 143) To build an organization culture that values ethical behavior, a company should do
all of the following, except
A. Not sanction people who do not engage in ethical behavior
B. Articulate values that emphasize ethical values
C. Make sure that key business decisions not only make good economic sense, but are also
ethical
D. Place a high value on ethical behavior by providing incentives and reward systems
Difficulty: Easy
96. (p. 144) External stakeholders

A. Are individuals or groups who own the business
B. Include all employees, the board of directors and stockholders
C. Typically, comprises customers, suppliers, lenders, etc
D. Are individuals or groups who work for the business
Difficulty: Medium
97. (p. 144) Internal stakeholders

A. Are individuals or groups who work for or own the business
B. Do not have any claim on a firm or its activities
C. Typically comprises customers, suppliers, lenders, governments, unions, etc
D. Are individuals, except employees, board of directors and stockholders that have some
claim on the firm
Difficulty: Easy
4-24
98. (p. 144) _____ means standing in the shoes of a stakeholder and asking how a proposed
decision might impact that stakeholder.
A. Veil of ignorance
B. Difference principle
C. Moral imagination
D. Noblesse oblige
Difficulty: Easy
99. (p. 145) Establishing _____ involves a business' resolve to place moral concerns ahead of
other concerns in cases where either the fundamental rights of stakeholders or key moral
principles have been violated.
A. A veil of ignorance
B. A difference principle
C. Moral imagination
D. Moral intent
Difficulty: Medium
100. (p. 145) _____ enables managers to walk away from a decision that is profitable, but
unethical.
A. Noblesse oblige
B. Moral courage
C. Difference principle
D. Friedman doctrine
Difficulty: Medium
4-25
Essay Questions
101. (p. 124) What are business ethics? What is the relationship between business ethics and an
ethical strategy?
Business ethics are the accepted principles of right or wrong governing the conduct of
businesspeople. An ethical strategy is a strategy or course of action that does not violate those
accepted principles.
Difficulty: Easy
102. (p. 124-13) What is considered normal practice in one country may be considered unethical
in others. Discuss.
Many of the ethical issues and dilemmas in international business are rooted in the fact that
political systems, law, economic development and culture vary significantly from nation to
nation. Therefore, what might be considered a normal business practice in one country may
constitute unethical behavior in another country. Managers in a multinational company need
to be sensitive to these differences and choose the ethical action in those circumstances where
variation across societies creates the potential for ethical problems. In the international
business setting, the most common ethical issues involve employment practices, human
rights, environmental regulations, corruption and the moral obligation of multinational
corporations.
Difficulty: Hard
103. (p. 125-126) Discuss how companies such as Exxon, Kodak and IBM helped improve human
rights in South Africa.
During the 1980s, many American companies doing business in South Africa realized that
following the Sullivan principles of not obeying apartheid laws and trying to promote their
abolition was not a sufficiently ethical strategy. Consequently, many companies divested their
holdings in the nation. At the same time, the U.S. government and other nations imposed
economic sanctions on the country. Together, these actions helped bring about democratic
elections in the nation in 1994 and an end to white minority rule.
Difficulty: Medium
4-26
104. (p. 127-128) Should a multinational feel free to pollute in a developing nation?
This question is designed to stimulate classroom discussion or the personal opinion of the
student. Issues that might emerge include whether there is any danger that amoral
management might move production to a developing nation precisely because costly pollution
controls are not required, the notion that the environment is public good that no one owns, but
that anyone can despoil and legality of various actions.
Difficulty: Medium
105. (p. 129) What is the Foreign Corrupt Practices Act? What is its purpose?
The Foreign Corrupt Practices Act was passed in 1977 in the U.S. The act outlawed the
paying of bribes to foreign government officials to gain business. The act was later amended
to allow for facilitating payments or grease money that enabled companies to make payments
to ensure that they receive the standard that a business ought to receive from a government.
Difficulty: Medium
106. (p. 129) What is the Convention on Combating Bribery of Foreign Public Officials in
International Business Transactions?
In 1997, the OECD adopted the Convention on Combating Bribery of Foreign Public
Officials in International Business Transactions. The convention obliges member states to
make it a criminal offense to make the bribery of foreign public officials a criminal offense.
The convention excludes facilitating payments made to expedite routine government action
from the convention.
Difficulty: Easy
4-27
107. (p. 129) In your opinion, are bribes ever acceptable? Why or why not?
This question is designed to allow the students to explore the idea of bribery as possibly
resulting in a positive rather than a negative outcome. Some economists have suggested that
corruption might in fact improve efficiency and help growth. Others however, argue that
corruption simply reduces the returns on business investment and leads to low economic
growth.
Difficulty: Medium
108. (p. 130) Discuss the notion of social responsibility. What does it mean for corporations?
The concept of social responsibility refers to the idea that businesspeople should consider the
social consequences of economic actions when making business decisions and that there
should be a presumption in favor of decisions that have both good economic and social
consequences. In a business setting, social responsibility means that benevolent behavior is
the responsibility of successful enterprises.
Difficulty: Medium
109. (p. 132) What are ethical dilemmas? Why do they exist?
Ethical dilemmas are situations in which none of the available alternatives seems ethically
acceptable. Ethical dilemmas exist because many real-world decisions are complex, difficult
to frame and involve first, second and third order consequences that are hard to quantify. To
deal with these situations, managers need a moral compass to guide them through the
dilemma to find an acceptable solution.
Difficulty: Medium
4-28
110. (p. 132-135) Why do managers behave in a manner that is unethical?

There is no easy answer to this question, but a few generalizations can be made. First,
business ethics are not divorced from personal ethics. Second, some businesspeople do not
realize they are behaving unethically. Third, an organization may not emphasize business
ethics and instead simply focus on the economic outcome of a business decision. Fourth
sometimes there is pressure from the parent company to meet unrealistic performance goals
that can be attained only by cutting corners or acting in an unethical manner. A fifth, root
cause of unethical behavior is often seen to be as leadership or leaders who do not behave in
an ethical manner.
Difficulty: Medium
111. (p. 133) What are the determinants of ethical behavior?

The determinants of ethical behavior include decision-making processes, leadership,
unrealistic performance goals, organization culture and personal ethics. Together these factors
help determine whether a manager behave in an ethically responsible manner or not.
Difficulty: Easy
112. (p. 136) Explain the Friedman doctrine. Who developed the philosophy? How well does this
approach hold up ethically?
In 1970, Milton Friedman suggested that the only social responsibility of business is to
increase profits, so long as the company stays within the rules of law. He explicitly rejects the
idea that business should undertake social expenditures beyond those mandated by the law
and required for the efficient running of a business. Friedman does state that businesses
should behave in an ethical manner and not engage in deception and fraud, however, most
economists believe that his approach to ethics does not hold up well. For example, even
though child labor may not be against the law in a particular country, it is still unethical to use
child labor.
Difficulty: Medium
4-29
113. (p. 137) Discuss the cultural relativism approach to business ethics. What is the connection
between this approach and the phrase when in Rome do as the Romans? How well does this
approach hold up ethically?
The cultural relativism approach is the belief that ethics are nothing more than the reflection
of a culture and accordingly, a firm should adopt the ethics of the culture in which it is
operating. This approach is often summarized by the maxim when in Rome do as the Romans.
Cultural relativism does not stand up well to business ethics because it suggests that if a
culture allows slavery, then it is acceptable for a firm to use slaves as well.
Difficulty: Medium
114. (p. 137-138) How does the righteous moralist approach business ethics? Who is likely to
favor this approach?
The righteous moralist claims that a multinational's home-country standards of ethics are the
appropriate ones for companies to following foreign countries. This approach is typically
associated with managers from developed counties. The main criticism of this approach is that
it goes too far. While there are some universal moral principles that should not be violated, it
does not always follow that the appropriate thing is to adopt home-country standards.
Difficulty: Medium
115. (p. 138) Discuss the naive immoralist's approach to business ethics. What are the criticisms
of this approach?
The naive immoralist asserts that if a manager of a multinational sees that firms from other
nations are not following ethical norms in a host nation, that manager should not either. This
approach has been criticized with the argument that simply accepting an action as being
ethically justified just because everyone is doing it is not sufficient. Moreover, the
multinational company does have the ability to change the prevailing practice in the country.
Difficulty: Medium
4-30
116. (p. 138-139) Discuss the utilitarian approach to business ethics. When was this approach
developed? What are its drawbacks?
The utilitarian to business ethics was developed in the 18th and 19th centuries by
philosophers such as David Hume, Jeremy Bentham and John Stuart Mill. The utilitarian
approach to ethics holds that the moral worth of actions or practices is determined by their
consequences. An action is judged to be desirable if it leads to the best possible balance of
good consequences over bad consequences. The best decisions are those that produce the
greatest good for the greatest number of people.
However, the approach has its limits. One serious drawback of the utilitarian approach is that
it is difficult to measure the benefits, costs and risks of a course of action. A second problem
is that the philosophy omits the consideration of justice.
Difficulty: Medium
117. (p. 138-139) Consider the Kantian approach to ethics. Who is responsible for the
philosophy?
Kantian ethics are based on the philosophy of Immanuel Kant and hold that people should be
treated as ends and never purely as means to the ends of others. Employing people in
sweatshops, making them work long hours for low pay in poor work conditions is a violation
ethics according to the Kantian philosophy because it treats people as mere cogs in a machine
and not as conscious moral beings that have dignity.
Difficulty: Medium
118. (p. 139-140) What are rights theories? What is the connection between rights theories and the
United Nations?
Rights theories recognize that human beings have fundamental rights and privileges that
transcend national borders and cultures. Rights establish a minimum level of morally
acceptable behavior. This philosophy formed the basis for the UN Universal Declaration of
Human Rights, which has been ratified by almost every country in the world and lays down
basic principles that should always be adhered to irrespective of the culture in which one is
doing business.
Difficulty: Medium
4-31
119. (p. 140-141) Describe justice theories. What is John Rawls position on ethics?
Justice theories focus on the attainment of a just distribution of economic goods and services.
One theory that is particularly important was developed by Rawls. Rawls argues that all
economic goods and services should be distributed equally except when an unequal
distribution would work to everyone's advantage. Rawls developed the veil of ignorance as a
conceptual tool that contributes to the moral compass that helps managers assess ethical
dilemmas.
Difficulty: Medium
120. (p. 141) What is the veil of ignorance? Why is it important to business?
The veil of ignorance was developed by John Rawls as part of his approach to justice theory.
According to Rawls, valid principles of justice are those with which all persons would agree if
they could freely and impartially consider the situation. Impartiality is guaranteed by the veil
of ignorance. Under the veil of ignorance, everyone is imagined to be ignorant of all of his or
her particular characteristics. Under these conditions everyone would agree that (1) each
person be permitted the maximum amount of basic liberty compatible with a similar liberty
for others and (2) once basic liberty is assured, inequality in basic social goods is to be
allowed only if such inequalities benefit everyone.
Difficulty: Medium
4-32

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Chapter 04 - Ethics in International Business

Chapter 04 - Ethics in International Business

Chapter 04 - Ethics in International Business

Chapter 04 - Ethics in International Business

Chapter 04 - Ethics in International Business

Chapter 04 - Ethics in International Business

Chapter 04 - Ethics in International Business

Chapter 04 - Ethics in International Business

Chapter 04 - Ethics in International Business

Multiple Choice Questions

Chapter 04 - Ethics in International Business

Chapter 04 - Ethics in International Business

Chapter 04 - Ethics in International Business

52. (p. 129) Grease payments

Chapter 04 - Ethics in International Business

53. (p. 129) Facilitating payments are

Chapter 04 - Ethics in International Business

Chapter 04 - Ethics in International Business

Chapter 04 - Ethics in International Business

65. (p. 136) The Friedman doctrine suggests that

67. (p. 137) Cultural relativism suggests that

Chapter 04 - Ethics in International Business

Chapter 04 - Ethics in International Business

71. (p. 137) The righteous moralist suggests that

Chapter 04 - Ethics in International Business

75. (p. 138) The naive immoralist suggests that

Chapter 04 - Ethics in International Business

81. (p. 139) The Kantian approach to ethics suggests that

Chapter 04 - Ethics in International Business

83. (p. 139) Rights theories suggest that

Chapter 04 - Ethics in International Business

88. (p. 140) Justice theories of business ethics focus on

Chapter 04 - Ethics in International Business

91. (p. 141) According to John Rawls,

Chapter 04 - Ethics in International Business

94. (p. 142) The UN Universal Declaration of Human Rights is grounded in

96. (p. 144) External stakeholders

97. (p. 144) Internal stakeholders

Chapter 04 - Ethics in International Business

Chapter 04 - Ethics in International Business

Chapter 04 - Ethics in International Business

Chapter 04 - Ethics in International Business

Chapter 04 - Ethics in International Business

110. (p. 132-135) Why do managers behave in a manner that is unethical?

111. (p. 133) What are the determinants of ethical behavior?

Chapter 04 - Ethics in International Business

Chapter 04 - Ethics in International Business

Chapter 04 - Ethics in International Business

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