chapter 02 small business ethics: a key to long-term...

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Chapter 02Small Business Ethics: A Key to Long-Term Success

True / False Questions

1. (p. 26) The Council of Better Business Bureaus reports that most of its consumer complaints from around the United States are about large businesses. FALSE

Difficulty: Medium

2. (p. 26) Trust means fairness in all business transactions in which the firm engages. TRUE

Difficulty: Easy

3. (p. 26) In many cases, the small business and its owner are seen as one and the same thing, not only by the community, but by the owner as well. TRUE

Difficulty: Medium

4. (p. 26) Unethical behavior in a small business commonly leads to lower sales and even bankruptcy. TRUE

Difficulty: Easy

5. (p. 27) Personal accountability is when people take responsibility for decisions others make and the consequences of those decisions. FALSE

Difficulty: Medium

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6. (p. 27) Modeling is a set of shared beliefs, basic assumptions or commonly, accepted ways of dealing with problems and challenges within a company that demonstrate how things get done. FALSE

Difficulty: Hard

7. (p. 28) The best time for owners to communicate an ethical culture that all employees understand is when the business is established and has matured. FALSE

Difficulty: Hard

8. (p. 28) When key people in a business behave in a consistently ethical way, employees do too. TRUE

Difficulty: Easy

9. (p. 28) Modeling and visibility of ethical behaviors are the keys to building an ethical business culture. FALSE

Difficulty: Easy

10. (p. 28) Consistency refers to when small business owners act in ways they want their employees to act. FALSE

Difficulty: Medium

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11. (p. 29) Spillover matters because an owner's values as well as an employee's personal values may conflict with the needs and expectations of the business. TRUE

Difficulty: Hard

12. (p. 30) By design, small businesses don't have lots of rules. TRUE

Difficulty: Easy

13. (p. 30) The reason why small businesses have flexibility is because they have to deal with a lot of ‘first time' situations. TRUE

Difficulty: Medium

14. (p. 30) Research shows that small business owners do not have many personal values/business values conflict when dealing with customers and employees. FALSE

Difficulty: Medium

15. (p. 31) Small businesses often do not try something innovative. FALSE

Difficulty: Medium

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16. (p. 33) Ethics planning is a process used to better consider issues of right and wrong. TRUE

Difficulty: Easy

17. (p. 34) One of the questions in the first step of ethics planning deals with "who will benefit and how much." TRUE

Difficulty: Easy

18. (p. 34) The focus of the Four Questions in the first step of ethics planning deals with inputs and outcomes. FALSE

Difficulty: Hard

19. (p. 36) Having an integrative view means that you think of problem solving as a win-lose issue. FALSE

Difficulty: Easy

20. (p. 39) One should think of legality as the "lowest common denominator" for acceptable actions. TRUE

Difficulty: Medium

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21. (p. 39) Utilitarianism has a long-term focus, so it works well with the integrative view. TRUE

Difficulty: Medium

22. (p. 39) The idea behind utilitarianism is the question "what would make a good standard that everyone has to follow?" FALSE

Difficulty: Medium

23. (p. 41) Social capital links directly to the idea of trust. TRUE

Difficulty: Hard

24. (p. 41) Two ways to build social capital are legitimacy and social networking. TRUE

Difficulty: Medium

25. (p. 42) Wearing uniforms or business attire is a goodwill indicator of people-based legitimacy. FALSE

Difficulty: Medium

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26. (p. 44) One of the key parts of social networking is actually seeking the help or advice of others. TRUE

Difficulty: Easy

27. (p. 46) Networking is the idea and action of each person helping the other. FALSE

Difficulty: Medium

28. (p. 48) Electronic social networks are usually fast and easy to develop but cost a lot. FALSE

Difficulty: Medium

29. (p. 49) One of the steps in handling a crisis is to admit you're in trouble. TRUE

Difficulty: Medium

30. (p. 49) Only one business in ten has a disaster or crisis plan. TRUE

Difficulty: Hard

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Multiple Choice Questions

31. (p. 26) A system of values that people consider in determining whether actions are right or wrong are referred to as A. Organizational cultureB. EthicsC. TrustD. Modeling

Difficulty: Easy

32. (p. 26) ______ occurs when a person's values are in conflict, making it unclear whether a particular decision is the right thing to do. A. ModelingB. Social networkingC. Ethical dilemmaD. Mutuality

Difficulty: Easy

33. (p. 26) Which of the following can occur when there are several different options for a decision one has to make and the best choice is not clear? A. Community impactB. Lack of flexibilityC. InnovationD. Ethical dilemma

Difficulty: Medium

34. (p. 26) Who often suffers first when a small business engages in unethical behavior? A. EmployeesB. Community businessesC. StockholdersD. Government

Difficulty: Medium

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35. (p. 26) The Council of Better Business Bureaus report that most of its consumer complaints from the U.S. are about A. Foreign companiesB. Large businessesC. Small businessesD. Medium-sized organizations

Difficulty: Medium

36. (p. 26) A feeling of fairness in all business transactions in which the firm engages refers to A. CultureB. TrustC. Ethical dilemmaD. Mutuality

Difficulty: Easy

37. (p. 27) Which of the following is NOT true of trust and the small business? A. An essential ingredient to the survival of small firms is trustB. Trust in a small business is a double-edged swordC. Trust is the glue of relationshipsD. Appearances of unfairness do not have a negative impact on trust

Difficulty: Medium

38. (p. 27) ______ is the foundation that makes a solid reputation. A. TrustB. CultureC. GoodwillD. Mutuality

Difficulty: Medium

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39. (p. 27) Identify the set of shared beliefs, basic assumptions or commonly accepted ways of dealing with problems and challenges within a company that demonstrate how things get done. A. TrustB. ModelingC. Organizational cultureD. Social networking

Difficulty: Easy

40. (p. 28) When a small business is first getting started, there is a lot of flexibility in terms of A. EthicsB. FinancesC. Government regulationsD. Roles and expected behaviors

Difficulty: Medium

41. (p. 28) ______ is when small business owners act in ways they want their employees to act. A. Social networkingB. ModelingC. FlexibilityD. Mutuality

Difficulty: Easy

42. (p. 28) Maintaining the same behavior, attitude or value over long periods of time refers to A. VisibilityB. MutualityC. ConsistencyD. Flexibility

Difficulty: Easy

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43. (p. 28) Demonstration of a behavior, attitude or value in ways that are evident to others refers to A. VisibilityB. MutualityC. ConsistencyD. Flexibility

Difficulty: Easy

44. (p. 29) What refers to attitudes regarding what a person believes is important in life and the best way to live one's life? A. Personal ethicsB. Societal normsC. Personal valuesD. Obligations

Difficulty: Easy

45. (p. 29) Research has identified ______ as a consistent link between the way personal and work-related decisions are made. A. CommonalityB. Golden ruleC. Spillover effectD. Utilitarianism

Difficulty: Medium

46. (p. 29) Most business dilemmas arise in relationships with A. Customers and employeesB. Suppliers and distributorsC. Competitors and government agenciesD. Investors and stockholders

Difficulty: Medium

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47. (p. 30) ______ are what an individual believes is right and wrong and are the beliefs that guide his/her decisions in everyday life. A. Ethical dilemmasB. Personal ethicsC. Social networksD. Billboard principles

Difficulty: Easy

48. (p. 30) ______ in small business means not having lots of rules, policies and procedures. A. FlexibilityB. VisibilityC. ConsistencyD. Modeling

Difficulty: Easy

49. (p. 30) The primary conflict areas between personal ethics and business expectations for small businesses are with regard to A. What customers and employees think is honest and fairB. Giving gifts and kickbacksC. Price collusion and pricing practicesD. Hiring family members as business partners

Difficulty: Hard

50. (p. 31) The creation of something new or trying something for the first time refers to A. Personal ethicsB. InnovationC. UniversalismD. Flexibility

Difficulty: Easy

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51. (p. 33) Which of these is a three-step process that helps people make better and more ethical decisions? A. First principlesB. Golden rulesC. Ethics planningD. Mutuality development process

Difficulty: Easy

52. (p. 34) The first step of ethics planning is A. Creating options for actionB. Asking the four questionsC. Conducting ethical testsD. Obtaining employee approval on planning

Difficulty: Medium

53. (p. 34) Which of these is NOT a question in step one of ethics planning? A. Who will be hurt and how badly?B. What do others owe you, if anything?C. What regulations get broken and how badly?D. Who will benefit and how much?

Difficulty: Hard

54. (p. 34) The two questions in step one of ethics planning on what do you owe others and what do others owe you focus on ______ of people who make decisions. A. MutualityB. Distributive viewC. Integrative viewD. Obligations

Difficulty: Medium

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55. (p. 34) ______ refer(s) to the social force which impels people who make decisions or have responsibilities to act ethically because the actions they take could affect many other people. A. ObligationsB. Golden rulesC. MutualitiesD. Organizational visibility

Difficulty: Easy

56. (p. 36) 56 Having a(n) ______ means to think of problem solving as a win-lose situation. A. Golden ruleB. Distributive viewC. Social networkD. Integrative view

Difficulty: Easy

57. (p. 36) Having ______ means that you are interested in what's best for everyone involved in a situation. A. A golden ruleB. A distributive viewC. A social networkD. An integrative view

Difficulty: Easy

58. (p. 36) This observation concerning the distributive view is incorrect. A. It involves thinking of problem solving as a win-lose issueB. You are interested in the best decision for yourself and your businessC. The problem occurs when you have a short-term perspectiveD. It is very important for you to keep good relationships in the long run

Difficulty: Medium

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59. (p. 36) Since we know that community relationships are important to small business owners, the ______ is the best way to think about your options in resolving ethical dilemmas. A. Distributive viewB. Billboard principleC. Integrative viewD. Personal ethics

Difficulty: Hard

60. (p. 39) In general terms, one should think of ______ as the "lowest common denominator" for acceptable actions. A. MoralityB. LegalityC. ValuesD. Culture

Difficulty: Medium

61. (p. 39) Which ethical model supports seeking the greatest good for the greatest number of people? A. UtilitarianismB. Billboard PrincipleC. Golden ruleD. Universalism

Difficulty: Easy

62. (p. 39) ______ has a long-term focus, so it works well with the integrative view. A. UtilitarianismB. Golden ruleC. Billboard PrincipleD. Universalism

Difficulty: Medium

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63. (p. 39) An ethical model that suggests that there is a code of right and wrong that everyone can see and follow refers to A. Billboard principleB. UniversalismC. Golden ruleD. Utilitarianism

Difficulty: Easy

64. (p. 39) The main idea behind universalism is A. The greatest good for the greatest number of peopleB. Treating others in the manner you wish to be treatedC. What would make a good standard that everyone has to followD. Would you be proud to see your potential course of action on a billboard

Difficulty: Hard

65. (p. 40) Which of the following observations concerning the golden rule is NOT true? A. It is an ethical modelB. It suggests that you treat others in the same manner you wish to be treatedC. Almost every major religious tradition in the world has some version of itD. It suggests that there is a code of right and wrong that everyone can see and follow

Difficulty: Hard

66. (p. 40) An ethical model which suggests you treat others in the manner you wish to be treated refers to A. The billboard principleB. UniversalismC. The golden ruleD. Utilitarianism

Difficulty: Easy

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67. (p. 40) "Would others think worse of you if they knew what you had done to resolve your ethical dilemma?" This question is fundamental to which ethical model? A. Billboard principleB. UniversalismC. Golden ruleD. Utilitarianism

Difficulty: Medium

68. (p. 41) All of the following are true of social capital EXCEPT A. It includes characteristics like trust, consistency and networksB. It links directly to the idea of trustC. It is not associated with the concept of "good will"D. It means building "capital" in your firm by treating others fairly and honestly

Difficulty: Easy

69. (p. 41) Which of these include characteristics of a business, like trust, consistency and networks that help make business operations smooth and efficient? A. Social capitalB. UniversalismC. LegitimacyD. Utilitarianism

Difficulty: Medium

70. (p. 41) The two ways to build social capital are through A. Consistency and visibilityB. Legitimacy and social networkingC. Culture and personal ethicsD. Individuals and teams

Difficulty: Medium

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71. (p. 41) ______ means that a firm is worthy of consideration or doing business with because of the impressions or opinions of customers, suppliers, investors or competitors. A. VisibilityB. FlexibilityC. LegitimacyD. Modeling

Difficulty: Easy

72. (p. 41) The three general forms of legitimacy that you can develop are based on A. Products, people and organizationB. Individuals, teams and industry viewsC. Universalism, utilitarianism and golden ruleD. Integration, distribution and universalism

Difficulty: Medium

73. (p. 42) Selling brand name merchandise or services is a people-based legitimate indicator of A. AttireB. Product/service name recognitionC. Business network membershipD. Organizational size

Difficulty: Hard

74. (p. 43) Which of these is a product-based legitimacy indicator? A. Organization sizeB. TestimonialsC. Business network membershipD. Internet identity

Difficulty: Hard

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75. (p. 43) An entrepreneur's relationships and contacts with others is termed as A. Social networkB. VisibilityC. Golden ruleD. Mutuality

Difficulty: Easy

76. (p. 44) Which of these is an organization-based legitimacy indicator? A. TestimonialsB. Intellectual propertyC. Legal formD. Attire

Difficulty: Hard

77. (p. 44) The number one type of help sought by entrepreneurs from the PSED was A. IntroductionB. InformationC. Financial resourcesD. Physical resources

Difficulty: Hard

78. (p. 46) The idea and action of each person helping another refers to A. NetworkingB. FlexibilityC. MutualityD. Consistency

Difficulty: Easy

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79. (p. 47) Interacting with others in order to build relationships useful to a business refers to A. NetworkingB. FlexibilityC. MutualityD. Consistency

Difficulty: Easy

80. (p. 48) Which of the following is not a key to success in electronic networking? A. Making it easy for people to contact youB. Taking initiative to ask others on the network to link with youC. Taking time to develop networksD. Finding and linking-up with network mavens

Difficulty: Medium

81. (p. 49) When faced with a crisis, what is the first step that a small business owner should follow? A. Get to the scene as soon as possibleB. Communicate facts you knowC. Appoint one person as the spokespersonD. Admit you are in trouble

Difficulty: Medium

Scenario: Amanda Albertson and "Durable Doors"Amanda is a small business owner of "Durable Doors", a manufacturer and installer of garage doors, based in the northeast. Amanda has built the business working very hard in the community. She has earned the reputation as a reliable, trustworthy business owner with solid garage doors. However, given the soft economic conditions with higher gasoline and wood prices, Amanda faces a tough situation. If she continues with her quality standard, she will lose money, but if she inserts panels of mixed lower quality wood she can remain profitable

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82. (p. 26) The situation that Amanda faces can be described as (an) A. MutualityB. Ethical dilemmaC. Social networkingD. Integrative view

Difficulty: Easy

83. (p. 27) If Amanda goes ahead with inserting the lower quality panels in her garage doors, which of these would be affected the most? A. TrustB. InnovationC. FlexibilityD. Mutuality

Difficulty: Medium

84. (p. 33) Which of these might help Amanda with her situation of inserting a lower quality panel in the garage doors to remain profitable? A. Consistency and visibilityB. Social obligationsC. People-based legitimacyD. Ethics planning

Difficulty: Medium

85. (p. 39) If Amanda wants a solution that is the best thing for most people, she should explore the ethical model of A. UniversalismB. Golden ruleC. UtilitarianismD. Billboard principle

Difficulty: Medium

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86. (p. 43) ‘Durable Doors' is known for its high quality standards, exceptional personalized customer service and industry leadership. These are indicators of which type of legitimacy? A. Product-basedB. Organization-basedC. People-basedD. Industry-based

Difficulty: Hard

Essay Questions

87. Why should a small business owner care or worry about ethics? Explain.

Please refer to the discussion on "How Ethics and Small Business Go Together" on Pages 26-32.

88. What role does culture play in a small business' ethics? Explain.

Please refer to the discussion on "Culture" on Pages 27-30.

89. How can an entrepreneur make a more ethical decision using ethical planning? Explain.

Please refer to the discussion on "Ethics Planning" on Pages 34-40.

90. Identify the Four Questions that should be asked in the first step of ethics planning. Why are they important and what is the focus of these questions?

Please refer to the discussion on "Step One: The Four Questions" on Pages 34-35.

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91. Differentiate between distributive and integrative view. Which of these is a preferred way of approaching ethical dilemmas?

Pleaser refer to the discussion on "Step Two: Creating Options for Action" on Pages 36-39.

92. Briefly describe the four ethical tests.

Please refer to "Step Three: The Ethical Tests" on Pages 39-40.

93. Define social capital. How can a business owner build social capital? Explain.

Please refer to the discussion on "Ethics and Small Business Success: The Creation of Social Capital" on Pages 41-48

94. Briefly describe the three types of legitimacy. Provide few indicator examples for each type.

Please see the discussion on "Legitimacy" on Pages 41-44.

95. When faced with a crisis situation, what steps should a small business owner follow? Explain.

Please see the discussion on "Handling a crisis" on Pages 48-49.

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