Complete Test Bank – Ch.3 | The Ethical And Social – 1e

Chapter 3: The Ethical and Social Responsibilities of Entrepreneurs

= Correct answer

Multiple Choice/Fill in the Blank

1. What are the primary needs of shareholders?

A. all having a vested interest

B. always obtaining a return on investment

C. managing a company

D. realizing value

Difficulty: Moderate

1. What is the common theme between the 1997 Business Roundtable Statement and the shareholder primacy?

A. balancing shareholder interests

B. concern for other constituencies

C. corporate social responsibility

D. maximizing shareholder value

Difficulty: Moderate

1. Which of the following is not an element of the Business Roundtable Official Statement on the purpose of a corporation?

A. creating long-term shareholder value

B. ethically dealing with suppliers

C. investing in employees

D. lowering prices of products

Difficulty: Moderate

1. Which of the following is the most effective way to cultivate anchoring organizational strategies?

A. delegation

B. encouragement

C. facilitation

D. punishment

Difficulty: Moderate

1. The Ten Principles of the United Nations Global Compact cover all of the following principles except ________.

A. association

B. corruption

C. fraud

D. human rights

Difficulty: Easy

1. What foundational beliefs inform one’s moral compass? (Select all that apply.)

A. analytical

B. environmental

C. philosophical

D. religious

Difficulty: Easy

1. Which professions have external codes of ethics? (Select all that apply.)

A. CPAs

B. CFPs

C. restaurateurs

D. attorneys

Difficulty: Moderate

1. What are some of the intellectual property issues facing entrepreneurs? (Select all that apply.)

A. contracts

B. nondisclosure agreements

C. organization

D. patents

Difficulty: Moderate

1. What is CSR?

A. company shareholder reorganization

B. corporate shareholder responsibility

C. corporate social responsibility

D. company social reorganization

Difficulty: Easy

1. Which of the following is not one of the entities that promulgated new regulations in response to business sector ethical failures? (Select all that apply.)

A. AICPA

B. FTC

C. PCAOB

D. SEC

Difficulty: Moderate

1. What are the desired outcomes for corporate social responsibility, ethics, and law? (Select all that apply.)

A. compliance

B. ethics

C. philanthropy

D. profits

Difficulty: Moderate

1. According to the text, which of the following is an example of financial and accounting fraud?

A. Enron

B. Nike

C. Pfizer

D. Toyota

Difficulty: Easy

1. Which of the following is not a way that a personal mission statement helps an entrepreneur?

A. It helps the entrepreneur focus on avenues of interest they can explore.

B. It serves as an ethical and moral compass for the entrepreneur.

C. It helps the entrepreneur stay on the path they have set.

D. It reflects the entrepreneur’s values by identifying profit.

Difficulty: Moderate

1. What is one of the most common characteristics of successful startups?

A. charismatic founders

B. collaborative founders

C. experienced founders

D. well-funded founders

Difficulty: Moderate

1. What are the most important benefits of micro-lending? (Select all that apply.)

A. Small loans help small business owners.

B. Loans are approved faster than usual.

C. Lenders loosen the eligibility requirements for loans.

D. The applications use better technology.

Difficulty: Easy

1. Which of the following is an example of a practical business mission statement?

A. “You can create the outcome you aim to achieve.”

B. “Have fun in your journey and learn from mistakes.”

C. “Serve as a leader and live a balanced life.”

D. “Listen and inspire others to apply their principles.”

Difficulty: Moderate

1. Which of the following demonstrates an ethical issue that could lead to an infringement of CSR?

A. A company’s website does not generate the amount of sales the owner thought it would. The owner decides to take the website down for a few weeks in order to update it. In the meantime, customers have to do their business in person or over the phone.

B. A company creates a new process for producing smartphones that takes half the amount of time. The company acquires a patent for that process and is the only one who can use it.

C. A company’s website is hacked and millions of customers’ identity information is lost. The company sells most of its stock for protection and then tells their customers about the hack.

D. A company discovers that its printers catch fire when printing for longer than ten minutes. The company loses millions of dollars when they recall the printers and offer free replacements.

Difficulty: Difficult

1. Where do founders derive their company’s mission?

A. experience, spirituality, and beliefs

B. religion, spirituality, and family

C. spirituality, values, and family

D. values, beliefs, and experience

Difficulty: Easy

1. Which of the following demonstrates how TOMS shoes has embraced the concept of CSR?

A. The creator named the company TOMS even though his name is Blake.

B. For every pair of shoes the company sells, it gives a pair of shoes to a child in need.

C. The company gained overnight popularity and sold out of its shoes.

D. The owner identified his values and mission to create a successful for-profit company.

Difficulty: Moderate

1. Which of the following is an example of leaving a positive footprint on the planet?

A. studying the environment, harvesting the forest, and then restoring it to its original form

B. encouraging population growth so that the local community is safe from extinction

C. harvesting plants for medications to attempt to create life-saving drugs

D. opening local schools to educate the local populations on their resources

Difficulty: Difficult

1. What are some aspects of micro-finance? (Select all that apply.)

A. high-yield return from saving and checking accounts

B. targets those who lack access to conventional banking

C. community banks issue money through third party lenders

D. hedge funds dedicated to investment in micro-lending

Difficulty: Difficult

1. Which ethical theories explain some entrepreneurial behavior? (Select all that apply.)

A. deontology

B. socialism

C. utilitarianism

D. vitalism

Difficulty: Easy

True/False

1. True or false? When Shkreli raised the price of his life-saving drug, he was acting in the best interest of the business and stakeholders.

Difficulty: Difficult

1. True or false? Stakeholders are a small group who are owners of a company.

Difficulty: Easy

1. True or false? The Business Roundtable Statement affirmed the older shareholder primacy doctrine approach.

Difficulty: Easy

1. True or false? Entrepreneurs are tasked with developing ethical and responsible organizations.

Difficulty: Easy

1. True or false? The relationship of an entrepreneurial mission and the founders’ values can be diagrammed as entrepreneurial mission statement → personal values → personal mission statement.

Difficulty: Easy

1. True or false? Ethics are standards of behavior that you choose to uphold.

Difficulty: Easy

1. True or false? Corporations are urged by laws and regulations to develop a principled approach to do business.

Difficulty: Moderate

1. True or false? Corporate social responsibility is the same as social entrepreneurship.

Difficulty: Easy

1. True or false? A perspective of CSR is that ethical business leaders opt to do well financially at the same time that they are promoting their cause.

Difficulty: Easy

1. True or false? One of the vulnerabilities in corrective measures to address scandals is that they are mainly compliance and threat based, which does not necessarily prevent the repeat of ethical deviations.

Difficulty: Easy

1. True or false? A socially responsible entrepreneur’s end goal is to generate wealth.

Difficulty: Easy

1. True or false? Some entrepreneurial businesses end up adjusting their leadership ethos as their company grows.

Difficulty: Easy

1. True or false? Even if a company does not include all of its ingredients on its label, it is still acceptable and ethical.

Difficulty: Moderate

1. True or false? Almost 75 percent of millennial workers would agree to work for 25 percent less money to work for a company whose business values comport with their personal values.

Difficulty: Moderate

1. True or false? An ethical entrepreneur should make sure that employees complete workplace climate surveys.

Difficulty: Moderate

1. True or false? Ben & Jerry’s founders were accused of disregarding CSR when they sold their business to a conglomerate which was commercially focused and sold generic products.

Difficulty: Difficult

1. True or false? Ethical companies do not make mistakes.

Difficulty: Difficult

1. True or false? The development of CSR has been a steady progression of success and advancement.

Difficulty: Easy

1. True or false? Under the social/philanthropic area of responsibility, the desired outcome is to avoid doing harm and act fairly.

Difficulty: Easy

1. True or false? The cleanup of the Amazon rainforest is an example of environmental entrepreneurship.

Difficulty: Moderate

1. True or false? Endowing worthwhile philanthropies is the most positive effect of business operations.

Difficulty: Moderate

1. True or false? When faced with an entrepreneur who makes an ethical breach, employees should not speak up or escalate the problem because it is a startup anyway.

Difficulty: Moderate

1. True or false? A nonprofit is the same as a cooperative.

Difficulty: Easy

Short Answer

1. What is the shareholder primacy doctrine, and how is it viewed today?

Difficulty: Easy

1. What is the Business Roundtable and why is it relevant today?

In 2019, the Business Roundtable amended its purpose to state that it is promoting an economy to serve all Americans. This modernized purpose shows how the organization wants to address all stakeholders and not just the business community. Their renewed focus is on sustainability through investing in employees and communities.

Difficulty: Moderate

1. What is corporate social responsibility? Provide an example from outside the reading.

A simple summary of CSR is that ethical business leaders try to do good while they do well. While companies are entitled to make money, that should not be their only purpose. Corporations are supposed to be good civic neighbors and be dedicated to societal prosperity, supporting communities while pursuing legitimate profit goals. With CSR, it is possible to strive for both profit and societal good.

In early 2019 during the longest national government shutdown in US history, furloughed employees missed paychecks they needed to sustain a living. Some companies embraced CSR, focusing on their communities with impacted workers. These do-gooder companies included Airbnb and Kraft, which took steps to support government employees, including providing food and supplies.

Difficulty: Moderate

1. What were General Motors’s key failures in considering stakeholders?

Difficulty: Easy

1. Why is it that when a company becomes successful, it is harder for the entrepreneur/founder? How can you overcome this? Provide examples.

Some examples of failures in transitioning during success include Uber and We Work, which had serious challenges with its executive management adapting to a corporate culture. Employees also had a hard time following the mission of the organization from its founding. For both organizations, there were human resources problems, including employee lawsuits and complaints, and ultimately the boards determined that the CEO founders needed to step aside from their roles.

Companies can avoid this problem by instituting human resources management and operational controls early on. Then the entrepreneurial mindset is made more formal to handle expansion and manage new employees that will not abruptly change a founding culture or mission. Also, founders need to embrace change and industry best practices.

Difficulty: Moderate

1. What are the ethical implications of Martin Shkreli’s entrepreneurship?

Difficulty: Easy

1. How are business ethics different than personal ethics? Please provide an example from outside the reading.

Business ethics are often based on a code of conduct. Sometimes there is even an official code mandated by one’s profession (e.g., CPAs, attorneys, CFPs, and others that have professional codes of ethics). There are also codes such as that of the Business Roundtable or Business for Social Responsibility that apply more generally. Business ethics guide a business and its employees’ actions.

Difficulty: Moderate

1. How is shareholder primacy being rethought? Provide an analysis and example from outside of the reading. Do you agree with the challenges to that theory?

This is an interesting spin on the shareholder primacy model. If shareholders could add ethics rules, they would be embracing a form of corporate social responsibility. Since this would be hard-coded into the bylaws, companies would have to follow them and would need shareholder voting approval to change them. That would make this a good idea to meaningfully impact corporate governance.

Difficulty: Difficult

1. What is E2 and how does it operate to impact sustainability? What are other options that businesses have to demonstrate a commitment to environmental awareness?

Companies can also show environmental awareness by sponsoring neighborhood cleanups or contributing money to research or academic learning on air quality or pollution control. Talking about issues is great, but finding solutions can also help companies raise their EQ.

Difficulty: Moderate

1. What is a B-Corp?

Difficulty: Easy

1. What are the risks of micro-lending to entrepreneurs? Should that deter an entrepreneur or lenders?

The lending institution may also face risk from internal sources such as bankruptcy, fraud and operational risk. Additionally, there is external risk from default and managing, operating, and collecting loans. Before giving a loan, lenders can assess the prospective client by looking at items such as their character, business, their level of financial need, as well as the local business’s community knowledge of the loan officers to try to lower their risk.

Difficulty: Difficult

1. Who is Muhammad Yunus and what is his legacy?

Difficulty: Moderate

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