,OpenStax Business Ethics Test Bank
Chapter 1: Why Ethics Matters
Chapter 1: Why Ethics Matters
* = Correct answer
Multiple Choice/Fill in the Blank
1. Which of the following is the best description for what it means to be a professional of
integrity?
A. following the investment style of Warren Buffet
B. thinking long term when investing
C. having an ethical mindset in business*
D. ensuring employee happiness
Difficulty: Easy
Blooms: Understand
AACSB: Ethics, Reflection, Diversity
2. Which of the following companies is considered ethical, according to the chapter?
A. Samsung
B. Kia
C. Au Bon Pain
D. Marriott*
Difficulty: Moderate
Blooms: Application
AACSB: Ethics, Diversity, Real-world
3. What is the golden mean?
A. treating every person the same
B. the aim of ethical behavior
C. a middle ground value between deficiency and excess*
D. justice as fairness
Difficulty: Moderate
Blooms: Analyze
AACSB: Ethics, Analytical, Application
4. Which of the following is an example of demonstrating ethical standards?
A. eudaimonia
B. consequentialism*
C. junzi
D. categorical imperative
Difficulty: Moderate
Blooms: Remember, Understand
AACSB: Application
Page 1 of 13
,OpenStax Business Ethics Test Bank
Chapter 1: Why Ethics Matters
5. What is ethics?
A. standards of behavior for professional and personal lives*
B. standards of behavior for business only
C. someone who is acting empathetic
D. setting norms for ways one interacts only with coworkers
Difficulty: Moderate
Blooms: Understand
AACSB: Ethics
6. Why do businesses care about ethics?
A. to gain greater wealth and power
B. to follow fiduciary duty
C. to uphold honorable standards of behavior*
D. to receive status and recognition
Difficulty: Moderate
Blooms: Analyze
AACSB: Ethics, Analytical
7. Which of the following best describes the role of ethics in a business environment?
A. guiding the conduct by which companies abide by the law
B. respecting the right of shareholders
C. guiding the conduct by which companies and their agents abide by the law*
D. respecting the community
Difficulty: Moderate
Blooms: Evaluate
AACSB: Reflection, Real-world
8. Are ethical and legal responsibilities the same?
A. Yes, they are the same standards of behavior and must be followed.
B. No, legal standards are necessary for a properly functioning society, and ethics deals with
voluntary business conduct in accordance with laws, statutes, regulations, and policies.*
C. No, because law is always superior to ethics.
D. Yes, because companies have duties of legal and ethical responsibility to assert right or
wrong.
Difficulty: Difficult
Blooms: Apply
AACSB: Ethics, Analytical, Application
9. How does Patagonia exemplify ethics?
A. being a market leader in outdoor gear
B. caring about its employees by giving them a large discount for friends and family
Page 2 of 13
,OpenStax Business Ethics Test Bank
Chapter 1: Why Ethics Matters
C. supporting sustainability with a recycling initiative in all retail stores and warehouses
D. instituting a “1% for the Planet” program that promotes environmentalism*
Difficulty: Moderate
Blooms: Evaluate
AACSB: Diversity, Reflection, Application, Real-world
10. Normative ethics means ________.
A. discovering right and not focusing on wrong
B. discovering right and delineating it from wrong*
C. developing rules and norms for corporate decision-making only
D. developing rules or norms for the greatest good for the greatest number
Difficulty: Moderate
Blooms: Evaluate
AACSB: Ethics, Analytical, Application
11. What does deontology mean?
A. Conduct is determined by a philosophical process focused on Kantian religious teaching.
B. Ethics is a duty we owe to others.*
C. Means justify the ends.
D. The means are the process driver for ancient Roman analytical thinking.
Difficulty: Moderate
Blooms: Apply
AACSB: Ethics, Analytical, Application
12. Adopting a consistent ethical standard is ________.
A. not in a manager’s best interests
B. selfless*
C. in a government’s best interest
D. selfish
Difficulty: Moderate
Blooms: Evaluate
AACSB: Ethics, Analytical, Application
13. What characteristics contribute to the bottom line? (Select all that apply.)
A. funding philanthropy and charitable endeavors*
B. sustainability, also known as “going green”*
C. always giving a dividend to your shareholders
D. taking an interest in employees’ personal lives*
Difficulty: Moderate
Blooms: Evaluate
AACSB: Ethics, Analytical, Application
Page 3 of 13
,OpenStax Business Ethics Test Bank
Chapter 1: Why Ethics Matters
14. Which personal philosophical approach does Warren Buffet believe in?
A. You can lose money for your firm.
B. Think short term.
C. Invest in yourself.*
D. What matters is how much money you make.
Difficulty: Easy
Blooms: Analyze
AACSB: Ethics, Reflection
15. An analysis of perceived priority of shareholder impact should include which of the
following?
A. stakeholders in reverse order of perceived priority
B. largest stakeholders by affiliation
C. interests and goals of shareholders*
D. impact of action or decision of management
Difficulty: Easy
Blooms: Apply
AACSB: Analytical, Application, Real-world
16. Which company attributes increase in value as stakeholders view that company in a positive
light? (Select all that apply.)
A. stock price
B. company name or logo*
C. competition
D. trademark*
Difficulty: Moderate
Blooms: Apply
AACSB: Real-world, Application
17. Which elements constitute corporate culture?
A. shared focus on the environment
B. shared profit of stakeholders
C. how the CEO interacts with his or her employees and managers*
D. how the CEO compensates his or her employees and managers
Difficulty: Moderate
Blooms: Analyze
AACSB: Application, Real-world, Interpersonal
18. Positive goodwill ________. (Select all that apply.)
A. is generated by ethical business practices*
B. is separate from profitability
Page 4 of 13
,OpenStax Business Ethics Test Bank
Chapter 1: Why Ethics Matters
C. yields better public relations
D. generates long-term business success*
Difficulty: Easy
Blooms: Remember
AACSB: Analytical
19. An ethical financial advisor must ________.
A. donate to charitable causes
B. be truthful about all fees*
C. focus only on potential profit to clients
D. have the same fees as other financial advisors
Difficulty: Moderate
Blooms: Apply
AACSB: Application, Real-world
20. How was management in the Equifax data breach case held accountable?
A. The chief information officer resigned.
B. Hackers accessed information because of insider trading.
C. Customers were offered free Equifax services.
D. The chief executive officer left the firm after he testified before Congress.*
Difficulty: Moderate
Blooms: Understand
AACSB: Application, Real-world
21. Which of the following most likely contributes to a corporation’s positive work atmosphere
over the long term?
A. having remote working policies for employees
B. treating suppliers fairly
C. engaging in cross-border business
D. being committed to ethical business practices*
Difficulty: Difficult
Blooms: Evaluate
AACSB: Ethics, Diversity, Application, Real-world
22. What is the best reason for a universal ethical standard?
A. It is good business practice.
B. It is easier to apply for business leaders.
C. It provides transparency in application.*
D. Having different rules is confusing to employees.
Difficulty: Moderate
Blooms: Analyze
Page 5 of 13
,OpenStax Business Ethics Test Bank
Chapter 1: Why Ethics Matters
AACSB: Reflection, Ethics
23. Which are the universal principles of behavior?
A. honesty and integrity*
B. virtue ethics and utilitarianism
C. loyalty to management
D. respect for business diversity
Difficulty: Moderate
Blooms: Apply
AACSB: Ethics
24. What did Milton Friedman believe?
A. A business should promote social consciousness.
B. The responsibility of a business is to decrease profits.
C. The only responsibility of a business is to increase profits.*
D. One of the drivers of a business is to increase publicity.
Difficulty: Easy
Blooms: Understand
AACSB: Analytical
25. Which is a characteristic of successful corporate leaders?
A. They will not take pride in their company unless it is profitable.
B. They are focused on short-term results.
C. They treat customers fairly.*
D. They take a competitive, though not always fair, approach to business.
Difficulty: Easy
Blooms: Apply
AACSB: Reflection, Application
26. Why is ethical relativism a good concept to adopt? (Select all that apply.)
A. We should use different standards for different contexts.*
B. Friends and family should be treated differently than coworkers.
C. One does not want an inconsistent outcome.*
D. Our reputation could increase.
Difficulty: Moderate
Blooms: Apply
AACSB: Interpersonal, Analytical, Application
True/False
27. True or false? Employees consider whether a company is ethical when selecting potential
employers.
Page 6 of 13
,OpenStax Business Ethics Test Bank
Chapter 1: Why Ethics Matters
Answer: True
Difficulty: Easy
Blooms: Understand
AACSB: Reflection, Ethics
28. True or false? The environment is not considered a stakeholder.
Answer: False
Difficulty: Easy
Blooms: Remember
AACSB: Ethics, Application, Real-world
29. True or false? Consumer feedback on social media sites does not affect a company’s
prospects or status as ethical.
Answer: False
Difficulty: Moderate
Blooms: Apply
AACSB: Application, Real-world
30. True or false? The Forbes list of ethical companies is based on the publication’s own
research rather than a governmental standard.
Answer: True
Difficulty: Easy
Blooms: Remember
AACSB: Application, Real-world
31. True or false? Phronesis is a practical wisdom that enables us to act virtuously.
Answer: True
Difficulty: Moderate
Blooms: Remember
AACSB: Ethics
32. True or false? Goodwill only applies to shareholders, and it is the amount of money a
shareholder could make after selling a holding in a company.
Answer: False
Difficulty: Moderate
Blooms: Apply
AACSB: Application
33. True or false? The business practice of Toyota was deemed ethical when it started to sell cars
in the United States in the 1950s.
Page 7 of 13
,OpenStax Business Ethics Test Bank
Chapter 1: Why Ethics Matters
Answer: True
Difficulty: Moderate
Blooms: Understand
AACSB: Ethics, Application, Real-world
34. True or false? Most admired companies are typically the least profitable.
Answer: False
Difficulty: Easy
Blooms: Remember
AACSB: Application, Real-world
35. True or false? The prevailing current business philosophy is that the sole purpose of business
is to make money for shareholders.
Answer: False
Difficulty: Moderate
Blooms: Understand
AACSB: Application, Real-world
Short Answer
36. Provide five examples of stakeholders.
Sample Answer: customers, media, suppliers, community, government, and shareholders
Difficulty: Easy
Blooms: Apply
AACSB: Application, Diversity
37. What motivated Mark Faris to be a white-collar criminal? How does he think such crimes
could be addressed?
Sample Answer: Mr. Faris admitted that greed, arrogance, and ambition compelled him to
become a white-collar criminal. He committed mail and wire fraud, as well as money laundering,
and spent almost a year in a federal prison. In his speaking engagements, he proposes solutions
such as ethical leadership, personal accountability, and corporate employee training.
Difficulty: Moderate
Blooms: Remember
AACSB: Ethics, Application, Real-world
38. How are stockholders also stakeholders? Explain your answer.
Sample Answer: Stockholders (who own equity shares of a company) are one of the categories
of stakeholders, which also include employees, management, customers, suppliers, the
environment, and the community, to name a few.
Page 8 of 13
, OpenStax Business Ethics Test Bank
Chapter 1: Why Ethics Matters
Difficulty: Easy
Blooms: Analyze
AACSB: Application, Ethics
39. What is compliance, and how is does it operate?
Sample Answer: Compliance in terms of business ethics refers to the extent to which a company
conducts its business operations in accordance with applicable laws, regulations, standards, and
policies. Many companies have a compliance department that is responsible for establishing
policies and procedures that are reasonably designed to prevent violations of law, regulations,
and corporate policy. Some of these companies have compliance officers and codes of conduct,
and implement compliance training and oversight.
Difficulty: Moderate
Blooms: Evaluate
AACSB: Ethics, Application, Real-world
40. Explain the concept of corporate social responsibility. Provide at least three examples of
companies that follow CSR.
Sample Answer: The nation’s most admired (ethical) companies are among those with the
highest profit margins. Consumers want to use companies that care for others and the
environment. Many unethical companies went bankrupt in 2008 and 2009. Examples of
companies that follow CSR and are mentioned in the chapter include Berkshire Hathaway,
Marriott, Nokia, illycaffè, and Toyota.
Difficulty: Moderate
Blooms: Evaluate
AACSB: Application, Real-world
41. Explain how a company enters into a social contract with its stakeholders. Be sure to address
the reciprocity of society and companies.
Sample Answer: A company enters into a social contract with society as a whole. It is an implicit
agreement among all members to cooperate for social benefits. A company must acknowledge
that all society will be affected to some extent by its operations. In return for society’s
permission to incorporate and engage in business, a company owes a reciprocal obligation to do
what is best for as many of society’s members as possible, regardless of whether they are
shareholders. Therefore, when applied specifically to a business, the social contract implies that a
company gives back to the society that permits it to exist, benefiting the community at the same
time it enriches itself.
Difficulty: Difficult
Blooms: Apply
AACSB: Ethics, Application
42. What happened in the Bradley Birkenfeld case, and how does that relate to whistleblowing?
Comment on the irony of the award.
Page 9 of 13
Chapter 1: Why Ethics Matters
Chapter 1: Why Ethics Matters
* = Correct answer
Multiple Choice/Fill in the Blank
1. Which of the following is the best description for what it means to be a professional of
integrity?
A. following the investment style of Warren Buffet
B. thinking long term when investing
C. having an ethical mindset in business*
D. ensuring employee happiness
Difficulty: Easy
Blooms: Understand
AACSB: Ethics, Reflection, Diversity
2. Which of the following companies is considered ethical, according to the chapter?
A. Samsung
B. Kia
C. Au Bon Pain
D. Marriott*
Difficulty: Moderate
Blooms: Application
AACSB: Ethics, Diversity, Real-world
3. What is the golden mean?
A. treating every person the same
B. the aim of ethical behavior
C. a middle ground value between deficiency and excess*
D. justice as fairness
Difficulty: Moderate
Blooms: Analyze
AACSB: Ethics, Analytical, Application
4. Which of the following is an example of demonstrating ethical standards?
A. eudaimonia
B. consequentialism*
C. junzi
D. categorical imperative
Difficulty: Moderate
Blooms: Remember, Understand
AACSB: Application
Page 1 of 13
,OpenStax Business Ethics Test Bank
Chapter 1: Why Ethics Matters
5. What is ethics?
A. standards of behavior for professional and personal lives*
B. standards of behavior for business only
C. someone who is acting empathetic
D. setting norms for ways one interacts only with coworkers
Difficulty: Moderate
Blooms: Understand
AACSB: Ethics
6. Why do businesses care about ethics?
A. to gain greater wealth and power
B. to follow fiduciary duty
C. to uphold honorable standards of behavior*
D. to receive status and recognition
Difficulty: Moderate
Blooms: Analyze
AACSB: Ethics, Analytical
7. Which of the following best describes the role of ethics in a business environment?
A. guiding the conduct by which companies abide by the law
B. respecting the right of shareholders
C. guiding the conduct by which companies and their agents abide by the law*
D. respecting the community
Difficulty: Moderate
Blooms: Evaluate
AACSB: Reflection, Real-world
8. Are ethical and legal responsibilities the same?
A. Yes, they are the same standards of behavior and must be followed.
B. No, legal standards are necessary for a properly functioning society, and ethics deals with
voluntary business conduct in accordance with laws, statutes, regulations, and policies.*
C. No, because law is always superior to ethics.
D. Yes, because companies have duties of legal and ethical responsibility to assert right or
wrong.
Difficulty: Difficult
Blooms: Apply
AACSB: Ethics, Analytical, Application
9. How does Patagonia exemplify ethics?
A. being a market leader in outdoor gear
B. caring about its employees by giving them a large discount for friends and family
Page 2 of 13
,OpenStax Business Ethics Test Bank
Chapter 1: Why Ethics Matters
C. supporting sustainability with a recycling initiative in all retail stores and warehouses
D. instituting a “1% for the Planet” program that promotes environmentalism*
Difficulty: Moderate
Blooms: Evaluate
AACSB: Diversity, Reflection, Application, Real-world
10. Normative ethics means ________.
A. discovering right and not focusing on wrong
B. discovering right and delineating it from wrong*
C. developing rules and norms for corporate decision-making only
D. developing rules or norms for the greatest good for the greatest number
Difficulty: Moderate
Blooms: Evaluate
AACSB: Ethics, Analytical, Application
11. What does deontology mean?
A. Conduct is determined by a philosophical process focused on Kantian religious teaching.
B. Ethics is a duty we owe to others.*
C. Means justify the ends.
D. The means are the process driver for ancient Roman analytical thinking.
Difficulty: Moderate
Blooms: Apply
AACSB: Ethics, Analytical, Application
12. Adopting a consistent ethical standard is ________.
A. not in a manager’s best interests
B. selfless*
C. in a government’s best interest
D. selfish
Difficulty: Moderate
Blooms: Evaluate
AACSB: Ethics, Analytical, Application
13. What characteristics contribute to the bottom line? (Select all that apply.)
A. funding philanthropy and charitable endeavors*
B. sustainability, also known as “going green”*
C. always giving a dividend to your shareholders
D. taking an interest in employees’ personal lives*
Difficulty: Moderate
Blooms: Evaluate
AACSB: Ethics, Analytical, Application
Page 3 of 13
,OpenStax Business Ethics Test Bank
Chapter 1: Why Ethics Matters
14. Which personal philosophical approach does Warren Buffet believe in?
A. You can lose money for your firm.
B. Think short term.
C. Invest in yourself.*
D. What matters is how much money you make.
Difficulty: Easy
Blooms: Analyze
AACSB: Ethics, Reflection
15. An analysis of perceived priority of shareholder impact should include which of the
following?
A. stakeholders in reverse order of perceived priority
B. largest stakeholders by affiliation
C. interests and goals of shareholders*
D. impact of action or decision of management
Difficulty: Easy
Blooms: Apply
AACSB: Analytical, Application, Real-world
16. Which company attributes increase in value as stakeholders view that company in a positive
light? (Select all that apply.)
A. stock price
B. company name or logo*
C. competition
D. trademark*
Difficulty: Moderate
Blooms: Apply
AACSB: Real-world, Application
17. Which elements constitute corporate culture?
A. shared focus on the environment
B. shared profit of stakeholders
C. how the CEO interacts with his or her employees and managers*
D. how the CEO compensates his or her employees and managers
Difficulty: Moderate
Blooms: Analyze
AACSB: Application, Real-world, Interpersonal
18. Positive goodwill ________. (Select all that apply.)
A. is generated by ethical business practices*
B. is separate from profitability
Page 4 of 13
,OpenStax Business Ethics Test Bank
Chapter 1: Why Ethics Matters
C. yields better public relations
D. generates long-term business success*
Difficulty: Easy
Blooms: Remember
AACSB: Analytical
19. An ethical financial advisor must ________.
A. donate to charitable causes
B. be truthful about all fees*
C. focus only on potential profit to clients
D. have the same fees as other financial advisors
Difficulty: Moderate
Blooms: Apply
AACSB: Application, Real-world
20. How was management in the Equifax data breach case held accountable?
A. The chief information officer resigned.
B. Hackers accessed information because of insider trading.
C. Customers were offered free Equifax services.
D. The chief executive officer left the firm after he testified before Congress.*
Difficulty: Moderate
Blooms: Understand
AACSB: Application, Real-world
21. Which of the following most likely contributes to a corporation’s positive work atmosphere
over the long term?
A. having remote working policies for employees
B. treating suppliers fairly
C. engaging in cross-border business
D. being committed to ethical business practices*
Difficulty: Difficult
Blooms: Evaluate
AACSB: Ethics, Diversity, Application, Real-world
22. What is the best reason for a universal ethical standard?
A. It is good business practice.
B. It is easier to apply for business leaders.
C. It provides transparency in application.*
D. Having different rules is confusing to employees.
Difficulty: Moderate
Blooms: Analyze
Page 5 of 13
,OpenStax Business Ethics Test Bank
Chapter 1: Why Ethics Matters
AACSB: Reflection, Ethics
23. Which are the universal principles of behavior?
A. honesty and integrity*
B. virtue ethics and utilitarianism
C. loyalty to management
D. respect for business diversity
Difficulty: Moderate
Blooms: Apply
AACSB: Ethics
24. What did Milton Friedman believe?
A. A business should promote social consciousness.
B. The responsibility of a business is to decrease profits.
C. The only responsibility of a business is to increase profits.*
D. One of the drivers of a business is to increase publicity.
Difficulty: Easy
Blooms: Understand
AACSB: Analytical
25. Which is a characteristic of successful corporate leaders?
A. They will not take pride in their company unless it is profitable.
B. They are focused on short-term results.
C. They treat customers fairly.*
D. They take a competitive, though not always fair, approach to business.
Difficulty: Easy
Blooms: Apply
AACSB: Reflection, Application
26. Why is ethical relativism a good concept to adopt? (Select all that apply.)
A. We should use different standards for different contexts.*
B. Friends and family should be treated differently than coworkers.
C. One does not want an inconsistent outcome.*
D. Our reputation could increase.
Difficulty: Moderate
Blooms: Apply
AACSB: Interpersonal, Analytical, Application
True/False
27. True or false? Employees consider whether a company is ethical when selecting potential
employers.
Page 6 of 13
,OpenStax Business Ethics Test Bank
Chapter 1: Why Ethics Matters
Answer: True
Difficulty: Easy
Blooms: Understand
AACSB: Reflection, Ethics
28. True or false? The environment is not considered a stakeholder.
Answer: False
Difficulty: Easy
Blooms: Remember
AACSB: Ethics, Application, Real-world
29. True or false? Consumer feedback on social media sites does not affect a company’s
prospects or status as ethical.
Answer: False
Difficulty: Moderate
Blooms: Apply
AACSB: Application, Real-world
30. True or false? The Forbes list of ethical companies is based on the publication’s own
research rather than a governmental standard.
Answer: True
Difficulty: Easy
Blooms: Remember
AACSB: Application, Real-world
31. True or false? Phronesis is a practical wisdom that enables us to act virtuously.
Answer: True
Difficulty: Moderate
Blooms: Remember
AACSB: Ethics
32. True or false? Goodwill only applies to shareholders, and it is the amount of money a
shareholder could make after selling a holding in a company.
Answer: False
Difficulty: Moderate
Blooms: Apply
AACSB: Application
33. True or false? The business practice of Toyota was deemed ethical when it started to sell cars
in the United States in the 1950s.
Page 7 of 13
,OpenStax Business Ethics Test Bank
Chapter 1: Why Ethics Matters
Answer: True
Difficulty: Moderate
Blooms: Understand
AACSB: Ethics, Application, Real-world
34. True or false? Most admired companies are typically the least profitable.
Answer: False
Difficulty: Easy
Blooms: Remember
AACSB: Application, Real-world
35. True or false? The prevailing current business philosophy is that the sole purpose of business
is to make money for shareholders.
Answer: False
Difficulty: Moderate
Blooms: Understand
AACSB: Application, Real-world
Short Answer
36. Provide five examples of stakeholders.
Sample Answer: customers, media, suppliers, community, government, and shareholders
Difficulty: Easy
Blooms: Apply
AACSB: Application, Diversity
37. What motivated Mark Faris to be a white-collar criminal? How does he think such crimes
could be addressed?
Sample Answer: Mr. Faris admitted that greed, arrogance, and ambition compelled him to
become a white-collar criminal. He committed mail and wire fraud, as well as money laundering,
and spent almost a year in a federal prison. In his speaking engagements, he proposes solutions
such as ethical leadership, personal accountability, and corporate employee training.
Difficulty: Moderate
Blooms: Remember
AACSB: Ethics, Application, Real-world
38. How are stockholders also stakeholders? Explain your answer.
Sample Answer: Stockholders (who own equity shares of a company) are one of the categories
of stakeholders, which also include employees, management, customers, suppliers, the
environment, and the community, to name a few.
Page 8 of 13
, OpenStax Business Ethics Test Bank
Chapter 1: Why Ethics Matters
Difficulty: Easy
Blooms: Analyze
AACSB: Application, Ethics
39. What is compliance, and how is does it operate?
Sample Answer: Compliance in terms of business ethics refers to the extent to which a company
conducts its business operations in accordance with applicable laws, regulations, standards, and
policies. Many companies have a compliance department that is responsible for establishing
policies and procedures that are reasonably designed to prevent violations of law, regulations,
and corporate policy. Some of these companies have compliance officers and codes of conduct,
and implement compliance training and oversight.
Difficulty: Moderate
Blooms: Evaluate
AACSB: Ethics, Application, Real-world
40. Explain the concept of corporate social responsibility. Provide at least three examples of
companies that follow CSR.
Sample Answer: The nation’s most admired (ethical) companies are among those with the
highest profit margins. Consumers want to use companies that care for others and the
environment. Many unethical companies went bankrupt in 2008 and 2009. Examples of
companies that follow CSR and are mentioned in the chapter include Berkshire Hathaway,
Marriott, Nokia, illycaffè, and Toyota.
Difficulty: Moderate
Blooms: Evaluate
AACSB: Application, Real-world
41. Explain how a company enters into a social contract with its stakeholders. Be sure to address
the reciprocity of society and companies.
Sample Answer: A company enters into a social contract with society as a whole. It is an implicit
agreement among all members to cooperate for social benefits. A company must acknowledge
that all society will be affected to some extent by its operations. In return for society’s
permission to incorporate and engage in business, a company owes a reciprocal obligation to do
what is best for as many of society’s members as possible, regardless of whether they are
shareholders. Therefore, when applied specifically to a business, the social contract implies that a
company gives back to the society that permits it to exist, benefiting the community at the same
time it enriches itself.
Difficulty: Difficult
Blooms: Apply
AACSB: Ethics, Application
42. What happened in the Bradley Birkenfeld case, and how does that relate to whistleblowing?
Comment on the irony of the award.
Page 9 of 13
