Pennsylvania State University



File: ch09.rtf, Chapter 9, Organizational Ethics and Social Responsibility

Fill in the Blank

1. Organizations are finding that in the area of Corporate Social Responsibility (CSR), it is becoming increasingly difficult to separate ____________ organizational ethics from___________ social responsibility.

Ans.: internal; external

Response: See page 322

Difficulty: Medium

2. CalPERS, the California Public Employees’ Retirement System pressures the companies it invests in to engage in good corporate governance and socially responsible practices in areas such as __________________ and _________________.

Ans.: human rights and environmental responsibility

Response: See p. 339

Difficulty: Difficult

3. In the __________ perspective, social responsibility is seen as appropriate because it is “the right thing to do.”

Ans: Duty-based

Response: See page 325.

Difficulty: Medium

4. According to the Corporate Social Responsibilities (CSR) pyramid, the __________ responsibility is considered to be of primary importance to organizations.

Ans: Economic

Response: See page 329.

Difficulty: Medium

5. According to the Corporate Social Responsibilities (CSR) pyramid, the __________ responsibility is a societal expectation that is not necessarily codified into law.

Ans: Ethical

Response: See page 330.

Difficulty: Medium

6. The three reasons that corporations should care about social responsibility are ___________,

________________ and _____________.

Ans.: pragmatic reason, ethical reason, strategic reason

Response: See page 322

Difficulty: Difficult

7. The _________ reason that corporations should care about social responsibility stands for the proposition that corporations must anticipate stakeholder concerns and act defensively to protect their reputation and viability.

Ans.: pragmatic

Response: See page 323

Difficulty: Medium

8. The ________ reason for corporate social responsibility argues that businesses, as part of society, have a responsibility to behave in the right way.

Ans: ethical

Response: See page 324

Difficulty: Easy

9. The __________ reason for CSR offers managers a stronger basis for making decisions about which stakeholders and social responsibility issues should garner their attention and resources given the multitude of options available.

Ans.: strategic

Response: See page 326

Difficulty: Medium

10. The late economist ________ _____ said that management should “make as much money as possible while conforming to the basic rules of society, both those embodied in the law and those embodied in ethical custom.”

Ans.: Milton Friedman

Response: See page 329

Difficulty: Difficult

11. The term __________ is sometimes used to represent harmony among three dimensions of economic, social and environmental impacts.

Ans. : sustainability

Response: See page 334

Difficulty: Medium

12. ______ ______ _________ (3 words) are those shareholders who clearly care about the financial and the social bottom line of a business.

Ans.: Socially responsible investors

Response: See page 338

Difficulty: Medium

13. ______________, such as environmental damage, are costs to society that are produced by companies but not reflected in the company’s cost structure.

Ans.: Externalities

Response: See page 341

Difficulty: Medium

True or False

14. An organization that does not fulfill its philanthropic responsibilities is acting unethically.

Ans: False

Response: Philanthropic responsibilities are considered to be voluntary or discretionary. See page 331

Difficulty: Medium

15. Constructive engagement of stakeholders, including critics, is replacing the “just trust us”

plea of yesteryear as executives conclude that the plea rarely works in a world of regular corporate scandals.

Ans.: True

Response: See page 324

Difficulty: Easy

16. The strategic reason for having CSR play a prominent role in a firm advanced by Harvard

Professor Michael Porter argues that in evaluating the firm’s CSR, executives should begin by scrutinizing the social impacts of the company’s value chain.

Ans. True

Response: See page 326

Difficulty: Medium

17. The most strategic CSR initiatives are those that add a social dimension to the firm’s overall

competitive strategy.

Ans.: True

Response: See page 327

Difficulty: Easy

18. The pragmatic approach is more proactive and affirmative than the strategic approach

because it asks companies to identify and acknowledge company activities that can do harm and encourages firms to scrutinize their practices and address potential harms by focusing on their own value-chain activities.

Ans.: False

Response: See page 327

Difficulty: Difficult

19. Even if social responsible business practices are costly, firms must perform them anyway.

Ans.: True

Response: See page 328

Difficulty: Medium

20. The economic responsibilities of a firm involve its primary function of producing goods and services that consumers need and want, while making an acceptable profit.

Ans. True

Response: See page 329

Difficulty: Easy

21. A firm’s financial responsibility is primary and the bedrock of corporate social responsibility because without financial viability, the other responsibilities become moot issues.

Ans.: True

Response: See page 329

Difficulty: Easy

22. The Social Investment Forum reported that socially responsible investing grew from $40

billion in 1984 to nearly $3 trillion in 2007 (out of $25 trillion in the US marketplace).

Ans.: True

Response: See page 339

Difficulty: Medium

23. Since the passage of Sarbanes-Oxley few firms have been prosecuted and fewer high level

executives have received jail terms proving convincingly that the legislation is flawed.

Ans.: False

Response: See page 339

Difficulty: Medium

24. Section 404 of the Sarbanes-Oxley Act (SOX) is credited with improving internal financial

control systems in public companies even if the cost of doing so is thought to be exorbitant by small firms.

Ans.: True

Response: See pages 341-342

Difficulty: Medium

25. Some analysts argue that the more stringent regulatory environment resulting in the post

Sarbanes-Oxley period increases shareholder confidence in financial reporting.

Ans.: True

Response: See page 342

Difficulty: Medium

26. Over the long run, to be successful, firms with excellent socially responsible strategies need

to worry less about their business strategies.

Ans. False

Response: See page 345

Difficulty: Medium

27. Failure to be socially responsible is costly.

Ans.: True

Response: See page 345

Difficulty: Easy

Multiple Choice

28. Corporate social responsibility (CSR) consists of which four kinds of responsibilities:

a) Economic, ethical, societal, and altruistic

b) Economic, legal, ethical, and altruistic

c) Fiscal, legal, societal, and philanthropic

d) Economic, legal, ethical, and philanthropic

Ans: d

Response: See page 329.

Difficulty: Easy

29. Interface Carpets, a stellar example of sustainability in action, lists seven fronts of Mount Sustainability. Which is NOT one of the firm’s goals to meet its total sustainability status?

a. Redesigning commerce

b. Sensitizing stakeholders

c. Using renewable energy

d. Ensuring benign emissions

e. Eliminating waste

f. None of the above

Ans.: f

Response: See page 336. Check out the firm’s website at

Difficulty: Difficult

30. Which of the items listed is NOT a product of a “favorable corporate reputation.”

a. Charge more for its products and services

b. Attract, Hire and keep higher quality applicants/employees

c. Enhance their access to better capital markets

d. Attract investors

e. Ignore the Foreign Corrupt Practices Act

Ans.: e

Response: See page 338

Difficulty: Medium

31. Typical Codes of Conduct cover conduct described below. In the aftermath of Bhopal, the chemical industry wishing to demonstrate responsible corporate citizenship has added which additional behaviors set out below.

a. Legal compliance

b. Continuous improvement, communication with external stakeholders and training of suppliers on the standards

c. Community awareness and emergency response

d. Pollution prevention

e. Safe distribution of chemicals in transit

f. Employee health and safety

g. Safe handling of chemicals from manufacture through disposal

Ans.: b

Response: See page 343

Difficulty: Difficult

Short Essay

32. Referring to the Corporate Social Responsibility (CSR) pyramid, how do legal responsibilities differ from ethical responsibilities? Provide specific examples to support your distinction.

Ans: Legal responsibilities refer to carrying out work in accordance with the law and government regulations. However, because not every societal expectation has been codified into law, ethical responsibilities refer to a more general responsibility of doing what’s right and avoiding harm. For example, government regulations may only require an auto manufacturer to meet a specific emissions test (i.e. legal responsibility). However, recognizing the importance of avoiding harmful gases, an auto manufacturer may voluntarily set a higher standard for its products (i.e. ethical responsibility).

Response: See pages 330-331.

Difficulty: Medium

33. Discuss the pro and cons for a firm of discussing its philanthropic activities internally and externally.

Response: See page 333

Difficulty: Medium

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