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Chapter 02
Small 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
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
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
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
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
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
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 culture
B.Ethics
C.Trust
D.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.Modeling
B.Social networking
C.Ethical dilemma
D.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 impact
B.Lack of flexibility
C.Innovation
D.Ethical dilemma
Difficulty: Medium
34.(p.26)Who often suffers first when a small business engages in unethical behavior?
A.Employees
B.Community businesses
C.Stockholders
D.Government
Difficulty: Medium
35.(p.26)The Council of Better Business Bureaus report that most of its consumer complaints from the U.S. are about
A.Foreign companies
B.Large businesses
C.Small businesses
D.Medium-sized organizations
Difficulty: Medium
36.(p.26)A feeling of fairness in all business transactions in which the firm engages refers to
A.Culture
B.Trust
C.Ethical dilemma
D.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 trust
B.Trust in a small business is a double-edged sword
C.Trust is the glue of relationships
D.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.Trust
B.Culture
C.Goodwill
D.Mutuality
Difficulty: Medium
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.Trust
B.Modeling
C.Organizational culture
D.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.Ethics
B.Finances
C.Government regulations
D.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 networking
B.Modeling
C.Flexibility
D.Mutuality
Difficulty: Easy
42.(p.28)Maintaining the same behavior, attitude or value over long periods of time refers to
A.Visibility
B.Mutuality
C.Consistency
D.Flexibility
Difficulty: Easy
43.(p.28)Demonstration of a behavior, attitude or value in ways that are evident to others refers to
A.Visibility
B.Mutuality
C.Consistency
D.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 ethics
B.Societal norms
C.Personal values
D.Obligations
Difficulty: Easy
45.(p.29)Research has identified ______as a consistent link between the way personal and work-related decisions are made.
A.Commonality
B.Golden rule
C.Spillover effect
D.Utilitarianism
Difficulty: Medium
46.(p.29)Most business dilemmas arise in relationships with
A.Customers and employees
B.Suppliers and distributors
C.Competitors and government agencies
D.Investors and stockholders
Difficulty: Medium
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 dilemmas
B.Personal ethics
C.Social networks
D.Billboard principles
Difficulty: Easy
48.(p.30)______in small business means not having lots of rules, policies and procedures.
A.Flexibility
B.Visibility
C.Consistency
D.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 fair
B.Giving gifts and kickbacks
C.Price collusion and pricing practices
D.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 ethics
B.Innovation
C.Universalism
D.Flexibility
Difficulty: Easy
51.(p.33)Which of these is a three-step process that helps people make better and more ethical decisions?
A.First principles
B.Golden rules
C.Ethics planning
D.Mutuality development process
Difficulty: Easy
52.(p.34)The first step of ethics planning is
A.Creating options for action
B.Asking the four questions
C.Conducting ethical tests
D.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.Mutuality
B.Distributive view
C.Integrative view
D.Obligations
Difficulty: Medium
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.Obligations
B.Golden rules
C.Mutualities
D.Organizational visibility
Difficulty: Easy
56.(p.36)56 Having a(n) ______means to think of problem solving as a win-lose situation.
A.Golden rule
B.Distributive view
C.Social network
D.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 rule
B.A distributive view
C.A social network
D.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 issue
B.You are interested in the best decision for yourself and your business
C.The problem occurs when you have a short-term perspective
D.It is very important for you to keep good relationships in the long run
Difficulty: Medium
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 view
B.Billboard principle
C.Integrative view
D.Personal ethics
Difficulty: Hard
60.(p.39)In general terms, one should think of ______as the "lowest common denominator" for acceptable actions.
A.Morality
B.Legality
C.Values
D.Culture
Difficulty: Medium
61.(p.39)Which ethical model supports seeking the greatest good for the greatest number of people?
A.Utilitarianism
B.Billboard Principle
C.Golden rule
D.Universalism
Difficulty: Easy
62.(p.39)______has a long-term focus, so it works well with the integrative view.
A.Utilitarianism
B.Golden rule
C.Billboard Principle
D.Universalism
Difficulty: Medium
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 principle
B.Universalism
C.Golden rule
D.Utilitarianism
Difficulty: Easy
64.(p.39)The main idea behind universalism is
A.The greatest good for the greatest number of people
B.Treating others in the manner you wish to be treated
C.What would make a good standard that everyone has to follow
D.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 model
B.It suggests that you treat others in the same manner you wish to be treated
C.Almost every major religious tradition in the world has some version of it
D.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 principle
B.Universalism
C.The golden rule
D.Utilitarianism
Difficulty: Easy
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 principle
B.Universalism
C.Golden rule
D.Utilitarianism
Difficulty: Medium
68.(p.41)All of the following are true of social capital EXCEPT
A.It includes characteristics like trust, consistency and networks
B.It links directly to the idea of trust
C.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 capital
B.Universalism
C.Legitimacy
D.Utilitarianism
Difficulty: Medium
70.(p.41)The two ways to build social capital are through
A.Consistency and visibility
B.Legitimacy and social networking
C.Culture and personal ethics
D.Individuals and teams
Difficulty: Medium
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.Visibility
B.Flexibility
C.Legitimacy
D.Modeling
Difficulty: Easy
72.(p.41)The three general forms of legitimacy that you can develop are based on
A.Products, people and organization
B.Individuals, teams and industry views
C.Universalism, utilitarianism and golden rule
D.Integration, distribution and universalism
Difficulty: Medium
73.(p.42)Selling brand name merchandise or services is a people-based legitimate indicator of
A.Attire
B.Product/service name recognition
C.Business network membership
D.Organizational size
Difficulty: Hard
74.(p.43)Which of these is a product-based legitimacy indicator?
A.Organization size
B.Testimonials
C.Business network membership
D.Internet identity
Difficulty: Hard
75.(p.43)An entrepreneur's relationships and contacts with others is termed as
A.Social network
B.Visibility
C.Golden rule
D.Mutuality
Difficulty: Easy
76.(p.44)Which of these is an organization-based legitimacy indicator?
A.Testimonials
B.Intellectual property
C.Legal form
D.Attire
Difficulty: Hard
77.(p.44)The number one type of help sought by entrepreneurs from the PSED was
A.Introduction
B.Information
C.Financial resources
D.Physical resources
Difficulty: Hard
78.(p.46)The idea and action of each person helping another refers to
A.Networking
B.Flexibility
C.Mutuality
D.Consistency
Difficulty: Easy
79.(p.47)Interacting with others in order to build relationships useful to a business refers to
A.Networking
B.Flexibility
C.Mutuality
D.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 you
B.Taking initiative to ask others on the network to link with you
C.Taking time to develop networks
D.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 possible
B.Communicate facts you know
C.Appoint one person as the spokesperson
D.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
82.(p.26)The situation that Amanda faces can be described as (an)
A.Mutuality
B.Ethical dilemma
C.Social networking
D.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.Trust
B.Innovation
C.Flexibility
D.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 visibility
B.Social obligations
C.People-based legitimacy
D.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.Universalism
B.Golden rule
C.Utilitarianism
D.Billboard principle
Difficulty: Medium
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-based
B.Organization-based
C.People-based
D.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.
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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