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Study Guide
Ethics in an International Environment

I. The U.S. Foreign Corrupt Practices Act of 1977 (FCPA)

A. In the mid-1970s hundreds of U.S. Companies were making “questionable” payments to foreign government officials. Generally, these payments were
described as a “commission” or a “facilitating payment” paid to a local government officer, and were considered to be necessary in order to transact
business in that country.
B. The U.S. Foreign Corrupt Practices Act, or FCPA, was established in 1977 to define and enforce against bribery of foreign officials. Essentially, FCPA
forbids any “American” to pay bribes to a foreign government or representative to obtain contracts or secure business.
C. Note that the FCPA does not deal with the illegality of bribes or facilitation payments to U.S. government officials. Generally, each state establishes legal
definitions and penalties for bribery that doesn't involve foreign officials.
D. The “nationality principle” of FCPA defines that this law applies to both companies and individuals, whether or not the company or individual is
physically present in the U.S. Specifically, FCPA jurisdiction includes:
1. Any U.S. business or any foreign corporation that has a class of securities registered in the U.S.
2. Any individual who is a citizen, national, or resident of the United States
3. Any foreign businesses and persons who make a corrupt payment while physically present in the U.S.
E. FCPA governs payments to foreign officials, candidates, and parties. FCPA also applies to any other payment if part of the bribe ultimately ends up with a
foreign official, candidate, or party.
F. FCPA also includes mandates related to accounting transparency and internal controls within organizations to guard against bribery of foreign officials.
G. Finally, the size of the payment does not matter in terms of whether the payment is considered to be a bribe for FCPA purposes. The issue is the intent of
the bribery rather than the amount. Further, FCPA applies not only to monetary payments, but also to disbursements or gifts of any value.
II. The U.K. Bribery Act 2010
A. The U.K. Bribery Act, established in 2010, applies to businesses and individuals in the United Kingdom. The Bribery Act is broader in scope than the FCPA
and imposes more severe penalties. Important differences between the FCPA and the Bribery Act are listed below.
1. The FCPA is focused on bribes offered to foreign officials, but the Bribery Act expands the focus to bribes paid to any person or organization.
2. While the FCPA makes it illegal to pay bribes to produce improper business behavior, the Bribery Act also makes it illegal to accept bribes.
3. The FCPA requires companies to establish internal controls that guard against bribery of foreign officials. However, these internal control
mandates are focused on accounting systems and procedures. The Bribery Act expands the control focus beyond accounting systems to include a
much wider array of organizational procedures, policies, and processes.
4. The FCPA limits its jurisdiction over bribery activities of foreign companies to only those listed on U.S stock exchanges. In contrast, the Bribery Act
expands its scope to include any foreign organization that is established or conducts some part of its business in the U.K.
5. Payments that expedite or secure the performance of a routine (non-discriminating) government action are permissible under the FCPA, but the
Bribery Act forbids facilitating payments even for routine outcomes that are typically (eventually) available without the need for a bribe.
6. Penalties under the FCPA can be as high as five years’ imprisonment and $250,000 in fines for individuals, or fines for organizations up to $2 million.
On the other hand, under the Bribery Act prison terms can be as high as ten years, and fines are unlimited for both individuals and organizations.
B. Note that neither the Bribery Act nor the FCPA makes illegal the act of genuine hospitality. This means, for example, that business expenditures to
provide tickets to sporting events, to take clients to dinner, or to pay suitable travel expenses are appropriate so long as the costs are reasonable and
balanced.
C. Finally, note that these two laws are focused strictly on facilitation payments. They do not extend to other legal and ethical issues in the conduct of
business such as fraud, theft, money laundering, unfair competition, misleading financial reporting, etc.

Practice Question
You've been recently hired as the controller for a company which, over the last three years, has been developing a new business segment in a small but
strategically crucial foreign country. Establishing good relations with that country's Office of Foreign Trade has been particularly central to the success of
launching the new business segment. In the last visit to that country, you accompanied the CEO and several other executive officers, including the CFO. On
the plane ride over, the CEO described the gift he was bringing to the Minister of Foreign Trade. The gift is significant in terms of its value, so much so that
you commented with surprise. The CEO responded he had been advised on the last trip that the size (i.e., value) of the gift was important to this Minister,
who expected the gift exchange to demonstrate the seriousness of the company's commitment to the county and its economy. As the discussion continued,
the CFO expressed her hope that the CEO's gift would be adequate as she believed that the Minister would either smooth over some regulatory demands or
delay enhanced regulatory compliance processes based on how the gift was received.

What concerns do you have in this situation with respect to the U.S Foreign Corrupt Practices Act?
Answer
Neither the CEO nor CFO indicate any ethical concerns in this situation, which suggests inadequate commitment to a code of ethics in this company. In the
case of this substantial gift, and the expectation that it will help facilitate business in the foreign country, there is potentially a serious breach of compliance
with the FCPA. These senior officers do not seem to be considering certain FCPA requirements that specifically restrict against providing gifts to foreign
officers with the expectation or hope that delivery of the gift (regardless of monetary value) will secure or improve business prospects or processes beyond
what might be expected normally.

III. Social Responsibility

A. It can be challenging for an organization to conduct business in countries where cultural “norms” of behavior are different than the organization's home
nation. This challenge is increasingly prevalent as advances in technology and travel bring together different norms. Hence, ethical challenges are part of
the complexity of risks that exists when conducting business across international lines.
B. The risk of unethical decisions by employees or organizations is not solely about illegal actions. Being in compliance with laws such as the U.S. FCPA or
the U.K Bribery Act does not mean that the organization is ethical. It is certainly possible and, unfortunately, too often the case that some organizations
are in compliance with the law while making unethical decisions and engaging in disreputable actions.

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C. Corporate ethics requires a larger view of stewardship than legal compliance. Many would argue that companies should place the pursuit of profits
within a larger framework of social responsibility. One popular framework of social responsibility is Carroll's CSR (corporate social responsibility)
Pyramid.
D. Carroll's CSR Pyramid is a four-fold view of social responsibility. This pyramid is depicted below. Note that it is established on a foundation of economic
success; that is, companies must be profitable in order to successfully pursue other social responsibilities.

Source: Carroll, A.B. (1991). “The pyramid of corporate social responsibility: Toward the moral management of organizational stakeholders,” Business
Horizons, 34(4): 39–48.
E. Organizations that institute a financially viable business model need to ensure their business practice complies with all laws and regulations in their
marketplace. This means that companies are responsible to be both legal and profitable. Hence, legal responsibility forms the second tier of the CSR
Pyramid.
F. The third tier of responsibility is ethics. Organizations must extend themselves beyond profits and compliance with the law to consider their ethical
responsibilities to their employees, suppliers, customers, etc.
G. Once the organization has established economic, legal, and ethical responsibility, Carroll's CSR Pyramid finally directs attention to the responsibility to
be philanthropic. This fourth responsibility is based on a compelling view that organizations have both an opportunity and an obligation to give back to
society. How the organization approaches its philanthropy is a discretionary choice.
IV. Business Sustainability
A. Business sustainability is often defined as managing the organization's performance in terms of a triple bottom line. In other words, sustainability is a
process by which companies manage their financial, social, and environmental risks, obligations, and opportunities. These three impacts are sometimes
referred to as profit, people, and planet.

B. Business sustainability represents resiliency over time. Companies that are committed to healthy economic, social, and ecological results are better
positioned to survive shocks in their environment.
C. Specifically, the triple bottom line involves managing important economic issues such as growth, innovation, and productivity; social issues involving
poverty, health and wellness, and human rights; and environmental issues that include climate change, land use, and pollution. This three-fold approach
to business provides a framework for organizations to manage themselves ethically no matter where in the world they might operate.

Practice Question
Your software design company is working with an automotive manufacturer to develop and release a new line of cars with self-driving capability. The success of
this project is essential to both the design company and the manufacturer. Developing the necessary technology is a complicated process with substantial
business risk in terms of serious cost overruns or significant delays in the release schedule. There is considerable pressure on management to do whatever is
necessary to deliver the software designs needed by the manufacturer. How can Carroll's Corporate Social Responsibility Pyramid be used to guide decision
making in this situation?

Answer
The pressure to perform in this environment creates serious ethical risk for the software design company. Carroll's CSR Pyramid emphasizes the importance of
responsibly managing the organization's economic viability in compliance with all applicable laws. With a clear understanding of both its economic and legal
commitments, the organization is positioned to then consider its ethical and philanthropic responsibilities. Ethical issues the company should consider include
how decisions being made impact its business partner, its employees, and its suppliers. Assuming the project is successful, leading to a profitable result for both

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partners, the opportunity to make a philanthropic contribution within its community is a responsibility that the software design company should finally deliberate
and then take action.

Summary
Compliance with the law is essential and is the first step toward establishing an ethics-based organization. To this end, two particularly crucial laws affecting
organizations and professionals that operate across international lines are the U.S. Foreign Corrupt Practices Act of 1977 (FCPA) and the U.K Bribery Act 2010. The
FCPA makes it illegal for companies and individuals to pay any type of bribe to a foreign government or official in order to secure a business need or advantage.
The Bribery Act expands the responsibility to include paying or receiving bribes to facilitate business processes with any individual or organization. Business ethics
extends significantly beyond the legality of facilitation payments. Organizations operating anywhere in the world should be committed to corporate responsibility
and sustainability practices. Carroll's CSR Pyramid emphasizes a four-fold commitment to economic, legal, ethical, and philanthropic responsibilities. Business
sustainability (resiliency) can be established using a triple bottom line structure involving performance related to profits, planet, and people.

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Flashcards
Ethics in an International Environment

1
FC.eth.int.env.001_1904

What is the U.S. Foreign Corrupt Practices Act? The U.S. Foreign Corrupt Practices Act (FCPA) was established in 1977
to define and enforce against bribery of foreign officials. Essentially,
FCPA forbids any “American” to pay bribes to a foreign government or
representative to obtain contracts or secure business.

2
FC.eth.int.env.002_1904

What is the U.K. Bribery Act? The U.K. Bribery Act, established in 2010, applies to businesses and
individuals in the United Kingdom. The Bribery Act is broader in scope
than the FCPA and imposes more severe penalties.

3
FC.eth.int.env.003_1904

The U.K. Bribery Act is different because it:

How is the U.K. Bribery Act different from the U.S. Foreign Corrupt
Expands the focus of bribes paid to any person or organization.
Practices Act?
Makes it illegal to both pay and accept bribes.
Expands the control focus beyond accounting systems.
Expands its scope to include any foreign organization.
Forbids facilitating payments even for routine outcomes.
Allows prison terms as high as ten years and unlimited fines for
both individuals and organizations.

4
FC.eth.int.env.004_1904

List the four views of social responsibility depicted in Carroll's CSR The four views of social responsibility depicted in Carroll's CSR
Pyramid starting at the base and working upward. Pyramid starting from the base and working upward are:

1. Economic Responsibility
2. Legal Responsibility
3. Ethical Responsibility
4. Philanthropic Responsibility

5
FC.eth.int.env.005_1904

Describe the triple bottom line. Business sustainability is often defined as managing the organization's
performance in terms of a triple bottom line. In other words,
sustainability is a process by which companies manage their financial,
social, and environmental risks, obligations, and opportunities. These
three impacts are sometimes referred to as profit, people, and planet.

6
FC.eth.int.env.006_0720
Difficulty: N/A

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What are some examples of triple bottom line reporting involving

financial, social, and environmental issues? Economic issues such as growth, innovation, and productivity.

Social issues involving poverty, health and wellness, and human rights.

Environmental issues that include climate change, land use, and

pollution.

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Test Bank Questions

Ethics in an International Environment

Question 1

2.F.3.o
aq.eth.org.0008_1710
Organizational values and internal controls are often discussed and analyzed as separate components, but which statement below best identifies how these two
topics are connected?
Since values are something that are personal, and differ from person to person, there is no real connection between organizational values and the
organization's internal control system.
Specific language describing the values of the organization must be embedded within every individual ethics training program, so the connection is clear and
consistent for purposes of internal controls.
Ethics are increasingly regulated and mandated from a legal perspective, so it is not nearly as important for organizations to manage and control ethical
practices.
The values of management, and how management leads the firm, are embedded and linked to the ethics policies and procedures implemented at that
organization.

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Question 2

2.F.3.p
cma11.p2.t1.me.0094_0820

Which one of the following is a permitted transaction under the U.S. Foreign Corrupt Practices Act?

*Source: Retired ICMA CMA Exam Questions.

Payments to close friends of government officials to obtain an exception to a regulation

Payments to government officials to circumvent importation rules in countries where such payments are a customary business practice by multinational
competitors
Payments to expedite routine governmental action.

Payments to customs officials to enable the release of an oil drilling rig and other equipment.

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Question 3

2.F.3.r
eth.int.env.010_0820
All of the following statements concerning ethical conduct in companies are correct except:
Carroll’s CSR Pyramid can be used by companies to guide ethical behavior.

The triple bottom line can be used by companies to guide ethical behavior.

Short-term profit maximization can be used by companies to guide ethical behavior.

A strong internal control system can be used by companies to guide ethical behavior.

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Question 4

2.F.3.r
eth.int.env.011_0820
All of the following people are subject to the Foreign Corrupt Practices Act (FCPA) except:
A U.S. citizen employed by a U.S. publicly traded company on assignment in France pays a bribe to a French official.

A German citizen pays a bribe to a French official while in New York on business.

A German citizen employed by a U.S. publicly traded company pays a bribe to a German official while in Germany.

A U.S. citizen employed by a U.S. publicly traded company pays a bribe to a US government official.

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Question 5

2.F.3.t
eth.int.env.012_0820
In regard to levels of social responsibility, which of the following statements is correct?
The philanthropic level involves “giving back” to society and the ethical level involves going beyond legal requirements to benefit society.

The ethical level involves “giving back” to society and the philanthropic level involves going beyond legal requirements to benefit society.
The economic level involves maintaining a strong economic position in order to stay in business and provide a return to shareholders and the philanthropic
level involves going beyond legal requirements to benefit society.
The economic level involves maintaining a strong economic position in order to stay in business and provide a return to shareholders and the ethical level
involves “giving back” to society.

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Question 6

2.F.3.t
eth.int.env.013_0820
In regard to levels of social responsibility, which of the following statements is correct?
The ethical level involves complying with laws and regulations and the economic level involves maintaining a strong economic position in order to stay in
business and provide a return to shareholders.
The legal level involves complying with laws and regulations and the economic level involves maintaining a strong economic position in order to stay in
business and provide a return to shareholders.
The economic level involves maintaining a strong economic position in order to stay in business and provide a return to shareholders and the philanthropic
level involves going beyond legal requirements to benefit society.
The legal level involves complying with laws and regulations and the ethical level involves “giving back” to society.

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Question 7

2.F.3.t
eth.int.env.014_0820
All of the following statements concerning Carroll’s Pyramid view of social responsibility are correct except:
Companies approach the philanthropic level similarly.

Economic success is the foundation of Carroll’s Pyramid since companies need to be profitable to pursue other social responsibilities.

Legal responsibility is the second tier of Carroll’s Pyramid view since profitable companies also need to comply with laws and regulations.
Ethical responsibility builds off legal responsibility in Carroll’s Pyramid view of social responsibility because ethical responsibility goes beyond doing what is
legal.

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Question 8

2.F.3.o
eth.int.env.015_0820
All of the following statements about ethical behavior and legal behavior are correct except:
Ethical behavior typically has a higher standard than legal behavior.

Determining what is ethical typically requires more judgment than determining what is legal.

Training can help people determine what is legal but it cannot help people determine what is ethical.

Following laws is not always enough to ensure ethical behavior.

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Question 9

2.F.3.o
eth.int.env.016_0820
All of the following statements about ethical behavior and legal behavior are correct except:
Legal behavior typically has a lower standard than ethical behavior.

Following laws is not always enough to ensure ethical behavior.

Training can help people determine what is legal and what is ethical.

Determining what is ethical typically requires less judgment than determining what is legal.

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Question 10

2.F.3.s
eth.int.env.017_0820
All of the following are major business sustainability issues except:
a company reducing the time spent preparing invoices.

a company earning profits in order to provide returns to shareholders.

a company treating its customers fairly.

a company reducing its use of water in its manufacturing process.

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Question 11

2.F.3.s
eth.int.env.018_0820
All of the following are major business sustainability issues except:
a company increasing sales to improve profitability.

a company reducing the time spent processing payments.

a company treating its suppliers fairly.

a company reducing its use of electricity in its manufacturing process.

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Question 12

2.F.3.q
eth.int.env.019_0820
While doing business overseas, the CEO of a U.S. pharmaceutical company gives the CEO of a German company ten tickets to an international sporting event after
reaching a deal to cooperate on a venture. The tickets are very difficult to acquire and are worth approximately $50,000. Does this potentially violate the FCPA?
Giving the tickets does not violate the FCPA because even though the company is headquartered in the United States, the action takes place overseas.

Giving the tickets does not violate the FCPA since negotiations for the venture had already concluded when the gift was made.

Giving the tickets does not violate the FCPA since the tickets were not given to a government official.

Giving the tickets dos not violate the FCPA because it did not involve cash.

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Question 13

2.F.3.p
eth.int.env.tb.001_0120
What is the main purpose of laws such as the Foreign Corrupt Practices Act in the United States and the UK Bribery Act?
To reduce bribes company officials pay to government officials since they provide the paying company an unfair advantage

To ensure companies adequately disclose bribes paid to elected officials

To establish penalties to government officials for taking bribes

To establish conditions when bribe payments can be made

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Question 14

2.F.3.q
eth.int.env.tb.003_0120
Which of the following statements about facilitating payments is correct?
Facilitating payments do not present legal and ethical issues because they are always illegal.

Facilitating payments do not present legal and ethical issues because there are bright lines between bribes and facilitating payments.
Facilitating payments present legal and ethical issues because if the motive of the person making the payment is unclear, whether it is an acceptable payment
may also be unclear.
Facilitating payments present legal and ethical issues because a facilitating payment is legal under the Foreign Corrupt Practices Act if made to gain an
advantage but illegal if made to compete at all.

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Question 15

2.F.3.s
eth.int.env.tb.005_0120
Which of the following is not an aspect of business sustainability?
Technological

Financial

Social

Environmental

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Question 16

2.F.3.t
eth.int.env.tb.006_0120
All of the following are examples of levels of social responsibility except:
Complying with laws

Providing an exercise facility for employees

Maximizing shareholder value

Donating supplies to disaster relief efforts

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Question 17

2.F.3.t
eth.int.env.tb.007_0120
Which of the following is the correct listing of the four levels of social responsibility?
Economic, ethical, moral, and philanthropic

Economic, legal, ethical, and philanthropic

Ethical, legal, philanthropic, and regulatory

Economic, legal, philanthropic, and charitable

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Question 18

2.F.3.t
eth.int.env.tb.008_0120
Which of the following is correct concerning levels of social responsibility?
The ethical level involves complying with laws and regulations and the philanthropic level involves “giving back” to society.

The legal level involves complying with laws and regulations and the economic level involves maximizing shareholder value.

The ethical level involves going beyond legal requirements to benefit society and the legal level involves “giving back” to society.
The economic level involves maintaining a strong economic position in order to stay in business and provide value to shareholders and the ethical level
involves going beyond legal requirements to benefit society.

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Question 19

2.F.3.t
eth.int.env.tb.009_0120
In regard to levels of social responsibility, which of the following statements is correct?
The ethical level involves “giving back” to society and the philanthropic level involves going beyond legal requirements to benefit society.

The legal level involves complying with laws and regulations and the philanthropic level involves “giving back” to society.
The ethical level involves complying with laws and regulations and the economic level involves maintaining a strong economic position in order to stay in
business and provide a return to shareholders.
The legal level involves complying with laws and regulations and the philanthropic level involves going beyond legal requirements to benefit society.

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Question 20

2.F.3.o
tb.eth.org.030_1712
Comparing legal statutes and regulations with the ethical guidelines and standards of practice for an industry, which of the following is more accurate?
Legal requirements and ethical mandates for a specific industry will always be identical.
Legal statutes and regulations and ethical guidelines and standards are different. Legal requirements hold management to a higher standard of behaving with
integrity.
Both sets of standards are imposed on management teams and organizations as a whole. Management has the option to choose one over the other.

Ethical and legal requirements are different, with ethical requirements imposing higher standards upon management to behave with integrity.

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Answered Question 1

2.F.3.o
aq.eth.org.0008_1710
Organizational values and internal controls are often discussed and analyzed as separate components, but which statement below best identifies how these two
topics are connected?
Since values are something that are personal, and differ from person to person, there is no real connection between organizational values and the
organization's internal control system.
Specific language describing the values of the organization must be embedded within every individual ethics training program, so the connection is clear and
consistent for purposes of internal controls.
Ethics are increasingly regulated and mandated from a legal perspective, so it is not nearly as important for organizations to manage and control ethical
practices.
The values of management, and how management leads the firm, are embedded and linked to the ethics policies and procedures implemented at that
organization.

Organizational values and the managerial style of leadership are directly connected to specific ethics
trainings and policies put into place as part of an internal control system to maintain those values.

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Answered Question 2

2.F.3.p
cma11.p2.t1.me.0094_0820

Which one of the following is a permitted transaction under the U.S. Foreign Corrupt Practices Act?

*Source: Retired ICMA CMA Exam Questions.

Payments to close friends of government officials to obtain an exception to a regulation

Payments to government officials to circumvent importation rules in countries where such payments are a customary business practice by multinational
competitors
Payments to expedite routine governmental action.

Payments to customs officials to enable the release of an oil drilling rig and other equipment.

The U.S. Foreign Corrupt Practices Act prohibits U.S. firms from making “corrupt payments” to foreign
officials, foreign political parties, officials of foreign political parties, or candidates for foreign political
office. “Corrupt payments” are payments designed to get the receiver to act or refrain from acting so that
the domestic firm may obtain or retain business. Payments to others are also prohibited if they are made
with the intention to influence a governmental official. Payments to facilitate “routine” governmental
actions are allowed.

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Answered Question 3

2.F.3.r
eth.int.env.010_0820
All of the following statements concerning ethical conduct in companies are correct except:
Carroll’s CSR Pyramid can be used by companies to guide ethical behavior.

The triple bottom line can be used by companies to guide ethical behavior.

Short-term profit maximization can be used by companies to guide ethical behavior.

A strong internal control system can be used by companies to guide ethical behavior.

Ethical conduct goes beyond strict legal compliance to encompass social, environmental, and human
factors. Since these factors often conflict with short-term profit maximization (since they often require
investments be made in the short-term), focusing on short-term profit maximization may result in a
company not behaving ethically.

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Answered Question 4

2.F.3.r
eth.int.env.011_0820
All of the following people are subject to the Foreign Corrupt Practices Act (FCPA) except:
A U.S. citizen employed by a U.S. publicly traded company on assignment in France pays a bribe to a French official.

A German citizen pays a bribe to a French official while in New York on business.

A German citizen employed by a U.S. publicly traded company pays a bribe to a German official while in Germany.

A U.S. citizen employed by a U.S. publicly traded company pays a bribe to a US government official.

The Foreign Corrupt Practices Act (FCPA) prohibits any American (individual or company) from paying
bribes to foreign governments or representatives to win business or secure business. It does not deal with
payments to U.S. government officials.

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Answered Question 5

2.F.3.t
eth.int.env.012_0820
In regard to levels of social responsibility, which of the following statements is correct?
The philanthropic level involves “giving back” to society and the ethical level involves going beyond legal requirements to benefit society.

The ethical level involves “giving back” to society and the philanthropic level involves going beyond legal requirements to benefit society.
The economic level involves maintaining a strong economic position in order to stay in business and provide a return to shareholders and the philanthropic
level involves going beyond legal requirements to benefit society.
The economic level involves maintaining a strong economic position in order to stay in business and provide a return to shareholders and the ethical level
involves “giving back” to society.

There are four levels to social responsibility: economic, legal, ethical, and philanthropic. The
philanthropic level involves “giving back” to society and the ethical level involves going above legal
requirements to benefit society.

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Answered Question 6

2.F.3.t
eth.int.env.013_0820
In regard to levels of social responsibility, which of the following statements is correct?
The ethical level involves complying with laws and regulations and the economic level involves maintaining a strong economic position in order to stay in
business and provide a return to shareholders.
The legal level involves complying with laws and regulations and the economic level involves maintaining a strong economic position in order to stay in
business and provide a return to shareholders.
The economic level involves maintaining a strong economic position in order to stay in business and provide a return to shareholders and the philanthropic
level involves going beyond legal requirements to benefit society.
The legal level involves complying with laws and regulations and the ethical level involves “giving back” to society.

There are four levels to social responsibility: economic, legal, ethical, and philanthropic. The legal level
involves complying with laws and regulations and the economic level involves maintaining a strong
economic position in order to stay in business and provide a return to shareholders.

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Answered Question 7

2.F.3.t
eth.int.env.014_0820
All of the following statements concerning Carroll’s Pyramid view of social responsibility are correct except:
Companies approach the philanthropic level similarly.

Economic success is the foundation of Carroll’s Pyramid since companies need to be profitable to pursue other social responsibilities.

Legal responsibility is the second tier of Carroll’s Pyramid view since profitable companies also need to comply with laws and regulations.
Ethical responsibility builds off legal responsibility in Carroll’s Pyramid view of social responsibility because ethical responsibility goes beyond doing what is
legal.

There are four levels to Carroll’s Pyramid view of social responsibility: economic, legal, ethical, and
philanthropic. The philanthropic level relates to the view that organizations have an opportunity and
obligation to give back to society. Companies have tremendous discretion in how they approach
philanthropy. This results in companies often taking different approaches to this level.

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Answered Question 8

2.F.3.o
eth.int.env.015_0820
All of the following statements about ethical behavior and legal behavior are correct except:
Ethical behavior typically has a higher standard than legal behavior.

Determining what is ethical typically requires more judgment than determining what is legal.

Training can help people determine what is legal but it cannot help people determine what is ethical.

Following laws is not always enough to ensure ethical behavior.

Training on laws and legal responsibilities can help improve peoples’ understanding of what is legal and
what is not legal. In many cases, unethical behavior results from people not understanding how their
behavior impacts other people. Training can help people better understand and appreciate the
ramifications of their behavior. Through this training, the identification of what is ethical and what is
unethical can be improved.

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Answered Question 9

2.F.3.o
eth.int.env.016_0820
All of the following statements about ethical behavior and legal behavior are correct except:
Legal behavior typically has a lower standard than ethical behavior.

Following laws is not always enough to ensure ethical behavior.

Training can help people determine what is legal and what is ethical.

Determining what is ethical typically requires less judgment than determining what is legal.

What is legal is quite often fairly objective, while what is ethical is quite often fairly subjective. In other
words, legal questions tend to be “black and white,” while ethical questions tend to be “gray.” This
means ethical questions require more judgment than legal questions.

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Answered Question 10

2.F.3.s
eth.int.env.017_0820
All of the following are major business sustainability issues except:
a company reducing the time spent preparing invoices.

a company earning profits in order to provide returns to shareholders.

a company treating its customers fairly.

a company reducing its use of water in its manufacturing process.

Business sustainability is typically defined as managing the triple bottom line of people, planet, and
profit. Through this approach, a company addresses its financial, social, and environmental risks,
opportunities, and obligations. While reducing the time spent preparing invoices is important for
addressing sustainability risks, opportunities, and obligations, it is not by itself a major business
sustainability issue since it does not directly relate to any aspect of the triple bottom line.

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Answered Question 11

2.F.3.s
eth.int.env.018_0820
All of the following are major business sustainability issues except:
a company increasing sales to improve profitability.

a company reducing the time spent processing payments.

a company treating its suppliers fairly.

a company reducing its use of electricity in its manufacturing process.

Business sustainability is typically defined as managing the triple bottom line of people, planet, and
profit. Through this approach, a company addresses its financial, social, and environmental risks,
opportunities, and obligations. While reducing the time spent processing payments is important for
addressing sustainability risks, opportunities, and obligations, it is not by itself a major business
sustainability issue since it does not directly relate to any aspect of the triple bottom line.

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Answered Question 12

2.F.3.q
eth.int.env.019_0820
While doing business overseas, the CEO of a U.S. pharmaceutical company gives the CEO of a German company ten tickets to an international sporting event after
reaching a deal to cooperate on a venture. The tickets are very difficult to acquire and are worth approximately $50,000. Does this potentially violate the FCPA?
Giving the tickets does not violate the FCPA because even though the company is headquartered in the United States, the action takes place overseas.

Giving the tickets does not violate the FCPA since negotiations for the venture had already concluded when the gift was made.

Giving the tickets does not violate the FCPA since the tickets were not given to a government official.

Giving the tickets dos not violate the FCPA because it did not involve cash.

The FCPA applies to payments to government officials, not to officials from other companies. This means
giving the tickets does not violate the FCPA.

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Answered Question 13

2.F.3.p
eth.int.env.tb.001_0120
What is the main purpose of laws such as the Foreign Corrupt Practices Act in the United States and the UK Bribery Act?
To reduce bribes company officials pay to government officials since they provide the paying company an unfair advantage

To ensure companies adequately disclose bribes paid to elected officials

To establish penalties to government officials for taking bribes

To establish conditions when bribe payments can be made

Paying a bribe to a government official can provide the paying company an unfair advantage over
companies that do not pay bribes. Laws such as the Foreign Corrupt Practices Act in the U.S. and the UK
Bribery Act were designed to reduce bribe payments.

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Answered Question 14

2.F.3.q
eth.int.env.tb.003_0120
Which of the following statements about facilitating payments is correct?
Facilitating payments do not present legal and ethical issues because they are always illegal.

Facilitating payments do not present legal and ethical issues because there are bright lines between bribes and facilitating payments.
Facilitating payments present legal and ethical issues because if the motive of the person making the payment is unclear, whether it is an acceptable payment
may also be unclear.
Facilitating payments present legal and ethical issues because a facilitating payment is legal under the Foreign Corrupt Practices Act if made to gain an
advantage but illegal if made to compete at all.

A person’s motive is sometimes an issue in determining whether an action is legal or ethical. A person
making a facilitating payment may be making it to get a government official to perform official duties
faster (which is legal under the Foreign Corrupt Practices Act) or may be trying to get a government
official to go beyond his or her official duties (which is not legal under the Foreign Corrupt Practices Act).
These kinds of gray areas lead to ethical and legal issues.

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Answered Question 15

2.F.3.s
eth.int.env.tb.005_0120
Which of the following is not an aspect of business sustainability?
Technological

Financial

Social

Environmental

Business sustainability involves financial, social, and environmental risks, opportunities, and obligations.
This is sometimes called the triple bottom line of people, planet, and profit. While technology can help
companies manage these issues, it is not an aspect of business sustainability.

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Answered Question 16

2.F.3.t
eth.int.env.tb.006_0120
All of the following are examples of levels of social responsibility except:
Complying with laws

Providing an exercise facility for employees

Maximizing shareholder value

Donating supplies to disaster relief efforts

While there is an economic aspect to social responsibility, it does not involve maximizing shareholder
value. It involves maintaining a strong economic position in order to stay in business and provide value to
shareholders. This is different from maximizing shareholder value.

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Answered Question 17

2.F.3.t
eth.int.env.tb.007_0120
Which of the following is the correct listing of the four levels of social responsibility?
Economic, ethical, moral, and philanthropic

Economic, legal, ethical, and philanthropic

Ethical, legal, philanthropic, and regulatory

Economic, legal, philanthropic, and charitable

There are four levels to social responsibility. The economic level involves the responsibility to maintain a
strong economic position in order to stay in business and provide value to shareholders. The legal level
involves the responsibility to comply with all laws and regulations. The ethical level involves going above
legal requirements to benefit society. The philanthropic level involves “giving back” to society.

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Answered Question 18

2.F.3.t
eth.int.env.tb.008_0120
Which of the following is correct concerning levels of social responsibility?
The ethical level involves complying with laws and regulations and the philanthropic level involves “giving back” to society.

The legal level involves complying with laws and regulations and the economic level involves maximizing shareholder value.

The ethical level involves going beyond legal requirements to benefit society and the legal level involves “giving back” to society.
The economic level involves maintaining a strong economic position in order to stay in business and provide value to shareholders and the ethical level
involves going beyond legal requirements to benefit society.

There are four levels to social responsibility. The economic level involves the responsibility to maintain a
strong economic position in order to stay in business and provide value to shareholders and the ethical
level involves going above legal requirements to benefit society.

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Answered Question 19

2.F.3.t
eth.int.env.tb.009_0120
In regard to levels of social responsibility, which of the following statements is correct?
The ethical level involves “giving back” to society and the philanthropic level involves going beyond legal requirements to benefit society.

The legal level involves complying with laws and regulations and the philanthropic level involves “giving back” to society.
The ethical level involves complying with laws and regulations and the economic level involves maintaining a strong economic position in order to stay in
business and provide a return to shareholders.
The legal level involves complying with laws and regulations and the philanthropic level involves going beyond legal requirements to benefit society.

There are four levels to social responsibility. The legal level involves the responsibility to comply with
laws and regulations and the philanthropic level involves “giving back” to society in terms of donations of
money, time, or other resources.

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Answered Question 20

2.F.3.o
tb.eth.org.030_1712
Comparing legal statutes and regulations with the ethical guidelines and standards of practice for an industry, which of the following is more accurate?
Legal requirements and ethical mandates for a specific industry will always be identical.
Legal statutes and regulations and ethical guidelines and standards are different. Legal requirements hold management to a higher standard of behaving with
integrity.
Both sets of standards are imposed on management teams and organizations as a whole. Management has the option to choose one over the other.

Ethical and legal requirements are different, with ethical requirements imposing higher standards upon management to behave with integrity.

Ethical standards are different from legal requirements, with ethical standards imposing higher
standards for management behavior. Therefore, this is the correct answer.

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