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    Code of Ethics, Transactio Cost Theory & Authority/Control

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    1. Create a code of ethics for an organization of your choice. For each point in the code of ethics, describe an ethical dilemma, which would be resolved using the code of ethics.

    2. Explain the components of the transaction cost theory and provide an example for each. The components are:
    - Environmental Uncertainty and Bounded Rationality
    - Opportunism and Small Numbers
    - Risk and Specific Assets

    3. What factors determine the appropriate authority and control structure in:
    - a research and development laboratory
    - a large department store
    - a small manufacturing company.

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    Solution Preview

    1. Code of ethics: Southern Auto Body Supply

    Southern Auto Body Supply strives to conduct business in the most ethical manner possible and, in parallel with its vision, become the industry paramount in this regard. Southern employees shall:

    1) Conduct business in a manner in accordance with all local and federal laws and mandates and, when faced with a decision in a gray area, always err on the side of conservative justice.

    2) Comply with disclosure principals in all areas of business including finance, accounting, sales, and others to ensure the best internal and external decisions are made in full confidence with all readily available information.

    3) Maintain communicative outlets for employees, vendors, and customers to enable those who feel ethical violations have occurred with the ability to relay this information to the appropriate persons.

    Ethical dilemma resolved by point #1: An employee working for a competitor who is a friend of a Southern salesman calls asking for a price on a case of masking tape. The employee isn't sure how much harm can become of a transfer of information, but knowing that Southern maintains a private file of prices and prints a privacy notice on all invoices, the employee understands that the company takes the position that its prices are not to be shared openly with competitors and that violation constitutes trademark infringement.

    Ethical dilemma resolved by point #2: A Southern salesman is trying to sale an account on a new coatings line. The buyer for the customer asks whether the coating offers a better match than a competitor. The salesman knows it does not. By referring to point #2, the salesman knows he should not lie and ...

    Solution Summary

    The solution creates a code of ethics for an organization, explains the components of transaction cost theory, and explains what factors determine the appropriate authority and control structure in various organizations. 1107 words.