Cheeseman blaw8e ch42
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Transcript of Cheeseman blaw8e ch42
Chapter 42
Ethics and Social Responsibility of
Business
Law and Ethics
Ethics: A set of moral principles or values that governs the conduct of an individual or group
Rule of law and rule of ethics may demand the same response
Law may permit an act that is ethically wrong Law may demand certain conduct, but person’s
ethical standards are contrary
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Law and Ethics
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Moral Theories of Business Ethics
Ethical RelativismEthical Relativism
Ethical Ethical FundamentalismFundamentalism
UtilitarianismUtilitarianism
Kantian EthicsKantian EthicsRawls’s Social Rawls’s Social Justice TheoryJustice Theory
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Ethical Fundamentalism
A person looks to an outside source or a central figure for ethical rules or commands
This maybe a book or a person Critics argue that ethical fundamentalism does not
permit people to determine right and wrong for themselves
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Utilitarianism
A person must choose the action or follow the rule that provides the greatest good to society Origins in works of Bentham and Stuart
It has been criticized because: It is difficult to estimate the “good” that will result
from different actions It is hard to apply It treats morality as an impersonal calculation
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Kantian Ethics
A person owes moral duties based on universal rules The rules are based on two principles:
Consistency—All cases are treated alike Reversibility—Actor must abide by the rule he or
she uses to judge the morality of someone else’s conduct
Critics argue that it is hard to reach a consensus as to what the universal rules should be
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Rawls’s Social Justice Theory
A person has a social contract with all others in society to obey moral rules that are necessary for people to live in peace and harmony Origins in work of Locke and Rousseau
The principles of justice should be chosen by persons who do not yet know their station in society
This veil of ignorance would permit the fairest possible principles to be selected
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Rawls’s Social Justice Theory
Two major criticisms of this theory: Establishing the blind “original position” for
choosing moral principles is impossible in the real world
Many persons in society would choose not to maximize the benefit to the least advantaged persons in society
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Ethical Relativism
A person must decide what is ethical based on his or her own feelings as to what is right or wrong
No universal ethical rules to guide a person’s conduct Critics argue that actions widely regarded as
unethical, would be seen as ethical under this theory, depending on perpetrator’s viewpoint
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Summary of Moral Theories
Theory Description
Ethical fundamentalism
Persons look to an outside source or central figure for ethical guidelines.
Utilitarianism Persons choose the alternative that would provide the greatest good to
society.
Kantian ethics A set of universal rules establishes ethical duties. The rules are based on
reasoning and require (1) consistency in application and (2) reversibility.
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Summary of Moral Theories
Theory Description
Rawls’s social justice theory
Moral duties are based on an implied social contract. Fairness is justice.
Rules are established from an original position.
Ethical relativism Individuals decide what is ethical based on their own feelings as to what
is right or wrong.
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Social Responsibility of Business
A theory that requires corporations and businesses to act with awareness of the consequences and impact that their decisions will have on others
Corporations and businesses are considered to owe some degree of responsibility for their actions
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Theories of Social Responsibility
Maximizing Maximizing ProfitsProfits
Moral Moral MinimumMinimum
Stakeholder Stakeholder InterestInterest
Corporate Corporate CitizenshipCitizenship
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Maximizing Profits
Corporation owes a duty to take actions that maximize profits for shareholders
Interests of other constituencies are not important in and of them
Milton Friedman, who won the Nobel Prize in economics, advocated the theory of maximizing profits for shareholders
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Case 42.1: U.S. Supreme Court Business Ethics
Case Walmart Stores, Inc. v. Samara Brothers, Inc. 529 U.S. 205, 120 S.Ct. 1339, 146 L.Ed.2d 182,
Web 2000 U.S. Lexis 2197 Supreme Court of the United States
Issue Must a product’s design have acquired a secondary
meaning before it is protected as trade dress?
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Moral Minimum
Corporation’s duty is to make a profit while avoiding harm to others
As long as business avoids or corrects the social injury it causes, it has met its duty of social responsibility
Legislative and judicial branches of government have established laws to enforce moral minimum
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Sarbanes-Oxley Act
Companies must disclose whether they have a code of ethics for senior financial officers
Compelling public companies to act ethically in dealings with shareholders, employees, and other constituents
Makes certain conducts illegal and establishes criminal penalties for violations
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Stakeholder Interest
Corporation must consider the effects its actions have on persons other than its shareholders
Critics argue that it is difficult to harmonize the conflicting interests of stakeholders
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Other Stakeholders of a Business
CustomersCustomers
EmployeesEmployees SuppliersSuppliers
Local Local CommunityCommunityCreditorsCreditors
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Case 42.2: U.S. Supreme Court Corporate Political Speech and Ethics
Case Citizens United v. Federal Election Commission 130 S.Ct. 876, 175 L.Ed.2d 753, Web 2010 U.S.
Lexis 766 (2010) Supreme Court of the United States
Issue Do the challenged federal restrictions on campaign
financing and electioneering violate the free speech rights of Citizens United?
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Corporate Citizenship
Business has a responsibility to do good A major criticism of this theory is that the duty of a
corporation to “do good” cannot be expanded beyond certain limits
Corporate social audit: Examines how well employees have adhered to the company’s code of ethics and how well the company has met its duty of social responsibility
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Summary of Theories of Social Responsibility
Theory Social Responsibility
Maximizing profits To maximize profits for stockholders.
Moral minimum To avoid causing harm and to compensate for harm caused.
Stakeholder interest To consider the interests of all stakeholders, including
stockholders, employees, customers, suppliers, creditors, and
local community.
Corporate citizenship
To do good and solve social problems.
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