Ethics Chapters 4-6

Proponents of Broadening Corporate Responsibility

1. Acknowledge the importance, even necessity, of conducting business morally 2. Make a real effort to encourage their members to take moral responsibilities seriously 3. End their defensiveness in the face of public discussion and criticism 4. Recognize the pluralistic nature of the social system of which they are a part

How do limited-liability companies differ from partnerships?

1. An organization becomes incorporated by being publicly registered. 2. The shareholder in a corporation is entitled to a dividend from the company's profits only when it has been 'declared'

To institutionalize ethics within corporations, management should

1. Articulate the firm's values and goals 2. Adopt a moral code applicable to all members of the company 3. Set up a high-ranking ethics committee to oversee, develop, and enforce the code 4. Incorporate ethics training into all employee-development programs

Vanishing Responsibility

1. Attribute moral agency to corporations just as we do to individual persons 2. Refuse to let individuals duck their personal responsibility

The Responsibilities of Business

1. Business should give safety the priority warranted by the product. 2. Business should abandon the misconception that accidents occur exclusively as a result of product misuse and that it is thereby absolved of all responsibility. 3. Business must monitor the manufacturing process itself. 4. When a product is ready to be marketed, companies should have their product safety staff review their marketing strategy and advertising for potential safety problems. 5. When a product reaches the marketplace, firms should make available to consumers written information about product's performance. 6. Companies should investigate consumer complaints and do so quickly.

Critiques of Capitalism

1. Capitalism breeds oligopolies 2. Corporate welfare often shelters businesses from competition 3. Competition is not a good thing

Three Arguments in Support of the Narrow View

1. Invisible-hand 2. let-government-do-it 3. business-can't-handle-it

Arguments for Strict Liability

1. Its advocates contend that only such a policy will induce firms to bend over backwards to guarantee product safety 2. Proponents of strict liability contend that the manufacturer is best able to bear the cost of injuries due to defects

Limits on What the Law Can Be Expected to Achieve

1. Many laws are passed only after there is general awareness of the problem 2. Formulating appropriate laws and designing effective regulations are difficult 3. Enforcing the law is often cumbersome

Defending Capitalism

1. Simply deny that it is responsible for poverty and inequality 2. The system can be modified or its inherent tendencies corrected by political action, so that inequality and poverty are reduced or even eliminating 3. The benefits of the system outweigh this weak point

The Act of Alienation of Practical Human Activity

1. The relationship of the worker to the product of labor as an alien object which dominates him 2. The relationship of labor to the act of production within labor

Paternalism and Safety Regulations

1. the safety of some products or some features of products or some features of products affects not only the consumer who purchases the product but third parties as well 2. Anti-paternalism gains plausibility from the view that individuals know their own interests better than anyone else does and that they are fully informed and able to advance those interests 3. The controversy over legal paternalism pits the values of individual freedom and autonomy against social welfare

Deceptive Techniques

Ambiguity Concealment of facts Exaggeration Psychological appeal

Oligopolies

a concentration of property and resources, and thus economic power, in the hands of a few.

Corporate Moral Code

a fine-grained ethical code that addresses ethical issues likely to arise at the level of subgoals

Corporate Culture

a general constellation of beliefs, mores, customs, value systems and behavioral norms, and ways of doing business that are unique to each corporation, that set a pattern for corporate activities and actions, and that describe implicit and emergent pattern of behavior and emotions characterizing life in the organization

Psychological Appeal

a persuasive effort aimed primarily at emotion, not reason

Price Gouging

a seller's exploiting a short-term situation in which buyers have few purchase options for a much-needed product by raising prices substantially

Privately Held Company

a small group of investors may own all the outstanding shares of a privately owned, profit-making corporations

Subliminal Advertising

advertising that communicates at a level beneath conscious awareness

Socialism

an economic system characterized by public ownership of property and a planned economy

Capitalism

an economic system that operates on the basis of profit and market exchange and in which the major means of production and distribution are in private hands

Robert Reich

argues that corporate executives lack the moral authority to balance profits against the public good or undertake any ethical balancing

Dependence Effect

as a society becomes increasingly affluent, wants are increasingly created by the process by which they are satisfied

Advocates of the broader view believes that

business must internalize its externalizes and consider the social costs of its activities.

Narrow View of Corporate Responsibility

business's only social responsibility is to make money within the rules of the game; private enterprise should not take on a social goals or public responsibilities

Outsource

buying parts or whole products from other producers, both home and abroad

Ambiguity

can be understood in two or more ways

Financial Capitalism

characterized by pools, trusts, holding companies, and the interpenetration of banking, insurance, and industrial intrests

Corporate Moral Agency

collects data about the impact of its actions; monitors work conditions, employee efficiency and productivity, and environmental impacts

Due Care

consumers and sellers do not meet as equals and that consumer's interests are particularly vulnerable to being harmed by the manufacturer, who has knowledge and expertise the consumer does not have

Social Entity Model or Stakeholder Model

corporation has obligations not only to its stockholders but also to other constituencies that affect or are affected by its behavior

Business-Can't-Handle-It Argument

corporations are the wrong group to be entrusted with broad responsibility for promoting the well-being of society because they lack the necessary expertise and in addressing noneconomic matters, they inevitable impose their own materialistic values on the rest of society

Broader View of Corporate Responsibility

corporations have responsibilities that go beyond making money because of their great social and economic power

Profit Motive

economic self-interests motivates human beings

Globilization

economies of different countries becoming more integrated

Corporate Internal Decision (CID) Structures

establish procedures for accomplishing specific goals

MacPherson v. Buick Motor Car

expanded the liability of manufacturers for injuries caused by defective products

Invisible-Hand Argument

if businesses are permitted to seek self-interest, their activities will inevitably yield the greatest good for society as a whole; rejects broadening corporate responsibility

Implied Warranties

include the claim, implicit in any sale, that a product if fit for its ordinary, intended use

Reasonable-Consumer Standard

it would prohibit only advertising claims that would deceive reasonable people

Corporations

legal entities, with legal rights and responsibilities similar but not identical to those enjoyed by individuals

Exaggeration

making claims unsupported by evidence

The narrow view holds that

management's responsibility to maximize shareholder wealth outweighs any other obligations

Capital

money that has been invested for the purpose of making more money

Diffusion of Responsibility

no particular person(s) are held morally responsible

Horizontal Price Fixing

occurs when competitors agree to adhere to a set price schedule, not to cut prices below a certain minimum, or two restrict price advertising or the terms of sales, discounts, or rebates

Gullible-Consumer Standard

prohibits an advertisement that might mislead someone who is ill informed and naive

Consumer Product Safety Commission (CPSC)

protects the public against unreasonable risks of injury associated with consumer products

Fiduciary Responsibility

safeguard a company's assets and handle its funds in a trustworthy manner

Concealment of Facts

suppress information that is unflattering to their products; neglect to mention or they distract consumers' attention away from information, knowledge of which would probably make their products less disirable

Exploitation

the action or fact of treating someone unfairly in order to benefit from their work

Express Warranties

the claims that sellers explicitly state

Consumer Sovereignty

the idea that consumers should and do control the market through their purchases

Corporate Punishment

the law can fine corporations, monitor and regulate their activities, and require the people who run them to do one thing or another

Legal Paternalism

the law may justifiably be used to restrict the freedom of individuals for their own good

Strict Product Liability

the manufacturer of a product has legal responsibilities to compensate the user of that product for injuries suffered because the product's defective condition made it unreasonably dangerous regardless of whether the manufacturer was negligent in permitting that defect to occur

Limited Liability

the members of the corporation are financially liable for the debts of the organization only up to the extent of their investments

Competition

the regulator that keeps a community activated only by self-interest from degenerating into a mob of ruthless profiteers

Alienation

the separation of individuals from the objects they create, which in turn results in one's separation from other people, from oneself, and ultimately from one's nature

Let-Government-Do-It Argument

the strong hand of government, through a system of laws and incentives, can and should bring corporations to heel; rejects broadening corporate responsibility

Puffery

the supposedly harmless use of superlatives and subjective praise in advertisements

Externalities

the unintended negative (sometimes positive) consequences that an economic transaction between two parties can have on some third party

Melvin Anshen's View

there is always a kind of social contract between business and society; society always structures the guidelines within which business is permitted to operate in order to derive certain benefits from business activity

Weasel Words

to evade or retreat from a direct or forthright statement

Work ethic

values work for its own sake, the belief that hard work pays off in the end

Invisible Hand

when each of us acts in a free-market environment to promote our own economic interests, we are lead by it to promote the general good

Vertical Price Fixing

when manufacturers and retailers agree to set prices