PHIL 430 TEST#3

What are three ways to create shared value?

1.Reconceiving Products and Markets 2.Redefining Productivity in the Value Chain 3.Building Clusters and Framework Conditions

What are the three main problems with the Shareholder View of Corporate Responsibility, according to Freeman?

1. It is resistant to change. 2. It is inconsistent with the law e.g.,the law requires consideration of the interests of customers: 3. It is inconsistent with basic ethics.

What is the Prisoner's Dilemma and why is it a challenge to the view that laissez faire capitalism advances the general good through efficiency?

1. Because they are self-interested, people are minimaxers. 2. In circumstances of mutual disinterest, it will be more rational for minimaxers not to cooperate for the common good, even if cooperation seems to be in their best interest. Therefore, it is sometimes more rational for people to act self-interestedly, rather than cooperate for the common good

What are the Responsibility Principle, the Separation Fallacy, and the Open Question Argument, and how do they factor into the argument for Stakeholder Theory?

1. Ethics is about understanding and solving our differences "so that we can all flourish without resorting to coercion and violence' 2. If so, we should accept the Responsibility Principle. The Responsibility Principle Most people, most of the time, want to, actually do, and should accept responsibility for the effects of their actions on others. 3.The Responsibility Principle is incompatible with the Separation Fallacy The Separation Fallacy Ethics is irrelevant to business decisions

What is the Tragedy of the Commons and why is it a challenge to the view that laissez faire capitalism advances the general good through efficiency?

1. Human nature results in individuals acting in their perceived self-interest. 2. It is in the self interest, given common resources, for individuals to take advantage of those resources, even when they know it would be disastrous if everyone were to do the same. 3. Therefore, even when they know it would be disastrous if everyone were to take advantage of common resources, individuals will take advantage of them.

What is stakeholder analysis? What are the three steps of a stakeholder analysis?

Identify Stakeholders Power-interest Grid (Prioritize Key Stakeholders) Understand Key Stakeholders

What was the nature and origin of IKEA's child labor scandal?

In 1994, IKEA began to deal with the issue of child labor by amending contracts to say that use of child labor would result in immediate contract termination. Threatened with losing business, carpet factories in Bangladesh dismissed approximately 50,000 child laborers. These children often ended up in more hazardous, lower paying jobs (e.g., quarrying, the sex industry, sometimes trafficked).

What are the only constraints on management's duty to shareholders?

Law & Ethical Custom (because law > promises?) The 'Rules of the Game' (because markets can only convert the selfish choices of participants into collectively beneficial results if free)

Shareholder theory by Friedman

Shareholder Theory: Given that businesses are moral individuals—or at least can be treated as if they were—we can now ask: What moral obligations, if any, do businesses have? This week, we will look at one answer to that question: "None!" Martin Friedman believes that businesses do not have any moral obligations or social responsibilities at all, other than to maximize their own profit. This view is called

Stakeholder theory by Freeman

Stakeholder Theory: Next week, we will look at a different view: One which states that businesses DO have social responsibilities; for instance, businesses have a responsibility to not detract from the well-being others, and perhaps they are even obligated to charitably PROMOTE the well-being of others. This view is called "Stakeholder Theory", and is held by philosophers such as R. Edward Freeman.

The Shareholder View:

The Shareholder View: corporate executives ought to maximize value for its shareholders.

corporate social responsibility?

a business approach that contributes to sustainable development by delivering economic, social and environmental benefits for all stakeholders

What is a key stakeholder?

hold the most power and most interest ex. management

What is "shared value?"

is a management strategy in which companies find business opportunities in social problems.

What is a fiduciary duty, and why does Friedman believe business management has fiduciary duties only to shareholders?

someone obligated to act for the benefit of their clients