Business Ethics

Critique of the result - the sequential argument

1. many markets are not sufficiently competitive 2. maximizing shareholder wealth is not the best way to acheive firm efficiency 3. increasing efficiency may not increase aggregate economic welfare 4. greater economic welfare is weakly linked to greater human happiness

Understand what a 'teleological approach' is

A teleological approach to ethics is based on the concept of seeking a "telos" in ethical decision-making. Telos is a Greek word meaning "end" or "goal"; thus, teleological ethics is concerned with how choices will affect a particular desired moral outcome

Know the difference between Act and Rule Utilitarianism and be able to tell which type of Utilitarianism a given example is

Act utilitarianism is about making the decision thjat results in the greatest net benefit with the decision at hand(The now). Rule utilitarianism is about following rules that are intended to produce the hgreatest net social benefit over time (The future)

Describe why the Agency relationship is problematic as an argument for defending Shareholder Wealth Maximization as a governance model

Although in theory shareholders have the right to elect and remove directors, in practice the costs of mounting a proxy battle combined with dispersed shareholders' "rational apathy" raises near-insurmountable obstacles to organized shareholder action in most public firms.15 Thanks to the business judgment rule, shareholders also can't successfully sue directors who place stakeholders' or society's interests above the shareholders' own.

Understand the principles and intent of the Employment at Will (EAW) doctrine

At-Will means that an employee can terminate anyone at anytime for any reason without incurring legal liability. The purpose of this doctrine is to prevent wrongful termination and employment lawsuits between employees and employers

Be able to distinguish between a necessary condition and a sufficient one

But to turn shareholders' needs into a purpose is to be guilty of a logical confusion, to mistake a necessary condition for a sufficient one. We need to eat to live; food is a necessary condition of life. But if we lived mainly to eat, making food a sufficient or sole purpose of life, we would become gross. The purpose of a business, in other words, is not to make a profit, full stop. It is to make a profit so that the business can do something more or better. That "something" becomes the real justification for the business. Owners know this. Investors needn't care.

Describe the third judicial exception to the EAW doctrine and give an example

Covenant of Good Faith and Fair dealing. This exception is the least accepted, and pertains to a certain clause (a covenant of good faith and fair dealing that exists in every employment relationship. An example is a termination for an insufficient cause

Explain how SWM (or Shareholder Value Thinking) get the economics and the evidence wrong.

Economics: 3 incorrect factual claims 1. shareholders "own" corporations 2. corporate "stakeholders" lik employees , customers, and creditors are assumed to recieve only the benefits their formal contrcats and the law entitle them to fixed salaries, while shareholders supposeldy get all profits leftover after firm meets fixed obligations. 3. principal-agent model is that shareholders and directors are just that—principalsand agents. Again, this premise is wrong. The hallmark of an agencyrelationship is that the principal retains the right to control the agent's behavior.Yet one of the most fundamental rules of corporate law is that corporations arecontrolled by boards of directors, not by shareholders. Evidence: only looks at individual companies over a short period of time, ie if fishermen uses dynamite it catches hella fish but eventually they will run out of fish

Determine that the SWM model is worth reconsidering using examples

Few markets are sufficiently competitive, and even fewer are perfectly competitive. Maximizing shareholder wealth is not always the best eway to maximize fimr efficiency- maximizing efficiency does not always maximize aggregate economic welfare-- increasing economic welfare welfare only increases human happiness to a degree.

Critique of the result - Economic Welfare

Firms not bearing cost of their actions- cost is absorbed elsehwere. Pareto efficiency (actions should be taken as long as at least one party is made better off without making any other parties worse off), goal of SWM is maximized social welfare. Tragedy of the commons (self interested behavior can have devastating consequences on the collective)

Describe the second judicial exception to the EAW doctrine and give an example

Implied-Contract. Second most widely accepted, and pertains to wrongful discharge when an implied contract is formed even though no express written contract exists. and example of this is periodic performance reviews

Critique of the result - Human Happiness

Money is not tied to happiness. Buying a 4$ meal may be just as rewarding as a 100$ meal

Know when it makes sense to ask the question 'If it didn't exist, would we invent it?'

Only if it could do something better or more useful than anyone else

Describe the first judicial exception to the EAW doctrine and give an example

Public-Policy. The most widely accepted exception. This exception states discharge is wringful when it is against an explicit well-established public policy of the state. An example of this is Termination after filing for workers compensation after being injured on the job.

Know what effects the artifacts that comprise our stock market can have on individual's capacity to engage in unethical behavior

Since Stocks and similar things are far removed from money (meaning it takes time to liquidate them), people are more likely to cheat the system and rig it on their behalf

Describe what the Agency relationship is as it pertains to corporate governance

The hallmark of an agencyrelationship is that the principal retains the right to control the agent's behavior.Yet one of the most fundamental rules of corporate law is that corporations arecontrolled by boards of directors, not by shareholders

In general terms, describe the significance of the analogy that Business is a type of game

Until and unless they become the norm, capitalism will continue to be seen as the rich man's game, serving mainly itself and its agents.

Describe what our 'personal fudge factor' is and how to make it grow and shrink

allowing ourselves to cheat a little bit in order to feel better about ourselves, but still allows us to benefit

Be able to correlate a Jesuit 'pillar' to a non-Jesuit concept

connect business to these pillars- impact on many people, where people can be reached who spread good, impact on the poor, impact can be durable, goods and services are delivered to meet the needs of people

Critique of result - Competitive Markets

perfectly competitive markets can only be acheived by- having a large number of buyers and sellers, both buyers and sellers have complete and costless information about prices, all firms have equal access to technology and resources, any frim can enter or exit, actions of sellers are independent, actions of buyers are independent . The theory of second best states that if any of these factors are not met then optimal outcomes are not acheivable

Understand the concepts of positive-normative-triangulation

theories should jointly consider normative implications of descriptive findings, and consider the kinds of data that could answer important normative questions