Business Ethics

freeman says that where stakeholders interests ____, the executive must find a way to ________ so that these interests can ______, so that even more _____ can be created for each

"Where stakeholders interests conflict, the executive must find a way to rethink the problems so that these interests can go together, so that even more value can be created for each" (64).

Business Roundtable- statement on the purpose of a corporation

"While each of our individual companies serves its own corporate purpose, we share a fundamental commitment to all of our stakeholders." It mentions key stakeholders explicitly: •Delivering value to our customers. •Investing in our employees. •Dealing fairly and ethically with our suppliers. •Supporting the communities in which we work. •Generating long-term value for shareholders

Business Roundtable

"[T]he principal objective of a business enterprise is to generate economic returns to its owners." (Shareholder capitalism)

low interference and regulation from the government

- self-employed people could live freely & independently - a society of equals.

Freeman on what we need to do

1. Get involved 2.We need to see challenge, conflict, and ctritique as important to what we do 3.We need to expect more from our companies and stakeholders.

3 major flaws in the shareholder capitalism story about business

1."The only purpose of business is to make money." 2."Business and ethics are separate categories." 3."Human beings are self-interest pursuing machines."

Freemans Stakeholder Capitalism

Business is about working together to create value together

who said this "By building into the very conceptual framework we use to think about business a concern with freedom, equality, consequences, decency, shared purpose, and paying attention to all of the effects of how we create value for each other, we can make business a human institution, and perhaps remake it in a way that sustains us" (67).

Freeman

Do corporations have any distinctly social responsibilities? how would friedman answer this question and how would freeman answer it

Friedman: NO focus on shareholders profits only and follow the law -long-term profits -business depends on the rule of law Freeman: YES create value for stakeholders--all, equally, pursuing profits only to stay in business (supererogatory) special obligations to subset of stakeholders

Freeman on the shareholder mindset

It is too shortsighted: •Shareholder quarterly earnings create bad incentives for business people. •Miss long term goals & potential for profitable partnerships.

what tax did france pass

a 3 percent tax will be levied on sales generated in france by multinational firms like google and facebook

treating a person as a mere means

a. treat them in ways that go against workers interests treating them like they dont have their own goals b. treat them in ways that ignores and/or undermines their autonomy and rationality

kants moral principle is called the

categorical imperitive

Freeman says that the primary responsibility of the executive is to _______

create as much value as possible for the stakeholders

benefits of business ethics

ethical culture leads to employee commitment and trust investor loyalty and trust customer satisfaction and trust LEAD TO profits

Freeman's stakeholder capitalism story about creating value together

i.Business is about purpose. ii."Get the purpose right, profits follow." •Passion is important. •Stakeholders are important to success. i.Tradeoff mindset is unhealthy.

Stakeholder analysis three steps

identify stakeholders power-interest grid (prioritize key stakeholders) understand key stakeholders

Friedman on corporate mindset

managers should focus on one goal which is increasing the company's profit

Friedman thinks you should want to......... especially in a corporation with....... shareholders

maximize profits, diverse

respect for persons commitments

persons - can act from principles -are rational and autonomous -have agency -have moral worth -have dignity -are worthy of respect -must be treated with respect

examples of treating someone as a mere means

physcial coercion, psychological coercion, hazardous working conditions, non subsistence wages

"The test of the morality of a rule, then, is not whether people in fact accept it, but whether all rational beings thinking rationally would accept it regardless of whether they are doers or receivers of the actions" do the right thing because it is right

shaw & barry said that

freeman thinks the shareholder mindset is too _________

shortsighted

"Each of our stakeholders is essential. We commit to deliver value to all of them, for the future success of our companies, our communities and our country." what statement is this

statement on the purpose of a corporation

•This is what they're good at => maximize happiness. •If not, conflicting obligations make doing business difficult.

these are some reasons friedman gives on why managers should focus only on increasing the companys profit

•It would be wrong to force shareholders to do things they don't want to do (like give to causes they don't endorse). •Use money on the environment => force shareholders to pay for cause.

this is one of friedmans reasons of why managers should focus on one goal which is increasing the company's profit

power interest grid

top left: keep satisfied -meet their needs Top right: manage closely -key players/stakeholders -always shareholders Bottom left: monitor(minimum effort) -least important bottom right: keep informed -show consideration

general duty of beneficence

we have an imperfect duty to support other autonomous and rational beings in the world by being beneficent (doing good, being generous) imperfect duty means sometimes do

Freemans Stakeholder Capitalism

•"We need to tell... and enact a new story about business." •Old story: •Greed is good! •Business people should do whatever they can get away with for profit! •New story: "Business is about working together to create value together."

a major flaw in shareholder capitalism: The only purpose of business is to make money why is this a flaw

•Flaw: "only" money •Ex: life & red blood cells •Other reasons: provide for family, improve lives, make the world a better place •Entrepreneurs start businesses because they have good ideas.

Freeman's argument on Friedman's idea that business and ethics are separate categories

•Freeman: "No stakeholder stands alone in the process of value creation. The stakes of each stakeholder group are multifaceted and inherently connected to each other" (63). "[W]e need to see stakeholder interests as joint, as inherently tied together" (63).

a major flaw in shareholder capitalism: Business and ethics are separate categories

•Mismatch between shareholder theory and how we do business & ethics. A. •Running a great business requires creating value for stakeholders other than shareholders. •Customers, employees, suppliers, communities. •Laws protect stakeholders. B. •Ethics is about how what we do affects others. •"Whose ethics do you use?" •We all have to live together: ethics is practical. •Ethics is about how to have conversations with those who disagree.

Early stakeholders

•Prior to industrialization + at its start, most business was simple. •Not much was produced or sold. •Difficult transportation limited transactions. •Adam Smith and other early classical liberals aspired to the ideal of the independent farmers, artisans, and shopkeepers.

what is a stakeholder?

•Stakeholders are those parties (individual or groups) that can affect a business or can be affected by the business itself or its purpose. •They're the parties who are vital to the success of the firm, or whose success is vital to the firm's success.

why does friedman think that managers should focus on only increasing the companys profit

•This is what they're good at => maximize happiness. •If not, conflicting obligations make doing business difficult. •It would be wrong to force shareholders to do things they don't want to do (like give to causes they don't endorse). Use money on the environment => force shareholders to pay for cause

Todays stakeholders

•Today's businesses are complicated and have the ability to affect/be affected by many other parties. •Most businesses have many employees, and most transactions aren't face to face (suppliers, customers).

A major flaw in shareholder capitalism: Human beings are self interest pursuing machines what is the flaw in this

•We're Homo sapiens, not Homo economicus. •Reality: businesses are deeply human institutions. •People are interested in: •Own happiness. •Others' happiness. •Things greater than themselves. •If we say only self-interest, encourage narrow thinking: •C.f. Wells Fargo, Enron, Ford Pinto, BP, and many other scandals

what is shareholder capitalism

•When business people are allowed to freely act on self-interest, they act in ways that maximize happiness for everyone. •BUT: they ought to follow the law. •AND laws ought to keep markets competitive. •No force or fraud

classical liberal ideal

•independent farmers, artisans, and shopkeepers.