ARBUS 202 Business Ethics

Externalities

A side effect of an action that affects a third party other than the buyer or seller.

Second conception of equality

All people are deserving of equal moral consideration

First conception of equality

All people are the same (employing the grand equalizer) - doesn't benefit anyone, harms others

virtue ethics

An ethical philosophy claiming that morality's primary function is to develop virtuous character

DMM Step 5

Look at the alternatives and their consequences and assess. Which will create dirty hands? Which best resolve the moral issue?

DMM Step 6

Make a reasoned decision and recommend a course of action. What assumptions are being made, moral theories being used? Facts, values, moral claims and norms of stakeholders.

strong fiduciary responsibility

Profit above all

Reasons for considering CSR

There are norms internal to the market system (Heath's 10 rules), businesses exist to benefit society because society sets the rules. The self-made person doesn't exist.

principles

a fundamental truth or proposition that serves as the foundation for a system of belief or behaviour or for a chain of reasoning.

negative incentive

a penalty that discourages a behavior

Proximal interest

directly affected

invidious discrimination

discrimination against persons or groups that works to their harm and is based on animosity

benign discrimination

discrimination that causes no harm because it is grounded in reason

Positional Bargaining

each side takes a position, argues for it, and makes concessions to reach a compromise

perverse incentives

reward structures that lead to suboptimal outcomes by stimulating counterproductive behavior; for example, welfare—to the extent that it discourages work efforts—is argued to have perverse incentives.

Coase Theorem

the proposition that if private parties can bargain without cost over the allocation of resources, they can solve the problem of externalities on their own

descriptive

way the world is

Ethical

(adj.) Having to do with morals, values, right and wrong; in accordance with standards of right conduct; requiring a prescription for purchase

heath's 10 rules

10 rules outlining the market failures approach and ways businesses can act that are unethical

First Fundamental Theorem of Welfare Economics

A perfectly competitive market will distribute resources efficiently.

Second Fundamental Theorem of Welfare Economics

A society can make an initial endowment of resources and social goods ... and then allow the competitive markets to distribute resources efficiently.

fact

A statement that can be proved.

Reasons why equality is important

Affective, profits, obligations, protections

Humanity Formulation

An action is right if and only if (and because) the action treats persons (including oneself) as ends in themselves and not merely as a means

private morality

An individual's ideas about right and wrong to be practiced in one's personal life. These are derived from religious, philosophical, familial, and other sources, including individual conscience.

Shielding from negative consequences

Company takes legal responsibility for employee

Suggesting inequality is nature's way

Conflating inequality with mere difference

Unlawful Discrimination

Discrimination based on color, national origin, race, religion, or sex that is not authorized by regulation.

Ethics of Care

Emphasizes the importance of understanding relationships, especially as they are revealed in personal narratives

DMM Step 3

Explore values that are relevant to each stakeholder. Which values are moral, which are prudential?

interest-based bargaining

Form of negotiating where parties look for common ground and attempt to satisfy mutual interests through the bargaining process.

Two types of SAPs

Game of chicken, prisoner's dilemma

DMM Step 1

Gather the facts of the case. Flag the facts that are morally relevant and the facts that are prudentially relevant

Benefits of businesses pursuing profits

High value and low prices, thus higher utility gains. Charitable and environmental works.

Three domain model

Namely, the Three-Domain model aims to show the interconnectedness of the economic, legal, and ethical responsibilities of business.

Machiavelli

Often stated his support for free governments and mocked the tyrants he purported to support.

Weak fiduciary responsibility

Profit considered less valuable

DMM Step 4

Set up the status quo, then propose between three and five distinct strategies that will resolve or reduce the severity of the moral problem. Think about positive/negative consequences for each stakeholder, short-term and long-term.

Utilitarian argument for redistribution of wealth

Taking wealth away from one person and giving it to another results in a utility gain with minimal utility losses

Fiduciary Duty

That duty owed by an agent to act in the highest good faith toward the principal and not to obtain any advantage over the latter by the slightest misrepresentation, concealment, duress or pressure.

Deontological Ethics

The idea that actions are right and wrong in themselves independently of any consequences - duties based

fixed pie fallacy

The term "fixed pie fallacy" is also used more generally to refer to the idea that there is a fixed amount of wealth in the world. This and other zero-sum fallacies can be caused by zero-sum bias.

public morality

The values and principles of right and wrong pertaining to public policies and actions.

Ethical Objectivism

The view that there is at least one objective moral standard

Moral Relativism

The view that there is no absolute or universal moral law or truth, resulting in a morality determined by cultural factors or personal preference.

Capabilities Approach

This approach argues that societies should be evaluated according to the freedoms their members enjoy to develop their potential in ways they value.

DMM Step 2

Use the facts to identify who the relevant stakeholders are, what they stand to gain/lose, what the main moral issue is, and why it is an ethical problem. Which stakeholders are proximally affected, distally affected. Genuine/scrupulous interest. Moral issues?

Market value

Using market value, we can assess the value of something by determining what a buyer would pay and a seller would accept for it. It is the price that something can be sold for on a given market.

intrinsic value

Value of an organism, species, ecosystem, or the earth's biodiversity based on its existence, regardless of whether it has any usefulness to us.

Social action problem

When everyone acts in their own self-interest and everyone (collectively) is worse off for it. No one wins in a SAP

what is a right

a just claim or entitlement that others are obliged to respect

pyramid of corporate social responsibility

a model that suggests corporate social responsibility is composed of economic, legal, ethical, and philanthropic responsibilities and that the firm's economic performance supports the entire structure

principal-agent problem

a problem caused by an agent pursuing his own interests rather than the interests of the principal who hired him

market failure

a situation in which the free market, operating on its own, does not distribute resources efficiently

dirty hands

a situation in which, even if someone does the morally right thing, that person has also done something that is morally wrong. The moral wrongness does not evaporate simply in virtue of the rightness of the act.

dominant strategy

a strategy that is best for a player in a game regardless of the strategies chosen by the other players

Arrow's Impossibility Theorem

a theorem that demonstrates that a voting method that is guaranteed to always produce fair outcomes is a mathematical impossibility

Ethical Relativism

actions must be judged by what individuals subjectively feel is right or wrong for themselves

Kant's Categorical Imperative

an act is only ethical if it would be acceptable for everyone to do the same thing

zero-sum

an exchange in a purely conflictual relationship in which what is gained by one competitor is lost by the other

glass ceiling

an invisible limit on women's climb up the occupational ladder

Act Utilitarianism

assesses each separate act according to whether it maximizes pleasure over pain

Rights-based ethics

belief that individual rights provide the vital protection of life, liberty, expression, and property

Frankena's two-pronged approach

beneficence, distributive

Albert Carr

business relativism theory analogy to poker - Not illegal = Okay

Universality Formulation

could only do things that we allow others to do

normative

describes beliefs or values about how things should be or what people ought to do rather than what actually is

attribution error

error made in attributing the causes for someone's behaviour to their membership in a particular group, such as a racial group

Prima Facie Duties

fidelity, beneficence, self-improvement, non-maleficence

unscrupulous interest

having or showing no moral principles; not honest or fair

Utilitarianism

idea that the goal of society should be to bring about the greatest happiness for the greatest number of people

distal interest

indirectly affected

glass walls

invisible barriers that confine minorities and women to certain types of positions within organizations

Prudential

involving or showing care and forethought, typically in business

caveat emptor

let the buyer beware

Caveat Venditor

let the seller beware

deontological pluralism (WD Ross)

many distinct basic moral obligations (prima facie duties)

Why is a consideration of ethical theories important for business

principles of market failure approach receive justification from ethical intuitions - debatable whether the approach can account for all moral obligations of businesses - need a general understanding because we care

Triple Bottom Line

recognition of the need for organizations to improve the state of people, the planet, and profit simultaneously if they are to achieve sustainable, long-term growth

genuine interest

rights are affected, relationships will change

instrumental value

something that has worth as an instrument or a tool that can be used to accomplish a goal. Something can have no market value whilst having instrumental value.

Rule Utilitarianism

supports rules that on balance produce the greatest pleasure for society

invisible hand

term economists use to describe the self-regulating nature of the marketplace

Ethical Egoism

the belief that individuals should live their lives so as to maximize their own pleasure and minimize their own pain

Moral Pluralism

the concept that there are fundamental truths that may dictate different definitions of what is moral in different situations

Condorcet Paradox

the failure of majority rule to produce transitive preferences for society

values

the ideas, beliefs, and attitudes about what is important that help guide the way you live

Corporate Social Responsibility

the notion that corporations are expected to go above and beyond following the law and making a profit

Friedman

the only social responsibility of business is to create profits and engage in activities designed to increase its profits so long it stays within the rules of the game, which is to say, engages open and free competition with deception or fraud - IF they stay within the rules of the game