Ethical Issues in Business Thomas Donaldson and Patricia Werhane

Some definitions: Ethics the study of whatever is right and good for humans Business ethics business actions etc in light of some aspect of human value. - it requires the evaluation of business practices. - Goes beyond facts to include the ought to of a situation. The two traditional issues involved with ethics: 1. Ethical Relativism are there universal values that apply to everyone or is everything relative to individual, country, company etc. a. Relates to cultural relativism. This presumes that different peoples reason about morality varies by culture, education and religious traditions. b. Arguments for ER are: i. Empirical evidence of cultural relativism. ii. There is no viable universal standard that can be applied to everyone. c. Arguments against ER are: i. Just because finding universals is hard that does not imply that ER is correct. ii. Just because a particular issues is not resolved does not imply that it is, in principle, not ever resolvable. iii. Taking ER to its full extent means that you cant justify any moral judgements at all. d. The Foreign Corrupt Practices Act (1977) attempted to legislate that what we say is moral is how we should behave. This Act was driven by the issue that you are being inconsistent with yourself if you say something is immoral yet do it anyway just because you are in a foreign country. 2. Truth telling can you ever justify not telling the truth? Must we communicate honestly? a. A vigorous defender of truth telling is Kant. TT is an essential feature of right communication (Lectures on Ethics). His reasoning is: i. We all want others to follow this when speaking to us. ii. All societies depend on mutual bonds of honesty and truthfulness to enforce their continued existence. iii. Lying thwarts the discovery of new truths. Knowledge growth is required for the advancement of a society. b. Counter agreements to this are: i. Everyone understands the game of inflating claims (not lying) in advertising etc. so it is all right. ii. You cant ever know the perfect truth around a product/service because perfect information is not available people cant know if a company is lying or bluffing.

iii. Outside of the advertising arena: How do you conduct a business negotiation if you never put something on the table that gives you room to wiggle so to speak? The Lockheed Case Study: Overview: The Japanese expected that certain individuals would be paid cash in exchange for the favours of giving access to the right people and to influence the awarding of orders for the TriStar jet. The payments were for significant amounts of money and were communicated by third parties who were setting up the deals. None of the individuals who were paid ever asked for money nor did anyone ever promise that if money was paid that orders would definitely be given. However, the strong implication was that if the money was not paid, the reverse would definitely occur (no orders). The amount of payments grew after the orders started, since the payments were later claimed to be for each airplane not just a one time payment. This was not communicated up front. The justifications of Lockheed management over this were: 1. 2. 3. 4. 5. 6. The $12 million was beneficial to Lockheed, only about 3% of the purchase price. The payments did not violate American laws. Workers, communities and stockholders would benefit. Lockheed never brought up making any payments. The sale would not have been made without the payments. Lockheed never talked about money to any Japanese politicians, government officials, or airline officials. (William Graham Sumner)

Cultural Relativism:

The concept of the folkways; they are the right way of doing things because they are traditional. Rights are never God-given or absolute they are the rules of mutual give and take that are imposed on members of a group for the long-term strength and health of the group. The morality of a group at a particular time is the sum of the taboos and prescriptions in the folkways by which right is defined. When lifes conditions change over time then the folkways change. New ethics and mores develop to support and justify the new ways. Conformance to the mores and ethics of a time is the driving force for why something exists or is the way it is. The Greeks and Romans defined as follows: Ethos: the compilation of the usages, ideas, standards, and codes by which a group lives. Ethics pertained to the ethos and therefore were the standard of right. Modern definitions have lost the intensity and interweaving of these two. Morals get connected only with religion or philosophy now. This separates them from what would have been the ethos or mores of the people today. If it is only connected with religion, then time spent systematizing right and wrong upon common, universal principles tends to be elevated apart from the people and becomes important in itself this is counterproductive. Sumner wants to study the ethos of groups, to see how it arises, how it gains power, how it influences group members. He substitutes mores for ethos in our society. They are what directs

society, not philosophy or ethics (which according to Sumner are products of the folkways). The mores of a people are, by definition, good for that group of people and time. However, they shift over time and therefore are not forever or absolute. Since the mores exist before we are born, we grow up into them as naturally as breathing. The morals of a particular age or people are simply the acting out of the mores of the people (what is done and the mores coming together). Ethical Relativity and Ethical Absolutism: - Walter Stace Relativism goes beyond mere thinking that what is right in one country or time may be wrong in another. Everybody thinks that this can occur. The relativist thinks this because he is a relativist, and the absolutist simply says that the other ideas are wrong. The relativist says that what is right in one place/time is actually wrong in another, not just thought to be. The absolutist says that there is an absolute and actual right across time/countries and if some people think something is right and some think it is wrong (which often happens because moral ideas or current standards vary) they are in error. Arguments in favour of ER: 1. Empirical evidence of the large number of moral codes in many countries. This is a weak argument as both sides readily agree upon it. 2. No one has ever been able to discover a foundation upon which absolute morality could be based. A command to be some way or to do something implies a commander with authority. The relativist says that you cant find the absolute moral foundation but you can if you allow for relative time and place variations. 3. Even if it is difficult to define the appropriate social group that relates to a particular norm, you can use logical groupings (IE all the people who think like) if you have to. You can always tell the moral standard of a people by observing it. Arguments in favour of Absolutism (or against ER): 1. It is very difficult to prove a negative (as in #2 above). 2. If ER is true, pursuing it will only end up destroying morality altogether. 3. If each people have their own valid standards, the whole premise of ethics being an evaluative effort is lost. It begs the question of the relative moral worth of the different standards. 4. While it would seem possible to say that you can evaluate ethical standard deviations of people within the same group, what is to say that the sub group currently chosen is the most appropriate one? What is to keep us from continuously subdividing the groups into smaller and smaller size (the ultimate being that only I have the right to judge my own moral standard)? 5. Even if we can identify a particular group of people to focus a particular moral standard on, how can we really know what the standard actually is? People always have a difference of opinion that will cloud the issue. Observation will produce a divergence of data.

Multinational Decision Making: Reconciling International Norms Thomas Donaldson A conflict in norms is the issue here. Often a multi national is heavily owned by people in the country where they are chartered, and their management is often heavily skewed by that nationality. Arguments for not saying if a practice is not moral/permissible in the host country, it should not be done. 1. We cant literally translate some of what we say is right. IE the wage rate in the US cant just be adjusted for the currency and standard of living. To do so would freeze the foreign workers out of the job market. 2. So we need to seek out responsibilities we hold as minimums versus enlightened ones. Minimum duties are required for the continued existence of the company; enlightened ones are very nice if they can occur but not required. 3. Rights are requirements that impose minimum behaviours on others. 4. Possible models are: a. Sterba 3rd world countries enjoy welfare rights workers must not have health/sanity endangered. b. Shue basic rights must be protected. Health, safety, no avoidable harm. This works for the obvious safety type harms, but is vague concerning other possible issues. 5. Local peoples may choose to trade off different things pollution vs. the need for fertilizer. 6. Therefore we need a more complex formula than a simple appeal to rights (which follows). Definitions: 1. Type #1 conflict based on the relative level of economic development. For example their view might change when (or if) they achieve the higher levels of economic success that other countries have achieved. But for now, they are willing to accept a particular trade off (lower wages, higher pollution of some kind) because what they do get is more important to them now. 2. Type #2 conflict the conflict is not related to economic development in any way. It is cultural, related to some other factor. Implications: Type #1 conflicts can be worked through, because they often do not signify an ultimate disagreement. Type #2 conflicts indicate a more significant (ultimate) ethical disagreement. We need a more complex formula to determine when something is permissible or not. We dont want to be ethnocentric (our way is the only way) nor conveniently forgetful of our ethics when a payoff is large.

Formulas: 1. Type #1 conflict: a practice is permissible if the members of A would, under similar economic development conditions as B exhibits, regard the practice as permissible. 2. Type #2 conflict: Is it possible to conduct business in B without doing the practice? Is the practice a clear violation of a basic human right? 3. A further question for type #2 conflicts: does it conflict with an embedded norm of A? To use the formulas, we need to first classify the type of conflict as #1 or #2. Then we can determine the moral outcome based on the answers to the questions above. The formulas are intended as a clarifying device, not to replace the extensive codes of ethics for specific industries. It helps multi-nationals to avoid being trapped into rationalising immoral behaviour under the guise of cultural sensitivity. Ethics and the Foreign Corrupt Practices Act: Mark Pastin and Michael Hooker Focused on the making of payments to foreign officials for the purpose of obtaining business/sales etc. It was intended that it be judged from an ethical perspective. Concerns: the enforcement has been lousy. Standards and interpretations of the reporting requirements vary widely. The practical necessity of doing this in some countries does not make it moral. Ethical assessment of laws: 1. the end point approach looks at the contribution to general social well being of society. The underlying view is utilitarianism. 2. The rule assessment of laws approach looks to see if the law is in accord with a code embodying correct ethical rules. Ethical rules are prima facie rules, which means they can allow exceptions when necessary. (IE bribe a doctor to care for a dying child if that is the only way) Overall Pastin/Hooker feel that the FCPA does not pass either ethical assessment test. Moral Dimensions of the Foreign Corrupt Practices act: Comments on Pastin and Hooker Kenneth Alpern His take on Pastin is as follows: 1. The FCPA prohibits bribery. 2. Bribery is prima facie obligation and is morally wrong. 3. Corporations have a prime facie moral obligations to protect their stockholders investments and the jobs of their employees. The government may also have a prima facie obligation to secure the welfare of American businesses and workers. 4. There are situations under the FCPA where the prima facie obligations of the government/corporation outweighs the obligation not to bribe. 5. Situations where the FCPA requires immoral actions are numerous and significant. 6. The FCPA does not have the support of the utilitarian nor the rule based moral perspectives.

A parallel argument against the FCPA by Pastin attempts to reclassify the bribes. 1. Payments were often extorted from the companies (not bribes at all). 2. Failure to make the payments might end up with inferior products being purchased. 3. Payments were in accordance with local practices. Argument against the Pastin/Hooker interpretation: 1. Requires a second principle that promises must be kept. This principle outweighs bribery in some (undefined) cases. 2. Three obligations are cited as deriving from this new principle. A. Corporations should promote shareholder investments. B. Corporations should protect employees jobs. C. The government is obligated to protect workers and businesses. This second principle is not relevant. 3. Connecting the bribery to the promise to look after shareholder interests is nonsense. The corporation has merely agreed to be an agent if this increased the moral right of a position, then we would all merely choose to use agents to accomplish our aims. They should choose to carry out their promise in another way that does not involve bribery. 4. Moral rules are supposed to overrule self interest the case Pastin cites promotes it instead. 5. The only cases where self interest might be important enough (from Pastins examples) would have to involve dire need (life threatening) and would have to be unique situations, not and involve the establishment of a permanent policy. 6. The parallel argument (see above) assumes that extortion is not morally objectionable. It is. It also does not separate between what is accepted/tolerated and what is held to be moral. Bribery is pretty much illegal everywhere, even if it is engaged in some places. Also, if we hold on to our moral standards, that does not impose them on to the other nation. 7. If Pastin is right, then we should expect foreign nations to use bribery and extortion in the US, since we cant rationalize the slide in other countries (where it is also illegal) and not rationalize it here. Truth Telling Case Study Italian Tax Mores Arthur Kelly

The normal way of filing taxes is to put in a very low number, which starts a protracted series of negotiations, eventually ending up with a higher number being paid. This new bank did not follow this and the Italian authorities assumed it was stated in the normal understated fashion. Everything went downhill from there. They wanted to negotiate with him. Ethical Duties Towards Others Truth Telling Immanuel Kant

Telling the truth is core to society and conversation. If someone does note tell the truth fellowship ceases and he is shunned. Man inherently has faults that he naturally wants to hide. We do not want to appear foolish. He either is reserved to conceal them or makes some act to conceal them. Being reserved can take the forms of not talking or talking but not revealing anything. The primary issue Kant deals with concerns what we intentionally do that might constitute a lie or something that is intentionally misleading.

If we say we will tell the truth or what we think, often we naturally tell much of what we think, but not all. A lie come into being when we lead people to think we are telling them the truth or what we really think and we do not do so. Differentiate between false statements and lies. False statements are misleading statements or actions, but occur when the person being misled does not have the right to think I am telling the truth. (The packed luggage example). I have not said I will tell the truth or give them my honest opinion. Lies are false statements or actions made after I have said I am telling the truth. It does not matter if my statements hurt anyone or not. I am still a liar. Lies are objectionable because we break our trust with mankind and thwart the building up of knowledge and community. The only exception would be the concept of the white lie if forced under hostile conditions to give up a secret, we might be justified in not telling the truth since the person knows we are not honour bound to do so. Last concept definition is the difference between breaking a promise and cheating. A true promise that is not kept is a breach of faith. A lying promise that I do not intent to keep is cheating and often an insult to the person intended. Is Business Bluffing Ethical? Albert Carr

He makes the distinction between lying and bluffing when everyone involved understands that the truth is not expected to be spoken, lying is not lying but playing the game of business. Business rules do not follow the religious ethical rules. The premise is that business requires and expects a degree of deception in order to play the game both at a personal and corporate level. He uses many examples such as playing poker, where bluffing is expected. Excuses used to justify this behaviour 1. We follow the law. We will change when the laws change or when public opinion rises up. The difference between following the law and being unethical are common we choose to be in a business where many thieves might be our customers but dont break any laws (IE selling master car keys) 2. If we dont as a society put ethics into our laws, why should we expect businesses to fill that void? 3. Any talk about ethics by businesses is primarily marketing talk, designed to make corporations look good to the public. Any real good done is nice but incidental. 4. Business people with strong reputations for honesty and integrity do better in the long run. The short run requires the business man (if he is to be a winner) to bluff within the rules of the business game. The Ethics and Profitability of Bluffing in Business: Wokutch & Carson

Premise bluffing is lying and is therefore usually wrong. To be permissible in a particular situation, there must be some sort of overriding justification. Standard justifications: they are standard practice; they are necessary for economic reasons. Standard rebuttals: honesty is always good business in the long run; transactions are built on trust; and to lie destroys that trust. The market is efficient, therefore word of distrustful people will spread.

Too many market anomalies that allow bluffing to continue to exist. 1. Market does not have perfect information. One time sales; some bluffs are hard to prove; product claims are subjective. 2. Financial incentives often support bluffing rather than go against it. When is it permissible (if it ever is permissible)? 1. Self-interest alone is not enough. This includes self-profitability. 2. Economic necessity is stronger few examples can be imagined that are clear enough. How could starvation ever result from not lying on behalf of employees? The welfare system etc would always take care of employees who might be thrown out of work if their employer did not lie in a crucial situation. A company that needs to use lying etc to stay in existence is of doubtful use to society. 3. What about lying for the benefit of the person being lied to? This usually amounts to selfserving aims and can often backfire; the product sold will not deliver the expected value. 4. The other parties do not have the right to know our true bargaining position. This does not mean it is right to lie to them. Just dont tell them. 5. But it is standard practice so what? That doesnt mean it is right. Slavery was once standard practice, but it was still wrong. 6. Therefore: we may be able to bluff in ordinary business circumstances unless either: 1. you believe the other party will not bluff in return 2. you think you will not be harmed by the bluffing of the other person even if you dont bluff yourself. NOTE: I dont follow the last point made here. I thought it jumped to a conclusion that was not well grounded.

PART II Morality and Corporations

A core concept that needs consideration is: What is a corporation? People are clearly moral agents, what about corporations? As a result, what should people expect of corporations? Case Study Manville: The Ethics of Economic Efficiency? Filed for bankruptcy soon after the first company folded under the weight of the lawsuits re: asbestos. This was a highly risky move given that it was not clear what impact this would have on the claims against it. Issues: 1. Was the bankruptcy filing used as an immoral shield against those hurt by asbestos? 2. Was Manville telling the truth about what they knew before hand and during the incubation period for the disease? 3. If Manville conspired to cover up their knowledge, was it right to ask the government for help? 4. How far back can claims be made against a company? Can you even sue a company after the fact when at the time it acted legally and in good faith?

5. Does the status of Manville as supplier of the product, not contractor, designer or project supervisor, change how we look at the situation? 6. Is the fact the Manville is alive and well as a company now have a bearing on the case? Context: 1. There was a clear connection with lung cancer. 2. Estimates of potential suits were labelled as way high and way low by credible medical sources. 3. Four reasons for filing bankruptcy were to avoid the largest tort litigation ever; federal accounting standards that required establishment of a reserve fund (this was impossible); legal disputes with insurance companies about which companies were liable; federal govt. unwillingness to help out. When Did Johns-Manville Know? Jeff Coplon

This is a key issue in the filing of many claims and impacted the level of punitive damages. Evidence appears to indicate that the company knew of the health risks from the 1930s and moved to either mitigate their negative PR effects or to not tell workers of the dangers. The Corporation as a Moral Person: Peter French

Summary: Corporations have internal decision making structure, rules and policies which qualify them for moral agent status. These controls make them intentional beings with the same responsibilities and rights as persons. Intelligent agents (Locke) are capable of law, happiness and misery. Persons must be intelligent agents. There are two schools of thought on the relation of the metaphysical and morality in people. One: to understand what it is to be accountable one must understand what it is to be an intelligent rational agent and visa versa. Two: being a rational agent is a necessary but not a sufficient condition of being a moral person. Most people keep the legal aspects of being a person apart from the first two. French feels that looking at the legal aspects of corporations is useless from a moral analysis point of view. Looking at a corporation as a collection of people (directors, execs etc) under the cover of the corporate structure (this is the Aggregate Theory) fails to recognise the logical difference between corporations and a mob. Frenchs definitions: 1. A moral person any proper name or reference that can be a non-eliminatable subject of the second type. A first type is when some one or thing did something. The second type is one of accountability or having a responsibility to act. This implies some sort of authority or relationship tying them to the act over the other person 2. For corporations to be held under this framework, we must attribute their actions the to corporations themselves and not the people that comprise them.

3. If we attribute the actions to the people that comprise the corporation then we cant distinguish logically between the corporation and a mob. 4. The question is: do corporations really cause events to happen through their employees, or do the employees actually cause the events? Does the corporation have a reason for its actions (like a person would)? This relies on the concept of the Corporate internal Decision Structure and its controlling influence on its employees. 5. The corporate structure is much larger than the influences of its directors or CEO etc. Its goals go beyond the personal enrichments of its executives (which might have been true many years ago). Morality and the Idea of Rationality in Formal Organizations: John Ladd Summary: The structure of corporations limits them to trying to achieve only their formal stated goals. These cant be moral ones, by definition. The corporation is more like a complicated machine, not a moral agent. Organizations outlive the people that are inside them. People are substitutable within the organizations structure different from families or other social structures. The theory of organizational decision-making is that employees make decisions that are impersonal, that carry out the aims of the organization. The employee is morally neutral as he/she makes a decision on behalf of the organization it becomes a social decision (attributed to the organization). The organizations goals/mission is clearly stated; the strategies etc all guide decision making to achieve the goal/mission. The contradiction: the orgs decisions are governed by the rational measure of efficiency versus the orgs goals and an individuals decisions are bound by normal morality. These two standards can often conflict with each other. The individual is expected to bring his personal moral standard to work in his relations to his co-workers. The org itself does not use these rules it approaches clients impersonally as cases etc. So, this creates a contradiction. Individuals cant enter into personal relations or compacts with organizations because the rules are different (see above). Similarly, organizations cant assume a genuine moral posture towards individuals. The only relevant principles in rational decisionmaking are those that relate to the goals of the org. (i.e., it is not rational to expect a corporation to not pollute on purely moral grounds). The methods of making these types of thing happen are through the force of law, public opinion etc.

Case Study: When E.F. Hutton Speaks They intentionally designed a system to allow them to overdraft their accounts by taking advantage of the float (time difference between deposits and withdrawls) in the system. This system got out of hand, when it became apparent that Hutton was creating float (not legal), not just taking advantage of the natural float (legal within limits) in the system. They were found guilty of fraud. Can a Corporation Have a Conscience? Kenneth Goodpaster and John Matthews

The example given shows a similar stance as that of John Ladd. The corporation cant use its power/clout to go outside of its goals and lobby government for social action causes etc. This is the domain of individuals. What is the concept of moral responsibility as it applies to people? Responsibility means three things a causal sense where blame or praise is offered up in a legal/moral context; rule following situations where people follow externally imposed social norms; decision making situations where people are trustworthy and reliable. This third area is a key one illustrating the moral judgement that is key to individuals. How do we apply this to corporations? A related question is if we can apply, to a group, some aspects of being a person can we expect the group to behave like a person on other ways as well? The author says that corporations show many examples of moral judgement as they build in features that allow them to evaluate the impact of their products and production processes on the environment and human health. Objection #1: Corps are not persons. Answer dont be literal jus understand that we can project a conscience onto a corporation. Objection #2: You cant sacrifice profit for other things. Answer - view moral responsibility as containment not a replacement for corporate self-interest. Objection #3: to project personal moral responsibility to the corporation is useless if we dont understand the personal responsibility well. Good point but we should not try as we understand it somewhat. Catch 20.5: Corporate Morality as an Organizational Phenomenon. Waters Or why do bad things happen at corporations made up of good workers? Organizational blocks to doing the right thing: 1. 2. 3. 4. 5. Socialization of new employees by existing managers into the way we do things. Strict chain of command I cant talk to anyone else higher up. Strong group cohesion excludes outsiders. Unclear priorities. Lower level people are expected to accept strategies as given. James

6. Division of work I cant influence what goes on over in Division X; I have not connecting to it. 7. Corporations often focus on the future looking at the past makes for embarrassing questions. How do we respond: mechanical affidavits and were tightening up moves, etc dont often work. 1. Remove ambiguity over corp priorities regarding ethical issues. 2. Use concrete examples of what is good/bad behaviour. 3. Provide clear steps that internal whistle blowers can take. 4. Develop internal company words/vocabulary for discussing sensitive issues. 5. use internal investigative groups to really follow up on issues.

Part III Property, Profit and Justice

These three issues are the key debate points today. The profit motive as an acceptable idea traces roots to Adam Smith (Wealth of Nations). Darwin and Marx came along to present different sides/aspects to this argument, Marx and Smith on opposite sides and Darwin with a whole new direction (survival of the fittest thus improvement of society). Major modern thinkers on private ownership issue: 1. The issue of government intervention comes up should we let the market run things or use the government intervene not just in life/death issues but also to shape our work society. Justice discussions are connected to economics and social justice topics. Is distributive justice a valid concept? it presumes an agency (the government) in charge of distribution policies rather than the free market or the action of a free social order. Case Study: Plasma International The company received lots of bad press over paying 45 cents/pint for blood (from Africa) to other depressed areas for $75/pint. Benefits of the Profit Motive: Excerpts from Adam Smith Wealth of Nations Used the pin factory example to illustrate division of labour. The concept of the division of labour is grounded in the concept of man readily need the help of his fellow man. Man naturally moves to barter, treaty, and exchange to improve his lot. It is in self-interest that the endeavours of man for his own gain naturally improve that of society.

Justification of Private Property:

John Locke

Private ownership of property is connected to motivation, human nature and the economic system. Locke provided foundational thoughts here. His ideas told of the human right to own our bodies and thus own the efforts of our bodies (our labour) and the resultant effects. We can rightly appropriate the results of our handwork to ourselves. This started with the fruits of the land and his labour, but grew to include the use of money. The right was naturally bounded by what man needed to use for himself no point in storing up great quantities of produce because things would not last. This meant that there would tend to be few conflicts between the rights of different people. Alienated Labour: Karl Marx

Labour was the main factor placed into production. Value was determined by the amount of labour. Marx felt that the more a person placed his value into an object, that left value left over to remain in himself. The larger the product becomes, the less of the worker there is left. The worker is alienated from his work and subsistence as it becomes a means to an end. Private property for Marx becomes the means or cause by which people are alienated from their labour and at the same time the outcome of being alienated. The Communist Manifesto: Karl Marx and Fredrich Engels The bourgeoisie has slowly taken over the world in terms of growth of capital and the means of production. This tends to make the rural more urban, increase consumption, more central politics. All this is based on feudal society. Yet the new force has become powerful that it threatens to fell the bourgeois society itself. Too much production and consumption sow the seeds of periodic wars or crisis. The methods used to avoid them must call on the modern working class (the proletariat), a class that the bourgeoisie largely created. The proletariat have lost their personal connection with their crafts due to the machines. They must sell themselves as a commodity wherever they can work. Their numbers grow as does their strength and their concentration. This union of the workers is a key to their future ability to overcome the bourgeoisie. The owner owns all and gets richer, and the worker owns little and gets poorer. Hence, they intent to do away with individual ownership of property, as 9/10 of the people dont own anything anyway and that will only force the middle class to lose power and spread it around. Wealth Andrew Carnegie

A clear attempt to justify Social Darwinism The basic argument is that society is improved by the struggle to survive in the marketplace. The result is that a few of the homes (generic) should show the best and highest in art and literature rather than none at all. If everybody is equal, then all live equally in squalor. The result of this industrialization is that the goods that were once rare are now cheap and plentiful. The poor have what the rich of past times could not even get. We pay a price to be sure the workers life at work is rigid and without much joy. Wage rates are low due to the competition. However, the benefits are that society has greatly improved in what it can offer everyone.

Carnegie talks about the need for great wisdom among the administrators of the great fortunes who must use them to improve the personal drive and conditions of the poor. These sums must not encourage slothfulness. The point is that this use of funds by the wealthy will yield far better results than the community could have done for itself. Case Study: Going After the Crooks Documents the Ivan Boesky insider trading scandal. The follow-up to this was the surge in civil lawsuits after the disclosure and trial. A related issue concerns the wave of mergers and takeovers. Millions of dollars were made over non-productive deal making betting on takeovers etc. Boesky received significant reductions in fines and sentencing due to an impressive deal he cut with the government (details untold here). The Social Responsibility of a Business is to Increase its Profits Milton Friedman

Friedman: businesses should not make ethics or social responsibility a primary goal. To do so is basically socialism. Their aim is to maximize profits for shareholders, which is their primary social responsibility. Private ownership is key to this public ownership undermines the market. Private market directions over wages etc. is better than government intervention. Responsibilities only people can have generic social responsibility. The business of employees is to serve the interests of the stockholders who invest in the company (based on achieving its stated goals which most often are to make money). The New Property: George Cabot Lodge Society has changed so much that Locke cant be interpreted as he once was. Private ownership has been weakened via courts and large numbers of shares in corporations that dilute ownership. Community benefit, a decent standard of living and a clean environment have risen in prominence over the right of private ownership. This has changed the views of not only private ownership but also labour rights and the basic views of freedom and responsibility Regulation that Works Steven Kelman

Premise is: the new regulations do not threaten freedoms, but are good. Two types of regulations 1. Price/conditions of market entry. a. These were the older kind. b. These were here to limit the free market to some degree. 2. Non-market behaviour. (EPA, OSHA, Consumer Product Safety Board etc) a. These are the newer kind of regulation. b. They exist to help determine which acts are so harmful as to be not permitted. Author argues that these regs have not fed inflation. Only a small portion of cited figures actually relates to the second type of regulation, which are the type the author prefers.

Resolving Income & Wealth Differences in a Market Economy: A Dialogue J. Gustafson/E. Johnson

Much discussion back and forth. Blah, blah, blah. Yadda, yadda, yadda. My brain fried in this section. However, a brief summary 1. Society in not merely a collection of individuals. Community is integral to our society government is necessary for the betterment of society. 2. Our government ensures the individual respect of individuals be also ensuring the meeting of health, food safety needs etc. 3. Our economic system meets needs above the needs floor. The government guarantees access and opportunity based on merit. 4. The meeting of basic needs is delivered in ways that are least costly to the community and least demeaning. 5. This means capitalism can stay (is necessary). 6. Private ownership is also consistent with their thoughts. It is combined with regulation and taxation to accomplish the governments portion while encouraging private capital growth. Justice: Case Study: International Computer Sales Nadel/Wiener

Documents how American computer sales to Latin American countries often go to support secret police (who use them to track people and activity in order to do vastly disgusting/immoral things on behalf of the regime in power). Telecommunications equipment is in the same category. Case Study: Who has First Claim on Health Care Resources? R. Veatch

Documents a proposed state bill of spending for a particular health program the discussion centers around whether or not that group is the best to get the funding. Should it be based on need, potential gain to society, those who might improve the most or what? Case Study: Cat Scan During a time of national health planning, a Harlem hospital was denied a new Cat Scan machine on premises (they had to borrow time or nearby hospital machines) the eventual cost of that was some 160 patients that died. Distributive Justice: John Rawls

Potential conceptions of justice: 1. Utilitarian individuals do this for themselves why cant a society as a whole? It is in the spreading of gains that the problems show up. It never works out that the right people get the right balance of gains or give up the right things for a later gain. Since individuals have the undeniable right based on justice, this mechanism does not work.

2. The social contract since projection from individuals does not work, society as a whole decides what is right, good etc. This starts everyone out as equal. Two principles of justice: 1. Everyone attached to or influenced by an institution has an equal right to liberty under it. 2. Any inequalities from this institution must be arbitrary (random) unless everyone will benefit equally and provided everyone has access to these arbitrary gains. Examples if you are born into money, that is just only if your actions make the less fortunate better off (good jobs, good health benefits, more opportunity for their own advancement etc.). A difference principle comes into play no one can be made better off without making someone else worse off. (Notice - all are not equal). If you take any more from the more gifted/wealthy that will negatively impact their ability to improve the lot of the less fortunate. How do you arrange this in an economy? 1. Must have a just constitution that secures the basic liberties of everyone. 2. Equality of opportunity education, commerce etc. 3. A governmental impartial distribution branch that ensures that the total income of the less advantaged allows then to maximize their expectations in light of their liberty. (Ed. pretty vague statement). This includes taxation authority, services branches etc. The Principles of a Liberal Social Order Friedrich Hayek

Liberalism concerned with the extent of governmental power. Intervention should be limited the spontaneous actions of individuals will be much more beneficial and powerful, so let them alone. Their natural, spontaneous, regular ordering activities in the market will produce a more complex and fruitful reality than we could ever intentionally try to do through government. Government should only concern itself with universal rules of just conduct and the few services that the market will not naturally provide. Taxes etc. will give government the means to carry these out. If the government enters into other areas of influence or control it will produce a narrower, more limited outcome. Government and society only tell people what they cant do, which leaves a much broader list of potential opportunities open. This proper outcome includes protecting the individual domain of the members from encroachment. This leads to the concept of private property in order to tell what constitutes a persons domain. This is key to the idea of justice. Other ideas of justice include: a just wage, a just price, social or distributive justice, a more public conception of acceptable laws. The author stays firmly in the camp of leaving government out of the market meddling business and believes the greatest aggregate social good is driven by the free reign of the market.

Morality and the Liberal Ideal

Michael Sandel

The author questions the ability of the liberal view to properly deal with moral issues. The freedom inherent in the liberal view requires them to say allow some practice (abortion/pornography) is only allowed but not condoned. Conservatives say if you are not against it, you are for it. The liberal view centers around the question of moral relativism who is to say what is filth vs. what is literature. The values that liberals chose to defend are freedom, fairness and toleration they can hardly say that values in general are not defendable. What is the moral basis of liberal thought? 1. Utilitarian John Stuart Mill maximizing the general welfare, which comes about if you leave people alone to pursue their own good as long as they dont infringe on others. a. Criticism is that the majority rule of utilitarianism is not a good liberal measuring tool. Individual rights are too often trampled. 2. Kantian utility is unfit for moral guidance it treats people as only a means to the happiness of others. They are not respected as individuals. a. Certain rights are so important that the general welfare cant override them. b. We cant presume that one way of life is better than another. Liberals define rights (the basic liberties we all enjoy) and the good (what people may choose to pursue within the framework of rights). c. Major issue very hard to agree which rights are to be inviolate.

Part IV: Employer-Employee Relationships

Employee Rights: Do employees have rights despite having entered into a contractual relationship? Three definitions of rights: 1. A justified claim (ie to freedom) 2. An entitlement to something, held over something else. 3. A trump over a collective goal (ie the right to worship as we please overrides social unity). Two kinds of rights: 1. Moral rights are not necessarily protected by law, but everyone has or should have them. (ie personal respect) 2. Legal rights are specified or protected by law.

Case Study: The Aircraft Brake Scandal

Vandivier

B.F. Goodrich made a absurdly low bid for a brake assembly order from LTV for a military jet application. They expected to make money off of the reorders/parts etc. the design was accepted from a very capable engineer, but one who people did not question because he had a bad temper. A new engineer found a bad design issue during testing but was thwarted in his attempts to get people to act despite solid proof. Many steps of lying and filing false reports were documented. No one was convicted of anything but the brake design was miraculously changed after Senate investigations. No one at the company was reprimanded. Case Study: The Copper O Company An example of a company that was deliberately flushing out of spec waste into the city sewers that posed a health hazard. The company was hiring a PR firm to dress up its image after building a new plant, basically ignoring the problem. A Proposed Bill of Rights (of employees): David Ewing What should it look like: 1. It must be clear and practical, not theoretical. 2. It should use negative injunctions (this is more precise than you should statements). 3. Succinct. 4. Written in lay language. 5. Enforceable. Must not be dependent on good will to work. A Suggested outline: 1. You cant demote or penalize an employee if he/she criticises the ethics, legality or social responsibility of the company. a. This does not allow disclosure of confidential info. b. Ed. this seems to not require any proof it protects criticism in general. 2. You cant penalize etc. an employee for what he/she does after work hours (includes, politics, social, economic, civic etc) 3. You cant penalize an employee for refusing to do something that violates common morality. 4. You cant record (audio/video) an employee without consent. You also cant require tests (polygraph etc.) that constitute an invasion of privacy. a. Leaves this up to the employee to determine an invasion of privacy. 5. Cant examine an employees desk, locker, files etc except by a senior manager who needs information to make a decision in the absence of the employee. 6. Cant keep employee information that isnt strictly relevant for management. Employee has the right to see his/her file. No one else should see that file, only essential facts. 7. No manager can talk about an ex employee that was fired in a gratuitous manner (that is make comments off the record and not in the file already). 8. If you are demoted or transferred etc you deserve a written explanation of why you are being penalized. 9. You are entitled to a fair hearing if you have been taken advantage of in any of the ways above.

The Myth of the Oppressive Corporation:

Max Ways

Premise: corporations are not the removers of rights that some people think they are. This was written is opposition the last article. Basically, we have the rights already that we need and the corporation cant take those away from us. The sanctions we occasionally see are also present in the rest of society as well. On the issue of whistle blowing, Ways argues that to encourage whistle blowing ignores the basic problem of how to determine real issues and spiteful accusations. It gives great protection for employees to work the system and avoid being fired when they should be. Employment at Will and Due Process: Contrary Employment Practices Werhane Patrica

Premise: the majority of employees work at will and the constitutional guarantees are seldom upheld in the workplace. Do employees have rights? They should be allowed procedural due process. The at will doctrine is unjust. The issue is not that all employers are ogres or that employment at will is used at all, but that EAW is used to justify arbitrary employment decisions proving that the right to an employees fair treatment is not supported. How did we get here? The growth of corporations and the manager as agent of the corporation idea tend to place more importance on the corporate goals than the people involved. EAW is designed to serve corporate ends. When someone is fired, it is assumed they deserved it, even though the EAW system requires no such justification. (This article appears somewhat dated to me.) The Case of the Polygraph on Employment Screening Gordon Barland

This article is by a practitioner of polygraph exams. The premise is that anger or resentment over taking the exams has not caused any false readings, so it is a good tool for business. It included the usual examples of really bad people who were found out by the exam. The Case Against the Polygraph in Employment Screening: David Lykken

They are in heavy use and have often ruined the lives of people involved. Two types of methods: 1. Control question test: (CQT) three studies determine only 2/3 accuracy. This form is biased against the innocent. 2. Relevant Control Test (RCT) a list of questions about possible misconduct that is considered to be job relevant. There are no studies that document this (this comment is out of date). Conclusion they are inherently stressful, intrusive and potentially damaging in a major way to people and to the workplace.

Affirmative Action: A moral right to be treated equally and fairly in hiring, pay, promotion. 3 types of affirmative action programs: 1. Deliberately hiring/promoting equally qualified minorities/women. 2. Deliberately hiring/promoting qualified (not necessarily equally qualified) minorities/women. 3. Quota systems based on an ideal distribution. Case Study: Freida Mae Jones Martin Moser

A highly educated black woman felt (she appears to be right) that she was getting lower level assignments and was being treated like she was dumb. The bottom line was the manager, when confronted with this, indicated that the real reason was the competitiveness of the market which required that the customers be fully comfortable with the people that service them. That meant white males. He portrayed it as a straightforward business decision. Is Turn About Fair Play? Barry Gross

Author presents four arguments against reverse discrimination: 1. Procedures designed to isolate the discriminations are flawed. a. Simply showing that a group is underrepresented in an occupation does not prove discrimination. b. Which groups are actually discriminated against? Even if the population criteria is a good one, there are many groups discriminated against by that criteria the issue is on which issues does it matter? c. Employment choice depends on many variables. 2. There are undesirable and dangerous consequences. 3. It fails to fit any models of reparations or compensation. 4. It fails both those it favours and those it disfavours. a. Either discrimination is undesirable or not. If people have the equal right to opportunity, then we shouldnt even discriminate now. b. Two strategies that dont work: i. Determine that there is a strong enough situation that requires reverse discrimination as compensation or reparations. This argument tends to be more attractive, yet has problems. First responsibility is not often as clearly established as with traditional civil claims nor as accepted by those presently in the class. Second, it is almost impossible to assign a monetary value to the reparations. ii. Make exceptions in favour of the wronged party. This raises the possibility that the person will not be competent for the job or that he will feel inferior. Discrimination is also invidious. Once it is licensed, it is hard to get away from. c. Determining that some form of compensation is good and then saying that reverse discrimination in a particular case is required is an illogical leap. That is not just. d. This form of redress is not aimed well it only seeks redress for those who happen by luck to be applying (for the same job) at the same time.

A Defense of Programs of Preferential Treatment

Richard Wasserstrom

Two arguments he counters: 1. Institutions had quotas before (to exclude) and the quotas now are equally wrong. He says the system before was designed to systematically exclude, and was run by the majority for that purpose. This quota is for the opposite purpose and is OK. 2. They use race/sex to assign jobs rather than merit etc. and reward a less qualified person. This is not fair or just. Authors response is that merit is used as the guide because it is efficient at providing the proper outcomes. But this ignores the issue of rightness. In general, our world does not run this way. Will the best student make the best lawyer? Should the best tennis player get the tennis court? I the best student simply the one with the best grades or should other criteria be used? 3. Author clearly does not establish that these programs are desirable or right, just that they are not as off base as other claim. Classification by Race in Compensatory Programs: James Nickel

1. The different characteristics reply: you can condemn racial discrimination yet support quotas because the issue in quotas is not the same it is because they have been victimized by slavery and discrimination not because of their race. Administrative expediency may result in having to use race as a high correlation factor to determine who gets the advantage. 2. The different issues reply: making a reparation (helping) is sufficiently different from mistreating someone that it is OK to hold different positions on the issue of the potentially discriminatory use of race. The issue here is that in many cases, distributing a benefit involves distributing a loss to someone else. This argument also does not cure the race basis argument; how can race actually (by itself) be a viable criterion for gain or loss? Author says it cant. How Can Compared Worth Be Achieved? The issue is: equal pay for equal work. Sub-issues are: 1. How to look at the differing mix of jobs that women hold? (more part time, they prefer job sharing) 2. Their stock of human capital declines when they leave for child bearing/rearing. 3. If they continue to choose the traditional lower level jobs they will earn less. 4. The open market sets wages dont mess with it. My note: the studies shown here do not document well why the disparity exists. It shows that there is some difference that correlates to gender but without causal factors we dont know what to fix. Naturally, the factors are likely to differ from industry to industry, job type to job type. There is no clear best method to implement this type of program, and there are many significant hurdles to overcome to fairly deal with it. Sean De Forrest

Part V Contemporary Business Issues:

The Environment: Case Study Three Mile Island

The core issue was over the significant need for electricity and jobs in the country, balanced by risks of producing it. All forms of generation have risks, however there is considerable opinion concerning the risks of nuclear power to the environment. The Case for Economic Growth Wilfred Beckerman

The two sides environmentalists vs proponents of growth. This article is mainly a statement of how wrong environmentalists are about their claims over the effects of pollution and over the available supplies of raw materials. The Scarcity Society: William Ophuls

Authors opinion is that we are living in a dream about the abundance of our world and about how the world deals with real scarcity, which historically has been to use war and oppression. Technology has made suckers out of us all it lulls us in to the position of not realizing the import of what we do environmentally. The dilemma to avoid the scarcity problem requires dramatic solutions that are unpalatable by many; ironically those solutions are little different from the results that the doomsayers predict will happen if we dont act. Summary we are a corrupt people by any historical standard. We have ordered our society around material gain. We approach democracy as a means to achieve our ends rather than as a wonderful system of government that allows us to rule ourselves. In effect, we are short of moral resources more than we short of physical ones. Ethics and Ecology: The Right to a Livable Environment as a Human Right William Blackstone

The author is clearly not a free market person. Governance is required to make sure that the manipulation of the environment is the best public interest. Can this issues be considered a basic human right? Premise: a livable environment is required for us to be able to enact our other existing rights (equality, liberty, happiness, life, property). Therefore we must be ready to accept restrictions on those same rights to make sure we can at least maintain the bulk of them at all. GNP (a signal of the growth oriention higher GNP was thought to be a measure of increased well being) is a lousy measure of a productive society it includes all the positive productive outputs as well all the negative outputs required to undo the damage by the negative outputs. (Cigarette sales and the required cancer research are included).

Advertising: Case Study Toy Wars

Manuel Velasquez

Documents the addition of a military type toy to the line of a family owned toy company, which they felt was necessary competitively given the large growth in that part of the toy market. The company felt that the advertising needed to be mean and macho to differentiate them from the competition, even pushing the limits of what the national networks would air. The advertising company was concerned about all the violent content on TV. The toy company threatened to move their business and turned down tamer versions when presented. The Dependence Effect: John Kenneth Galbraith

He wants to debunk some commonly held beliefs: 1. The urgency of our wants does not decrease as we satisfy them; once physical needs are met we graduate to psych needs, which cant be met entirely. Authors point this is only true if the want originates with the person himself if the production creates the wants then you cant say that the production is only satisfying wants. (He does not show very effectively why this is true!) He notes that the whole purpose of advertising is to create wants which means that production creates the wants that it seeks to satisfy. People do not need to be told they are hungry (an urgent need) but marketing is necessary to show them they need the latest movie video. Our whole system shows this commonly held belief to be wrong. 2. The issue comes about concerning how society spends it money. The cycle of higher wants followed by higher production followed by higher wants tends to direct money towards some things and away from others. Private vs. public goods and services are a good example where we rely on the democratic process to supply the services we desire as a society (but we take little interest in the process sometimes compared to the consumption process in general). Advertising and Behaviour Control: Robert Arrington

Puffery is rampant in ads. We use many techniques to enhance our products (like association with desirable people, images etc.). We are anything but free in what we buy, having been influenced, controlled and manipulated throughout the buying process. Author even brings in subliminal suggestion into the discussion. This tends to counter the suggestion that advertising is purely information to help us buy what we need. The concept here is to determine exactly what is meant by autonomy in buying. 1. Autonomous desire: just because the most recent thought came from a TV ad doesnt mean that it is not autonomous with myself. Induced and autonomous are not mutually exclusive. I may have desires that I choose to not act on or that I immediately disown because they are really outside of chose to accept as desirable behaviour. The key is do I fully accept these ideas or not? It is the exception that advertising actually gets me to act on desires that are not truly mine.

2. Rational desire and choice: critics claim that advertising produces irrational desires in that they are not fully informed about the product/service. We rarely have all the facts anyway, and advertising usually complements or adds to the picture we have over a product. It is just part of the puzzle. 3. Free choice: the issue here is can we determine between impulses that we choose not to resist and one we could not resist? Clearly advertising does not do this all the time. Only in some cases does someone buy something that they should not, when it is attributable to advertising. It is not reasonable to argue that we routinely make advertising driven decisions that place us at risk. 4. Control or manipulation: advertisers certainly intend for people to buy their products, but they dont activate or bring about all the other necessary conditions to ensure that people buy their products. They do not have this much control. Corporate Governance: Case Study: A.H. Robbins - Dalkon Shield

The company filed for bankruptcy over the lawsuits resulting from medical problems over the old product (similar to the Manville situation). The product was introduced after one large test (premature?). further tests shows higher and higher pregnancy results that initially publicized. Medical removals were also higher. The issues were similar to Manville, ie were what did the company know and when? They certainly seemed to be covering up many facets of the medical work that was being done after the product was launched. Who Rules the Corporation? Nader, Green and Seligman

Premise: an autocracy actually rules most corporations rather than some sterile legal structure with checks and balances. Too many boards are captive or bought. The boards need to be revamped. 1. Boards should designate people in the corporation who are responsible for following the laws. 2. Boards actually need to review management decisions. 3. The board role is a real, time-consuming role, requiring real talent in a broad spectrum of abilities. 4. Assign each member of the board to oversee specific areas of the corporation. 5. Elect a mostly outside board. Power and Accountability: Changing Role of the Corporate Board of Directors Shapiro Irving

Premise: more board reforms are needed because the bulk of governmental reforms have been ineffectual and hence the changes must come from the oversight of outside boards.