Definitions of Core Terms

Ethics how you should live your life

o The values and ideals that apply to our actions
Nested in the definition of ethics is
Morality how should you treat other people?
Nested within morality is
Justice how should social institutions be shaped?
o Vital social institutions that have a huge impact on how we get treated:
Legal system who gets to make all the decisions (decision making
process)
Governing process political process
Education what should we teach
Religion some people include this, some people dont (how
powerful are religious institutions in modern day society? 100 years
ago but still today?)
Health care how should it be structured and funded? Free-market?
Economic Organization how the economy is organized and its
core ground rules. It has a lot to do with power and peoples
opportunities
How should the economy be put together? Should there be
free market or regulation?
Teleology/Virtue Ethics
Definition: the roots telos and logos
o Logos - The study of something or an inquiry into something (biology is the
study of life, psychology is an inquiry into the human mind
o Telos Goal, end, or purpose
o Definition of teleology: An inquiry into purpose
o Aristotle: an ancient Greek philosopher.
Said that what makes human beings unique from animals is
Rationality this gives us the capacity for reason which brings us to
asking the question of ethics: how should I live my life.
Aristotle believes that we should live our lives...
Rationally
Live a life according to reason
To the fullest extent capable/
o Teleologists believe there is a purpose of life and the point of life is to fulfill
it to the best of your ability achieve a goal and realize an end.
o What is the rational life? Reason
Theoretical doesnt concern us in an ethics class
Science
Mathematics
Formal logic
Practical does concern us in an ethics class

The application of reason

To life in general and more importantly - to an individuals
actions
o How can I exhibit rationality in my actions?
If you try to be the best you can be. Aristotle believed we could
completely fulfill our nature as human beings.
o What is the human perfectibility? What is the ideal that Aristotle is talking
about?
Eudaimonia a Greek word roots
Eu a Greek prefix that indicates goodness and positivity
Daimon - refers to spirit or personality
Definition: Flourishing or well being. Doing well and
feeling well at the same time.
Summary/Review of Teleology/Virtue of Ethics
We alone have rationality
This is natures clue to us as to how we should behave in life
What does it mean to behave rationally in the practical spirit of our affairs?
To pursue our own well-being and flourish
To fail to have that as your objective is to think irrationally and fail.
What is flourishing?
Aristotle says there are 3 constituent components to a flourishing life or
Eudaimonia
o Pleasure pleasure is important but its not everything. It is a necessary but
not a sufficient condition.
o External goods Things that are not part of your character
Financial resources you dont need to be extremely wealthy but
you dont want to be poor because you will be trapped in always
looking for your next meal
Good upbringing you cant achieve excellence if you have had an
abusive upbringing
Friends they are morally important because they are your most
regularly human relation and give you the opportunity to display
moral behaviour
Just society you need to live in a society that is not war torn, one
that does education
Good looks beauty helps
o Internal goods - virtues
Personal characteristics that somehow are produced through free
choice
Physical appearances are not a moral virtue (having brown
eyes)

Personal characters that you have to work at to achieve, things that

are difficult to achieve.
They are corrective of natural human tendencies. We are not
always naturally virtuous
Beneficial to self and others
A characteristic that is worthy of moral praise
Greek culture the Four Cardinal Virtues
Wisdom we would rather play than gain knowledge
Courage we naturally are inclined to fight or flight
response
Moderation
Justice
Christian Virtues
Faith
Hope
Charity we are not naturally generous
Love

Application of Theory
How to apply an abstract moral theory to a concrete problem in business ethics
How would each other these theories solve a moral dilemma in business
Ethical Issues in Business
Conflict of interest
Intellectual property who owns it if intellectual property is created
Affirmative action is it an appropriate hiring policy
Mandatory retirement
Health and safety what kind of health and safety issues does a business owner
owe to their workers
Teleology/Virtue Ethics Theory How would you solve a moral dilemma?
Decision process
1. What would a virtuous person do in my position?
This is a short term solution that teleologist would recommend
2. What are the resources and education that I need to become such a person
myself?
This is a long term solution
Stress the importance of education.
For Teleologists, its all about education and character. Its about
becoming a virtuous person, a person of integrity one with
wisdom, faith, hope love, courage, etc.
Criticisms of this Teleology
1. Selfish its too selfish to be a plausible perspective on morality

Why? Because the focus is on self-realization. Me fulfilling my

purpose in life and me becoming the best person I can be. Some
people think that the focus should be elsewhere.
Optimistic its not a realistic code of ethics, its wildly optimistic.
Notion of perfectibility it sets the bar way too high
Elitist some people thing that it has an elitist tone to it
It has a hierarchical/aristocratic overtone
Vague its emphasis on creating a certain type of people creates vagueness
Emphasis on character: people who you think are virtuous disagree
about what would be the most appropriate thing to do.
Unhelpful its an unhelpful approach to moral dilemmas
Succumbing to the advice of a wise expert
Long term solution educate people so that when they get to
a difficult situation its not difficult for them
This doesnt answer the question of what are we suppose to
do in the short term?
Relativism what seems virtuous varies from culture to culture
Cultures differ and what they see are a virtuous/flourishing life
differs

2.
3.
4.
5.

6.

Deontology Theory
Greek work roots deon and logos
Logos is the study of or inquiry into or account of
Deon is the Greek word for duty.
Definition: the study of duty. Adhering to duty. When you are confronted with an
obligation that you know you are involved with a moral issue
Ethics: How should I live my life?
I should live it in accord with certain fundamental duties or rules
Which rules apply? Find out which rule applies and then follow it.
o Religious. Example: Christianity: Adhere to duty/rules
The 10 Commandments
The Golden Rule
These tell you how you should life your life and how you should
treat other people.
o What do you do when you are faced with a moral
dilemma? See which rule applies here and then follow it.
o Secular: Immanuel Kant
The Categorical Imperative
Much like the Golden Rule except for the categorical Imperative
its a dictate of reason itself so the ultimate justification for the
principle is entirely secular - its a command of your own
rational nature. Using your rational powers to decide what you
should do.
The Categorical Imperative has two elements or tests
Universality Test

One ethical and moral code for everyone

Discoverable by reason
Cultural diversity fallible
Universality test - you have to think of every one having
a veto over the action that you are considering. If any
one were to veto that action, it is impermissible.
o Why does Kant emphasis Universality test so much?
Because one of the prime motivations for immoral
behaviour is that we exempt ourselves from moral rules.
Example: Lying people will veto it. Always
wrong
Humanity Test
o We have to treat other people as ends in themselves and
not as mere means to our own ends of action (Kant).
o Motivation for Immoral Behaviour - to use other people
as props in their own design, to forward our own ends.
o If I act in that way am I using others in my own design
or, by contrast, in acting am I respecting their autonomy.
o * Its not just about finding our which rule applies and then follow it. It also
involves acting with the right intention.
Objective Duty
Subjective Intention
Criticisms with Deontology
1. Some people things theres a problem with interpretation and vagueness
o In order for these rules to be universal they have to be stated in very
general terms
o Sometimes this can mean you dont really know what the rule
means
Example: The commandment is it though shall not kill or
though shall not murder. Murder justified/intentional. Kill
can we kill animals?
Example: Honour your mother and father. What does this
mean buy them a house? Just obey their rules?
o Its not just deciding what to do - we first have to have a debate
about what the rule means and which rule should apply.
2. Artificial and legalistic approach
o Western approach
3. Form of rule worship
o Some people (consequentialists) say whats most important is the
results of our acts. Its not whether it corresponds to a rule, its about
the results of the action.
o
o
o
o

Consequentialist Theory
Consequentialism the core concern of consequentialism is the consequences of
our actions that matter the most.

o Its a results driven conception of morality

o They are dismissive of subjective intent
o Only objective results is important (it doesn`t matter what you`re intentions
where, it`s the objective results of your actions that matter).
Example of consequentialism: Utilitarianism
o Greatest happiness for the greatest number
o Developed in the 18th century out of a reaction against Kant and Christians
People thought both Kant and Christians based morality on
unjustifiable premises, on premises that were metaphysical
Christians God
Utilitarianism saw no proof
Kant Rationality/Reason
in either of these.
o Jeremy Bentham (the founder of utilitarianism) said he was going to found
ethics and morality on a firm scientific basis. Goal: The whole point of
acting is to make the world a better place in a demonstrable, measurable
way.
How do we measure the world becoming better? Utility!
Utility: Happiness or pleasure from consuming something
o Raw sensory pleasure
How should I live my life? How should I treat other people? How
should we shape social institutions? All in a way that produces the
greatest happiness for the greatest number of people.
How do I solve a moral dilemma? What decision process do I have
to engage in to solve it? Moral Cost-benefit analysis:
1. Consider the options
2. Consider the expected pleasures and pains that will result
with taking each option
3. Pick the option with the highest net pleasure score
Example: Option A or B predict the pleasures and pains that would
result from A and B, add up the pleasure and add up the pains.
Subtract the pain from the pleasures and choose the one that has the
higher score.

Ask things like is the pleasure certain or uncertain, intense or not,

duration of the pleasure (the longer the better), purity of the pleasure
(if its not followed by pain, ex: getting drunk is not pure because
its followed with a hangover).
Criticism of Consequentialism
They over-estimate our capacity to predict consequences

Consequencialism is predicated on us having reliable knowledge of

the consequences of our actions however we cant always know
what the consequences will be.
Calculus requires impossible foresight
It seems to run in to issues of ends justifying the means (Jacobs)
What is something that makes the greatest number happy but sticks
it to minority group or individuals.
Historical instances show that it has happened where it has
contributed to the greatest happiness but hurts the minority or an
individual and that is unjust and immoral, therefore
consequentialism cant be the most authoritative perspective on
morality.
Too demanding on an individual (Teleologists)
Moral obligation to the greatest number
Loss of personal priorities
Intent is important (Deontologists) but in moral life dont we still think that
intentions matter
Example: Tourists want to gas Toronto, however instead of their gas
killing people it doesnt do anything bad but instead cures people
who have asthma. Their intent was to kill but the consequences were
good different consequences than they expected. Deontologists
would use an example like this to say to consequentialists that they
need to pay attention to intention in moral life results are not all
that matter, intention matters as well.

Rights Based Theory

Similarities to Deontology
o Rights and Duties are two sides of the same coin. You dont have a right
to something without some institution or someone else having a duty to
do something else. Deontology duties.
Heroes in the Rights Based Theory: John Locke, John Stewart Mill, Martin
Luther King, Mahatma Gandhi, John Rawls
Rights Based How do we solve a moral dilemma
o Decision Process
When I act, am I violating anyones right?
If yes then you cant do it. If no, then its permissible
What is a right? A right is a justified claim or entitlement to something or
somebody
o Entitlement or claim to what?
Level 1: Its a claim to a whole set of objects
Freedom of speech
Freedom of torture
The right to vote
Ownership rights (to a house, car, clothes)

Level 2: We want a certain kind of minimally decent treatment

from other people
The reason we want free speech is because we dont
want people interfering with our speech or we dont want
the government mandating what to say in public.
How is decent treatment defined?
o Rights based theory is at the opposite of the spectrum than
Teleology/Virtue Ethics maximally optimistic. Excellence, flourishing,
optimality. But the Rights based system just wants a minimally good
life.
Rights to what?
o First Generation Rights
Classic Standard rights
Due process (legal process if you are charged with a
crime, whats the due process)
Political freedom (right to vote, right to run for office)
Property ownership
o Second Generation Rights
They do not deny First Generation Rights, they want to add to
the list
They need more to enjoy a minimally good life in the modern
world
Focus on social and Economic entitlements
o Right to subsistence income
o Basic preventative health care
o Basic education
o Clean water

Rights based system provides a sphere of personal freedom that

consequentialism doesnt allow.
Critics with the Rights-Based System (very similar to the critics against Deontology)
1. Its rigid and legalistic
2. Vagueness in the meaning of rights
o What is the meaning of rights?
o What do we have rights to?
How does the Right Based System differ from Deontology?
3. There isnt the intent requirement
It really is just about avoiding violating someone elses rights
Frame of mind is irrelevant (doesnt matter if its a good
It doesnt matter if you have good intentions, its only the
action that matters)

Theories of Justice Micro and Macro Contexts

We can think about how to treat people, how to live your life and put together
institutions, etc. in a micro and macro way.
For example
o Micro Context the Government passes new standards based on effluence
coming out of a pulp and paper mill it has lots of effluence/polluting by
products. Its a personal choice of ethics whether the manager adheres to
the new regulation or not.
What is my duty?
What are the consequences to myself and society
What would a virtuous person do/ Would the adhere to or violate
these standards
o Macro context
Issue of justice
Are the standards set by the government good in the first
place?
By what process did the government set those standards?
Its not a issue of duties, consequences, virtues, etc. its an
issue of justice we are talking about the overall shape of a
vital social institution.
Institutions of Justice
o Government tends to get all the attention in terms of social institutions.
Its inappropriate to think of the government as the only vital social
institution.
Its appropriate to think of it as a uniquely pervasive institution in
society
The government has strong fingers in all of these other vital social
institutions:
Legal System
Health Care
Education
o In a way it is natural to focus on the way government should be instituted as
the locust of any institution of justice.

Three Prominent Theories of Justice (Conservatism, Liberalism, and Socialism)

Why just these three? Whats the rational of just talking about these three?
o We only want to talk about the most serious contenders.
For example, Anarchism the tradition of thought about
government but its not a particularly influential body of theory. Its
not a prominent theory of justice so we dont talk about it here in
Business Ethics.
Fascism perspective on justice but its discredited after WWII if
it was political philosophy wed touch on it but not in business
ethics.

These three theories are comprehensive world views and traditions of thought about
how social institution should be put together.
o This is slightly at odds with certain trends in contemporary politics. Its very
common in contemporary politics that people dont really care about
comprehensive views or about how social institution should be put together
as a whole. They only care about their pet issue their one issue (example:
abortion, the environment, animal rights, tax cuts, government subsidies for
their business, etc.: these are all non-comprehensive views one issue and
doesnt come as a theory of justice).
World views since the French revolution theres 3 prominent successful and
influential and comprehensive theories in the West (Western Europe and countries
that have developed from the colonization).
o Warning: These words and how Brain Orend defines them are the way that
scholars define these terms, they do not necessarily line up with how
political parties brand themselves.

Conservatism
The oldest surviving prominent theory in the West. Its not necessary the political
platform of the Conservative party of Ontario.
o Here we refer to a consistent, coherent body of principles whereas a
political party may change their principles in order to get elected.
Conservatism to conserve
The essence of conservatism is about conserving a certain way of life and
preserving a set of institutions handed down.
o Its a hesitancy about change
o A scepticism about the wisdom of wide-spread reform
o A pro-attitude towards the past
o A true conservative is nationalist and things very highly of their country.
o Social institutions should foster values that have been transmitted over time
to the next generations. Preserve respect for a certain set of values over
time. A very useful institution to protect that way of life it the government
or the State
o A conservative favours the state having a positive and active role they
would like the state to take positive action to persevere this given way of
life.
Not hostile to government.
o Values and morality are objective. Its possible to talk about a moral truth
and to discern this. They think the state must be involve in conserving this
shared heritage and passing it on to future generations.
o Conservatives feel very comfortable with the state intervening in issues of
social morality such as legislating sex, role in deciding curricula
(homosexual material in schools or not).
Feel comfortable with the state intervention, provided its the right
kind of government intervention, namely, intervention that props up
this good objectively true shared way of life thats been passed

down by our ancestors and needs to be preserved for future

generations.
o They are comfortable with inequality in society
Those who know the moral truth should have more power
Logical consequence of the world view that there be considerable
inequalities
Politically, socially, legally, and economically
o General concept of justice that the conservatives have in mind is that the
conservative images a group of elite members of society who are genuinely
motivated by a sense of public good (preserving heritage and a way of life).
Elites who are in charge of the state and social institutions and who run
them in accord with a given way of life.
Historically the trend has been against conservatism
Industrial Revolution
Women entering the workforce between the two WWs
Pre-French Revolution - it used to be dominant (Kings and
Queens, the decor, Louis the XIV)
At the same time though, we can see how conservatism has heavily
influenced aspects of social institutions.
In certain facets of life, governments are mainly concerned
just with preserving the status-quo and not necessarily about
pursuing change.
The role of the State in education
o The culture wars what should be taught
Issues of marriage and sex
Liberalism
A direct reaction to Conservatism, Liberalism is broken down into two kinds.
Whats the root meaning of liberalism?
Its all about personal freedom. Liberals would look at a
conservative system as oppressive, hostile to change, they want a
regimented hierarchy, they want elite, self selected few running
institutions. Liberals would want nothing to do with this way of life
they would want more freedom for themselves.
Liberalism all about Maximizing personal freedom
Two waves of Liberalism
Classical Liberalism the first wave that appears historically
Do not like government intervention. They want minimal
government intervention (shrink the state to as small as possible)
o The Night Watchman State they do believe that
the government has some legitimate function
The government keeps the peace
Maintains law and order

Defends the country from external attacks

(national defense)
Enforces contracts that people freely enter
into
Liberals does not view morality as conservative do. For the liberals,
Morality allows for different defensible ways of life.
They are more morally sceptical about claims to know the
objective moral truth. You can do whatever you want, as
long as it doesnt affect me
o Prefer to be agnostic about which way of life is true
or not
o Role of the state is to let people pursue the life they
want, provided peace is not violated.
Classical liberalism wants maximum economic freedom
Free trade
Free market
Minimal government intervention
Minimal taxation
CL - In equality is acceptable
People are going to have different want, interests, and
capacities which will lead to different results and different
rewards (socially, economically, politically, legally)
Inequalities are the price individuals pay for freedom
CL is not nationalistic at all
For them its all about me
o Does my society work for me? If it does then I care
about it, if it doesnt then Im out of here.
For the conservative its about preserving
shared heritage and working for public good
this is not the liberals
o Liberals have an atomistic conception of society
Were all just atoms, just a collection of
individuals
The conservatives see life as a shared way of
life that we all sort of participate in.
Margaret Thatcher prime minister of
Britain in the 1980s for a while was asked a
question about social good and replied: dont
you know theres no such thing as society.
Influenced American founding fathers
Following the American revolution it gained traction in real world
political institution and not just political theory
Conservative today may actually be classically liberal

Those who call themselves conservative today may actually

be a mix of classical liberalism when it comes to economic
issues and social conservative when it comes to social issues
(sex, marriage, education). Thatcher is a part of the
conservative party but is a CL, Reagan is the combined
figure economically CL, but socially quite conservative.
Progressive Conservative.
Theres a split in liberalism around the time of the Industrial
Revolution

Summary of Classical Liberalism

Morally sceptic
Core Value = individual freedom
State plays minimal role
Pro free market
Socialism
Born in the Industrial Revolution (IR) which makes it the most recent of the major
political doctrines
Why? The IR produces all kinds of good things products, inventions
o Produces massive inequalities of wealth
Not just an abstract sense
Totally changed in a time period of 45-50 years
As a result people flooded into the cities looking for jobs. However
the cities could not handle that massive population increase
This resulted in slums. Tons of people in a tight space,
working 12 hours a day in a factory with no showers
o No public sanitation
o No public housing
o Disease was rampant
Result is disease, mental illness, violence,
crime, and squalor (bickering)
This is not a just way to organize society!
Essence of Socialism
o Prime Value more equality
o The goal of socialism is equality
How do you achieve equality?
According to Socialists we need the state to counteract
forces of the free market
Massive government intervention (like the conservatives)
They want government intervention but they want it to be
accessible to everyone

o Wants everyone to have a shot at becoming part of

government and having their say and serving the
interests of everybody
Conserve the heritage for its own sake is incomprehensible to
socialists. Socialists look at the past and see a litany of crimes
racism, intolerance, elitist exclusion, etc. The past is something to be
overcome. For the socialists (and liberals) its all about the future.
The effects of government intervention cannot be unfair. It has to be
involved in peoples lives to mitigate all the inequalities that would
result from a free market.
Socialists like public housing, public education, public health care.

Welfare liberalism
Welfare liberalism is an attempt to mediate between classical liberalism and socialism.
Bizarre because these are two very different doctrines
Prime Value Both personal freedom and equality are important
Role of government is to walk the fine line between these two values
Re-conceive liberty - Distinction between negative and positive freedom
Negative Freedom - Freedom from obstacles or interference.
Freedom from the government intervention of from the intervention
of others in our lives.
Classical Liberals view is negative freedom
Freedom of speech
Intervention in the economy
Being told what is the best way of life
Positive Freedom freed to do something
People have to be empowered or enabled if they are to really, truly
be free
Education is commonly seen as an aspect as positive freedom
Health care preventative kinds of health care, you need to be
minimally healthy in order to be able to act at all
Welfare Liberalism endorses both negative and positive freedom
Combined you get...
A mixed economy
Government is not minimal (not completely free trade)
Theres some taxation regulations
Health and safety regulation
Pollution regulations
General attempt to allow for...
Freedom of movement
Freedom of trade
Government involvement in providing...
Public education up to a certain level
Health care

Welfare Liberalism is the attempt to mediate between classical liberalism and

socialism and it is very influential throughout the western world.

Canadian Law and the Regulations of Profit-Seeking

Criminal Code restricts profit-seeking from criminal enterprises
o Narcotics criminalising profit seeking activity
o Sex/Prostitution is prohibited for profit seeking activities
o Fraud. Scams
Fraud involves deceit, deception, falsehood
Making false promises
Not fulfilling contracts
o Where does fraud occur?
Stock market
Bre-X Gold
o Leaked out certain information
o Falsified technical information
They dug holes in the ground and then put
the gold into the examples in order to
persuade people that they were sitting on the
biggest gold mine in history.
o Their stocks sky rocketed as a result
Security speculation conscious use of deception to inflate
the price of stock
Television
Diet and fitness products
Mail order products
Real estate deception about the quality of a house or property
Accounting statements
o Use of intimidation to make profit
Protection money pay me $200 a month and Ill keep the bad
people away from you (really the bad people are their friends)
o Bribery of public officials
o Insider trading
Some insider trading is illegal, some isnt
What is it?
When people who are employed by a company and trade the
stock of the company they work for
Why is insider trading illegal?
Employees, officers, and mangers trade own company
stocks.
Why cant they trade their own stocks?
Public policy to have stock market to act as a stable,
predictable force for economic growth

To maintain public confidence it must be believed that there

is a certain fairness in the trading of a stock
Regulation have been placed on corporate insiders,
otherwise they have privileged access about their companys
stock
Becomes illegal because insiders would profit off the public
o Unjust enrichment
Vague crime written into the criminal code to monitor any windfall
profits that looks suspicious
Its something that the state uses to keep tabs on people
Corporate Structure
Small business
o 70% of economy in Canada
o Most people are employed by small businesses
Corporations
o Large companies
o More money involved in corporations
o Many are publicly trade on stock exchanges
The Economy is made up of different sectors
o Public sector
Government, Expenditures, Tax revenues, Pays civil servants salary, not
for profit
o Between the Private and public sector is the MUSH Sector
Municipality, University, School, Hospital
o Private sector
Corporation, Small businesses, For profit
Corporate Structure How is a corporation put together?
o Board of Directors the shadowy part of a corporation they are the group of
people who are responsible for hiring the managers and for setting out the long
term business plan of the company (the mission statement).
What kind of company is it? The board of directors decide this.
Usually less than twelve
o Managers responsible for executing the orders of the directors and get the
other employers to do the rest of the work to make the mission happen
CEO Chief Executive Officer
CAO Chief Administrative Officer
CFO Chief Financial Officer
Vice-President Marketing, Finance
o Other employees
Do the work to fulfill the vision
o Shareholders
Own the company
Members of the public

The directors and the managers are usually major shareholders

themselves and often have a controlling interests
They have so many shares that they can control the direction of
the company
Appoint the board of directors
o Sometimes these roles can be integrated. Shareholders can be managers and
board of directors. If they are the Chairman and the CEO that person has a lot
of power.
Corporation Facilitate the Pursuit of Profit
o Why are corporation effective instruments of business activity?
They have limited liability for their actions
The company is treated as a separate person from all the people who
work for it and compose it
Ada Ltd. the company
Legal construct (fictitious entity)
Enables corporation to take big risks for big profit because they dont
have to fear the down size and if down size does happen it falls on Ada
o Qualifications on Limited Liability
Criminal Activity directors and managers are held personally
responsible
They do not float above the law
Bankruptcy the directors are liable and responsible for giving 6
months of wages to all their employees if their company goes bankrupt
Example: Insurance company
Shareholders are not liable for any losses of the corporation.
If you buy 100 shares in Bell Canada, the company is taken over
by a new CEO and this new CEO makes the share price
plummet you lose the amount of money that your share went
down (ex, $40 to $18, $22 lost)but you are not liable for any of
the debt that the company now has. This is an incentive for
people to be shareholders because they dont have as much risk
they cant lose too much

Ethics of the Pursuit of Profit

Miton Friedman
Wrote a controversial piece called The Social Responsibility of Business is to
maximise its Profits written in the late 1960s (hippies, after the war, lots of
protesters, etc.)
Nobel Prize winner in Economics
One of the most influential economists of the century
Founder of Doctrine of Monetarism
He is a Classical Liberal
He says that what we should do as a society is set up the basic ground rules of
economic activity and then get out of the way. You must have...

o A Peaceful society (if youre gonna have any kind of economic activity at all)
o Law and order (hard to have a business if youre constantly dealing with theft)
o Enforcement of contracts cant engage in business where signed contracts
mean nothing
o Private property rights be respected you want your ownership to your car or
house to be respected because you worked hard to buy them
o Business was not as social responsible activity
o Not socially responsible because it doesnt build housing, because it creates and
dumps waste. It is only a sociable responsible activity when it pursues a profit
Friedmans argument is that business do fulfill social activity when it pursues profit
o Anything but the pursuit of profit is:
1. At odds with free society, freedom
2. Doomed to fail
Why? Because business people only know how to pursue profit
Government wont direct the business in a good way because it
doesnt know how to generate the revenue sufficiency or run a
business
3. Sceptical about our ability to predict the future
Intervening in business has unpredictable consequences
When the government tries to go beyond night watchman
state, it inevitably fails
o They cannot predict the consequences of their
intervention in the economy
o There is always a time lag between the creation of the
policy, when it gets implemented and when its effects are
seen
Creation of policy market forces change
usefulness
Example: Public housing the government
knows how to do it but they cant achieve it
4. Shareholders own the companies and are motivated by profit
5. Adam Smith invisible hand argument
Trying to maximize profit has the consequence of maximizing
the standard of living in a society
o Division of labour (The Wealth of Nations, 1776 book)
o Collectively we have more if we all focus on what we do
best
o Inefficient to try and meet all of our own needs (cut your
own hair, grow your own food, build your own car). Its
much better for society if we concentrate on what we
each do best and then....
o Exchange free trade allows growth of economy and
improved standards of living

Comment on Friedmans Argument Jacobsens criticisms of it.

Some shareholders may purchase a stock with a socially responsible agenda in

mind
o Maybe shareholder arent profit maximizers
o Maybe shareholders invest in a company if they are socially responsible and
they dont mind if the company gives up some of their money and gives it
to a charity (instead of to themselves as the shareholders)
Instead of profit maximizers, businesses are profit satisficers
o Satisfies with a certain threshold of profit
Board meeting our goal is to produce 12 million in profit this year
o Consistent with Friedmans world view that here could be profit to be made
doing good things
Produce housing
Vaccines for disease
o Businesses may be able to serve others by having additional knowledge of
marketing and budgets
Friedman argues that to endorse financially all social programs, business must be
taxed
o Only way to come up with the tax dollars is if you have robust business
activity
o The only way to get this robust business activity is to let corporation do
their thing
o Supply Side or Trickle Down Economics if business is taken care of, it
will trickle down to benefit all of society
Structure tax laws benefit business to pursue profit more
profit/more tax revenuesociety benefits
You increase government revenue if you decrease taxation, You
increase taxation and government revenue will decrease
Why? If taxation is increased, businesses are less inclined to do
their thing
Less economic activity less income is generated
government takes in less tax revenue impoverishes all of
society
o Example: Socialist experiments was a terrible failure
they heavily taxed and intervened in the short term
and the result was they discouraged activity and had
less revenue in the long run.
o Even though taxation should be kept to a minimum, in a free market society,
there would be much more charity than there is now.
Theres less charity now because people have less money to give to
charity
In a society with less tax they would give a lot more to charity.

Rockney Jacobsen Economic Efficiency and the Quality of Life

He comments on the Friedman essay

o In his view the economy should be about Quality of life, which is not
necessarily the standard of living
Standard of living = wealth in the economy
GDP per capita
Personal income
o Theres more to life than money and income
o We need wealth so that we are not a poor society...
o We need a society of reasonable affluence
To pursue further affluence come at a cost of quality of life.
Example: Pollution
Trade-off between amount of time worked and income (leisure vs.
money)
o Profit maximization isnt desirable because it cuts against quality of life and
our enjoyment of life and Jacobsen says we are naturally satisficers, not
maximizers.
o Psychologically we are satisficers, not maximizers
Satisfied with a certain level of income
If additional income comes at the cost of quality of life, we are not
willing to make it
He agrees with Friedmans argument that...
o Business people should not be involved in socially responsible projects
Jacobsen thinks that letting corporations get involved in socially
responsible project would invests too much power in corporation
that cannot be removed.
Good to have government control because the government can be
removed whereas a corporation cannot be removed.
So essentially they agree that business people should not be
involved in socially responsible projects but for totally
different reasons.

Grant Brown Are Profits Deserved?

Profit is often justified on the grounds of moral desert
o Is this true?
Brown argues that most of the arguments for thinking this is true,
are false. Arguments for why people deserve the profits they get are
false.
Example: Entrepreneur make giant profits, they say they deserve it
because they...
Took the risk. Risk taking
Superior skill
Consequences to society
o Risk taking
Does risk taking deserve anything?

Ex: Las Vegas when you go here and gamble you are
taking a risk this doesnt mean you deserve anything.
Raw idea of taking a risk doesnt imply anything about a moral
desert
Successful handlers of risk is deserving
Show prior acts of successfully managing risks in a socially
useful way
More of a argument about superior skill and consequences to
society, not so much that you took a risk
Different kinds of risk
Financial risks
Employee risks they too are taking a risk with their health
and safety by working for the entrepreneur
o Superior Skill
Entrepreneurs should be told they are morally deserving of their
profit no matter how profit was made.
Why? Because this creates incentives it gives them incentive to do
it again and get others involved in activities what might produce
profits.
Would you work hard at something that would produce no profit for
you to benefit from? Public policy not a moral desert.
Corporate structure is such that the people with the superior skills
are usually the researchers who are usually just plain old employees.
Sometimes they are also the shareholders. Usually the major
beneficiaries and the main researchers are not the same people.
Most of the profit goes to the majority shareholder and sometimes it
is the inventor, but usually the public shareholders, or the business
manager who recognized the skill and brought it to the market.
o Consequences to Society
Argument might work were we in an ideal free market
Many regulation and obstacles to the free market must be taken into
account
Ex: Patent laws
o Is this beneficial to society?
Yes because it rewards the inventor
incentive argument to invent again
No because it can have perverse effects
though
EX: Oil and gas companies hold the
majority of the patentable technology
for solar energy
Inventor can sell the rights to the invention
however they want (poor student with debt,
has a great idea and sells it for much less than

Module 3 Notes

its worth, the buyer makes tons of profit,

even though its not their idea).
Procedural Argument: Some profits have been produced in a
morally unobjectionable way.
A profit created through a freely contractual process without
violation to anothers rights is procedurally justified and
morally unobjectionable.
Best argument for how profits can be morally justified

Code of Conduct/Ethics
Focus of concern surrounding business and professional ethics centres around these
codes of ethics
o What are codes of ethics?
o What is their function?
Examples
Disciplinary mechanisms
John Ladd
Professionalism and conflict of interests
o Our Business Ethics Book Weakness of the chapter is that it just deals
with the business side doesnt consider the professions. Rights about
codes of ethics as they appear in business, not the professions
The appearance and importance of codes of ethics in the profession is importantly
different
o A lot of the lecture is focused on what the book doesnt talk about : the
notion of professionalism
Are ethic conceived the same or differently in the professions?
Business vs. Professional Codes
Its important to distinguish between the codes of ethics found in business and in
the professions
o Profession theres looseness to its usage in English. People can use this
word however they want.
o What is a professional? To count as a professional you must have.....
1. Mastered a system of theory
Extensive educational experience
o For example, a doctor, lawyer, nurse, accountant all
have a long educational process to become
professionals at what they do
2. Process of education culminates in a series of licensing exams
Process includes an ethics exam
Competency exams
o Doctor Board certified
o Lawyer the Bar exam

Licensing exams must be passed before one gains entry into

the profession
3. Each of the professions has a distinctive culture
Ex: Lawyers are argumentative; all have gray hair, etc.
Doctors have crazy working hours, etc.
4. Professionals are recognized by the community as having authority
in a certain field of expertise that everyone else lacks
o Business Ethics = ethics as it applies to everyone else.
o Codes of Ethics are taken much more seriously and have a lot more weight
and import in the professions than they do in business.
Codes of Ethics in Business
o Two Kinds of Business Conduct
1. Intra-Business Code
A code that applies to one company
o For example Canadian Tire Code: just applies to
the employees of Canadian Tire
2. Inter-Business Code
Applies to everyone in a given industry
o For example Natural resource extraction so in the
oil industry, the forestry industry, the pulp and paper
industry
o How common are these codes of ethics?
Extremely prevalent amongst public corporations
1999 survey by KPMG
o Out of all the 300 companies listed on the TSX, KPMG
suggest that between 75% and 80% of those companies
had codes of ethics
o Approximately 75% of the executives that responded
claimed that they adopted a code of ethics to improve
their corporate image.
Are codes of ethics simply another marketing strategy for
companies
The Difference Between Public and Private Companies
o
The Three sectors of Economy
Public sector

Government

Civil service
MUSH sector

Mixture of for profit and not for profit motivation

Municipality, University, School, Hospitals (and all

the other non-for-profit do gooders)
Private sector

Business for profit motivation

When we talk about corporate codes of conduct we are just talking about the for
profit sector.
o The fundamental distinction for the profit sector is between public and
private
There is a distinction between who can own shares in those
companies
Public corporation means that the shares of that company
can be bought by members of the public
Private company means share cannot be sold to the public
o Often these companies are family run affairs
o The majority of private companies are small
businesses (fewer than 150 employees)
KPMG survey is referring to public corporations publically listed
companies whose shares are publically traded. Not necessarily the
most profitable but do receive the most attention
What is the function of this code of ethics?
A code of ethics is essentially deontological in structure and motivation
o The whole idea behind a code of ethics is to set out a general set or rules or
directives that are to guide employee behaviour
How you should behave on company time
How you should spend company money
How you should interact with customer or suppliers
o If the rules arent followed there is some type of disciplinary action
Certain results are being sought after by having a code of conduct
o Cynical interpretation improvement in the companys reputation
o Generous interpretation improve the behaviour of the employees

The Common Elements of Code of Ethics

Common Elements that are shared by all:
1. Have to obey all the relevant laws that apply
2. Integrity
o Youre conduct cannot bring disgrace upon this business or profession
3. Norm of competence
o Its an ethical duty to maintain profession knowledge and keep it updated
you owe it to your clients/patient/etc.
4. Norm of honesty and full disclosure
o Richard Nixon Its not the deed that gets you, its the lie afterwards.
5. Norm of confidentiality and trustworthiness
6. Norm of professionalism towards colleagues
7. Duty towards the public good
o This applies to Professional Codes only
o For example, doctors have the Hippocratic oath, lawyers have justice,
accountants have the reliability of accounting statements
8. Duty to help mentor future members of the profession
o This applies to Professional Codes only

9. Norm of loyalty to the company or industry

o This applies only to Business codes
10. Provision for some kind of disciplinary mechanism
o As an employee or a professional, if you violate some principle in the code
of ethics you will face some kind of disciplinary mechanism
Examples of Real Codes of Conduct/Ethics
E.g. National Society of Professional Engineers Code of Ethics
1. Preamble Engineering is an important and learned profession. As
members of this profession, engineers are expected to... The services proved
by engineers require honesty, fairness...
2. See below for the Fundamental Canons for engineers

3. Rules of Practice section for engineers goes through these five fundamental
canons and go into much more detail about each.
E.g. The Institute of Chartered Accountant of Ontario Rule of Professional
Conduct

Disciplinary Mechanisms Business vs. Professional

Business
1. Ethics Officers: their functions focus on developing, writing, and enforcing
a code of ethics
2. How does a code of ethics get enforced?
Complaint by client or co-worker
Ethics officer calls a hearing (pro-con kind of hearing)
Recommendation is made to the senior executives
3. In some cases there is little of no serious attempt to realize the principles of
their own code of ethics
4. Some do care though and in those cases in which the industry cares the
following could happen:
Recommendation for education/seminar
Could be required to pay a fine
Fine may involved covering the costs of the hearing
Conduct may be noted on employment record
Extreme cases could involve being fired
Formal apology
Required to take a leave, with or without pay, depending on the
severity
Professional
1. Each professional has an independent professional body which is in charge
of licensing and supervising all of its members
2. The government recognized the control of this self-regulating body
For example, in Ontario for doctors its the Ontario Medical
Association, for lawyers its the Law Society of Upper Canada
3. When an alleged ethics violation has occurred, a formal process is set in
motion
Formal fact finding
Alleged will be given the opportunity to make their cases with a
lawyer present
With the assistance of a lawyer, a case will also be made by the one
who wishes to see the disciplinary action
Case is usually heard in front of a tribunal three senior members of
the profession
Ruling is decided which cannot be appealed
For minor infringement, individual is required to rewrite the
professions ethics exam
More serious, may be required to pay for the cost of the
hearing (which can be quite costly, especially if lawyers are
involved)
Tribunal can also decided on what will happened with the
individuals licence to practice
o Licence can be temporarily or permanently
suspended

o Can add training wheels to the licence

Restrict practice to one limited field
Supervision by a senior member of the
profession
Your signature isnt sufficient, after
you finish your work you have to
send it out to someone else to review
it and sign off on it
o All the details of these ethics cases heard by the
tribunals, are published in professional newsletters
This can be really humiliating for some
professionals and can have a big detrimental
effect on ones career
John Ladd Criticisms of Code of Ethics
Ladds Criticisms will be similar to the criticisms of deontology
1. Too rigid, too artificial, and are constructed by rule-worshippers.
The product of litigious American culture run amok
It must be left to freedom of choice
2. Rules are too general
What exactly does this norm of competence imply?
What does a code of ethics add?
Ladd doesnt believe that there is a need for this kind of in-between
solution (in between morality and legality)
Either it is a matter of ordinary morality allowing for freedom of
choice, or it is important enough to make it law and have legal
ramifications for violation
3. Rules are either extremely vague or far too specific
Vague example reference to image of the profession, what kind
of advertising is beneath the profession (Ads that does not solicit
new business but merely informs people about the nature of your
services)
Too specific example an attempt to legislate behaviour. It either
falls into the law or into ordinary morality theres no sustainable
middle ground it with falls in to law or morality, not both on a
middle ground
4. Codes are useless
Why? Because Ethical people dont need codes to tell them what the
right thing to do is and unethical people are going to follow them
anyway.
What is the utility of these codes?
5. The only utility in his mind is the public relations utility
Codes of ethics are an elaborate public relations or marketing
exercise designed to boost the image of the
company/industry/profession
Ask Yourself: What do you think of these criticisms? Is he bang on?

In Defence of Codes of Ethics

1. You can think of the various Professions as clubs within society (clubs that
demand certain skills)
Rules of conduct have been freely chosen by those who have
entered into the profession you cant enter into these clubs without
knowing these rules
Ask Yourself: What is wrong with judging someone
according to the club rules?
If we want to freely chose these clubs, and people want to
freely join, then we are justified with holding people up to
these principles and kicking them out if they dont follow
them.
2. Protects the public by giving them an understanding of what to expect from
people in that profession
Give the public a clear understanding of the values of the
professions
Why is this important?
There is a doctrine of thought that hypocrisy is a particularly
stinging moral accusation to make
o Accusing someone of not living up to their own
ideals
o When subjected to such criticism people are much
more likely to change their behaviour
Think of it in terms of successful historical
moralizers
Martin Luther King
Ghandi
o When you hold mirrors up to people it can move
them to action much more quickly than holding them
to objective standards
3. Professional are in a position to do greater harm to people in the course of
their activities, than your ordinary business person.
Code of ethics for professional captures that additional sense of
obligation that people thus empowered owe society
What is the thinking here? They are licensed because they
are involved in activities that carries with it the potential for
great harm to people than the vast range of ordinary business
activity
Theres a lot of power involved in these professions.
Agency Bayles Models of the Professional-Client Relationship
4 different ways of modelling the relationship between a professional and a client
1. Agency
2. Contract

3. Paternalistic
4. Fiduciary
The distribution of decision making power between professional and client

Agency
Morally , this is the most important thing about the relationship between
professional and client
The professional should be the hired gun of the client
The client has all of the decision making power and authority
The reason they think this way is because the client is paying the
professional
Bayles thought he believes this model is going to fail
1. Model is inaccurate
Professional always have third party obligations that limit the degree
to which they can do their clients bidding
Professional societies that give out the licences
Public
Court
o Example: A lawyer - Obligation to let prosecutors
handle the evidence
2. It is the professional who has the expertise that the client is seeking
The professional has the information that the client wants
If the professional is in a superior power position it goes against the
tide of things
3. Generally, the professional has more power to choose which clients they are
willing to see
Contract
Views the distribution of decision making power between the two equally
Ideal consensus model between two equals view both the client and the
professional as bringing something important to the relationship. The professional
brings skills and information while the client brings in money
Consensus model/Egalitarian model
1. Wrong to portray the power as equal when in reality it is the professional
who has the greater power
Expertise
Capacity to turn down clients
2. What happens when there is fundamental disagreement between the two
Paternalistic
Professional does and should have the decision making power/authority
Power vs. Authority
Power is the factual difference, empirically determined
Authority is the right to use power, legitimate use of power

Example: Medicine
Theres a large gap between the professional and the client here.
Doctors are very educated in their field and the client muse rely on
their knowledge
Bayles thoughts:
1. In certain instances, such as in medicine, he agrees with this justification
2. Generally, not a good model because the possibility of abuse of power is too
great

Fiduciary
Relationship of trust with someone
Even though the professional has superior power in the relationship, the client
should have superior authority (the client still has the final say).
Professional is to advise the client as best he or she can, but the ultimate decision is
left to the client.
This is the ideal relationship between client and professional
Fundamentally a relationship of trust the client is trusting that the professional
will act in a certain way in accords to their interests
Why is this model the best?
Blocks abusive power
Our society values individual autonomy
Bayles thoughts
Believes a professional should treat a client as exemplifying certain virtues
1. Honesty not always easy to be honest, for example and mother who loves
her children and you have to tell her she probably wont get custody
2. Candour full disclosure tell the whole truth and nothing but the truth
3. Competence
4. Diligence hard work
5. Loyalty
6. Fairness
7. Discretion confidentiality
Two-way relationship the client should behave in a certain way toward the
professional
o What might a client owe to a professional?
1. Honesty
2. Ethical duty to pay for professionals services
3. Clients should not ask for the professional to do illegal, unethical
acts
Defining Conflict of Interest
What is it?
Who can get involved in it?
Does conflict of interests apply in business?
Conflict of Interests Clearly apply to the professional and in public office
Every case of conflict of interest involves a conflict between different incentives

o Subjective Incentive
Financial gain
o Objective incentive
Public official - To behave in a way that is in accord with the
public good
Professional - To behave in a way that secures its prime
public good value
o Ex: Doctor- health, Lawyers justice, engineers
health and safety, accountants accurate reporting
Thus defined, conflict of interests only applies to the professions and the public
sector
o Does that mean that there are no conflicts of interests in business?
1. One school of thought
Endorses the belief that there is no conflict of interest in
business
o In business, the overriding incentive is money
o Buyer beware
o Business people dont otherwise have a duty to the
public
2. Other school of thought...
Is more liberal in its definition of conflict of interests
o EX: Employee competing interests
Can advance his companies interests at the
expense of his own career advancement
interests
Can advance his career interests at the
expense of the company
o Subjective personal incentive vs. Corporate loyalty

Module 3 Conflict of Interests

Conflict of Interest Case Study
One like this will be on the exam, only harder
You area government engineer
You occupy a position of power
You are one of three people on a committee that decides which private for profit
companies get ministry engineering contract
You have been with the government for 20 years and are looking for a change
You go to a party in which there will be industry representatives
You enter into conversation with the CEO of a major engineering firm in which a
person of equivalent stature as yourself is getting paid considerably more than you
are currently making
Your committee is currently considering bids for a certain contract
The bidding firms are X and Y

The CEO you are in conversation with is the CEO of X (they are currently bidding
to win a contract that you have partial power over)
The conversation continues and you find out that X can only afford an individual
like you if they win this contract
Ask yourself:
o What do you do?
o What is the ethical issue here?
o What would you do and why?
o What options do you have?
o Whats a good decision? Why?
o Whats a bad decision? Why?

The situation
You are a government engineer on a committee with two other people, A and B
Committee is responsible for determining which private engineering firms get
awarded ministry contracts, X andY
The Setup
You are losing interest in your job and looking to make a move to the private sector
At a social engagement you meet the CEO of S who expresses interest in hiring you
but unless X is awarded the contract they cannot afford to do so
The Questions
What is the dilemma?
o Conflict of Interests
o As a public official you are supposed to decide between rival bids on the
basis of merit
o In this situation there is an enormous incentive to favour one or the other for
personal gain
What would you do and why? What kind of options do you confront and which are
stronger? Why or why not?
What is the moral problem or issue?
Do you understand the meaning of it?
What options would you take?
The Analysis
Consequentialist standard/ Consequentialism
o What are the consequences of my decision?
X and Y will provide the public with the same substantive contract
work.
o What does it matter if you vote in favour of X?
o Would you tell A and B that X has made you this offer prior to voting?
A and B are opposed on the merits of X and Y and you have the
deciding vote.

 Would that make a difference?

o You hesitate to disclose the offer for fear that it might poison the rest of the
committee against X
Shouldnt A and B be concerned about the merit of X?
Wouldnt you wonder about the sincerity of the offer?
Might this be relevant data as to whether they are as good as Y
Who might be harmed?
You
o Some might think that the very ft that he made this offer is data that is
relevant to the calibre of these two bids
What if A has also received the same offer?
Wouldnt that be relevant?
What about this notion of being in a position of public trust?
o How do you think you can trust your objectivity?
Legal Rule of Thumb when it comes to conflict of interests is disclosure.
o As soon as the possibility of conflict of interest arises it must be told to all
Total disclosure
Total documentation
Surrender self to what coworkers believe you should do
Excuse self from committee
Stay on due to honesty and potential objectivity
o In situation where disclosure did not take place legal problem can occur
Broader Theory
Narrow Theory
Only those in public office and professionals can have a
conflict of interest (whereas business people cant because
they are motivated by profit. )
Public office and professionals have motives of profit but
they also have a duty that theyve sworn to uphold
o Justice, Health and safety, public service, nonbribery, and incorruptibility
o If as a public servant, you did not disclose that you had a conflict of interest,
there would be potential for legal trouble
How would this arise?
Fired or professionally disciplined to demoted by minister
Y finds out about the offer and request the minister to launch
an investigation
o Findings may lead to criminal trial or civil case on
the part of Y seeking damages
o Consideration of your options is important
When confronted with these dilemmas do not forget out old tools
The Tools
Consequentialism
o What are the costs and benefits of my decision

o Is it going to harm society

Deontology
o Are there important rules or duties here?
As a public servant, to make decisions on an impeccable,
incorruptible basis
Teleology/Virtue of Ethics
o What would a virtuous person do in this case?
The fact that weve written it into law to disclose, would seem to be
that theres consensus that hiding that you got this offer, isnt
virtuous
Sir Adrian Cadbury
o He was the CEO/billionaire who was very interested in business ethics and
gave many lectures about it.
o It all boiled down to this one question: Can my choices survive the glare of
publicity?
If yes then its probably morally permissible
If not, what you are doing or considering doing is inappropriate

Threefold Answer
1.
Diagnosis of what the issue is
2.
Analysis of what the options are
3.
Some reference to values or principle that will give you the most plausible
solution to the dilemma
* Make a good intelligent argument
Module 4 notes Loyalty and Whistle-Blowing
Corporate Loyalty Case Studies of Whistle Blowing
Loyalty is an expectation of the employer
Theres a fundamental vagueness about its meaning
Difference of opinion between employer and employee
With professions, requirement of loyalty is written into the code of ethics
What does loyalty mean?
Should it extend to cases where whistle-blowing has occurred
Whistle-blowing an employee calling public attention to his companys alleged
wrong-doing.
Case Studies of Whistle-Blowing
The Insider Russel Crow a research chemist at a tobacco factory in Virginia
o At Issue Should he blow the whistle on his own company who has been
denying that they have any knowledge about the addictiveness of nicotine
o In the end he does blow the whistle and reveals that the company knew
about the addictiveness and as a result he
is fired

his wife and children leave him

he loses his home
he was subject to physical intimidation
underwent many lawsuits
Silkwood (a movie based on an activist named Karen Silkwood)
o She was a whistle-blower on negligent practices in the nuclear power
industry
First Challenger shuttle explosion in 1986
o Roger Boisjoly worked for a company called Mortin Thiokol a supplies to
NASA
o Why did the challenger explode? Because of an O ring.
What is an O Ring?
Two separate parts that are made out of inflexible material
can be sealed or held together by an O ring.
Temperature (freezing cold in January) caused the rubber to
peel away from one of the segments allowing flammable gas
to escape and ignite the explosion of the entire shuttle
Boisjoly, involved in the research of the O ring, warned of
the probability of an explosion occurring.
During the investigation, Boisjoly blew the whistle on
Thiokol (after the fact). He gave many warning with much
data and memos supporting the warning
o As a result
Progressively demoted
Fired
Loses family and home
Cannot find employment in his field
o He was frequently asked if he would have don otherwise and he always says
no, he wouldnt change a thing.
Dr. Nancy Olivieri vs. Apotex.
o Doctor and medical researcher at University of Toronto and the Hospital for
Sick Kids
o She is approached by Apotex to do a clinical trial (human testing) on the
children with a drug, which affects the iron level in the blood.
Parents/children signed off on it and participated in the clinical trials.
o One year into it, based on biopsy reports, Olivieri concluded that the drug
left a dangerous amount of iron in the blood (sever side effects as a result)
o Olivieri originally agreed to sign a confidentiality agreement forbidding her
to discuss the trial until it was completed
o She is so upset by the results of this drug and wants to stop the clinical trial
because its harming those who are willing to take the drug for the clinical
trial.

o Apotex finds someone else to do the research and trial testing. She goes to
University of Toronto, The Hospital of Sick Kids, and the Regulatory
Branch of Health Canada which eventually cycles and becomes public news
She violated her confidentiality agreement and essentially blew the
whistle. She said the condition of the drug justified her doing this.
Pros and Cons of Corporate Loyalty
George Duska
Duska does not think highly of corporate loyalty he think its a scam
Why does he disagree with Corporate Loyalty?
o He says loyalty is only appropriate to friends and family, especially when
the employer is a for-profit employer
o Appropriate only in a context where 2 things are true (2 criteria to be met):
4. Its a mutually enriching relationship
5. Self-sacrifice is sometimes required of everybody
a. A business will never sacrifice itself for you, its employee
It is nave and foolish to put much value on corporate loyalty
o Employees owe the corporation a good days work for a good days wage.
One of the most prevalent tools used by employers and business to inculcate loyalty
is the team analogy
o Teams are used to get employees to misplace their loyalty and give more to
the company than is rational
What do you think about Duskas argument?
Would you hire Duska?
Would you talk like this in an interview?
o Believing in team loyalty is at odds with your self interest as a rational
employee.
Do you think whistle blowers betray the company?
Isnt it much better to work in a n environment where people get
along?
o Concern that people may invest themselves too personally, transferring
feelings that are more appropriate for family and friends into the workplace
De Georges Criteria for Whistle -Blowing
Must first distinguish between obligatory and permissible whistle-blowing
Whistle-blowing is permissible if the following criteria are met:
1. Whistle-blowing in question seeks to prevent serious harm/injury to life
and limb
a. Psychological trauma is not included in this
2. Inform superior, but get no results
3. Exhaust all internal channels went through all the chain of commands
or chain of authority and get no results

a. In most cases, informal channels just go to boss and let them

know
b. Can be formal
4. Human resource manager - There can be quite formal channels for
talking about potential issues for Whistle-blowing.
5. Ombudsperson only in massive, public corporations. This person is to
handle complaints and seek out complaints that employees might have
about the company and then deal with them
Whistle-blowing is required if these two criteria are met:
1. Whist-blower has documented evidence of the harm in question and the
source of the harm
2. Probability of success the act of whistle blowing will have some effect in
preventing the harm in question

James Kinds of Whistle-Blowing

James does not like criteria 4 and 5 from George
o Often getting evidence of the harm is very difficult to get
Overcoming a cover up
Legal implication
Getting physical access to the necessary documentation
o 4 and 5 are too stringent of a requirement it puts the burden on the
individual for what occurs afterwards
o Whistle-blowing is permissible if 1,2, and 3 hold; it becomes obligatory if
the harm in question is serious enough
o Main standard should be whether the issue will threaten the health and
safety of the public
If it is, it should be fully obligatory
Example: Doctor Olivieri
James - Categorization of the Kinds of Whistle Blowing
Internal vs. External
o Internal complaining in house
o External complaining to the public (going to the public)
Various forms of public whistle-blowing
Media cases
Responsible public authority (which is what Olivieri did)
this is public but its not mass media
Government authority
Consumer agency or watchdog
Own professional society
o Crafted committees that deal with the issue of
whistle-blowing and help advise professionals about
Whistle Blowing dilemmas
Ex: Whistle-blowing is not that uncommon

o PEO Society for Engineers gets an inquiry at least

once a month that someone is thinking of blowing
the whistle

Personal vs. Impersonal

o Personal harm is being done to the individual
Sexual harassment
o Impersonal harm is being done to the public
Open vs. Anonymous
o Open when you disclose your identity (as the whistle blower)
Why would you ever be open?
It adds credibility
o Anonymous identity remains a secret
Its much easier to dismiss as a disgruntled employee/ an
anonymous complaint
Current vs. Alumni
o Current still on the job, but whistle-blowing about current situation
Issue with the timing of the harm in question
May not have time to get another job
o Alumni have left the job
Easier to portray alumni as having other motives

**Mid-term analysis of a whistle-blowing dilemma

Protection for Whistle-Blowing
Resources and protections for Whistle-Blowers
o Legislation that makes it illegal to fire someone for Whistle-Blowing
Must be proven: If you can prove that youve been fired for blowing
the whistle then you can sue for re-instatement (not usually done
because going back into a hostile environment) or sue for a cash
settlement
o Professional get assistance from their professional society
Committees to determine if there is a good case
May have funds to help pay expenses
Not 100% salary recovery but there is an income to help pay
for expenses
o Ombudsperson
They answer to senior management and can only make
recommendations to them
It does protect Whistle-Blowers in that they are able to make
accusations to someone who is not senior-management
Required to do an investigation and take accusation seriously
What they can do depends on the company and the job
Is corporate loyalty rational?

If an employer is not legally entitled to do something, they cannot pressure their

employee to do it for them nor to keep quiet about them doing it
When the risks are less (not talking about public health and safety, just your career
path), you have the Duska to say be self serving and the more soft people who say
whats wrong with a little corporate love every now and then.

Module 5: Internal Health and Safety Issues

Related Issues of Employee Rights
Case Study Westray Coal Mine Disaster (Nova Scotia, 1992)
26 people died
Subsequent Inquiry into the Disaster
o Complete breakdown of al reasonable health and safety measures
o Such a recent occurrence
o Complicity of everyone in what went on
Management had many problems
o Focus on maximizing profits
o Mine needs to be continuously active
o Mandated long shifts
o Overall project focus was to get as much out of the mine within a certain
period of time
o Willing to take risks with the health and safety of their workers
o Insensitive to workers complaints about health and safety
o Threatened people with losing their jobs for complaining
o Most of the management had no certification of training in min safety
Workers were the least to blame in this case
o Acquiescent (docile) workforce
o Raised some concerns
o Proposed some alternatives
o Docile because they needed the work and jobs were hard to find in metropolitan centers such as in Nova Scotia
Role of the Regulators of the Nova Scotia Civil Service
o Each of the government ministries involved in the regulation of mines bent
to the will of management during inspections
Ministry of Labour
Department of Health
Inspections of standards were spotty
When they did occur, civil servants seemed to be uniquely
susceptible to managements interpretation of the issue
o Tend to see more of this is poorer and more remote areas due to lack of
government resources
Findings

o Even though adequate standard were enforced, there was a compliance

problem
Results
o An explosion which could easily have been prevented
More ventilation: bring in air from the outside
Stone dusting shoot additional particles into the air that render the
methane inert so that it doesnt blow up
o Two of the senior management faced with charges of manslaughter and
negligence causing bodily harm
Although the charges were subsequently stayed (which means the
prosecution did not follow through with the charges)
o Familial lawsuits are filed
o Westray goes bankrupt paying legal fees.
Extreme example and rarely encountered
Important to see the degree of complicity and just how recent it is
It is a grave mistake to believe in the notion that because education is better and
because we are a more sophisticate society, that issues like these are not important

Health and Safety Law - Constitutions, Statutes, and Common Law

Most provinces in Canada have Health and Safety Act, which attempts to enforce
compliance on employers to ensure the minimal amount of safety in the workplace.
Constitution
o Most fundamental law
o A rule for making rules
o British North American Act (Amended in 1982)
Details procedures by which further rules can be made
Further rules are statutes
o The Ground Work
Statutes
o A particular piece of legislation that sets out certain requirement in detailed
form
o Explicit law designed to regulate something
Taz Code of Canada
Ontarios Health and Safety Act
Motor Vehicle Act
o The vast majority of things that we know as law are statutes
o Its in between a constitution and common law
Health and safety act is a statute
o Mostly actions
Common Law
o A set of court precedents which reflect custom in of the country in question
o Additional law as that arent explicitly drafted in a piece of legislation
o Rights which are not written into any codified piece of legislation

Even if you dont have a right in the constitution or a right specified

by a statue, you may still have a right in the common law
o Rich sources for protecting and expanding peoples freedom

Rights and Duties of Employer/Owner of a Company

Both employers and employees have a set of rights and duties that they are both
entitled to and responsible to fulfill.

Rights

o Right to seek a profit (not to get profit)

o Right to control of direct the company within the law
o Right to expect your employees to take all reasonable measures to comply
with health and safety regulations
o Entitled to fire people with just cause
Theres a limitation put on what you can fire a worker for. Whats a
just cause for firing?
Theft from employer
Chronic absenteeism or lateness
Inability to perform job
Fundamental incompatibility between employer and
employee or employee to colleagues
Disclosure of trade secrets
Fundamental immorality on the job
o Lying on a job application
o Harassing coworkers
Material economic grounds
o Economic recession I your industry
o Job redundancy
o Cost pressure and cant afford to keep them on
What is not a just cause?
Whistle Blowing
Personal reprisal (nothing to do with the merits of your job)
Duties
o Duty to fully inform and disclose to workers all known health and safety
risks prior to hiring
o Duty to fully train workers to know about and control such risks
No one is entitled to a 100% safe work place because there are no
guarantees in life.
o Duty is not on the part of the employer to bear all cost for safety equipment
However, any big ticket item has to be bore by the employer
They can require their workers to have work boots, goggles, etc and
do not have to pay for them
o Required to continuously monitor and upgrade safety measures and monitor
to ensure compliance

Rights and Duties of Employee

Rights
o To be fully informed of health and safety risks and trained in their
minimization
Employers often fail to respect this entitlement
If you dont want a risky job, you dont take it
Buyer beware you are the job seeker
o Point at which it stops
If the employer has all the information about the risks of the job
They are in a position in power and have the duty to disclose
all the risks associated with the job. If the employer
discharges that duty then we can talk about buyer beware. If
you are told of all these risks and you decided to take the job
you are assuming the risk yourself
o Right to refuse to work under conditions that they believe risks their health
and safety except where the work itself is regarded as intrinsically risky
(like a policeman or fireman, etc)
Public health and safety
Ambulance
Health care workers
Exposure to biohazards
o Right not to be wrongfully dismissed
In the second essay that was to be read for this module, Discourse of Control. The
author suggest an additional employee right
o Right to have an accountable management
o This article is heavily critical of command and control hierarchies that
corporations have traditionally employed
The author thinks the discourse of control should be replaced with a
discourse of accountability (more responsive and more of a give and
take)
Managers set our certain goals for a company and engage in
responsive relationship with employees
Flatter organizational style
o No rigid hierarchy
o CEOs are closer to frontline workers
o What do you think?
o Can that be seen as a right or is it anew age management trend?

Duties
o Strive to implement all health and safety training and laws
o Duty to not knowingly create health and safety risks as a result of ones
own conduct
Forklift drivers horseplay that is increasing health and safety risk
A trend in Productivity and Leadership Studies
o Opposed to old hierarchical command and control focus of traditional
corporations
o Emphasis on flatter organization CEO is closer to frontline worker
o Emphasis on collaborative work environment
o Integrating whole person into work environment
o To allow workers a relaxed atmosphere where they are free to inject their
natural off-work personality into the work environment
Studies in productivity that show that a flatter organizational structure combined
with whole-person human resources polices do measurably increase productivity
o Structurally impossible for certain industries to integrate such polices
Financial services
Certain kinds of manufacturing
o Vita to a business plan for other organizations
Intellectual property
Software
Pharmaceutical innovation
biotechnology

Finding the Balance Between Too Plush and Too Stingy

When it comes to health and safety issues, employers generally experience a
conflict of interest
o One the one hand, the corporation will want to make as much profit/money
as they can
o On the other hand it all costs money
Implementing training on health and safety issues
Buying all the health and safety equipment
Devising a flatter corporate organization
Injecting a whole person human resources strategy

Health and safety expenditures are the second biggest human resources related
expenditures after wages
Conflict of Interest between pursuit of profit and trying to come up with an
adequate health and safety policy
What would happen if you were too stingy?
o Injuries
Lost of productivity of the individual who is injured
Lawsuits
o Image Suffers
Lost sales
Problem recruiting new members
Bad public relations
Fines
Insurance premiums go up Workplace Safety Insurance Board
(WSB)
Sickness
Bad air people can develop breathing problems
Unionization if you are confronted with the unionized workforce
your costs will go way up

Mental health and Safety

Is harsh criticism a health and safety issue?
Should employers have to concern themselves with mental health issues?
To what extent should employers be concerned?
What is meant by mental health and safety?
Is stress a concern for employers?
Is mental health and safety and issue?
o Mental fitness is difficult to include in a health and safety policy
Less obvious
More difficult to prove
Subject to controversy
o Stress causing physical health and safety side effects
Mental health issues
Critical pressures
Verbal harassment
e.g. Air Traffic controller
o Should employers be concerned about mental health if it is an intrinsically
stressful situation
o What about chronically long hours? (12-15 hour days)
o What do you think, is that a health and safety issue?
The Right to Privacy
Do you think employees should have a right to privacy?
Corporate Monitoring of Employees

o Email
o Web surfing
Right to Own personal Informtaion
o Drug testing
Do you think mandatory drug testing is fair as a condition for a
job?
o Genetic Screening
Common in the United States because private health care is very
expensive for individuals and corporations
Why shouldnt employers be allowed to genetically screen
employees to see their predisposition to contract certain debilitating
condition that the employer is going to have to pay for 15-20 years
time?
How can they be fired then? You cant just fire someone, you must
have a just cause
Genetic Screening is Analogous to Discrimination
Disorders are fundamentally characteristics that are not
chosen
Analogous to gender or racial discrimination
Two Arguments against Genetic Screening
Genetic illnesses might not actually develop, or fully
develop
Advances in health care may occur between now and the
time of contraction, which means the illness may be less
costly or even preventable in the future
o Think of yourself as the employer
You are the one who will be paying the insurance premium
Doesnt that affect your thinking?
Is it a legitimate reason to appeal to costs in these cases?
What about drug testing?
People do drug testing to avoid having to hire someone, train
them, and then have them leave or you need to fire them
because of poor performance because they are doing drugs.
It saves expenses when you can just hire someone whos
clean.
Fair wage
There is a Statutory right to equal wages for equal value in the public sector (not the
private sector)
Why has the private sector resisted the attempt to enforce this?
o Notion of equal wage for equal work get blurry when the work isnt exactly
equal, but it is believed to be just as valuable
o Difficult to come up with the same scale value
o They have full committees in government who are devoted to thinking
about this and making these kinds of judgments

o It is very controversial
The private sector is exempt from the equal wage for equal work. Although often
with huge employers you will see some language to the effect that they are
committed to equal work for equal value.

Right to a Job
Intro in the chapter and essays within it both defend the right to a job
This is an extraordinary controversial assumption
No such recognized right in Canadian law
There is a right to a subsistence income, a right to welfare
Thats different than a right to a job
Its implausible to argue for a right to a job for everyone because some people have
terrible circumstances where they are not employable (physical deformities)
They have a right to a subsistence income but not to a job, because thats a different
thing
Module 6 - Eternal health and safety issue
Its not just about pollution that is the health and safety issue, its also about
product safety (some products physically damage people)
The Politics of Pollution Control
Is there really a problem?
Jan Narvesons Libertarian critique of Environmentalism
o Convinced that there is no environmental problem at all
o Vocal minority group out to feather their own nests
o Base problem on dubious science
o Hysterical socialist agenda
That is misanthropic
Systematically underestimates human capacity for technological
adaptation
Where is the problem?
Is it a problem that we keep on taking?
Isnt that what the earth is for?
Do we need to be concerned about depleting all of our resources?
o Oil and gas companies
o Tress and reforestation
Where does this hysteria come from? (that if we take and take there will be nothing
left and mass catastrophes)
John Palmers Critique of Environmentalism 2nd reading
o Resource gets scarce
o Supply falls
o Price goes up
o New producers are attracted
o Deforestation is all supply and demand

o Diminishment of the resource creates incentives to plant more

Environmentalist being critiqued have certain convictions about the rate of resource
depletion
E.g. Oil is going to run out in 15 years
E.g. Forests will be depleted in 35 years
o Deep scientific questions to ask about whether those are accurate claims
E.g. debate about the science behind global warming
Kyoto Accord debate as to whether global warming is
even happening
Or is this just a 200 year hot cycle
o Does industrialization have anything to do with global warning?

Stewart and Dickeys Optimism Re: Pollution Control Reading in text book
The Issue of Optimism and Pessimism
Stewart and Dickeys Optimism
o Prospects of finding a balance between:
Pursuit of short-term profit goring and maximizing standard of
living
Some kind of environmental sustainability
Schreckers Pessimism (not in reading)
o Doesnt believe that this balance is possible
Steward and Dickey: The Pollution Control Argument
It is in the self-interest of business to care about environmental responsibility
o Public image
o Prolong their resources
o Employees dont want to live in a polluted environment
o Cost efficiency do more with less
o Employee morale helps recruitment
o Increase profit
With raw demand
Willing to pay more
Stewart and Dickey Favourably Cite Public Opinion Polls
o Changes in consumer awareness and consumer behaviour are beginning to
create demand for green products. (people are becoming more green and its
changing they way they buy things/product demand)
o Do you think thats true?
o They believe that this shift is permanent and built into the marketplace?
Do you shop at Body Shop or Walmart? $15 vs $3 for lotion
o What do these surveys actually indicate?
Surveys are notoriously unreliable when it comes to long term
attitudes and long term changes
People dont tell surveyors what they actually believe
Often give answer that they think surveyors wants

1960 election between J.F. Kennedy and Johnson 70% of people

told the poller that they voted for Kennedy but in reality many of
them lied because that was the closest election in history
o Environmentalism has gone in cycles
Early 1960s Silent Spring by Rachel Carson
Late 1960s counter culture movement
Early 1970s creates momentum in favour of all the proenvironmental legislation
Late 1970;s environmentalism is not on the agenda
o Connection with Economic Growth
Ealty 1980s difficult for economy
Mid 1980s economy heats up again
Late 1980s environmentalism is a hot issue again; Brundtland
Commission
Early 1990s recession, little concern for environmental issues
Late 1990s economy up again, but environmentalism cannot
match late 1980s
Rio Conference scheduled during the pack of interest in
89, then the economy tanked and nothing came out of Rio
because they wanted the recession to end
o Dont recession show that people are more concerned about their jobs than
about the environment?
Income and standard of living (income goes up you buy a nice house
and nice cars but it doesnt mean you wont shop of Walmart
anymore)
Ten years ago the concept of stakeholder as opposed to shareholder
didnt exist
Sustainable development and the Brundtland Commission
Japans economic success see lecture for more on this
o Does concern mean a change in consumption pattern?
o Do you look for green information on your groceries?
o Are you just going by price?
There is progress in knowledge and on some front but what Stewart and Dickey are
saying is that there has been a permanent progression in consumers attitudes
towards what they purchase

Schreckers Pessimism Re: pollution Control

He is a skeptic about pollution control and its effectiveness
He is skeptical about our ability to find that balance
Schrecker has 3 arguments as to why pollution regulation will not work without
substantial political reform:
6. The information needed to develop appropriate standards for pollution is in the hands
of industry and difficult for the government to access

o Counter argument to this could be for them to just legislate that they have to
provide that information: Schrecker has something to say about this (cover
this later)
o This is not part of the current laws currently preference is to adopt a
cooperative stance between industry and government
o Government relies on information provided by the very polluters who are
supposed to be regulated
o For polluters, this is a huge conflict of interests
Prevalence in North America is cooperation between environment
ministries and industry
Industry is trusted to release reliable information
Have a say in the data that the regulation relies on
o Punitive regulations cannot be placed on industry or they will withhold
information they will delay the information forever (lost in the mail, spell
check, lost in the mail again, etc)
7. Majority of the pollution comes from heavy industry
o Scientific debate about whether consumer measures are important at all
o Heavy industry usually found in remote, sparsely populated areas
This gives polluters enormous political sway in the districts they
represent
Their lobbying efforts of the company and its employees are much
more effective
They are able to exert a concentrated political force because of the
way electoral boundaries are drawn in North America
o Owing to their concentrated political influence, polluter will shape the
regulations to suit their interest. How? Through:
Direct lobbying
Jobs blackmail If you increase environmental standards then we
will move our business to Mexico and hundreds of jobs will be lost
and you wont be re-elected
Political fundraising
Direct support of candidate
o Remember: Although public opinion changes on environment protection,
legislation implemented during the cresting phase will survive
Shrecker does not believe that this is true
8. Politicians are crafty and have discovered the prefect legislative solution for dealing
with pollution
o Pass tough legislation, but fail to give enough resources to those who are in
charge of enforcing the law. Its the perfect short term solution because you
satisfy the environmentalists by pointing to the tough regulations and you
satisfy the business people because they know that the regulations are not
going to be enforced
Pass the toughest law and then you can say to all the
environmentalists that you (the politician) passed the toughest laws.

Meanwhile you are cutting back on the budgets of the very agencies
that are responsible for enforcing the law
Other solutions that arent as good: talk it up, make speeches about
new taxes, full cost pricing, environmental bill of rights etc.
o There is a great deal of hope for effective pollution control of heavy
polluters as long as:
Political incentives remain the same
Electoral boundaries are drawn the same
There is a short-term electoral focus
o ISO International Organization for Standardization
ISO Inspection and verification process is heavily reliant on this
cooperative paradigm
Questions raised:
Reliability of the data
Level of due diligence taking place
Ford Pinto Case Study
1971 Ford Pinto What is a Pinto and what do you think your life is worth?
Its a small ugly car - Who was the target market/who bought pintos?
The facts
o Target market = entry level consumers (18 year olds)
o 1976 US federal safety standards on the position of gas tanks for cars
were released. Thus when the Pinto was made there was no law regarding
safety standards on car gas tanks.
o The development of the Pinto violated none for the legal standards
o When the law was passed they made a new model, however by then their
PR was already ruin so
o Pinto retired for good in 1978-1979
The Design Flaw
o Gas tank was placed behind the rear wheels in such a way that if the car was
hit at speeds any greater than 20 mph there was a 70% chance of the steel
crumpling and puncturing the gas tank wall
o This causes the tank to spark, the sparks lit the gas and the car would blow
up
The Problem
o The engineers new that when the Pinto was introduced there was this design
flaw and the probability of an explosion. However they were thinking of
only two things at that time:
However there were no federal safety standards
The cost-benefit analysis
o Who are we selling this car to? Essentially lower,
middle class entry level consumers (18 year olds)
How does the law evaluate human life?
On average a 20 year old is worth $250,000

This number represents:

o Familys plan of loss and suffering
o Average lost future wages

Fords Argument
o Ford is aware of the design problem
o Not all cars will explode
o 20 mph is a considerable speed
How many of the cars will be in collision?
How many are going to be rear-ended?
How many that are rear-ended are going to be travelling at 20 mph
or faster?
Of those only 70% are going to cause death to occupants
And of those 70% - Who will have the financial resources and the
guts to sue Ford Motor Company?
If they do sue, are they guaranteed to win?
And those who doe win? They will only get $250,000
On that basis
o Cost per car to fix problem is $12.00
o Whole objective is to gain market share in youth market
o Total amount: $21 million 1971 US dollars
o Cost analysis of possible legal costs determined to be less than $21 million
o Result as a matter of management economics the Pinto will not be fixed
o Many deaths as a result of their decision
The Flaw
o Their projection was wrong: The cost of litigation up to 1990 was over $200
million
What is the obvious moral problem with this way of proceeding?
o This case demonstrates the limits of the data received from a cost-benefit
analysis
o Problem with the Cost benefit Analysis
Fails to take into account peoples rights and their violation
Insensitive to the distribution if costs and benefits
Sum of the costs and sum of the benefits usually to the
corporations point of view
Who benefits? For executives and Ford shareholders
Who receives the costs? Innocent eighteen year olds who are
looking to buy a cheap, reliable car
o The whole cost benefit way of thinking , which is so heavily ingrained in
business training is not morally comprehensive it leaves out vital moral
information such as peoples rights and who these cost are going to fall on

Product Safety Laws

Three Branches of Law that are Designed to Protect Consumers
1. Negligence

Two Vital Elements

Harm caused by a careless action or omission
Violation of the Reasonable person Standard
What is the Reasonable Person Standard?
Lawyers judges and juries what would a reasonable person do if
they were in the exact same circumstance?
Evaluate the behaviour accordingly
The reasonable person is an average person
Custom and experience inform with reasonable person standard
E.g. Running a red light violates the reasonable person
standard and is considered negligent behaviour
E.g. Donohue and Stevens applying this standard to
products: A consumer opened up a Ginger ale and came
across decomposing snail remains in it.
The vast majority of product safety cases are due to negligence
2. Violation of warranty
The company attests to the fact that their goods will perform to a
certain standard
If product does not meet standards, it will be replaced
Much more straight forward to prove them negligence
Did you product perform as set out in the warranty or not?
Warranties usually expire after a year or two
Warranty may only cover specific parts
3. Strict liability
Liable even without proof of either negligence or violation of
warranty
Strict Liability has been applied and developed in very limited
frameworks
Applied to goods that are intrinsically dangerous
Firearms
Chainsaw
Lawnmowers
Sharp knives
Fireworks
o These goods are inherently dangerous yet have not
been declared illegal
o As a profit is made from their sale, companies should
be held responsible for some of the damages incurred
as a result of product use
Who should pay the cost of the damage?
Should it fall entirely on the person hurt?
As a society we have said no those who make a profit of
the sale should bear some of the cost and should actor cost
of damages into cost of doing business.

Pros and Cons of Using Nuclear Power

Nuclear Power Some Ethical and Social Dimensions: Read this article in the
health and safety chapter! Orend speaks highly of it
What is good about nuclear power? The Pros:
o Cleaner in the short term.
o Renewable (its expensive to do so but it is renewable)
o Provides a large amount of energy relative to the inputs that go into it
(inputs = the raw material used, not the expenses)
o E.g. France relies heavily on nuclear power and has developed expertise in
using it. Theyve never had a melt down and get the majority of their energy
from nuclear power
What are the other alternative sources of energy that are dirty?
o Coal major source for Ontario Hydro, dirty emissions, strip mining, nonrenewable (once its dug out and used its gone)
Whats negative about nuclear power? The Cons:
o Issue of Nuclear waste
Radioactive by product remains radioactive for at least 1000 years
Reactors could also be considered nuclear waste because they cant
last forever and the breakdown like every other piece of machinery
Therefore: the reactor will outlive their usefulness after about 50-60
years
o Extremely Expensive to Start
Huge sunk cost to get plant up and running
Expertise required to build and maintain plant
o Potential Dangers
Meltdown
E.g. Three Mile Island Pennsylvania (1979): not a meltdown
but a leak of radioactive gas from the core
Chernobyl, Russia (1986) meltdown: over 1000 people
were killed and much cancer resulted
Terrorism tempting to terrorism
This article allows us to
o Raise the question about the moral acceptability of risk
o It raises the issue of intergenerational justice
o What do older people owe the younger generation?
o What do the current living owe future generations?
Argument 1: The article argues that taking the nuclear option is unjust and poses a
morally unacceptable level of risk to future generations (2 arguments here)
o What is meant by a morally acceptable level of risk?
o Distinction must be made between risk to self and risk to other
o Risk to self vs. Risk inflicted to others

o Most people think the scope of risk is much wider for risks inflicted
willingly to oneself those inflicted on others. You need to be more cautious,
careful and conservation when it come to intentionally inflicting risk on
other people
o Risk to self
Getting in a car
Motorcycle license
Chose of career
Notion of Western moral thinkers: if the vast majority of the burden
of risk taking falls on the individual then its the individuals chose
to make
o Risk inflicted on others
Issues of responsibility
At what point does the potential for harm reach a threshold of
irresponsibility?
Argument 2: Nuclear power is irresponsible because an adequate disposal or
containment process might not be found
o What is the threshold of risk that we can inflict on future generations
appropriately? In the case of nuclear power, the threshold has been
breached.
o Big Issue with it is How to Contain Nuclear Waste
Current strategy focuses on storage and containment
No reliable way to dilute material
Dump in old coal and salt mines and seal it off this is what
we currently do in Ontario with the Canadian Shield (a large
rock far away from human population where we dump
nuclear waste now)
o Is this a responsible way of waste disposing?
The authors say now for these reasons:
1. Do not know the effect that boring into the rock will have on the rocks
stability
Is this a responsible thing to do?
Is the level of risk breaching a threshold of danger?
Knowledge of geology
Shift of terrain
Radical changes in parts of the world
Deforestation
How can you reliably count on a storage facility when there have
been so many change over the past 1000 years?
By using nuclear energy we are inflicting a level of risk
regarding potential future exposures to carcinogens
2. What can be done with the entire reactor facility?

Duties to Future Generations

Nuclear Power Some Ethical and Social Dimensions

How are we treating future generations unjustly?
4 Principles of Justice
1. Future generation will be heavily impacted by the decision to use nuclear power, yet
they have no easy in the decision
o What do you think about this principle?
o Is it a good principle of justice?
Intergenerational equity
Mandatory retirement
o Isnt this just life?
o Is it unjust that we are not living with the impact of those who went before
us
o Isnt this part of the human condition?
2. Future generations will have to bear the cost of nuclear power and will not receive as
much of a benefit
What to do with nuclear waste
How to ensure that storage facilities are continuously safe
Dealing with increased rates of carcinogen exposure
This violates distributive justice between generations the distribution of benefits
and burdens in society (not just economic/financial benefits)
o E.g. Inception of railroad in North America (1750-1850)
Benefits today are no the same as previous generation
Many made their fortunes off the railroad which cannot be done
today because its a dying industry
Huge part of Canadian politics was dominated by the railroad
These fortunes were invested in development that we have benefited
from
However, we still have to deal with the costs of dead track,
pollution, and the fact that the railroad is a dying industry
o Does that make it unjust?
3. Transmission Principle
o Dont leave the world worse off than how you found it
Is that rule true with nuclear power?
o Need to understand standard for better or worse
Value judgment -- What is the appropriate value for saying better or
for worse?
Measurement issues -- What is the appropriate unit of measurement?
o Dangers of nuclear waste are so obvious that we are making the future
worse by relying on nuclear power theres no plausible argument for
saying its better even if it creates financial gain the harm it causes to the
human body is much worse and not worth the economic gain
Counter Argument
o Nuclear power may be cleaner in terms of emissions

4.

o Confronted with choice between dirty air and disposing of nuclear waste
o Might have to make a more subtle judgment that parts of nuclear energy
might actually improve the world
o What do you think about that argument?
o
No Harm Principle
Do not intentionally inflict harm on another human being
By consciously adopting a strategy of nuclear power with its necessary result of
nuclear waste, we are intentionally inflicting harm on future generations
Problem with applying this principle with this case is: It assumes that we should
treat the future life on par with present life
Why should the future be taken seriously?
Do future generations have rights that we have somehow violated?
Where do the duties to future generations stop?
Is it an issue of justice or self interest?
What do we own future generations?
What is the moral basis of that duty if we owe them something?
Is it anything more than a self interest in providing well for our children?
Is that a sufficient basis?

Economists and Statisticians commonly think about future value

They say we should care about the future but discount its value
What do you think about that strategy?
Is that a good compromise?
Is it morally outrageous?
o 1st draft of US Constitution stated that slaves were worth 3/5s of a person
Is that what we are doing?
When we talk about the environment, there is this notion that the reason for doing
so is to improve the future
o Is it just our own quality of life that we are doing this for?
o Is it a selfish regard for maximizing the welfare of out children?
o Do we owe it as a matter of moral duty?
o If so, what is the ground of the duty?
Why did we get away from nuclear power?
o Complex Factors have led us Away from Nuclear power:
Cost of Operation are Substantial
Government short-term economizing. Short term
economizing to gain a short term political advantage but it
has long term consequences
What does short term vs. long-term mean?
Political Pressures
Responding to fears

Currently there are no plans to build any new nuclear plants in North
America (however in Europe there are plans to rehabilitate existing
generators and build new ones)
From a political perspective, Three Mile Island skewered the
nuclear movement in N.A.
Was that a hysterical short-term reaction that was wrong?
Should we bas future energy planning on short-term political
reactions like that?

Module 7
Intellectual Property
Not in the text but much controversy over it
What is intellectual property?
Fields in Which Intellectual Property Issues Arise
o Software, Medical research, Biochemical research, Advertising, Marketing,
Design, Fashion, Engineering, Television, Production and film,
Commercial, Publishing ,Construction
Key ethical and legal questions about intellectual property:
Who should own and benefit from the creation of new knowledge?
o Intellectual property - Rights of ownership to a new piece of knowledge
Tangible Form
E.g. Own commercial that one has produced
o Theres the film and digital product
Abstract Form
E.g. Own an equation in chemical engineering
o Abstract equation that are important to healing a
virus
E.g. HIV Research
Many intellectual property claims are made as researchers
pursue more effective treatments
Controversy over affordability of treatments due to
intellectual property protection
Those who own drugs want to be paid a certain amount to
ensure a profit
Developing world, where problem is biggest cannot afford
drugs
Strong humanitarian argument for access to knowledge, but
at the same time have intellectual property claim
What do you do?
Who should benefit from that knowledge?
The Inventor should own and benefit from the creation of knowledge, for 2
reasons:
o Personal

Public policy decision that this is the person who morally deserves
ownership
Some one needs to own it; it should be the person who came up with
it

o Social
As a society, we benefit from people devoting themselves to
production of new knowledge
Incentives must be present in laws and in economy in favour
of generating new ideas
People are not going to devote themselves to the creation of
new knowledge unless they are going to get to own it
Benefits to inventor have to be assured and if it so happens
to benefit society so much the better
o Ex: movies you have to pay to get it but you enjoy
it
Pros and Cons of Intellectual Property
Pros
o Inventors are rewarded by ownership of intellectual property
o Will not get same generation of intellectual property if inventors are not
rewarded
They wont invest the same kind of time and energy if they arent
rewarded
Cons
o New knowledge should be open to all
Weapons is it good for the world that people creating new
weapons has patents
HIV is it good for the world for those who have the patents on
these cures to have so much power of thousands of people who cant
afford it?
o Inventors not only own property, but are also in position to sell it
E.g. Oil and gas companies
Own patent for solar power
Must watch out for new companies who will take market
share
Solve this by buying technologies that would be used
Economic self-interests

Examples Illustrating Ethical Controversies

The Ethical and Legal Controversies Involved in Intellectual Property Creation
E.g. Computer Science Co-op Student Software
o Scenario
Invented a new piece of software for co-op employer
Company expressed an interest in buying new software

Student received $3000 and signed off rights to software

Company sold software for $17,000 per unit
o Did they take advantage of his lack of knowledge?
o Is that a fair reward?
Unaware of the amount of money involved and the amount of profit
going to the company.
o Was he treated legally, but not ethically?
E.g. The Grandfather and the switch
o Scenario
Engineer who invented a new switch
So successful, that eventually it became the sole product made by
the company that he worked for
Worked his entire life for this company
In exchange for inventing the switch he received
Black and white photo of the president of the company
shaking his hand
Plaque
Christmas ham
Work had been adequately rewarded through wage; therefore,
intellectual property was owned by company
The case of B.F. Goodrich vs. Donald Wohlgelmuth
o Donald Wohlgelmuth - Chemical engineer (1950s)
Given the assignment to start working on producing space suits
Unsatisfied with his wage, tries to negotiate a raise several times but
gets turned down each time
Loyalty and ethics have their price and international Latex has paid
this price, quote by him.
International Latex offers him the same job for more money; he
takes it
Goodrich seeks an injunction against Wohlegelmuth
Trying to stop him from being employed by International
Latex
Civil law Liability vs. Non-liability
Disputes that dont involve the state
Designed to handle private disputes (especially those of
monetary value) between citizens and companies
No such thing as being guilty of a civil law case- if you lose
you are not guilty you are liable
Criminal law Innocence vs. Guilt
State going after individual or company for certain kinds of
conduct
o Liability Case
The vast majority of civil law cases are liability claims/about
liability

Damage has already occurred

Backward looking because they are just looking for compensation
Injunction
Forward looking because they are seeking to prevent some future
action
Seeking to get a court order to stop something from
happening
Goodrichs Argument
Access to Goodrich trade secrets that he is going to share with
International latex
Goodrich owns Wohlgelmuths expertise in that field
Hired straight from MIT to work I brand new area
Developed department, knew all trade secrets,
And gained expertise by working at Goodrich
You owned that time and attained it on company time, through
exposure to technology, lab resources
Wohlgelmuths Argument
Without his training and ability, the work would not have been
completed
Synthesis of companys resources and Wohlgelmuths brain
Where do you draw the line between the companys contribution and
Wohlgelmuths?
Wohlgelmuth says you cant say what is from his brain and what is
from the company you cant draw a line between whats from
what
Judges decision:
It would be professional slavery to make Wohlgelmuth work for
Goodrich for the rest of his life
If Goodrich won, Wohlgelmuth would not be able to earn a living
without being radically retrained
Agrees that Goodrich cannot specifically say which part of that new
knowledge it is solely responsible for
Wohlgelmuth goes free
Result
If a contract had been signed at the beginning of employment, the
judge would have ruled in favour of Goodrich
After this decision, employees in the IP are required to sign
standard, non-competition, non-disclosure agreements at the start of
employment
Wohlgelmuth forbidden from disclosing Goodrichs trade secrets to
International Latex

Kinds of Intellectual Property

Four different kinds of copy right protection...

Discuss
o What they mean
o What they are
o Costs and benefits

Kinds of Intellectual Property

Copyright
o What is copy right? Forms of Copyright:
Publication in all their forms
Articles, books, journals
Television media
Shows, commercials, broadcasts
Some software code is patented instead or copyrighted on going
debate whether to take a patent or copyright for these kinds of things
o Copy right is the right to copy something
E.g. A book you have the right to your manuscript and to sell it to
other people
o For something to be copyrightable it has to be original
Exact expressions or sets or words and images cannot copyright
abstract and general ideas
With music, it is the exact set of notes or lyrics
o How long does copyright last?
Generally speaking, 50 years beyond the death of the author
Generally speaking, a copyright is not renewable; after the 50 years
material becomes public domain (anyone can then copy and sell it)
Movement by Disney to get copyright either extended or make it
renewable
Disney has partially succeeded in protecting their own
intellectual property
When there is considerable amount of money at stake, courts
might be willing to take a look at renewal, especially if there
are issues of the authors descendents needing that money
o What is a copyright?
Easy to prove violation of copyright in the countries with developed
intellectual property laws
Problems can be experienced in other countries where
intellectual properly laws are not as developed a those in the
West
o E.g. Russia they have all sorts of bootleg copies of
Hollywood movies and its almost impossible for
Hollywood to get copyright laws to be followed
there
Copyright is very cheap to obtain
Copyright inheres in anything in original form

Copyright can be registered for those things which may generate

great amounts of revenue
In every developed country, highest level of government is
responsible for intellectual property (for us and the US its
the federal government)
o E.g. Ottawa and Washington
Application to register goes to IP office in
Ottawa
Receipt is received from IP office as
evidence of registration
The issue of who invented what first may come up in copyright
litigation
E.g. Music
o Registration receipt guarantees ownership, if no
receipt then...
o Must rely on evidence with no receipt
Note books
Witnesses
Mail document to self for federal postal date
and leave it sealed
o Summary of what a copyright is:
Inexpensive (registration is less than $100)
Rights of copy for 50 years after death
Public domain after 50 years
Exception are made
o Difference between Royalties and Advance Payments
Royalties
Certain privileges of sales or net sales which are specified in
contract itself
Advantages:
o More common to actors, producers, agents
o Separate negotiations, with more money exchanged
o E.g. Titanic, Star Wars
Advance payments
Upfront money which is often paid out before good gets
produced
o Advance on royalties up front money subtracted
from subsequent royalties
Advantages
o Money up front
o Can be controversial as to how many units sold or
what net sales actually means

o Royalty money may never appear the

product/music/tv show, etc. may not be a hit, it may
be a flop
The best companies use royalties and advance payments to settle
controversies over who owns intellectual property
It is difficult to prove who owns intellectual property created
on company time and with company resources
To avoid expensive lawsuits, contracts specify what form of
payment will be given for creation of new property

Trademark
o Definition of Trademark: Mark of a trade associated with specific goods
Design, Symbol, Graphic, Word, Colour
People have trademarks to build a brand and to get public
recognition of your good
o What gets trademarked?
Nike Swoosh, Company Names, Golden Arches, Special K, Tony
the Tiger, Count Chocula, Colonel Sanders, name of products
o Must be registered with the intellectual property office (in Ottawa for
Canada and in Washington for the US)
o Requirement of originality
o Cost is somewhere between copyright and patent (patents are very
expensive)
Trademark lawyer does search on the good in question
Lawyer files an application on behalf of the owner
o You lose it only if you dont use it
E.g Coca Cola lettering of the words and that exact shade of red
colour used on containers has been used for over a hundred years
Routinely, trademarks are taken over by another company if they are
not used
o General Rule of Thumb
Only get IP protection if trademark is registered
Must file separate application in each country product will be sold in
No control in countries where there is no IP regime (Ex: China not
a developed mature, constitutional regime that has IP for goods)
Patent
o Definition of patent:
Most expensive
Your good/product must be materially different than the state of
the art
Material difference is decided by IP officer (in Ottawa and
Washington)
Must be original
o E,g, Beverage patent

What is the material difference?

Is it that they used different bases?
Are they similar due to taste OR are they difference because of the
bases used?
o What gets patented?
Concrete manufactured goods
Pharmaceuticals
Manufacturing process
Architect may patent blueprint
o Patent is highest risk, highest return form of IP
Highest return granted monopoly use over the good in question for
20 years
o Comes at a cost
Lawyers expense (to make the original claim successful)
Everything about product must be disclosed for public grant of
monopoly anyone could access that patent information
Information becomes available to public at IP offices
Other competitive manufacturers can then produce goods that are
materially difference, but substitutable
Invitation for litigation/lawsuits
Can be difficult to prove violation of patent
Cost-benefit analysis - will projected sales be worth the sunk cost to
produce the good and any legal costs
Software
Drugs
Automobile designs
Trade Secret
o Definition of Trade Secret
Originality not required
Something a company wishes to keep secret
E.g recipe for Coke or Pepsi Receipt for KFC Zildjian
(specific way to fold a metal to make a specific Zildjian
sound)
Some things are portrayed as secrets for marketing purposes
o Criteria for a Trade Secret
No originality, can be anything
No need for registration
Lasts as long as it is kept secret
Costs are the costs of keeping it secret
o Keeping Trade Secrets Secret
Non-disclosure in contracts for employees
Segmenting production process

Compensation contingent on stock (if the secret gets out the stock
would plunge)
Means of contractual restraints
Non-disclosure of trade secret
Non-competition (you cant go to work for a competitor for
a certain amount of time max prof has ever seen 2 years)
Enforcement will Vary depending on Person and Skill set
Goodrich vs. Wohlgelmuth Fundamental right to earn a living
Talented young person working in intellectual property fresh
out of university
o Even if non-competition clause has been signed,
unlikely that court will enforce it
Mature CEO with lots of experience in industry and in
signing employment contracts
o Whatever contractual restraint was agreed to will be
enforced
Forms of Non-Competition
Competitor in the industry
Specify geography (you can work in the industry but not in the area)
List competitions by name (who they consider their competitors to
be)
E.g. Silicon Valley, CA
Segmenting the Production Process
Badged environment (you cannot physically get in to certain parts of
the building unless you have a badge/code)
Pharmaceuticals not aware of all ingredients used (jars labelled X,
Y, Z, it reacts in this way, etc.)
Enforcing the Controlled Environment
Control over outgoing emails
Being able to view what is on the screen of all computers
Cameras above photocopiers
Photocopiers that make digital copy that management can download
Blueprints
Architectural designs
Reward employees and treat them well
Once It is Out, It is Out
There are Exceptions
If violation of contractual agreement or corporate espionage can be
proven, courts will take action
If secret has not yet been divulged, can get injunction
If secret has been divulged, get restitution
If secret was stolen and is still intact, can get it back
Intellectual property knowledge cannot be retrieved
Must compete on economic basis

o
o

o Trade Secrets can be costly

Contractual restraints are the cheapest (pay a lawyer to draft a
contract)
All the others are costly
Segmenting production process
Rewarding employees
Rewarding those with knowledge
Which of the four options to take will ultimately be a business
decision? All depends on your expectation of how you are going to
make money of it.
Module 8
Employment Equity vs. Affirmative Action
When you hear those words do you get a good feeling?
What do you think of?
Employment Equity Affirmative Action (Employment Equity term used in
Canada, Affirmative Equity term used in US)
Target Groups
o In Canada, there are four groups targeted for employment equity benefits:
Aboriginals
Disabled
Visible minorities
Women
o In the US, these groups are divided differently
Visible minorities
Native Americans
Special emphasis on African Americans
Women
Disabled
There are different Kinds of Employment Equity or Affirmative Action Policies
Even though most example/.debates about these come up with jobs its
more than just that, it is also:
o Hiring
o Promotions
o Entrance into Educational Programs
Law school
Medical school
General BA
o Professional Qualifications
Means for getting professional qualifications
Canadian and US Legal Context
The differences

o Canadian Legal Context

Charter of Rights and Freedom Section 15 (split in to 2 parts)
Equality of law is not in Section 15
Section 15 has two parts: Anti-discrimination and exemptions
o US Legal context
Bill of Rights
Guaranteed equality under the law
o Section 15: It is a violation of an individuals rights to discriminate against
them on the grounds of:
Gender, Age, Marital Status, race, Religion

o 15-2: Any program of affirmative action or employment equity does not

count as a violation of 15-1
Some criticize employment equity as reverse discrimination

Employment Equity has a Statutory basis as well

o Constitution is comprised of the rules for making the rules basic law of
the land and the rules for making rules
o Statutes are the rules
Who has authority over what
o Processual concern with equality built in as one of our foundation values
What does quality mean?
o Non-discrimination the right not to be discriminated against
o Right to equal benefit under the law
Employment Equity Act of 1986 (Statutory basis)
o What does it apply to?
Canadian scope of mandatory affirmative action
Federal department civil servants
Companies bidding on federal contracts (worth voer .25
million $)
Those companies who
o Have more than 100 employees
o Line of work falls under federal jurisdiction as laid
out in the constitution
e.g banking the big banks are all required to
have employment equity program
Studies show that this amounts to 10% of the Canadian
workforce by number of workers
Equity Act does not apply to everything in the Canadian economy
Inflated notions of where the law requires affirmative action
Controversies attached to this idea commonly lead people to
think that the scope of affirmative action is larger than it
actually is
Voluntary employment equity programs
o Provincial government
o Municipal government
o Regional government
o MUSH Sector (Municipality, uni, school, hospitals)
o Private sector
Generally business want to minimize their participation in
any government action because its costly
Bob Rae and the NDP (1993)
o Passed a provincial employment equity act which
was scheduled to come into effect in 1996
o 995 election ushered in the PC government which
repealed the act before it was ever implemented
o Not the same mandatory requirements on the
provincial level as there are at the federal level

Statutory basis in the U.S. Civil Rights Act 1964

o Martin Luther King

o Lyndon Johnson
o Subset of the act Equal Opportunity Provisions
o Affirmative action stronger and more robust in U.S. than in Canada

o More court based in US

Main sites of disputes and activity
Most aggressive defenders of affirmative action rights
Canada has a softer/weaker process
o What happens when one feels violated?
e.g. bank employees visible minority who does not believe bank
has a large enough representation of minorities. They could use:
Internal appeal
More aggressive action file complaint with the Federal
human Rights Commission
Result
Bank is required to respond to the Human Rights
Commission on the details of its plan
Failure to respond results in $10,000 fine
Repeated failures to respond - $50,000 fine
Main negative would be the negative publicity
The process in Canada
o E.g. Dispute between Bell Canada and its operators
Was in civil court for over a billion dollars
Involved a concept of equal pay for equal value which is different
thatn Employment Equity
Three common ways to implement equity:
E.g. Hiring
1. Elaborate Point System
o If applicant is from one of the four groups, they automatically get a certain
number of points
Skill at job
Interpersonal skills
Hygiene
Member of one of four protected groups
o Not determinative of who gets job or ultimate benefit
o Canadian federal legislature requires company to have a program of
employment equity but no results are required
2. Tie-Breaker
o Use as a tie-breaker between equivalently qualified candidates
o Whoever falls under the four protected groups gets the position
o In this situation, employment equity is determinative of who get the benefit
o Again note: Canadian legislation only requires that you have an
employment equity program in place but no results are necessary
3. Quota System
o Certain number of jobs
o Certain percentage of workforce
o Certain number of kinds of jobs
o Have to go to applicants from the four protected groups

o Most stringent as there is no way to avoid giving the benefit to people from
the protected groups
Employment equity or affirmative action does not mean hiring someone who is not
qualified
o It could mean giving such a benefit to someone who is not as qualified as
someone else

Empirical Affects of Employment Equity and Affirmative Action

Most Empirical Studies about the effects of affirmative action come out of the
United States they have a bolder policy of action than Canada
Do these programs do what they are intended to do?
o What is the nature of the law?
o What have been its effects?
Consensus among American studies that there seems to be a
measurable benefit to target groups
Benefit = income
Easiest variable to measure
When group is taken as whole distributions in income were not
equally felt
o Affirmative action is supposed to be about equality, isnt it?
Most American studies that most of the benefits have been
disproportionately enjoyed by a narrow subgroup within group
Who? Those who were well positioned
o Good education
o Solid family income at time of implementation of
programs
Those in best position to know about and take advantage of benefits
will gain the most
Some studies claim that there has been an increase in income
inequality between the top African Americans and the bottom
African Americans as a result of affirmative action
Isnt it important that at least some African Americans are
benefiting?
Some evidence that gains in income to targeted groups may have
come at expense of a small to lower income non-target groups
o Few Canadian Studies Have Been Done
Data Issue
Law is recent
Finding reliable data
Few studies that exist suggest that benefits dont seem to flow to all
four targeted groups, but rather most benefits seem to go to two of
the four
Women
Visible Minorities

Aboriginals and disabled appear to have difficulties

benefiting

Considering the Morality and Justice of These programs: Pros and Cons of
Employment Equity
Reading: Affirmative Action and Employment Equity in Canada by Susan
Dimock and Christopher Tucker
o Criticism of Affirmative Action and Employment Equity
o What do you think of these arguments?
o What arguments did it give?
o Were you offended by it?
o Did you agree with it?
The Issue of Compensatory Justice: The Level Playing Field
o Main argument affirmative action is required to redress historical
injustices
o Cons
Victims of discrimination are not the ones being compensated
Their children are the beneficiaries (generational justice)
Those who carried out or profited from discrimination are not being
penalized penalizing their children or grand children
Have to inquire more deeply
What is meant in terms of a level playing field
What is meant by equality of opportunity and fair
competition in society
o Pros
Necessary to ensure a level playing field in the present
Accumulated benefit in favour of the white man
Accumulated suffering due to obstacles on part of target
groups
o A concern behind employment equity programs is always the degree of
entrenchment that these programs are going to have
Are these programs meant to be a temporary measure only?
Tendency for government programs to entrench themselves
for good
Says law once you have established any kind of
bureaucracy, it has an intrinsic impulse to grow and it
usually takes exceptional political action to stop that growth
One way to challenge this argument is to ask:
When are we going to know that we have this level playing
field?
Does it ensure a level playing field if just on individual is
losing a position to someone in one of the four targeted
groups?

Will this policy have to be used systematically over the next

couple of generations?
What about my rights?
Why should my rights be sacrificed to the pursuit of wide
scale social reform that was not of my creation?

The Notion of Merit

o Cons
Part of notion of merit means that a spot cannot be reserved for a
special category of people
Merit is individual you deserve it or you dont
o Pros
Any inefficiencies are worth the cost of any of the benefits of
affirmative action
Redressing historical injustice
Promoting social harmony in ethnically diverse societies
Merit is defined in terms of past established paradigms
What is standard of merit being employed?
Self-referential definition of merit
Who gets to decide what is merit?
Merit is based on prevailing paradigm
Prevailing paradigm is in question here
Affirmative action is a way for people to show that they meet the
prevailing paradigm
Social Cohesion in a Diverse Society
o Cons
Affirmative action might actually aggravate social divisions
Cause bitterness and resentment on part of the non-target
groups who are passed over
o Pros
Affirmative action is an important part of cementing social cohesion
in a diverse society
E.g. North American
o America first country in world to think about
affirmative action
o Incredibly diverse set of societies
o Affirmative action required to help keep it together
The Issue of Irrelevant Standards
o Cons
Moral beliefs are different than they were at implementation of
programs
People now acting out of different socialized and
internalized set of values
Dont require a bureaucratic solution

o Educated differently
o More tolerant and inclusive environment
o Pros

Consistent standards may not be relevant for determining merits of

those from different background
Members of certain culture
Members of similar background
Difficult to come up with a metric by which merit can be ranked on
the same scale of value
Black female and white male
Forces those in power positions to take into account different
considerations of what might make a person effective or ineffective

Mirroring of Society
o Pros
Women make up 51% of population, but amongst senior members
of federal civil service, only 2% of women = discrimination
Question about whether that inference is true or not
May not be a desirable thin for employers to have their
workforce mirror society
What do you think about that argument?
Does this make sense at all?
Why should I have to mirror society>?
How is that a benefit?
What about the civil service?

The Role model Argument

o Pros
Even if benefits of affirmative action dont flow evenly through out
groups, it is still important to create role models that future members
of those groups can identify with

These Policies are Necessary to Change Social Attitudes

o Pros
Social attitudes about work capabilities of disabled
Empirical research shows that abled people have a low
underestimation of what disabled are capable of doing
Program is beneficial because those kinds of stereotypes will
be diminished
o Are these programs needed to challenge stereotypical attitudes?
o Do you know what a disabled person is capable of doing?
o Would you be comfortable asking what they are capable of doing?
Cons
o There is the side effect of bitterness and social tension

o Programs keep forcing us to focus on irrelevant differences

o In other spheres, things like gender and race dont matter at all
Mandatory Retirement and the Law
In Canada, considered age discrimination and hence violates the charter
Age is specifically referred to as prohibited grounds for discrimination
Many sectors in the economy to which mandatory retirement does apply legally
Why? It happens as a result of a number of court cases on the part of both
employers and employees regarding mandatory retirement
The program of Mandatory Retirement
o Supreme court has developed two tests, which if met, allow a program of
mandatory retirement to take place legally
1. Being under the retirement age (65) is a bona fide occupational
requirement
Bona fide- a good faith reason that is attached demonstrably
to the merits of the job
E.g. Pilots in Canada
o Have to retire at age of sixty
o Pilots Association challenged this
o Supreme Court held that, based on scientific
evidence, the natural process of deterioration in the
eyes beyond sixty makes it a bona fide occupational
requirement to be under sixty.
2. The age limits in question constitutes the normal age of retirement
for people in a similar position.
More controversial
Especially because mandatory retirement infringes on
personal freedom
Not attached to the bona fide occupational requirements of
the job
Allowing for stereotypical generalizing which is
objectionable ton the grounds of discrimination
Wedeking Is Retirement Unfair Age Discrimination?
Wedeking Supports Mandatory retirement
o Two Moral Arguments
It is unlike other categories of discrimination in that it is easier to
show the justifications of treating people differently on the basis of
age
Age usually correlates with developmental and skill
capacities
o Examples: age for driving, voting, drinking, running
for office
Difficult to show that what appears to be age discrimination
isnt bona fide discrimination on this basis

Show me how their age is not connected to developmental

capacity and skill level
Fairness
Mandatory retirement is not unfair because everyone in the
relevant job chosen is subjected to exact same rules
Irrelevant to compare oneself to someone in a completely
different line of work
What do you think about that?
o What if these rules treat everyone in a terrible way?
Treat everyone equally, but in a way that restrains their right to
freedom
Fairness: Insufficient basis for what Wedeking wants to establish
Empirical Affect of Mandatory Retirement
Study of Federal Department of Justice in Canada
The Study:
o Industries in which mandatory retirement applies
Public sector
MUSH sector with exception of doctors
Why?
o Money and power
o Enormous social investment in the training of each
doctor
Very few predominately private sector jobs
Pilots
Private industries where there is a great deal of federal
regulations
The findings:
o Morally works against personal freedom and may count as form of
discrimination
o Government suggests empirical reasons for not having policy
Some evidence that this policy increases poverty in old age
especially with women and recent immigrants
Substitutability isnt as plausible the older one gets
Why? On average, women take some years out of workforce
in connection with child-raising responsibilities
o Wage differential
o By implementing a limit, women are being penalized
o Mandatory retirement does not decrease opportunities for young workers
Allows for fresh ideas and new blood to come into an organization
Argument endorsed by Supreme Court of Canada
There is no Empirical basis for that Judgement:
1. Judgement assumes a finitude of jobs right from the start
o Crude governmental thinking about jobs

o Positions get: retired, technologically replaced, redundant

2. What kind of jobs are we talking about and who is qualified to do these jobs?
o If this is referring to younger people more substitutable
o Young people vs. retirees most would not have the qualification for some
of the positions
o There is no evidence to prove that mandatory retirement decreases
opportunities for young workers
3. With few exceptions, there is apparently very little empirical connection between
age and performance in most jobs
o Depends on what is meant by few exceptions and how few is defined
4. Aging population
o In most developed economies, with the exception of the US, there is a
definite trend toward an older workforce
o Need more, not fewer workers
o Need less, not more retirees
o Have as many workers as possible to keep funding of social programs on
even keel
Module 9
The Diversity of Jurisdictions
International Business and Ethics
o Do these things go together at all?
o What is controversial about international business?
The plurality of jurisdictions
The plurality or diversity of moral beliefs
The Business Context
o Focus on the things that are unique
Diversity of jurisdictions
How to deal with international regulations
How to deal with diversity of moral beliefs?
Who should prevail in business negotiations?
What are the ethical issues?
Should accompany engage in illegal activities which are legal in
other countries?
The law
o There is no uniform international law regulation business
Not yet a position in the history of humanity where that kind of
unification and cooperation is possible
Some companies and industries make their profit based on diversity
of jurisdictions and what happens
There are attempts on both regional and global basis to work out
some rules and laws regulating international business

E.g Accountants making profit by advising companies on

how to move their assets around
Take advantage of the difference in tax laws
o Grand Cayman
o Isle of Mann
o Monaco
o Costa Rica
o Bermuda
Seeking out their place in international trade

Differences Between Regional and Global Business Institutions- Their Nature and
Rules
Regional Business Institutes
Global Arrangements regarding Business
Regional Multilateral Institutions
o Countries in a region have signed an agreement between themselves
o Canada
Free Trade Agreement with Us (1989)
Extended to NAFTA which added Mexico (1994)
o Variety of arrangements
Some South American counties
Southeast Asian countries
European Union
o Most developed agreement with a consistent set of rule and regulations on a
regional basis
o Policies
Tariffs
Labour standards
Environmental standards
Common currency
European Central bank sets common interest rates throughout
territory
Robust common political institutions
Common tax rate
European parliament
o Europe grows out of historical set of circumstances that are not paralleled in
other parts of the world
European Union formed to prevent another war between France and
Germany
Began as tariff agreement in steel and coal industry (1953)
Economic and political integration
Many countries signed on as a way to boost their economies
after WWII
Seeking to reduce tariffs to increase the volume of trade

Rational for political integration of Europe is to create stronger

economic integration
o The Issue with NAFTA is that there is a party with disproportionate power
One of the reasons for Europes success is that there is relative
equality of power and size of economies
Cooperative arrangements do not work as well when you have one
party who has incredible advantage in terms of finance and
population
Canada
As Americas neighbour and because our economy is closely
tied, we dont like it when America acts in unilateral and
unpredictable ways
o Reason to advocate Americas entry into multilateral,
global institutions
o Better able to predict what they are going to do and
to cushion ourselves accordingly
Dont want to be included in common institutions with
Americans in which they will clearly have the majority of
the power
o e.g. United nations other big powers which will
check American interests
If there were common NAFTA institutions, Canadas interests
would not have importance in terms of economic and political clout

Global Business Institutes

Global Economic Institutions
o World Trade Organization (WTO, GATT)
Formed in attempt to prevent a recurrence of WWII
One cause of war was pursuit of excessively protectionist polices in
Europe (!920s and 1930s)
Connected to that, was imperial experiment the drive to get
colonies
Incentive to militarily grow an empire
GATT reduced tariffs on international trade to prevent this from
occurring
Function:
To engage in regular negotiations about the reduction of
tariffs on international trade
Provides dispute resolution mechanism arbitration panel
o What are you going to do if they dont want to
adhere to the ruling of the arbitration?
o E.g. Canada wins ruling
Commitment to an international system that regulates
business

Because of diversity of jurisdictions, enforcement

mechanisms are weaker

o World bank
Function:
To help development of Less Developed Countries (LCD)
To help countries with sever short-term economic crises
o E.g Mexico
Economic Crisis?
Less Developed Countries
o Many owe money to banks in developed countries
o Paying interest on money owed can often be
problematic
Controversies Surrounding Global Business Institutions
The Criticism
Policies hard to disagree with, but there is also controversy
o Agendas of these institutions
o Effects that these institutions have
o Histories
Who benefits the most from these institutions?
o Clear benefit to very rich people from most developed countries in the
world
o Is the purpose of the World Bank to help out development?
o Is the purpose of the World Bank to ensure that developing countries are
going to pay back their debts to the developed countries?
e.g. World Bank and Mexico
o Mexico benefits in the short-term
o Whoever holds Mexicos loans will also benefit
World Bank
o In exchange for loans, the world bank either charges interest or stipulates
other concessions
No exchange unless policy changes are made that affect the state of
economy
Level of government spending
Ability to foreigners to own companies
Degree to which capital can be exported
Structural readjustment plans
o Critiques
Argue that they are interfering with the sovereignty of the country
Less about helping the country economically than about exerting
power over its policies]
o Tariffs
In some sectors there has been great reduction in tariffs
In other instances

 Tariffs have not come down

Tariffs reduction is unbalanced
o Agricultural sector
Developed world subsidizes its farmers and agricultural produce
More concerned about tariffs in Europe and America on basic
staples
Wheat
Corn
Cattle
Poultry
Both America and Europe maintain very high tariff rates and
additional subsidies to those industries
Those in LDC feel that those are the kinds of industry in which they
could compete
o Some view a harmful asymmetry
If developed world was really committed t principles of WTO, there
wouldnt be a selective reduction in tariffs
o Debate on global institutions
Are they in favour of development of the poorer countries or do they
exist as a disguised form of maintaining power advantage?
Is Globalization Here to Stay?
Globalization is a common topic
Global skill set
Glossy international business magazines
Slogan Go global or go broke
Globalization is Clearly a Trend
o Nothing in the structure of economics or nature that make globalization
inevitable
Historically, within the economy, there have been eras of relative
globalization which all came to an end
o E.g. 100 years ago similar era of globalization
Robust international trade and activity
Dominated by Britain instead of America
Ended with
Rising tide of nationalism in Europe
War started in 1914
Existing international trading regime fell apart
Reconstruction did not take place until after WWII in 1945
Institutions Make All the Difference
o Theories of Justice
Conservatism
Liberalism

Socialism
o Vital to understand that they are about a set of institutions
o What kinds of institutions should guide or shape society and the relations
between each other?
Globalization product of definite set of institutions put in place following WWII
that are largely dominated by US and are at the instigation of US
Americans wanted this set of globalizing Institutions
o Believed it would restrain or prevent another outbreak of war in Europe
o France, Germany and England would be less likely to go to war if they had
robust trading relationship and their economies were dependent on each
other
o Post 1945 and since end of Cold War in 1989-1990
Globalization is Sector Specific
o Pop culture
o Market for news
o Investment flows
Sectors are not Global
o Agriculture
o No genuine free trade between developing and developed world
o Developing world developed world talks about globalization only when it
involves sectors that it is in their interest to globalize
May actually limit the extent to which economy truly becomes
globalized
Might ask ethical questions
o Is that hypocrisy?
o Is that good for the whole world?
Demystifying Globalization
1. Have historical and realistic perspective
2. Recognize the globalization is supported by definite set of institutions
3. That set of institutions makes it a trend
4. Nothing natural or inevitable about it
5. Largely sector specific
6. Ethical controversy about degree to which developed world actually supports
free trade

Bribery and Gift Giving

Hypothetical Case
In a foreign developing country
Competing for a lucrative government contract
Meeting with government official to discuss how to go about bidding
Government official demands $100,00 from your firm, payable to him, to pass
along contract
Government official makes it known to you that this is common business practice
in his part of the world

Note that he is not promising success, but if you dont pay you are guaranteed
failure
What do you do and why?
o Do research and find that it is indeed business practice in this country to pay
bribes
o You are personally against it
o Its illegal in North America to engage in bribery
Tools for Analyzing
Consequentialism
o What are the costs and benefits?
Deontology
o What are the relevant rules?
o Whose rules do you obey?
Teleology
o What would a virtuous person do?
o Does a virtuous person bribe?
o What does it matter if it is excepted practice and legal in that country?
o Would a virtuous person say it is up to you?
o Can your choices survive the glare or publicity?
o What if you choice became public back home?
o How would others think of you?
What is Gift-Giving?
Gift giving is a more acceptable North American Business Practice
Bribery is illegal in North American and most of developed world
o Developing world is checkered instance
o Difference between what laws actually say and how laws are actually
enforced
o Bribery may technically be illegal, but in practice is an expected part of
doing business
o Must do due diligence check out whats true and legal, and what actually
get enforced
Gift giving is extremely common
o Especially in connection with sales
o Take clients out
Dinner
Sports events
Golf
Types of Gifts
o Is there any kind of acceptable gift?
Free samples
Free golf shirts
Golf balls
Tennis balls

Coffee mugs
Cups
Watches
Pens

Almeder's Arguments Against Bribery and Gift-Giving

Never Indulge in Either Bribery or Gift-Giving
Neither give bribes or gifts, nor receive bribes or gifts
o Series of Arguments - Moral
1. Bribes and gifts undermine competition
Why? Incline people to decide to make business decisions
not on the basis of merit/value, but for irrelevant personal
reasons, distorting free market
2. Bribes/gifts violate universality (deontological argument)
If you were a competitor, you would not want to be put in
the position of losing by not having bribes
Designed to give unfair advantage whish has nothing to do
with legitimate business reasons and has everything to do
with irrational, psychological stroking
o Series of Arguments - Prudential
1. Slippery Slope
If you pay now, where does it end?
Danger of losing control over costs with no guarantee of
getting contract
2. Can undermine own future competitiveness if you rely only on
bribes and not quality product to get contracts
3. You and your company may get a bad reputation
Shareholders may not want to invest in company because
you indulge in what they believe to be sleazy business
practice
Reduces market for stock
o Series of Argument Prudential and moral
1. Bribery corrupts moral character
Specific to public officials
Urging the abuse of positions of trust for private gain
2. Bribery often forces on to lie
Falsifying financial records to cover up the expense
Shareholders in developed world dont want to hear that
their company is involved in bribery
Shareholder want their money actively pursuing profit
Foreign Corrupt Practices Act
o Passed during Carter administration
o Illegal as an American headquartered company to bribe
Within confines of the US

Anywhere in the world even where bribery is legal

Reasons to Engage in Bribery and Gift-Giving

Business Pressures
o If the bribe isnt paid, the contract will be lost
Legal in that country
What is needed to ensure equal access and fair treatment of the
contract proposal
When in Rome, do as the Romans do
o Paternalistic and arrogant to insist on North American ethical and legal
standards abroad
o Bow to local custom and engage in that practice
o Whose values should you follow when you are engaged in international
business practice across different cultures that have clashing moral values
o Which do you choose and why?
Business is business
o Bribery is necessary if you want to win the game
o Failing to engage in that practice is intentionally putting yourself at a huge
disadvantage
E.g. Golf
o Whole sectors where there is a strong group culture in which it is important
to get along
Middle of the Road Policies
What policy on bribery and gift-giving would you implement in your company?
Should I authorize my employees to make bribes?
Should we give gifts?
What do we expect in return for those gifts?
Permissive Policy
o Engage in any kind of bribery and gift-giving that is not illegal and which
gives a business advantage
Almeder
o Dont engage in bribery at all
Involves Developing Different Rules of Thumb to Guide Employees
o Does the gift have lasting value or not?
We will neither give nor receive gifts of substantial lasting value
Car
Pool
Washer and dryer
Television
Gifts that can be consumed on the spot are not adding to the assets
of others
Dinner
Golf

Sports events
o Doesnt matter whether gift lasts or not, it is the value of the gift that
matters
The Thinking Behind the Strategy
o Gift giving is a prominent part of business culture both in developing and
developed world
o Customers might see things negatively if the games isnt played
Judgement of your generosity
Extent to which their business is wanted
Extent to which you want them to be happy, satisfied customers
o Okay to do so if
It is legal and customary
It will not affect the judgement of the person it is being given to
Which rule of thumb is most defensible?
Can that middle of the road policy be sustained?
o Against Almeders arguments
o Permissive extreme arguments
What is your bribery or gift-giving policy?
Which would you choose and hwy?
What are the strengths and weaknesses of that?

Whose Values Should You Follow and why?

E.g The Business of Importing and Exporting
o When in Rome should you do as the Romans do?
o Does it matter what the Romans do?
o What if the Romans do thing that you find deeply offensive?
o Should you still go along with it for the sake of the deal, at the expense of
your moral integrity?
o Should you stick to your moral integrity and personal moral commitments
knowing that it might cost you a great deal?
o What would you have urged that woman to do?
o Would you privately be thinking that your female colleague lost the deal?
o Would you see her as a woman with integrity?
The Conflict of Values
o The issue of Child labour
Illegal and morally unacceptable in the developed world
Common practice in the developing world
Children are expected at certain age to get a job and help
contribute to large and impoverished families
o E.g Nike, Kathy Lee Gifford
All kinds of industries employ child labour especially manufacturing
Building furniture, carpeting
Are we hypocrites in buying the goods?

Do we have a responsibility to find out where the goods we are

buying are being manufactured?
Do we have a responsibility as consumers to do some basic
research to make sure child labour has not produced our goods?
The other side of the debate
Economic activity that market supports in those countries
Legal
Provides economic benefit to families
The trade in Garbage
o Authors take strong Western moralistic tones
o Robust, thriving trade in developed world of shipping garbage to be stored
at sites in developing world
o Cons
Rich dumping by-products of processes whereby they get rich, onto
the poor
Imagine the outrage in our community if rich dumped their garbage
into the backyards of the poor
Overtones of abuse of power and exploitation
o Pros
Legitimate business activity which is legal in those countries
Very easy business for them to get into
Why? All they need is a piece of land that can be designated
as a dump and then they fill it up
Doesnt have nearly the barriers to entry as other sectors do
Agriculture
Technology
Pharmaceuticals
One of the ways that they can compete in global economy
Easy access earnings for them
Who are we to take that away from them because of our
moral values?
Best to Stick with Our Own Moral Code when doing Business Internationally
o Why?
Most honest genuine reflection of your beliefs
Sleep at night factor
Much Simpler
Dont have to research each foreign country to lean
customers
If business cant be done on basis of own values, then deal
will not go through
Better for reputation
More consistent behaviour
Controversial business practice not only affects one morally,
but can have concrete effect on bottom line

Wont get suckered by claims that something is customary practice

Who actually decides what is customary in that society?
Who are these people who set themselves up as the
authoritative spokespeople for their entire culture?
o Cost of doing due diligence can be considerable
o Cannot necessarily accept the assurances of those
people who are going to profit from that activity
There are going to be real business risks when doing this
Refusal to bend to local custom might be costly as well
Is it disrespectful and arrogant to insist on using own values?
o The Ugly America
Notion of being
Parochial
Narrow minded
Not knowing about rest of world and how it operates
Insisting that the world bends to your values
Westerners are always open to charge when engaging in any kind of
activity in developing world
o How do you make the decision?
In the case of business, it would depend on what kind of deal you
are talking about

The Issue of Moral Universalism vs. Moral Relativity

Whose Values should I follow?
Whose values are true?
o Moral Universalism
What is morally right is what is morally right
What is morally right does not change when you cross a border
Whether those universal moral standards get recognized by the laws
of individual countries is irrelevant from the moral point of view
Follow those values which you believe on the basis of best evidence
to be right
Anti-Child labour activists
o Moral relativist
Skepticism about
Whether there is a universal objective moral truth
If there is such a thing, do we obviously know what it is?
Moral codes and rules do alter between every culture
Consensus within Western world about moral values
Not the same degree of consensus about what is right and
wrong especially in connection with economic activity
o Western vs. Islamic
o Western vs. Southeast Asia

o Western vs. Sub-Saharan Africa

o Developed world vs. Developing world
Talking about economic production role of ethics in
connection with economic production is disputed between
different cultures
When In Rome you should do as the Romans do
There is variability in ethical value
Want to respect the culture that you are in
Business benefit
o Think of it in terms of
Individual case studies
Issues of Universalism vs. Relativism
The Pros and Cons of the Multinational Corporation
Multinational Corporations are a Major Part of International Business Activity
Requirements of International Business
o Major company
o Many resources
o Ability to negotiate international contracts
o Able to do market research
1. Generate economic activity in the countries that they are in
o Major controversy comes from the divide between rich countries and poor
countries
o Almost all are form developed countries
E.g Kentucky Fried Chicken
Controversial when large pharmaceutical company makes its
drugs in developing words, but sells them and has its
headquarters in the developed world
Is this exploitation or not?
o Pros
Clear that multinational companies do generate beneficial economic
activity
Know what they are doing
Savvy players
Hire locals
Pay salaries
Locals spend salaries houses, good, food
Financial security
Subsidiary economic activity generated
o Cons
Issue of Wage partiality
Multinational acts in question
Canadian = $32.00 per hour
Mexican = $3.10 per hour

o Answer depends on how exploitation is defined and conceived

What is demanded by labour market in Canada
In developing world employees get paid more than fellow country
people
Can it be exploitation if they are paid better than standards of that
labour market
They freely seek employment
Exploitation has connotation of coercion
Wrong to judge issue of exploitation by Western standards
2. Encourage Urbanization
o Is that good or bad?
Depends on your values
o Pro
City life is liberating compared with rural life
Increasingly cities and city regions seem to be the main engines in
global economy
Want to develop a thriving city-state region
Increasingly seeing cities as being generator of economic growth
and change in modern world
E.g Toronto, New York City, Los Angeles, Houston,
Vancouver, Montreal, Paris, London
o Con
Pollution
Crime
Decline family values
3. Increase class divisions
o Con
Growing wage gap
Standard of living gap
Quality of life gap
4. Clearly seems to contribute to growth and strength of a small elite, which exercises
disproportionate power in that society
o Con
Companies support the governments that allow them to come in
Relationship between multinational corporation and government and
multinational corporation and employees
Creates an elite over that country
o What is questionable is not so much that it is unequal but that it gives so
much power to such a small group of people
Incentives in favour of:
Corruption
Undemocratic government
Socio-economic inequalities

May not be intent, but it is the socio-economic consequences of that

activity
o On the grounds of Consequentialism
There should be additional measures in those societies to make sure
that the gap does not become too great that it becomes morally
offensive
Strong anti-corruption and democracy laws that limit the extent to
which there will be a small clique that controls the society in a way
which offends peoples values

Module 10
Ethics of Advertising
The Law- Cases and Principles
What should be prohibited?
Fraud and Deception
o Fraud understood as an intention falsehood
Done for the purpose of making a profit
o Types of Fraud
Telemarketing scams
Misleading advertising
Commercial Fraud
Would the average consumer misunderstand this ad as presented?
Is the ad being constructed in such a way to be misunderstood?
Is this being done for profit?
What kinds of things fall under these categories of fraud and deception?
o Product Guarantees
No intention to carry through on durability and quality guarantees
o Money back Promises
o Testimonials
Experts or use of quotes to sell products
o Contests
Rules of legitimate contest can be complicated and are often
contested by the average consumer (when its unclear it results in a
lot of litigation).
o Sales
There are legal limits for length of sales a sale cannot last for more
than 1/3 of a year
Closing sale ha to be a closing sale
Irwin Toy Decision (1989)
o Important: it starts out in a promising way for advertising
o The freedom of speech guaranteed in the charter applies not only to political
expression, but also to advertising, except when it comes to advertising for
children

o Why?
Law views children as irrational
Deemed to be more susceptible and less discriminating to their
judgement
Uniquely influenced by advertising
Entitled to more protection from the tools that advertisers and
marketers are allowed to use on adults
o What kind of speech should still be okay for kids?
o Are there certain ways of advertising to children that you clearly think are
wrong?
o What things are illegal to advertise to children?
Cigarettes and alcohol
Firearms
Gambling
Pornography
Provincial Advertising Councils
o Self-regulation on the part of the advertising industry
o Act as ombudspersons who
Receive complaints from public
If complaints has merit, they take it up with advertiser
E.g. Beer commercial Bavaria
Women strips and shows bum with thong lots of
complaints about it and now that scene is deleted from the
commercial
Tobacco
Tobacco Occupies a Unique Spot in Canadian Advertising Law
o Legal to advertise
o Age restrictions
o Warning labels regulations by government for tobacco advertising
o Tobacco companies no loner able to sponsor sporting events
Government trying to protect vulnerable audience watching the
event
Is this government intrusiveness?
What if it affects the amount of resources needed to run
events?
o Cultural events also targeted, but cultural industry used resource argument
Canadian government made an exception
o Two discrimination arguments
Privileging
Economic
Nestle Case
Campaign to Market infant formula in Third World Countries in the 1970s and
Early 1980s

The Campaign
o Nestle advertised explicitly that the infant formula was better than breast
milk for infants
o Used iconography to suggest that breast feeding was primitive
Modern mothers use formula
o Even though they could not get doctors to endorse their claims, they place
people in white jackets with doctor paraphernalia in their ads
To people in a mostly illiterate culture, the capability to make that
distinction is not readily there
The Case
o Blatant form of anti-factual claim
o Misleading use of imagery
o Assumption on the part of Nestle marketers that consumer would have safe
drinkable water
o Poverty Issue
Expensive by developing world standards
Mother would dilute it to make it last
Increasing infants intake of dirty water
o Example of ethically controversial advertising

Political Advertising
Because political ads are considered political speech, the courts are reluctant to get
involved in what is aid in political advertising. Unless
o Factual error which requires correction
o Violation of chartered right
e.g Discrimination
o E.g. 1993 Kim Campbell vs. John Chretien
Ad of his face with lots of wrinkles and lip twitch, etc not a very
attractive picture with the sub line:
Is this the man you want to represent Canada on the world stage?
It backfired because it was cruel to pick on a facial disability that
Jean could not help
o E.g 1964 Lyndon Johnson vs. Barry Goldwater
Barry was conservation in 1964 standards
In a pro Johnson ad they had him saying something very extreme
and then zoomed in on his face and in onto his eye and then turned
that into a nuclear explosion
Point of the ad negative: this man is so radical, would you
trust him with a nuclear bomb?
Condom Case
Advertising comes under critical evaluation in Many Ways: 2nd Reading Chapter
12 (471-498)
The AIDS Crisis: Unethical Marketing Leads to Negligent Homicide.

o The failure to advertise

Because the condom company did not aggressively advertise to the
gay community in 1980s, theyre complicit in the spread of AIDS in
that community
Such companies should be seen as guilty of negligent homicide
o Why is that questionable?
o Why werent these companies aggressively marketing condoms to the gay
community?
They didnt want their brand associated with homosexuality
o Author is at pains to show size of homosexual market
Size of gay community claimed by author is contested - Kinsey
Report
Alfred Kinsey and his wife were pioneers in the research of sexual
behaviour
One finding of this report: Estimate 10% of male population is
homosexual
Two responses to this claim
The Gay male population has clung to that number and
refuses to admit it might be lower
Other researches argue that number is inflated
o Kinsey may have had selection bias
E.g. Kinsey study based on selection of
undergraduate men in liberal arts colleges in
New England gay population could be
higher here than in the general community
o There is absolutely no consensus in terms of empirical research as to what
percent of population is gay
Almost all studies put the number somewhere between 2-10% of
men as homosexual
o Companies are going to defend themselves on market reasons
Small market didnt want to lose larger heterosexual market
Public Health Issue responsibility of government
Debating the Pros and Cons of the Morality of Advertising
The Moral Case Against Advertising
o First Wave of Criticism
Late 1950s and early 1960s Generated by Vance Packard and John
Kenneth Galbraith
Criticized advertising industry and its effect on culture
Packard wrote book = The Hidden Persuaders
Galbraith wrote book = The Affluent Society
o Cons of Advertising
1. Advertising culture promotes and exploits peoples unhappiness
Not going as well as it should be

Not as affluent as you want to be

Not as sexually potent
Not as non-balding
Not as well-dressed
E.g. people involved with eating disorders in young girls
argue that the standards of beauty in our culture, confirmed
by advertising, leads to an unnatural degree of female
thinness
o What do you think about that?
o Does the advertising community live off human
unhappiness?
o Does it set impossible expectations which keeps us
buying the product in the attempt to reach the goal?
2. Ads contribute to a commercial and non-rational public culture
Key part of dumbing down of public discourse for the last
thirty to forty years
Public debate used to be more serious and thoughtful
Techniques of advertising
o TV, Political parties, Magazines, Billboards, Bus
stops
Most effective advertising is the most simple
o Catchy tune, colour, attractive person
What do you think?
Is this a measurable thing?
Is it totally subjective?
By glorifying market goods, advertising makes people less
sensitive than they should be to non-market goods (said by a
guy named Wade)
o Personality traits
o Virtues
More sophisticated criticism
o Overall effect on our culture is not that obvious
3. Overwhelmingly, main focus of advertising is young people
Brand loyalty gets developed before that time
After thirty-five, not worth the advertising dollar
What might be objectionable is the issue of advertising to
children
o Advertising believe that this age group can be easily
manipulated and exploited
o The older you get, the more resistant you get
Care less about brand used
4. Virtue ethics criticism
What is advertising encouraging?
What kind of personality traits is it encouraging?

Advertising encourages;
Non-rational decision making
Acquisitiveness
Indulgence in fantasy
Succumbing to deception
These are not the kinds of character traits that we should be
cultivating in people
5. Deontological criticism Kant (
Universality Test rules out lying in every instance
Act, assuming that everyone has a veto on your action, and it
is only if no one vetoes that your action is morally
permissible
o Pros
1. Buyer beware
Cant treat people as if they have no intelligence and make
sure that advertising has achievable reality
Ads try to get our attention through the use of humour and
exaggerations
People only pay attention when things are soaked in
aspiration fantasy
Certain kind of lifestyle
Certain kind of partner
Certain kind of car
Certain kind of friends
2. Barbara Phillips argument
It is not the fault of advertising so much as whole underlying
structure of economy itself
Advertising is just responding to the free market structure of
the economy
o Pros of Advertising
1. Buyer Beware
Blaming advertising is a refusal to accept personal
responsibility
2. Endorsing the right to freedom of speech and free expression
E.g. The Infinity car advertising that was a shot of motion
through trees no showing of the car just the word infinity.
Now theyve changed it and the car is in the commercial
Power, speed, freedom, independence
3. Promotes competition
Drives prices down
Gives consumers more choice
Informs consumers of what it out there
4. Ads are only picking up on what already exists
Park of human nature

Part of common life experience

o Desire for security, excitement, passion , and
adventure
What is alternative?
o Censorship
o Government sponsorship
o Advertising pays for many things
News, television, sports programs

Ethical Investing read text

Negative vs. Positive Screening
World of finance and investments and the capital market are vitally important for
the structure of the entire economy
o Relevance of ethical investing is two fold
How money should be invested
What you should buy
What characteristics, or criteria should be used
Ethical mutual funds available
Business investing
Where to locate a new plant
What criteria should be used to select ethical investments?
Negative Screening
o Will not invest in any company that has characteristics X, Y, Z, everyone
else is eligible
E.g. Ethical Funds (Company in Vancouver)
If a company involves itself in the following Ethical Funds would
not invest in it:
Nuclear industry
Tobacco industry
Alcohol
Gambling
Positive Screening
o Only if certain companies have certain properties, A, B, C, will you invest
in it
o Higher standards because more companies are being excluded from
consideration
o Only those few that meet those criteria are acceptable
o What is wrong in investing in the nuclear power industry?
Nuclear waste it a legitimate problem but it is relatively clean in
short-term, doesnt contribute to smog, could actually clean air in
short-term, and is renewable
o What is wrong with in vesting in companies that sell alcohol? Gambling?
o Do those screen have moral content or not?

o There are difficulties in knowing all the details

o Ethical funds
Market up = good return on investment
Further analysis = vast majority of investments in banks and high
tech
o How ethical is it to invest in the banks because banks make controversial
loans to:
Tobacco companies
Nuclear industry
Weapons
o But what is wrong in investing in a bank and bank stocks?
Attractive shares to buy based on return of investment
They give to charity
Give loans to those in need of assistance
o Can one make an overall judgement about the effects of a company or
sectors activity that can be definitively pronounced ethical or not?
Irvine on the Principles of Ethical Investing
Degree of Knowledge Necessary to Be an Ethical Investor is Too Burdensome
Its all about Coming up with a Reasonable Standard
o Ethical investing doesnt require any more information about a company
than the amount of information needed to consider that investment from a
purely financial point of view
o All it requires is additional thinking or different perspective on data
Past record
Kind of business it is involved with
Whether it is a leader in it markets
Principle of Ethical Investing
1. Tainted Profits Principle
Dont invest in anything that generates profit off the misfortune of
others
E.g. Blood diamonds
Generally speaking this is not a good principle because it prevents
investment in a whole range of important industries.
Health care profit off the misfortune/illness/harms of other
but it also does a lot of good things and helps people
Insurance based on profiting off of the misfortune of
others but it also helps people underside risk
o E.g. Shortselling an investor who heard about the
gas leak in India (1984) immediately says they must
short sell union carbide stock. Short selling you are
speculating, you purchase a contract in which you
speculate that the stock is going to fall in the near
future

o Irvine says that this is not objectionable

2. Enablement Principle
In making this investment, am I enabling other to do harm
Irvine agrees with this principle
Child labour
Pollution
The Difference between primary and secondary markets
o Secondary Market
Involves the stock market and those who own stock
How am I enabling them to do harm if the stock is bough
from another?
Where is the connection?
o Primary market
Company in initial public offering first decides to issue its stocks
Buying shares benefits the company
Why? Because only officers and employees own stock at
that point
o Not as Obvious in the Secondary Market
As retailer investors that is what we do
You are enabling them to do harm in an indirect way. Why?
o By purchasing stock, you are increasing the demand
in that market
o Makes it easier to raise money in the future
Similar response from Irvine to small retail investor
Any kind of demand (even if its small) is an increase in
liquidity of the market for that share
Still makes it easier for the company to make money
Irvines version of Universality
When you are investing you should think of yourself as a big
investor