Business Ethics Flashcards
Who established the stockholder theory?
•Friedman
What does the stockholder theory argue?
•It argues that the social responsibility of a business is to increase its profits while engaging in open and free competition without fraud
- This means a business’ only duty is to its stockholders
What 3 points is the stockholder theory based on?
1.That only humans have a moral responsibility for their actions, not companies or businesses
2.That managers of companies have a financial obligation to the stockholders (because if they make a bad business decision they have essentially stolen money from the stockholders)
3.That solving social problems should be the job of the government, not businesses
What did Smith argue?
•He argued that within the free market of capitalism, there is an invisible hand that operates and ensures that self-interested actions tend to promote general welfare
Who established the stakeholder theory?
•Freeman
What does the stakeholder theory argue?
•It argues that stockholders do not own the businesses as if the company is not successful then they can sell their stocks
- This means businesses have a responsibility to their stakeholders as they are the ones affected by the decision of the business
Who supports that stockholders are happy to sell their stocks if the company is not successful?
•Ghoshal - he argues that “most stockholders can sell their stocks far more easily than most employees can find another job”
What is Corporate Social Responsibility?
•It argues businesses have social responsibilities (responsibilities towards the environment and community)
Who developed one model of CSR to show 4 different responsibilities?
•Carroll
1.Economic responsibility - businesses have to make a profit and stay in business
2.Legal responsibility - actions that are required by law
3.Ethical responsibility - to act justly, fairly and right when it is not required by law
4.Philanthropic responsibility - actions to improve society
What company acts as an example for legal, philanthropic and ethical responsibilities?
•Co-op
- Their legal responsibility is shown by their “Fair Tax” mark which means they do not avoid their taxes
- Their philanthropic responsibility is shown by them donating £20 million a year to local causes
- Their ethical responsibility is shown by their confectionery having the “Fair-trade” mark
What are the 3 strengths of CSR policies?
1.It can be good for business as more people may want to invest in a business they see as ethical
2.They allow businesses to self-regulate and avoid strict rules from the government
3.They can reduce costs (especially for energy and waste)
How does Wal-Mart support that CSR policies can reduce costs?
•They are expected to have achieved savings of $1 billion by 2020 through becoming more sustainable
Who established the idea that CSR policies are “Hypocritical Window-Dressing”?
•Friedman
- He argues that CSR policies are a way of making profit “under the cloak of social responsibility”
What does Friedman argue CSR policies cause?
•He argues they cause “enlightened self-interest” that ultimately benefit the company itself
Who argued corporate motives are almost impossible to workout?
•Crane and Matten
- They argue that we can never know if businesses have a genuine interest in helping people or if their sole motive is to gain a good reputation that will improve their profits
- They do this through highlighting that studies have not been able to definitely prove that CSR policies increase profits
What 3 moral argument did Crane & Matten create in response to Friedman?
1.Externalities argument - this argues that businesses create impacts on people so have a responsibility for ensuring a positive impact rather than negative
2.Power argument - this argues that businesses have power within society and so have a responsibility to use that power wisely
3.Dependency argument- this argues that businesses depend on a wide range of stakeholders in society and so have a responsibility towards them
Who argues “we should not expect businesses to be genuinely charitable, but we can use our choices in the market and through campaigns to persuade companies to be good for sound business reasons”?
•Bowie (Robert)
Good ethics is good business:
What is whistleblowing?
•It is when an employee discloses wrongdoings of a business to their employers or the public
What are the negative consequences whistleblowers can face?
•Their employees can make working life more difficult for them and their colleagues might shun them for what they see as betrayal
What law in the UK protects whistleblowers from the negative consequences?
•The Public Interest Disclosure Act
- This bans employers from taking any action against an employee for whistleblowing
Arguments For and Against whistleblowing:
Positive and Negative impacts of globalisation:
Positives and Negatives of capitalism:
Strengths and Weaknesses of Utilitarianism being applied to business ethics:
Strengths and Weaknesses of Kantian Ethics being applied to business ethics:
