Business Ethics

Question 1

What is corporate social responsibility? (CSR)

Answer 1

The idea that a business has a responsibility as a whole towards the community and the environment, which are factors taken into decision making.

Question 2

What is a stake holder?

Answer 2

Any individual or group affected by the activities of a business

Question 3

What is a shareholder?

Answer 3

People who own part of a business. They take dividends of the companies profits

Question 4

What is whistle blowing?

Answer 4

When an employee reports misconduct if a superior, co worker, or the business as a whole

Question 5

What is globalisation?

Answer 5

Economic and cultural interests across the world, not restricted to once country.

Question 6

Who suggested the Stockholder theory?

Answer 6

Milton Freidman

Question 7

What is the stockholder theory?

Answer 7

The idea that the responsibly of a business is to make as much money that is legal for their stock holders.
CEOs and workers are just agents to fulfil this.
Shareholder should be concerned with social issues.

Question 8

What is the stake holder theory?

Answer 8

The idea that a business should provide value ( CSR ) to ALL of their stakeholders, not just in the form of profit for their shareholders.

Question 9

Who suggested the stake holder theory?

Answer 9

Freeman

Question 10

How might the stockholder theory view corporate social responsibility?

Answer 10

As unethical as it does not place profits first

Question 11

How might the stakeholder theory view corporate social responsibility?

Answer 11

As ethical.

Question 12

How might CSR benefit stakeholders?

Answer 12

Actions led by CSR will have positive social and environmental benefits on stakeholders and the local community.

Question 13

How might CSR benefit the shareholder theory?

Answer 13

A business appearing to have CSR may win customer loyalty by giving a company an ethical image. This increases sales and hence profits for shareholders.

Question 14

Explain the difference between philanthropical and enlightened self interest CSR

Answer 14

Philanthropical is doing CSR because it is the right and moral thing to do.
Enlightened self interest is doing CSR to increase profits.

Question 15

What does CSR involve?

Answer 15

• Conducting business in an ethical way
• Responding positively to emerging societal problems
• Willingness to act ahead of regulations
• Balancing shareholder interests with social interests

Question 16

What are the four main parts of CSR?

Answer 16

• Economic responsibility to make money for shareholders
• Legal responsibility to comply with law
• Ethical responsibility to do what is moral
• Voluntary and philanthropic responsibility to protect human welfare and good will

Question 17

What are the two ways of measuring CSR?

Answer 17

• The triple bottom line
• Social audit

Question 18

What is the triple bottom line?

Answer 18

A method of measuring CSR that involves reviewing a businesses economic, social and environmental performance rather than just economic

Question 19

What are social audits?

Answer 19

Allowing employees and other stakeholders to share their views, feelings and concerns about a company

Question 20

Whose ideas did Friedman built his theory on?

Answer 20

Adam Smith

Question 21

What did Adam Smith believe about human nature?

Answer 21

That humans only acted out of self interest

Question 22

Explain the Ford Pinto case study

Answer 22

• In the 1960s, American car companies had little competition from cars from other countries.
• However, when Japan and European companies began improving quality, Americans started buying the smaller, cheaper and lighter foreign cars.
• In response, Ford made the Pinto which was a smaller car. However, in order to dodge oncoming safety regulation changes, they rushed the car which resulted in it being very unsafe.
• Ford did a cost benefit analysis and realised it would be cheaper to pay the legal fines for injuries and deaths than to fix the problem

Question 23

Why does Friedman believe the CEOs only responsibility is to make more profit?

Answer 23

• Helping social issues would go against the shareholders wishes (the CEO’s bosses. A CEO should not use company resources on anything other than increasing profit
• The CEO has been employed due to their skills in money making, not solving social issues
• The people who are chosen to solve social issues (civil servants) and responsible for social issues, not CEOs.

Question 24

Did Ford completely obey Friedman’s theory?

Answer 24

No. They committed deception

Question 25

What is separation fallacy?

Answer 25

The claim that business decisions are completely separate to ethical decisions, and have no moral implications.

Question 26

What does Freeman think of separation fallacy?

Answer 26

It is an incorrect claim.

Question 27

What two concepts does Freeman point to to support his view on separation fallacy?

Answer 27

- The open question argument - The Responsibility principle

Question 28

What is the open question argument?

Answer 28

Freeman’s idea that there are several questions that are always open when a decision is made. This means that any business decision has ethical implications.

Question 29

What is the responsibility principle?

Answer 29

Freeman’s idea that everyone, including businesses, should take responsibility for their actions.

Question 30

What are the questions that Freeman proposes in the open question argument?

Answer 30

- If this decision is made, for whom is value created and destroyed? - Who is harmed and or benefited by this decision? - Whose rights are recognised or infringed? - What kind of person will I become if I make this decision?

Question 31

What would Milton Friedman say about ethics in regards to business?

Answer 31

Ethics is not relevant to business. While in some cases acting ethically may lead to good business, there are other cases in which acting overly ethical will lead to losses.

Question 32

What would Kant suggest about ethics in regards to business?

Answer 32

Good ethics are more important than good business Businesses must act ethically out of duty, not out of self interest A business which only behaves ethically to increase profits is not ethical

Question 33

What would Adam Smith suggest about ethics in regards to business?

Answer 33

Due to the symbiotic relationships within business, acting towards good business usually results in good ethics An ethical approach in business is likely to pay off even if the motives are out of self interest.

Question 34

What does Adam suggest about the relationships within business?

Answer 34

The relationship between the business and its stakeholders can be described as symbiotic - if the business treats the stakeholder well, the business is likely to benefit For example, the symbiotic relationship between business owners and workers mean that if the workers are treated well, the business as well as the workers will benefit because the workers will work harder

Question 35

What approach would utilitarianism take to Business ethics?

Answer 35

A shareholder theory approach. By trying to maximise profits, a business will end up providing benefit for their market as they will improve their services for increase profits (Trickle down economy) Enlightened self interest

Question 36

What may Kant criticise about utilitarianism's approach to business ethics?

Answer 36

Enlightened self interest does not treat people as ends in themselves, but rather as means to an end. Kant argues people have intrinsic worth, but a utilitarianist approach suggests people only have extrinsic worth We should act morally out of duty, not self interest.

Question 37

What may Mill suggest about the utilitarianist approach to business ethics?

Answer 37

The happiness of shareholders and customers should not be put before that of the people who make the products in poor conditions for little pay. This is an example of the tyranny of the majority.

Question 38

What approach would Kantian ethics take to business ethics?

Answer 38

A stakeholder theory like approach. Employees and owners have a duty toward each other and customers As everyone involved has intrinsic worth, everyone must be treated as an ends in themselves Profit is irrelevant. Business should only be concerned with acting out of duty

Question 39

What are some issues with the Kantian approach to business ethics?

Answer 39

- It could be considered too abstract meaning it is of little use in the real world - If businesses behaved as if they were in a Kingdom of ends, it's unlikely they will be successful. Business is based on competition. - The universal and absolutist approach may not be helpful in the world of business - The intent of actions can never be truly proven

Question 40

What is Adam Smiths' concept of the Stakeholder's invisible hand?

Answer 40

- Smith suggested that when a business acts with the purpose of self interest to increase profits, they end up benefiting their stakeholders too. - For example, producing good products wins customer loyalty, hence increasing profits, but also benefits the customer as they have good products.

Question 41

What are three positives of the Kantian approach to business ethics?

Answer 41

- Kantian ethics places high importance on individuals, allowing a business to act with CSR - Kantian ethics focus on the intent of actions ensures CSR is genuine and done for philanthropic reasons - The universal nature requires businesses be consistent in decision making.

Question 42

What are three strengths of the utilitarianist approach to business ethics?

Answer 42

- The teleological nature is beneficial as businesses are often - concerned with results - Act utilitarianism provides a large amount of flexibility in decision making, allowing complex situations to be dealt with. - It focuses on the greatest pleasure for the greatest number, which will usually result in customers being benefitted.