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Flashcards in Exam 2 Deck (40)
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Production and distribution that is in private hands and the operations are funded by profits

Strength: allows new products and businesses, free market, provides social services, customer driven, competition gives variety

Weakness: allows top 1% to get all the wealth, classes are spread out, lowers work ethic and want for american dream



Production and distribution that is in public hands and the operations are funded by profits; value made belongs in hands of society


*Difference between capitalism and socialism

public vs. private hands


5 historical components of capitalism

Based on mutual dependency between state and commercial interest.
Large scale industry
Characterized by trust, banks, money
-State welfare
Provides welfare services to employees
Transcends national borders


4 elements/functions of capitalism

Promotes creation of companies or business organizations that exists
Makes individual pursuit of self interest socially beneficial
-Profit motive
Lies in the motive that the company is which to make a profit
-Private property
Capitalism requires private ownership of the means of production


Keynes (British)

Government regulated capitalism

Spend money to spread economic growth

FDR and Obama

Most accepted/popular in early 20th century

Specifically during Roosevelt’s new deal time period

Giving 300-400 dollars to families to spend

Government bailouts


F. A. Hayek (Austria in the early to mid part of the 20th century)

free market capitalism
Save money to help economic growth
Friedman and Reagan


Milton Friedman (relates to Nozick)

Move towards socialism

Barbara Thaten as prime minister in Britain



single seller

Ex: apple owns phone and laptop.. They can buy out Nike and sell computers



market shared by a small number of producers

Ex: Apple buying Nike and Patagonia but keeping their products but owning them


Karl Marx

workers taking power could be a problem

No one should have power over another majority of wealth


Broader view

Goodpaster and Matthews

Business has social responsibility to stakeholders, consumers, environment, workers


Donaldson’s social contract theory

business owes society because it allows for the business to exist


Multiple stakeholders argument

other stakes in business besides profit


Velasquez’s argument

companies are about moral ethics


Employment at will

either party may fire/quit and hire/apply without reasoning




Business has no social responsibility except to maximize profit


Fiduciary responsibility

get most amount of money for the shareholder as possible

Maximize profits through shareholders


Adam Smith invisible hand

if people were left to pursue their own interests they would unknowingly create the most good and benefit


Visible hand

“let government do it” government has the resources and ability to hold the responsibility they should

Government has everything they need in order to appeal to social responsibility which is why they should do it and not businesses



businesses are like a custodian trying to handle a responsibility “government doesn’t know what to do”


Economic efficiency

hating broad view; wrong bc it’s inefficient and does not maximize shareholders values


Materialization of society

if social responsibility is imposed it will increase materialization in society

Ex: clean up ocean to get in newspaper


Compatibility of self interest and social responsibility

if companies are to put their shareholders first that they will automatically be fair to workers and society


Ford v. Pinto case


Ford ran a cost benefit analysis and determined that people’s lives are worth the price that they’d pay for the car

Unsafe gas tank situation


Macpherson v. Buick

Wheel of car fell off and sued manufacturers

Moves us to the idea of manufacturers acting under the process of due care

Due care: consumers and sellers do not meet as equals
Let the buyer beware
Consumer misuse


Greenman v. Yuba Power Products

Liability and safety case


Hemington v. Bloomfield

Legal responsibility to compensate for injury

Caveat emptor- let the buyer beware
*Switched to Due care- consumers and sellers do not meet as equals


Business Responsibility (6)

Business should give safety the priority warranted by the product

Business should abandon the misconception that it is exclusively product misuse and they are therefore responsible

Business must monitor manufacturing process

When a product is ready to be marketed, business should have a product safety staff review it

When products reach marketplace, firms should offer information about the product

Companies should investigate consumer complaints and do it quickly



Ad can be understood in two or more ways
*Concealment of facts
Not giving all the information about a product
Ex: pain reliever
Claims that are unsupported by evidence
Making product sound better than it is
Ex: company claiming they have the best blanket on the market
*Psychological appeals
Aimless effort swayed at a motion
Ex: puppy ads
*Subliminal ads
Communicate at a level beneath conscious awareness
Ex: coke in romantic comedy