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CSR > Part 3 > Flashcards

Part 3 Flashcards

1
Q

Voluntary exchange:

A

Transactions build upon principle of consensus [legitimacy]
▪ Voluntary participation in exchange transaction expresses the participants’ consent
▪ Voluntary exchange aims at mutual betterment [realization of win-win situation] and is fully compatible with
pluralist values and diversity
▪ Self-determination without the use of force

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2
Q

Business context:

A

Organization of voluntary win-win-win-relations, companies have relations with employees, costumers, suppliers, investors if both parties are consent and better off than before

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3
Q

Ballot of the market:

mention economist related

A

Democracy and consumer sovereignty in the market [Ludwig von Mises]

▪ The consumers by their buying and abstention from buying elect the entrepreneurs in a daily repeated plebiscite as it were, they determine who should own and who not, and how much each owner should own

▪ The ballot of the market elevates those who in the immediate past have best served the consumers, choice is alterable and can daily be corrected, the elected who disappoints electorate is speedily reduced to the ranks

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4
Q

Democracy in the state:

A 
▪ Voting with your ballot sheet
▪ Vote just on election day
▪ Vote on few/collectively important decisions
▪ Majority can overrule minority
▪ Votes may have no impact
▪ One human one vote
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5
Q

Democracy in the market

A

▪ Voting with your feet
▪ Daily vote with every market choice
▪ Vote on many detailed decisions of individual relevance
▪ Bilateral consensual relationship
▪ Each single transaction counts
▪ Voting with one’s purse only possible with resources

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6
Q

Bilateral Exchange

A

Buyer and seller of a T-Shirt [Mixed motive game]
▪ Shared interest in a deal to realize betterment through exchange
▪ Conflicting interests = price, quality, service/effort, time of payment, production costs & working conditions`

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7
Q

Exchange is at risk due to a potential social dilemma:
everyone is tempted to take without (fully) giving.
Two solutions:

A

! Property Rights & Rule of Law: Courts (or other third parties) sanction contracts
! Competition: Competition as an instrument to discipline market participants (especially when incomplete contracts are not easily enforced)

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8
Q

Is cooperation in the market always good?

A

[Adam Smith] = skeptical of certain forms of cooperation

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9
Q

Do we need more competition or more cooperation?

A

Competition and cooperation are not necessarily opposites, we can use cooperation to compete but also use competition to cooperate more effectively

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10
Q

Normative Ambivalence:

A

many issues/things are ambivalent: Depending on
context, they can show very different faces and may lead to important negative effects in one instance and positive effects in another.

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11
Q

Competitive Pressure:

A

[William Baumol]
▪ Competition creates incentives that can ultimately reduce certain individual options
▪ The competitive process precludes voluntarism on any significant scale
▪ Competition can enforce behavior conforming the dominant incentives

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12
Q

Negative outcomes of competition:

A

▪ Competition can lead to unintended negative consequences [sports > doping; politics > populism; business >
pollution, corruption, poor labor conditions]
▪ Race to the bottom = competition reduces the scope for morally desirable behavior = competition can create
incentives that make morally desirable behavior almost impossible
▪ Competition as social dilemma, e.g., pollution = all companies pollute environment to gain competitive
advantage but no company actually gets advantage because all pollute

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13
Q

Positive outcomes of competition:

A

▪ The case of negative discrimination = manager would like to decide according to personal values [discriminate
against talented applicant because of XY] but competition tolerates no business deviation from virtue
▪ Race to the top = unintended outcome = competition reduces scope for morally undesirable behavior =
competition can create incentives that make morally undesirable behavior almost impossible

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14
Q

Competition as ambivalent tool:

A

▪ Depending on the institutional framework, competition can advance and undermine moral behavior
▪ Competition detaches individual intentions from collective outcomes in the market
▪ The moral quality of market outcomes does not depend primarily on individual character but on the quality of
the rules of the game

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15
Q

The systematic locus of morality in competitive markets

[Mention person related]

A

[Karl Homann]

Under competitive conditions, the institutional framework emerges as the systematic locus for morality
▪ Not only place for morality but whenever moral problems are caused systematically by the competitive logic, then the only systematic solution is to change this logic
▪ A naïve appeal to individual heroism risks that the morally sensitive will be driven out of the market
▪ No justification for undesirable status quo but a perspective for democratic reform

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16
Q

Competition and morality according to whom?

A

[William Baumol]

Competition reduces societal dependence on individual good will = society can seek to reform institutional rules of the game which is better than to reform people individually

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17
Q

A market exchange dilemma can be solved by property rights.

TRUE OR FALSE?

A

TRUE

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18
Q

An exchange is destabilized when third parties use their right to sanction (in the form of contracts).

TRUE OR FALSE?

A

FALSE

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19
Q

Competition can be used as a disciplinary tool so that the parties keep their promise to exchange.

TRUE OR FALSE?

A

TRUE

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20
Q

Competition as an instrument limits the freedom of choice for those involved in an exchange.

TRUE OR FALSE?

A

FALSE

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21
Q

Setting property rights is often associated with additional costs and increased effort for those involved.

TRUE OR FALSE?

A

TRUE

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22
Q

Perfect competition is also called…
The quantity offered and the associated price result from….
With this type of market, welfare for those involved is…

A

…POLYPOLY
…the interplay of supply and demand
…maximal

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23
Q

The difference between the price the consumer would be willing to pay and the market price is called….

A

consumer surplus

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24
Q

The difference between the market price and the price at which the seller would be willing to manufacture and offer a good…

A

producer surplus

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25
Q

Competition with outside players can solve the dilemma by incentivizing the players within the game to keep their promises.

TRUE OR FALSE?

A

TRUE

26
Q

Competition can be a means to enable desirable forms of cooperation.

TRUE OR FALSE?

A

TRUE

27
Q

Competition can lead to undesirable outcomes because it enlarges the freedom to follow one’s personal egoistic intentions.

TRUE OR FALSE?

A

FALSE

28
Q

Competition is not an end by itself but serves as a means to stabilize cooperation.

TRUE OR FALSE?

A

TRUE

29
Q

Which of the following statements is NOT true regarding the idea popularized by Ludwig von Mises that you got to know during the lecture? Please choose only one correct answer.

a. Those who disappoint the “voters” - the consumers - are immediately punished for it.
b. Customers elect the one they perceived best. Those who are successful in the market because they serve people better than others.
c. Ludwig von Mises introduced the idea of customer or consumer sovereignty.
d. In a market, customers always have many options to choose, they can go to other options.

A

d.

30
Q

Ambivalence can also mean a state of…

A

psychological turmoil

31
Q

Perfect competition might hinder ______, when there are no incentives for moral behavior. A ___ __ __ ____ might occur such as in the case of unsustainable production. In contrast, competition can also _____ attitudes which would have an undesirable effect on the society. This ____ ___ ___ ____ can, for instance, be seen with regards to discrimination.

A

Perfect competition might hinder voluntarism, when there are no incentives for moral behavior. A race to the bottom might occur such as in the case of unsustainable production. In contrast, competition can also preclude attitudes which would have an undesirable effect on the society. This race to the top can, for instance, be seen with regards to discrimination.

32
Q

Race to the bottom =

A

Negative outcomes of competition.
competition reduces the scope for morally desirable behavior = competition can create incentives that make morally desirable behavior almost impossible.

33
Q

Race to the top =

A

Positive outcomes of competition
unintended outcome = competition reduces scope for morally undesirable behavior = competition can create incentives that make morally undesirable behavior almost impossible.

34
Q

The practical syllogism can be applied to the means-and-ends concept. _____ ______ of the practical syllogism can be seen as goals - we state what we ____ ____ do. The _____ ______ , on the other hand, can be seen as a description of the _____ - they express what we ____ do.

A

The practical syllogism can be applied to the means-and-ends concept. Normative assumptions of the practical syllogism can be seen as goals - we state what we want to do. The positive assumptions, on the other hand, can be seen as a description of the means - they express what we can do.

35
Q

Rising distrust towards the profit principle >

A

The profits of large companies help to make things better for everyone who uses their products and services [nowadays more disagree]

36
Q

In a society there is one and only one social responsibility of business – to use its resources and engage in activities designed to increase its profits so long as it stays within the rules of the game, which is to say, engages in open and free competition without deception or fraud

SAID…

Those are arguments for…

A

[Milton Friedman]

Arguments for the profit principle

37
Q

what is the function/purpose that companies should fulfill when viewed from a societal perspective?

A

Maximizing profits is an end from the private point of view & a means from the social point of view = from societal perspective, profits are not an end but an instrument

38
Q

Meta-Criticism:

A

▪ Unfairly generated revenues = corruption, fraud, cartels, monopolies
▪ Externalized costs = environmental pollution, forced labor, child labor, secret drug testing
▪ Profits = no longer a yardstick for societal value creation because sometimes they do not tell “the truth”
> it is not relevant whether but how profits are made

39
Q

Friedman fails to account for situations in which profit-seeking leads to undesirable social results. Blind spots:

A

▪ Real-life business ethics problems [without deception or fraud]
▪ Pressing CSR challenges in a globalized world [within the rules of the game]

40
Q

Friedman’s implicit ethics of competitive markets:

A

Given a functional institutional framework …
▪ … the pursuit of self-interest in the marketplace can lead to highly desirable social results
▪ … profits are, then, an epiphenomenon of successful value creation
▪ … profits, then, signal and reward the successful organization of win-win cooperation
→ profit seeking is important as powerful instrument and is normatively ambivalent

41
Q

The principal-agent problem:

A

Delegation of tasks under information asymmetries & conflicting interests

42
Q

Principal-agent problem between owner and manager=

A

CSR favors unfaithfulness

43
Q

Principal-agent problem between citizens and manager=

A

CSR is undemocratic

44
Q

Problem of implementation (CSR)

A

▪ Managers do not have the knowledge and competences to address complex CSR problems
▪ Under competitive conditions, CSR is not possible in the long term [to expense of profits]

45
Q

Problem of back-firing (CSR)

A

▪ The commitment to CSR confirms the perception that corporations would not be legitimate without CSR
▪ CSR might worsen underlying problem of declining legitimacy

46
Q

Assumption of idealized economic models:

A

[no market failure, a functioning state to provide adequate regulation [no challenges due to globalization, etc.] = Not a national issue anymore, if there is no functioning state governance then the state might be a poor agent, if problems get really complex it is an open question who has adequate competence and knowledge [corporations might be better agent than governments]
• In the age of globalized value chains and ubiquitous governance challenges, CSR needs to be compared with imperfect state governance, Friedman’s view fails to look at the relevant alternatives

47
Q

Assumption that CSR is only possible as a necessary trade-off:`

A

[either self-interest or responsibility, Freidman transcends trade-off thinking in market ethics case but sticks to it in case of business ethics] = CSR actually helps secure and create profits and is highly compatible with competition, in line with shareholder interests, can be more credible and explain win-win logic of value creation
• Need for alternative CSR concepts that do not define responsibility and profitability as necessary and
invariably given trade-off

48
Q

Social Responsibility - Friedman’s assumptions =

A

Companies have a social responsibility to be profitable, to create value for society, to not destroy value for society.

49
Q

“The social responsibility of business is to increase its profits.”

SAID…

A

Milton Friedman

50
Q

What is a social business?

A

social business” is a form of business striking a balance between social objectives and financial goals, situated somewhere between profit-maximizing business and the non-profit sector.

51
Q

Under adequate conditions, companies increase value for society when they make a _____. Thus, increasing their ____ then increases their _____ _____ to society.

A

Under adequate conditions, companies increase value for society when they make a profit. Thus, increasing their profits then increases their value contribution to society.

52
Q

Profit seeking is important as a powerful ______ (means). As such, however, it is ______ ambivalent.

A

Profit seeking is important as a powerful instrument (means). As such, however, it is normatively ambivalent.

53
Q

“Stakeholder = any group or individual who can
affect or is affected by the achievement of the organization’s objectives“

SAID…

A

R. Edward Freeman

54
Q

There is a multiplicity of problems that can be characterized as one-sided PD structures. This holds for phenomena such as:

A
  • Specialization makes one dependent (specific investments)
  • Principal-Agent-Problems
  • Information asymmetries
55
Q

General definition of a social dilemma:

A

A situation in which conflicting interests keep rational actors from realizing a common goal such that the whole of the group remains below its best.

56
Q

asymmetric vs symmetric problem?

A

ASYMMETRIC PROBLEM: one-sided social dilemma
• Within a one-sided social dilemma there is an asymmetric problem of exploitation. Ex-post anticipating of exploitation leads to unproductive counterstrategies ex ante by which all parties involved are worse off.
• In such a situation, a credible individual self-commitment helps to render unattractive the option to exploit the other. This way, an individual self-commitment helps to set incentives for mutually beneficial cooperation.

SYMMETRIC PROBLEM: many-sided social dilemma
• Within a many-sided social dilemma everybody acts in the way he fears from others. It is a symmetric problem.
• In such a situation, a collective self- commitment is required in order to change the incentives for all players and make them play a better game.

57
Q

The problem of specific investments:

A

A man commissions a shelf, carpenter tailors the shelf. After completing work the client only wants to pay value of tailored wood = a generally usable economic good is limited in its reusability through a specific investment and a strong dependency is created and consequently a problem of exploitation [economic reconstruction].

58
Q

Three-tiered framework:

A

FROM BOTTOM UP:
1. Social interactions = basic game = players who chose
moves, do what is individually good for them =
analysis
2. Rule-setting processes = meta game = Institutions &
rules on how to govern social interactions = change
of situation
3. Rule-finding discourse = meta-meta game = ideas
and mental models governing the rule-setting
processes = needs to happen to change situation

59
Q

By complementing the positive aspects of both NGOs and traditional businesses, the form of ‚ _____ ______‘ arises. Hereby, the societal value can be seen as a
______ of those businesses. In order to reduce the dependency of donations, those businesses finance themselves through their self-sustainable income.

A

By complementing the positive aspects of both NGOs and traditional businesses, the form of ‚social business‘ arises. Hereby, the societal value can be seen as a
end of those businesses. In order to reduce the dependency of donations, those businesses finance themselves through their self-sustainable income.

60
Q

Which of the following statements are NOT true according to Friedman’s perspective? Please select only one correct answer.

a. In a free-enterprise, private property system, a corporate executive has direct responsibility to the society.
b. The social responsibility of business is to increase its profits.
c. Maximizing profits is an end from the private point of view; it is a means from the social point of view
d. Only people can have responsibilities.

A

a.

CSR (5 decks)

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