GROUP 1 THE NATURE OF CAPITALISM

Capitalism is a worldwide system, multinational firms operate without regard for traditional political boundaries, and the economies of capitalist nations are intricately interconnected. But what exactly is the nature of the economic system called capitalism. What is its underlying economic philosophy? What has it accomplished and what are its prospects for the future? Our report will and these and related questions. Looking back in history, one must definitely credit capitalism with helping break the constraints of medieval feudalism, which had severely limited individual possibilities of improvement. In place of a stifling economic system, capitalism offered opportunities for those blessed with imagination, an ability to plan, and a willingness to work. Capitalism must also be credited with enhancing the abundance and diversity of consumer goods beyond Adam Smiths wildest dreams. It has converted our cities from modest bazaars into treasure troves of dazzling merchandise.

interests. Implicit in mercantile capitalism are the beliefs that national wealth and power are best served by increasing exports and collecting precious metals in return, and that the role of government is to provide laws and economic policies designed to encourage production for foreign trade, keep out imports, and promote national supremacy. Industrial capitalism emerged, which is associated with the development of large-scale industry. As industrialization increased, so did the size and power of business. Financial capitalism characterized by pools, trusts, holding companies, and an interpenetration of banking, insurance, and inward larger and larger corporations, controlling more and more of the countrys economics capacity. State welfare capitalism in which government plays an active role in regulating economic activities in an effort to smooth out the boomand-bust pattern of the business cycle. That exists when great depression is evident.

KEY FEATURES OF CAPITALISM 1.) Companies

CAPITALISM

Capitalism can be defined ideally as an economic system in which the major portion of production and distribution is in private hands, operating under what is termed a profit or market system. All manufacturing firms are privately owned, including those that produce military hardware for the government. The private ownership and market aspects of capitalism contrast with its polar opposite, socialism. Ideally socialism is an economic system characterized by public ownership of property and a planned economy. Under socialism, a societys equipment is not owned by individuals (capitalists) but by public bodies. Socialism depends primarily on centralized planning rather than on the market system for both its overall allocation of resources and its distribution of income; crucial economic decisions are made not by individuals but by government. Worker control socialism is a hybrid economic system advocated by some socialists (and once approximated by Yugoslavia) individual firms respond to a market in acquiring the necessary factors of production and in deciding what to produce. The workforce of each enterprise controls the enterprise (although it may elect or hire managers to oversee day-to-day operations), and the profits accrue to the workers as a group to divide in whatever manner they agree on. The workers manage their factories, the capital assets of each enterprise are owned by society as a whole and not by private individuals.

The existence of companies or business firms separate from the human beings who work for and within them. Expressions and concept of business entity is evident. Such personifications are not mere lapses into figurative but bespeak a basic characteristic of capitalism: Capitalism permits the creation of companies or business organizations that exist separately from the people associated with the. Chief Justice john Marshall defined a corporation as artificial being, invisible, intangible, and existing only in the contemplation of law. Although a corporation is not something that can be seen or touched, it does have prescribed rights and legal obligations within the community.

2.)

Profit Motive

Historical Background of Capitalism

Capitalism did not fully emerge until the Renaissance in Europe during the fifteenth and sixteenth centuries. Before the Renaissance, business exchanges in medieval Europe through guilds (which were associations of individuals of the same trade). Weaving was another big medieval trade. In fourteenth century weaving was the leading industry in Augsburg, Germany. Capitalism had undergone changes since then. The kind of capitalism that emerged in the Fuggers time is often termed mercantile capitalism, because it was based on mutual dependence between state and commercial

A second characteristic of capitalism lies in the motive of the company: to make profit. As dollar-directed and gain-motivated as our society is, most of us take for granted that the human being is by nature an acquisitive creature who, left to his or her own devices, will pursue profit with all the instinctual vigor of a cat chasing a mouse. Economist Robert Heilbroner points out, the profit motive, as we understand it, is a very recent phenomenon. It was foreign to the lower and middle classes of Egyptian, Greek, Roman, and medieval cultures, only scattered throughout the Renaissance times, and largely absent in most Eastern civilization. Modern or not, profit in the form of money is the lifeblood of the capitalist system. Companies and capitalists alike are motivated by a robust appetite for money profit. The profit motive implies and reflects a critical assumption about human nature: that human beings are basically economic creatures, who recognize and are motivated by their own economic self-interest.

3.)

Competition

Free competition, said by Adam Smith, is the regulator that keeps a community activated only by self-interest from degenerating into a mob of ruthless profiteers.

When restraints are removed from the sale of goods and from wages and when all individuals have equal access to raw materials and markets (the doctrine of laissez faire, from the French meaning to let [people] do [as they choose]), we are all free to pursue our own interest. If any of us allow blind self-interest to dictate our actions we will quickly find ourselves beaten out by a competitor. Thus, competition regulates individual economic activity.

4.)

Private Property

Under the libertarian theory of justice: o Property refers not only to physical object o Ownership is not the just the simple relationship between the owner and thing owned. o First, one can have property rights over things not simple physical objects (i.e. stocks in the company) o Second, property ownership involves generally complex bundles of rights & rules governing how and in what ways both the owner and others can use, possess, dispose of, and have access to the thing in question. o Private property is central to capitalism, that is, as socio-economic system; capitalism is a specific form of private property. o Capitalism is not merely private property in the sense of personal possessions; it requires private ownership of the major means of production & distribution (i.e. factories, warehouse, etc) o Under capitalism, private hands control the basic assets and resources. Thus, the major economic decisions are made by them in pursuit of profit. o Closely related to private property, capital is money invested for purpose of making more money. o Using money to make money is at the heart of the definition of capitalism.

be owned privately, collectively, or in any ways. The moral task is to find the property system, that way of organizing production and distribution, with the greatest utility. Even one believes there is natural right to property, but this does not lead to capitalism or that it is right to have system of property rules & regulations. Example: even if Carl has natural right to the coconuts, there are still moral limits as how many coconuts he can harvest and as to what he can use them for. When he takes the coconut to a coconut bank and receives coconut as interest, this is not a result of his labor. When we look at capitalistic property, socio-economic environments in which people profit from ownership alone, then, we have left Lockes argument of natural right as human labor. Even if there may be certain fundamental moral rights to property, those need not be unlimited and guarantee capitalism as we know it.

Adam Smiths Concept of the Invisible Hand

MORAL JUSTIFICATIONS OF CAPITALISM

Whether capitalism is morally justifiable will depend somehow on which general theory of justice turns out to be the soundest. The two justification/arguments: o Moral right to property o Utilitarian-based economic argument of Adam Smith

Natural Right to Property

A common defense of capitalism is the argument that people have a fundamental moral right to property and capitalism is simply the outcome of this natural right. Locke based the right of property to human labor. o Example: Carl diligently harvests coconuts on a land he shares with Adam, while Adam idle away his days, then most of us would agree Carl has entitlement to those coconuts. o But today property ownership is very complex---- for example, bonds. o Utilitarian reject this idea of natural ownership. In their view: Although various property systems exist, there is no natural right that things are to

Important argument defends capitalism in terms of the many economic benefits the system brings, claiming that a free and unrestrained market system is more efficient and more productive than any other possible system and is thus to be preferred on moral grounds. Smith argues that when people are left to pursue their own interests, they will, without intending it, produce the greatest good for all. He took it for granted that human beings are acquisitive creatures. Self-interest and personal advantage, specifically in an economic sense, may not be all that motivate people, but they do seem to motivate most people much of the time. Humans have natural propensity for trading to truck, barter, and exchange. And we have an almost constant need for the assistance of others unlike other species. o For example: Give me that which I want, and you shall have this which you want, is the meaning of every such offer; and it is in this manner that we obtain from one another the far greater part of those good offices which we stand in need of. o Government interfere in private enterprise should be eliminated, free competition encouraged, and economic self-interest made the rule of the day. o Smith invoked the law of supply and demand, to explain why pursuit of selfinterest necessarily leads to the greatest social benefit. The law of supply and demand tempers the pursuit of selfinterest exactly as competition keeps the enterprising capitalist from becoming a ruthless profiteer.

CRITICISMS OF CAPITALISM

Objections to capitalism are both theoretical and operational. Theoretical criticisms challenge capitalisms fundamental values, basic assumptions, or inherent economic tendencies. Operational criticisms focus more on capitalisms alleged deficiencies in actual practice (as opposed to theory) in particular, on its failure to live up to its own economic ideas.

corporate welfare programs protect businesses; and that competition is not necessarily good. 1.) Capitalism Breeds Oligopolies According to Karl Marx, capitalism leads to a concentration or economic resources and power in the hands of a few and thus, it does not exhibit competition per se. Before, small firms experienced open competition. But when the advent of enormous companies, which can conspire to dictate current prices and dominate the market share, came to exist, monopolies came about, and thus eliminated competition. 2.) Corporate Welfare Programs Protect Businesses There are relatively existing government-sponsored corporate welfare programs such as the Export Enhancement Program, the Foreign Military Financing Program, the Department of Commerces Advanced Technology program and the like, which supports in its own distinct way commercial businesses and their operations. 3.) Competition is Not Good Competition may often demonstrate a negative relationship between performance and individual competitiveness. Cooperation is healthier and is technically better that competition because cooperation allows effective and efficient use of resources while competition means occurring expenditures that might result to business failure and mediocre outputs in the end. Competition, as an extrinsic motivator, weakens intrinsic motivators and thus would lead to adverse effects in the performance in the long run. Exploitation and Alienation

Inequality

The disparity in personal incomes is enormous; a tiny minority of the population owns the vast majority of the countrys productive assets; and at the beginning of the twenty-first century, our society continues to be marred by poverty and homelessness. Few doubt that poverty and inequality are bad things, but defenders of capitalism make several responses to those who criticize it on these grounds:

1.) A few extreme supporters of capitalism simply deny that it is responsible for poverty and inequality. Government interfere with the market causes these problems. The market would eliminate unemployment and poverty while ultimately lessening inequality. 2.) More moderate defenders of capitalism concede that, in its pure laissez-faire form, capitalism does nothing to prevent and may even foster inequality and poverty. However, they argue that the system can be modified or its inherent tendencies corrected by political action, so that inequality and poverty are reduced or even eliminated. 3.) Finally, defenders of capitalism argue that the benefits of the system outweigh this weak point. Inequality is not so important if living standards are rising and even poor have better lives than they did in previous times.

Some critics of capitalism also go on to maintain the inequality inherent in the worker-capitalist relationship is itself morally undesirable. John Stuart Mill found capitalism inferior in this respect to more cooperative and egalitarian economic arrangements.

Human Nature and Capitalism

Capitalism considers human beings as rational economic creatures. They are capable of recognizing their own self-interests. For Adam Smith, capitalism assumes that they know about the different options available, the structure and product differences in the marketplace. Consumer literacy is very important in making decisions especially those that concern products sold in the market. However, even with the help of some government agencies, consumers are, in reality, not totally aware of the important details that they should be considering in choosing which product to use and to buy in the market especially with the existing advertising strategies that tend to blind them in one way or another. Status quo says that the ideals of capitalism view human beings as consumers who are individualistic, and materialistic in theory and that in reality, capitalism presents or does not direct humans to achieve a higher sense of human purpose.

Competition Isnt What Its Cracked up to Be

Critics contend that capitalism brings about oligopolies that eliminate competition; that

Marx argued that as the means of production become concentrated in the hands of the few, the balance of power between capitalist *(bourgeoisie) and laborers *(proletariat). o *Bourgeoisie- exploitative middle class: the social class that, according to Marxist theory, owns the means of producing wealth and is regarded as exploiting the working class. o *proletariat- class of industrial wage earners: in Marxist theory: the class of industrial workers whose only asset is the labor they sell to an employer. (Encarta dictionary) o Workers have nothing to sell but their labor, said Marx; the bourgeoisie is able to exploit them by paying them less than the true created by their labor. In fact, Marx thought, it is only through such an exploitative arrangement the capitalists make a profit and increase their capital. o And the more capital they accumulate, the more they can exploit workers. Marx predicted that eventually workers would revolt. o Legal, political and economic changes have tempered many of the greedy, exploitative dispositions of early capitalism. The twentieth century witnessed legislation curbing egregious worker abuse, guaranteeing a minimum wage and ensuring a safer and more healthful work environment o According to Marx and his collaborator Friedrich Engels in communist manifesto (1848) has been implemented in the capitalist countries: a program of graduated income tax, free education for all children in public schools, investiture of significant economic control in the state and so on. o Still, many would say that although democratic institutions may have curbed the excess of capitalism, they

can do nothing to prevent the alienation of workers that results from having to do unfulfilling work. For that, because of unequal positions of capitalist and worker, laborers must work for someone else- they must do work imposed on them as a means of satisfying the needs of others. But what about workers who are paid handsomely for their efforts? They, too said Marx, remain alienated, for as the fruits of their labor are enjoyed by someone else, their work ultimately proves meaningless to them. The following selection from Marxs economic and philosophic manuscripts summarizes his notion of alienation: The worker is related to the product of his labor as to an alien object. For it is clear that the more workers expends himself in work the more powerful becomes the world of objects which he creates in face himself, the poorer he becomes in his inner life and the less he belongs to himself. The worker puts his life into the object and his life then belongs no longer to himself but to the object. What is embodied in the product of his labor is no longer his own. The greater this product is, therefore the more he is diminished.

replaced the small-scale entrepreneurs and free-wheeling competition of an earlier day. And governments in all capitalist countries actively intervene in the economic realm; they endeavor to assist or modify the so-called invisible hand. Its defenders may be advocating either the pure laissez-faire ideal or the modified state welfare capitalism that we in fact have. Those who attack the laissez-faire ideal may do so, on behalf of a modified, welfarist capitalism, or they may criticize both forms of capitalism and defend some kind of socialism, in which private property and the pursuit of profit are no longer governing economic principles. We have three-way debate over the respective strengths and weaknesses of laissez-faire capitalism, state capitalism and socialism.

Slow Growth in Productivity

Productivity isnt everything, writes MIT economist Paul Krugman, but in long run it is almost everything. If productivity growth is not improved, our standard of living will stagnate. Although median family income has increased in recent years, in real terms it is not that much higher than thirty years ago despite the fact that far more families have two wage-earners. Although twenty years ago the United States led the world in terms of the standard of living we provide our workers, today we are in thirteenth place- far behind in wages, benefits, health care, pensions, paid vacation days, and educational opportunities.

What constitutes the alienation of labor?

The work is external to the worker, that it is not part of his nature; and that, consequently, he does not fulfill himself in his work but denies himself. External labor is a labor of self-sacrifice because it alienates himself.

Short-term performance The US companies are preoccupied with short-term performance at the expense of long-term strategies, and this strategic myopia is an important part of a story behind Americas declining rate of productivity.

There are two aspects of act in alienation of practical human activity; 1. 2. The relationship of the worker to the product of labor as an alien object which dominates him. The relationship of labor to the act of production within labor. This is the relationships of the worker to his own activity as something alien and not belonging to him. This is called self-alienation. In Marxs view, when workers are alienated they cannot be truly free. They may have the political and social freedoms of speech, religion, and governance, but even with these rights, individuals still are not fully free.

According to the critics, their short-term orientation has made US Corporation unimaginative in flexible, and uncompetitive. This business strategies have urge US Companies to become more visionary arguing that there must be define long term goals and be willing to stick to them even at the expense of short-term profit. Many believe that one of to important economic challenges facing the United States today and a key to enhancing productivity growth is to get companies and managers to think long term when they have been trained to think and do otherwise.

Declining Interest in Production Hollow Corporations

TODAYS ECONOMIC CHALLENGES

Capitalism faces a number of important critical questions both theoretical and operational. These criticisms are powerful challenge, especially to capitalism in its pure laissez-faire form. o *laissez-faire - the principle that the economy works best if private industry is not regulated and markets are free. (Encarta dictionary) o Corporate behemoths able to control markets and sway governments have

The result is the evolution of a new kind of company: manufacturers that do little or manufacturing. They may perform a host of profit-making functions from design to distribution but they lack their own production base. In contrast to traditional manufacturers, they become hollow or weightless. Manufacturers are now pursuing a strategy of outsourcing that is, buying parts or whole products from other producers, both at home and abroad.

Mergers and Takeovers

Declining interest in the increase in corporate mergers and acquisition. Takeovers and vast restructuring that resulted were among the most visible economic trends and they continued into the new century. The most exciting action in town and the best opportunity for making quick, enormous profits lies in taking over or threatening to take over existing corporations

Changing Attitudes Toward Work

Shifting attitudes is one of the challenges facing our socioeconomic system as it heads into the twenty-first century. The so-called work ethic values work for its own sake, seeing it as something necessary for every person. It also emphasizes the belief that hard work pays off in the end. People become less optimistic about the future and begin to doubt that their efforts will pay off, they become less interested in work than in looking out for themselves. Loyalty to employers seems on the decline, and loyalty to fellow workers seems on the rise. Organizational plans, schedules and demands no longer carry the authoritative clout they once did; workers today often subordinate them to personal needs, which results in rampant absenteeism. Employee sabotage and violence, once unheard of, occur frequently enough today to worry management. Drug use at the office is increasingly the cause of employee theft, absenteeism, and low productivity.

But it is by no means immortal. Powers Exercised by a Corporation being a mere creation of law, may exercise only such powers as are granted by the law of its creation. All powers which may be implied from those expressly provided by law and those which are incidental or essential to the corporations existence may also be exercised.

Types of a Corporation: 1. For-profit and non-profit

Of corporate governance commonly appear in a wide variety of business and non-profit activities. Though the laws governing these creatures of statute often differ, the courts often interpret provisions of the law that apply to profit- making enterprises in the same manner (or in a similar manner) when applying principles to non-profit organizations. 2. Closely held and public

GROUP 2 However, the majority of corporations are said to be closely held, privately held or close corporations, meaning that no ready market exists for the trading of shares. Many such corporations are owned and managed by a small group of business people or companies, although the size of such a corporation can be as vast as the largest public corporations.

CORPORATION

General Definition of a Corporation: o In the Philippines, the general law defines a Corporation as an artificial being created by operation of law, having the right of succession and the powers, attributes and properties expressly authorized by law or incident to its existence. o A corporation is a legal or juridical person with a personality separate and apart from its individual members or stockholders who, as natural persons, are merged in the corporate body. It is not, in fact, and, in reality, a person but the law treats it as though it is a person. The stockholders or members compose the corporations but they are not the corporation. A corporation:

The corporation is a three-part organization made up of: Stockholders or shareholders They are the owners of the corporation, who provide the capital, and enjoy liability limited to the amount of their investments. Managers who runs the business operations Employees who produce the goods and services. The dominant role of corporations in our society extends well beyond from gaining profits, providing employment and improving economy. Not only do they produce almost all of the goods and services we buy, but also they and their philosophy permeate everything from politics and communications to athletics and religion. And their influence is growing relentlessly around the world.

o
is created by law or by operation of law. Cannot come into existence by mere agreement of the parties. Requires special authority or grant from the State through the legislative department. has a capacity of continuous existence irrespective of death, withdrawal, insolvency, or incapacity of the individual members or stockholders and regardless of the transfer of interest of shares of stock.

THE LIMITED LIABILITY COMPANY

Limited Liability Company (LLC): o Is a relatively new business structure allowed bystate statute. o Similar to a corporation, owners have limited personal liability for the debts and actions of the LLC. o Other features of LLCs are more like a partnership. o It is a legal form of company that provides limited liability to its owners.

LLCs do not need to be organized for profit. o Is created when proper articles of organization (or the equivalent under the laws of a particular state) are filed with the proper state authority, and all fees are paid. State laws typically impose additional pre or post-creation requirements as well. o Owners of an LLC are called members. o Members may include individuals, corporations, other LLCs and foreign entities. There is no maximum number of members. o A few types of businesses generally cannot be LLCs, such as banks and insurance companies. Advantages and Disadvantages of forming a LLC. o The primary advantage of a limited liability company is limiting the liability of its members. o Another advantage/s: pass-through taxation is available, meaning that and the members have greater flexibility in structuring the limited liability company than is ordinarily the case with a corporation, including the ability to divide ownership and voting rights in unconventional ways while still enjoying the benefits of pass-through taxation. o The primary disadvantages are (1) the work involved in, and the expense of, forming a limited liability company, and (2) after-formation record keeping requirements. Organizational Structure of Limited Liability Company o A limited liability company is owned by its members o The members may also apportion duties amongst themselves as they see fit. o One of the virtues of a limited liability company is the ability (in most states) to structure the limited liability company however its members want it to be structured. o All LLCs must have at least one member. LLC members are the owners of the LLC much as shareholders are the owners of corporation or the partners of partnership. Like shareholders, a member's liability to repay the LLC's obligations is limited to his or her capital contribution. Members may be natural persons, corporations, partnerships, or other LLCs. o A member's ownership interest in the LLC is called a membership interest. Membership interests are often divided into standardized units which, in turn, are often called shares. Stages that mark the evolution of Corporations o The corporate form itself developed during the early Middle Ages, and the first corporations were towns, universities, and ecclesiastical orders. o They were chartered by the government and regulated by the public statute. They existed independently of any particular membership as corporate bodies. o By the fifteenth century, the courts of England had evolved the principle of limited liability. o During the Medieval period, the law did not grant corporate status to purely profit-making organizations because in

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those days, something besides economic self-interest had to be seen to unite corporations- religion, trade, shared political responsibilities. During the Elizabeth era, the actual corporation of business enterprises began. Two important theoretical shifts. First, underlying the old system was the mercantilist idea that a corporations activities should advance some specific public purpose. Second, when nineteenth-century reformers argued in incorporation procedures, they talked not only about government favoritism, but also about the principle of the corporations right to exist. Corporations must be recognized by the law as a single agent in order for them to enjoy their rights and privileges. The corporation remains, as an artificial being, invisible, intangible, and existing only in contemplation of the law.

CORPORATE MORAL AGENCY

Corporations are not human beings but artificial persons created by law. They are collections of different, changing individuals who set goals and policies and perform specific actions. A corporation is like legal persons. It emphasizes that they enjoy the same moral and political rights as citizens. They have the rights and protections that any ordinary individuals do. Given that moral agency entails responsibility. They are capable of responding to moral reasons; accountability is a necessary feature of morality. A sense of accountability derives from the roles we occupy. Responsibilities attach to roles, for example, professional responsibilities, and roles sometimes are defined in terms of responsibilities. Given that corporations are not actual persons, in what sense can they be held morally responsible for their actions? At this point, it may help to understand what is meant by individual moral responsibility. People are simply said to have a moral responsibility to do whatever it is that morality requires them. Thus, I may have a moral responsibility to help my neighbour or to keep my promise to Peter. But reference to an individuals moral responsibility may also have other meanings.

MEANINGS OF MORAL RESPONSIBILITY

It refers to holding people morally accountable for some past action. Thus, if you are playing with your cars radio while you drive and, as a result, cruise through a stop sign, you are responsible for the accident that results; you deserve to be blamed. On the other hand, if the accident resulted from your having suffered a heart attack, you would not be seen as morally responsible for it. Responsibility in this sense of accountability for actions, therefore, refers to assigning people blame or praise for particular action they performed. It refers to a persons accountability for the care, welfare or treatment of others according to social conventions. Thus, parents are responsible for seeing that their children go to school; teachers are responsible for what occurs in their classrooms; doctors are responsible for the treatment of their hospital patients. These specific role responsibilities are typically set by social or organizational conventions.

It refers to a persons own capacity to make moral and rational decisions. Thus, when parents hire a babysitter for their young children, they recognize that their children lack mental and emotional maturity to make competent, informed decisions. On the other hand, the babysitter and the parents presumably are morally responsible agents. They have the capacity to make autonomous, informed, and rational moral decisions.

CAN CORPORATIONS MAKE MORAL DECISIONS?

The process of moral corporate decision making is filtered through the framework of the corporate internal decision (CID) structures. Corporate Internal Decision (CID) structures amount to established procedures for accomplishing specific goals. It lay outs lines of authority and stipulates under what conditions personal actions become official corporate actions. The major component of corporate decision making consists of the framework in which policies and activities are determined. Can Corporations Make Moral Decisions? Yes, corporate internal decision structure establishes lines of authority and corporate procedures and objectives. In addition, corporate decision making structure acts intentionally and with a purpose. Therefore, corporate makes informed and rational moral decisions, and carries out actions in order to realize its intentions.

responsibilities to them just as we do to individual persons To conclude that explanations like Sporchs are nothing but lame excuses to protect blameworthy individuals Inescapable fact: Corporations are increasingly being accorded the status of biological persons with all the rights and responsibilities implied by that status.

CORPORATE SOCIAL RESPONSIBILITY

Covers a wide range of issues, including the effects that an organizations business has on the environment, human rights and third world poverty. There are three meanings of moral responsibility: o refers to people being morally accountable for some past action; o refers to a persons accountability for the care, welfare or treatment of others according to social conventions; o refers to a persons own capacity to make moral and rational decisions.

NARROW VIEW: PROFIT MAXIMIZATION

VANISHING INDIVIDUAL RESPONSIBILITY

The nature and structure of modern corporate organizations allow virtually everyone to share moral accountability for an action. o This diffusion of responsibility can mean that no particular person or persons are held morally responsible o Inside and outside corporations, assigning praise and blame can be problematic. o The impersonality of the corporate entity so envelops its members that they in effect lose their moral agency o Members of corporate organizations cannot be considered capable of making moral decisions in a corporate context o CIDs not only give rise to the industry pattern but effectively paralyzed, if not usurped, the moral agency of corporate members o It makes no sense to speak of corporate moral agency It is equally vacuous to speak of individual moral agency in a corporate context Actions without actors in any moral sense- of flouted contracts, as in the case of National Semiconductor, without any morally responsible parties Two ways to escape the intellectual discomfort posed by morally actorless actions: To attribute moral agency to corporations and assign

According to Milton Friedman, a business has no social responsibilities other than to maximize profits. Corporate officials have a sole responsibilities to serve the interests of their shareholders within the rules of the game: open and free competition without deception and fraud Corporate managers must obey civility and to seek material gain. To have other social responsibilities means that managers must subordinate owners interest to some social objectives, such as controlling pollution or fighting sexual discrimination.

THE BROADER VIEW OF CORPORATE SOCIAL RESPONSIBILITY

A business has other obligations in addition to pursuing profits. Critics do not believe that there is anything wrong with corporate profit. They maintain that corporations have other responsibilities to the consumers, their employees, and to the society at large. If the adherents of the broader view share one belief, it is that corporations have responsibilities beyond simply enhancing their profits because they have great social and economic power in society- with that power must come social responsibility. Social responsibility arises from social power. If the business has power, then a just relationship demands that business also bear responsibility for its action. Social responsibility arises from concern about the consequences of businesss acts as they affect the interest of others. Social responsibility implies that a business decision maker is obliged to take actions that

protect and enhance societys interests. The net effect is to improve the quality of life in the broadest possible way. Businesses cannot make decisions that are solely economic decisions; because they are interrelated with the whole social system-business activities have profound implications for society. Today, society has concerns and interest other than rapid economic growthin particular, a concern for the quality of life and for the preservation of the environment. Society expects business to pursue other responsibilities as well.

through a system of law and incentives, can and should bring corporations to heel. Lacking intimate knowledge of the goals and subgoals of specific corporations, as well as their daily operations, government simply cant anticipate a specific corporations moral challenges. It can prescribe only for broad, cross-sectional issues such as bribery, price fixing, unfair competition and the like.

THE INEPT CUSTODIAN ARGUMENT

CORPORATIONS, STOCKHOLDERS AND THE PROMISSORY RELATIONSHIP

The corporations top obligation is its employees; others say it is to the community or nation. Only 17% thinks stockholders deserve the highest priority. Promissory relationship between the management and the owners (stockholders) of corporation: it imposes an obligation on management that is inconsistent with any social responsibility other that profit maximization. Very few investors out their money directly into a corporation; rather they buy shares that were initially issued years ago. Factors that further weaken the analogy between holding stock and entrusting money to a financial manager: o most shareholders arent even aware who the managers of their corporations are; o most shareholders never have direct contact with management; o complexity of management systems; o the managers never given a choice, as your adviser was, of refusing to maximize your profits as a shareholders. o Promissory agreement exists between and management obligating management to make the most possible money for shareholder. o Promises create obligations, but few people would claim that the existence of a promise automatically settles all the moral issues.

Corporate executives lack the moral and social expertise to make other than economic decisions. o To charge them with noneconomic responsibilities would be to put social welfare in the hands of inept custodians. o Corporate members lack the moral or social expertise that a broader view of corporate responsibility would seem to require of them. But the same can be said of most people in organizations: They are not trained moral philosophers or social scientists. Yet, we dont ordinarily restrict the activities of these parties, individually or collectively, to carefully circumscribed organizational goals. The Larger point: Responsibility is not always limited to narrow professional or occupational concerns.

THE MATERIALIZATION-OF-SOCIETY ARGUMENT

Broadening corporate responsibility will materialize society rather than moralize corporate activity Corporate managers will impose their materialistic ideas, using cost-benefit analysis, on many non-economic activities Yet, businesses already use their privilege position to promote their view of humanity and the good life through corporate advertising and marketing Corporations are unlikely to have a more materialistic effect than they do now

THE INVISIBLE-HAND ARGUMENT

INTSTITUTIONALIZING ETHICS WITHIN CORPORATIONS

Adam Smith claimed that when individuals act in self-interested manner in a free-market environment, the general good is promoted. If business are permitted to seek self-interest (maximization of profit), their activities will inevitably yield the greatest good for society as a whole through the invisible hand of the market.

THE HAND-OF GOVERNMENT ARGUMENT

Corporations should not be considered moral agents. Critics reject the assumption that Smiths invisible hand will have the effect of moralizing corporate activities. Modern corporations will enrich themselves while impoverishing society. Corporations natural and insatiable appetite for profit is to be controlled by the government regulation. The strong hand of government,

The criticisms of these four arguments against broadening corporate responsibility have led many people inside and outside business to adopt the broader view of corporate responsibility that the obligations of the modern business corporation extend beyond simply making money for itself. Society grants corporations the right to exist, gives them legal status as separate entities, and permits them to use natural resources. The available raw materials must be transformed into needed goods and services. In return for its sufferance of corporations, society has the right to expect corporations not to cause harm, to take into account the external effects of their activities, and whenever possible to act for the betterment of society. The list of corporate responsibilities goes beyond such negative injunctions as Dont pollute, and Dont misrepresent products.


1.

Included also are affirmative duties like Improve working conditions, and Contribute to arts and education. Corporations require at least four actions to institutionalize ethical behavior: 1. Acknowledge the importance of moral business conduct:

Corporations should acknowledge the importance, even necessity, of conducting business morally. Their commitment to ethical behavior should be unequivocal and highly visible, from top management down. 1. 2. Encourage employees to take moral responsibilities seriously

Corporations should make a real effort to encourage their members to take moral responsibility seriously. This commitment would mean ending all forms of retaliation against those who buck the system and rewarding employees for evaluating corporate decisions in their broader social and moral contexts. 1. 3. Encourage public discussion and criticism

the expertise and knowledge of the seller, an effective moral code, either requiring full disclosure or setting minimal standards of performance, enhances rather than diminishes economic efficiency. Without such a code, buyers may purchase products or services they dont need. Or because they dont trust the seller, they may refrain from purchasing products and services they do need. Either way, from the economists point of view, the situation is inefficient. An effective professional or business moral code, as well as the publics awareness of the code, is god for business. For a code to be effective, it must be realistic, Arrow argues, in the sense of connecting with the collective sense of the business. And it must become part of the corporate culture, accepted by the significant operating institutions and transmitted from one generation of executives to the next through standard operating procedures through education in business schools. The development of feasible and effective business and professional codes of ethics must be a central focus of any effort to enhance or expand corporate responsibility.

Corporations should end their defensiveness in the face of public discussion and criticisms. Instead, they should actively solicit the views of stockholders, managers, employees, managers, suppliers, customers, and society as a whole. Corporations should invite outside opinions and conduct a candid ethical audit of their organizational policies, priorities, and practices. 1. 4. Recognize the pluralistic nature of the social system

CORPORATE MORAL CODES

It needs clearly stated and communicated ethical standards that are equitable and enforced. This development seems possible only if the standards of expected behaviour are institutionalized. To institutionalize ethics within corporations, professor Milton Snoeyenbos suggests that top management should:

Corporations must recognize the pluralistic nature of the social system of which they are a part. Society consists of diverse, interlocked groups, all vying to maintain their autonomy and advance their interests. These groups are so related that the actions of one inevitably affect the standing of another on a variety of levels: economic, political, educational, and cultural. As part of society, corporations affect many groups, and these groups affect corporations. Failing to realize this, corporations can lose sight of the social framework that governs their relationship with the external environment. ETHICAL CODES and ECONOMIC EFFICIENCY

1. Articulate the firm's values and goals. 2. Adopt an ethical code applicable to all members of the company. 3. Setup a high-ranking ethics committee to oversee, develop, and enforce the code, and 4. Incorporate ethics training into all employee development programs.

It is important that corporations their mown explicit and implicit codes of conduct and moral standards that are being propagated to their employees. There are two defenders regarding the assumption that ethical behavior in the business comes at the expense of economic efficiency. The first defender is Anshen who believes that the other values should take priority over economic efficiency. Friedman on the other hand believes that business should concern itself only with profit and this way, maximize economic well-being. However, Nobel Prize-winning economist Kenneth Arrow has challenged this assumption. First, any kind of settled economic life requires a certain degree of ethical behavior, some element of trust and confidence. In addition, Arrow says that, there are two types of situation in which the simple rule of maximizing profits is socially inefficient: the case in which costs are not paid for, and the case where the seller has considerably more knowledge about his product than the buyer. The first type of situation relates to the demand that corporations internalize their externalities. In the second situation, in which the buyer lacks

The companys code of ethics should not be window dressing or so general as to be useless. It should set reasonable goals and subgoals, with an eye in blunting unethical pressures on subordinates.

CORPORATE CULTURE

Corporate culture refers to the shared values, attitudes, standards, and beliefs that characterize members of an organization and define its nature. Corporate culture as rooted in an organizations goals, strategies, structure, and approaches to labor. As such, it is an essential component in any businesss ultimate success of failure. It is the underlying soul and guiding force within an organization that creates attitude.

GROUP 3 The Workplace: Basic Issues Introduction

The workplace basic issues tackle on the common issues or should we say concerns faced by individuals in the workplace be it top management or just ordinary employees. It is relevant on business ethics because in here we analyze real cases that happen in the workplace and then try to evaluate on the cases and solve the ethical issues in the workplace.

Civil Rights Act of 1964

Prohibits discrimination on the basis of race, creed, nationality, sex or age. Companies that look beyond the bottom line

Objectives

To understand the state of civil liberties in the workplace To identify moral issues that arise with respect to personnel matters-namely, hiring, promotions, discipline and discharge and wages. To understand the role and history of unions in our economic system, their ideals and achievements, and the moral issues they arise.

Civil Liberties in the Workplace

Civil liberties are rights and freedoms that provide an individual specific rights such as the right to life, freedom from torture, freedom from slavery and forced labor, the right to liberty and security, right to a fair trial, the right to defend one's self, the right to privacy, freedom of conscience, freedom of expression, freedom of assembly and association, and the right to marry and have a family.

A number of companies now are encouraging their employees to fight for their rights and civil liberties in the workplace especially when they know they are on the right track. The state also passed a specific resolutions that tackle on these issues and protecting the rights of employees to the workplace Encourage employees to question and criticism about company policies affecting the welfare of the employee and the community through open communication whether formal, informal exchanges between management and other employee. It is a moral duty of a company to respect the right and dignity if their employee by acknowledging their civil liberties and guarantee them due process.

Personnel Policies and Procedures

Hiring

Two historical factors that lie behind the absence of civil liberties in the Workplace

Employees generally seek to hire people who will enhance efficiency or promote other goals of the organization. Furthermore, the courts have used the principle of negligent hiring to broaden the liability an of employer for damage or injury caused by its employeesevery after regular hours and away from the job site.

The rise of professional management and personnel engineering at the turn of twentieth century, following the emergence of large corporations.

Principal steps involved in the process of hiring Tests

Frederick Winslow Taylor, founder of scientific management says In the past, the man has been first. In the future, the system must be first. The law has traditionally given the employer a free hand in hiring and firing employees. A century ago, a Tennessee court expressed this doctrine: employers may dismiss their employees at will.. for good cause, for no cause, or even for cause morally wrong Similarly, California court upheld this traditional rule, observing that the arbitrary right of the employer to employ or discharge labour, with or without regard to actuating motives.

Tests are generally designed to measure the applicants verbal, quantitative, and logical skills. Aptitude tests help determine job suitability; skill tests measure the applicants proficiency in specific areas, such as typing and shorthand; personality tests help determine the applicants maturity and sociability.

Principal steps involved in the process of hiring A test must be valid. Validity refers to whether test scores correlate with performance in some other activity. Tests must be reliable. Reliability means that a subjects score will remain constant from test to test. Principal steps involved in the process of hiring

Interviews When moral issues arise in interviewing, they almost always relate to the manner in which the interview was conducted. The literature of personnel management rightly cautions against rudeness, coarseness, hostility, and condescension in interviewing job applicants. Interviewers must exercise care to avoid thoughtless comments that may hurt the person being interviewed-for instance, a passing remarks about a persons physical disability or personal situation (a single parent for instance). Promotions the act of promoting or the fact of being promoted from your business field or job. Some factors that can influence promotions:

Common law

Requires that an employee be loyal to an employer, acting solely for the employers benefit in matters connected to work. Unless there is an explicit contractual provision to the contrary, every employment is employment at will and either side is free to terminate it at any time without advance notice or reason.

Wagner Act of 1935 (National Labor Relations Act )

A watershed to the common law It prohibited firing workers because of union membership or union activities.

 How long youve been with a firm How well youre liked Whom you know When you were last promoted Seniority Inbreeding Nepotism Seniority refers to longevity on a job or with a firm. e.g. Personnel Manager Manuel Rodriguez needs to fill the job of quality-control supervisor. Carol Martin seems better qualified for the job than Jim Turner, except in one respect: Turner has been on the job for three years longer than Martin. Whom should Rodriguez promote to qualitycontrol supervisor? The difficulty of the question is compounded by the fact that seniority in itself does not necessarily indicate competence or loyalty. Although, in some instances, seniority may be a real indicator of job qualifications. Then theres the question of employee expectations. If employees expect seniority to count substantially, management can injure morale and productivity by overlooking it. Ambitious and competent workers might see little point in refining skills and developing talents when positions are doled out strictly on the basis of longevity. Of paramount importance in any decision is that management remember its twin responsibilities of promoting on the basis of qualifications and of recognizing prolonged and constructive contributions to the firm. A policy that provides for promotions strictly on the basis of qualifications seems heartless, whereas one that promotes by seniority alone seems mindless. Inbreeding -can be defined as the selection of related individuals within an isolated or a closed group or business entity. -the practice of promoting exclusively from within the firm In theory, whenever managers must fill positions they should look only to competence. The most competent, whether within or without the firm, should receive the position. In this way, responsibilities to owners are best served. In practice, however, managers must seriously consider the impact of outside recruitment on in-house morale. Years of loyal service, often at great personal expense, invariably create a unique relationship between employer and employee and, with it, unique obligations of gratitude. Nepotism -the practice of showing favoritism to relatives and close friends.

-such an action would raise a number of moral concerns, chief among them disregard of managerial responsibilities to the organization and of fairness to other employees but not at all instances. e.g. Advest Group, a brokerage firm, traditionally brings sons and daughters into the organization. Good work ethics seem to run throughout families -Senior Vice President Robert Rulevich. Even when a relative of someone in management is qualified for a position or deserving of promotion, one must consider the impact of the decision within the company. Will the selection breed resentment and jealousy among other employees? Will it discourage qualified outsiders from seeking employment with the firm Will it create problems in future placement, scheduling, or dismissal, of the relative? Will it make the person an object of distrust and hostility within the organization? Discipline and Discharge

For an organization to function in an orderly efficient and productive way, managers and personnel departments establish guidelines for behaviour based on such factor as appearance, Punctuality, dependability, efficiency, and cooperation. This is not the place to examine the morality of specific rules and regulations only the organizations treatment of the employees when infractions occur.

Also trying to correct someones behaviour on a graduated basis, from verbal warning to dismissal, is different from firing someone for the first infraction. The point of discipline is that, although desirable and necessary, it raises concert about fairness non-injury and respect to persons. Discipline and Discharge should also follow these principles: Just cause- requires that reasons of discipline and discharge should directly deal with job performance. Due process- which refers to the fairness of the procedure an organization process about the sanction of employee. 4 types of Discharge Firing- is for cause- dismissal the result of employee theft, gross insubordination, release of business information and etc. Termination- result from poor performance that is failure to comply what is required to him. Layoff- refers to hourly employee and implies that they all subject to recall. Position elimination- designates the permanent elimination of a job as a result or work force reduction, plant costing and departmental consolidation. WAGES

issue of fair wage is not as morally insoluble as it might appear as a general matter, an ethical organizations remuneration should be distributive justice, with a wage and salary system that focus on employees value to the business

* Establishing fair wage enhances the work environment by removing a potential cost of job dissatisfaction and helps management discharge one of its prime responsibilities to employees. UNIONS Labor unions

Factors to consider to help minimize chances of setting unfair wages and salaries:

1. What is the law? Law requires that business pay at least minimum wage 2. What is the prevailing wage in the industry? Provides some direction for arriving at a fair wage 3. What is the community wage level? Cost of living relates to basic maintenance needs and must be considered in establishing wage rates (ex: cost of living in NY is more expensive than Little Rock)

- one of the basic institutions structuring employeremployee relations, determining terms and conditions of employment, and shaping the environment in which people work - an organization of wage earners that is set up to serve and advance its members' interests in terms of wages, benefits, and working hours and conditions (Microsoft Encarta 2009) - free and independent labor union are characteristic of a free and democratic modern nation. Franklin D. Roosevelt History - Originated in the United States participated by groups of skilled artisans (carpenters, shoemakers, tailors, and the like) in 1800. - Basic reasons: to equalize their relationship with their employers and to professionalize their crafts - Historians believed that first truly national trade union is the Knights of Labor (K of L) in 1869 - 1886- American Federation of Labor (AFL) was founded - 1935- National Labor Relations Act (Wagner Act) was enacted - 1945- Congress of Industrial Organization (CIO) emerged - 1947- Taft Harley Act, amended National Labor Relations Act - 1955- AFL and CIO merged UNION IDEALS Union Purposes: Non-injury - protect workers from abuse.

Factors to consider to help minimize chances of setting unfair wages and salaries:

4. What is the nature of job itself? Although it is impossible to draw precise correlation between nature of job and what someone should be paid, a relationship exists that must be taken into account 5. Is the job secure? What are its prospects? If employment promises little or no security, employers must compensate workers for this deprivation through higher pay. On the other hand, secure job may justify more moderate wage.

Factors to consider to help minimize chances of setting unfair wages and salaries:

6. What are employers financial capabilities? What can the organization afford to pay? 7. What are other employees inside the organization earning for comparable work? To avoid discrimination and unfairness in setting wage rates, it is important to look at what the organization is already paying its present employees for work of similar nature Two final factors: 1. Job performance As with an employers base salary, however, bonuses and other awards must relate to business performance and be a function of criteria that are measurable and objectively applied 2. How the wage agreement was arrived at Fair wage presupposes fair work contract, and the fairness of work contract requires free negotiation * In sum, consideration of the factors upon which a wage is based and of the procedure that was followed in establishing the wage usually determines its fairness which is the primary concern in the discussions about wages.

Autonomy give employees voice on matters that affect their lives. Collective Bargaining Negotiations between the representatives of organized workers and their employers over things such as wages, hours, rules, work conditions, and increasingly participation in decisions affecting the workplace. Basis for Collective Bargaining: Equality & Mutual dependence Effects of Union: Push up wages Improve productivity and efficiency Promote stability in the work force

 Make government less likely to meddle in the labor market Criticisms: Union shops infringe on the autonomy and right of association of individual workers (infringe on their freedom). Favoritism to union members is discriminatory and unlawful. Competing Ideals and Other Consequences: Existence of organized labors ideal of solidarity, which is vital to collective bargaining and winning worker equality. The agency shop is designed to eliminate free riders while respecting the individual workers freedom of choice. Union tactics are used to try to get management to accept their demands. I. Direct Strikes Strike occurs when an organized body of workers withholds its labor to force the employer to comply with its demands. Conditions of a Justified Strike: 1. Just Cause refers to job-related matters such as inadequate pay, excessive hours, and dangerous and unhealthy working conditions. Revenge, personal ambition, petty jealousness, and the like do not constitute just cause and thus cannot justify a strike. 2. Proper Authorization Workers themselves must freely reach the decision without coercion and intimidation. The proposed strike must receive union backing.

* In general, a boycott is justifiable when it meets the same conditions as strike.

Corporate Campaigns

A relatively new pressure tactic in which unions enlist the cooperation of a companys creditors to pressure the company to unionize or comply with union demands. Issues pertaining to Corporate Campaigns: Corporate governance

Involves pressuring financial institutions with mass withdrawals and cancellations of policies, unions and administrators of public-employee pension funds are trying to exert an influence over institutional policy. Corporate blackmail

-Viewed as an effective way to get financial institutions and companies to become good corporate citizens. GROUP 4 Moral Choices Facing Employees Introduction Imagine that you are an auditor in a government firm. You have worked there for 18 years and you are about to retire at the end of this year. But, in the firm that you are to audit, this year, you found out that there are irregularities regarding the budget of the firm. What will you do? Will you whistle blow these irregularities, even if it means personal problems for you and your family? This was the situation George Spanton, a 62-year old federal auditor faced. In such situation, two issues come up. First is a question of where your overall moral duty lies. You should take into consideration if you are morally obligated to pursue whistle blowing in such situation. Second, having decided that one is morally obliged to blow the whistle, an employee must face realistically the possible negative financial, career, and personal consequences. These two themes recur throughout this report as we discuss the moral choices and problems that employees often face. (1) Determining ones moral responsibility amid conflicting demands, and (2) The personal costs involved in living up to ones obligations We will also look at the following topics: 1) Obligations employees have to the firm and the problem of conflicts of interest. 2) The illegitimate use of ones official position for private gain, through insider trading or access to proprietary data. 3) Domestic and foreign bribery and the factors to consider in determining the morality of giving and receiving gifts in a business context. 4) The obligations employees have to third parties and the considerations they should weigh in cases of conflicting moral duties or divided loyalties.

3. Last Resort to be justified a strike must come as a last resort. * Basic moral principle: we should always use the least injurious means available to accomplish the good we desire. II. Sympathetic Strikes Sympathetic strike occurs when workers who have no particular grievance of their own and who may or may not have the same employer decide to strike in support of others. It sometimes involves several groups of workers belonging to different unions but employed by the same company. III. Boycott and Corporate Campaigns Boycott Primary Boycott - occurs when union members and their supporters refuse to buy products from a company being struck. Secondary Boycott - occurs when PEOPLE refuse to patronize companies that handle product of struck companies. Purpose of Boycott: to hurt the employer or company financially thus, enforce union demands.

5) What whistle blowing is, and the factors that are relevant to evaluating it morally. 6) The problem of how considerations of self-interest are to be weighed by an employee facing a tough moral choice. 1. I. Obligations To The Firm and Conflicts of Interest

Use of ones official position for personal gain can be a serious area of conflict of interest. o Cases in this area can range from: using subordinates for non organization-related work; to using ones important position within an organization to enhance ones financial leverage and holdings.

Employees often find themselves not liking what they are tasked to do. Rewards, autonomy, and self-fulfillment that workers seek arent always compatible with the worker productivity the organization desires. Sometimes this clash of perspectives or goals can take a serious form in what is termed a Conflict of Interest. A conflict of interest in an organization arises when employees or parties have interest in a transaction substantial enough that it does or reasonably might affect their independent judgment in acts for the organization. Looked at another way, the organization has the right to expect employees to use independent judgment on its behalf. Conflicts of interest arise when employees jeopardize their independent judgment. The primary source of the right of the organization to expect this independence of judgment from the employees and expect them to respect that right is the work contract. Employees are to work for the company based on what the contract agreement says. They are to fulfill the terms of the agreement in exchange for payment. In any contract, employees should never use the firm for personal advantage endangering the welfare of the organization. Conflicts on interest may either be: a) Actual conflict of interest arises when employees allow their interest in a transaction to becloud their independent judgment on behalf of the firm b) Potential conflict of interest arises in cases in which an employees ability to exercise independent judgment on behalf of the organization is likely to be in jeopardy. Conflicts of interest can arise in all sorts of way and take many forms. Its common expressions involve actions related to financial investments, use of official position, bribery, kickbacks, gifts and entertainment. Although these cases do not necessarily involve conflicts of interest, they often do. And they raise moral questions about what employees owe the organization. II - Financial Investments

Insider Trading

Many abuses of official position arise from insider trading. Insider trading refers to the use of significant facts that have not yet been made public and will likely affect stock prices. An insider could be considered anyone who has access to inside information. The Securities Exchange Commission (SEC) is charged with policing the stock market for insider-trading violations. Inside traders ordinarily defend their actions by claiming they didnt injure anyone. What causes injury or loss to outsiders is not what the insiders knew or did; rather it is what the outsiders did not know. It is their own lack of knowledge which exposes them to risk of loss or denies them an opportunity to make a profit. The information that employees garner within the company is not always the kind that they can use to affect stock prices. Sometimes the information concerns highly sensitive data concerning company research, technology, product development, and so on. How employees use such secret or classified data can also raise important moral concerns.

Propriety Data

Conflicts of interest can be present when employees have financial investments in suppliers, customers, or distributors with whom their organizations do business. Even if an employee never advantages himself, he is potentially conflicted because of his interest in the outsiders party. Its impossible to say how much of a financial investment compromises ones independent judgment in acts for the organization. Organizational policies will largely determine the morally permissible limits of outside investments and conflicts of interest. It's worth noting, however, that since such a policy can affect the financial well-being of those who fall under it, it should be subjected to the same kind of free and open negotiations that any form of compensation is.

Companies guard information that can affect their competitive standing with all zealousness. When information is patented or copy-righted, it is legally protected but not a secret. Others may have access the information, but they are forbidden to use it, without permission, for the life of the patent or copyright. o CASE OF P&G and Other Competitors (FRITO LAY) Although patent or copyright violates the ideal of free market and would appear to slow the spread of new processes and technology, patents and copyrights are, in fact, generally defended on the ground that without them technological innovation would be hampered. Individuals and companies would not be willing to invest in the development of a new process if other firms could then immediately exploit any new invention without having themselves invested in developing it. Patents and Copyrights is not the same or contrary to Trade Secrets. Patents and Copyrights must be well-defined legally while Trade Secrets are broad and imprecise. Trade Secrets are any formula, pattern, device, or compilation of information which is used in ones business and which gives him an opportunity to obtain an advantage over competitors who do not know or use it. CASE OF COCA-COLAs formula. (Secret but not patented).

III - Use of Official Position

One of an organizations biggest challenges is to protect its Trade Secrets and Propriety Data from being misused by its own employees. This is troublesome in high-tech firms when employees who are privy to sensitive information leave the company. The problems are compounded by at least two factors:

1) the individual have the right to seek for new employment 2) the difficulty of separating trade secrets from technical knowledge, experience, and skills that are part of the employees own intellect and talent.

undermines the free market system. Bribes tend to destabilize the free enterprise system, because they function to give advantage in a way that is not directly or indirectly product-related. Last Case: Bethlehem Steel Corporation. Multiple impact of bribery.

V - Gifts and Entertainment The following are the factors that must be considered in determining the morality of gift giving and gift receiving in business situation and in deciding whether a conflict of interest exists. 1. What is the value of the gift?

CASE OF GOODRICH and INTERNATIONAL LATEX. Insider trading is different from the case above because they pit for the right of the company to protect its secret and the employees right to seek employment wherever he or she chooses. This does not mean moral problem dont arise in propriety data cases or that they are easily resolved. Clearly, more moral groundbreaking is needed the areas of insider trading and propriety data. Both areas raise serious ethical questions.

1.

Is the gift of nominal value, or is it substantial value enough to influence a business decision? Nominal gift a gift given infrequently Substantial gift anything larger or more frequently given 2. What is the purpose of the gift?

IV - BRIBES AND KICKBACKS

So long as the gift is not intended or received as a bribe and it remains nominal, there doesnt appear to be any actual conflict of interest in such cases. 3. What are the circumstances under which the gift was given or received? A gift with donors name embossed on it usually constitutes an open gift, whereas one known only to donor and recipient would constitutes a secret gift 4. What is the position and sensitivity to influence of the person receiving the gift? Is the person in a position to affect materially a business decision on behalf of the gift giver? Could the recipients opinion, influence, or decision of itself result in preferential treatment for the donor? Whether the recipients have made it abundantly clear to the donors that they dont intend to allow the gift to influence their action one way or the other. 5. What is accepted business practice in the area? Is this the customary way of conducting this kind of business? Monetary gifts and tips are standard practice in numerous service industries but its not customary to tip the head of the produce department in a supermarket so that the person will put aside the beast of the crop for you. 6. What is the companys policy?

Bribery means any remuneration for the performance of an act thats inconsistent with the work contract or the nature of the work one has been hired to perform. The remuneration can be money, gifts, entertainment, or preferential treatment. Bribes constitute another area when conflict of interest arises. Bribery sometimes takes in a form of Kickbacks, a practice that involves a percentage payment to a person able to influence or control a source of income. CASE OF SISYPHUS BOOK CO. Bribes are ordinarily illegal, the raise the same general moral issues as any act of lawbreaker does. This observation applies even when an organization gives gratuities without asking for or expecting in return. CASE OF GULF CORPORATION 1977.

1.

1.

1. The Foreign Corrupt Practices Act (FCPA) is made to provide stiff fines and prison sentences to corporations official engaging in bribery overseas and requires corporations to establish strict accounting and auditing controls to guard against the creation of slush funds from which bribes can be paid. Since the passage of FCPA many American corporations lobbied for changes to extract some teeth of the law. They say it is unfair in competition to other companies wherein their country allows bribery. Also worth noting is that where bribes are condoned, they can have effect of encouraging employees of organizations to take bribes and thus subordinate the interest of the corporation to their own gain. Even when bribes hurt no one, moral concerns still arise. o Bribery always involves cooperation with others who are seeking to gain preferred treatment through an act that

1.

Many firms explicitly forbid the practice of giving and receiving gifts in order to minimize even the suspicion that a conflict may exist 7. What is the law?

1.

Some laws forbid the gift giving and receiving among employees and firms connected with government contracts. A conflict of interest is

always present where the gift transaction violates the law. Related to gift giving is the practice of entertaining. Entertainment should be interpreted more sympathetically than gifts because it usually occurs within the context of doing business in a social situation. If you can eat or drink it on the spot, its entertainment. The morality of entertainment may be evaluated on the same basis as gifts. In each case the ultimate moral judgment hinges largely on a decision as to whether an objective party could reasonably suspect that the gift or entertainment could blur ones independent judgment. The donor must ask whether an objective party could reasonably suspect that the gift or entertainment was aimed at blurring the recipients independent judgment. VI - OBLIGATIONS TO THIRD PARTIES Workers have obligations to the employer, organization, or client. They have also obligations to third parties: fellow employees, customers, government or society. Conflicts between a workers obligation to the firm and to others are the heart of many moral decisions workers must make. A way to resolve these conflicts is needed, but that in turn requires identifying the obligations, if any, workers have to third parties. Three basic obligations of workers to third parties as a matter of ordinary morality: 1) 2) 3) Truthfulness Non-injury Fairness

Employees frequently know about the illegal or immoral actions of a supervisor or firm. When an employee tries to correct the situation within institutional channels and is thwarted, a central moral question emerges:

Should the employee go public with the information? Should a worker who it ordered to do something illegal or immoral, or who knows of the illegal or immoral behavior of a supervisor or organization, inform the public?

When these questions are answered affirmatively and the public is informed, cases of whistle blowing result. VII - Whistle Blowing It refers to an employee act of informing the public about the illegal or immoral behavior of an employer or organization. Norman Bowie (Professor of Philosophy) Whistle Blower Is an employee or officer of any institution, profit or non-profit, private or public, who believes either that he/she has been ordered to perform some act or he/she has obtained knowledge that the institution is engaged in activities which: a) Are believed to cause unnecessary harm to third parties; b) One in violation of human rights; or

c) Run counter to the defines purpose of the institution and who informs the public of this fact.

The application of these obligations to outside parties is relatively straightforward. For accountants, it is not so much the obligation of noninjury that dominates the relationship to third parties, but truthfulness and justice. Any moral decision should take account of the relevant obligations, ideals and effects. The specific responsibilities that one assumes in a given business or professional role will affect the strength of ones obligations to third parties. The impact of our action on significant moral ideals is the second consideration to be weighed. Moral decisions must take account not only of distinct ethical obligations, but also of the various ideals advanced or respected, ignored or hindered, by the alternative actions open to us. Ones moral choices will often be influenced strongly by the personal weight that ones place on the different values that may be at stake in a specific situation. One must examine the effects of the different courses of action. Considerations of consequences can help one determine the exact strength of ones different obligations in a given situation. One must first identify the relevant obligations, ideals and effects and then try to decide where the emphasis among the people should lie. Two simple things can help to keep ones deliberations free from various rationalizations to which one is prone: 1) One can ask oneself whether he would be willing to read an account of his actions in the newspaper. 2) Discussing a moral dilemma or ethical problem with a friend can often help one to avoid bias and to gain a better perspective.

Limits the scope of ones responsibility to inform the public A worker who publicizes in-house indiscretion is not a whistleblower but a gossip monger

Professor Sissela Bok (Professor of Philosophy) The dangers of Whistle Blowing:

The whistle can be blown in error or malice, privacy invaded, and trust undermined. Publicly accusing others of wrongdoing can be very destructive and brings with it an obligation to be fair to the persons accused. Internal prying and mutual suspicion make it hard for any organization to function.

Gene S. James (Professor of Philosophy) In his essay entitled, In Defense of the Whistle Blowing, it states that there are some considerations that any potential whistle blower should keep in mind Norman Bowie (Professor of Philosophy) Six conditions that must be met (An act of whistle blowing is morally justified if): 1) It is done from the appropriate moral motive, namely, as as provided in the definition of whistle blowing; 2) The whistle blower, except in special circumstances, has exhausted all internal channels for dissent before going to public;

3) The whistle blower has compelling evidence to believe that the inappropriate actions are orders or have occurred; 4) The whistle blower has acted after a careful analysis of the danger a) b) c) How serious is the moral violation? How immediate is the moral violation? Is the moral violation one that can be specified?

the lives of others are at stake), elementary morality and personal integrity can require people to make substantial sacrifices. Couple of further observations:

First, an evaluation of prudential reasons obviously is colored by ones temperament and perceptions of self- interest.

5) The whistle blowers actions is in keeping with ones responsibility for avoiding and/or exposing moral violations 6) The whistle blowing has some chance of success

v Most of us typically have been socialized to heed authority, often to the extent of causing others great personal harm. v Additionally, each of us has a tendency to magnify potential threats to our livelihood or status within the firm. v It follows then, that each of us has an obligation to perform a kind of character or personality audit.

VIII - The Question of Self Interest For many workers, protecting themselves or safeguarding their jobs is the primary factor in deciding whether to put third- party interests above those firms.

A second observation about the prudential/ moral distinction concerns the welfare of society.

v The only reasonable solution to protecting the welfare of society from serious wrongdoing is to restructure business and social institutions so that such acts no longer carry such severe penalties. v Just as laws currently exist to protect whistle blowers in the public sector from reprisals, so comparable legislation is probably needed in the private sector. v If this account is correct, then it seems that each of us has an obligation to advocate such legislation. v Example of this legislation is Michigans Whistle Blowers Protection Act, the first law of its kind to cover corporate employees. v Under this act, any employee in private industry fired or disciplined for reporting alleged violations of federal, state, or local law to public authorities can now bring an action in state court for unjust reprisal. v The new Michigan law probably will help convince leading managements that creating the climate and procedures that encourage honest and concerned employees to blow the whistle on illegalities and actual malpractice is an important corporate priority for the 1990s. GROUP 5 THE ENVIRONMENT

Concern with self- interest in cases that pit loyalty to the firm against obligations to third parties is altogether understandable and even warranted. Workers who subordinate the organizations interests to an outside partys expose themselves to charges of disloyalty, disciplinary action, freezes in job status, forced relocations, and even dismissal. Given the potential harm to self and family that employees risk in honoring third party obligations, it is perfectly legitimate to inquire about the weight self- interest considerations should be given in resolving cases of conflicting obligations. What part if any, should self- interest considerations play in determining what a worker should do in a situation in which his or her obligation to the organization conflicts with the obligations to an outside party? Moral theorists and society as a whole do distinguish between prudential reasons and moral reasons. o Prudential (from the word prudence) refers to considerations of self- interest. o Moral refers here to consideration of the interests of others. o In general, prudential concerns outweigh moral ones, then employees may do what is in their own best interests. o If moral reasons override prudential ones, then workers should honor their obligations to others. o In situations where whistle blowing threaten ones very livelihood and career, prudential concerns may properly be taken into account in deciding what one should do, all things considered. o This doesnt mean that if the worker blows the whistle despite overriding prudential reasons not to, he or she is not moral. (Ethicists term such actions superogatory, meaning that they are above and beyond the call of duty.) o On the other hand, when moral concerns are great (for example when

Effects of environmental negligence by manufacturing, industry, and consumers are now being seen. Humankind has damaged the planet, polluted the air, contaminated the soil, and depleted resources. What are the responsibilities of businesses toward the environment, plants and animals, and all other resources?

Business and Ecology

Definition of ecology: science of interrelationships among organisms (especially humans) and their environments. Ecosystems: A total ecological community, both living and nonliving, webs of interdependency structure ecosystems a change in one element can have ripple effects through the system.

Business inevitably intrudes into ecosystems as it produces the things we want but not all or all kinds of intrusions are justifiable.

Traditional Business Attitudes Towards Environment

Traditionally, business has seen the natural world as a free and unlimited good pollution and the depletion of natural resources have resulted from this attitude. The tragedy of the commons: Damage to the environment can also be explained as the result of a situation in which each persons or businesss pursuit of self-interest can make everyone worse off the reverse of Adam Smiths invisible hand. Spillover effect: the disparity between private industrial costs and public social costs. In viewing things strictly in terms of private industrial costs, business overlooks spillover. So business often derives a profit from a product without considering overall social cost the damage the product or the production process causes to the environment and human populations.

Those who would benefit: Critics of this argument point out that every individual, rich or poor, and every institution, large or small, stands to benefit from environmental protection and restoration, albeit not necessarily to the same degree. The problem: If pollution concerns all of us to a different degree, how would we determine the amount individuals and companies should pay, based on the degree to which they benefit?

Achieving Environmental Goals

Regulations: The use of direct public (state and federal) regulation and control in determining how the pollution bill is paid. Four drawbacks:

1) Regulators have to know how much pollution to expect from companies and whether or not its possible for them to reduce pollution. 2) Although regulations treat all parties equally, this often comes at the cost of ignoring the special circumstances of particular industries and individual firms. 3) Regulation can also cause plants to shut down or relocate.

Ethics of Environmental Protection

Free rider problem: Protecting the environment is in everyones self-interest, but a company may rationalize (unfairly) that the little bit it adds to the total pollution problem doesnt make any difference. So it benefits from the efforts of others to prevent pollution but rides for free by not making the same effort itself. Some philosophers (e.g., William Blackstone) argue that every human being has a right to a livable environment. Questions about the costs of pollution control: o What kind of environment do we want? o What is required to bring about the kind of environment we want? The costs of pollution control: Determining the cost of pollution control requires cost-benefit analysis which is difficult because it involves controversial factual assessments and value judgments. Ecological economics: A new discipline, which attempts to expand the boundaries of environmental cost-benefit analysis. It calculates the value of an ecosystem in terms of what it would cost to provide the benefits and services it now furnishes us. For example, the worth of a wetland in terms of the cost of constructing structures that provide the same flood control and storm protection that natural wetlands do. Who should pay the cost? This is a question of social justice. Two popular answers are currently in circulation: o Those responsible for causing the pollution ought to pay. o Those who stand to benefit from protection and restoration should pick up the tab. Those responsible: Business has profited greatly from treating the environment as a free good, but consumers have paid lower costs for products. Some blame consumers, not businesses, for pollution because they create demand for products whose production harms the environment. But this argument fails to recognize the deeprooted causes of pollution population growth, increasing urbanization, and rising affluence.

4) Companies might be able to reduce pollution below the regulated requirements, but have no incentive to do so.

Incentives: A widely supported approach to the problem of cost allocation for environmental improvement through government investment, subsidy, and general economic incentive (e.g. by means of tax cuts, grants or awards). The advantage is that it minimizes regulatory interference and coercion. The disadvantage is that it moves slowly, pays polluters not to pollute, and is not always costeffective. Pricing mechanisms: Also called effluent charges, they spell out the cost for a specific kind of pollution in a specific area at a specific time. Prices are tied to the amount of damage caused so may vary from place to place and time to time. Pollution permits: Allow companies to discharge a limited amount of pollution or trade pollution rights with other companies.

Delving Deeper Into Environmental Ethics

To satisfy their disproportionate consumption of nonrenewable resources, developed countries turn to foreign lands. This raises two critical moral questions: o How is the continued availability of foreign resources to be secured? o Does any nation have a right to consume the worlds irreplaceable resources at a rate grossly out of proportion to the size of its population? Obligations to future generations: A broader view of environmental ethics considers our duties to other societies and upcoming generations. Some say we must respect the right of future generations to inherit an environment that is not seriously damaged. Others argue that by putting ourselves in the original position, we can balance our interests against those of our descendants. The value of nature: A radical approach to environmental ethics challenges the humancentered assumption that preserving the environment is good only because it is good for us.

Adopting a naturalistic, non-anthropocentric ethic would change our way of looking at nature, but many philosophers are skeptical of the idea that nature has any intrinsic value. Our treatment of animals: Business affects the welfare of animals very substantially. One way is through experimentation and the testing of products on animals. Critics such as Peter Singer contend that most experiments and tests are unjustified on moral grounds because, he says, animals have moral rights. Utilitarians stress the moral necessity of taking into account animal pain and suffering. Factory farming: Businesss largest and most devastating impact on animals is the production of animal-related products-in particular, meat. The economizing of the meat and animalproducts industries leads to their treating animals in ways that many reject as cruel and immoral. Is it wrong to eat meat? The answer depends on whether animals have moral rights, and whether and to what extent these rights are on a par with human rights.

Conclusion

The environment is one of the most important moral issues not only because harming the environment often violates our right to noninjury, but also because environmental damage has been incredibly harmful to both people and other animals. The importance of the environment not only shows traditional failures of business ethics of the past and present, but it also helps clarify the importance of externalities and animals. Businesses traditionally saw no need to respect animals, but many moral philosophers no longer see any reason to value ourselves over other animals at any cost.