MGSC14 Midterm Notes

Lecture Important Concepts

Oxymoron
Oxymoron: Two terms contradict each other. For example: business and ethics
Altruistic: An ethical doctrine that holds that the moral value of an individual’s
actions depends solely on the impact on other individuals, regardless of the
consequences on the individual itself.
● An ethical doctrine that holds that individuals have a moral obligation to
help, serve or benefit others, if necessary at the sacrifice of self-interest
Neoclassical Theory of Management (Before 1930’s)
● Whatever the law and market allows
○ If these two criteria are fulfilled, then the practice is considered as
ethical
● Businesses can manipulate the law by lobbying
● Gain the market by advertising
○ Pharmaceuticals in the U.S.
○ Cigarettes
○ Gas Guzzlers
The Corporate Social Responsibility Approach (1960’s & 1970’s)
● Ask yourself: Even if it’s legal now, if keep doing it, is it possible that it
becomes illegal later on?
● E.g., Pharmaceutical advertising
○ Insurance gets annoyed with it, one day it will be regulated
○ Ultimately considered unethical
● Nike child labour
● “Being ethical heads off the law”
○ Even if something is legal now, it may not be in the future. So do the
ethical thing now.
● “Ethics pays”
○ In the LR, a business will be rewarded for doing the right thing.
● Resembled the neoclassical approach.
● If the answer to the question is yes, then it’s unethical.
Business Ethical Approach
● E.g., a White owner of a restaurant does not serve blacks.
 ○ Segregation became illegal
○ CSR could not foresee that coming, which shows that what’s ethical
does not equal what the market requires in the LR.
● E.g., Ford introduced seatbelts in the early 70s
○ Nobody bought them until consumer advocates demanded
government make it a law to have seatbelts for safety issues
○ This also shows that CSR does not give the right answer all the time
1. Ethics does not always = Anticipate law or market even in the long run
2. When ethics = law + market in the long run, Act for ethical reasons, not
because of future laws or market rewards.
● From the Ford example, Ford initially sold cars with seatbelts, not because of
consumer safety, but because the law might require it later
● Thus, you are behaving unethically, if you’re doing it because the law might
require it.
● Lawyer vs. Client confidentiality →promotion of justice
○ Businesses are promotions of profitability
○ They are designed to promote wealth, obligated
○ Trying to do what’s good for the business itself is unethical
○ Should do the right thing because it’s right, not because of businesses
■ But don’t insist if that’s not what they do, do not expect it
■ Because it is inconsistent with who we are as human
beings/against human nature to have mere self-interest.
Legality and Morality
● Illegal but moral
○ Personal recreational drug use
○ Parking infractions (e.g., parking at a certain location is illegal, but in
principle, it does not affect anyone)
● Legal but immoral
○ Animal testing for beauty products
○ Smoking in public
Factual VS Moral Differences
● Facts bear moral questions but don’t necessarily answer them.
● E.g., Tobacco companies expanding the market in Africa. Many critics argue
that they are literally “shipping death”
 ○ Tobacco companies argued that the rate of death (lung cancer) among
smokers was only 2%, which was lower than in the U.S.
○ Proved that the moral criticism was false, because they were not, in
fact, “shipping death”
○ As an argument to this: Most died before having lung cancer
■ Africa was a host of other illnesses (i.e., HIV, Malaria)
● Tobacco company also argued that “because the world is an unfair
place, it’s ok to do what we do”
● But this argument is exploiting, and it draws advantages to yourself
● Once the health-care system gets better, the argument will not be
effective anymore
● The example of the Tobacco company proves that facts don’t always settle
themselves
Utilitarianism
“Greatest good for the greatest number”
● It is a moral principle that almost nobody can observe in present-days
● It is also not suited for the kind of creatures we are”
○ We are not entirely being fair to ourselves
● E.g., a Sheriff shoots one person, to save many people, but can saving that
person will result in the death of many people
○ Utilitarianism will choose to kill one person
○ But need to protect the rights of individuals
● E.g., Prof. Stark has a daughter, and he is now in a situation where he has to
choose to save either his daughter or a girl that could cure diseases
○ Utilitarianism will choose to save the girl
○ But certain emotions are not taken into account (i.e., bond with family)
● E.g., 5 pills in a bottle, you can choose to give it to five people who need one
pill each but can also choose to give it to one person who needs all five pills
○ Utilitarianism will choose to give to five different people
○ Solution: Flipping coins or some other randomizing way
■ It gives chance to everyone
■ The only way to be fair
■ It is unethical from a Utilitarian perspective since there is a 50%
chance that 5 people will get killed
Act Utilitarianism
If I did x, would that bring about the greatest good for the greatest number?
● What would result if YOU behaved in that way?
● E.g., Daughter vs girl prodigy
● To maximize the good for all is that what is good for one person is not
necessarily good for another
Rule Utilitarianism
If everyone did x in this kind of situation, would that bring the greatest good for the
greatest number?
● What would result if EVERYBODY acted in the same way?
● If everybody saves the prodigy, there will be no family life, specialness bond
will dissolve.
Categorical Imperative
If everybody did x, would there still be a point in doing x?
● You will no longer be able to serve the purpose of x
● The only way that x is ethical, is if there was a rule that says everybody else
cannot cheat.
● E.g., if everybody lied, would you serve the purpose...
○ No, nobody will believe in anything anybody says
○ Lying has to be wrong if lying does not serve the purpose
Bill & Sam Both Helps Karen
● Bill gains joy from helping people → situation of human emotion/interaction
● Sam has a moral obligation to help (not a natural feeling) → situation of
achievement
● Who is a morally better person?
● Shows the complexity of judging other’s motivation
Shareholder vs. Community
In the Viking case:
● George was arguing for the business, taking concern of broader view for the
company
● Other obligations beyond shareholders, whether or not best for the
shareholders
● Goodwill in community → good relationship with government, less regulatory
 ● If George simply argued that it was for moral obligation, Larsson may not
have been able to argue
Milton Friedman (Economist)
● The only obligation that businesses have, is to maximize shareholder’s
wealth.
● Corporate Social Responsibility is an assault on freedom
● Businesses should not do any more than the law requires
1. Taxation without representation
a. Imagine managers decide to cut the prices of products to fight
inflation
i. Cutting shareholder’s gains, taking money out of their pocket
ii. Taxing shareholders
iii. Fundamental violation of liberty, and it is considered theft
iv. Shareholders are not represented for the money they agreed
for
1. Shareholders do represent the board
b. Raise prices to clean up environmental issues (law does not require)
i. Using consumer’s money
1. As soon as the money is exchanged for products/services,
companies can do whatever they want with it
ii. Shareholders are not representing the decision
c. If you want to help with unemployment, hire somebody that have a
disadvantage in life instead of people who are qualified for
i. Helping something that’s worthwhile using the resources of
others
1. The salary does not belong to the person who wasn’t
hired
● Friedman “pointless for management to be socially responsible”
○ Corporate value will diminish
○ Consumers will leave and sales drop
○ CSR is fertile
■ But he cannot make both criticisms at the same time
2. CSR is pure adult socialism (leads society to socialist dictation)
● A community centre will let off steam for employees to steal, vandalize
 ○ Did it for self-interest reason, not autistic reason
○ It will save the company money in the long run
○ A company should never say it is doing it for the community because it
will lead to socialism and determining the community’s well-being is
the government’s job
● Being CSR, it prevents the government from interfering
● The more companies for CSR, the government will retreat
Individual vs. Organizational Responsibility
When the below two overlap, it proves that the organization is well-designed
● Power to stop the launch
● Knowledge
Bottom of the management:
● Roger could’ve stopped the launch by going to the press (whistle-blowing)
● However, doing so comes to a great cost (i.e., demotion)
● By whistle-blowing, it means that he has to go out of the organization
○ Might have stopped the launch, but it is not part of his role
Middle of the management:
● Larry Mulloy had the power to stop the launch but he argued as below:
● He was informed about the O-ring issue, but he didn’t know whether or not
what he heard was true, because he didn’t have the conceptual framework to
know
● He was informed but had no way of understanding the information because
the organization did not provide him a conceptual framework
● There was also tremendous organizational pressure and psychological
momentum in favour of the launch
○ He could say that he could not stand the pressure to stop the launch
● Thus, it’s unfair to blame him/me

They both disagree that they have power or knowledge, but agree that the other
party had it.

Henry plans to hike in the desert

Two enemies; Burt and Ernie
Bird: put poison in Henry’s water bottle (intention to kill him by poisoning)
Ernie: empty the bottle (intention to kill him by thirst)
Who killed Henry?
● Ernie intended that Henry die of thirst as a result of leaking out pure water
● There was no pure water
● Henry didn't die from the poison
You can't blame only one of them
● no individual responsibility
● organization responsibility: The organization of each role ultimately caused
Henry’s death
To argue that Ernie killed Henry:
● The poison would’ve killed Henry anyway