Business Ethics

Question 1

What is Milton Friedman’s Shareholder Theory?

Answer 1

Suggests that the social responsibility of a business is primarily to increase profits whilst not commiting fraud and allowing there to be a free market

Question 2

Why does Friedman believe a CEO’s only responsibility is to maximise profits?

Answer 2

1. If the CEO had responsibilities beyond the employers wishes, this would be wrong as he would have to spend the companies money differently.
2. The CEO was not employed to address social responsibility but to retain profits and work for the benefit of the company.
3. There are people hired to address social responsibility therefore the leader should stick to the job they are hired for.

Question 3

Summarise the Ford Pinto case

Answer 3

1970

Ford concluded that there was a serious design flaw with the cars as the gas tank would explode in collision.

Ford did not change the car as the safety regulations were not put into law yet.

The cost of incidents were lower than repairs, this results in hundreds of fire-related deaths.

Question 4

What is Freeman’s Stakeholder theory?

Answer 4

The belief that businesses should value their stakeholders before being concerned about profit.

Question 5

What is the Separation Fallacy

Answer 5

The idea that business has no ethical concern. Business and ethics should be separate.

Question 6

What two arguments does Freeman give to reject the separation fallacy?

Answer 6

Open question argument

Responsibility principle

Question 7

What is the open question argument?

Answer 7

The belief that there will always be questions open to ask when we make a decision - it should not be considered unusual to ask these in a business scenario.

Question 8

What is the responsibility principle?

Answer 8

The belief that we should take an equal amount of responsibility for our bad actions as we do for our good actions.

Question 9

What is CSR?

Answer 9

Corporate social responsibility

The responsibilities a business has towards stakeholders and wider community.

Question 10

What does Warren Buffett say about reputation?

Answer 10

‘it takes 20 years to build a reputation and 5 minutes to ruin it’

Question 11

What does Dame Anita Roddick (founder of Body Shop) say about responsibility?

Answer 11

‘the business of business should not be about money, it should be about responsibility’

Question 12

What are the 4 main parts of CSR?

Answer 12

Economic

Legal

Voluntary

Ethical

Question 13

What does the triple bottom line include?

Answer 13

Social, environmental and economic performance.

Question 14

What is a social audit?

Answer 14

A means by which a business can measure its progress when committed to acting responsibly towards its stakeholders.

Question 15

Example of The Body Shop embracing CSR?

Answer 15

They are committed to reducing their impact on the environment by minimizing the energy they use and generating less waste.

They use a global network to help change attitudes worldwide.

Question 16

Example of Mcdonalds not embracing CSR?

Answer 16

Mcdonalds have been using beef which is reared from ex-rainforest land, preventing regeneration and forcing local people to move away.

They have clearly prioritised profit over social responsibility.

Question 17

What is Adam Smith’s idea of the ‘invisible hand’?

Answer 17

When businesses work for their own self-interests, an ‘invisible hand’ promotes an end which was no part of their intention.

When people follow these self-interests in a free market, the result is economic prosperity which promotes general happiness in society.

Question 18

What is a quote from Henry Ford to show his view on business?

Answer 18

‘a business that makes nothing but money is a poor kind of business’

Question 19

What does Dame Anita Roddick (Body shop) promote?

Answer 19

Good business because it is the right thing to do.

This is an intrinsic reason.

Question 20

What does Lord Alan Sugar promote?

Answer 20

Good ethics is good for a business, as every business needs to hook in an audience to be successful.

This is an extrinsic reason.

Question 21

What is a quote from Friedman’s view on business?

Answer 21

‘there is one and only one responsibility of a business… to increase its profits so long as it stays within the rules of the game’

Question 22

What does Friedman say makes capitalism less effective?

Answer 22

Helping communities and improving the lives of workers.

Question 23

Strengths of Freidman’s point of view?

Answer 23

Without profit, a business cannot survive.

If there is money in a society then the society can be benefited (social responsibility).

The increase of profits in a company benefits the economy which benefits the citizens.

Question 24

Issues with Friedman’s point of view?

Answer 24

He believed social responsibility should not be enforced by the government.

Companies can still be successful while pursuing methods of social responsibility at the same time.

Question 25

What is a shareholder?

Answer 25

An owner of shares in a company. The more successful a business is, the more return on your money.

Question 26

What are stakeholders?

Answer 26

Any person, group or people that have an interest in the activity of a business. A business must ensure the wider community are considered as well as ethical standards.

Question 27

Who are internal stakeholders?

Answer 27

Owners, managers, workers, suppliers, lenders. Can conflict with external stakeholders.

Question 28

Who are external stakeholders?

Answer 28

Customers, communities, local environment. Can conflict with internal stakeholders.

Question 29

How has the relationship between businesses and consumers changed?

Answer 29

Originally, this meant not conning the consumer into buying something they did not need (PPI). Now, the consumer wants to see social responsibility from a business - quality, safety, price, good customer service.

Question 30

What is whistleblowing?

Answer 30

Someone who risks their livelihood to tell the truth about companies and make businesses accountable for their actions. Whistleblowing is encouraged to serve public interest.

Question 31

What is globalization?

Answer 31

Companies becoming worldwide. This integrates industries, economies, markets, culture and policy making around the world.

Question 32

Why is the process of globalization speeding up?

Answer 32

Technology is changing - communication is faster. Transport is cheaper and faster. Removal of capital exchange controls - money can be moved easier. Consumer tastes have changed and the UK gets all year round produce.

Question 33

What do businesses, like Primark, often do now that they can globalize?

Answer 33

they take trade to companies that are not influenced by unions/ equal rights = cheap labor.

Question 34

Justification of globalization?

Answer 34

Gives jobs/ a small income to poorer communities. Trains local people to have new skills. Consumers are happy with cheaper clothing. Products can be enjoyed all year round.

Question 35

Issues with globalization?

Answer 35

Global companies can take trade from smaller businesses. Keeps poorer communities poor and big companies richer - capitalism. Takes jobs away from countries with stricter human rights laws. Indigenous cultures/ child labor/ pollution are affected negatively.

Question 36

What happened to the Rana Plaza factory and when?

Answer 36

April 2013 The factory collapsed as the upper floors had been build without permits and without reinforcements for heavy machinery. 1100 people died. $30 million was given in compensation. Other unsafe factories were closed.

Question 37

How would Kantian ethics view whistleblowing?

Answer 37

Importance of honesty and promise keeping - example of axe murderer. Whistleblowing therefore tells the truth about a business. But, what about the promises made by the employee to the company.

Question 38

How would Kantian ethics view globalization?

Answer 38

Using countries with fewer human rights as a means for cheap labor means these people are used as a means to an end. Links to Formula of the end itself. Globalization encourages inequality, Kant did not promote this. We cannot universalize exploiting every nation and person - no good will and duty. Links to Formula of the law of nature.

Question 39

How does Kant's opposition of slavery link to the Rana Plaza incident?

Answer 39

Kant opposed slavery as he suggests consent requires autonomy. Arguably, the workers did not have autonomy over what they were doing as they were forced and threatened to work in unsafe conditions.

Question 40

How does William Temple develop the formula of the end itself?

Answer 40

Claims that we should always act for the good of persons. The purpose of production is consumption, manipulating the market to create shortages to maximize profit is immoral. To use buyers as a means for profit is wrong.

Question 41

How would utilitarianism view whistleblowing?

Answer 41

They might resist whistleblowing depending on how much harm was done in the situation. Weigh up the balance of good vs harm.

Question 42

How would utilitarianism view globalization?

Answer 42

Western good produced at the lowest possible price creates the greatest happiness for the greatest number. (Bentham, however, would reject this)

Question 43

How does Peter Singer's development of utilitarianism link to businesses?

Answer 43

Singer claims that we should focus on minimizing pain rather than maximizing pleasure. We must consider individuals and minorities in doing so. This may reject globalization's exploitation of people.