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

The car was designed to be small, light and cheap to fit into a struggling part of the market.
They would have had the change the the car according to new safety regulations hence they aimed to finish the design in two years rather than three and a half.
They chose to go through with this and there were 500 fire related deaths recorded.

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 Freeman’s Separation Fallacy

Answer 5

The idea that ethics cannot be separated from business.