Business Ethics Flashcards
What was Adam Smith’s theory?
He believed that humans only act out of enlightened self-interest and if it appears they are acting in the interest of other it’s because it ultimately benefits themselves. For example, if a businessman insists on high quality it is because he cares for the customer only because he knows it will benefit himself in the long run as the customer will return or recommend the business. He, therefore, argues that we do not have to regulate businesses as they will regulate themselves - this is the invisible hand theory.
What was Milton Friedman’s theory?
He argues that the purpose of a business is profit and this will ultimately benefit society as successful companies can employ a large workforce and pay a higher salary which will boost the economy. This profit is solely in the hands of the shareholders but will “trickle down” to the wider community.
What is a shareholder?
The business owner(s)
What is a stakeholder?
The employees, customers, community etc)
What is the shareholder model?
Utilitarianism, Milton Friedman and Adam Smith argue for this model and argue that the model will ultimately benefit the community but the main responsibility of a business is profit. Supporters of Capitalism argue that humans flourish when they fulfil their own desires and the less fortunate will ultimately be cared for because we have the means to do so.
What is the stakeholder model?
Kant supports this model. Some consider businesses to exist to fulfil the human need to work rather than for profit. We all need to be members of a productive society. People who agree with this view argue that the business has a duty to the stakeholders. The shareholders make a little profit because the money goes on good wages, quality pensions, and pensions etc. People are not just consumers and should be seen as an end in themselves.
What does Utilitarianism argue about corporate responsibility?
Adam Smith’s enlightened self-interest theory fit with Utilitarian ideas. Bentham’s Utilitarianism
What does Utilitarianism argue about corporate responsibility?
Adam Smith’s enlightened self-interest theory fit with Utilitarian ideas. Bentham’s Utilitarianism states that we aim to make others happy and this will benefit society just as Smith’s theory says that we act in the benefit of others because it will benefit ourselves. In this case, we must act in favour of the shareholder as this will create the invisible hand theory and therefore the greatest happiness for the greatest number.
What does Kant argue about corporate responsibility?
Employers and employees are under contradict and so have a duty to each other and the customer. This suggests a stakeholder business model is prefered. Kant says everyone must be treated as an end in themselves. Companies that don’t give good wages or working environment are treating employees as a means to an end. For Kant, consequences are irrelevant so profit doesn’t matter. Fair Trade is a good example of the Kingdom of ends being used.
What are the issues with Kant’s approach to corporate responsibility?
- Kant’s theory is too abstract to be of practical use in the real world. He insists that people be put before profit but this means the business will fail
- Kant’s ideas on duty will cause greater injustice as businesses will close furthering unemployment and the decline of the economy
What is whistleblowing?
When an employee speaks out about wrongdoings in a business. Some whistleblowers report to the public when their complaint to the company go unnoticed.
What is whistleblowing?
When an employee speaks out about wrongdoings in a business. Some whistleblowers report to the public when their complaint to the company goes unnoticed.
What does Kant argue about whistleblowing?
For Kant an employee has signed a contract so has a duty to the company and whistleblowing seems like breaking a contract. However, if the concern is that the company itself is putting its customers at risk then it would seem there is a wider sense of duty at stake.
What does Kant argue about whistleblowing?
For Kant an employee has signed a contract so has a duty to the company and whistleblowing seems like breaking a contract. However, if the concern is that the company itself is putting its customers at risk then it would seem there is a wider sense of duty at stake.
What does Utilitarianism argue about whistleblowing?
An act utilitarian would decide what is the best interest of the company and its employees before reporting the wrongdoing. For example, if they discovered a leak of waste in a nearby river that may cost the company millions and lay off workers they may argue to cover it up if no damage has been done. A rule utilitarian would argue that you should always stick to your principles by deciding what will generally generate the most happiness eg) it is best to report the leak as it is covered up who knows what else is. Whistleblowing may also encourage integrity as it encourages companies to be moral. Mill may want to protect whistleblowers against unfair dismissal. There are some cases when whistleblowing should apply differently eg) teaching or the secret service.
