Businesses Ethics Flashcards
Corporate Responsibility
This asks whether a business’ main concern should be economic responsibility (to make a profit) or social responsibility (to care
for employees, the environment, customers etc.)
Milton Friedman
argues that the purpose of business is profit. This ultimately benefits society because successful companies
employ a large workforce, can pay prized employees high salaries etc. which in turn means that people have money to spend
which boosts the economy.
Adam Smith
believed that humans act only out of ‘enlightened self interest’; if they appear to be acting for the sake
of others it is essentially because it benefits themselves. So, for example, if a business man produces a poor product he might
initially make a lot of money out of the consumer but ultimately his business will fail because people will not buy his goods again.
Utilitarianism and Corporate Responsibility
Adam Smith’s enlightened self interest is also the model for Utilitarianism. Smith argued that we act for the benefit of others
because we will benefit ourselves; Bentham’s Principle of Utility runs along the same lines – unless I aim to make others happy,
then society will not benefit, and I will not be happy.
Utilitarianism and Corporate Responsibility
The hedonic calculus is like a cost-benefit analysis – what are the costs of labour, materials, transport, advertising etc. against the
financial return.
Criticisms of Bentham’s Theory
Kant would argue that everybody involved in business must be treated as “ends in themselves”. Kant recognises everybody’s
ability to reason which gives each an intrinsic worth. For Kant the depersonalisation of people as ‘consumers’ or ‘employees’ is
wrong as we are all free reasoning individuals.
Criticisms of Bentham’s Theory
Mill might also argue that the happiness of the shareholders, and the thousands of customers who enjoy cheap goods, should
not come before the unhappiness of the workers who are paid very little and work in poor conditions. This is an example of the
tyranny of the majority. He believed that an individual’s rights should be protected by the law, so his followers might insist on
regulations such as the minimum wage.
Criticisms of Bentham’s Theory
As utilitarianism is consequentialist on must ask oneself “consequences for whom ?” – for example the sale of fast food makes
enormous profits for business but the human cost of obesity, diabetes and heart disease is borne by the tax payer. Does the fast
food industry have a social responsibility ? Do we concern ourselves solely with business needs or look to the collective
happiness of the population as a whole ?
Kant and Corporate Social Responsibility
Kantian Ethics and the emphasis on duty fits well with business ethics. Employers and employees are under contractual
agreement and have a duty (social responsibility) towards each other and the customer. This suggests a stakeholder business
model is preferred.
Kant and Corporate Social Responsibility
Everybody involved in business must be treated as “ends in themselves”. Kant recognises everybody’s ability to reason which
gives each an intrinsic worth. For Kant the depersonalisation of people as ‘consumers’ or ‘employees’ is wrong as we are all free
reasoning individuals.
Kant and Corporate Social Responsibility
• He says that we should behave as if we lived in a Kingdom of ends – ie that we should behave in accordance with how the world
should be rather than how it is. Fair Trade is a good example of the Kingdom of Ends in practice, where companies insist on fair
pay and conditions for workers in LEDCs, not because it will benefit them, but simply because it is the right thing to do.
Criticism of Kant’s Theory
Kant’s theory is too abstract to be of any practical use in business – it sounds good, and the right thing to do, but it will not work
in the real world. His insistence that we put people before profits will mean that the company will lose out to its competitors. To
Kant this is an irrelevant consequence, but we cannot simply dismiss consequences because if the company is not competitive it
will close.
Criticism of Kant’s Theory
Utilitarians might argue that it is better to act in the interests of the shareholders because this will ultimately benefit all because
money, jobs etc. will eventually ‘trickle down’. Kant’s insistence on sticking to principles will actually cause greater unhappiness
as businesses will close, there will be more unemployment and the economy will suffer.
Whistle Blowing
Whistle blowing is when an employee speaks out about wrongdoing. Some whistle blowers resort to making their complaints
public because their boss has been informed and has done nothing to remedy the situation – so, for example, they might reveal
to the newspaper allegations of bullying or harassment within their company.
Utilitarianism and Whistle Blowing
• An Act utilitarian would have to decide what is in the best interests of the company and its employees before they decided to
report wrongdoing. For example, the discovery of a leak of waste products into a nearby river might cost the company millions
in fines which would result in some workers being laid off. If no damage has been caused by the leak, then surely it is in
everybody’s best interest to cover it up.
