Midterm Study Questions, Business and Consumer Ethics

Editors Introduction

1.         What is the difference between descriptive ethics and prescriptive ethics and which does philosophical business ethics involve? Give examples.

2.         Explain the doctrine of ethical/cultural relativism and explain one of the editors’ criticisms of this idea.

3.         Does the value of tolerance support or undermine ethical relativism? Explain.


Friedman (and editors) on Social Responsibility

5.         What is Friedman's view of business' social responsibility? Does he believe that businesses should be socially responsible? (Hint: Distinguish between “narrow” and “broad/ordinary” social responsibility.) Do you agree with this position? Why or why not?

6.         Explain what sorts of "socially responsible" behavior Friedman would approve of and then explain what types of "socially responsible" behavior Friedman would oppose. Give examples.

7.         Why does Friedman think "ordinary" social responsibility on the part of managers of business is "intolerable as a matter of political principle?" (Hint: The tax argument.) Explain the editors’ response to this dimension of Friedman’s argument.

8.          Is donating to charity (or cutting pollution beyond what the law requires) ever acceptable according to Friedman? Explain why or why not.

9.         Explain the relationship between “the legal” and “the moral.” Do they coincide? If they do not, would it be desirable if we made them coincide? What is the editors’ view on the question of whether or not “obedience to law is enough to insure ethical behavior?” What is your own position on this issue?

10.       Why does Friedman think bad consequences will result form managers pursuing social objectives? What is the editors’ response to this argument?

11.       Explain the idea behind and use of the notion of “Adam Smith’s invisible hand.”

12.       The editors claim that Friedman’s view of the proper role of government in the economy is “radical.” Why do they claim this? Are they right?

13.       Friedman argues that by regulating the market, we undermine a “free society.” Using the distinction between Capitalism and Democracy, explain how the editors respond to this argument. Can there be “capitalist dictatorships?” Can there be “democratic socialist” societies? Explain these concepts.

The Corporation as a Social Institution

14.       Explain how limiting the legal liability of owners of corporations to the amount of their investment gives the owners a special privilege that our society does not extend to owners of ordinary property. In other words, what is unique about the policy of limiting liability for damage caused by one's property to the value of that property? Give an example where it isn't limited in this fashion. (See the editors’ example p. 66.)

15.       Is there a social contract between corporations and society? Using the distinction between an implicit and explicit contract, consider reasons for thinking there is such a contract.

Lynn Stout on Shareholder Primacy

16.       Explain the distinction between “shareholder primacy” (the property view) and a “stakeholder view” (or the entity view) about the reason corporations exist.

17.       List four other “stakeholders” besides shareholders and give examples of plausible duties owed to them.

18.       Explain why Stout accepts or rejects the argument for shareholder primacy that says “A corporation belongs to the shareholders; they own it.”

19.       Explain why Stout accepts or rejects the argument for shareholder primacy that claims “the shareholders are the sole residual claimants.” What is a “sole residual claimant?”

20.       Who does Stout claim controls corporate assets?

21.       According to Stout, what are other legal and legitimate things managers can do with corporate earnings besides declare dividends for shareholders or pay employee wages/salaries? Mention at least three.

22.       Explain the “team production argument” against shareholder primacy and assess it from your own point of view.

23.       Explain the “agency cost argument” for shareholder primacy and assess it from your own point of view.

24.       Is it legal or illegal in most states for corporate directors to sacrifice shareholder interests in order to serve other stakeholders?

The Film “The Corporation”

25.       Make the argument for each side of the dispute about the fairness of wages that pay foreign workers 30 cents for making a $17 shirt. Now assess these arguments from your own perspective.

26.       Discuss the debate about the limits of ownership. What are examples of things that the film suggested should not be owned (and yet have been made private property). What are arguments both for and against ownership of these items? Do you think either side of this debate has a stronger case? Why?

27.       Explain the case of concerning BGH (Bovine Growth Hormone injected into cows), Fox News, and Monsanto.

Carr on Business Bluffing

28.       Explain the distinction between empirical and normative claims about ethics. Is Carr's claim (in "Is Business Bluffing Ethical?") that typical business practices violate ordinary standards of morality a empirical or normative claim? Give examples of both empirical and normative claims that Carr makes about business ethics.

29.       Does the fact (if it is a fact) that typical business practices violate the rules of ordinary morality give us a reason for thinking that these practices are morally legitimate? Why or why not?

30.       What is Carr's main argument for the view that "business bluffing is ethical?" Explain the analogy he uses and how he thinks it supports his contention. How might the appeal to “legal ethics” support Carr’s view? Do you think Carr has provided a good argument for his view that “business bluffing is ethical?”

31.       In what ways does Carr think business is like poker? Explain several problems with this "poker analogy."

32.       According to Carr, what norms (rules) must business people obey in order to be ethical?

Readings on Legal, Potentially Morally-Troubling, Business Practices

33.       If consumers demand a product does that make it morally permissible (or morally praiseworthy) to supply it? Does it change your answer if in addition to there being consumer demand, it is not illegal to supply it? Can you think of persuasive examples that suggest that legality and consumer demand do not guarantee that providing a product is morally permissible?\

34.       Assume you are a CEO of a company that sells products for children. If you would not want your child to have this product, is it ethical for your company to market this product to children?

35.       In “Finding Drucker’s vision in all that stuff” Charles Handy identifies what he calls “Adam Smith’s Great Conundrum.” Explain what it is.

36.       Did Wal-Mart act socially responsibly with their policy concerning CDs? What would Friedman say about this policy? What would Goodpaster say?

37.       Describe the conditions at the pickle factory. What sorts of moral obligations to the workers are the owners of the factory violating, if any? Justify your view.

38.       What is James Kunstler's critique of Wal-Mart's (and other "big box" stores’) affects on towns into which they move? Is this a justified perspective?

39.       Are emails and other files on business computer systems private? Should they be private? Is it morally permissible for managers to examine the contents of an employees computer or emails?

40.       Should employees’ loyalty to their companies extend to buying the company’s products and saying only good things about the companies? Do consumers have a duty (based on loyalty?) to buy American? Are American jobs more important than jobs of foreign peoples? Is partiality toward Americans morally permissible? Praiseworthy?

41.       Describe some of the ethical issues in marketing and selling guns. What are some of the objections raised by critics? Do they have any merit? What is Wal-mart doing to be more socially responsible with its gun sales?

Goodpaster (and Matthews)

42.       Describe the decision of the CEO of Southern Steel Corporation (James Weston) (in Goodpaster "Can a Corporation have a Conscience?") and Goodpaster's response to it. Do you agree with Goodpaster or with Weston? Why?

43.       What are the three mechanisms ("hands") for insuring corporate social responsibility that Goodpaster discusses? Which mechanism(s) does Goodpaster suggest we use? Which are imposed from the outside onto corporations?

44.       How can the structure of a corporation itself make that corporation more or less morally responsible? Give an example.

45.       Is it politically illegitimate for private individuals to act in ways that serve their view of the public interest? What does Friedman think about this? What does Goodpaster think about this? (See Goodpaster's objection #3 and reply)

46.       If immoral behavior is profitable, why might businesses be forced to adopt the standards of the least moral company in the industry?

47.       What is Goodpaster's response to the claim that moral behavior by managers that is not legally required and involves some sacrifice of corporate profit violates the fiduciary responsibility managers have to shareholders? (See objection #4 and reply)

48.       What is Goodpaster's response to the argument that corporations are too powerful to be "unleashed" into the moral domain and that it is less dangerous to keep them focused solely on profits? (See objection #5)

49.       What is Goodpaster’s response to the objection that acting socially responsibly when it involves the sacrifice of profit violates a manager’s fiduciary role to the shareholders? (See objection # 4.)

Readings on “Issues in Ethics and the Market”

50.       What is the difference between wealth and income? Could the distribution of wealth be unequal and the distribution of income equal?

51.       How does the gap between rich and poor in the U.S. compare to other advanced countries? Are American in general concerned about the rising gap between rich and poor? Why or why not?

52.       Discuss the debate over changes in CEO pay. Do executives today earn closer to 300 times the wage of the average blue collar worker or closer to 20 times? Do U.S. CEOs make more or less than CE0 of like sized foreign companies? What are some of the factors that explain changes in CEO pay?

53.       Evaluate: As profits have fallen and companies have gone bankrupt or asked the government for loans, CEO pay has also fallen and bonuses have been withheld.

54.       Evaluate: Is being “filthy rich” a sin? Very briefly describe the case where the owner of a road building company sold the firm and split the proceeds with his workers. Who is Charles Feeney? (Hint: See “One life to give”)

55.       Describe the debate over genetic screening in the workplace and for insurance purposes. Should costs of insuring someone be consider in deciding whether or not to employ someone? Should people be denied jobs due to “bad genes?”

56.       Is Levis a socially responsible company? Describe the debate over its layoff of workers in the late 1990s. Do American owned companies have obligations to American workers that they violate when they relocate their operations in foreign countries and businesses?

57.       What is insider trading? Why is it illegal? Is it morally wrong? Why or why not? Did Martha Stewart go to jail for insider trading or for obstruction of justice (lying after the fact)?

58.       Describe the collapse of Enron and Arthur Anderson. What factors led to this collapse? Who are the parties responsible for this collapse and explain why they are responsible? What changes in the practices of the auditing industry might these events suggest?

59.       Describe the case in which McDonalds was sued for its hot coffee. Make the best case you can for why this was not a frivolous suit. Now do the opposite. What is your own view about this case?

60.       Describe the case in which McDonalds was sued for marketing and serving food that was (is) unhealthy. Make the best case you can for why this was not a frivolous suit. Now do the opposite. What is your own view about this case?

Editors, Utilitarianism and the Free Market (and Virtue Ethics)

61.       What is a norm? What features of ethical norms distinguish them from other sorts of norms? (Hint: hypothetical versus categorical?)

62.       What does it mean to say ethical norms are “impartial?” Using an example, explain why someone might claim that partiality is sometimes ethically required..

63.       How is virtue ethics different from an ethic of duty or principle (like utilitarianism and rights-based ethical theory)?

64.       Define and explain the difference between virtues and vices and give examples of each.

65.       What sorts of vices might the consumer culture promote?

66.       Explain in detail what makes an action or policy right according to utilitarianism? Can utilitarianism condone making some people unhappy (or harming their good)? Can utilitarianism condone making more people unhappy than happy (harming more people than helping)? Explain why.

67.       Explain what it means to say utilitarianism is a consequentialist moral theory and that rights-based moral theory (and virtue ethics) are not.

68.       Explain the difference between intrinsic value and instrumental value and give examples of each.

69.       Does utilitarianism see right acts as intrinsically valuable? Why or why not?

70.       What are some examples of different conceptions of the good that utilitarians might endorse as what right action should produce.

71.       Explain the distinction between wanting something and it being in one's interests (between desires/preferences and interests). Explain why the market may better respond to people's preferences than to their interests.

72.       Do people’s preferences as expressed in the market track what they really believe to be good? Why or why not? Give examples.

73.       What does it mean to say utilitarianism is “aggregative” and why might someone think this is problematic?

74.       What do the editors mean by the "laissez-faire" view of the free market? What conception of the “free market” are they critical of?

75.       Use the editors’ car buying example to explain the idea that trading in the free market moves us toward the overall social good. Why think that market transactions make people better off without making anyone else worse off (bring about a Pareto improvement).? Do they invariably do this? (Consider the possibility of being relatively disadvantaged by someone else’s market transactions.) If a trade in the market makes people better off without making anyone else worse off, does it follow that this situation maximizes utility (happiness)? Why not?

76.       What is the "invisible hand" and how is it used to defend a utilitarian justification for a laissez-faire free market? Do defenders of the invisible hand of the market think that altruism (looking out for the interests of others) is necessary to achieve the common good?

77.       What are some reasons for thinking that trading in the free market will not maximize overall social good? Does the market distinguish between vital needs and luxuries? How might one argue that it is justifiable (and perhaps utilitarian) that poor people don’t have their need met will the rich get to have luxuries? Evaluate this debate from your own point of view.

78.       In what ways do free markets fail to represent the interests of the poor or future generations (or nonhumans)?

79.       What are the editors’ reasons for arguing that the (minimally regulated) free market is not necessary to achieve the maximum good (or a high standard of living)?

80.       What are the editors’ reasons for arguing that the (minimally regulated) free market is not sufficient (does not guarantee) that the maximum good is achieved)?

81.       What is a prisoner's dilemma (or a tragedy of the commons)? Give examples. Explain how the utilitarian invisible hand argument for the free market is affected by the existence of prisoner's dilemmas.

82.       What is an externality? Define and give examples. How do externalities undermine the tendency of markets to increase overall utility?


Editors on Rights and the Market

83.       What is rights-based moral theory? What acts or policies are morally right according to this theory?

84.       Explain how a defender of rights-based moral theory would criticize utilitarian moral theory.

85.       Can an action/policy maximize total utility (happiness) and still be a morally wrong? What reasons support this claim? Give examples.

86.       Define and explain the concept of a right.

87.       Explain the relationship between rights and duties. Do rights imply duties or obligations? What is the “correlativity thesis?”

88.       Explain what it means to say rights can be demanded as one's due. How does this distinguish rights from privileges and from charitable benefits?

89.       Using an example, explain the difference between a legal and moral right.

90.       Explain how the editors tie the idea of rights with the idea that persons have dignity and are owed respect.

91.       How do the editors suggest we justify a rights claim?

92.       When rights conflict, how do the editors suggest we resolve this conflict?

93.       What is the difference between positive and negative rights (and duties)? Give examples. Are positive rights (and duties) more controversial than negative ones? Are they less weighty? What are the editors’ reasons for rejecting the claim that only negative rights exist (and that there are no positive rights and duties based on them). Can positive duties exist even if one has not caused an individual to need assistance and if there is no contractual basis for the duty?

94.       Identify the four conditions that the editors set out for when positive duties to assist exist (even though not contractual relations underlie them). Explain them using the Kitty Genovese case.

95.       What does it mean to say corporations have only negative duties and not positive ones? Is this a plausible position?

96.       Do you think the minimally-regulated free market better protects people's rights than does a more substantially regulated market? What is the editors’ view? What examples do they give to support this? Might economic liberties conflict with other (more important) liberties?

97.       Evaluate the following argument: Because a minimally-regulated free market has minimal government regulation and because government regulation decreases liberty (freedom), it follows that a minimally regulated market gives people more liberty than a more regulated market (and thus best protects liberty). Evaluate the editors say in response to this argument.

98.       Give an example where government regulation can increase people's freedom overall.

99.       Explain why the editors think the type of economic liberty guaranteed by a minimally regulated market might interfere with other more important liberties (rights). Do you agree with them? What are some of these conflicting liberties/rights?

100.     What is the editors response to the argument that a commitment to private property rights justifies a minimally regulated free market?

101.     What is a property right? Are property rights absolute?

102.     What (3) values do the editors argue underlie and justify the institution of private property? Give examples of how unregulated uses of private property can undermine these values.

Werhane and Maitland


103.     What is employment at will? What is due process? How are they opposed to each other?

104.     If companies are exceptionally profitable do they have a moral obligation to refrain from laying off huge numbers of employees for the sake of increasing profits further? Do companies that layoff employees have obligations to those employees and their communities?

105.     State and evaluate the reciprocity/fairness argument for employment at will. What is Patricia Werhane's response to this argument?

106.     State the private property rights argument for employment at will? What is Werhane's response to this argument? Is it a good response?

107.     Do the right of freedom and the right of private property arguments for employment at will prove too much?

108.     Explain and evaluate the utilitarian/practical argument for employment at will. Assume that employees have a right to due process. What implication does this have for this utilitarian argument?

109.     Explain some of Maitland's objections to legally establishing rights in the workplace to due process, meaningful work, and so on. How does he think a competitive market for labor will solve these problems?

110.     Should society allow there to be a market in rights? Should people have to pay for their rights?