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ETHC 3P82 Lecture Notes - Autocracy, Fiduciary, Externality

Course Code
Thomas Mulligan

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Monday, Feb 8 - Legal and Social Views of the Role of Business in
Society, and some notes on arguing from examples in ethics
What purpose does business serve in society?
What purpose should business serve in society?
How should business serve that purpose?
oShould corporations be self-interested or altruistic (=selbstlos,
-ELEEMOSYNARY INSTITUTION = Not-for-profit institution (e.g. church, school,
etc.; is chartered not to make profit bus to serve society in an altruistic way)
-PHILANTHROPY = Charity (a philantrophic person gives money to charity)
LEGAL (and ETHICAL) JUDGMENT - has 3 parts (at least)
FACT FINDING: getting all the facts affecting a decision (testimonials,
witnesses, etc.)
DELIBERATION: Consider how facts relate to legal (and/or ethical)
principles; relate the particulars of a case to the universals of rules and
Landmark legal cases which helped to define the social role of business
1. Dodge vs. Ford Motor Co.
HENRY FORD 1863 - 1947
Engineer/inventor, became a powerful industrialist in modern era
In 1903 founded Ford Motor Company, pioneered the large-scale
production line, made the automobile affordable change of living
A self-made man, peace activist (during WWI), visionary, but criticized for
unpleasant racial views and fiercely opposed to labor unions (hired private
army to fight them)
In 1915 Ford doubled assembly line pay, from $2.50 to $5 per day,
dramatically decreasing labor turnover and actually reducing operating
In 1918, Ford was a stock corporation; majority of stocks was still hold by
Ford himself
Case: reported by J. Ostrander, Michigan Supreme Court ( sophisticated
for business cases)
Change in society due to new production techniques; cars became
affordable/feasible to have a car Ford: very high profit
Ford’s vision: re-invest profits, annually reduce selling price of cars, while
keeping up, or improving, their quality; reasoning behind this: too much
profit made – has to be shared with public semi-eleemosynary
Philanthropic and altruistic view
Stockholder’s are upset; expect higher dividend Ford is NOT semi-
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Deliberation: Benefit mankind at the expense of others business is
supposed to benefit stockholders; can only decide HOW to make money
(means) not change the ends of company itself
2. Few decades later (1953): A.P. Smith Manufacturing vs. Barlow
Supreme Court of New Jersey (Jurisdiction with many business cases);
opinion reported by J. Jacobs
Company donates $ 1,500 to Princeton
Mr. Hubert F. O’Brien: investment – public expects corporations to aid
philanthropic and benevolent institutions; obtain good will in the
W. Abrams: corporation are expected to acknowledge their public
responsibilities in support of the essential elements – not good business to
disappoint this reasonable and justified public public expectation;
maintenance of liberal education
Shareholders question that decision and wanted to fight it
Court decided they could do it: Wealth in corporate hands and individual
taxation cannot keep up with philanthropic needs justification to turn
to corporation and expect their contribution AND this kind of expenditures
is for their own benefit
Two milestone legal decisions:
o1st case (Dodge vs. Ford, 1917): disallowed Ford’s philanthropic
general purpose to mankind
o2nd case (Smith vs. Barlow, 1953): upheld charitable donation
times and society have changed
State the proposed ethical rule or explanatory concept which you believe or
think you believe
Example: The actions of companies should conform to the expectations of
their core constitutents.
The uses of examples and counter-examples in ethical arguments
Develop an example where following the rule or using the explanatory
concept makes it clearer and believable.
Example: The Bank of America's policy in the 1970's of surveying women
customers to find out what they expected from the bank. The bank learned
women wanted financial credit status separate from their husbands' credit
status. The bank became a leader in providing women with their own
Create a variation of the example, or new examples, where NOT following the
rule or failing to use the explanatory concept makes it clearer and believable.
Example: A. P. Smith Mfg. vs. Barlow. Frank Abrams testified that
corporations are expected to acknowledge their public responsibilities,
saying that it is not good business to disappoint "this reasonable and
justified public expectation."
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