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Lecture

5_February 8-10.doc

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Department
Ethics
Course Code
ETHC 3P82
Professor
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 SOME CONCEPTS FOR TODAY - BUSINESS PURPOSE • What purpose does business serve in society? • What purpose should business serve in society? • How should business serve that purpose? o Should corporations be self-interested or altruistic (=selbstlos, uneigennützig)? - 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 laws • DECISION 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 patterns • 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 costs. • 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- eleemosynary • 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 community • 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: o 1 case (Dodge vs. Ford, 1917): disallowed Ford’s philanthropic general purpose to mankind o 2 ndcase (Smith vs. Barlow, 1953): upheld charitable donation  times and society have changed HOW TO ARGUE FROM EXAMPLES IN ETHICS 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 credit. 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." Create more variations of the example, or new examples, which "stress test" the proposed principle or rule. Example: Nazi Germany in the 1930's. Businesses in Nazi Germany had the Nazi government and the Nazi public as core constituents. These core constituents expected businesses to refuse to employ or to transact business with Jews, Gypsies and others branded as "undesirable" by Nazis. Should these businesses have conformed to the expectations of their Nazi core constituents?  only works if core constituency are moral agents in the 1 place Wednesday, Feb 10 - Corporate Governance, Stockholders, Stakeholders WHO RULES THE CORPORATION?: Heavy critique of corporate governance by Ralph Nader et al. (Honest Work, 583-585) • Deals with the que
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