Notice any mistakes in the notes? Let me know via an instant msg on the right ->
Are you a good notes-taker?
Looking for a collaborator: e-mail me at [email protected]
1. Midterms Returned Next Week
2. Chill out!
3. Finish Pinto + Product Safety
4. Intellectual Property
Ford Pinto Continued:
The Classic Case of Business Ethics
1. Failure as Business Calculation (See cost comparison from last lecture’s notes)
2. Moral Failure
3. Legal Failure -> FORD guilty of NEGLIGENCE:
a) Failure to act as a reasonable person would
b) This violates a duty of care
c) Resulting in harm to others (exploding cards: death, injury)
1. Ruthless, Selfish Cost-Benefit Analysis:
Ford did not do consequential calculus for everyone - only did it for its own profit (putting the
cost on others: their own customers!).
Not only that, Ford failed in its own Marketing Analysis because it did not consider “Confirmation
Advertising” - Existing Customers Crucial
2. Cost-Benefit Standard vs. Rights-Respecting Standard:
Cost-benefit: aggregating pleasure vs. pains across a population.
Rights-based: respecting all individuals in a population 2A: Problem: Quantifies things that can’t be quantified: life / death, injuries - McDonalds hot
2B: Problem: Ignores distribution of these costs & benefits within a population
2c: Problem: Ignores the existence of Rights not to be harmed, Right to be informed of risk
Negligence has 3 elements:
1. Failure to act as a reasonable person would.
LAW: rules / standards for behaviour, which makes society better.
Can’t set standards too high because:
- People aren’t perfect, nor saints
- Widespread disobedience
Can’t set standards too low because:
- People will do terrible things!
“Goldilocks” Standard: Standard of the reasonable average person.
In Ford Pinto’s case, Ford could have done any of these things:
1. Fix It: $21 million in recall costs
2. Fix It: Share the cost with customers, or pass it all onto them ($11 per car)
3. R.C.C would have fully informed the consumer of risk & let them take it themselves.
Bad Ethics -> Bad Business.
1. Negligence (Pinto)
2. Breach of Warranty: (Warranty: promise that a product will adhere to a certain standard)
Explicit: Written on a piece of paper
Implicit: Intrinsic to purchase of good: “This good will do what it’s designed to do for at
least 1 month” (To prevent fraud)
3. Strict Liability:
Even if you’ve done nothing wrong, you might still be held liable for your products: If
damage ordinarily comes about from the use of your goods (e.g.: firecracker, knifes,
guns, gym equipment, lawn mowers)
The notion is: the damage is done, who should pay for the damage? We decided as a
public policy that the company should pay at least a portion of the damage - otherwise
switch business. The reason that big ticket items that you think would be sueable by
strict liability, like alcohol, tobacco, pharmaceuticals, cars are not is because these
companies have really large sums of money and because of this reason they’re exempt
from Strict Liability.
1. Rigorous product testing 2. Huge warning labels + clear instruction guides
3. Adhere any social safety codes I.S.O 9000/12000 etc
4. *Keep up with the industry state of the art
Aside: Judge Learned Hand:
- Ship smashing into the harbour of a big city, destroying the harbour
- City sues the ship company for damages
- Ship Company states that they followed all safety standards (flag-signal method), not
negligent, but still crashed.
- But Learned Hand asserted that use of radio is reasonable, thus precedent-setting to find a
whole industry negligent.
Aside: Viagra / Cialis takes advantage of fineprint product safety requirement to advertise its
1. Definitions + Importance:
Property: right to own things - things follow rights.
Intellectual: As opposed to physical; ideas, especially creative ideas: entertainment,
architecture, software design, inter