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ETHC 3P82 Final: EXAM REVIEW


Department
Ethics
Course Code
ETHC 3P82
Professor
Yasanthi Perera
Study Guide
Final

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Theories
Stockholder/Shareholder Theory (Friedman)
Theory: The only social responsibility of a business is to increase profits for
stockholders
Managers social responsibility is to maximize shareholder profits
Not your job to do things that aren’t maximizing shareholder profits
Corporate social responsibility is not as important
Must operate within the scope of the law and without deception
Any commitment to fulfilling social responsibilities other than making money is
an illegitimate tax, or even theft
oThis constitutes to taxation without representation and is unjust
oConsequentially, corporate executives will be fired; employees and
customers will go elsewhere
Maximizing profits will produce the best overall consequences for society
oPrivate businesses should maximize profits
Businesses cannot have responsibilities – people do
Stakeholder Theory (Freeman)
Theory: Creating as much value as possible for stakeholders without a trade off
Job as a manager is to manage different relationships// Business should be
managed to create value for all stakeholders while managing the nexus of the
relationship among them
oInconsistent with the law
oInconsistent with basic ethics
Maximize value for all parties involved
Managing for Stakeholders: Business is a set of relationships among groups
which have a stake in the activities that make up the business – how these parties
interact and create value
There are primary and secondary stakeholders (some are affected more than
others)
oStakeholder interests may be prioritized by different companies in
different ways
Create as much value as possible for stakeholders without resorting to tradeoffs
Terms:
oStakeholder: Those groups without whose support, the business would
cease to be viable// Any group or individual that can affect or be affected
by the realization of an organization’s purpose
oSeparation Fallacy: Business and ethics have nothing to do with each other
oThe Open Question Argument
If this decision is made, for whom is value created and destroyed?
Who is harmed/ benefited by this decision?

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What kind of person will I become if I make this decision?
oIntegration Theory: Majority of business decisions have some ethical
content (incompatible with separation fallacy)
oResponsibility Principle: Most people, most of the time, want to accept
responsibility for the effects of their actions of others (incompatible with
separation fallacy)
Carrolls Pyramid of Social Responsibility
Four part definition for CSR:
oCSR encompasses the economic, legal, ethical, and discretionary
(philanthropic) expectations that society has of organizations at a given
point in time
Types of Management
oImmoral, Amoral, Moral
Framework:
oGet the Facts
oDefine the Ethical Issues
oIdentify the Affected Parties (Stakeholders)
oWhat Options am I Contemplating?
oEvaluate the Options
oMake a Decision and Test it
oAct and Reflect on the Outcome
Utilitarianism
Theory: Purpose or function of morality is to minimize harms and maximize
benefits// Evaluate various actions, policies, options, etc. on basis of costs and
benefits imposed on society
oMoral worth is determined by consequences
oUtility = net benefits produced by an action
Assessing Utility:
oAssumes ability to measure and add the quantities of benefits; measure
and add quantities of harm; subtract to determine utility and best
alternative

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oBest alternative = the sum total of utilities produced by the act is greater
than the sum total of utilities produced by any other act
oUtility for all persons, not simply the decision-maker; societal/group
welfare
oConsequences – direct and immediate, as well as indirect, and all
foreseeable future costs and benefits
oDetermine and compare utility for alternative courses of action; only one
morally correct action
Evolution of what constitutes good:
oHedonistic: pleasure and pain
oEudemonistic: happiness
oPluralistic: other things have intrinsic worth e.g. friendship, knowledge,
courage, health, and beauty
oPreference: satisfying individual preferences
Act Utilitarianism: Act to promote the general welfare in any given situation
Rule Utilitarianism: Moral rules that cannot be compromised// Follow moral rules
that tend to promote the general welfare
Issues:
oOf Justice: Greatest good for the greatest number may involve unfair
treatment of some
oOf Rights: Greatest good for the greatest number may involve infringing
on people’s personal rights
Rights & Duties
Right: a person’s entitlement to something
Natural Rights: Certain basic, important, unalienable entitlements that should be
respected a protected in every single action
Moral Rights
oClosely correlated with duties
oProvide individuals with autonomy and equality in the free pursuit of their
interests
oMoral rights provide a basis for justifying one’s actions and invoking the
aid of others
Negative Rights: Duties others have not to interfere in certain activities of the
person who holds the right (Privacy)
Positive Rights: Duties of other agents to provide the holder of the right with
whatever he or she needs to freely pursue his or her interests (Right to Life)
Contractual Rights and Duties
oRights attach only to specific individuals
oArise out of specific transactions between parties and depend upon a pre-
existing public system of rules
oWithout the institution of contracts, modern businesses could not exist
oFour ethical rules governing contracts
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