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Chapter 2

Essentials of Business Ethics, chapter 2.docx

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BUSI 4705
Diane Huberman- Arnold

Essentials of Business Ethics – Chapter 2: The Ethical Foundation of Capitalism and the Optimal Ethics Systems Model Free market capitalism is a significant ethical improvement over previous forms of economic arrangements. Adam Smith’s Capitalism and Business Ethics Adam Smith formulated capitalism as an economic system ethically superior to mercantilism. Trained in protestant theology smith was aware that there would be infinite opportunities to act immorally in a free market system, but thought that most of the time individuals would choose to act morally. Selfishness = concern about oneself, without any concern about the well-being of others Self interest = concern about oneself in relationship to the well-being of others. Smith concluded that human beings were driven by self interest. Smith believed people self regulated themselves based on moral sentiments, originating from the conscience, belief in god and natural concern for the well-being of others. Smith’s ethical defense of capitalism rests on the following beliefs: - Freedom and liberty are essential values - A free people naturally pursue their own self-interests - People will choose to enter product and labor markets where there is the greatest need and opportunity - People morally self regulate their actions based on their conscience, belief in god, concern for the well-being of others and reason - A strong system of justice is essential to punish those who do not appropriately self-regulate themselves Federal sentencing guidelines 1991, George H.W. Bush  new Federal sentencing guidelines. To encourage, but not require, to implementation of ethical best practices. When an organization has to come before a judge because of unethical behavior, they are being rewarded or punished based on the amount of best practices they have implemented in their organization. This means that your standard fine can multiplied or Guidelines: - Organizational personnel issue: o Substantial authority is not given to any employee known to have engaged in illegal activities - Ethics compliance program personnel o A specific high level manager oversees the program o A specific individual is accountable for the program’s day to day operations - Content of the ethics compliance program o Code of ethics is developed and publicized. Procedures are established for preventing and detecting criminal misconduct or unethical behavior. o Mechanisms are available for employees to anonymously or confidentially seek guidance on, or report, criminal or unethical con
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