PHIL 2274 Business Ethics Study Guide Exam 2 3/21/16

What is a capitalism?

Capitalism 

Capitalism – an economic system that operates on the basis of profit and  market exchange and in which the major means of production and  distribution are in private hands

Capital – money being used for a specific purpose – to make more money  (closely related to private property)

An argument for capitalism is that it reflects people’s natural right to  property  as well as private ownership of the means of production Another – it is the most efficient and productive economic system  (utilitarian consideration) Adam’s Invisible Hand

∙ done privately with limited gov. interference  competitive ∙ Bush said “it’s not a zero-sum game” – we can all be winners Adam Smith’s Invisible Hand 

∙ Smith argues when people are left to pursue their own interests, they  will, without intending it, produce the greatest good of all  

∙ Everyone’s private pursuit of wealth results as if guided by an invisible  hand – in the most beneficial overall organization and distribution of  economic resources

What is a corporations?

∙ Human beings have a natural instinct for trade and so in pursuing our  individual economic interests, we can benefit society as a whole March 1996 – employment rose (5.5  5.8%) We also discuss several other topics like com 101 bu

∙ Good news for job seekers, NYSE Jones dropped 171 pts ∙ With more jobs  comes more money  things are more expensive  inflation

 money is worth less (helped some, hurt others)

Capitalism has corporations If you want to learn more check out supply and demand long beach

Corporations – private organizations, artificial persons

They are legal entities, with legal rights and responsibilities similar but  not identical to those enjoyed by individuals. Business corporations are  limited-liability companies- their stockholders are liable to corporate debts  only up to the extent of their invesments.

Limited Liability – not the same as partnership, organization  becomes a corporation when it is registered by law and the shareholders  only benefit from their investment after it is declared a corporation by law

What is a insider trading?

Don't forget about the age old question of chem 131

∙ Chief Justice John Marshal described as “artificial being,  intangible, invisible” We also discuss several other topics like fhce 2100 uga

∙ They risk other people’s money, and sell shares

∙ Not responsible for corporation’s money

∙ Allows them to evade legal responsibility  

CEO (boss)

Board of Directors (elected)

Shareholders (owners)

*Board of Directors act as mediator because share holders have a ton  of money but may not know how to run corporation

Fair Wages 

Competition – is a regulator that keeps a community activated only by self interest from degenerating into a mob of ruthless profiteers Because of competition – people with similar interests as our own  become competitors and this leads to price gouging or employee  exploitation  competition makes individual pursuit of self-interest socially beneficial

Employees want higher wages, employers want lower

Ian Maitland – both shareholders and employees face risks Shareholders place risk when they invest in a corporation

Employees risk other possible job opportunities, and anticipate steady  income for homes

Job Security 

Employment at Will – an employer may fire, hire, promote, etc an employee  whenever and for whatever reason the employer wishes and employees have to rights to demand and appeal. Applies to those in private sector, most of  whom are “at will”. Patricia Werhane is strongly against EAW. EAW justified for:

1. Businesses should be able to control their property (not persons) 2. Businesses should have the right to free association

3. EAW increases business efficiency

4. Gov should stay out of business

Negligent Hiring – in order to accuse of negligent hiring, must prove: 1. X worked for Y

2. X was unfit to work for Y (criminal activity, alcohol, drug,  inexperience) We also discuss several other topics like gen 102 week 1 assignment

3. Y knew/should have known X was unfit (proximate cause) Cases:

Avis Rent-A-Car

∙ Had a stand at an airport, with a man and woman working. The  man raped the woman  Is Avis responsible?

∙ Respondeat superior- do what superior says even if you believe  it’s wrong

∙ According to RS – man worked for Avis – so Avis is responsible ∙ Judges now disregard RS and allow for charge of Negligent Hiring American Airlines

∙ Man came up to boarding agent without a ticket & boarding  agent bit the man and kicked him

∙ There had been no prior record of violence – how to prove  negligent hiring?

Foster v. The Loft

∙ Loft = a bar, Foster went to the bar with a friend, friend wasn’t  pleased with a drink and the bartender (Rida) said they could  leave

∙ Foster’s friend threw drink @ Rida, blinded Rida and accidentally  punched Foster – Foster & friend sued the bar

Insider Trading – buying/selling of shares based on knowledge which is not  public

Tort = civil penalties – up to 3 times amount lost/gained

Crime = criminal  

Securities Exchange Act (SEA)

Gov set up the SEA, section 21A:

∙ “if you’re trading shares (buying/selling) while in possession of  “material, nonpublic info” you shouldn’t be buying/selling

Nonpublic = available to insiders (managers, directors)

Material = affects share price

It’s strict because we want to maintain an honorable financial system It is responsibility of CEO to prevent insider trading

Martha Stewart

∙ Imclone was developing a drug (Erbitux) Dr. Sam Waxall found out  that the FDA wouldn’t approve of Erbitux, and he had already  invested money in it with MS We also discuss several other topics like hans johnston umass

∙ Together they removed investment to avoid losing money ∙ Imprisoned for obstruction of justice (denied contact with Sam  Waxall)

Privacy 

Richard Lippke – without privacy there is autonomy

When you apply for jobs, they have access to many private records:  academic, polic credit, medical, drug testing

Some offer a psychological profile- a quiz to determine hiring potential Privacy (The right to privacy) 

1. A. Parent – the right not to have personal, undocumented info about  self possessed by others

2. Warren & Brandeis – “the right to be left alone”

3. John S. Mill – the right to do anything unless harmful to others Workplace Privacy

Should allow privacy unless harmful to your work

Cases:

Elementary Teacher/Swinger

∙ Mrs. Pettit – an elementary school teacher for mentally handicapped by day, husband & swingers were night swingers

∙ She went on TV and people recognized her, police entered club and  gave out tickets for public lewdness (she had sex with 3 men in an  hour publicly)

∙ School found out – they fired her and she sued

∙ School argued 1. Danger - She might expose students to her lifestyle 2. She should be a moral role model to students

3. Her actions were not private – occurred in public

Deal v Spears (1992)

∙ Sibby Deal was a clerk at a liquor stor, and Sears was the owner ∙ Sears lived in a trailer behind the store, they had a party phone line  between the store & trailer. Sibby was on the phone a lot

∙ Store was robbed $16,000 and Spears thought it was Deal  tapped  phone for evidence

∙ Taped for 22 hours – found Sibby having an affair with Calvin Lucas –  she was giving Lucas discounts  Spears fired her

∙ She sued & won because Spears didn’t disclose that he was tapping  the phone

Privacy: Drug Testing 

DesJardins & Duska think drug testing of workers is a violation of privacy Arguments for drug test use:

1. Job performance – believe it hinders performance

2. Danger/Safety – necessary only if safety is involved

NIOSH (1984) regulate workplace safety

They tested work place accidents within a chemical industry and found that of the 3,000 accidents – only 8 involved drugs

Enzyme drug test – typically a urine sample

Multiplied 99% sensitive (catches 99% percent of users) Immunoassay 90% specific (catches some nonusers) Technique can request alternative tests (GC/MS)

Luedtke v. Nabors (1989)

∙ Paul Luedtke = driller, Nabors = Alaskan oil company

∙ Thought Luedtke was a drug user, asked him to take a physical on  land, company wanted a sample of his blood & found traces of  marijuana

∙ He sued for violation of privacy – judges argued right of safety of  others, and was fired

Trade Secrets & Patents

Trade secret 

1. Secret knowledge

2. Competitive advantage

3. Not patented  

4. Protected as a secret

Patents  

1. Public information (to read, not to use) while patent pending 2. Expiry date- 20 yrs after apply date (prevents monopoly) to  encourage invention, reward invention. You can posses a 20 year  monopoly

3. Expense for patent (must apply for patent in every country where  you intend to sell)

Kentucky Fried Chicken

∙ The recipe for KFC chicken is made of 14 herbs & spices (no one knew  except Col. Sanders)

∙ Secretary had recipe typed & hidden in vault

Donald Wohlgemuth

∙ Worked for BF Goodrich, making space suits

∙ Another company (International Latex) wanted to make suits but  couldn’t figure out valve for oxygen

∙ International Latex looked into Wohlgemuth and found he wasn’t paid  well and worked with poor lab conditions, so they promised him a pay  raise & new lab

∙ Donald wanted job, Goodrich ordered an injunction (prevent him from  working with company that sold space suits) but court wouldn’t grant  injunction

Bribery

Bribery – giver usually initiates exchange, usually no threat made. Both  parties benefit

Extortion – recipient usually initiates, sometimes with a threat. One party  benefits (also called blackmail)

Jeffry Fadiman – found that bribery is the highest in Africa, Asia, and S.  America

Under President Carter (1977)

∙ Issued Foreign Corrupt Practice Act (FCPA) which prohibits US  companies from bribing to obtain business contracts

∙ Doesn’t exclude gifts (not quid pro quo)

∙ Grease payments – to speed up a process

∙ Violation of FCPA = 1 mill$, officer of company = $10,000 & 5 years in  prison

PHIL 2274 Business Ethics Study Guide Exam 2 3/21/16

Capitalism 

Capitalism – an economic system that operates on the basis of profit and  market exchange and in which the major means of production and  distribution are in private hands

Capital – money being used for a specific purpose – to make more money  (closely related to private property)

An argument for capitalism is that it reflects people’s natural right to  property  as well as private ownership of the means of production Another – it is the most efficient and productive economic system  (utilitarian consideration) Adam’s Invisible Hand

∙ done privately with limited gov. interference  competitive ∙ Bush said “it’s not a zero-sum game” – we can all be winners Adam Smith’s Invisible Hand 

∙ Smith argues when people are left to pursue their own interests, they  will, without intending it, produce the greatest good of all  

∙ Everyone’s private pursuit of wealth results as if guided by an invisible  hand – in the most beneficial overall organization and distribution of  economic resources

∙ Human beings have a natural instinct for trade and so in pursuing our  individual economic interests, we can benefit society as a whole March 1996 – employment rose (5.5  5.8%)

∙ Good news for job seekers, NYSE Jones dropped 171 pts ∙ With more jobs  comes more money  things are more expensive  inflation

 money is worth less (helped some, hurt others)

Capitalism has corporations

Corporations – private organizations, artificial persons

They are legal entities, with legal rights and responsibilities similar but  not identical to those enjoyed by individuals. Business corporations are  limited-liability companies- their stockholders are liable to corporate debts  only up to the extent of their invesments.

Limited Liability – not the same as partnership, organization  becomes a corporation when it is registered by law and the shareholders  only benefit from their investment after it is declared a corporation by law

∙ Chief Justice John Marshal described as “artificial being,  intangible, invisible”

∙ They risk other people’s money, and sell shares

∙ Not responsible for corporation’s money

∙ Allows them to evade legal responsibility  

CEO (boss)

Board of Directors (elected)

Shareholders (owners)

*Board of Directors act as mediator because share holders have a ton  of money but may not know how to run corporation

Fair Wages 

Competition – is a regulator that keeps a community activated only by self interest from degenerating into a mob of ruthless profiteers Because of competition – people with similar interests as our own  become competitors and this leads to price gouging or employee  exploitation  competition makes individual pursuit of self-interest socially beneficial

Employees want higher wages, employers want lower

Ian Maitland – both shareholders and employees face risks Shareholders place risk when they invest in a corporation

Employees risk other possible job opportunities, and anticipate steady  income for homes

Job Security 

Employment at Will – an employer may fire, hire, promote, etc an employee  whenever and for whatever reason the employer wishes and employees have to rights to demand and appeal. Applies to those in private sector, most of  whom are “at will”. Patricia Werhane is strongly against EAW. EAW justified for:

1. Businesses should be able to control their property (not persons) 2. Businesses should have the right to free association

3. EAW increases business efficiency

4. Gov should stay out of business

Negligent Hiring – in order to accuse of negligent hiring, must prove: 1. X worked for Y

2. X was unfit to work for Y (criminal activity, alcohol, drug,  inexperience)

3. Y knew/should have known X was unfit (proximate cause) Cases:

Avis Rent-A-Car

∙ Had a stand at an airport, with a man and woman working. The  man raped the woman  Is Avis responsible?

∙ Respondeat superior- do what superior says even if you believe  it’s wrong

∙ According to RS – man worked for Avis – so Avis is responsible ∙ Judges now disregard RS and allow for charge of Negligent Hiring American Airlines

∙ Man came up to boarding agent without a ticket & boarding  agent bit the man and kicked him

∙ There had been no prior record of violence – how to prove  negligent hiring?

Foster v. The Loft

∙ Loft = a bar, Foster went to the bar with a friend, friend wasn’t  pleased with a drink and the bartender (Rida) said they could  leave

∙ Foster’s friend threw drink @ Rida, blinded Rida and accidentally  punched Foster – Foster & friend sued the bar

Insider Trading – buying/selling of shares based on knowledge which is not  public

Tort = civil penalties – up to 3 times amount lost/gained

Crime = criminal  

Securities Exchange Act (SEA)

Gov set up the SEA, section 21A:

∙ “if you’re trading shares (buying/selling) while in possession of  “material, nonpublic info” you shouldn’t be buying/selling

Nonpublic = available to insiders (managers, directors)

Material = affects share price

It’s strict because we want to maintain an honorable financial system It is responsibility of CEO to prevent insider trading

Martha Stewart

∙ Imclone was developing a drug (Erbitux) Dr. Sam Waxall found out  that the FDA wouldn’t approve of Erbitux, and he had already  invested money in it with MS

∙ Together they removed investment to avoid losing money ∙ Imprisoned for obstruction of justice (denied contact with Sam  Waxall)

Privacy 

Richard Lippke – without privacy there is autonomy

When you apply for jobs, they have access to many private records:  academic, polic credit, medical, drug testing

Some offer a psychological profile- a quiz to determine hiring potential Privacy (The right to privacy) 

1. A. Parent – the right not to have personal, undocumented info about  self possessed by others

2. Warren & Brandeis – “the right to be left alone”

3. John S. Mill – the right to do anything unless harmful to others Workplace Privacy

Should allow privacy unless harmful to your work

Cases:

Elementary Teacher/Swinger

∙ Mrs. Pettit – an elementary school teacher for mentally handicapped by day, husband & swingers were night swingers

∙ She went on TV and people recognized her, police entered club and  gave out tickets for public lewdness (she had sex with 3 men in an  hour publicly)

∙ School found out – they fired her and she sued

∙ School argued 1. Danger - She might expose students to her lifestyle 2. She should be a moral role model to students

3. Her actions were not private – occurred in public

Deal v Spears (1992)

∙ Sibby Deal was a clerk at a liquor stor, and Sears was the owner ∙ Sears lived in a trailer behind the store, they had a party phone line  between the store & trailer. Sibby was on the phone a lot

∙ Store was robbed $16,000 and Spears thought it was Deal  tapped  phone for evidence

∙ Taped for 22 hours – found Sibby having an affair with Calvin Lucas –  she was giving Lucas discounts  Spears fired her

∙ She sued & won because Spears didn’t disclose that he was tapping  the phone

Privacy: Drug Testing 

DesJardins & Duska think drug testing of workers is a violation of privacy Arguments for drug test use:

1. Job performance – believe it hinders performance

2. Danger/Safety – necessary only if safety is involved

NIOSH (1984) regulate workplace safety

They tested work place accidents within a chemical industry and found that of the 3,000 accidents – only 8 involved drugs

Enzyme drug test – typically a urine sample

Multiplied 99% sensitive (catches 99% percent of users) Immunoassay 90% specific (catches some nonusers) Technique can request alternative tests (GC/MS)

Luedtke v. Nabors (1989)

∙ Paul Luedtke = driller, Nabors = Alaskan oil company

∙ Thought Luedtke was a drug user, asked him to take a physical on  land, company wanted a sample of his blood & found traces of  marijuana

∙ He sued for violation of privacy – judges argued right of safety of  others, and was fired

Trade Secrets & Patents

Trade secret 

1. Secret knowledge

2. Competitive advantage

3. Not patented  

4. Protected as a secret

Patents  

1. Public information (to read, not to use) while patent pending 2. Expiry date- 20 yrs after apply date (prevents monopoly) to  encourage invention, reward invention. You can posses a 20 year  monopoly

3. Expense for patent (must apply for patent in every country where  you intend to sell)

Kentucky Fried Chicken

∙ The recipe for KFC chicken is made of 14 herbs & spices (no one knew  except Col. Sanders)

∙ Secretary had recipe typed & hidden in vault

Donald Wohlgemuth

∙ Worked for BF Goodrich, making space suits

∙ Another company (International Latex) wanted to make suits but  couldn’t figure out valve for oxygen

∙ International Latex looked into Wohlgemuth and found he wasn’t paid  well and worked with poor lab conditions, so they promised him a pay  raise & new lab

∙ Donald wanted job, Goodrich ordered an injunction (prevent him from  working with company that sold space suits) but court wouldn’t grant  injunction

Bribery

Bribery – giver usually initiates exchange, usually no threat made. Both  parties benefit

Extortion – recipient usually initiates, sometimes with a threat. One party  benefits (also called blackmail)

Jeffry Fadiman – found that bribery is the highest in Africa, Asia, and S.  America

Under President Carter (1977)

∙ Issued Foreign Corrupt Practice Act (FCPA) which prohibits US  companies from bribing to obtain business contracts

∙ Doesn’t exclude gifts (not quid pro quo)

∙ Grease payments – to speed up a process

∙ Violation of FCPA = 1 mill$, officer of company = $10,000 & 5 years in  prison