Business Ethics Case Study: Merck
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Questions and Answers

What is the primary aim of ethics as described?

  • To determine the legality of corporate actions
  • To establish reasonable moral standards that individuals can accept (correct)
  • To create a universal set of rules for all individuals
  • To describe how different societies approach morality

How do ethics differ from social sciences in studying morality?

  • Both ethics and social sciences study morality in the same way
  • Ethics studies morality from a legal perspective, while social sciences focus on behavior
  • Ethics studies morality descriptively, while social sciences study it normatively
  • Ethics is normative, while social sciences engage in a descriptive study of morality (correct)

What viewpoint do some theorists hold regarding moral responsibility of corporations?

  • Moral notions apply solely to individuals and not corporations (correct)
  • Corporations should be considered morally responsible like individuals
  • Corporations can never commit immoral actions
  • Only shareholders of corporations should be held accountable for their actions

What was the main controversy surrounding the Arthur Andersen case?

<p>Whether corporations should be charged instead of individuals (C)</p> Signup and view all the answers

What do critics argue regarding the accountability of corporate behavior?

<p>Individuals act on behalf of corporations and should be responsible for their actions (D)</p> Signup and view all the answers

According to the content, how might corporate culture influence ethical behavior?

<p>It directs and shapes the decisions and actions of individuals. (A)</p> Signup and view all the answers

What conclusion can be drawn regarding corporate organizations and moral duties?

<p>Corporate organizations can have moral duties and responsibilities for their actions. (C)</p> Signup and view all the answers

In the context of ethics, how is the role of individuals within a corporation viewed?

<p>Individuals’ actions contribute to the corporate culture and moral responsibility. (A)</p> Signup and view all the answers

What is a significant driver of international business activity in newly industrialized countries?

<p>Low wages and growing markets (D)</p> Signup and view all the answers

Which of the following statements best reflects the morality of the free market system?

<p>It relies on competition for fair resource allocation. (C)</p> Signup and view all the answers

What percentage of New York Stock Exchange companies were involved in antitrust suits in the previous five years?

<p>10% (A)</p> Signup and view all the answers

What economic model is characterized by no buyer or seller being able to significantly affect the price of a good?

<p>Perfect competition (C)</p> Signup and view all the answers

What is the primary ethical concern with anticompetitive practices within the market?

<p>They can lead to market monopolization. (C)</p> Signup and view all the answers

What percentage of corporate executives believe many businesses engage in price fixing?

<p>60% (A)</p> Signup and view all the answers

Which form of market competition involves a few firms dominating the market?

<p>Oligopoly (B)</p> Signup and view all the answers

Why is it critical for a market to maintain its competitiveness?

<p>To justify the existing economic system. (A)</p> Signup and view all the answers

What was the primary ethical dilemma faced by Merck regarding Ivermectin?

<p>The victims were mostly impoverished individuals. (C)</p> Signup and view all the answers

What decision did Merck ultimately make regarding the distribution of Ivermectin?

<p>They gave the drug away for free. (D)</p> Signup and view all the answers

What potential consequence did Merck fear about developing the human version of Ivermectin?

<p>It might harm their profitable animal drug sales. (C)</p> Signup and view all the answers

What financial investment was estimated for the development of the human version of Ivermectin?

<p>$100 million (C)</p> Signup and view all the answers

What was the total annual sales figure for Merck mentioned in the case?

<p>$2 billion (C)</p> Signup and view all the answers

What societal issue was highlighted in the case study concerning the victims of river blindness?

<p>They largely had no access to any medical treatment. (D)</p> Signup and view all the answers

How did Merck's decision regarding Ivermectin challenge common assumptions about corporate behavior?

<p>Companies can balance profit with ethical obligations. (D)</p> Signup and view all the answers

What is a potential criticism of the ethics of care?

<p>It can lead to unjust favoritism. (A)</p> Signup and view all the answers

What legislative change was mentioned that could impact competition in the drug industry?

<p>The Drug Regulation Act (A)</p> Signup and view all the answers

When should utilitarian standards be applied?

<p>When resources are insufficient to meet everyone's objectives. (D)</p> Signup and view all the answers

Which standard must be employed to evaluate how benefits and burdens are distributed?

<p>Standards of justice (B)</p> Signup and view all the answers

What comprises moral reasoning concerning individuals' treatment?

<p>Evaluating special duties and agreements. (C)</p> Signup and view all the answers

What is a strategy to incorporate different moral considerations into reasoning?

<p>Ask systematic questions about utility, rights, justice, and caring. (C)</p> Signup and view all the answers

Which standard is essential for addressing moral questions within close relationships?

<p>Standards of caring (C)</p> Signup and view all the answers

Which of the following is NOT one of the four main kinds of basic moral considerations?

<p>Philosophical standards (C)</p> Signup and view all the answers

What potential outcome can arise from the ethics of care?

<p>Experiencing caregiver burnout. (A)</p> Signup and view all the answers

What does Bentham define as the right action from an ethical standpoint?

<p>An action that produces the greatest sum total of utilities for all involved. (A)</p> Signup and view all the answers

Which of the following is NOT one of the three considerations outlined for determining moral actions?

<p>Estimate the resources necessary to perform the action. (C)</p> Signup and view all the answers

Why is utilitarianism often appealing in discussions about government policy?

<p>It seeks to identify actions that provide the greatest societal benefits for the least cost. (D)</p> Signup and view all the answers

How do traditional utilitarians view the morality of an action?

<p>Each action must be evaluated based on its specific circumstances. (A)</p> Signup and view all the answers

What is a key criticism of utilitarianism regarding moral actions?

<p>It denies that actions can be universally classified as right or wrong. (C)</p> Signup and view all the answers

What is meant by 'the greatest sum total of utility'?

<p>Producing the most overall happiness and welfare for all affected parties. (D)</p> Signup and view all the answers

How does utilitarianism relate to the perception of immoral actions, such as lying?

<p>Lying is deemed immoral due to its long-term costly effects. (A)</p> Signup and view all the answers

What aspect of economics has been influenced by utilitarian views?

<p>The evaluation of actions based on overall welfare and utility. (D)</p> Signup and view all the answers

What do Friedrich A. Hayek and others believe should be the role of government in a free market economy?

<p>To allow free exchanges by protecting property rights (A)</p> Signup and view all the answers

What is the core principle of Locke's view on private property?

<p>Labor expended on a thing grants ownership rights (A)</p> Signup and view all the answers

Which advantage does Adam Smith's theory of absolute advantage emphasize?

<p>Free trade allows countries to maximize their economic well-being (B)</p> Signup and view all the answers

According to the content, what is one of the influences of Locke's views on property in American law?

<p>Private property rights are nearly absolute (A)</p> Signup and view all the answers

What does Smith suggest about workers in specialized production?

<p>They gain skill through repeated tasks (A)</p> Signup and view all the answers

What does Locke's theory imply about economies incorporating free markets?

<p>Free markets align with individual liberty and property rights (B)</p> Signup and view all the answers

Which factor does Smith identify as a reason for greater efficiency in production?

<p>Long production runs create effective methods (C)</p> Signup and view all the answers

What is the significance of country-specific advantages in Smith's theory?

<p>They are essential for understanding market dynamics (B)</p> Signup and view all the answers

Flashcards

Ethics' Goal

To create a set of moral standards we believe are reasonable, thought-out, and justified for our decisions.

Ethics vs. Social Sciences

Ethics examines morality in a normative way, focusing on what should be, while social sciences study morality descriptively, focusing on how it is.

Corporate Morality

Whether corporations can be held morally responsible for their actions, like individuals.

Machine vs. Individual

Some argue that corporations are like machines, not individuals, and shouldn't be held morally accountable.

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Corporate Accountability

The idea that corporations have objectives and actions that can be moral or immoral, making them accountable for their acts.

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Corporate Culture & Policies

Corporations have policies and culture that influence individual behavior and should be held accountable for these artifacts.

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Corporate Moral Duties

Corporations have moral duties and are responsible for their acts, even though they are not individuals.

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Individual Accountability

While corporations have moral responsibilities, individuals within the corporation should be held accountable for their actions.

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River Blindness

A debilitating disease affecting millions in Africa and Latin America, caused by parasitic worms. Symptoms include intense itching, lesions, blindness, and eventually death.

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Ivermectin

A drug developed by Merck, initially for animal use, showing potential to treat river blindness.

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Ethical Dilemma

A situation where a choice needs to be made between two conflicting moral values. In this case, Merck faced a dilemma between potential profits and helping those suffering from a devastating disease.

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R&D Investment

The money and resources allocated to research and development of a new product or service, like a potential drug.

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Profit vs. Ethics

The common conflict between maximizing profits and acting ethically. Merck's decision to provide Ivermectin for free challenged this assumption.

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Social Responsibility

A company's commitment to contribute to societal well-being beyond just financial interests. Merck's decision exemplifies social responsibility.

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Long-term Benefits

The idea that ethical actions, even if initially costly, can lead to positive outcomes for a company in the long run, like enhanced reputation or customer loyalty.

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Ethical Behavior

Conforming to moral principles and standards in all business practices. Merck's decision reflects a commitment to ethical behavior.

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Utilitarianism

Ethical theory where the best action maximizes overall happiness and well-being for everyone involved.

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Net Benefits

The total positive outcomes minus the total negative outcomes of an action.

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Ethical Action (Utilitarianism)

An action is morally right if it produces the greatest sum of utilities compared to any other possible action.

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Cost-Benefit Analysis

A method for making ethical decisions by carefully considering all potential costs and benefits for all stakeholders.

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Alternative Actions

The different possible courses of action you have in a situation.

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Direct & Indirect Costs/Benefits

Both immediate and long-term consequences for everyone involved.

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Utilitarianism's Applicability

Utilitarianism's principles can guide ethical decisions in government policies and public goods.

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Utilitarianism's Limitations

This theory doesn't say whether an action is always right or wrong – it depends on specific circumstances.

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Utilitarian Standards

These standards focus on maximizing social benefits and minimizing social costs. They are used when resources are limited and we need to choose actions that benefit the most people.

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Standards of Justice

These standards determine how benefits and burdens should be distributed fairly among a group. They are important when evaluating actions that have different impacts on people.

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Standards of Caring

These standards define the care owed to people in close relationships, especially those who depend on us. They are crucial when moral questions involve personal connections.

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Rights Standards

These standards protect individual rights and freedoms. They are essential when our actions impact the well-being and choices of specific people.

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Ethics of Care

This moral theory emphasizes empathy, compassion, and nurturing relationships. It considers individuals' needs within their contexts, particularly those in vulnerable situations.

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Moral Reasoning

The process of systematically thinking through ethical dilemmas by considering all relevant moral standards, such as utility, rights, justice, and caring.

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Conflict between Justice and Care

This occurs when the demands of fairness and impartiality clash with the needs of specific individuals and their relationships.

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Favoritism in Care Ethics

A potential flaw of the ethics of care where favoritism can arise due to biases or personal relationships, undermining principles of justice.

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Locke's Theory of Natural Rights

Locke's theory states that individuals have innate rights to liberty and property, which should limit government interference with personal freedom and economic activities.

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Free Market

A free market is an economic system where individuals freely exchange goods, services, and labor without significant government intervention. The system relies on voluntary transactions and competition.

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Locke's Impact on Property Rights

Locke's arguments on property rights have deeply influenced American legal tradition, emphasizing individual ownership and limiting government intervention in private property.

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Absolute Advantage

Adam Smith's theory suggests that a country can maximize its wealth and well-being by focusing on producing goods and services where it has a clear advantage over other countries, leading to greater global efficiency.

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How does Absolute Advantage benefit a nation?

By concentrating on its most efficient areas of production, a nation gains expertise, boosts productivity, and fosters innovation, ultimately benefiting both its citizens and the global economy.

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What are country-specific advantages?

Country-specific advantages refer to the unique factors that give a nation an edge in producing certain goods or services. These can be natural resources, skilled labor, or developed technologies.

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How can country-specific advantages be acquired?

Nations can acquire advantages through strategic investments in education, infrastructure, research, and technology, fostering innovation and skills development.

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What are the benefits of free trade?

Free trade promotes economic growth, increases consumer choice, lowers prices, and fosters international cooperation and understanding between nations.

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Anticompetitive Practices

Actions by businesses that try to limit competition, such as price fixing or creating monopolies.

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Perfect Competition

A market where many buyers and sellers compete freely, with no single entity having significant power to influence prices.

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Pure Monopoly

A market where one company controls the entire supply of a product or service, with no competition.

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Oligopoly

A market with a small number of companies dominating the industry, leading to limited competition.

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Price Fixing

An illegal agreement between competitors to set prices for a product or service at a certain level, eliminating competition.

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Morality of Free Market

The ethical justification for a free market system is based on competition creating a fair allocation of resources and maximizing utility for society.

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Market Reforms

Changes implemented in economies to shift from centrally planned systems to more market-based approaches, often involving privatization and deregulation.

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Newly Industrialized Countries

Nations experiencing rapid economic growth and industrialization, attracting investment from international companies.

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Study Notes

Introduction

  • Business ethics deals with the moral implications of business actions
  • The text presents a case study of Merck, discussing their decision to release a potentially life-saving drug for free
  • Merck's managers felt morally obligated to develop the drug, even though it might not generate profits
  • Ethical behavior can often benefit a company in the long run
  • Ethical decisions are not always clear-cut and companies have responsibility to shareholders
  • Companies that engage in unethical behavior often face consequences

Business Issues

  • Ethics is the study of morality, a field of investigation
  • Ethical principles guide individual and group conduct
  • Personal ethics and professional ethics impact different contexts
  • Defining the differences between morality and ethics: Ethics examines morality whilst morality is the subject matter of ethics study
  • Moral standards are standards for right and wrong, often deeply held
  • Moral standards differ from non-moral standards by addressing substantial harm or benefit to human kind
  • Moral standards are not subject to authority figures
  • Moral standards should be prioritized over self-interest, and are made with impartiality considerations

Theory of Ethical Relativism

  • Some theorists argue that moral notions apply only to individuals and not organizations
  • In 2002, Arthur Andersen was charged for obstructing justice in helping Enron Hide its debts
  • Critics argue that companies should not be held responsible for actions of employees, as only people can act
  • Ethical relativism posits that different cultures have different ethical beliefs
  • There is no single right answer to ethical dilemmas because of diverse cultural norms
  • Cultural relativism is the belief that morality varies from culture to culture
  • Ethical relativism contends that there are no universal moral principles

Moral Developments and Moral Reasoning

  • Moral development is a process of growth in ethical awareness, reasoning and actions
  • Kohlberg's Stages of Moral Development identifies six stages:
    • Punishment and obedience orientation
    • Instrumental and relativity orientation
    • Interpersonal concordance orientation
    • Law and order orientation
    • Social contract orientation
    • Universal ethical principles orientation

Moral Reasoning

  • Moral reasoning involves both understanding moral standards and applying them to specific cases.
  • Moral reasoning depends on logical thinking, accurate facts and consistent moral standards.
  • Moral reasoning should consider all reasonable perspectives

Utilitarianism

  • Utilitarianism is a consequentialist approach to ethics
  • Determining right or wrong by focusing on the best outcome producing the greatest happiness for the greatest number
  • Calculating the costs and benefits of an action
  • An action is right if and only if the sum total of utilities produced by that act is greater than the sum total of utilities produced by any other act.
  • Critics of utilitarianism raise concerns about measuring and predicting consequences.

Universalizability and Reversibility

  • Universalizability requires acting on principles that everyone could act on.
  • Reversibility requires being willing for others to act on the same principles.
  • This approach differs from utilitarianism (which focuses on consequences) and instead focuses on the reasons behind the actions

Justice and Fairness

  • Justice concerns the fair allocation of benefits and burdens in society
  • Distribution of resources, responsibilities, burdens and punishments
  • Compensatory justice seeks to compensate individuals for losses caused by others
  • Distributive justice aims for fair distribution of societal benefits and burdens

Free Trade Theories

  • Free-market economic systems assume that individuals act in self-interest.
  • Free trade is about maximizing utility through specialization
  • Individuals benefit from specialization and exchange, as they can get more for less
  • Critics like Marx argue that free market systems lead to inequality, and may not be fair to everyone

Competition and the Market

  • Analysis of perfect competition: the buyer and seller's actions impacting other parties are not significant
  • Monopoly where a single seller holds a significant portion of the market
  • Oligopoly where a limited number of sellers dominate the market.
  • Factors affect a free market equilibrium.
    • The demand side (buyers): Diminishing marginal utility—the less buyers consume, the less they are willing to pay
    • The supply side (sellers): Increasing marginal costs—the greater the output, the more costly it becomes for sellers to produce more
  • Critics of utilitarian analyses of markets, raise concerns about measuring costs and benefits accurately

The Ethics of Care

  • The ethics of care emphasizes relationships and concrete interactions amongst people.
  • Special consideration is made for vulnerable communities.
  • Prioritsizes caring for dependent and vulnerable parties
  • Interdependence, and consideration for others
  • Ethics of care and justice are not mutually exclusive, but rather complementary

Moral Virtue Ethics

  • Virtue ethics focuses on the character traits of a morally good person.
  • Habits, or character traits, that produce good actions.
  • Focus on the moral qualities or virtues of an individual
  • Individuals strive to develop virtues and live in accordance with their virtues, to pursue excellence in their activities.

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Business Ethics - MGT610 Midterm Syllabus PDF

Description

Explore the complexities of business ethics through the case study of Merck and their decision to release a drug for free. This quiz delves into the moral implications of business actions and the impact of ethical behavior on long-term success. Understand the differences between personal and professional ethics and the consequences of unethical conduct.

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