Ethical Frameworks & Capitalism

• Three main approaches to normative ethics theories exists.
• Deontological ethics
• Teleological ethics
• Virtue ethics

Deontological Ethics

• Actions are ethical if done for the sake of what is good, regardless of consequences
• Decisions are based on duty and adherence to universal principles.
• Rule-based ethics means individuals have a duty to do the right thing even if another action has preferable consequences.
• Examples are The Ten Commandments and The Charter of Rights and Freedoms.

Teleological Ethics

• Focuses on the outcomes or the results of actions.
• Utilitarianism focuses on making decisions based on the action's consequences.
• Theft/stealing can be morally permissible or obligatory if the consequences are good.
• An action is wrong or impermissible if the consequences are bad.
• Decisions should result in the greatest good for the larger number of people.
• Utilitarianism is a moral theory promoting actions resulting in the greatest good for the greatest number.
• For example, the choice to divert a train to kill one person instead of many.

Virtue Ethics

• Emphasizes an individual's moral character, traits, or virtues while focusing on being a good person.
• Morality is based on the development of good character traits, or virtues.
• Assumes a "good" person will act ethically.
• A nurse helping a patient is an example.
• A colleague helping a new employee is another example.
• Absolute rules are unlikely to apply in all situations within virtue ethics.
• Examples of virtues that make a good business person or leader are courage, integrity, humility, compassion, passion, wisdom and humor.

Ethics and Capitalism

• The Canadian economic system is largely composed of business enterprises operating in a market system.
• The theory of capitalism examines eight elements.
• Right of Private Property
• Equality of Opportunity
• Competition
• Individualism and Economic Freedom
• Profits
• Work Ethic
• Consumer Sovereignty
• Role of Government

Right of Private Property

• The legal right to own and use economic goods like land and buildings, generally tangible.
• Provides a sense of security, destiny, and pride; develops respect for the property of others, and a sense of satisfaction.
• Uneven distribution of wealth demands more equitable distribution by government action, such as taxation.
• This includes government control of property restrictions on foreign ownership and ownership of natural resources.
• Intellectual Property is an umbrella term for patents, copyrights, trademarks, industrial designs, integrated circuit topographies, and plant breeders' rights.

Individualism and Economic Freedom

• Individualism suggests the individual, not society, is the paramount decision-maker and inherently decent and rational, behaving in their self-interest.
• It is linked to freedom.
• Economic freedom exists when the business system operates with few restrictions on its activities.
• Ethical implications include the desirability of individual versus collective action and the extent to which economic freedoms should exist.

Equality of Opportunity

• Assumes all individuals or groups have an even chance at responding to a condition in society.
• An 'Equal' chance to succeed.
• Ethical implications are that it is difficult to achieve in a capitalistic system because wealth is not distributed equally.
• There's movement towards social, educational, and culturally leveling which leads to equality of results.
• Income inequity is an important issue for business because if Canadians are better off financially, there will be higher consumer spending.

Income Inequity

• If income inequity is reduced the government would devote fewer resources to it, reducing the demand for higher corporate taxation.
• Income inequity could lead to social and economic instability, or demands for fairer wages or social assistance.
• It should be viewed as the right thing to do from a moral perspective.
• Several proposed approaches to reduce income inequity and to reduce poverty.
• Establishing a system of living wages that allows full-time workers to meet basic needs and reach past low-income tax thresholds.
• Creating a guaranteed minimum income, also known as universal basic income, basic income guarantee or negative income tax.
• Increasing minimum wages, the lowest wage rates legislated by governments.
• Raising taxes paid by high earners, especially the top 1%.
• Raising taxes on corporations.

Competition

• Describes the condition in a market system in which many rival sellers seek to provide goods and services to many buyers.
• It is natural and desirable, and the invisible hand that is responsible for the orderly operation of the market.
• Goods and services are provided at lower costs.
• There can be advantages.
• Reduces waste and inefficiency.
• Holds profit to a minimum.
• Widens the choice of goods and services available to consumers.
• Regulates prices.
• Ethical Implications are that oligopolies, few sellers in an industry, or even monopolies , one seller, can be created.
• It is more difficult for some firms to enter certain industries, such as those needing plant size to achieve economies of scale.
• Firms might engage in anti-competitive activity.

Profits

• The excess of revenues over expenses
• Closely associated with competition
• It is a measure of effectiveness.
• It can be used as businesses wish.
• Profits are sometimes viewed with disdain or as immoral.

Work Ethic

• The work ethic is a code of values, or a body of moral principles, claiming that work is desirable, a natural activity, and good in and of itself, hence 'Worthy' and 'Admirable' and “Personally & Socially Valuable."
• Government programs and society's expectations have influenced individuals' attitudes toward work.
• Individuals now expect more from government and business enterprises in terms of working conditions, benefits, and salaries.

Consumer Sovereignty

• Consumers have and exercise power over producers through the decisions they make in purchasing the goods and services provided by corporations.
• Consumers dictate the types, styles, and quality of goods and services provided by business.
• Ethical Implications include that consumers are not always aware of alternative products available.
• Consumers do not always understand the technical complexities of many goods and services, thus creating an issue of choice, or lack thereof.
• Consumer preferences are shaped by persuasive advertising, resulting in too many products/brands with too little difference.
• Producers have power to ignore consumer wishes.

Role of Government

• Is kept to a minimum, which is a Laissez-faire approach, or 'Leave us alone.'
• The role does shift over time, to provide national security, internal law and order, a system of currency and measures, and a body of law relating to contracts between individuals.
• The government is now an influential stakeholder in business.
• Government involvement in the economy has always been greater in Canada than in the U.S.

The National Policy

• It was a response to the U.S. cancelling of the Reciprocity Treaty of 1866, the Panic of 1873, a financial crisis, and was followed by a long agricultural depression.
• Key element in Macdonald Conservatives' election platform of 1878.
• High protective tariff on manufacturing industries to encourage industrialization (economic nationalism).
• Building of transcontinental railroad to link Canada, profoundly facilitated Western settlement, nation-building, and politics of economic nationalism.
• Settlement of Prairies to provide a growing market for Canadian manufactured goods (largely from Central Canada).
• Sought to integrate Canada's scattered regions within a transcontinental national economy.
• Political significance was greater than its economic impact, enabling Macdonald to appeal to both English-Canadian and French-Canadian nationalism by creating an external enemy being the U.S.
• Governments restrict capital movements and natural resource sales, impose product standards, and prevent businesses from shutting down plants
• Legislation governs treatment of employees.
• Government is extensively involved in the economy through subsidies, taxation, tariffs, regulations, legislation, loans, grants, and ownership.
• Government can restrict capital movement, impose product standards, and prevent businesses from shutting down plants.

Forms of Capitalism

• Capitalism allows for private ownership of the means of production (land, labor, and capital).
• Assumes economic decision-making is in the hands of individuals or enterprises that make decisions expecting to earn a profit.
• Canada does not have a pure free-enterprise system.
• Different forms of capitalism exist throughout the world.
• Consumer capitalism is when government involvement is limited, with open borders and a profit mentality.
• Producer capitalism emphasizes production, employment, and statist policies.
• Social market economy means a regulated capitalist market with generous social welfare; with input from labor.
• Family capitalism is when extended clans dominate business activities and control capital flows.
• Frontier capitalism is the introduction to the fundamentals of business, or capitalism in its beginning stages.
• State capitalism is an economic system in which governments manipulate market outcomes for political and social purposes.
• This does not result in the most efficient use of resources.

Ethics of Capitalism

• Greed is an excessive and selfish form of self-interest where individuals desire more of something than what is needed or fair.
• There are economic downturns.
• Economic cycles are a feature of capitalism, such as the 2008 collapse of financial institutions.
• Business failures have implications for the government, employees, and investors.
• There is income and wealth inequality.
• Corporate crime and wrongdoing harm the reputation of businesses.
• There are stagnant incomes versus increasing CEO salaries.
• Damage to the environment is prominent.
• This is reliant on a market system that seldom works perfectly.

The Stakeholder Concept and Business

• Operates in a pluralistic social system, where a variety of groups and institutions use power or influence to represent the interests of particular groups of citizens.
• In a Pluralistic Social System influence or power is decentralized by dispersing it among a variety of institutions.
• Protects society from the dominance of one group.
• Business is subject to the influence of other institutions and must respond to the various participants in society called stakeholders.
• Stakeholders are individuals or groups who can influence or are influenced by the achievement of an organization's purpose.
• This indicates legitimacy.
• All stakeholders have expectations.
• The relationship with business is a two-way street.
• Corporations must understand how activities influence stakeholders.
• Stakeholders must consider their responsibilities to the corporation.

Civil Society

• It comprises the voluntary, community, and social organizations or institutions that contribute to the functioning of society, but are not related to or supported by government.
• Non-governmental Organizations (NGOs), the media, community-based organizations, civic clubs, trade unions, charities, social and sports clubs, cooperatives, environmental groups, professional associations, etc.
• Non-Governmental Organizations (NGOs) are any groups that hold shared values or attitudes about an issue confronting society.
• Some advocate for changes relating to the issue.
• NGOs are well-known, such as Mothers Against Drunk Driving (MADD), which fights against impaired driving, raises awareness, and provides support services.
• These are not new to society; they are usually, but not always, non-profit.

NGO Societal Issues, Tactics and Benefits

• Animal rights and technology.
• Economic factors are often opposed to capitalism.
• Social development such as gap between rich and poor.
• Workers'/human rights such as working conditions.
• Environment is one of the most common causes of NGO activity.
• Religious activism becomes prevalent in the U.S.
• Tactics pressure governments to change policies, damage publicity, disrupt annual meetings, develop shareholder social policy resolutions, damage physical property, picket managers' homes, sponsor demonstrations, picket corporate locations, organize boycotts, launch letter-writing campaigns, initiate legal proceedings, use the Internet non-violently, develop anti-business websites, support anti-business documentaries, and provide support for alternative sources of goods and services.
• Benefits from partnership include idenitifying opportunities and risks, influence on public opinion, innovation possibilities, reputation and trust by the public, expertise on specific issues, and employee engagement.

Relationship Strategies

• Proactively engage NGOs, do not underestimate NGO's influence, and reversing a decision from a project should not be viewed as a defecat.
• Sometimes selective concessions are sufficient
• it is better to deal with "realist" NGO and not the "radical" and "idealistic" ones.
• A pre-emptive strategy may be feasible.
• Ingredients to a successful parternship are Corporate and NGO leaders must be open to change with a commitment to being committed, and partners have a shared goal.

Relations with the Media

• Reporters are not knowledgeable about business and economics and fail to do their homework.
• The media is interested only in "bad" news that can be sensationalized and unable to place the information into the correct context.
• The media has bias against business dominated by leftist journalists who do not support nor understand a market economy.
• Business reporting is biased, oversimplified, and lacking in insight.
• Reporters do not respect "off-the-record" comments.
• Businesspersons confuse issues, attempt to hide negative information, or by lying.
• Businesspersons use the excuse that they are accountable only to shareholders; not the media.
• Businesspersons overreact to the process of reporting events and covering issues.
• Managers try to manage relationship to suite their purposes such as press releases.
• A business threatens legal action if a particular article or book is published. (Libel Chill)
• A service of public relations expert puts a particular “spin,” or interpretation, on corporate events or information. (Media Spin)
• Fairness and bias in the media make a difference.
• The media is an important influence on performance of modern companies.

Media Centralization and Challenges

• Business enterprises own and operate major media outlets.
• Newspaper monopolies exist in cities by large corporations.
• There is interlocking ownership between print and broadcasting media.
• The licensing process in broadcasting favors some corporations over others.
• Newspaper chains focus on financial performance more than professional journalism.
• There may be too few voices in media.
• Social media uses online technologies and practices so people to share opinions, insights, experiences, and perspectives, allow business and society stakeholders by networking platforms, instant exchanges, low costs, and ability to build or destroy reputation.
• In HR there are issues such as time employees should spend on social media during work hours, the action to take when employees make incorrect comments, and scanning social media for information when evaluating potential employees for positions.
• Social media affects marketing and advertising practices.
• Corporations may distort endorsements by misrepresenting credentials, affiliations, and expertise or by placing fake stories.
• Marketers may inappropriately collect data on consumers.
• A study found that those who texted or used social media heavily are more image conscious, placer greater importance on morally shallow life goals with a lower tendency to deeply reflective thoughts, and used social media less frequently when Students had moral life goals.
• The use of social media affects student grades and build social relationships.

Media Issues and the Economy

• Involvement in social media should be guided by virtues such as honesty, trust, openness, respect, and fairness.
• There are rights of privacy for consumers and employees.
• There are struggles to ascertain which information should be banned (freedom of speech versus censorship).
• The collection of data without paying along with manipulation is a challenge.
• Regulation of social media needs to arise with the regulation mostly handled by the industry.
• There are increased demands for government intervention.
• A Policy Development Institution researches and analyzes important social, economic, and political issues confronting business and society with the goal of attempting to influence society's position on various business and social issues and bring fresh thinking to an issue to mold government policy.
• Religious Institutions and their influence on business include manager decision making, provision of spiritual services, and response to activism.
• There are increasing views regarding the use of spirituality in the workplace.
• The influence of Educational Institutions and the business system has been viewed as corporate influence or beneficial.
• There is a focus social responsibilities to primary and secondary schools, such as marketing soft drinks to kids

Business Ethics

• Rules, standards, codes, or principles that provide guidelines for morally right behavior and truthfulness in specific situations, however the meaning varies among managers.
• Influences become the bases for an individual's value judgments and determine behavior.
• These categories include influences of individuals, corporate or organizational influences, economic efficiency influences, government and legal system influences, and social influences

Influences

• The Influences on individuals are family, home, religion, and education.
• Corporate and organizational influences stem from superiors, colleagues, corporate mission statements, and codes of conduct.
• There are some that are from industry.
• Economic efficiency influences lead to a corporation's success being equal to social betterment; enhanced public good; and not producing sub-standard products.
• Governmental and Regulations like Competition act enact laws.
• Societal influences like NGOs are impactful.

Ethical Conduct

• Moral problems should be defined as resulting in harms to some and benefits to others.
• Ethical principles are applied the same way in any context.
• Includes objective statements rather than subjective measures.
• Self-Interest Ethic (Ethical Egoism) suggests individuals or corporations set their own measure to judge actions ethics based on its own values, not necessarily its own selfishness.
• Personal Virtues Ethic means an individual's or corporation's behavior is based upon being a good person or corporate citizen with honor.
• There are “Day Light Test” to ensure actions are ethical.
• Ethic of Caring means attentions to people or stakeholders.

Distribution Ethics

• Utilitarian Ethic maximizes benefits, harms as many stakeholders while “The greatest good for the greatest number." with attempt to understand the impact of action to stakeholders.
• Universal Ensure corporations obligated same situations and are also referred to by imperative for others, as means to end and not for ones own use.

Rights and Liberties

• The Individual Rights Ethic relies on a list of agreed upon rights by all, like Canadians.
• Canadians enjoy Rights to safety, information, privacy, property, freedom of speech, freedom of association.
• Ethic of Justice considers moral decisions are based on the primacy of a single value such as procedural and compensatory.
• Ethical Dilemmas are situations or problems where a person has to make a difficult choice to resolve issues or a problem, there are no perfect solutions.
• Review/analyze the principles to solve/resolve problem.

Test your knowledge of ethics including utilitarianism and capitalism. Explore ethical decision-making, universal principles, and character-based ethics. Examine the core principles of a capitalist economic system.