A HISTORICAL PERSPECTIVE ON BUSINESS ETHICS
Chapter Two
Copyright © 2012 John Wiley & Sons
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Chapter 2
Learning Objectives
Describe salient business ethics issues in precapitalist America
Understand the ethical foundation of capitalism as argued by Adam Smith in the 1700s
Appreciate the delicate balance between economic growth and stakeholder rights, particularly labor issues, throughout U.S. history
Benchmark an organization to the Ethics Compliance Program best practices outlined by the Federal Sentencing Guidelines
Conceptualize how to maximize ethical behaviors in organizations based on an Optimal Ethics Systems Model
Chapter 2: Collins, Business Ethics
Economic Growth and Business Ethics in Precapitalist America
Christopher Columbus’s Arrival:
“Get gold, humanely if possible, but at all hazards-get gold”
Chapter 2: Collins, Business Ethics
Economic Growth and Business Ethics in Precapitalist America
Roanoke and Jamestown Settlements
In the 1580s Walter Raleigh and his business associates were granted a charter to establish a colony in the area of modern-day Virginia and North Carolina to trade, search for minerals, and plunder Spanish merchant ships
Chapter 2: Collins, Business Ethics
Economic Growth and Business Ethics in Precapitalist America
Chapter 2: Collins, Business Ethics
Buildup to the Revolutionary WarBy 1774 more than 2.3 million European
colonists participated in highly regulated business activities
Business and tax policies exacerbated anti-England sentiments
Freedom, Rights, and the Ethics of Capitalism
“We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable rights, that among these are life, liberty, and the pursuit of happiness.”
Approximately 25,000 colonists died for these rights during the victorious Revolutionary War
Chapter 2: Collins, Business Ethics
Freedom, Rights, and the Ethics of Capitalism
The Bill of Rights (1791) included:
Freedom of speechFreedom of the pressFreedom of religionFreedom to petition the governmentFreedom to keep and bear armsFreedom from unreasonable search and
seizure
Chapter 2: Collins, Business Ethics
Freedom, Rights, and the Ethics of Capitalism
Adam Smith’s Capitalism
Adam Smith (1723-90), a prominent member of the Scottish enlightenment, applied the concepts “reason” and “liberty” to a wide range of endeavors, including philosophy, politics, economics, and law
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Exhibit 2.1 Ethical Foundation of Capitalism
Isert Exhibit 2.1
Chapter 2: Collins, Business Ethics
Freedom, Rights, and the Ethics of Capitalism
Smith and Labor Issues
Freedom and self-interest play central roles in Smith’s conception of capitalism
Laborers benefit from capitalism because economic growth generates more jobs and they are free to choose an occupation
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Economic Growth Under Capitalism
Chapter 2: Collins, Business Ethics
The Industrial Revolution
The economy boomed when the Industrial Revolution spread from Britain to the United States
in the early 1800s
Economic Growth Under
Capitalism
New laws: antitrust, charters, and liabilities
The federal government created the Interstate Commerce Commission in 1886
A few years later, Congress passed the Sherman Antitrust Act of 1890
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Labor Issues
Chapter 2: Collins, Business Ethics
Slavery
The most notable economic problems included slavery, working conditions, and income and wage inequality
Labor Issues
Strikes and Labor Unions
A labor union is an association of employees that advances its members’ interests, such as wages, benefits, work rules, and other conditions of employment, through collective bargaining with an employer
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Labor Issues
Chapter 2: Collins, Business Ethics
Labor Issues
Wages and Compensation
Capitalism’s emphasis on liberty has increased national wealth more than any other economic system
Economic inequality still remains
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Exhibit 2.3 Economic Class Structure in the United States
Insert Exhibit 2.3
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Exhibit 2.4 Median Personal Income by Educational Attainment
Insert Exhibit 2.3
Chapter 2: Collins, Business Ethics
Labor Issues
The minimum wage refers to the lowest wage an employer can legally pay an employee
A living wage refers to the amount of money a full-time employee needs to either afford the basic necessities in life or exceed the poverty threshold
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Further Expansion of Stakeholder Rights
Regulations protecting stakeholders against unethical business practices:
Food, Drug, and Cosmetic Act Amendments (1962)
Air Pollution Control Act (1962)Equal Pay Act (1963)Civil Rights Act (1964)Equal Employment Opportunity Commission
(1964)Cigarette Labeling and Advertising Act (1965)
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Further Expansion of Stakeholder Rights
Regulations (cont.)Fair Packaging and Labeling Act (1966)Child Protection Act (1966)Traffic Safety Act (1966)Coal Mining Safety Amendments (1966)Flammable Fabrics Act (1967)Age Discrimination in Employment Act (1967)Consumer Credit Protection Act (1968)Interstate Land Sales Full Disclosure Act
(1968)Chapter 2: Collins, Business Ethics
Federal Sentencing Guidelines
The continued existence of free market capitalism depends on organizational employees behaving ethically
In 1991, President George H. W. Bush issued new Federal Sentencing Guidelines
The guidelines are based on the best practices for ethics compliance programs
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B Corporations
In 2007, B Lab, a nonprofit organization, initiated a third-party Benefit Corporation, known as a B Corporation
It is a certification process for branding a business as being ethical, sustainable, and socially responsible
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Exhibit 2.6 Rating System for Manufacturing Firm: Version 1.0
Insert Exhibit 2.6
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The Optimal Ethics Systems Model
Business ethics scholars and consultants have developed a variety of audits and surveys to help organizations account for ethical behaviors
The Optimal Ethics Systems Model synthesizes these various approaches into a systematic best practices framework for reinforcing ethical behaviors
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Exhibit 2.7 Optimal Ethics Systems Model
Insert Exhibit 2.7
Chapter 2: Collins, Business Ethics