A HISTORICAL PERSPECTIVE ON BUSINESS ETHICS

Chapter Two

Copyright © 2012 John Wiley & Sons

Visit http://wileymanagementupdates.com/ for the latest in business news stories.

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

Chapter 2: Collins, Business Ethics

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

Chapter 2: Collins, Business Ethics

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

Chapter 2: Collins, Business Ethics

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

Chapter 2: Collins, Business Ethics

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

Chapter 2: Collins, Business Ethics

Exhibit 2.3 Economic Class Structure in the United States

Insert Exhibit 2.3

Chapter 2: Collins, Business Ethics

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

Chapter 2: Collins, Business Ethics

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)

Chapter 2: Collins, Business Ethics

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

Chapter 2: Collins, Business Ethics

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

Chapter 2: Collins, Business Ethics

Exhibit 2.6 Rating System for Manufacturing Firm: Version 1.0

Insert Exhibit 2.6

Chapter 2: Collins, Business Ethics

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

Chapter 2: Collins, Business Ethics

Exhibit 2.7 Optimal Ethics Systems Model

Insert Exhibit 2.7

Chapter 2: Collins, Business Ethics