AEREN FOUNDATION’S Maharashtra Govt. Reg. No.: F-11724

MARKS : 80 COURSE : EMBA

SUB : BUSINESS ETHICS

N. B. 1) Attempt any Four Cases2) All cases carries equal marks.

No : 1

PUBLIUS

Although many people believe that the World Wide Web is anonymous and

secure from censorship, the reality is very different. Governments, law

courts, and other officials who want to censor, examine, or trace a file of

materials on the Web need merely go to the server (the online computer)

where they think the file is stored. Using their subpoena power, they can

comb through the server’s drives to find the files they are looking for and the

identify of the person who created the files.

On Friday June 30, 2000, however, researches at AT & T Labs

announced the creation of Publius, a software program that enables Web

users to encrypt (translate into a secret code) their files – text, pictures, or

music – break them up like the pieces of a jigsaw puzzle, and store the

encrypted pieces on many different servers scattered all over the globe on

the World Wide Web. As a result, any one wanting to examine or censor the

files or wanting to trace the original transaction that produced the file would

find it impossible to succeed because they would have to examine the

contents of dozens of different servers all over the world, and the files in the

servers would be encrypted and fragmented in a way that would make the

pieces impossible to identify without the help of the person who created the

file. A person authorized to retrieve the file, however, would look through a

directory of his files posted on a Publius – affiliated website, and the Publius

network would reassemble the file for him at his request. Researchers

published a description of Publius at www.cs.nyu.edu/waldman/publius.

Although many people welcomed the way that the new software would

enhance freedom of speech on the Web, many others were dismayed. Bruce

Taylor, an antipornography activist for the National Law Center for Children

and Families, stated : “It’s nice to be anonymous, but who wants to be more

anonymous than criminals, terrorists, child molesters, child pornographers,

hackers and e-mail virus punks.” Aviel Rubin and Lorrie Cranor, the creators

of Publius, however, hoped that their program would help people in countries

where freedom of speech was repressed and individuals were punished for

speaking out. The ideal user of Publius, they stated, was “a person in China

observing abuses of human rights on a day – to – day basis.”

Questions :

1. Analyze the ethics of marketing Publius using utilitarianism,

rights, justice, and caring. In your judgement, is it ethical to

market Publius ? Explain.

Ans:- The marketing of publius is ethically correct because  the Internet is a worldwide medium for

communication and the transfer of information. It is also, theoretically, a print medium. By virtue of these

facts, restrictions such as censorship should not be placed upon the Internet. Instead of censorship and

regulation by the government, we as users of the Internet should be able to practice self-regulation.

Censorship of the Internet violates the First Amendment of the Constitution, and thus robs us of our right

to freedom of speech.

2. Are the creators of Publius in any way morally responsible for

any criminal acts that criminals are able to carry out and keep

secret by relying on Publius ? Is AT & T in any way morally

responsible for these ? Explain your answers.

I'm always cautious of big companies developing tools like this, but AT&T's research is always interesting and very useful. It's nice to see a “real” company out there putting some of its weight and money behind a project that can really change the face of the Internet. We can all benefit from that, as these projects can be developed and put to use much faster than the other anonymous Internet projects out there.This is by no means the final word on the anonymous revolution starting on the 'Net, but it does give some indication of where we are headed.

I'm all for these sorts of beat-the-censorship systems because they protect what the Internet is about: free speech and free exchange of ideas. Critics moan and cry about all the dangerous information that could be hosted on these systems and greedy corporations like the record companies go sue-crazy because their bloated executives might not be able to buy another 85-foot luxury yacht if people swap MP3, but the main page of the Publius website makes the argument well: “The publication of written words has long been a tool for spreading new (and sometimes controversial) ideas, often with the goal of bringing about social change.”

There was one thing that concerned me a bit, though. According to CNET, the Publius administrators will list content that “it considers interesting,” and this does not include music or pornography. However, the Sample Publius URLs page says the following: “Below are the first six Publius links sent to the Publius mailing list. This is not intended to be a directory of Publius Links. We encourage others to post their own collections of Publius links.” If its true that the Publius folks are the only ones who will be providing content links, I honestly hope that that will take place only during this trial period. Seems kind of antithetical to the whole concept to have ANYONE deciding what is interesting.

3. In your judgment, should governments allow the

implementation of Publius ? Why or why not ?

Answer: Yes the govt. should allow implementation of Publius, which will result in free Net i.e.

providing anonymity and freedom of speech. Government involvement in internet just means you wish

people to have no choice, that it be imposed upon them. In a free society you can simply choose to

censor content for yourself, without involving bureaucracy.

NO. 2

A JAPANESE BRIBE

In July 1976, Kukeo Tanaka, former prime minister of Japan, was arrested on

charges of taking bribes ($ 1.8 million) from Locjheed Aircraft Company to

secure the purchase of several Lockheed jets. Tanaka’s secretary and serial

other government officials were arrested with him. The Japanese public

reacted with angry demands for a complete disclosure of Tanaka’s dealings.

By the end of the year, they had ousted Tanaka’s successor, Takeo Miki, who

was widely believed to have been trying to conceal Tanaka’s actions.

In Holland that same year, Prince Bernhard, husband of Queen Juliana,

resigned from 300 hundred positions he held in government, military, and

private organizations. The reason : He was alleged to have accepted $ 1.1

million in bribes from Lockheed in connection with the sale of 138 F – 104

Starfighter jets.

In Italy, Giovani Leone, president in 1970, and Aldo Moro and Mariano

Rumor, both prime ministers, were accused of accepting bribes from

Lockheed in connection with the purchase of $ 100 million worth of aircraft in

the late 1960s. All were excluded from government.

Scandinavia, South Africa, Turkey, Greece, and Nigeria were also

among the 15 countries in which Lockheed admitted to having handed out

payments and at least $ 202 million in commissions since 1970.

Lockheed Aircraft’s involvement in the Japanese bribes was revealed to

have begun in 1958 when Lockheed and Grumman Aircraft (also an American

firm) were competing for a Japanese Air Force jet aircraft contract. According

to the testimony of Mr. William Findley, a partner in Arthur Young & Co.

(auditors for Lockheed), in 1958 Lockheed engaged the services of Yoshio

Kodama, an ultra right – wing war criminal and reputed underworld figure

with strong political ties to officials in the ruling Liberal Democratic Party.

With Kodama’s help, Lockheed secured the Government contract. Seventeen

years later, it was revealed that the CIA had been informed at the time (by an

American embassy employee) that Lockheed had made several bribes while

negotiating the contract.

In 1972, Lockheed again hired Kodama as a consultant to help secure

the sale of its aircraft in Japan. Lockheed was desperate to sell planes to any

major Japanese airline because it was scrambling to recover from a series of

financial disasters. Cost overruns on a government contract had pushed

Lockheed to the brink of bankruptcy in 1970. Only through a controversial

emergency government loan guarantee of $ 250 million in 1971 did the

company narrowly avert disaster. Mr. A. Carl Kotchian, president of Lockheed

from 1967 to 1975, was especially anxious to make the sales because the

company had been unable to get as many contracts in other parts of the

world as it had wanted.

This bleak situation all but dictated a strong push for sales in the

biggest untapped market left-Japan. This push, if successful, might well

bring in revenues upward of $ 400 million. Such a cash inflow would go a

long way towards helping to restore Lockheed’s fiscal health, and it would,

of course, save the jobs of thousands of firm’s employees. (Statement of

Carl Kotchian)

Kodama eventually succeeded in engineering a contract for Lockhed

with All – Nippon Airways, even beating out McDonnell Douglas, which was

actively competing with Lockheed for the same sales. To ensure the sale,

Kodama asked for and received from Lockheed about $9 million during the

period from 1972 to 1975. Much of money allegedly went to then – prime

minister Kukeo Tanaka and other government officials, who were supposed to

intercede with All – Nippon Airlines on behalf of Lockheed.

According to Mr. Carl Kotchian, “ I knew from the beginning that this

money was going to the office of the Prime Minister.” He was, however,

persuaded that, by paying the money, he was sure to get the contract from

All-Nippon Airways. The negotiations eventually netted over $1.3 billion in

contracts for Lockheed.

In addition to Kodama, Lockheed had also been advised by Toshiharu

Okubo, an official of the private trading company, Marubeni, which acted as

Lockheed’s official representative. Mr. A. Carl Kotchian later defended the

payments, which he saw as one of many “Japanese business practices” that

he had accepted on the advice of his local consultants. The payments, the

company was convinced, were in keeping with local “ business practices.”

Further, as I’ve noted, such disbursements did not violate American

laws. I should also like to stress that my decision to make such

payments stemmed from my judgment that the (contracts) …… would

provided Lockheed workers with jobs and thus redound to the benefit of

their dependents, their communities, and stockholders of the corporation. I

should like to emphasize that the payments to the so-called “ high

Japanese government officials” were all requested y Okubo and were

not brought up from my side. When he told me “ five hundred million yen

is necessary for such sales,” from a purely ethical and moral standpoint I

would have declined such a request. However, in that case, I would

most certainly have sacrificed commercial success….. (If) Lockheed had not

remained competitive by the rules of the game as then played, we would

not have sold (our planes) ……… I knew that if we wanted our product

to have a chance to win on its own merits, we had to follow the functioning

system. (Statement of A. Carl Kotchian)

In August, 1975, investigations by the U.S. government led Lockheed to

admit it had made $ 22 million in secret payoffs. Subsequent senate

investigations in February 1976 made Lockheed’s involvement with Japanese

government officials public. Japan subsequently canceled their billion dollar

contract with Lockheed.

In June 1979, Lockheed pleaded guilty to concealing the Japanese

bribes from the government by falsely writing them off as “marketing costs”.

The Internal Revenue Code states, in part. “ No deduction shall be allowed…..

for any payment made, directly or indirectly, to an official or employee of any

government …. If the payment constitutes an illegal bribe or kickback.’

Lockheed was not charged specifically with bribery because the U.S. law

forbidding bribery was not enacted until 1978. Lockheed pleaded guilty to

four counts of fraud and four counts of making false statements to the

government. Mr. Kotchian was not indicated, but under pressure from the

board of directors, he was forced to resign from Lockheed. In Japan, Kodama

was arrested along with Tanaka.

Questions :

1. Fully explain the effects that payment like those which

Lockheed made to the Japanese have on the structure of a market.

2. In your view, were Lockheed’s payments to the various

Japanese parties “bribes” or “extortions” ? Explain your response

fully.

3. In your judgment, did Mr. A. Carl Kotchian act rightly from a

moral point of view ? (Your answer should take into

account the effects of the payments on the welfare of the

societies affected, on the right and duties of the various parties

involved, and on the distribution of benefits and burdens among

the groups involved.) In your judgment, was Mr. Kotchian

morally responsible for his actions ? Was he, in the end, treated

fairly ?

4. In its October 27, 1980, issue, Business Week argued that every

corporation has a corporate culture – that is, values that set a

pattern for its employee’s activities, opinions and actions and

that are instilled in succeeding generations of employees (pp.148-

60) Describe, if you can, the corporate culture of Lockheed and

relate that culture to Mr. Kotchian’s actions. Describe some

strategies for changing that culture in ways that might

make foreign payments less likely.

NO. 3

THE NEW MARKET OPPORTUNITY

In 1994, anxious to show off the benefits of a communist regime, the

government of China invited leading auto manufacturers from around the

world to submit plans for a car designed to meet the needs of its massive

population. A wave of rising affluence had suddenly created a large middle

class of Chinese families with enough money to buy and maintain a private

automobile. China was now eager to enter joint ventures with foreign

companies to construct and operate automobile manufacturing plants inside

China. The plants would not only manufacture cars to supply China’s new

internal market, but could also make cars that could be exported for sale

abroad and would be sure to generate thousands of new jobs. The Chinese

government specified that the new car had to be priced at less than $5000,

be small enough to suit families with a single child (couples in China are

prohibited from having more than one child), rugged enough to endure the

poorly maintained roads that criss-crossed the nation, generate a minimum of

pollution, be composed of parts that were predominantly made within China,

and be manufactured through joint – venture agreements between Chinese

and foreign companies. Experts anticipated that the plants manufacturing

the new cars would use a minimum of automation and wuld instead rely on

labor – intensive technologies that could capitalize on China’s cheap labor.

China saw the development of a new auto industry as a key step in its drive

to industrialize its economy.

The Chinese market was an irresistible opportunity for General Motors,

Ford and Chrysler, as well as for the leading Japanese, European and Korean

automobile companies. With a population of 1.2 billion people and almost

double digit annual economic growth rates, China estimated that in the next

40 years between 200 and 300 million of the new vehicles would be

purchased by Chinese citizens. Already cars had become a symbol of

affluence for China’s new rising middle class, and a craze for cars had led

more than 30 million Chinese to take driving lessons despite that the nation

had only 10 million vehicles, most of them government – owned trucks.

Environmentalists, however, were opposed to the auto manufactures’

eager rush to respond to the call of the Chinese government. The world

market for energy, particularly oil, they pointed out, was based in part on the

fact that China, with its large population, was using relatively low levels of

energy. In 1994, the per-person consumption of oil in China was only one

sixth of Japan’s and only a quarter of Taiwan’s. If China were to reach even

the modes per person consumption level of South Korea, China would be

consuming twice the amount of oil the United States currently uses. At the

present time, the United States consumes one forth of the world’s total

annual oil supplies, about half of which it must import from foreign countries.

Critics pointed out that if China were to eventually have as many cars

on the road per person as Germany does, the world would contain twice as

many cars as it currently does. No matter how “ pollution – free” the new car

design was, the cumulative environmental effects of that many more

automobiles in the world would be formidable. Even clean cars would have to

generate large amounts of carbon dioxide as they burned fuel, thus

significantly worsening the greenhouse effect. Engineers pointed out that it

would be difficult, if not impossible, to build a clean car for under $5000.

Catalytic converters, which diminished pollution, alone cost over $200 per car

to manufacture. In addition, China’s oil refineries were designed to produce

only gasoline with high levels of lead. Upgrading all its refineries so they

could make low-lead gasoline would require an investment China seemed

unwilling to make.

Some of the car companies were considering submitting plans for an

electric car because China had immense coal reserves which it could burn to

produce electricity. This would diminish the need for China to rely on oil,

which it would have to import. However, China did not have sufficient coal

burning electric plants nor an electrical power distribution system that could

provide adequate electrical power to a large number of vehicles. Building

such an electrical power system also would require a huge investment that

the Chinese government did not seem particularly interested in making.

Moreover, because coal is a fossil fuel, switching from an oil – based auto to a

coal – based electric auto would still result in adding substantial quantities of

carbon dioxide to the atmosphere.

Many government officials were also worried by the political

implications of having China become a major consumer of oil. If China were

to increase its oil consumption, would have to import all its oil from the same

countries that other nations relied on, which would create large political,

economic and military risks. Although the United States imported some of its

oil from Venezuela and Mexico, most of its imports came from the Middle East

– an oil source that China would have to turn to also. Rising demand for

Middle East oil would push oil prices sharply upward, which would send major

shocks reverberating through the economics of the United States and those of

other nations that relied heavily on oil. State Department officials worried

that China would begin to trade weapons for oil with Iran or Iraq, heightening

the risks of major military confrontations in the region. If China were to

become a major trading partner with Iran or Iraq, this would also create closer

ties between these two major power centres of the non-Western world – a

possibility that was also laden with risk. Of course, China might also turn to

tapping the large reserves of oil that were thought to be lying under Taiwan

and other areas neighboring its coast. However, this would bring it into

competition with Japan, South Korea, Thailand, Singapore, Taiwan, the

Phillippines, and other nations that were already drawing on these sources to

supply their own booming economies. Many of these nations, anticipating

heightened tensions, were already puring money into their military forces,

particularly their navies. In short, because world supplies of oil were limited,

increasing demand seemed likely to increase the potential for conflict.

Questions :

1. In your judgment, is it wrong, from an ethical point of view, for

the auto companies to submit plans for an automobile to China

? Explain your answer ?

2. Of the various approaches to environmental ethics outlined in

this chapter, which approach sheds most light on the ethical issues

raised by this case ? Explain your answer.

3. Should the U.S. government intervene in any way in the

negotiations between U.S. auto companies and the Chinese

government ? Explain.

NO. 4

WAGE DIFFERENCES AT ROBERT HALL

Robert Hall Clothes, Inc., owned a chain of retail stores that specialized in

clothing for the family. One of the Chain’s stores was located in Wilmington,

Delaware. The Robert Hall store in Wilmington had a department for men’s

and boy’s clothing and another department for women’s and girl’s clothing.

The departments were physically separated and were staffed by different

personnel : Only men were allowed to work in the men’s department and only

women in the women’s department. The personnel of the store were sexually

segregated because years of experience had taught the store’s managers

that, unless clerks and customers were of the same sex, the frequent physical

contact between clerks and customers would embarrass both and would

inhibit sales.

The clothing in the men’s department was generally of a higher and

more expensive quality than the clothing in the women’s department.

Competitive factors accounted for this : There were few other men’s stores in

Wilmington so the store could stock expensive men’s clothes and still do a

thriving business, whereas women’s clothing had to be lower priced to

compete with the many other women’s stores in Wilmington. Because of

these differences in merchandise, the store’s profit margins on the men’s

clothing was higher than its margins on the women’s clothing. As a result,

the men’s department consistently showed a larger dollar volume in gross

sales and a greater gross profit, as is indicated in Table 7.11.

Because of the differences shown in Table 7.11 women personnel brought in

lower sales and profits per hour. In fact male salespersons brought in substantially more

than the females did (see Tables 7.12 and 7.13)

Men’s Department Women’s Department

YearSales

($)

Gross Profit

($)

Percent Profit

($)Sales

($)

Gross Profit

($)

Percent Profit

($)1963 210,639 85,328 40.5 177,742 58,547 32.91964 178,867 73,608 41.2 142,788 44,612 31.21965 206,472 89,930 43.6 148,252 49,608 33.51966 217,765 97,447 44.7 166,479 55,463 33.51967 244,922 111,498 45.5 206,680 69,190 33.51968 263,663 123,681 46.9 230,156 79,846 34.71969 316,242 248,001 46.8 254,379 91,687 36.4

TABLE 7. 12

YearMale Sales per

Hour($)

Female Sales Per Hour($)

Excess M Over F (%)

1963196419651966196719681969

38.3140.2254.7759.5863.1862.2773.00

27.3130.3633.3034.3136.9237.2041.26

40326473717077

As a result of these differences in the income produced by the two

departments, the management of Robert Hall paid their male salespersons

more than their female personnel. Management learned after a Supreme

Court ruiling in their favor in 1973 that it was entirely legal for them to do this

if they wanted. Wages in the store were set on the basis of profits per hour

per department, with some slight adjustments upward to ensure wages were

comparable and competitive to what other stores in the area were paying.

Over the years, Robert Hall set the wages given in Table 7.14. Although the

wage differences between males and females were substantial, they were not

as large as the percentage differences between male and female sales and

profits. The management of Robert Hall argued that their female clerks were

paid less because the commodities they sold could not bear the same selling

costs that the commodities sold in the men’s department could bear.

However, the female clerks argued, the skills, sales efforts, and

responsibilities required of male and female clerks were “substantially” the

same.

TABLE 7. 13

Male Gross Profits Female Gross Profits Excess M Over

Year per Hour($)

Per Hour($)

F (%)

1963196419651966196719681969

15.5216.5523.8526.6628.7429.2134.16

9.009.49

11.14114312.3612.9115.03

7274114134133127127

TABLE 7. 14

YearMale Earnings per

Hour($)

Female Earnings Per Hour($)

Excess M Over F (%)

1963196419651966196719681969

2.182.462.672.922.882.973.13

1.751.861.801.951.982.022.16

25324850454745

Questions :

1. In your judgment, do the managers of the Robert Hall store

have any ethical obligations to change their salary policies ? If you

do not think they should change, then explain why they have an

obligation to change and describe the kinds of changes they

should make. Would it make any difference to your analysis if,

instead of two departments in the same store, it involved two

different Robert Hall Stores, one for men and one for women ? Would

it make a difference if two stores (one for men and one for

women) owned by different companies were involved ? Explain

each of your answers in terms of the relevant ethical principles

upon which you are relying.

2. Suppose that there were very few males applying for clerks’

jobs in Wilmington while females were flooding the clerking job

market. Would this competitive factor justify paying males more

than females ? Why ? Suppose that 95 percent of the women in

Wilmington who were applying for clerks’ jobs were single

women with children who were on welfare while 95 percent of the

men were single with no families to support. Would this need

factor justify paying females more than males ? Why ? Suppose

for the sake of argument that men were better at selling than

women; would this justify different salaries ?

3. If you think the managers of the Robert Hall store should pay

their male and female clerks equal wages because they do

“substantially the same work” then do you also think that ideally

each worker’s salary should be pegged to the work he or she

individually performs (such as by having each worker sell on

commission) ? Why ? Would a commission system be preferable

from a utilitarian point of view considering the substantial book

keeping expenses it would involve ? From the point of view of

justice ? What does the phrase substantially the same mean to

you ?

NO. 5

NAPSTER’S REVOLUTION

Eighteen – year old Shawn “NAPSTER” Fanning, then a freshman at

Northeastern University, dropped out of school and founded Napster Inc.

(website was at w.w.w.napster.com) in San Mateo, California in May 1999.

Two months earlier, working in his college dorm room, he had developed both

a website that let users locate other users who were willing to share whatever

music files they had in MP3 format on the hard drives of their computers and

a software program (called “Napster) that let users copy these music files

from each other over the Internet. When an early free version of the program

he posted on Download.com received more than 300,000 hits and was named

“Download of the week,” he decided to devote himself full time to developing

his program and website. The final version of his version of his program was

officially released August 1999, and in May 2000, with more than 10 million

people – most of them students on college campuses where Napster was

especially popular – signed up at its website, Shawn’s company received $ 15

million of start – up funds from venture capital firms in California’s “Silicon

Valley.”

Fanning grew up in Brockton, Massauchettes, the son of a nurse’s aid

and the stepson of a truck driver, in a family of four half-brothers and half-

sisters. He got the nickname “Napster” during a basketball game when a

player commented on his closely cropped sweaty head of hair. Fanning had

taught himself programming and had held several summer programming

jobs.

The company Shawn helped establish gave the Napster program away

for free and charged users nothing to use its website to post the URL

addresses where personal copies of music could be downloaded.

Nevertheless, a month later, Shawn found himself embroiled in a legal and

ethical controversy when two record tables, two musicians (Metallica and Dr.

Dre), and two industry trade groups of music companies (the National Music

Publishers Association and the Recording Industry Association of America)

filed suits against his young company claiming that Napster’s software was

enabling other to make and distribute copies of copyrighted music that the

musicians and companies owned.

On June 12, the two industry trade groups filed preliminary injunctions

against the company demanding that it remove all the songs owned by their

member companies from Napster’s song directories. According to the two

groups, a survey of 2555 college students showed a correlation between

Napster use and decreased CD purchases. College students were outraged,

especially fans of Metallica and Dr. Dre. Supporters of Napster argued that

Napster allowed people to hear music that they then went out and purchased,

so Napster actually helped the music companies. Music sales had increased

by over $500 million a year since Napster had started to operate, but the

music companies claimed that this was a result of a booming economy.

Supporters of Napster also argued that individuals had a moral and legal right

to lend other individuals a copy of the music on the CDs that they had

purchased. After all, they argued, the law explicitly stated that an individual

could make a copy of copyrighted music he or she had purchased to hear the

music on another player. Moreover, according to Fanning, Napster was not

doing anything illegal, and the company was not responsible if other people

used its software and website to copy music in violation of copyright law any

more than a car company was responsible when its autos were used by

thieves to rob banks. Much of the music that was downloaded using Napster,

they claimed, was in the public domain (i.e.not legally owned by anyone) and

was being legally copied. The music companies countered that an individual

had no right to give multiple copies of their music to others even if the

individual had paid for the original CD. If everyone was allowed to copy music

without paying for it, they charged, eventually the music companies would

stop producing music and musicians would stop creating it. Other musicians

claimed, however, that Napster and the Web gave them a way to put their

music before millions of potential fans without having to beg the music

companies to sponser them.

In March 2000, the band Metallica hired consultant PDNet to

electronically “evesdrop” on users who assumed they were anonymously

accessing Napster’s website. The following week the band’s lawyers handed

Napster a list with the names of 300, 000 people that Metallica claimed had

violated its copyrights using Napster’s service and that Metallica now wanted

removed from Napster’s services. Fanning complied with the demand of

Metallica, whose drummer, Lars Ulrich, was one of his musical heros. “If they

want to steal our music,” said Ulrich, “ why don’t they just go down to Tower

Records and grab them off the shelves ?” Many young people protested that

the bands should not be alienating their own fans in this way. One fan posted

a note on an MP3 chat room : “Give me a break ! I have been dropping 16

bucks an album for Metallica’s music since I was a teenager. They made a

fortune off us and now they accuse us of stealing from them. What nerve !”

Howard King, a Los Angeles lawyer for Metallica and Dr. Dre, stated that “I

don’t know Shawn Fanning but he seems to be a pretty good kid who came

up with a sensational program. But this sensational program has allowed

people to take music without paying ………. Shawn probably had no idea of

the legal ramifications of what he created. I’m sure the though never crossed

his mind.”

In August 2000, a federal judge in San Francisco, Marilyn Patel,

responded to the suit against Napster. Judge Patel called Shawn’s company a

“monster” and charged that the only purpose of Napster was to copy pirated

music without paying for it. The judge ordered Napster to remove all URLS

from its website that referenced material that was copyrighted.

Judge Patel’s ruling would have shut down the company’s website

immediately. But a few days later, an appeals court reversed Judge Patel and

allowed the company to continue operating. The reprieve was only

temporary. On Monday February 12, 2001, the Ninth Circuit Court of Appeals

in San Francisco affirmed Judge Patel’s ruling. The company attempted to

circumvent the ruling by negotiating agreements with the music companies

that would pay them certain annual fees in return for withdrawing the suit.

Napster was not the only software that allowed individuals to swap files

from

One personal computer to another over the Internet. The software program

named “Gnutella” let individuals swap any kind of files – music, text, or

visuals – over the Internet, but Gnutella did not operate a centralized index

like the website that Napster had established. Observers predicated that if

Napster was put out of business, numerous underground websites would be

created providing the kind of listing service that the company had earlier

provided on its website. Already a website named zeropaid.com provided

free copies of Gnutella and many other Napster clones that users could

download and use to share digital music files with each other. Unlike

Napster, these software products did not require a central website to connect

users to each other, making it impossible for music companies to find and

target single entity whom they could sue. Many observers predicated that

Napster was only the beginning of an upheaval that would revolutionize the

music industry, forcing music companies to lower their prices, make their

music easily available on the Internet, and completely change their business

models.

Questions : 1. What are the legal issues involved in this case, and what are the moral issues ? How are the two different kinds of issues different from each other, and how are they related to each other ? Identify and distinguish the “systemic, corporate and individual issues” involved in this case.

2. In your judgment, was it morally wrong for Shawn Fanning to develop and release his technology to the world given its

possible consequences ? Was it morally wrong for an individual to use Napster’s website and software to copy for free the copy righted music on another person’s hard drive ? If you believe it was wrong, then explain exactly why it was wrong. If you believe it was not morally wrong, then how would you defend your views against t he claim that such copying is stealing ? Assume that it was not I illegal for an individual to copy music using Napster. Would there be anything immoral with doing so ? Explain ?

3. Assume that it is morally wrong for a person to use Napster’s website and software to make a copy of copyrighted music. Who,

then, would be morally responsible for this person’s wrong doing ? Would only the person himself be morally responsible ? Was Napster, the company, morally responsible ? Wash shawn Fanning morally responsible ? Was any employee of Napster, the company, morally responsible ? Was the operator of the server or that portion of the Internet that the person used morally responsible ? What if the person did not know that the music was copyrighted or did not think that it was

illegal to copy copyrighted music ?

4. Do the music companies share any of the moral responsibility for what has happened ? How do you think technology like Napster is likely to change the music industry ? In your judgment, are these changes ethically good or ethically bad ?

NO. 6

WORKING FOR ELI LILLY & COMPANY

Eli Lilly, the discoverer of Erythromycin, Darvon, Ceclor, and Prozac, is a

major pharmaceutical company that sold $6.8 billion of drugs all over the

world in 1995, giving it profits of $2.3 billion. Headquartered in Indianpolis,

Minnesota, the company also provides food, housing, and compensation to

numerous homeless alcoholics who perform short-term work for the company.

The work these street people perform, however, is a bit unusual.

Before approving the sale of a newly discovered drug, the U.S. Food and

Drug Administration requires that the drug be put through three phases of

tests after being tested on animals. In phase I, the drug is taken by healthy

human individuals to determine whether it has any dangerous side effects. In

Phase II, the drug is given to a small number of sick patients to determine

dosage levels. In Phase III, the drug is given to large numbers of sick patients

by doctors and hospitals to determine its efficacy.

Phase I testing is often the most difficult to carry out because most

healthy individuals are reluctant to take a new and untested medication that

is not intended to cure them of anything and that may have potentially

crippling or deadly side effects. To secure test subjects, companies must

advertise widely and offer to pay them as such as $250 a day. Eli Lilly,

however, does not advertise as widely and pays its volunteers only $85 a day

plus free from and board, the lowest in the industry. One of the reasons that

Lily’s rates are so low is because, as a long time nurse at the Lily Clinic is

reported to have indicated, “ the majority of its subjects are homeless

alcoholics” recruited through word of mouth that is spread in soup kitchens,

shelters, and prisons all over the United States. Because they are alcoholics,

they are fairly desperate for money. Because they alcoholics, they are fairly

desperate for money. Because phase I testes can run several months, test

subjects can make as $4500 – an enormous sum to people who are otherwise

unemployable and surviving on handouts. Interviews with several homeless

men who have participated in Lily’s drug tests and who describe themselves

as alcoholics who drink daily suggest that they are, by and large, quite happy

to participate in an arrangement that provides them with “easy money”.

When asked, one homeless drinker hired to participate in a Phase I trail said

he had no idea what kind of drug was being tested on him even though he

had signed an informed – consent form. An advantage for Lilly is that this

kind of test subject is less likely to sue if severely injured by the drug. The

tests run on the homeless men, moreover, provide enormous benefits for

society. It has been suggested, in fact, that in light of the difficulty of

securing test subjects, some tests might be delayed or not performed at all if

it were not for the large pool of homeless men willing and eager to participate

in the tests.

The Federal Drug Administration requires that people who agree to

participate in Phase I tests must give their “ informed consent” and must take

a “ truly voluntary and a uncoerced decision.” Some have questioned

whether the desperate circumstances of alcoholic and homeless men allow

them to make a truly voluntary and uncoerced decision when they agree to

take an untested potentially dangerous drug for $ 85 a day. Some doctors

claim that alcoholics run a higher risk because they may carry diseases that

are undetectable by standard blood screening and that make them vulnerable

to being severely named by certain drugs. One former test subject indicated

in an interview that the drug he had been given in a test several years before

had arrested his heart and “ they had to put things on my chest to start my

heart up again.” The same thing happened to another subject in the same

test. Another man indicated that the drug he was given had made him

unconscious for 2 days while others told of excruciating headaches.

In earlier years, drug companies used prisoners to test drugs in Phase I

tests. During the 1970s, drug companies stopped using prisoners when

critics complained that their poverty and the promise of early parole in effect

were coercing the prisoners into “Volunteering”. When Lilly first turned to

using homeless people during the 1980s, a doctor at the company is quoted

as saying, “ We were constantly talking about whether we were exploiting the

homeless. But there were a lot of them who were willing to stay in the

hospital for four weeks.” Moreover, he adds. “Providing them with a nice

warm bed and good medical care and sending them out drug – and alcohol –

free was a positive thing to do.”

A homeless alcoholic indicated in an interview that when the test he

was participating in was completed, he would rent a cheap motel room where

I’ll get a case of Miller and an escort girl have sex. The girl will cost me $ 200

an hour.” He estimated that it would take him about two weeks to spend the

$ 4650 Lily would pay him for his services. The manager at another cheap

motel said that when test subjects completed their stints at Lily, they

generally arrived at his motel with about $ 2500 in cash : “ The guinea pigs

go to the lounge next door, get drunk and buy the house a round. The idea

is, they can party for a couple of weeks and go back to Lily and do the next

one.”

Questions :

1. Discuss this case from the perspective of utilitarianism, rights,

justice and caring. What insight does virtue theory shed on the

ethics of the events described in this case ?

2. “ In a free enterprise society all adults should be allowed to

make their own decisions about how they choose to earn their

living.” Discuss the statement in light of the Lily case.

3. In your judgment, is the policy of using homeless alcoholics for

test subjects morally appropriate ? Explain the reasons for your

judgment. What does your judgment imply about the moral

legitimacy of a free market in labor ?

4. How should the managers of Lily handle this issue ?