Ethics
Ethics: A conception of right and wrong conduct. It tells us whether our behavior is moral or immoral and deals with fundamental human relationships—how we think and behave toward others and how we want them to think and behave toward us.
Ethical Principles: Guides to moral behavior.
Ethical Relativism: Holds that ethical principles should be defined by various periods of time in history, a society’s traditions, the special circumstances of the moment, or personal opinion.
Laws: Society’s formal written rules about what constitutes right and wrong conduct in various spheres of life.
Business Ethics: The application of general ethical ideas to business behavior.
Why Should Business Be Ethical?
⦁ To Enhance Business Performance
⦁ To Comply with Legal Requirements
⦁ To Prevent or Minimize Harm
⦁ To Meet Demands of Stakeholders
⦁ To Promote Personal Morality
Conflict of Interest: Occurs when an individual’s self-interest conflicts with acting in the best interest of another, when the individual has an obligation to do so.
Virtue Ethics: A theory of ethics that is based on values and personal character. it focuses on character traits that a good person should possess, theorizing that moral values will direct the person toward good behavior.
Utilitarian Reasoning / Utilitarianism / Cost-Benefit Analysis: An approach to ethical decision-making that weighs the costs and benefits of a decision, a policy, or an action. These costs and benefits can be economic (expressed in dollar amounts), social (the effect on society at large), or human (usually a psychological or an emotional impact). For a utilitarian, the alternative where the benefits most outweigh the costs is the ethically preferred action because it produces the greatest good for the greatest number of people in society.
Consumerism
Consumerism: A movement to promote the rights and
powers of consumers in relation to sellers. Also, a powerful ideology in which the pursuit of
material goods beyond subsistence shapes social conduct
Materialism: An emphasis on material objects or money that displaces spiritual, aesthetic, or
philosophical values.
Conspicuous Consumption: The notion that consumers buy things not for their functional utility, but for status and show.
Government Regulation and the Role of Money in Politics
Public policy: A plan of action undertaken by government officials to achieve some broad purpose affecting a substantial segment of a nation’s citizens. Public policy sets the goals, plans, and actions that each national government follows in achieving its purposes.
Fiscal policy: Patterns of government collecting and spending funds to stimulate or support the economy.
Monetary policy: Policies that affect the supply, demand, and value of a nation’s currency.
Taxation policy: Raising or lowering taxes on business or individuals
Industrial policy: Directing economic resources toward the development of specific industries
Trade policy: Encouraging or discouraging trade with other countries
Regulation: Government activity that guides the behavior of citizens, groups, and corporations to reach economic or social goals.
Rule: A decree (Thou shalt, thou shalt not) issued by a regulatory body to implement a law passed by Congress. A regulation may consist of multiple rules.
Two circumstances justify regulation of the private sector:
⦁ Flaws in the Market: When market flaws appear in the market that lead to undesirable consequences
Natural monopoly
Destructive competition
Externalities
Inadequate information
⦁ Social and Political Reasons for Regulation: When sufficient social or political reasons for regulation exist
Socially desirable goods and services
Socially desirable production methods
Resolution of national and global problems
Regulation to benefit special interests
Federal regulation originates in an act of Congress. When a bill is passed by both houses of Congress and signed by the president its provisions become law. It is then the responsibility of the appropriate regulatory agency to create the specific regulations (rules) needed to implement the provisions of the bill – this process is referred to as rule-making.
Federal Register: A daily government publication containing proposed rules, final rules, notices of public meetings by regulatory agencies, and presidential executive orders
Code of Federal Regulations: A reference work that compiles regulations of all agencies in a series of volumes
Guidance: Information in nonbinding documents intended to clarify official regulations
Independent Regulatory Commission: A regulatory agency run by a small group of commissioners independent of political control
Executive Agency: A regulatory agency in the executive branch run by a single administrator
Deregulation: The removal or substantial reduction of the body of regulation covering an industry
Troubled Asset Relief Program (TARP): A response to the 2007-08 economic crisis, this was a program that gave federal regulators power to exchange funds for an ownership interest in banks and corporations
Chevron Doctrine: The general rule that federal courts should defer to agency rules that are based on reasonable interpretations of ambiguous statutes
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The federal system divides powers between a central (federal) government and subdivision (state) governments. It creates many points of access for business influence.
152. The supremacy clause in the Constitution allows federal law to preempt state law.
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154. The system of separation of powers divides powers among the executive, legislative, and judicial branches of the federal government. This also creates multiple points of access for business lobbying.
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156. Judicial review is the power of judges to review actions of government officials and strike down laws that are unconstitutional. In the past, courts have blocked actions and invalidated laws opposed by business.
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158. The First Amendment Right of Free Speech protects the right of business to influence government. It gives business the right to lobby officials and to express ideas expansively.
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160. Peak Associations represent many companies in different industries. The U.S. Chamber of Commerce is an example.
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162. Trade Associations represent companies grouped by industry. Large companies are often members of many trade associations.
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164. Lobbying is advocating a viewpoint to government. Lobbyists are little regulated because the First Amendment protects their activities.
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166. Grassroots Lobbying, Background Lobbying and Contact Lobbying definitions are found in the powerpoint.
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168. The Lobbying Disclosure Act of 1995 requires them to register and both the House and the Senate have adopted rules to prevent impropriety.
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170. Bribery Statutes make it illegal for lawmakers to exchange official acts for anything of value given with corrupt intent. Legal campaign contributions are not considered bribes.
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172. Lobbyists and lawmakers must also avoid the crime of illegal gratuity or the exchange of a gratuity for an official action in the past or future when that action might have been or might be taken even without the gift.
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174. Business also engages in Electoral Activity to get friendly politicians elected.
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176. The Tillman Act of 1907, prohibits corporate contributions to federal candidates. The law was quickly bypassed by, for instance, large individual contributions from business executives.
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178. The Federal Election Campaign Act (FECA), as amended in 1974, set up a regulatory framework intended to limit contributions and expenditures. It failed to limit campaign spending, mainly for the following reasons.
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180. Political action committees, or PACs, set up by companies and funded by employee contributions. PACs can legally give to federal candidates, whereas their sponsoring companies cannot.
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182. Soft money contributions unregulated under the FECA. Federal Election Commission rulings permitted corporations to give unlimited amounts of soft money to party committees. This money was then used to influence federal elections, primarily by funding issue ads that promoted federal candidates but avoided specific wording about election or defeat of those candidates.
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184. In 2010, in Citizens United v. Federal Election Commission, the Supreme Court struck down a prior prohibition against corporate funding of issue ads and the Federal Election Campaign Act’s prohibition against corporations making independent expenditures for the election or defeat of candidates. It held that these prohibitions violated the First Amendment’s free speech protections.
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186. Super PACs, are technically known as Independent-Expenditure Only Committees. Super PACs:
⦁ may receive unlimited sums of money from corporations, unions, associations and individuals,
⦁ may spend unlimited sums to independently advocate for or against political candidates,
⦁ may not give directly to candidate campaigns,
⦁ may not coordinate their activities with candidate campaign, and
⦁ must report their donors to the Federal Election Commission on a monthly or quarterly basis as a traditional PAC would.
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Dark Money – non-disclosed political contributions given by Political Nonprofits (usually 501(c)(4)s and 501(c)(6)s). Dark Money groups:
⦁ may receive unlimited sums of money from corporations, unions, associations and individuals,
⦁ may spend unlimited sums to independently advocate for or against political candidates,
⦁ may not give directly to candidate campaigns,
⦁ may not coordinate their activities with candidate campaign, and
⦁ do not have to disclose donors, expenditures are reported to IRS after election period,
⦁ no more than 50% of their spending can be on political activity, and
⦁ though their political activity is supposed to be limited, the IRS has done little to enforce those limits.
Globalization
Globalization: Defined as the spread of economic, political, cultural, military, scientific, or environmental interdependence across political and geographic (nation-states) boundaries. We say that “the mainspring of globalization is trade.”
Multinational corporation: An entity headquartered in one country that does business in one or more foreign countries.
Foreign direct investment: Funds invested by a parent MNC for starting, acquiring, or expanding an affiliate in a foreign nation
Portfolio investment: The limited, speculative purchase of stocks and bonds in a foreign company by individuals or equity funds
Free trade: The flow of goods and services across borders unhindered by government imposed restrictions such as taxes, tariffs, quotas, and rules. An economic philosophy based on the Law of Comparative Advantage. It is argued that free trade will stimulate competition, reward individual initiative, increase productivity, and improve national well-being. It is often equated with Neoliberal Economics (Milton Friedman)
Liberalization: The economic policy of lowering tariffs and other barriers to encourage trade and investment
Protectionism: The use of trade barriers to shield domestic industries from foreign competitors
Mercantilism: A policy of increasing national power by managing the economy to create a trade surplus.
Tariff: A tax or duty charged by a government on goods moved across a border.
Autarky: A policy of national self-sufficiency and economic independence
The World Bank was created to overcome, supplement shortages in private capital to make loans to rebuilding war-torn nations.
The IMF’s mission is to promote international economic stability by making loans to countries with balance of payment problems.
The General Agreement on Tariffs and Trade (GATT) is a framework for free trade agreements between countries designed to expand trade by eliminating discriminatory barriers.
Most-favored nation provision, under GATT is any duty, tariff, privilege or favor granted to one signatory nation has to be granted to all.
National treatment provision, under GATT, requires equal treatment for imported and local goods within a domestic market.
The World Trade Organization (WTO), formally born in 1995. it is a formal organization with 153 members (nations and regional bodies such as the EU) that provides a framework for trade negotiations, but has been mostly unsuccessful in adding to the GATT legacy of trade liberalization – not a single new trade round has been concluded.
The North American Free Trade Agreement (NAFTA) (U.S.A., Mexico and Canada)
The IMF's and World Bank's Structural Adjustment Policies (SAPs) ensure debt repayment by requiring countries to cut spending on education and health; eliminate basic food and transportation subsidies; devalue national currencies to make exports cheaper; privatize national assets; and freeze wages. Such belt-tightening measures increase poverty, reduce countries' ability to develop strong domestic economies and allow multinational corporations to exploit workers and the environment.
The Natural Environment and Climate Change
Global overshoot occurs when humanity’s annual demand for the goods and services that our land and seas can provide—fruits and vegetables, meat, fish, wood, cotton for clothing, and carbon dioxide absorption—exceeds what Earth’s ecosystems can renew in a year.
The Anthropocene is a new era in world history in which human activity has become the dominant influence on climate and the environment.
Sustainable development: Nonpolluting economic growth that raises standards of living without depleting the net resources of the earth for others. Sustainable development requires that human society use natural resources at a rate that can be continued over an indefinite period.
Biosphere – Earth’s “life zone” where life can exist
Ecosystem – an animated, interactive realm of plants, animals and microorganisms inhabiting an area of the nonliving environment
Ecosystem Services: The numerous benefits derived by humans from natural ecosystems can be categorized into four Ecosystem Services”
⦁ Supporting – nutrient recycling, soil production
⦁ Provisioning – food, raw materials, water, medicinal resources, energy
⦁ Regulating – climate regulation, water and air purification, pest and disease control
⦁ Cultural – spiritual, recreational, historical, scientific and educational resource
Thus, Ecosystem Services are the basis of the material world; the very foundation of materialism and the platform from which all economic value is created.
Natural capital - The world's stock of natural resources, which includes geology, soils, air, water and all living organisms. These natural capital assets provide people with a wide range of free goods and services – Ecosystem Services - which underpin our economy and society and make human life possible at all.
Environmental Kuznets curve: An inverted U-shaped curve illustrating that as gross domestic product rises in emerging economies pollution goes through stages of rapid increase, leveling off, and decline.
As with the Kuznets Curve on Inequality, there is now substantial evidence that the EKC is wrong, at least with respect to greenhouse gas emissions.
Greenhouse gases: Atmospheric gases that absorb energy radiated from the earth, preventing it from being released into space
The increasing concentration of carbon dioxide (CO2) in the atmosphere, largely from burning fossil fuels (coal, oil, natural gas), and other greenhouse gases are driving a rise in global temperature and causing changes to our climate system
CO2 concentration is measured in PPM – parts-per-million. Since the start of the Industrial Revolution, atmospheric CO2 has risen from 280 parts per million to over 400 parts per million
Climate Change: A long-term change in the Earth’s overall temperature with massive and permanent ramifications.
The Intergovernmental Panel on Climate Change (IPCC) is the leading international body of scientists who report updates on Climate Change to world leaders.
Among the Climate Change Effects:
⦁ As temperatures rise, glaciers and ice sheets melt, causing sea levels to warm and rise, causing more melting, and on, and on, and on….
⦁ Water on land is depleted and more greenhouse gases are released, which unlocks methane, thus causing more evaporation of water, and on, and on….
⦁ Extreme weather events, such as crop-withering heat waves, droughts, and powerful storms become more frequent and more intense.
⦁ Greenhouses gases will remain in the atmosphere for many years making impossible to eliminate global warming for decades.
⦁ For every 1°C rise in temperature above the optimum during the growing season, yields of wheat, rice, and corn drop 10 percent.
Paris Agreement: Commitment to keep post-Industrial Revolution global temperature rise to within 2 degrees C, and to try to cap it at 1.5 degrees C.
⦁ Requires steep reductions in fossil fuel use and emissions.
⦁ No real enforcement, no fines or economic sanctions.
⦁ Goes into effect if 55 countries accounting for 55% of global CO2 ratify it.
⦁ U.S. and China combined account for 40% of global CO2 emissions.
⦁ President Trump has announced his intention to withdraw the U.S. from the Paris Agreement.
Climate Change as Market Failure: "The problem of climate change involves a fundamental failure of markets: those who damage others by emitting greenhouse gases generally do not pay," Nicholas Stern, former chief economist at the World Bank.
Locke’s Proviso, “at least where there is enough, and as good, left in common for others.” The phrase at the end of John Locke’s paragraph in Second Treatise of Government that some scholars point to as evidence that Locke conditioned the right of private property on the maintenance of a sustainable earth.
Laudato Si, On Care for Our Common Home, also referred to as Pope Francis’ Encyclical on Climate Change: Released in May 2015, the Pope criticizes consumerism, over-development, and inequality between rich and poor nations. Acknowledges global warming as being human-caused, and calls all people of the world to take "swift and unified global action". The Pope attributes the climate crisis to economic and moral failures.
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