Chapter 2: Business Ethics

Definition of Ethics

Study of what is right or good for human beings.

Definition of Business Ethics

Study of what is right and good in a business setting

Definition of Utilitarianism

Moral actions are those that produce the greatest net pleasure compared with net pain.

Kohlberg’s Ethical System

Preconventional, conventional, and postconventional.

Definition of Preconventional

Childhood; seeking a reward, avoiding punishment.

Definition of Conventional

Adolescence; fitting in, conforming to norms.

Definition of Postconventional

Adulthood; doing the right thing because it is the right thing to do.

Why is there business regulation?

To keep people from doing technically legal actions but morally corrupt. By having negative externalities, business will behave with the people’s opinions in mind.

Definition of Stake

Interest in a company.

Definition of Stakeholder

Individual or group with a recognized stake.

What did Milton Friedman advocate for?

Advocate for managers focusing on shareholders only; not against corporate responsibility if it is in the self-interest of the business.

What are the six stakeholders of the business corporation?

Managers, employees, suppliers, customers, stockholders, and community

In a corporation, whose interest does the law solely focus on?

The law privileges shareholders.