Business Ethics Quiz 2

shareholder, stakeholder, market, justice

Foundations in business ethics:

• _____ theory

• _____ theory

• _____ failures approach

• _____ failures approach

human error, sensors, software, safety, quality, competitive

The Boeing Max 737 Crisis

• Two plane crashes in 2018 and 2019 led to a global grounding of Boeing 737 Max

• Executives denied there was a problem with the planes and attributed all responsibility to _____ ___

• Whistleblowers inside Boeing held that the crashes were caused by defects in ____ and ____ design

• These were due, in turn, to compromises of ____ and ____ standards, motivated by _____ pressures

freedman’s argument

In a free society “there is only one responsibility of business - to use its resources and engage in activities designed to increase its profits so long as it stays within the rules of the game, which is to say. Engages in open and free competition without deception or fraud”

profits, deception, fraud

Friedman’s Argument:

In a free society “there is only one responsibility of business - to use its resources and engage in activities designed to increase its ___ so long as it stays within the rules of the game, which is to say. Engages in open and free competition without ____ or _____”

unanimity, conformity

Friedman’s Argument:

• Markets mechanisms are ruled by a principle of ____

• Political mechanisms are ruled by a principle of ______

voluntary, coerce, individuals, individuals, general

Friedman’s Argument

In an ideal free society….

• Markets mechanisms are ruled by a principle of unanimity

  • All cooperation is _____, and no individual can _____ any other

  • No social values or responsibilities other than those held by ______

• Political mechanisms are ruled by a principle of conformity

  • ______ must serve the more _____ social interest and may be coerced to

freedman’s argument

In an ideal free society….

• Markets mechanisms are ruled by a principle of unanimity

  • All cooperation is voluntary, and no individual can coerce any other

  • No social values or responsibilities other than those held by individuals

• Political mechanisms are ruled by a principle of conformity

  • Individuals must serve the more general social interest and may be coerced to

social, political

Friedman’s Argument:

The doctrine of _____ responsibility would extend the scope of _____ mechanisms to every human activity

friedmans argument

The doctrine of social responsibility would extend the scope of political mechanisms to every human activity

freedman’s property based argument

If executives used shareholders money to promote the public good, they would be using someone else’s money to advance their moral and social agenda

executives, shareholders, moral, social

Friedman’s Property-Based Argument:

If _____ used _____ money to promote the public good, they would be using someone else’s money to advance their ____ and ____ agenda

taxation

Friedman’s Property-Based Argument:

• If executives used shareholders money to promote the public good, they would be using someone else’s money to advance their moral and social agenda

  • This would amount to a form of _____ of the owners

freedman’s property based argument

• Taxation belongs to the realm of politics

• It works through compelled conformity, not free exchange

• It erandes the mechanisms of the free market

taxation, politics conformity, exchange, free

Friedman’s Argument

• _____ belongs to the realm of ____

• It works through compelled _____, not free _____

• It erandes the mechanisms of the ____ market

freedman’s political argument

• Imposition and expenditure of taxes are governmental functions

• We have established institutional provisions to exercise democratic control over these functions

• Business executives are under no such constraints

• Hence, they should not act as civil servants, but as employees of private enterprises

imposition, expenditure, institutional, democratic

Friedman’s Political Argument:

• _____ and _____ of taxes are governmental functions

• We have established ______ provisions to exercise _____ control over these functions

  • Responsiveness to public preferences

  • Accountability to public interests

  • Checks and balances through separation of powers

responsiveness, accountability, checks, balances

Friedman’s Argument:

• Imposition and expenditure of taxes are governmental functions

• We have established institutional provisions to exercise democratic control over these functions

  • ____ to public preferences

  • ______ to public interests

  • ____ and _____ through separation of powers

preferences, interests, separation, powers

Friedman’s Argument

• Imposition and expenditure of taxes are governmental functions

• We have established institutional provisions to exercise democratic control over these functions

  • Responsiveness to public _____

  • Accountability to public ______

  • Checks and balances through ______ of ____

business executives, civil servants, employees, private

Friedman’s Political Argument:

• Imposition and expenditure of taxes are governmental functions

• We have established institutional provisions to exercise democratic control over these functions

• ______ ______ are under no such constraints

• Hence, they should not act as _____ _____, but as _____ of ____ enterprises

elect, objectives, accountable

Friedman’s Argument:

• Imposition and expenditure of taxes are governmental functions

• We have established institutional provisions to exercise democratic control over these functions

• Business executives are under no such constraints

• Hence, they should not act as civil servants, but as employees of private enterprises

• If they were to act as civil servants, political machinery should be set up to

  • _____ them

  • Determine the ____ to be pursued

  • Hold them _____

freedman’s political argument

Political mechanisms would then take the place of markets in determining the allocation of private resources

political, markets, private resources

Friedman’s Political Argument:

_____ mechanisms would then take the place of _____ in determining the allocation of ______ _____

freemans stakeholder theory

• Theories that give primacy to shareholders overlook three facts about real world business practices

  • Externalities

  • Moral hazards

  • Monopolies

externalities, moral hazards, monopolies

Freeman’s Stakeholder Theory:

• Theories that give primacy to shareholders overlook three facts about real world business practices

  • ______: corporate activity has negative impact on public goods and society must bear these costs

  • ____ ____: people take more risks when they don't bear the full cost of their actions

  • _________: profit seeking leads to avoidance of competitive behavior with the aim of monopolizing portions of the market

externalities

Freeman’s Stakeholder Theory:

• Theories that give primacy to shareholders overlook three facts about real world business practices

  • corporate activity has negative impact on public goods and society must bear these costs

moral hazards

Freeman’s Stakeholder Theory

• Theories that give primacy to shareholders overlook three facts about real world business practices

  • people take more risks when they don't bear the full cost of their actions

monopolies

Freeman’s Stakeholder Theory

• Theories that give primacy to shareholders overlook three facts about real world business practices

  • profit seeking leads to avoidance of competitive behavior with the aim of monopolizing portions of the market

freemans stakeholder theory

• In an ideal market, it would be acceptable for executives to only protect shareholders interests, as everyone else would only engage in transactions that they have agreed to

• But since costs are imposed on various parties without their consent, executives have a duty to consider the impact of their actions beyond shareholder value

executives, shareholders, transactions, consent, executives, shareholder

Freeman’s Stakeholder Theory:

• In an ideal market, it would be acceptable for _____ to only protect ______ interests, as everyone else would only engage in _____ that they have agreed to

• But since costs are imposed on various parties without their _____, _____ have a duty to consider the impact of their actions beyond _______ value

stakeholders

 all parties who benefit from or are harmed by, and whose rights are violated or respected by, corporate actions

owners

Freeman’s Stakeholder Theory:

• Groups who are vital to the survival and success of the corporation:

  • _______

  • Employees

  • Customers

  • Communities

employees

Freeman’s Stakeholder Theory:

• Groups who are vital to the survival and success of the corporation:

  • Owners

  • ________

  • Customers

  • Communities

customers

Freeman’s Stakeholder Theory:

• Groups who are vital to the survival and success of the corporation:

  • Owners

  • Employees

  • ________

  • Communities

communities

Freeman’s Stakeholder Theory:

• Groups who are vital to the survival and success of the corporation:

  • Owners

  • Employees

  • Customers

  • ________

freemans stakeholder theory

• Corporation as a whole is the source of moral responsibilities

  • More people stand to receive benefits/harms from corporations

  • More people are vital to the survival of the corporation

moral

Freeman’s Stakeholder Theory:

• Corporation as a whole is the source of _____ responsibilities

  • More people stand to receive benefits/harms from corporations

  • More people are vital to the survival of the corporation

benefits, harms, vital, survival

Freeman’s Stakeholder Theory:

• Corporation as a whole is the source of moral responsibilities

  • More people stand to receive ____/____ from corporations

  • More people are ____ to the ______ of the corporation

heath

Business’s responsibility to increase profits is derived from firms role in the market economy

friedman

Business’s primary responsibility is to increase shareholders’ profits

freeman

Business’s primary responsibility is to the corporation and, therefore, to the stakeholder’s

heath, Friedman, freeman

• ________: Business’s responsibility to increase profits is derived from firms role in the market economy

• ________: Business’s primary responsibility is to increase shareholders’ profits

• ________: Business’s primary responsibility is to the corporation and, therefore, to the stakeholder’s

justice failures approach

Business ethics must address failures of justice (especially equality), not just efficiency.

inefficiency, inequality, injustice

• Market failure → ________

• Justice failure → ______ or ______

market, justice

• _____ failure → inefficiency

• _____ failure → inequality or injustice

create, profit, remedy

What are the three main duties of firms under justice failure?

1. Do not _____ justice failure

2. Do not ____ from it

3. Help ____ it

efficiency, equality, justice

What is the key ethical shift in the justice failures approach?

• From ______-only ethics → ethics that include ______ and _____.

biases

A tool that is trained on text encountered on the internet, will inevitably inherit all kinds of ________.

sycophancy

• AI chatbots are designed to generate content that is enjoyable for users.

• Humans happen to love flattery; critical engagement, not so much.

social inequalities

Justice Failures:

It is immoral for corporations to profit from existing ____ ________

social inequalities, free market

Justice Failures:

_____ _______ are imperfections in the scheme of social cooperation that allows a _____ _____ to exist.

inequalities

Justice Failures:

Firms should take measures to address existing ______

free, private, private, markets, equality, equality, free

Justice Failures:

• ____ markets allow _____ actors to freely pursue ____ interests

• _____ are part of a liberal society

• This societal structure is based on the value of ______

• ______ is necessary to have a ____ market

justice failures approach

• Free markets allow private actors to freely pursue private interests

• Markets are part of a liberal society

• This societal structure is based on the value of equality

• Equality is necessary to have a free market

government, firms, inequality, injustice, social, free

When the _______ fails to secure equality, ______ are morally required step

up by taking active measures

• Failing to do so amounts to benefitting from ______ and ______.

• Thus, eroding the value that enables the scheme of ____ cooperation in which there can be ___ markets.

justice failure

when societies don’t always live up to the idea of equality.

political, social, distributive

Justice Failures:

• ______: unequal participation and representation in democratic governance

• ____: insufficiently equal enforcement of rights and opportunities

• _______: unjust distribution of wealth

profit-maximization, competition, competition, equilibrium, waste

Market Failures Approach:

• _____-________ is not morally justified per se but for its role in a beneficial economic system

• _______ between suppliers and purchasers promotes efficiency and is, thus, beneficial to society.

• Under the correct circumstances, _____ will push prices towards market _______, thus minimizing the overall amount of ____ in the economy

efficient, resources, profit, efficiency, profits

Market Failures Approach:

• The function of the market economy is to generate the most ______ use of our productive ______.

• The role of the firm is to compete for _____ in order to secure such ______

• Managers are, hence, morally entitled to do what is necessary for the firm to maximize _____ in this way.

market failures

When the underlying conditions for market efficiency are unmet, we confront “market imperfections” or

free choice

Market Failures Approach:

• Ideal free market: every transaction is the result of individual ____ ____

market imperfections

Market Failures Approach:

“ _______ _______”

• Large negative externalities: costs are imposed, not chosen

• Market dominance: small number of firms exert control

• Informational asymmetries: one of the parties in the transaction is unaware of information that is relevant to their choices.

  • All these imperfections erode free and open competition.

large negative externalities

Market Failures Approach:

“ Market Imperfections”

• ____ ____ _____: costs are imposed, not chosen

• Market dominance: small number of firms exert control

• Informational asymmetries: one of the parties in the transaction is unaware of information that is relevant to their choices.

  • All these imperfections erode free and open competition

market dominance

Market Failures Approach:

“ Market Imperfections”

• Large negative externalities: costs are imposed, not chosen

• ______ _______: small number of firms exert control

• Informational asymmetries: one of the parties in the transaction is unaware of information that is relevant to their choices.

  • All these imperfections erode free and open competition

informational asymmetries

Market Failures Approach:

“ Market Imperfections”

• Large negative externalities: costs are imposed, not chosen

• Market dominance: small number of firms exert control

• _______ ______: one of the parties in the transaction is unaware of information that is relevant to their choices.

  • All these imperfections erode free and open competition

free, open

Market Failures Approach:

“ Market Imperfections”

• Large negative externalities: costs are imposed, not chosen

• Market dominance: small number of firms exert control

• Informational asymmetries: one of the parties in the transaction is unaware of information that is relevant to their choices.

  • All these imperfections erode ____ and ____ competition

ghost work

On-demand performance of tasks that enable AI systems to operate successfully and require human judgment

health, safety

Ghost Work creates challenges in 4 areas:

• ____ and _____

• Meaningful work

• Control and participation

• Pay

meaningful work

Ghost Work creates challenges in 4 areas:

• Health and safety

• ________ ______

• Control and participation

• Pay

control, participation

Ghost Work creates challenges in 4 areas:

• Health and safety

• Meaningful work

• ______ and _______

• Pay

pay

Ghost Work creates challenges in 4 areas:

• Health and safety

• Meaningful work

• Control and participation

• ____