Make as Much Money as Possible–Typical Business Rule?


029-1Do businesses have ethical obligations beyond what the law and shareholders require? | The CQ Researcher Blog

“In a free-enterprise, private-property system,” Friedman wrote, “a corporate executive is an employee of the owners of a business. He has direct responsibility to his employers. That responsibility is to conduct the business in accordance with their desires, which generally will be to make as much money as possible while conforming to the basic rules of society, both those embodied in law and those embodied in ethical custom.”
In this view, going beyond those basic requirements — for instance, as Friedman wrote, spending more to reduce pollution than “the amount that is in the best interests of the corporation or that is required by law” — amounts to improperly spending money that belongs to the shareholders.
The U.S. concept of free-market capitalism is not, of course, universally accepted. Karl Marx, the intellectual father of communism, saw profit as the result of capitalist exploitation of workers. Socialist and communist systems assert that some or all of business profits rightfully belong to society.
But among those who embrace capitalism, many say ethical obligations go well beyond simply making a profit.
A survey of business executives from around the world by consulting firm McKinsey & Co. found that only a minority wholeheartedly embraced Friedman’s view. Sixteen percent of respondents agreed that business should “focus solely on providing the highest possible returns to investors while obeying all laws and regulations.” But 84 percent said the role of large corporations should be to “generate high returns to investors but balance [that] with contributions to the broader public good.” [Footnote 14]

Do businesses have ethical obligations beyond what the law and shareholders require? | The CQ Researcher Blog

Does business believe in the absolute pursuit of profit to the exclusion of all other goals? A study by McKinsey and Co. indicates otherwise. This is an unexpected result based on my perceptions but, of course, I live in the Southern United States where free market worship is one very short step below the more traditional forms of worship.

I hope the study is correct. We need business leaders willing to be valuable members of our communities. Without their participation, the ties that bind us together as a people, a civilization, weaken.

James Pilant

From around the web.

From the web site, Business Talk.

http://businessadministrationblog.wordpress.com/2012/01/29/goal-of-the-firm-maximize-profit-maximize-shareholder-wealth-stakeholder-wealth/

Wealth maximization is long term process. It refers the value of the company generally expressed in the value of the stock.

Value maximization says that managers should make all decisions so as to increase the total long run market value of the firm. Total value is the sum of the value of all financial claims on the firm- including equity, debt, preferred stock and warrants.

Here, the executives undertake investing in new projects, maximizing profits from existing products and services, controlling cost, and adding value to the company through process, which reflects in the price of the stock, but always in the increase in Net Asset Value and Equity Per Share.

The wealth of corporate owners is measured by the share price of the stock, which in turn is based on the timing of returns (cash flows), their magnitude and their risk. Maximizing share price will maximize owner wealth.

Cash flow and risk are the key decision variables in maximizing owner wealth.

When investors look at a company they not only look at dollar profit but also profit margins, return on capital, and other indicators of efficiency. Profit maximization does not achieve the objectives of the firm’s owners; therefore wealth maximization is better option than profit maximization.

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Islamic Business Ethics!


Business Ethics – Mufti Menk – YouTube

Mufti Menk explains the rules of a good bargain.

I have taught business ethics for some years now and I have tried to emphasize the application of religion to the field. Several Protestant denominations have strong codes of business ethics, and the Catholic Church has an vast array of teachings on the proper conduct of business from a moral standpoint. However, both Judaism and the religion of Islam have a lot to say about business ethics. I have been impressed by the Islamic take on what constitutes proper business conduct.

This brief video is eloquent and beautifully explains the concept of “blessings” in business dealings. Blessings in this teaching are the benefits of the bargain. They are not to be concentrated on one side of the deal but both parties are to share in the prosperity brought about by business deals. I was delighted with the concept and I hope you enjoy it too.

 

Kaaba at night (from wikipedia)

In these days, when many are willing to judge all practitioners of Islam as militant radicals, it is important to recognize the basic morality of the religion and the benefits it has brought hundreds of millions of people. Among those benefits is a strong well taught set of rules for Islamic business ethics.

James Pilant

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The Ethics Sage Addresses Youthful Cybercrime – Hacking and Online Bullying


Cyber ethics education – Ethics Sage

I feel strongly that cyber ethics education is a must. Students tend to react more positively to discussing right and wrong behavior when they are personally invested. After all, it is difficult to discuss with youngsters the ethics of some Congressional representative; they can’t relate; they have no frame of reference. However, using computers to steal information or bully others is front and center in their consciousness.

Dr. Marvin Berkowitz of St. Louis University conducted an analysis of the behavioral development factors that must be considered in searching for an optimal age range for instruction of cyber ethics. Dr. Berkowitz concluded that the 9-12 ages was a “very reasonable” age to target for a first time strategy of cyber ethics instruction. Several factors led to this conclusion. This age range is considered a “gateway” age and has been used by other groups to begin message delivery; e.g. substance abuse and sex education. Absent hard data on the age at which children actually begin to go on line, we can generally assume that by age 13 children have routine access to the Internet. The 9-12 ages is also the point in development where children begin to understand abstract values, for example, privacy rights, and can begin to evaluate the consequences of their actions. It is important to be able to think abstractly, particularly when working in a medium that is routinely described as “virtual.”

Cyber ethics education – Ethics Sage

 

I also feel strongly about this issue. Ethics training should begin in the schools as early as possible and the article is absolutely correct. Dealing with real current issues is completely superior to hypothetical scenarios.What is happening in your life now is almost always more important and more relevant then what might happen. Hacking and cyberbullying, also referred to as cybercrime, are gateway crimes. I believe they can lead to more serious crimes because they make unethical behavior more acceptable and more routine.

I believe that we strengthen our ethics and moral stance by our choices in our life experiences. You can choose to limit television viewing to programs that have strong themes of morality and justice. You can choose motions pictures based on whether or not the film conveys messages of kindness and healing as opposed to wanton killing and theft. You can choose to surround yourself with art, culture and literature choosing to become a fuller and better human being instead of relying on consumerism to make you content in the narrow sense.

Ethics is not just a class in college. It is a lifetime pursuit of the what Greeks called the “good life.” The earlier we begin ethical training and the more relevant it is, the better to begin that internal conversation that builds judgment and wisdom.

There is no doubt in my mind that this society at this time in history needs more judgment and wisdom. We are in the midst of an ethics crisis. The great financial institutions of this country have engaged in trickery and deceit on a massive scaled as well as engaging in the most reckless kind of speculation with other peoples’ money.

Concentrated around Washington and its environs, is a relatively small number of opinion leaders known as “very serious people” or the Washington Elite or the “villagers.” They believe that standardized tests solve educational problems, that cutting the benefits that feed the helpless and keep the elderly out of poverty have to be cut in a time of economic recession and high unemployment. They seem to have no idea how the great mass of Americans live and little curiosity about them. We live in the richest nation on earth and we are unable to maintain our infrastructure or feed the poor. This is immoral. Exalting greed is immoral. Evading taxes by moving money overseas is immoral and unpatriotic. Making corporations already profitable even richer by tax breaks is immoral.

We should start moral education early and if we do so, we see real effects with a little luck in our lifetimes. It is obvious that there has been failures in the moral teaching delivered to this generation.

Let us build a new consensus that “Let us have faith that right makes might, and in that faith, let us, to the end, dare to do our duty as we understand it”

James Pilant

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Should We Embed Business Ethics Into All Business Curriculum? Chuck Gallagher Weighs In


 

Chuck Gallagher’s Book

Business Ethics as a Core Course in Business Schools? What a novel idea…or do you prefer an Orange Jumpsuit and Handcuffs? « Motivational Speaker – Chuck Gallagher Business Ethics and Choices Expert

What a novel idea is right… It seems that what is OBVIOUS sometimes is missed by the masses. Honesty, integrity, and ethics are – or should be – the core foundation for which we operate in life. Yet, as Luigi Zingales points out in his article: “Business School should count ethics as a core course” it appears that all to often those who are at the top of the business food chain seem to forget the core of business fundamentals.

So here’s the deal…if your business school isn’t committed to teaching practical ethics then you can’t expect graduates to apply ethics in practical day-to-day applications.  What is practical ethics – perhaps it’s ethics applied in such a manner that it keeps you out of an orange jumpsuit and handcuffs.

Business Ethics as a Core Course in Business Schools? What a novel idea…or do you prefer an Orange Jumpsuit and Handcuffs? « Motivational Speaker – Chuck Gallagher Business Ethics and Choices Expert

I think this is a wonderful idea and it’s a painfully obvious concept. But it would be very difficult to implement. We would have to re-educate massive numbers of business faculty, more than a few of which are going to be doubtful of whether or not ethics has a place in business. There are always a certain number of those believing “It’s a dog eat dog world out there and you better get used to it.

But that one business class devoted to ethics is what’s holding what’s left of the line and not holding it very well. It’s a poetic and noble gesture much like turning an electric fan toward a hurricane to change its path. We in the world of business can do better and should.

James Pilant

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Is Teaching Business Ethics a Waste of Time?


English: , Prussian philosopher. Português: , ...

English: , Prussian philosopher. Português: , filósofo alemão. (Photo credit: Wikipedia)

Business school and ethics: Can we train MBAs to do the right thing? – Slate Magazine

The only way we’ll get our students to integrate their moral compasses with the practical tools of business we teach them is to incorporate the topic of ethics throughout the curriculum. This will require the accounting and finance and marketing professors to grasp the ethical blind spots inherent in their respective areas, and to appreciate and recognize approaches to lessening them. Professors, in other words, need to be moral architects themselves.

When you stop and ask students whether they’d like their dying words to be “I maximized profits,” a wave of laughter ripples through the class, as all but the most callous have higher aspirations for themselves. When we ask MBA students why they might want to be a CEO, the first two responses are “I want to make a difference” and “I enjoy a challenge”; “Making gobs of money” always comes in third. We need to work harder to equip students to live up to those aspirations. And if we’re not going to make a better-faith effort in this endeavor, perhaps we should remove discussion of ethics from business schools altogether. Otherwise, it serves merely as empty PR for MBA programs and to appease the consciences of those who teach in them.

Business school and ethics: Can we train MBAs to do the right thing? – Slate Magazine

Maybe, but I don’t think so. I do think the way like the article says that the way business ethics is taught now is a failure and a disaster. The article recommends embedding ethics in every part of the business curriculum. That would be nice, but it is neither necessary or likely that will happen.

I recommend that business ethics be taught the way I do it. (I know, everybody does – however, hear me out.) I believe in giving business students the opportunity to develop their own moral landscape. I use moral problems, big ones, airline crashes, economic disasters, fires, murders, etc., as examples. Then I ask students the big questions: Who’s responsible and what should be done? They decide within a set of guidelines. I tell them that for every big open ended question, that there are usually around five or so really good answers, eleven to fifteen mediocre answers and an infinity of bad inadequate poorly thought out answers. I tell them to look for the five.

By providing the students with broad guidelines and by refusing to tell them the “right” answers, I engage their judgment. They write brief essays justifying their choices, and then we do it again and again. By the end of the semester, they have created a moral framework, that I hope lasts for their lifetimes certainly for many years. My perception is that self education, self creations in a real sense is the most effective means of education.

James Pilant

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Why Moral Philosophers Aren’t More Moral Than the Rest of Us (via Ockham’s Beard)


Courtesy of Wiki Commons

This is a fun article. Of course, as an ethics teacher I should probably worry, but I will continue to have faith that I will do okay.

I am still working my way through moral philosophy so this article had relevance for me. I hope you enjoy it as well. Read the comments, some of them are pretty fire breathing.

James Pilant

Brace yourself. Or sit down. Or both. Eric Schwitzgebel and compatriots have uncovered a startling revelation: professional ethicists don’t behave any more morally or courteously than non-ethicists. Full abstract of their paper: If philosophical moral reflection tends to promote moral behavior, one might think that professional ethicists would behave morally better than do socially comparable non-ethicists.  We examined three types of courteous a … Read More

via Ockham’s Beard

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Ethics Bob has a book out!!


The Ethics Challenge

The newspapers (and our blog) are full of unethical politicians; the sports pages full of rule-breaking players and parents; the business news full of sleazy companies and greedy CEOs; the education pages full of students who cheat on exams.  What’s a person to think?
Perhaps you really do have to cheat to win.  Perhaps you need to shade the truth to get ahead.  Good people hear that “everybody does it,” and wonder.

The Ethics Challenge

It is a great pleasure for me to offer a plug for Ethics Bob’s book. Please go the web site (click the link above) and consider buying a copy.

James Pilant

This is a video from the same author –

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Steven Mintz, the Ethics Sage Talks Occupy Wall Street, the 99%ers.


I consider the Ethics Sage to be a friend. His writing ranges from business ethics to workplace bullying to economic issues and of late he has written passionately about the death penalty.

In his lastest essay he describes the criticism of the Occupy Wall Street Movement and then responds by emphasizing the serious nature of the complaints presented by the protestors. I am using more than a third of his article and I do this because I don’t want to diminish the power of his message. Of course, you should real the full article if at possible. His heart is in this and I am pleased to consider him a colleague.

Steven Mintz, the Ethics Sage

If there is a class warfare that has developed in the U.S. it is because the selfish policies of these institutions caused the financial meltdown, economic recession, and massive loss of jobs – all through no fault of us who play by the rules. The unemployed didn’t cause the crisis. Sure, some people overspent and got too deeply in debt, but that was due in part to the belief fostered by the actions of these institutions that the good times would keep rolling along. Instead, the bubble burst and it was the average American that was left holding the bag.

The Republicans attack over-regulation in the form of Dodd-Frank and Sarbanes-Oxley that, they claim, has created an uncertainty and unwillingness to expand economically by the very companies being regulated. That may be so and there is no denying it is a problem. However, the Republicans need to look in the mirror of those being regulated to see the face of who created the need for more regulation.

Our free market capitalistic system is based on the notion that by acting out of self-interest, business will create a better economic climate for all Americans. Well, it is just not working out as intended by Adam Smith. According to a survey by salary.com, the average salary and benefits paid to the CEOs of the Standard & Poor’s top 500 companies in 2010 was $11.4 million. The average CEO earned 343 times more than typical workers.

Very little has been said this election year cycle about how much the financial crisis has cost the average American in lost wealth. Well, hold on to your chairs as you look at the data provided by The Pew Charitable Trust that covers the period between 2008 and 2009:

  • $100,000: Cost to the typical American family in combined losses from declining stock and home prices
  • $5,800: Average household income loss resulting from declining economic growth
  • $14,200: Average household loss in wealth caused by plunging real estate prices
  • $66,200: Average stock market losses for households from July 2008 to March 2009
  • $2,050: Average household cost to pay for TARP, the main government program to shore up the economy
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Business Ethics Roundup 10/11/2011


1. The Ethics Sage has a new post on the civility movement at Harvard  entitled –

Harvard University Jumps on the Civility Bandwagon

Here’s a key paragraph:

The fact is administrators at Harvard are pressuring the Class of 2015 to do something no other student class has ever been asked to do in 375 years: Sign a civility pledge. The “Class of 2015 Freshman Pledge” was presented to students before an opening convocation last month. The message serves as a kind of moral compass for the education Harvard imparts. In the classroom, in extracurricular endeavors, and in Harvard Yard and Houses, students are expected to act with integrity, respect, and industry, and to sustain a community characterized by inclusiveness and civility. The “Pledge” idea seems a bit odd to me. Is Harvard saying its students have not acted civilly up until now? Has Harvard ignored civic virtue in its teachings?

It’s a good article. Certainly, I think a few more pledges in the direction of civility and morality are merited. The current American ethos seems to be heavily drawn from Milton Friedman and Gordon Gekko, in equal parts.

2. Professor Chris MacDonald writing in the Business Ethics Blog has an article intriguingly entitled –

Bullying in Pursuit of the Public Good

This would be my preference for the key paragraph – not as lively as some of the others but it contains the heart of the message – Don’t assume one side is right all the time.

Now most people are generally not very worried about major corporations, or large institutions of any kind, being bullied. And it’s easy enough to understand why. We’re usually more worried about corporations having too much power, rather than too little. But to uniformly celebrate victories of NGOs over corporations is to assume that NGOs are always right. And that’s a mistake. It’s also a mistake to assume that NGOs are in any important sense democratic, or automatically representative of the public interest.

3. Lauren Bloom writing in her blog has a new article called –

A Loving Tribute to Steve Jobs

This is the best paragraph –

But the thing that keeps coming to my mind as I think about Steve Jobs was his dedication to creating extraordinary products that inspired unprecedented customer devotion. Everyone uses cell phones, computers, and other portable electornic devices these days, but if I hear someone say they “absolutely love” one of those devices, more often than not it turns out to be an Apple product. And while cartoons aren’t everyone’s cup of tea, film buffs who enjoy animation typically love Pixar movies. One might disagree on which of Pixar’s films is the best (my personal favorite is Ratatouille but my brother lobbies hard for The Incredibles), but to my recollection, there’s been something to love about every movie Pixar has ever produced.

4. Josephson on Business Ethics and Leadership has an article called –

Hunger and Poverty: Consequences of deregulating food markets

Millions of poor people are starving in famines right now because the U.S. has relaxed regulations on commodities trading over the past 10 years. Into the breach have rushed financial companies like Goldman Sachs that poured millions of dollars into food commodities trading, in pursuit of short-term profits. In the process, they’ve created artificially soaring food prices that affect the whole world.

As went tech stocks in the 90s, and housing prices in the 00s, the price of food is now set on a financial bubble.  And human agony and death is the result.

I wish the author had developed the topic in more detail. I fell like I was in the middle of a good strong read and then was cut off in the middle.

James Pilant

 

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Andi comments on the previous post – The 99 Percenters – Why is New York the Center of their Protests?


This is a comment on a previous post –  The 99 Percenters – Why is New York the Center of their Protests?

(The article was actually motivated by one of my reader’s comments on Facebook and while I hope there are elements of a call for economic justice implied in it, I didn’t have any ethical argument except for inequality itself – James Pilant)

Here’s Andi’s response to the post –

While reading this article, I wondered about the ethics and what the author wanted us to tell. Is it the question whether it is morally right that people do the protests in NY or is it the question if it’s ethically that 1 percent of the population in NY owns about 44 percent of all income?! Or is it the more general question whether it is ethically to do protests in the street?

To answer this question it is necessary to know the definition of an ethical decision. A decision is ethically if it affects others, has alternative courses of action and is perceived as ethically relevant by one or more parties.
By comparing the questions with the definition, it becomes clear that the second question cannot be discussed under ethical terms. Only the questions whether it is ethically to to protests or to do them in NY, has alternative courses of actions.
Therefore I focus on protests and try to state my opinion about it.

To answer the question with the postmodern ethical theory (= decision is morally right if the person follows his emotions in a situation), I would say that doing protests to point to abuses is morally okay because it is a good medium to raise high attention in the press and in tv newscasts. But that’s only half of the story. To answer this question in a more rational view, the combination of postmodern ethical theories and ethics of rights and justice is needed. Here the question of fair procedures or fair outcomes comes up.

Whether protests are morally right or wrong, is difficult. What do you think about the following questions?:

Can a protest really influence decisions that there are fair outcomes for everybody? Or is it only a way to highlight unfair procedures?

My great thanks to Andi for taking the time to comment and not just to comment but to comment with intelligence and insight. I want Andi to know that author identification is up to the contributor. If you want to be clearly identified with e-mail, blog links, etc.., you have only to ask and I will modify the posting.

Thanks!!!

James Pilant

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