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Part One
General Issues in Business Ethics
Part One of the text covers, “General Issues in Business Ethics,” and consists of an Introduction
followed by Chapter 1 – Business Ethics: The Controversy; Chapter 2 — Ethical Reasoning in
Practice; Chapter 3 — Truth Telling.
The introduction to Part One (pp. 13-20) is not as essential as the introduction of the book in
understanding what follows. That is, it is a more typical introduction running through what will be
summary of the material to be presented. This manual will summarize material as we cover each
chapter.
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Chapter 1 — Business Ethics: The Controversy (pp. 21-53)
Chapter 1 starts with a case study (pp. 21-33). We will see this pattern throughout the text.
The particular case study that begins Chapter 1 concerns the H. B. Fuller Company of St. Paul,
Minnesota. In 1985, H. B. Fuller, a company renowned for its ethical behavior, came to the realization
(through a press report) that many children and young adults in Central and South America had been
sniffing its glue products to get high. The news reports particularly highlighted Honduras. A
Honduran subsidiary of a subsidiary of H. B. Fuller manufactured a glue used in the production and
repair of shoes. The manufacture of shoes was a substantial portion of the manufacturing industry in
Honduras, a very poor country. The glue that the children wound up sniffing was sold only to
industry. Somehow, the glue was being resold in small quantities to people seeking to get high.
However, it did not seem that H.B. Fuller or any of its staff was part of this distribution. As a matter
of fact, glues made by other companies were also being inhaled in this abusive way, although clearly
H. B. Fuller’s glue was the predominant one in the marketplace.
The controversy is: Whether ethics can be applied to business, and if so, how? There seems to be no
easy answer.
Article: “The Social Responsibility of Business Is to Increase Its Profits” by Milton Friedman (pp.
34-39)
The first article that follows the case study is called “The Social Responsibility of Business Is to
Increase Its Profits” by Nobel prize winning economist Milton Friedman of the “Chicago
School.” In this article, he talks about what it is that business is to do to fulfill its social responsibility.
As a free-market economist, he decides that the only social responsibility business has is to increase
its profits within the bounds of the law. The theory behind this is that as a business prospers and gains
more profit, it will naturally be subject to public scrutiny and perhaps laws against it or against its
practices. Over the course of economic history in the United States, we certainly have seen this many
times. On a very mundane level, every business must comply with some government regulations; on a
more spectacular level, we could consider the breakup of John D. Rockefeller’s Standard Oil under
the Sherman Antitrust Act, and other cases, up to the present day, as Microsoft has been found to have
been engaging in some monopolistic practices, and has entered into a settlement with the U. S.
Government (and is coming under broader scrutiny by the European Union). Friedman points out that
if we ask business to do anything more than seek profit while obeying legal regulations, we are setting
a role that the business did not ask for, should not have planned on, and cannot fulfill.
Article: “Managing for Stakeholders” by R. Edward Freeman (pp.39-53)
A second article follows by R. Edward Freeman. He is a Professor of Business Administration at the
University of Virginia. In his article, Freeman takes a very contemporary approach to the way one
may theoretically deal with business. The title of the article is “Managing for Stakeholders,” and in it,
Freeman explains that stakeholders consist of more than the stockholders. Stakeholders include
anyone who has a relation with the business, including stockholders, customers, clients, employees,
subcontractors, suppliers, people who live near the business center and in the vicinity of the business
itself, the town in which the business is located, etc. Freeman states that there are good reasons to
believe that stakeholders have a claim on the business’s responsibilities. He points out, as a parallel
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example, that through the years, the idea that one has to have an existing contract with a business in
order to sue it has been broadened so that almost anyone who has any type of interaction with a
business has a claim under which he or she could sue if the interaction turns out badly because of
something the business did.
Freeman also takes on what he calls “the Separation Fallacy”– the idea that ethics has nothing to do
with business or, as it is sometimes stated, that “business ethics is an oxymoron.” He goes on to posit
“The Integration Thesis” in which he says that all business decisions have some ethical content, and
should have some ethical principles applied to them. He also posits what he calls “The Responsibility
Principle,” in which he claims that responsibility and ethics always go together. And, since a business
is responsible for its actions it is also responsible to make sure that those actions are ethical. In his
summary he engages in several philosophical arguments, including an argument from consequences,
an argument from rights, an argument from character, and a pragmatic argument — all of which he
claims support the idea that businesses should be held to ethical standards.
Teaching Hints
Be sure to impress upon your students the need to read each article carefully. Pick out which concepts
you want them to learn and be able to apply. Give them some examples from outside the book, either
from the Discussion Questions in this manual or your own examples, to apply the concepts you want
them to have facility with to, so you can see if your students have acquired an understanding of the
material.
Discussion Questions
1. Consider the question of “attractive nuisance” — under law in the United States, one who sets
up an attractive nuisance is liable for the damage it may cause. An example of an attractive
nuisance is an unfenced swimming pool in a neighborhood with many children. If a child
sneaks onto your property, gets into the pool, and drowns, you will be held liable. Is this fair?
2. A corporation is often defined as an artificial being (or artificial person) created by law. Can
we, therefore, expect a corporation to act according to the same standards that we would
expect a person to follow; specifically, can we apply ethical standards to a corporation?
3. You rent an off-campus apartment with several friends. Each of you has your own rental
agreement with the landlord covering your room and a share of the common areas. One of
your friends decides to leave, and works out arrangements with the landlord (the only person
to whom he or she had a legal obligation), but you do not find out they are gone until you see
that their room is empty and that the microwave they brought is gone from the kitchen. Have
they done the right thing?
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Resources for further study — Film, Literature, and the Web:
Dakota State University, South Dakota, “Inhalant Abuse – The Signs and Concerns,” retrieved April
18, 2007 from http://www.departments.dsu.edu/student_services/ra_projects/huffing.htm
Lee’s Summit School District, Missouri, “Huffing,” retrieved April 18, 2007 from
http://www.leesummit.k12.mo.us/parents&students/huffing.htm
Multinational Monitor, December 1995, “Glue Maker’s Image Won’t Stick,” Paul Jeffrey, retrieved
April 18, 2007 from http://pangaea.org/street_children/latin/fuller.htm