Instructor Resource
Collins, Business Ethics 3e
SAGE Publishing, 2022
Instructor Manual
Chapter 2: The Evolution of Business Ethics
CHAPTER 2 LEARNING OBJECTIVES AND END OF CHAPTER QUESTIONS
After reading this chapter, you will be able to
2.1 Describe salient business ethics issues in precapitalist civilizations.
End of Chapter Question 1: What are several salient business ethics issues in
2.2 Summarize the ethical foundation of capitalism as argued by Adam Smith in the
1700s.
End of Chapter Question 2: How did Adam Smith justify the ethics of capitalism?
2.3 Explain ethical issues experienced in the United States since adopting capitalism.
2.4 Appraise the historical shift back and forth between mandatory business
regulations and voluntary ethical enhancements.
End of Chapter Question 4: What have been some of the historical shifts back and
2.5 Apply the Ethical Systems Model to create a high-integrity work culture.
End of Chapter Question 5: What are the key dimensions of the Optimal Ethics
Instructor Resource
Collins, Business Ethics 3e
SAGE Publishing, 2022
CHAPTER 2 OVERVIEW
Business ethics must be understood from an historical perspective to appreciate how the current
economic system and regulatory system has evolved over time. The movement of history has
been toward the creation of a wealthy and just society, which requires balancing economic
This chapter describes the business dimension of Christopher Columbus’s arrival,
colonial settlements at Jamestown and Plymouth, and the buildup to the Revolutionary War. The
philosophically inclined founders of the United States, wanting to create the most just political
and economic system in the world, chose capitalism for the new nation’s economy because of its
CHAPTER 2 LECTURE OUTLINE
Suggested Time: 2 to 3 hours of class time is recommended to present this chapter.
I. Chapter Question 1: What are several salient business ethics issues in
precapitalist America?
Early Civilizations and Business Ethics
II. Chapter Question 2: How did Adam Smith justify the ethics of capitalism?
Instructor Resource
Collins, Business Ethics 3e
SAGE Publishing, 2022
III. Chapter Question 3: What prominent labor issues challenged the fairness of free
market capitalism in the United States?
Unfair Competition
V. Chapter Question 5: What have been some of the historical shifts back and forth
since the 1930s Great Depression between mandatory business regulations and
voluntary ethical enhancements?
Wages and Compensation
VI. Chapter Question 6: What are the key dimensions of the Optimal Ethics
Systems Model for creating a high-integrity work culture?
A High-Integrity Work Culture
The Ethical Systems Model
Instructor Resource
Collins, Business Ethics 3e
SAGE Publishing, 2022
CHAPTER 2 SUPPORTING MATERIALS
Textbook Inserts
Ethical Dilemma Analysis
• What Would You Do: Beyond Legal Compliance
Tables and Figures
• Table 2.1: Median Personal Income by Educational Attainment
Self-Assessment (in Vantage only)
• Self-Assessment 2.1: Conscientiousness
Thematic Boxes
CHAPTER QUESTION 1: WHAT ARE SEVERAL SALIENT BUSINESS ETHICS
ISSUES IN PRECAPITALITST AMERICA?
THE HISTORIAL FLOW OF CIVILIZATION AND BUSINESS ETHICS
Begin with a few broad comments about life and business ethics right now, then go back in
DISCUSSION ACTIVITY
Is the world getting better or worse over the past few decades?
Instructor Resource
Collins, Business Ethics 3e
SAGE Publishing, 2022
Have students close their books and give them a 4-item quiz based on the discussion of the flow
of civilization.
• Take a tally on poverty flow since 1993 and give them the 3 options (doubled to 4 billion,
stayed the same at 2 billion, or reduced in half to 1 billion).
DISCUSSION ACTIVITY
Do students agree or disagree with Michael Shermer’s quote:
According to Michael Shermer (2015), a historian of science, “we are living in the most moral
period in our species’ history” where “liberal democracies with market economies are more
prosperous, more peaceful, and fairer than any other form of governance and economic system.”
• History is driven by individuals seeking to improve the quality of their lives.
• Martin Luther King Jr., influenced by the writings of Theodore Parker, maintained
that “the arc of the moral universe is long, but it bends toward justice.” People aspire
Instructor Resource
Collins, Business Ethics 3e
SAGE Publishing, 2022
• During the 1700s and 1800s, it was morally permissible to hire young children and
adults to work 16 hours a day, 6 days a week, in sweatshop conditions with hazardous
EARLY CIVILIZATIONS AND BUSINESS ETHICS
• Some people tend to blame capitalism for unethical business practices. But people
have been engaged in work activities since the beginning of time. Both ethical and
unethical business activities occurred in all ancient civilizations.
• Neanderthal bone findings strongly suggest that tribes lacking a necessary resource,
• Tools, weapons, and living accommodations were privately possessed yet
communally shared for the well-being of the tribe. The needs of the collective had to
be put above individual wants and desires. Essential virtues needed to maintain peace
within this social structure included justice, group loyalty, and generosity. Courage
Instructor Resource
Collins, Business Ethics 3e
SAGE Publishing, 2022
• The Code of Hammurabi, the oldest written set of laws for maintaining civil
relationships among people, dates back to 1754 BC Mesopotamia. Unethical business
EUROPEAN SETTLEMENT OF AMERICA AND BUSINESS ETHICS
Why did Christopher Columbus risk his life to be the first person to sail west to get to India?
• In 1453, the Ottoman Turks conquered Constantinople. The overland spice trade
routes linking Europe to India fell under the auspices of Ottoman government
Ethical Issues?
• Columbus concluded that the indigenous people would be relatively easy to conquer,
enslave, and Christianize.
• Columbus kidnapped twenty indigenous people and boarded them on his return ship
Instructor Resource
Collins, Business Ethics 3e
SAGE Publishing, 2022
Creation of Charters
• England, France, and the Netherlands competed with Spain to find riches in
“America.”
• In the 1580s, Queen Elizabeth I of England granted Walter Raleigh and his business
associates a charter to establish a colony in the area of modern-day Virginia and
Ethical Issues?
• English colonists stole from indigenous tribes when food supplies ran low. Warfare
weather conditions, or from an attack by indigenous people or Spanish sailors.
Virginia
• King James succeeded Queen Elizabeth and chartered the Virginia Company of
Ethical Issues?
• The laborers consisted mostly of indentured servants required to serve their masters
Instructor Resource
Collins, Business Ethics 3e
SAGE Publishing, 2022
• Many Jamestown colonists died from starvation or in military battles with indigenous
tribes who opposed encroachment on their lands and the kidnapping of their children
Pilgrims
• The Pilgrim settlement at modern-day Plymouth, Massachusetts was also a business
venture. The Plymouth Company, an association of merchants in England, obtained
a charter to establish a trading colony on the northeast coast of America and recruited
the Pilgrims as its settlers. The Pilgrims were willing to take on the risk for religious
Ethical Issues?
• The Mayflower eventually anchored in southeastern Massachusetts, near corn fields
that had been harvested by indigenous tribes for thousands of years. Peaceful
Instructor Resource
Collins, Business Ethics 3e
SAGE Publishing, 2022
Buildup to Revolutionary War
• By 1774, more than 2.3 million European colonists participated in highly regulated
Ethical Issues?
• Business and tax policies exacerbated anti-England sentiments. The British
government placed restrictions on entrepreneurship, trade, travel, and political
• Wealthy colonial farmers and merchants protested that they wanted greater say in
self-government. Britain’s taxing polices were unethical, they claimed, because no
elected colonialist served in British Parliament. Taxation without representation
violated the British Constitution. British troops occupied Boston to silence colonial
dissent, which worsened the situation.
• The Boston Tea Party was the result of the East India Company’s monopolistic
Instructor Resource
Collins, Business Ethics 3e
SAGE Publishing, 2022
York, and Charleston. The Massachusetts governor, loyal to England, refused to let
the ships depart. During the standoff, a group of radical colonialists snuck on the
DISCUSSION ACTIVITY
In small groups or as an entire class: The arrival of Europeans—Columbus, Roanoke, Jamestown
—created a clash of cultures where European traders with greater military technology initially
DISCUSSION ACTIVITY
In small groups or as an entire class: The British established monopolies, a highly regulated
CHAPTER QUESTION 2: HOW DID ADAM SMITH JUSTIFY THE ETHICS OF
CAPITALISM?
ADAM SMITH’S CAPITALISM
James Madison, Benjamin Franklin, and Alexander Hamilton relied on the writings of Scottish
Instructor Resource
Collins, Business Ethics 3e
SAGE Publishing, 2022
Background Info
• Adam Smith (1723–1790), a prominent member of the Scottish enlightenment,
• Smith recommended abandoning mercantilist policies that sanctioned monopolies,
put quotas on imports, and regulated tradesmen. Key management positions were
filled based on family and political connections rather than individual merit. The lack
of competition under mercantilism, Smith argued, led to high prices, low-quality
products, and shortages.
Adam Smith’s ethical defense of capitalism rests on the following beliefs:
• Freedom and liberty are essential values.
• A free people naturally pursue their self-interests and respect the interests of others.
DISCUSSION ACTIVITY
Small group or whole class discussion: Adam Smith maintained that, if given the opportunity to
steal something without anyone looking, most pepole would not because of our conscience,
Instructor Resource
Collins, Business Ethics 3e
SAGE Publishing, 2022
• Government intervention in the marketplace is only needed under three conditions:
o When contracts are violated
o When merchants abuse their freedom by committing injustices against others,
SMITH ON LABOR ISSUES
Smith highlighted three problems that could occur if owners, in pursuit of greater profits, did not
rely on moral sentiments when dealing with laborers.
• First, due to an overabundance of labor, owners could drive wages below subsistence
DISCUSSION ACTIVITY
Have students choose the number that represents the extent to which they each believe the U.S.
version of free market capitalism experienced right now is ethical.
#1: Very Ethical
Instructor Resource
Collins, Business Ethics 3e
SAGE Publishing, 2022
CHAPTER QUESTION 3: WHAT PROMINENT LABOR ISSUES CHALLENGED THE
FAIRNESS OF FREE MARKET CAPITALISM IN THE UNITED STATES?
Over the past 200 years industrialized society has doubled life expectancy, eliminated famine,
and developed a non-ending list of technological innovations that enhance the quality of life.
Purchasing power increased tenfold during the twentieth century.
• In slightly more than a century, the United States economy grew from family farms and
UNFAIR COMPETITION
• The Constitution provided patent rights to inventors, which helped fuel innovation. The
• The Industrial Revolution spread from Britain to the United States in the early 1800s.
Technological innovation and the division of labor significantly increased productivity
and reduced the price of products.
Instructor Resource
Collins, Business Ethics 3e
SAGE Publishing, 2022
• The growth in the number of factories attracted more European immigrants seeking an
alternative to the poverty they had been experiencing.
• Westward expansion required the transportation of goods to new markets, and resulted in
the creation of integrated industries, cheaper products, and job growth; technologies
ANTI-TRUST LAWS
• Capitalism has an inherent contradiction.
o Competition is good in part because it forces companies to become more efficient and
effective at providing quality goods at affordable prices.
o Successful companies increase market share and unsuccessful companies go bankrupt
Instructor Resource
Collins, Business Ethics 3e
SAGE Publishing, 2022
• The federal government attempted to counteract these anti-competitive trends by creating
the Interstate Commerce Commission in 1886, which determined reasonable railway
rates.
DISCUSSION ACTIVITY
Small group or whole class discussion: There is a fine line between an oligopolistic market and a
monopoly. What percentage of a market should (your personal belief) a company, such as
Contrary to Adam Smith’s reasoned arguments, some people who benefitted the most from
capitalism misused their dominant positions to the detriment of laborers. The most notable
ethical problems included slavery, working conditions, and income and wage inequality.
SLAVERY
• Slavery, the worst form of labor exploitation, predates capitalism and can be found in
almost all ancient societies.
Instructor Resource
Collins, Business Ethics 3e
SAGE Publishing, 2022
LABOR UNIONS
• A labor union is an association of employees that advances its members interests, such
as wages, benefits, work rules, and other conditions of employment, through collective
• Philadelphia shoemakers formed the first local union in 1792, but 13 years later a jury
composed of merchants found eight members of the shoemakers union guilty of engaging
in a criminal conspiracy to raise wages. Business owners claimed that unions violated
• The union movement has been hampered by the stigmas of violence and corruption.
Violence became a union strategy in response to some business owners hiring thugs to
beat up union organizers. People with criminal records rose to union leadership positions
and extorted money from businesses in exchange for either not striking or striking a
Instructor Resource
Collins, Business Ethics 3e
SAGE Publishing, 2022
• The highest unionization rates are in the public sector (37 percent), namely employees in
government, education, and protective services, such as fire fighters and police officers.
• In the private sector, 7.2 percent of employees are union members.
STAKEHOLDER RIGHTS AND THE INTERPENETRATING SYSTEMS MODEL
Since the 1960s, profit maximization and the rights of owners came under attack by social
activists who believed business was a detriment, rather than a contributor, to improving the
• Congress under a democratic party presidential administration
o Protecting Consumers, Employees, and Communities
▪ Congress approved the Food, Drug, and Cosmetic Act Amendments
(1962), Air Pollution Control Act (1962), Equal Pay Act (1963), Civil
Instructor Resource
Collins, Business Ethics 3e
SAGE Publishing, 2022
• Congress under republican party presidential administration
o Protecting Consumers, Employees, and Communities
▪ Congress, under Richard Nixon and Gerald Ford’s Republican Party
presidential administrations, approved a similarly large number of
• In the 1980s, Republican President Ronald Reagan argued that the high costs associated
with the onslaught of government regulations outweighed the benefits.
• The Reagan and George H. W. Bush Administrations began to deregulate the economy,
INTERPENTRATING SYSTEMS MODEL
• Figure 2.1, Interpenetrating Systems Model, segments human activities into four major
subsystems: government, business, nonprofits, and personal-communal, each with its
own purpose.
o Governments exercise control over populations by developing and enforcing rules
and regulations, businesses provide goods and services by generating wealth for