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o During a business recession, individuals have less discretionary income, nonprofits
lose funding, and incumbent politicians lose elections. Government is the most
powerful subsystem because it finalizes the rules for behaviors within its own
CHAPTER QUESTION 4: WHAT HAVE BEEN THE HISTORICAL SHIFTS BACK
AND FORTH SINCE THE 1930S GREAT DEPRESSION BETWEEN MANDATORY
BUSINESS REGULATIONS AND VOLUNTARY ETHICAL ENHANCEMENTS?
WAGES AND COMPENSATION
• Income inequality is not unique to capitalist societies, found in all economic systems.
Minimum Wage and Living Wage
• The minimum wage refers to the lowest wage an employer can legally pay an employee,
an amount higher than what the market would otherwise establish.
• First federal minimum wage was under Franklin Roosevelt’s administration’s Fair Labor
Standards Act of 1938.
o 25 cents an hour or $11 a week ($151.20 modern equivalent adjusted for inflation)
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• Education, which correlates with wealth, plays an important factor in income inequality.
The more education a person receives the higher his or her income, with a slight decline
occurring at the doctorate level (see Table 2.3).
• Median annual salary for a high school graduate is $35,256. About 40 percent of
population has at most a high school degree.
• Minimum wage in 29 states and about 24 cities have set higher minimum wages than
federal, which is legal to do.
o New York City: $15 an hour in 2018
• Some free market advocates oppose minimum wage laws for the following reasons:
o Violating the constitutional right of employers and employees to freely enter into
DISCUSSION ACTIVITY
Small group or whole class analysis: Assume you graduate from college and over the course of
your career you earn the median salary of a college graduate. How much income will you earn
before you retire ($55,656 x 45 years = $2.5 million)? Assume you drop out of college and over
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• A full-time employee earning a minimum wage does not derive enough income to exceed
the poverty threshold.
• A living wage refers to the amount of money a full-time employee needs to either afford
the basic necessities in life or exceed the poverty threshold.
DISCUSSION ACTIVITY
Have each student visit the Economic Policy Institute’s “Basic Family Budget Calculator”
EMPLOYEE BENEFITS
• One way to reduce salary inequalities
• Ethics in Action lists some ways to offer benefits
DEFENSE INDUSTRY INITIATIVE
• The DII was a response to mid-1980s fraud and corruption in U.S. defense industry.
• Firms sign and voluntary agree to implement self-regulatory conditions: establishing an
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FEDERAL SENTENCING GUIDELINES FOR ORGANIZATIONS (FSG)
In 1991, President George H. W. Bush issued new Federal Sentencing Guidelines with the
intention of encouraging, though not requiring, managers to implement policies and procedures
that reinforce ethical behaviors.
• Discussions about the need for guidelines were initiated during Jimmy Carter’s
BEST PRACTICES
The 16 best practices suggested by the Federal Sentencing Guidelines, divided into six
categories are:
• Organizational Personnel Issue
o Substantial authority not given to any employee known to have engaged in illegal
activities
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• Rewards and Punishments
o Employees provided incentives for performing in accordance with the program’s
provisions
• After Criminal Conduct Detected
o Reasonable steps taken to respond appropriately to the criminal conduct
o Reasonable steps taken to prevent similar criminal misconduct in the future
CULPABILITY FINE
• The judge refers to a standardized chart listing fines for specific types of crime and
organizational size, and then adjusts the fine by a culpability multiplier.
OTHER INCENTIVES
• Awards—Ethisphere Institute’s “World’s Most Ethical Companies”
• Recognitions
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DISCUSSION ACTIVITY
Have students explore the websites for Glassdoor (https://www.glassdoor.com/index.htm) and
CHAPTER QUESTION 5: WHAT ARE THE KEY DIMENSIONS OF THE ETHICAL
SYSTEMS MODEL FOR CREATING A HIGH-INTEGRITY WORK CULTURE?
HIGH-INTEGRITY WORK CLUTURE
High-integrity culture factors (Ethics Resource Center)
1. Ethical leadership at the top of the organization
2. Supervisor reinforcement of ethical behavior
3. Peer commitment to ethics by supporting one another in doing what is right
• 22 percent of the companies had a strong ethics culture.
The Ethical Systems Model presented in Figure 2.2 synthesizes these various approaches into a
systematic “best practices” framework for reinforcing ethical behaviors, and reducing ethical
risks, throughout the workplace.
Creating and sustaining a culture of trust can be achieved through the multiple support systems
in the Optimal Ethics Systems Model.
• Hiring Ethical People (Chapter 3)
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• Ethics Reporting Systems (Chapter 8)
DISCUSSION ACTIVITY
Small group and class discussion: You’ve just fired an employee for embezzling $10,000. Is the
problem solved? What other steps should you take to ensure the problem is managed
appropriately?
DISCUSSION ACTIVITY
In small groups or as an entire class: Do you believe the costs of government regulations exceed
the benefits? Why? Do we need more or less government regulations? Why?
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Chapter 2 QUESTIONS ANSWERED
Chapter Question 1: What are several salient business ethics issues in precapitalist
civilizations?
• Slavery: Columbus shipped 500 slaves back to Spain, of which 200 died on the trip. The
surviving slaves were sold at auctions. Within 2 years of Columbus’s initial contact, half
of Haiti’s 250,000 indigenous population died, mostly from new diseases caused by
European viruses.
Chapter Question 2: How did Adam Smith justify the ethics of capitalism?
• Adam Smith (1723–1790), a prominent member of the Scottish enlightenment, applied
• Adam Smith’s ethical defense of capitalism rests on the following beliefs:
o Freedom and liberty are essential values.
o A free people naturally pursue their self-interests and respect the interests of others.
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• Government intervention in the marketplace is only needed under three conditions:
o When contracts are violated
• Smith highlighted three problems that could occur if owners, in pursuit of greater profits,
did not rely on moral sentiments when dealing with laborers.
o Due to an overabundance of labor, owners could drive wages below subsistence
Chapter Question 3: What prominent labor issues challenged the fairness of free market
capitalism in the United States?
• Contrary to Adam Smith’s reasoned arguments, some people who benefitted the most
SLAVERY
• Slavery, the worst form of labor exploitation, predates capitalism and can be found in
almost all ancient societies.
STRIKES AND LABOR UNIONS
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• 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 1840, Philadelphia strikers won the right to work only 10 hours a day. This became the
standard for federal employees. But most still worked at least 10 hours a day.
• In 1905, many laborers in the United States still worked 12-hour days.
• The union movement has been hampered by the stigmas of violence and corruption.
STAKEHOLDER RIGHTS EXANDED
• Regulations Protecting Consumers, Employees, and Communities
Chapter Question 4: 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
• The minimum wage refers to the lowest wage an employer can legally pay an employee,
an amount higher than what the market would otherwise establish.
Instructor Resource
Collins, Business Ethics 3e
SAGE Publishing, 2022
• Minimum wage in 29 states and about 24 cities have set higher minimum wages than
• Some free market advocates oppose minimum wage laws for the following reasons:
o Violating the constitutional right of employers and employees to freely enter into
• A living wage refers to the amount of money a full-time employee needs to either afford
the basic necessities in life or exceed the poverty threshold.
• It is based on the principle that people working full-time should earn enough money to
financially support their families.
• More than 140 municipalities have living wage ordinances, including San Francisco,
EMPLOYEE BENEFITS
• These are one way to reduce salary inequalities.
• Ethics in Action lists some ways to offer benefits.
Instructor Resource
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DEFENSE INDUSTRY INITIATIVE
• DII was a response to mid-1980s fraud and corruption in U.S. defense industry.
FEDERAL SENTENCING GUIDELINES FOR ORGANIZATIONS (FSG)
• In 1991, President George H. W. Bush issued new Federal Sentencing Guidelines with
the intention of encouraging, though not requiring, managers to implement policies and
procedures that reinforce ethical behaviors.
• The judge refers to a standardized chart listing fines for specific types of crime and
organizational size, and then adjusts the fine by a culpability multiplier (0.05 to 4.0) that
is based on the best practices implemented by the company.
OTHER INCENTIVES
• Awards—Ethisphere Institute’s “World’s Most Ethical Companies”
Chapter Question 5: What are the key dimensions of the Ethical Systems Model for
creating a high-integrity work culture?
The Ethical Systems Model, presented in Figure 2.2, synthesizes these various approaches into
Instructor Resource
Collins, Business Ethics 3e
SAGE Publishing, 2022
Creating and sustaining a culture of trust can be achieved through the multiple support systems
in the Optimal Ethics Systems Model.
• Hiring Ethical People (Chapter 3)
• Codes of Ethics and Codes of Conduct (Chapter 4)
CHAPTER 2 ANALYSIS FOR “WHAT WOULD YOU DO?” OPENING DILEMMA
Chapter 2: Beyond Legal Compliance
Summary
• You are a staff assistant to the CEO of a large manufacturing company that produces
printers at affordable price points.
Table 6.3 Systematic Rational Ethical Decision-Making Process
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1. Who are all the people affected by the action?
You (staff assistant to the CEO), CEO, consumers, protesters.
2. What option benefits me the most (egoism)? Why?
Mixed: Complying with minimum regulations (Option A) allows the prices of printers to
3. What option does my social group support (social group relativism)? Why?
Mixed: Some managers will likely suggest that your job is to maximize profits (Option A).
However, other managers may recommend that you comply with new voluntary
4. What option is legal (cultural relativism)? Why?
5. What option is the greatest good for the greatest number of people affected
(utilitarianism)? Why?
Implement new voluntary regulation (Option B): This option may result in an increase
6. What option is based on truthfulness and respect/integrity toward each stakeholder
(deontology)? Why?
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Implement new voluntary regulation (Option B): You are respecting the natural
7. What option would a virtuous person do (virtue ethics)? Why?
Implement new voluntary regulation (Option B): Moral character can be strengthened
Note
• If answers to Questions 2 through 7 are all the same option, then do that option.
• If answers to Questions 2 through 7 are mixed, then:
o If answers to Questions 5, 6, and 7 are the same option, this option is the most ethical.
weaknesses of Questions 2 through 7.
Option
Option Strengths Based on
Application of Ethical Theories
Option Weaknesses Based on
Application of Ethical Theories
A: Comply with
minimum
regulation
This option is legal. Complying
with current and minimum
environmental regulation allows
The company’s performance may
be hurt in the long-term due to
reputational harm.
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C: Other?
Option Chosen
Option B: Implement new voluntary regulation.
Chosen Because
The option of implementing the new voluntary regulation (Option B) is
based on social group relativism, utilitarianism, deontology, virtue
How Will You
Manage Chosen
The biggest problem is losing some customers who are no longer
willing to pay a 20% premium for the printers. However, you may
CHAPTER 2 ANALYSIS FOR UP FOR DEBATE
environment.
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Yes
• The U.S. free market means that
individuals are free from government
coercion and government intervention
No
• Free market has led to unequal
distribution of wealth in the U.S.,
leaving millions of people in poverty
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interest, which lead to the benefit of
society as a whole (egoism,
utilitarianism).
• Free market capitalism encourages
exploitation of labor and violation of
human rights (cultural relativism, virtue
ethics).
• The U.S. free market prioritizes profit