CHAPTER 1: ETHICS AND BUSINESS

Introduction

• Business ethics is applied ethics—applying principles of right and wrong to business situations.
• Ethics helps businesses build trust, just like a handshake in business symbolizes trust.
• Key ethical areas in business include decision-making, responsibility, and dealing with ethical issues that
arise from globalization.

Definition of Business Ethics

• Business ethics involves applying moral principles to business activities such as transactions, technology,
and organizational behavior.
• Ethical business practices help companies build reputation, credibility, and trust among stakeholders.

Case Study: Merck & Co., Inc. discovered a drug that could cure river blindness, a disease affecting millions
in Africa and Latin America. Instead of focusing on profit, Merck distributed the drug for free, showing ethical
responsibility. This example challenges the idea that business ethics and profit are always in conflict.

Ethics vs. Profit

• Some argue that "business ethics is a contradiction”, suggesting companies prioritize profit over ethics.
• The Merck case shows that ethical behavior can lead to long-term success and a good reputation.

Long-Term Business Strategy

• Companies like Enron, WorldCom, and Arthur Andersen were unethical and faced major scandals.
• Ethical companies build strong customer and employee trust, making them more stable in the long run.

Definition of Ethics & Morality

• Ethics: The study of morality, focusing on what is right and wrong.

• Morality: Standards of right and wrong that a person or society adopts.

Case Study: BFGoodrich won a contract to design brakes for an Air Force plane. The brake design had serious
flaws, but the company falsified test results to qualify for the contract. Engineers involved knew it was wrong
but felt pressure from their company, raising ethical concerns.

Moral vs. Non-Moral Standards

• Moral Standards deal with serious issues: honesty, fairness, harm prevention.
• Non-Moral Standards include social customs, rules of etiquette, and professional norms.

Characteristics of Moral Standards

• Deal with serious matters—violating them causes harm.

• Preferred over self-interest—ethics should outweigh personal gain.
• Independent of authority—not based on what leaders say, but on universal principles.
• Universal—applies to all people, in all situations.
• Impartial—decisions should be fair to everyone.
• Connected to special emotions—violating moral standards leads to guilt and shame.

Moral Reasoning

• Applying moral standards to situations.

• Evaluating facts to make ethical decisions.
• Using logical arguments to determine what is right.
Technology & Business Ethics

• Technology like biotechnology and information systems raises ethical concerns.

• Issues include privacy, property rights, and unintended risks in business decisions.

Globalization & Ethics

• Globalization has connected economies, leading to new ethical challenges.

• Multinational corporations face dilemmas regarding cultural differences, legal standards, and fair labor
practices.

Case Study: Nike outsources manufacturing to developing countries. Factories mistreated workers—low
wages, poor working conditions. Nike was criticized because, even though they didn’t directly mistreat
workers, they could have prevented the unethical practices.

Ethical Relativism

• Some believe morality is different in each culture; what is unethical in one place, is normal elsewhere.
• Others argue that certain universal ethical standards apply everywhere, such as fairness and human rights.

Integrative Social Contracts Theory

• Hypernorms: Universal moral principles that apply to all people (e.g., human rights).
• Microsocial Norms: Moral standards that vary across cultures (e.g., business customs).

Moral Development

• People’s ethical thinking evolves through different stages of moral reasoning.

• Kohlberg’s Stages of Moral Development:
1. Preconventional Level: Focus on personal gain and avoiding punishment.
2. Conventional Level: Following societal rules and norms.
3. Postconventional Level: Developing personal moral principles based on reasoning.

Carol Gilligan’s Perspective: Men and women approach ethics differently. Men focus on justice and rules;
women prioritize relationships and caring for others.

Emotions in Ethical Decision-Making

• Ethics is influenced by emotions like guilt, shame, empathy, and anger.

• Empathy helps recognize ethical issues; anger drives action against injustices.

When Is a Person Morally Responsible? A person is morally responsible for an injury or wrongdoing if:

• They caused or failed to prevent it when they could and should have.
• They knew what they were doing.
• They acted of their own free will.

Factors That Reduce Responsibility

• Minimal involvement—only played a small role in the wrongdoing.

• Uncertainty—didn’t fully understand the consequences.
• External pressure—forced or threatened into the action.

Moral Responsibility in Organizations

• Individuals are responsible for unethical acts even if they followed orders.
• A company as a whole can be morally responsible when its culture promotes unethical behavior.
 SUMMARY OF CHAPTER 1
• Business ethics helps businesses build trust and reputation.
• Moral reasoning involves applying ethical principles to real situations.
• Globalization and technology create new ethical challenges.
• Kohlberg’s stages show how people’s ethical thinking develops.
• Moral responsibility depends on causality, knowledge, and free will.
• Organizations and individuals are accountable for unethical business practices.
 CHAPTER 2: ETHICAL PRINCIPLES IN BUSINESS
Introduction

• Ethics in business requires companies to apply moral principles when making decisions.
• Ethical business decisions consider fairness, rights, responsibility, and societal impact.
• This chapter explores major ethical theories that guide business decisions: Utilitarianism, Rights Theory,
Justice, and Ethics of Care.

Utilitarianism – Maximizing Well-being

Ethical theory that determines right and wrong based on which action produces the greatest overall good for
the greatest number of people. Developed by Jeremy Bentham and John Stuart Mill, it focuses on maximizing
benefits and minimizing harm.

• Consequences Matter – Actions are judged by their results, not intentions.

• Happiness is the Goal – The right action is the one that maximizes happiness and well-being for society.
• The Greater Good – Decisions should prioritize what is best for the majority, rather than individuals.
• Cost-Benefit Analysis – Weighing benefits vs. harms to determine ethical business choices.

Application in Business:

• Companies often use utilitarian reasoning to justify decisions:

o Outsourcing jobs to cheaper labor markets increases company profits but might harm domestic
workers.
o Environmental sustainability initiatives benefit the planet and future generations.
o Layoffs might harm employees but could save the company, benefiting shareholders and remaining
employees.

Challenges of Utilitarianism in Business

• Predicting consequences is difficult – A decision may seem good but have unforeseen negative effects.
• Justice concerns – Utilitarianism may justify sacrificing individual rights for the greater good (e.g.,
exploiting workers).

Rights Theory – Protecting Individual Freedoms

Ethical actions respect and protect individual rights, such as freedom, dignity, privacy, and property. Based
on Immanuel Kant’s philosophy, which states that people should never be treated as a means to an end.

• Human Dignity – Every person has intrinsic worth and should be treated with respect.
• Moral Rules – Ethics is not about results but following moral principles regardless of consequences.
• Universal Laws – If an action is right, it should be right for everyone (e.g., honesty should always be
expected).
• Autonomy – People must be allowed to make their own decisions without coercion or manipulation.

Application in Business

• Businesses should respect employees, customers, and stakeholders:

o Fair hiring practices ensure job applicants aren’t discriminated against.
o Product transparency protects consumer rights to know what they’re buying.
o Privacy laws safeguard user data from misuse.

Challenges of Rights-Based Ethics

• Conflicts between rights – A worker’s right to strike might harm customers needing urgent services.
• Struggles with utilitarianism – Respecting one individual’s rights might reduce overall well-being (e.g.,
refusing to reveal data that could save lives).

Justice – Fairness in Business

Justice ensures people are treated fairly, equally, and with due process. Based on John Rawls’ theory of
fairness, justice should ensure equal opportunities for all. Types:

• Distributive Justice – Fair allocation of benefits and resources (e.g., fair wages).
• Procedural Justice – Fairness in decision-making processes (e.g., transparent promotions).
• Compensatory Justice – Fair compensation for harm caused by businesses (e.g., refunds for defective
products).

Application in Business

• Companies must ensure justice in hiring, promotions, wages, and consumer rights:
o Equal pay laws aim to fix gender wage gaps.
o Workplace discrimination policies ensure everyone gets fair treatment.
o Consumer protection laws prevent exploitation through misleading advertising.

Challenges of Justice-Based Ethics

• Defining fairness is difficult – Should businesses reward merit or prioritize equal opportunity?
• Market forces create inequality – Businesses competing in capitalism may struggle to maintain justice
while maximizing profits.

Ethics of Care – Empathy & Relationships

Ethical decisions should prioritize empathy, relationships, and care for others. Developed by Carol Gilligan,
who argued ethics shouldn’t be cold logic, but should focus on human connection.

• Emotional Intelligence – Ethical decisions should consider people’s feelings and relationships.
• Context Matters – Ethics isn't just following rules—it’s understanding unique situations and needs.
• Compassion & Kindness – Ethics should focus on helping those who are vulnerable.

Application in Business

• Companies should prioritize people over profit:

o Supporting employee well-being through mental health programs.
o Ethical supply chains—ensuring fair wages and safe conditions for workers.
o Customer care policies that focus on solving problems rather than maximizing profits.

Challenges of Ethics of Care

• Conflicts with justice and rights – Favoring relationships might seem unfair or contradict legal obligations.
• Hard to quantify care – Businesses struggle to measure the value of empathy and human connection.

SUMMARY OF CHAPTER 2
• Utilitarianism – Choose actions that maximize overall well-being.
• Rights Theory – Respect individual freedoms and moral rules.
• Justice – Ensure fairness and equality in business decisions.
• Ethics of Care – Prioritize human relationships and empathy.
 CHAPTER 3: THE BUSINESS SYSTEM: GOVERNMENT, MARKETS, AND INTERNATIONAL TRADE
Introduction

• This chapter explores globalization, free trade, free markets, and government intervention in business.
• It examines different economic theories and philosophies related to free markets and trade, including
ideas from John Locke, Adam Smith, David Ricardo, and Karl Marx.
• The focus is on how governments, businesses, and economies interact, and how these interactions shape
ethical business practices.

What is Globalization?

• It refers to the increasing interconnection between nations due to trade, technology, and communication.
• Goods, services, labor, and capital move freely across borders due to globalization.
• Supported by international agreements and institutions, such as:
o World Trade Organization (WTO) – Sets trade rules among member nations.
o North American Free Trade Agreement (NAFTA) – Allowed free trade between the United States,
Mexico, and Canada.

Ethical Issues in Globalization

• Positive Impacts:
o Increased economic growth.
o Lower prices for consumers.
o More job opportunities in developing nations.

• Negative Impacts:
o Companies relocating factories to lower-cost regions, causing job loss in developed nations.
o Poor working conditions (low wages, unsafe environments).
o Environmental harm from global production.

Example: Swingline (a stapler company) moved its factory from the U.S. to Mexico and later to China.
Workers lost their jobs, and the company took advantage of lower wages abroad. Raises ethical concerns:
Should companies prioritize profits over workers? Do companies have ethical responsibilities to workers
when relocating?

John Locke’s View on Free Markets

• John Locke argued that human beings have natural rights:

o Right to liberty (freedom of choice).
o Right to property (ownership of goods, land, and labor).
• Free markets protect these rights:
o Businesses and individuals should be free to trade without government interference.
o Governments should only protect private property and enforce contracts.

Criticism of Locke’s Theory

• Locke assumes natural rights exist, but critics argue they are not universally agreed upon.
• Free markets may lead to inequality, where the rich gain more and the poor struggle.

Adam Smith’s View on Free Markets

• Adam Smith believed that free markets naturally regulate themselves through competition.
• The "Invisible Hand" theory:
o When businesses seek profit, they unintentionally promote the public good.
o Competition keeps prices low and ensures efficiency.
Criticism of Smith’s Theory

• Not all markets are fair:

o Monopolies allow large companies to control prices.
o Businesses externalize costs (pollution, worker exploitation).
• Government regulation may be necessary to ensure fairness and prevent abuse.

Example: Abbott Laboratories patented an AIDS drug, making it too expensive for poor countries. Thailand
tried producing a generic version to help its citizens. Raises the question: Should patents restrict access to
lifesaving drugs? Do companies have ethical obligations toward global health?

David Ricardo’s Theory of Comparative Advantage

• Comparative advantage: A country should focus on producing goods it can make efficiently and trade for
other goods.
• Example: If Portugal produces wine more efficiently than England, and England produces cloth more
efficiently, they should trade.

Criticism of Free Trade

• Job losses – Companies move operations where labor is cheapest.

• Environmental concerns – Free trade may lead to overuse of natural resources.
• WTO trade rules favor wealthy nations, making it harder for developing countries to compete fairly.

Karl Marx’s View on Capitalism

• Capitalism creates inequality by allowing owners to exploit workers.

• Workers receive low wages while owners keep the profits.
• Leads to economic class conflict between:
o Owners (capitalists) who control production.
o Workers (laborers) who depend on wages.

Key Concept: Alienation

• Workers feel detached from:

o Their work (they don’t control their labor).
o The products they make (owned by the company).
o Their self-worth (work is repetitive and exhausting).
o Their human relationships (treated as replaceable parts).

Criticism of Marx’s Theory

• Many countries have mixed economies, blending capitalism with government regulation.
• Workers today have better rights and conditions compared to Marx’s era.
• Marx’s revolutionary ideas led to failures in communist countries (economic inefficiency, loss of individual
freedoms).

What is a Mixed Economy?

• A combination of free markets and government regulation. Examples:

o Minimum wage laws.
o Environmental protections.
o Government oversight of monopolies.
Intellectual Property & New Business Ethics

• Modern businesses must balance profit and ethical concerns, such as:
o Patents vs. accessibility (medicine, technology).
o Fair labor practices (working conditions, wages).
o Environmental responsibility (sustainability).

SUMMARY OF CHAPTER 3
• Globalization connects markets but raises ethical concerns (worker exploitation, pollution).
• John Locke argued for property rights & free markets, but critics say inequality is a problem.
• Adam Smith believed in self-regulating markets, but critics warn against monopolies & unethical business
practices.
• David Ricardo’s free trade theory benefits economies, but developing nations may suffer.
• Karl Marx criticized capitalism, arguing that it exploits workers, but mixed economies offer solutions.
• Modern business ethics address global trade, intellectual property, and fair labor standards.
 CHAPTER 4: ETHICS IN THE MARKETPLACE
Introduction

• This chapter examines market ethics, focusing on competition, monopolies, oligopolies, and public
policies that regulate markets.
• Ethical markets are fair, maximize utility, and respect consumer freedom.
• When companies use unfair practices to manipulate competition, they create injustice, harm economic
efficiency, and restrict consumer choice.

What is Market Competition?

• Market competition exists when multiple sellers compete for customers.

• Competition keeps prices low, encourages innovation, and ensures quality products.
• When companies collude to fix prices or prevent competition, they act unethically.

Unethical Anticompetitive Practices

• Several major industries have been caught fixing prices, limiting supply, or rigging bids:
o Auto Industry – Japanese companies conspired to increase car part prices, affecting millions of vehicles.
o Publishing Industry – Apple and five publishers fixed eBook prices, raising costs for consumers.
o Shipping Industry – Companies rigged bids for ocean cargo transportation, leading to higher shipping
costs.
o Real Estate Industry – Investors conspired to lower prices in foreclosure auctions, benefiting only
themselves.

Three Economic Market Models

• Markets exist in different forms, each with different levels of competition:

o Perfect Competition – Many small firms competing fairly (most ethical model).
o Oligopoly – A few large firms control the market (limited competition, potential unethical behavior).
o Pure Monopoly – One company dominates the market (least ethical model, prone to exploitation).

Conditions of Ethical Market Competition

• Perfect competition creates the most ethical marketplace by ensuring:

o Numerous sellers and buyers – No single company controls the market.
o Easy market entry/exit – Anyone can enter or leave freely.
o Full transparency – Buyers and sellers know all available prices and products.
o Identical products – No seller has an advantage.
o Fair distribution of costs and benefits – No external negative effects.
o Utility maximization – Buyers and sellers make decisions based on efficiency.
o No external regulation – The market is free of government interference.

Ethical Benefits of Perfect Competition

• Justice: Everyone gets a fair price based on supply and demand.

• Efficiency: The market self-regulates, preventing shortages or surpluses.
• Freedom: Buyers and sellers act voluntarily without coercion.

What is a Monopoly?

• A monopoly occurs when a single firm dominates the market, limiting competition. Monopolies can set
high prices, limit choices, and reduce efficiency.
o Example: Microsoft controlled over 90% of the PC operating system market, leading to government
investigations for unfair practices.
Ethical Issues with Monopolies

• Violates justice – Overcharges consumers.

• Harms utility – Reduces efficiency and innovation.
• Limits freedom – Consumers have no alternative choices.
• Creates barriers – Other businesses cannot compete.

Case Study: Pharmaceutical Industry drug companies own patents, preventing competitors from selling
cheaper alternatives. Prices remain artificially high, making essential medicines unaffordable.

What is an Oligopoly?

• An oligopoly exists when a few large firms control an industry, reducing competition. Oligopolies often fix
prices, limit supply, or create unfair business environments.
o Examples: Airlines, Oil Companies, Tech Giants, Tobacco Industry

Case Study: U.S. airlines used mergers to reduce the number of competitors, allowing them to increase prices
and add extra fees for services.

Unethical Practices in Oligopolies

• Price-Fixing – Companies agree to raise prices together.

• Manipulation of Supply – Firms limit production to increase demand and prices.
• Market Allocation – Companies divide territories to control different regions.
• Bid Rigging – Companies collude to ensure predetermined winners in contracts.
• Tying Arrangements – Forcing buyers to purchase unnecessary additional products.
• Predatory Pricing – Temporarily lowering prices to force competitors out, then increasing them again.
• Bribery – Paying officials to prevent new competition.

Government Regulations to Prevent Unfair Markets

• Governments create laws to ensure ethical business behavior:

o Sherman Antitrust Act (1890) – Prohibits monopolies and anti-competitive practices.
o Clayton Act (1914) – Blocks price discrimination, mergers, and tying arrangements.
o Federal Trade Commission (FTC) – Regulates markets, investigates companies, and enforces fair
competition rules.

Debates on Business Regulation

• There are three main perspectives on how much government should regulate markets:
o Do-Nothing Approach – Let businesses self-regulate, believing market forces will correct unethical
behavior.
o Antitrust Enforcement – Actively break up monopolies and oligopolies to restore competition.
o Regulation Approach – Supervise industries without fully breaking them apart.

SUMMARY OF CHAPTER 4
• Perfect competition is the most ethical market model.
• Monopolies harm justice, utility, and consumer freedom.
• Oligopolies often collude to fix prices, limit supply, and prevent new competition.
• Government regulations exist to prevent unethical behavior in marketplaces.
• Businesses must compete fairly to maintain ethical standards.
 CHAPTER 5: ETHICS AND THE ENVIRONMENT
Introduction

• Businesses impact the environment through resource extraction, pollution, and climate change.
• Environmental ethics examines how companies should handle their moral responsibilities toward the
planet.
• This chapter covers key environmental issues, including sustainability, corporate responsibility, and
economic impacts.

Why Environmental Ethics Matter

• The environment provides businesses with raw materials (wood, metals, oil, water) and energy sources
(coal, natural gas).
• Pollution from business activities can harm ecosystems, human health, and future generations.
• Ethical business decisions should balance profit and environmental protection.

Major Environmental Issues

• Climate Change – Rising global temperatures due to greenhouse gases (carbon dioxide from factories,
transportation).
• Deforestation – Removing forests harms biodiversity and increases carbon emissions.
• Water Pollution – Factories and agriculture pollute rivers and oceans.
• Air Pollution – Industrial emissions harm respiratory health.
• Waste Management – Businesses generate tons of plastic, toxic waste, and non-biodegradable materials.

What Is Sustainability?

• Sustainability means meeting today’s needs without harming future generations.

• Businesses should use renewable resources, reduce waste, and cut emissions.

Three Pillars of Sustainability

• Environmental Responsibility – Reduce pollution, conserve resources.

• Social Responsibility – Ensure fair labor practices and community welfare.
• Economic Responsibility – Maintain long-term profitability while protecting the planet.

Case Study: Patagonia, an outdoor clothing brand, uses recycled materials and promotes environmental
activism. The company proves that sustainability can also be profitable.

Profit vs. Responsibility

• Businesses aim to maximize profits, but environmental protection can be costly.

• Some argue free markets will naturally encourage sustainability.
• Others believe government regulation is needed to prevent environmental harm.

Key Perspectives

• Free Market Approach – Businesses will self-regulate based on consumer demand.

• Regulation Approach – Governments should intervene to prevent pollution.
• Corporate Social Responsibility (CSR) – Companies should voluntarily adopt ethical environmental
practices.

Case Study: BP Oil Spill - In 2010, BP’s Deepwater Horizon oil spill caused massive environmental destruction.
Critics argue that weak regulations contributed to the disaster. Shows that self-regulation may not always
work.
Ethical Theories and the Environment

• Utilitarianism: Utilitarianism argues that businesses should minimize harm and maximize benefits.
Example: Companies should reduce pollution to protect global health.
• Rights-Based Ethics: The environment has intrinsic value, and future generations have a right to a healthy
planet. Businesses must respect people’s right to clean air and water.
• Justice and Fairness: Environmental destruction disproportionately affects poor communities. Wealthy
corporations should pay for the damages they cause.
• Ethics of Care: Businesses should act with compassion toward nature. Example: Supporting local farmers
instead of exploiting natural resources.

How Companies Can Be More Sustainable

• Reducing Carbon Footprint – Use renewable energy and eco-friendly materials.

• Circular Economy – Recycle, reuse, and reduce waste.
• Sustainable Supply Chains – Avoid suppliers that damage ecosystems.
• Green Innovation – Develop environmentally friendly technologies.

Government’s Role

• Environmental laws help regulate pollution.

• The Paris Agreement set international goals to fight climate change.

Case Study: Tesla creates electric cars to reduce dependence on fossil fuels. The company’s success proves
that sustainable businesses can thrive.

SUMMARY OF CHAPTER 5

• Business ethics should include environmental responsibility.

• Sustainability involves balancing economic, environmental, and social goals.
• Free markets vs. regulations—which is the better approach?
• Ethical theories provide frameworks for environmental decisions.
• Companies can reduce their carbon footprint and waste through sustainable policies.
 Chapter 6: THE ETHICS OF CONSUMER PRODUCTION AND MARKETING
Introduction

• Businesses create products and services for consumers, but they also have ethical responsibilities to
ensure product safety, honesty in advertising, fair treatment of consumers, and consumer privacy.
• This chapter examines consumer risks, arguments for and against consumer protection, manufacturer
duties, advertising ethics, and privacy concerns.

What are Consumer Risks?

• Consumers face product injuries, misleading sales tactics, poor product quality, and deceptive warranties.
• In the U.S., about 15.6 million people suffer injuries related to consumer products every year (excluding
motor vehicles), with 4,000 deaths. Examples of harmful products:
o Motor vehicles cause 30,000 deaths per year.
o Cigarettes kill 450,000 U.S. consumers annually.
o Prescription painkillers cause 14,000 deaths each year.
o ATVs kill between 600 and 800 people per year.

Misleading Business Practices

• Some companies fail to honor warranties, leaving customers financially stranded.

• Cramming: Cell phone companies add unauthorized charges for services consumers never agreed to.

Case Study: Verizon and Sprint were fined $158 million for cramming unauthorized charges onto customers'
phone bills. AT&T and T-Mobile had earlier been fined $217 million for the same deceptive practice.

Product Recalls

• The government often forces recalls of dangerous or defective products. Example recalls:
o Takata airbags exploded and injured drivers.
o GM cars had faulty ignition switches that led to crashes.
o Nestlé cookie dough was recalled due to contamination.

Should the Free Market Regulate Safety?

• Some argue that companies will provide safe products if consumers demand them.
• The market will provide safety if customers are willing to pay for it.
• No government interference means businesses compete freely and price safety accordingly.

Criticism of Market-Based Safety

• Markets don’t always provide enough safety.

• Consumers aren’t always informed about risks.
• Companies hide product flaws to maximize profit.
• Some industries lack competition, so companies have no incentive to improve safety.

Government Protection vs. Consumer Responsibility

• Consumers should research products and use them responsibly.

• But manufacturers also must minimize risks through better product design and safety measures.

What is the Contractual View?

• The relationship between businesses and consumers is like a contract.

• Companies have a moral duty to fulfill the promises they make about products.
• Consumers agree to buy based on these promises and expect fair treatment.
Four Moral Duties of Businesses

• Duty to comply – Companies must fulfill the promises they make about product quality and function.
• Duty to disclose – Companies must inform consumers about important product risks.
• Duty not to misrepresent – Companies cannot lie about their products.
• Duty not to coerce – Companies must not pressure consumers unfairly into buying.

Criticism of the Contractual View

• Businesses don’t always deal directly with consumers, so their legal duty is unclear.
• Companies can avoid responsibility through disclaimers (e.g., “Sold As-Is”).
• Unfair power imbalance – Consumers often rely on company expertise and are vulnerable to deception.

What is Due Care?

• Companies should take extra precautions to prevent consumer harm.

• Manufacturers know more than consumers, so they have a greater duty to ensure safety.
• The caveat emptor (“buyer beware”) approach is outdated—companies must take responsibility.

Case Study: Tobacco Companies lied about health risks and marketed cigarettes as safe. In 2006, the U.S.
ruled they engaged in deceptive practices but refused to force them to give up their profits.

Limits of Due Care

• How much safety is enough? Companies can’t eliminate all risks.

• Some dangers appear years later (e.g., asbestos causing cancer).

What is the Social Costs View?

• Companies should pay for any harm their products cause, even if they weren’t negligent.
• This prevents social costs from being passed onto innocent consumers.

Criticism of the Social Costs View

• Unfair to manufacturers – They can be forced to pay for unforeseen problems.

• Encourages consumer recklessness – Buyers may become careless, knowing companies will pay for
damages.

Criticism of Advertising

• Ads exaggerate product benefits or fail to provide true information.

• Materialism – Ads promote consumerism and superficial desires.
• Monopoly concerns – Big companies use ads to control markets and block smaller competitors.

Deceptive Advertising

• Bait-and-switch – Advertising cheap items to lure customers in, then pushing expensive ones.
• False testimonials – Paying fake customers to praise products.
• Misleading pricing – Falsely marking up the “original price” to make sales seem better.

Case Study: Tobacco Ads Targeting Kids, Camel cigarettes ran ads with colorful cartoon characters aimed at
teenagers. Tobacco firms marketed candy-flavored e-cigarettes to attract young smokers.

Ethical Concerns About Privacy

• Companies collect personal data (shopping habits, location, medical history, political views).
• Big data risks – Businesses sell consumer data without consent.
• Errors in personal records can prevent people from getting jobs, loans, or insurance.

Key Principles for Protecting Privacy

• Purpose – Data collection must serve a legitimate business need.

• Relevance – Only necessary information should be stored.
• Consent – Consumers must approve data collection.
• Security – Companies must protect sensitive data.

SUMMARY OF CHAPTER 6
• Manufacturers must prioritize consumer safety.
• Free markets don’t always protect consumers.
• Businesses should avoid deception and unethical marketing.
• Consumers have the right to truthful ads, fair treatment, and privacy.
 CHAPTER 7: THE ETHICS OF JOB DISCRIMINATION
Introduction

• Discrimination in the workplace affects hiring, promotions, pay, and job security.
• This chapter explores what counts as discrimination, its effects, ethical implications, and affirmative action
policies.
• The key ethical concerns center around fairness, rights, justice, and economic efficiency.

What is Job Discrimination?

• A person is denied opportunities based on race, gender, religion, age, disability, or other characteristics
unrelated to job performance.
• Individuals or groups are treated unfairly, even unintentionally, due to bias or systemic policies.
• A company's hiring and promotion practices exclude or disadvantage groups without legitimate reasons.

Forms of Discrimination

• Intentional vs. Unintentional Discrimination

o Intentional: A company deliberately excludes minorities or women.
o Unintentional: Bias is built into policies or workplace culture.
• Individual vs. Institutional Discrimination
o Individual: A single manager rejects candidates based on stereotypes.
o Institutional: The company systematically overlooks certain groups.

Examples

• A company only hires men for leadership roles, assuming women are less capable.
• A hiring manager rejects an equally qualified minority candidate based on unconscious bias.
• A workplace allows sexist or racist jokes, making certain employees feel unwelcome.

Legal Framework

• Title VII of the Civil Rights Act (1964): Protects against discrimination based on race, sex, religion, and
national origin.
• Age Discrimination in Employment Act (1967): Prohibits bias against workers over 40.
• Americans with Disabilities Act (1990): Requires businesses to accommodate disabled workers.
• Equal Pay Act (1963): Mandates equal wages for men and women performing the same job.

Income Gaps

• Women earn less than men across all industries.

• Minorities earn less than white workers in similar roles.
• Women and minorities are less likely to reach top executive positions.

Poverty and Employment

• Families led by single women experience twice the poverty rates of male-headed households.
• Blacks and Hispanics are disproportionately represented in lower-wage jobs.
• Hiring bias keeps minorities and women in lower-paying careers.

Occupational Segregation

• Women dominate low-paying roles like childcare, nursing, and secretarial work.
• Men hold higher-paying roles like engineering, law, and management.
• Minorities are underrepresented in professional and executive roles.
Statistics Supporting Workplace Discrimination

• The gender pay gap has narrowed but persists (women earn around 79% of men’s wages).
• Only 4% of Fortune 500 CEOs are women.
• Less than 1% of CEOs are Black or Hispanic.

Utilitarian Perspective (Economic Efficiency)

• Discrimination wastes talent—excluding qualified workers reduces productivity.

• Hiring based on prejudice rather than merit results in weaker performance.
• Companies that embrace diversity and inclusion are more innovative and profitable.

Rights-Based Perspective

• Every individual has a right to equal treatment.

• Discrimination violates human dignity by treating certain people as inferior.
• If bias were universalized, everyone could suffer unfair exclusion.

Justice Perspective

• John Rawls' Theory of Justice argues jobs should be distributed fairly.

• Discrimination keeps wealth and power concentrated among dominant groups.
• Equal opportunity ensures access to promotions, leadership, and fair wages.

What is Sexual Harassment?

• Quid pro quo harassment: A boss demands sexual favors in exchange for job benefits.
• Hostile work environment: Sexist comments, offensive jokes, and inappropriate behavior make the
workplace unsafe. Examples of Sexual Harassment
o A supervisor pressures an employee for a date.
o Workers mock a female co-worker, making sexist remarks.
o Women are denied promotions because male bosses believe they should "stay home."

Legal Protections

• Equal Employment Opportunity Commission (EEOC) sets workplace policies.

• Sexual harassment is prohibited under Title VII.
• Employers must prevent and address harassment.

What is Affirmative Action? Policy designed to:

• Increase diversity in hiring and promotions.

• Reduce barriers faced by minorities and women.
• Address historical discrimination and its lasting effects.

Common Affirmative Action Practices

• Targeted hiring initiatives: Expanding job openings to minorities and women.

• Mentorship and training programs: Helping underrepresented workers develop leadership skills.
• Educational diversity programs: Ensuring fair representation of minority students.

Arguments FOR Affirmative Action

• Compensatory Justice: Helps correct historical injustices.

• Promotes diversity: Improves creativity, innovation, and problem-solving.
• Reduces bias: Provides opportunities where discrimination previously existed.
Arguments AGAINST Affirmative Action

• Reverse discrimination: Some argue white males are unfairly excluded.

• Merit-based hiring: Critics say job skills—not race or gender—should determine hiring.
• Temporary necessity: Once diversity improves, preference policies should end.

Legal Rulings on Affirmative Action

• Affirmative action must be "narrowly tailored" to ensure fairness.

• Quotas are illegal, but diversity goals are acceptable.
• Preference can be given to minorities and women only when qualifications are equal.

SUMMARY OF CHAPTER 7
• Job discrimination happens when people are denied opportunities based on race, gender, or other factors
unrelated to job performance.
• Women and minorities earn less than white men, hold fewer top jobs, and face higher poverty rates.
• Utilitarian, rights-based, and justice arguments show why discrimination is unethical.
• Sexual harassment is a major issue that creates hostile work environments.
• Affirmative action seeks to correct past discrimination but is highly debated.
• Federal laws protect workers from discrimination, but challenges remain.