PHIL 1273 1st Edition Lecture 23 Outline of Last Lecture I. Employers and Employees (continued)A. Whistleblowing (continued)B. LoyaltyC. Segue to Last TopicOutline of Current Lecture I. Ethics in MarketsA. Firms and those affectedB. FriedmanC. Response to Friedman – StoneCurrent LectureI. Ethics in MarketsA. Firms and those affected1. Shareholders have a direct financial stake2. Stakeholders are affected by firm’s actions even if not a party to transactions3. What is owed to each group? What is the moral priority?4. Frame as issue of social responsibility5. Argument from all three moral theoriesB. Friedman (1912-2006)1. Noted economista. Offered broadly libertarian defense of free market against New Deal/post-war regulationb. Capitalism and Freedom (1962)2. Holds that “there is one and only one social responsibility of business: to use its resources and engage in activities designed to increase its profits so long as it stays within the rules of the game” (Friedman 253)3. On social responsibilitya. Look at managers of corporationsb. Definition: “What does it mean to say that the corporate executivehas a “social responsibility” in his capacity as businessman? If this statement is not pure rhetoric, it must mean that he is to act in some way that is not in the interest of his employers… Insofar as These notes represent a detailed interpretation of the professor’s lecture. GradeBuddy is best used as a supplement to your own notes, not as a substitute.his actions in accord with his “social responsibility” reduce returnsto stockholders, he is spending their money… But if he does this, he is in effect imposing taxes, on the one hand, and deciding how the tax proceeds shall be spent, on the other” (Friedman 250)c. Deontological argumenti. “On the level of political principle, the imposition of taxes and the expenditure of tax proceeds are governmental functions… If [business people] are to be civil servants, then they must be elected through a political process. If they are to impose taxes and make expenditures to foster ‘social’ objectives, then political machinery must be set up to make the assessment of taxes and to determine througha political process the objectives to be served” (Friedman 251)ii. Tax metaphor- Taking away money from people without their specific agreement- This is wrong, outside a process that supplies broad consent (majority rule)iii. Business people have no right to use their firms’ money in this wayd. Utilitarian argumenti. “On the grounds of consequences, can the corporate executive in fact discharge his alleged ‘social responsibilities’? On the one hand, suppose he could get away with spending the stockholders’ or customers’ or employees’ money. How is he to know how to spend it?” (Friedman 251)ii. Leave aside the principle- Say shareholders pass a social responsibility resolution, up to managers to carry outiii. But business people lack the knowledge required to get good consequencese. Virtue argumenti. Not explicitly but note appeal to purpose of firmii. “In a free-enterprise, private-property system, a corporate executive is an employee of the owners of the business. Hehas direct responsibility to his employers. That responsibility is to conduct the business in accordance with their desires, which generally will be to make as muchmoney as possible while conforming to the basic rules of the society, both those embodied in law and those embodied in ethical custom” (Friedman 250)iii. Purpose of firm sets standard for what makes a good employee make profitiv. Doing other things (pursue social responsibility) works against that standard, so it makes for bad employeesv. Purpose of an organization is the virtues of its members- In business, social conscience is not a virtue- Looks like it is immoralC. Response to Friedman – Stone1. Same issue: moral responsibility of managers of a corporation, but opposite conclusiona. Stone denies it is wrong for managers to adopt social responsibility policies, that is, social responsibility can be rightb. What’s his view on how the purpose of firms sets the moral agenda for managers?2. Examines for arguments against social responsibilitya. Promissory Statementi. Management promises shareholders it will act to maximizetheir profitsii. What kind of argument is this?- Promise establishes a duty- Deontological iii. Stone’s rebuttal- False premise: no such promise- “But that simple model is hardly the one that obtains between the management of major corporations and their shareholders. Few if any American shareholders ever put their money into a corporation upon the express promise of management that the company would be operated so as to maximize their returns” (Friedman 254)- In any event, other duties can outweigh