Ethical Theory

and Business
SEVENTH EDITION

Edited by

Tom L. Beauchamp
Georgetown University

Norman E. Bowie
University of Minnesota

Pearson Education International

 Contents

PREFACE xiii

Chapter One
ETHICAL THEORY AND BUSINESS PRACTICE 1

FUNDAMENTAL CONCEPTS AND PROBLEMS

Morality and Ethical Theory 1
Morality and Prudence 2
Morality and Law 4
The Rule of Conscience 5
Approaches to the Study of Morality 6
Relativism and Objectivity of Belief 7
Moral Disagreements 10
The Problem of Egoism 12

NORMATIVE ETHICAL THEORY

Utilitarian Theories 17
, Kantian Ethics 22
Contemporary Challenges to the Dominant Theories 28
Rights Theories 28
Virtue Ethics 31
Feminist Ethics and the Ethics of Care 33
Common Morality Theories 35
A Prologue to Theories of Justice 38

ANALYSIS OF CASES
The Case Method in Law 39
The Case Method in Business 40
The Case Method in Ethics 40
Ethical Theory and Case Analysis 41

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Chapter Two
THE PURPOSE OF THE CORPORATION 45

INTRODUCTION

STOCKHOLDER MANAGEMENT VERSUS STAKEHOLDER MANAGEMENT

Milton Friedman, The Social Responsibility of Business 1s to Increase Its Profits 50
R. Edward Freeman, A Stakeholder Theory of the Modern Corporation 55

W I C H VIEW IS RIGHT?
John Hasnas, Two Normative Theories of Business Ethics: A Critique 65
John R. Boatright, What's S o Special About Shareholders? 75

LEGAL PERSPECTIVES
Michigan Supreme Court, Dodge U. Ford Motor Co. 83
Supreme Court of New Jersey, A. F! Smith Manufacturing Co. U . Barlow 85
Johnson & Johnson: Our Credo 88

CASES
Case 1: Shutdown at Eastland 89
Case 2: Merck & River Blindness 90
Case 3: H. B. Fuller in Honduras: Street Children and Substance Abuse 91

Suggested Supplementary Readings 93

Chapter Three
CORPORATE CHARACTER AND INDIVIDUAL RESPONSIBILITY 95

INTRODUCTION

ACCOUNTABILITY AND RESPONSIBILITY

Jennijii Moore, Corporate Culpability under the Federal Sentencing Guidelines 99
Manuel Velasquez, Debunking Corporate Moral Responsibility 109
Russell l? Boisjoly, Ellen Foster Curtis, Eugene Mellican, Roger Boisjoly and the Challenger
Disaster: The Ethical Dimensions 123
Lisa Belkin, How Can We Save the Next Victim? 136

LEGAL PERSPECTIVES
Federal Sentencing Guidelines-Sentencing of Organizations 147
United States Court of Appeals for the First Circuit, United States U.Bank of Na0 England 152
Supreme Court of South Dakota, Stute of South Dakota U. Hy Vee Food Stores, Inc. 156
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W E S
Case 1: An Auditor's Dilemma 158
Case 2: Sears Auto Centers 159
Case 3: H. J. Heinz Company: The Administration of Policy 161
1'

Chapter Four
ACCEPTABLE RISK 166

Ii INTRODUCTION

CONSUMER RISK
Manuel G. Velasquez, The Ethics of Consumer Production 175
Gemge G. Brenkert, Strict Products Liability and Compensatory Justice 184

INVESTMENT RISK
Robert E. Fredcrick und I?! Michael Hoffman, The Individual Investor in Securities Markets:
An Ethical Analysis 189
John R. Boatright, Ethical Issues in Financial Services 196

OCCUPATIONAL RISK
Ruth R Faden und Tom L. Beuuchamp, The Right to Risk Information and the Right
to Refuse Workplace Hazards 204
John R. Boathght, Occupational Health and Safety 211

ENVIRONMENTAL RISK
Richard '7: De George, Safety, Risk, and Environmental Protection 222
Manuel G. Velasquez, Ethics and the Environment 227

LEGAL PERSPECTIVES
Supreme Court of New Jersey, Henningsen U . Bloomfield Motors, Inc. und Chrysler
Coqoration 237
Supreme Court of the United States, Automobile Workers U. Johnson Controls, Inc. 241
Supreme Court of the United States, United States, Petitioner U . Bestjoods et al. 244
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Case 1: Protecting Consumers Against Tobacco 247

Case 2: Exposing Workers to Plutonium 248
Case 3: The McDonald’s Polystyrene Case 249
Case 4 Enron and Employee Investment Risk 251
Case 5: OSHA Noncompliance and Security 252
Case 6: Texaco in the Ecuadorean Amazon 252

Suggested Supplementary Readings 254

Chapter Five
ETHICAL TREATMENT OF EMPLOYEES 257

INTRODUCTION

I THE HIRING AND FIRING OF EMPLOYEES

Patriciu H. Werhane und TuraJ Radin, Employment at Will and Due Process 266
Kichard A. Epstein, In Defense of the Contract at Will 274

PRNACY
Joseph K u p f i The Ethics of Genetic Screening in the Workplace 282
Andrew C. Wicks, Lowell E. S a i q Rebekah Harty, Steuen V? Gajewski, Miriam Marcus-Smith,
Screening Workers for Genetic Hypersusceptibility: Potential Ethical, Legal, and Social
Implications from the Human Genome Project 289

WHISTLEBLOWING
Michael Davis, Some Paradoxes of Whistleblowing 297
Ronald Duska, Whistleblowing and Employee Loyalty 305

LEGAL PERSPECTIVES
Superior Court of New Jersey, Warthen U. Toms River Community Memorial Hospital 310
Superior Court of New Jersey, Potter U . Villuge Bank of New Jersey 314

CASES
Case 1: The Reluctant Security Guard 318
Case 2: A Matter of Principle 321
Case 3: Health and Genetic Screening 322

Suggested Supplementary Readings 323

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Chapter Six
DIVERSITY AND DISCRIMINATION IN THE WORJWLACE 325

INTRODUCTION
George Sher, Diversity 331

AFFIRMATIVE ACTION AND REVERSE DISCRIMINATION

Thomas Nagel, A Defense of Affirmative Action 339
N. Scott Arnold, Affirmative Action and the Demands ofJustice 343
Tom L. Beauchamp, Goals and Quotas in Hiring and Promotion 352

ARTICLES
Deborah Epstein, Can a “Dumb A s s Woman” Achieve Equality in the Workplace?
Running the Gauntlet of Hostile Environment Harassing Speech 361
E u p VOZokh,What Speech Does “HostileWork Environment”Harassment Law Restrict? 369

LEGAL PERSPECTNES
Supreme Court of the United States, Local28 of the Sheet Meta1 Worker’sInternational
Association U. Equal Employment Opportunity Commission 374
Supreme Court of the United States, City ofRichmond u.J A. Croson Company 379
Supreme Court of the United States, Mmitor Sauings Bank, I S B v. Vinson, et al. 384
Supreme Court of the United States, Teresa Harn’s, Petitioner U . Forklijit Systems, Inc. 389

CASES
Case 1: Increasing Minority Coaches in the NFL 391
Case 2: Sing’s Chinese Restaurant 392
Case 3: Wards Cove Packing Co. v. Atonio 393
Case 4: Weber and the Kaiser Aluminum Steelworkers Plan 394
Case 5: Firefighters Local Union No. 1784 v. Stotts 395
Case 6: Promotions at Uptown Bottling and Canning Company 396
Case 7: Freedom of Expression in the Workplace 397
Case 8: “Harassment”at Brademore Electric 397
Suggested Supplementary Readings 399

Chapter Seven
MARKETING AND THE DISCLOSURE OF INFORMATION 401

INTRODUCTION
Robert L. Arn’ngton,Advertising and Behavior Control 409
John Douglas Bishop, 1s Self-Identity Image Advertising Ethical? 417
Dauid M. Hollty, Information Disclosure in Sales 427
Thomas Carson, Deception and Withholding Information in Sales 434
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. BLUFFING
Albert 2. Cam, 1s Business Bluffing Ethical? 443
Thomas Carson, Second Thoughts About Bluffing 448

LEGAL PERSPECTIVES
United States Court ofAppeals (First Circuit), IrvingA. Backman U. Polaroid Corporation 453
United States Court of Appeals for the Seventh Circuit, B. Sanfield, Inc. v. Finlay Fine
Jeweliy Co?. 456
United States Court of Appeals for the Second Circuit, Coca-Cola Company U . Tropicana
Products, Inc. 459

CASES
Case 1: More HorsePOWER? 461
Case 2: Self-IdentityAdvertising 462
Case 3: Advertising Joe Camel 462
Case 4: Green Advertising 463
Case 5: Sales at World Camera and Electronics 464
Case 6: Marketing Malt Liquor 465
Case 7: The Conventions of Lying on Wall Street 465

Suggested Supplementary Readings 467

Chapter Eight
ETHICAL ISSUES IN INFORMATION TECHNOLOGY 469

INTRODUCTION

COMPUTERS AND PRIVACY

DeborahJohnson, Privacy 473
Damen Charters, Electronic Monitoring and Privacy Issues in Business-Marketing:
The Ethics of the DoubleClick Experience 487
TECHNOLOGICAL CHALLENGES TO INTELLECTUAL PROPERTY
Richard 7:De Gemge, Intellectual Property and The Information Age 495
Lawrence Lessig, Controlling the Wired 504

I LEGAL PERSPECTniTES
U.S. Supreme Court, Sony C e . U. Universal City Studios Inc. 513
United States District Court for the Northern District of California,
A €fM Records v. Napster 518
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CASES
Case 1: Privacy, Legality, and Information Technology 524
Case 2: Privacy Pressures: The Use of Web Bugs at HomeConnection 525
Case 3: Spiders at the Auction 527
Case 4: Ditto.Com 528

Suggested Supplementary Readings 530

Chapter Nine
ETHICAL ISSUES IN INTERNATIONAL, BUSINESS 532

INTRODUCTION
UNIVERSALS, RELATIVISM, AND THE PROBLEM OF BRIBERY
Normun Bowie, Relativism and the Moral Obligations of Multinational Corporations 538
Patm'ciu H. Werhane,Exporting Mental Models: Global Capitalism in the 21st Century 544
Thomas I/I! Dunfee and ThomasJ Donaldson, Untangling the Corruption Knot: Global
Bribery Viewed through the Lens of Integrative Social Contract Theory 550

HUMAN RIGHTS AND THE MULTINATIONAL CORPORATION

Denis G. Arnold, Human Rights and Global Labor Practices 558
John R. Schermerhorn,J K ,Terms of Global Business Engagement in Ethically Challenging
Environments: Applications to Burma 570
Iun Maitlund, The Great Non-Debate Over International Sweatshops 579
Denis G. Arnold, Norman E. Bowie, Sweatshops and Respect for Persons 591

LEGAL PERSPECTIVES
Universal Declaration of Human Rights 606
Supreme Court of Texas, Dow Chemical Company and Shell Oil Company U. Domingo Castro
Alfaro et al. 610
U.S. Court of Appeals, Ninth Circuit, Doe 1 us. Unocal 615

CASES
Gase 1: Foreign Assignment 621
Case 2: Facilitation or Bribery: Cultural and Ethical Disparities 623
Case 3: Adidas-Salomon: Application of Standards of Engagement to Child Labor
Dilemma 624

Suggested Supplementary Readings 628