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Business Ethics

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Business Ethics ­MGT610
VU
LESSON 24
OLIGOPOLIES AND PUBLIC POLICY
1. Is the offer of a payment initiated by the payer (the one who pays the money), or does
the payee (the one who receives the money) demand the payment by threatening injury
to the payer's interests? In the latter case, the payment is not a bribe but a form of
extortion. If the threatened injury is large enough, the payer may not be morally
responsible for his or her act, or the moral responsibility may at least be diminished.
2. Is the payment made to induce the payee to act in a manner that violates his or her
official sworn duty to act in the best interests of the public? Or is the payment made to
induce the payee to perform what is already his or her official duty? If the payee is
being induced to violate his or her official duty, then the payer is cooperating in an
immoral act because the payee has entered an agreement to fulfill these duties.
3. Are the nature and purpose of the payment considered ethically unobjectionable in the
local culture? If a form of payment is a locally accepted public custom and there is a
proportionately serious reason for making the payment, then it would appear to be
ethically permissible on utilitarian grounds.
Oligopolies and Public Policy
What should society do in the face of the high degree of market concentration in oligopolistic
industries? There are three main points of view:
First, the Do-Nothing view claims that the power of oligopolies is not as large as it appears.
Though competition within industries has declined, they maintain that competition between
industries with substitutable products has replaced it. In addition, there are "countervailing
powers" of other large corporate groups, the government, and unions that keep corporations in
check. Finally, they argue that bigger is better, especially in the current age of global
competition. Economies of scale, produced by high concentration, actually lower prices for
consumers.
Second, the antitrust view argues that prices and profits in highly concentrated industries are
higher than they should be. By breaking up large corporations into smaller units, they claim,
higher levels of competition will emerge in those industries. The result will be a decrease in
collusion, greater innovation, and lower prices. Clearly, the antitrust view is based on a number
of assumptions. J. Fred Weston has summarized the basic propositions on which this traditional
view is based:
1. If an industry is not atomistic with many small competitors, there is likely to be
administrative discretion over prices.
2. Concentration results in recognized interdependence among companies, with no price
competition in concentrated industries.
3. Concentration is due mostly to mergers because the most efficient scale of operation is
not more than 3 to 5 percent of the industry. A high degree of concentration is
unnecessary.
4. There is a positive correlation between concentration and profitability that gives
evidence of monopoly power in concentrated industries--the ability to elevate prices
and the persistence of high profits. Entry does not take place to eliminate excessive
profits.
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Business Ethics ­MGT610
VU
5. Concentration is aggravated by product differentiation and advertising. Advertising is
correlated with higher profits.
6. There is oligopolistic coordination by signaling through press releases or other means.
The third view is the Regulation view, which can be seen as a middle ground between the
other two. Those who advocate regulation do not wish to lose the economies of scale offered by
large corporations, but they also wish to ensure that large firms do not harm the consumers.
Therefore, they suggest setting up regulatory agencies and legislation to control the activities of
large corporations. Some even suggest that the government should take over the operation of
firms where only public ownership can guarantee that they operate in the public interest.
Whichever view we take, clearly the social benefits of free markets cannot be guaranteed, and
the markets themselves cannot be morally justified, unless firms remain competitive.
Ethic & Environment
This chapter on ethics and the environment begins with some rather sobering statistics from the
World watch Institute. This includes population growth, rising temperature, falling water
tables, shrinking cropland per person, collapsing fisheries, shrinking forests, and the loss of
plant and animal species. Our environment seems to be stressed nearly to the breaking point.
The ethical and technological questions that this state of affairs raises are extremely important
and complex.
First, there are still serious disagreements about the extent of the environmental damage that
industrial technology has produced. Furthermore, there is no precise way of knowing just how
much of a threat this environmental damage will have for our future welfare. And whatever the
level of damage, we must surely sacrifice some values to halt or slow it.
To explore these issues, this chapter begins with an overview of the technical aspects of
environmental resource use. Then it moves to a discussion of the ethical basis of environmental
protection. It concludes with a consideration of our obligation to future generations and the
prospects for continued economic expansion.
The Dimensions of Pollution and Resource Depletion
Environmental damage inevitably threatens the welfare of human beings as well as plants and
animals. Threats to the environment come from two sources, pollution and resource depletion.
Pollution refers to the undesirable and unintended contamination of the environment by the
manufacture or use of commodities. Resource depletion refers to the consumption of finite or
scarce resources. In a certain sense, pollution is really a type of resource depletion because
contamination of air, water, or land diminishes their beneficial qualities.
Air pollution has been with modern society for nearly 200 years; its costs are increasing
greatly. It negatively affects agricultural yields, human health, and global temperatures. The
result is a large economic impact and a staggering effect on the quality of human life.
Global warming itself poses a difficult and frightening challenge. Global warming greenhouse
gases such as: carbon dioxide, nitrous oxide, methane, and chlorofluorocarbons, are gases that
absorb and hold heat from the sun, preventing it from escaping back into space, much like a
greenhouse absorbs and holds the sun's heat. Most scenarios concerning the effects of global
warming predict massive flooding, increase of disease, loss of plant and animal species, and
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Business Ethics ­MGT610
VU
expansion of deserts at the expense of agricultural land. These effects will have high human
and economic costs. However, to halt the increase of greenhouse gasses, we would have to
reduce emissions by 60% to 70%, a level that would damage the economies of countries around
the world. To halt global warming, experts say that we would need to change our lifestyles and
values drastically.
Ozone depletion is also a serious concern. Caused by the release of CFCs into the atmosphere,
ozone depletion may lead to several hundred thousand new cases of skin cancer each year and
destroy many valuable food crops. Also, ocean plankton, on which the entire ocean's food chain
depends, may be severely damaged. Even though CFC production has been nearly halted, we
can expect the gasses already released to continue damaging the ozone for the next century.
Burning fossil fuels causes acid rain and global warming. Though not as devastating as
global warming, it nevertheless is harming many fish populations and trees, corroding bridges
and buildings, and contaminating drinking water. Airborne toxins and air quality in general are
also serious concerns for human health.
Airborne Toxics are less catastrophic but highly worrisome air pollution threats; 2.4 billion
pounds of airborne toxic substances released annually into the nation's atmosphere, including
phosgene, a nerve gas used in warfare, and methyl isocyanate.
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Table of Contents:
  1. INTRODUCTION:Business Issues
  2. INTRODUCTION (CONTD.)
  3. THEORY OF ETHICAL RELATIVISM
  4. MORAL DEVELOPMENTS AND MORAL REASONING
  5. MORAL REASONING:Arguments For and Against Business Ethics
  6. MORAL RESPONSIBILITY AND BLAME
  7. UTILITARIANISM:Utilitarianism: Weighing Social Costs and Benefits
  8. UTILITARIANISM (CONTD.):rule utilitarianism, Rights and Duties
  9. UNIVERSALIZABILITY & REVERSIBILITY:Justice and Fairness
  10. EGALITARIANS’ VIEW
  11. JOHN RAWLS' THEORY OF JUSTICE:The Ethics of Care
  12. THE ETHICS OF CARE:Integrating Utility, Rights, Justice, and Caring
  13. THE ETHICS OF CARE (CONTD.):Morality in International Contexts
  14. MORALITY IN INTERNATIONAL CONTEXTS:Free Markets and Rights: John Locke
  15. FREE MARKET & PLANNED ECONOMY:FREE TRADE THEORIES
  16. LAW OF NATURE:Theory of Absolute Advantage, Comparative Advantage
  17. FREE MARKETS AND UTILITY: ADAM SMITH:Free Trade and Utility: David Ricardo
  18. RICARDO & GLOBALIZATION:Ricardo’s Assumptions, Conclusion
  19. FREE MARKET ECONOMY:Mixed Economy, Bottom Line for Business
  20. COMPETITION AND THE MARKET:Perfect Competition
  21. PERFECT COMPETITION
  22. MONOPOLY COMPETITION:Oligopolistic Competition
  23. OLIGOPOLISTIC COMPETITION:Crowded and Mature Market
  24. OLIGOPOLIES AND PUBLIC POLICY:Ethic & Environment, Ozone depletion
  25. WORLDWATCH FIGURES:Population Year, Agriculture, Food and Land Use
  26. FORESTS AND BIODIVERSITY:The Ethics of Pollution Control
  27. THE ETHICS OF POLLUTION CONTROL:Toxic Chemicals in Teflon
  28. THE ETHICS OF POLLUTION CONTROL
  29. THE ETHICS OF POLLUTION CONTROL:Recommendations to Managers
  30. COST AND BENEFITS:Basis of social audit, Objectives of social audit
  31. COST AND BENEFITS:The Ethics of Conserving Depletable Resources
  32. COST AND BENEFITS:The Club of Rome
  33. THE ETHICS OF CONSUMER PRODUCTION AND MARKETING:DSA Comments
  34. THE ETHICS OF CONSUMER PRODUCTION AND MARKETING:Should Consumers Bear More Responsibility?
  35. THE CONTRACT VIEW OF BUSINESS' DUTIES TO CONSUMERS
  36. THE CONTRACT VIEW OF BUSINESS' DUTIES TO CONSUMERS:The Due Care Theory
  37. THE SOCIAL COSTS VIEW OF THE MANUFACTURER’S DUTIES
  38. ADVERTISING ETHICS:The Benefits of Advertising, The harm done by advertising
  39. ADVERTISING ETHICS:Basic Principles, Evidence, Remedies, Puffery
  40. ADVERTISING IN TODAY’S SOCIETY:Psychological tricks
  41. ADVERTISING IN TODAY’S SOCIETY:Criticism of Galbraith's Work
  42. ADVERTISING IN TODAY’S SOCIETY:Medal of Freedom
  43. ADVERTISING IN TODAY’S SOCIETY:GENERAL RULES, Substantiation
  44. ADVERTISING IN TODAY’S SOCIETY:Consumer Privacy, Accuracy
  45. THE ETHICS OF JOB DISCRIMINATION:Job Discrimination: Its Nature