Essay on Business Ethics

1778 Words 8 Pages
Running Head: Business Ethics











Business Ethics
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The modern theory of the firm, which is central to finance and corporate law, views the corporation as a of contracts among the various corporate constituencies. Upon this foundation, finance theory and corporate law postulate shareholder wealth as the objective of the firm. Research in business ethics has largely ignored this contracts theory of the firm except to reject the financial-legal model as normatively inadequate. Philosophers generally bring philosophical theories of ethics to bear on problems of business, and they regard the contractual theory of the firm primarily as a subject for criticism using the resources of philosophical ethics. In particular
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In other words, what are the main ethical problems in business?
The following three-fold classification, which is derived from the literature on the ethical problems of contracting, does not encompass every business ethics problem, and, indeed, the next section lists many kinds of problems that are not related to contractual relations. The classification provides a useful perspective; however, on a great many problems of business, and by viewing them within the context of the contractual theory, appropriate remedies can also be identified.

Wrongful Harms
All constituencies, including shareholders, are vulnerable to loss of one kind or another from the activities of a firm. Many of these losses take the form of negative externalities, such as occupational hazards, consumer injury, discrimination, wrongful discharge, pollution, and plant closings. Shareholders, too, can be harmed by fraud, financial manipulation, and mismanagement that reduce the value of a company's stock. Whether harm is "wrongful" depends, of course, on some standards for the harms that constituencies ought to be protected against, and although developing such standards is difficult, we have many examples in tort law and government regulation. For example, developing a standard for workplace safety consists of deciding which possible harms are "wrongful" such that workers ought to be protected against them.

Misallocations…

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