Business Ethics Final Exam

Front 1

The Foreign Corrupt Practices Act (FCPA) has been criticized on moral grounds. What do you think of its critics’ claims?

Back 1

The critics’ claims against the FCPA hold some truth in 3 respects:
1. There are exceptions to the rule against bribery, and thus, critics believe we shouldn't have this law. Ex. the kidnapping of a child or getting medical care for a child, bribery is legitimate. Bribes fueled by altruism are acceptable.
- However, most bribes are egoistic, such as is the case with Lakeed and laws should exist against these types of bribes. It is important to note that the FCPA is concerned only with egoistic bribes; altruistic bribes are not included in the law. Therefore, this first moral argument against the FCPA holds a true premise but lacks a conclusion that follows the premise.
2. Critics claim that many actions considered bribes aren’t actually bribes and therefore we should not have the FCPA law. In the case of Don Jose, what is actually going on is an extortion. Don Jose is refusing to lend help unless he is given money. However, this does not justify the fact that because some actions are classified as bribes when they really aren’t, we shouldn’t have a law against bribes which are correctly classified. The last argument against the FCPA is that the kind of practices covered by the FCPA aren’t immoral. This argument is wrong in the sense that it seems to assume that because an act is tolerated, it is not immoral. However, this is not the case. For example, paying a bribe to a police officer rather than paying a fine is immoral because it puts money in the pockets of the wrong person and leads to poor allocation of resources.
3. culture - some things considered as bribes in one culture may not be in other cultures - in case of Don Jose (adoption agency case)

Hint 1

The Foreign Corrupt Practices Act of 1977 is a United States federal law known primarily for two of its main provisions, one that addresses accounting transparency (The full, accurate, and timely disclosure of information) requirements under the Securities Exchange Act of 1934 and another concerning bribery of foreign officials.

Front 2

Even though the FCPA is an American law, what gives it international currency (general acceptance, vogue, circulation)?

Back 2

- 20 years after the passage of the FCPA in the United States, 29 OECD (Organisation for Economic Co-operation and Development) countries passed their own version of the law.
- FCPA was inacted 5 years after 1972, when Japanese prime minister accepted 7 million dollars for Lackey.
- At the end of 1996, the General Assembly of the UN passed its own legislation against bribery and corruption.
- Transparency International published a bribe payers’ index.
- The passing of such legislation similar to the FCPA has given this law international currency. The FCPA has made the consequences of bribery apparent to many countries that now support it. Poverty in the world has been linked with such practices as bribery and extortion. Resources are being misallocated by being siphoned off (to convey, draw, or pass through) into the wrong person’s pockets. -Take the example of traffic cops in Mexico. Fines paid by those being stopped don’t go towards the public good but pass directly into the hands of the cops. Traffic offenders pay $2.5 billion to them yearly.

Front 3

How could the TI Ethics Quick Test help in dealing with “A Questionable Gift”?

Back 3

- The TI Ethics Quick Test provides us w/?'s that help us decide in this case whether or not a gift is deemed reasonable and is not classified as a bribe. The test’s questions:
1.Is the action legal?
2.Does it comply with our values?
3.If you do it, will you feel bad?
4.How will it look in the newspaper?
1. "is it legal"? Although it is technically legal in U.S. law, Kenneth should consider the explicit and implicit policies in the company concerning this matter of accepting gifts.
2.Does it comply with our values? Very likely, as most of us are slightly materialistic and enjoy expensive trips, and $5 pens (in the case 2). Thus it's more important in these 3 cases to look at the other 3 questions.

3. "does it make him feel bad?" Maybe it makes him feel slightly obligated to continue to do business with this company, despite concern with the safety of the South Korean company's valves. In Case 1 The valve was more costly and less safe, but Kenneth recommended it anyway, and then Kenneth receives an invite to a S.Am. fishing trip. In Case 3, in every case the new valve was less expensive and often gave a tighter seal than the common valve, and then Kenneth is invited on a fishing trip. In both of these cases Kenneth could feel slightly guilty/shameful for going on a fishing trip, especially if he decides later not to continue business with this company who gave him this gift: maybe they were expecting something in return.
However, in the case 2 with the gift of the pen, I don't think he would feel much guilt for accepting a $5 gift.

The company may have an explicit statement that states what a reasonable gift is or how to act in a situation when faced with this issue. Kenneth should take into consideration the company’s customs and act accordingly.

4. "how will his action look in the newspaper?" although a particular course of action may be deemed ethical, it may still be harmful/create scandal if perceived by others as not being ethical. Therefore, it would be helpful for Kenneth to look at the environment in making his decision. The environment either makes the decision for us or at least gives us advice on how to handle the matter. It would probably appear scandalous if a story was printed about Kenneth going on an expensive South American fishing trip, reflecting poorly on the company and Kenneth, and could result in Kenneth losing his job.

Front 4

What is Kant’s overall position on truth telling? What reasons does he offer for this position?

Back 4

- According to Kant, “the exchange of our sentiments is the principle factor in social intercourse, and truth must be the guiding principle herein.”
3 reasons:
- The truth should be told most of the time because without it, social intercourse and conversation become valueless. The only way to know what a man thinks is through his thoughts. In turn, expressing ones thoughts truthfully is the only way of ensuring that there can exist a society of men.
- A liar destroys fellowship, a second important condition of society, and makes it impossible to derive any benefit from conversation.
- Another important reason to have truth telling is linked with knowledge. Because every person’s experience of reality is limited, men depend on one another to expand one another's knowledge. If it was impossible to count on anyone being truthful, knowledge would be of no worth and one would have no way of determining whether it is true at all.

Front 5

Critically discuss what Kant says about white lies.

Back 5

According to Kant, because men are naturally malicious, being truthful is often times dangerous. This has given rise to the conception of a white lie, a lie enforced upon us by necessity. Suppose that a man, in attempting to rob another man, asks him if he has any money on him. If the man being robbed were to say no, would he be lying? Kant states that there are three conditions for satisfying a white lie: “if force is used to extort a confession from me, if any confession is improperly used against me, and if I cannot save myself by maintaining silent…” Under these circumstances, a lie is perceived as a weapon of defense and is therefore justified. In the example previously mentioned, the three conditions would be met to justify the man being robbed in telling a white lie.

But grandmother bad soup doesn't go with the above conditions.

Front 6

1.What does Donaldson propose for managing conflicts between home-country and host-country norms?

Back 6

2 measures for addressing the conflicy:
1st is relative development - conflict between Germany vs. Chad, where Germany was dumping things in the lake of Chad's river. Argument that you can only adapt the home country norm, if you would do it in the host country. There is economic difference - so Chad gets taken advantage of.
2nd is cultural conflict - resulting from cultural difference - according to Donaldson, adopting the host country norm, you should adopt the host country norm - if you adopt the host country norm, would it be violating a core human value? (India - if you adopt their norms, kids are taken advantage of, dieing - exploitative sweatshops). Can you not do business without adopting the host country norm? (like in case of Don Jose)

Front 7

2. Show how to apply Donaldson’s proposal in the case of the adoption agency.

Back 7

- The case of adoption agency - it's a clear example of conflict of cultural difference. Don Jose. Just explain how to deal with it. So you pay them the money - because it doesn't violate any core human value.

Front 8

Discuss Marshall’s inclination to be a Practical Economist by reference either to his theory of demand or his theory of the firm.

Back 8

In his theory of demand, he clearly distinguished between market behaviour and normal behaviour which was very practical. Market behaviour according to him concerns the quality of goods actually bought and sold at a given moment and at a given price. Marshall stated the general law of demand: “The amount demanded increases with a fall in price, and diminishes with a rise in price.” The normal behaviour reflects what the single agent decides to buy or sell “normally” over a certain time-span. The normal decisions depend on the “normal” level of prices the agent expects to prevail during the period considered. He also states that the market price is usually different from the normal price and the agent will base his daily decisions (if the day is the unit of time under consideration) on the current market price. However, his final aim is to realize, within the time span considered, his won normal decision.

The gap between the market price and normal price will induce the agent to anticipate or delay the buying or selling of a certain good, but will not change his own ideas of what normal behaviour is. Marshall considered normal prices to be subjective evaluations of the prices that are expected to prevail on the market at a particular time in the future; it is on the basis of these expected prices that the single entrepreneur decides on the size and type of plant to adopt.

Front 9

In what ways has the study of economics changed after the Marginalist Revolution?

Back 9

The marginalist revolution was a change form the old classical system of the study of economics. It introduced neoclassical economics. Jevons, Menger and Walrus were the three most important figures in neoclassical economics.

In neoclassical economics, the founders did not consider the problem of the evolution of industrial economics. The neoclassical economists did not consider the problem of the evolution of industrial economies. The central argument of this theoretical research in this period was the study of a static equilibrium, that is, an economy.

The first difference between the classical economics before the revolution and the neoclassical system of economics that brought about change in the study of economics was that they focused on the problem of the allocation of given resources among alternative uses.

Another inclusion to the study of economics was the reformation of the utility theory of value and in the hypothesis of decreasing marginal utility, in the way they modified the utilitarian foundation. They accepted the utilitarian approach.

Thirdly the neoclassical method is based on the principle of the variation of proportions, the so-called “substitution principle,” a method which has no equivalent in classical economics. In the theory of consumption, the substitutability of one basket of goods for another is assumed; in the theory of production, the substitutability of one combination of factors for another. The analysis is carried out in terms of the alternative possibilities among which the subjects, both consumers and producers can choose. And the objective is the same: to search for the conditions under which optimal alternative is chosen. This method presupposes that the alternatives at stake are “open” and that the decisions taken are reversible; otherwise the substitution principle would have no rational ground.

A fourth distinctive point looks at the economic agents. If they are subjects able to make rational decisions with a view to maximising an individual goal, such as utility or profit, they must be individuals, or, “minimum” social aggregates characterized by the individuality of the decision-making unit, such as households or companies. Therefore, the collective agents, the social classes and “political bodies”, disappear from the scene.

A fifth addition was that the neoclassical economists removed the social relation economics had. Here, economics had no other field of research than technical relationships. The social class system was ignored since they thought it was irrelevant.

Finally, the neoclassical economists substituted a subjective theory of value for an objective one. In an objective theory of value, value exists independently of individual choices. The individual can accept of reject values but he is not able to influence them.

Front 10

Why is Walras’s Theory of general equilibrium important?

Back 10

General equilibrium model is an analysis of the economy in which all sectors are considered simultaneously. Thus, one considers both the direct and the indirect effects of any shock to the system, and one considers the cross-market effects simultaneously with the direct effects. This interrelationship of the sectors of the economy is relatively simple to conceptualize, but it is an enormously complicated idea to put down formally. Walras's contribution was to model the general equilibrium system in a formal manner.

Walras’s theory shows how the voluntary exchanges among individuals who are well-informed, self-interested, and rational will lead to an organization of the production and distribution of income which is efficient and mutually beneficial.

From his analysis, Walras came up with a law that proved that if all markets but one are in equilibrium, then the last market must also be in equilibrium. This meant that with any given set of prices, the total demand for all things exchanged must equal the total supply of all things exchanged. Therefore, supply was a consequence of demand. This implied that there would always be a demand for all newly produced commodities. If there was disequilibrium or excess supply somewhere, then there must also be an equal disequilibrium or excess demand somewhere else since total excess supply equaled total excess demand.

Walras's law purportedly held even if every single individual market was out of equilibrium. The central issue, then, became whether market forces would automatically correct disequilibrium through forces of supply and demand. Walras assumed that it was indeed so and that there would be immediate reaction or fast adjustment from disequilibrium to equilibrium. His Theory led to a greater understanding of the market and products sold in them.