BusinessEthics-OP-28

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and external approach to ethics. Corporate social responsibility and good corporate governance are in reality
just two sides of the very same coin. Social responsibility does not mean lower profitability.
4.2 Sustainability: Business and the Environment
Adopting sustainability as a strategy means protecting the environment. Society has an interest in the long-
term survival, indeed the flourishing, of ecological habitats and natural resources, and we ask and expect
companies to respect this societal goal in their business activities.
When analyzing what a business owes society in return for the freedom to extract our natural resources, we
must balance development and preservation. It may be easy to say from afar that a business should cut back
on how much it pollutes the air, but what happens when that means cutting back on fossil fuel use and
transitioning to electric vehicles, a choice that affects everyone on a personal level?
4.3 Government and the Private Sector
One challenge in a free enterprise system is balancing the need for government regulation and private-sector
corporate managers’ need for independence in running their businesses. The Sarbanes-Oxley Act tries to
strike this balance by mandating transparency in corporate governance. This debate also includes the question
whether businesses operating in the private sector ought to do public good on their own, regardless of
whether the government mandates it. For example, many companies make a commitment to keep the
environment clean, and to do so by going above and beyond what the law requires.
Assessment Questions
1. True or false? Corporations that embrace CSR policies consistently produce a lower rate of return on
investment for shareholders.
2. True or false? Milton Friedman’s economic philosophy advocates increased government regulation to
ensure that corporations are socially responsible.
3. Which of the following is not true?
A. Shareholder primacy is the clear legal precedent in the United States.
B. Maximizing shareholder profits is a legitimate goal of management.
C. Dividends are paid out of corporate profits.
D. Companies that pursue CSR policies can also be profitable.
4. Industries like to be in control of their own destiny and as a result prefer self-regulation to laws imposed by
governments. Self-regulation is often ________.
A. based on external codes of conduct
B. enforced by the courts
C. in conflict with common law
D. less costly for firms than government regulation
5. Identify two benefits for a company following a policy of corporate social responsibility (CSR).
6. What is earth jurisprudence?
126 Chapter 4 Three Special Stakeholders: Society, the Environment, and Government
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7. Which of the following best describes the tragedy of the commons?
A. People are always willing to sacrifice for the good of society.
B. People are likely to use all the natural resources they want without regard to others.
C. The common good of the people is a popular corporate goal.
D. Tragedies occur when there is too much government regulation.
8. ISOs are sustainability standards for businesses ________.
A. promulgated by the state government
B. promulgated by the federal government
C. promulgated by the World Trade Organization
D. none of the above
9. True or false? If environmental harm is discovered, the business entity causing it is frequently held liable by
both the government and the victims of the harm in separate proceedings.
10. Which of the following is a potentially effective way to reduce global warming?
A. build more coal-burning power plants
B. build more diesel-burning cars
C. implement a carbon tax
D. implement tax-free gasoline
11. True or false? The law prohibits all executives from serving in senior government posts and then leaving to
go back to work for the same company in the private sector.
12. True or false? Air pollution is regulated by three levels of government: local, state, and federal.
13. Which of the following is true?
A. Very few business executives have ever left private jobs to go into government service.
B. Most government regulatory agencies are funded by donations.
C. Numerous executives have left Goldman Sachs to go to work for the government.
D. Few people leave government service to go into the private sector.
14. Which of the following constitutional provisions gives regulatory power to the federal government?
A. First Amendment
B. Tenth Amendment
C. Commerce Clause
D. Supremacy Clause
15. The Citizens United case ________.
A. upheld existing law limiting spending on behalf of political candidates
B. overturned existing law
C. sent the case back to the lower court to be re-tried
D. created more restrictive limits on political spending
16. What Amendment was at the center of the Citizens United case? Explain.
Endnotes
1. Patrick Moorhead, “Cisco’s CSR Program under CEO Chuck Robbins Is Flourishing,” Forbes, March 9, 2016. https://www.forbes.com/sites/
patrickmoorhead/2016/03/09/ciscos-csr-program-under-ceo-chuck-robbins-is-flourishing/#46e003c2574e.
2. Dodge v. Ford Motor Company, 204 Mich. 459, 170 N.W. 668 (Mich. 1919).
3. Dodge v. Ford Motor Company, 204 Mich. 459, 170 N.W. 668 (Mich. 1919).
Chapter 4 Three Special Stakeholders: Society, the Environment, and Government 127
4. Dodge v. Ford Motor Company, 204 Mich. 459, 170 N.W. 668 (Mich. 1919).
5. Shlensky v. Wrigley, 237 N.E. 2d 776 (Ill. App. 1968).
6. Shlensky v. Wrigley, 237 N.E. 2d 776 (Ill. App. 1968).
7. Burwell v. Hobby Lobby, 573 U.S. ________ (2014).
8. Burwell v. Hobby Lobby, 573 U.S. ________ (2014).
9. Burwell v. Hobby Lobby, 573 U.S. ________ (2014).
10. “Corporate Social Responsibility: The Halo Effect,” The Economist, June 25, 2015. https://www.economist.com/news/business/21656218-do-
gooding-policies-help-firms-when-they-get-prosecuted-halo-effect.
11. Milton Friedman, Capitalism and Freedom. (Chicago: University of Chicago Press. 1963).
12. Lindsay Llewellyn, “Breaking Down the Business-Judgment Rule,” American Bar Association, May 30, 2013.
http://apps.americanbar.org/litigation/committees/commercial/articles/spring2013-0513-breaking-down-the-business-judgement-
rule.html.
13. Stephen Bainbridge, “A Duty to Shareholder Value,” Opinion Pages, New York Times, April 16, 2015.
https://www.nytimes.com/roomfordebate/2015/04/16/what-are-corporations-obligations-to-shareholders/a-duty-to-shareholder-value.
14. Stephen Bainbridge, “A Duty to Shareholder Value,” Opinion Pages, New York Times, April 16, 2015. https://www.nytimes.com/
roomfordebate/2015/04/16/what-are-corporations-obligations-to-shareholders/a-duty-to-shareholder-value.
15. Lynn Stout, “Corporations Don’t Have to Maximize Profits,” Opinion Pages, New York Times, April 16, 2015. https://www.nytimes.com/
roomfordebate/2015/04/16/what-are-corporations-obligations-to-shareholders/corporations-dont-have-to-maximize-profits.
16. Rick Wartzman, “What Peter Drucker Knew About 2020,” Harvard Business Review, October 16, 2014. https://hbr.org/2014/10/what-peter-
drucker-knew-about-2020.
17. Unilever. https://www.unilever.com/sustainable-living/values-and-values/.
18. Tracey Keys, et al., “Making the Most of Corporate Social Responsibility,” McKenzie Quarterly, December 2009. https://www.mckinsey.com/
global-themes/leadership/making-the-most-of-corporate-social-responsibility.
19. Calvert. https://www.calvert.com/.
20. H.J. Graham, Everyman’s Constitution. (Madison: State Historical Society of Wisconsin, 1968). See also H.J. Graham, “The ‘Conspiracy Theory’
of the Fourteenth Amendment,” Yale Law Journal 47, no. 3 (1938): 341–403. doi: 10.2307/791947.
21. “Ecuador Adopts Rights of Nature in Constitution,” The Rights of Nature. https://therightsofnature.org/ecuador-rights/.
22. M. Triassi, et al., “Environmental Pollution from Illegal Waste Disposal and Health Effects,” Int J Environ Res Public Health 12, no. 2 (2015):
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year/.
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26. Garrett Hardin, “The Tragedy of the Commons,” Science 162, no. 3859 (1968): 1243–1248. doi: 10.1126/science.162.3859.1243.
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17/the-worlds-most-sustainable-companies-2017/#2773f73a4e9d.
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17/the-worlds-most-sustainable-companies-2017/#2773f73a4e9d.
30. 3BLMedia, “2015 Cisco Corporate Social Responsibility Report: Supply Chain,” 2015. http://3blmedia.com/News/2015-Cisco-Corporate-
Social-Responsibility-Report-Supply-Chain.
31. McKinsey & Co., “Sustainability’s Strategic Worth,” 2016. http://csr-raadgivning.dk/wp-content/uploads/2016/02/Sustainabilitys-strategic-
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32. Paul Raleigh, “Corporate Social Responsibility: Beyond Financials,” Grant Thornton, August 13, 2014. https://www.grantthornton.global/en/
insights/articles/Corporate-social-responsibility/.
33. Jessica Lyons Hardcastle, “Dell’s Flexible Work Programs Save $12M, Reduce GHGs,” Environmental Leader, July 10, 2014.
https://www.environmentalleader.com/2014/07/dells-flexible-work-programs-save-12m-reduce-ghgs/.
34. Knut Haanaes, “Making Sustainability Profitable,” Harvard Business Review, March 2013. https://hbr.org/2013/03/making-sustainability-
profitable.
35. Adam Wernick, “The U.S. Defense Department Takes Climate Change Seriously,” Public Radio International, October 8, 2017.
https://www.pri.org/stories/2017-10-08/us-defense-department-takes-climate-change-seriously.
36. Union of Concerned Scientists, “Global Warming Impacts.” https://www.ucsusa.org/our-work/global-warming/science-and-impacts/
global-warming-impacts#.WjQa11WnF0w.
37. Lucy P. Marcus, “Why Strong Ties between Business and Government Matter,” The Guardian, January 4, 2016.
https://www.theguardian.com/business/2016/jan/04/why-strong-ties-between-business-and-government-matter-r-and-d.
38. Union of Concerned Scientists, “Global Warming Impacts.” https://www.ucsusa.org/our-work/global-warming/science-and-impacts/
global-warming-impacts#.WjQa11WnF0w.
39. National Conference on State Legislatures, “State Plastic and Paper Bag Legislation,” July 5, 2017. http://www.ncsl.org/research/
environment-and-natural-resources/plastic-bag-legislation.aspx.
40. Elizabeth Chuck, “Hurricane Harvey: How Many Billions of Dollars in Damage Will Historic Storm Cost?” NBC News, August 30, 2017.
https://www.nbcnews.com/storyline/hurricane-harvey/how-many-billions-damage-will-harvey-cost-s-anyone-s-n797521.
41. NASA, “Report on Climate Change,” March 22, 2018. https://climate.nasa.gov/evidence/.
42. James Brooke, “Waste Dumpers Turning to West Africa,” New York Times, July 17, 1998. http://www.nytimes.com/1988/07/17/world/waste-
dumpers-turning-to-west-africa.html?pagewanted=all.
43. Financial Transparency Coalition, “Cross-border Dumping of Hazardous Waste,” August 20, 2010. https://financialtransparency.org/
hazardous-waste/.
44. Andrew Winston, “Business Owes the World Everything . . . and Nothing,” Harvard Business Review, May 4, 2010. https://hbr.org/2010/05/
business-owes-the-world-everyt.html.
45. Lew Harris, “Business Owes Significant Obligations to Society,” Newswise, February 23, 2000. https://www.newswise.com/articles/business-
owes-significant-obligations-to-society.
46. Climate Leadership Council, “The Four Pillars of Our Carbon Dividends Plan.” https://www.clcouncil.org/our-plan/.
47. John Schwartz, “Exxon Mobil Lends Its Support to a Carbon Tax Proposal,” New York Times, June 20, 2017. https://www.nytimes.com/2017/
06/20/science/exxon-carbon-tax.html.
48. John Schwartz, “Exxon Mobil Lends Its Support to a Carbon Tax Proposal,” New York Times, June 20, 2017. https://www.nytimes.com/2017/
06/20/science/exxon-carbon-tax.html.
49. Katy Lederer, “Why Can’t Republicans Support a Carbon Tax?” The New Yorker, November 9, 2015. https://www.newyorker.com/business/
128 Chapter 4 Three Special Stakeholders: Society, the Environment, and Government
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currency/why-cant-republicans-support-a-carbon-tax.
50. Lauren Rosenbaum, “The growing complexity of social and economic challenges is driving new, innovative forms of collaboration between
governments and businesses.” Deloitte, March, 19, 2013. https://www2.deloitte.com/insights/us/en/focus/business-trends/2013/
partnerships-for-the-future.html.
51. U.S. Department of Justice, “Under Agreement with United States and State of Texas, Vopak to Reduce Hazardous Air Pollution at Chemical
Storage Facility,” May 17, 2017. https://www.justice.gov/opa/pr/under-agreement-united-states-and-state-texas-vopak-reduce-hazardous-
air-pollution-chemical.
52. U.S. Department of Justice, “State-Federal Cooperation in Environmental Enforcement,” May 24, 2017. https://www.justice.gov/archives/
opa/blog/state-federal-cooperation-environmental-enforcement.
53. Ben Wolfgang, “Environmentalists, Tribes Promise Dakota Access-style Camps, Protests to Stop Keystone XL Pipeline,” The Washington
Times, March 24, 2017. http://www.washingtontimes.com/news/2017/mar/24/keystone-xl-pipeline-environmentalists-tribes-prom/.
54. Oliver Laughland and Laurence Mathieu-Léger, “Keystone Pipeline Defiance Triggers Further Assault on Citizens’ Rights,” The Guardian,
May 3, 2017. https://www.theguardian.com/us-news/2017/may/03/keystone-pipeline-protests-land-rights-south-dakota.
55. World Health Organization, “Global Status Report on Alcohol and Health,” 2011. http://www.who.int/substance_abuse/publications/
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56. Larry Merlo, “Message from Larry Merlo, President and CEO,” February 5, 2014. https://cvshealth.com/thought-leadership/message-from-
larry-merlo-president-and-ceo.
57. Louis Jacobson, “Counting Up How Much the NRA Spends on Campaigns and Lobbying,” Politifact, October 11, 2017.
http://www.politifact.com/truth-o-meter/article/2017/oct/11/counting-up-how-much-nra-spends/.
58. Mattie Quinn, “The Opioid Files: Hundreds of States and Cities Are Suing Drug Companies,” Governing, November 13, 2017.
http://www.governing.com/topics/health-human-services/gov-opioid-lawsuits-companies-states-cities.html.
59. Owen Amos, “Why Opioids Are Such an American Problem?” BBC News, October 25, 2017. http://www.bbc.com/news/world-us-
canada-41701718.
60. Matthew Prescott, “Why Animal Cruelty Is Bad Business,” Fortune, June 23, 2017. http://fortune.com/2017/06/23/animal-cruelty-stop-
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61. “Egg Markets Overview,” USDA AMS Agricultural Analytics Division, July 20, 2018. https://www.ams.usda.gov/sites/default/files/media/
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62. Matthew Prescott, “Why Animal Cruelty Is Bad Business,” Fortune, June 23, 2017. http://fortune.com/2017/06/23/animal-cruelty-stop-
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63. Janet Yellen, “Financial Stability a Decade after the Onset of the Crisis,” Symposium Federal Reserve Bank of Kansas City, August 25, 2017.
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64. Dave Nadler and Ryan P. McGovern, “Top Ten Things Every Government Contractor Should Know about Post-Government Employment
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71. Citizens United v. Federal Election Commission, 558 U.S. 310 (2010).
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	Chapter 4. Three Special Stakeholders: Society, the Environment, and Government
	Assessment Questions
	Assessment Questions
	Endnotes
	Endnotes