This paper gives prescriptions for introducing ethical concerns into the economic theory of the firm. Topics include social responsibility, corporate governance, profit maximization, competition barriers, collusion, the market system, and welfare economics. The need for such prescriptions is based on a content analysis of 21 managerial economics texts for their coverage of ethics. My analysis finds that substantive discussions of ethics are conspicuous by their absence. As ethical breaches can involve significant monetary damages to a firm – particularly through adverse (...) market reactions – moral-reasoning abilities can complement analytical skills. Consequently, my analysis demonstrates how ethics figure into the opportunity costs of managerial decision making, which is central to the economic definition of profit. (shrink)

Price gouging occurs when, in the wake of an emergency, sellers of a certain necessary goods sharply raise their prices beyond the level needed to cover increased costs. Most people think that price gouging is immoral, and most states have laws rendering the practice a civil or criminal offense. The purpose of this paper is to explore some of the philosophic issues surrounding price gouging, and to argue that the common moral condemnation of it is largely mistaken. I make this (...) argument in three steps, by rebutting three widely held beliefs about the ethics of price gouging: 1) that laws prohibiting price gouging are morally justified, 2) that price gouging is morally impermissible behavior, even if it ought not be illegal, and 3) that price gouging reflects poorly on the moral character of those who engage in it, even if the act itself is not morally impermissible. (shrink)

In 1999, the Journal of Business Ethics published its 1 500th article. This article commemorates the journal's quest "to improve the human condition" (Michalos, 1988, p. 1) with a summary and assessment of the first eighteen volumes. The first part provides an overview of JBE, highlighting the journal's growth, types of methodologies published, and the breadth of the field. The second part provides a detailed account of the quantitative research findings. Major research topics include (1) prevalence of ethical behavior, (2) (...) ethical sensitivities, (3) ethics codes and programs, (4) corporate social performance and policies, (5) human resource practices and policies, and (6) professions – accounting, marketing/sales, and finance/strategy. Much remains to be done. (shrink)

Pricing policies and fair-trade practices are critical for sustaining commercial relationships between firms and customers. Nevertheless, in current business practices, fairness has been mistakenly reduced to a minimalistic ethic wherein justice only demands legal and explicit norms to which commercial parties voluntarily agree. Aimed at giving a different explanation of commercial agreements, this paper will introduce a Virtue Ethics (VE) explanation of the relationship between pricing and the common good by taking up classical concepts related to justice in commerce. In (...) particular, we will explore three principles associated with the notion of fairness in commerce as defined in Neo-Aristotelian ethics towards a relationship between a common good and justice in pricing, i.e., proportionality, benevolence and well-being. To exemplify how these criteria of justice apply to decision-making in commercial practices, we will discuss several cases of fair and unfair commercial relationships. (shrink)

The choice argument against sweatshop regulations states that public officials should not prohibit workers from accepting jobs that require long hours, low pay, and poor working conditions, because enforcing such regulations would be disrespectful to the workers who choose to work in sweatshops. Critics of the choice argument reply that these regulations can be justified when workers only choose to work in sweatshops because they lack acceptable alternatives and are unable to coordinate to achieve better conditions for all workers. My (...) thesis is that the presence of unacceptable alternatives to sweatshop labor or barriers to coordination cannot justify sweatshop regulations such as minimum wage and maximum hour laws. Although officials should promote alternatives to difficult and dangerous sweatshop labor, they should not do so by limiting workers’ and employers’ options through coercive regulation. And the fact that sweatshop workers may face coordination problems does not undermine the claim that sweatshop workers choose to work in sweatshops, just as other workers face coordination problems but nevertheless make occupational choices. Furthermore, efforts to restrict sweatshop workers’ choices are morally risky and may not promote workers’ wellbeing or wellbeing in general. (shrink)

The neoclassical paradigm assumes that shareholders'' utility is solely a function of their wealth, and prescribes that management should act in a manner consistent with share price maximization. The stakeholder view also assumes that shareholders'' utility derives from wealth, but prescribes that managers must balance the shareholder wealth maximization objective against the rights of other constituencies. Thus, while neoclassicists and stakeholder theorists have different prescriptives for management behavior, their definitions of the shareholders'' interest are consistent — shareholders are self-interested economic (...) agents whose utility is best served by share price maximization. However, if shareholders are other-interested, and attack importance to ethical and moral values, then both the neoclassical and stakeholder view derive from invalid assumptions. In this paper, I present evidence that much shareholder behavior is ethically motivated. As a result, the basis for both the neoclassical and the stakeholder view are weakened. (shrink)

The accurate pricing of securities in the capital markets depends upon the markets being both efficient and fair. In management buyout transactions (MBOs), the price bid by inside managers enhances the efficient pricing of securities but raises a reasonable doubt about the fairness to existing shareholders. This study addresses this fairness question in MBOs and offers short-term and long-term legal alternatives which allow both the efficiency and fairness criteria to be met. In the short-term the case law established in the (...) Basic v. Levinson decision for merger negotiation disclosures should be applied to MBO transactions. Over the longer horizon, legislative changes should be made to existing securities laws. Applying the investor protection principles of the 1933 and 1934 securities acts to MBO transactions will suppress the temptation of managers to extract shareholder wealth for their personal gain. (shrink)

Most economists are committed to some version of egoism. After distinguishing among the various sorts of egoistic claims, l cite the empirical literature against psychological egoism and show that attempts to account for this data make these economists' previous empirical claims tautological. Moreover, the assumption of egoism has undesirable consequences, especially for students; if people believe that others behave egoistically, they are more likely to behave egoistically themselves. As an alternative to egoism I recommend the commitment model of Robert Frank. (...) The equivalent of egoism at the organizational level is that business firms seek (should seek) to maximize profits. I present arguments to show that a conscious attempt by managers to maximize profits is likely to fail. A committed altruism is more likely to raise profits. I suggest that a firm should take as its primary purpose providing meaningful work for employees. (shrink)