A recent article in this Journal argued that insider trading is an unethical practice leading to an inefficiently functioning market. The debate on this topic has primarily pitted ethical defenses of prohibition against economic arguments extolling its allowance. In addition to being incomplete, this approach ignores other unwanted economic effects of prohibition itself and unethical implications of its existence. This article shows that Adam Smith's free market concept, when properly interpreted, provides all the incentive structure necessary for an efficient and (...) ethical marketplace even when insider trading is permitted. (shrink)

The shareholder wealth maximization objective for corporate management can be a very effective tool for decision making. However, it can also be used to rationalize the commission of unethical or socially irresponsible actions. Overemphasis on the SWM objective by some companies can lead to dangerous or disastrous consequences for consumers, employees, or the general population. Even so, issues of business ethics and social responsibility (BE-SR) are almost totally ignored in corporate finance textbooks. If the typical coverage of corporate finance courses (...) is represented by these textbooks, then financial educators are abdicating their responsibility to help prepare future corporate managers to recognize and deal with BE-SR issues effectively. (shrink)

Although previous ethical analyses of management buyouts have presented useful insights, they have been flawed in three major ways. First, they define the transaction too narrowly, emphasizing the going private aspect and ignoring the leveraged aspect. Leveraging alters the nature of the transaction substantially and warrants additional ethical analysis. Second, these previous analyses ignore the impact of buyouts on non-stockholder constituents of the firm, an omission which renders their implicit utilitarian approach incomplete. Third, these analyses do not include Rawlsian, libertarian, (...) or Kantian perspectives on ethics. This paper addresses these shortcomings and finds the ethical status of leveraged management buyouts to be highly suspect. (shrink)

This paper takes a critical look at the empirical studies assessing the effectiveness of teaching courses in business and society and business ethics. It is generally found that students' ethical awareness or reasoning skills improve after taking the courses, yet this improvement appears to be short-lived. The generalizability of these findings is limited due to the lack of extensive empirical research and the inconsistencies in research design, empirical measures, and statistical analysis across studies. Thus, recommendations are presented and discussed for (...) improving the generalizability and sophistication of future research efforts in this area. (shrink)

Milton Friedman's article, The Social Responsibility of Business Is To Increase Its Profits, owes its appeal to the rhetorical devices of simplicity, authority, and finality. More careful consideration reveals oversimplification and ambiguity that conceals empirical errors and logical fallacies. It is false that business does, or would, operate exclusively in economic terms, that managers concentrate obsessively on profitability, and that ethics can be marginalized. These errors reflect basic contradictions: an apolitical political base, altruistic agents of selfishness, and good deriving from (...) greed. (shrink)

Although Friedman's The Social Responsibility of Business is to Increase Profits is widely read, the central argument is rarely identified. Stone's discussion of Friedman in Where the Law Ends, is often used as a companion piece. Stone claims that the most important argument in Friedman is the Polestar argument but never succeeds in explaining what it is. This paper shows that Friedman's position must be read in the context of his theory of political economy, and that at least four distinct (...) utilitarian arguments are required to account for his views. Specifically, Friedman relies upon what I describe as Realistic Rule Utilitarianism in which utility is understood in terms of actual preferences. The weaknesses of this theory are then explained. (shrink)

In this essay we defend the view that from a purely rule-utilitarian perspective there is no sound argument favoring the immorality of hostile liquidating buyouts. All arguments favoring such a view are seriously flawed. Moreover, there are some good argument favoring the view that such buyouts may be morally obligatory from the rule-utilitarian perspective. We also defend the view that most of the shark repellents in the market are immoral. If we are right in our arguments there is no justification, (...) moral or otherwise, for any form of legislation that would constrain the practice of hostile liquidating buyouts. (shrink)