Leadership and Ethics Summary Midterm
2024-2025
Lecture 1: Introduction
Business Ethics: It’s about how we ought to act in business to do what is right. Business
ethics apply standards of right and wrong to business contexts.
Law vs. Ethics: Not everything legal is moral, and not everything illegal is immoral.
Ethics goes beyond what the law requires, as laws may not cover all ethical concerns in
business (e.g., fairness, moral concepts).
Ethical Theories: Learn the distinction between:
Descriptive (what is) vs. Normative (what ought to be).
Empirical disagreements (facts) vs. moral disagreements (values).
Case Studies (examples):
Sales Rep: Should they close a deal knowing there may be delivery delays? (The
company could blame the manufacturer)
Research Director: Should a woman be removed as head due to sabotage by her
team? (The director believes it is unfair to remove her but must consider the
team's success)
Marketing Director: Should they follow unethical marketing practices?
(Competitors use tasteless gimmicks, contributing to underage drinking)
CEO: Should they support a merger that benefits shareholders but harms
employees and the community? (The merger would close a plant, which is the
main employer in a small town)
Decision Making: Ethical business decisions require critical thinking, assessing facts,
and moral considerations.
Lecture 2: Stakeholder vs Shareholder
The lecture covered the core ethical question: What are the responsibilities of
business leaders? This includes a detailed discussion on di erent forms of
responsibility:
Causal Responsibility: Who caused the problem?
Blame Responsibility: Who should be held accountable for the problem?
Role Responsibility: What are the duties inherent in a leader’s position?
Remedial Responsibility: Who is responsible for addressing or fixing the issue?
Legal Responsibility (Liability): Who is legally responsible for any consequences
or harm?
, Shareholder Approach
This view is rooted in Milton Friedman’s argument that the primary responsibility of
managers is to increase the company’s profits, and in doing so, serve the shareholders.
Key points include:
Managers as Agents: Managers are agents employed by shareholders to serve
their interests, primarily to maximize profits.
Property Rights: Shareholders, as owners of the firm, have the right to decide
what to do with their firm. Managers must act in accordance with this
responsibility.
Profit Maximization: The main goal is to generate profit within legal and ethical
boundaries. Any other goals, such as social responsibility, are outside the
manager’s scope unless they benefit shareholders.
Constraints: Although profit maximization is key, managers are still bound by
legal and moral constraints in their actions.
Friedman’s Core Argument: Businesses should focus on maximizing profit for
shareholders, as this is their primary duty. Social concerns should only be addressed if
they align with or enhance profit.
Stakeholder Theory
The Stakeholder Theory argues that businesses have a responsibility to all
stakeholders, not just shareholders. Stakeholders include anyone who is a ected by or
can a ect the company's activities (e.g., employees, customers, suppliers, the
community).
Descriptive: Companies naturally consist of various stakeholders with di ering
needs and interests.
Instrumental: Balancing stakeholder interests can be beneficial for the
company’s long-term profitability and sustainability.
Normative/Ethical: Businesses have moral obligations to treat all stakeholders as
ends in themselves, rather than just as means to profit. This includes
responsibilities that extend beyond legal obligations.
Ethical and Strategic Stakeholder Views
Strategic Stakeholder View: From a strategic perspective, acting in the interests
of stakeholders can be beneficial to the company in terms of reputation,
customer loyalty, employee satisfaction, and avoiding government regulation.
Ethical Stakeholder View: According to the ethical view, companies should act
in a way that respects the rights and interests of all stakeholders equally, even
when this might conflict with maximizing profit. This view argues that businesses
have duties beyond legal requirements, including acting ethically even in the
absence of immediate financial benefit.
Key Questions Discussed in the Lecture:
Balancing Responsibilities: Can a manager e ectively balance the interests of
all stakeholders, or should maximizing profit always come first?
2024-2025
Lecture 1: Introduction
Business Ethics: It’s about how we ought to act in business to do what is right. Business
ethics apply standards of right and wrong to business contexts.
Law vs. Ethics: Not everything legal is moral, and not everything illegal is immoral.
Ethics goes beyond what the law requires, as laws may not cover all ethical concerns in
business (e.g., fairness, moral concepts).
Ethical Theories: Learn the distinction between:
Descriptive (what is) vs. Normative (what ought to be).
Empirical disagreements (facts) vs. moral disagreements (values).
Case Studies (examples):
Sales Rep: Should they close a deal knowing there may be delivery delays? (The
company could blame the manufacturer)
Research Director: Should a woman be removed as head due to sabotage by her
team? (The director believes it is unfair to remove her but must consider the
team's success)
Marketing Director: Should they follow unethical marketing practices?
(Competitors use tasteless gimmicks, contributing to underage drinking)
CEO: Should they support a merger that benefits shareholders but harms
employees and the community? (The merger would close a plant, which is the
main employer in a small town)
Decision Making: Ethical business decisions require critical thinking, assessing facts,
and moral considerations.
Lecture 2: Stakeholder vs Shareholder
The lecture covered the core ethical question: What are the responsibilities of
business leaders? This includes a detailed discussion on di erent forms of
responsibility:
Causal Responsibility: Who caused the problem?
Blame Responsibility: Who should be held accountable for the problem?
Role Responsibility: What are the duties inherent in a leader’s position?
Remedial Responsibility: Who is responsible for addressing or fixing the issue?
Legal Responsibility (Liability): Who is legally responsible for any consequences
or harm?
, Shareholder Approach
This view is rooted in Milton Friedman’s argument that the primary responsibility of
managers is to increase the company’s profits, and in doing so, serve the shareholders.
Key points include:
Managers as Agents: Managers are agents employed by shareholders to serve
their interests, primarily to maximize profits.
Property Rights: Shareholders, as owners of the firm, have the right to decide
what to do with their firm. Managers must act in accordance with this
responsibility.
Profit Maximization: The main goal is to generate profit within legal and ethical
boundaries. Any other goals, such as social responsibility, are outside the
manager’s scope unless they benefit shareholders.
Constraints: Although profit maximization is key, managers are still bound by
legal and moral constraints in their actions.
Friedman’s Core Argument: Businesses should focus on maximizing profit for
shareholders, as this is their primary duty. Social concerns should only be addressed if
they align with or enhance profit.
Stakeholder Theory
The Stakeholder Theory argues that businesses have a responsibility to all
stakeholders, not just shareholders. Stakeholders include anyone who is a ected by or
can a ect the company's activities (e.g., employees, customers, suppliers, the
community).
Descriptive: Companies naturally consist of various stakeholders with di ering
needs and interests.
Instrumental: Balancing stakeholder interests can be beneficial for the
company’s long-term profitability and sustainability.
Normative/Ethical: Businesses have moral obligations to treat all stakeholders as
ends in themselves, rather than just as means to profit. This includes
responsibilities that extend beyond legal obligations.
Ethical and Strategic Stakeholder Views
Strategic Stakeholder View: From a strategic perspective, acting in the interests
of stakeholders can be beneficial to the company in terms of reputation,
customer loyalty, employee satisfaction, and avoiding government regulation.
Ethical Stakeholder View: According to the ethical view, companies should act
in a way that respects the rights and interests of all stakeholders equally, even
when this might conflict with maximizing profit. This view argues that businesses
have duties beyond legal requirements, including acting ethically even in the
absence of immediate financial benefit.
Key Questions Discussed in the Lecture:
Balancing Responsibilities: Can a manager e ectively balance the interests of
all stakeholders, or should maximizing profit always come first?
