What is a corporation
A thing that can endure beyond the natural lives of its members and that has incorporators who may sue and be sued as a unit, and who are able to consign part of their property to the corporation for ventures of limited liability
means that the members of the corporation are financially liable for corporate debts only up to the extent of their investment.
First National Bank of Boston vs. Bellotti
This was a 1978 U.S. Supreme court case in which the free-speech rights of corporations were defined for the first time. The bank wanted to spend corporate funds to oppose a Massachusetts’s referendum enacting a graduated personal income tax, and the Supreme Court decision allowed them to do so.
Three Senses Of “Moral Responsibility”
- Sense 1 refers to holding people morally accountable for some past action.
- • Sense 2 refers to one's accountability, not for a particular past action, but for the care, welfare, or treatment of others as derived from the specific social role that one plays.
- • Sense 3 refers to one's capacity for making moral or rational decisions on one's own.
- • Shaw and Barry say that sense 3 is a necessary but not sufficient condition for senses 1 and 2.
2 Views Of Corporate Social Responsibility
- • Narrow View -- profit maximization:
- o The only responsibility of business is to make money for its owners. The only limits here are the elementary rules of morality (face-to-face conduct) such as honesty, good faith, etc.
- • Broad View -- social responsibility:
- o In addition to making a profit, business has other responsibilities, e.g., to consumers, employees, and society at large. Business should refrain from undesirable conduct and contribute actively and directly to the social good.
4 Arguments Against Broadening Corporate Responsibility
- The Invisible-Hand Argument: Inviting corporations on anything other than profits will prevent them from supplying our material needs
- The Hand-of-Government Argument: Government needs to regulate business in order to insure that it acts in a socially responsible and useful way.
- The Inept-Custodian Argument: Corporate executives lack the moral and social expertise to make any decisions other than economic ones.
- The Materialization-of-Society Argument: If corporations and their officials are permitted to stray from strictly economic matters, they will impose their materialistic values on all of society.
Institutionalizing Ethics within Corporations
In exchange for allowing corporations to exist, society has the right to expect corporations not to cause harm, to take into account the external effects of their activities, and whenever possible to act for the betterment of society.
Limits to What the Law Can Do
- • Many laws, like controls on the disposal of toxic waste, are passed only after the damage has been done.
- • Formulating appropriate laws and designing effective regulations requires expertise that the government might not have.
- • Enforcing the law can be expensive and time consuming and the threat of lawsuits makes corporations more secretive about their practices
According to Shaw and Barry
“Business’s responsibility for understanding and providing for consumer needs derives from the fact that citizen-consumers are completely dependent on business to satisfy their needs.”
Manufacturer Liability – early view
- • Contractual Relationship between producer and consumer
- o exchange of money for a commodity of a certain description.
- • Caveat emptor – Let the buyer beware
- o the consumer was entirely responsible if harmed by a purchased product.
- o This was changed by the 1916 court decision in MacPherson v. Buick Motor Car
- • The MacPherson case replaced the doctrine of caveat emptor with that of “due care” – the idea consumers and sellers do not meet as equals and that the consumer’s interests are particularly vulnerable to being harmed by the manufacturer, who has knowledge and expertise the consumer does not have.
- • According to the due care view, the manufacturers have an obligation above and beyond any contract, to exercise due care to prevent the consumer from being injured by defective products
Greenman v. Yuba Power Products
responsible for turning due care into strict liability
- • “A manufacturer is strictly liable …. when an article he places on the market, knowing that it is to be used w/o inspection for defects, proves to have a defect that causes an injury to a human being.”
- The manufacturer of a product has legal responsibilities to compensate the user of that product for injuries suffered due to a defective aspect of the product, even though the manufacturer has not been negligent in permitting the defect to occur
- The argument for strict product liability is basically utilitarian.
Consumer Product Safety Commission
- Created in 1972. Its job is to “protect the public against unreasonable risks associated with consumer products.”
- Compared with many developed European countries, the U.S. regulates fewer products (relying more on media attention, pressure from consumer advocacy groups and the threat of lawsuits to protect consumers), and many products escape effective regulation
- Argument for - They protect consumers.
- Argument against - They add to the cost of products and raise the issue of legal paternalism because they prevent individuals from choosing to purchase a riskier but less expensive product.
the doctrine that the law may justifiably be used to restrict the freedom of individuals for their own good.
Legal Paternalism – 3 points
- Some products (e.g., brakes) affect third parties. Regulating these products can be defended on nonpaternalistic grounds.
- People who oppose paternalistic regulations contend that individuals know their own interests better than anyone else. Paternalists deny this, presumably because individuals are often ignorant or swayed by emotions and irrational feelings and so aren’t the best judges in their own cases.
- There is often a conflict between freedom and autonomy on the one hand, and social welfare on the other hand. Shaw and Barry say that “in the end, one may have to examine paternalistic product safety legislation case by case and try to weigh the conflicting values and likely results.”
Four Deceptive Advertising Techniques
- Ambiguity: This is a deceptive advertising technique because it conflicts with businesses’ responsibility to provide clear product information.
- Concealed Facts: This is a deceptive advertising technique because it conflicts with business’s responsibility to provide adequate and accurate product information.
- Exaggeration: This is a deceptive advertising technique because it conflicts with businesses’ responsibility to provide accurate information.
- Psychological Appeals: A psychological appeal is one that aims to persuade by appealing to human emotions and not to either reason or evidence.