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134-507: Business ethics refers to contemporary organizational standards, principles, sets of values and norms that govern the actions and behavior of an individual in the business organization. Business ethics have two dimensions, normative business ethics or descriptive business ethics. As a corporate practice and a career specialization, the field is primarily normative. Academics attempting to understand business behavior employ descriptive methods. The range and quantity of business ethical issues reflects

268-729: A blind trust , placing their financial affairs in the hands of a fiduciary and giving up all right to know about or intervene in their handling. The fiduciary functions of trusts and agencies are commonly performed by a trust company , such as a commercial bank , organized for that purpose. In the United States, the Office of the Comptroller of the Currency (OCC), an agency of the United States Department of

402-559: A conflict of interest . The state of Texas in the United States sets out the duties of a fiduciary in its Estates Code, chapter 751, as follows (the bracketed references to TPC refer to the Texas Probate Code superseded by the Estates Code, effective January 1, 2014): A fiduciary's duty must not conflict with another fiduciary duty. Conflicts between one fiduciary duty and another fiduciary duty arise most often when

536-522: A conflict of interest . It has been said that fiduciaries must conduct themselves "at a level higher than that trodden by the crowd" and that "[t]he distinguishing or overriding duty of a fiduciary is the obligation of undivided loyalty". Different jurisdictions regard fiduciary duties in different lights. Canadian law , for example, has developed a more expansive view of fiduciary obligation than American law , while Australian law and British law have developed more conservative approaches than either

670-540: A corporate psychopath is in charge. This will not only affect the company and its outcome but the employees who work under a corporate psychopath. The way a corporate psychopath can rise in a company is by their manipulation, scheming, and bullying. They do this in a way that can hide their true character and intentions within a company. Fundamentally, finance is a social science discipline. The discipline borders behavioral economics , sociology , economics , accounting and management . It concerns technical issues such as

804-464: A lawyer or an agent , such as a real estate agent , represent more than one client, and the interests of those clients conflict. This would occur when a lawyer attempts to represent both the plaintiff and the defendant in the same matter, for example. The rule comes from the logical conclusion that a fiduciary cannot make the principal's interests a top priority if he has two principals and their interests are diametrically opposed; he must balance

938-470: A monetary theory of value , where "Money is the necessary form of appearance of value (and of capital) in the sense that prices constitute the only form of appearance of the value of commodities." Similarly to the exchange theory, this theory emphasizes value as being socially determined, rather than having a physical substance. According to this analysis, when money incorporates production into its M-C-M' circulation, it functions as capital implementing

1072-423: A trust may owe fiduciary duties to the beneficiaries , although there is no case law establishing this to be the case. In 2015, the United States Department of Labor issued a proposed rule that if finalized would extend the fiduciary duty relationship to investment advisors and some brokers including insurance brokers. In 2017, the first Trump administration planned to order a 180-delay of implementation of

1206-447: A "labor theory of price" where the point of analyzing value was to allow the calculation of relative prices . Others see values as part of his sociopolitical interpretation and critique of capitalism and other societies, and deny that it was intended to serve as a category of economics. According to a third interpretation, Marx aimed for a theory of the dynamics of price formation but did not complete it. In 1860, John Ruskin published

1340-405: A "soft" approach that regards employees as a source of creative energy and participants in workplace decision making, a "hard" version explicitly focused on control and Theory Z that emphasizes philosophy, culture and consensus. None ensure ethical behavior. Some studies claim that sustainable success requires a humanely treated and satisfied workforce. Marketing ethics came of age only as late as

1474-421: A band currently under contract with one another (or with some other tangible, existing relationship that creates a legal duty) record songs together. Let us imagine it is a serious, successful band and that a court would declare that the two members are equal partners in a business. One day, X takes some demos made cooperatively by the duo to a recording label, where an executive expresses interest. X pretends it

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1608-401: A bank, acts in a fiduciary capacity to another party, who, for example, has entrusted funds to the fiduciary for safekeeping or investment. Likewise, financial advisers , financial planners , and asset managers, including managers of pension plans, endowments, and other tax-exempt assets, are considered fiduciaries under applicable statutes and laws. In a fiduciary relationship, one person, in

1742-525: A business to be ethical and that violating that expectation must be counterproductive for the business. Ethical issues include the rights and duties between a company and its employees, suppliers, customers and neighbors , its fiduciary responsibility to its shareholders . Issues concerning relations between different companies include hostile take-overs and industrial espionage . Related issues include corporate governance ; corporate social entrepreneurship ; political contributions ; legal issues such as

1876-521: A changing environment in verses 474, 426, and 140, learning the intricacies of different tasks in verses 462 and 677. Business ethics reflects the philosophy of business , of which one aim is to determine the fundamental purposes of a company. Business purpose expresses the company's reason for existing. Modern discussion on the purpose of business has been freshened by views from thinkers such as Richard R. Ellesworth, Peter Drucker , and Nikos Mourkogiannis : Earlier views such as Milton Friedman's held that

2010-550: A commodity. However, this theory is rejected in Smith's work The Wealth of Nations . The famous diamond–water paradox questions this by examining the use in comparison to price of these goods. Water, while necessary for life, is far less expensive than diamonds, which have basically no use. Which value theory holds true divides economic thinkers, and is the base for many socioeconomic and political beliefs. Silvio Gesell denied value theory in economics. He thought that value theory

2144-401: A company longer is passed over for a promotion, but it is not unethical. It is only unethical if the employer did not give the employee proper consideration or used improper criteria for the promotion. Each employer should know the distinction between what is unethical and what is illegal. If an action is illegal it is breaking the law but if an action seems morally incorrect that is unethical. In

2278-418: A critique of the economic concept of value from a moral point of view. He entitled the volume Unto This Last , and his central point was this: "It is impossible to conclude, of any given mass of acquired wealth, merely by the fact of its existence, whether it signifies good or evil to the nation in the midst of which it exists. Its real value depends on the moral sign attached to it, just as strictly as that of

2412-448: A currency administration guided by value theory is doomed to sterility and inactivity. The theory of value is closely related to that of allocative efficiency , the quality by which firms produce those goods and services most valued by society. The market value of a machine part, for example, will depend upon a variety of objective facts involving its efficiency versus the efficiency of other types of part or other types of machine to make

2546-419: A different, stricter standard of behavior than the comparable tortious duty of care in common law. The fiduciary has a duty not to be in a situation where personal interests and fiduciary duty conflict, not to be in a situation where their fiduciary duty conflicts with another fiduciary duty, and a duty not to profit from their fiduciary position without knowledge and consent. A fiduciary ideally would not have

2680-445: A fideicommissum is a fideicommissioner and one that receives property from a fiduciary heir is a fideicommissary heir . Fiduciary principles may be applied in a variety of legal contexts. Joint ventures , as opposed to business partnerships , are not presumed to carry a fiduciary duty; however, this is a matter of degree. If a joint venture is conducted at commercial arm's length and both parties are on an equal footing then

2814-452: A fiduciary duty between certain classes of persons include these: In Australia, the categories of fiduciary relationships are not closed. Roman and civil law recognized a type of contract called fiducia (also contractus fiduciae or fiduciary contract), involving essentially a sale to a person coupled with an agreement that the purchaser should sell the property back upon the fulfillment of certain conditions. Such contracts were used in

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2948-411: A great deal of cooperation, trustworthiness, and self-restraint among the people who enjoy it." Menon claims that the autonomous individual, responsible for his/her own existence is a cultural construct moulded by Western culture rather than the truth about the human condition . Penner views property as an "illusion"—a "normative phantasm" without substance. In the neoliberal literature, the property

3082-471: A mathematical quantity depends on the algebraic sign attached to it. Any given accumulation of commercial wealth may be indicative, on the one hand, of faithful industries, progressive energies, and productive ingenuities: or, on the other, it may be indicative of mortal luxury, merciless tyranny, ruinous chicanery." Gandhi was greatly inspired by Ruskin's book and published a paraphrase of it in 1908. Economists such as Ludwig von Mises asserted that "value"

3216-570: A mortgage may sell fractional shares to investors, thereby creating a participating mortgage . A fiduciary will be liable to account if proven to have acquired a profit, benefit or gain from the relationship by one of three means: Therefore, it is said the fiduciary has a duty not to be in a situation where personal interests and fiduciary duty conflict, a duty not to be in a situation where his fiduciary duty conflicts with another fiduciary duty, and not to profit from his fiduciary position without express knowledge and consent. A fiduciary cannot have

3350-440: A position of vulnerability, justifiably vests confidence, good faith , reliance, and trust in another whose aid, advice, or protection is sought in some matter. In such a relation, good conscience requires the fiduciary to act at all times for the sole benefit and interest of the one who trusts. A fiduciary is someone who has undertaken to act for and on behalf of another in a particular matter in circumstances which give rise to

3484-402: A probate court or judge a surety bond , called a fiduciary bond or probate bond , to guarantee faithful performance of his duties. One of those duties may be to prepare, generally under oath, an inventory of the tangible or intangible property of the estate, describing the items or classes of property and usually placing a valuation on them. A bank or other fiduciary having legal title to

3618-510: A profit is the only concern of business, Duska argued. Peter Drucker once said, "There is neither a separate ethics of business nor is one needed", implying that standards of personal ethics cover all business situations. However, Drucker in another instance said that the ultimate responsibility of company directors is not to harm— primum non nocere . Philosopher and author Ayn Rand has put forth her idea of rational egoism , which also applies to business ethics. She stresses that position of

3752-480: A relationship of trust and confidence. Fiduciary duties in a financial sense exist to ensure that those who manage other people's money act in their beneficiaries' interests, rather than serving their own interests. A fiduciary duty is the highest standard of care in equity or law. A fiduciary is expected to be extremely loyal to the person to whom he owes the duty (the " principal ") such that there must be no conflict of duty between fiduciary and principal, and

3886-477: A slave is distinctly and expressly affirmed in the Constitution." Neoliberals hold that private property rights are a non-negotiable natural right. Davies counters with "property is no different from other legal categories in that it is simply a consequence of the significance attached by law to the relationships between legal persons." Singer claims, "Property is a form of power, and the distribution of power

4020-618: A test appropriate to determine whether a fiduciary relationship exists for one purpose might be inappropriate for another: In 2014 the Law Commission (England and Wales) reviewed the fiduciary duties of investment intermediaries, looking particularly at the duties on pension trustees. They commented that the term "fiduciary" is used in many different ways. Fiduciary duties cannot be understood in isolation. Instead they are better viewed as ‘legal polyfilla ’, molding themselves flexibly around other legal structures, and sometimes filling

4154-418: A whole through taxation and/or the company's involvement in social action when it occurs. On the other hand, if a company's purpose is to maximize shareholder returns, then sacrificing profits for other concerns is a violation of its fiduciary responsibility . Corporate entities are legal persons but this does not mean they are legally entitled to all of the rights and liabilities as natural persons. Ethics are

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4288-499: A written code of ethics that governs standards of professional conduct expected of all in the field. It is important to note that "law" and "ethics" are not synonymous, nor are the "legal" and "ethical" courses of action in a given situation necessarily the same. Statutes and regulations passed by legislative bodies and administrative boards set forth the "law". Slavery once was legal in the US, but one certainly would not say enslaving another

4422-467: Is a need for a power theory of value. There is, however, a causality dilemma to their argument that has drawn criticism: power is based on the ability of firms to set monopoly prices yet the ability to set prices is based on firms possessing a degree of power in the market. Capitalization , in their theory, is a measure of power, as illuminated through the present discounted value of future earnings (while also taking into account hype and risk). This formula

4556-525: Is a political problem of the highest order". Rose finds, " 'Property' is only an effect, a construction, of relationships between people, meaning that its objective character is contestable. Persons and things, are 'constituted' or 'fabricated' by legal and other normative techniques." Singer observes, "A private property regime is not, after all, a Hobbesian state of nature; it requires a working legal system that can define, allocate, and enforce property rights." Davis claims that common law theory generally favors

4690-452: Is a subjective judgment. Prices can only be determined by taking these subjective judgments into account, and that this is done through the price mechanism in the market. Thus, it was false to say that the economic value of a good was equal to what it cost to produce or to its current replacement cost. Silvio Gesell denied value theory in economics. He thought that value theory is useless and prevents economics from becoming science and that

4824-445: Is all his work and receives an exclusive contract and $ 50,000. Y is unaware of the encounter until reading it in the paper the next week. This situation represents a conflict of interest and duty. Both X and Y hold fiduciary duties to each other, which means they must subdue their own interests in favor of the duo's collective interest. By signing an individual contract and taking all the money, X has put personal interest above

4958-426: Is basic to finance which is the overarching logic of capitalism. The logic is also inherently differential as every capitalist strives to accumulate greater earnings than their competitors (but not profit maximization ). Nitzan and Bichler label this process differential accumulation . In order to have a power theory of value there needs to be differential accumulation where some owners' rate of growth of capitalization

5092-416: Is between a trustee , whether real or juristic, and a beneficiary . The trustee to whom property is legally committed is the legal—i.e., common law—owner of all such property. The beneficiary, at law, has no legal title to the trust ; however, the trustee is bound by equity to suppress their own interests and administer the property only for the benefit of the beneficiary. In this way, the beneficiary obtains

5226-476: Is complicated, however, by the efforts of classical economists to connect price and labor value. Karl Marx , for one, saw exchange value as the "form of appearance" (This interpretation of Marx is along the lines of the Marxist thinker Michael Heinrich ) [ Erscheinungsform ] of value, in his critique of political economy which implies that, although value is separate from exchange value, it is meaningless without

5360-412: Is due to pragmatic reasons, especially in regard to a bankrupt fiduciary. If a fiduciary takes a bribe and that bribe is considered a debt then if the fiduciary goes bankrupt the debt will be left in his pool of assets to be paid to creditors and the principal may miss out on recovery because other creditors were more secured. If the bribe is treated as held on a constructive trust then it will remain in

5494-406: Is easy to see situations where the actual value is considerably larger than the market price: purchase of drinking water is one example. The economic value of a good or service has puzzled economists since the beginning of the discipline. First, economists tried to estimate the value of a good to an individual alone, and extend that definition to goods that can be exchanged. From this analysis came

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5628-599: Is faster than the average pace of capitalization. The subjective theory of value emphasizes the role of consumer preferences in influencing price. According to this theory, the consumer places a value on a commodity by determining the marginal utility , or additional satisfaction of one additional unit. Marginalism employs concepts such as marginal utility , marginal rate of substitution , and opportunity costs to explain consumer preferences and price. Subjectivist or marginalist theories of value were created by William Stanley Jevons , Léon Walras , and Carl Menger in

5762-408: Is generally measured through units of currency , and the interpretation is therefore "what is the maximum amount of money a person is willing and able to pay for a good or service?” Value for money is often expressed in comparative terms, such as "better", or "best value for money", but may also be expressed in absolute terms, such as where a deal does, or does not, offer value for money. Among

5896-447: Is necessary for life. This paradox was answered by the subjective theory of value by realizing that water, in total, is more valuable than diamonds because the first few units are necessary for life. The key difference between water and diamonds is that water is more plentiful and diamonds are rare. Because of the availability, one additional unit of diamonds exceeds the value of one additional unit of water. The subjective theory emphasizes

6030-410: Is no market to set a price then there is no economic value. In classical economics , the value of an object or condition is the amount of discomfort/labor saved through the consumption or use of an object or condition (Labor Theory of Value) . Though exchange value is recognized, economic value is not, in theory, dependent on the existence of a market and price and value are not seen as equal. This

6164-428: Is obtained by the rate at which transactions occur, telling observers the extent to which the purchase of the good has value over time. Said another way, value is how much a desired object or condition is worth relative to other objects or conditions. Economic values are expressed as "how much" of one desirable condition or product will, or would be given up in exchange for some other desired condition or product. Among

6298-425: Is overlooked for another reason—issues in finance are often addressed as matters of law rather than ethics. Aristotle said, "the end and purpose of the polis is the good life". Adam Smith characterized the good life in terms of material goods and intellectual and moral excellences of character. Smith in his The Wealth of Nations commented, "All for ourselves, and nothing for other people, seems, in every age of

6432-415: Is part of a cost-of-production theory of value and price. Ricardo, but not Keen, used a " labor theory of price " in which a commodity's "innate worth" was the amount of labor needed to produce it. "The value of a thing in any given time and place", according to Henry George , "is the largest amount of exertion that anyone will render in exchange for it. But as men always seek to gratify their desires with

6566-527: Is part of the private side of a public/private dichotomy and acts a counterweight to state power. Davies counters that "any space may be subject to plural meanings or appropriations which do not necessarily come into conflict". Private property has never been a universal doctrine, although since the end of the Cold War is it has become nearly so. Some societies, e.g., Native American bands, held land, if not all property, in common. When groups came into conflict,

6700-399: Is that it enhances individual liberty by extending the line of non-interference by the state or others around the person. Seen from this perspective, property right is absolute and property has a special and distinctive character that precedes its legal protection. Blackstone conceptualized property as the "sole and despotic dominion which one man claims and exercises over the external things of

6834-458: Is useless and prevents economics from becoming science and that a currency administration guided by value theory is doomed to sterility and inactivity. In classical economics , the labor theory of value asserts that the economic value of a commodity is determined by the total amount of socially necessary labor required to produce it. When speaking in terms of a labor theory of value, value without any qualifying adjective theoretically refers to

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6968-637: Is value loaded and associated with the personal qualities of propriety and respectability, also implies questions relating to ownership. A 'proper' person owns and is true to herself or himself, and is thus genuine, perfect and pure. Modern discourse on property emerged by the turn of the 17th century within theological discussions of that time. For instance, John Locke justified property rights saying that God had made "the earth, and all inferior creatures, [in] common to all men". In 1802 utilitarian Jeremy Bentham stated, "property and law are born together and die together". One argument for property ownership

7102-413: The capitalist relation and the exploitation of labor power constitutes the actual presupposition for this incorporation. Radical institutional economists Jonathan Nitzan and Shimshon Bichler (2009) argue that it was never possible to separate economics from politics. This separation is required to allow for neoclassical economics to base their theory on utility value and for Marxists to base

7236-454: The courts will be reluctant to find a fiduciary duty, but if the joint venture is carried out more in the manner of a partnership then fiduciary relationships can and often will arise. Husbands and wives are not presumed to be in a fiduciary relationship in many jurisdictions; however, this may be easily established. Similarly, ordinary commercial transactions in themselves are not presumed to but can give rise to fiduciary duties, should

7370-426: The duty of care , (2) the duty of loyalty and (3) the duty of good faith . The duty of care requires control persons to act on an informed basis after due consideration of all information. The duty includes a requirement that such persons reasonably inform themselves of alternatives. In doing so, they may rely on employees and other advisers so long as they do so with a critical eye and do not unquestionably accept

7504-412: The entrepreneur , who has to be responsible for his own happiness and the business is a means to said happiness, where the entrepreneur is not required to serve the interest of anyone else and no-one is entitled to his/her work. Another view of business is that it must exhibit corporate social responsibility (CSR): an umbrella term indicating that an ethical business must act as a responsible citizen of

7638-459: The labour theory of value on quantified abstract labour . Instead of a utility theory of value (like neoclassical economics ) or a labour theory of value (as found in Marxian economics ), Nitzan and Bichler propose a power theory of value . The structure of prices has little to do with the so-called "material" sphere of production and consumption. The quantification of power in prices is not

7772-501: The use of property without being its technical owner. Others, such as corporate directors , may be held to a fiduciary duty similar in some respects to that of a trustee. This happens when, for example, the directors of a bank are trustees for the depositors, the directors of a corporation are trustees for the stockholders or a guardian is trustee of their ward's property. A person in a sensitive position sometimes protects themselves from possible conflict of interest charges by setting up

7906-457: The young or the old ), gender / sexual harassment , race , religion , disability , weight and attractiveness. A common approach to remedying discrimination is affirmative action . Once hired, employees have the right to the occasional cost of living increases, as well as raises based on merit. Promotions, however, are not a right, and there are often fewer openings than qualified applicants. It may seem unfair if an employee who has been with

8040-511: The 18th and 19th century intellectuals as land, labor or idea, and property right over slaves had the same theological and essentialized justification It was even held that the property in slaves was a sacred right. Wiecek says, "Yet slavery was more clearly and explicitly established under the Constitution than it had been under the Articles". In an 1857 judgment, US Supreme Court Chief Justice Roger B. Taney said, "The right of property in

8174-1612: The 1990s. Marketing ethics was approached from ethical perspectives of virtue or virtue ethics , deontology , consequentialism , pragmatism and relativism. Ethics in marketing deals with the principles, values and/or ideas by which marketers (and marketing institutions) ought to act. Marketing ethics is also contested terrain, beyond the previously described issue of potential conflicts between profitability and other concerns. Ethical marketing issues include marketing redundant or dangerous products/services, transparency about environmental risks, transparency about product ingredients such as genetically modified organisms possible health risks, financial risks , security risks, etc., respect for consumer privacy and autonomy, advertising truthfulness and fairness in pricing & distribution. According to Borgerson, and Schroeder (2008), marketing can influence individuals' perceptions of and interactions with other people, implying an ethical responsibility to avoid distorting those perceptions and interactions. Marketing ethics involves pricing practices, including illegal actions such as price fixing and legal actions including price discrimination and price skimming . Certain promotional activities have drawn fire, including greenwashing , bait and switch , shilling , viral marketing , spam (electronic) , pyramid schemes and multi-level marketing . Advertising has raised objections about attack ads , subliminal messages , sex in advertising and marketing in schools . Scholars in business and management have paid much attention to

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8308-453: The Court reluctant in recognising the fiduciary relationship. In 2011, in an insider trading case, the U.S. Securities and Exchange Commission brought charges against a boyfriend of a Disney intern, alleging he had a fiduciary duty to his girlfriend and breached it. The boyfriend, Toby Scammell, allegedly received and used insider information on Disney's takeover of Marvel Comics. Generally,

8442-462: The Treasury , is the primary regulator of the fiduciary activities of federal savings associations . When a court desires to hold the offending party to a transaction responsible so as to prevent unjust enrichment, the judge can declare that a fiduciary relation exists between the parties, as though the offender were in fact a trustee for the partner. Relationships which routinely attract by law

8576-399: The United States or Canada . In Australia, it has been found that there is no comprehensive list of criteria by which to establish a fiduciary relationship. Courts have so far refused to define the concept of a fiduciary, instead preferring to develop the law on a case-by-case basis and by way of analogy. Fiduciary relationships are of different types and carry different obligations so that

8710-425: The act of exchange. In this tradition, Steve Keen makes the claim that "value" refers to "the innate worth of a commodity, which determines the normal ('equilibrium') ratio at which two commodities exchange." To Keen and the tradition of David Ricardo , this corresponds to the classical concept of long-run cost-determined prices, what Adam Smith called "natural prices" and Marx called " prices of production ". It

8844-491: The aggregate, not a specific price of a particular good or service in a given circumstance. Theories in either class allow for deviations when a particular price is struck in a real-world market transaction, or when a price is set in some price fixing regime. Critics of traditional Marxian economics , especially those associated with the Neue Marx-Lektüre (New Readings of Marx) such as Michael Heinrich , emphasize

8978-421: The amount of labor necessary for the production of a marketable commodity , including the labor necessary for the development of any capital used in the production process. Both David Ricardo and Karl Marx attempted to quantify and embody all labor components in order to develop a theory of the real, or natural, price of a commodity. In either case, what is being addressed are general prices—i.e., prices in

9112-465: The appropriate circumstances arise. These are usually circumstances where the contract specifies a degree of trust and loyalty or it can be inferred by the court. Australian courts also do not recognise parents and their children to be in fiduciary relationships. In contrast, the Supreme Court of Canada allowed a child to sue her father for damages for breach of his fiduciary duties, opening

9246-499: The attention of academics, media and business firms by the end of the Cold War . However, criticism of business practices was attacked for infringing the freedom of entrepreneurs and critics were accused of supporting communists . This scuttled the discourse of business ethics both in media and academia. The Defense Industry Initiative on Business Ethics and Conduct (DII) was created to support corporate ethical conduct. This era began

9380-488: The belief and support of self-regulation and free trade, which lifted tariffs and barriers and allowed businesses to merge and divest in an increasing global atmosphere. One of the earliest written treatments of business ethics is found in the Tirukkuṛaḷ , a Tamil book dated variously from 300 BCE to the 7th century CE and attributed to Thiruvalluvar . Many verses discuss business ethics, in particular, verse 113, adapting to

9514-454: The care that a reasonably prudent person in a similar position would use under similar circumstances. Control persons fail to act in good faith, even if their actions are not illegal, when they take actions for improper purposes or, in certain circumstances, when their actions have grossly inequitable results. The duty to act in good faith is an obligation not only to make decisions free from self-interest, but also free of any interest that diverts

9648-404: The case of the government, community, and society what was merely an ethical issue can become a legal debate and eventually law." Some emerging ethical issues are: This area of business ethics usually deals with the duties of a company to ensure that products and production processes do not needlessly cause harm. Since few goods and services can be produced and consumed with zero risks, determining

9782-446: The communities in which it operates even at the cost of profits or other goals. In the US and most other nations, corporate entities are legally treated as persons in some respects. For example, they can hold title to property, sue and be sued and are subject to taxation, although their free speech rights are limited. This can be interpreted to imply that they have independent ethical responsibilities. Duska argued that stakeholders expect

9916-577: The communities in which they operate accelerated the development of formal ethics regimes. Maintaining an ethical status is the responsibility of the manager of the business. According to a 1990 article in the Journal of Business Ethics , "Managing ethical behavior is one of the most pervasive and complex problems facing business organizations today." Business ethics reflect the norms of each historical period. As time passes, norms evolve, causing accepted behaviors to become objectionable. Business ethics and

10050-425: The competing schools of economic theory there are differing theories of value . Economic value is not the same as market price , nor is economic value the same thing as market value . If a consumer is willing to buy a good, it implies that the customer places a higher value on the good than the market price. The difference between the value to the consumer and the market price is called " consumer surplus ". It

10184-544: The competing schools of economic theory there are differing metrics for value assessment and the metrics are the subject of a theory of value . Value theories are a large part of the differences and disagreements between the various schools of economic theory. Value for money forms part of the "economic dimension" of the five "cases" required to validate a UK government investment or spending proposal. UK government guidance in this context speaks of "assessing" and of "maximising" value for money. In neoclassical economics ,

10318-437: The concepts value in use and value in exchange . Value is linked to price through the mechanism of exchange . When an economist observes an exchange, two important value functions are revealed: those of the buyer and seller. Just as the buyer reveals what he is willing to pay for a certain amount of a good, so too does the seller reveal what it costs him to give up the good. Additional information about market value

10452-443: The consequence of external laws—whether natural or historical—but entirely internal to society. In capitalism , power is the governing principle as rooted in the centrality of private ownership. Private ownership is wholly and only an act of institutionalized exclusion, and institutionalized exclusion is a matter of organized power. And since the power behind private ownership is denominated in prices, Nitzan and Bichler argue, there

10586-410: The consequences of his deviation from his duty? The law expressed here follows the general body of elementary fiduciary law found in most common law jurisdictions; for in-depth analysis of particular jurisdictional idiosyncrasies please consult primary authorities within the relevant jurisdiction. This is especially true in the area of Labor and Employment law. In Canada a fiduciary has obligations to

10720-495: The control persons from acting in the best interest of the company. The duty to act in good faith may be measured by an individual's particular knowledge and expertise. The higher the level of expertise, the more accountable that person will be (e.g., a finance expert may be held to a more exacting standard than others in accepting a third party valuation). At one time, courts seemed to view the duty of good faith as an independent obligation. However, more recently, courts have treated

10854-405: The corporation, which contains two component duties — (2) a duty to protect shareholder interests from harm, and (3) a procedural duty of "fair treatment" for relevant stakeholder interests. This tripartite structure encapsulates the duty of directors to act in the "best interests of the corporation, viewed as a good corporate citizen". The most common circumstance where a fiduciary duty will arise

10988-545: The door in Canada for allowing fiduciary obligations between parent and child to be recognised. Australian courts have also not accepted doctor-patient relationships as fiduciary in nature. In Breen v Williams , the High Court viewed the doctor's responsibilities over their patients as lacking the representative capacity of the trustee in fiduciary relationships. Moreover, the existence of remedies in contract and tort made

11122-528: The duty of good faith as a component of the duty of loyalty. In Canada, directors of corporations owe a fiduciary duty. A debate exists as to the nature and extent of this duty following a controversial landmark judgment from the Supreme Court of Canada in BCE Inc. v. 1976 Debentureholders . Scholarly literature has defined this as a "tripartite fiduciary duty", composed of (1) an overarching duty to

11256-432: The emancipation of children, in connection with testamentary gifts and in pledges. Under Roman law a woman could arrange a fictitious sale called a fiduciary coemption in order to change her guardian or gain legal capacity to make a will. In Roman Dutch law , a fiduciary heir may receive property subject to passing it to another on fulfilment of certain conditions; the gift is called a fideicommissum . The fiduciary of

11390-579: The employer even after the employment relationship is terminated, whereas in the United States the employment and fiduciary relationships terminate together. The corporate law of Delaware is the most influential in the United States, as more than 50% of publicly traded companies in the United States, including 64% of the Fortune 500, have chosen to incorporate in that state. Under Delaware law, officers, directors and other control persons of corporations and other entities owe three primary fiduciary duties, (1)

11524-580: The employment relationship is not regarded as fiduciary, but may be so if ... within a particular contractual relationship there are specific contractual obligations which the employee has undertaken which have placed him in a situation where equity imposes these rigorous duties in addition to the contractual obligations. Although terminologies like duty of good faith, or loyalty, or the mutual duty of trust and confidence are frequently used to describe employment relationships, such concepts usually denote situations where "a party merely has to take into consideration

11658-420: The equitable principles, or maxims, equity serves those with clean hands. Therefore, the bribe is held on constructive trust for the principal, the only innocent party. Bribes were initially considered not to be held on constructive trust, but were considered to be held as a debt by the fiduciary to the principal. This approach has been overruled; the bribe is now classified as a constructive trust. The change

11792-518: The ethical course can be difficult. In some case, consumers demand products that harm them, such as tobacco products. Production may have environmental impacts, including pollution , habitat destruction and urban sprawl . The downstream effects of technologies nuclear power , genetically modified food and mobile phones may not be well understood. While the precautionary principle may prohibit introducing new technology whose consequences are not fully understood, that principle would have prohibited

11926-548: The ethical debate over introducing a crime of corporate manslaughter ; and the marketing of corporations' ethics policies. According to research published by the Institute of Business Ethics and Ipsos MORI in late 2012, the three major areas of public concern regarding business ethics in Britain are executive pay, corporate tax avoidance and bribery and corruption. Ethical standards of an entire organization can be damaged if

12060-458: The ethical issues in the different forms of relationships between organizations such as buyer-supplier relationships, networks, alliances , or joint ventures . Drawing in particular on Transaction Cost Theory and Agency Theory , they note the risk of opportunistic and unethical practices between partners through, for instance, shirking, poaching , and other deceitful behaviors. In turn, research on inter-organizational relationships has observed

12194-482: The fiduciary duty. Therefore, a court will find that X has breached his fiduciary duty. The judicial remedy here will be that X holds both the contract and the money in a constructive trust for the duo. Note, X will not be punished or totally denied of the benefit; both X and Y will receive a half share in the contract and the money. When T. Boone Pickens 's Mesa Petroleum attempted to take over Cities Service in 1982, Cities Service attempted to take over

12328-408: The fiduciary must not profit from their position as a fiduciary, unless the principal consents. The nature of fiduciary obligations differs among jurisdictions. In Australia, only proscriptive or negative fiduciary obligations are recognised, whereas in Canada, fiduciaries can come under both proscriptive (negative) and prescriptive (positive) fiduciary obligations. In English common law ,

12462-587: The fiduciary relation is an important concept within a part of the legal system known as equity . In the United Kingdom, the Judicature Acts merged the courts of equity (historically based in England's Court of Chancery ) with the courts of common law, and as a result the concept of fiduciary duty also became applicable in common law courts. When a fiduciary duty is imposed, equity requires

12596-433: The gaps. The question of who is a fiduciary is a "notoriously intractable" question and this was the first of many questions. In SEC v. Chenery Corporation , Frankfurter J said, To say that a man is a fiduciary only begins the analysis; it gives direction to further inquiry. To whom is he a fiduciary? What obligations does he owe as a fiduciary? In what respect has he failed to discharge these obligations? And what are

12730-781: The global market with minimal regulation over capital flows. The recommendations however, met with criticisms from various schools of ethical philosophy. Some pragmatic ethicists , found these claims to be unfalsifiable and a priori, although neither of these makes the recommendations false or unethical per se. Raising economic growth to the highest value necessarily means that welfare is subordinate, although advocates dispute this saying that economic growth provides more welfare than known alternatives. Since history shows that neither regulated nor unregulated firms always behave ethically, neither regime offers an ethical panacea . Neoliberal recommendations to developing countries to unconditionally open up their economies to transnational finance corporations

12864-464: The ideology hold that unrestricted financial flows, if redeemed from the shackles of "financial repressions", best help impoverished nations to grow. The theory holds that open financial systems accelerate economic growth by encouraging foreign capital inflows, thereby enabling higher levels of savings, investment, employment, productivity and "welfare", along with containing corruption. Neoliberals recommended that governments open their financial systems to

12998-409: The information and conclusions provided to them. Under normal circumstances, their actions are accorded the protection of the business judgment rule, which presumes that control persons acted properly, provided that they act on an informed basis, in good faith and in the honest belief that the action taken was in the best interests of the company. The duty of loyalty requires control persons to look to

13132-413: The interaction of profit-maximizing behavior with non-economic concerns. Interest in business ethics accelerated dramatically during the 1980s and 1990s, both within major corporations and within academia. For example, most major corporations today promote their commitment to non- economic values under headings such as ethics codes and social responsibility charters. Adam Smith said in 1776, "People of

13266-487: The interests of another, but does not have to act in the interests of that other. If fiduciary relationships are to arise between employers and employees, it is necessary to ascertain that the employee has placed himself in a position where he must act solely in the interests of his employer. In the case of Canadian Aero Service Ltd v O'Malley , it was held that a senior employee is much more likely to be found to owe fiduciary duties towards his employer. A protector of

13400-494: The interests of the company and its other owners and not to their personal interests. In general, they cannot use their positions of trust, confidence and inside knowledge to further their own private interests or approve an action that will provide them with a personal benefit (such as continued employment) that does not primarily benefit the company or its other owners. The duty of good faith requires control persons to exercise care and prudence in making business decisions—that is,

13534-418: The interests, which is not acceptable to equity. Therefore, the conflict of duty and duty rule is really an extension of the conflict of interest and duty rules. A fiduciary must not profit from the fiduciary position. This includes any benefits or profits which, although unrelated to the fiduciary position, came about because of an opportunity that the fiduciary position afforded. It is unnecessary that

13668-418: The kind of products that consumers will value in turn. In such a case, market value has both objective and subjective components. Economy, efficiency and effectiveness , often referred to as the "Three Es", may be used as complementary factors contributing to an assessment of the value for money provided by a purchase, project or activity. The UK National Audit Office uses the following summaries to explain

13802-404: The late 19th century. These theories contradicted earlier labour theories of values proposed by classical economists which emphasize the role of socially necessary labour in producing value. The subjective theory of value helped answer the " diamond–water paradox ," which many believed to be unsolvable. The diamond–water paradox questions why diamonds are so much more valuable than water when water

13936-521: The least exertion this is the lowest amount for which a similar thing can otherwise be obtained." In another classical tradition, Marx distinguished between the "value in use" ( use-value , what a commodity provides to its buyer), labor cost which he calls "value" (the socially-necessary labour time it embodies), and " exchange value " (how much labor-time the sale of the commodity can claim, Smith's "labor commanded" value). By most interpretations of his labor theory of value , Marx, like Ricardo, developed

14070-496: The meaning of each term: Sometimes a fourth 'E', equity , is also added. In philosophy, economic value is a subcategory of a more general philosophical value , as defined in goodness and value theory or in the science of value . Adam Smith agreed with certain aspects of labor theory of value , but believed it did not fully explain price and profit. Instead, he proposed a cost-of-production theory of value (to later develop into exchange value theory) that explained value

14204-475: The mix of debt and equity , dividend policy , the evaluation of alternative investment projects, options , futures , swaps , and other derivatives , portfolio diversification and many others. Finance is often mistaken by the people to be a discipline free from ethical burdens. The 2008 financial crisis caused critics to challenge the ethics of the executives in charge of U.S. and European financial institutions and financial regulatory bodies. Finance ethics

14338-414: The most people in the long term. Duska argued that Friedman failed to differentiate two very different aspects of business: (1) the motive of individuals, who are generally motivated by profit to participate in business, and (2) the socially sanctioned purpose of business, or the reason why people allow businesses to exist, which is to provide goods and services to people. So Friedman was wrong that making

14472-602: The newest technology introduced since the industrial revolution . Product testing protocols have been attacked for violating the rights of both humans and animals . There are sources that provide information on companies that are environmentally responsible or do not test on animals. The etymological root of property is the Latin proprius , which refers to 'nature', 'quality', 'one's own', 'special characteristic', 'proper', 'intrinsic', 'inherent', 'regular', 'normal', 'genuine', 'thorough, complete, perfect' etc. The word property

14606-453: The object is to win, and winning is measured in terms solely of material wealth. Within the discipline, this rationality concept is never questioned, and has indeed become the theory-of-the-firm's sine qua non". Financial ethics is in this view a mathematical function of shareholder wealth. Such simplifying assumptions were once necessary for the construction of mathematically robust models. However, signalling theory and agency theory extended

14740-713: The paradigm to greater realism. Fairness in trading practices, trading conditions, financial contracting, sales practices, consultancy services, tax payments, internal audit, external audit and executive compensation also, fall under the umbrella of finance and accounting. Particular corporate ethical/legal abuses include: creative accounting , earnings management , misleading financial analysis, insider trading , securities fraud , bribery /kickbacks and facilitation payments . Outside of corporations, bucket shops and forex scams are criminal manipulations of financial markets. Cases include accounting scandals , Enron , WorldCom and Satyam . Human resource management occupies

14874-413: The principal would have been unable to make the profit; if the fiduciary makes a profit, by virtue of his role as fiduciary for the principal, then the fiduciary must report the profit to the principal. If the principal provides fully informed consent , then the fiduciary may keep the benefit and be absolved of any liability for what would be a breach of fiduciary duty. If this requirement is not met then

15008-463: The property is deemed by the court to be held by the fiduciary on constructive trust for the principal. Secret commissions, or bribes , also come under the no profit rule. The bribe shall be held in constructive trust for the principal. The person who made the bribe cannot recover it, since he has committed a crime . Similarly, the fiduciary, who received the bribe, has committed a crime. Fiduciary duties are an aspect of equity and, in accordance with

15142-427: The purpose of a business organization is to make profit for shareholders. Nevertheless, the purpose of maximizing shareholder's wealth often "fails to energize employees". In practice, many non-shareholders also benefit from a firm's economic activity, among them employees through contractual compensation and its broader impact, consumers by the tangible or non-tangible value derived from their purchase choices; society as

15276-445: The purview of individual companies. Trade unions , for example, may push employers to establish due process for workers, but may also cause job loss by demanding unsustainable compensation and work rules. Unionized workplaces may confront union busting and strike breaking and face the ethical implications of work rules that advantage some workers over others. Among the many people management strategies that companies employ are

15410-657: The question is, do corporate executives, provided they stay within the law, have responsibilities in their business activities other than to make as much money for their stockholders as possible? And my answer to that is, no, they do not." This view is known as the Friedman doctrine . A multi-country 2011 survey found support for this view among the "informed public" ranging from 30 to 80%. Ronald Duska and Jacques Cory have described Friedman's argument as consequentialist or utilitarian rather than pragmatic : Friedman's argument implies that unrestrained corporate freedom would benefit

15544-448: The resulting behavior evolved as well. Business was involved in slavery , colonialism , and the Cold War . The term 'business ethics' came into common use in the United States in the early 1970s. By the mid-1980s at least 500 courses in business ethics reached 40,000 students, using some twenty textbooks and at least ten casebooks supported by professional societies, centers and journals of business ethics. The Society for Business Ethics

15678-401: The role of supply and demand in determining price. Fiduciary responsibility A fiduciary is a person who holds a legal or ethical relationship of trust with one or more other parties (person or group of persons). Typically, a fiduciary prudently takes care of money or other assets for another person. One party, for example, a corporate trust company or the trust department of

15812-522: The role of formal and informal mechanisms to both prevent unethical practices and mitigate their consequences. It especially discusses the importance of formal contracts and relational norms between partners to manage ethical issues. Being the most important element of a business, stakeholders' main concern is to determine whether or not the business is behaving ethically or unethically. The business's actions and decisions should be primarily ethical before it happens to become an ethical or even legal issue. "In

15946-532: The rule, sometimes known as the 'fiduciary rule'. The rule would require "brokers offering retirement investment advice to put their clients' interest first". The Trump administration later rescinded the fiduciary rule on July 20, 2018. Prior to its repeal, the rule was also dealt blows by the US Fifth Circuit Court of Appeals in March and June 2018. For example, two members, X and Y , of

16080-427: The rules or standards that govern our decisions on a daily basis. Many consider "ethics" with conscience or a simplistic sense of "right" and "wrong". Others would say that ethics is an internal code that governs an individual's conduct, ingrained into each person by family, faith, tradition, community, laws, and personal mores. Corporations and professional organizations, particularly licensing boards, generally will have

16214-470: The same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices." Governments use laws and regulations to point business behavior in what they perceive to be beneficial directions. Ethics implicitly regulates areas and details of behavior that lie beyond governmental control. The emergence of large corporations with limited relationships and sensitivity to

16348-408: The smaller Mesa instead. Pickens was friends with Alan Habacht of Weiss, Peck & Greer , who supported Mesa's attempt. Fiduciary duty, however, required Habacht to seek the maximum possible return on the investment he managed by offering Weiss's Mesa shares to Cities's tender offer . A fiduciary, such as the administrator, executor or guardian of an estate, may be legally required to file with

16482-603: The sphere of activity of recruitment selection, orientation, performance appraisal , training and development , industrial relations and health and safety issues. Business Ethicists differ in their orientation towards labor ethics. Some assess human resource policies according to whether they support an egalitarian workplace and the dignity of labor . Issues including employment itself , privacy , compensation in accord with comparable worth , collective bargaining (and/or its opposite) can be seen either as inalienable rights or as negotiable. Discrimination by age (preferring

16616-421: The value of an object or service is often seen as nothing but the price it would bring in an open and competitive market. This is determined primarily by the demand for the object relative to supply in a perfectly competitive market . Many neoclassical economic theories equate the value of a commodity with its price, whether the market is competitive or not. As such, everything is seen as a commodity and if there

16750-497: The victor often appropriated the loser's property. The rights paradigm tended to stabilize the distribution of property holdings on the presumption that title had been lawfully acquired. Economic value In economics , economic value is a measure of the benefit provided by a good or service to an economic agent , and value for money represents an assessment of whether financial or other resources are being used effectively in order to secure such benefit. Economic value

16884-499: The view that "property is not essentially a 'right to a thing', but rather a separable bundle of rights subsisting between persons which may vary according to the context and the object which is at stake". In common parlance property rights involve a bundle of rights including occupancy, use and enjoyment, and the right to sell, devise, give, or lease all or part of these rights. Custodians of property have obligations as well as rights. Michelman writes, "A property regime thus depends on

17018-443: The workplace what is unethical does not mean illegal and should follow the guidelines put in place by OSHA ( Occupational Safety and Health Administration ), EEOC ( Equal Employment Opportunity Commission ), and other law binding entities. Potential employees have ethical obligations to employers, involving intellectual property protection and whistle-blowing . Employers must consider workplace safety , which may involve modifying

17152-420: The workplace, or providing appropriate training or hazard disclosure. This differentiates on the location and type of work that is taking place and can need to comply with the standards to protect employees and non-employees under workplace safety. Larger economic issues such as immigration , trade policy , globalization and trade unionism affect workplaces and have an ethical dimension, but are often beyond

17286-491: The world, in total exclusion of the right of any other individual in the universe". During the seventeenth and eighteenth centuries, slavery spread to European colonies including America, where colonial legislatures defined the legal status of slaves as a form of property. Combined with theological justification, the property was taken to be essentially natural ordained by God. Property, which later gained meaning as ownership and appeared natural to Locke, Jefferson and to many of

17420-415: The world, to have been the vile maxim of the masters of mankind." However, a section of economists influenced by the ideology of neoliberalism , interpreted the objective of economics to be maximization of economic growth through accelerated consumption and production of goods and services . Neoliberal ideology promoted finance from its position as a component of economics to its core. Proponents of

17554-419: Was an "ethical" act. Economist Milton Friedman wrote that corporate executives' "responsibility ... generally will be to make as much money as possible while conforming to their basic rules of the society, both those embodied in law and those embodied in ethical custom". Friedman also said, "the only entities who can have responsibilities are individuals ... A business cannot have responsibilities. So

17688-411: Was determined by several different factors, including wages and rents. This theory of value, according to Smith, best explained the natural prices in the market. While an underdeveloped theory at the time, it did offer an alternative to another popular value theory of the time. The utility theory of value was the belief that price and value were solely based on how much "use" an individual received from

17822-406: Was fiercely contested by some ethicists. The claim that deregulation and the opening up of economies would reduce corruption was also contested. Dobson observes, "a rational agent is simply one who pursues personal material advantage ad infinitum. In essence, to be rational in finance is to be individualistic, materialistic, and competitive. Business is a game played by individuals, as with all games

17956-532: Was founded in 1980. European business schools adopted business ethics after 1987 commencing with the European Business Ethics Network. In 1982 the first single-authored books in the field appeared. Firms began highlighting their ethical stature in the late 1980s and early 1990s, possibly in an attempt to distance themselves from the business scandals of the day, such as the savings and loan crisis . The concept of business ethics caught

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