Ethics and Law in Business and
Society Lecture Series
SEAN D. JASSO, PHD © 2020
OUR OVERARCHING AIM
HELPING YOU NAVIGATE THE COMPLEXITIES
OF A DYNAMIC ENVIRONMENT
QUESTION….
UCR - WINTER 2020
Government
ARE YOU GOOD?
A Dynamic
Environment
Business
Society
First – Government
•
political philosophy
•
politics
•
rule of law
•
democracy
•
The Social Contract
voluntary agreement among individuals, by which society
organizes itself and its resources to ensure mutual protection
and welfare and to regulate the relations among its citizens
Hobbes: 1588-1679
Locke: 1632-1704
tyranny
Rousseau: 1712-1778
•
political economic systems
Jefferson: 1743-1826
•
the social contract
Madison: 1751-1836
1
Second – Society
Federalist 51
1788 – Feb 6, 1788
“IF MEN WERE ANGELS, NO GOVERNMENT
WOULD BE NECESSARY. IF ANGELS WERE TO
GOVERN MEN, NEITHER EXTERNAL NOR
INTERNAL CONTROLS WOULD BE NECESSARY”
Third – Business
•
•
•
pluralistic
•
society’s needs – universal principles
•
governments views of society’s needs differ
•
society is ‘best’ when it is free
•
•
Western, American, Industrial, Developed
“society” – look to markets for prosperity and value – under the rule of law
Guiding Questions
Foundations
•
•
economics, political economic systems
the business enterprise – solutions, jobs, products, services,
innovations, progress
Markets
•
what is the nature of the corporation
•
what does society want from the corporation
•
what is the responsibility of the corporation
•
what is the morality of the firm
what is the morality of the market
•
competitive, global, strategic
•
•
require guidelines, boundaries, regulations
•
where is your moral development
•
what are the rules of the game
•
hence, “ethics and law”
ETHICS – TYPES
ON ETHICS &
MORALS
IDEAS BY WHICH WE LIVE
Descriptive / Positive – what is right?
Normative / Natural Law / what ought to be right?
Conventional / Principled / what is your character?
2
TOWARD THE
ETHICAL LIFE
ETHICS
GREEK FOR ETHOS – ONE’S MORAL CHARACTER
IN ESSENCE – HOW WE ACT
A JOURNEY OF MORAL DEVELOPMENT
MORALITY
LATIN FOR MORALIS – ONE’S CUSTOM OR
MANNER (VERY SIMILAR)
IN ESSENCE – HOW GOOD OUR CONDUCT IS
AND OUR STANDARDS ABOUT CONDUCT IN
GENERAL
ETHICS, THEREFORE, IS THE FORMAL STUDY OF
THOSE STANDARDS OR CONDUCT BY WAY OF
CODES, RULES, PRINCIPLES, POLICIES – AND IN
THE END, OUR HABITS
MORALS AND ETHICS
Conscience – one’s inner sense of right and wrong
- for believers – God’s presence in man
MORALS
THE MOTIVATION BASED ON IDEAS OF RIGHT
AND WRONG – MORALS ARE FAR MORE
ABOUT GOOD AND BAD THAN OTHER VALUES
WE MIGHT JUDGE OTHERS MORE STRONGLY
ON THEIR MORALS THAN ON THEIR VALUES
VALUES
ONE’S PRINCIPLES OR STANDARDS OF
RIGHT BEHAVIOR – ONE'S JUDGMENT OF
WHAT IS IMPORTANT AND RIGHT IN LIFE
Consider MORALS as within your conscience
Consider ETHICS as the rules to support your conscience
3
ON VALUES
ON MORALS
Values are our fundamental beliefs. They are the
principles we use to define that which is right, good and
just. Values provide guidance as we determine the right
versus the wrong, the good versus the bad. They are our
standards.
Consider the word “evaluate”. When we evaluate
something we compare it to a standard. We determine
whether it meets that standard or falls short, comes close
or far exceeds. To evaluate is to determine the merit of a
thing or an action as compared to a standard.
Morals are values which we attribute to a system of
beliefs, typically a religious system, but it could be a
political system of some other set of beliefs. These values
get their authority from something outside the individuala higher being or higher authority. Many of us find our
values are strongly influenced by our sense of morality right as defined by a higher authority. Yet we refrain from
citing that authority because doing so may seem less
rational and more emotional to others who do not share
our belief system.
ON ETHICS
Ethics is about our actions and decisions. When one acts in ways
which are consistent with our beliefs (whether secular or derived
from a moral authority) we will characterize that as acting
ethically. When one’s actions are not congruent with our values
- our sense of right, good and just - we will view that as acting
unethically.
Defining what is ethical is not an individual exercise however. If
it were then one could have argued that what Hitler did was
ethical since his actions conformed to his definition of right, fair
and good. The ethics of our decisions and actions is defined
societally, not individually.
PRINCIPAL RESPONSIBILITIES OF VALUES
1.
2.
3.
4.
5.
Religious Values – profession of faith
Cultural Values – cultural norms
Legal Values – judicial systems
Professional Values – business etiquette
Philosophical Values – general wisdom
On Moral Reasoning
Lawrence Kohlberg (1927-1987)
Thesis – moral reasoning is the
foundation of one’s ethical behavior
Approach to moral development –
psychology
4
The Ethics Checklist
1.
2.
3.
4.
ON BEING GOOD
5.
6.
‘HOW AND WHY’
7.
8.
9.
10.
11.
ON THE GOOD
It is no easy task to be good. For in
everything it is no easy task to
find the middle ... any one can
get angry --that is easy-- or give
or spend money; but to do this to
the right person, to the right
extent, at the right time, with the
right aim, and in the right way,
that is not for every one, nor is it
easy; that is why goodness is
both rare and laudable and
noble.
Is the outcome moral – is it right
Is the behavior ethical – is it good
What ethic is being tested
Is it legal
Does it fit the culture of the nation/organization
Will it negatively impact your stakeholders
Will it negatively impact your reputation
Will it look bad in the media
Can you sleep at night
Can you live with it – how’s your conscience?
How will it impact your spouse and children
WHY BE GOOD?
Elevate the Absolute
Knowledge of the Good
Excellence of Character
Preeminence of Achievement
Sustain the Right
The Life Well Led
Aristotle
HOW TO BE GOOD?
On VIRTUE
RIGOROUS PRACTICE OF
VIRTUE
KNOWLEDGE OF THE
GOOD
WE ARE WHAT WE
REMEMBER
A trait of human character that is
valued as being good in and of itself –
or universally understood to be a
value of goodness
5
ARISTOTLE’S VIRTUES –
in between excess and deficiency
1.
2.
3.
4.
5.
Courage
Justice
Generosity
Pride
Temperance
Truthfulness
7. Wittiness
8. Friendliness
9. Modesty
10. Righteous Indignation
6.
Where does good
come from?
Forthcoming
Toward
Where does being good
take us?
the Philosophy of the State
Virtue, Duty, Utility, Justice
Toward
Governance
Introduction to Corporate Governance
Introduction to Corporate ‘Social’ Responsibility
Introduction
Policy
to the Rationale for Public
Market Failure – in brief
6
Kant’s Central Lessons
Our purpose – to will
decisive action or choice toward the good
reason – our intellect to govern our free will – in essence, we
know the good
Our destination – moral law –
what makes goodness is one’s possession of a will
determined by a universal, moral law
a good will must be good in of itself & not in virtue with any
thing else – even one’s happiness
Greatest Contribution to Moral
Philosophy –
System of the Categorical Imperative
Great Work – Critique of Practical
Reason, 1788
Stanford's Great Source on Philosophy
- Kant
Our method – categorical imperative –
the unconditional command of conscience
in essence, we must be willed to be good
Imperative – because it is a command to exercise our wills
toward action
Categorical - absolute in virtue applying to us unconditionally
driven by our reason/rationality to do right by duty
Kantian Ethic – Duty
what is singular about motivation by duty is that it consists of bare
respect for lawfulness – Kant’s ‘ethics checklist’ or ‘categorical
imperative’
Act only according to that maxim by which you can at the
same time will that it would become a universal law.
Act in such a way that you always treat humanity, whether in
your own person or in the person of any other, never simply
as a means, but always at the same time as an end.
So act as though you were, through your maxims, a law
making member of a kingdom of ends.
Immanuel Kant
1724-1804
Kaliningrad, Prussia
Kant’s Burning
Questions –
•
What makes a person good
•
What is moral law
•
How do we achieve the highest
good
•
What is good will
Aristotle’s Central Lessons
Our purpose – eudaimonia – happiness
through flourishing
Our destination - aretê –excellence of
intellect and character
Our method – ethics – or, the
knowledge, aim and enduring
habituation toward the highest good
Aristotelian Ethic – virtue
384 BC – 322 BC
Athens, Greece
Stanford's Great Source on Philosophy - Aristotle
a life of virtue yields aretê
Ethics is not theoretical, but a life of
practice
Great works –
Nicomochean Ethics
The Politics
Oikonomos – The Management of the
Household
Our Purpose – universal liberty - from
egoism (self interest) to utility (collective
welfare)
Our Destination – aggregate
Our Method – utility
Greatest Contribution to Moral
Philosophy –
Mill’s Central Lessons
Aristotle
Aristotle’s Burning Questions –
•
What is happiness
•
What is a life lived well
•
What character traits are
•
What is the essential nature of an
activity
needed
•
What excellences are worthy of honor
and recognition
•
Why study ethics
Proportionality Doctrine – duty and right
action is defined in terms of universal
promotion of happiness
Millian Ethic – utilitarianism
happiness
driver of modern public policy
John Stuart Mill
1806-1873
London, England
What is the role of the individual in
society
•
What is the role of the state upon
individual liberty
•
How does society achieve
universal happiness
Greatest Contribution to Moral Philosophy
Advances modern liberalism
Great Work – On Liberty, 1859, Utilitarianism,
1863
Mill’s Burning Questions –
•
Rawls’ Central Lessons
Our Purpose – social cooperation – the
tenet of liberal thought
Our Destination – social justice –
cooperative policy should be free and fair
Our Method – Justice as Fairness – by way of
John Rawls
Enduring Questions
1921-2002
United States
the veil of ignorance free and equal citizens
achieve cooperation
Can you have equality at the expense of excellence?
Principle One – equal basic liberties to all
Does economic redistribution minimize prosperity?
Principle Two – fair equality of opportunity to all
for political & economic leadership
Does aggregate happiness curtail individualism?
Is society generally good?
Rawlsian Ethic – social justice
to achieve social justice, redistributive
public policy aims to level opportunity
Greatest Contribution to Moral Philosophy
Liberal Public Policy
Great Work – A Theory of Justice, 1971
•
Rawls’ Burning Questions –
How can society achieve
collective happiness
•
What is the nature of justice
Why do ‘good’ people do bad things?
•
What is ultimately fair
Who are your moral heroes
What is the right thing to do?
7
So……
SO, WHAT IS THE RIGHT THING TO DO?
Toward the Philosophy of
the State
SOCIAL CONTRACT THEORY - FORTHCOMING
Jasso’s Governance Framework
Good
Governance
ON GOVERNANCE
Ethical
Covenant
TOWARD GOOD GOVERNANCE
Governance
What is it…
“the system that defines the distribution of rights
and responsibilities among different
participants in the corporation, such as the
board, managers, shareholders, and other
stakeholders, and spells out the rules and
procedures for making decisions of corporate
affairs”
Moral Charter
Governing What
Purpose of the Corporation
Created by individuals and a legal entity of the state
Limited liability
Harness resources – maximize scale and scope
Maximize wealth creation for itself by providing
competitive value for its stakeholders
8
Structure of Governance
On Corporate Purpose
Board of Directors
“PROPERLY DEFINED, CORPORATE PURPOSE
SHOULD RARELY, IF EVER CHANGE”
– RICHARD ELLSWORTH
Council of “elders”
Set Moral Framework
Legally required
Set corporate mission, vision
Hire / fire CEO and senior executives
Control top management
Represent shareholder interests … stakeholder
Review use of major resources
Sarbanes Oxley Compliance
BOD’s Responsibilities
The Importance of
The Board of Directors
ON BOARDS, CEOS AND STRATEGY
The Board’s Central Responsibilities
CEO Performance Evaluation
and Executive Compensation
Generic CEO Evaluation Criteria
Bottom-line impact
Operational impact
Leadership Effectiveness
Governance is not Management
1.
CEO Selection
2.
Oversight, Compliance, and Risk Management
3.
Strategy Development
4.
Responding to External Pressures and Unforeseen Events
5.
Maintaining High Performance of the Board Itself
The Board’s Central Responsibilities
Responding to External Pressures
and Unforeseen Events
Best Practices
Think strategically about executive compensation
Integrate compensation decisions with succession planning
Competitive benchmarking is limiting – performance is key
Understand how executives view compensation
Communicate with major shareholders
Carefully select, monitor and evaluate board advisers – NYSE required board self-evaluation process
Demands for CSR and Shareholder Accountability
Globalization
Loss of trust
Civil society activism
Institutional interest in CSR – perception is reality
Movement toward “socially responsible investing”
Other Pressures
Hostile Takeovers
Crisis management
9
The Board’s Central Responsibilities
Creating a High-Performance Board
Seven practices to ensure value growth
1.
Effective boards set the moral framework
2.
Effective boards own the strategy
3.
Effective boards built the top executive team
4.
Effective boards link reward to performance
5.
Effective boards focus on financial viability
6.
Effective boards match risk with return
7.
Effective boards manage corporate reputation
8.
Effective boards manage themselves
ON CORPORATE
RESPONSIBILITY
WHAT IS THE RESPONSIBILITY OF THE
CORPORATION?
Guiding
Questions
TO WHOM OR WHAT IS THE CORPORATION
ACCOUNTABLE?
WHO IS THE BENEFICIARY OF CORPORATE
SUCCESS?
ACCOUNTABILITY
IN ETHICS AND GOVERNANCE,
ACCOUNTABILITY IS ANSWERABILITY,
BLAMEWORTHINESS, LIABILITY, AND THE
EXPECTATION OF GIVING EXPLANATION FOR
YOUR ACTIONS
RESPONSIBILITY
BEING IN CHARGE OF OR OWNING A
TASK - EXPLANATIONS NOT ALWAYS
OWED
ACCOUNTABLE, BUT NOT
RESPONSIBLE ….
CEOS MAY CLAIM ACCOUNTABILITY FOR THE
DOWNFALL OF THE FIRM, BUT THEY ARE NOT
DIRECTLY RESPONSIBLE FOR THE FRAUDULENT
BEHAVIOR OF THEIR SUBORDINATES
10
Drucker’s three dimensions of the
corporation 1.
an economic institution
2.
a human organization
3.
an embodiment of values
THE CONTEMPORARY
PERSPECTIVE OF RESPONSIBILITY
SHAREHOLDER – STAKEHOLDER – CONSTITUENT
CSR - perspectives
The American Corporation
CSR – self regulation within the business enterprise
•
the company town – mid 1800s
CS Responsibility – obligation, accountability
•
the corporate giants – Carnegie, Rockefeller
CS Responsiveness – action, activity
•
the corporation as investment – 1920s
CS Performance – outcomes, results
•
the corporation as victim – 1930s
Corporate Citizenship – stakeholder impact
•
the corporation as war machine – 1940s
•
the corporation as the new economy – 1950s-1970s
•
the corporation as social advocate – 1980s
•
the corporation as innovator – 1990s
•
the corporation as leviathan – 2000s
Proactive measures upon society, environment and general public interest
triple bottom line – ecological, social, financial
11
The Social Responsibility of Business is to Increase its Profits
by Milton Friedman The New York Times Magazine, September 13, 1970. Copyright @ 1970
by The New York Times Company.
Critics of CSR
Milton Friedman – 1962
Peter Drucker – 1971
Archie Carroll – 1980s
When I hear businessmen speak eloquently about the "social responsibilities of business in a
free-enterprise system," I am reminded of the wonderful line about the Frenchman who
discovered at the age of 70 that he had been speaking prose all his life. The businessmen
believe that they are defending free enterprise when they declaim that business is not
concerned "merely" with profit but also with promoting desirable "social" ends; that
business has a "social conscience" and takes seriously its responsibilities for providing employment, eliminating discrimination, avoiding pollution and whatever else may be the
catchwords of the contemporary crop of reformers. In fact they are–or would be if they or
anyone else took them seriously–preaching pure and unadulterated socialism. Businessmen who talk this way are unwitting puppets of the intellectual forces that have been
undermining the basis of a free society these past decades.
Profits
Social
Four
impact
The discussions of the "social responsibilities of business" are notable for their analytical
looseness and lack of rigor. What does it mean to say that "business" has responsibilities?
Only people can have responsibilities. A corporation is an artificial person and in this sense
may have artificial responsibilities, but "business" as a whole cannot be said to have
responsibilities, even in this vague sense. The first step toward clarity in examining the
doctrine of the social responsibility of business is to ask precisely what it implies for whom.
levels
Economic,
legal, ethical,
philanthropic
PHILANTHROPIC
Desired
Be good corporate citizens.
ETHICAL
Expected
Obligation to do what is right and fair. Avoid doing
harm.
LEGAL
Required
Obey the law. Law is society’s codification of right and wrong.
ECONOMIC
Required
Be profitable. The Foundation on which all others rest
Carroll’s Pyramid of Corporate Social Responsibilities
Stages of Stages of Corporate Citizenship - Mirvis and Googins
Stage One Elementary
Stage Two Engaged
Stage Three Innovative
Stage Four Integrated
Stage Five Transforming
Jobs, Profits, Taxes
Philanthropic
Stakeholder
Management
Sustainability
Change the Game
Strategic Intent
Legal Compliance
License to Operate
Business Case
Value Proposition
Market Creation/Social Chg
Leadership
Lip Service, Out of
Touch
Supporter, In the
Loop
Steward, On Top of It
Champion, In Front of
It
Visionary, Ahead of It
Structure
Marginal: Staff Driven
Functional
Ownership
Cross-Functional
Coord.
Org. Alilgnment
Mainstream: Business
Driven
Issues
Management
Defensive
Reactive Policies
Responsive, Programs
Pro-Active Systems
Defining
Stakeholder
Relations
Unilateral
Interactive
Mutual Influence
Partnership Alliance
Multi-Organization
Transparency
Flank Protection
Public Relations
Public Reporting
Assurance
Full Disclosure
EMPLOYEES
GOVERNMENT
Citizen Concept
BUSINESS
COMMUNITY
OWNERS
CONSUMERS
Stakeholder View of the Firm
12
RONALD MCDONALD'S HOUSE
Fred Hill, a player for the Philadelphia Eagles, had a daughter suffering from
leukaemia, which prompted the team to raise in excess of $100,000 dollars
to support the hospital. This was met with much gratitude from Dr Evans and
her team but also with a request for another $32,000 to fund a house in
which the families of the children in the hospital could get proper rest, away
from the ward.
In turn this request was met by Ed Rensi, an area manager for McDonald's.
The company was using the Eagles' players as part of an advertising
campaign and offered to donate the proceeds from their 'shamrock shake'
to the cause. In return Ed asked that the house be known as the Ronald
McDonald House. So it was, that on 15 October 1974, the first Ronald
McDonald House opened its doors. In the intervening years Ronald
McDonald House Charities has spread across the world, forming new and
independent branches in over 50 regions and countries.
McDonald’s
Doing Good
Walmart
(Founded in 1962)
01
02
The fortune 500
forces of good
Retail
Industry
03
04
Total Net Income
9.862 billion USD (2018)
Revenue = 500.343 billion USD
Total Operating Expenses = 478.094 billion USD
Number of Employees
2.2 Million Associates Around the World
Stocks/Dividends
Stock Price = $94.80
Dividends = $0.52 per share (Quarterly)
Charitable Contribution
1.08 billion USD
Exxon Mobil
(Founded in 1999)
01
Charitable Contributions
U.S. donations went to organizations including the National Teacher of the Year
program, hospital aid group Children’s Miracle Network, the Salvation Army, United
Way and food bank America’s Second Harvest.
02
Impact on Education
Walmart to offer employees a college education for $1 a day.
Walmart, the country's largest private employer, announced that
it will pay for its workers to go back to school — as long as they
get degrees in business or supply-chain management.
Other Interesting Facts
About 75% of our store management teams started as hourly
associates, and they earn between $50,000 and $170,000 a year.
Walmart is investing $2.7 billion over two years in higher wages,
education and training.
Total Net Income
19.71 billion USD (2018)
Revenue = 238.883 billion USD
Total Operating Expenses = 223.584 billion USD
Number of Employees
69,600 employees worldwide
Energy
Industry
03
04
Stocks/Dividends
Stock Price = $72.29
Dividends = $0.82 per share (Quarterly)
Charitable Contribution
268 million USD
13
Berkshire Hathaway
(Founded in 1839)
01
Charitable Contributions
ExxonMobil gives to charities in 9 different causes: arts ands culture, civic and
community, health and environment, higher education, pre-college education,
women’s economic opportunity, workforce development, and united appeals and
workplace giving.
Impact on Education
In 2017, ExxonMobil provided $41.5 million worldwide to colleges,
universities and other organizations that support higher education.
ExxonMobil’s higher education initiatives focus on supporting
programs that improve teaching and learning in STEM fields.
Other Interesting Facts
When Ebola broke out in Nigeria the company helped fight the
outbreak. It provided assistance to the Nigerian government in terms
of equipment, vehicles and personal protective equipment. It also
sent across medical personnel and a specialist team from the Baylor
College Of Medicine to educate Nigerian officials.
Multiple
Industries
Total Net Income
44.940 million USD (2018)
Revenue = 239.289 billion USD
Total Operating Expenses = 213.395 billion USD
02
Number of Employees
03
Stocks/Dividends
04
367,700 employees worldwide
Stock Price = $309,180.00
Dividends = None
Charitable Contribution
3.4 billion USD
Apple
(Founded in1976)
01
Charitable Contributions
Since 2006, Buffett has donated over $30 billion to charity, of which $24.5 billion went
to the Gates Foundation. When Buffett explained his decision to donate much of his
wealth to his family’s foundations and Gates in 2007, he told shareholders that he
believes in giving his excess wealth to people who are “energized, working hard at it,
smart.”
Impact on Education
02
Berkshire Hathaway does not directly work with Universities or
provide funding for any; however, their charitable donations to
the Gates Foundation is indirectly supporting a global initiative to
make education more accessible for everyone.
03
Other Interesting Facts
Berkshire Hathaway is a very big supporter of wind power. In fact,
Berkshire Hathaway’s MidAmerican Energy was the number one
owner of wind-generated power among US entities which are rateregulated.
Tech Industry
04
Total Net Income
59.531 billion USD (2018)
Revenue = 265.595 billion USD
Total Operating Expenses = 194.697 billion USD
Number of Employees
132,000 employees worldwide
Stocks/Dividends
Stock Price = $165.52
Dividends = $0.73 per share (Quarterly)
Charitable Contribution
100 million USD
UnitedHealth Group
(Founded in 1977)
01
Charitable Contributions
Apple donated $5 million to Hand in Hand to help Hurricane Harvey and Hurricane
Irma victims. Additionally, Apple donated $5 million to the American Red Cross,
including $3 million from the company and ongoing contributions from employees and
Apple customers donating through iTunes and the App Store, according to CNN
Money.
Impact on Education
Apple University is a training facility of Apple Inc., located in
Cupertino, California. This corporate university is designed to
instruct personnel employed by Apple in the various aspects of
Apple's technology and corporate culture. It is mainly a training
facility of Apple Inc.
Other Interesting Facts
Apple became the first American public company to surpass $1
trillion in value.
02
Total Net Income
11.986 billion USD (2018)
Revenue = 226.247 billion USD
Total Operating Expenses = 208.903 billion USD
Number of Employees
270,000 employees worldwide
Healthcare
Industry
03
04
Stocks/Dividends
Stock Price = $270.37
Dividends = $0.90 per stock (Quarterly)
Charitable Contribution
Specific Value Unknown
14
McKesson
(Founded in 1833)
01
Charitable Contributions
UnitedHealthcare and Optum businesses are donating $500,000 to help residents of
California recover and rebuild from the devastating fires in Butte, Ventura and Los
Angeles counties.
Impact on Education
The Diverse Scholars Initiative works to create a more relevant
health workforce, particularly in underserved communities, by
increasing the number of primary care health providers ready to
meet future health care needs.
Other Interesting Facts
In 2018 alone, UnitedHealth Group employees volunteered over two
million hours to help build healthier communities. Since 2005, our
giving program has donated $308 million.
Medical Supplies
Industry
Total Net Income
67 million USD (2018)
Revenue = 208.357 billion USD
Total Operating Expenses = 205.436 billion USD
02
Number of Employees
03
Stocks/Dividends
04
78,000 employees worldwide
Stock Price = $124.97
Dividends = $0.39 per share (Quarterly)
Charitable Contribution
1.2 million USD
CVS Health
(Founded in 1963)
01
Charitable Contributions
McKesson pledged $100 million to create a new foundation that will combat drug
abuse and addiction. The company said the money will be used for educating
patients, caregivers, and providers; addressing policy issues; and increasing access to
opioid-overdose medications.
02
Impact on Education
McKesson does not have a foundation directed towards higher
education; however, over 80 CE courses, meet-ups and
workshops, are offered at McKesson ideaShare event where
attendees uncover various topics in healthcare.
6.622 billion USD (2018)
Revenue = 184.765 billion USD
Total Operating Expenses = 174.718 billion USD
Number of Employees
203,000 employees worldwide
Other Interesting Facts
More than 200,000 physicians utilize McKesson's technology and
services, and 76 percent of hospitals with more than 200 beds are
McKesson customers.
Total Net Income
Retail Healthcare
Industry
03
04
Stocks/Dividends
Stock Price = $65.96
Dividends = $0.50 per share (Quarterly)
Charitable Contribution
Specific Value Unknown
Amazon.com
(Founded in 1994)
Total Net Income
01
Charitable Contributions
For more than a decade, CVS’s Project Health events have provided more than $6.40million worth of free health services to patients in underserved communities around the
country.
02
Impact on Education
CVS has four fully operational store and pharmacy training
locations that support the development of colleagues and
partnering community agencies.
Other Interesting Facts
CVS Health is well-known as a pharmacy business. But in recent
years, it has moved to rebrand itself as a health care company,
including expanding its MinuteClinic brand to over 1,100 locations
and nixing tobacco products from its stores.
Retail Industry
03
04
3.033 billion USD (2018)
Revenue = 177.866 billion USD
Total Operating Expenses = 173.760 billion USD
Number of Employees
613,300 employees worldwide
Stocks/Dividends
Stock Price = $1,670.43
Dividends = None
Charitable Contribution
100 million USD
15
AT&T
(Founded in 1983)
Total Net Income
01
Charitable Contributions
Amazon has made a $2 billion philanthropic commitment to two areas: funding
existing nonprofits that help homeless families and creating a network of nonprofit
preschools in underserved communities.
02
Impact on Education
Once employees have been with Amazon for a year, they only
need to cover 5 percent of tuition and fees. Amazon covers the
rest and also reimburses 95 percent of textbook costs. Full-time
employees are eligible for $3,000 in tuition assistance a year.
Other Interesting Facts
AmazonSmile allows its users to support charities of their choice
when they shop at smile.amazon.com. The AmazonSmile
Foundation donates 0.5% of the purchase price of products eligible
for AmazonSmile purchases.
29.450 billion USD (2018)
Revenue = 160.546 billion USD
Expenses = 136.683 billion USD
Telecommunications
Industry
03
04
Number of Employees
273,210 employees worldwide
Stocks/Dividends
Stock Price = $29.37
Dividends = $0.50 per share (Quarterly)
Charitable Contribution
35 million USD
General Motors
(Founded in 1908)
01
Charitable Contributions
The company’s key philanthropic program is AT&T Aspire, a $350M
commitment to education, helping students succeed in school, the workforce and in
life.
Impact on Education
02
2020 Goal: We will invest resources, develop initiatives and
collaborate with stakeholders with the goal of increasing the U.S.
high school graduation rate to 90% by 2020.
-3.864 billion USD (2018)
Revenue = 145.588 billion USD
Total Operating Expenses = 134.885 billion USD
Discontinued Operation = -4.212 billion USD
Number of Employees
180,000 employees worldwide
2025 Goal: We will invest resources, develop initiatives and
collaborate with stakeholders to close the skills gap by increasing
the number of Americans with high-quality post-secondary
degrees or credentials to 60% by 2025.
03
Other Interesting Facts
2025 Goal: AT&T will enable carbon savings 10 times the footprint of
our operations by enhancing the efficiency of our network and
delivering sustainable customer solutions.
Total Net Income
Automotive
Industry
04
Stocks/Dividends
Stock Price = $39.09
Dividends = $0.38 per share (Quarterly)
Charitable Contribution
31 million USD
Charitable Contributions
GM pledged to give $30 million in annual donations to focus on global development
and education in science, technology, engineering and math.
Impact on Education
GM has partnered and helped four new programs in their college
initiative: code.org, black girls code, institute of play, and digital
promise.
Other Interesting Facts
General Motor is the only company in the top 10 of the Fortune 500
with a female CEO.
See a theme……
VOLUNTEERING – YOUR COMPETITIVE ADVANTAGE – A LIFE IN SERVICE
16
So what and now what…
Advancing your competitiveness
Preparing For the Leader of Tomorrow
First - Are you good?
Now – Do you serve?
Does Your Volunteer Resume Match Your Professional Resume?
How Many Service Hours Did You Give Last Year?
Did You Give to Your Most Important Organizations –
Time/Money/Resources
What’s Your Plan – What’s Your Pledge
Results – Stronger Firms, Stronger Communities, Stronger Souls.
Ethics and Law in Business and
Society Lecture Series
SEAN D. JASSO, PHD © 2020
UCR - WINTER 2020
Toward the Philosophy of
the State
SOCIAL CONTRACT THEORY
Guiding Questions
Why Laws?
What is Constitutional Law?
Why Ethics?
What is the Rule of Law?
What is Public Policy?
Rationale for
Public Policy
MARKET FAILURE
GOVERNMENT
FAILURE
What is the Rationale for Public Policy?
How Does the U.S. Government Govern?
How Did it All Start?
How Does it All Really Work?
17
The Milestones
The Sarbanes-Oxley of 2002
The Gramm-Leech-Bliley Act of 1999 (Repealing the Glass-Steagall Act of 1933)
The Patriot Act of 2001
The Emergency Economic Stabilization Act of 2008 (TARP)
The American Recovery and Reinvestment Act of 2009
The Patient Protection and Affordable Care Act of 2010
The Tax Cut and Jobs Act of 2017
●
●
●
●
●
●
●
Rationale for
Public Policy
FIRST – PUBLIC POLICY DEFINED
The decisive action to solve problems of civic life
The product of civic governance
The various rules, regulations, and laws that aim to solve problems and
re-direct social behaviors to some equilibrium
The statement of a society’s morality embodied in non-negotiable law
The embodiment of a society’s priorities – moral, economic, political
The rules.
WHEN DID WE LEARN ABOUT MARKET
FAILURE
Among the Founding Thinkers – School of Social Choice and Welfare
Vilfredo Pareto (1848 – 1923) – Pareto Optimality – at least one person is made better off and not
one person is made worse off – in this case with a policy implementation
Kenneth Arrow (1921 – 2017) – Arrow’s Theorem – it is impossible to rank a community’s
preferences - majority rule
Francis Bator – 1958 - The Anatomy of Market Failure - The Quarterly Journal of Economics, Vol. 72,
No. 3 (Aug., 1958), pp. 351-379 – the modern framework – information asymmetry, public goods,
monopoly
David Weimer and Aidan Vining –Policy Analysis: Concepts and Practice, 6th Ed. Routledge, 2017
– simply the ultimate tool for the trade since 1989
Market Failure
Government Failure
ON MARKETS – FUNDAMENTALS
Free markets allocate the supply of goods to the buyers who value them most highly, as
measured by their willingness to pay
Free markets allocate demand for goods to the sellers who can produce them at the least cost
Free markets produce the quantity of goods that maximize the sum of quantity of consumer and
producer surplus
The market price is the markets demand curve
We look to markets for solutions – products, services, labor, factors of production, and investment
The more competitive and global a market, the more transparent, exposed and self-regulated it
must be
When markets over or under produce, can’t self-regulate through negotiation over time they
create externalities – negative and positive - causing “market failure”
MARKET FAILURES – CAUSES AND TYPES
On the assumption of ‘competitive
markets’ –
Markets yield an inefficient output of
resources often negatively impacting society
Types
information asymmetry
Monopolies
public goods
18
Market Failure - Impacts
POSITIVE EXTERNALITY MODEL
Public Good – monopoly
Information Asymmetry – fraud
Monopoly – stagnation, idleness
Externality – positive, negative
NEGATIVE EXTERNALITY MODEL
19
RATIONALE FOR PUBLIC POLICY =
MARKET FAILURE
Reconciles conflicting claims on scarce resources
Establishes incentives for cooperation and collective action that would
be irrational without government involvement/influence
Prohibits morally unacceptable behavior
Protects the activity of a group or an individual
Promotes activities that are essential or important to government
Provides benefits (with costs) to citizens
PUBLIC POLICY TYPES
FOUNDATIONS OF PUBLIC POLICY
Distinguishes what government intends to do and what they actually
do
Government in-action is just as important as government action
Multifaceted – not created by single actors or in a vacuum
Pervasive – not just rules, regulations, executive orders – it’s
unlimited
It is political
Redistributive – re-balancing disbursements
Substantive – what government intends to do
Procedural – how something can be done
Regulatory – rules from the state
Distributive – government disbursements
Collective policy – goods given to all
Private policy – individual beneficiaries or payers
Liberal – state-centered
Conservative – market-centered
GOVERNMENT FAILURE –
A PUBLIC CHOICE THEORY
Rationale for
Public Policy
Public Choice – explains that public policy outcomes often
conflict with public opinion, public awareness, preferences of the
general public, and the economic forces of markets – uses
economic theory to rationalize political science
Consequences – Government Failure
Market Failure
Government Failure
When policies veer away from traditional institutional norms,
electoral mandates, and industrial market forces
Economic consequences – crowding out, monopoly, public
goods
Social consequences – institutional change, politicization of
economic and social norms
20
PUBLIC CHOICE THEORY – CENTRAL
FIGURES
WHEN DID WE LEARN ABOUT GOVERNMENT FAILURE
James Buchanan (1919 – 2013) and Gordon Tullock (1922 – 2014)
The Calculus of Consent: Logical Foundations of Constitutional Democracy –
1962 – the basic premise:
The importance of the individual in collective decision-making
The aim of Pareto optimality
The costs of majority rule (high external and decision costs)
The zero-costs of unanimous rule (high decision costs)
Aim of constitutional change yield real/permanent civic improvements
A rigorous pursuit of market-based public policy
Anything other is “government failure”
Among the Founding Thinkers – School of Public Choice Theory
Knut Wicksell (1851 – 1926) 1896, Studies in the theory of Public Finance – foundational work on
business cycles – influences Keynes and Schumpeter
Central Figures
Duncan Black (1908 – 1991) – studies in Condorcet voting turnouts
Ronald Coase (1910 – 2013) – Coase Theorem – transaction costs and property rights
Kenneth Arrow (1921 – 1917) – Arrow’s Impossibility Theorem
Anthony Downs (1930 – ) An Economic Theory of Democracy (1957) – Rational Choice Theory |
voter distribution favors centrist policies
Mancur Olson (1932 – 1998) The Logic of Collective Action: Public Goods and the Theory of
Groups (1965) – rational choice theory – individual self-interest eclipses group interests
GOVERNMENT FAILURE
TYPES AND IMPACTS
Crowding Out – government spending encroaches on private
sector
Logrolling – process of legislative vote trading
Pork Barrel Spending – earmarks for spending in constituencies
Rational Ignorance – cost of educating on issues outweighs the
benefits
POLICY ANALYSIS – U.S.
LEGISLATIVE MILESTONES
The Sarbanes-Oxley of 2002
The Sarbanes-Oxley of 2002
What problem did the law aim to solve?
●
Improve quality of financial reporting, and reduce information asymmetry for investors in U.S. Capital Markets
●
Increase the strength of corporate governance through a number of mechanisms
What are the lasting benefits and costs?
●
What were the politics that shaped the law?
●
In response to accounting scandals, such as WorldCom and Enron, the SOX of 2002 was enacted by the U.S. Congress to restore investor confidence.
●
Between 1997 - 2002 accounting irregularities rose each year, which resulted in companies losing billions in market capitalization
●
The GAO fully endorsed the implementation of more oversight on the accounting profession
●
Sections 302 and 404(a) require assessment, reporting, and certification of the effectiveness of a company's internal controls over financial reporting
●
Section 404(b) requires external auditors to verify these internal controls for financial reporting and asses their effectiveness
Was the law effective?
●
●
●
Cost
Benefit
Section 404 does not show an impact on reducing information asymmetry
SOX reduces undervaluing a IPO, so there is minimal price adjustment due to reduced information asymmetry
SOX reduces overinvestment and risk taking by overconfident CEOs
●
After SOX, overconfident CEOs’ acquisitions create significantly more value
●
●
●
●
●
Even though Section 404 does not reduce information asymmetry it is believed to be the control factor, which can answer why section 302 does reduce
information asymmetry
●
●
●
Section 302 does reduce information asymmetry
●
The issue of cost versus benefit is not yet settled. While the SEC’s Office of Economic Analysis in a 2009 study acknowledged the high cost of
implementing internal control requirements, it also suggested that the benefits outweigh the costs without providing any hard evidence to support the
claim
Significant increase in compliance costs
Direct cost of a company going public post-SOX is an increase in the underwriting fee and other expenses related to the public
offering
In-direct costs associated with updating company systems to comply to SOX requirements pulling attention from top
management away from operation and investment decision-making
SOX directly benefits credit ratings of Firms
Price adjustments for an IPO is significantly reduced due to SOX
SOX audit costs increase with size; however, the unit SOX audit cost decrease with size, so large firms benefit from economies
of scale
Section 302 causes a firm's trading volumes to increase, bid-ask spread to decrease, and price volatility to decrease according to
the sample firms used in the research proving investor confidence in accordance to the law
Where is the law today?
●
SOX is still the current law today; however, continual research is necessary to understand any current breakdowns in the governing
and auditing systems to reduce any future risks
21
The Sarbanes-Oxley of 2002
The Gramm-Leech-Bliley Act of 1999
What problem did the law aim to solve?
Goals
Difficulties
Improve quality of financial
reporting
●
●
Supreme Court case on
constitutionality of SOX with
SEC oversight rather than the
President
Significant increase in
compliance costs
Status Today
Possibility of a
Policy Change
●
Remove barrier between commercial and investment banks to allow banks to be involved with the insurance industry
●
Increase the value of the financial service industry
●
Reduce government intervention and rely on corporate governance mechanisms to oversee the actions of financial institutions
Small arguments have been made in
regards to the increase in cost to comply
with the law; however, the policy is well
supported in the current growing
economy
Low: The confidence for shareholders
created by the improvement in financial
reporting outweighs the cost associated
with compliance. There is no immediate
need to change the current policy
●
Modernize the financial servicing industry and permit its growth
What were the politics that shaped the law?
Glass-Steagall aimed to increase faith in financial institutions, but halted their growth - Bankers tried to erode the Glass-Steagall Act well before 1999 by attempting
mergers and gaining rights to underwrite by the Federal Reserve
●
Five major events happened in 1999
The House approved to revamp the financial services industry
Glass-Steagall was facing a veto vote - Lack of an agreement
○
House-Senate- and the White House reach a compromise regarding Glass-Steagall
○
Congress overwhelmingly approves of a financial servicing overhaul
○
President Clinton Signs financial services bill.
●
Reduce Information
Asymmetry
●
Pulling attention from top
management away from
operation and investment
decision-making to comply with
policy
Highly supported by all shareholders
because it provides the transparency
needed to provide confidence in all
publicly traded firms
○
Low: The reduction of information
asymmetry provided by SOX has
improved investor and firm relations
because of transparency in financials
which in result has improved valuations
of IPO. There is no immediate need to
change the current policy
○
Was the law effective?
Gramm-Leech-Bliley Act of 1999 helped increase the stock value of banks
●
Banks with smaller boards, lower levels of insider ownership, fewer annual board meetings, and more independent boards experienced more positive shareholder
price reactions and should benefit more from passage of the GLB
●
Some blame the financial crisis on the passage of the Gramm-Leech-Bliley Act of 1999
●
The Patriot Act of 2001
The Gramm-Leech-Bliley Act of 1999
What are the lasting benefits and costs?
Cost
●
●
●
Benefit
●
●
●
What problem did the law aim to solve?
Credited with creating the concept of “too big to fail” in the financial institutions
“Too big to fail” is cited as one of the primary factors amplifying the 2008 financial crisis
Contributed to the rise of an era in which financial behemoths combined different services that generated high levels of risk.
●
To prevent future terrorism plots by strengthening current federal anti-money laundering laws
●
Detect national security threats and identify terrorist networks
What were the politics that shaped the law?
●
Insurance companies benefit from the rise in competition associated with the Act
Bank stocks begin increasing in value
Deregulation caused mergers that created larger, more diverse financial institutions during the period 1999 to 2007
●
Phone data collection does not violate the First or Fourth Amendment since the government is conducting the program in good
faith
●
On May 8, 2015, the U.S. Court of Appeals for the Second Circuit held the language of this section could not plausibly be
interpreted as authorizing bulk surveillance, though it did not rule on whether the program would be constitutional even with
statutory justification
●
Bulk collection of phone metadata has minimal value - no terrorist plots have been prevented in result of metadata collection
●
Overloads data for analysts to derive important information needed
Where is the law today?
Still the current law. Under scrutiny due to the economic recession of 2008.
●
The Emergency Economic
Stabilization Act of 2008 (TARP)
The Patriot Act of 2001
What are the lasting benefits and costs?
What problem did the law aim to solve?
●
Cost
●
Benefit
●
●
●
Reduces privacy of U.S. citizens
Congress intended section 215 to be uniquely "flexible" and "broad” to justify bulk surveillance on domestic telephone metadata
Prevention of terrorist activity
Reduction in money-laundering activities
Response to the 9/11 terrorist attack
Was the law effective?
Aim to stabilize the economy, preserve homeownership, protect taxpayers, provide no windfalls for certain executives, and strengthen oversight
What were the politics that shaped the law?
●
●
●
The autumn of 2008 witnessed what was probably the most extensive and prolonged breakdown of the US credit mechanism that has occurred since the establishment of the banking system.
The deadweight losses from bankruptcies, foreclosures and job losses are significant.
In February 2009, the number of unemployed persons increased by 253,000 to 12.5 million
Beginning in the second week of September 2008, a series of events indicated that the US financial sector was in the midst of a severe crisis
On Monday, September 15, Lehman Brothers submitted the largest bankruptcy filing in history.
On Tuesday, September 16, the US government nationalized the American International Group (AIG) after the insurance firm experienced sharp losses and potential downgrades related
to the writing of credit default swaps.
○
On Wednesday, September 17, a few large money market funds “broke the buck,” which effectively meant losses on deposits that were supposed to be close to riskless. In the midst of
the financial market turmoil
○
On Friday, September 19, initial news reports suggested that “the federal government is working on a sweeping series of programs that would represent perhaps the biggest intervention
in financial markets since the 1930s.”
○
○
Where is the law today?
●
Section 215 authority for the Patriot Act expired; however, a new program was enacted into law under the USA Freedom Act requiring the metadata
be held by phone companies
Was the law effective?
●
The impact of the EESA on executive compensation is ambiguous
●
The effect of wage caps, as provided within the EESA framework, on the volatility of pay-for-performance at firms with qualified plans is ambiguous
●
Several indicators of distress among homeowners with mortgages have shown improvements since the height of the housing crisis, and evidence suggests that recent loans are less risky than
those originated before the crisis
●
Nearly 1.8 million mortgage loan modifications were completed in 2010, and this number has steadily decreased since that time
●
No reportable noncompliance for fiscal year 2017 with provisions of applicable laws, regulations, contracts, and grant agreements
22
The Emergency Economic
Stabilization Act of 2008 (TARP)
The American Recovery and
Reinvestment Act of 2009
What problem did the law aim to solve?
What are the lasting benefits and costs?
Cost
Increased U.S. Debt
Increased the magnitude of the 2008 Financial Crisis
●
●
Benefit
Executives are not allowed to receive severance pay wherever the government takes over a firm
In 2009, Treasury announced that as many as 3 million to 4 million borrowers who were at risk of default and foreclosure could be
offered a loan modification under HAMP
Extension of various tax exemptions for middle-class Americans.
●
●
●
Where is the law today?
●
●
As of August 2015, performance audits of the TARP programs have resulted in 72 recommendations to Treasury. Of the 72 performance audit
recommendations, Treasury has implemented 59, or approximately 82 percent
In December 2015 Congress mandated that the MHA program in EESA be terminated on December 31, 2016.
●
Provide a monetary boost
●
Create jobs
●
Seed the beginning of a green-energy infrastructure
What were the politics that shaped the law?
●
Despite healthy corporate earnings, an employment rate that has slowly rebounded since the financial crisis of 2008, and the outpouring of high-tech distractions from Silicon Valley, many people have
an aching sense that there is something deeply wrong with the economy.
○
Slow productivity growth is stunting their financial opportunities
○
high levels of income inequality in the United States and Europe are fueling public outrage and frustration in those left behind, leading to unprecedentedly angry politics
Was the law effective?
●
The stimulus energy investments were “a bit of a disaster,” says Josh Lerner, a professor at Harvard Business School
●
Even some of the stimulus’s greatest apparent successes now seem to be less effective than originally hoped. Steven Chu, a Nobel Prize– winning physicist, was named secretary of the Department of
Energy in early 2009 and implemented many of the bill’s most ambitious efforts to boost energy R&D
●
The investment in broadband development does not show a clear benefit in a increased adoption of use
●
The process of collecting and processing information necessary to comply with these requirements affected program implementation
●
Increased federal guidance eliminated the impact of experiential capacity by the end of the second year of the program
●
The Great Recession proved significantly deeper than forecasters had predicted, when the American Recovery And Reinvestment Act was enacted, but as new information became available, Congress
did little to alter the fiscal stimulus in response, other than to continue some expiring provisions.
●
The bottom line is that the environment rapidly changed after major new stimulus legislation had been put in place, but Congress’s response was slow and not proportionate to the new information. That
left the economy in a deeper recession than it otherwise might have experienced if the problem of policy drift had been formally addressed in ARRA
The Patient Protection and
Affordable Care Act of 2010
The American Recovery and
Reinvestment Act of 2009
What are the lasting benefits and costs?
Cost
A heavy debt load that forces cutbacks in services or a rise in taxes can make it difficult to compete in state markets
The affordability of a state’s debt can affect not only its fiscal sustainability but also its economic competitiveness, as states
compete with each other to attract or retain residents and business investment based, in part, on the public services they offer and
the taxes they levy
Government intervention into green energy solution may increase the chance of failure if experts are not running the initiative
●
●
●
Benefit
Approximately $90 billion went toward “clean energy activities”
The ARRA was designed to inject $840 billion into the U.S. economy
$7.2 billion was allocated for expanding access to broadband services throughout the nation
A total of $130 billion was allocated to the construction industry to be spent on various projects, which included various
transportation systems, new construction and renovation of government facilities, and housing construction
●
●
●
●
What problem did the law aim to solve?
●
ACA is intended to prevent the uninsured from catastrophic medical expenses which not only devastate individual credit ratings, but also lead to bankruptcy and home foreclosures
●
The Affordable Care Act was implemented with dual goals of comprehensive coverage and cost containment for a healthcare system that has long battled issues of adverse selection
What were the politics that shaped the law?
●
The ACA was supposed to be tied to the federally mandated Medicaid program, which would assist state pools in providing insurance for those who couldn’t buy health insurance in the market
●
Anywhere from thirty-eight to forty-eight million Americans do not have health insurance for a number of reasons
Was the law effective?
●
The benefits will primarily go to Americans living in the lowest-income deciles and will reduce income inequality
●
Following CoOportunity Health’s placement in rehabilitation in late December 2014 and ordered liquidation in February 2015, a series of 11 other CO-OPs ceased operations during the year as did
four more in 2016. The closings were attributed to various combinations of the following factors:
○
Limited enrollment, Higher than expected medical claims, High administrative costs, Plans priced too low, High priced health insurance plans, Financial Management, Lack of experience,
Lack of diversification, Lack of federal funds, Flawed Risk Adjustment Formula, Limited sources of external capital
●
The risk corridors shortfall has been directly implicated in the failure of eight CO-OPs, seven of which failed in October. These seven CO-OPs were in serious financial jeopardy as a result of the
risk corridors shortfall as well as other factor
●
The ACA did reduce the number of uninsured citizens, at least for a period of time. On the other hand, many of the CO-OPs formed as a result of the act have failed, and others continue to
experience unfavorable operating results, raising questions about their financial viability.
●
On June 28, 2012, the United States Supreme Court upheld the constitutionality of most of the ACA in the case National Federation of Independent Business v. Sebelius. However, the Court held
that states cannot be forced to participate in the ACA’s Medicaid funding. Since the ruling, the law and its implementation have continued to face challenges in Congress, in federal courts, and from
some state governments
Where is the law today?
●
Currently still impacting U.S. economy today. Most recent economic stimulus package in the U.S.
The Patient Protection and
Affordable Care Act of 2010
The Patient Protection and
Affordable Care Act of 2010
What are the lasting benefits and costs?
Cost
●
●
●
Benefit
●
●
●
Employee mandate for firms with 50 or more employees
UnitedHealth, Highmark, Blue Cross and Blue Shield of North Carolina, and Health Care Service Corp. have reported losses of approximately $720 million,
$590 million, $400 million, and $240 million, respectively, resulting from mispricing of exchange business
An individual mandate requires all individuals not covered by an employer sponsored health plan, Medicaid, Medicare, or other public insurance program to
secure an approved private insurance policy or pay a penalty
ACA prohibits insurers from denying coverage to individuals regardless of pre-existing conditions, and a partial community rating requires insurers to offer
the same premium to all applicants of the same age and geographical location without regard to gender or most pre-existing conditions (excluding tobacco use)
Minimum standards for health insurance policies are established; no more junk insurance can be sold by private insurance companies
Workers with smaller firms could get health coverage in ACA-mandated public exchanges where they could not be denied coverage for pre-existing
conditions, premiums would not vary with health status, subsidies would be available for those with income below 400 percent of the federal poverty level,
and in many cases there would be more plan choices than smaller employers are typically able to provide
Goals
Comprehensive Coverage
Difficulties
●
●
Cost Containment for a
Healthcare System
●
●
Where is the law today?
●
Still current law.
●
Individual Mandates no longer part of ACA law after Trump passed new Tax Act of 2017
Status Today
Possibility of a
Policy Change
Supreme Court decision regarding
the constitutionality of the ACA
Bad implementation of Policy
Change
Even though the ACA had a bad rollout of
policy implementation, the policy has
provided healthcare coverage to more
Americans. The comprehensive coverage
aspect of the ACA is highly approved by the
public
Low: The coverage provided by the ACA
helped cover more Americans with health
insurance than previous systems, so a
policy change regarding the
comprehensive coverage of the ACA will
be unlikely to change
Supreme Court ruled that States
cannot be forced to participate in
the ACA’s Medicaid funding
Major financial losses for large
Healthcare companies due to
mispricing.
The rise in premiums is a general concern for
the stability of the policy in the long-term.
The removal of the individual mandate by the
Trump administration will impact the funding
of the Healthcare system
High: Removal of individual mandates
will reduce the funding needed to sustain
the ACA, so a policy change for
Healthcare is a high possibility to
stabilize the rising Healthcare costs
23
The Tax Cut and Jobs Act of 2017
The Tax Cut and Jobs Act of 2017
What are the lasting benefits and costs?
Cost
What problem did the law aim to solve?
●
●
Designed to cut taxes on businesses and individuals
●
●
●
●
Stimulate the economy and create jobs
●
Tax cuts will increase the U.S. debt by $1.5 trillion
Tax reduction minimizes state budgets, which is critical impacts public health funding
Lower-income taxpayers struggling to hold on to their health insurance will likely be hurt by the tax legislation
Implementation of the Act by the IRS is estimated to cost $495 million in fiscal years 2018 and 2019
Increases risk of a recession in the next decade
What were the politics that shaped the law?
●
Benefit
After the passage of the 1986 Tax Reform Act, other countries began to reduce their corporate tax rates to become more globally competitive
●
Academics, practitioners, and government officials have started a dialog on U.S. Corporate Tax Reform in order to reduce the burden placed upon U.S.
corporations
●
Many U.S. corporations recognize significant profits overseas and defer taxes on such earnings indefinitely while the profits remain invested overseas,
thereby sheltering income from U.S. tax. Currently, $2.1 trillion dollars, including $966 billion dollars from the Dow 30, is parked outside of the U.S. tax
jurisdiction
●
●
●
●
●
Was the law effective?
●
●
●
Smaller S corporations and other pass-through entities will enjoy a lower marginal rate, giving them a $250 billion tax break
through 2025 when this cut expires along with the rest of the tax cuts for individuals
The law reduces the maximum tax rate on corporate earnings— which, at 35%, had been relatively high compared with those in
other high-income countries —to a flat rate of 21%
Raises the standard individual deduction and the child tax credit
Elimination of the individual mandate will reduce federal expenditures by $318 billion over the 10-year budget window
The deficit-financed tax cuts will act as a fiscal stimulus, temporarily pumping up growth
Lower marginal corporate tax rates reduce businesses’ after-tax cost of capital, which incentivizes them to invest more, adding to
their capital stock and ultimately increasing their productivity and the economy’s growth
IRS implementation of new tax code will be crucial for the success of the Tax overhaul in 2018
The Trump administration has not nominated a new commissioner. Assistant Secretary of the Treasury for Tax Policy, David J. Kautter has been assigned
double duty, serving both in his tax policy role and as acting IRS commissioner
Where is the law today?
●
Current Law. Implemented December 22nd, 2017.
The Aristotelian Nation
THE SOCIAL CONTRACT
WHAT IS THE ROLE OF THE STATE IN A SOCIETY
TOWARD AN UNDERSTANDING OF
CIVIL SOCIETY
The Enduring Issues of a free Civilization
•
self / national preservation
•
human / social flourishing
•
Rights – entitlements of behavior – governed
•
Liberty – right to self ownership
The Politics – elaborates our fullest available analysis of how
humans can most completely develop and reveal their political
nature – that is, as self-governing, republican – beings
Preconditions? – for such a social existence to flourish we must
be concerned with the quantity, sophistication and urban
concentration of the citizenry
Requirements? Intellectual and moral desire to belong to a
political community and share in the ongoing debate over
what is just and important in life – hence, politics is the highest
science and among the highest good
Article One, Section 8
“The Congress shall have the Power … to regulate Commerce with foreign
Nations, and among the several states, and with the Indian tribes…”
- US Constitution, 1789
Protect the markets
Enable efficient markets
Bolster trade markets
Strengthen capital markets
** Prosperous Society **
24
THE LAW
FROM A BILL, TO A LAW, TO THE COURT
Statutes at Large is available online:
•Volumes 1-125 (1789-2011)
http://heinonline.org/HOL/Index?index=statdocs&collectio
n=statute
•Volumes 1-18 (1789-1875)
http://memory.loc.gov/ammem/amlaw/lwsllink.html
•Volumes 1-64 (1789-1951) http://legisworks.org/sal/
•Volumes 65-125 (1951-2011)
http://www.gpo.gov/fdsys/browse/collection.action?collectionCode=
STATUTE
•Volumes 109-Current (1995- )
http://www.gpo.gov/fdsys/browse/collection.action?collectionCode=
PLAW (Make sure you select the Public Law menu).
Laws are bound together in a publication named Statutes at Large. They have
citations that look like:
•P.L. 107-110 ( the 110th public law passed in the 107th Congress)
•115 Stat. 1425 (volume 115 of the Statutes at Large, page 1425)
Both formats refer to the same law, in this case the No Child Left Behind Act of
2001. It is easiest to use the second format, 115 Stat. 1425, to find the law.
Note - before 1957 each law was called a "chapter". A citation would like:
Tennessee Valley Authority Act, ch. 32, 48 Stat. 58 (1933).
25
Laws are bound together in a publication named Statutes at Large. They have citations that look like:
P.L. 107-110 ( the 110th public law passed in the 107th Congress)
115 Stat. 1425 (volume 115 of the Statutes at Large, page 1425)
Both formats refer to the same law, in this case the No Child Left Behind Act of 2001. It is easiest to use the
second format, 115 Stat. 1425, to find the law.
Note - before 1957 each law was called a "chapter". A citation would like: Tennessee Valley Authority Act, ch.
32, 48 Stat. 58 (1933).
US CODE WEBSITE
Part of the assignment asks for the implementation. The next bullet states, "Act, Code, Agency, etc."
You have been working with a public law. That law can amend earlier laws by adding, or deleting, provisions.
The result is gathered in the United States Code, which is abbreviated "USC".
Laws are separated into 53 different subjects, such as bankruptcy, commerce and trades, or patents. Each
subject area is called a "title."
Look in the margin of a law for a citation such as 20 USC 6301. That translates as Title 20 of the United States
Code, section 6301.
(Replaced by the Every Student Succeeds Act - 2015)
26
The Big Question
WHAT IS LIFE LIKE
IN THE STATE OF
NATURE?
27
Non est potestas Super Terram quae
Comparetur ei
There is no power on earth to be compared to
Leviathan – or The Matter, Forme and Power of a
Common Wealth Ecclesiasticall and Civil
1651
Two Treatises of Government:
In the Former, The False Principles and Foundation of Sir Robert Filmer, And His Followers,
are Detected and Overthrown.
The Latter is an Essay concerning The True Original, Extent, and End of Civil-Government
JOHN LOCKE
(1632-1704)
Ethics of Rights
Two Treatises of Government, 1689
Inalienable Rights
"Any single man must judge for himself whether circumstances warrant
obedience or resistance to the commands of the civil magistrate; we are all
qualified, entitled, and morally obliged to evaluate the conduct of
our rulers. This political judgment, moreover, is not simply or primarily a
right, but like self-preservation, a duty to God. As such it is a judgment that
men cannot part with according to the God of Nature. It is the first and
foremost of our inalienable rights without which we
can preserve no other."
28
The state of nature has a law of nature to
govern it, which obliges every one: and
reason, which is that law, teaches all
mankind, who will but consult it, that
being all equal and independent, no one
ought to harm another in his life, health,
liberty, or possessions
Second Treatise, 2, 6
the United States
THE FOUNDING
On U.S. National Governance
The Big Questions –
•
How does the state balance power?
•
What does Constitutional really mean?
•
How does the government create law?
•
How does government implement law?
•
Does law change or evolve?
The Federalist Papers
October 1787 – August 1788
The Goal – Ratify the Constitution
The Strategy – A Literary Debate
85 Essays countered by anti-federalist essays
A rigorous, philosophical argument articulated in a free press designed to generate a debate among
citizens
The only social contract born from a people on how to govern themselves
Overarching Aim
Create a united nation of independent states
Create a federal government with central power
29
Federalist 1
Hamilton
Federalist 10
Madison - November 22, 1787
October 28, 1787
It has been frequently remarked, that it seems to have been reserved to the people of this
country, by their conduct and example, to decide the important question, whether societies
of men are really capable or not, of establishing good government from reflection and
choice, or whether they are forever destined to depend, for their political constitutions, on
accident and force
There are two methods of curing the mischiefs of faction: the one, by
removing its causes; the other, by controlling its effects.
There are again two methods of removing the causes of faction: the one,
by destroying the liberty which is essential to its existence; the other, by
giving to every citizen the same opinions, the same passions, and the
same interests.
It could never be more truly said than of the first remedy, that it was worse
than the disease. Liberty is to faction what air is to fire, an aliment without
which it instantly expires. But it could not be less folly to abolish liberty,
which is essential to political life, because it nourishes faction, than it
would be to wish the annihilation of air, which is essential to animal life,
because it imparts to fire its destructive agency.
Toward Democracy
John Locke (1632-1704) – the fundamental political question is not
whether to have or not to have collective action – but rather, what
sort of political action.
Hence, political legitimacy comes from the authority of the engaged
citizenry
Robert Dahl (1915 - ) – the fundamental political assumption is not that
the U.S. has remained democratic because of its Constitution; rather, it
is more plausible to suppose that the Constitution has remained
because the United States is essentially democratic
How – the political and economic traditions as well as institutions
which underwrite a well-functioning, competitive democracy
Federalist 1
The
Federalist Papers
The Cornerstone of
American Political Philosophy
Federalist 51
Introduction
The Structure of the Government Must Furnish the Proper Checks and Balances Between the
Different Departments
Independent Journal
Independent Journal
Wednesday, February 6, 1788
James Madison
Saturday, October 27, 1787
Alexander Hamilton
It has been frequently remarked, that it seems to have been reserved
to the people of this country, by their conduct and example, to
decide the important question, whether societies of men are really
capable or not, of establishing good government from reflection and
choice, or whether they are forever destined to depend, for their
political constitutions, on accident and force
“IF MEN WERE ANGELS, NO GOVERNMENT WOULD
BE NECESSARY. IF ANGELS WERE TO GOVERN MEN,
NEITHER EXTERNAL NOR INTERNAL CONTROLS
WOULD BE NECESSARY”
30
The U.S. Constitution
Constitutional Law
September 17, 1787
Ratified March 4, 1789
Becomes the supreme law of the land
George Washington, Inaugurated 1st President of the United States under the Constitution
Since ratification, amended 27 times
April 30, 1789 – March 4, 1797
First ten – Bill of Rights, 1791
13 – abolish slavery, 1865
14 – defines U.S. citizenship, 1868
15 – prohibits denial of suffrage based on race, 1870
16 – establishes federal income tax, 1913
19 – women’s suffrage, 1920
26 – voting age at 18, 1971
27 – on congressional salaries, 1992
The U.S. Constitution is the cornerstone for holding government accountable to the
governed
Anchors the American political culture and tradition
The Constitution is the only unchanged social contract in human history: 1789 – now
What is the reason for such the enduring contact?
What does it mean to preserve, protect and defend the Constitution?
Moral conscience of the founders – roots in inalienable rights – clarity of property rights
grounded in law – first in human history
To save the nation
To the Finish
The U.S. System of
Governance
MORAL CHARTER
CHECKS AND BALANCES
DEMOCRATIC REPUBLIC
CONSTITUTIONAL
Charters
of Freedom - The Declaration of
Independence, The Constitution, The Bill
of Rights
Teaching
American History
Well – Would You?
Aristotle – virtue ethics – would likely chose switching the track over the fat
man – why…the virtuous person is morally required to make a decision –
remember we are concerned with whether moral decisions are about
“outcomes” or the “manner in which we achieve them” – so, by tossing a fat
man off the bridge, you use murder and might save the five…if you switch the
track you a guaranteed to save the five – collateral damage is the sixth man.
Mill – utilitarian ethics – all that matters are the end results – the consequences.
Save five, kill one. Simple. Greatest amount of good. The problem, however,
is the problem of intent – you just murdered an innocent man.
Kant – duty ethics – the only intrinsic good in the world is to do good – we have
a duty to the good as prescribed by universal law – a categorical imperative
whereby our actions are taken without regard to the end – we have a duty to
the law and rational beings (the fat man and the 6th man) – hence, Kant
would let them all die – killing the fat man or changing the track implies a
means to an immoral end – preserving universal law is our highest duty.
It is no easy task to be good. For in
everything it is no easy task to
find the middle ... any one can
get angry --that is easy-- or
give or spend money; but to do
this to the right person, to the
right extent, at the right time,
with the right aim, and in the
right way, that is not for every
one, nor is it easy; that is why
goodness is both rare and
laudable and noble.
Aristotle
31
Ethics and Law in Business
and Society Lecture
Series
SEAN D. JASSO, PHD
UCR - WINTER 2020
32
1. On Market Failure – We said that the rationale for public policy is either
market failure and/or government failure. Address the following with this
rationale in mind:
a. Define market failure from the perspective of the economist and government
failure from the perspective of the political scientist (recall public choice theory).
i. Which definition best fits the policy problem of the law you are studying
for your final paper? Explain why.
b. Market failures are most commonly identified with negative externalities.
Provide an example and theoretical illustration/model of this phenomenon as well
as a pro and con of government regulation as a corrective measure
.
c. Lastly, provide an example of a public good and explain why it is framed within
the theory of market failure. Be specific.
2. On Public Policy – We defined public policy as problem resolution of civic
affairs of a nation, state, or city.
a. Referring to the policy you are studying for your final paper, select one of the
policy foundations as well as one of the policy types discussed in lecture (see slides)
that best describes the policy goal.
b. Building upon the policy goal, discuss the political feasibility of the following:
i. What are/were the political hurdles in passing the bill into law?
ii. Identify the major benefit and major cost associated with this law.
iii. Is this law financially feasible – can it pay for itself?
c. American politics has always been about the competition of ideas about
what people really want. Referring to the policy you are studying, identify the
characteristics of whether your policy is liberal or conservative – or, perhaps it is
neither. Explain.
3. On the Philosophy of the State – Civil society has been characterized
by the theory of the social contract initially formalized by Thomas Hobbes and
John Locke:
a. How do the two philosopher’s visions of the social contract differ? Explain in
detail
i. Does your law show evidence of Leviathan reaching into the American
public policy domain?
b. Identify the following characteristics of the American social contract:
i. How did the Federalist Papers influence the ratification of the Constitution?
i. What is meant by “if angels were to govern men …”
ii. How does the U.S. government balance power?
iii. How does a bill become a law?
iv. How is a law implemented?
v. How is the constitutionality of a law affirmed?
4. Would You Kill the Fat Man?
a. Discuss the trolley experiments Spur and Fat Man with specific reference to how
the two have distinct differences within the Doctrine of Double Effect. Additionally,
these two thought experiments shed light on each of our philosophers’ approach to
ethics – Aristotle, Kant and Mill.
i. Of the three philosophers, who do you think would and who would not kill
the Fat Man? Explain in detail.
ii. Finally, trolleyology teaches us the importance of having a set of values and
ethics from which to refer when making decisions – especially vital decisions.
What can our lessons from the trolley teach us about becoming an effective and
moral manager? Pull from the book to support your response.
Exam Question 1
On Market Failure – We said that the rationale for public policy is either market failure and/or
government failure. Address the following with this rationale in mind:
•
a. Define market failure from the perspective of the economist and government failure
from the perspective of the political scientist (recall public choice theory).
• i. Which definition best fits the policy problem of the law you are studying for your
final paper? Explain why.
b. Market failures are most commonly identified with negative externalities. Provide an
example and theoretical illustration/model of this phenomenon as well as a pro and con
of government regulation as a corrective measure.
c. Lastly, provide an example of a public good and explain why it is framed within the
theory of market failure. Be specific
Slide Deck Page 18
Slide Deck Page 19
Slide Deck Page 19-20
Slide Deck Page 20-21
Exam Question 2
•
On Public Policy – We defined public policy as problem resolution of civic
affairs of a nation, state, or city.
•
a. Referring to the policy you are studying for your final paper, select one of the policy
foundations as well as one of the policy types discussed in lecture (see slides) that best
describes the policy goal.
•
b. Building upon the policy goal, discuss the political feasibility of the following:
• i. What are/were the political hurdles in passing the bill into law?
• ii. Identify the major benefit and major cost associated with this law.
• iii. Is this law financially feasible – can it pay for itself?
c. American politics has always been about the competition of ideas about what people
really want. Referring to the policy you are studying, identify the characteristics of
whether your policy is liberal or conservative – or, perhaps it is neither. Explain.
Slide Deck Page 20
Exam Question 3
•
On the Philosophy of the State – Civil society has been characterized by the
theory of the social contract initially formalized by Thomas Hobbes and John
Locke:
•
a. How do the two philosopher’s visions of the social contract differ? Explain in
detail
• i. Does your law show evidence of Leviathan reaching into the American
public policy domain?
b. Identify the following characteristics of the American social contract: i. How
did the Federalist Papers influence the ratification of the Constitution?
i.
What is meant by “if angels were to govern men …”
ii.
ii. How does the U.S. government balance power?
iii.
iii. How does a bill become a law?
iv.
iv. How is a law implemented?
v.
v. How is the constitutionality of a law affirmed?
Exam Question 4
•
Would You Kill the Fat Man?
• a. Discuss the trolley experiments Spur and Fat Man with specific
reference to how the two have distinct differences within the
Doctrine of Double Effect. Additionally, these two thought
experiments shed light on each of our philosophers’ approach to
ethics – Aristotle, Kant and Mill.
• i. Of the three philosophers, who do you think would and who
would not kill the Fat Man? Explain in detail.
• Ii. Finally, trolleyology teaches us the importance of having a set of
values and ethics from which to refer when making decisions –
especially vital decisions.
• What can our lessons from the trolley teach us about becoming an effective and moral
manager? Pull from the book to support your response.
Slide Deck Page 31
Exam Two
• Monday and Wednesday next week!
• Bring 1 blue book each day!!!
• Same procedure:
• Line up outside at 7:30, wait for TAs to collect blue book and bring you in
• Grab a writing table - look behind the curtains if they run out from the bins
• If you remember:
• Write on the front pages only (preferably in pen!)
• Underline key points and write question number in the margins
• Draw a picture or leave a note! ☺
• TIPS
• Use outside sources in answers (ex. Articles, readings, videos, lecture,
discussion material, etc.)
• Write legibly
• Answer all parts of questions
The Trolley Problem
• https://www.youtube.com/watch?v=vfIdNV22LQM
• Group Reflection
• How do you choose? Why?
Would You Kill the Fat Man?
Would You Kill the Fat Man?
The Trolley Problem a nd
W hat Your A ns wer Tells Us
a bout R ight a nd Wrong
David Edmonds
Princeton University Press
Princeton and Oxford
Copyright © 2014 by David Edmonds
Requests for permission to reproduce material from this work should be sent to
Permissions, Princeton University Press
Published by Princeton University Press, 41 William Street,
Princeton, New Jersey 08540
In the United Kingdom: Princeton University Press, 6 Oxford Street,
Woodstock, Oxfordshire OX20 1TW
press.princeton.edu
All Rights Reserved
Library of Congress Cataloging-in-Publication Data
Edmonds, David, 1964–
Would you kill the fat man? : the trolley problem and what your answer tells us
about right and wrong / David Edmonds.
pages cm
Includes bibliographical references and index.
ISBN 978-0-691-15402-2 (hardcover : alk. paper) 1. Ethics. 2. Thought
experiments. 3. Churchill, Winston, 1874–1965—Miscellanea. I. Title.
BJ1012.E34 2013
150--dc23 2013012385
British Library Cataloging-in-Publication Data is available
This book has been composed in Electra and Syntax
Printed on acid-free paper. ∞
Printed in the United States of America
10 9 8 7 6 5 4 3 2 1
To Liz, Isaac, and Saul
(an undiscriminating fan of wheels, trains, and trolleys)
“Clang, clang, clang” went the trolley
“Ding, ding, ding” went the bell
“Zing, zing, zing” went my heartstrings
From the moment I saw him I fell.
—H ugh Martin and Ralph Blane,
“The Trolley Song,” 1944
(sung by Judy Garland in Meet Me in St. Louis)
Contents
List of Figures
Prologue
Acknowledgments
Part 1
xi
xiii
xv
Philosophy and the Trolley
Chapter 1 Churchill’s Dilemma
3
Chapter 2 Spur of the Moment
8
Chapter 3 The Founding Mothers
13
Chapter 4 The Seventh Son of
Count Landulf
26
Chapter 5 Fat Man, Loop, and
Lazy Susan
35
Chapter 6 Ticking Clocks and
the Sage of Königsberg
44
Chapter 7 Paving the Road to Hell
57
Chapter 8 Morals by Numbers
69
Part 2
Experiment s and the Trolley
Chapter 9 Out of the Armchair
87
Chapter 10 It Just Feels Wrong
94
Chapter 11 Dudley’s Choice and
the Moral Instinct
Part 3
108
Mind and Brain and the Trolley
Chapter 12 The Irrational Animal
127
Chapter 13 Wrestling with Neurons
135
Chapter 14 Bionic Trolley
153
Contents
Part 4 The Trolley and It s Critics
Chapter 15 A Streetcar Named Backfire
169
Chapter 16 The Terminal
175
Appendix
Ten Trolleys: A Rerun183
Notes193
Bibliography205
Index213
x
Figures
Figur e 1 Spur9
Figur e 2 Fat Man
37
Figur e 3 Lazy Susan
40
Figur e 4 Loop41
Figur e 5 Six Behind One
55
Figur e 6 Extra Push
64
Figur e 7 Two Loop
65
Figur e 8 Tractor Man
98
Figur e 9 The Tumble Case
99
Figur e 10 The Trap Door
140
Prologue
The levity of the examples is not meant to offend.
—P hilippa Foot
This book is going to leave i n its wake a litter of corpses and
a trail of blood. Only one animal will suffer within its pages,
but many humans will die. They will be mostly blameless victims caught up in bizarre circumstances. A heavyset man may
or may not topple from a footbridge.
Fortunately, almost all these fatalities are fictional. However, the thought experiments are designed to test our moral
intuitions, to help us develop moral principles and thus to be
of some practical use in a world in which real choices have to
be made, and real people get hurt. The point of any thought
experiment in ethics is to exclude irrelevant considerations
that might cloud our judgment in real cases. But the experiment has to have some structural similarities with real cases to
be of use. And so, in the forthcoming pages, you will also read
about a few episodes involving genuine matters of life and
death. Making cameo appearances, for example, will be Winston Churchill, the twenty-
fourth president of the United
States, a German kidnapper, and a nineteenth-century sailor
accused of cannibalism.
Thought experiments don’t exist until they have been
thought up. Books covering philosophy tend, rightly, to focus
on ideas, not people. But ideas do not emerge from a vacuum;
they are the product of time and place, of upbringing and per-
Prologue
sonality. Perhaps they have been conceived as a rebuttal to
other ideas, or as a reflection of the concerns of the moment.
Perhaps they reflect a thinker’s particular preoccupation. In
any case, intellectual history is fascinating, and I wanted to
weave in the stories of one or two of those responsible for the
ideas on which this book is based.
There is a reason why the crime at the heart of this book, the
killing of the fat man, has never been fully solved, philosophically: it is complicated . . . really complicated. Questions that,
at first glance, appear straightforward—such as “When you
pushed the fat man, did you intend to kill him?”—turn out to
be multi-dimensional. A book that attempted to address every
aspect of all the fraught issues raised by the killing would be
ten times the length of this one. In any case, although some of
the intricacies can’t be avoided—indeed, they provide much of
the scholarly excitement—my aim was to write a book that did
not require readers to hold a philosophy PhD.
When I first came across the trolley problem I was an undergraduate. When the fat man was introduced to philosophy I
was a postgraduate. That was a long time ago. Since then,
though, what has reignited my interest has been the perspective brought to bear on the problem from several other
disciplines.
My hope is that the text that follows will give some insight
into why philosophers and non-philosophers alike have found
the fat man’s imaginary death so fascinating.
xiv
Acknowledgments
This is a dull bit for the reader, b
ut a welcome opportunity for the author—the acknowledgment of debts. And I have
a trolley load of people to thank.
First, to numerous philosophers: I’ve conducted many interviews or had many meetings with academic philosophers about
the book, and have also drawn on relevant material gathered
through my work with the BBC, Prospect, and especially Philosophy Bites (www.philosophybites.com). These philosophers
include Anthony Appiah, Fiery Cushman, Jonathan Haidt,
Rom Harré, Anthony Kenny, Joshua Knobe, Sabina Lovibond,
Mary Midgley, Adrian Moore, Mike Otsuka, Nick Phillipson,
Janet Radcliffe Richards, Philip Schofield, Walter SinnottArmstrong and Quentin Skinner.
Second, thanks to another set of philosophers who have
read part or all of the manuscript. No doubt there are still errors in the book, but that there aren’t more of them is down to
Steve Clarke, John Campbell, Josh Greene, Guy Kahane, Neil
Levy, John Mikhail, Regina Rini, Simon Rippon, Alex Voorhoeve, and David Wiggins (and Nick Shea, for helping me decipher Professor Wiggins’s handwriting).
Third, thanks to those who assisted with material for the biographical section—Lesley Brown, M.R.D. Foot (who, sadly,
has passed away), Sir Anthony Kenny, and Daphne Stroud, a
former tutorial partner of Philippa Foot’s.
acknowledgmentsacknowledgments
Fourth, I appreciate assistance I received from journalists at
the BBC and Prospect. Colleagues at the BBC were crucial
during this book’s germination stage. Jeremy Skeet helped to
commission a two-part BBC World Service series on the subject, which was presented by the estimable Steve Evans, an
economist with an insatiable curiosity, who would have made
an excellent philosopher. For the past few years I’ve been contributing philosophy articles to Prospect, in which some of this
material was given a first airing. James Crabtree (now of the
Financial Times) and the former editor, David Goodhart, commissioned articles on subjects that other periodicals would shy
away from. If it’s possible to plagiarize one’s own work, then
I’m guilty in one or two places of doing so. The chapter on
experiments in philosophy relies on some of the research done
for an interview, co-written with Nigel Warburton, on the X-
Phi movement. And I’ve also written for Prospect on enhancement as well as on the trolley problem itself.
Fifth, to the team at Princeton University Press: Hannah
Paul and Al Bertrand were patient and encouraging throughout the writing process—people always express similar sentiments about their editors in the acknowledgment section, but
this time it’s really true. Copyeditor Karen Verde, illustrator
Dimitri Karetnikov, and press officer Caroline Priday made up
an excellent team. Hannah Edmonds, as usual, played the role
of proofreading long-stop, brilliantly catching grammatical and
spelling infelicities that had slipped through others.
Sixth, thanks to my agents at David Higham, particularly
Laura West and Veronique Baxter.
Seventh, my referees’ input was much appreciated. Princeton approached two academics to read the manuscript. I was
fortunate in that both of them are moral philosophers of international standing and both chose to waive their anonymity.
xvi
Acknowledgments
Roger Crisp, a professor at Oxford, made numerous useful suggestions, as did Jeff McMahan, of Rutgers and Princeton and
one of the world’s leading specialists in this area.
Eighth, gratitude to Julian Savulescu, Miriam Wood, Deborah Sheehan, Rachel Gaminiratne, and others at Oxford’s
Uehiro Centre for Practical Ethics, for providing me over the
past several years with such an hospitable academic base. Likewise, to Barry Smith and Shahrar Ali from the Institute of
Philosophy.
Ninth, thanks to Britain’s finest Indian restaurant, the Curry
Paradise, for fueling the brain.
Finally, several friends merit a special mention. For the past
six years, Nigel Warburton has been my partner-in-crime on
the Philosophy Bites podcast. As of May 2012, our interviews
have had 18 million downloads: more important, the series has
been tremendous fun and has given me a wonderfully broad
philosophical education. I also want to acknowledge two non-
philosophers. John Eidinow (with whom I’ve written three
books) and David Franklin, a law scholar, are very clever chaps
indeed. Both read the entire manuscript and made countless
invaluable comments.
The book is dedicated to Liz, for her loving kindness and
her gentle toleration; to Saul, who has trumped my trolley preoccupations with his toy-train obsession; and to Isaac, the most
delightful of way stations, born some time between chapters 7
and 8.
xvii
Pa rt 1
Philosophy and the Trolley
C h apt e r 1
Churchill’s Dilemma
At 4:13 a.m. on June 13, 1944, there was an explosion in a lettuce
patch twenty-five miles south-east of London.
Britain had been at war for five years, but this marked the
beginning of a new torment for the inhabitants of the capital,
one that would last several months and cost thousands of lives.
The Germans called their flying bomb Vergeltungswaffe—retaliation weapon. The first V1 merely destroyed edible plants,
but there were nine other missiles of vengeance that night, and
they had more deadly effect.
Londoners prided themselves on—and had to some extent
mythologized—their fortitude during the Blitz. Yet, by the
summer of ’44, reservoirs of optimism and morale were running dry,—even though D-day had occurred on June 6 and the
Nazis were already on the retreat on the Eastern front.
The V1s were a terrifying sight. The two tons of steel hurtled
through the sky, with a flaming orange-red tail. But it was the
sound that most deeply imprinted itself on witnesses. The rockets would buzz like a deranged bee and then go eerily quiet.
Silence signaled that they had run out of fuel and were falling.
On contact with the ground they would cause a deafening explosion that could flatten several buildings. Londoners tempered their fear by giving the bombs a name of childlike inno-
Chapter 1
cence: doodlebugs. (The Germans called them “hell hounds”
or “fire dragons.”) Only an exceptional few citizens could be as
phlegmatic as the poet Edith Sitwell, who was in the middle of
a reading when a doodlebug was heard above. She “merely
lifted her eyes to the ceiling for a moment and, giving her voice
a little more volume to counter the racket in the sky, read on.”1
Because the missiles were not piloted, they could be dispatched across the Channel day or night, rain or shine. That
they were unmanned made them more, not less, menacing.
“No enemy was risking his life up there,” wrote Evelyn Waugh,
“it was as impersonal as a plague, as though the city was infested with enormous, venomous insects.”2
The doodlebugs were aimed at the heart of the capital,
which was both densely populated and contained the institutions of government and power. Some doodlebugs reached the
targeted zone. One smashed windows in Buckingham Palace
and damaged George VI’s tennis court. More seriously, on
June 18, 1944, a V1 landed on the Guards Chapel, near the
Palace, in the midst of a morning service attended by both civilians and soldiers: 121 people were killed.
The skylight of nearby Number 5, Seaforth Place, would
have been shaken by this explosion too. Number 5 was an attic
flat overrun by mice and volumes of poetry: there were so many
books that additional shelves had had to be installed in what
had originally been a bread oven, set into the wall. There was
a crack in the roof, through which could be heard the intermittent growl of planes, and there were cracks in the floor as well,
through which could be heard the near constant roar of the
underground. The flat was home to two young women, who
shared shoes (they had three pairs between them) and a lover.
Iris was working in the Treasury, and secretly feeding information back to the Communist Party; Philippa was researching
4
Churchill’s Dilemma
how American money could revitalize European economies
once the war was over. Both Iris Murdoch and Philippa Bonsanquet would go on to become outstanding philosophers,
though Iris would always be better known as a novelist.
Iris’s biographer, Peter Conradi, says the women became
used to walking to work in the morning to discover various
buildings had disappeared during the night. Back at the flat,
during intense bombing raids, they would climb into the bathtub under the stairs for comfort and protection.
They weren’t aware of it at the time, but matters could have
been worse. The Nazis faced two problems. First, despite the
near miss to Buckingham Palace, and the terrible toll at the
Guards Chapel, most of the V1 bombs actually fell a few miles
south of the center. Second, this was a fact of which the Nazis
were ignorant.
An ingenious plan presented itself in Whitehall. If the Germans could be deceived into believing that the doodlebugs
were hitting their mark—or, better still, missing their mark by
falling north—then they would not readjust the trajectory of
the bombs, and perhaps even alter it so that they fell still farther
south. That could save lives.
The details of this deception were intricately plotted by the
secret service and involved several double agents, including
two of the most colorful, ZigZag3 and Garbo.4 Both ZigZag
and Garbo were on the Nazi payroll but working for the Allies.
The Nazis requested eyewitness information about where the
bombs were exploding—and for a month they swallowed up
the regular and misleading information that ZigZag and Garbo
provided.
The military immediately recognized the benefits of this
ruse and supported the operation. But for the politicians it had
been a tougher call. There was an impassioned debate between
5
Chapter 1
the minister for Home Security, Herbert Morrison, and Prime
Minister Winston Churchill. It would be too crude to characterize it as a class conflict, but Morrison, who was the son of a
policeman from south London and who represented a desperately poor constituency in east London, perhaps felt more
keenly than did Churchill the burden that the operation would
impose on the working-class areas south of the center. And he
was uneasy at the thought of “playing God,” of politicians determining who was to live and who to die. Churchill, as usual,
prevailed.
The success of the operation is contested by historians. The
British intelligence agency, MI5, destroyed the false reports
dispatched by Garbo and ZigZag, recognizing that, were they
ever to come to light, the residents of south London might not
take kindly to being used in this way. However, the Nazis never
improved their aim. And a scientific adviser with a stiff upper
lip, who promoted the operation even though his parents and
his old school were in south London (“I knew that neither my
parents nor the school would have had it otherwise”), estimated it may have saved as many as 10,000 lives.5
By the end of August 1944, the danger from V1s had receded. The British got better at shooting down the doodlebugs
from both air and ground. More important, the V1 launching
pads in Northern France were overrun by the advancing Allied
forces. On September 7, 1944, the British government announced that the war against the flying bomb was over.6 The
V1s had killed around six thousand people. Areas of south London—Croydon, Penge, Beckenham, Dulwich, Streatham, and
Lewisham—had been rocked and pounded: 57,000 houses
had been damaged in Croydon alone.
Nonetheless, it’s possible that without the double-agent subterfuge, many more buildings would have been destroyed—
6
Churchill’s Dilemma
and many more lives lost. Churchill probably didn’t lose too
much sleep over the decision. He faced excruciating moral dilemmas on an almost daily basis. But this one is significant for
capturing the structure of a famous philosophical puzzle.
That puzzle is the subject of this book.
7
C h apt e r 2
Spur of the Moment
How are they free from sin who . . .
have taken a human life?
—Saint Augustine
A man is standing by the side of a track w
hen he sees a
runaway train hurtling toward him: clearly the brakes have
failed. Ahead are five people, tied to the track. If the man does
nothing, the five will be run over and killed. Luckily he is next
to a signal switch: turning this switch will send the out-of-
control train down a side track, a spur, just ahead of him. Alas,
there’s a snag: on the spur he spots one person tied to the track:
changing direction will inevitably result in this person being
killed...
Purchase answer to see full
attachment