01 ethical aspects of business curs

8/13/2019 01 Ethical Aspects of Business Curs

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Introductory

Elements


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THE CONCEPT OF BUSINESS

State-owned enterprises are not businesses! The profit they make

if anyis managed by the government and local administration inorder to achieve certain social and political objectives.

a pr ivately-ownedcommercial enterprise

Individuals and organizations that make products and / or render

services for other reasons than profit are working, but not doingbusiness.

whose intrinsic purpose is to make a prof i tforits owners

Profit means money, but making money does not always mean doing

business. Selling an inherited house or grandma's silver andgrandpa's stamp collection could make one very rich, but as a luckyguy, not as a business person.

by means of legallyselling on the free marketprodu cts and services

Drug dealing, smuggling or prostitution are very profitable activities,but they are i l legalbusinesses, because they harm a lot of people.

designed to satisfy soc ial ly accepted humanneeds


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1. Is profit the sole andultimate purpose of

any business?

Twoopenquestionsabout

profit:

PROFIT
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The answer depends on the broadness of our perspective.

X

society -economic

environment,offering businessopportunities

society -system ofneeds and wants,demanding productsand services, offeredby businesses

XY

Z

Business needs society asmeans to make profititsintrinsic purpose.

Society needs businesses asmeans to satisfy human needsthe purpose of market economy.

YES

From a narrow viewpoint, focused ona single business, the answer isaffirmative. Each single business (X)is founded by its owners, who put atrisk their capital, as a system ofresources (workers and managers,facilities, technology, raw materials,

utilities, etc.) ment to make a profit forthe investors.

NO

Enlarging our perspective, so that toencompass the social and economicsystem, the right answer is negative.There are businesses (X, Y, Z) insofaras they function as efficient means tofulfill the needs and wants of thepeople. Profit is a deserved reward for

those who can satisfy the socialdemand.


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2. How large should

be the profit?

PROFIT
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PROFIT

maximum

The supporters of thenarrow, micro-levelperspective logically claimthat a good, competent andcompetitive management

should aim at maximizingthe company's profit (usingmethods permitted by thelaw), since this is the bestway to satisfy the owners'interests.

reasonable

The supporters of the large,macro-level perspectiveideologically rather thanlogically claim that a good,competent and responsible

management should aim atthe best fulfillment of thesocial needs and wants,since this is the best way tosatisfy the consumers'interests. As a deserved

reward for economicperformance, profit shouldbe 'reasonable'.


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PROFIT

It's easy to define clearly

what maximum profitmeans, and to

understand the objectivelogic of maximizing

profit.

Business persons are

not greedy, but rationalself-motivated people.Trying to maximize their

profit, they strive toserve the best the public

interest.

It's extremely difficult todefine clearly what a

reasonable profitmeans, and to supportwith objective reasons

why, when and howprofit should not be

maximized.

Business persons are

greedy, selfish andirresponsible people.Obsessed with

maximizing their profit,they don't give a damn

about the public interest.


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PROFIT IN PHARMACEUTICAL INDUSTRY

Drug companies in the US are granted a patent on any new pharmaceuticaldrug they develop, which gives them a monopoly on that drug for 20 years.Not surprisingly, high monopoly profits, well beyond the average rate of

profits in other industries, are characteristic of the pharmaceutical industry.

In a study published in 2003, Public Citizens

Congress Watch noted that in 2002 average profitsfor drug companies in the Fortune 500 were 17% of

revenues whereas average profits for Fortune 500companies in all other industries were 3% ofrevenues.

PeriodDrug companies median profit on revenuescompared to all other industries in the Fortune 500

1970s and 1980s double

1990s 4 times

today 8 times

17%

3%


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PROFIT IN PHARMACEUTICAL INDUSTRY

Drug companies say they need these profits to cover the costsof research for new drugs.

A 2004 study of drug costs showed that prescription drugs havemarkups of 5,000%, 30,000% and 50,000% over the cost of theiringredients.

Ingredients cost / 100 tabletsDrug Selling price

Norvasc 14 cents $ 220

Prozac 11 cents $ 247

Tenormin 13 cents $ 104

Xanax 3 cents $ 136

research 14%

profits for shareholders 17%

advertising and administration 31%

01 ethical aspects of business curs

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