Pareto-optimality and shareholder primacy in business ethics

Ethics

Question 1 pareto-optimal state means that essentially no person is being needlessly left behind. For example, if a particular person's utility or usefulness to the economy or quality of life cannot be raised without reducing the utility of someone else, a society has achieved this state. In other words, if a worker can receive benefits at a company without the company having to lay off workers or deprive shareholders of income, the society is not pareto-optimal -- ideally, there must be a mechanism in place to ensure that the worker has benefits, if the owner can provide it. However, defining pareto-optimal utilization is difficult in such a model. Naturally, individuals will, always however wealthy, see any reduction in their income from taxes for benefits to be to their detriment, even if this ultimately improves their quality of life by improving public education, for example, to ensure a better educated and more productive workforce and a more competitive and thus more secure nation, from an international perspective. This is why a pareto-optimal state is not a very limited kind of success, and achieving such a definition may or may not guarantee much, as there will be little agreement as to what it constitutes between different social classes and constituencies.

Question

Although the conventional stereotype is that businessmen are rapacious creatures, simply intent upon making money for their own coffers, to line their own pockets, this is not always the case, even in the point-of-view of stridently libertarian economists. Machan and Chesher stress that businesspeople have a moral obligation to their shareholders to enrich the company. However, the authors also insist, more controversially, that this is the only obligation of businessmen and women in the position of CEO. What the authors mean by a violation of business ethics, according to their definition, is that the sole obligation of an executive is to shareholders and not to society. Thus it is unethical to pursue one's own political agenda as a CEO, even if this means to instate a tolerance policy for employees. The authors understand the objective of the business profession as an implied contractual affair between shareholders and chief executives alone, an agreement that supersedes any company obligation to other social forces, and even to company workers, save to keep company employees in a job, and working at maximum productivity.

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The sentiment that "the state is certainly not protecting property by removing it, without due judicial cause, such as a fine, imposed for unacceptable behavior and thus it appears therefore that the state has no right to imposed taxes," might be a popular one right now, around the traditional American tax season. This sentiment advocates that such taxation restraints, for the purpose of redistribution mean that the state is imposing a fine for essentially being wealthy to certain personages in the community. It is not fair to overburden some citizens for simply being successful and is therefore in error.

However, without taxation, the protective mechanisms that make up the state, such as a standing army to protect the economic apparatus of the nation would not exist. And if taxation must occur to preserve the state, should it not be redistributive, so as not to incapacitate the weakest members of society, and thus would it not cost taxpayers to not have redistributive taxes even more money in the long run, debilitating the coffers of the state still further? While the passage bifurcates the individual's right to private property and the state's duty to protect public welfare, it is not so easy to make such a distinction, for threatening the public good without redistribution ultimately harms private industry's ability to make money and to have a healthy and educated workforce. An uneducated and unhealthy employee without schooling or Medicare helps no company, CEO, or shareholder

Question

However, not even all capitalists behave solely according to their rawest self-interest. Despite Machan and Chesher's assertions, this would seem poor for public relations as well as for economic survival. Who wishes to buy the product of a company that hurts its worker -- even Nike and Wal-mart have had to reform their business practices, due to sheer public demand and media scandal. Moreover, the excesses of CEOs at Tyco and Enron intent upon enrichment seems to further refute the author's theory, as well as underline the necessity of laws regarding best business practices to keep such egoism in check.