Question

Explain the market failures approach to business ethics. What, according to Joseph Heath, makes business ethics a particular kind of ethics?Consider at least five possible practical implications of the approach for the moral responsibility of business managers.

Answer 1

Market failure approach to business ethics :

• Market failures approach takes its guidance from the policy objectives that underlie the regulatory environment in which firms compete
• It is also based on the conditions that must be satisfied in order for the market economy to achieve efficiency in production and allocation of goods and services
• According to this theory the markets should seek to profit from information assymetries from externalities from exercising monopoly power

According to Joseph Heath stakeholders idea does not provide managers with any useful direction

He argues that shareholders driven and stakeholders driven theories of business ethics have virtues but both are subjected to flaws

Therefore he argued that there should be an alternative which he calls the market failure theory

According to health business ethics is a particular kind of ethics because he believes that the cooperative arrangement in society are essential to healthy Markets

According to him moral motivation comes from psychological not philosophical sources

He tells that business ethics is not designed to teach people to know what is right

Rather it is meant to help people think rationally through his behaviours and values

5 possible practical implications of the approach for moral responsibilities of business managers are:

• The business managers must analyze the effects of decisions on people affected by decisions
• Population standards and analyzation are the most important implications of the approach for moral responsibility of managers
• Managers have to follow ethical code which takes care of Moral rights of human beings, right to speech,express,safety and life
• Disclosing only the information in annual reports necessary for welfare of the people concerned
• Business managers are morally and socially committed to look after the interest of society by adopting ethical business practices