FIN 240 Lecture Notes - Lecture 9: Profit Maximization, Business Ethics, Corporate Social Responsibility
Document Summary
Ethics - application of moral principles and values to social behavior. Business ethics - moral principles and values applied to situations that arise in a business setting. Morals = what we think is right and wrong. Many people view this idea as greedy or inhumane but the rational for the profit-maximization theory is still valid. Profit maximization - in an ideal world, if all firms strictly adhere to the goal of profit maximization, it would lead to the most efficient allocation of scarce resources. Rise of corporate citizenship - many investors an others now consider a corporation"s tribe bottom line. Triple bottom line - its profit, its impact on people, and its impact on the planet. Companies are ranked on their environmental impact and ethical decisions and are viewed as citizens" that are expected to help better communities and society. Importance of ethics in making business decisions - businesses should evaluate these factors when making ethical decisions.