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Ethics and Law in Business and Society Lecture Series
SEAN D. JASSO, PHD © 2019 UCR - FALL 2019
OUR OVERARCHING AIM HELPING YOU NAVIGATE THE COMPLEXITIES
OF A DYNAMIC ENVIRONMENT QUESTION….
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ARE YOU GOOD?
A Dynamic Environment
Government
Business
Society
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First – Government
• political philosophy • politics • rule of law • democracy • tyranny • political economic systems • the social contract
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 Rousseau: 1712-1778 Jefferson: 1743-1826 Madison: 1751-1836
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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”
Second – Society
• 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
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Third – Business
• Foundations • economics, political economic systems • the business enterprise – solutions, jobs, products, services,
innovations, progress
• Markets • competitive, global, strategic • require guidelines, boundaries, regulations
• hence, “ethics and law”
Guiding Questions
• 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 • where is your moral development • what are the rules of the game
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ON ETHICS & MORALS
IDEAS BY WHICH WE LIVE
ETHICS – TYPES
Descriptive / Positive – what is right?
Normative / Natural Law / what ought to be right?
Conventional / Principled / what is your character?
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TOWARD THE ETHICAL LIFE
A JOURNEY OF MORAL DEVELOPMENT
ETHICS GREEK FOR ETHOS – ONE’S MORAL CHARACTER
IN ESSENCE – HOW WE ACT
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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 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
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MORALS AND ETHICS
Conscience – one’s inner sense of right and wrong - for believers – God’s presence in man
Consider MORALS as within your conscience
Consider ETHICS as the rules to support your conscience
VALUES ONE’S PRINCIPLES OR STANDARDS OF
RIGHT BEHAVIOR – ONE'S JUDGMENT OF WHAT IS IMPORTANT AND RIGHT IN LIFE
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ON VALUES
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.
ON MORALS
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 individual- a 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.
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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. Religious Values – profession of faith 2. Cultural Values – cultural norms 3. Legal Values – judicial systems 4. Professional Values – business etiquette 5. Philosophical Values – general wisdom
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On Moral Reasoning
Lawrence Kohlberg (1927-1987) Thesis – moral reasoning is the foundation of one’s ethical behavior Approach to moral development – psychology
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ON BEING GOOD ‘HOW AND WHY’
The Ethics Checklist
1. Is the outcome moral – is it right 2. Is the behavior ethical – is it good 3. What ethic is being tested 4. Is it legal 5. Does it fit the culture of the nation/organization 6. Will it negatively impact your stakeholders 7. Will it negatively impact your reputation 8. Will it look bad in the media 9. Can you sleep at night 10. Can you live with it – how’s your conscience? 11. How will it impact your spouse and children
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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.
Aristotle
WHY BE GOOD?
Elevate the Absolute Knowledge of the Good Excellence of Character
Preeminence of Achievement Sustain the Right The Life Well Led
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HOW TO BE GOOD?
RIGOROUS PRACTICE OF VIRTUE KNOWLEDGE OF THE GOOD WE ARE WHAT WE REMEMBER
On VIRTUE
A trait of human character that is valued as being good in and of itself –
or universally understood to be a value of goodness
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ARISTOTLE’S VIRTUES – in between excess and deficiency
1. Courage 2. Justice 3. Generosity 4. Pride 5. Temperance
6. Truthfulness 7. Wittiness 8. Friendliness 9. Modesty 10. Righteous Indignation
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Where does good come from?
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Where does being good take us?
Forthcoming
Toward the Philosophy of the State Virtue, Duty, Utility, Justice
Toward Governance Introduction to Corporate Governance Introduction to Corporate ‘Social’ Responsibility
Introduction to the Rationale for Public Policy Market Failure – in brief
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Greatest Contribution to Moral Philosophy – System of the Categorical Imperative Great Work – Critique of Practical Reason, 1788 Stanford's Great Source on Philosophy - Kant
Immanuel Kant 1724-1804 Kaliningrad, Prussia
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
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.
Kant’s Burning Questions – • What makes a person good • What is moral law • How do we achieve the highest
good • What is good will
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Aristotle 384 BC – 322 BC Athens, Greece
Stanford's Great Source on Philosophy - Aristotle
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 a life of virtue yields aretê
Greatest Contribution to Moral Philosophy – Ethics is not theoretical, but a life of
practice Great works –
Nicomochean Ethics The Politics Oikonomos – The Management of the
Household
Aristotle’s Burning Questions – • What is happiness • What is a life lived well • What character traits are needed • What is the essential nature of an
activity • What excellences are worthy of honor
and recognition • Why study ethics
John Stuart Mill 1806-1873 London, England
Mill’s Central Lessons Our Purpose – universal liberty - from
egoism (self interest) to utility (collective welfare)
Our Destination – aggregate happiness Our Method – utility
Proportionality Doctrine – duty and right action is defined in terms of universal promotion of happiness
Millian Ethic – utilitarianism driver of modern public policy
Greatest Contribution to Moral Philosophy Advances modern liberalism
Great Work – On Liberty, 1859, Utilitarianism, 1863
Mill’s Burning Questions – • 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
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John Rawls 1921-2002 United States
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
the veil of ignorance free and equal citizens achieve cooperation Principle One – equal basic liberties to all Principle Two – fair equality of opportunity to all
for political & economic leadership 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 • What is ultimately fair
Enduring Questions
Can you have equality at the expense of excellence? Does economic redistribution minimize prosperity? Does aggregate happiness curtail individualism? Is society generally good?
Why do ‘good’ people do bad things? Who are your moral heroes What is the right thing to do?
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So…… SO, WHAT IS THE RIGHT THING TO DO?
Toward the Philosophy of the State
SOCIAL CONTRACT THEORY - FORTHCOMING
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ON GOVERNANCE TOWARD GOOD GOVERNANCE
Jasso’s Governance Framework
Good Governance
Ethical Covenant
Moral Charter
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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”
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
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On Corporate Purpose
“PROPERLY DEFINED, CORPORATE PURPOSE SHOULD RARELY, IF EVER CHANGE”
– RICHARD ELLSWORTH
Structure of Governance
Board of Directors 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
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The Importance of The Board of Directors
ON BOARDS, CEOS AND STRATEGY
BOD’s Responsibilities 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
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The Board’s Central Responsibilities
CEO Selection External Selection – Alan Mulally, CEO Ford, 2006- present
Ford Annual Report Internal Selection – Michael Duke, CEO Walmart, 2009 – present,
joined 1995 Walmart Annual Report
Oversight, Compliance and Risk Management Sarbanes Oxley Act of 2002
The Board’s Central Responsibilities Strategy Development – How Board’s Should Engage
Fundamental Approach Setting ultimate direction of the
corporation Reviewing and approving strategic
initiatives and directions Assessing the risks that define and drive
long-tern corporate performance
Framework for Strategic Activity Strategic Thinking Strategic Decision Making Strategic Planning Strategy Execution
Strategic Choice Process Agreeing in the company
vision Viewing the opportunity space Assessing the company’s
business design and internal capabilities
Determining the company’s future strategic intent (affirming initiatives)
Developing Business Design Prototypes (business model audit)
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The Board’s Central Responsibilities
CEO Performance Evaluation and Executive Compensation Generic CEO Evaluation Criteria
Bottom-line impact
Operational impact
Leadership Effectiveness
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
The Board’s Central Responsibilities
Responding to External Pressures and Unforeseen Events 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
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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
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Guiding Questions
WHAT IS THE RESPONSIBILITY OF THE CORPORATION? TO WHOM OR WHAT IS THE CORPORATION ACCOUNTABLE? WHO IS THE BENEFICIARY OF CORPORATE SUCCESS?
RESPONSIBILITY BEING IN CHARGE OF OR OWNING A TASK - EXPLANATIONS NOT ALWAYS OWED
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ACCOUNTABILITY IN ETHICS AND GOVERNANCE, ACCOUNTABILITY IS ANSWERABILITY, BLAMEWORTHINESS, LIABILITY, AND THE EXPECTATION OF GIVING EXPLANATION FOR YOUR ACTIONS
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
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Drucker’s three dimensions of the corporation -
1. an economic institution 2. a human organization 3. an embodiment of values
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THE CONTEMPORARY PERSPECTIVE OF RESPONSIBILITY
SHAREHOLDER – STAKEHOLDER – CONSTITUENT
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Core Values
RESPECT: We treat others as we would like to be treated ourselves. We do not tolerate abusive or disrespectful treatment. Ruthlessness, callousness, and arrogance don't belong here.
INTEGRITY: We work with customers and prospects openly, honestly and sincerely. When we say we will do something, we will do it; when we say we cannot or will not do something, we won't do it.
COMMUNICATION: We have an obligation to communicate. Here, we take the time to talk with one another...and to listen. We believe that information is meant to move and that information moves people.
EXCELLENCE: We are satisfied with nothing less than the very best in everything we do. We will continue to raise the bar for everyone. The great fun here will be for all of us to discover just how good we can really be.
CSR - perspectives
CSR – self regulation within the business enterprise
CS Responsibility – obligation, accountability
CS Responsiveness – action, activity
CS Performance – outcomes, results
Corporate Citizenship – stakeholder impact Proactive measures upon society, environment and general public interest
triple bottom line – ecological, social, financial
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The American Corporation
• the company town – mid 1800s • the corporate giants – Carnegie, Rockefeller • the corporation as investment – 1920s • the corporation as victim – 1930s • 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
Critics of CSR
Milton Friedman – 1962 Profits
Peter Drucker – 1971 Social impact
Archie Carroll – 1980s Four levels
Economic, legal, ethical, philanthropic
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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.
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 em- ployment, 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. Busi- nessmen who talk this way are unwitting puppets of the intellectual forces that have been undermining the basis of a free society these past decades.
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.
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Carroll’s Pyramid of Corporate Social Responsibilities
ECONOMIC Required
Be profitable. The Foundation on which all others rest
LEGAL Required
Obey the law. Law is society’s codification of right and wrong.
ETHICAL Expected
Obligation to do what is right and fair. Avoid doing harm.
PHILANTHROPIC Desired
Be good corporate citizens.
Stakeholder View of the Firm
BUSINESS
GOVERNMENT
COMMUNITY
EMPLOYEES
OWNERS
CONSUMERS
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Stages of Corporate Citizenship Mirvis and Googins
Business Ethics Journal Stage One - Elementary
Stage Two - Engaged
Stage Three - Innovative
Stage Four - Integrated
Stage Five - Transforming
Citizen Concept Jobs, Profits, Taxes Philanthropic Stakeholder Management Sustainability Change the Game
Strategic Intent Legal Compliance Licence 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
McDonald’s Doing Good
RONALD MCDONALD'S HOUSE
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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.
The fortune 500 forces of good
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Walmart (Founded in 1962)
Revenue = 500.343 billion USD Total Operating Expenses = 478.094 billion USD
Total Net Income 9.862 billion USD (2018)01
2.2 Million Associates Around the World Number of Employees02
Stock Price = $94.80 Dividends = $0.52 per share (Quarterly)
Stocks/Dividends03
1.08 billion USD Charitable Contribution04
Retail Industry
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.
Charitable Contributions
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.
Impact on Education
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.
Other Interesting Facts
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Exxon Mobil (Founded in 1999)
Revenue = 238.883 billion USD Total Operating Expenses = 223.584 billion USD
Total Net Income 19.71 billion USD (2018)01
69,600 employees worldwide Number of Employees02
Stock Price = $72.29 Dividends = $0.82 per share (Quarterly)
Stocks/Dividends03
268 million USD Charitable Contribution04
Energy Industry
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.
Charitable Contributions
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.
Impact on Education
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.
Other Interesting Facts
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Berkshire Hathaway (Founded in 1839)
Revenue = 239.289 billion USD Total Operating Expenses = 213.395 billion USD
Total Net Income 44.940 million USD (2018)01
367,700 employees worldwide Number of Employees02
Stock Price = $309,180.00 Dividends = None
Stocks/Dividends03
3.4 billion USD Charitable Contribution04
Multiple Industries
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.”
Charitable Contributions
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.
Impact on Education
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 rate- regulated.
Other Interesting Facts
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Apple (Founded in1976)
Revenue = 265.595 billion USD Total Operating Expenses = 194.697 billion USD
Total Net Income 59.531 billion USD (2018)01
132,000 employees worldwide Number of Employees02
Stock Price = $165.52 Dividends = $0.73 per share (Quarterly)
Stocks/Dividends03
100 million USD Charitable Contribution04
Tech Industry
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.
Charitable Contributions
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.
Impact on Education
Apple became the first American public company to surpass $1 trillion in value.
Other Interesting Facts
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UnitedHealth Group (Founded in 1977)
Revenue = 226.247 billion USD Total Operating Expenses = 208.903 billion USD
Total Net Income 11.986 billion USD (2018)01
270,000 employees worldwide Number of Employees02
Stock Price = $270.37 Dividends = $0.90 per stock (Quarterly)
Stocks/Dividends03
Specific Value Unknown Charitable Contribution04
Healthcare Industry
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.
Charitable Contributions
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.
Impact on Education
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.
Other Interesting Facts
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McKesson (Founded in 1833)
Revenue = 208.357 billion USD Total Operating Expenses = 205.436 billion USD
Total Net Income 67 million USD (2018)01
78,000 employees worldwide Number of Employees02
Stock Price = $124.97 Dividends = $0.39 per share (Quarterly)
Stocks/Dividends03
1.2 million USD Charitable Contribution04
Medical Supplies Industry
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.
Charitable Contributions
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.
Impact on Education
More than 200,000 physicians utilize McKesson's technology and services, and 76 percent of hospitals with more than 200 beds are
McKesson customers.
Other Interesting Facts
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CVS Health (Founded in 1963)
Revenue = 184.765 billion USD Total Operating Expenses = 174.718 billion USD
Total Net Income 6.622 billion USD (2018)01
203,000 employees worldwide Number of Employees02
Stock Price = $65.96 Dividends = $0.50 per share (Quarterly)
Stocks/Dividends03
Specific Value Unknown Charitable Contribution04
Retail Healthcare Industry
For more than a decade, CVS’s Project Health events have provided more than $6.40- million worth of free health services to patients in underserved communities around the
country.
Charitable Contributions
CVS has four fully operational store and pharmacy training locations that support the development of colleagues and
partnering community agencies.
Impact on Education
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.
Other Interesting Facts
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Amazon.com (Founded in 1994)
Revenue = 177.866 billion USD Total Operating Expenses = 173.760 billion USD
Total Net Income 3.033 billion USD (2018)01
613,300 employees worldwide Number of Employees02
Stock Price = $1,670.43 Dividends = None
Stocks/Dividends03
100 million USD Charitable Contribution04
Retail Industry
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.
Charitable Contributions
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.
Impact on Education
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.
Other Interesting Facts
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AT&T (Founded in 1983)
Revenue = 160.546 billion USD Expenses = 136.683 billion USD
Total Net Income 29.450 billion USD (2018)01
273,210 employees worldwide Number of Employees02
Stock Price = $29.37 Dividends = $0.50 per share (Quarterly)
Stocks/Dividends03
35 million USD Charitable Contribution04
Telecommunications Industry
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.
Charitable Contributions
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.
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.
Impact on Education
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.
Other Interesting Facts
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General Motors (Founded in 1908)
Revenue = 145.588 billion USD Total Operating Expenses = 134.885 billion USD Discontinued Operation = -4.212 billion USD
Total Net Income -3.864 billion USD (2018)01
180,000 employees worldwide Number of Employees02
Stock Price = $39.09 Dividends = $0.38 per share (Quarterly)
Stocks/Dividends03
31 million USD Charitable Contribution04
Automotive Industry
GM pledged to give $30 million in annual donations to focus on global development and education in science, technology, engineering and math.
Charitable Contributions
GM has partnered and helped four new programs in their college initiative: code.org, black girls code, institute of play, and digital
promise.
Impact on Education
General Motor is the only company in the top 10 of the Fortune 500 with a female CEO.
Other Interesting Facts
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See a theme…… VOLUNTEERING – YOUR COMPETITIVE ADVANTAGE – A LIFE IN SERVICE
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.
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Toward the Philosophy of the State SOCIAL CONTRACT THEORY
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Guiding Questions
Why Ethics? Why Laws?
What is the Rule of Law? What is Constitutional Law?
What is Public Policy? 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?
Rationale for Public Policy
MARKET FAILURE GOVERNMENT FAILURE
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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 Market Failure
Government Failure
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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.
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”
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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 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
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Market Failure - Impacts
Public Good – monopoly Information Asymmetry – fraud
Monopoly – stagnation, idleness Externality – positive, negative
POSITIVE EXTERNALITY MODEL
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NEGATIVE EXTERNALITY MODEL
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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
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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
PUBLIC POLICY TYPES
Regulatory – rules from the state Distributive – government disbursements
Redistributive – re-balancing disbursements Substantive – what government intends to do Procedural – how something can be done
Collective policy – goods given to all Private policy – individual beneficiaries or payers
Liberal – state-centered Conservative – market-centered
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Rationale for Public Policy
Market Failure Government Failure
GOVERNMENT FAILURE – A PUBLIC CHOICE THEORY
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 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
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WHEN DID WE LEARN ABOUT 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
PUBLIC CHOICE THEORY – CENTRAL FIGURES
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”
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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
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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 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?
● Section 302 does reduce information asymmetry
● Section 404 does not show an impact on reducing information asymmetry
● 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
● 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
What are the lasting benefits and costs?
● 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
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
The Sarbanes-Oxley of 2002
Cost ● 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
Benefit ● 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
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The Sarbanes-Oxley of 2002
Goals Difficulties Status Today Possibility of a Policy Change
Improve quality of financial reporting
● Supreme Court case on constitutionality of SOX with SEC oversight rather than the President
● Significant increase in compliance costs
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
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
What problem did the law aim to solve?
● 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
● 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.
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 Gramm-Leech-Bliley Act of 1999
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What are the lasting benefits and costs?
Where is the law today?
● Still the current law. Under scrutiny due to the economic recession of 2008.
The Gramm-Leech-Bliley Act of 1999
Cost ● 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.
Benefit ● 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
What problem did the law aim to solve?
● 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?
● Response to the 9/11 terrorist attack
Was the law effective?
● 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
The Patriot Act of 2001
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What are the lasting benefits and costs?
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
The Patriot Act of 2001
Cost ● Reduces privacy of U.S. citizens ● Congress intended section 215 to be uniquely "flexible" and "broad” to justify bulk surveillance on domestic telephone metadata
Benefit ● Prevention of terrorist activity ● Reduction in money-laundering activities
What problem did the law aim to solve?
● 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.”
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
The Emergency Economic Stabilization Act of 2008 (TARP)
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What are the lasting benefits and costs?
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.
The Emergency Economic Stabilization Act of 2008 (TARP)
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.
What problem did the law aim to solve?
● 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 American Recovery and Reinvestment Act of 2009
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What are the lasting benefits and costs?
Where is the law today?
● Currently still impacting U.S. economy today. Most recent economic stimulus package in the U.S.
The American Recovery and Reinvestment Act of 2009
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
The Patient Protection and Affordable Care Act of 2010
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What are the lasting benefits and costs?
Where is the law today?
● Still current law.
● Individual Mandates no longer part of ACA law after Trump passed new Tax Act of 2017
The Patient Protection and Affordable Care Act of 2010
Cost ● 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
Benefit ● 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
The Patient Protection and Affordable Care Act of 2010
Goals Difficulties Status Today Possibility of a Policy Change
Comprehensive Coverage ● 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
Cost Containment for a Healthcare System
● 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
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What problem did the law aim to solve?
● Designed to cut taxes on businesses and individuals
● Stimulate the economy and create jobs
What were the politics that shaped the law?
● 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?
● 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
The Tax Cut and Jobs Act of 2017
What are the lasting benefits and costs?
Where is the law today?
● Current Law. Implemented December 22nd, 2017.
The Tax Cut and Jobs Act of 2017
Cost ● 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
Benefit ● 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
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THE SOCIAL CONTRACT WHAT IS THE ROLE OF THE STATE IN A SOCIETY
The Aristotelian Nation
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
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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
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 **
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THE LAW FROM A BILL, TO A LAW, TO THE COURT
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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).
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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).
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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)
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The Big Question WHAT IS LIFE LIKE IN THE STATE OF NATURE?
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Non est potestas Super Terram quae Comparetur ei
There is no power on earth to be compared to
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
Leviathan – or The Matter, Forme and Power of a Common Wealth Ecclesiasticall and Civil
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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."
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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
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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?
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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
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Federalist 1 Hamilton 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
Federalist 10 Madison - November 22, 1787
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.
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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
The Cornerstone of American Political Philosophy
The Federalist Papers
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Federalist 1
Introduction
Independent Journal
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
Federalist 51
The Structure of the Government Must Furnish the Proper Checks and Balances Between the Different Departments
Independent Journal Wednesday, February 6, 1788
James Madison
“IF MEN WERE ANGELS, NO GOVERNMENT WOULD BE NECESSARY. IF ANGELS WERE TO GOVERN MEN, NEITHER EXTERNAL NOR INTERNAL CONTROLS WOULD BE NECESSARY”
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The U.S. Constitution
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
April 30, 1789 – March 4, 1797
Since ratification, amended 27 times 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
Constitutional Law
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? Moral conscience of the founders – roots in inalienable rights – clarity of property rights
grounded in law – first in human history
What does it mean to preserve, protect and defend the Constitution? To save the nation
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The U.S. System of Governance
MORAL CHARTER CHECKS AND BALANCES DEMOCRATIC REPUBLIC CONSTITUTIONAL
To the Finish
Charters of Freedom - The Declaration of Independence, The Constitution, The Bill of Rights
Teaching American History
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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
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Ethics and Law in Business and Society Lecture Series SEAN D. JASSO, PHD UCR - FALL 2019
