Ethics and the Conduct of Business Eighth edition Chapter 8 Employment Rights Copyright © 2017, 2012, 2009 Pearson Education, Inc. All Rights Reserved

Modules Introduction: Employment Rights 8.1: Employment at Will 8.2: Right to Due Process 8.3: Freedom of Expression 8.4: Workplace Democracy 8.5: Worker Compensation 8.6: Executive Compensation Conclusion: Employment Rights Copyright © 2017, 2012, 2009 Pearson Education, Inc. All Rights Reserved

Learning Objectives (1 of 2) 8.1: Recognize the three basic arguments that justify employment at will and the three types of exceptions to this doctrine that protect employees from unjust dismissal 8.2: Describe the main arguments and principles of the Model Employment Termination Act that support the right of employees to due process in employment decisions 8.3: Explain the significance of freedom of expression for employees, the extent to which it is protected by law, and the arguments for and against this right in the workplace Copyright © 2017, 2012, 2009 Pearson Education, Inc. All Rights Reserved

Learning Objectives (2 of 2) 8.4: Analyze the correlation between worker participation and workplace democracy and how Dahl's argument supports workplace democracy as a right 8.5: Assess the market forces and other factors that influence employee compensation, the fairness of wages, and justifications for a minimum wage 8.6: Evaluate the reasoning underlying criticisms and justifications of the compensation for top executives Copyright © 2017, 2012, 2009 Pearson Education, Inc. All Rights Reserved

Introduction: Employment Rights Case Study: The Firing of Robert Greeley Examining at-will employment Employers’ rights vs. Employee rights Due process Copyright © 2017, 2012, 2009 Pearson Education, Inc. All Rights Reserved

Figure 8.1: Arguments Used to Justify Employment at Will Property rights argument Freedom of contract argument Efficiency argument Copyright © 2017, 2012, 2009 Pearson Education, Inc. All Rights Reserved

8.1: Employment at Will (1 of 3) Objective: Recognize the three basic arguments that justify employment at will and the three types of exceptions to this doctrine that protect employees from unjust dismissal 8.1.1: Property Rights Argument Employers and employees own property Exchange of property between the parties Downside 8.1.2: Freedom of Contract Argument Overview 8.1.1: Property Rights Argument Point 1- Employers and employees own property Employers own machinery, raw materials, and money for wages Employees own labor, or productive power Point 2- Exchange of property between the parties Employer is free to utilize productive power Employee is free to accept work under the conditions or seek job elsewhere Restrictions on this agreement is violation of property rights Point 3- Downside Limited when in conflict with each other’s right Impoverishes workers Employers benefit more 8.1.2: Freedom of Contract Argument Point 1- Overview Employment is a contractual agreement between employers and employees Restrictions on the agreements that can be made between the parties means violation of freedom of contract Point 2- Downside Difference in bargaining power between employers and employees Employers take advantage Copyright © 2017, 2012, 2009 Pearson Education, Inc. All Rights Reserved

8.1: Employment at Will (2 of 3) Objective: Recognize the three basic arguments that justify employment at will and the three types of exceptions to this doctrine that protect employees from unjust dismissal 8.1.3: Efficiency Argument Employers granted freedom to choose workers Employee benefits Consequences of job immobility 8.1.3: Suitability Point 1- Employers granted freedom to choose workers To decide the number of workers required To choose best workers To assign jobs to workers To dismiss workers who perform poorly Benefits employer more Point 2- Employee benefits Better compensation Job mobility Point 3- Consequences of job immobility Employers can abuse employee Choice of first job becomes critical Copyright © 2017, 2012, 2009 Pearson Education, Inc. All Rights Reserved

Table 8.1: Arguments Supporting Employment at Will Premise Application Property Rights Argument Both employers and employees have “property” of some economic value and the right to determine what they do with their own property. Employers have wages and employees have labor. They are free to buy and sell this “property” or accept and refuse offers for it. Freedom of Contract Argument Employment is a contractual arrangement between employers and employees. Both have the right to contract as they choose. Excessive limits on the agreements that can be made between employers and employees violate their freedom of contract. Efficiency Argument This utilitarian argument relies on the importance of employment at will for the efficient operation of business, which benefits employers, employees, and society. Many employers and employees agree to employment at will, so it benefits both parties and allows the most efficient use of all resources. Arguments supporting employment at will Three arguments supporting employment at will Underlying principles How those arguments support the doctrine Copyright © 2017, 2012, 2009 Pearson Education, Inc. All Rights Reserved

8.1: Employment at Will (3 of 3) Objective: Recognize the three basic arguments that justify employment at will and the three types of exceptions to this doctrine that protect employees from unjust dismissal 8.1.4: Exceptions Restrictions to employment-at-will 8.1.4: Exceptions Point 1- Restrictions to employment-at-will Public policy Implied contract Bad faith and malice Copyright © 2017, 2012, 2009 Pearson Education, Inc. All Rights Reserved

Figure 8.2: An Acceptable Employment at Will Doctrine Supporting arguments Necessary restrictions Copyright © 2017, 2012, 2009 Pearson Education, Inc. All Rights Reserved

8.2: Right to Due Process 8.2.1: Support for Due Process Objective: Describe the main arguments and principles of the Model Employment Termination Act that support the right of employees to due process in employment decisions 8.2.1: Support for Due Process Three arguments to support due process 8.2.2: Law of Due Process Features Model Employment Termination Act 8.2.1: Support for Due Process Point 1- Three arguments to support due process Terminated employees suffer substantial harm Respect for the dignity of workers Good management practice 8.2.2: Law of Due Process Point 1- Features Introduce the legal right not to be dismissed without cause Introduce a fair hearing into every employment relation Point 2- Model Employment Termination Act Forbids employers from terminating employee without good cause Arbitration and reinstatement are remedies for unjust termination Does not cover all employees Protects employers from litigation Copyright © 2017, 2012, 2009 Pearson Education, Inc. All Rights Reserved

8.3 Freedom of Expression (1 of 2) Objective: Explain the significance of freedom of expression for employees, the extent to which it is protected by law, and the arguments for and against this right in the workplace 8.3.1: Defining Freedom of Expression Four elements Definition 8.3.2: Legal Protection for Expression American law Two provisions 8.3.1: Defining Freedom of Expression Point 1- Four elements Nature of expression Subject of expression Location of expression Audience of expression Point 2- Definition Can be defined narrowly or broadly It might be restricted to the expression of views about the workplace in the workplace 8.3.2: Legal Protection for Expression Point 1- American law No restriction on actions of private business Public and private employees treated differently Point 2- Two provisions First Amendment guarantee of free speech Doctrine of employment at will Copyright © 2017, 2012, 2009 Pearson Education, Inc. All Rights Reserved

8.3 Freedom of Expression (2 of 2) Objective: Explain the significance of freedom of expression for employees, the extent to which it is protected by law, and the arguments for and against this right in the workplace 8.3.3: Arguments over Expression Two arguments Just grounds for dismissal 8.3.3: Arguments over Expression Point 1- Two arguments Individualist justification The social argument Point 2- Just grounds for dismissal Derogatory insults Disruptive criticism Disclosure of confidential information Copyright © 2017, 2012, 2009 Pearson Education, Inc. All Rights Reserved

8.4 Workplace Democracy 8.4.1: Participation and Democracy Objective: Analyze the correlation between worker participation and workplace democracy and how Dahl's argument supports workplace democracy as a right 8.4.1: Participation and Democracy Overview 8.4.2: Arguments for Democracy Two moral arguments Dahl’s argument 8.4.1: Participation and Democracy Point 1- Overview Worker participation Workplace democracy 8.4.2: Arguments for Democracy Increases organizational effectiveness Increases productivity Point 2- Two moral arguments Contribution to political democracy Need to legitimize authority Point 3- Dahl’s argument  Democracy is necessary in corporations Members are like citizens Copyright © 2017, 2012, 2009 Pearson Education, Inc. All Rights Reserved

8.5 Worker Compensation (1 of 2) Objective: Assess the market forces and other factors that influence employee compensation, the fairness of wages, and justifications for a minimum wage 8.5.1: Setting Wages Overview Factors that determine pay Correction of unequal distribution of wealth 8.5.2: Market Outcomes Economist view of wages Efficient markets Market justice 8.5.1: Setting Wages Point 1- Overview Pay determined by market force Employers must consider both level and form of pay Point 2- Factors that determine pay Production Company strategy Point 3- Correction of unequal distribution of wealth Placing legal limits Provide basic needs Redistribute wealth through government programs 8.5.2: Market Outcomes Point 1- Economist view of wages Reflection of market price of labor Function of supply and demand Point 2- Efficient markets Market-clearing price All workers receive market-clearing price Wages equal marginal product of labor Point 3- Market justice Arguments for justifying wage setting Challenges to market justice Copyright © 2017, 2012, 2009 Pearson Education, Inc. All Rights Reserved

8.5 Worker Compensation (2 of 2) Objective: Assess the market forces and other factors that influence employee compensation, the fairness of wages, and justifications for a minimum wage 8.5.3: Minimum Wage Rationales for minimum wage legislation 8.5.3: Minimum Wage Point 1- Rationales for minimum wage legislation Exploitation Redistribution Copyright © 2017, 2012, 2009 Pearson Education, Inc. All Rights Reserved

8.6 Executive Compensation Objective: Evaluate the reasoning underlying criticisms and justifications of the compensation for top executives 8.6.1: Criticism of CEO Pay Condemnation of CEO pay 8.6.2: Justifying CEO Pay Justifying CEO pay 8.6.3: Problems with Justification Bebchuk and Fried thesis 8.6.1: Criticism of CEO Pay Point 1- Condemnation of CEO pay Pay unrelated to performance Lack of proportion between executive pay and pay of low- level employees Unintended consequences 8.6.2: Justifying CEO Pay Point 1- Justifying CEO pay Set by board of directors Marginal product Motivation to perform Induce to become a loyal agent 8.6.3: Problems with Justification Point 1- Bebchuk and Fried thesis CEOs have excessive influence over the process Board members are linked to CEO Board is advised by compensation consultant who works for the company Copyright © 2017, 2012, 2009 Pearson Education, Inc. All Rights Reserved

Conclusion: Employment Rights Employee rights are important Workers are sensitive to unjust treatment Due process in termination has moral grounding Labor law ensures just treatment of workers Copyright © 2017, 2012, 2009 Pearson Education, Inc. All Rights Reserved