Chapter 3 PHILOSOPHICAL ETHICS AND BUSINESS MGT604 CHAPTER OBJECTIVES After exploring this chapter, you will be able to: 1. Explain the ethical framework of utilitarianism. 2. Describe how utilitarian thinking underlies much economic and business decision-making. 3. Explain how the free market is thought to serve the utilitarian goal of maximizing the overall good. 4. Explain some challenges to utilitarian decision making. 5. Explain principle-based, or rights-based, frameworks. 6. Explain the concept of human rights and how they are relevant to business. 7. Distinguish moral rights from legal rights. 8. Explain several challenges to principle-based ethics. 9. Describe and explain virtue-based framework of ethical character. 2 MGT604 1
INTRODUCTION: ETHICAL FRAMEWORKS AND TRADITIONS Reasons that guide an individual s ethical judgment fall into three general categories: Consequences Principles Personal character An ethical framework: An attempt to provide a systematic answer to the fundamental ethical question: How should human beings live their lives? Ethical frameworks provide reasons to support their answers. 3 MGT604 RELIGIOUS ETHICS VS. PHILOSOPHICAL ETHICS Religious ethics: Explains human well-being in religious terms. The biggest practical problem with this approach, of course, is that people differ widely in their religious beliefs. If ethics is based only on religious origins, and if people disagree about those religious starting points, then ethics would never escape the predicament of relativism. Philosophical ethics: Provides justifications that must be applicable to all people regardless, of their religious starting points. Philosophical ethics seeks foundations that all reasonable people can accept, regardless of their religious convictions. 4 MGT604 2
DECISION POINT: WHO IS TO SAY WHAT IS RIGHT OR WRONG? An ethical relativist holds that ethical values are relative to particular people, cultures, or times. The relativist denies that there are can be any rationally justified or objective ethical judgments. When there are ethical disagreements between people or cultures, the ethical relativist concludes that there is no way to resolve that dispute and to prove that one side is right or more reasonable than the other. Ethical relativists believe that ethical values depend on one s own background, culture, and personal opinions. 5 MGT604 DECISION POINT: APPLICATION Imagineateacherreturnsanassignmenttoyouwithagrade of F. When you ask for an explanation, you are told that, frankly, the teacher does not believe that people like you (e.g., women, Christians, African Americans) are capable of doing good work in this field (e.g., science, engineering, math, finance). When you object that this is unfair and wrong, the teacher offers a relativist explanation. Fairness is a matter of personal opinion, the professor explains. Who determines what is fair or unfair? you ask. Your teacher claims that his view of what is fair is as valid as any other. Because everyone is entitled to their own personal opinion, he is entitled to fail you since, in his personal opinion, you do not deserve to succeed. 6 MGT604 3
THE ETHICAL TRADITIONS Utilitarianism: Directs us to decide based on overall consequences of our acts. Deontological ethical traditions: Direct us to act on the basis of moral principles such as respecting human rights. Virtue ethics: Directs us to consider the moral character of individuals and how various character traits can contribute to, or obstruct, a happy and meaningful human life. 7 MGT604 UTILITARIANISM: MAKING DECISIONS BASED ON ETHICAL CONSEQUENCES Utilitarianism has been called a consequentialist approach to ethics and social policy. We should act in ways that produce better consequences than the alternatives we are considering. What is meant by better consequences? Better consequences are those that promote human well-being: the happiness, health, dignity, integrity, freedom, respect of all the people affected. A decision that promotes the greatest amount of these values for the greatest number of people is the most reasonable decision from an ethical point of view. Utilitarianism is identified with the principle of: Maximize the overall good. OR The greatest good for the greatest number. 8 MGT604 4
UTILITARIANISM: MAKING DECISIONS BASED ON ETHICAL CONSEQUENCES (cont d) The economy and economic institutions are utilitarian: They exist to provide the highest standard of living for the greatest number of people. They do not exist to create wealth for a privileged few. In other words, utilitarianism theory accepts utility (in economics is defined as the measure of happiness or satisfaction received from consuming goods and services), or the greatest happiness principle, as the foundation of morals. It holds that actions are right in proportion, as they tend to promote happiness, wrong, as they tend to promote the opposite of happiness. Utilitarianism is a calculating approach to ethics. It assumes the quantity and quality of happiness can be weighed. It is often assumed, in a business context, that maximising happiness is the same as maximising profit. Improved profitability will generate happiness for some. But to apply the utilitarian principle properly one must consider the possibility that the pleasure derived from increased profitability has been achieved at the cost of a greater pain to other people. (Cost-benefit analysis is a natural tool of a utilitarian approach because it measures not only the direct costs and benefits to an organisation but also externalities social costs and benefits that are not reflected in the price of a product because they do not accrue directly to the organisation concerned.) 9 MGT604 UTILITARIANISM: EXAMPLES Child labor Compare the problematic consequences of child labor to the consequences of alternative decisions. Problematic consequences: Children suffer physical and psychological harms, they are denied opportunities for education, their low pay is not enough to escape a life of poverty, and so forth. Compared to the consequences of alternative decisions: What are the consequences if children in poor regions are denied factory jobs? These children would still be denied opportunities for education; they are in worse poverty; and they have less money for food and family support. In many cases, the only alternatives for obtaining any income available to young children who are prohibited from joining the workforce might include crime, drugs, prostitution. Consider also the consequences to the entire society. Consequences to the entire society: Child labor can have beneficial results for bringing foreign investment and money into a poor country. In the opinion of some observers, allowing children to work for pennies a day under sweatshop conditions produces better overall consequences than the available alternatives. Thus, one might argue on utilitarian grounds that child labor practices are ethically permissible because they produce better overall consequences than the alternatives. 10 MGT604 5
UTILITARIANISM: LESSONS FROM EXAMPLES Utilitarians tend to be very pragmatic thinkers: They decide on the basis of consequences. The consequences of our actions will depend on the specific facts of each situation. No act is ever absolutely right or wrong in all cases in every situation; it will always depend on the consequences. 11 MGT604 UTILITARIANISM: LESSONS FROM EXAMPLES Utilitarian reasoning supplies support for each competing available alternative: Example: Banning child labor as harmful to the overall good or allow child labor as contributing to the overall good. Deciding on the ethical legitimacy of alternative decisions requires that we make judgments about the likely consequences of our actions. How do we do this? With the help of social sciences: Social science studies the causes and consequences of individual and social actions. 12 MGT604 6
FREE AND COMPETITIVE MARKETS One movement within utilitarian thinking invokes the tradition of Adam Smith. Claims that free and competitive markets are the best means for attaining utilitarian goals. Classic free market economics: Economic activity aims to satisfy consumer demand. The goal of free market economics is to maximize the satisfaction of wants. To attain the utilitarian goal, current free market economics advices to structure our economy according to he principles of free market capitalism. This version would promote policies that deregulate private industry, protect property rights, allow for free exchanges, and encourage competition. In such situations, decisions of rationally self-interested individuals would result, as if led by an invisible hand in Adam Smith s terms, in the maximum satisfaction of individual happiness. 13 MGT604 INFLUENTIAL VERSION OF UTILITARIAN POLICY Policy experts can predict the outcome of various policies and carry out policies that will attain utilitarian ends. These experts, usually trained in the social sciences such as economics, political science, and public policy, are familiar with the specifics of how society works and they therefore are in a position to determine which policy will maximize the overall good. The administrative side (presidents, governors, mayors) executes (administers) policies to fulfill public goals. From this view, the legislative body (from Congress to local city councils) establishes the public goals that we assume will maximize overall happiness. The administrative side (presidents, governors, mayors) executes (administers) policies to fulfill these goals. The people working within the administration know how the social and political system works and use this knowledge to carry out the mandate of the legislature. This utilitarian approach, for example, would by sympathetic with government regulation of business on the grounds that such regulation will insure that business activities do contribute to the overall good. 14 MGT604 7
CHALLENGES TO UTILITARIAN ETHICS Counting, measuring, comparing, and quantifying the consequences of alternative actions is very difficult. The principle shift occurring from one of the earliest ethical principles the end does not always justify the means to the utilitarian principle the end justifies the means. 15 MGT604 SHORTCOMINGS OF UTILITARIAN ETHICS Forces us to examine the outcomes of our decisions. It is difficult to know everyone who will be affected by our decisions and how they are impacted. It does not exhaust the range of ethical concerns. 16 MGT604 8
DEONTOLOGY: AN ETHICS OF RIGHTS AND DUTIES Deontological ethical frameworks are principle-based. It supplements the utilitarian approach. It tells us that there are some rules that we ought to follow even if doing so prevents good consequences from happening or even if it results in some bad consequences. What rules should we follow? Legal rules Rules which are derived from various institutions in which we participate, or from various social roles that we fill. Role-based rules (Business) Professional rules The above mentioned rules are described as gatekeeper functions, which insure the integrity and proper functioning of the economic, legal, or financial system. These rules are a part of a social agreement, or social contract, which functions to organize and ease relations between individuals. Roles as sources of rules: A professor ought to read each student s research paper carefully and diligently, even if they will never know the difference and their final grade will not be affected. In my role as teacher and university faculty member, I have taken on certain responsibilities that accompany those roles that cannot be abandoned whenever it is convenient for me to do so. 17 MGT604 DEONTOLOGY: AN ETHICS OF RIGHTS AND DUTIES Kantian ethics: Kant s ethical philosophy was that actions must be guided by universally accepted principles that apply irrespective of the consequences of the actions. In addition, an action can only be morally right if it is carried out as a duty, not in expectation of a reward. From a Kantian perspective, principles exist apriori. By this is meant that, knowing what to do in a situation will be determined by a set of principles that have been established by deductive reasoning, independent of, or before, the specifics of the decision in hand have been considered. For Kantian ethics the context and consequences of a decision are irrelevant. Lying, for example, is employed to illustrate the inflexibility of Kantian ethics. Lying, irrespective of the context, is wrong. So, for Kant, truth telling, even if the telling of a lie would save a human life, has to be strictly adhered to no deviations, no exceptions. For Kant, actions have moral worth only when they spring from recognition of duty, and a choice to discharge it. The duties to which Kant refers were a response to the question, What makes a moral act right? They were formulated around the concept of the categorical imperative. Categorical means unconditional (no exceptions), while imperative means a command or, in Kantian terms, a principle. Thus a categorical imperative refers to a command/principle that must be obeyed, with no exceptions. If the categorical imperative is conceptually sound we should be able to will all rational people around the world to follow this particular law. This is the concept of universalisability. (universally accepted principles) For Kant an act is morally right if it can be judged by all reasoning people to be appropriate as a universal principle of conduct, irrespective of whether they are to be the doers, receivers or mere observers of an act. The Golden Rule which is normally expressed as do unto others as you would have done unto yourself, is an example of a categorical imperative. It is a rule that can be willed as universalisable. 18 MGT604 9
HUMAN RIGHTS AND DUTIES According to Immanuel Kant, German philosopher, there is essentially one fundamental ethical principle that we should follow: Respect the dignity of each individual human being. Kant claimed that this duty to respect human dignity could be expressed in several ways. Act according to those rules that could be universally agreed to by all people. Treat each person as end in themselves and never only as means to our own ends. The Kantian tradition claims that our fundamental human rights are derived from our nature as free and rational beings: Humans do not act only out of instinct and conditioning; they make free choices about: How they live their lives. Their own goals or ends. Humans are said to have a fundamental human right of autonomy, or self-rule. 19 MGT604 HUMAN RIGHTS AND DUTIES Example: This perspective on ethical duties is particularly relevant to employment issues. Examine the language of human resource management, which suggests that human are resources to be managed (akin to natural resources which are managed?). To return to an earlier example, the Kantian would object to child labor because such practices violate our duty to treat children with respect. We violate the rights of children when we treat them as mere means to the ends of production and economic growth. We are treating them merely as means because, as children, they have not rationally and freely chosen their own ends. We are simply using them as tools or objects. Two related rights have emerged as fundamental within philosophical ethics. If autonomy, or self-rule, is a fundamental characteristic of human nature, then the freedom to make our own choices deserves special protection as a basic right. Since all humans possess this fundamental characteristic, equal treatment and equal consideration is also a fundamental right. 20 MGT604 10
DISTINGUISHING BETWEEN MORAL RIGHTS AND LEGAL RIGHTS Legal rights may be granted on the basis of legislation or judicial rulings. Legal rights might also arise from contractual agreements. One cannot contract away one s moral rights - moral rights lie outside of the bargaining that occurs in a contract. Moral rights establish the basic moral framework for legal environment itself, and more specifically for any contracts that are negotiated within business. MGT604 CHALLENGES TO AN ETHICS OF RIGHTS AND DUTIES There is no agreement about the scope and range of ethics based rights. Practical problems in applying a framework of rights to reallife situations. 22 MGT604 11
VIRTUE ETHICS: MAKING DECISIONS BASED ON INTEGRITY AND CHARACTER Virtue Ethics is a tradition within philosophical ethics that seeks a full and detailed description of those character traits, or virtues, that would constitute a good and full human life. An ethics of virtue shifts the focus from questions about what a person should do, to a focus on who that person is. Implicit in this distinction is the recognition that our identity as a person is constituted in part by our wants, beliefs, values and attitudes. The self is identical to a person s most fundamental and enduring dispositions, attitudes, values, and beliefs. Emphasizes the more affective side of our character. Seeks to understand how our traits are formed and which traits bolster and which undermine a meaningful, worthwhile, and satisfying human life. Encourages a fuller description, rather than simply describing people as good or bad, right or wrong. Reminds us to examine how character traits are formed and conditioned. 23 MGT604 VIRTUE ETHICS Virtues are not ends ; rather they are means. They are personal qualities that provide the basis for the individual to lead a good, noble or happy life. The person most associated with virtue ethics is Aristotle. For Aristotle, those personal qualities that were regarded as virtues were reflected in behaviours that represented a balance, or mean, in terms of the particular personal quality being considered. Thus, if the response of the individual to the threat of danger or significant personal challenge was being considered, we can visualize a continuum with cowardice at one extreme and recklessness at the other (see Table 3-1). Neither of these personal qualities is appealing as they are both likely to lead to detrimental outcomes in the long run. In the face of danger the noble or great-soul-man would have to overcome his fears (i.e. suppress feelings of cowardice), but avoid acts of rashness, which would be likely to reduce the chances of success. Thus, an intermediatepoint is required. This mean, or disposition, in this context is termed courage. 24 MGT604 12
A DECISION-MAKING MODEL FOR BUSINESS ETHICS REVISITED 1. Determine the facts 2. Identify the ethical issues involved 3. Identify stakeholders 4. Consider the available alternatives 5. Consider how a decision affects stakeholders a. Consequences i. Beneficial and harmful consequences b. Duties, rights, principles i. What does the law say? ii. Are there professional duties involved? iii. Which principles are most obligatory? iv. How are people being treated? c. Implications for personal integrity and character i. What type of person am I becoming through this decision? ii. What are my own principles and purposes? iii. Can I live with public disclosure of this decision? 25 MGT604 A DECISION-MAKING MODEL FOR BUSINESS ETHICS REVISITED (cont d) 6. Guidance 7. Assessment Review Questions 1. Define utilitarian ethics and discuss the issue of child labour from a utilitarian perspective. 2. Differentiate between Virtue ethics and Kantian ethics. In your analysis you should include a definition for each and list their major differences and similarities, if any. 26 MGT604 13