Ethics and Business Introduction Velasquez's Thesis: Ethical behavior the best long term business strategy

Merck & Co. a case in point Ethical behavior is the best long-term business strategy means
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in the long run & for the most part ethical companies enjoy significant competitive advantages over unethical ones

Why ethical behavior pays off in the long run & for the most part
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customers more likely to buy from a business known to be honest & trustworthy employees are more likely to loyally join & faithfully serve a company that treats its workers with loyalty and respect

Assuming that it pays to do the right thing . . . still it's not easy to know what that is: e.g., how to balance
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duties to shareholders rights of employees needs of customers obligations to society

1.1 The Nature of Business Ethics

What does ethical mean: Study of businessmen

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"What my feelings tell me is right" (50%): Doing what your conscience tells you. "What is in accord with my religious beliefs" (25%): Doing what the church or bible says.

What "conforms to the golden rule" (18%)

Inadequacy of all these answers in theory & practice

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"conscience" sometimes commands wrongly or not at all religion: sometimes commands wrongly

especially others' religions, we're inclined to think

Salmon Rushdie fatwah example "You shall not suffer a witch to live"?

the golden rule:

perhaps commands wrongly: different strokes for different folks hard to interpret it

Morality

Definition: "the standards an individual or group has about what is right and wrong, or good and evil"

Contrast: standards we hold about things that are not moral

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legal standards etiquette: rules of politeness aesthetics: good & bad art; what's beautiful, ugly, etc.

Five Characteristics of moral standards 1. deal with matters we think can seriously injure or benefit human (& other sentient?) beings 2. not established or changed by the decisions of authoritative individuals or bodies 3. are overriding: take precedence over other standards & considerations (especially of self-interest) 4. are based on impartial considerations: like my momma said

"what if you were them?"; " "how'd you like someone to do that to you?"

5. associated with special emotions and vocabulary

emotions like guilt, shame, & remorse vocabulary like "wrong", "right", "ought", "good", "bad", "immoral"

We absorb these standards as children from a variety of influences and revise them as we mature

Ethics

Definition: the activity of examining one's moral standards or societies' and asking
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how these standards apply to our lives whether they are reasonable or unreasonable

Ethical v. Social Scientific Study of morality

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Social scientific study is descriptive: what there standards are & how they came by them (not, e.g., whether they're reasonable): Is

anthropologists: taboos of the Trobriand Islanders social scientific: the value system of neo-nazi groups in the U.S. psychological: the moral development of the child

Ethics is a normative (i.e., evaluative study of morality): Ought

questions about consistency & rationality completeness & adequacy

Business Ethics

Definition:
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V: normative study of moral standards as they apply to business policies, institutions, and behavior

LH: the ethical analysis of business practices

Business defined
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preliminary definitions

a society = people who have common ends and whose activities are organized by a system of institutions designed to achieve those ends

institutions = relatively fixed patterns of activity economic = pertaining to the production & distribution of goods and services

businesses = the primary economic institutions through which people in modern societies carry on the tasks of producing and distributing goods and services

Corporations: the most significant kinds of modern business enterprises

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"dominant life form on our planet in the 20th century" (Wm. Gibson)

top 500 U.S. companies: account of 80% of all industrial profits & hold 80% of all industrial assets

corporations = immortal "fictitious persons" with rights, in their own name, to

sue & be sued hold & sell property enter into contracts

Organizational structure

stockholders

contribute capital own the corporations liability limited to capital contributed

directors or officers

administer the corporation's assets run the corporation, typically through various levels of middle managers

employees: do the basic work related to the production of goods & services

Three kinds of Issues for Business Ethics (arising from the purposes & structure of Corporations) 1. systemic: concerning the economic, political, and other social systems within which businesses operate. 2. corporate: concerning issues & practices of a particular company 3. individual: concerning particular individuals within companies

Applying Ethics to Corporate Organizations

Problem: are corporations moral agents capable of acting morally & immorally just as people are
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are corporations as a whole morally responsible for their acts? or does moral judgment & responsibility apply only to the individuals who make up the corporations?

Corporate responsibility theory: Corporations have moral responsibilities as such.

Pro: the rules that tie corporations together allow us to say

they "act" as individuals and have "intended objectives" hence, they are "morally responsible" for these acts & objectives

Con: Organizations don't really "act" or "intend" as persons do

Corporate nonresponsibility theory:

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Pro: Corporations are morally nonresponsible. Con: Moral responsibility percolates up.

The humans that comprise the corporation can make responsible moral decisions.

so can the corporation.

Velasquez's "Intermediate" View

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When an organization's members collectively, but freely and knowingly pursue some objective it makes perfect sense to say the acts they perform for the organization are "moral" or "immoral" and that the organization [n.b.] is "morally responsible" for these acts.

Nevertheless individuals are the primary bearers of moral responsibility since "corporate acts originate in the choices and actions of human individuals"

Organizations have moral duties, etc. in a secondary sense: A corporation has a moral duty to do something only if its members have a moral duty to make sure its done.

Velasquez's Concession: corporate policies, culture, norms, and designs can & do "have an enormous influence on the choices, beliefs, and behaviors of corporate employees" [& officers?!]
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Not so concessive

But these corporate policies, etc., do not make the individuals' choices for them.

So the policies or the corporation are not responsible for these individuals' actions.

How to square with this: "corporate actions flow wholly out of [human] choices and behaviors."

Globalization, Multinationals, and Business Ethics

Most large companies today are multinationals: firms that maintain operations in many different countries.

The fact that multinationals operate in more than one country produces ethical dilemmas
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Able to shift operations out of one country & into another that offers more favorable conditions, e.g.,

cheaper labor less stringent laws: e.g., environmental regulations lower rates of taxation

Enabling them to playing off one government against another (as happens even between U.S. states)

to escape social controls (e.g., minimum wage laws, safe working condition laws & environmental laws)

even taxes

Moral Dilemmas Posed by these Abilities: requires choosing between the needs & interests of the business & those of their host countries. Their ability to relocate v. the expense of relocation, threat of confiscation, etc. by host countries means they can face hard choices: 1. To go along with ethically questionable local practices (e.g., apartheid as previously practiced in South Africa) v. risk their operations & market in the host country 2. To practice tax avoidance to the maximum of their abilities v. paying what might be viewed as their fair share 3. Benefits of technology transfer v. risks

Business Ethics and Cultural Differences

Ethical Relativism (ER) holds

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Negative thesis: there are no ethical standards that are absolutely true for all societies

Positive thesis: something is right within a given society if it accords with that societies moral standards.

"When in Rome do as the Romans." But what if what the "Romans" practice is routine bribery of government officials, gender discrimination, or the like?

Counters to ER
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Fact of cultural disagreement over the likes of

polygamy & homosexuality infanticide & abortion slavery and racial & sexual discrimination genocide & the torture of animals

Doesn't necessarily mean there are no objective standards that are universally true

there is disagreement over whether the human species evolved from apes still there's plain truth about the matter (regardless of whether we could find it out)

not true for creationists that we did and true for evolutionists that we didn't

either we did or that we didn't is just plain true, for everyone & either the evolutionists or the creationists are just plain mistaken

similarly there's plain truth about the matter of genocide

not right for nazis but wrong for us just plain wrong: nazis are just plain mistaken

Some norms or standards are universal in the sense that every society must have them

norms forbidding indiscriminate injuring and killing of other members of society

norms forbidding theft norms enjoining truth telling & censuring lying

Seeming different practices may express shared underlying values

Inuit abandonment of the aged v. our nurture of the aged might reflect similar value on community survival

Cannibals who eat their dead and we who bury or cremate our dead may share an underlying value of honoring the dead (just have different opinions in how to go about it).

Most telling criticism: Absurd Consequence

If ER were correct then the moral standards of a society are above criticism

either internal criticism by members of that society or external criticism by those outside of that society

But the moral standards of societies are not above criticism in this way So ER is not correct

Technology and Business Ethics

"Technology consists of all those methods, processes, and tools that humans invent to manipulate their environment."

Radical technological transformation poses special ethical challenges

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being disruptive of former economic & social structures such transformations engender challenges & conflict

Ethical issues therein raised concern (LH)

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Utility: risk vs. promise: costs v. benefits of the transformations Justice: fairness of the distribution of resulting costs or risks & benefits Culture & Character: human habitability of the world as transformed ... do we really want to go there (1984? BNW?)?

Notable Technological Revolutions

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Agricultural revolution: "humans developed the farming technologies that enabled them to stop relyuing on foraging and on the luck of the hunt": growth of affiliated technologies (e.g., irrigation, tool-developments, etc.) and social stability "eventually allowed humans to accumulate more goods than they could consume, and out of this surplus grew trade, commerce, and the first businesses."

Industrial revolution: "transformed Western society and business, primarily through the introduction of electro-mechanical machines powered by fossil fuels such as the steam engine, automobile, railroad, and cotton gin."

subsequent nationalization and now globalization of markets and trade mass production and giant enterprises the rise of "the large corporation that came to dominate our economies and that brought with it a host of ethical issues for business including"

exploitation of the workers who labored under these new conditions

manipulation of financial markets producing massive damage to the environment

New Technologies Now Transforming Society

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Information technology including the internet and cyberspace.

issues of privacy issues of property: copyrights v. "fair use"

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Nanotechnology poses unknown risks Biotechnology and especially genetic engineering poses dimly understood ecosystemic risks

1.2 Moral Development and Moral Reasoning Moral Development (skip) Moral Reasoning

Reasoning by which actions or policies are judged to accord with or be in violation of moral standards

Has two essential components

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Evaluative component: beliefs concerning what the relevant moral standards are A factual component: evidence or information about which courses of action meet or fail to meet the standards

Example

Racial & sexual discrimination is wrong. (Evaluative premise.) Affirmative action is (reverse) racial & sexual discrimination. (Factual premise)

Affirmative action policies are wrong.

Not always easy to separate the two

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Different opinions concerning the facts May mask different understandings of the standards

faux factual question?: whether reverse preferences are discriminatory. masked evaluative question: whether discrimination against dominant or historically advantaged classes is wrong.

Analyzing Moral Reasoning 1. Logical validity

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does the conclusion really follow from the premises? given some hidden assumptions?

2. Concerning the factual evidence

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Is it accurate? Is it relevant? Is it complete?

3. Concerning the moral standards

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Are they consistent with other acknowledged moral standards Are they being consistently applied

Consistency requirement: If I judge that a certain person is morally justified (or unjustified) in doing A in circumstances C, then I must accept that it is morally justified (or unjustified) for any other person to perform any act relevantly similar to A in any circumstances relevantly similar to C.

Method of Hypothetical Counterexamples

How would you like it if your brother did that to you? Ought to be willing to receive what you dish out: compare the Golden Rule.

Moral standards should be such that you would be willing to accept regardless of whether you were on the giving or the receiving end.

1.3 Arguments for and Against Business Ethics Three Arguments Against Bringing Ethics into Business (skim)

Perfectly free markets insure maximum social benefits better than anything else
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Pro

leads most efficiently to the production of goods & services that the buying public needs and wants.

attempts by managers to impose their moral convictions only gets in the way of the workings of the marketplace

so managers should single-mindedly pursue profit to the exclusion of all else (including what they take to be morality)

Cons

Questionable assumptions:

in fact industrial markets are not perfectly free not all profit increasing practices are socially beneficial

unconstrained pollution deceptive advertising price fixing

the buying public <> the public: distribution of goods & services also an essential purpose of economic institutions

Inconsistency: the conclusion that managers should single-mindedly pursue profit to the exclusion of all else (morality included) is itself a normative ethical judgment

1.4 Moral Responsibility and Blame

Two sorts of moral questions

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about the rightness or wrongness of actions about who to blame for wrongdoing: especially sticky in cases of corporate wrongdoing: questions about responsibility & blame

People are not blamed for every unfortunate consequence of their actions

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some bad consequences are accidental unforeseen or even unforeseeable consequences

Conditions of Moral Responsibility: A person is morally responsible only for those acts and their foreseen injurious effects of deliberate acts or ommissions
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commission

knowingly and freely performing or bringing about what it was morally wrong for the person to perform or bring about

omission

knowingly and freely failing to perform or to prevent which it was morally wrong for the person to fail to perform or prevent

Excusing Conditions & Mitigating Conditions

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Excusing Conditions: Total absolve the agent of blame: Eliminate responsibility

ignorance: didn't know asbestos exposure was carcinogenic inability: workers refused to wear protective masks & company was unable to force them

Exceptions to Excusing Conditions

Willful ignorance: carefully avoided studying up on the effects of asbestos exposure because they didn't want to know.

Ignorance of Principle vs. Ignorance of Fact

Example

Principle: bribery is wrong Fact: by tipping a customs official I was actually bribing him into canceling certain import fees

Both exculpatory to they extent that they are not willful

Mitigating Conditions: partially absolve the agent of blame: diminish responsibility 1. Circumstances which leave a person uncertain but not altogether unsure about what they're doing

person may have doubts about the facts and the seriousness of the standards involved

examples:

wrongdoing -- e.g., what gets "winked at" in a certain corporate culture -- so it doesn't seem so bad (everyone's doing it)

your not from around here

2. circumstances making it difficult but not impossible to avoid doing it

decisions taken under threats or other kinds of duress e.g., middle managers getting pressured from above to disregard safety standards or impose unrealistic production goals (less culpable than a middle manager who did this on their own initiative)

3. circumstances that minimize but do not completely remove a person's direct involvement in the act: diminished instrumentality

Commission vs. omission: generally people are held to be more responsible for things brought about by their action than by their inaction: e.g., drowning someone vs. failing to rescue them (at no risk to oneself).

"Not my department": omission or acts that are not your specified responsibility judged less serious:

if an accountant specifically hired to audit a companies books chooses not to report discrepancies they're more seriously to blame

that a bookkeeper who suspects irregularities but says nothing

4. Factoring in the seriousness of the wrong

if the wrong is very serious, then uncertainty, duress, and lessened involvement are less mitigating: with so much at stake the agent

ought to have found out the score ought to have done the right thing regardless of duress should have made it their business to do something

Example: my employer says sell this lemon or you're fired

I know the car's cd-player is about to go.

I know the car's brakes are about to go out.

Critical Contentions about mitigating factors

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duress is no excuse (some say) there's no real difference between omission and commission: letting die is as bad as killing (some say)

Corporate Responsibility

Corporate acts: acts brought about by several actions or omissions of many different people all cooperating together so that their linked actions and omissions jointly produce the corporate act.

Question: Who is morally responsible?

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"Traditional" Individual Responsibility View: those who knowingly & freely did their parts are each morally responsible for the act.

Alternative Corporate Responsibility View: the corporate group and not the individuals who make up the group must be held responsible.

Pro Corporate Responsibility

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We (and the law) say EXXON was responsible for the Valdez oil spill: not just the Captain (though he was drinking) + the person who hired this captain + . . .

More often than not . . . employees of large corporations cannot be said to have "knowingly and freely joined their actions together" to bring about a corporate act or pursue a corporate objective. Employees of large-scale organizations follow bureaucratic rules that link their activities together to achieve corporate outcomes of which the employee may not even be aware.

engineers may design a product with certain weaknesses not knowing that marketing dreamt up an application for which the product is unfit and plans to sell the product for that application (without knowing its unfit for that application)

Traditionalist rejoinder: in such cases ordinary mitigating factors suffice to mitigate the employees responsibility without appeal to any such notion as "corporate responsibility"
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Example:

e.g., the engineers didn't know it would be used that way

e.g., the marketing dept. didn't know it couldn't safely be used that way

Amply mitigates the individuals: but isn't there some responsibility left over that belongs to no particular individual but rather the Corporation: say due to its corporate culture engineers don't talk to marketing

Subordinates' Responsibility

Corporations generally have hierarchical authority structures in which

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those above issue orders & directives which those below them are expected -- on pain of dismissal -- to follow & carry out

One view: those who are "only following orders" are not responsible for the acts that result (only those who gave the orders): the Nuremberg defense.
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When a subordinate acts on the orders of a legitimate superior this absolves the subordinate of all responsibility for the act.

They were only "following orders"

The Post Nuremburg Principle

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A subordinate has no obligation to obey an immoral order -- quite the contrary The subordinate's responsibility

may be mitigated by the duress: "Do it or I'll find some one who will," the Boss says.

but they are not excused.

The superior bears unmitigated responsibility

the fact that the superior used a "human instrument" (the subordinate) to do the act

does not diminish the superior's own "instrumentality" in bringing it about.