PHIL WEEK 2 IN CLASS activity
Cooper2021
2-3.pptxBusiness Ethics Summer 2022 (1) Week 2, Lecture 3
Chaeyoung Paek
In today’s class…
We’ll see whether ethics and business could be compatible, based on Duska’s paper, “Business Ethics: Oxymoron or Good Business?”
There will be no in-class activity for this class; but feel free to leave questions or comments on the Q&A discussion forum for Week 2!
Business + Ethics?
We’re in a Business Ethics class, but many people think that business and ethics do not, and cannot, go together.
The argument behind this belief is probably goes like this:
Business (and the market) is driven by each economic agent’s self-interest and self-interest only;
Such an egoistic behavior is fundamentally immoral;
Therefore, business cannot be compatible with doing what’s moral.
Business + Ethics?
If that’s a valid & sound argument, it seems like there’s no point in taking (and teaching) Business Ethics class; there’s no such thing as business ethics!
But should business be always driven by each agent’s self-interest only? Does “good business” always include being unethical?
Let’s see how Duska answers this question in “Business Ethics: Oxymoron or Good Business?”.
Business’ Responsibility & Ethics
Many people believe that business’ only responsibility is to maximize its profits & that this is the reason why business and ethics do not go together.
(ex) Teresa Goodrich vs. The CEO of Aetna
(ex) Jack Welch’s hiring (firing?) practices
But this does not necessarily make business ethics oxymoron; some argue that business can do good by maximizing its profits.
Two approaches: Utilitarian approach & Strategy approach
The Invisible Hand Argument
“It is not from the benevolence of the butcher, the brewer or the baker, that we expect our dinner, but from their regard to their own interest … We address ourselves not to their humanity but to their self-love, and never talk to them of our own necessities but of their advantages… He generally indeed, neither intends to promote the public interest, nor knows he is promoting it ... and by directing that industry in such a manner as its produce may be of the greatest value, he intends only his own gain, and he is in this … led by an invisible hand to promote an end which was no part of his intention.”
From Adam Smith, The Wealth of Nations
The Invisible Hand Argument
The Invisible Hand argument:
P1. Our society benefits most either by each businessperson being benevolent to others or each businessperson pursing their own interest.
P2. It is not the case that our society benefits most by each businessperson being benevolent toward others.
C. Our society benefits most by each businessperson pursuing their own interest.
The Invisible Hand Argument
One Caveat about the Invisible Hand argument
Duska points out that Adam Smith himself never advocated business pursuing its self-interest without any restriction.
Smith claims that there are two things that motivate humans to act: self-interest and sympathy.
Smith also claims that it is not always worse for the society if business pursues its self-interest, not that business ought to pursue its self-interest at all times.
Utilitarian Approach
The Invisible Hand argument takes, in its essence, the utilitarian approach.
Utilitarianism: You should X if and only if X maximizes utility.
The Invisible Hand argument says that letting business freely pursuing its self-interest yields the maximum utility for the society; hence, it must be the best option for the society as a whole.
(Duska) Two problems: the problem of identifying appropriate ends & the problem of fair distribution
The Problem of Identifying Appropriate Ends
The Invisible Hand argument says that our society benefits the most by each businessperson pursuing their own interest.
Q. But what does it mean that our society ”benefits” from something?
A society can value many things, not just the increase in wealth: quality of life, justice, etc..
Furthermore, one may argue that the increase in wealth is just an instrumental goal our society has in order to achieve a higher goal.
So, it is not always the case that economic goods are ethical goods.
The Problem of Fair Distribution
And as the Invisible Hand argument takes the utilitarian approach, it is subject to the same problem that Utilitarianism has, the problem of fairness/fair distribution.
The Invisible Hand argument only shows that the overall amount of wealth will be increased if business seeks to maximize its profit, but how that increased wealth should be distributed.
So, the Invisible Hand argument fails to defend business ethics properly.
Ethics as a Strategy for Profit
An alternative way to defend business ethics: the Strategy approach
The Strategy Approach: Business should operate ethically in order to be profitable.
On this approach, ethics is adopted as a strategy to maximize profit.
(ex) Being honest to customers → Builds better long-term relationship with customers → More sales in the long run
Ethics as a Strategy for Profit
Duska’s criticism of the Strategy approach:
- If being ethical stops being profitable, then business does not have any motivation to be ethical.
(ex) Being honest to customers → Other dishonest businesses do better in the market → Loses the motivation to keep being honest
In the end, the Strategy approach fails to explain how business and ethics could be compatible; on this approach, they are compatible only as long as ethics serves business’ purpose.
“Good Business” & Ethics
So, business and ethics cannot be compatible as long as ethics is supposed to follow from or serve “good business”.
Duska: Business and ethics would be compatible only when ethics comes first.
Q. But how can business put ethics first, when doing so could risk its profit?
Duska: Ethics should be the focus of the very system in which business operates.
Two Notions of Justice
Cicero’s two notions of justice
Justice in the first meaning: Giving everyone their due → Fairness within the system
Justice in the second meaning: Not inflicting harm on others and shielding them from harm → Fairness of the system
(Duska) Justice in the second meaning should come first before justice in the first meaning.
(ex) The business that divides the profit without shielding its employees from harm
Fairness of the System
As long as the system itself is unfair/unjust, business cannot operate ethically.
Duska points out that many cases of unethical business were caused by focusing on fairness within the (unethical) system.
(ex) Jack Welch’s management of GE
For any business to behave ethically, the system needs to be ethical; this can be done by legislation or regulation.
Fairness of the System
But Duska points out that legislation & regulation is not enough; we have to rethink the purpose of business itself as a society.
Many businesspeople think that the purpose is to keep the business afloat by maximizing profit; but for what?
It can’t be that business should flourish just because business should flourish; the maximization of profit is only instrumental.
Once we get the real purpose of business, we’ll get a clear picture of which system we need for business.
Business & Ethics
Duska concludes that business ethics would be possible once we know the true purpose of business.
One ultimate goal of any business could be helping people have a better life; once we get a vision of a truly good life, we’ll know what the true purpose of business should be.
One (final) counterexample to “Good business = Profitable business”: production & distribution of cocaine
Remaining Thoughts
Duska does not say much about what he thinks is a good life; what is a good life, and how could business help one to have a good life?
Some businesses sell things that we love but are not necessarily “good” for us; think of cigarette/alcohol/soda industry!
If “good business” should be ethical, can such businesses be “good business” too? Or is it impossible?
For the next class…
Read Michael Sandel, “Introduction: Markets and Morals”
