research paper

2 CHAPTER

Ethical Theory and Business L E A R N N G OBJ E CTIV E S

After reading this chapter, you should be able to:

• Understand the basic concepts and categories of ethics;

• Explain ethical virtues;

• Identify a number of virtues and vices;

• Explain the ethical theory of utilitarianism;

• Explain how utilitarian ethics can provide support for market economics and business policy;

• Explain several challenges to utilitarian ethics;

• Explain an ethics based on principles, rights, and duties.

DISCUSSION CASE: Mylan Pharmaceuticals and the EpiPen

M ylan, Inc. is a U.S. pharmaceutical company that manufactures the EpiPen, an easy-to-use auto-injection medical device. EpiPen delivers the proper dosage of epinephrine, a drug that safely and effectively counteracts anaphylaxis, a severe allergic reaction that can close a person's breathing passages and cause death. EpiPen is especially effective because the proper dosage can be quickly delivered by anyone- the persons themselves, co-workers, teachers, by slanders- by simply placing the device against the skin and pushing a button. Because of the ease of use, EpiPens are especially popular for treating severe allergies in children.

The device itself is simple and inexpensive, costing at most a few dollars to manufacture . The drug epinephrine is also inexpensive, costing less than $1 per dose. But, epinephrine degrades over time, so medical professionals recommend that unused devices be replaced at least once a year. It is not uncommon for some- one susceptible to anaphylaxis to keep several on hand at work, school, or home . Because the EpiPen has been in use and proven its effectiveness for over forty years, the initial investment required to develop the product has long since been recovered.

Mylan purchased righ ts to the EpiPen in 2007. At the time, EpiPens sold for under $60 each, and annual sales approached $200 million. Mylan invested to

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improve the design and manufacturing process, but the overall product did not change significantly. Mylan also invested heavily in marketing the product, includ- ing an advertising campaign aimed at increasing public awareness of anaphylaxis and lobbying governments to require institutions like schools to keep EpiPens on hand for emergencies and to protect those institutions from liability for using EpiPens in emergencies. By 2016, it was estimated that EpiPen accounted for over $1.5 billion in revenues for Mylan.

In the following years, a number of public and private decisions lead to major increases in the costs to consumers . Because a portion of anaphylaxis cases require a second dose of epinephrine, medical guidelines were changed in 2010 to recom- mend that patients always have access to two doses. Soon after this recommenda- tion, Mylan began selling EpiPens only in packages of two, effectively doubling the price to consumers . For a variety of reasons, including regulatory roadblocks, busi- ness decisions, and patent protections, competitors have had a difficult time enter- ing and remaining on the market. By 2016, when few competitors remained and Mylan had a 90 percent share of the market, the price for a two-pack of EpiPens had risen to over $600. It was estimated that in 2016, sales of EpiPen produced close to $1.5 billion in revenues. During this same period, Mylan's CEO's pay rose from $2.3 to $19 million annually. In 2016, former CEO Robert Coury was reported to have received over $90 million in compensation from Mylan.

In 2016, Mylan came under serious public criticism for increasing the price of EpiPen . Some critics pointed out that Mylan's CEO, Heather Bresch, was the daughter of former West Virginia governor and present U.S. Senator Joe Manchin. These critics claimed that her political connections helped pave the way for govern- mental regulations, including increased risk warnings for anaphylaxis, encourage- ment to schools to stock EpiPens, and regulations to make EpiPens as publicly available as defibrillators. In October 2016, Bresch was called to testify before the U.S. Congress to defend Mylan's actions.

The criticisms of Mylan can be grouped into thre e general categories. First, some critics saw the massive profits and excessive executive compensation as another example of out of control corporate and personal greed. Second, others saw Mylan as an example of systemic failures in health care policy and economics that prevent society from providing adequate health care. Finally, some critics charged that Mylan' s actions violate a number of basic ethical principles.

The Mylan hearings took place during a period when affordable health care was at the center of a national political debate . This also occurred at the time when another pharmaceutical company executive, Martin Shkreli of Turning Pharmaceu- ticals, was in the news for raising the price of one of its drugs from $13 to $750 per pill. Shkreli, who the press had named "Pharma-Bro" for his condescending atti- tude toward public criticism, had also been called to testify before Congress, but he refused on the grounds of self-incrimination. During Bresch's testimony to the U.S. House Oversight and Government Reform Committee, Congressman John Duncan told her that "The greed is astounding, it's sickening and disgusting. I'm a very conservative, pro-business Republican, but I am really sickened by what I heard today and by what I've read before about this situation. In my opinion, no one can really earn or deserve $19 million a year."

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The national debate about affordable health care provided the context for much of the broader, systemic criticism of Mylan. The national debate on affordable health care focused on the relative strengths and weaknesses of free markets and government regulation in providing adequate health care. Those who argued for a greater role for free markets, most often Republicans, saw Mylan as a case study for what happens when there is a lack of competition and the market gets controlled by a near monopoly. Mylan was able to exploit this unfair competitive advantage and raise prices almost without consequences. These critics also pointed out that government regulation of the market contributed much to the problem. Govern- mental actions, such as requiring institutions and schools to stock EpiPens and creating regulatory standards that created a barrier for competitors to enter the market, created an economic environment in which Mylan's exploitation could flourish. As a result, the public was denied access to the important good of afford- able health care.

Those who supported greater governmental involvement in the health care sys- tem, most often Democrats, saw Mylan as a case study of what happens when important public goods such as health care are left to the decisions of profit-seeking corporations. These critics argued that Mylan used its political influence, lobbing activities, and marketing campaign to create artificial markets, eliminate competi- tion, and deny the poorest citizens access to needed health care. From this perspec- tive, a managed health care system in which private businesses are regulated by public bodies would provide better overall health care. In particular, they argued that only government regulation could prevent companies from price gouging on prescription drugs and other health care products that consumers need.

Finally, many criticisms of Mylan appealed to fundamental ethical principles and values. These critics pointed out that citizens should have a basic right to health care and that this need should not be sacrificed for the profit of private businesses . Other critics pointed out that the burden of high drug prices fell disproportionately on the poor, and that a basic principle of fairness and equality is violated by a sys- tem in which health care is distributed according to the ability to pay. Still other critics raised questions about the justice of a system in which executives earned tens of millions of dollars a year, while poor, sick people were denied access to the product that generated this wealth. These critics argued that Mylan had a duty to provide the EpiPens at an affordable price.

DISCUSSION QUESTIONS

1. What judgment would you make about Mylan? Did they do anything ethically wrong in their pricing of the EpiPen?

2. Do you think that a pharmaceutical company should be allowed to charge whatever price the market will pay for prescription drugs? Should prescription drugs be treated differently than any other consumer product?

3. Congressman Duncan used the word "greed" when describing Mylan's actions. What is the difference between greed and simply the desire for more money? Is greed always bad? Why or why not?

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4. As a citizen, would you support more, or less, government oversight and regulation for the pharmaceutical industry? Why?

5. What duties do pharmaceutical companies have toward customers? 6. When, if at all, is it unfair that a consumer cannot afford a product that he

or she wants or needs? 7. Do you agree that "no one can really earn or deserve $19 million a year"?

How about $90 million?

2.1 INTRODUCTION

The Mylan EpiPen case demonstrates how business activities can raise fundamental questions of fairness, justice, rights, duties, and virtues. It would be impossible to talk about the Mylan case without using the language of ethics. Because the lan- guage of ethics is inextricably a part of business, it makes sense to begin our exam- ination of business ethics with a short introduction to some of the basic concepts, terms, and categories of philosophical ethics. Just as you need to have a familiarity with the language and concepts of economics and management to make responsi- ble business decisions so, too, you need a basic familiarity with ethics. This chapter will show how some of the key concepts of ethics are both relevant and necessary for any study of business.

Chapter 1 introduced ethics as a process of reasoning about what is perhaps the most significant question any human being can ask: How should I live my life? But, of course, this question is not new; every major philosophical, cultural, politi- cal, and religious tradition in human history has grappled with it. In light of this, it would be a mistake to ignore these traditions as we examine ethical issues in busi- ness. Nevertheless, discussion of ethical "theories" and philosophy can seem too abstract to be of much relevance to business. In this chapter, I hope to suggest a more accessible understanding of ethics, one that will shed some light on the prac- tical and pragmatic application to actual problems faced by businesspeople.

An ethical theory, or ethical framework, is nothing more than an attempt to provide a systematic answer to the fundamental ethical question: How should human beings live their lives? Ethical theories attempt to answer the question of how we should live, but they also give reasons to support their answer. Ethics seeks to provide a reasonable justification for why we should act and decide in a particular prescribed way. Anyone can offer advice for what you should do and how you should act, but a philosophical and reasoned ethics must answer the "Why?" question as well.

As a first step, let us reflect upon the reasoning that was offered to support and criticize the actions of Mylan. As described in the discussion case, these reasons fall into three general categories. Some reasons appeal to the personal character of the people involved. Executives were described as "greedy" or uncaring. Other reasons appealed to the consequences of EpiPen pricing and to failures within the political and economic system to serve the public good. Other reasons appealed to certain principles: fairness, justice, rights.

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As it turns out, the three major traditions of ethics that we shall rely on in this text are reflected in these three categories. This should be no surprise, since ethical traditions in philosophy reflect common ways to think and reason about how we should live and what we should do. Ethics of personal character, of overall social consequences, and of principles, are the traditions that we will rely on for much of this text.

This chapter will introduce three ethical traditions that have proven influen- tial in the development of business ethics and that have a very practical relevance in evaluating ethical issues in contemporary business . Virtue ethics directs us to consider the moral character of individuals and how various character traits can contribute to, or obstruct, a worthy and good human life. Reasoning that criticizes excessive executive pay or price gouging as greedy, or as motivated by selfishness, is language that comes from a virtue-based perspective on ethics . The implication is that a greedy person who does distasteful and selfish things will not lead a fulfilling and good human life . The other pharmaceutical executive described in the opening case, Martin Shkreli, or the "pharm-bro," was described as arrogant, condescending, disdainful and lacking the virtues of modest, compassion, and humility.

Virtue ethics is especially focused on the ethics of personal morality and indi- vidual character: Is this a good person? Is this person honorable? What type of person am I? What type of person do I wish for my children to be? Virtue ethics speaks a language of personal character. The virtues, or character traits, are such qualities as honesty, integrity, trustworthiness, compassion, humility, friendliness, kindness, and loyalty. The opposite of virtues, identified as vices, include describ- ing someone as greedy, selfish, arrogant, condescending, deceitful, a hypocrite.

A second ethical tradition is utilitarianism, which holds that ethical decisions are determined on the overall social consequences of an act. Utilitarianism judges an act that produces greatest beneficial consequences as the ethically right thing to do. While utilitarianism can apply to personal morality and individual decisions (I should do whatever produces the greatest overall benefits), it most appropri- ately applies to social and policy decisions . Thus, in the Mylan case, utilitarians might debate whether more rather than fewer government regulations, more rather than less reliance on the free market, would produce the greatest overall social benefit .

Finally, an ethical tradition based on the importance of ethical principles and rights directs us to decide on the basis of moral principles such as every person should have a right to an equal and fair chance at living a healthy life, that some individuals should not benefit excessively at the expense of vulnerable other, and that we all have a duty to meet human needs before pursuing business profits . Principles, promises, justice, fairness, rights, and duties are concepts that are at the heart of principle-based ethics.

We will examine these arguments in more depth later in this chapter. For now, the crucial thing to recognize is the inescapability of the language of ethics. Debates surrounding the Mylan case were fundamentally debates about ethics: What do people deserve? What produces beneficial overall consequences? What is one's duty? What is fair or unfair, just or unjust? What is wrong with being greedy?

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2.2 VIRTUE ETHICS

As already described, virtue ethics focuses on the ethics of personal character. Virtue ethics is a tradition within philosophical ethics that seeks a full and detailed description of those character traits, or "virtues," that would make a human life, a good, meaningful, well-lived life. When we describe someone as an honest per- son, a loyal friend, a helpful neighbor, a caring and generous citizen, or when we say that someone is a person of integrity, or that an employee is reliable, trust- worthy, diligent and disciplined, we are speaking the language of virtues. When someone is described as greedy, as happened in the discussion case that opened this chapter, we are also speaking language of virtues or, in the case the opposite of virtues, the vices. A person described as selfish, mean-spirited, arrogant, nar- cissistic, untrustworthy, dishonest, or immodest is lacking virtue and living an unethical life.

We'll find the language of virtue ethics at several points in this book, most notably in discussions of leadership and corporate culture. Consider how you would answer the question: What makes a good leader? Words like decisive, transparent, honest, integrity, visionary, fair, empowering, respectful, inspirational, and coura- geous come to mind. Each of the words describes a human virtue, traits that others can rely on because they are deeply ingrained within the person's character. Virtues are not characteristics that a person adopts one day, but forgets about and drops the next. They are enduring because they describe who that person truly is. Bad leaders not only lack such characteristics, they might also be described by such vices as self-centered, egoistic, mean-spirited, timid, unreliable, and undisciplined.

Similarly, consider how you might describe a good, ethical employee. Again, virtue words come to mind, characteristics such as trustworthy, loyal, creative, hard-working, motivated, reliable, honest. Bad employees might be characterized as lazy, dishonest, unreliable, or easily distracted.

From its earliest days, virtue ethics has grappled with two fundamental chal- lenges: one practical and one critical. The practical challenge, one that Plato himself asked, is "Can virtue be taught?" How do people become honest, trustworthy, reli- able, kind? Why do some people become mean-spirited and others kind, some self-centered and others altruistic? Is this something that can be taught and, if so, how? These questions have arisen in business ethics as businesses seek ways to encourage ethical behavior and discourage unethical behavior. As mentioned in the discussion case from chapter 1, many critics charge that Wells Fargo's corporate culture created an environment in which the virtue of honesty was discouraged and the vice of greed was the norm. The question of how virtuous and ethical behavior can be encouraged within business will be examined in chapter 4's focus on the idea of a corporate culture, the social environment that establishes corporate expec- tations, behaviors, and norms.

The critical challenge asks why be virtuous? Why should one be honest, kind, hard-working, rather than selfish, unreliable, lazy? This is a philosophical challenge that seeks a rational justification of the virtues. According to critics, without a ratio- nal justification that provides reasons for being virtuous, virtue ethics amounts to little more than name calling or what logicians would call an ad hominem attack.

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Both of these challenges have found a sympathetic audience among some in business. These challenges often arise from a particular view of human nature, a view that is as much at home in economics than it is in philosophy. That view, identified as psychological egoism, posits that human beings are, by nature, selfish. If this is true and all humans always act out of self-interest, then there would be a significant challenge for anyone hoping to teach people to be otherwise. How can one teach someone to be altruistic, kind, generous, and helpful if those behaviors go against human nature? Further, how can you provide a reason for someone to act against their own self-interest if, in fact, that would be to go against human nature?

Long traditions in both philosophical ethics and economics have developed out of this perspective. In ethics, the social contract tradition holds that ethical respon- sibilities and duties to others must be based on a social contract, an agreement that essentially says that I will be ethical toward you-help you and not hurt you-as long as you agree to do the same to me. Thus, ethical duties are based upon self-interest and what may appear to be acting for the interests of another actually is acting for your own self-interest. In economic theory, defenders of free markets argue that because human nature is self-interested, economic systems should be arranged to channel that self-interest toward the overall social interest. In a tradition that reaches as far back as Adam Smith, some economists argue that competitive mar- kets, freedom from coercion and fraud, and freedom from governmental control will, "as if lead by an invisible hand," turn self-interested behavior toward social good. Both the social contract tradition and the free market view in economics will be in the background of many of the debates we examine throughout this text. In particular, the free market economic view is deeply embedded in one of the major theories of corporate social responsibility that we examine at length in the next chapter .

But the virtue ethics tradition has experienced something of a revival in recent years and it is perhaps no coincidence that this has occurred as psychological ego- ism has gone out of favor. As philosophers and psychologist have always known, human motivation is more complex than is portrayed by psychological egoism. The entire field of behavioral economics grew out of this recognition that human beings seldom behave in ways that conform to the narrow self-interest predicted by abstract, mathematical model of economics. Certainly, some people are motivated only by selfish reasons, but many others are not. Some people are motivated by a deep care for others, by compassion, sympathy, and respect. Most of us behave both selfishly and charitably at different times. Importantly, as every parent would recog- nize, such motivational factors can be taught and learned. Human beings are no more naturally selfish and greedy than they are naturally kind and compassionate. Human beings have the capability of being both selfish and kind.

Once we recognize this fact (and philosophers from at least the time of Plato and Aristotle have recognized this), we can begin to separate those motivations that are likely to lead us to a good and happy life from those motivations that are likely to lead us to a life of unhappiness. The first set of motivation or character traits are called virtues, the latter are vices . An ethics of virtue seeks to develop the character traits and habits that will lead us to live a meaningful and happy human life.

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By connecting the virtues to a happy, good human life, virtue ethicists answer the critical question of justification as that raised earlier. You should be honest, kind, friendly, and so on because by doing so you will live a better, happier, more fulfilled human life.

For virtue ethics, how these traits are acquired, which would be an answer the practical challenge described above, becomes an important task for ethics . Can we teach people to be honest, trustworthy, loyal, courteous, moderate, respectful, and compassionate? While this might be difficult, it is not, as the psychological egoist would claim, impossible. Virtue ethicists turn to such fields as psychology, educa- tion, organizational behavior, and sociology to gain insight about how to teach virtue .

Parents confront this question every day. I know my children will lead happier and more meaningful lives if they are honest, respectful, cheerful, moderate and not greedy, envious, gloomy, arrogant, and selfish. Yet, simply telling my children to be honest and to avoid greed is insufficient. I cannot remain passive and assume that these traits will develop naturally. Instilling these character traits and habits is a long-term process that develops over time .

Business institutions also have come to recognize that character formation is both difficult and unavoidable . Employees come to business with certain character traits and habits, and these can get shaped and reinforced in the workplace. Hire a person with the wrong character traits, and there will be trouble ahead. Designing a workplace, creating a corporate culture, to reinforce virtues and discourage vice is one of the greatest challenges for an ethical business.

An ethics of virtue shifts the focus from questions about what a person should do to a focus on what type of person one is. This shift requires not only a different view of ethics but, at least as important, also a different view of ourselves. Implicit in this distinction is the recognition that our identity as a person is constituted in part by our wants, beliefs, motivations, values, and attitudes. A person's character- those dispositions, relationships, attitudes, values, and beliefs that popularly might be called a "personality" -is not some feature that remains independent of that per- son's identity. Character is not like a suit of clothes that you step into and out of at will. Rather, the self is identical to a person's most fundamental and enduring dis- positions, attitudes, values, and beliefs.

As an example, consider the issue of executive compensation paid by Mylan that was discussed in this chapter's discussion case . It is important to remember that not every CEO demands an exorbitant salary. The language of virtues and vices would seem very relevant as we think about the motivations involved. Why do some people expect and demand tens of millions of dollars a year from selling a medically necessary medical device, while others would be happy with much less? Virtues such as modesty, moderation, self-control, unselfishness, and humility come to mind when we think about a CEO who could, but does not, take an exces- sive salary. Self-indulgence, greed, callousness, competitiveness, and selfishness come to mind about the others. To a person with moderate and constrained desires, an exorbitant salary is simply not an option. It would be out of character.

Virtue ethics can offer us a more fully textured understanding of life within business . Rather than simply describing people as good or bad, right or wrong, an

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ethics of virtue encourages a fuller description. For example, we might describe a business leader as visionary and courageous, a person of integrity, who sympathizes with employees and cares about their well-being. Other executives might be described as greedy or ruthless, proud or competitive. Faced with a difficult dilemma, we might ask what would a person with integrity do?

For each of us, working in business will provide opportunities for behavior that is generous or greedy, ruthless or compassionate, fair or manipulative. Given these opportunities, each one of us must ask which character traits are likely to help us live a good life and which are likely to frustrate this. What type of person are we to be? Presumably such questions arose for those entry-level Wells Fargo employees who were faced with the expectation to commit fraud. What would an honest per- son say and do? Do I have the courage of my convictions?

By the time we are adults, much of our character is formed by such factors as our parents, schools, church, friends, and society. But powerful social institutions such as business and especially our own places of employment and our particular social roles within them (e.g., manager, professional, and trainee) have a profound influence on shaping our character. An accounting firm that hires a group of train- ees fully expecting that fewer than half will be retained and only a very small group will make partner, encourages motivations and behavior very different from a firm that hires fewer people but gives them all a greater chance at long-term success. A company like Wells Fargo that sets unrealistic sales goals will find that it creates a different sales force than one that understands sales more as customer service. Virtue ethics reminds us to look to the actual practices we find in the business world and ask what type of people are being created by these practices . Many indi- vidual moral dilemmas that arise within business ethics can best be understood as arising from a tension between the type of person we seek to be and the type of person business expects us to be .

Consider an example described to me by someone who is conducting empirical studies of the values found within marketing firms and advertising agencies. This person reported that on several occasions advertising agents told her that they would never allow their own children to watch the very television shows and adver- tisements that their own firm was producing. By their own admission, the ads for such shows aim to manipulate children into buying, or getting their parents to buy, products that had little or no real value. In some cases the ads promoted beer drink- ing and the advertisers themselves admitted, as their "dirty little secret," that they were targeted for the teenage market. Further, their own research showed them how successful their ads were in increasing sales .

Independent of the ethical questions we might ask about advertising aimed at children, a virtue ethics approach would look at the type of person who is so able to disassociate oneself and one's own values from one's work, and the social institu- tions and practices that encourage it. What kind of person is willing to subject chil- dren to marketing practices that they are unwilling to accept for their own children? Such a person seems to lack even the most elementary form of personal integrity. What kind of institution encourages people to treat children in ways that they will- ingly admit are indecent? What kind of person do you become by working in such an institution?

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Virtues ethics provides us with the language and framework for talking about and examining a wide range of human values in business. It helps us understand good people, in all their diversity, and bad people, in all their diversity as well. It helps us evaluate organizations and how they can encourage and discourage ethical behavior, and how they might be changed so that we get more of the former and less of the latter.

2.3 UTILITARIAN ETHICS

Utilitarianism is a second ethical tradition that is very relevant for understanding business ethics . Utilitarianism has had a significant impact on the modern world and has been especially influential in shaping politics, economics, and public policy. It therefore has had, and continues to have, an enormous influence on busi- ness. Because of its influence on contemporary politics and economics, it will be helpful to start our consideration by locating utilitarianism within its historical con- text. Roots of utilitarian thinking can be found in works by Thomas Hobbes (1588- 1679), David Hume (1711-1776), and Adam Smith (1723-1790), but the classic formulations are found in the works of Jeremy Bentham (1748-1832) and John Stuart Mill (1806-1873) . Each of these social philosophers was writing against a background of the great democratic revolutions of the seventeenth and eighteenth centuries.

Utilitarianism tells us that we can determine the ethical significance of any action by looking to the consequences of that act. Utilitarianism is typically identi- fied with the policy of "maximizing the overall good" or, in a slightly different ver- sion, of producing "the greatest good for the greatest number." Acts that accomplish this aim are good; those that do not are bad. Thus, utilitarianism can be thought of in terms of means and ends. An act or a decision is judged as ethical depending on whether or not it is an effective means for attaining the ethically good end of over- all, maximum happiness .

As utilitarianism emerged in the eighteenth and nineteenth centuries, this emphasis on the overall good, and upon producing the greatest good for the great- est number, directly opposed authoritarian policies that aimed to benefit the politi- cal elite . Thus, utilitarianism provided strong support for democratic institutions and policies. Government and all social institutions exist for the well-being of all, not to further the interests of the monarch, the nobility, or some small minority. Likewise, the economy exists to provide this highest standard of living for the great- est number of people, not to create wealth for a privileged few.

These early utilitarians also believed that, apart from exceptional circumstances, the best judges of happiness are individuals themselves. Each person, rather than a king or priest, should be free to judge for himself or herself what is good for him or her. Thus, utilitarianism also provided strong support for civil liberties and civil rights . This combined view, that social policy should aim for the greatest over- all good and that individuals should have the freedom to decide for themselves what their own good is, provided strong philosophical support for the type of

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liberal democratic forms of governments that developed in Western Europe and the United States, including support for free markets and free economies.

Thus, utilitarianism is a consequentialist ethics. Decisions and acts are deter- mined by their consequences. (How else might we judge acts? Well, sometimes we determine that we should or should not do something as a matter of principle, regardless of consequences. We'll look at this approach in more detail in the next section.) In this way, utilitarians tend to be pragmatic thinkers. No act is ever right or wrong in all cases in every situation. It will all depend on the consequences. For example, lying is neither right nor wrong at all times in all situations. There might be situations in which lying will produce greater overall good than telling the truth. In such a situation, it would be ethically right to tell a lie.

Consider a question that might arise out of the discussion case from the start of this chapter. Should the U.S. government pass a law that limits the amount of profit Mylan can earn from the EpiPen? A utilitarian approach to this question will consider the likely consequences of either alternative. Limiting the price of a product would tend to make it more readily available to people who need it, espe- cially those with limited resources. In general, this could save lives and promote health. On the other hand, lower prices might make it more difficult to attract research and development among pharmaceutical companies. This would result in harm to everyone, including consumers. Utilitarianism would suspend judg- ment until the consequences, or expected consequences, became known. Either way, the ethical judgment made about the decision is a function of what happens after the fact.

If we judge our actions in terms of consequences, in terms of means and ends, then we must have some standard for deciding between good and bad conse- quences, between good and bad ends. How do we know that these consequences are good but others are bad? In very general terms, all utilitarian thinkers agree that we should maximize the overall good, but among utilitarians there are different interpretations of what this "good" involves.

In general, the utilitarian position is that the goal of ethics, both individually and as a matter of public policy, should be to maximize the overall happiness. But, what exactly is happiness? Jeremy Bentham argued that only pleasure, or at least the absence of pain, was intrinsically good. Happiness, according to Bentham, must be understood in terms of pleasure and the absence of pain; unhappiness is under- stood as pain or the deprivation of pleasure. On Bentham's view, pleasure and pain are the two fundamental motivational factors of human nature. In his words,

Nature has placed mankind under the governance of two sovereign masters, pain and pleasure. It is for them alone to point out what we ought to do, as well as to determine what we shall do .... They govern us in all we do, in all we say, in all we think.1

Consider, then, Bentham's utilitarian reasoning. Only pleasure and the absence of pain are valued for its own sake. Only pleasure and the absence of pain, there- fore, are intrinsically, objectively, and indisputably good. If pleasure and the absence of pain are good, more pleasure (or less pain) is better and maximum pleasure

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(or minimum pain) is best. Therefore, maximizing pleasure (the utilitarian princi- ple) is the fundamental, objective, and indisputable ethical principle.

While the imperative to maximize pleasure sounds like a return to egoism, util- itarianism differs from egoism in important ways. Egoism focuses on the happiness of individuals. Utilitarian acts are judged by their consequences for the general and overall good. Consistent with their commitment to democratic equality, however, the general good includes the well-being of each individual affected by the action.

While agreeing with the general framework of Bentham's utilitarianism, John Stuart Mill defended a different understanding of happiness. Mill believed that there is a qualitative dimension to happiness that is missed by Bentham's focus on pleasure . Human happiness is not mere hedonism. According to Mill, humans are capable of enjoying a variety of experiences that produce happiness . Besides the pleasures of sensation that Bentham mentions, humans also experience social and intellectual pleasures that are qualitatively different from, and superior to, mere feelings. In a famous passage, Mill claims that "it is better to be a human being dis- satisfied than a pig satisfied; better to be a Socrates dissatisfied than a fool satisfied."2

But the claim that there is a form of happiness that is qualitatively better than sensations of pleasure is controversial. How do we know, or how can we prove, that it is better to be Socrates dissatisfied than a fool satisfied? Mill's answer has signifi- cant ethical and social implications. To decide which pleasures and what type of happiness is better, according to Mill, we should consult with someone with the experience of both . Such experienced and competent judges are the best test for determining the highest happiness.

Of two pleasures, if there be one to which all or almost all who have experience of both give a decided preference, ... that is the more desirable pleasure. 3

And if disagreement continues beyond this, Mill next suggests that

From the verdict of the only competent judges, I apprehend there can be no appeal. On a question which is the best worth having of two pleasures . .. the judgment of those who are qualified by knowledge of both, of if they differ, that of the majority among them, must be admitted as final. 4

Thus, Mill acknowledges that not all opinions are equal. Some people are more competent and more qualified than others in judging what is good. Mill's utilitari- anism does not support an uncritical majority rule in which every opinion of what is good is treated as equally valid. However, we shouldn't abandon democracy because of this. The way to develop competent judges is through experience and education. People need to be educated and experienced in a variety of pleasures before they are competent to judge. Once they are experienced, then majority-rule democracy is the best way to make decisions.

Thus, in John Stuart Mill's writings we find one of the classic defenses of liberal democracy and liberal education. The most fundamental ethical principle commits us to arranging society in such a way that we maximize the happiness for the great- est number of people. The best means for attaining this goal is an educated citi- zenry making decisions through a majority-rule democracy. The best method for

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securing an educated citizenry is to allow individuals the freedom of choice to pur- sue their own ends. Even when those choices are unwise, individuals are gaining the experience needed to distinguish between good and bad, higher and lower, pleasures .

These views have significant implications for business and economics. In clas- sical free market economics, consumer demand is sovereign. Economic transactions occur when individuals seek their own happiness, understood as getting what they demand. If individuals make mistakes and buy products that fail to bring them sat- isfaction, they learn from their mistakes, no longer buy the product, and according to supply and demand, market forces eventually eliminate unsatisfactory products .

Perhaps utilitarianism's greatest contribution to social and political thought has come through its influence in economics. With roots in the works of Adam Smith as well as those of Bentham and Mill, the ethics of twentieth-century neoclassical economics- essentially what we think of as free market capitalism-is decidedly util- itarian . It is in this way that utilitarianism has had an overwhelming impact on business and business ethics.

Under free market economies, economic activity aims to satisfy consumer demand. The law of supply and demand tells us that economies should, and healthy economies do, produce (supply) those goods and services that consumers want (demand) . Since scarcity and competition prevent everyone from getting all that they want, the goal of free market economics is to optimally satisfy wants. Free markets accomplish this goal by allowing individuals to decide for themselves what they most want and then bargain for these goods in a free and competitive market- place. This process of allowing individuals to set their own preferences and bid for them in the marketplace will, over time and under the right conditions, guarantee the optimal satisfaction of wants.

This brief description suggests how free market economics fits the utilitarian framework. The end or goal of economic activity, what economists often refer to as utility or welfare, is the maximum satisfaction of consumer demand. We do the most good for the greatest number when we get as many people as possible as much of what they want. as possible. The "good" is defined in terms of satisfying one's wants . But since scarcity and competition prevent us from getting all that we want, individuals are left to rank-order their wants or, in other terms, to establish their own preferences . Thus, free market economics can be thought of as a version of preference utilitarianism, where the utilitarian goal is the maximum satisfaction of preferences.

Given this goal, free market economics advises us that the most efficient means to attain that goal is to structure our economy according to the principles of free market capitalism. We should allow individuals the freedom to bargain for them- selves in an open, free, and competitive marketplace . Self-interested individuals (and mainstream economics assumes that this is at least a strong tendency among human motivations) will always be seeking ways to improve their own position. Agreements (contracts) will occur only in those situations where both parties believe that a transaction will improve their own position. In such a situation, the competition among rational and self-interested individuals will continuously work to promote the greatest overall good. Whenever a situation occurs in which one or

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more individuals can attain an improvement in their own happiness without a net loss in others' happiness, market forces will guarantee that this occurs. Thus, the market is seen as the most efficient means to the utilitarian end of maximizing happiness .

2.4 CHALLENGES TO UTILITARIANISM

We will examine some more specific debates surrounding the free market version of utilitarianism in chapter 3. For now, let us consider some general challenges to the ethics of utilitarianism. We can classify these challenges into two groups- problems raised from within a utilitarian perspective that involve finding a defensi- ble version of utilitarianism and problems raised from outside that challenge the plausibility of the entire utilitarian project.

Problems Raised from within the Utilitarian Tradition

We will mention two challenges that are debated from within utilitarian perspec- tives. First, all utilitarians must find a defensible way to measure happiness. Phrases like "maximize the overall good" and the "greatest good for the greatest number" require some form of measurement and comparison (how else would you know that this situation rather than another has maximized the good?). Bentham went to great lengths to develop a "hedonistic calculus" to help quantify pleasures. Mill left it to the judgment of a majority of well-informed, competent judges. Economists substitute such measures as the gross national product for determining overall happiness.

Bentham, Mill, and neoclassical economics all sought a scientific, measurable ethics. But there simply is no consensus among utilitarians on how to measure and determine the overall good. This problem is only compounded by the fact that util- itarians are committed to considering all the consequences to all affected parties. Many business ethics issues highlight how difficult this could be . Consider the con- sequences of using nonrenewable energy sources and burning fossil fuels for energy. It is hard to see how a utilitarian could ever hope to calculate the conse- quences of a choice between investing in nonrenewable sources and continuing the present reliance on coal and oil. Yet this is exactly what is required by the utilitarian principle. (Attempts to shift focus, as economists often do, on to the "expected" utility of an act is to abandon utilitarianism. At that point we have adopted an ethics not of consequences but of intentions and that is no longer utilitarianism. We'll see this view developed in the following section.)

The second problem with the utilitarian perspective deals with differing ver- sions of the good and the implications for human freedom. Historically, utilitarians are social and political liberals. That is, they all placed a very high value on individ- ual freedom of choice. But there is a tension between objective accounts of the good and individual freedom. Simply put, free individuals do not always choose to do what is good for them. The more utilitarians emphasize freedom, the more likely they hold more relativistic accounts of the good. On this view, good is simply a

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matter of opinion, or individual desires, preferences, and wants . However, this seems to abandon the entire project of ethics since, after all, people often desire what is trivial, immoral, and bad. On the other hand, the more utilitarians are will- ing to specify a specific content to the good life, the more the need to abandon the commitment to individual freedom. If we know what is truly good, then individuals ought to act in certain ways (to maximize the good) even if they don't want to. Finding a balance between individual freedom and the overall good is a challenge that confronts most versions of utilitarianism.

Problems Raised to the Utilitarian Tradition

The final challenges are not raised from within the utilitarian perspective but rather go directly to the core of utilitarianism. The essence of utilitarianism is its conse- quentialism. Good and bad acts are judged by their consequences. In short, the end justifies the means. But this seems to deny one of the earliest and most funda- mental ethical principles that many of us have learned: The ends don't justify the means.

This challenge can be explained in terms of rules or principles. When we say that the ends don't justify the means what we are often saying is that there are cer- tain rules or principles we should follow no matter what the consequences. Put another way, we have certain duties or obligations that we ought to obey even when doing so does not produce a net increase in overall happiness. Examples of such duties are those required by such principles as justice, loyalty, and respect, as well as the duties that flow from our roles as parent, spouse, friend, and citizen. We will examine that ethical tradition in more detail in the next section.

Several examples can be used to explain this criticism. Since utilitarianism focuses on the overall consequences, utilitarianism seems willing to sacrifice the good of individuals for the greater overall good. So, for example, it might turn out that the overall happiness would be increased if we allocate health care according to free markets. Utilitarians could object to denying someone needed medical care like an EpiPen not as a matter of principle, but only if and to the degree that denial of medicine to a minority of people detracts from the overall good. If it turns out that such action increases the net overall happiness, utilitarianism would have to support it. In the judgment of many people, such a decision would violate the principles of justice, equality, and respect. As we will see developed in the following section, principle-based ethics would appeal to the concept of ethi- cal rights in criticizing utilitarianism. From that perspective, individuals possess certain basic rights that should not be violated even if doing so would increase the overall social happiness. Some might claim, for example, that everyone has a right to needed health care. Or, critics of laws restricting executive compensation argue that businesses should be free to decide for themselves what to pay their execu- tives. The income paid to executives belongs to the corporation, not to the govern- ment, and therefore such a law would violate their property rights. Rights function to protect certain central interests from being sacrificed for the greater overall happiness. Utilitarians can defend rights only to the degree that rights contribute to the overall good.

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Another example that can be raised against utilitarianism looks to specific relationships and commitments that we all make. For example, as a parent we love our children and have certain duties to them. Imagine a situation in which you have to choose between saving the life of your child and saving the life of a talented dedicated brain surgeon. Utilitarians are committed to determining the ethical decision by calculating the overall consequences of each choice and doing what- ever will maximize the overall good. The example can be arranged in such a way that saving the brain surgeon clearly contributes to the overall good. But what eth- ical judgment should we make about the parent who even begins to make such calculations?

Utilitarians would seem to be committed to parental love and duty only to the degree that such love and duty contributes to the overall good. Parents should love their children because this contributes to the overall good of society. (And if it doesn't?) But surely this misrepresents (and insults) the nature of parental love. I do not love my children because of the consequences that this might have for soci- ety. Principle-based ethicists would argue that there are certain commitments that we make, certain duties that we have, which should not be violated even if doing so would increase the net overall happiness. Violating such commitments and duties would require individuals to sacrifice their own integrity for the common good. Thus, critics of excessive executive compensation might claim that gross inequality in pay is unfair and unjust in principle. We will consider similar themes of professional commitments and duties when a later chapter examines the role of professional responsibilities within business institutions .

2.5 UTILITARIANISM AND BUSINESS POLICY

Before moving on to principle-based ethics, it will be helpful to connect utilitarian ethics to some general concerns of business ethics. At its most basic, utilitarianism is a social philosophy, offering criteria by which the basic structure of social institu- tions, such as business and the economy, ought to be determined. Utilitarianism asserts that social institutions should be structured in whatever way will maximize the overall good. Two important schools of thought, each reflected in many contem- porary policy debates that concern business, have emerged within the utilitarian- ism for deciding how best to achieve this goal.

One version of utilitarianism public policy holds that there are experts who can predict the outcome of various policies and carry out policies that will attain our ends. These experts, usually trained in social sciences such as economics, are famil- iar with the specifics of how society works and can therefore determine which pol- icy will maximize the overall good. This approach to public policy underlies one theory of the entire administrative and bureaucratic side of government. On this view, the legislative body (from Congress to local city councils) establishes the pub- lic goals, and the administrative side (presidents, governors, mayors) executes (administers) policies to fulfill these goals. The people working within the adminis- tration, the classic government bureaucrats, should know how the social and polit- ical system works and use this knowledge to carry out the mandate of the legislature .

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The government is filled with such people, typically trained in such fields as eco- nomics, law, social science, public policy, and political science. This approach, for example, would justify widespread government regulation of business on the grounds that such a regulation will ensure that business activities do contribute to the overall good.

Consider how the U.S . Federal Reserve Board sets interest rates. There is an established goal, a public policy "good," that the Federal Reserve takes to be the greatest good for the country. (This goal is something like the highest sustainable rate of economic growth compatible with minimal inflation.) The Fed examines the relevant economic data and makes a judgment about the present and future state of the economy. If economic activity seems to be slowing down, the Fed might decide to lower interest rates as a means for stimulating economic growth. If the economy seems to be growing too fast and the inflation rate is increasing, they might choose to raise interest rates . Lowering or raising interest rates in itself is neither good nor bad; the rightness of the act depends on the consequences. The role of the public servant is to use his or her expertise to judge the likely consequences and make the decision that is most likely to produce the best result.

A second influential version of utilitarian policy invokes the tradition of Adam Smith and claims that competitive markets are the best means for attaining utilitar- ian goals . This version would promote policies that deregulate private industry, protect property rights, allow for free exchanges, and encourage competition. In such situations the self-interest of rational individuals will result, as if led by "an invisible hand" in Adam Smith's terms, to the maximum satisfaction of individual happiness.

The dispute between these two versions of utilitarian policy, what we might call the "expert" and the "market" versions, characterizes many disputes in public pol- icy and many within business ethics. Consider recent debates within the United States concerning health care policy. Some argue that the country's health care is best provided by a government-regulated and -managed, if not government pro- vided, health care system. Others argue that health care decisions are best left to the decisions of private individuals within a free market deciding for themselves the appropriate level of health care that they are willing to pay for. Both sides might agree that the ultimate goal is to provide the best health care for the most people, but they disagree significantly on the appropriate means for attaining that goal.

Another example of these debates within business ethics concerns regulation of unsafe workplaces. One side argues that questions of safety and risk should be determined by experts who then establish standards that business is required to meet . Government regulators (in this case, the Occupational Safety and Health Administration [OSHA]) are then charged with enforcing safety standards in the workplace. The other side argues that the best judges of acceptable risk and safety are workers themselves. A free and competitive labor market will ensure that peo- ple will get the level of safety that they want . Individuals calculate for themselves what risks they wish to take and what trade-offs they are willing to make in order to attain safety. Workers willing to take risks likely will be paid more than workers who demand safe work environments. Thus, a market-based solution will prove best at optimally satisfying these various and competing interests.

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There is no question that utilitarian reasoning dominates among policy makers and policy administrators. Policy experts at all levels are focused on results and on getting things done. This makes the utilitarian emphasis on consequences particu- larly attractive to fields such as economics, business, and government. It seems obvious that policy questions should be judged by results and consequences. The utilitarian emphasis on measuring, comparing, and quantifying also reinforces the view that policy makers should be neutral administrators. The standard view is that policy goals should be left to the democratic decisions of the people. The people decide what they want and what makes them happy; the job of social policy is sim- ply to help them attain those goals in as efficient a manner as possible . Efficiency is simply another word for maximizing happiness.

Despite these close connections between utilitarianism and public policy, seri- ous ethical challenges remain . We turn now to a major alternative to utilitarian ethics: principle-based ethics.

2.6 PRINCIPLE-BASED ETHICS

Principle-based ethics, or what is sometimes called an ethics of rights and duties, emphasizes the fact that sometimes the correct path is determined not by its conse- quences but by certain principles or duties. More familiar synonyms for duty include obligations, commitments, and responsibilities. This principle-based approach faults utilitarianism for thinking that our acts should always be judged by their consequences to the overall good. This ethical tradition denies the utilitarian belief that the ends do justify the means. It holds that there are some things that we should, or should not, do regardless of the consequences .

To understand why the ends don't justify the means we need to emphasize that utilitarian ends are focused on the collective or aggregate good. Utilitarianism is concerned with the well-being of the whole. (This is one of the things that makes utilitarianism attractive to public policy makers.) But many of us have a deep com- mitment to the dignity of individuals . We believe that individuals should not be used as a mere means to the greater overall good. A prominent way of explaining this is to say that individuals have rights that should not be sacrificed simply to produce a net increase in the collective good.

Consider the debate mentioned previously concerning child labor in the devel- oping world. Some policy makers in impoverished countries believe that the best means for raising the standard of living within their country is to increase exports. This brings in hard currency with which the country can pay for food, medicine, and education (and repay debts!). Increasing exports will raise the standard of liv- ing for all citizens and thereby meet the utilitarian goal of improving the collective good. However, to increase exports a country must be capable of selling their goods at costs below those of competing countries. Since labor is a major production cost, keeping labor costs low helps the country as a whole. Unfortunately, one means for maintaining low labor costs is to employ young children. (Cases of child labor in the manufacture of athletic shoes and clothing are only the most well-publicized instances of an all too common phenomenon.)

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Is it ethical to use young children in such circumstances? Defenders of this practice argue, typically on good utilitarian grounds, that the children are better off with the jobs than without them, that they contribute to their own family's income, and that they contribute to the overall welfare of their society. Critics claim, on principle-based grounds, that it is unethical to treat young children this way even if there are beneficial results. In this view, child labor is ethically equivalent to child abuse and slavery. It is something wrong on principle .

Within one tradition, our ethical duty is explained in terms of a principle that the German philosopher Immanuel Kant called the categorical imperative. (An imperative is a command or duty; categorical means that it is without exception.) Our primary duty is, according to Kant, to act only in those ways in which the maxim of our acts could be made a universal law. This is a very abstract way of saying something that is fairly intuitive. The "maxim" of our acts can be thought of as the intention behind our acts. The maxim answers the question: "What am I doing?"

Kant tells us that we should act only according to those maxims that could be universally accepted and acted on. (Consider how Kant might respond to the egoist view that all human behavior is intended for one's own self-interest.) For example, Kant believed that truth telling could, but lying could not, be made a universal law. If everyone lied whenever it suited them, rational communication would be impos- sible. Thus, lying is unethical. This condition of universality, not unlike the Golden Rule, prohibits us from giving our own personal point of view privileged status over the points of view of others . It is a strong requirement of impartiality and equality for ethics.

Kant also provided two other versions of this categorical imperative that are less abstract. He claimed that ethics requires us to treat all people as ends and never only as means. In yet another formulation, we are required to treat people as sub- jects, not as objects. These formulations restate the commitment to treat people as capable of thinking and choosing for themselves. Humans are subjects (they per- form the act rather than being acted upon, to use the familiar subject/object catego- ries from grammar). They have their own ends and purposes and therefore should not be treated simply as a means to the ends of others. In chapter 3, we will examine a view on corporate social responsibility that concludes, on Kantian grounds, that business managers have direct ethical responsibilities to all parties (stakeholders) who are affected by business activities.

Thus, on this Kantian theory, our fundamental ethical duty is to treat people with respect, to treat them as equally capable of living an autonomous life. But since each person has this same fundamental duty toward others, each of us can be said to have the right to be treated with respect, the right to be treated as an end and never as a means only. I have the right to pursue my own autonomously chosen ends as long as I do not in turn treat other people as means to my ends.

This points to a common way of understanding rights and duties. Philosophers will sometimes claim that rights and duties are correlative. This is to say that my rights establish your duties and my duties correspond to the rights of others. The principle-based tradition focuses on duties, which can be thought of as establish- ing the ethical limits of my behavior. From my perspective, duties are what I owe

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to others. Other people have certain claims upon my behavior; they have, in other words, certain rights against me .

Thus, to return to the 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 are incapable of rationally and freely choosing their own ends.

From this beginning, the principle-based, or rights-based, approach to ethics gets more complex. A complete theory must specify what rights we have and how they are justified, the range and scope of rights, and some process for prioritizing rights and resolving conflicts between different rights . As preparation for evaluat- ing many of the debates to follow, we will pursue these questions briefly.

One way to understand rights is to think of them as protecting interests. We often make a distinction between a person's wants and interests. Wants (or desires) are psychological states of an individual. They are what, as a matter of fact, people will pursue. Wants are subjectively known, in the sense that individuals enjoy a privileged status for knowing what they want. (Imagine disagreeing with a person's claim that they want something.) Interests work for a person's benefit and are objectively connected to what is good for that person. People don't always want what it is in their interest to have.

For example, if given the choice, many children would want to eat sugarcoated breakfast cereal each morning. Their parents deny them this on the grounds that it is not in their interests to eat such food. Tn this case, wants and interests conflict. Likewise, many college students want to skip class, but it is not in their interest to do so. On the other hand, wants and interests can coincide. You want a good edu- cation and good health, both of which are in your interests to have.

As we have seen, some versions of utilitarianism take happiness, understood as the satisfaction of wants, as the final goal of ethics. This version would either deny the distinction between wants and interests (interests being simply strong wants) or argue that the best way to decide what is in someone's interest is to let them decide for themselves (i.e., let them pursue their own wants). Either way, utilitarians believe that all wants/interests equally deserve to be satisfied to the degree that they equally produce happiness. If your desire for protection against an unsafe workplace is equal to my desire for high wages, each equally deserves satisfaction. Given this equality, the utilitarian commitment to satisfy as many wants as possible seems a reasonable strategy.

But principle-based ethics disagrees and argues that wants and interests are not equal. They argue that at least some interests are so important to the well-being of an individual that they should not be sacrificed simply for a net increase in the overall happiness. Rights serve to protect these interests from being sacrificed.

Consider the case of downloading and sharing music and movie files over the Internet. A plausible case could be made that we would promote greater overall happiness by adopting a public policy that allowed unlimited and unrestricted downloads. Only a relatively small minority of people, mostly performing artists and producers, would be unhappy. On utilitarian grounds, it would seem that we would best serve the public interest by allowing unregulated downloads. However,

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the artists and producers would claim that they have property rights that should prohibit such a policy. The interests that the public might have in listening to free music or watching free videos is not on a par with the interests that individuals have in controlling their own property.

Rights are thought to function the way a "trump suit" functions in a game of cards. A trump overrides the face value of cards of any other suit. Rights function in this way because they protect certain interests that are more important and central to human well-being than the mere happiness of others. The connection between rights and interests is important because it provides a way for determining which rights we have. By identifying central important interests, and distinguishing them from mere wants, we can determine the range of human rights.

So what rights do we have? The challenge is to develop an account that creates neither too many nor too few rights. Here is another example from my local com- munity. City planners have a blueprint for road construction throughout the area. One of the planned roads would cut through and destroy a rare oak woodland within the city. When the plan was announced, local residents objected to the road on a variety of environmental grounds. The director of the regional planning group answered protesters by claiming that local citizens "have a right to uncongested roads." Surely this theory of rights is too extensive.

The connection between rights and duties that we mentioned previously is a good test for this. If rights imply duties, and if people have a right to uncongested roads, then it would seem that someone (local government?) has the duty to pro- vide enough roads to prevent people from ever having to sit in a traffic jam. It is difficult to see how this could be done without wreaking havoc on the well-being of many people by raising taxes, destroying neighborhoods, taking away property, and so on.

This suggests that we do not get "rights" simply by wanting something very badly. (Critics charge that this is a problem with rights-based ethics. It encourages people toward self-centered individualism, trying to privilege their own selfish wants by calling them rights. Anything that someone wants eventually gets called a right and thereby people come to expect society to provide this for them.) But we also don't want to have too narrow a view of rights. Too weak an account, or too few rights, collapses the entire theory toward utilitarianism.

We can at least sketch a general account of rights by returning to the original idea of respect and the elements of autonomy and dignity on which it is based. What human characteristic justifies the assumption that humans possess a special dignity? Why would it be wrong to treat humans as mere means or objects, rather than as ends or subjects?

The most common answer offered through the Western ethical tradition is that the human capacity to make rational choices is the distinctive human characteristic. Humans do not act only out of instinct and conditioning, they make free choices about how they live their lives, about their own ends. In this sense, humans are said to have autonomy. Humans are subjects in the sense that they originate action, they choose, they act for their own ends . To treat someone as a means or as an object is to deny to them this distinctive and essential human characteristic; it would be to deny to them their very humanity.

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From this we can see how 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 pro- tection as a basic right. But since all humans possess this fundamental characteris- tic, equal treatment (or equal consideration) is also a fundamental right. Thus, personal liberty and equality are considered by many to be fundamental human rights.

In summary, we can say that rights offer protection of certain central human interests, prohibiting the sacrifice of these interests merely to provide a net increase in the overall happiness. But interests, as opposed to desires, are connected to human well-being in an objective manner. Human nature, characterized as the capacity for free and autonomous choice, provides the grounds for distinguishing central interests from mere wants.

2.7 SUMMARY AND REVIEW

No doubt, philosophical ethics can appear very abstract and far removed from the business world. Despite such appearances, these frameworks provide helpful ways to think about everyday issues in business by providing the fundamental concepts and categories for thinking about ethical issues. We should resist the temptation to treat these theories as some external rules that can be applied to situations in a way that produces specific decisions. It is best to think of these theories as attempts to articulate the basic principles already present in common ways of thinking. Once such principles are clearly described, the philosopher's role is to draw out their implications and offer justifications of them. Then the principles can be brought back to bear on practical decision making. Understood in this way, ethical theories are not as abstract and nebulous as they might at first appear. They have emerged from common ways of thinking as much as they are intended to guide our ways of thinking.

Virtue ethics encourages us to step back from specific decisions and actions to ask the very profound and personal questions : Who am I? What type of person am I to be? Throughout the course of our lives, each one of us develops a personal char- acter that is reflected in what we believe, what we value, what we desire, and how we act. This character is manifested in our habits, dispositions, and personality. The ethics of virtue seeks to articulate which of those habits and character traits are likely to be part of a meaningful and happy human life . Whether reflected in the ordinary language of such virtues as honesty, integrity, modesty, and trustworthi- ness, or such vices as greed, materialism, belligerence, and rudeness, virtue ethics plays an important role in ordinary business life .

Or, consider utilitarianism. The fundamental insight of utilitarian thinking is that we should consider the consequences, all the consequences, of our actions before deciding what to do. A reasonable principle is that we should consider not only the consequences that our acts might have for ourselves but also the conse- quences of our acts for all parties affected by them. The ethical theory of utilitarian- ism tries to work out the implications of this insight. In doing so, this theory has

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presented a powerful approach to answer the fundamental ethical question: How should we live our lives?

It is fair to say that many economic decisions are implicitly justified on utili- tarian grounds. Understanding utilitarianism, both its strengths and weaknesses, is necessary for developing a reasoned perspective on many economic matters. From the original rationale for market-based economies found in the works of Adam Smith to the original legal rationale for creating limited-liability corpora- tions to much public policy and law-governing finance, employment, consumer- ism, and world trade, utilitarian considerations have played a prominent, if not deciding, role.

Likewise, principled approaches to ethics capture another insight that is recog- nized in such common observations as "the ends don't justify the means." If utili- tarian ethics make judgments in terms of consequences, principled approaches demand that something should, or should not, be done regardless of the conse- quences. Some acts are right or wrong as a matter of principle, and it is our duty to act accordingly even if beneficial consequences would suggest otherwise. Respecting individual rights and fulfilling our ethical obligations can set limits on decisions aimed at producing good consequences.

The language of rights and obligations will play a major role in all the discus- sions that follow. One need only reflect on such phrases as "human resource man- agement" and "labor as a factor of production" to see that Kantian ethics will have much to contribute to discussions about how employees ought to be treated. Treating employees as mere means to the end of productivity, while perhaps useful in terms of beneficial consequences, is something that principle-based ethics rejects. Likewise, the professional duties associated with the gate-keeping roles as accountants, auditors, lawyers, financial analysts, and boards of directors also func- tion as ethical limitations on business activities.

The basic approaches to ethics outlined in this chapter will provide essential tools for understanding business ethics, and for making responsible ethical deci- sions in business .

REFLECTIONS ON THE CHAPTER DISCUSSION CASE

Consider two very different responses to the pricing of needed medical devices as described in the opening discussion case. One response might be to shrug one's shoulders and claim that this is just the way it is. One could simply acknowledge that some businesses have power over important consumer goods and they will use that power to make as much of a profit as possible. In fact, few observers took this approach when the Mylan case first made news. Without exception, the public and political response was very different from a shrug of the shoulders attitude. The Mylan case led to a widespread debate about corporate social responsibility. That is, almost everyone who heard of the case took a stand either to criticize or to defend these decisions. If you were to review the public debates surrounding this case in detail, it would be difficult to find an opinion that did not involve ethical concepts and categories.

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Reflecting on these debates, one can discover patterns in the way that most people think about such normative issues. Many people judge the ethics of health care pricing and availability in terms of consequences . Some argued that relatively freer markets are the best means for providing health care, while others argued that government regulations and mandates are best. Deciding between these views would involve, at least in part, investigating the real-world consequences that result from such policies. Ethical analysis will sometimes require such empirical investiga- tion: Is a free market in health care, in fact, highly correlated with availability of services? Do government regulations on pricing discourage research and develop- ment of new drugs and medical treatments? Determining the facts will often play an important role in ethical analysis, and this would be a helpful first step to take in the process of analysis.

This case also raises ethical issues of principles and standards that do not involve empirical consequences . Do people have a moral right to the medical care that they need? Does private business or government have a duty to provide such medical treatment? Ownership rights and fiduciary duties are other factors that establish ethical constraints on consequentialist thinking. For example, many argue that the executives of Mylan had a fiduciary duty to its stockholders that required them to seek maximum profit and prohibited them from lowering prices. A helpful step in the process of identifying principles and duties is to ask who might be ben- efited and who might be harmed by alternative decisions. Once such stakeholders have been identified, one should then ask if there are any individuals or institutions that have a duty to provide the benefit or prevent the harm.

Finally, this case also raises questions about personal virtues and vices. At first glance, this is a descriptive activity: Describe someone who so desires money that he would engage in price gouging on a product needed by sick people; describe someone for whom a salary of several hundred thousands of dollars each year is not enough. But within these descriptions are normative and evaluative components. A person described as greedy has a real character flaw; a person of integrity is to be praised and honored. One challenge to such descriptions, of course, is to answer the "so what?" question. So what if I am greedy? Why should I care if I lack integ- rity? These questions go to the heart of ethical motivation. Business ethics seeks not only to justify good and right behavior, but it also seeks to motivate people to act accordingly. This is among the foremost ethical challenges facing contemporary business managers.

CHAPTER REVIEW QUESTIONS

1. Distinguish between utilitarian, principle-based, and virtue-based approaches to ethics. What are the strengths and weaknesses of each?

2. How are utilitarian ethics relevant to business? Explain at least two challenges to utilitarian ethics.

3. How does principle-based ethics establish a connection between individual rights and the nature of human beings?

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Ethical Th eory and Business 45

4. Develop a list of virtues and vices . As a helpful way to begin, think about the pledge offered by Boy Scouts and Girls Scouts that begins : "A scout is trustworthy, loyal, helpful. . .. " Are these various virtues unified in any way?

5. In what ways, if at all, do you think that a virtuous life is ethically better than one lacking the virtues? In answering this question, refer to specific virtues (e .g., in what ways is a trustworthy life better than one lacking trust? A generous life better than a miserly one?) .

ENDNOTES

1Jeremy Bentham, An Introduction to th e Principles of Morals and Legislatio n (Oxford: Clarendon Press, 1907), p. 1.

2John Stuart Mill, Utilitarianism, ed. George Sher (Indianapolis: Hackett Publishing Co ., 1979), p. 10.

3Ibid., p. 8. 41bid., p . 11.