Ethical Business Responsibility Assignment - Honda Auction Case
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MGMT3080-Ch8.pdf
Copyright © 2012 by The McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin
Chapter 8 Making Ethical
Decisions in Business
8-2
David Geffen
o David Geffen the son of poor Russian immigrants
o Used a fake UCLA degree to land a mailroom job at the William Morris Agency
o Instead of being fired, he laid his mother had cancer and was promoted to assistant agent
o From the mailroom a 21-year-old Geffen launched the career that made him “the richest man in Hollywood”
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David Geffen
o Irrespective of moral admonitions Geffen was now on his way o His extraordinary qualities in a business that
rewards such traits o Geffen’s achievements and atonements can be
weighed against his early indiscretions?
8-4
Principles of Ethical Conduct
o The following 14 principles are fundamental guides or rules for behavior o Deontological ethics is the idea that actions are
right and wrong in themselves independently of consequences
o Consequentialism is the idea that actions are right or wrong, in part or whole, based on their consequences
o These principles distill basic wisdom that spans 2,000 years of ethical thought
8-5
The Categorical Imperative
o Origination: Immanuel Kant o Basic premise: Act only according to that maxim
by which you can at the same time will that it should become a universal law o One should not adopt principles of action unless
they can, without inconsistency, be adopted by everyone
o Criticism: Theory is dogmatic and inflexible
8-6
The Conventionalist Ethic
o Origination: Albert Z. Carr o Basic premise: Business is like a game with
permissive ethics and any action that does not violate the law is permitted
o Criticism: o No distinction between society’s ethics and
business ethics o Commerce defines the life changes of millions
and is not a game to be taken lightly
8-7
The Disclosure Rule
o Basic premise: Test an ethical decision by asking how you would feel explaining it to a wider audience such as newspaper readers, television viewers, or your family o Google: when faced with a potential conflict of
interest
8-8
The Disclosure Rule
o Criticism: o This rule is a mental exercise that invokes the
potential for emotional distress o Does not always give clear guidance for ethical
dilemmas in which strong arguments exist for several alternatives
o An action that sounds acceptable if disclosed may not, upon reflection, be the most ethical
8-9
The Doctrine of the Mean
o Origination: Aristotle o Basic premise: Virtue is achieved through
moderation (Golden Mean) o Avoid behavior that is excessive or deficient of a
virtue o ITT: Harold Geneen pushed mangers to
extraordinary personal sacrifices. o To Aristotle, this would have been wrong
8-10
The Doctrine of the Mean
o Criticism: The doctrine itself is inexact o The moderate course and specific virtues such as
honesty, however, are defined as aspects existing between and defined in relation to polar extremes.
o What they are is open to wide interpretation
8-11
The Ends-Mean Ethic
o Origination: Ancient Roman proverb, but often associated with Niccolò Machiavelli
o Basic premise: The end justifies the means o The result validates the deeds o Oracle Corporation – in 1980s frenzied sales to
crush its early competition in the relation database market
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The Ends-Mean Ethic
o Criticism: o In solving ethical problems, means may be as
important, or more so, than ends o The process of ethical character development can
never be furthered by the use of expedient means
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The Golden Rule
o Origination: Found in the great religions and in works of philosophy
o Basic premise: Do unto others what you would have them do unto you o It includes not knowingly doing harm to others o Practical imperative, this principle admonishes a
manager to treat employees as ends in themselves, not to manipulate them simply as factors of production for the self-interested ends of the company
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The Golden Rule
o Example: Harriman – Southern Pacific railroad – instead of firing the crew chief, Harriman insisted on firing the whole crew. o The workers were not treated as individuals; they
were punished en masse to signal others in the company
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The Golden Rule
o Test of reversibility – a manger shall asking he would change places with the person affected by the contemplated action
o Criticism: o People’s ethical values differ, and they may
mistakenly assume that their preferences are universal
o It is primarily a perfectionist rule for interpersonal relations not applying it in business life
8-16
The Intuition Ethic
o Origination: Defined by G.E. Moore in Principia Ethica
o Basic premise: What is good or right is understood by an inner moral sense based on character development and felt as intuition o The solution to an ethical problem lies in what you
sense or understand to be right or wrong without resort to conscious reasoning
o Everyone carries a lifetime of moral lessons that can well up in an instant emotional reaction
8-17
The Intuition Ethic
o Many companies recognize the intuition ethic in their conduct codes and offer it as a simple guideline for employees: o Cummins Inc. – Do I feel uncomfortable with this
particular course of action? o Dow Chemical Company – what feels right or
wrong abut the situation or action?
8-18
The Intuition Ethic
o Criticism: o Ethical intuition is reliable, but not infallible o Self-interest may be confused with ethical insight o No standard of validation exists outside the
individual o It is wrong because I just think so
o Intuition may fail to give a clear answer when ethical norms are in conflict
8-19
The Might-Equals-Right Ethic
o Origination: Thracymachus o Basic premise: Justice is the interest of the
stronger o What is ethical is what a stronger individual or
company has the power to impose on a weaker one
o Ex: Overland Stage Line – perfected a competitive strategy based on overbearing power
8-20
The Might-Equals-Right Ethic
o Criticism: o Confusion of ethics with force o Invites retaliation and censure, and is not
conducive to long-term advantage o Seizure by power violates the bedrock ethical
duty of reciprocity on which all societies are based
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The Organization Ethic
o Basic premise: Be loyal to the organization o The wills and needs of individuals are
subordinate to the overall welfare of the organization
o This ethic leads to cooperation and mutual trust o Some Americans jeopardize their health and work
excessively long hours without pay out of devotion to the employer
o In Asian societies – commitment to companies is exceptionally strong
8-22
The Organization Ethic
o Criticism: Many employees have such deep loyalty to an organization that it transcends self- interest
8-23
The Principle of Equal Freedom
o Origination: Herbert Spencer o Basic premise: A person has the right to freedom
of action unless such action deprives another person of a proper freedom
o Criticism: Lacks a tie breaker for situations in which two rights conflict o Such situations require invocation of some
additional rule to decide which right or freedom has priority
o Ex: privacy right v. company investigation
8-24
The Proportionality Ethic
o Origination: Medieval Catholic theology o Basic premise: A set of rules for making
decisions having both good and evil consequences
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The Proportionality Ethic
o The principle of proportionality allows mangers to risk predictable, but unwilled, harms to people: o Mangers must assess the type of good and evil
involved distinguishing between major and minor forms.
o They should calculate the urgency of the situation o They must estimate the probability of both good
and evil effects
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The Proportionality Ethic
o The intensity of influence over effects must be considered
o The existence of alternatives must be considered o An alternative formulation – the principle of
double effect o a manager will act ethically if (1) the good effects
outweigh the bad, (2) the manger’s intention is to achieve the good effects, and (3) there is no better alternative
8-27
The Proportionality Ethic
o Criticism: These are intricate principles, requiring consideration of many factors
8-28
The Rights Ethic
o Origination: Western Europe during the Enlightenment
o Basic premise: Each person has protections and entitlements that others have a duty to respect
o Criticism: o Rights are sometimes stretched into selfish
demands or entitlements o Rights are not absolute and their limits may be
hard to define ex: the right of the life v. benefit to the public
8-29
The Theory of Justice
o Originator: Contemporary, John Rawls o Basic premise:
o Each person should act fairly toward others in order to maintain the bonds of community
o In business life, justice requires fair relationships within the corporate community and using policies that treat its members fairly
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The Theory of Justice
o Rawls speculates that rational persons situated behind a hypothetical “veil of ignorance” and not knowing their place in a society but knowing general principles of human society would deliberate and choose two rules to ensure fairness in any society they created.
8-31
The Theory of Justice
o Rawls theory: o Impartiality – each person is to have an equal
right to the most extensive basic liberty compatible with a similar liberty for others, and
o Equal treatment – social and economic inequalities are to be arranged so that they are both (a) reasonable expected to be everyone’s advantage, and (b) attached to positions and offices open to all
8-32
Figure 8.1 - Three Spheres of Justice
8-33
The Theory of Justice
o Acting justly in a daily business life requires the application of maxims that more concretely define justice o Distributive Justice – the benefits and burdens of
company life be distributed using impartial criteria o Retributive Justice – punishment to be
evenhanded and proportionate to transgressions o Compensatory Justice – fair compensation to
victims
8-34
The Theory of Justice
o The general idea of fairness in such maxims of justice supports orderly communities and organizations in which people secure human rights and meet humane needs
o Criticism: Rawl’s principles are resplendent in theory and may even inspire some business decisions, but they are best applied to an analysis of broad societal issues
8-35
The Utilitarian Ethic
o Origination: Line of English philosophers, including Jeremy Bentham and John Stuart Mill
o Basic premise: The greatest good for the greatest number – actions that promote happiness are right and actions that cause unhappiness are wrong o Utilitarianism requires comparison of the ethical
consequences for each alternative in a decision o It can permit violation of an ethical rule if, in the
sequel, that leads to the greatest good. Ex:Geffen
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The Utilitarian Ethic
o Criticism: o In practice it has led to self-interested reasoning o Because decisions are to be made for the
greatest good of all, utilitarian thinking has led to decisions that permit the abridgement of individual or minority group rights
8-37
Reasoning with Principles
o The use of ethical principles, as opposed to the intuitive use of ethical common sense, may improve reasoning, especially in complex situations
o Example: You are a manager in a division that was going to be closed o Utilitarian o Right o Justice
8-38
Reasoning with Principles
o Based on the application of utility, rights, and justice, the manager’s decision in the text example to remain silent is acceptable
o Some judgment is required in balancing rights, but the combined weight of reasoning with all three principles supports the manger’s decision
8-39
Character Development
o Character development is a source of ethical behavior separate from the use of principles reasoning
o Virtue ethic: Ethical behavior stems from character virtues built up by habit
o Aristotle believed that by their nature ethical decisions require choice, and we build virtue, or ethical character, by habitually making the right choices
8-40
Character Development
o The virtue ethic requires conscious effort to develop a good disposition by making right decisions over time
o Then acts are generated by inner traits ingrained from repetition and they reflect the disposition of a virtuous character o CEO of Tri-United Technologies sent a check to
the city to compensate it for his periodic failure to put coins in parking meters
8-41
Character Development
o Acting inner virtue is not a rejection of the study and use of philosophical principles, which can still inspire and delight the moral imagination
8-42
The Neural Basis of Ethical Decisions
o The transitional view in moral philosophy is that ethical decisions, particularly right ones, come from deliberate reasoning that relies on principles and maxims
o A fast, unconscious, and automatic process in neural circuits causes ethical judgments to appear in our awareness without any feeling of having gone through a reasoning process
o There is no specific part of the brain that makes ethical decisions
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The Neural Basis of Ethical Decisions
o Functional magnetic resonance imaging (fMRI): A method used to map activity in neural networks during ethical decision making
o Emotions have a central role in ethical thought because of their importance to adaptive behavior
o Moral intuition creates awareness of a moral judgment without any memory of having gone through a step-by-step reasoning process
8-44
The Neural Basis of Ethical Decisions
o Moral intuition is a form of social intuition that is adaptive to the social environment and predominates in individual ethical decisions
o There is considerable individual variation in perceptions of right and wrong
o Neuroscience, as it removes physiological mysteries, reinforces the ethical teachings of centuries
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Practical Suggestions for Making Ethical Decisions
o Pay attention to your ethical intuition o Consider tactics that illuminate alternatives o Critical questions approach: A method of
ethical reasoning in which insight comes from answering a list of questions
o Sort out ethical priorities early
8-46
Practical Suggestions for Making Ethical Decisions
o Set an example o Thoughts must be translated into action, and
ethical deeds often require courage o Cultivate sympathy and charity toward others o Ethical perfection is illusory
8-47
Concluding Observations
o There are many paths to ethical behavior o Not all managers appreciate the repertoire of
principles and ideas that exist to resolve the ethical problems of business life
