If you had to choose just one of the philosophical approaches discussed in Lecture 2 (Business Ethics - Normative Theories) to guide your decision making, which would you choose? Why? If you had to rank them from most to least helpful, how would you rank

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Home >English homework help >If you had to choose just one of the philosophical approaches discussed in Lecture 2 (Business Ethics - Normative Theories) to guide your decision making, which would you choose? Why? If you had to rank them from most to least helpful, how would you rank

Ethics & Governance Lecture 2: Business Ethics – Normative Theories

Learning objectives for today

Define moral philosophy, moral agency and moral responsibility

Discuss the two normative ethical theories/perspectives (moral philosophy) – consequential/teleological and non-consequential/deontological

Compare and contrast each of the normative ethical theories

School of Management

Moral Philosophy

Provides prescriptions i.e. tells us what we should/ought to do, how we should live our life and resolve ethical dilemmas

Provides justifications that are applicable to all people (unlike theological ethics) (Hartman & Desjardins, 2008)

Is primarily concerned with the individual person, not social groups such as business organisations

School of Management

Moral Agency and Moral Responsibility

An agent in ethical theory (De George, 1992):

is any entity that acts and is subject to ethical rules,

is a rational being, and

is not an agent for anyone or anything else (e.g. once an agent accepts an ethical theory, he will be self-governing himself and hence will act in his best interests and no one/anything will influence his actions.)

A moral agent’s actions and acts can be evaluated in moral terms.

School of Management

Moral agency and moral responsibility

The central concept of moral agency is moral responsibility i.e. we can hold a moral agent morally accountable for his/her behaviour/actions

A moral agent needs to be rational (know what is right and wrong) and autonomous (have the right to choose an action)

Young children are not considered moral agents (the reason advertising to children is unethical)

School of Management

Moral responsibility

Morally responsible when:-

-knowingly & freely performed the act

-knowingly & freely failed to prevent the act

NOT morally responsible if:-

-did not possess all relevant information

-were unable to prevent the act

Relativism – actions relative to culture

A corporate justification/excuse?

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Examining Moral Responsibility

Harming employees

James Hardie – asbestos (1930’s) see http ://www.abc.net.au/7.30/content/2012/s3495057.htm

Environmental degradation

Union Carbide – Bophal

BHP – Ok Tedi mine

School of Management

Ethical principles in agent-principal relationship (De George, 1992)

An agent acts for/represents a principal

Agents are not ethically allowed to do what the principals are not ethically allowed to do.

Agents cannot exonerate themselves for unethical actions. Agents are responsible for the actions they perform, whether they are under command or on behalf for another.

The principal is morally responsible for the actions of their agents. Agency involves the delegation of authority but not the complete delegation of responsibility.

An agent (e.g. manager or housing agent) acts for/represents a principal (e.g. shareholder or house owner)

Agents are not ethically allowed to do what a principals are not ethically allowed to do (e.g. hiding some defects in a house)

Agents cannot disclaim liability for their actions (e.g. cannot claim that he does not know about the defects if informed). They are morally responsible, whether under command or on behalf of the others

The principals are morally responsible for the actions of the agents. Agency involves the delegation of authority (to sell the house) but not the complete delegation of responsibility (not willing to pay for the repair of the defects)

Normative theories on ethics

A value judgement on what a person should do rather than what they probably will do (e.g. one should always be honest in business dealings)

They serve as a criteria for judging the ethics of a situation

They provide a philosophical approach for making ethical decisions

Divided into consequential and non-consequential theories

School of Management

Moral philosophy: Two main perspectives

Non-consequential, Duty based or deontological

Kantian ethics

Justice ethics

Consequence based or teleological

(Ethical Egoism)

Utilitarianism

Virtue ethics

Consequential (Teleology or End-based) vs. Non-consequential (Deontology or Duty-based) Theories

Egoism

Egoism views that an act is morally right if and only if it best promotes an agent’s self interests.

People should make decisions that maximise their self-interest

E.g. A CEO (agent) may recommend a “lousy” director with the self-interest that the latter will give him some benefits in the long-term (e.g pay rises).

Is this ethical? Is it reasonable and impartial (Rachels, 1993, Lecture 1)

Egoism argues “greatest good for oneself”. The emphasis is “I”.

Advantages and disadvantages of egoism

Simple argument, suits the argument/notion of self-interest

However:

each person must allow everyone else to pursue their self interests

it cannot be universalised

it assumes we live among strangers, we do not care for anyone or anything.

Is this really an ethical theory?

We need to balance self interest with the interest for others

Ignores wrongs. One’s self-interest = many sufferings. Imagine closing a company in a weak economy.

Utilitarianism

Utilitarianism: concerned with making decisions that promote greatest overall amount of good in the world.

An ethical decision is one that maximises good consequences over bad consequences for the greatest number of people.

Consequences include happiness (pleasure, health and satisfaction) and pain (sadness, sickness and disappointment).

Best decision is one that yields greatest net benefit.

Utility concerns “greatest good for the greatest number”. The emphasis is “majority”.

Rule and Act utilitarianism

Rule utilitarianism – Examine the consequences of having everyone follow a particular rule and calculate the overall utility of accepting and rejecting the rule. E.g. “Bribery is wrong”

Act utilitarianism – Examine the consequences of each individual act and calculate the utility each time the act is performed. E.g. “Bribery is generally wrong but it may be acceptable in this case if it produces overall net benefit”.

Ferrell et al. (2005)

Applying utilitarian principles

Define the problem

Identify the stakeholders that affected by the problem

List the alternative courses of action for resolving the problem

Identify and calculate the short- and long-term costs and benefits for each alternative courses of action

Select the course of action that yields the greatest sum of benefits over costs for the greatest number of people.

An Example

Define the problem – Company’s profitability falling

Identify the stakeholders that affected by the problem – Employees, Govt. (loss of income tax), Consumers (served poorly)

List the alternative courses of action for resolving the problem – Retrench staff, close whole company

Identify and calculate the short- and long-term costs and benefits for each alternative courses of action

Select the course of action that yields the greatest sum of benefits over costs for the greatest number of people – 20%-80% retrenchment

Advantages of utilitarianism

Cost-benefit analysis fits with business decision making

Provides an objective and attractive way of resolving conflicts of self-interest

Fits into people’s intuitive criteria for deciding moral problem

Making ethical decisions based on the greatest good for the greatest number of people seems to have a logical basis

Limitations of utilitarianism

The nature of the consequences: bias. Need to retrench 20% randomly so that 80% of staff are kept. So as to satisfy the shareholders. Is financial outcomes the best? Too much focus on ethical ends can lead to ignoring moral consideration of the means.

The measurability of consequence: difficult to evaluate all consequences. For example, those who are affected in the future.

Stakeholder analysis: rights of some stakeholders (e.g. suppliers who have been supporting the company) are ignored

Fairness: e.g. workers who are retrenched lack representation or voice in the decision

difficult to evaluate all consequences

rights of minorities may be sacrificed

too much focus on ethical ends can lead to ignoring moral considerations of means

School of Management

Virtue ethics

A moral virtue is an acquired disposition that is valued as a part of an individual’s character (Ferrell et al. 2005)

Teleological?

Focuses on the integrity of the moral actor rather than the act.

Strengths

- Considers actor's character, motivations and intentions

Character defined by one's community

Limitations

May be limited agreement about standards

Community may be wrong

(Trevino & Nelson, 2006)

Virtue and Moral Agency (MacIntyre, 1999)

A good human being possesses two core virtues:

Integrity – to have educated oneself so that one is unable to be one kind of person in one social context, while quite another in other contexts. Across situations

Constancy – to pursue the same goods (=objective) through extended periods of time. Across time

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Deontology - Duty based theories

The deontological (duty) theories view actions as either right or wrong independent of their consequences.

The moral status of an act, is judged not by its consequences but by the agent's intentions (Etzioni, 1996)

Morality involves a respect for each individual's rights by performing one's corresponding duties (Singer, 1997).

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Kantianism

decisions based upon abstract universal principles: honesty, promise keeping, fairness, justice, respect.

focus on doing what is 'right' rather than doing what will maximise societal welfare – what is good (as in utilitarianism)

Two formulations of the categorical imperative

“Always act in such a way that the maxim of your action can be willed as a universal law of humanity.”

“Always treat humanity, whether in yourself or in other people, as an end in itself and never as a mere means”: ethics of respect

Motive/intention of the act is important than outcome

If you feel comfortable allowing everyone in the world to see you commit an act and if your rationale for acting in a particular manner is suitable to become a universal guiding principle, then committing that act is ethical

Emphasizes moral rights, e.g. treat everyone with respect. Hence, slavery/child labour is wrong under Kantianism though it may be fine under egoism/utility.

Comes up with “categorical imperative” = universal principles such as honesty, integrity, dignity, kindness.

Kantianism

Motive/intention of the act is important than outcome

Intuitive – fit into one’s sense of morality

Produces universal moral guidelines, e.g. honesty

Motive is always taken to be more important than outcome. At times, this is debatable. E.g. bribery to get job done. But what if everyone starts bribing to get job done?

(Hence, it is often argued that Kantianism should be considered in conjunction with utilitarianism thinking)

Often involves emotions, which can be wrong at times

Difficult to determine which rule, principle, right to follow/takes precedence. E.g. Kantianism may indicate that free speech rights is “good”; but privacy of others is also “good”.

Advantages & Limitations of Kantianism

Justice Ethics

Justice – fair treatment and due reward in accordance with ethical or legal standards

Managers adopting this theory will provide the same rate of pay to workers who are similar in level of skills, responsibility instead of gender, personality, favouritism

Protects the interests of stakeholders who may be under-represented or lack power

The basic moral question is:

How fair is an action?

Types of Justice

Distributive – Based on evaluation of outcomes or results. Benefits derived; equity in rewards

Procedural – Based on processes or activities that produce the outcome or results. Decision-making process; level of access, openness and participation

Interaction – Based on evaluation of one’s perception of whether he/she is treated fairly. Communication process

Applying Justice Ethics

Benefits and burdens are identified

Benefits and burdens are assigned to the stakeholders

A judgement is made to determine whether the benefits and burdens are distributed fairly and equally

Comparing Utilitarianism and Justice Ethics

Quite similar in the definition of costs (burdens)/benefits

But, utility is based on net gain which may not consider the issue of fairness

Advantages and Limitations of Justice Ethics

Intuitive – fit into one’s sense of morality

Useful as it protects those who lack voice/influence

Benefits/burdens can be hard to define/quantify

The rights of some may have to be sacrificed in order to ensure a more equitable distribution of benefits

Need to be highly trained (i.e. Judges etc.)

Confucian Ethics

Main principles:

Humanity to others and have esteem for yourself

Proper action and social harmony

Sense of right

Respect to/for elders

Emphasize making profits with human virtue.

Consequential vs. Non-Consequential

An issue of benefits vs. right

Most people in most situations tend to use both approaches

On the other hand, empirical evidence shows that managers place a greater concern on utility (outcomes) than rights/justice

Summary - Why study normative theories?

Provides alternative approaches to analysing an ethical problem

Provides insights from a number of perspectives that is generally not achievable from a single theory

Likely to improve decision maker’s moral awareness and understanding of the ethical issues involved in the dilemma

Review: Application of Theories

Sam, a sales representative, is preparing a sales presentation for his firm, Midwest Hardware, which manufactures nuts and bolts. Sam hopes to obtain a large sales order from a construction firm that is building a bridge across the Missis river. The bolts produced by Midwest have a 3% defect rate, which, although acceptable in the industry, makes it unacceptable for certain projects, such as those subject to sudden, severe stress. The new bridge is located near to the centre of a great earthquake zone. If Sam wins the contract, he will earn a commission of $25,000. But, if Sam tells the construction firm about the defect rate, the construction firm may award the job to a competitor whose bolts are more reliable. Sam is thus in a dilemma on whether to report the bolts’ 3% defect rate to the construction firm.

1. Egoism

Sam will probably choose the choice that maximizes his self-interest.

If his self-interest is personal wealth, value the $25,000 commission than the collapse of the bridge. Sam will likely keep quiet about the defect rate.

2. Utilitarianism

Sam will conduct a cost-benefit analysis to determine which alternative generate the most utility.

Building the bridge – improve roadways, transportation across river; create hundred of new jobs; boost the local economy; increase revenue for Midwest.

In contrast, bridge collapse kill or injure hundreds/thousands of people.

But, bolts only 3% defect rate; earthquake may not occur; few cars/people at time of disaster.

Seems that building the bridge create greater utility than not building. Sam will not report the defect rate.

3. Virtue Ethics

Sam probably tell the construction firm about the defect rate (honesty) – right thing to do because of the outcome of the potential loss of lives with the bridge collapse.

This action will contribute the most positively to his virtue/integrity as a decision maker

4. Kantianism

Sam will be morally responsible to inform the construction firm about the defect rate. The motive of moral action is more important than the potential loss of commission.

5. Justice

Sam will conduct a benefit-burden analysis for the various stakeholders (Midwest, construction firm, local community, government, competitor) and judge whether the benefits/burdens are fairly distributed among the stakeholders.

It is unlikely that with the construction of the bridge will lead to fairness. E.g. a better qualified competitor should be more suitable for the job; Lives may be lost for those using the bridge at the time of the disaster if Midwest’s bolts are used.

Sam will probably inform the construction firm on the bolts’ defect rate.

Guidant Consultant

Identify the main ethical issues of the case.

Identify the affected parties.

Identify the possible consequences of the executives’ actions.

Identify the executives’ obligations to the affected parties.

Do you think the executives of Guidant Corporation acted ethically? (justify your opinion with ethical theories)

Identify the main issues of the case:

Withholding information that a patient & doctor needed to make an informed decision.

Medical ethics obligation to explain all effects including possible negative side effects.

2. Affected parties:

Patients, doctors, Guidant, hospitals, families of patients, the advisor – Dr. Fogoros

3. Id possible consequences of the executive’s activities:

Deaths, litigation, loss of sales, drop in share price, damage to brand

4. Id obligations to the affected parties:

Disclosure of information, Compensation, honesty

5. Did they behave ethically? Id theory:

Utilitarianism - they believed they were doing it for the overall good – not forcing patients to have unnecessary operations (Y)

Deontological – based on rules set down by the medical ethics and government (N)

6. Dr Fogoras advice:

It gave Guidance an “out”

Is human life a statistic (collateral damage)

7. Dr Fogoras:

Advisor/consultant/critic

Defender of Guidant/advocate

Internal accuser to Guidant whilst defending externally

Manipulate public opinion by burying negative information in a positive news release.

Dr F was spit between pure medical advice and business strategy/marketing

Guidant Consultant (cont.)

What do you think Dr Fogoros statement that the decision of the Guidant executives ‘to withhold such data, while statistically defensible, was questionable’?

Identify the roles Dr Fogoros adopts and the different positions he takes. Do you think he acted ethically? How can his actions be justified?

Identify the main issues of the case:

Withholding information that a patient & doctor needed to make an informed decision.

Medical ethics obligation to explain all effects including possible negative side effects.

2. Affected parties:

Patients, doctors, Guidant, hospitals, families of patients, the advisor – Dr Fogoros

3. Id possible consequences of the executive’s activities:

Deaths, litigation, loss of sales, drop in share price, damage to brand

4. Id obligations to the affected parties:

Disclosure of information, Compensation, honesty

5. Did they behave ethically? Id theory:

Utilitarianism - they believed they were doing it for the overall good – not forcing patients to have unnecessary operations (Y)

Deontological – based on rules set down by the medical ethics and government (N)

6. Dr Fogoras advice:

It gave Guidance an “out”

Is human life a statistic (collateral damage)

7. Dr Fogoras:

Advisor/consultant/critic

Defender of Guidant/advocate

Internal accuser to Guidant whilst defending externally

Manipulate public opinion by burying negative information in a positive news release.

Dr F was spit between pure medical advice and business strategy/marketing

What is a moral agent?

When is an organisation morally responsible?

What is the difference between consequence (teleological) based and duty (deontological) based ethics?

What is the difference between utilitarianism, Kantianism and virtue ethics?

Review Questions

A moral agent, is a person capable of possessing moral qualities – i.e a rational being (an adult, not a child) that acts subject to moral rule (not a psychopath, someone that knows what right and wrong is and acts with reference to that) that is free to act (not a slave). We ascribe moral agency – the ability to be moral people and then hold them responsible and accountable for their actions.

An organisation is morally responsible they:-

-knowingly & freely performed the act

-knowingly & freely failed to prevent the act

NOT morally responsible if:-

-did not possess all relevant information

-were unable to prevent the act

(We reflected on BHP and Union Carbide in class – where the companies had information and failed to prevent large scale industrial disasters that cost lives and or destroyed the environment – James Hardie, knowingly and failed to prevent exposure to asbestos which led to specific lung cancer in workers (mesothelioma)

3. Consequence (teleological) – decisions made -> actions based on outcome/consequence of my action – for overall good. Duty-based (Deontological) – my duty is to follow teaching (religion, culture, parents); ethical traditions which direct us to act on the basis of moral principles such as respecting human rights (A theory of social justice that takes fairness as a primary social principle.)

Utilitarianism – greatest amount of good in the world. An ethical tradition that directs us to decide based on overall consequences of our act.

Kantianism – focus on doing what is right; treat with respect, not just as a means

Virtue ethics – directs us to consider the moral character of individuals and how various character traits can contribute to, or obstruct, a happy and meaningful life.

Utilitarian – strengths – most people feel that justice is done, it is easier to implement and defend based on the “common good”; weakness – minority groups and diversity are discriminated against, used as a defence for genocide, Hitler, Stalin, Pol Pot etc.

Kantian – strengths – having respect for the individual can be highly powerful; weaknesses – who decides what is right? Abuse by those in power?

Make policies for the benefit of the majority of workers, suppliers and customers; think through a number of “frames” before making a decision and therefore the quality of the decision making should be higher.

References

De George, RT 1992, 'Agency theory and the ethics of agency', in NE Bowie & ER Freeman (eds), Ethics and agency theory: An introduction, 3 edn, Oxford University Press, New York, pp. 59-74.

Etzioni, A 1996, 'A moderate communitarian proposal', Political Theory, v. 24, n. 2, pp. 155-71.

Ferrell, OC, Fraedrich, J & Ferrell, L 2005, Business ethics: Ethical decision making and cases, Houghton Mifflin, Boston.

Hartman, LP & Desjardins, J 2008, Business ethics: Decision making for personal integrity & social responsibility, McGraw-Hill irwin, Boston.

MacIntyre, A 1999, 'Social structures and their threat to moral agency', Philosophy, v. 74, pp. 311-29.

Singer, M 1997, Ethics and justice in organisations, Avebury, Aldershot.

Trevino, LK, & Nelson, KA 2006, Managing business ethics: Straight talk about how to do it right, 4 edn, John Wiley & Sons, New York.

Tomorrow

Psychological (Cognitive) Ethics Theories