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Lecture 2

Week 2 - Moral Standards

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York University
Administrative Studies
ADMS 3660
Mark Schwartz

Ethical Responsibility Seven moral standards: (1) universal ethical values; (2) relativism; (3) egoism; (4) utilitarianism; (5) Kantianism; (6) moral rights; and (7) justice. 1) Universal Ethical Values The first moral standard is really a collection of core ethical values. These values have been determined to be universal in nature, as they exist in one form or another throughout the world among different nationalities, religions, and even corporate codes of ethics. Some have referred to this moral standard as “common morality” whereby basic ethical values are understood and accepted to be applicable to everyone. On this basis alone they are considered to be important to abide by. One could also argue that in some respects, this moral standard is closest to Aristotle’s virtue ethics, although the virtues that he suggests are somewhat different to those proposed below (e.g., goodness, excellence, reasoning, and intelligence). iii The initial core value is trustworthiness. There are a number of other values that must be exhibited before an individual or a firm would be considered trustworthy: honesty; integrity; promise keeping; loyalty; and transparency. The first is honesty; firms and individuals must be honest with their stakeholders. Second is integrity. While some have equated integrity with ethics (i.e., you act with integrity therefore you are ethical), this would not be accurate. The definition of integrity literally means ‘wholeness’ or ‘being complete’, which is achieved by acting consistently according to one’s (or the firm’s) stated values or principles. In other words, one sticks to their principles, or walks the talk, even when there are pressures (such as financial pressures) to do otherwise. When firms have a mission, credo, or code of ethics, do they act accordingly and thus with integrity? One should note that based on this definition, one could act with integrity, but still be unethical. For example, the mafia, the Nazis, and terrorist organizations all act with integrity (i.e., consistently according to their stated beliefs). However integrity is a key component of trustworthiness. A second component is promise keeping, which doesn’t just mean keep your promises, but don’t make promises you may not be able to keep. For example, when it comes to confidentiality in business, when someone says “I want to tell you something confidentiality, can you keep it a secret?”, the response really should be “it depends”. For example, what if the information could lead to the direct harm of others if not disclosed? Loyalty is also part of trustworthiness, in other words, acting in the best interests of one’s firm, profession, managers or work colleagues, customers, suppliers, or even one’s family. The main difficulty with loyalty is when there is a conflict, for example between one’s firm and one’s family, which should take precedence? Transparency is also important. In order for a firm to be considered transparent, sufficient relevant information must be disclosed on a timely basis for interested stakeholders to properly judge the actions of the firm (today this might be achieved through the publishing of financial and non-financial reports that are then audited). The second core value is responsibility, or what is often referred to as accountability. This is not just a question of an individual doing what they are supposed to do, but being accountable for one’s actions. Responsibility is about acknowledging when one has made a mistake, or has been at fault. Often as individuals we tend not to admit fault, even when we clearly realize that we are 1 at fault. For business firms, this can often be the case due to pressures from the firm’s legal department to act defensively, i.e., once the firm admits fault, the lawsuits commence. While this may be true, there may also be cases whereby firms ultimately benefit financially more by immediately admitting fault and by sincerely apologizing to those who were harmed. For many plaintiffs (i.e., the injured consumer) of lawsuits, all they may want to hear from firms and their executives is that they were wrong, and that they are sorry for the harm caused. The last thing many plaintiffs want to hear is that someone else (e.g., a competitor, the government, or the consumer himself or herself) is at fault. Responsibility also means that once you admit fault, you take reasonable steps to correct the mistake so that it will not happen again in the future. The third core value is caring. This ethical value is about taking necessary precautions to iv prevent unnecessary harm in order to be considered a caring firm. The reason for indicating ‘unnecessary’ harm is that in the production of goods and services, there will always be some harm. For example, the production of cars means that people will be killed in car accidents, but on this basis alone we would not prohibit cars. Firms can be expected to take reasonable steps however to prevent harm from occurring, and certainly can disclose to others (e.g., through warnings) of potential risks and dangers. But caring goes beyond avoiding unnecessary harm. It also means doing good when it requires relatively little cost to oneself. This concept can be used to justify corporate philanthropy when the firm is the only party that can do tremendous good that no one else is willing or able to do, and the firm can clearly afford to do so at the time or there is no overall cost to the firm. The last component of caring is being sensitive to others feelings, for example being sensitive to the manner in which layoffs take place or by trying not to offend others through potentially offensive advertising practices. The fourth core value is citizenship. As an individual citizen, one has expected obligations, including obeying the law, assisting the community, and protecting the environment. One can argue that firms should also have these same obligations, as citizens of society. This core value can also be used to justify many philanthropic acts, especially community involvement, environmental practices, or even contributions to environmental or community organizations. 2) Relativism: This conventionalist approach is based on the moral theory of ethical relativism. In fact, it might be one of the more dominant approaches used around the world by individuals and even firms to establish right versus wrong. In other words, one asks the question: Does the majority of a particular reference point believe that the action in question is morally acceptable? Many refer to this position as ‘When in Rome, do as the Romans do’. Relativism rejects the view that there are single, universal standards or rules to determine the morality of an act. In order to ask this question however, one needs to identify the particular reference point. In terms of analyzing business cases, the following are the typical reference points: the firm itself (which could include the employees, managers, and/or board of directors), industry/competitors, customers, or the community. One can turn to levels of activity, polls or surveys, legislation, or code of ethics as evidence of what the majority of a particular reference believes is morally acceptable. For example, should you open up a store when the law prevents doing so on a particular holiday? Using relativism, one could refer to the majority of the competitors; will they also be opening up? (And therefore presumably believe it is morally acceptable to do so?) What do the majority 2 of employees want you to do? The majority of your customers? The majority of the neighbourhood community? Based on relativism, one is justified in opening up the store as long as the majority of one or more reference points believes at a particular point in time that it is morally acceptable to open up. For teaching purposes however, the views of a single person should not constitute sufficient justification for determining what is ethical (this is known as ‘naïve relativism’), there must be a group reference point that is referred to (known as ‘cultural relativism’), otherwise the standard in my opinion collapses completely. Criticisms: There are many potential deficiencies to using relativism as a moral standard. First, if one relies on relativism, moral judgments can easily change based on time, circumstance, or culture. It almost becomes too easy to justify one’s action. As long as the majority of the firm, industry, or any other reference point believes the action is morally acceptable, then the argument ends. Even if the majority position on a particular matter changes from one day to the next, it would still be considered morally legitimate under relativism. Second, an application of relativism can lead to certain results that might be considered problematic. For example, consequences or individual moral rights can be ignored: if the majority of a particular society accepts genocide or female circumcision as being appropriate, then such practices are ethically justified and must be respected. Activities such as slave labour in the chocolate industry , thev padding of expense accounts by an entire group of employees, or bribery that was approved by a vi team of executives , would also all be considered morally acceptable according to relativism. As a matter of practical application, there may also be difficulties in establishing the relevant community to refer to, given the internal pluralism in most countries as well as due to economic globalization. Finally, there may be some philosophers who would reject relativism as a moral standard, yet still argue that community standards remain important to consider when vii determining what should be considered morally acceptable. 3) Egoism: Egoism indicates that what is perceived to maximize the long-term best self-interest of the individual is the morally appropriate action. For the purposes of business decisions, egoism would also include the best interests of the firm, typically based on either perceived long- term profits or share value. For the individual businessperson, the extent of the ‘guilt’ they might feel upon making a particular decision, should also be taken into account in the calculation of perceived best self-interest. One can argue that egoism (i.e., self-interest) is the basis of laissez-faire capitalism, and is often referred to in connection with 18 century economist and moral philosopher Adam Smith (but only as ‘conditional egoism’, in other words self-interest is acceptable but only when it leads to the betterment of society). Others typically connected with egoism as a moral standard include economist Milton Friedman and philosopher Ayn Rand in her various novels such as The Fountainhead or Atlas Shrugged. For many, such as Smith and Friedman, individual egoism is often justified in terms of the moral standard of utilitarianism (discussed below) in that self-interest moves the marketplace towards optimal efficiency. viiiIt may be that egoism has been the most dominant moral standard driving firm and individual behaviour in the marketplace since the beginning of commerce. Criticisms: Many criticize egoism as leading to significant socially irresponsible or unethical actions of individuals or firms. Some of the more significant scandals might include Enron, WorldCom, or Bernie Madoff’s massive Ponzi scheme. Many have suggested that the 2008 U.S. financial crisis, primarily involving sub-prime mortgages, was caused by unrestricted egoism or 3 self-interest on the part of mortgage lenders and investment banks. ixTypically, such criticism of egoism is contingent on regarding egoism as equivalent with the notion of ‘greedy’ individuals or firms, often leading to highly problematic consequences for others who are taken advantage of. This comparison however is not accurate. Greed shouxd only be considered as representing one extreme end of the entire spectrum of egoism. Greed has been defined as acting to gain something, typically money, wealth, power, or status, in an insatiable (i.e., never satisfied) and excessive manner. In addition, one is willing to cut ethical corners, harm others, or even break the law (if they don’t think they will get caught) in order to fulfill their insatiable desires. Greed should be contrasted with other expressions of egoism, such as selfishness (i.e., concern excessively or exclusively with oneself; love of oneself; or inability to share with others), self- interest (i.e., owns own perceived interest or material well-being); or acting out of enlightened self-interest (i.e., initially focus on the interests of others based on the belief that by doing so one’s own best self-interest will be served). In other words, one can argue on behalf of egoism, while still rejecting the notion of greed as ethically unacceptable. Another criticism of egoism as a moral standard simply is that self-sacrifice or altruism becomes unacceptable in society. For many, they would not wish to live in such a society, and thus reject egoism as a guiding ethical principle. 4) Utilitarianism: This moral theory focuses on the consequences of a given action, and in this respect is a teleological or consequentialist theory. It is often expressed by the classic phrase from 19 century philosopher Jeremy Bentham: “The greatest good for the greatest number of people.” His other important statement is that: “The greatest happiness of the greatest number is the foundation of morals and legislation.” Unlike egoism, which focuses only on the consequences of an action upon a particular individual or firm, utilitarianism focuses on the impact of a decision on all those affected. The typical process for applying utilitarianism is to first identify all the alternatives, determine the costs and benefits for each stakeholder (e.g., shareholders, employees and their families, customers, suppliers, competitors, community, etc.) under each alternative, and then select the alternative that produces (or tends to augment) the greatest net good (i.e., also referred to as utility, happiness, benefit, pleasure, or absence of pain). As one classic example, there is a runaway train, which is about to crash into another train with 100 passengers. You have the ability to switch the train tracks so that the runaway train will crash into a train with 50 people. If you have no other information about the passengers, and you must make an immediate decision, do you switch the tracks so that only 50 people are killed? If the answer was yes, then you appear to be deciding on the basis of utilitarianism, i.e., the greatest net good for all those affected. One has to be careful however, as there are several traps to fall into when applying utilitarianism. First, if the sum total of the benefits is greater than the sum total of the costs for a given action, is it moral? The answer is ‘no’, only when net benefits are greater than all other possible alternatives. Second, if the net benefits are greatest for the person performing the action versus all other possible alternatives, is it moral? Again, the answer is no, only if the net benefits are greatest for all people affected by the action. Criticisms: One major criticism of utilitarianism is with respect to the difficulties in measuring utility. For example, how does one put a value on life or health? Such determinations are often subject to individual, subjective assessments. As well, it is very difficult to reliably predict the 4 future, and it is not always so clear whether something is a benefit or a cost. While this remains an important criticism, utilitarian’s might respond by suggesting that despite the difficulties, society does place economic value on things like life (e.g., life insurance policies, lawsuits, etc.). In addition, one can still attempt to make reasonable predictions about the future. Others, known as ‘preference utilitarian’s, have their own response to any concerns raised over measurement of utility. They would suggest that what is determined as ‘good’ or as a ‘benefit’ should simply be based on whatever action leads to the greatest satisfaction of the preferences and desires for all those involved (which can be unique for each individual). xi The second major criticism of utilitarianism is that it is either ‘unable’ to address or possibly ‘ignores’ other moral standards, such as moral rights or justice (described below). This is even more problematic if the firm or industry could keep secret the violation of rights or justice. One could justify a totalitarian regime or a sheriff arresting an innocent man to prevent a racial riot on the basis of utilitarianism. Pharmaceutical firms would be justified testing new drugs on thousands of uninformed African patients in order to develop drugs that could save millions of other lives.xii But in doing so, the moral standards of moral rights (particularly those in the minority) or justice would be violated. One response of some utilitarian’s is to apply ‘rule’ utilitarianism, whereby the net benefit of adopting a general rule is considered, as opposed to the net benefit of a particular act (i.e., ‘act’ utilitarianism). 5) Kantianism: The next moral standard is based on one particular philosopher, and is significant enough to deserve its own representation as a distinct standard. The standard, known as ‘Kantianism’, is based on the work of 18 century German philosopher Immanuel Kant. For Kant, the moral worth of an action is based on the reasons or motive for acting (i.e., one’s ‘good will’). The motive to act should be based on one’s moral duty, as opposed to inclination or self- interest. As a duty-based principle, this moral standard is referred to as a form of deontology (or non-consequentialism). The question then becomes, how does one determine one’s moral duty? Kant developed a particular principle to determine moral duty, which he called the ‘categorical imperative’. While there have been numerous explanations of Kant’s categorical imperative, I would suggest the following three different formulations: (i) universalizability, (ii) reversibility; and (iii) respect. Universalizability. Kant's first formulation is that one should act only according to that maxim (i.e., rule) by which you can universalize it. He states: “Act only according to that maxim whereby you can at the same time will that it should become a universal law without xiii contradiction.” The basic idea is that if the rule applied universally was self-defeating, then the act is immoral. Upon first reading however, it’s not very clear what Kant means by this, or how it could ever be applied. In fact, this formulation of the categorical imperative may be one of the more difficult moral principles to understand as well as apply to cases. The following will provide a more simplistic example in an attempt to demonstrate how universalizability might apply. Consider the following: Should you drive on the shoulder of a busy highway? An egoist approach would focus on the long-term perceived self-interest. Utilitarianism would determine the net benefits to all those affected, taking into account your own needs (e.g., not to miss an important meeting) versus the possible harm caused to others as a result. To answer this 5 question according to universality however, one does not consider the consequences of the action. Instead, one first needs to determine the intended purpose of the shoulder of the highway, i.e., that the shoulder exists for emergency vehicles (e.g., police, fire, ambulance) or for car breakdowns. If everyone were to drive on the shoulder, would the purpose of the shoulder become self-defeating? The answer is yes, therefore according to Kant’s universalizability principle; one should not drive on the shoulder. In other
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