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MGMT 1040
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MGMT 1040 – KEY DEFINITIONS A PRIORI: Outside of, prior to or independent of experience. This is a term used by Kant and many other philosophers to justify knowledge or beliefs that we have that cannot be understood strictly within the world of empirical experience. When we use the word “God” we understand a being that functions independently of experience and is not bound to it. Words like “freedom,” “morality,” “peace” or “intrinsic value” are difficult to conceptualize entirely within the world of experience except as they become manifest in human behavior, but such behavior does not fully capture the meaning of these words and so this meaning must in some sense be understood outside of the world of experience. CARE ETHICS/FEMINIST ETHICS: A moral theory that emphasizes the importance of partiality as an ethical principle in our relationships with individuals. We focus on the needs of the other person as defined by that other person. It has been associated by Carol Gilligan and others with feminist ethics, which critiques certain masculine characteristics (aggression, competitiveness) and challenges their classification as virtues. CARROLL’S PYRAMID OF CORPORATE SOCIAL RESPONSIBILITY: Carroll’s csr pyramid has four levels. At the base are a corporation’s economic responsibilities to earn a profit for shareholders and to satisfy its basic fiduciary responsibilities. The next highest level consists of legal responsibilities, which entail full compliance with laws and all applicable regulations. These first two levels are deemed to be “required by society.” The third level comprises ethical responsibilities, which include both ethical and social auditing (i.e., satisfying the requirements of license to operate both with respect to subjective TBL standards and objective, universal moral principles). This third level is deemed “expected by society.” Finally, at the fourth level, we have philanthropic responsibilities, which are largely centred around charitable donations, and are indicative of the corporation’s view of its own supererogatory obligations. This fourth level is deemed as “desired by society,” and can be an effective area of good corporate public relations. (Clearly, corporations do have csr responsibilities that exceed the merely philanthropic.) It is important to understand Milton Friedman’s free market view as expressed in his essay, “The Social Responsibility of Business is to Increase its Profits.” Friedman utterly rejects the fourth level under any and all circumstances. He accepts the second level in its entirely, as well as some objective elements from level three, which he very adroitly combines in the phrase “the rules of the game,” which he feels corporations must follow. His real focus is on level one, which must be the main objective. CATEGORICAL IMPERATIVE: A procedural principle developed by Kant that specifies what in his view is the required method for generating universal moral principles. Kant starts with hypothetical imperatives, which are entirely applicable to our material interests, and then determines whether such imperatives could be developed into universal principles that would have categorical moral validity, but only if they can be taken entirely outside of the domain of our material interests. (As such, the categorical imperative is an a priori principle.) Kant imagined three formulations of the CI: First Formulation: In Kant’s words, “Act only in accordance with that maxim through which you can at the same time will that it become a universal law.” A maxim is a rule you give to yourself, and Kant tries to conceive of maxims that are so important that they can become universal laws. Kant’s objective is to make this a logical formulation. If a moral law is a priori, universal and necessarily applicable in all circumstances, then violating it would have the force of a logical contradiction. Take one conditional statement that might be a possible categorical imperative: “If I ever need to borrow money, I will be absolutely committed to repaying my debts.” In formal logic, the validity of propositions is proved transforming a statement into its negative. Thus: “If I ever need to borrow money, I will make a false promise to repay it, knowing in advance I never will.” If we attempt to universalize this statement as a categorical imperative, we will destroy the entire possibility of financial credit because the trust that financial agents have in the character, commitment and capacity of debtors to repay their debts would be entirely destroyed, along with the whole enterprise of making promises. (Think of the story, “the boy who cried wolf” we were all told as children.) Thus, because the negation of our conditional statement generates a contradiction, the actual conditional itself must pass the test, and so on Kant’s view becomes a categorical imperative. 1 Notice how this applies to other conditionals that we recognize intuitively could never be categorical imperatives: “If I want to become happy, I will earn a million dollars.” This could never be universalized because that would destroy the whole motivation for becoming a millionaire in the first place. Second Formulation: In Kant’s words: “So act that you use humanity, whether in your own person or that of another, always at the same time as an end, never merely as a means.” If the first formulation seems convoluted, this second one is much easier to get. We are now compelled to treat humanity itself as intrinsically valuable, as an end-in-itself. Under this second formulation, the Ford Motor Company would be prohibited from making cost- benefit analyses of the value of human life and would spend the money needed to make engineering repairs on the Pinto. At the same time it’s very important to notice that Kant uses the word “humanity” and not the word “individual human agent.” Ford or any other corporation does not violate the second formulation by employing workers as the means to the end of company profits, so long as the corporate mission succeeds in improving the status of all men (humanity in general). On the other hand, if the demand of Dell Computer for coltan results in the slaughter of four million Congolese, then the second formulation is egregiously violated. Third Formulation: In Kant’s words: “…the idea of the will of every rational being as a will giving universal law.” What Kant has in mind here is the concept of autonomy, the idea that we are fully free and independent as moral, social and economic agents because we are all capable of formulating laws and imposing them on ourselves. If the second formulation serves as a “snapshot,” as an instant test of how well we have applied the categorical imperative at any given moment of time, the third formulation is dynamic, a motion picture that gives us an idea of moral progress through history. For what Kant has in mind here is the continuous activity of all citizens who legislate and impose laws on themselves, and then go on to impose laws on society through political institutions. Kant argues that if this process is consistent in all nations around the world, we have every chance to create historical momentum towards a world characterized by (an admittedly utopian) vision of “perpetual peace.” Through the categorical imperative Kant thus paints a picture of the evolution of human societies from individual moral standards to universal legal requirements. It is thus vitally important that you compare this Kantian vision of the world to the empiricist picture of this evolution that is developed by Hosmer on pages 64-67. It is only because of the realities of the modern world that we have to press forward and emphasize the pursuit of our self-interests constantly and continually. That is why, as social evolution progresses, we have the problems of “inadequate information,” “incomplete participation,” “inconsistent representation,” “inconsistent formulation” and “inconclusive composition.” (Please read the course notes on these sections of the Hosmer text carefully.) In Hosmer’s vision of moral progress, the complications of the modern world make the realization of our individual and collective interests more vitally important than ever because the minimum standard of living that we find psychologically acceptable keeps rising. As the problems of actualizing our interests become more complicated, we are increasingly in need of lawyers and their implementation of legal requirements. In Kant’s vision, on the other hand, we must detach from our interests in order to perfect the alignment of our moral standards with our legal requirements, a long term objective we are all compelled to work towards under the categorical imperative. Hosmer, by contrast, is virtually certain that “we cannot view this set of rules [the law] as representing the collective moral judgments of our society.” Why? Because “the social and political processes by which the law is formulated are too complex and too cumbersome – and perhaps too subject to manipulation.” Imagine what the world would look like if lawyers were committed to the perfection of the law, not to pushing the realization of their clients’ interests at all costs. The free market in lawyers means we have to pay big bucks for the best lawyer who has the best chance to actualize our preferences. There’s a joke about a mafia boss facing serious jail time who interviews a prospective lawyer. “Are you as good as Perry Mason?” (a hotshot TV lawyer from the 1950’s who always won his cases). “I’m better,” the lawyer shoots back. “Both of us get our clients off the hook, but Mason’s are innocent.” CHINA PRICE: The low production costs that have to be met by producers in order to get their goods sold through large retailers such as WalMart. WalMart then exerts market power to keep that price falling year after year. In order to meet this requirement manufacturers have to outsource their production to low cost nations like China. CORPORATE CITIZENSHIP: A subdivision of corporate social responsibility under which corporations themselves become proactive and take the initiative in identifying potential social and business problems before they become manifested in reality. It is 2 related to the concept of corporate personhood in viewing corporations as autonomous entities on whose behalf can be ascribed beliefs, attitudes, principled convictions. CORPORATE GOVERNANCE: The study of the principles, procedures and standards established to ensure that the management of corporations reflects the interests of shareholders, compliance with law and service to communities from which it gains its “license to operate.” The study is largely focused on the corporation’s organizational structures, principally the board of directors and its functioning committees. It is also concerned with the procedures under which shareholder interests are protected: the establishment of board committees, the arm’s length relationship between the board chairman and executive management, fiduciary responsibility, as well as a range of policies and procedures that sustain effective corporate operations. CORPORATE PERSONHOOD: A concept developed in U.S. law in the late nineteenth century after the passage of the fourteenth amendment, which inadvertently gave corporations various legal protections and benefits as legal persons without being accountable as moral persons. Corporations can enter contracts, sue other parties in court, gain protection from unlawful search and seizure with the same legal rights granted to human persons. CORPORATE SOCIAL RESPONSIBILITY: A broad set of concepts and principles through which is articulated the obligations businesses and corporations have towards their stakeholders and society at large. Corporations gain their authority through the “license to operate” they are granted (in theory) by society at large, and thus corporations are obligated to advance the interests of societies where they do business. Society builds the roads, regulates the airways, educates the citizens, all of which are source of corporate profits. DEONTOLOGY: A philosophy of ethics that focuses on actions or principles and their intrinsic value or nature as the locus for determining right and wrong. Deontological ethics privileges the right over the good and directly contrast with teleological theories, which focus on the consequences of actions. DEREGULATION: Emergent practices based on a broadly based philosophy of business which claims that business enterprises can make substantial efficiency gains through decreased regulation on the part of government agencies relative to the benefits societies have gained through regulation. As business practices have improved, much longstanding regulation has become redundant or wasteful and is kept alive by entrenched bureaucracies. While much deregulation has been justified, some forms have been catastrophic and have facilitated massive short term transfers of wealth from the public sector to the private sector, or the unjustified imposition of risk on to the public sector. The Savings and Loan disaster in the U.S. (from the late 1970’s to the early 1990’s) is an egregious case, with public losses exceeding $200 billion. Deregulation in Russia after the collapse of communism in the early 1990’s resulted in the massive theft of public assets. Deregulation of public utilities has had mixed results in different jurisdictions: some good, others egregious. With the growing complexity of business and technology, it is recognized that new forms of regulation are expensive or impractical, and thus self-regulation must play a greater role. This is especially true with respect to financial derivatives, which have become so complicated that it is a major challenge for the private sector to keep them under control - as evidenced in sub-prime mortgages –let alone the public sector. DIVISION OF LABOUR: A fundamental concept of economics developed by Adam Smith, which demonstrates that productivity is increased substantially when a given manufacturing process is divided among a larger number of workers, each with a greater specialization of function, rather than among fewer workers with more general responsibilities. (Smith did not consider the role of machine specialization.) Smith heavily qualified his approval of the productivity gains by noting that worker became more impaired mentally and spiritually through the endless repetition of specialized routines. DUE PROCESS: 3 A principle of responsibility exercised by the judiciary or government agencies when an agent is arrested, detained or is otherwise deprived of his freedoms of action or right to property. Under law he gains new rights to a timely resolution of official grievances, such that within a specified time limit after arrest he must be charged with a crime or released. If charged, he has the right to a fair trial to be conducted within reasonable time frames. ENLIGHTENED SELF-INTERST: The belief that self interest and moral requirements come into alignment over the long term if individual agents attend to the needs and interests of the groups or organizations to which they belong. EQUALITY CONDITION: A term coined by social contract theorist Thomas Hobbes in the seventeenth century to describe the material conditions that gave all men equal power. Regardless of inequalities of wealth or power, those without power could always seek to equalize their status through destructive acts that in Hobbes’ view had every chance to succeed and thereby lead to greater equality. ETHICAL RELATIVISM: An ethical theory stipulating first that questions of ethics have nothing to do with ontology or metaphysics, with mysterious forces that separate one human being from another, as is the case in ethical subjectivism; they thus pertain entirely to epistemological issues, i.e., to issues about which we have knowledge. On this basis the ethical relativist argues that what we know about morality is inextricably tied up with all our other beliefs, and so there cannot be any moral truth as such. We may find that the practices of some person or some culture are morally repugnant or disgusting, but we have no basis to dispute or challenge such practices because we recognize that moral practices are “relative” to the unique practices of the culture as a distinct social group. We cannot refer to something called “moral truth” to question these activities. Relativism is thus an ethical theory stipulating that there are no universally valid moral principles based on the claim that there is no universally valid ethical truth. The truth, as such, is relative to a given set of coherent beliefs or ideals that are held by an individual or community. This differs from ethical subjectivism, which holds that there could be ethical truths with universal application (charitable donations are virtuous), but leaves the adoption of principles related to such truths to the individual. Ethical relativism, on the other hand, can only secure its position by conceding that there are higher order principles and truths that make relativism possible. (It is true that there is no universally valid ethical truth; therefore, we must behave in such a way that each culture is left free to adopt its own standards.) Subjectivism requires no such second order logical structure; the truths acknowledged and the principles adopted are transacted within the individual mind based on forces that separate one mind from another. It is thus important to understand that relativism is vulnerable to the criticism that the theory itself is incoherent. The theory cannot be “right,” either as a theory of knowledge or as a theory of ethics, because by definition it denies any objective criteria of “rightness.” The relativist can defend him or herself against the charge of incoherence by arguing that truth itself is not objective, but only “intersubjective,” i.e., based on a common set of beliefs held by a community. Beliefs are thus “right” in virtue of the fact that they have this common consent, not because they can be verified objectively outside of the community. The relativist can thus accuse the critic of “begging the question,” that is merely assuming that there is an absolute conception of knowledge, an assumption that is the very issue in dispute. ETHICAL SUBJECTIVISM: An ethical theory stipulating first that questions of ethics are about “what goes on in the head,” with deep, mysterious issues of metaphysics and ontology that inquire into the questions of what separates one human soul from another, or one human mind from another. On this basis the ethical subjectivist argues that morality is deeply personal; someone can tell us about his/her moral beliefs and express emotions about these beliefs through behavior, but we know from the depth of our own mental states that there is something uniquely personal about our ethical beliefs. Thus, it’s quite possible that through our inner states we could discover some powerful moral truths – even truths that might have some universal application - but another person might stumble upon her own truths that are very different but inspire an equally deep commitment. It’s possible to have collective subjectivism based on some idea of a “collective consciousness.” (A Nazi leader once said, “I think with my blood,” which captures the idea perfectly.) Sometimes ethical subjectivists are hostile to metaphysics and go 4 straight to the point about personal moral commitments, but the metaphysical assumptions are important, even if they’re ignored. More generally, ethical subjectivism should be understood as an ethical theory stipulating that moral principles apply only to the individual agent and thus what constitutes right action could vary from one individual to another. This theory contrasts to moral objectivism, which holds that moral principles have universal and objective validity. Subjectivism differs from egoism, which compels the individual agent to attend to his own self-interest. Under subjectivism, an agent may choose to give away his wealth to charity under a principle he believes applies only to himself. ETHICS AUDITING (ETHICS AUDIT): A systematic investigation of an organization’s policies, procedures, practices conducted in order to identify actual or potential non-compliance with objective ethical principles, as well as incidents of unethical behavior. As the standards are objective in nature, ethics audits are preventive, as well as remedial in nature. We can objectively measure the effectiveness and reliability of a company’s code of conduct on this basis, as well as determine the extent of compliance with the code. It is very important to distinguish an ethics audit from a social audit. Social auditing pertains to the subjective, TBL-oriented objectives a company has set for itself. A company could be very effective in its issues management and could be building impressive levels of social capital and still be deficient in fulfilling its license to operate because crucial objective standards – e.g. meeting carbon emissions standards or failing to correct severe financial risks – are not being addressed. A company could be generating conflicts of interest or moral hazards; the company itself might be in the process of transforming itself into a “too big to fail” or “too big to bail” organization. Because of the preventative dimension, a company might be obligated, in the face of uncertainty with respect to a given technology or state of affairs, be obligated to initiate the precautionary principle. EXPORT OF EXTERNALITIES: The moral permissibility of exporting dangerous products, the use of which is banned in the home nation, to developing countries where no such prohibition exists. This also includes the relocation of polluting industries to developing nations, so the principle is focused on the negative externalities that are being exported. This violates the principle of impartiality in international contexts and is a phenomenon directly related to globalization. It is a direct imposition of harm on involuntary stakeholders; i.e., poor people in developing nations who typically bear the brunt of negative effects while gaining little of nothing in terms of the benefits of globalization. This can also apply to phenomena in international finance, such as the “export of inflation,” which was a problem in the early 1970’s. This problem was most evident in the seminar on pesticides (1040F), but was also an issued in bottled water (plastic bottle refuse is exported to China). The Summers memo on page 61 of the course pack (the “migration” of polluting industries) is a particularly egregious example, but the phenomenon applies to cigarettes, pharmaceuticals, DDT and a number of other products. It is important to note that the phenomenon is not always asymmetrical and can be linked to many other issues pertaining to globalization. Regarding pesticides, the “circle of poison” phenomenon (page 521 of the course pack) describes how the residue of banned pesticides used in developing countries is exported back to us in the food products we import from these foreign jurisdictions. The same thing happens to chemical components in pharmaceuticals that are exported from China to American and European markets. Under globalization and the inexorable price cutting it demands, product safety standards have significantly deteriorated, both for products manufactured in foreign jurisdictions and for products imported into wealthy nations. A new dimension of this problem has recently developed with respect to the export of waste products: nuclear waste to Russia, used computer parts to China. In a recent news event, a barge carrying toxic waste was refused admittance to several European ports because the barge owner refused to pay the costs for detoxifying the waste. The barge was sent to a Western African nation and the contents dumped in an open landfill when appropriate bribes were paid. It is also important to note that the externalities exported don’t always turn out to be negative externalities. Used steel petroleum canisters dumped on to the beaches of Trinidad after the end of World War II were turned into steel drums by enterprising locals, who created the basis of one of Trinidad’s cultural industries. FIDUCIARY RESPONSIBILITY: 5 The legally established obligations of corporate managers to fulfill their duties to shareholders under a relationship of trust to maximize the profits of the company. An ethical issue is created because such duties often conflict with genuine moral responsibilities that can be ascribed to corporations with respect to stakeholders. FRONTIER CAPITALISM: Capitalism in its earliest stages, such as could be seen in England in the seventeenth and eighteenth century, or in China and Russia today. It can be characterized by lawlessness and weak institutions (Russia in the 199
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