Does Business Ethics Make Sense? Amartya Sen - the importance of a claim depends to a great extent on what it denies ( to understand what the conviction rests on, to be able to understand its inadequacies - in regard for people’s thoughts that we do not need ethics - early philosophers used to believe economics was a branch of “practical reason” - Aristotle, Ockham, Aquinas, Kautilya Maimonides etc. - official story;; this changed with Adam Smith ;; father of modern economics ;; made it so that economics was scientific and hard headed (no ethics, or morals and moralizing) Exchange Production and Distribution - butcher brewer and baker example ;; - Wealth of Nations - “ it’s not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own interest. We address ourselves, not to their humanity but to their self love...” - they want our business and we want their products, there seems no need for ethics - all that is needed is our regards for our own respective interests, and the market is due to bringing about the mutually gainful exchanges - he did in fact insist that self interest would do fine to motivate the exchange of commodities but it’s also a very limited claim - so what about the problems associated with production and distribution and to the aspect that a system of exchange can flourish institutionally (although he never stated that his theory voided all these aspects) - his claim was simply that the motivation for exchange without establishing or trying to establish the redundancy of business or ethics in general;; which could be considered as true - TMS he argues that “HUmanity. justice, generosity and public spirit are the qualities most useful to others” - with just focusing on the brewer/baker/butcher aspect, he is made out to be a ideologue which isn’t the case - transformed into a partisan exponent of ethics-free philosophy - b-b-b- example is all about motivation for exchange - but he was deeply concerned with production and distribution as well Author discusses: 1. the problem of organization (especially that of exchange) 2. The arrangement and performance of production 3. Challenge of distribution Organization and Exchange: Rules and Trust BBB example - own interests can motivate all of them and take part in the exchange that benefits all of them - whether the exchange would operate depends on the organizational conditions - requires institutional development - what needs to be considered now is the extent to which the economic institutions operate on the basis of common behavior patterns, shared trusts, and a mutual confidence in the ethics of different parties - if he cannot trust the householder, the baker may have difficulty in proceeding to produce bread to meet orders, or in delivering bread without prepayment - householder may not be certain on whether or not he would be sensible in relying on the delivery of the ordered bread if the baker is not altogether reliable - these problems of mutual confidence can be more severe and critical - mutual confidence in certain rules of behaviour is typically implicit rather than explicit - Third World: there is a deep rooted scepticism of the reliability and moral quality of business behaviour - both local businesses and the commercial people from abroad - vulnerable countries - a traditional lack of confidence in the moral behaviour of a particular group of traders for e,g, merchants of a food train - issue of business ethics becomes a large component when considering famine relief and prevention - creating additional incomes for the destitute (possibly through employment schemes) and then rely on normal trade to meet demands - however giving crucial roles to the gain traders at times of famine threats raises difficult issues of trust and trustworthiness - the problem can be dealt with, with the threat of government intervention in markets ( depends on the grain reserves the government itself has) much depends on the extent to which the relevant business people can establish exacting standards of behaviour, rather than fly off in search of unusual profits to be rapidly extracted from manipulated situations Organization of Production: Firms and Public Goods Japan capitalism - only communist nation that works - most of the successful capitalist nations flourish because their base is from the pursuit of self-interest, which is the bedrock of capitalism - distinction between private and public goods - when the good is public, the commodities being non-competitive, then there is a strain on self interest bases mechanism or the market - the market system initially works by putting a price on a commodity and the allocation between consumers is done by the intensities of the respective willingness to buy it at the prevailing price - when equilibrium emerges, they balance demand and supply for that commodity - in the case of public goods though, the uses are non competitive, so the system of giving the good to the highest bidder does not have much merit, since one person's consumption does not exclude that of another - optimum resource allocations be that combined benefits be compared with the costs of production and here the market mechanism based on profit max. functions badly - externalities;; public good and externalities are a relation 1. There would tend to be some failure in resource allocation when the commodities produced are public goods or involve strong externalities taken either as: 1. an argument for having publicly owned enterprises that are governed by principles not profit maximization 2. a case for public regulations governing private enterprise 3. Establishing a need for the use of non profit values - particularly of social concern - in private decisions 2. Even in the production of private commodities, there can be an important “public good” aspect in the production process itself - this is because production itself is a joint process (supervisions are costly and each participant contributes to overall success of the firm in a way that cannot be fully reflected in the private rewards that he or she gets The Challenge of Distribution : Values and Incentives - in dividing a cake, one person's gain is another person's loss - amelioration of misery through policies explicitly aimed at the result of the contributions that can be made by ethics - distributional and productional problems are mixed: so how the cake is divided influences the size of the cake itself - The Incentive Problem: the more narrowly profit oriented an enterprise is, the more it would, in general, tend to resist looking after the interests of others- workers, associates, consumers SO does business make economic sense? It depends on how you define economic sense - if it includes the achievement of a good society in which one lives, then the distributional improvements can be counted in as parts of sensible outcomes even for business - if economic sense is interpreted to mean nothing other than achievement of profits and business rewards, then the concerns for others and for distributional equity have to be judged entirely instrumentally (- firms that treat their employees well are richly rewarded for it- for one thing workers are more reluctant to lose their jobs, since more would be dismissed in the case of, plus the effort and team spirit) Two different ways a good business behaviour can make economic sense 1. see the improvement of the society in which one lives as a reward in itself;; this works directly 2. use a business criterion for improvement but to take note of the extent to which good business behaviour could in its turn lead to favorable business performance;; involves an indirect reasoning Concluding Remark 1. The importance of business ethics is in no way contradicted by Adam Smith - Smiths BBB argument is concerned with i) directly with exchanges only (not production and distribution) ii) only with the motivational aspect of exchange (not organizational and behavioral aspects) 2. Business ethics can be ethically important in economic organization in general and in exchange operations in particular - relationship is extensive and fairly ubiquitous 3. Importance of B Ethics in the arrangement and performance of production can be illustrated by the contrasting experiences of different economies - i.e. japans unusual success Advancements go beyond the pursuit of profit Failure of profit-based market allocation in dealing with public goods (relevant in 2 ways:) 1. the presence of public goods in the commodities produced 2. the fact that the success of the firm can itself be fruitfully seen as a public good 4. Distributional problems is largely related to ethics - behavioral ethics - relation can be both direct and valuational - relation can be indirect and instrumental - the incentive problem ( the interrelation of the cake aspect) etc. Systems of Moral Evaluation Heather Salazar: Kantian Business Ethics Example of supplements and medication given to patients - (In Depth Knowledge) Ephedra;; banned in the US in 2004 for being the cause of 155 deaths and many fatal side effects, although because there was no proof of it being a cause of those deaths so it had been brought back in 2006 - the FDA notified 62 companies that market products containing ephedra (consider the fact that all of them would be affected therefore) - FDA issues a consumer alert warning to the public - Ephedra Education Council (funded by manufacturers and distributors- had supported tougher labeling requirements but opposed a federal ban) - constituted for 1% of the medical world sales, but 64% of the severe complaints of side effects - i.e increased chances for stroke, insomnia etc. - Ephedra had first been introduced as a method of curing asthma (because unlike adrenaline it could be given by mouth) - since late 1950s it has stopped with its therapeutic use (prevention and treatment of venereal diseases and cough/respiratory complaints) - Ephedra is also a major source of the addictive compound methamphetamine (crystal meth) Kantian answer: - to purchase and sell ineffective and harmful supplements;; 1. allow and help people to make rational decisions 2. having a motivation from what Kant calls “the good will” (meaning your motivation is from duty, not simple self-seeking) - must be motivated to do so because you believe it’s the right thing to do (not because maybe you don’t want to create a bad reputation for yourself) - principles will allow you to sell ineffective and harmful supplements if you are not deceiving or harming people, or otherwise using them for your own gains - concept of ‘respect’ - as humans, we each have value that stems from our rational and moral capacities and should act in a way that shows our appreciation for that value - differs from standard approaches i.e. utilitarianism or rights-based theories Utilitarianism: - it does not ask us to maximize any particular value - not treat groups or people as more or less valuable Rights-based - it does however, propose constraints on actions, giving us rules upon which we act - differs from both by claiming that it is not only what you do that matter morally, but with what motivation you do it - duties are unlike rights i.e. Duty to love my sister is not her right to my love - Morality for Kant: how we ought to treat each other as fellow members of humanity - Kant ethics - only thing that is intrinsically good, or good in itself is the good will Quote: “ There is no possibility for thinking of anything at all in the world, or even out if it, which can be regarded as good without qualification, except a ‘goodwill’” MM 393 - the will is the rational part of each person - the good will is the rationality which chooses to do what is right for the reason that it is good - these are the reasons why 1. all members of humanity/rationality have value 2. why these beings are the only thing of true value - you have control over your motivation but no control over the results of the actions/intentions e.g. UNICEF;; give money, could never get to the family which is why for the moral worth of the action, Kant claims you need: 1. the choice of what to do 2. motivation Salazar: Four steps to Determining the Right Action and Motivation: 1. formulate a Maxim-for-action - identify the action - developing a statement of the action (to analyze when it is correct or not) - asserting what you will do and for what purpose you will do it 2. Evaluate it as coming from the good will or not a. ask whether it is the right action b. ask whether in willing it, you have the right motivation - for kant the right actions to take are those that are rational (because the will is the rational part of each of us, and so if the maxim is rational, it is fit to be willed) Various tests to determining: 1. The Categorical Imperative - the law of rationality that does not depend on our desires, but depends purely on pure rationality - when maxim is tested by the CI, it tells us which maxims we can take, which we cannot take, and those which we have to take (permissible, impermissible, required) three formulations of the CI : 1. The Formula of Universal Law - rationality= logic - to be consistent: anything that is not is irrational and immoral for Kant - once it is universalized you must check for inconsistencies - is easy for people to misunderstand and think that the test requires that we see whether or not a good or bad state of affairs results from universalized version of the maxim - it tests whether it is possible for everyone to will it and still achieve the purposes of the maxims 2. The Formula for Humanity - intuitive version of the CI - “Act in a way that you treat humanity, whether in your own person or in the person of another, always at the same time as an end and never simply as a means” - logical rule of consistency still applies - humanity= valuable in itself - “ An end is something that is valuable in-itself and a means si something that is valuable only as a way to get what you want or achieve an end” - eliminates lying or deceiving - eliminates using ourselves without the consent of our rationality and it prohibits our use of other people without the consent of their rationality - not consistent with someone giving their consent, because it doesn’t necessarily mean they’re giving their “rational” consent - giving one’s rational consent: reflecting n the action and its consequences, and examining whether it is a good thing for one to perform it i.e. sign up for a credit card with interest. One may agree to a credit card but no rational person would consent to an interest charge - therefore impermissible and immoral for anyone to ask a person to sign such a contract - people ought never to be unfair or treat people poorly 3. The Formula for Autonomy The Good Will: Right Motivations - after determining permissible, impermissible, one must determine whether the motivation for the act is good - not good= will not come from the Good Will - examine the three maxims and the the different motivations that accompany these maxims (Kant’s example of a shopkeeper who treats his customers honestly for three distinct purposes) 1. I will be honest with my customers in order to gain their trust and get repeat business 2. I will be honest with my customers because I like them 3. I will be honest with the customers because that is the right thing to do Three Types of Motivation (respective to above) A. Self Interest (1) B. Character or Sympathy (2) C. The Moral Law or Duty (3) - only 3 deserves recognition 3. If it comes from the good will, it is good, and you are good in doing it;; if it doesn’t, then see step 4 4. If it doesn’t come from the Good Will, but is consistent with it, then the action is good, but you are not doing it for the right motive and so you are not praiseworthy The Social Responsibility of Business Is to Increase Its Profit Milton Friedman - business has responsibilities? Only people have responsibilities. - corporation is an artificial person and in this sense may have artificial responsibilities, but business as a whole cannot be said to have responsibilities, even in this vague sense - first step towards clarity in examining the doctrine or social responsibilities of business: Ask precisely what it implies and for whom corporate executive : an employee - direct responsibility to his employers - responsibility: to conduct duties in accordance to their desires - corporations for eleemosynary purposes (e.g. school) - manager will not have money profit as his objective but the rendering of certain services - point is: his capacity as a corporate executive, the manager is the agent of the individuals who own the corporation or establish the eleemosynary institution, and his primary responsibility is to them - criterion of performance is straightforward- and the persons among whom a voluntary contractual arrangement exists are clearly defined - social responsibility in his capacity as a businessman - rhetoric statement? or it must mean that he is to in some way act that is not in the interest of his employers e.g. refrain from increasing the principal objective of preventing inflation e.g. make expenditures on reducing pollution beyond the amount that is in the best interests of the corporation - each of these cases: he uses someone else’s money for a general social interest - stockholders, customers, employees could separately spend their own money on the particular action if they wished to do so Raises political questions on two levels: 1. Principles - imposition of taxes +expenditure or tax proceeds are governmental functions - taxes without representation, checks and balances to separate the legislative function of imposing taxes and enacting expenditures from the executive function of collecting taxes and administering expenditure programs and from the judicial function of mediating disputes and interpreting the law - businessman: simultaneously the legislator, jurist, and executive - permitting the corporate executive to be selected by the stockholders is that he is an agent serving the interests of his principal (justification disappears when he imposes taxes, and spends for social purposes) - becomes in effect a public employee, a civil servant - intolerable that such civil servants should be selected as they are now (must be elected through a political process) Basic analogy of why the doctrine of “social responsibility” involves the acceptance of the socialist view that political mechanisms, not market mechanisms, are the appropriate way to determine the allocation of scarce resources to alternative uses 2. Consequences - can the executive in fact discharge his alleged social responsibilities? - assuming he gets away with spending the money of employees, stockholders etc. How is he to know how to spend it? - he is told to contribute to fighting inflation, how is he to know what action of his will will contribute to that end? - he is an expert at running his company- but nothing about hat makes him an expert in inflation etc. - facet of social responsibility is brought to sharp relief when the doctrine is used to justify wage restraint by trade unions - conflict of interest is naked when union officials are asked to subordinate the interest of their members to some more general purpose - i.e. union officials enforce wage restraint: consequences are strikes, revolts etc. - ironic phenomenon that union leaders have objected to Government interference with the market far more consistently and courageously than have business leaders - difficulty of exercising social responsibility: virtue of private competitive enterprise (forces people to be responsible for their own actions and makes it difficult for them to “exploit” other people for either selfish or unselfish purposes - they can do good- only at their own expense - Adam Smith’s skepticism about benefits that can be expected from those who affected to trade for the public good - rejected on the grounds of principle - an assertion that those who favour the taxes and expenditures in question have failed to persuade a majority of their fellow citizens to be of like mind and that they are seeking to attain by undemocratic procedures what they cannot attain by democratic procedures - GM - gain of stockholders against their will for social benefits because of activists (GM- The environmentalist Mark Lynas said GM crops could help provide more food at a lower price by reducing the need for pesticides and fertilisers.- said the poorest people of the world could benefit from crops with additional nutrients, or designed to resist droughts and floods, but were not being developed because people in positions of power said GM was dangerous) - situation of individual proprietor - different - if

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Philosophy Business Ethics 2074F - Required Readings Notes

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