Ethical Theory and Business

 

For this week’s assignment, you will be working on an individual rather than group project. The format will be the same, but you will simply write up the answers and submit them by yourself as opposed to after discussion with a group.

Here is the assignment:

A. Read over pages 38-44 of Desjardins, Chapter 2.

B. Write up answers of approximately one to two sentences to each of the following questions.

1. What is the principled-ethics objection to utilitarian approaches to determining right and wrong?
2. What would the difference be between a utilitarian analysis of the morality of child labor and a principled-ethics analysis of the morality of child labor?
3. What is the “categorical imperative”? What does it say about the importance of the intentions behind your actions?
4. What does the categorical have to say about treating others as a means to your ends? What does it mean to treat someone as a means? Is this good or bad?
5. What is autonomy?
6. What is a personal right? What do rights have to do with morality?

2.6 PRINCIPLE-BASED ETHICS

Principle-based ethics, or what is sometimes called an ethics of rights and duties, emphasizes the fact that sometimes the correct path is determined not by its consequences but by certain principles or duties. More familiar synonyms for duty include obligations, commitments, and responsibilities. This principle-based approach faults utilitarianism for thinking that our acts should always be judged by their consequences to the overall good. This ethical tradition denies the utilitarian belief that the ends do justify the means. It holds that there are some things that we should, or should not, do regardless of the consequences.

To understand why the ends don’t justify the means we need to emphasize that utilitarian ends are focused on the collective or aggregate good. Utilitarianism is concerned with the well-being of the whole. (This is one of the things that makes utilitarianism attractive to public policy makers.) But many of us have a deep commitment to the dignity of individuals. We believe that individuals should not be used as a mere means to the greater overall good. A prominent way of explaining this is to say that individuals have rights that should not be sacrificed simply to produce a net increase in the collective good.

Consider the debate mentioned previously concerning child labor in the developing world. Some policy makers in impoverished countries believe that the best means for raising the standard of living within their country is to increase exports. This brings in hard currency with which the country can pay for food, medicine, and education (and repay debts!). Increasing exports will raise the standard of living for all citizens and thereby meet the utilitarian goal of improving the collective good. However, to increase exports a country must be capable of selling their goods at costs below those of competing countries. Since labor is a major production cost, keeping labor costs low helps the country as a whole. Unfortunately, one means for maintaining low labor costs is to employ young children. (Cases of child labor in the manufacture of athletic shoes and clothing are only the most well-publicized instances of an all too common phenomenon.)

Is it ethical to use young children in such circumstances? Defenders of this practice argue, typically on good utilitarian grounds, that the children are better off with the jobs than without them, that they contribute to their own family’s income, and that they contribute to the overall welfare of their society. Critics claim, on principle-based grounds, that it is unethical to treat young children this way even if there are beneficial results. In this view, child labor is ethically equivalent to child abuse and slavery. It is something wrong on principle.

Within one tradition, our ethical duty is explained in terms of a principle that the German philosopher Immanuel Kant called the categorical imperative. (An imperative is a command or duty; categorical means that it is without exception.) Our primary duty is, according to Kant, to act only in those ways in which the maxim of our acts could be made a universal law. This is a very abstract way of saying something that is fairly intuitive. The “maxim” of our acts can be thought of as the intention behind our acts. The maxim answers the question: “What am I doing?”

Kant tells us that we should act only according to those maxims that could be universally accepted and acted on. (Consider how Kant might respond to the egoist view that all human behavior is intended for one’s own self-interest.) For example, Kant believed that truth telling could, but lying could not, be made a universal law. If everyone lied whenever it suited them, rational communication would be impossible. Thus, lying is unethical. This condition of universality, not unlike the Golden Rule, prohibits us from giving our own personal point of view privileged status over the points of view of others. It is a strong requirement of impartiality and equality for ethics.

Kant also provided two other versions of this categorical imperative that are less abstract. He claimed that ethics requires us to treat all people as ends and never only as means. In yet another formulation, we are required to treat people as subjects, not as objects. These formulations restate the commitment to treat people as capable of thinking and choosing for themselves. Humans are subjects (they perform the act rather than being acted upon, to use the familiar subject/object categories from grammar). They have their own ends and purposes and therefore should not be treated simply as a means to the ends of others. In chapter 3, we will examine a view on corporate social responsibility that concludes, on Kantian grounds, that business managers have direct ethical responsibilities to all parties (stakeholders) who are affected by business activities.

Thus, on this Kantian theory, our fundamental ethical duty is to treat people with respect, to treat them as equally capable of living an autonomous life. But since each person has this same fundamental duty toward others, each of us can be said to have the right to be treated with respect, the right to be treated as an end and never as a means only. I have the right to pursue my own autonomously chosen ends as long as I do not in turn treat other people as means to my ends.

This points to a common way of understanding rights and duties. Philosophers will sometimes claim that rights and duties are correlative. This is to say that my rights establish your duties and my duties correspond to the rights of others. The principle-based tradition focuses on duties, which can be thought of as establishing the ethical limits of my behavior. From my perspective, duties are what I owe to others. Other people have certain claims upon my behavior; they have, in other words, certain rights against me.

Thus, to return to the earlier example, the Kantian would object to child labor because such practices violate our duty to treat children with respect. We violate the rights of children when we treat them as mere means to the ends of production and economic growth. We are treating them merely as means because, as children, they are incapable of rationally and freely choosing their own ends.

From this beginning, the principle-based, or rights-based, approach to ethics gets more complex. A complete theory must specify what rights we have and how they are justified, the range and scope of rights, and some process for prioritizing rights and resolving conflicts between different rights. As preparation for evaluating many of the debates to follow, we will pursue these questions briefly.

One way to understand rights is to think of them as protecting interests. We often make a distinction between a person’s wants and interests. Wants (or desires) are psychological states of an individual. They are what, as a matter of fact, people will pursue. Wants are subjectively known, in the sense that individuals enjoy a privileged status for knowing what they want. (Imagine disagreeing with a person’s claim that they want something.) Interests work for a person’s benefit and are objectively connected to what is good for that person. People don’t always want what it is in their interest to have.

For example, if given the choice, many children would want to eat sugarcoated breakfast cereal each morning. Their parents deny them this on the grounds that it is not in their interests to eat such food. In this case, wants and interests conflict. Likewise, many college students want to skip class, but it is not in their interest to do so. On the other hand, wants and interests can coincide. You want a good education and good health, both of which are in your interests to have.

As we have seen, some versions of utilitarianism take happiness, understood as the satisfaction of wants, as the final goal of ethics. This version would either deny the distinction between wants and interests (interests being simply strong wants) or argue that the best way to decide what is in someone’s interest is to let them decide for themselves (i.e., let them pursue their own wants). Either way, utilitarians believe that all wants/interests equally deserve to be satisfied to the degree that they equally produce happiness. If your desire for protection against an unsafe workplace is equal to my desire for high wages, each equally deserves satisfaction. Given this equality, the utilitarian commitment to satisfy as many wants as possible seems a reasonable strategy.

But principle-based ethics disagrees and argues that wants and interests are not equal. They argue that at least some interests are so important to the well-being of an individual that they should not be sacrificed simply for a net increase in the overall happiness. Rights serve to protect these interests from being sacrificed.

Consider the case of downloading and sharing music and movie files over the Internet. A plausible case could be made that we would promote greater overall happiness by adopting a public policy that allowed unlimited and unrestricted downloads. Only a relatively small minority of people, mostly performing artists and producers, would be unhappy. On utilitarian grounds, it would seem that we would best serve the public interest by allowing unregulated downloads. However, the artists and producers would claim that they have property rights that should prohibit such a policy. The interests that the public might have in listening to free music or watching free videos is not on a par with the interests that individuals have in controlling their own property.

Rights are thought to function the way a “trump suit” functions in a game of cards. A trump overrides the face value of cards of any other suit. Rights function in this way because they protect certain interests that are more important and central to human well-being than the mere happiness of others. The connection between rights and interests is important because it provides a way for determining which rights we have. By identifying central important interests, and distinguishing them from mere wants, we can determine the range of human rights.

So what rights do we have? The challenge is to develop an account that creates neither too many nor too few rights. Here is another example from my local community. City planners have a blueprint for road construction throughout the area. One of the planned roads would cut through and destroy a rare oak woodland within the city. When the plan was announced, local residents objected to the road on a variety of environmental grounds. The director of the regional planning group answered protesters by claiming that local citizens “have a right to uncongested roads.” Surely this theory of rights is too extensive.

The connection between rights and duties that we mentioned previously is a good test for this. If rights imply duties, and if people have a right to uncongested roads, then it would seem that someone (local government?) has the duty to provide enough roads to prevent people from ever having to sit in a traffic jam. It is difficult to see how this could be done without wreaking havoc on the well-being of many people by raising taxes, destroying neighborhoods, taking away property, and so on.

This suggests that we do not get “rights” simply by wanting something very badly. (Critics charge that this is a problem with rights-based ethics. It encourages people toward self-centered individualism, trying to privilege their own selfish wants by calling them rights. Anything that someone wants eventually gets called a right and thereby people come to expect society to provide this for them.) But we also don’t want to have too narrow a view of rights. Too weak an account, or too few rights, collapses the entire theory toward utilitarianism.

We can at least sketch a general account of rights by returning to the original idea of respect and the elements of autonomy and dignity on which it is based. What human characteristic justifies the assumption that humans possess a special dignity? Why would it be wrong to treat humans as mere means or objects, rather than as ends or subjects?

The most common answer offered through the Western ethical tradition is that the human capacity to make rational choices is the distinctive human characteristic. Humans do not act only out of instinct and conditioning, they make free choices about how they live their lives, about their own ends. In this sense, humans are said to have autonomy. Humans are subjects in the sense that they originate action, they choose, they act for their own ends. To treat someone as a means or as an object is to deny to them this distinctive and essential human characteristic; it would be to deny to them their very humanity.

From this we can see how two related rights have emerged as fundamental within philosophical ethics. If autonomy, or self-rule, is a fundamental characteristic of human nature, then the freedom to make our own choices deserves special protection as a basic right. But since all humans possess this fundamental characteristic, equal treatment (or equal consideration) is also a fundamental right. Thus, personal liberty and equality are considered by many to be fundamental human rights.

In summary, we can say that rights offer protection of certain central human interests, prohibiting the sacrifice of these interests merely to provide a net increase in the overall happiness. But interests, as opposed to desires, are connected to human well-being in an objective manner. Human nature, characterized as the capacity for free and autonomous choice, provides the grounds for distinguishing central interests from mere wants.

2.7 SUMMARY AND REVIEW

No doubt, philosophical ethics can appear very abstract and far removed from the business world. Despite such appearances, these frameworks provide helpful ways to think about everyday issues in business by providing the fundamental concepts and categories for thinking about ethical issues. We should resist the temptation to treat these theories as some external rules that can be applied to situations in a way that produces specific decisions. It is best to think of these theories as attempts to articulate the basic principles already present in common ways of thinking. Once such principles are clearly described, the philosopher’s role is to draw out their implications and offer justifications of them. Then the principles can be brought back to bear on practical decision making. Understood in this way, ethical theories are not as abstract and nebulous as they might at first appear. They have emerged from common ways of thinking as much as they are intended to guide our ways of thinking.

Virtue ethics encourages us to step back from specific decisions and actions to ask the very profound and personal questions: Who am I? What type of person am I to be? Throughout the course of our lives, each one of us develops a personal character that is reflected in what we believe, what we value, what we desire, and how we act. This character is manifested in our habits, dispositions, and personality. The ethics of virtue seeks to articulate which of those habits and character traits are likely to be part of a meaningful and happy human life. Whether reflected in the ordinary language of such virtues as honesty, integrity, modesty, and trustworthiness, or such vices as greed, materialism, belligerence, and rudeness, virtue ethics plays an important role in ordinary business life.

Or, consider utilitarianism. The fundamental insight of utilitarian thinking is that we should consider the consequences, all the consequences, of our actions before deciding what to do. A reasonable principle is that we should consider not only the consequences that our acts might have for ourselves but also the consequences of our acts for all parties affected by them. The ethical theory of utilitarianism tries to work out the implications of this insight. In doing so, this theory has presented a powerful approach to answer the fundamental ethical question: How should we live our lives?

It is fair to say that many economic decisions are implicitly justified on utilitarian grounds. Understanding utilitarianism, both its strengths and weaknesses, is necessary for developing a reasoned perspective on many economic matters. From the original rationale for market-based economies found in the works of Adam Smith to the original legal rationale for creating limited-liability corporations to much public policy and law-governing finance, employment, consumerism, and world trade, utilitarian considerations have played a prominent, if not deciding, role.

Likewise, principled approaches to ethics capture another insight that is recognized in such common observations as “the ends don’t justify the means.” If utilitarian ethics make judgments in terms of consequences, principled approaches demand that something should, or should not, be done regardless of the consequences. Some acts are right or wrong as a matter of principle, and it is our duty to act accordingly even if beneficial consequences would suggest otherwise. Respecting individual rights and fulfilling our ethical obligations can set limits on decisions aimed at producing good consequences.

The language of rights and obligations will play a major role in all the discussions that follow. One need only reflect on such phrases as “human resource management” and “labor as a factor of production” to see that Kantian ethics will have much to contribute to discussions about how employees ought to be treated. Treating employees as mere means to the end of productivity, while perhaps useful in terms of beneficial consequences, is something that principle-based ethics rejects. Likewise, the professional duties associated with the gate-keeping roles as accountants, auditors, lawyers, financial analysts, and boards of directors also function as ethical limitations on business activities.

The basic approaches to ethics outlined in this chapter will provide essential tools for understanding business ethics, and for making responsible ethical decisions in business.

REFLECTIONS ON THE CHAPTER DISCUSSION CASE

Consider two very different responses to the pricing of needed medical devices as described in the opening discussion case. One response might be to shrug one’s shoulders and claim that this is just the way it is. One could simply acknowledge that some businesses have power over important consumer goods and they will use that power to make as much of a profit as possible. In fact, few observers took this approach when the Mylan case first made news. Without exception, the public and political response was very different from a shrug of the shoulders attitude. The Mylan case led to a widespread debate about corporate social responsibility. That is, almost everyone who heard of the case took a stand either to criticize or to defend these decisions. If you were to review the public debates surrounding this case in detail, it would be difficult to find an opinion that did not involve ethical concepts and categories.

Reflecting on these debates, one can discover patterns in the way that most people think about such normative issues. Many people judge the ethics of health care pricing and availability in terms of consequences. Some argued that relatively freer markets are the best means for providing health care, while others argued that government regulations and mandates are best. Deciding between these views would involve, at least in part, investigating the real-world consequences that result from such policies. Ethical analysis will sometimes require such empirical investigation: Is a free market in health care, in fact, highly correlated with availability of services? Do government regulations on pricing discourage research and development of new drugs and medical treatments? Determining the facts will often play an important role in ethical analysis, and this would be a helpful first step to take in the process of analysis.

This case also raises ethical issues of principles and standards that do not involve empirical consequences. Do people have a moral right to the medical care that they need? Does private business or government have a duty to provide such medical treatment? Ownership rights and fiduciary duties are other factors that establish ethical constraints on consequentialist thinking. For example, many argue that the executives of Mylan had a fiduciary duty to its stockholders that required them to seek maximum profit and prohibited them from lowering prices. A helpful step in the process of identifying principles and duties is to ask who might be benefited and who might be harmed by alternative decisions. Once such stakeholders have been identified, one should then ask if there are any individuals or institutions that have a duty to provide the benefit or prevent the harm.

Finally, this case also raises questions about personal virtues and vices. At first glance, this is a descriptive activity: Describe someone who so desires money that he would engage in price gouging on a product needed by sick people; describe someone for whom a salary of several hundred thousands of dollars each year is not enough. But within these descriptions are normative and evaluative components. A person described as greedy has a real character flaw; a person of integrity is to be praised and honored. One challenge to such descriptions, of course, is to answer the “so what?” question. So what if I am greedy? Why should I care if I lack integrity? These questions go to the heart of ethical motivation. Business ethics seeks not only to justify good and right behavior, but it also seeks to motivate people to act accordingly. This is among the foremost ethical challenges facing contemporary business managers.