Introduction to Ethics MBA 685 Chapter #2 Introduction to Ethics

Chapter #2 Overview Introduction to business ethics Overview of ethical theories Thinking ethically for business decision making The PLUS model Combining ethical theories Code of Ethics

Nature and Significance of Ethics in Business Decision-Making Ethics: Rational examination of moral beliefs and behavior; the study of morality. Morality: Standards, conduct, and systems that provide guidance on how to act. Law: Society’s standards and values that are enforceable in court

Is business ethics an oxymoron? Former Supreme Court Justice Potter Stewart, “Ethics is knowing the difference between what you have a right to do and what is the right thing to do.” Is business ethics an oxymoron?

Overview of Ethical Theories Subjective relativism Cultural relativism Divine command theory Kantianism Act utilitarianism Rule utilitarianism Social contract theory

Relativism versus Objectivism: Where “The Good” Exists Subjective relativism Cultural relativism Divine command theory Kantianism Act utilitarianism Rule utilitarianism Social contract theory Relativism “The Good” is inside Objectivism “The Good” is outside

The Workable Ethical Theories: Rational Theories Not a Workable Theory According to the Author Subjective relativism Cultural relativism Divine command theory Kantianism Act utilitarianism Rule utilitarianism Social contract theory Workable Theories

1. Subjective relativism Case for Well-meaning and intelligent people disagree on moral issues Ethical debates are disagreeable and pointless Case against Blurs distinction between doing what you think is right and doing what you want to do Makes no moral distinction between the actions of different people SR and tolerance are two different things Decisions may not be based on reason Not a workable ethical theory (according to author) Relativism No universal norms of right and wrong One person can say “X is right,” another can say “X is wrong,” and both can be right Subjective relativism Each person decides right and wrong for himself or herself “What’s right for you may not be right for me”

2. Cultural relativism Case for Case against Different social contexts demand different moral guidelines It is arrogant for one society to judge another Morality is reflected in actual behavior Case against Because two societies do have different moral views doesn’t mean they ought to have different views Doesn’t explain how moral guidelines are determined Doesn’t explain how guidelines evolve Provides no way out for cultures in conflict Because many practices are acceptable does not mean any cultural practice is acceptable (many/any fallacy) Societies do, in fact, share certain core values Only indirectly based on reason Not a workable ethical theory What is “right” and “wrong” depends upon a society’s actual moral guidelines These guidelines vary from place to place and from time to time A particular action may be right in one society at one time and wrong in other society or at another time

3. Divine command theory (the virtue approach) Good actions: those aligned with God’s will Bad actions: those contrary to God’s will Holy books reveal God’s will. We should use holy books as moral decision-making guides. Case for We owe obedience to our Creator. God is all-good and all-knowing. God is the ultimate authority. Case against Different holy books disagree Society is multicultural, secular Some moral problems not addressed in scripture “The good” ≠ “God” (equivalence fallacy) Based on obedience, not reason

4. Kantianism (the rights approach) Good will: the desire to do the right thing Immanuel Kant: Only thing in the world good without qualification is good will. Reason should cultivate desire to do right thing. Case for Rational Produces universal moral guidelines Treats all persons as moral equals Workable ethical theory Case against Sometimes no rule adequately characterizes an action. There is no way to resolve a conflict between rules. Kantianism allows no exceptions to moral laws.

Consumer Bill of Rights

Negative Versus Positive Rights Negative right (liberty right): A right that another can guarantee by leaving you alone Positive right (claim right): A right obligating others to do something on your behalf

Discussion Questions In the following (true) scenarios on the next two slides, tell whether the people are interpreting the right being claimed as a negative right or as a positive right. Explain your choice. In each scenario, which kind of right should it be and why?

Scenario A: A man sued his health insurance company because it would not pay for Viagra. He argued that the insurer’s refusal to pay denied his right to a happy sex life.

Scenario B: Two legislators who lost reelection votes sued an organization that ran ads criticizing their right to hold office.

5. Act Utilitarianism Jeremy Bentham and John Stuart Mill, 19th century The best ethical course of action is the one that brings the greatest good for the greatest number An action is good if it benefits someone An action is bad if it harms someone Utility: tendency of an object to produce happiness or prevent unhappiness for an individual or a community Happiness = advantage = benefit = good = pleasure Unhappiness = disadvantage = cost = evil = pain Principle of Utility (The Greatest Happiness Principle) An action is right (or wrong) to the extent that it increases (or decreases) the total happiness of the affected parties.

Act utilitarianism - Continued Act utilitarianism applies Principle of Utility to individual actions Act utilitarianism Add up change in happiness of all affected beings Sum > 0, action is good Sum < 0, action is bad Case for Focuses on happiness Down-to-earth (practical) Comprehensive Workable ethical theory Case against Unclear whom to include in calculations Too much work Ignores our innate sense of duty Susceptible to the problem of moral luck

6. Rule utilitarianism We ought to adopt moral rules which, if followed by everyone, will lead to the greatest increase in total happiness Rule utilitarianism applies Principle of Utility to moral rules Case for Compared to act utilitarianism, it is easier to perform the utilitarian calculus. Not every moral decision requires performing utilitarian calculus. Moral rules survive exceptional situations Avoids the problem of moral luck Workable ethical theory Case against All consequences must be measured on a single scale. Utilitarianism ignores the problem of an unjust distribution of good consequences. Utilitarianism does not always mean “the greatest good of the greatest number” That requires a principle of justice What happens when a conflict arises between the Principle of Utility and a principle of justice?

7. Social contract theory (The Common Good Approach) Thomas Hobbes “State of nature” We implicitly accept a social contract Establishment of moral rules to govern relations among citizens Government capable of enforcing these rules Jean-Jacques Rousseau In ideal society, no one above rules That prevents society from enacting bad rules Case for Framed in language of rights Explains why people act in self-interest without common agreement Provides clear analysis of certain citizen/government problems Workable ethical theory Case against No one signed contract Some actions have multiple characterizations Conflicting rights problem May unjustly treat people who cannot uphold contract

Thinking Ethically for Business Decision Making How exactly should we think through an ethical issue? What questions should we ask? What factors should we consider? The first step is obvious but not always easy: GET THE FACTS! Primary/Direct Stakeholders Secondary/Indirect Stakeholders

Basic Business Decision Making Model Step 1: Define the problem Step 2: Identify alternatives Step 3: Evaluate the alternatives Step 4: Make the decision Step 5: Implement the decision Step 6: Evaluate the decision

Example of an Ethical Filter: The PLUS Model P = Policies Is it consistent with my organization's policies, procedures and guidelines? L= Legal Is it acceptable under the applicable laws and regulations? U = Universal Does it conform to the universal principles/values my organization has adopted? S= Self Does it satisfy my personal definition of right, good and fair?

Six Steps to Ethical Decision Making Using the PLUS Model Step 1: Define the problem PLUS Step 2: Identify alternatives Step 3: Evaluate the alternatives PLUS Step 4: Make the decision Step 5: Implement the decision Step 6: Evaluate the decision PLUS Ethical Filters

Using Multiple Theories for Ethical Problem Solving What moral rights do the affected parties have, and which course of action best respects those rights? What benefits and what harms will each course of action produce, and which alternative will lead to the best overall consequence? Which course of action treats everyone the same, except where there is a morally justifiable reason not to, and does not show favoritism or discrimination? Which course of action advances the common good? Which course of action develops moral virtues? Other Approaches The Legality Test The Golden Rule Test The Light of Day Test

Codes of Ethics (Ethics Codes, Ethics Policies, Core Values, Integrity Policies, etc.) Formal statement of ethical principles and rules of conduct United Technologies –http://www.utc.com/responsibility/ethics/index.htm JMU CoB Faculty Integrity Policy - http://www.jmu.edu/cob/CoB2/FacPolicies.shtml#FIP JMU Finance Code of Ethics - http://www.jmu.edu/financeoffice/code_of_ethics.shtml Advice from the Ethics Office of Texas Instruments - http://www.onlineethics.org/CMS/workplace/workcases/ti-ethics.aspx

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