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CHAPTER 2

ETHICAL PRINCIPLES IN BUSINESS

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Chapter 2: Learning out comes• What is the central question posed in the utilitarian

approach to moral evaluation?• How can the concept of a “right’’ be applied to

business situations?• What is “justice”?• What is the key concept underlying an “ethic of

care”?• Is it possible to integrate the various approaches to

moral evaluation?• What role does character play in morality?• What are the special challenges of applying

business ethics in an international context?

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Utilitarianism: Weighing Social Costs and Benefits

Example: Ford and its infamous pinto

• Ford knew that the pinto would explode when the rear ended at only 20mph, but they also knew that it would cost $137 million to fix the problem. Since they would only have to pay $49 million in damages to the injured victims and families of those who died, they calculated that it was not right to spend money to fix the cars when the society set such a low price on the lives and health of the victims. The kind of analysis that Ford used in their cost-benefit analysis is a version of what has been traditionally called utilitarianism.

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Utilitarianism: Weighing Social Costs and Benefits

• Utilitarianism (consequentialism) is a general term for any view that holds that actions and policies should be evaluated on the basis of the benefits and costs they will impose on society.

• In any situation, the “right” action or policy is the one that will produce the greatest net benefits or the lowest net costs.

• The benefits of an action may include any desirable goods (pleasures, health, lives, satisfactions, knowledge, happiness) produced by the action, and costs may include any of its undesirable evils (pain, sickness, death, dissatisfaction, ignorance, unhappiness).

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How does one determine the moral thing to do on any particular occasion?

There are three considerations to follow:1.You must determine what alternative

actions are available.2.You must estimate the direct and

indirect costs and benefits the action would produce for all involved in the foreseeable future.

3.You must choose the alternative that produces the greatest sum of utility.

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• However, traditional utilitarians would deny that an action of a certain kind is always either right or wrong.

• Instead, each action would have to be weighed given its particular circumstances.

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• Measurement Problems

1. Comparative measures of the values things have for different people cannot be made,

2. Some benefits and costs are impossible to measure. How much is human life worth for example?

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3. The potential benefits and costs of an action cannot always be reliably predicted, they also cannot be adequately measured.

4. It is unclear exactly what counts as benefits or cost. People see these things in different ways.

5. Utilitarian measurement implies that all goods can be traded for equivalents of each other. However not everything has monetary equivalent. Critics have argued that there are some none-economic goods – such as life, love, freedom, equality, health, beauty, whose value is such that no quantity of any economic good is equal in value to the value of the none-economic good.

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Two widely used common-sense criteria

(a) Distinction between Instrumental goods and intrinsic goods

• Instrumental goods: are things that are considered valuable only because they lead to other good things (e.g., a radio is instrumentally good in order to hear music).

• Intrinsic goods: Intrinsic are things that are desired for their own sake (is worth for itself, not as a means to something else) such as health and life. These goods always take precedence over instrumental goods, which are things that are good because they help to bring about an intrinsic good.

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(b) Distinction between needs and wants

• Goods that bring about needs are more important than those that bring about wants.

• NOTE: These commonsense methods of weighing goods are only intended to aid us in situations where quantitative methods fail.

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Problems with Rights and Justice

• The major difficulty with utilitarianism is that it is unable to deal with two kinds of moral issues: those relating to RIGHTS and those relating to JUSTICE. That is, the utilitarian principle implies that certain actions are morally right when in fact they are unjust or violate people’s rights.

• Rights: look at individual entitlements to freedom of choice and well-being

• Justice: looks at how benefits and burdens are distributed among people

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Utilitarian Replies to Objections on Rights and Justice

• In response to the critics on rights and justice, utilitarians have devised or proposed an important and influential alternative version of utilitarianism called rule-utilitarianism.

• Rule-Utilitarianism

• According to the rule-utilitarian, when trying to determine whether a particular action is ethical, one is never supposed to ask whether that particular action will produce the greatest amount of utility. Instead, one is supposed to ask whether the action is required by the correct moral rules that everyone should follow.

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• If the action is required by such rules, then one should carry out the action.

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• Example: Imagine the following scenario

• A prominent and much-loved leader has been rushed to the hospital, grievously wounded by an assassin’s bullet. He needs a heart and lung transplant immediately to survive. No suitable donors are available, but there is a homeless person in the emergency room who is being kept alive on a respirator, who probably has only a few days to live, and who is a perfect donor. Without the transplant, the leader will die; the homeless person will die in a few days anyway. Security at the hospital is very well controlled. The transplant team could hasten the death of the homeless person and carry out the transplant without the public ever knowing that they killed the homeless person for his organs. What should they do?– For rule utilitarians, this is an easy choice. No one could

approve a general rule that lets hospitals kill patients for their organs when they are going to die anyway. The consequences of adopting such a general rule would be highly negative and would certainly undermine public trust in the medical establishment.

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Quick Review

Evaluating Utilitarianism

• Critics say not all values can be measured• Utilitarians respond that monetary and

commonsense measures can measure everything

• Critics say utilitarianism fails with rights and justice

• Utilitarians respond that rule-utilitarianism can deal with rights and justice.

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Rights and Duties• In general, a right is an individual’s entitlement to

something. A person has a right when that person is entitled to act in a certain way or is entitled to have others act in a certain way toward him or her.

• The entitlement may derive from a legal system that permits or empowers the person to act in a specified way or that requires others to act in certain ways toward that person. The entitlement is then called a legal right.

• Legal rights are limited, to the particular jurisdiction within which the legal system is in force.

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• Entitlements can also derive from a system of moral standards independently of any particular legal system. Such rights are called moral rights or human rights and they are based on moral norms and principles that specify that all human beings are permitted or empowered to do something or are entitled to have something done for them.

• Unlike legal rights, moral rights are not limited to a particular jurisdiction.

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Three important features defining moral rights

1. Moral rights are closely related to duties2. Moral rights provide individuals with

autonomy and equality in the free pursuit of their interests.

3. Moral rights provide a basis for justifying one’s actions and for invoking the protection or aid of others.

• Moral judgements made on the basis of rights differ substantially from those based on utility

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Moral rights vs. utilitarianism

• Moral rights express the requirements of morality from the point of view of the individual, whereas utilitarianism expresses the requirements of morality from the point of view of society as a whole.

• Rights limit the validity of appeals to social benefits and to numbers.

• On the other hand although rights generally override utilitarian standards, they do not always do so. In times of war for example, civil rights are commonly restricted for the public good.

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Negative and Positive Rights

• Negative rights: Duties others have to not interfere in certain activities of the person who hold a given right. For e.g right to privacy.

• Positive rights: Duties of other agents (it is not always clear who) to provide the holder of the right with whatever he or she needs to freely pursue his or interest. For e.g right to education, right to medical care.

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Contractual Rights and Duties

• Contractual rights and duties (sometimes called special rights and duties or special obligations) are the limited and correlative duties that arise when one person enters an agreement with another person. This rights are closely connected to business.

• These rights attach only to specific individuals, and the duties they give rise to attach only to specific individuals.

• In addition, they arise out of specific transactions between parties and depend upon a publicly accepted system of rules.

• Without the institution of contract, modern businesses could not exist.

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Four ethical rules governing contracts

• Both parties to a contract must have full knowledge of the nature of the agreement.

• Neither party must intentionally misrepresent the facts.

• Neither party must be forced to enter a contract.

• The contract must not bind the parties to an immoral act.

• NOTE: Generally, a contract that violates one or more of these conditions is considered void.

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A basis for Moral Rights: Kant

• A more satisfactory foundation for moral rights is provided by the ethical theory developed by Immanuel Kant.

• Kant in fact attempts to show that there are certain moral rights and duties that all human beings possess regardless of any utilitarian benefits that the exercise of those rights and duties may provide for others.

• His principle known as categorical imperative requires that everyone be treated as a free and equal person.

• Kant provides at least two ways of formulating this basic moral principle, each formulation serves as an explanation of the meaning of this basic moral right and correlative duty.

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The first formulation of Kant’s categorical imperative

• It states: “ I ought never to act except in a such a way that I can also will that my maxim should become a universal law".

• According to Kant a maxim is the reason a person has for doing what he plans to do.

• Therefore, an action is morally right if the person’s reason for doing it is a reason he would be willing to have every person in a similar situation act upon. For Kant

• “An action is morally right for a person in a certain situation if, and only if, the person’s reason for carrying out the action is a reason that he or she would be willing to have every person act on, in a similar situation”.

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• Categorical imperative incorporates two criteria for determining moral right and wrong: universalizability and reversibility.

• Universalizability: The person’s reasons for acting must be the reasons that everyone could act on at least in principle.

• Reversibility: The person’s reasons for acting must be reasons that he or she would be willing to have all others use, even as a basis of how they treat him or her.

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The second formulation of Kant’s categorical Imperative

• “ act in such a way that you simply treat humanity, whether in your own person or in the person of any other, never simply as a means, but always at the same time as an end”.

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This version of the categorical imperative implies that human beings have an equal dignity that sets them apart from things such as tools or machines and that is incompatible with their being manipulated, deceived, or otherwise unwillingly exploited to satisfy the self-interests of another.

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Quick ReviewKant’s Categorical Imperative Formulas

1. Never do something unless you are willing to have everyone do it.

2. Never use people merely as means, but always respect and develop their ability to choose for themselves.

Kant’s principle advocate the following;“Do unto others as you would have them do unto you.”

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The libertarian objection: Nozick

• Some important views on rights that are different from the ones we have sketched have been proposed recently by several libertarian philosophers, such as Robert Nozick.

• They claim that freedom from constraint is necessarily good and that all constraints on one by others are necessarily evils, except when they prevent even a greater human constraints.

• If I have a right to unionize for example, I constrain the rights of my employer to treat me as he sees fit.

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Justice and Fairness• Justice, like rights, is an important moral concept

with a wide range of applications.• We use it to evaluate not only the actions of

individuals but also social, legal, political and economic practices and institutions.

• Although the word “just” is sometimes used interchangeably with “right” and “good,” it generally has a more restricted meaning that is closer to “fair”.

• Questions of justice often arise when there is something to distribute. If there is a shortage of organ donors, for example, we ask, what is a just,

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or fair, way of deciding who gets a transplant? If there is a burden, such as taxes, we want to make sure that everyone bears a fair share.

• Justice is also concerned with the righting of wrongs. It requires for example, that a criminal be punished for a crime and that the punishment fit the crime by being neither too lenient nor too severe.

• To treat people justly is to give them what they deserve.

• The concept of justice is relevant to business ethics primarily in the distribution of benefits and burdens.

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Types of justice

• Distributive justice: Concerned with the fair distribution of society’s benefits and burdens.

• Retributive justice: refers to just the imposition of punishments and penalties on those who do wrong.

• Namibia’s Stock Theft Act which prescribe a sentence of at least 20 years’ imprisonment without the option of a fine for anyone convicted of stealing livestock worth N$500 or more, when the conviction is the offender’s second stock theft, then a sentence of at least 30 years’ imprisonment without the option of a fine which is prescribed for people convicted of stock theft for a second or subsequent time is given.

• Compensatory justice: concerns the just way of compensating people for what they lost when they were wronged by others.

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Distributive Justice

• The fundamental principle of distributive justice may be expressed as follows:

“individuals who are similar in all respects relevant to the kind of treatment in question should be given similar benefits and burdens, even if they are dissimilar in other relevant respects and individuals who are dissimilar in a relevant respect ought to be treated dissimilarly, in proportion to their dissimilarity.”

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Principles of Distributive Justice

• Fundamental: distribute benefits and burdens equally to equals and unequally to unequals

• Egalitarian: distribute equally to everyone• Capitalist: distribute by contributions• Socialist: distribute by need and ability• Libertarian: distribute by free choices• Rawls: distribute by equal liberty, equal

opportunity, and needs of disadvantaged

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• Some of the egalitarians have tried to strengthen their position by distinguishing between two kinds of equality; political equality and economic equality.

1. Political equality: refers to an equal participation in, and treatment by, the means of controlling and directing the political system. This includes rights to participate in the legislative process, equal civil liberties and equal rights to due process.

2. Economic equality: refers to the equality of income and wealth and equality of opportunity. The criticisms levelled against equality, according to some egalitarians, their criticisms about equality only apply to economic equality not political equality.

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• The main question that is raised by contributive justice is how the value of contribution of each should be measured, some say it should be measures in terms of work effort, the harder one works the more one deserves.

• This is the assumption behind the Puritan ethic, which held that individuals had a religious obligation to work hard at their calling (the career to which God summons each individual) and that God justly rewards hard work with wealth and success, while He justly punishes laziness with poverty and failure.

• A second part says that contribution should be measured in terms of productivity, the better quality of a person’s contributed product, the more he or she should receive.

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Rawls’ theory of justice

Each person is to have an equal right to the most extensive total system of equal basic liberties compatible with a similar system of liberty for all. ( The Principle of equal Liberty)

1. Social and economic inequalities are to be arranged so that they are both:

a) to the greatest benefit of the least advantaged, consistent with the just savings principle, (the difference principle) and

b) attached to offices and positions open to all under conditions of fair equality of opportunity. (the principle of equal opportunity)

• # Rawls tells us that Principle 1 is supposed to take priority over Principle 2, should the two of them ever come into conflict, and within Principle 2, Part b is supposed to take priority over Part a.

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• Principle of equal liberty: it says that each citizen’s liberties must be protected from invasion by others and must be equal to those of others. These basic liberties include the right to vote, freedom of speech and conscience and the other civil liberties, freedom to hold personal property, and freedom from arbitrary arrest.

• Difference principle: It assumes that a productive society will incorporate inequalities, but it then asserts that steps must be taken to improve the position of the most needy members of society, such as the sick and the disabled, unless such improvements would so burden society that they make everyone, including the needy, worse off than before.

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• Principle of fair equality of opportunity: It says that everyone should be given an equal opportunity to qualify for the more privileged positions in society’s institutions.

• Rawls theory incorporates with the Kantian principles of reversibility and universability, though some critics of Rawls point out that just because a group of people would be willing to live under a principle it does not mean that it is morally justified.

•

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Retributive justice and compensatory justice

• They both deal with how best to deal with wrongdoers.

• Retributive justice concerns blaming or punishing those who do wrong.

• Compensatory justice concerns restoring to a harmed person what he lost when someone else wronged him. A person should be compensated if these three conditions pertain:

1.The action that the inflicted injury was wrong or negligent.

2.The action was the real cause of the injury3.The person did the action voluntarily

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The Ethics of Care• Ethic of care is an ethic that

emphasises that we have an obligation to exercise special care toward the people with whom we have valuable close relationships.

• Compassion, concern, love, friendship, and kindness are all sentiments or virtues that normally manifest this dimension of morality.

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Virtue Ethics• According to virtue ethics, one should not only look at

the kind of actions an agent ought to perform, but should pay attention to the kind of person an agent ought to be.

• An “agent-based” focus on what one ought to be, in contrast to an “action-based” focus on how one ought to act, would look carefully at a person’s moral character, including, in particular, whether a person’s moral character exhibits virtue or vice.

• A more adequate approach to ethics, according to these ethicists, would take the virtues (such as honesty, courage, temperance, integrity, compassion, self-control) and the vices (such as dishonesty, ruthlessness, greed, lack of integrity, cowardliness) as the basic starting point for ethical reasoning.