Discussion Questions - Kant:
1.Does Kant’s rational framework have special appeal for multinational corporate managers? Does it allow the manager to argue, without appeal to any particular religion, that there are some evil things a corporate executives shouldn’t do (even if these actions could be shown to benefit shareholders in the short term), such as killing, stealing and lying? Could these categorical imperatives be useful guides when issues of product safety or earnings reporting are raised?
2. Does Kant allow sufficiently for the complexity of the situations in which modern corporate managers find themselves? For example, Kant would forbid a face-saving “white lie” because for him truth is an absolute. Yet in dealing with business counterparts in certain cultures where saving face is essential, could a refusal to shade the truth in any way be a deal-breaker? Is it always clear where one’s duty lies? Commonly there are choices among two evils or two alternatives that have different benefits. Is a categorical imperative in practice so useful a guide? Does Kant provide a way to resolve conflict among duties?
Discussion Question: The Free Rider Problem
You decide as manager of a small bank to adopt standards that are higher than required by U.S. law for disclosing terms of loans and savings accounts. You find that a competitive bank offers less favorable terms but disguises them through a practice called “shrouding” (not emphasizing negative aspects of a deal). What are your options for addressing this Free Rider problem (i.e., your competitors’ attracting customers by adhering to unethical standards of advertising).
| FOUR ETHICAL APPROACHES: VIRTUE, DUTY, CONSEQUENCE AND RELATIVISM
Four ethical approaches have evolved as the focus of those who study moral philosophy: virtue ethics, duty ethics, consequential ethics and relativistic ethics. Virtue ethics, associating ethics with personal habits, is associated with Aristotle. Duty ethics is associated with religious beliefs, although Kant tried to create a system of duties independent of belief in God. Consequential ethics is associated with the quest for rationalism during the Enlightenment, and especially with the Utilitarians. Relativistic ethics is based on an appreciation of the importance of cultural milieu and allows that the ethics of one's peers is a key factor in determining what is right for the individual.[1]
Plato and especially later Aristotle described moral behavior as “what the moral or virtuous person does.” The virtuous person develops a sense of right and wrong. This idea endures. We look to people we think of as ethical to give us advice on an ethical issue because such people have a sense of right and wrong.
Aristotle tried to take the idea further, with less success. He thought that virtuous behavior meant people realizing their potential. He suggested that virtue was tied to moderation, a middle way between excess and deficiency. This idea is in practice not proven so helpful because where the midpoint is depends on where we put the extremes.[2] For example if an extreme drinker is someone who drinks six liters a day of vodka, then is three liters a day a moderate drinker?
Markets operate without depending on the virtue of the business people who trade in them. But in practice ethical behavior is admired. Political campaigners like to focus on the ethical shortcomings of business, while businesses poke fun at the ethical shortcomings of political leaders.
Business Example: A company has a certain DNA. If it has a permissive cultural code that that loses sight of who the customer is, it can lose the confidence of investors, workers and customers. Why should anyone invest in a fund or company if it appears that its managers condone phony accounting or insider trading? Why patronize a casino known to give worse odds than others on the same gambling strip, unless it is “the only game in town”? If I have a choice, why work for or buy from a company that is known not to treat its workers fairly?
The most primitive ethical systems seem to be based on a system of obligations. The child does what the parent wants because the parent says so. Thus “deontological” (from the Greek word δεοντος, deontos, “duty”, which derives from the Greek word for “bind”) ethics starts from the idea that some things are just wrong and mustn’t be done. The key idea here is that the intent to obey the rule is more important than the outcome. Goodness is the ability to understand and act on moral obligations. Fundamental binding principles should govern an individual or firm’s behavior under any circumstance. The two main sources of such principles are religions and Kantian ethics.
Religions have rules attributed to revelation from God or advice handed down from religious leaders. Religions have different rules about what believers should eat or do on certain holy days, but many base their general guides to action
Many Religious Principles Make Good Consequential Social Sense...
But They Also Encourage Relativistic Ethics
Judeo-Christian
Love thy neighbor as thyself - has good consequences for neighborliness!
Native American
Walk in the other person’s moccasins - helps see other people's point of view.
Hindu
What goes around comes around (karma) - so don't be evil.
Confucian
Reciprocity (to be a better person) - what you aspire to be is a socially integrated person.
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on principles of reciprocity and symmetry. Religions have the advantage that their rules are accompanied by maxims and parables to guide behavior. A common belief provides support and motivation from fellow believers to follow through on the desired behavior.
A major motivating tool of religion are our lack of knowledge of what happens, if anything, after death. Religions offer the carrot of great rewards in the next world or the stick of hell. Ethical behavior historically was governed by religious or tribal practices. Even the famously rational Greeks took their temples very seriously. Adam Smith, despite his high reputation among those who seek non-religious ethical principles, considered himself a believer and his research goals as Professor of Moral Philosophy were altruistic. His “instigating event” for writing The Wealth of Nations was puzzlement about why business as a whole does such a good job of providing for society’s needs despite his observation that many people in business were motivated by selfish considerations.
Early laws were linked to religion, from the Ten Commandments to canon law to the Koran. Kings took on a religious mantle by claiming a divine right to rule. Gradually the rule of the king in the West became the rule of law (“rex” became “lex”). Modern law is a set of rules, with a subset of rules dealing with how we recognize what rules are authoritative. The rule for recognizing what is authoritative is to look at what in practice people take to be such rules.
Kantian ethics was developed by Immanuel Kant (1724-1804) based on categorical (absolute) imperatives that are derived from rational analysis instead of revelation or the teachings of priests and prophets. In this way Kant was seeking to combine the rational virtue ethics of the Greek philosophers with the duty ethics of Judaeo-Christian religions. Kant uses two tests of an action to differentiate right from wrong:
- Is it universal? The underlying motive should be universally applicable – that is, for an action to be moral, it must be an action that we will to happen and that would be desirable if everyone else behaved in the same manner.
- Is it reversible? This test is akin to reciprocity. Human beings should be viewed as worthy of respect for themselves and not as means to other ends. It is irrational and immoral to consider ourselves worthy ends (deserving of respect) and deny such respect to others.
Consequentialist or teleological ethics abandons the criterion of motive and focuses attention on the outcomes of actions. If the outcome is good the related actions are likely to be good – regardless of the motivation of the individual actor. The fact that someone has good motives for an act is not enough to ensure that it is ethically good.
Utilitarians are that large group of consequentialists who believe that the outcomes of government and business policies can be predicted and measured. As John Stuart Mill said: “Public policies should be judged by their consequences.” Actions are right as they tend to promote happiness – the greatest good of the greatest number – and wrong as they tend to produce the reverse of happiness. A large part of the activity of economists is showing how public policies produce “unintended consequences” that are bad. Sometimes economists can even show that the consequences are the opposite of those intended.
But utilitarians are split over the issue of who is to decide what the greatest good is. Those who seek to use government power to give people what they ought to want whether or not they realize that it is good for them are called managerial liberals. Those who are more interested in addressing what people actually do want – whether or not obtaining this will, objectively speaking, turn out to be good for them – are called subjectivists. Those who believe that businesses should respond without questions to NGOs that are active on behalf of consumers or investors might be described as subjectivists. Those who disagree on the grounds that government should be the ones to decide how businesses respond might be managerial liberals.
In Practice: Duty vs. Consequence
Walter Lippmann favored “governing simplicity.” In the old days people could understand "Go fetch a goat." The peasant could understand the obligation to make a goat sacrifice. The gods must be appeased. The philosophers' "maximize utility" doesn't quite resonate so well.[3] Deontological tends to be defined among philosophers as the position that some acts are morally binding independently of utility calculations. That doesn't exclude the idea that utility calculations might produce moral binding directives. It just includes more than this under what is morally binding.
Chart 1-1. Brands of EthicsPersonal Ethics
VIRTUE Realize One’s Potential (Aristotle)
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CONSEQUENTIAL Do What Is Best (What will happen? Teleological)
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DUTY Do what is right. (Deontological, rule-based or contract-based.)
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Community Ethics
Do Best for All - Consequential
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Do Right – Duty
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Utilitarian – “Greatest good for the greatest number” (Mill)
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Ethical Egoism – self-interest in free markets tends to a utilitarian outcome (Smith)
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Kantian – Rules derived rationally from universality and reversibility principles.
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Social Contracts – Agreements on human rights, fairness.
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Why are social contracts identified with doing the right thing rather than the best thing? Because a contract is a promise with the added feature that if formally drawn up it is legally enforceable. Someone who is a believer in promise-keeping is more likely to insist on honoring a contract. Also, if someone does not intend to honor a contract, signing it is a lie; if the contract is broken after the fact, it is theft.
Utilitarians disagree about how to behave in practice. But they tend to agree that people should keep their promises because society works better if they do. So a rule-utilitarian would allow for some duty-based guidance because it is useful. The utilitarian might be a little more flexible than a duty-based ethicist (certainly more flexible than Kant!) when it turns out that the best consequence might flow from ignoring the contract (i.e., the overall good would be maximized by not fulfilling the obligation). Rule-utilitarians would be more rigid than act-utilitarians in individual cases. Even a duty-bound ethicist must think twice in the classic example in Plato’s Republic in which a man leaves weapons with you for safe-keeping, and then wants them back when he is in a drunken state and seems ready to kill himself or someone else.[4] The point of this example is that ethical issues can be complex.
4. Relativistic Ethics
Relativism is only possible where there are ethical disagreements. Then ethical teaching interprets the Golden Rule as mutual respect for one's neighbor, which means allowing the norms of a person's peer group to govern their ethical choices. Many have criticized the golden rule; George Bernard Shaw said that "The golden rule is that there are no golden rules" and "Do not do unto others as you would expect they should do unto you. Their tastes may not be the same." (Maxims for Revolutionists). "The golden rule is a good standard which is further improved by doing unto others, wherever possible, as they want to be done by." Karl Popper, The Open Society and Its Enemies, Vol. 2. A key element of the ethic of reciprocity is that a person attempting to live by this rule treats all people, not just members of his or her peer group with consideration, which leads to a tolerant if not relativistic outlook.
So what is a community's ethical outlook? Some ethical theories are more concerned with institutional and society-wide issues than about individual morality. Three brands of ethics are worth summarizing in this context: egalitarianism, libertarianism and consensus-building.
John Rawls[5] argues that people should judge the rules of a society by interposing a "veil of ignorance" about where they are placed in the social hierarchy. If you don’t know in advance which social class you would be born into, which society would you prefer? He says people will choose a “maxi-min” society (the least fortunate are the least unfortunate), based on two principles:
- Equal Liberty: Each person has an equal right to the most extensive liberties compatible with similar liberties for all.
- Difference: Social and economic inequalities are arranged to (a) to provide the greatest benefit of the least advantaged persons, and (b) keep offices and positions equally open to all. Society may fairly give some people more income and power than others if this (1) makes life better off for the worst off by raising the living standards of everyone, and (2) provides access to positions of power without discrimination other than by criteria related to the success of the effort.
Business Application: An egalitarian philosophy would appear to lead to a compensation system in businesses that is "flat" - i.e., the top executive earns a low multiple of the least-well-paid employees.
Question 1. Are people as totally risk-averse as Rawls suggests? Might people prefer less of a safety net in return for a higher productivity of the society?
Question 2. Warren Buffett in his 2005 annual report has complained that executives are paid exorbitant salaries with no evidence of superior performance. Are the executives taking money from the shareholders or the workers, or both? In your view, which would be a more serious ethical issue?
Robert Nozick[6] responded to Rawls by building on the idea of basic individual property rights to argue for a minimal state. Libertarianism has also been argued from the perspective of ethical egoism – the view that if all agents act equally in their own self-interest, the marketplace will ensure maximum prosperity (this goes far beyond Adam Smith’s belief that the Invisible Hand creates benign consequences from predatory or amoral business practices). An ethical egoist is in principle opposed to altruism, in the belief that the attempt to help others fails because (1) it makes them dependent and (2) it ignores the fact that needs are specific to the individual.[7]
Business Application: It is appropriate for businesses to lobby governments in two areas: (1) To reduce regulation, because businesses are defending their basic rights to a sphere of action without government interference. (2) To defend an inventor’s right to the reward for the invention.
Question 1. Is there really a free-market case for patents and copyrights? The “right” to the fruits of property, including invention, is actually conferred and protected by government. Patents and copyrights rest on a web of government data collection – business without government protection would be no paradise.
Question 2. In fact, people don’t behave as if they believe anyone has absolute property rights. During wars, business people who raise their prices are considered exploitative. If a member of a tribe of primitive fishing people invents a fishhook, custom will not allow this person rights in perpetuity to the use of the fishhook idea. Mustn’t property rights always yield to the right of people to stay alive?
Social Contracts – Based on Rights or Fairness
Rights Contracts
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Fairness Contracts (Consensus)
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Political rights: people.
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Property rights.
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Social design based on fairness.
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Voluntary consensus-building on rules, standards
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Global ethical issues are often tackled today using a multi-stakeholder approach with representatives from labor, business and NGOs to address common problems. Common principles for consensus-building of this form are:
- Transparency of process
- Inclusiveness of representation (from all major “stakeholders” including workers, the community, suppliers)
- Use of conflict prevention and resolution techniques
- Development of standards based on, but more specific than, global conventions on human rights or the environment.
Business Application: Standards for corporate behavior relative to the environment or labor are increasingly being developed and monitored through on a multi-stakeholder global basis with representation from the key stakeholder groups, as was done for the labor standard SA8000.
Critique 1: Adherence to standards is voluntary. What about the damage being done – to the environment, to workers – by companies that do not adhere to the standards?
Critique 2: How good are the standards if key stakeholder groups are left out? How does one identify who should be at the table?
[1] Updated by John Tepper Marlin February 11, 2008.
[2] Virtue ethics is being rehabilitated by Alasdair Macintyre, author of After Virtue, and Whose Justice? Which Rationality?
[3] Comments in italics are by Prof. Randal R. Marlin of the Department of Philosophy, Carleton University, Ottawa. Prof. Marlin is the author of Propaganda & the Ethics of Persuasion and other books.
[4] Socrates to Cephalus: “ Suppose, for example, I have a friend who leaves weapons with me, when he is of sound mind, and then asks for them back after he has gone insane. Should I give this madman his weapons? No one would say that was the right thing to do…[or that] you should always speak the truth to someone in such a seriously disturbed frame of mind.” Plato, The Republic, Book I.
[5] A Theory of Justice, Harvard University Press, 1971.
[6] Robert Nozick, Anarchy, State and Utopia, 1974.
[7] Researchers have found that students trained in economics are more likely to be ethical egoists than those who are not…
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