Values, Ethics and Business Decisions From Ethics to Ethical Rationality Marc Le Menestrel

What does it mean to be ethical? Are you an ethical person? Do you work for an ethical company? Is business ethical?

You feel good, full of energy You may not be very credible And you may be blind to risks You are honest It feels bad But you are more aware and anticipate Looking at the good side Looking at the bad side Thinking Ethics as a Grey Zone  Your ethical judgments are bounded and biased by your emotions, your interest, your mental habits and self-image, your cultural context and work environment, etc.  This psychological phenomenon is not necessarily intentional, but it can have significant consequences. It can be used by others to influence or even control you.  With training and effort, you can develop, refine and structure your ethical consciousness. It requires to open your mind and be able to think beyond the justification of your ethical opinion. Purely ethical You are here! Purely unethical

Enlighten your Ethical Blindspot Which stakeholders can be harmed? How much? When? Can this be wrong? According to law? To some ethical principle? If everyone does the same? All the time? Am I having bad feelings? A sense of discomfort? An early warning signal inside? Would this be better kept secret? Is this taboo? Could it be publicly known? Which stakeholders can benefit? How much? When? Is this right? Is this legal? Is this respecting ethical principles, code of values? Can this be universalized? What good feelings do I have? What virtue do I incarnate? Why is this respecting my personal integrity? What would I like to be known? To be transparent? is transparent? To which extent is this unethical?To which extent is this ethical?

Some Ethical Questions Are you an ethical manager? Do you work for an ethical company? Is it ethical to close a profitable plant? Is it ethical to influence a government? Is it ethical to compromise on the safety of a product? Is it ethical to shape customers desires? Is economic progress ethical? Is it ethical to work as hard as possible?

What Should you do? Less ethicalMore Ethical Better Worse Ethical Values Business-Interest There is no point of talking about ethics in business if we don’t talk about how much it costs Ethics vs. Business Interest

First Discourse: Economic Rationality Less ethicalMore Ethical Better Worse Ethical Values Rational Business interest should be the sole and unique criterion of rational choice Irrational Business-Interest

Second Discourse: Idealism Less ethicalMore Ethical Better Worse Ethical Values Rational Ethical values should be the sole and unique criterion of choice Irrational Business-Interest

Third Discourse: Corporate Social Responsibility Less ethicalMore Ethical Better Worse Ethical Values Rational Business interest and ethics should always combine Irrational Business-Interest

Ethical Rationality Less ethicalMore Ethical Better Worse Ethical Values Interest Ideal Irrational Priority to interest Priority to ethics Marc Le Menestrel, UPF & INSEAD, for Rational choices between interest and ethics are often kept hidden, but they are the most difficult: We can rationally give priority to interest, and sacrifice ethics We can rationally give priority to ethics, and sacrifice interest

A Framework of Ethical Rationality 1. Economic Analysis 2. Ethical Analysis 3. Ethical Dilemma 4. Dynamic Analysis

1. Economic Analysis The rational actor (you, the team, the firm) 1. Anticipates the consequences of the available actions 2. Evaluates these consequences according to their interest for the actor 3. Identify the action that leads to the best consequence Interest of the consequence ? Step 1: What is the action that leads to the best consequence for you?

2. Ethical Analysis To which extent is it ethical? Emotions/Virtue: Do I feel good? Is this a natural way to act? Deontology/Idealism: What sort of principle, rule or norm do I respect? What happens if everybody does the same? What happens if I always act like this? Utilitarianism/Consequentialism: What are the good consequences for others? Would I like these consequences for myself? What are the good consequences for the environment? Would the children of my children like these consequences? To which extent is it unethical? Emotions/Virtue: Do I feel bad? Is this an unnatural way to act? Deontology/Idealism: What sort of principle, rule or norm do I violate? What happens if everybody does the same? What happens if I always act like this? Utilitarianism/Consequentialism: What are the bad consequences for others? Would I suffer these consequences for myself? What are the bad consequences for the environment? Would the children of my children dislike these consequences? Step 2: What is the ethics of the action that leads to the best consequence for you? ? Here you raise an ethical dilemma!Here you justify your interest!

3. Ethical Dilemma Step 3: Facing the extent to which there is a dilemma Prudence: Could the unethical aspects lead to unexpected negative consequences? ? Unethical aspects of behavior More ethical alternative Vision:Can you find a more ethical alternative? Imagination: If the consequences of the alternative affect your interest, cannot they be improved? ? ?

4. Dynamics Analysis Ideal If you are in the ideal position, you may not be lucky for very long Irrational Priority to interest Priority to ethics Lack of transparency Legal pressure Liabilities Bad Reputation PR costs Negative motivation Managerial inertia Transparency Social involvement & support New scope of activities New business processes Long term thinking Strategic investment Positive motivation Learning process Increasing demands (legal, social) Credibility ambiguous Contentment, lack of vigilance Unawareness, rationalization If you give priority to interest, you will need reactive strategies to survive If you give priority to ethics, you may find help for your proactive strategies

A Difficult Strategy… Few ones are going to believe it, Outside or inside the company… Ideal Irrational Priority to interest Priority to ethics

A Reactive Strategy… We wait for change to become necessary But it can be very dangerous… Ideal Irrational Priority to interest Priority to ethics

A Proactive Strategy… We are likely to be more credible, And more motivated for change… Visionary Leaders Welcome! Ideal Irrational Priority to interest Priority to ethics

Conclusions It is easy not to see ethical dilemmas: you just have to find a good justification for the action leading to the best consequence! It is not easy to see ethical dilemmas: it questions ourselves and it does not look fun… It can be rational to be ethical sacrificing your interest, or to sacrifice ethics for your interest: the choice remains yours It is difficult, but helpful, to search for ethical dilemmas beforehand if you want to have a chance not to be trapped by them and anticipate their dynamics

Joan Miro, 1968