Chapter 8 Making Ethical Decisions in Business

David Geffen David Geffen the son of poor Russian immigrants Geffen was coming of age as an entrepreneur, he still had to face school Geffen graduated from high school wanting to get rich in show business From the mailroom a 21-year-old Geffen launched the career that made him “the richest man in Hollywood”

David Geffen Irrespective of moral admonitions Geffen was now on his way His extraordinary qualities in a business that rewards such traits Geffen’s achievements and atonements can be weighed against his early indiscretions

Principles of Ethical Conduct The following 14 principles are fundamental guides or rules for behavior These principles distill basic wisdom that spans 2,000 years of ethical thought

The Categorical Imperative Origination: Immanuel Kant Basic premise: Act only according to that maxim by which you can at the same time will that it should become a universal law Criticism: Theory is dogmatic and inflexible

The Conventionalist Ethic Origination: Albert Z. Carr Basic premise: Business is like a game with permissive ethics and any action that does not violate the law is permitted Criticism: Commerce defines the life changes of millions and is not a game to be taken lightly

The Disclosure Rule Basic premise: Test an ethical decision by asking how you would feel explaining it to a wider audience such as newspaper readers, television viewers, or your family

The Disclosure Rule Criticism: Does not always give clear guidance for ethical dilemmas in which strong arguments exist for several alternatives An action that sounds acceptable if disclosed may not, upon reflection, be the most ethical

The Doctrine of the Mean Origination: Aristotle Basic premise: Virtue is achieved through moderation Avoid behavior that is excessive or deficient of a virtue Criticism: The doctrine itself is inexact

The Ends-Mean Ethic Origination: Ancient Roman proverb, but often associated with Niccolò Machiavelli Basic premise: The end justifies the means Criticism: In solving ethical problems, means may be as important, or more so, that ends The process of ethical character development can never be furthered by the use of expedient means

The Golden Rule Origination: Found in the great religions and in works of philosophy Basic premise: Do unto others what you would have them do unto you Criticism: People’s ethical values differ, and they may mistakenly assume that their preferences are universal It is primarily a perfectionist rule for interpersonal relations

The Intuition Ethic Origination: Defined by G.E. Moore in Principia Ethica Basic premise: What is good or right is understood by an inner moral sense based on character development and felt as intuition

The Intuition Ethic Criticism: Ethical intuition is reliable, but not infallible Self-interest may be confused with ethical insight No standard of validation exists outside the individual Intuition may fail to give a clear answer when ethical norms are in conflict

The Might-Equals-Right Ethic Origination: Thracymachus Basic premise: Justice is the interest of the stronger Criticism: Confusion of ethics with force Invites retaliation and censure, and is not conducive to long-term advantage

The Organization Ethic Origination: Not credited Basic premise: Be loyal to the organization Criticism: Many employees have such deep loyalty to an organization that it transcends self-interest

The Principle of Equal Freedom Origination: Herbert Spencer Basic premise: A person has the right to freedom of action unless such action deprives another person of a proper freedom Criticism: Lacks a tie breaker for situations in which two rights conflict

The Proportionality Ethic Origination: Medieval Catholic theology Basic premise: A set of rules for making decisions having both good and evil consequences Criticism: These are intricate principles, requiring consideration of many factors

The Rights Ethic Origination: Western Europe during the Enlightenment Basic premise: Each person has protections and entitlements that others have a duty to respect Criticism: Rights are sometimes stretched into selfish demands or entitlements Rights are not absolute and their limits may be hard to define

The Theory of Justice Originator: Contemporary, John Rawls Basic premise: Each person should act fairly toward others in order to maintain the bonds of community Criticism: Rawl’s principles are resplendent in theory and may even inspire some business decisions, but they are best applied to an analysis of broad societal issues

Figure 8.1 - Three Spheres of Justice

The Utilitarian Ethic Origination: Line of English philosophers, including Jeremy Bentham and John Stuart Mill Basic premise: The greatest good for the greatest number

The Utilitarian Ethic Criticism: In practice it has led to self-interested reasoning Because decisions are to be made for the greatest good of all, utilitarian thinking has led to decisions that permit the abridgement of individual or minority group rights

Reasoning with Principles The use of ethical principles, as opposed to the intuitive use of ethical common sense, may improve reasoning, especially in complex situations Based on the application of utility, rights, and justice, the manager’s decision in the text example to remain silent is acceptable

Reasoning with Principles Some judgment is required in balancing rights, but the combined weight of reasoning with all three principles supports the manger’s decision

Character Development Character development is a source of ethical behavior separate from the use of principles reasoning Virtue ethic: Ethical behavior stems from character virtues built up by habit Aristotle believed that by their nature ethical decisions require choice, and we build virtue, or ethical character, by habitually making the right choices

The Neural Basis of Ethical Decisions A fast, unconscious, and automatic process in neural circuits causes ethical judgments to appear in our awareness without any feeling of having gone through a reasoning process There is no specific part of the brain that makes ethical decisions

The Neural Basis of Ethical Decisions Functional magnetic resonance imaging: A method used to map activity in neural networks during ethical decision making Emotions have a central role in ethical thought because of their importance to adaptive behavior Moral intuition creates awareness of a moral judgment without any memory of having gone through a step-by-step reasoning process

The Neural Basis of Ethical Decisions Moral intuition is a form of social intuition that is adaptive to the social environment and predominates in individual ethical decisions There is considerable individual variation in perceptions of right and wrong Neuroscience, as it removes physiological mysteries, reinforces the ethical teachings of centuries

Practical Suggestions for Making Ethical Decisions Pay attention to your ethical intuition Consider tactics that illuminate alternatives Critical questions approach: A method of ethical reasoning in which insight comes from answering a list of questions Sort out ethical priorities early

Practical Suggestions for Making Ethical Decisions Set an example Thoughts must be translated into action, and ethical deeds often require courage Cultivate sympathy and charity toward others Ethical perfection is illusory

Concluding Observations There are many paths to ethical behavior Not all managers appreciate the repertoire of principles and ideas that exist to resolve the ethical problems of business life