+

Managing Business Ethics

Chapter 2

Treviño & Nelson – 5th Edition

+Case: Should I wait on the EPA?
You’re the VP of a medium-sized organization that uses chemicals
in its production processes. In good faith, you’ve hired a highly
competent scientist to ensure that your company complies with all
environmental laws and safety regulations. This individual
informs you that a chemical the company now uses in some
quantity is not yet on the approved Environmental Protection
Agency (EPA) list. However, it has been found to be safe and is
scheduled to be placed on the list in about three months. You can’t
produce your product without this chemical, yet regulations say
that you’re not supposed to use the chemical until it’s officially
approved. Waiting for approval would require shutting down the
plant for three months, putting hundreds of people out of work,
and threatening the company’s very survival. What should you
do?
+
Learning Objectives

 Ethical Dilemmas
 Prescriptive Approaches
 Focus on consequences (consequentialist
theories)
 Focus on duties, obligations, principles
(deontological theories)
 Focus on integrity (virtue ethics)

 Eight steps to making sound ethical decisions

+
What is an Ethical Dilemma?

 A situation where values are in conflict

 Two or more values you hold dear - or –
 Personal value conflicts with organizational value

Value Value
+
Ethical Theories
Ethical theories attempt to supply basic principles that we can rely
on in making moral decisions.

Four major theories are:

  Utilitarianism

 Deontology – Kant’s version and Ross’s version

 Rawls’s Theory of Justice

 Virtue ethics
+
Prescriptive (Normative) Approaches

 Prescribe how people ought to act

 Focus on consequences (consequentialist
theories)
 Focus on duties, obligations, principles
(deontological theories)
 Focus on integrity (virtue ethics)
+
Utilitarianism

Core Idea: Ethics should be based

on facts about the results of our
actions upon human happiness and
suffering in the real world
+
Focus on Consequences
(Consequentialist Theories)

Utilitarianism - best known

consequentialist theory
 Identify
alternative actions and
consequences to stakeholders
 Bestdecision yields greatest net
benefits to society
 Worst decision yields greatest net
harms to society
+ Utilitarianism
 According to Utilitarianism, a person should perform
those actions which conform to the Principle of Utility.
 The Principle of Utility says: a person should choose that
action which produce the greatest good for the greatest
number of people affected by the alternatives open to
him. (GGGN)
 The rightness or wrongness of actions is determined by
the goodness or badness of the actions’ consequences, not
by the actions themselves.
+
Utilitarianism
 Because the morality of an action, according to
utilitarianism, rests on its consequences,
utilitarianism is called a “consequentialist theory
of ethics.”
 Thereare different views as to what make a
consequence good or bad.
 According to the “classical” or “hedonistic”
version, what makes a consequence good or bad
is its effect on people’s happiness.
+
Utilitarianism

 Roughly,a consequence is bad if it reduces

happiness, good if it increases happiness.
 Happiness, in turn, is understood to mean: an
increase in pleasure and/or decrease in pain.
 Because of the emphasis on happiness,
Utilitarianism is sometimes called “the greatest
happiness principle”.
+
Focus on consequences – classic
Trolley example

A runaway trolley is hurtling down the

tracks toward 5 people who will be killed
if it proceeds on its present course. You
can save these 5 by diverting the trolley
onto a different set of tracks, one that has
only 1 person on it, but if you do this that
person will be killed.

Question: Should you turn the trolley to

prevent 5 deaths at the cost of 1?  
+
Consequentialist Questions

 Can I identify all the stakeholders?

 Immediate, distant?

 What are the potential actions I could take?

 What are the harms and benefits for stakeholders given
potential decisions/actions?
 What decision will produce the most benefit (and least
harm) for the greatest number of people, and for society at
large?
Consequentialist Analysis

Stakeholder Option 1 - Option 1 - Option 2- Option 2 -

Costs Benefits Costs Benefits

#1

#2
#3

#4
….etc.

Bottom line = action that produces the greatest good for the
greatest number of people, for society overall!
+Case: Should I wait on the EPA?
A chemical the company now uses in some quantity is not yet
on the approved Environmental Protection Agency (EPA) list.

However, it has been found to be safe and is scheduled to be

placed on the list in about three months.

You can’t produce your product without this chemical, yet

regulations say that you’re not supposed to use the chemical
until it’s officially approved.

Waiting for approval would require shutting down the plant

for three months, putting hundreds of people out of work, and
threatening the company’s very survival.

Under utilitarianism, what would you do?

+
Focus on Consequences
(Consequentialist Theories)

 Advantages
 Practical
 Already underlies business thinking
 Challenges
 Difficultto evaluate all consequences
 Rights of minorities can be sacrificed
+
Deontology

 As noted earlier, consequentialist theories of

ethics find the basis for an action’s morality in the
consequences produced by the action rather than
in the action itself.
 Deontological theories of ethics, argue that it is
features of the action itself, apart from
consequences, which determine its morality.
 When an action has the relevant features then we
can say it is our duty (or obligation) to perform it.
+
Focus on Duties, Obligations,
Principles (Deontological Theories)

 Decisions based upon abstract

universal principles: honesty,
promise-keeping, fairness, rights,
justice, respect
 Focus on doing what’s “right”
(consistent with these principles)
rather than doing what will
maximize societal welfare (as in
utilitarianism)
+
Deontology

 Itis this emphasis on duty that earns them the

name “deontological”, which is derived from the
Greek word for “duty” or “obligation”.

 Thereare different versions of deontology. We

examine one: Immanuel Kant
+ German philosopher Immanuel Kant
(1724-1804)

Basic Summary:  

Certain types of actions (including murder,

theft, and lying) were absolutely prohibited,
even in cases where the action would bring
about an alternative resulting in more
happiness
+ German philosopher Immanuel Kant
(1724-1804)
Basic Summary:  
Two questions that we must ask ourselves whenever we
decide to act: 

 (i) Can I rationally will that everyone act as I propose to

act?  If the answer is no, then we must not perform the
action. 

 (ii)  Does my action respect the goals of human beings

rather than merely using them for my own purposes?  
Again, if the answer is no, then we must not perform the
action.  (Kant believed that these questions were
equivalent).
+Case: Should I wait on the EPA?
A chemical the company now uses in some quantity is not yet
on the approved Environmental Protection Agency (EPA) list.

However, it has been found to be safe and is scheduled to be

placed on the list in about three months.

You can’t produce your product without this chemical, yet

regulations say that you’re not supposed to use the chemical
until it’s officially approved.

Waiting for approval would require shutting down the plant

for three months, putting hundreds of people out of work, and
threatening the company’s very survival.

What would the deontologist do?

+
W. D. Ross (1877-1971)

 W. D. Ross attempts to incorporate aspects of

utilitarianism and aspects of Kantianism.
 He saw not only that such rules fail to show
sensitivity to the complexities of actual situations,
but also that they sometimes conflict with one
another.
+
Prima facie duties
 Like Kant, Ross is a deontologist, but he believed (as Kant
apparently did not) that moral duties can conflict, in which
case their relative merits had to be weighed and the
chosen action based on the outcome of that weighing.
 Because duty A might be outweighed by another duty B in
a situation where the two conflict, it might seem
inappropriate to call A a duty in the first place. Aware of
this concern, Ross describes A and B as prima facie duties.
They are duties we have “all things being equal”. But in a
situation only one of them will turn out (after weighing) to
be our actual duty.
+
Prima facie duties (Ross)

Ross offers a list of duties that he considers binding on all

moral agents. (He did not claim that the list is
exhaustive).
1. Duties of fidelity: telling the truth, keeping actual and
implicit promises, and not representing fiction as history
2. Duties of reparation: righting the wrongs we have done
to others
3. Duties of gratitude: recognizing the services others
have done for us
+
Prima facie duties (Ross)

4. Duties of justice: preventing a distribution of pleasure or

happiness that is not in keeping with the merit of the people
involved
5. Duties of beneficence: helping to better the condition of
other beings with respect to virtue, intelligence, or pleasure
6. Duties of self-improvement: bettering ourselves with
respect to virtue or intelligence
7. Duties of non-malfeasance: avoiding or preventing an
injury to others
+ Deontological Questions

 Which values or principles apply?

 Which are most important and why?
 What are my ethical duties, obligations?
 Have I treated others as I would want to be treated? (Golden
Rule)
 Have I assumed that the other(s) is ethical and responsible?
 If everyone behaved this way, would that be acceptable?
 Would I want to live in that world? (Immanuel Kant’s
categorical imperative)
 What would be a fair action if identities were unknown?
(Rawls’ veil of ignorance)
+
Focus on Duties, Obligations, Principles
(Deontological Theories)
 Advantages
 Rights approach found in public policy debates
(e.g., abortion)
 Challenges
 Determining rule, principle, or right to follow:
Golden rule, Kant’s maxim
 Deciding which takes precedence
 Reconciling deontological and consequentialist
approaches when they conflict
+
John Rawls’ theory of justice
 The two principles of justice
(1) “Each person is to have an equal right to the
most extensive liberty compatible with a similar
system of liberty for others.”
 Concerned with basic rights or liberties
 Calls for strict equality in this area

John Rawls' theory of justice ~ slide 29

+ John Rawls’ theory of justice
(2) “All social values--liberty and opportunity,
income and wealth, and the bases for self-
respect--are to be distributed equally unless an
unequal distribution of any, or all, of these
values is to everyone’s advantage.”
 Concerned with wealth & social status

Social and economic inequalities are to be arranged so that

they are both

a) to the greatest benefit of the least advantaged

b) attached to offices and positions open to all under

conditions of fair equality of opportunity
John Rawls' theory of justice ~ slide 30
+ Rawls’ Veil of Ignorance

Symbolic depiction of Rawls's veil of ignorance. The citizens

making the choices about their society make them from an
"original position" of equality and ignorance (left), without
knowing what gender, race, abilities, tastes, wealth, or position in
society they will have (right). Rawls claims this ensures they will
choose a just society
+
Principles of justice

 ForRawls, these two principles are taken to

govern the distribution of all social goods: liberty,
property, wealth, and social privilege.

 The first principle has priority. It guarantees a

system of equal liberty for all. The second
principle governs the distribution of social goods
other than liberty.
+
Virtue Ethics

Virtue Ethics (or Virtue Theory) is an

approach to ethics that emphasizes an
individual's character as the key element
of ethical thinking, rather than rules
about the acts themselves (Deontology)
or their consequences
(Consequentialism).
+
Virtue ethics (Focus on Integrity)

 Virtueethics is ethics based on character. Its

fundamental idea is that a person who has acquired
the proper set of dispositions will do what is right
when faced with a situation involving a moral choice.
 Thus,virtue ethics doesn’t involve invoking
principles or rules or calculationd to guide actions.
 The virtuous person is both the basic concept and the
goal of virtue ethics. The virtuous person is one who
acts right, because he/she is just that sort of person.
+ Virtue Ethics Questions

 What does it mean to be a person of integrity in this

situation, profession, etc.?
 What ethical community would hold me to the highest
ethical standards?
 Do carefully developed community standards exist?
 What would the broader community think if this were
disclosed? Front-Page test?
 What would my “harshest moral critic” expect me to do?
 What would my “ethical role model” expect?
 What do I want my professional reputation to be?
+ Virtue Ethics –
Management as a Profession
 Theproposed “Hippocratic Oath”
 Managers as agents of society – serve public interest,
enhance long-term value for society
 Enterprise well-being over self-interest
 Obedience to letter/spirit of law and other contracts
 Behavior of integrity – self and others
 Accuracy and transparency in reporting outcomes &
processes
 Treat others with respect/fairness re: others, the powerless
 Knowledge/fact-based decision making
 Accept responsibility as a professional manager
+
Focus on Integrity
(Virtue Ethics)

 Advantages
 Can rely upon community standards
 Challenges
 Limited agreement about community
standards
 Many communities haven’t done this
kind of thinking
 Community may be wrong
+ Ethical rules (simplified)
 Kant’s categorical imperative
 “What kind of world would it be if everyone behaved this
way?” “Would I want to live in that world?”
 Rawls’ veilof ignorance – for deciding what’s fair
 “What would decision be if decision makers knew nothing
about their identities or status?”
 Golden Rule
 “Treat others as you would have them treat you”
(Assumption is that both parties are ETHICAL! An ethical
person wouldn’t expect someone else to be unethical for
him/her.)
+
Eight Steps to Sound Ethical Decision
Making

1. Gather the facts

2. Define the ethical issues
3. Identify the affected parties
4. Identify the consequences
5. Identify the obligations
6. Consider your character and integrity
7. Think creatively about potential actions
8. Check your gut
+
Summary
(When Asked to Make a Snap Decision)

 Pay attention to your gut

 Ask for time
 Find out about organizational policy
 Ask manager or peers for advice
 Use “Front-PageTest” (disclosure rule)
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End of Lecture

Questions?