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Ethical Principles in Business

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` In 1948 the whites-only National Party won controlover South Africa

` The establishment of Apartheid- total domination

by 20% of the population, i.e., the whites over the80% - the blacks

` The Blacks were without any rights in their ancientmotherland

` At the height of the Apartheid Caltex a U S OilCompany was very much in South Africa

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` Caltex operated several oil refineries underTexaco & Standard Oil in South Africa and theywere expanding further

` South Africa depended on oil for 25% of its energyneeds, some oil went for the use by the Govt., astiff tax regime meant that a large chunk of Caltexrevenue went to the Govt.

` There were native protesters who were jailedincluding Nelson Mandela

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` Many Standard Oil & Texaco shareholdersprotested against this policy of Caltex and wantedCaltex to stop its South African operations afterall the South African Prime Minister John Vorster

openly said that they ran a govt. for the whitesonly

` The management of Caltex did not agree` Texaco believed that Caltex operations were in the

best interests of all the races- a closure of theseoperations would weigh heavily on non-whites

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` The argument of Caltex was that foreignoperations boosted the black incomes by about150%

` Bishop Desmond Tutu- an Anglican bishopproposed a non-violent protest and there wereprotests & marches

` Whether Caltex should remain in South Africa was

now a moral issue- the issue whether companiesshould support Govts.practising laws like theApartheid

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` Caltex trotted out the utilitarian view that if thecompany left the blacks would suffer greatly

` Caltex claimed that they took care of the blacks in

what they called the ethic of care` The people of South Africa called the protesters

like Nelson Mandela as operating on the ethics ofvirtue

` Ethics of Care vs. Ethics of Virtue

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` During the middle of he last half century FordMotors was losing market share to the Japanese

` Lee Iacocca, Ford President, determined to regain

the lost market with the Ford Pinto` Pinto would weigh less than 2000 pounds, cost

less than US $ 2000 and could be launched in 2instead of the customary 4 years

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` Ford calculated that the cost of modifying thetank of 12.5 million Pintos planned would castUS $ 137 million and if it was assumed that themodification would save 180 lives the benefits

will be US $ 49.15 million` These US $ 137 million will be passed on to the

purchaser in the form of increased price` Ford came to the conclusion that it would not be

fair to charge an increased price of US $ 137million to give them a benefit of US $ 49.15 million

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` In the decade that followed 60 people died anddouble that number sustained serious injuries fromburns

` Pinto was finally discontinued` Ford managers had based their decisions on what

is know as utilitarianism

` It is a philosophy that actions and policies be

based on the benefits and the costs they wouldimpose on society

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` Jeremy Bentham (1748- 1832) is considered thefounder of this view he wanted an objectivebasis for making value judgments as a commonlyaccepted social norm for social policy & legislation

` In summary the principle holds that an actionis right from an ethical point of view if and onlythe utilities produced by the act is greater thanthe sum total of utilities produced by any

other act by the agent in its stead

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` The assumption was that it was possible tomeasure the quantum of benefits produced by anaction and subtract from them the quantum of

harms produced by the same action` Like 500 units of benefits produced by an act in a

factory on its workers will entail 700 units of harmsresulting in 200 negative units of utility

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` The only basis of right & wrong here is based onthe outnumbering of the costs and also thebenefits of any alternative course of action by the

benefits of the chosen action - no other basis` Only the immediate and direct consequences of

actions are taken into account

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` Utilitarianism is an elegant and attractive theory

` It can be nicely used to evaluate the govt. policiesand public goals

` It can be a ready guide about what is moralconduct by highlighting the arms and benefits ofany action- can it go an little deeper?

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` Utilitarianism is the basis of cost-benefit analysisin economic terms

` However can we calculate the real benefits of a

lush green forest?` Utilitarianism emphasises efficiency- desired

output at minimum cost

` Do we have to conclude that the right course of

action is only the efficient one