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1 Handout 07 – Managerial Ethics – XLRI 2014 Ethics of Executive Moral Reasoning and Moral Judgment Ozzie Mascarenhas, S.J., Ph.D. July 11, 2014 Case 7.1: Dassault Aviation and the Defense Ministry, India The Medium Multi-Role Combat Aircraft (MMRCA) competition, also known as the MRCA tender, was a competition to supply 126 multi-role combat aircraft to the Indian Air Force (IAF). The Defense Ministry has allocated 82000 crore (US$14 billion) for the purchase of these aircraft, making it India's single largest defense deal. The MRCA tender was floated with the idea of filling the gap between its future Light Combat Aircraft and its in-service Sukhoi Su- 30MKI air superiority fighter. The bid contest featured six fighter aircraft: Boeing F/A-18E/F Super Hornet, Dassault Rafale, Eurofighter Typhoon, Lockheed Martin F-16 Fighting Falcon, Mikoyan MiG-35, and Saab JAS 39 Gripen. On 27 April 2011, after an intensive and detailed technical evaluation by the IAF, it reduced the bidders to two fighters — Eurofighter Typhoon and Dassault Rafale. On 31 January 2012, Ministry of Defense (MOD), India announced that Dassault Rafale won the competition due to its lower life-cycle cost. Contract negotiations were underway. The decision was received in France with the French President Nicolas Sarkozy, Minister of State for Foreign Trade, Pierre Lellouche, and Dassault Aviation - all issuing statements in support of the decision. Dassault Aviation shares soared more than 21% on the Paris Stock Exchange immediately after the news broke. Nicolas Sarkozy said that the selection of Dassault's Rafale multi-role fighter "goes far beyond the company that makes them, far beyond aerospace — it is a vote of confidence in the entire French economy." Eurofighter issued a statement saying that although they are disappointed, they respect the decision: "India took the decision to select our competitor as the preferred bidder in the Medium Multi-Role Combat Aircraft (MMRCA) tender. Although this is not yet a contract signature and contract negotiations are still ahead, we are disappointed. However, we respect the decision of the MOD. With the Eurofighter Typhoon, we offered the Indian Air
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Handout 07 – Managerial Ethics – XLRI 2014Ethics of Executive Moral Reasoning and Moral Judgment

Ozzie Mascarenhas, S.J., Ph.D.July 11, 2014

Case 7.1: Dassault Aviation and the Defense Ministry, India

The Medium Multi-Role Combat Aircraft (MMRCA) competition, also known as the MRCA tender, was a competition to supply 126 multi-role combat aircraft to the Indian Air Force (IAF). The Defense Ministry has allocated 82000 crore (US$14 billion) for the purchase of these aircraft, making it India's single largest defense deal. The MRCA tender was floated with the idea of filling the gap between its future Light Combat Aircraft and its in-service Sukhoi Su-30MKI air superiority fighter.

The bid contest featured six fighter aircraft: Boeing F/A-18E/F Super Hornet, Dassault Rafale, Eurofighter Typhoon, Lockheed Martin F-16 Fighting Falcon, Mikoyan MiG-35, and Saab JAS 39 Gripen. On 27 April 2011, after an intensive and detailed technical evaluation by the IAF, it reduced the bidders to two fighters — Eurofighter Typhoon and Dassault Rafale. On 31 January 2012, Ministry of Defense (MOD), India announced that Dassault Rafale won the competition due to its lower life-cycle cost. Contract negotiations were underway.

The decision was received in France with the French President Nicolas Sarkozy, Minister of State for Foreign Trade, Pierre Lellouche, and Dassault Aviation - all issuing statements in support of the decision. Dassault Aviation shares soared more than 21% on the Paris Stock Exchange immediately after the news broke. Nicolas Sarkozy said that the selection of Dassault's Rafale multi-role fighter "goes far beyond the company that makes them, far beyond aerospace — it is a vote of confidence in the entire French economy."

Eurofighter issued a statement saying that although they are disappointed, they respect the decision: "India took the decision to select our competitor as the preferred bidder in the Medium Multi-Role Combat Aircraft (MMRCA) tender. Although this is not yet a contract signature and contract negotiations are still ahead, we are disappointed. However, we respect the decision of the MOD. With the Eurofighter Typhoon, we offered the Indian Air Force the most modern combat aircraft available. Based on the Indian Government feedback, we will now carefully analyze and evaluate this situation together with our European Partner Companies and their respective Governments." Officials at the British High Commission in Delhi also said they were disappointed with the decision but added that it was expressly said this was about the cost of the contract, not a reflection on the health of bilateral relations between India and the countries.

After the announcement of Dassault Rafale as the L1 bidder, the Eurofighter Consortium also decided to lower the price of the Typhoon jets to stay in the race. This decision came after extensive discussion amongst the member nations. However, the Indian MOD officials ruled out any possibility of a comeback by the Eurofighter Typhoon in the competition. According to them, Dassault Rafale beat the Typhoon by a huge margin in terms of life cycle costs as well as direct acquisition costs. In March 2012, UK defense minister Gerald Howarth told the British House of Commons that the Eurofighter Consortium respects the Indian government's decision but stands ready to enter further negotiations if possible.

Currently, however, India’s $12 billion Medium Multi-role Combat Aircraft (MMRCA) program has run into turbulence due to a disagreement over delivery commitments, according to an Indian Defense Ministry source. The Defense Ministry, India, in concurrence with the Defense Minster A. K. Antony, had short-listed Dassault Aviation, a French Company, to supply the multi-role medium-combat Rafale aircraft. The Rafale combat aircraft was selected by India as the lowest and preferred bidder two years ago (2012) for supplying 126 fighter aircraft planes at a cost of $12 billion. The deal has been reported to cost US$28-30 billion in 2014.

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On behalf of Dassault, the French government has been urging India to expedite the multi-billion dollar deal, fearing the new government that comes to power after the Lokh Sabha elections of May 16, 2014 may stall the negotiations further. France wants India to sign a pact to provide government guarantee for completion of the Dassault-Defense ministry negotiations, but the Defense Minister A K Anthony has refused to do so. Anthony argued that government guarantee cannot be provided when negotiations are still under way.

For the last two years the Defense Ministry has still been negotiating the price and terms and conditions of the contract with Dassault Aviation. The Indian Air Force has told the new Modi government that Dassault Aviation, maker of the Rafale jet, and Hindustan Aeronautics Ltd. (HAL), which will produce the aircraft in India, must put their delivery guarantees in writing before the Ministry of Defense (MOD) signs the contract. But HAL is unwilling to give any written guarantee on the delivery schedule for the Indian-made Rafales, and instead wants Dassault to guarantee deliveries of the Indian-made aircraft, a condition the French have already rejected, the MOD source said. The Dassault deal proposal stipulates that the first 18 aircraft will be supplied by the vendor — Dassault — in fly-away condition and the remaining 108 aircraft will be manufactured — in this case, by HAL — through technology transfer from Dassault. The delivery of the aircraft should begin three years after the contract is signed.

One of the more recent terms stalling the deal has been the issue of the life cycle costs (LCC) relating to Rafale. The MMRCA contract negotiations have also been delayed because HAL has not finalized the cost of the India-made Rafale. No date is available for when the final cost of the Indian-made Rafale will be provided to the MOD, according to a senior HAL official.

There are complaints about the procedure of calculating the life cycle costs, and this issue is far from being settled. Before bringing the deal to the Cabinet Committee on Security for final approval, the defense ministry wants clarification on LCC, defense Minister Anthony said. Moreover, LCC has to be taken into the equation in determining the lowest bidder. Meanwhile senior BJP leader and former finance minister Yashwant Sinha has written to Anthony raising several questions over the “conceptual shift” in the defense procurement policy, and has expressed fears that the LCC concept may lead to corruption. [See Deccan Herald, Monday, March 31, 2014, p.1].

In January 2014, the cost of the aircraft had reportedly escalated by 100% to US$28-30 billion. The cost of the program was projected at US$12 billion (Rs 42,000 crore) in 2007. The cost increased to US$18 billion (Rs 90,000 crore) in January 2012 when the lowest bidder was declared. In February 2014, it was reported that contract had not been signed owing to the fact that the department's budget had been spent for the year, but that it was expected to be signed in the next fiscal year, not before six months after the new government takes charge after the elections.

Some References (chronologically sequenced):

1. Pandey, Vinay (2008). "F-16 maker Lockheed mounts an India campaign". The Times of India, January 17, 2008.2. Pandit, Rajat (2009). "India ready for war? Forces grapple with delays, red tape". The Times of India. January 20, 2009.3. "India says to have fifth generation jets in 2018". The Times of India. 23 April 2010.4. Watt, Nicholas (2013). "David Cameron to press India over Eurofighter jet sales". The Guardian (London), February 15,

2013. 5. "Dassault CEO talks of ‘hope and uncertainty’". The Hindu. 26 July 2013. 6. "Reliance, Dassault planning facility to produce warplane wings: report". NDTV. 10 December 2013. 7. "RIL, Dassault plan to set up Rs 1,000-cr warplane facility". Financial Express. 10 December 2013. 8. Pandit, Rajat (2014). "Mega 126-fighter jet deal will be inked next fiscal, defense minister AK Antony says".

indiatimes.com. TNN, February 7, 2014.9. See also Deccan Herald, Monday, March 31, 2014, p.1.10. Vivek Raghuvanshi (2014), “India's Fighter Jet Negotiations Stall over Delivery Commitments,” filed under World News,

Asia & Pacific Rim, June 16, 2014, 3:45 am. 11. “Indian MRCA competition,” Wikipedia, the free encyclopedia, retrieved July 6, 2014.

Ethical Issues:

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1. Was the process by which the IAF and the MOD selected Dassault as the finalist in the MRCA tender closed bid legal and ethical, and why?

2. Is the Indian Defense ministry morally justified in prolonging the Dassault-Rafale deal negotiation for over two years, almost doubling the cost originally agreed upon?

3. Is this prolongation an example of good moral reasoning and good moral judgment?4. Given that India’s air defense based on aging and obsolete MIGs was progressively weakened, to what extent

was the long delay in the Dassault-Rafale deal a prudent and brave proactive defense strategy? In short, was this delay a violation of the four cardinal virtues?

5. Is the French government justified in putting pressure on India for expediting the Dassault-Rafale deal?6. Is the LCC “conceptual shift” valid and necessary? Explain. Will it spur corruption? 7. How can legal, ethical and moral reasoning skills and processes on the part of buyers and sellers bring this deal

to a closure?

Case 7.2: Arun Jaitley, Modiy’s Chanakya[See Nivedita Mookerji and Veenu Sandhu (2014) “Modi’s Chanakya,” Business Standard, Weekend, July 5, 2014, p.1. Rakesh Joshi (2014), “Five Big Ideas for Jaitley’s Budget,” Business India, Cover Feature, June 9-22, 2014, pp. 34-40]

Arun Jaitley, 61, is at the center of politics in New Delhi. The most powerful leader after Prime Minister Narendra Modi, Jaitley heads two critical weighty ministries, Finance and Defense, two of the top four ministries in India, the other two being Home (Rajnath Singh) and External Affairs (Sushma Swaraj). He also handles Corporate Affairs. All these three big portfolios “for a man who had just lost the first parliamentary election he had contested from Amritsar (his birthplace), and had expressed his reluctance to accept a ministerial assignment on moral grounds” (Business India: Cover Feature, June 9-22, 2014, p. 35). Jaitley’s long-standing relationship with Modi is one of the reasons the latter has entrusted him with so many big portfolios. All party spokespersons run to him for advice. Ministerial colleagues like Nirmala Sitharaman (Commerce & Industry Minister) and Piyush Goyal (Power) rush to seek his guidance. He is Modi’s ace troubleshooter on almost all issues. Modi depends upon on Jaitley’s sharp legal mind for taking critical decisions. Besides his legal background, Jaitley’s large circle of friends in the media, judiciary, big business, bureaucracy and even sports, makes him a critical asset in the Modi government.

Jaitley’s friends cut across party lines. He shares a good relationship with Congress leaders Jyotiraditya Scindia, Ahmed Patel and P. Chidambaram. It is said that for the forthcoming Budget he even consulted Chidambaram and ex-Prime Minister ManMohan Singh. Soon after taking office, Jaitley had an hour-long meeting with RBI Governor Raghuram Rajan. Among other things, the two discussed ways to contain inflation and revive economic growth. Marketing consultant Suhel Seth calls Jaitley the “Amol Palekar of Indian Politics.” Suhel Seth, who has known Jaitley for well over two decades, asserts “there isn’t an iota of change in the man, whether he’s in or out of power. He’s truly a 2 am friend.” Though a disciplined man who loves his early morning walk in Lodi Garden, Jaitley is known to party regularly. Besides Seth and Karanjawala, his close friends include Attorney General Mukul Rohatgi, Hindustan Times Group Chairperson Shobana Bhartia, and bureaucrat turned politician N. K. Singh.

The Makings of Arun Jaitley

Jaitley is a Brahmin, and a BJP spokesperson described him as Modi’s Chanakya, recalling Chandragupta Mauriya’s advisor around 400 BC. Jaitley’s parents are from Punjab. His father, Maharaj Kishen Jaitley, a lawyer, came from Lahore, while his mother, Ratna Prabha, belonged to Amritsar. The couple was in Amritsar expecting their first child, Arun’s older sister, when the Partition riots broke out. The family decided to stay on in India. Later they moved to Naraina Vihar in Delhi into a house vacated by a Muslim family that had left for Pakistan. MK Jaitley resumed his legal practice, while the growing boy Arun Jaitley was schooled at St. Xavier’s Delhi, a missionary school, and later was admitted by the prestigious Sri Ram College of Commerce (SRCC), where he soon became the college union president. Arun was smart, articulate, and a good debater, recalls his classmate at SRCC, Raian Karanjawala, senior advocate and founder of Karanjawala & Co. From SRCC Arun proceeded to study law in Delhi where he became the president of the Delhi Students Union when Indira Gandhi declared emergency. “The day Emergency was declared I slipped out of my residence. The police took my father into detention but being a lawyer he was released immediately,” Arun Jaitley told Business Standard recently. The next day of Emergency, Arun

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Jaitley organized a massive protest at the Delhi University campus and was promptly arrested under the Maintenance of Internal Security Act. He spent the next 19 months in prison, opting not to seek early release through an apology or an assurance that he would not participate in any political activity. “He handled his time in prison in a stoic manner. The only time I thought he was a little low when, on one occasion, he was not allowed to sit for his exams and he missed a year” recalls Karanjawala.

In 1980, when Indira Gandhi returned to power, Jagmohan, the Lieutenant Governor of Delhi, tried to demolish the Indian Express building. Arun Jaitley challenged it in the Courts (on the other side was Abhishek Manu Shingvi, later Congress leader). That incident brought Arun Jaitley into close contact with Ramnath Goenka, Arun Shourie, Fali Nariman, and Swaminathan Gurumurthy, Goenka’s chartered accountant and legal advisor. It was this association that brought Arun Jaitley to the notice of Vishwanath Pratap Singh in 1986-87. When VP Singh became Prime Minister in 1989, Arun Jaitley was appointed Additional Solicitor General, one of the youngest to hold the post.

Arun Jaitley became a minister in 1999 when the National Democratic Alliance (NDA) came to power. Arun handled the Law, Information & Broadcasting, Disinvestment, Shipping, and Commerce & Industry portfolios. While he found the Law Ministry intellectually challenging, Arun enjoyed and governed better as a minister of commerce. He took on the US and the European Union over trade liberalization in Doha, drew the blueprint for the Special Economic Zone Act, pushed for opening Indian retail to foreigners, and convinced the government and the RBI to allow Indian companies to buy lands overseas. “Now as Finance Minister, it’s good to see someone with an exploring mind,” says Ajay Shriram, Chairman, Shriram Group.

Arun Jaitley took care of his staff as a lawyer beyond the call of duty. Traditionally, lawyers are entitled to charge 10% of their fees as clerkage (charge for clerical work) from clients, but not many lawyers share this money with their staff. Arun Jaitley always did, says Om Prakash Sharma, his one-time political secretary and now a Delhi MLA from Vishwas Nagar. Jaitley founded a clerkage corpus fund whereby he ensured that the children of all his staff go to good schools. Some of them have grown up to become dentists and engineers. “He also used this money to help his employees own a house,” adds Om Prakash Sharma who has known Jaitley since 1972.

Arun Jaitley is married to Sangeeta (“Dolly Aunty” of many BJP juniors), and has a daughter Sonali, now a lawyer with her own practice and who also campaigned for her father in the recent Amritsar MP seat campaign. Not less than forty of Jaitley’s relatives had turned their homes into campaign offices. Being so astute and so much supported by his campaign crew, how and why did Arun Jaitley lose the Amritsar seat to Congress opponent Amarinder Singh? That will remain a mystery for some time. Recently, however, Sangeeta and Sonali went back to Amritsar to feed orphans on Sonali’s birthday. Arun and Sangeeta have a son, Rohan, who just completed masters in law at Cornell University, USA.

Arun Jaitley is a man of simple tastes. His family often travels by trams and buses on vacations abroad. Recalls a friend, while on a holiday in Vancouver, he chose Sarvana Bhavan over fancy restaurants. Though a workaholic, he does not let work stress him, say his colleagues. “You will never hear him shout, even if he is annoyed,” says a BJP junior leader. “Critics sometimes suggest that he rules too much by the head and too little by the heart, but I have not found him to be a heartless person” said Abhishek Manu Singhvi.

Those who campaigned for him in Amritsar say that he ensured that even the street-play actors called from Delhi were looked after. Known to enjoy a hearty meal, Jaitley, however, is frugal and temperate and keeps his indulgence in check. His other passions are cricket and old Bollywood films and songs. While Jaitley lived at his house in Kailash Colony, his official residence, 9 Ashoka Road, was open for use for others. It is here that cricketer Virender Shewag got married, as did BJP National Secretary Vani Tripathi.

Arun Jaitley, along with Narendra Modi, Sushma Swaraj, and Pramod Mahajan, was among the most popular leaders groomed by L. K. Advani in the 1990s. After Mahajan passed away and Modi shifted to Gujarat, Jaitley acquired the mantle of being BJP’s chief strategist, managing several assembly polls and the 2009 general elections. Jaitley stoutly defended Modi when the latter came under post-Godhra fire from the media and the politicians. The

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most critical point in the Modi-Jaitley relationship came when Vajpayee wanted to fire the then chief minister of Gujarat after the 2002 riots. In a tension-filled meeting in April 2002, along with Advani, Arun Jaitley preempted Vajpayee’s move to dethrone Modi. Jaitley flew to Gujarat and travelled with Modi to the national executive meeting in Goa where, before Vajpayee could proceed, Modi offered to quit only to be rejected unanimously by the gathering. It was a master strategy that worked, and the bond between Modi and Jaitley has grown stronger since.

Currently all eyes are on Arun Jaitley as Finance Minister as he prepares to present his first National Budget before July 31, 2014. He has taken charge at a time when Indian GDP growth has got stuck below 5% for the second year in succession, and there is fear that the fiscal deficit may exceed 5% of GDP in 2014-2015. In his initial comments after taking over the Finance Ministry, Jaitley acknowledged the challenging times the Indian economy is facing. “We have to restore the pace of growth, contain inflation, and obviously concentrate on fiscal consolidation itself” said Jaitley. Despite the mess that government finances are in, expectations are high. The country hopes his Budget will reflect the quality and challenge the country deserves.

Ethical Issues:

1. What are the moral economic and political challenges to Arun Jaitley as the Union Defense Minister of India, and what are the modes of ethical and moral reasoning and judgment does this Office need for fulfilling the sacred duty of defending and protecting our country and enhancing peace along all its borders?

2. What are the moral economic and political challenges to Arun Jaitley as the Union Finance Minister of India, and what are the modes of ethical and moral reasoning and judgment does this Office need for fulfilling the paramount duty of fighting inflation, sustaining growth, global trade surplus, and eradicating poverty and disease in India?

3. What are the moral economic and market challenges to Arun Jaitley as the Union Corporate Affairs Minister of India, and what are the modes of ethical and moral reasoning and judgment does his Office need for fulfilling his critical duty of bringing about economic recovery and growth, full employment with meaningful work, just wages and salaries, financial market buyer-seller transparency, fiscal honesty and corporate citizenship?

4. If you were the corporate Chanakya to Arun Jaitley for bringing about social harmony and solidarity, and eradication of gender and caste discrimination in the country, what advice will you give to bring about distributive and corrective justice in areas marked with structured injustices?

5. If you were the corporate Chanakya to Arun Jaitley for bringing about educational, social, economic and political reform in the country, what advice will you give to him based upon the ethics of virtue and the ethics of mutual interpersonal trust?

6. If you were the corporate Chanakya to Arun Jaitley for bringing about strong and sustained economic growth in the country via creativity, imagination, innovation, entrepreneurship and adventure in the educational systems, what bureaucratic and regulatory structures would you dismantle based on the principles of teleology, deontology, distributive justice, and corrective justice, and why?

Case 7.3: Mukesh Ambani: The New Media Moghul in India![Daksesh Parikh (2014), “The New Media Moghul,” Business India: The Magazine of the Corporate World, Special Report,

June 9-22, 2014, pp. 42-46].

Towards the end of May 2014, the board of directors (BOD) of Reliance Industries Ltd (RIL) decided to acquire control in Raghav Bahal’s Network 18 Media and Investments Ltd (market cap: Rs 5,665 crore) and its subsidiary, TV 18 Broadcast Ltd (market cap: Rs 5,700 crore) [See Exhibit 7.3.1 for product offerings]. This was done by the BOD empowering RIL to invest Rs 4,000 crore in Independent Media Trust (IMT), an entity whose sole beneficiary is RIL. This meant that with money power, RIL, India’s second largest company by market capitalization, was taking control of the Indian media. Obviously, such corporatization of media would seriously weaken all independent media houses in India. If media should be objective and reliable, then it should be independent from big businesses.

However, Professor Kanu Doshi, dean: finance, Weingkar Institute, argues that media, be it print or electronic, is highly capital-intensive and can easily face cash flow problems. Earlier reports said that Raghav Bahal and some of his key members decided to step down in order to make way for Mukesh Ambani and his team to take effective control. Raghav Bahal, a first generation entrepreneur, who founded the media and entertainment house, initially divested part of his equity some time ago, and still found it difficult to survive the competitive onslaught coming

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from Times Now and ET Now, feted and fattened by India’s largest media house, Bennet, Coleman & Co Ltd, now controlled by the Jains. Finding it increasingly difficult, Raghav Bahal has now decided to sell his enterprise to the Mukesh Ambani team and use the realized sales revenue in another business venture. Professor Kanu Doshi sees nothing wrong about this divestment; it is just a part of a global trend, he argues. For instance, Warren Buffet bailed out owners of The Washington Post. Consultants Frost & Sullivan also rationalize this deal by saying that “this is the new reality in business.”

Exhibit 7.3.1: Network 18 + TV 18: Assortment of Offerings[Source: Daksesh Parikh (2014: 43)]

News Entertainment Film Production

Portal Business Distribution & Aggregation

Investments

Business NewsCNBC – TV 18CNBC – AwaazIBN 7General NewsRegional NewsCNN-IBNRegional NewsETV – MPETV - UPRajasthanBiharUrduKannadaHaryanaIBN Lokmat

ColorsRishteyMTVMTV IndiesVH1NickSonicComedy CentralETV – MarathiETV -Gujarati ETV - OriyaETV BengaliETV KannadaInfotainmentHistory 18

Famous TitlesBhag Milkha BhagQueenMadras CaféBombay TalkiesSons of SardarKahaniSingh is KingOMGGangs of Wassepur

In.comMoneycontrol.comIBNLive.comFirstpost.comBurpNews 18E-Commerce selling products through portals, and TV Channels through HOMESHOP 18

Distribution ofETVTV 18Viacom 18

Publishing and distribution of:Magazines Including:ForbesChipOverdriveModern PharmaEntrepreneurAuto Monitor

Channels:ETV TeluguETV AndhraETV Telangana

Financial Invest-ments in start-ups:Bookmyshow.comYatra.comUbona-VASStargaze (multi-theatre screen)Colosceum Production HouseTopper Channel for kids

In fact, the Indian TV industry as well as the cable/DTH service segments, have been struggling over the past few years. Advertising is taking a beating. Conflict within the advertising industry over content carriage rights and fees, poor regulatory support, heavy taxation, resource churn and the demand for digital content has seriously impacted the advertising business in the negative. Increasing viewership, moreover, has not translated into profitable bottom lines, and it is has been hard to sustain growth. Under such dire circumstances, consolidation seems to be the only way to streamline operations, cut costs, and survive. Throughout multi-media and international distribution, companies are working towards consolidation. The oft-repeated term ‘convergence’ has been occurring in the telecom, media and entertainment industries over the last few years (Gupta 2014: 42-43). For instance, Comcast, the US’s biggest cable multi-service operator, has recently proposed to buy Times Warner Cable for $45 billion – another example of convergence or consolidation of two big companies, whose combined presence may reach every third household in America. Earlier, Comcast had bought NBC Universal, a media and entertainment company, in two stages, from GE – the first lot in 2009 and the balance 49% stake in 2012.

Whether Mukesh Ambani has become a Media Moghul in India by 2014 is still debated, and possibly irrelevant. The fact is that one of India’s largest business houses has taken stake in the media sector through investments from a listed company. K. K. Birla, another media baron, had invested in The Hindustan Times, but it was through his private funds. How Mukesh Ambani is going to ensure editorial independence and build a framework for keeping commercial dealings at an arm’s length will be carefully watched and even emulated by others, who may even contemplate similar media ventures, said Vimal Bhandari, CEO, Indostar Finance, a Mumbai-based NBFC. Moreover, Mukesh Ambani’s foray into media is part of an overarching strategy towards achieving leadership in the telecom space, and not guided by any ambition of being a media Moghul. Planning to acquire a majority stake in Network 18 and TV 18 is a well-thought-out strategy that fits in with RIL’s overall telecom roll-out plans. “It is synergistic with Reliance’s 4G plans,” says Ashish Chugani, head, investment banking, Centrum Finance. In a strategic deal, valuation is not relevant, argues Chugani. The deal cannot be examined as a stand-alone action in isolation; it is part of the group’s foray into telecom. By taking over Network 18 and TV 18, Mukesh Ambani has ensured that he gets a head-start in the media and entertainment segment, one of the important building blocks that ensure a leadership position in the telecom space. This acquisition will give Ambani a lot of content in education, e-commerce and entertainment. It will get RIL a presence across several verticals (see Exhibit 7.3.1) of news and entertainment channels. It is, therefore, a “smart strategy” says Deven Choksey, CEO of KR Choksey Shares and

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Securities, a Mumbai-based broking house. The takeover will allow RIL not just news and entertainment content, but also facilitate e-commerce and offer interactive platforms to his telecom subscribers. RIL will control not just content in news, entertainment and film production but also in the distribution mechanisms. Consumers are trying new platforms to seek faster and accessible platforms to view content. Content is the prime driver in the digital media. “The world is going digital and new platforms are emerging. The leader will have to demonstrate not only the quality of content but also leadership in packaging and delivering the contents on the platforms of consumers’ choice,” argues Smita Jha, leader, media and entertainment, PwC India.

Having full ownership of media content, platforms and distribution would give RIL a better bargaining power with other content providers, especially when the telecom majors start charging for the content. In which case, content companies will always remain cost centers for telecom companies, given the mushrooming of content (print, television or internet) providers. Consolidation is the only way forward in this industry, says M. M. Gupta, CMD, Jagran Prakashan, one of the few listed media houses in India that is making profits. Ambani’s deal is sure to spark off more such deals in the media space,” adds Rasesh Shah, founder chairman, Edelweiss Group. Shah had earlier facilitated capital flows to the TV 18 Group.

But, while everyone may agree that RIL’s forays into media is a long-term 4G strategic move, will Mukesh Ambani deliver quality products and platforms and enable the media to grow to desired global levels of excellence? Most business houses, foreign and domestic, that have taken to media have made yet another commodity. Content, platforms, films production, distribution, technology - each component of the media value chain needs a specific mind set and creative skills, says Pritish Nandy, chairman, Pritish Nandy Communications, a listed company focused on the production of films and having a string content library. The Ambanis may have an edge over others in content, delivery, and technology, says Pritish, but this may not ensure quality and excellence along the entire media value chain. It is best left to small entrepreneurs or start-ups to develop new technologies, and content is best left to creative hub-shops. Pritish Nandy opines that conglomerates should focus on delivery and distribution, and not on content that must be left to young artists spread all over the globe.

Meanwhile, other investors with deep pockets like the Ambanis are indeed making inroads into the media space. Kumar Managalam Birla’s Aditya Birla group is another industrial house venturing into media. It has picked up a minority stake in the India Today group which, like Network 18 and TV 18, has also a presence across verticals, including production of original content for television, India’s largest printing press and magazines of repute like India Today, across several languages and Business Today.

Ethical Questions:

1. The ability to exploit media content over various distribution mechanisms may give Ambanis the edge, but is this ethically and morally good for India in terms of objective news content, quality entertainment content, radical technological breakthroughs in 4G platforms, and marketing breakthroughs in films production?

2. Do you fear that control of the entire media value chain that the Ambanis are aspiring as a good 4G strategy may eventually “commoditize” media, and ethically and morally compromise the ultimate symbol of free India and the bastion of Indian democracy? Explain.

3. Is convergence or consolidation in the culture-intensive media industry a morally and ethically healthy development given the rich social, religious, cultural and linguistic diversity of India?

4. Media dominance will compromise and even threaten economic freedom, political choice, moral national conscience, and value-education among the youth, as it happened in India during the 2014 elections and in other parts of the world. Will this be another threat to free enterprise capitalism? Explain.

5. What ethical and moral reasoning and moral judgment skills will you deploy for stalling the current consolidation moves in the Indian media industry, and to what effect?

The Ethics of Executive Moral Reasoning and Moral Judgment

Besides providing materials for addressing ethical questions raised under Cases 7.1, 7.2, and 7.3, this Handout 07 addresses a crucial moral question: What ethical theories enable me to arrive at the moral justification of my corporate business strategies, decisions and actions? Business managers, in general, and corporate executives, in particular, could use various ethical theories or ideologies in arriving at

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ethical judgments and moral justifications. There is a wide distribution of ethical ideologies and moral philosophies among corporate decision makers (Fraedrich and Ferrell 1992a), and executives may often switch moral philosophies between home and work environments (Fraedrich and Ferrell 1992b).

While individual personality factors, ethical ideologies, and moral philosophies influence corporate decision making processes, ethical scholars have researched a number of other factors that are also found to influence ethical decision-making among executives, such as corporate culture, organizational culture, one's significant others, opportunity to be unethical, and the individual's role and function within a decision-making team. It has also been found that these latter factors provide more insight into how ethical decisions are made on a daily basis (see also Fraedrich and Ferrell 1992a, b; Fritzsche and Becker 1984; Laczniak and Inderrieden 1987; Mayo and Marks 1990).

Hence, recently there has been an increasing tendency among corporations to ground their company ethics-training programs more on relativistic sociological sources such as corporate and organizational culture, behavioral and cultural universals, than on universally normative ethical ideologies, theories, moral principles and philosophies. This is an unfortunate shift, and possibly, moral philosophers must take the blame for it. This shift primarily results from philosophies and principles that are rather absolutistic, dogmatic, abstract, and non-practical - features typically detested by the business world.

This handout revisits the major ethical theories of teleology, deontology, distributive justice and corrective justice briefly stated in handout 01 but from the viewpoint of intrinsic versus instrumental good, moral worth and moral obligation, moral conscience and moral justification. Such advance reviews and synthesis of major ethical theories can provide additional insights as practical and readily applicable principles for ethical reasoning and assessment. The focus throughout this chapter is how to apply ethical theories of moral reasoning and moral judgment to executive decisions and moral obligations. Some practical "business executive exercises" for ethical-moral reasoning and assessment are added. This handout has two parts: Part I: General Application of Moral and Ethical Theories to Executive Decisions and Moral Dilemmas, and Part II: Applying Specific Moral and Ethical Theories to Executive Decisions and Moral Obligations

Part I: General Application of Moral and Ethical Theories to Executive Decisions

Ethics is all about making good and moral decisions. As a corporate executive our moral and ethical concerns and decisions should be:

What should I do? What should I not do? What ought I to do? What I ought not to do? What am I obliged to do? What am I not obliged to do? What should I become? What should I not become? What should I be? And what should I not be?

Kohlberg’s Theory of Phases in Moral Reasoning

It is generally agreed among psychologists (e.g., Kohlberg 1969, 1984) that ethical reasoning attains full maturity through three main phases as one's decisions and actions get predominantly based on:

The immediate consequences of an action such as rewards and punishments (Pre-conventional Phase); On social approval, compliance or conformity (Conventional Phase),

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On personal, moral or ethical, standards (Post-conventional Phase).

We assume that most business students and executives have reached the second stage of conventional or the third stage of post-conventional moral reasoning During the third stage, maturity increases through the internalization of moral judgments, and the standards of society are often a subject of criticism. Executives may use, more implicitly than explicitly, some major ethical theories (e.g., teleology, deontology, distributive justice, corrective justice, virtue ethics, and ethics of trust) for ethically analyzing and justifying corporate decisions and strategies. For instance:

Pre-conventional Phase: We do things because of the immediate consequence of an action such as rewards and punishments. 1. I obey at work lest I should be fired (reward/punishment)2. I obey at work as it benefits both the company and me (cost/benefits).3. I obey at work that I may learn and grow on my job. (instrumental) 4. I obey at work for my colleagues and superiors (interpersonal).

Conventional Phase: We do certain things for social approval, compliance or conformity. 5. I obey at work, as everybody does it (social compliance)6. I obey at work, as I need to be recognized (social approval)7. I obey at work, because of my contract to do so (contractual)8. I obey at work, as this is my duty (obligation).

Post-conventional Phase: We do certain things based on personal, moral or ethical standards and convictions. 9. I obey at work, for work unites humankind regardless of race, color, age, gender or creed (sociological).10. I obey at work, because everybody should work for a living (deontological)11. I obey at work, for work is human and humanizes me (philosophical)12. I obey at work, for work is a divine mandate (theological).

As students of business and corporate executives to be, we could check where we stand in relation to the above sets of motivations. For instance:

a) Personally, where would we like to be on this ethics phase, and why? b) Ideally or normatively, where should we be at this stage of your executive life?c) How do we argue for higher forms of ethical and moral reasoning from the pre-conventional to the conventional

to the post-conventional phase, and why?d) Does our executive moral reasoning become more objective, universalizable and reversible (in the Kantian sense

of categorical imperatives) as we ascend from the pre-conventional to the conventional to the post-conventional phase, and why?

These are equivalent, if not identical, ethical questions that a course in business ethics should include. These questions relate to commissions and omissions, rights and duties, moral obligations and responsibilities. The word “I” in these questions can easily be substituted by institutions such as a business, a venture, a corporation, a school, a university, a church, a government, and the like. The main purpose of any ethical theory is to provide consistent and coherent answers to these practical questions.

In general, an ethical theory is the reasoning process by which we justify our particular ethical decisions. An ethical theory helps us to organize complex information regarding an ethical problem (or dilemma) at hand, the competing values and alternatives available to resolve the problem, and thus, arrive at a solution to the above ethical questions.

In the past, teleological considerations were mostly emphasized; presently deontological norms are getting attention; distributive justice and corrective justice considerations are just emerging. Even more recently, corrective justice theory considerations and empirical applications are entering business ethics literature (e.g., Mascarenhas, Kesavan, and Bernacchi 2008). We need all four ethical systems, including

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virtue ethics and ethics of trust, especially for analyzing controversial cost-containment and revenue-generating business strategies such as market dominance, consolidation, strategic alliances, joint ventures, plants closings, mass labor layoffs, offshore outsourcing, and seeking strategic bankruptcy.

Major Normative Ethical Theories or Systems

A well-developed ethical-moral reasoning process or methodology should be guided by a framework of theories, moral principles, moral rules or norms, whereby moral judgments regarding right or wrong, good or bad, fair or unfair, and just or unjust may be derived and assessed. There are various theories in ethics that attempt to do so. These theories try to answer the basic dichotomous questions of what is right or wrong, truth or falsehood, ethical or unethical, moral or immoral, good or evil, and just or unjust, or, the more general question: what should I do and what should I not do.

In general, ethical scholars distinguish at least three positions in judging the moral rectitude of human actions (Beauchamp 1993; Frankena 1973; Schuller 1976):1

The moral correctness of all actions is determined EXCLUSIVELY by its consequences. To the question: “What should I do?” this theory responds by the following guideline: Act in a such way that your action brings about the greatest number of advantages over disadvantages, more benefits over costs, or the greatest good for the greatest number of people. This theory justifies an ethical action by the outcomes or consequences of the action in a given situation. Hence, this position is often called utilitarian teleology or consequentialism or situation ethics.

This is an output-based version of teleology since it judges the moral correctness of the executive action from its benefits versus costs, advantages versus disadvantages to the greatest number. But the problem is when and how does the executive know the nature and degree and seriousness of benefits versus costs, or advantages over disadvantages? Often, it may take days, weeks or months to do that moral and ethical assessment. Hence, this version of out-based teleology fails to be a useful rule of moral assessment of executive judgment or action. A later version (Broad 1946, see footnote 1 below) of teleology argues thus: Act in such a way that your action is geared to produce at least more good consequences than evil ones, or more advantages than disadvantages to the greatest number. This traces the morality of the act to the process than to the outputs. But even this version begs or urges the same question: how and when do you know that your action is geared to produce better consequences? To this the teleologists would counter by saying: Act in such a way that your pre-disposition is to do good and make it right rather than the opposite. This as an input-based version of teleology, and boils down to striving right and being good in all our actions, a position that Ross (1930; see footnote 1) held all the while, and which Broad (1946) adopted as the final teleological rule.

A second theory of moral reasoning argues thus:

1 The distinction between teleological and deontological ethical theories is usually attributed to C. D. Broad (1930: 206ff), Five Types of Ethical Theory, (London: Routledge & Kegan Paul). In a subsequent Essay (1946) “Some of the Main Problems in Ethics,” Philosophy, 21, Broad identified any teleological argumentation with a consequential one. According to Broad, one characteristic that tends to make an action right is that it will produce at least as good consequences as an alternative open to the agent in the circumstances. Broad also characterizes non-teleological actions such as an obligation to perform what one has promised, regardless of consequences. The term “consequentialism” was coined by G. E. M. Anscombe (1953) and the term “Utilitarianism” is traced to John Stuart Mill (1964). The distinction between the goodness and the rightness of an action was introduced by W. D. Ross (1930), The Right and the Good (oxford: Clarendon Press). The terms “right-making” versus “wrong-making” characteristics or “good-making” versus “bad-making” properties of an action were first discussed by Broad (1946) in the article cited above. Consequentialists emphasize the fundamental difference between the moral rightness (or “right-making properties”) and the moral goodness (i.e., “good-making properties”) of an action. The former concerns properties in the action-situation that make it right or wrong, whereas the latter relates to the properties of the free will of the agent (e.g., benevolence, love of justice, fairness) that makes an action good or bad.

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The moral correctness of all actions is ALWAYS ALSO, BUT NOT ALWAYS ONLY, determined by its consequences. Certain conventions, principles, rules, rights and duties of involved subjects also determine it. To the question, “What should I do?” this theory offers the following guideline: Act in such a way that you violate no moral conventions or pacts, rules or principles, rights or duties, and, at the same time, you uphold and fulfill most of your obligations, responsibilities and duties toward others. This position is called deontology (deon = duty in Greek) or existentialism or situationalism.

This is a process-based version of deontology since it judges the moral correctness of an executive action from its conformance or fulfillment of moral conventions or pacts, rules or principles, rights or duties that concern the greatest number. But the problem is when and how does the executive know the nature, extent and seriousness of moral conventions or pacts, rules or principles, rights or duties that matter, especially if they are non-existent or not fully evolved and accepted? Often, it may take years and decades to arrive at such pacts and conventions. Hence, this version of process-based deontology often fails to be a readily applicable rule for pre-moral assessment of executive judgment or action. Hence, Emmanuel Kant would argue thus: Act in such a way that your action is a norm for all mankind whatever you do and wherever you are. This traces the morality of the act to the universalizability principle of Kant that we internalize as an input to all our actions.

The third theory of moral reasoning is:

The moral correctness of AT LEAST SOME ACTIONS is in no way determined by their consequences. Thus, while teleologically an action may have positive net benefits, and while deontologically the same action may not violate any known moral principles, rights or duties, yet in the distribution of these net benefits there may be some injustice: the rich may become richer while the poor become poorer. Hence, the need for a third ethical system: that of distributive justice. To the question: what should I do? This theory answers: Act in such a way that, while fulfilling most of your duties and moral obligations, the benefits of your action clearly exceed the costs, and that the costs and benefits, rights and duties are equitably spread across all people affected by the action.

This is once again an output-based version of teleology-deontology combined since it judges the moral correctness of the executive action from its benefits versus costs, rights versus duties, conformance to pacts and agreements that bring greater advantages than disadvantages to the greatest number. But the problem is when and how does the executive know the nature and degree and seriousness of benefits versus costs, or advantages over disadvantages, rights over duties, pacts and agreements over non-existent ones? Often, it may take days, weeks or months to do that. Hence, this version of process or out-based distributive justice also fails to be a useful rule of moral assessment of executive judgment or action.

With utilitarians, we may be concerned with maximizing the good in society, and most of us would not consider this alone as right. No doubt, an efficient society is one that is most capable of maximizing the good of its citizens, but such a society is not a moral one unless its goods are justly distributed (Grassian 1999: 88). Hence, teleology and deontology need to be supplemented by distributive justice, and distributive justice by corrective justice.

There are other ethical evaluation systems (e.g., Egalitarianism, Libertarianism, Egoism), all of which can be construed as subsets under any of the above three major ethical theory-systems. In general, business ethics literature has used ethical theories of teleology (primarily utilitarianism) and deontology (rights-based norms) (e.g., Hunt and Vitell 1986; Laczniak 1983; Murphy and Laczniak 198; Robin and Reidenbach 1987, 1988a). Recent studies report also the use of distributive and corrective justice principles. Business is filled with relationships in which power is uneven and chance can operate to both the benefit and detriment of different publics (Robin and Reidenbach 1993: 100). Such inequitable

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relationships need to be specifically addressed by distributive justice principles and unjust structures need to be rectified by corrective justice principles. "The application of distributive justice system that is part of capitalism affords the opportunity for abuse of power and marketers must attempt to understand how and why abuse can occur" (Robin and Reidenbach 1993: 103).

Moral Judgments and Moral Justification

Judgments express a decision, verdict or conclusion about a particular action or about a person's character based on our intuition or learning. Moral judgments express a decision, verdict or conclusion about a particular action or about a person's character based on our understanding of moral theories and/or their principles. The average executive in most circumstances has no difficulty making moral judgments such as whether to tell the truth, whether a given decision is morally right or wrong, whether there is conflict of interest, and so on. Our moral life is usually composed of a rich blend of directives, experiences, parables, vignettes and virtues that suffice to guide us to moral judgments.

Moral reasoning is process of arriving at moral judgments. Moral judgments are followed by moral justification of our moral judgments, decisions and their outcomes. A typical moral justification starts with a moral judgment. It upholds the judgment by moral rules specific to the context and restricted in scope. The moral rules are justified by certain moral principles, which are more general and fundamental than moral rules. Finally, the moral principles are justified by moral theories, which integrate bodies of principles, rules and action guides. The theories backing moral principles may themselves need to be defended unless they are already well accepted among moral philosophers. If the proclaimed ethical theories and moral principles are not commonly accepted, then one could further inquire if they need to be replaced, rejected, revised or expanded. Most executives defend their moral judgments in terms of rules; few in terms of principles; and very few relate them to ethical theories.

Moral justification goes further to deliberate about these moral judgments and justifies them or the principles underlying them. Moral dilemmas occur at the level of moral justification and not so much at the level of moral judgment.

The Process of Justifying Executive Moral Judgments

In general, any moral justification of one's corporate judgment and decision involves five supporting sets of beliefs and values held by a particular person in one or more of the following hierarchical series of moral values:

A. A set of normative ethical theories;B. A set of moral principles derived from set A;C. A set of moral standards derived from sets A and B,D. A set of moral rules derived from set C, and E. A set of moral judgments resulting from applying sets A, B, C or D while assessing concrete actions

Briefly, each set may be described as follows:

Moral or ethical theory is the reasoning process that one uses to justify one's moral judgments and ethical actions. Major moral or normative ethical theories are deontology, teleology, and distributive and corrective justice. More recent theories include personhood ethics (see Handout 03), virtue ethics (Handout 05), ethics of trust (Handout 06), ethics of moral reasoning (Handout 07), ethics of rights and duties (Handout 08), ethics of leadership (Handout 09), and ethics of responsibility ethics (Handouts 10-11).

Moral principles are more general moral axioms or guidelines derived from moral theories that pertain to human or social welfare (teleological moral principles), to personal or social rights/duties (deontological moral

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principles), to social justice (distributive justice moral principles), or to a sense of personal and spiritual fairness or righteousness (e.g., virtue ethics, responsibility ethics). Example: The deontological principle of non-malfeasance: Do not harm others; or the Golden axiom: Do unto others what you would like others to do unto you.

Moral standards are less general or more specific moral norms of behavior that require, prohibit or allow certain actions. Such norms are derived from moral theories and their moral principles. Moral standards are teleological if they relate to social costs and benefits; they are deontological if they uphold rights and duties; they are related to distributive justice if they deal with issues of fairness and justice, and fourthly, they are related to virtue ethics if they promote a general sense of physical, functional and moral wellbeing. Examples of deontological standards: Do not kill; do not steal; do not lie; do not be avaricious.

Moral rules are concrete applications of moral principles and moral standards to a society, corporation, government or any social institution, given the situational context of economy, politics, culture, science and technology. Example: Do not produce or market harmful products since: every consumer has a right to product safety (deontological), a harmful product harms consumers and society (teleological), harmful products bring about serious injustices to the public (distributive justice), and any harm destroys the physical, functional and moral well-being of people (virtue ethics).Table 7.1 provides some well-known distributive justice moral rules.

Moral judgments: These are practical moral assessments of concrete executive decisions, strategies and actions based on sets A, B, C and D. Some of these could be “considered moral judgments “applicable to several actions over longer time-periods; then, these are tantamount to corporation standards of ethical conduct or the corporate Code of Ethics. Statements of corporate codes could be typically moral standards or norms, which are also derived from moral theories, but they are less general than moral principles or moral rules. Some examples of moral judgments: Capital punishment is wrong. Child labor is evil. Sweatshops are dehumanizing.

Two criteria characterize moral principles:

Supremacy: moral principles override other considerations such as contingencies, situations, self-interest, group interest or politics. Examples: Do not harm. Speak the truth. Do not lie.

Universal: moral principles apply to all people under comparable conditions with no exceptions based on any socio-biological factors such as gender, age, race, color, religion, nationality or social status. Examples: Kant’s Universalizeable principle: Whatever you do should be a moral rule for all others. Kant’s reversible principle: What all others do should be a moral principle that you should follow.

Besides moral theories, principles, standards and rules, there may be specific conditions and circumstances that render a given moral judgment morally defensible. Moral justification is needed when one has to defend one's moral convictions or judgments under a given situation.

Thus, particular judgments are justified by moral rules; moral rules are justified by moral standards; moral standards are derived from moral principles, and moral principles are derived from appropriate ethical theories. Table 7.2 captures this hierarchical process of moral reasoning. The derivation of moral justification based on ethical theories is deductive. Moral justification based on the application of moral principles is deductive-inductive, since this process may have some inductive elements of deriving the moral principles through empirical inquiry. Moral justification via moral rules is inductive, as both moral rules and their concrete applications to a given situation require search and empirical inquiry. Moral justification through moral judgments is situational, as most moral judgments consider the concrete business situation.

Rule versus Act Applications of Ethical Theories

Application problem: teleology, deontology, and distributive justice are all based on principles. However, what is the ultimate source of appeal under each theory for the determination of morally right and wrong actions? In this regard, it is conventional to distinguish between Act application and Rule application of ethical theories.

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The ACT application judges the morality of an act by applying a given moral principle directly to the human act without any intermediary rules, while the RULE application judges the morality of a given act only after verifying if the act conforms to firm and publicly advocated moral rules derived from that moral principle or moral standards set up by past considered moral judgments. Thus:

RULE APPLICATION: Apply principles to rules, and rules to particular judgments or actions and then judge the morality of the executive action.

ACT APPLICATION: Apply principles directly to particular actions or judgments to judge the morality of the executive action.

Figure 7.1 traces the process that links the four sets (A: moral theories; B: Moral Principles; C: Moral Standards and D: Moral Rules) to the derivations of moral judgments. This process may be based directly on the normative moral theories and moral principles as ACT ethical applications; application of these via moral standards (considered moral judgments) or moral rules is designated as RULE ethical applications.

From everyday executive moral judgments result executive moral choices, decisions and strategies, which in turn may be ethically assessed using ACT or RULE assessments as indicated in Figure 7.1. From executive actions follow the action effect complex of consequences, which we also need to assess by ACT or RULE applications of the four belief sets (A, B, C and D). Finally, from resulting from executive action effect complex of consequences are executive responsibilities, which also may be ethically assessed by ACT or RULE ethical application processes. In other words, one could start with ethical and moral theories and arrive at moral judgments deductively using Figure 7.1 downwards. Alternatively, one could start with one’s actual moral judgments and decisions, and work one’s way upwards in Figure 7.1 and derive their moral justification via moral rules, moral standards, moral principles and moral theories. The vertical bi-directional arrows in Figure 7.1 indicate this upward-downward dynamic of assessing executive decisions.

Figure 7.1 characterizes the process of assessing executive moral decisions and actions by linking belief-sets A, B, C, and D with the corresponding act and rule applications. Act applications can derive from the interaction (indicated by a bi-directional arrow) of both ethical theories and their moral principles. Similarly, rule applications can arise from the interaction (also indicated by a bi-directional arrow) of both moral rules and considered moral judgments. Executive moral decision-actions can result from either act or rule applications of major normative ethical theories such as deontology, teleology, distributive justice, and virtue ethics with their respective moral principles.

Given these executive decisions and actions, the underlying intentions and reasons, duties and rights, could be deontologically assessed by act and/or rule applications of deontological theories and principles. Similarly, the social consequences of these executive decisions-actions could be teleologically assessed by act and/or rule applications of teleological theories. The moral responsibilities of the social consequences, particularly, in relation to the fair distribution of rights and duties, costs and benefits, could be distributively assessed by act and/or rule applications of distributive justice principles. Lastly, the executive moral responsibilities of promoting physical, functional and moral well-being of all stakeholders affected by executive action could be morally assessed by act and/or rule applications of virtue ethics principles.

Executive Moral Dilemma and Challenges

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The word dilemma is commonly understood as a "challenging problem" implying a "forced choice" for the agent between two or more equally unfavorable (or fatal) choices or alternatives. Most moral problems are usually posed as irreducible value-conflicting dilemmas, quandaries, predicaments or as a multiple-choice problem (Whitebeck 1992). The attempt to force most moral problems into dilemmas stems from one's neglect of what actually goes into the agent's deliberations, intentions, motivations and reasoning processes. Kohlberg (1969) seems to assess one's moral development by one's forced choice among limited alternatives proposed (Gilligan 1982).

Many business situations involve moral dilemmas where executives experience moral perplexity, moral conflict or moral disagreement. As stated earlier, moral dilemmas originate at the level of moral justification and not so much at the level of moral judgment. Executive moral dilemmas involve concerns of moral obligation or moral rightness of a given executive action.

Business problems in general are best described as ethical-moral dilemmas that involve multiple constraints, all of which may not be simultaneously satisfiable but which are definitely not just dichotomous or multi-chotomous choices (Whitebeck 1992). Most business situations imply a real human narrative form that extends over time, and not just faceless theoretical dichotomous dilemmas.

Ethical Dilemma and Corporate Executive Decisions

An ethical dilemma is an undesirable or unpleasant choice relating to a moral principle or practice (Maxwell 2003: 5). What do we do in such situations – the easy thing or the right thing? What should I do when a clerk gives me too much change? What should I say when a convenient lie can cover a mistake? How far should I go in my promises to win a business contract? How do I deal with executive pressure – by cutting corners and over-rationalizing my downsizing decisions? How far do I doctor the data in order to prove that I am turning around the company I am contracted with? How far should I go in my promises to win a client?

In such circumstances, do we do the easy thing (ethics of convenience) or the right thing (ethics of morality)? Many people believe that embracing ethics would limit their options, their opportunities, and their very ability to succeed in business. In today’s culture of high debt and me-first living, ethics may be the only luxury some people are choosing to live without! Hence, morality becomes a private and costly luxury. In order to be ethical, we must be honest with ourselves before we can be honest with others. And this could be very challenging and inconvenient. Practicing the honesty discipline is inconvenient. Paying a high price for success is inconvenient. Losing a high potential client or a much desired promotion is inconvenient. (Maxwell 2003).

There are really only two important challenges when it comes to ethics: a) a standard to follow, and b) the will to follow it. Such a standard can be the Golden Rule. This Rule has been expressed in every living culture (see Table 1.8, Chapter 01). Using the standard we should have the ability to discern right from wrong, good from evil, just from unjust, fair from unfair, and propriety from impropriety. The second challenge is that we have the dedication and commitment to do what is right, good, just, fair and proper and that we have the moral courage to consistently avoid what is wrong, evil, unjust, unfair and improper. Ethics entails decision and action, commission and omission (Maxwell 2003: 24-25).

Moral Dilemma and Executive Decisions

If we believe we have only two choices: a) win by doing whatever it takes, including being unethical,

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and b) to be ethical and lose – we are faced with a real moral dilemma.

A moral dilemma is a situation in which an agent is morally obliged to do an action X and is also morally obliged to do another action Y, when at the same time the agent is precluded by circumstances from doing both.2 For instance, if X is to “win” by doing whatever it takes, even if it is unethical, Y is to be ethical and lose! Few executives set out with a desire to be dishonest, but nobody wants to lose (Maxwell 2003: 7). At the same time, while we desire honesty and plain dealing, we are still not winning the battle of ethics. Companies are even teaching “remedial ethics” to employees via online ethics courses, not because they need ethics, but in order to evade punishment. Under federal guidelines, companies that have ethic programs are eligible for reduced fines if convicted of wrongdoing (Ryan 2002).

The reasons supporting X and Y are weighty, but neither set of reasons is dominant to force action. That is, each set of reasons, considered in itself, is a good set, but may not be sufficient to oblige or justify an action. If one acts on one set of reasons, the action will be desirable in some aspects but undesirable in others. Hence, one needs both good and sufficient reasons to act morally.

In general, moral dilemmas may take two forms:

a) Some evidence indicates that act X is morally right while some evidence suggests that act X is morally wrong, and the evidence on both sides is inconclusive; e.g., seeking downsizing via massive layoffs; seeking bankruptcy to resolve chronic insolvency.

b) The agent believes that on moral grounds act X ought or ought not to be performed; e.g., plant closing; forced retirement of employees.

Moral dilemma of form (a) deals with the rightness of the act, while that of form (b) concerns obligation. Most moral dilemmas are created by conflicting moral principles that generate conflicting demands.3 Moral dilemmas and disputes not only involve conflicts between moral rules, principles and theories but also on factual beliefs about the situation to which the rules, principles and theories are concretely applied. Often factual beliefs reflect our current scientific, metaphysical and theological (religious) thinking. The latter underlie our beliefs and help us to interpret current phenomena that create moral dilemma. Factual beliefs often revolve around cost and benefits, and risks and uncertainties associated with obliging actions.4

2Technically, a trilemma (a conflict between three equally compelling choices), a quadrilemma, and so on are conceivable, depending on the number of close competing economic alternatives we confront in making economic decisions that also have moral implications. For instance, today free enterprise capitalism poses as an economic and moral trilemma: a) If we allow labor productivity to grow faster than the growth of GDP, then we create less employment; b) When the real interest rate exceeds the real growth rate of GDP, then debtors are impoverished and creditors are enriched; c) An increase of real GDP growth violates the condition of ecological sustainability.

3 Some moral philosophers argue that there are many types of practical dilemmas but never genuine moral dilemmas. A genuine moral dilemma is a situation in which two moral “oughts” are in a type of conflict in which an action that one ought to perform cannot be performed without forgoing another action one also ought to perform. This is form (b) moral dilemma. These philosophers advocate one supreme moral value that overrides all other values, moral or non-moral, with which it might be in conflict. The only real ought, in this theory, is the “ought” generated by the supreme value (Gowans 1987, Santurri 1987). The major problem here is to identify, establish and socially accept this one supreme moral value outside the context of one's religious beliefs. Often it is difficult to determine which moral value is so supreme as to override other “oughts” (Beauchamp and Childress 1989).

4 Moral dilemmas should be distinguished from "moral weakness". The latter revolves around the old Socratic problem: how

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Resolving Moral Corporate Executive Dilemmas

Many situations involve ethical dilemmas created by conflicting moral principles, which in turn generate conflicting moral demands. Typical examples are:

a) John, a recently hired salesperson is sure of a serious product flaw in a medical drug that the company has been selling to generate revenues. If he does not continue to sell it, he may be fired; if he pushes it well, he may turn the company around and reap high “success” bonuses. What should he do?

b) Jane, another salesperson in the same company, finds that Jack Doe has been doing exceedingly well in prospecting and realizing sales of that flawed medical drug. Jane has also found that Jack has been bribing purchasing managers (e.g., offering kickbacks) to stimulate purchasing. Should Jane let Jack continue his marketing strategy, or should she discourage him from bribing, even at the risk of depressing sales?

c) Jim, a recruiter, has the authority and responsibility of filling a position in his firm. His friend John applied and was qualified. However, another applicant, Jane, seems even more qualified. Jim wants to give the job to John, but he feels guilty. He applies the moral principle that one should be impartial. Nevertheless, Jim also argues from the virtue of friendship: friendship has a moral importance that permits, or even requires, partiality in some circumstances. He hires John and rejects Jane. Was he morally right?

In resolving these dilemmas, corporate executives may adopt the following procedure:

1. Specify the conflicting moral (teleological, deontological, distributive justice and virtue ethics) principles involved in the dilemma.

2. Identify the conflicting moral (teleological, deontological, distributive justice and virtue ethics) obligations involved. Thus for Case (a): duty to users, to prescribing doctors, and to USDA; also duty to the corporation, to his own sense of executive integrity (virtue ethics), job security and performance. Case (b): duty to code of ethics and virtue ethics that forbids bribes in the form of kickbacks; duty to consumers who must eventually pay for the kickbacks; on the other hand, duty to the company, to the consumers of the drug, to self, and duty to perform well. Case (c): duty to be impartial in hiring; duty to both John and Jane; duty to the company that needs best skills, and duty to perform well as an executive. Hiring John in the place of Jane may involve conflict of interest.

3. Identify other feasible alternatives to the one in question. Case (a): rectify the product flaw; warn the doctors; warn prospective users; withdraw the product from the market. Case (b): let Jack progressively reduce kickbacks; change kickbacks to alternative favors that are accepted by the corporation; change Jack's sales territory. Case (c): recommend John to another company; hire Jane now, but John later if Jane proves inefficient; or hire John and Jane on a part-time basis dividing the budgeted salary between them.

4. Consider which alternative would you choose if by fulfilling one obligation (alternative) another must be contravened, and why?

can one know what is right and yet do what is wrong? Hare's (1964) version is slightly different: If moral principles guide moral judgments, and moral judgments guide moral conduct, then how can we think, e.g., that we ought not to be doing a certain thing, and then not be guided by it? The normal answer to these questions is in terms of "moral weakness" or "weakness of the will" or "overpowering desires", all of which are similar but not identical terms (Matthews 1966). In general moral weakness is a tendency not to do something that we commend, or do something that we condemn. According to Aristotle (1984), moral weakness may lead to two behaviors: 1) a marketing executive could cheerfully accept bad principles, act in accordance with them, and not feel compunction, 2) a marketing executive may follow one's desires against one's moral principles, act on them, and feel remorse. The former is "corruption", and the latter "weakness". Other forms of moral weakness are procrastination (needlessly postponing moral decisions), backsliding (slipping from moral to immoral behavior type), irresolution (vacillating from moral decisions) and intemperance (lack of self-control).

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5. What crucial circumstance would change the priority of obligations (alternatives) you have identified?

Other things being equal, an executive choice is more ethical if he or she seriously investigates more competing alternatives before selecting the most socially beneficial alternative.

Executive Moral Conflict Management

Conflict has been perceived as a major problem in all organizations throughout the centuries. Classical organization theorists argued that conflict produced inefficiency and was therefore undesirable, even detrimental to organizations, and hence should be eliminated or minimized to the extent possible. But with the emergence of social systems and open system theory, the older view of conflict has changed. Organizational conflicts are now considered as legitimate, inevitable, and sometimes even positive and desirable indicators of effective management (Rahim 1983). It is even believed that within certain limits conflict may be essential to heighten productivity. Lobel (1994) even argues that the absence of conflict might be a sign of an unhealthy organization. When dealt constructively, conflicts enhance creative definition, formulation and solution of problems (King 1999:1); it can lead to change, adaptation, and survival. However, much would depend upon two factors: the intensity of the conflict, and the way the conflict is managed. In general, if the conflict intensity is moderate and if managed well will impact the organization positively (Schermerhorn 2001 339). The issue then is to design and engage techniques that empower individuals and organizations to handle conflicts productively (McNary 2003). In fact, most scholars view today that conflicts, if properly channeled, can be an engine of innovation and change (Dressler 1998:511).

People respond to conflicts in different ways, depending upon the degree of assertiveness versus cooperation people bring in to conflict management. Assertiveness is the desire to satisfy one’s own needs, desires and dreams. On the contrary, cooperativeness is the desire to satisfy another’s needs, concerns and desires. Using these opposite concepts of cooperation and assertiveness, Schermerhorn and Chappell (2000: 218) distinguished and empirically verified five interpersonal styles of conflict management:

Assertiveness Cooperativeness Hypothesized Interpersonal Style for Conflict Management

High High Accommodating or Smoothing(Playing down conflict and seeking harming among parties)

High Low Collaborating or Problem Solving(Searching for a solution that meets each other’s need)

Low High Avoidance(Denying the existence of conflict and hiding one’s true feelings)

Low Low Competing or Authoritative Commanding(Forcing a solution to impose one’s will on the other party)

Medium Medium Compromise(Bargaining for gains and losses to each party).

Part II: Applying Specific Moral and Ethical Theories to Executive Decisions

The first questions moralists want to ask are, “what actions are morally correct?” and “what actions are morally wrong? “That is, what actions are morally right or what actions are morally obligatory? Specifically, moral questions relative to corporate business executives are: As a corporate executive what should I do? What should I not do? What ought I to do? What I ought not to do? What am I obliged to do or not obliged to do? These are equivalent, if not identical, ethical questions. Other moral general

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questions include “what things in life are worthwhile or desirable?”

Various theories of moral value or obligation respond to these questions, as well as the moral dilemmas we illustrated in Part I. In addressing concerns such as these, moral philosophers make a distinction between instrumental and intrinsic good.

An instrumental good is good because of its consequences, e.g., work is good because of the wages it earns, and wages are good because they provide buying power; buying power is good because it can satisfy one’s consumer needs, wants, and desires, and satisfying one’s needs, wants and desires is good as it makes us happy and contended, and so on. On the other hand,

An intrinsic good is good by and of itself; e.g., happiness, honesty, integrity. These are terminal goods sought for themselves. These are ends in themselves and not means towards further ends.

The concepts of moral value, obligation, instrumental and intrinsic good are important in the understanding the free enterprise business system. [We will address the theory of “intrinsic evil’ in Part III, under the theory of double effect]. Normative ethical theory is the reasoning process that one uses to justify the moral (instrumental or intrinsic) goodness of judgments, actions, or institutions, given a free enterprise market system. Ethical scholars distinguish at least two primary positions (e.g., teleology, deontology) when evaluating moral rectitude of decisions, actions and institutions (Beauchamp 1993; Frankena 1973).

According to teleology, a right conduct is determined solely by what is achieved by the conduct, that is, by the intrinsic good it brings into the world. Consequently, a teleological theory of moral value or obligation is dependent on some theory of intrinsic good (Grassian 1992: 51). Some teleologists define intrinsic good as pleasure (these are called hedonists); others define it as happiness (these are called eudemonists); others, as one’s own greatest good (this position is called ethical egoism), and yet others, as the greatest good for everyone (this theory is called utilitarianism).

Teleologists further distinguish whether an intrinsic good is commensurable; that is, whether there is some common unit or benchmark by which one can assess or rank the intrinsic good in terms of relative value. Those utilitarians who are consequentialists affirm this common unit. Those who do not agree are nonconsequentialists who invoke the natural law theory. According to this natural law theory, there are several independent (noncommensurable) intrinsic goods such as human life, children, and the family that one cannot tradeoff for another good by some common scale of comparison.

The intrinsic goodness of life, child, family, and society, according to the natural law theory, either comes:

From the laws and purpose of nature upon which human nature is patterned (this was the position of ancient Greek philosophers like Plato and Aristotle) or

From our innate conscience that is implanted and informed by God; (this is essentially the moral theology of Christian moralists such as Aquinas and John Locke).

Both positions are called “absolutist” since the immutable laws of physical and human nature are finally traced to the immutability of God. Obviously, atheists, agnostics, and those who do not want to “assume” God in moral discourse, do not accept the natural law theory.

Teleological Schools of Moral Obligation

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An objective teleological (consequentialist) assessment would imply that one can (Leys 1952):

1. Foresee all the critical consequences of the action.2. Pre-estimate their impact on various stakeholders including the environment.3. Ascertain which consequences are willed or intended explicitly and which unintended but implicitly built in.4. Judge the net benefits of the willed action.5. Seek other alternative actions that can do better, and 6. Accordingly, judge the merits of this action.

All six steps call for serious research and objective reflection. There could be lingering doubts whether corporate executives would foresee all critical consequences and pre-assess their impact on all stakeholders (Hunt and Vitell 1986). Lack of time, data, skills and moral endurance often make objective application of teleology very difficult, if not impossible. Given our rapidly changing information-intensive, volatile and turbulent environments (Achrol 1991; Glazer 1991, 1993), one may neither foresee nor control all the consequences of one's executive decisions or strategies. Owing to this inherent difficulty, teleology has evolved into many versions, each trying to be more practical than the other. The major versions of teleology are egoism and enlightened egoism.

Egoism states that some desired results are exclusively personal, and personal good takes primacy over social good. Enlightened Egoism states that when personal good is sought it should be sought in conjunction with long-term social

good.

Enlightened egoism appears under three versions: Hedonism, Utilitarianism, and Eudemonism, depending upon the specific rule applied.

Hedonism states that an action is ethical when the social good desired is pleasure and when it results in the gratification of the maximum number of people involved in that action and affected by that action.

Utilitarianism (especially, the version of Jeremy Bentham and John Locke) defines the rightness of an action or institution as that which maximizes total utility (personal and social good) of the greatest number, or that an act or institution is ethical only if the sum total of utilities generated by it is greater than the sum total of comparable utilities produced by a competing alternative.

Eudemonism requires that the social good sought should be happiness and self-fulfillment of the maximum number.

The ethical systems of Plato (e.g., Republic) and Aristotle (e.g., Nicomachean Ethics) are eudemonistic. In general, teleologists define morality of decision, action, or an institution by their consequences.

Utilitarianism of Jeremy Bentham

Utilitarianism has a wider appeal among Americans because of its pragmatic nature. Most scholars of ethics use the term “utilitarianism” to refer to the specific systematic theory of Jeremy Bentham (1748-1832), an English jurist and philosopher, who was the first to coin this term. It also refers to the later refinements of this theory at the hands of his many disciples, in particular, John Stuart Mill (1806-73), an English philosopher and economist. Bentham criticized the natural law theory since the bourgeoisie of his day complacently used it to defend the natural and inalienable rights of private property of the privileged class, binding themselves to the legalized inequalities and exploitation that the exercise of these rights entailed (Grassian 1992).

In the place of the natural law theory, Bentham proposed a universal principle of moral criticism that could cut through the partiality of the bourgeois status quo and the abstractness of natural law and rights: “the greatest happiness for the greatest number.” Bentham called it “the principle of utility.” This principle, as Bentham saw it, had two great values: a) it was universal in that it referred equally to all

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human beings and not just to some, and b) equating morality with the maximization of happiness was determinable “real entity” capable of scientific measure (Bentham 1789/1948). Happiness (pleasure and unhappiness or pain) can be measured and compared in quantitative terms. For each alternative, one could use a “moral arithmetic” or “moral reasoning” that sums up items of pleasure likely to be experienced and subtracts items of likely pain, and choose the alternative that has the greatest net sum of pleasure for the greatest number (Bentham 1789/1948).

Thus, the rightness of an action or law depends upon its consequences. In this “moral accounting,” all individuals would be treated equally, no individual’s pain or pleasure dominating another’s. One may not be able to foresee all the consequences of pleasure and pain, and hence, moral judgment is subject to correction as new and unforeseeable consequences come into light. There may not be certainty regarding any moral judgment, and nor would there be exception-less moral rules (other than the principle of utility). This is the inevitable price one must pay for the finiteness of human foresight (Bentham 1789/1948).

According to Adam Smith, Bentham’s contemporary, self-seeking individual interest will tend, in the long-run, to coincide with the general interest. In Smith’s theory of laissez-faire economics, a situation of unfettered economic competition where each producer attempts to sell one’s own products and services and maximizes one’s own profits, laissez-faire leads in the long-run, without any conscious intention, to the most efficient economic system for all concerned. This is the foundation of capitalism. However, most reject the laissez-faire theory of Smith as an over-optimistic assumption of human nature - that individual and community interest would ultimately converge.

Bentham used this principle to develop his hedonistic utilitarian theory. The goal of life, he said, was to create as much human happiness as possible. We should condemn a human desire only when it comes into conflict with other desires that promise to create greater human happiness in the long-run. One should not construe morality as a conflict between inclination and an abstract duty, but rather as an attempt to arbitrate between conflicting inclinations as to maximize happiness. Either in a situation of individual moral choice or in legislative deciding between conflicting laws, the right act or law is that which among all alternatives produces the greatest happiness for the greatest number. The conventional morality rules such as “never lie,” “never break promises,” or “never kill” are not absolute exception-less rules, but are mere social conventions or moral guides precisely because they maximize happiness of the greatest number, and this is the principle of utility.

There are obvious problems with Bentham’s version of utilitarianism:

1. If there are no absolute moral principles, so is the principle of utility. It may be a true principle, but how do we know that our sole basic moral obligation is to maximize human happiness of the maximum? Bentham never explained the source of our ultimate moral obligation to maximize human happiness, especially when this obligation conflicted with our own interests (Grassian 1992: 76).

2. According to utilitarianism, morality is nothing more than a maximization of human desires, such as the desire for happiness. In which case, human reason is subservient to one’s desires or passions. “Reason is the slave of the passions,” said David Hume.

3. Further, Bentham agreed that he could not prove this principle since “it is used to prove everything else and a chain of proofs must have their commencement somewhere” (Bentham: Theory of Legislation, Preface). That is, this principle is either self-evident or known by intuition (Sidgwick 1907). According to the utilitarian G. E. Moore (Principia Ethica, 1903), there are certain moral rules whose violation so regularly leads to bad consequences that one would be mistaken in violating them in any given situation. Such is the principle of utility. It is exception-less because a person will never have sufficient information in a concrete situation of moral choice to know that in this situation breaking such a rule will have the best consequences.

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4. The utility principle of maximizing happiness of the greatest number treats everyone equally; but there are special social responsibilities that require we consider the happiness of our family, or close relatives and friends as more important. That is, one must fulfill one’s special moral obligations that the principle of utility seems to disregard.

5. Related to this, the principle of utility involves but does not distinguish between two maxima: total happiness for all individuals and the total number of individuals who share that happiness. Which maximum is better: total amount of happiness, or its wider distribution? Can one voluntarily sacrifice one’s share of happiness in order to reach the sum of happiness to all, especially, the disadvantaged? Alternatively, can we kill someone in order mistakenly to maximize the happiness of all? - Most martyrs were killed that way. Thus, the principle of utility disregards principles of distributive justice. For instance, a war against a foreign country may maximize happiness for all Americans, yet it does not justify it as thousands of innocent foreign people are killed in the process. An act which maximizes the sum of human happiness is not the best until that happiness is justly distributed among the greatest number, especially the most deserving.

6. Which is better, a world population of 10 billion with the same sum of happiness thinly distributed among them, or a world of 5 billion people with each one’s happiness doubled? By the principle of utility, the first should be better than the second alternative!

7. Happiness is subjective: the pleasure of one may be the pain of the other; the gain in happiness of one could be at the loss of happiness to another. One could easily delude oneself as maximizing the happiness of others while maximizing their pain. The recent cases of corporate frauds illustrate this.

8. Further, we may maximize our happiness, but thereby jeopardize the happiness of future generations. This happens every time we damage our environment permanently by overusing or abusing its scarce resources.

9. Our obligation not to harm people is much more stringent than our obligation to help people. Utilitarians cannot give any justification to this moral distinction.

The major difficulty with utilitarianism is that it is unable to deal with two kinds of moral issues: namely, rights and justice (Bowie: Toward a New Theory of Distributive Justice, pp. 20-4). Certain actions that are morally right by the principles of utilitarianism may be unjust by deontological principles when such actions violate people’s rights (Velasquez 2002: 83-6).

Utilitarianism of John Stuart Mill

J. S. Mill, an ardent disciple of Jeremy Bentham, tried to anchor the “self-evident” principle of utility to the doctrine of psychological egoism that asserts: the pursuit of individual pleasure is the sole human motive. According to psychological egoism, people seek only to maximize their own pleasure, and seek the pleasure of others only as a means of satisfying their own pleasure. Both Bentham and Mill agreed that there is no guarantee that self-interest would naturally lead to consider all humans equally and seek the happiness of the greatest number. Hence, the theory of psychological egoism, far from proving the principle of utility, disproved it. In his famous essay On Liberty, John Stuart Mill argued that the principle of utility implies a commitment to the value of freedom that allows individuals to make their own choices as to what is best for themselves and for others. There is no guarantee, however, that these two values (individual and social) would coincide.

Thus, the principle of utility for Bentham and Mill demands courses of actions that produce the maximum possible happiness. In other words, an action ought to be performed if the sum of the happiness of all affected individuals would be maximized by the performance of action.

Success, money, prestige, and the like are normal sources of pleasure and happiness. These may not be directly sought always. Thus, highly dedicated professionals among research scientists may dedicate

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lifelong hours to the point of exhaustion for the sake of knowledge they hope to gain, even though the same individuals could have chosen different routes to happiness or pleasure. Knowledge, dedication, integrity, and the like virtues are sought by the magnanimous. Friendship, health, and beauty are also sought by people with high self-esteem. These are values that have intrinsic worth, apart from their content of pleasure or happiness (Moore 1962). Those who seek these values seek happiness by making humanity happy. Hence, the utilitarian principles of Bentham and Mill may not fully explain the dedicated lives of scientists and saints, Olympic and major league athletes.

Deontological Schools of Moral Obligation

While in general, teleologists define morality of decision, action, or an institution by their consequences, deontologists deny this claim and maintain that the morality of an action is independent of its consequences. Moral rightness and wrongness are basic and ultimate moral terms (De George 1999: 80); they do not depend upon the commission or omission of good or evil, right or wrong. One’s duty is do what is morally right and avoid what is morally wrong, regardless of the consequences of so doing.

The Theory of Kantian Ethics

Emmanuel Kant (1724-1804) wrote his famous ethical treatise Foundations of the Metaphysics of Morals in 1785 before the rise of British utilitarianism, but he was well acquainted with the basic tenets of that doctrine (Boatright 2003: 51). Hence, his ethical theory is best understood as a reaction to hedonistic utilitarianism and its fundamental inadequacies: its reliance upon the notion of happiness as the ultimate ground of morality, and its potential for injustice (Grassian 1992: 83). Kant rejected the view that reason is a slave of human passions. Morality should be grounded in a value that gives human beings their distinctive worth. Such a value cannot be a desire for happiness that is grounded in human psychology. People may desire happiness, but they do not derive their dignity or moral worth as persons from desiring happiness.

Human dignity is derived from human freedom and the ability to reason, characteristics that distinguish humans from animals. What defines and grounds morality is human freedom and rationality. Legal systems exist, said Kant, in order to secure the value of justice. Justice, in turn, demands that each person enjoy the fullest possible liberty compatible with a like liberty to all. Hence, while the principle of utility disregards distributive justice, Kant’s theory of moral worth affirms it.

Further, Kant, unlike the utilitarians, did not believe that people needed guidance in arriving at enlightened moral judgments. The central problem of ethics is not what utilitarians pose: What would be the right thing for a person to do in a given situation? Perhaps due to his deeply religious background, Kant thought that the answer to this question should be obvious to every decent human being.

Discerning right from wrong was not the central problem for Kant; hence, he did not deal with moral dilemmas or perplexities or conflicting obligations (this would be the central problem for Sartre). The real problem is - having discerned what is right and what is wrong, how does one doggedly pursue right and avoid wrong? That is, the ultimate question is, not what morality is, but how is morality possible?

Kant grew in a scientific world of deterministic laws, and consequently, his main inquiry was: how do you reconcile free will (which is vital for any moral act) with physical determinism? If moral actions were entirely governed by deterministic cosmic laws, then freewill would be an illusion, and people would not be obliged to behave morally when they do not have a free will, which determinists seemed to

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deny.

Hence, Kant made a radical distinction between the physiological part of human nature (sensual or animal natures) that deterministic physical laws may influence, and the psychological or spiritual nature, which grounds freewill and moral choice. Unlike classical natural theorists who derived their concept of morality from a biological and social view of nature, Kant attempts to free his moral theory from such considerations and instead base it on the moral and free rational person. Hence, the basic principles of morality bind all rational or free people, regardless of their psychological desires for happiness. Thus, the concept of morality inextricably connects the concepts of rationality, freedom, impartiality and justice, and respect for the autonomy of persons.

This concept of morality provides a ground for:

A theory of moral value (i.e., a theory of how we should determine when a person is morally good).

A theory of moral obligation (that is, a theory of how we should determine when an act is right and obliging), and also,

A theory of moral justification (that is, a theory of how we should determine when an outcome of the act is good or harmful, and how the harm can be compensated).

Kant’s Theory of Moral Value

How do we determine if a person is morally good? It is insufficient to look at the person’s actions and their consequences without considering the motives and the intentions. Actions by themselves do not reveal the moral character. A bad person may do right things for bad reasons, or a good person, with right intentions, may mistakenly end up doing wrong things. The only thing that makes a person morally good is that he/she acts from duty for its own sake; such a person has goodwill, and has moral character. A person who does one’s duty for any other motive (e.g., a retailer is honest for winning customer loyalty is motivated by self-interest and not duty) does not deserve moral praise.

Even the person who is naturally good or kind and who does what is right or compassionate out of a natural inclination without acting by a sense of moral duty is unworthy of moral praise. We should not get credit for our natural inclinations since our heredity and environment largely determine them and over which we have no control. However, if a person habitually does good out of duty, then his or her subsequent actions, even if not done consciously out a sense of duty, are morally praise worthy because of that person’s learnt disposition to act from duty.

For Kant, responsibility or moral worth stems from the underlying principle of the will than from the purposes or ends or excuses that precede the action or from the consequences that follow it. In this sense, Kant's Groundwork of the Metaphysics of Morals (1964) is a treatment of an Ethic of Duty, primarily as the Categorical Imperative, and secondarily, as an Ethic of Hypothetical Imperatives.

A categorical imperative demands that “an action is as of itself objectively necessary, without regard to any other end.” It is fulfilling duty for its own sake, and not for any other ulterior motives. Hypothetical imperatives are instrumental: here the actions are done for specific ends. For instance, if I intend to lose weight, then I must eat less; “eating less” is a hypothetical imperative conditioned on the purpose of losing weight. If I do not need to cut down weight, then there is no imperative for eating less.

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According to Kant, the "moral worth can be found nowhere but in the principle of the will, irrespective of the ends which can be brought about by such action" (Kant 1964: 68). To use modern terminology, Kant seems to argue for a deontological (i.e., duty-based) source of moral worth, than a teleological (i.e., purpose-based) one. The underlying duty-principle makes an action a categorical imperative, while the underlying purpose makes an action a hypothetical imperative. A categorical imperative "declares an action to be objectively necessary in itself without reference to some purpose - that is, even without any further end" (Kant 1964: 82). Categorical imperatives are "concerned not with the matter of the action ... but with its form and with the principle from which it follows" (Kant 1964: 84).

On the other hand, hypothetical imperatives imply that "an action is good for some purpose or other" (1964: 82). Such imperatives declare that an action is necessary "as a means to the attainment of something else that one wills" (1964: 82); they concern ends and purposes, and hence, the matter (and not the “form”) of an action. Categorical imperatives ignore purposes and ends, are not concerned with the matter of the action (1964: 84) but only the principle guiding the will, and hence, refer only to the form of the action (Wike 1987).5

Although Kant does not directly connect categorical and hypothetical imperatives to responsibility, yet one can deduce the following relationship: categorical imperatives generate categorical or unconditional responsibility; they ground absolute or necessary responsibility. Whereas hypothetical imperatives generate hypothetical or relative responsibility, conditioned or relative to moral agent's ends, purposes, and circumstances (Mascarenhas 2008). Absolute ends that are valued for their own sake often rule categorical imperatives; that is, they are ends-in-themselves.

Kant’s Theory of Moral Obligation

Fundamental to most conceptions of morality is a commitment to the value of justice. With utilitarians, our major concern might be maximizing the good in society, and most of us would not consider this alone as right. No doubt, an efficient society is one that is most capable of maximizing the good and minimizing the evil for its citizens, but such a society is not a moral one unless its goods are justly distributed. Hence, the value of distributive justice is more fundamental than the value of teleology or deontology.

Justice is the cornerstone of Kant’s theory of moral obligation. In his theory, the notion of justice is inseparably tied to the notions of freedom and rationality (Grassian 1992: 88). Justice involves treating individuals fairly, and this, in turn, involves considering them as rational moral agents who have the right to make their own choices unless these choices interfere with the freedom of others. Justice demands, therefore, that people cannot be used as means but treated as persons, free and rational moral agents. Demands of morality are categorical imperatives. They are not means for achieving any desires or objectives as such, but are pursued for their own ends; they are values or actions that are objectively

5 However, it does not follow that the categorical imperative lacks purpose or ends. While purpose or ends may not be the source of the categorical imperative itself, nor of its moral worth, the categorical imperative itself may have ends or purposes, just as the hypothetical imperative has ends or purposes. The major end of a categorical imperative is "objective" or absolute end, valued in itself (Kant 1964: 95). Thus, persons or rational beings are objective ends (Zwecke) (Kant 1964: 96). If there is a categorical imperative, it is because an end in itself, or an objective principle of the will, forms or makes it (Kant 1964: 96). Thus, the end or matter of a categorical imperative is the objective or absolute end that makes it categorical. On the contrary hypothetical imperatives have relative or subjective ends or purposes, these subjective ends make the imperatives hypothetical (Wike 1987).

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necessary by themselves without regard to any other ends. That is, moral demands are not conditional or hypothetical imperatives. For instance, our moral obligations to keep our promises are in a way dependent upon whether we desire to keep them.

Kant claims that specific categorical moral demands follow from a supreme categorical moral principle that he calls the categorical imperative. This categorical imperative (CI), Kant claimed, is so basic to moral thinking that all rational persons who understand what it means would accept it as binding, regardless of their specific psychological, political or religious beliefs. Kant presents five formulations of CI that he claims have an equivalent meaning. Some formulations are:

Act as if the maxim of your action (the subjective principle under which you act) were to become through your will a universal law of nature (i.e., that everyone could not but follow that maxim).

Act in such a way that you always treat humanity, whether in your own person, or in the person of any other, never simply as a means, but always at the same time as an end.

The first version is also called the principle of universalizability. That is, when we act on a certain moral principle, we must be willing to accept the right of everyone else to act on the same principle. For example, if I act on the principle, “never break promises and never lie, regardless of the circumstances,” then this not universalizable, since there is an equally valid principle, “lie if it is necessary to save an innocent human life.”

This first formulation also stands for and demands impartiality. Impartiality is at the heart of the golden rule: Do unto others as you would have them do unto you. Confucius has a passive version of the golden rule: Do not do unto others what you would not have them do unto you. But, what if a sadomasochist hates himself: can he hate others by the golden rule? What if a person does not want to be loved: Can he refuse to love others? Kant’s CI expresses in a more precise manner the real spirit behind the golden rule without implicit reference to the vagaries or subjective preferences of human beings. To what extent CI does this, however, is still debated.

The second formulation affirms human dignity that resides in rationality and freedom, equality, and justice. This version of the CI expresses Kant’s view that if we treat people as means and not ends we do not respect them as persons.

This Kantian doctrine has relevance for marketing. For instance, a recent marketing doctrine considers customers as “sovereign.” One could interpret this to mean that customers are not means but absolute ends-in-themselves, and therefore, marketers should bind themselves to customers by categorical responsibility. Further, most marketing executive duties that directly deal with customers can be assumed to be categorical imperatives such as, innovating and marketing consumer-safe products, truth in advertising, being honest to customers, offering fair value to customers, and offering quality products and services to all customers regardless of age, gender, color, race, and residence. On the other hand, some executive duties may be deemed hypothetical or conditional responsibilities such as, offering discounts to senior citizens, marketing state-of-the-art products, promoting salespeople based on sales-performance, talent, education, age, or seniority, offering preferential credit terms to senior distributors, and satisfying all company stockholders.

The Kantian doctrine of categorical imperatives has also relevance for business management. For instance, consider the doctrine that some of your “stakeholders” are “sovereign.” One could interpret this to mean that certain stakeholders are not means but absolute ends-in-themselves, and therefore, executives should bind themselves to at least certain stakeholders (e.g., employees, secured creditors,

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long-term suppliers and distributors) by categorical responsibility. Further, some executive duties that directly deal with some stakeholders can be assumed to be categorical imperatives, such as paying accrued taxes, paying deferred wages to employees, paying bills of suppliers who supply only for your company, workout schedules with the major bankers, due diligence before undertaking divestitures, mergers and acquisitions, innovating and marketing consumer-safe products for your retailers and customers, truth in financial statements, being honest with your bankers, honoring warranties and guarantees on your products and services, and the like. On the other hand, some executive duties may be reckoned as hypothetical or conditional responsibilities such as, paying dividends to your shareholders, repaying unsecured loans, offering stock options to your senior management, paying hefty severance packages to your CEO, cooperating with your hostile takeover sharks, and satisfying all company stockholders.

Kant’s critics would argue that human freedom is not best manifested in choices involving moral duty. The disposition to do one’s duty may be as much determined by heredity, childhood training and good school environment, for which they should not be morally praise worthy, rather than by any free choice. Hence, why should a learnt disposition to duty be morally praiseworthy? Moreover, we do not have a free choice whether we should have a good and kindly character even as we may not have a free choice to be an evil and unkindly person. If the former does not deserve moral praise, the latter should not deserve moral blame either. Kant would reply that people have less control over their temperament and environment that makes them good or bad, but they can certainly control the moral principles under which they choose to act.

Kant’s critics urge: it is one thing to act out of duty, but it is another to understand one’s duty correctly. What if one acts out of duty wrongly understood and another acts out of duty rightly discerned. Should we praise both of them equally? Alternatively, should we blame the first and praise the second, even though both acted out of duty? What if the first one wrongly understood duty because of inadequate childhood training and improper environment, and the second understood it correctly because of adequate childhood training and proper environment? In judging moral character, we must consider what a conscientious (duty-conscious) person is conscientious about. Kant, given his deep religious training, did not focus on this problem, as he thought that demands of duty were or should be clear to all.

Further, what if one’s duty as informed by one’s religion is not clear? For instance, consider this case: Parents XYZ are Jehovah’s witnesses who believe that blood transfusions are morally wrong. Their only son, a minor, meets with an accident, bleeds profusely and when rushed to the hospital the doctors urge blood transfusion without which he will die. XYZ are confused in their duty: duty to a religious belief versus duty to their only son. There are many similar situations when the “demands of duty” may not be too clear. What would Kant advise? What would you? Is one duty to religious belief just fanatical, fickle or secondary when one’s duty to save one’s only son from imminent death is real, critical and primary? Who should decide this: the parents, the son, or the society?

Furthermore, where does moral effort feature in ethics? For instance, consider A is by disposition very calm and compassionate, and B is by disposition very excited and violent. If both restrain themselves equally well under very similar circumstances, should not we commend B more than A, as B would have exerted much more moral effort?

Conscience and Moral Obligation

The existence of conscience is one of the most widely validated concepts in psychological, sociological, religious, and philosophical literature (Covey, Merrill and Merrill 1994/2003: 65). Whether

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called “inner voice” (Book of Wisdom) or the “collective Unconscious” (Sigmund Freud and Carl Jung), our conscience has been recognized as a major part of human dignity and endowment. When corporate executive develop their vision and mission statements, the collective unconscious of the corporate executives frequently comes to the surface when most of them get deeper into their inner lives, regardless of their religion, upbringing, nationality or culture. They seem to have a common unique sense of the basic laws of life we call conscience. They all carry within them an educated conscience, and often, an educated delicate moral conscience that we have nurtured, internalized and developed over almost all the conscious years of our life.

Immanuel Kant said, “I am constantly amazed by two things: the starry heavens above and the moral law within.” Conscience is the moral law within. It is the overlapping of moral law and behavior. It is the voice of God in us or the innate sense in us of fairness and justice, of right and wrong, of kind and unkind, of what is true or false, just or unjust, of what contributes and what detracts, of what beautifies and what destroys. One’s culture may dress and translate this moral sense or conscience into different kinds of practices and words, but this translation does not negate the underlying sense of right and wrong. This universal conscience is a set of values, a sense of fairness, honesty, respect and contribution that transcends culture, time, and space; it is self-evident; it is the requirement of trustworthiness . When people live by their conscience, their behavior echoes in everyone’s souls. People instinctively feel trust and confidence toward them. This is the beginning of moral authority (Covey 2002: 4-5).

Conscience was originally a term used by the Stoics in their gnostic moral philosophy. Conscience was defined as that inner guide by which the wise persons regulated their activities regardless and spite of the opinions of others. In this sense, conscience is conscientiousness or social consciousness. However, conscience does not guarantee free autonomy, to think and do as far as one’s knowledge guides that person. Good conscience surrenders to higher good such as fraternal charity, responsible citizenship, and religious faith. Sometimes, even rightful freedoms must be foregone (e.g., engaging in a just war). A good moral conscience needs to be educated by (Covey, Merrill and Merrill 2003: 67):

Reading and pondering over the wisdom literature of various religions, especially their sacred scriptures; they broaden our awareness of truth and common sense through time;

Standing apart from and learning from our own experience; Carefully observing the experience of others; Taking time to be still and listen to that deep inner voice, and Responding to that inner voice.

Both listening and responding to the inner voice is needed. Otherwise we dull our conscience. As C S Lewis said, “disobedience to conscience makes conscience blind.” With our educated moral conscience we connect with the wisdom of the ages with the wisdom of our heart; we become less a function of the social conscience or social mirror and more of a person f character and conscience. Our security does not come from the people we associate with as much from our own sense of integrity, a moral integrity.

Stephen Covey (2004: 77-82) emphasizes the following features of a good informed conscience:

Conscience is an inner light, a small voice within, a moral sense, and a universal phenomenon. It is quiet, peaceful, and harmony. The opposite voice – the ego – can be tyrannical, despotic and dictatorial.

Conscience democratizes, challenges and elevates ego to a larger sense of the group, the whole, the community, the greater good, - the common good. It sees life in terms of service and contribution, in terms of security and fulfillment of the other.

Conscience introduces us into the world of relationships; it moves us from independent to an interdependent state. Conscience teaches us that vision and values must be shared before people will be willing to accept the institutionalized discipline of structures and systems that embody those shared values. Such shared vision creates discipline and order without demanding it. Conscience of ten provides the why, vision identifies the what

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we are trying to accomplish, discipline represents how we are going to accomplish it, and passion represents the strength of feelings behind the why, the what, and the how (Covey 2002: 9).

Conscience also transforms passion into compassion. It engenders sincere caring for others, a combination of both sympathy and empathy, where pain is shared and received. Compassion is the interdependent expression of passion (Covey 2002: 9).

Conscience is sacrifice – the subordinating of one’s self or one’s ego to a higher purpose, cause or principle. Sacrifice gives up something good for something better, something immediate and vaporous for something eternal and lasting.

Conscience is discernment – discerning between right and wrong, good and evil, moral and immoral, ethical and unethical, fair and unfair, just and unjust, and truth and falsehood.

Conscience empowers. It reflects the worth and value of all people and affirms their power for freedom to choose. It sees their potential for self-control.

Conscience teaches us that ends and means are inseparable. That ends actually preexist in the means. That is, means used to accomplish the ends could be as important as the ends (E. Kant). Machiavelli taught the opposite - The ends justify the means.

The ego is threatened by negative feedback; it seeks to negate the message by destroying the messenger or the prophet. It is myopic and interprets all life through its own agenda. It interprets all data in terms of self-preservation. It constantly censors information for threatening elements. It denies much of reality. On the contrary, conscience values feedback and attempts to discern whatever truth it contains. It embraces information, does not censor it, but accurately interprets it. Conscience is a social ecologist ever sensitive to and preservative of nature.

The spiritual and moral nature of people is independent of their religion, religious cult, culture or religious approach, geography, nationality or race. Yet all the major enduring religious traditions of the world are unified when it comes to certain basic underlying principles or values (such as respect, compassion, kindness, fairness, contribution, honesty, and integrity). These values are timeless, transcend ages, and are self-evident. Conscience is the moral law within. It is the intersection of moral law and human behavior. It is the inner voice of God to his children (Covey 2004: 77-78).

A conscience raised and developed well can oblige. The human conscience is not merely a social construction. It is a genuine human process of assessment and judgment. It derives etymologically from con + scientia = with + knowing. In this sense, conscience is self-reflexive and socially connected, a knowing that is accountable to our deepest self, to human communities, and ultimately to God. Larger purposes and standards beyond our self-influence and form the individual through conscience. Loyalty and obligation to those larger purposes related the conscientious person to others in common cause and mutual accountability (Spohn 2000: 122-123).

Conscience eludes precise definition, just like rationality, emotion, and choice. Conscience is not a distinct or separate faculty of the mind. It integrates a whole range of mental operations. Conscience is a personal, self-conscious activity integrating reason, emotion and will in self-committed decisions about right and wrong, good and evil, fair and unfair, just and unjust (Callahan 1991: 14). Conscience begins in initial sensitivity to moral salience and moves to conscious empathy. Conscience engages in “cross-checking” one’s critical thought, intuitive insight, affective valence, empirical possibilities, imaginatively grasped analogies, and social corroboration. Reason tutors emotion and emotion instructs reason; intuition is assessed against remembered experience; imagination projects possible scenarios that are evaluated by affective resonance and critical reflection. All of these operations converge to the act of making a moral judgment with as much freedom and commitment as we can muster. Conscience enables more than individual moral decisions; it enters into the self-constitution of the person over time. Our moral choices shape our character; they can make us or mar us. We become what we decide and do (Spohn 2000: 123-124).

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Morality bears upon conscience, which must judge between right and wrong, good and evil, fairness and unfairness of various alternatives or strategies such as firing, hiring, promoting, downsizing, plant shut downs, massive layoffs, outsourcing, the plight of the laid-off or the displaced and their healthcare coverage, preservation of the environment, and the dignity of human labor. Conscience is not just what I think about these issues, but it is me in the act of thinking about what is just and true. Conscience is that part of us that is bigger than us.

Conscience implies at least three levels of reflection (Bransfield 2008: 17-18):

a) Conscience is an inward reflection where I find a norm that obliges me (Catholic tradition calls this synderesis). This awareness of the inner moral sense is the capacity of the person to hear the voice of God within or the voice of faith. Conscience is founded upon truth – therefore, it looks to God as the author of truth revealed through right reason and teaching of the sacred scriptures (especially, the prophets). This is the subjective aspect of conscience – it relates to joy versus sadness, happiness versus guilt.

b) Conscience is also an outward reflection to understand the truth of the nature of things in themselves. This is the objective aspect of conscience – conformity with nature outside us and its laws – it relates to objective right and wrong, good and evil.

c) Conscience is the last and the best judgment I make based on my inward [level (a)] and outward [level (b)] reflection; it is a virtuous fitting together such that the conscience is a manifestation of truth itself rather our own preferences. Conscience emerges as a voice, greater than our own, from the two reflections. Hence, a conscience needs to be informed, trained and educated.

Conscience has been described under two senses: a) anterior conscience and b) subsequent conscience. The former is a mental and moral process; the latter is an outcome (e.g., my conscience bothers me). O’Connell (1990: 110-114) distinguishes three meanings of anterior conscience as capacity, as process, and as judgment.

Conscience as capacity: It is our capacity to determine good from evil, and right from wrong and to recognize corresponding moral claims. It is our capacity for responsibility, accountability and commitment. It defines the human species. Despite the skepticism of postmodernism, there is considerable evidence for a common human morality. We live under analogous moral systems and can argue about moral issues across cultural and linguistic boundaries.

Conscience as practical process: It is a reflective process. It seeks to determine the right and appropriate action in particular situations by perceiving moral salience and by taking into consideration the perspectives of others. Depending upon the complexity of the moral situation, we strive to seek the best moral decision by scrutinizing our options and by assessing their relative moral worth; we foresee or imagine their consequences, recall relevant standards and comparable experiences, seek advice, compare one source against another, and then arrive at a moral judgment. This process of moral reflection is not necessarily sequential but a more circular path integrating so many different aspects of a moral situation . In order to deliberate wisely and accurately we need specific skills such as honest searching for the facts, prudent reflection, a willingness to entertain dissenting opinions and unpleasant consequences, and acknowledgement of personal bias and fallibility. At this juncture, conscience as processing skills and conscience as capacity merge. Conscience reflects the degree of our personal maturity, emotional stability, social awareness, and our virtues and vices.

Conscience as judgment: Our capacity and process of conscientious deliberations result in a judgment, a decision that embraces truth and avoids falsehood, discerns right from wrong, and recognizes and pursues good and avoids evil, and acts accordingly. At this stage we achieve a full congruent, reflective equilibrium of reason, intuition, and emotion, and commit ourselves in a wholehearted decision of conscience (Callahan 1991: 137). This is moral competence at its best. The truth discovered in the

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process of our conscientious deliberation makes a claim upon us. We have found the right thing to do, a morally compelling course to pursue, or follow the least harmful option. Failing to obey this claim would violate our personal integrity. This is moral obligation.

We must distinguish the skills of acting well from the skills of reflecting well. To decide to act on one’s conscience calls for another set of virtues: resoluteness, courage, persistence, and passionate attachment to the moral good.

Conscience and Moral Formation

Conscience also relies on the moral quality of our family we were raised and nurtured, of the groups (e.g., schools, college, workplace, religious and social affiliations) to which we belong. Our moral formation comes from them; we gain our moral bearings from these communities; we carry their voices and values, for better or worse. Values are transmitted through groups (O’Connell 1990: 170). We live up or down to the standards of the groups to which we belong. In these groups we find our identity and the inspiration and accountability to lead a moral life. We may trace the lack of a sound moral formation among the youth today to a lack of sound moral values and crucial moral resources in our families and society; there is too much value-neutrality, and occasionally, moral cynicism. The importance of moral and role models in moral formation and social learning is more crucial than ever before (Bandura 1986; Walker and Taylor 1991). The youth moral conscience is dull in USA today, as we do not nurture it with an adequate moral value and vocabulary and when our own moral values are dulled by self-interest and utilitarian advantage (Bellah et al. 1985; 1992).

Simply stated, relativism asserts that everything is relative; there are no absolutes. Thus, there is no objective truth (ontological relativism). We cannot know or arrive at truth (epistemological or cognitive relativism). There is no moral absolute truth or value (moral relativism). There is no objectively true and permanently valued meaning and culture (cultural relativism

Relativism has two major counterparts: cognitive relativism and moral relativism. Cognitive relativism dates from the Greek classic period. In Theaeteus, Plato presents Socrates arguing Protagoras' relativist doctrine: Man is the measure of all things (homo mensura). Hence, there is no objective truth possible. Relativism lay dormant thereafter till it resurged in the twentieth century when cultural anthropologists made us aware of cultural pluralism and genuine cultural diversity in values, customs and habits. At the same time 18th century Classic Rationalism (triggered by Kant and his followers) proposed that man's reason can arrive at (even moral) truth independent of any revelation or authority or one's religious faith. Classic Rationalism and Cultural Pluralism begot philosophical pluralism or relativism.

Cognitive relativism, in its modern version, holds that truth (or its cognates) is relative to a conceptual framework or philosophical orientation. Truth is truth (i.e., univocal or uniquely assertable) within that framework or paradigm or culture or philosophy. It becomes equivocal (i.e., not uniquely assertable) outside that framework (Krausz 1984: 397). Thus, the central tenet of cognitive relativism is that the truth or the evaluation of truth is relative to the conceptual schema of an individual or the situational context within which the assertion is made (Muncy and Fisk 1987: 21). Hence, cognitive relativism does not reject truth (or falsity), its existence and our capacity to find truth. Skepticism is the philosophy that denies truth, but it is different from cognitive relativism (Krausz and Meiland 1982).

Relativism generally rejects the idea of categorical truth (something is either true or false) and "absolute" truth that is valid and true across all times, places and cultures. Cognitive relativism does not assert that such absolute truths are non-existent (there may be such truths or falsitudes), but they cannot

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be proved or disproved as such, given the relativist framework of one's investigation. All that cognitive relativism says is that truth is relative to one's investigative framework. Given this understanding of cognitive relativism, one can distinguish several types of cognitive relativism:

Aletheic Relativism: all truth is relative, relative to the individual, his or her purpose, or to the conceptual scheme within which the truth is asserted;

Epistemic Relativism: criteria for verifying truth are relative to the context or conceptual framework in which truth is investigated;

Subjective Relativism: any truth should be assessed in relation to the beliefs and attitudes of the investigator system;

Objective Relativism: ceteris paribus, truth is invariant; that is, other things being equal, truth can be compared and assessed; when other things are not equal, then either the truth or its criteria are relative;

Conceptual Relativism: the conceptual framework of the investigator defines and determines the truth or the perception thereof; as stated, this is a subtype of epistemic relativism.

The first two versions are distinguished by Vallicella (1984), and the latter three come from Mandelbaum (1979). Often, relativism can be a combination of two or more types. Thus, Mandelbaum (1979: 403) claims that the most common basic common denominator of relativism is the contention that assertions cannot be judged true or false in themselves, but must be so judged with reference to one or more aspects of the total situation in which they have been made. Obviously, this version of relativism combines epistemic and subjective types of cognitive relativism.

Obviously, aletheic relativism is untenable; its assertion that "all truth is relative" must be itself relative, unless one makes one's own position an exception to this rule, which Mandelbaum (1962) calls the "self-excepting fallacy." Epistemic relativism or conceptual relativism are counterproductive - if all truth must be evaluated only within the conceptual framework it is developed in, then other critics cannot evaluate it, cannot appreciate it, nor use it, and epistemic-conceptual relativism degenerates to cognitive enclavism. If science cannot be shared or interacted against, then it ceases to be "knowledge" or the "received doctrine" on anything. Any theory is best evaluated against a framework different from the one in which it was developed.

Moral relativism is closely associated with value relativism and cultural relativism. Cultural anthropologists assert three propositions regarding cultural relativism (Krausz and Meiland 1982):

The imperatives or values in a given culture should only be evaluated relative to the norms of that culture.

There are no transcendental or culture neutral norms to evaluate different cultures or cultural elements within a culture.

Hence, culture comparisons are meaningless; there is no such thing as a better or the best culture.

Value relativism maintains that each set of values, including moral values, is as valid as each other set, and hence no society has a right to change the values of any other society (Krausz and Meiland 1982: 7).

Following cultural relativism, moral relativism holds two major tenets:

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Whether an action is right or wrong can only be evaluated relative to the moral code of the individual, society, group or culture where the action occurs.

There are no absolute, impartial, objective moral standards for evaluating (praising, condemning, or revising) decisions or actions across individuals, groups and cultures.

In general, cultural, moral and ethical relativism was motivated by an enlightened tolerance for nonwestern cultures, by a desire for philosophical and theological pluralism, and by one's rejection of ethnocentrism (a belief that one's culture is better than other cultures). While certain forms of value relativism are laudable, using moral relativism to sanction social evils such as slavery, genocide, racism, xenophobia, chauvinism, and anti-Semitism, far from indicating tolerance to other cultures, reveals deep-seated intolerance of the equality status of others.

From a philosophical viewpoint, any relativism is self-refuting, since the principles on which it is based (such as the principles stated above) are themselves relative and hence can be challenged. One could always assess other values, cultures and moral imperatives, as long as one does not assert that the criteria of assessment are "absolute" (Siegel 1987).

Following cognitive relativist and skepticist arguments, moral relativists have also denied the possibility of ethical theory on the grounds that there is no ethical knowledge (e.g., Baier 1985: 263; Williams 1985). This is typically a non-cognitivist normative theory stand. Arguments against cognitive skepticism are also valid in combating this position. However, there are others who, while admitting the possibility of ethical theory and knowledge, are against any sort of normative ethical theory that guides human behavior by systematizing and generalizing moral judgments. Three major arguments supporting this position are that normative theory is a) unnecessary, b) theoretically impossible, and c) undesirable. Clarke (1987), Rawls (1971: 48-50) and others have successfully argued against this rationalist position (which Clarke calls "anti-theory"). Rationalist normative theory requires moral principles that are definite in meaning so that moral judgments may be deduced from them. The norms of actual moral practices, however, are vague in order to permit context to play a role in determining their application. Most moral norms (e.g., thou shall not kill, not covet they neighbor's wife) bring with them a very rich "cultural baggage" (Baier 1985) if these norms are to have any moral content at all. These norms get determinate content only against the histories of their background institutions and the ways of life of people affiliated to these institutions. Moral rules or principles are too abstract to justify any definite conclusions without the interpretive background of cultural institutions and moral practices. Most moral principles are best interpreted and justified against social "conventions" that generated these rules or principles (Hamshire 1983: 163).

Table 7.3 summarizes the impact of cognitive and moral relativism, in some of their versions and subsets, on moral decisions and executive responsibilities. Thus, every type or version of moral relativism does not equally diminish executive responsibility. For instance, cognitive relativism with all its versions may affect one’s “intellectual development” but not necessarily one’s “volitional development” or “moral development.”

Applied to the executive’s moral development, the several versions of cognitive moral relativism could imply serious consequences. For instance, in Aletheic Relativism all truth and therefore, all value is relative, relative to the company or the executive, his or her objective, or to the business plan within which the truth or value is asserted. Hence, the truth of a company statement (e.g., in a balanced sheet, profit and loss statements or packaging labels) could be judged only within its conceptual framework, which hardly makes sense. Moreover, if this were true, truth or knowledge would be insulated and confined within the system in which it was generated, and could be hardly imported, used, and referred

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to outside that system.

Similarly, according to Epistemic Relativism, criteria for verifying truth or genuine stakeholder values are relative to the contextual or conceptual framework in which truth or value is investigated. This would destroy the project itself that tries to persuade and negotiate products, services, values and motivations across all its stakeholders, most of which are outside one’s contextual and conceptual framework. If all truth should be assessed only in relation to the beliefs and attitudes of the executive’s investigator system, then executives could not relate meaningfully to each other. If the conceptual framework of the executive and the company solely defined and determined the truth/value of all stakeholders, then this would lead to solipsism or business enclaves, both of which would defeat the purpose of business management as a discipline or practice.

None of the above five versions of cognitive moral relativism, either individually or collectively, can significantly and in the long run exonerate moral responsibility of the executive. Since, if all truth or value is relative, the statement asserting moral relativism itself must also be relative (Mandelbaum 1962). On the other hand, if the firm and the Corporate climate within it, are rampant with moral relativism either in terms of absolute moral values (value-relativism) or cultural mores (cultural relativism), and if the executives working within this firm and its climate are inextricably and inevitably constrained to decide and act within such moral relativist frames, then to that extent their responsibility may be diminished (Mascarenhas 1995; Mascarenhas 2008: 145-147). Nothing stops, however, a morally “conscientious objector” to quit the firm in search of more morally conducive organizational cultures and climates.

Moral Obligations in Business Practice

With the discussions on moral worth and moral obligation and their principles thus far, we should be able to apply them and put them to concrete business practice. Let us consider some practical cases. What rules of deontological, teleological and distributive justice or moral obligation do the following strategies uphold or violate, and why?

a) An aggressive marketing executive hires only at the entry level, and promotes employees from within. His reasons: 1) internal promotions enhance bonding and trusting relationships between the firm and its employees, 2) they encourage job-training and skills development; 3) they promote informal relationships that make formal hierarchy less important; 4) they provide a sense of justice and fairness (loyal employees will not be bypassed in favor of outside candidates), and 5) they offer better incentives for good performance (Pfeffer 1994).

b) A sales force manager will not contract out work formerly done by one's employees (Pfeffer 1994).

c) A purchasing manager prefers a small number of suppliers in order to 1) develop long term and mutually trusting relationships, 2) so that suppliers may achieve reasonable economies of scale in their operations, and 3) that they may timely invest in assets specific to the production of the purchasing firm's needs.

d) Japanese firms are reported to enter into long term "relational contracts" with their first-tier (important) suppliers by manufacturing less than 30 percent of their components in house, whereas Ford and GM manufacture 50 and 70 percent of their components in house, respectively (Aoki 1988).

e) Recognizing that pressure from mining, tourism, ... could undermine local culture, hunting, fishing, ... of the Inuit Eskimos in Alaska, the Alaska's Department of Natural Resources included the Eskimos in their planning process, thus minimizing such intrusions and by encouraging more benign tourist activities [Schwab, Jim (1990), "Paul Davidoff Award: Alaska's Northwest Area Plan," Planning, 56 (March), 11].

f) Hewlett Packard (HP) proposes to be an "intellectual asset to each nation and each community in which we operate. ... This means contributing talent, time, and financial support to worthwhile community projects.... As

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citizens of their community, there is much that HP can and should do to improve - either working as individuals or through such groups as churches, schools, civic or charitable organizations" [Hewlett Packard (1989), Corporate Objectives, Palo, Alto: CA, 15-16].

g) In view of the high cost of losing customers and high sensitivity of profits to the retention of customers (Reichheld and Sasser 1990), a store manager adopts product return, guarantee, and recall policies.

In general, all seven cases (a) to (g) uphold rights of one’s internal stakeholders (e.g., employees, customers, suppliers) and executive duties towards them. Overall, all seven cases advocate good policies as they will contain costs and augment benefits. Hence, seemingly, deontological and teleological moral obligations are satisfied. However, how do you verify about distributive justice-based moral obligations? For instance, will strategies (a) and (b) generate excessive internal breeding, and hence, often perpetuate mediocrity, without fresh and proven talent from the outside world? Bypassing better talent from outside in favor of internal lesser skills may hurt the company in the long run. Thus, under what conditions are the five reasons justifying internal promotions in case (a) and the three reasons rationalizing the small number of suppliers in case (c) valid, reliable and non-discriminatory? In this connection, case (d) is no different from case (c).

What do you think of the motivations underlying strategies under cases (d) to (g)? To what extent are they altruistic? Do they tend to use the publics they intend to serve and support more as means to Corporate ends rather than ends-in-themselves? Do these strategies evenly distribute rights and duties, costs and benefits involved across all concerned stakeholders, especially the external publics?

Moreover, all strategies (a) to (g) fulfill moral obligations, if ever, as “hypothetical imperatives” and “instrumental good.” How can you refine these strategies such they can approximate Kantian “categorical imperative” generating “intrinsic good” of the stakeholders concerned?

Next, analyze the following arguments from a distributive justice point of view.

1. A firm has a social obligation to maximize profits. Firms buy the goods and services they need for production. What they buy they pay for. What they receive in payment for selling their goods and services, they receive because the buyers consider them worthwhile. This is a world of voluntary contracts; nobody has to sell or buy. If they choose to sell or buy, they must be deriving benefits from the transactions measured by the price paid or received. Hence, profits really represent the net contributions that the firm makes toward the social good, and the profits should therefore be made as large as possible - this regardless of the unequal distribution of income that results from unrestrained profit maximization.

2. When firms compete with each other in buying or selling, they may have to raise or lower prices in order to get more of the market to themselves. In either case, benefits accrue both to the firms, the suppliers and the customers, and hence society gains from competition.

3. The primary benefit of coordinating marketing plans and activities of diverse marketing agents is to increase macro efficiency through region wide resource optimization, rather than individual marketing efforts that sub-optimize resource uses (Samli 1992). For instance, multiple marketing agents (e.g., the mayor's office, the chamber of commerce, a regional economic development association, a utility company,) may purchase advertising for a region in consultation with one another, or coordinate marketing efforts as advertising for new businesses (Vann and Kumku 1995). Such "pluralistic coalitions" bring about both macro efficiency and distributive justice in resource allocation (Vann and Kumku 1995).

4. Adam Smith in his Wealth of Nations (1776) wrote more than two centuries ago, "To widen the market and to limit competition is always the interest of the dealers. To widen the market may frequently be agreeable enough to the

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interest of the public; but to narrow competition must always be against it, and can serve only to enable the dealers, by raising their profits above what they naturally might be, to levy for their own benefit an absurd tax upon the rest of their fellow citizens," (p. 211).

5. A producer of luxury suitcases uses behavioral inputs (e.g., management, marketing, labor and craftsmanship) and physical inputs (e.g., machines, plastics, leathers, and brass) at a cost of $200. The customer is willing to pay $400 for it, and so it is priced at $400. The surplus $200 generated in the process may be primarily attributable to the value added by the behavioral assets, and can be consumed or transformed into either value paper (e.g. bank deposit, commercial paper, ...) or into a physical asset (e.g., building a new plant), thus adding to the wealth of the firm. By continuously creating new value for the customers, the firm also creates value for its owners - it increases the wealth of the owners (Falkenberg 1996: 6).

6. If defect-free used cars of a certain vintage are worth $5,000 (Class 1) and similar cars with an average number of defects are worth $3,000 (Class 2), and if prospective buyers of such cars cannot tell which cars belong to which Class, two behaviors will result. Owners of Class 1 cars will not bring them to the market for fear of receiving Class 2 price. Secondly, if Class 1 cars are not available in the market, and only Class 2 cars are offered for sale, then prospective buyers will come to know that, and their refusal to buy them will force Class 2 prices down, even eliminating Class 2 cars from the market. Soon only worst cars (lemons) will be offered for sale. If the cost of car repair exceeds $3,000 to $5,000, the used car market will collapse entirely. Hence, the absence of reliable information about individual used cars can result in substantial market inefficiencies (Noreen 1988).

For a good distributive justice analysis of arguments (1) and (2), see Nobel Prize economist Kenneth J. Arrow (1993). Argument (6) is similar to the “lemon problem” first stated and discussed by another Noble Prize winner Akerlof (1970). All six arguments uphold competitive rights and free enterprise markets, thus promoting market justice.

Arguments (1) and (2) reaffirm the “invisible hand” doctrine of Adam Smith (1776), (see argument (4)), which still needs to be proven. Argument (3) favors "pluralistic coalitions" as they bring about both macro efficiency and distributive justice in resource allocation (Vann and Kumku 1995).Pluralistic allocations may spell macro-efficiency, but they do not automatically guarantee distributive justice. Our modern healthcare in the U.S. is based on pluralistic coalitions of doctors, hospitals, pharmaceuticals and insurance agencies – but this coalition has hardly generated an evenly distributed healthcare system. Currently in the U. S., over 40 million people are uninsured and over 60 million are underinsured in critical healthcare. Argument (5) assumes that by continuously creating new value for the customers, the firm also creates value for its owners. Is the reverse true or often assumed true? Argument (6) tells us that serious information asymmetry in the car industry can destroy markets because of either adverse selection or the buyer’s curse (see Mascarenhas, Kesavan and Bernacchi 2008).

Distributive justice rules imply equity-based moral obligations to shareholders and to larger groups of stakeholders such as competition, communities, community nonprofit institutions, and public facilities (e.g., universities, libraries, parks, museums). Corporations have a moral obligation to put back into the community what they got from the community they operate in (Goodpaster1991). Moral obligations are not only toward just good deeds that an executive may or may not do. Long-term loyalty relationships with consumers are generated more by observing equality than equity rules.

The Problem of Necessary Evil or Inevitable Harm

Thousands of American youth were agonizing over the Vietnam War during the 1970s. All college youth were drafted to the war by lottery and had to enlist for war duty if called. For most of these young men and women these were the most significant moral decisions of their lives. They were strongly

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pulled in two directions: the obligation to serve their country – the call of patriotism, and their conscience that lead them to believe that the USA government had a made a grave moral mistake in Vietnam – the call of moral conscience. Despite their upbringing, moral and philosophical training, personal history and life experiences, culturally inherited values, institutions and practices, most youth struggled with this moral dilemma and did not know what to do. They had all the information they could want, some marshaled all the arguments, pro and con, about Vietnam, and they had all the moral education they could handle, and yet could not easily cope with the demand of duty and the demand of one’s conscience. Some had many ideals, goals, commitments, laws, arguments, and motivations, and some of them were quite incompatible with each other. Some options were good and presented themselves as strong legal and moral obligations, and at the same time some options were evil and presented themselves as strong illegal and immoral decisions, choices and strategies.

We continue to face similar situations from time to time when dealing with other contemporary political situations such as terrorism, preventive wars, religious bigotry, ethnic cleansing and genocide, abortions and infanticide, civil wars and civil disobedience, patriotic duty and moral conscientious objections. We run into situations where we are confronted with conflicting goals and values, disparate commitments, ambiguous moral laws, and irreconcilable motivations. Under each dilemma we confront a diversity of goods, and we have no ultimate overriding principle for rank ordering them. Short of deceiving ourselves, there is no such thing as “right” or “wrong” answer, and there is no simple method for deciding how to act (Johnson 1993: 186-187). In any case, what is my duty to do good and duty to avoid harm? While accepting praise for doing good, should I be held guilty for doing harm that I did not intend? How should I take responsibility for the harm that I could not avoid?

One of the principle functions of normative ethics is the guidance of human choice and activity. Ethics not only deals with protecting values and meeting human needs; it also attempts to provide us with guidance about how we should act, what we should do and what we should not do if these values and needs are to be fulfilled (Rehrauver 1996: 232). Both the Maker and the Citizen Metaphors and paradigms of human action (see Chapter 02) provide us with norms and principles useful for the making of important moral decisions prior to acting. The Maker paradigm says “act so as to produce or realize the good,” while the Citizen paradigm will affirm “Act in a lawful and dutiful manner.” Obviously, both these injunctions are very inadequate in dealing with doing things that produce inevitable harm while also producing good. Both principles are very useful in evaluating actions after they have been performed, but they do not provide with a foolproof recipe for determining what is the right thing to do in case of moral dilemmas such as described above. Only the paradigm of the Responder could offer some relief and help in this situation.

The Ethical Theory of Non-Malfeasance

Often, some harmful effects are inevitable. A good action (e.g., surgery, business venture) may have both good effects (cure, profits) as well as bad side effects (risk of bleeding to death, risk of failure). Similarly, most actions of organizational downsizing (e.g., closing plants, offshore outsourcing, asset divestitures, retiring models or products) have both good effects and bad consequences.

The principle of non-malfeasance states that an act should do no harm to anyone at any cost and at any time. Non-malfeasance considers both the act itself as well as its consequences, judging whether the act itself or its consequences are per se harmful. The principle of non-malfeasance as applied to any executive act can imply four elements (Frankena 1973: 47):

1. The act should not inflict evil or harm (strict liability);

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2. It should prevent evil or harm (preventive justice); 3. It should remove evil or harm (protective justice), and 4. It should do or promote good (beneficent justice).

The fourth element may not amount to a moral obligation, and constitutes the principle of beneficence. The principle of non-malfeasance is primarily incorporated in the first element. The remaining three elements are more principles of beneficence than of non-malfeasance. Preventing harm and removing harm are alternate forms of promoting good (Frankena 1973). Procedural justice whereby one is obliged to establish just procedures to prevent harm (e.g., of convicting the innocent or wrongly releasing the guilty) is a subset of preventive justice.

According to Curd and May (1984), the following elements are essential to be ethically responsible for a violation of the duty of non-malfeasance: a) the institution must have a duty to the affected party; b) the institution must breach that duty; c) the affected party must experience a harm, and d) this harm must be caused by the breach of duty. Duty may relate to commission or omission of an act. Imputability accrues with breached duty, and accountability accrues with harm caused by breached duty. Duties of non-malfeasance include not only not inflicting actual harm, but also not imposing "risks of harm." By strict liability laws, it is not necessary to act maliciously or be even aware of or intending the harm or risk of harm. The harm can be legally "recovered" through the laws of “strict liability” when the duty of non-malfeasance is violated (Stern and Eovaldi 1984). Such violations may involve commission or omission. Negligence is a failure to guard against risks of harm to others (Prosser 1971); it fails below the "standards of due care" established by law and morality, or determined by the principle of protective justice (Jonsen 1977).

Hence, given the principle of non-malfeasance whereby not only all harm must be avoided and prevented, but also “risks of Harm” be minimized, when and how can we morally justify some inevitable harm that accompanies or follows certain executive actions? It is under such conditions that we invoke the principle of double effect.

The Principle of Double Effect

When executives are puzzled by the undesirable side effects of actions they feel morally obliged to execute, then they could have recourse to the principle of double effect. This doctrine is grounded on the principle of non-malfeasance, but differs from it. As discussed earlier, the principle of non-malfeasance states that an act should do no harm to anyone at any cost and at any time. This principle is incorporated in the Hippocratic Oath of doctors and physicians as a combined principle of non-malfeasance and beneficence: "I will use treatment to help the sick according to my ability and judgment, but I will never use it to injure or wrong them".

The correct understanding of the principle of double effect (PDE) has implications not only for the licit self-defense of an individual (the context in which it was first stated by Thomas Aquinas, see footnote below), but also for noncombatants in war, persons undergoing surgery who are significantly at the risk of death, terminally ill patients receiving morphine for palliative care, and other cases that present medical moral issues such as hysterectomy during pregnancy, ectopic pregnancy, and craniotomy. In each case, the unintended death, though a foreseeable consequence of self-defense or surgery or anesthesia, is a side effect of the directly intended aim of preserving life (Anscombe 1982). The PDE applies to a police officer who in defending himself kills the criminal aggressor, as long as the officer uses minimal force and does not kill because of his animosity against the attacker. Self-defense in such cases may not only be permissible, but also required, when not to defend one’s own life is to act with too

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little virtue of self-care (Keenan 2008). PDE rests on the ability to foresee harm without intending harm.

The principle of double effect states: when an action has a twofold effect, one good and another bad, the agent is morally permitted to act as long as the bad effect is not intended. Five conditions must verify in applying this principle (O’Donnell 1991: 30:

1. The action, in itself (independent of its consequences),must not be intrinsically wrong or evil; it must be morally good or at least morally neutral;

2. The agent must intend only the good effect and not the bad effect; the bad effect may be foreseen, tolerated or permitted, but not intended; the bad effect is allowed, but not sought; otherwise, the evil effect becomes a direct voluntary effect;

3. The bad effect must not be a means to the end for bringing about the good effect; that is, the good effect must be achieved directly by the action and not by way of the bad effect; otherwise, the evil effect, like any other means, would be necessarily directly willed;

4. The good result must outweigh the evil permitted; there must be a favorable balance or due proportion between the good that is intended and the bad effect that is permitted;

5. The good effect cannot be obtained in some equally expeditious and effective way without the concomitant evil.

The agent must verify all five conditions simultaneously, with no priority or bias for any one against the other. Overemphasizing the second condition would reduce the principle of double effect to deontologism. Insisting only on the fourth condition would reduce this principle to utilitarianism. When the executive fulfills all five conditions, the principle of double effect kicks in to safeguard the principles of strict liability, protective justice, pre-emptive justice, and the principle of beneficence.

How to apply these five conditions, however, to concrete cases is a matter of some debate. The moral language of “defense,” “self-defense,” and “unjust aggressor” does not adequately resolve the enigma of whether it is morally licit to act under certain circumstances.6

Hence, to make the principle of double effect even more rigorous one adds the fifth condition: that the action undertaken be seriously necessary, that is, it is the last and only feasible alternative or resort, given the then level and availability of technology. With this condition, an executive may not want to do what he intends to do; that is, he reluctantly does something (e.g., plant closings, outsourcing) that he cannot morally avoid under the circumstances, even though it causes a bad effect (e.g., massive labor layoffs, impoverishing worker families).The executive wills and decides plant closing directly as something inevitable (condition 5), but does not intend the bad effect that accompanies it (e.g., massive layoffs). The latter is circumstantial necessity. The effect (massive layoffs) that the executive clearly sees will happen or that is very likely to occur is not intended. Some ground for this fifth condition may be found in Faden and Beauchamp (1986, chapter 7) and Beauchamp and Childers (1989: 131-34).

However, it is not true that just because someone does not want a particular effect of a voluntary action, that the person is relieved of all moral responsibility for causing the effect. The theory of double effect is "not an attempt to absolve persons of responsibility for what they bring about but only to determine what it is permissible to bring about" (Beauchamp and Childers 1989: 132). In other words,

6 A classical clinical case when applying the PDE is hysterectomy when the woman is pregnant and her womb is malignant (carcinoma of the cervix). If the physician takes no action, the cancer will likely metastasize throughout the woman’s body, resulting in her death; chemotherapy or radiation therapy might cause malformation of the fetus, and eventual death. Assuming, therefore, that surgery (hysterectomy) is the only and necessary treatment, PDE applies. But the fetus is not an “unjust aggressor” in this case. Perhaps, the doctor would have performed hysterectomy even if the woman was not pregnant.

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the PDE speaks of moral permissibility of the action and not its strict liability. Moreover, in judging responsibility the underlying intentions, motivations and character of the agent should be the most important factors to consider (Hauerwas 1981).

Schematically, the principle of double effect may be characterized as in Figure 7.2. There may a situation that is unique to the agent of the action, to the act itself, to the good effect that follows and is intended, and to the inevitable evil effect that follows and is just tolerated. Figure 7.2 incorporates the fifth condition. The major problem in applying the principle of double effect is in determining the difference between what is intended and what is unintended, what an intentional action is, and what an un-intentional action is. The evil effect that is foreseen, even though not explicitly "sought," is indirectly intended. Undesirable effects or risks of harm that attend particular procedures almost always fall into this category.

Choices are actuations of the will, guided by moral norms, by which we determine ourselves with respect to human goods (Grisez 1970). That is, a choice is a determination of the will following upon deliberation among competing alternatives. Thus, not every form of voluntariness involves choice (e.g., spontaneous willing that responds to an attainable good without considering alternative courses of action). In choice or choosing, one adopts a proposal to act in a certain way. This proposal includes both the good at which the agent aims, and anything that one chooses to do as a means to an end. On the other hand, the side effects of the agent’s action are not included in the proposal that one adopts. The side effects are not chosen, and they do not determine the stance of the will involved in a choice. One may accept the bad side effects of one’s act but not cause them. One does not intend the bad side effects, even though they one may accept them voluntarily or involuntarily. Such bad side effects are considered “indirect” effects. The agent’s intention is the sole morally determinative factor. Thus, an act may be morally justified, if the agent’s intention is morally good, and the bad effect is not necessarily included in the attainment of the intended good. The causal relation between the good and the bad effect is not a criterion for moral evaluation.

For example, a woman who shoots her would-be-rapist in self-defense does not intend his death; she intends to stop his attack, and only accepts his death as a side effect. Note that she could have stopped the attack by seriously injuring or maiming him, but not killing him. An action with both good and bad effects is not defined by the bad effect unless the bad effect is necessarily included in the agent’s intention. The woman’s action is focused on the good effect (e.g., self-defense) and not on the bad effect (e.g., killing). The action of self-defense may result in many other actions other than killing, as long as it stops the attack. The more she considers other alternatives to stop the rapist (e.g., persuasion, pleading, screaming, running away from the scene, diverting his attention, injuring the rapist that does not kill him) the more morally defensible is her action of self-defense.7

Certain goods are basic and intrinsic (e.g., life, knowledge, friendship) in the sense that they are desirable as ends-in-themselves, while other goods are non-basic and extrinsic (e.g., wealth, physical fitness, health) that are sought for the sake of attaining the basic goods. Each intrinsic good is intrinsic to the human person and participates in the dignity of the person, a dignity that is beyond any price, a dignity that is inalienable (Porter 1996: 615). The basic goods enable us to achieve integral human

7 Distinguish this case from euthanasia. A doctor, who kills her patient to relieve her from intractable suffering, directly kills the patient, even

though she may not will it. The death of the patient and the act of euthanasia are one and the same act. Whereas, in the case of the woman killing her assailant in an act of self-defense, the death of the assailant is not necessarily connected to her act of self-defense, as she could use other alternatives to overpower or dissuade him. Distinguish also the case where someone chooses to kill one person to save the life of another – there is intentional killing and intentional saving of life involved here (Porter 1996: 622-24).

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fulfillment. We direct most of our actions to some basic good or other, though not every action aims at attaining or safeguarding a basic good. Admittedly, we cannot aim at all the basic goods all the time, but we can always act in such a way as to remain open to those basic goods that we do not actively pursue. Only in this way will our actions be reasonable, that is, morally good.

Summary and Concluding Remarks

Not all moral rules bind equally, nor do they define the same degree of ethicality or morality. These rules could be hierarchically arranged in relation to the degree of internal commitment they demand of the executives, and in terms of their universal binding power. Deontology is a duty ethic based on norms and commandments, while teleology is means-end ethics based on consequences of the act. For most practical applications one would need a combination of both ethical theories. People cannot claim complete control of their lives (as means-ends ethics seems to assume), nor can they reduce their responsibilities to obedience to general norms (as duty ethics assumes). Rather, they have to respond to persons and events that confront them in real life in ways that maximize human values. Morality then becomes a prudential ethic.

Morality is not always a matter of obedience to the will of God (this is theonomous ethic of the Judeo-Christian tradition) or of a lawmaker (heteronomous ethic), or even obedience to one's own conscience (autonomous ethic). Often morality is the process of intelligently seeking socially appropriate, positive (net benefits) human behavior that supports personal and communal goals. Laws and duties are necessary, but what makes laws and duties righteous or obligatory is "their helpfulness in guiding prudential decisions to successful goal achievement" (Ashley and O'Rourke 1989: 161).

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Figure 7.1: The Process of Justifying Corporate Executive

Moral Judgments and Decisions

Set A:Normative Ethical Theories

Set B:Moral Principles

Set C: Moral Standards

Set D:Moral Rules

Act Application ofEthical Theories

Corporate De-cisions and Strategies Rule Application of

Ethical Theories

Act DeontologicalAssessment

Rule DeontologicalAssessment

What rights/duties and norms/ principles does the corporate action uphold?

Act Teleological Assessment

What are the social consequences of this corporate decision and action?

Rule Teleological Assessment

Act Distributive Justice Assessment

Does this action evenly distribute costs/benefits and rights/duties across all stakeholders?

Rule Distributive Justice Assessment

Does this action promote the physical, functional and moral well-being of all stakeholders?

Act Virtue Ethics Assessment

Rule Virtue Ethics Assessment

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Figure 7.2: The Dynamic Structure of the Principle of Double Effect

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Situation Unique to the Agent/Act Situation Unique to the Good EffectSituation Unique to the Bad Effect

Condition 1: The act must be morally good or at least morally neutral.Condition 2a: The agent must intend the good effect.Condition 2b: The agent must only tolerate the evil effect.

Condition 3a: The evil effect must not be a means to bring about the good effect. That is, the evil effect must follow or stem from the good effect.Condition 3b: if the evil effect directly follows from the act, it must occur simultaneously with the good effect but not before.

Condition 5: The action must be the last resort or the best alternative. Condition 4: The good effect must outweigh the evil effect.

Table 7.1: Some Practical Distributive Justice Principles

Distributive Justice Theory

Distributive Justice Principle Critical Comment

Egalitarianism Equal access to the goods of life that every rational person desires based on need and equality.

What needs: real, felt or created? What equality: human, economic, social, racial?

Libertarianism Equal access to social and economic liberty to all.

Advocates fair procedures and systems rather than substantive outcomes.

Utilitarianism Equal access to the goods of life such that public utility is maximized.

The free and equal access could be abused, thus reducing public

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utility.Fair Opportunism (Rawls 1971)

No person should be granted social benefits based on undeserved advantage (e.g., royalty, inheritance, status) or disadvantage (e.g., gender, age, race, color, disability, religion, and nationality).

This is a universalizable and reversible principle (by Kantian criteria) and very appropriate in a situation.

Non-malfeasanceFrankena (1973)

1. Above all, do not harm.2. Protect or remove people from harm.3. Prevent people from harm.4. Set up procedures that minimize harm.5. Do good whenever possible.

Morality and goodness of the executive act increases from the first to the fifth principle.

Well-being by Due Care (Jonsen 1977)

The act should serve the well-being of all stakeholders by carefully employing standards of due care and assessing risk-benefits and detriment-benefits of the act.

This can be a good and practical management principle that seeks welfare of all affected stakeholders.

Libertarian theory of justice, Nozick (1974)

There is no pattern of just distribution other than that of the unpatterned free-market system based on three principles: acquisition, transfer, and rectification:

a) The principle of justice in acquisitions: it is the principle and process whereby originally "unheld things" began to be appropriated in the first place.

b) The principle of justice in transfers: it is the principle and process whereby people acquire and transfer holdings from one to another.

c) The principle of rectification in acquisitions: it relates to rectification of acquisitions and transfers if the original principles and processes of acquisitions and transfers were unjust.

Distributive justice should have two components: from each and to each, and the two component principles are related. What society chooses to do for one may be a function of what one chooses to do for society.

A person who acquires a holding in accordance with any of these three principles is entitled to that holding. If principles (a) and (b) are just, then we have a just distribution of holdings; given (a) and (b), the complete principle of distributive justice states that a distribution is just if all are entitled to the holdings they possess under a given distribution.

Table 7.2: A Hierarchical Process of Ethical-Moral Reasoning forCorporate Executives

Rea-soningStep

Rea-soningProcess

Moral Justification

based on:

A Typical Example of Moral Judgments orEthical-Moral Reasoning in

Corporate Situations“Round-Trip Sales” to boost profits in a

failing business is wrong because:

One Deductive Ethical Theory of:DeontologyTeleologyDistributive JusticeCorrective JusticeVirtue Ethics

Round trip sales cannot be justified deontologically.Round trip sales cannot be justified teleologically.One cannot justify round trip sales based on distributive and corrective justice ethics.Round trip sales cannot be justified from a virtue-ethics theory.

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Two Deductive/Inductive

Ethical-moral Principles:DeontologyTeleologyDistributive JusticeCorrective JusticeVirtue Ethics

It violates my duty towards those affected by it.It harms the persons the corporation is dealing with.It does injustice to the entire business and economy.It needs to be rectified immediatelyIt is outright dishonest, deception and trickery.

Three Deductive/Inductive

Ethical-moral Standards:DeontologyTeleologyDistributive JusticeCorrective JusticeVirtue Ethics

It violates the moral standard (MS) of integrity towards those affected by it.It violates the MS of transparency towards all affected by it.It violates the MS of entitlement towards all affected by it.It violates the MS of fair procedures towards all affected by it.It violates the MS of honesty towards all affected by it.

Four Inductive Moral Rules:DeontologyTeleologyDistributive JusticeCorrective JusticeVirtue Ethics

The affected stakeholders have the right to know the truth.Every stakeholder must benefit from this action.This action must treat every stakeholder with fairness and equity.The system that allows round-trip sales needs to be corrected.The action is against the Corporate virtue of executive integrity.

Five SituationalAssessment

Moral Judgments:DeontologyTeleologyDistributive JusticeCorrective JusticeVirtue Ethics

It violates my own duty to do the right thing.I will eventually be unhappy about this strategy.It will bring harm to numerous stakeholders down the line.It will rationalize and justify incorrect procedures.It is eventually self-deception and violates self-esteem.

Six Ethical-moralAssessment

Moral Justification:DeontologyTeleologyDistributive JusticeCorrective JusticeVirtue Ethics

It violates my duties towards all stakeholders.Net benefits to most stakeholders are decidedly negative.Uneven distribution of costs/benefits, rights/duties of this action.Round trip sales uncorrected will deceive and cheat the public.This action violates almost every executive virtue that must promote the physical, functional and moral well-being of my stakeholders.

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Table 7.3: Corporate Responsibilities as a Function of Cognitive and Moral Relativism[See also, Mascarenhas 2008: 150]

RelativismType

Subsets ofRelativism

Definitions andAssumptions

Moral Implications Corporate ExecutiveResponsibilities

Objective Relativism

Ontological orAbsoluteRelativism, orSkepticism

Man is the measure of all things. There is no objective truth.

Hence, the truth of corporate assertions or the morality of corporate actions can never be verified or falsified.

Nor can absolute relativism as a position be verified; hence, it is untenable for executives.

CategoricalRelativism

There is no categorical truth; i.e., a statement can be partially true or false.

Hence, the truth of corporate assertions or the morality of corporate actions can only be partially verified or falsified.

Even if true, the corporate executive must take responsibility for at least the partial falsehood.

DogmaticRelativism

Even revealed truth is relative to the context and culture in which it was revealed.

Hence, the truth of corporate assertions or the morality of corporate actions can only be partially judged relative to a dogmatic (religious) value system.

Regardless of one’s religion, one is legally or morally accountable for one’s actions.

CognitiveRelativism

PhilosophicalRelativism

A statement is true only within one’s philosophical system, and not outside it.

Hence, the truth of a given corporate statement or assertion can be judged only within one’s philosophical system.

This insulates truth and knowledge and thus, makes them falsely immune from criticism outside the philosophical system.

Contextual orAletheicRelativism

Truth is relative to and bound by its own conceptual schema or investigative framework.

Hence, the truth of a given corporate statement or assertion can be judged only within its conceptual framework.

This also insulates truth and knowledge and thus, falsely immunizes it from criticism outside its conceptual framework.

CulturalRelativism

Truth is relative to the culture within which it is born, nurtured or investigated.

Hence, the truth of a given corporate statement or assertion can be judged only within its cultural framework.

This also insulates truth and knowledge, and thus falsely immunizes it from criticism outside its cultural system.

Epistemic Relativism

Criteria for verifying truth are valid and relative to its epistemological schema or investigative framework.

Criteria for verifying the truth of corporate statements or assertions are valid only within its epistemological framework they apply.

This position creates knowledge or culture enclaves. Universal truths are universally verifiable, and executives should explore and endorse them.

Moral Relativism

PhilosophicalRelativism

A moral norm or value is true only within a given philosophical system, and not outside it. There are no transcendental moral values or norms.

Hence, the morality of a given corporate decision or action can be judged only within its philosophical system or framework.

This position insulates morality and thus, falsely makes it immune from criticism outside the philosophical system.

Contextual orAletheicRelativism

A moral norm or value isrelative to and bound by its own conceptual schema or investigative framework.

Hence, the morality of a given corporate decision or action can be judged only within its conceptual framework.

This position also insulates morality and thus, falsely immunizes executives from criticism outside its conceptual framework.

CulturalRelativism

A moral norm or value is relative to the culture within which it is born, nurtured or investigated.

Hence, the morality of a corporate decision or action can be judged only within the culture it is made.

This position also insulates morality, and thus, falsely immunizes it from criticism outside its cultural system.

EpistemicRelativism

Criteria for verifying a moral norm or value are valid and relative to its own epistemological schema or investigative framework.

Criteria for verifying the truth of corporate statements or for judging morality of corporate actions are valid only within the epistemological framework they apply.

This position also creates morality enclaves, and corporate executives should explore their harmful consequences.


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