Week 1 – Ethical decision-making

Some housekeeping matters◦ Class allocations◦ 3 hour structure◦ Textbook – 5th edition◦ Unit Outline and Week 1 Doc◦ Blackboard site

Attend classes regularly Come PREPARED. The lectorial has ‘tutorial’

aspects, so you need to prepare for them, otherwise you are just wasting your time.

Be willing to do work and participate in class – part of the lectorial involves students working on problems. Students should also ask questions and discuss issues.

Attempt all questions done in class, especially in the second half of the unit when we do ‘hypothetical’ style problems.

What affects a business’ decisions? Obviously profit, but do we have a truly

‘free market’ to conduct our business in? Should we? Why/Why not?

In BSB111 we look at the legal system and specific laws that are important to business (such as contract law, consumer protection law). But we also examine regulation and ethics as other factors which would play a part in business decision-making.

BUSINESS DECISIONS

Internal ForcesType of Business Structure

EthicsCSR

Corporate Governance

External (Legal) ForcesContract Law

AgencyTort Law

Consumer Law

External (Structural) ForcesLegal System

Dispute ResolutionRegulation

What is ethics? ◦ Why study ethics?◦ Evolution of ethics◦ Business ethics? ◦ Law and ethics◦ The role of conscience

Kohlberg’s theory of moral development Approaches to ethical theory

◦ Outcome-based◦ Code-based◦ Character-based

You should read the textbook (readings 1, 2 and 3) to gain a fuller understanding of the theories discussed in these slides.

It is important that you understand them because they are relevant to your assignment task – ethics case study.

Read the WorldCom excerpt (on BB) and consider Cynthia Cooper’s dilemma.

Do you think something like that could happen to you in the future? Or do you think you will never experience ethical dilemmas in your life?

What other examples of ethical dilemmas can you think of?

Ethics is primarily concerned with how we should behave. It involves theories that describe the ‘right’ way to make a decision.

Morality is concerned with social practices defining right or wrong. Ethical theory point to reflection on the nature and justification of right actions.

Morality, we might say, consists of what persons ought to do to conform to society’s norms of behaviour, whereas ethical theory concerns the philosophical reasons for and against aspects of social morality.

For example, morally, society says that stealing is wrong. Ethical theory examines and explains why.

Ethics has its origins in the writings of ancient philosophers such as Socrates, Aristotle, and Confucius.

In a business sense, ethics has become far more prominent since the 1980’s, when the ‘greed is good’ position started to result in scandalous corporate collapses.

WorldCom is one example of a corporate collapse that occurred in the US. Enron is another. We will look at these two cases and Australian examples in week 2.

Is ethics relevant to business? Some might argue that the concept of ‘business ethics’ is incompatible with a business’ goal of making a profit.

Others argue that businesses should be ethical because being ethical is good for the bottom line (Harrison, p3), whilst others say that business should be ethical because being ethical is the right thing to do (Harrison, p3).

The aim of teaching ethics in this unit is to stimulate and provoke thought, rather than to advocate a particular method or ethical position. The process is more important than the answer. There is NOT necessarily a right answer!!!

Is mere compliance with the law enough? Arguably not – society expects more.

Why? Law can be limited because:◦ it is simply not possible to predict and therefore

outlaw all situations that give rise to bad conduct.

◦ law usually lags behind social trends because the law-making process is slow and reactive.

◦ the law itself is sometimes viewed as deficient and for this reason should not be treated or seen as some sort of ethical or moral high ground (‘bad’ law).

Some people say that ‘let your conscience be your guide’ is what morality is all about.

But philosophers say that just relying on conscience is not sufficient for ethical judgment.

Everyone’s conscience is different, and is formed by life circumstances, religious belief, childhood, training etc.

So it isn’t sufficient to rely just on conscience, moral justification must be based on a source external to individual conscience.

What can influence a person’s answer to ethical dilemmas? Personal moral development is one factor.

Lawrence Kohlberg is famous for his theory of “cognitive moral reasoning and development” in which he mapped out various stages in which individuals pass through on their way to moral maturity.

Essentially three levels of development, of which each level can be broken down into 2 stages (giving a total of 6 stages).

LEVEL ONE: PRE-CONVENTIONAL

Summary note: an individuals’ focus at this level is exclusively self-centred such that ethical decisions will only be made if they bring about a benefit.

1. Individuals at this primary stage of maturity in ethical decisions will conduct themselves in an ethical manner in order to avoid punishment. It follows that if the perceived risk of detection is low and/or the punishment is low, then individuals will take a course of action that minimises personal harm and maximises personal gain – irrespective of whether such action is ethical or not; or if it has an adverse impact on others.

2. At this stage, individuals will only conduct themselves in an ethical manner if in doing so brings about a benefit; and will only consider the interests of others if there is a mutual benefit.

People at this level, and certainly all young children, have no innate sense of morality but they have learned that certain actions bring praise while others bring punishment.

In the stage 1 of level 1, they react to punishment. For eg, toddlers don’t have any sense of moral right and wrong, but they soon learn that if they write on the living room wall with a crayon they will get scolded or otherwise punished. What keeps them from writing on the wall is their desire to avoid punishment.

So this stage involves unwitting compliance to avoid punishment.

Personal gain and the wish not to miss out on good things characterises moral thinking at the stage 2 of level 1.

People evaluate options according to the benefits they might gain and reflects their desire to receive a reward.

All of us to some extent react to pleasure and pain and reward and punishment. So all of us sometimes act on the preconventional level.

LEVEL TWO: CONVENTIONAL

Summary note: individuals at this secondary stage are increasingly concerned with conforming and maintaining relationships within a community

3. At this stage of maturity, individuals conduct themselves in an ethical manner to please or avoid being frowned upon by the immediate group of people around them such as family and friends.

4. The actions of individuals at this stage are motivated to conform to the norms and rules of the greater community in order to preserve and respect social harmony. In business, these individuals will be guided by company policies, codes of conduct, and the law.

In stage 3 of Level 2, a person responds to their social role by thinking about morality in terms of being a ‘Nice boy/Good girl’.

At this stage people accept as legitimate the social norms and expectations of the groups they belong to. For example, they conform to the norms learned at home, in school.

This stage does not involve ethical thought about the issues. People abide by the social norms not because they have analysed them and concluded they are correct but because they wish to be socially accepted.

In stage four of level 2, conformity is with the laws of one’s society.

The individual understands what a good citizen is supposed to be and do and lives in accordance with the conventional rules that govern the society.

Most adults live at the level of conformity morality. Some may not go beyond this level.

LEVEL THREE: POST-CONVENTIONAL

Summary note: individuals at this stage go beyond the mere compliance to the law and are motivated by moral/ethical principles

5. Whilst individuals at this stage of maturity respect and follow laws, they will evaluate and question the appropriateness of the laws and seek change where they are inconsistent with ethical principles.

6. At this large stage of maturity, individuals make decisions based entirely on ethical principles.

In Stage 5 people are capable of questioning and reflecting upon the systems and principles or morality that they follow. For example, ◦ ‘Is what my society holds to be right really right?’ ◦ ‘Why should I accept what my parents told me is right or

wrong?’ ◦ ‘Why should I accept what the laws say is right and wrong’?

People challenge the prevailing morality and may seek to change it in accordance with their own reflections.

They might for example campaign to change the law on cigarette advertising because they think it would advance social justice to do so.

In Stage 6, we are able to give a rational defence of the moral principles that guide our actions.

It is at the third level that ethical theory operates.

Although most people move up through the stages of moral development as they get older, it is possible for some people to remain stuck at one of the earlier stages of moral development.

Kids will generally hover around stages 1 and 2, reaching stage 3 by mid teens and then developing further from the ages 16 – 24. An individual’s strength of character and respective life experiences will determine the rate at which she or he will mature.

Kohlberg believes that reaching stages 5 and 6 (post-conventional) of moral reasoning takes a high degree of maturation which, if at all, is attained by people in their late 20s and beyond. Only a few people reach states 5 and 6 (post-conventional), most people do not develop beyond stages 3 and 4 (conventional) moral decision making.

Not everyone will advance to the third level; and no one operates only on the third level.

Most people operates sometimes on one level and sometimes on another.

Your textbook reading 1 has two additional stages – zero and seven. For BSB111, please disregard these stages.

Do question 1 on your week 1 activity sheet

Terms to describe different focuses of study:◦ Descriptive (Scientific) approach: scholars

examine the actual moral practices of a society (eg anthropologists, sociologists).

◦ Conceptual approach: analysis of the meaning of key terms (concepts), eg: right, obligation, justice, good etc.

◦ Prescriptive (Normative) approach: aims to determine what ought to be done, rather than what is done.

◦ We’re studying this approach in BSB111.

Ethical theories attempt to systematize ordinary moral judgments, and to establish and defend basic moral principles (De George, p49).

Ethical theory explains why actions are right or wrong by providing a decision making procedure for resolving difficult cases (De George, p49).

Ethical theory also makes it possible for an individual to explain and justify his/her decision to others (De George, p49).

There is no one ethical theory that all people or philosophers agree. In BSB111, we study three different approaches.

Teleogical(Outcome-

based)Focus is on the consequences (outcome) of a decision. The ends can justify the means

Deontological

(Duty-based)

Focus is on the process used, e.g. doing social duty, follow principles etc

Virtue Ethics

(Character-based)

Focus is on whether a ‘good’ person, i.e. good virtues, would do the act

Egoism

Utilitarianism

Kantian ethics Virtue ethics

Do Question 2 in your week 1 activity sheet

Ethical egoism is a theory stating that the supreme principle of conduct is to promote one’s well being - everyone ought to act on the basis of self interest.

Supporters of ethical egoism argue that acting against one’s interest is contrary to reason. It is not their view that one should always ignore the interests of others, but that one should take account of and act on the interests of others only if it suits one’s own interests to do so.

This does not mean that the egoist will always be greedy or selfish, but that the motivation for acting will be to gain benefit themselves:◦ may be by undergoing a short-term sacrifice or

pain, or by doing something that benefits another in the hope of reciprocation or gaining some intangible benefit like satisfaction, praise or fame – or to avoid the detriment of punishment (eg by following laws and rules).

Would egoism cause anarchy and chaos? Some philosophers say ‘yes’.

Imagine a world with limited resources, where persons are approximately equal in their ability to harm one another and where everyone acts exclusively in his or her interest. Hobbes argued that in such a world everyone would be at everyone else’s throat, and society would be plagued by anxiety, violence, and constant danger…life would be “solitary, poor, nasty, brutish and short”. Hobbes argued for a strong government to stop this from happening (textbook reading 2 p24).

Other proponents of ethical egoism argue that human beings are rational enough to avoid war of all against all, and so we voluntarily assume moral obligations to others because it is in our own best interests.

Egoists also argue that only an unduly narrow conception of self interest would lead to the argument that an egoist will not be willing to observe conventional rules (textbook reading 2 p24).

Utilitarian theory hold that the moral worth of actions is determined by their consequences. An action is right if it leads to the best possible balance of good consequences over bad consequences for all the parties affected.

Influential figures include Jeremy Bentham (1748-1832) and John Stuart Mill (1806-1873).

‘Good’ refers to happiness or pleasure according to hedonists Bentham and Mill. Later utilitarians argued that other concepts such as friendship, knowledge, courage etc are also valuable.

Good is measured in total – an act causing a large unhappiness to one person can be outweighed by a small increase in happiness to lots of people (and vice-versa).

Difficulties with utilitarianism come with measurement. Bentham and Mill both had theories on how to measure pleasure, with limited practical value. For example, Bentham identified the following features of happiness:◦ Intensity: the strength of happiness◦ Duration: the length of time happiness lasts◦ Certainty: the probability of happiness resulting◦ Extent: the number of people effected◦ Closeness: is the pleasure now or later in time?◦ Richness: will the act lead to further pleasure?◦ Purity: is it all pleasure, or mixed with some pain?

Another difficulty is all types of ‘good’ may not be equally valuable to all people (eg the saying that ‘money can’t buy love’ would not be followed by everyone).

Another example, in deciding whether to open a pristine Alaskan wildlife preserve to oil exploration and drilling, how does one compare the combined value of an increased in the oil supply, jobs and consumer purchasing power with the value of wildlife preservation and environmental protection?

A further criticism is that it ignores important moral factors such as justice.Example (units of happiness):

Option 1 Option 2 Option 3Anne 2 9 9Ben 2 1 5Chris 2 1 2Dan 2 0 -2Ellie 2 0 -2TOTAL 10 11 12

Utilitarianism demands option 3, but is it the most just?

You can see from the previous slide that Utility is measured as a whole – it advocates choosing the option that gives the greatest good.

Even though Option 1 created good for the greatest number of people, Option 3 creates the greatest good. If there were 2 options that were equal, then go with what benefits the greatest number.

Another example, suppose insurance companies are allowed to weed out those covered because they have some characteristics that are statistically associated with an enhanced risk of injury or disease (such as genetic disorders). Suppose such policies would on balance serve the public’s interest by lowering insurance costs. Utilitarianism would justify the action of insurance companies denying insurance coverage to these persons but would this denial be unjust?

Do question 3 on your week 1 activity sheet

Deontological approach to ethics is that actions are morally right or wrong independent of their consequences. Moral rightness does not depend on how much good is produced. So this approach is very different to utilitarianism and egoism.

It focuses on one’s duty to do what is morally right and to avoid what is morally wrong, regardless of the consequences.

The major ethical theorist of deontology is Immanuel Kant.

The essence of this approach is that these duties guide our behaviour.

And it is the process of making the decision (i.e. following the duties) that is the important factor, not the outcome of the decision.

Doing the right thing for the wrong reasons cheapens the result. Actions must come from a sense of duty.

Kant wrote of the ‘Categorical Imperative’. The Categorical Imperative states the form

moral actions have and provides the criteria against which we can test whether an action is moral (De George, p82).

Kant gave three formulations of the Categorical Imperative. These state the three formal conditions that an action must have if it is to be a moral action (De George, p82).

For an action to be a moral action:1. It must be amenable to being made

consistently universal - Universal acceptability – can the act be a rule performed by everyone without contradiction?

2. It must respect rational beings as ends in themselves - Respect for persons – treating a person exclusively as a means to some end fails to give them respect.

3. Reversibility – would you like to be on the receiving end of such action?

For universal acceptability – it is an inquiry as to whether the rule or the maxim of an action can be internally consistent when made universal (De George, p83). Examples:

1) Consider the action of killing, in anger, another human being. Stated as a rule, it would read: “Kill others whenever you are angry at them”. Can this rule be made consistently universal? Because it is likely that everyone gets angry at someone at some time, and because it is likely that everyone has had someone angry at him at some time, if everyone followed this rule we would kill each other off. If we all followed this rule, none of us would be alive to continue following it. The rule therefore when made universal leads to its own demise so that lies the inconsistency (De George p83).

2) Suppose a person considers breaking a promise to a co-worker that would be inconvenient to keep. First formulate his/her reason as a universal rule. The rule would say “Everyone should break their promises whenever keeping it is inconvenient”. Such a rule is contradictory because it would mean that the practice of making promises would be senseless (reading 2, p33).

A rule that allows cheating on an exam negates the purpose of testing.

Do Question 4 of your week 1 activity sheet

The theories of utilitarianism and Kantian ethics are more legalistic in their approach, focusing more on obligations and rights.

These theories don’t look at the person performing the action. So in recent years some philosophers have argued for a virtue based moral theory (De George, p106).

Virtue ethics comes from philosophers such as Plato and Aristotle in which the cultivation of a virtuous character is seen as morality’s primary function.

Virtue ethics is not a system of rules, but a set of personal characteristics that, if practised, will ensure that the individual is likely to make the ‘right’ choice in any ethical dilemma they are faced with.

So a person faced with an ethical dilemma using virtue ethics as a guide will ask the question ‘what would a virtuous person do in this situation’?

What are virtues? Virtues are not ‘ends’, they are ‘means’. They are personal qualities that provide the basis for the individual to lead a good, noble, or ‘happy’ life.

Plato identified four virtues : wisdom, courage, self-control, and justice.

Aristotle then expanded upon the number of personal qualities that could be regarded as virtues.

From Aristotle came qualities such as:◦ Liberality (the virtuous attitude towards money)◦ Patience (the virtuous response to minor

provocation)◦ Amiability (the virtue of personal persona)◦ Truthfulness ◦ Indifference (in relation to the seeking of public

recognition of achievement) See next slide for the complete table. This is

taken from your textbook.

For Aristotle, those personal qualities that were regarded as virtues were reflected in behaviours that represented a balance, or mean, in terms of the particular personal quality being considered.

So if the response of an individual to the threat of a ‘danger or significant personal challenge’ was being considered, the personal qualities of cowardice and recklessness would lead to detrimental outcomes. So a virtuous person would have to overcome his fears but avoid acts of rashness. This intermediate mean or disposition is called ‘courage’.

The virtues of Aristotle can be said to be virtues from a masculine perspective (women didn’t feature prominently in those days).

Carol Gilligan, a former student of Kohlberg took issue with the use of justice as the pre-eminent determinant of moral reasoning.

Within Kohlberg’s studies fewer females than males displayed the form of moral reasoning that can be classified as reasoning at the highest levels of Kohlberg’s hierarchy.

Gilligan argued that this is because the form of reasoning displayed by women is different to that held by men, and not because women used a lower form of reasoning.

She argued that women’s early socialisation processes (particularly observing their mothers) encourage them to seek out compromises, not to allocate blame exclusively to one side or the other nor to give praise exclusively to one member of a group. Rather the resolution of arguments is achieved with a sense of ‘everyone gets something’.

Gilligan argued that women had a longer-term viewpoint, that is if a family unit was to function effectively, there must be give and take from both sides.

The wisdom used in reasoning this way Gilligan referred to as ‘care’.

To add Gilligan’s ethics of care into Aristotle’s framework:◦ Vice of deficiency: Inflexible rule following◦ Virtue: Care/wisdom◦ Vice of excess: Appeasement

Answer Question 5 in your week 1 activity sheet

Many people prefer to avoid the problem rather than confront and acknowledge an ethical dilemma. Such techniques include (Jennings, pp45-47):◦ Calling it by a different name (eg copyright infringement

termed ‘peer-to-peer file sharing’)◦ “Everybody else does it”◦ “If we don’t do it, someone else will”◦ “That’s the way it’s always been done”◦ “We wait until the lawyers tell us it’s wrong”◦ “It doesn’t really hurt anyone”◦ “The system is unfair”◦ “I was just following orders”

Ultimately, a person’s decision will depend on their moral development and which ethical theory they find more appropriate.

Answer question 6 on your week 1 activity sheet

1. Read Readings 1, 2 and 3 in your textbook. It will help with understanding the ethical theories discussed in this lecture and this will be useful when you do your ethics case study.

2. Read the document ‘Ethics Case Study Topic and Instruction. This is the first piece of assessment for BSB111.

3. It is also ESSENTIAL that you do next week’s reading before class. This is “Reading 4” in the textbook, 2 articles on Corporate Social Responsibility, which we be analysing in class.