Values, Ethics and Business Decisions

From Ethics to Ethical Rationality

Marc Le Menestrel

What does it mean to be ethical?

Are you an ethical person?

Do you work for an ethical company?

Is business ethical?

You feel good, full of

energy

You may not be very credible

And you may be blind to

risks

You are honest

It feels bad

But you are more aware

and anticipate

Looking at the good side

Looking at the bad side

Thinking Ethics as a Grey Zone

Your ethical judgments are bounded and biased by your emotions, your

interest, your mental habits and self-image, your cultural context and work

environment, etc.

This psychological phenomenon is not necessarily intentional, but it can have

significant consequences. It can be used by others to influence or even control

you.

With training and effort, you can develop, refine and structure your ethical

consciousness. It requires to open your mind and be able to think beyond the

justification of your ethical opinion.

Purely

ethicalYou

are

here!

Purely

unethical

Enlighten your Ethical Blindspot

Which stakeholders can be harmed? How much? When?

Can this be wrong? According to law? To some ethical principle? If everyone

does the same? All the time?

Am I having bad feelings? A sense of discomfort? An early warning signal

inside?

Would this be better kept secret? Is this taboo? Could it be publicly known?

Which stakeholders can benefit? How much? When?

Is this right? Is this legal? Is this respecting ethical principles, code of values? Can this be universalized?

What good feelings do I have? What virtue do I incarnate? Why is this respecting

my personal integrity?

What would I like to be known? To be transparent? is transparent?

To which extent is this unethical? To which extent is this ethical?

Some Ethical Questions

Are you an ethical manager? Do you work for an ethical company? Is it ethical to close a profitable plant? Is it ethical to influence a government? Is it ethical to compromise on the safety of a

product? Is it ethical to shape customers desires? Is economic progress ethical? Is it ethical to work as hard as possible?

What Should you do?

Less ethical More Ethical

Bet

ter

Wor

se

Ethical Values

Bus

ines

s-In

tere

st

There is no point of talking about ethics in business if we don’t talk about how much it costs

Ethics vs. Business Interest

First Discourse: Economic Rationality

Less ethical More Ethical

Bet

ter

Wor

se

Ethical Values

Rational

Business interest should be the sole and unique criterion of rational choice

IrrationalBus

ines

s-In

tere

st

Second Discourse: Idealism

Less ethical More Ethical

Bet

ter

Wor

se

Ethical Values

Rational

Ethical values should be the sole and unique criterion of choice

Irrational

Bus

ines

s-In

tere

st

Third Discourse: Corporate Social Responsibility

Less ethical More Ethical

Bet

ter

Wor

se

Ethical Values

Rational

Business interest and ethics should always combine

IrrationalBus

ines

s-In

tere

st

Ethical Rationality

Less ethical More Ethical

Bet

ter

Wor

se

Ethical Values

Inte

rest

Ideal

Irrational

Priority

to

interest

Priority

to

ethics

Marc Le Menestrel, UPF & INSEAD, for

Rational choices between interest and ethics are often kept hidden, but they are the most difficult:We can rationally give priority to interest, and sacrifice ethicsWe can rationally give priority to ethics, and sacrifice interest

A Framework of Ethical Rationality

1. Economic Analysis

2. Ethical Analysis

3. Ethical Dilemma

4. Dynamic Analysis

1. Economic Analysis

The rational actor (you, the team, the firm)1. Anticipates the consequences of the available actions2. Evaluates these consequences according to their interest for

the actor3. Identify the action that leads to the best consequence

Interest of the consequence

?

Step 1: What is the action that leads to the best consequence for you?

2. Ethical Analysis

To which extent is it ethical?

Emotions/Virtue:Do I feel good?Is this a natural way to act?

Deontology/Idealism:What sort of principle, rule or norm do I

respect?What happens if everybody does the same?What happens if I always act like this?

Utilitarianism/Consequentialism:What are the good consequences for others?Would I like these consequences for myself?What are the good consequences for the

environment?Would the children of my children like these

consequences?

To which extent is it unethical?

Emotions/Virtue:Do I feel bad?Is this an unnatural way to act?

Deontology/Idealism:What sort of principle, rule or norm do I violate?What happens if everybody does the same?What happens if I always act like this?

Utilitarianism/Consequentialism:What are the bad consequences for others?Would I suffer these consequences for myself?What are the bad consequences for the

environment?Would the children of my children dislike these

consequences?

Step 2: What is the ethics of the action that leads to the best consequence for you?

?

Here you raise an ethical dilemma!

Here you justify your interest!

3. Ethical DilemmaStep 3: Facing the extent to which there is a dilemma

Prudence: Could the unethical aspects lead to unexpected negative consequences?

?

Unethical aspects of behavior

More ethical alternative

Vision: Can you find a more ethical alternative?

Imagination: If the consequences of the alternative affect your interest, cannot they be improved?

?

?

4. Dynamics Analysis

Ideal

If you are in the ideal position, you may not be lucky for very long

Irrational

Prioritytointerest

Prioritytoethics

Lack of transparencyLegal pressureLiabilitiesBad ReputationPR costsNegative motivationManagerial inertia

TransparencySocial involvement & supportNew scope of activitiesNew business processesLong term thinkingStrategic investmentPositive motivationLearning process

Increasing demands (legal, social)Credibility ambiguous Contentment, lack of vigilanceUnawareness, rationalization

If you give priority to interest, you will need reactive strategies to survive

If you give priority to ethics, you may find help for your proactive strategies

A Difficult Strategy…

Few ones are going to believe it, Outside or inside the company…

Ideal

Irrational

Prioritytointerest

Prioritytoethics

A Reactive Strategy…

We wait for change to become necessary

But it can be very dangerous…

Ideal

Irrational

Prioritytointerest

Prioritytoethics

A Proactive Strategy…

We are likely to be more credible,And more motivated for change…Visionary Leaders Welcome!

Ideal

Irrational

Prioritytointerest

Prioritytoethics

Conclusions

It is easy not to see ethical dilemmas: you just have to

find a good justification for the action leading to the best

consequence!

It is not easy to see ethical dilemmas: it questions

ourselves and it does not look fun…

It can be rational to be ethical sacrificing your interest, or

to sacrifice ethics for your interest: the choice remains

yours

It is difficult, but helpful, to search for ethical dilemmas

beforehand if you want to have a chance not to be

trapped by them and anticipate their dynamics

Joan Miro, 1968