BusinessEthics OP
BusinessEthics OP
BusinessEthics OP
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TABLE OF CONTENTS
Preface 1
1
Why Ethics Matter 7
2
Ethics from Antiquity to the Present 27
4
Three Special Stakeholders: Society, the Environment, and
93
Government
5
The Impact of Culture and Time on Business Ethics 131
6
What Employers Owe Employees 159
7
What Employees Owe Employers 195
8
Recognizing and Respecting the Rights of All 231
10
Changing Work Environments and Future Trends 295
11
Epilogue: Why Ethics Still Matter 325
A
The Lives of Ethical Philosophers 341
Index 365
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Preface 1 Preface
Welcome to Business Ethics, an OpenStax resource. This textbook was written to increase student access
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About OpenStax
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Errata
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2 Preface
Format
You can access this textbook for free in web view or PDF through OpenStax.org, and for a low cost in
Business Ethics is designed to meet the scope and sequence requirements of the single-semester
standardized business ethics course across all majors. This title includes innovative features designed to
enhance student learning, including case studies, application scenarios, and links to video interviews with
executives, all of which help instill in students a sense of ethical awareness and responsibility. The book
provides an important opportunity for students to learn the core concepts of business ethics and understand
how to apply those concepts to their professional lives.
Coverage and scope
Our Business Ethics textbook adheres to the scope and sequence requirements of introductory business ethics
courses nationwide. We have endeavored to make the core theories and practical concepts of business ethics
engaging, relevant, and accessible to students. The guiding themes of the textbook are to promote high
ethical standards and to assist the integration of ethical thinking across the business school curriculum, with
an end result of encouraging even greater ethical consciousness on the part of business practitioners beyond
their graduation. We particularly emphasize the reality of today’s global business community and observe that
geography, culture, and time contribute to ethical concepts and constructs. With awareness of these issues in
mind, the content of this textbook has been developed and arranged to emphasize the necessity—and
difficulty—of ethical decision-making. The authors seek to help students recognize legal and moral issues,
reason through the consequences of different courses of action, and promote social responsibility. The text
emphasizes connections between topics such as ethical theories, legal responsibilities, the prioritization of
stakeholders, and corporate social responsibility. The organization and pedagogical features were developed
and vetted with feedback from business ethics instructors dedicated to the project.
• Cases from the Real World. This feature presents brief examples of real companies making ethical
decisions in the midst of hectic competition. Each example includes follow-up critical thinking
questions that encourage reflection on the case and how it relates to chapter concepts and themes.
• What Would You Do? This feature presents brief, fact-based scenarios in which students are challenged
to put themselves into the shoes of ranking executives and balance a host of interests—some
conflicting—as they make decisions for their businesses. Students provide an answer to a practical
problem or ethical issue, as well as their reasoning.
• Ethics across Time and Cultures. This feature considers how geography, culture, and time influence the
ethical values we have. Follow-up critical thinking questions allow for broader reflection on the chapter
topics and encourage deeper integration of the chapter content.
• Link to Learning. This feature provides a very brief introduction to online resources and videos that are
pertinent to students’ exploration of the topic at hand. Link to Learning boxes allow students to connect
easily to some of the most important thought leaders and concepts in the field of business ethics. The
Additional resources
Student and instructor resources
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Stephen Byars received his BA from Claremont McKenna College, his MA from the University of San Diego,
and his PhD from the University of Southern California. He teaches business ethics and oral and written
communication at the Marshall School of Business at USC to both graduate and undergraduate business
majors. He has served as associate director of the USC Writing Program, temporary director of the Writing
4 Preface
Center within the Writing Program, and as director of the USC Marshall Consulting Program. His scholarly
interests include business and professional ethics, the constructive mediation of disputes in the workplace,
and those best practices that permit leaders to direct business in ways that engender community, social,
and corporate good.
Kurt Stanberry is a professor of legal studies in the College of Business at the University of Houston
Downtown and has held the PLM Endowed Professorship since 2011. He is also a licensed attorney. He
received his BA from Yale University, an MBA from the Graduate School of Business at Temple University, and
a JD from the University of Houston College of Law.
Kurt teaches courses at the undergraduate and graduate level in business law, contracts, employment law,
negotiations, ethics, and other related topics. He also conducts continuing education seminars in topics such
as negotiations, leadership, diversity, and ethics for CPAs, CFPs, attorneys, and business executives, through
organizations such as the AICPA, FEI, and TSCPA at the state and national levels. He has published numerous
articles in scholarly journals, two textbooks, various practice manuals, and cases. Prior to joining the faculty
at UHD, Kurt was a professor in the California State University System and was also a visiting professor in
international programs in London, Bonn, Tokyo, and Seoul. He has been teaching and practicing law for over
30 years.
Contributing authors
Barbara Boerner, Brevard College
Reviewers
Justin Bateh, Florida State College at Jacksonville
1
Why Ethics Matter
Figure 1.1 Each of us makes innumerable decisions every day. In a business context, these choices have
consequences for ourselves and others whom we must take into account in our decision-making
process. (credit: modification of “business paper office laptop” by “rawpixel”/Pixabay, CC0)
Chapter Outline
1.1 Being a Professional of Integrity
1.2 Ethics and Profitability
1.3 Multiple versus Single Ethical Standards
Introduction
Ethics consists of the standards of behavior to which we hold ourselves in our personal and professional
lives. It establishes the levels of honesty, empathy, and trustworthiness and other virtues by which we hope
to identify our personal behavior and our public reputation. In our personal lives, our ethics sets norms for
the ways in which we interact with family and friends. In our professional lives, ethics guides our interactions
with customers, clients, colleagues, employees, and shareholders affected by our business practices (Figure
1.1).
Should we care about ethics in our lives? In our practices in business and the professions? That is the central
question we will examine in this chapter and throughout the book. Our goal is to understand why the
answer is yes.
Whatever hopes you have for your future, you almost certainly want to be successful in whatever career you
choose. But what does success mean to you, and how will you know you have achieved it? Will you measure it
in terms of wealth, status, power, or recognition? Before blindly embarking on a quest to achieve these goals,
which society considers important, stop and think about what a successful career means to you personally.
Does it include a blameless reputation, colleagues whose good opinion you value, and the ability to think well
of yourself? How might ethics guide your decision-making and contribute to your achievement of these goals?
8 Chapter 1 Why Ethics Matter
Whenever you think about the behavior you expect of yourself in your personal life and as a professional,
you are engaging in a philosophical dialogue with yourself to establish the standards of behavior you choose
to uphold, that is, your ethics. You may decide you should always tell the truth to family, friends, customers,
clients, and shareholders, and if that is not possible, you should have very good reasons why you cannot. You
may also choose never to defraud or mislead your business partners. You may decide, as well, that while you
are pursuing profit in your business, you will not require that all the money on the table come your way.
Instead, there might be some to go around to those who are important because they are affected one way or
another by your business. These are your stakeholders.
Figure 1.2 Stakeholders are the individuals and entities affected by a business’s decisions, including clients,
customers, suppliers, investors, retailers, employees, the media, the government, members of the
surrounding community, the environment, and even competitors. (attribution: Copyright Rice University,
OpenStax, under CC BY 4.0 license)
Being successful at work may therefore consist of much more than simply earning money and promotions.
It may also mean treating our employees, customers, and clients with honesty and respect. It may come
from the sense of pride we feel about engaging in honest transactions, not just because the law demands it
but because we demand it of ourselves. It may lie in knowing the profit we make does not come from
shortchanging others. Thus, business ethics guides the conduct by which companies and their agents abide
by the law and respect the rights of their stakeholders, particularly their customers, clients, employees, and
the surrounding community and environment. Ethical business conduct permits us to sleep well at night.
LINK TO LEARNING
Are business ethics an oxymoron? Read “Why Ethics Matter” to understand (https://openstax.org/l/
53oxymoron) just a few of the reasons to have values-driven management.
Nearly all systems of religious belief stress the building blocks of engaging others with respect, empathy,
and honesty. These foundational beliefs, in turn, prepare us for the codes of ethical behavior that serve as
ideal guides for business and the professions. Still, we need not subscribe to any religious faith to hold that
ethical behavior in business is still necessary. Just by virtue of being human, we all share obligations to one
another, and principal among these is the requirement that we treat others with fairness and dignity,
including in our commercial transactions.
10 Chapter 1 Why Ethics Matter
For this reason, we use the words ethics and morals interchangeably in this book, though some philosophers
distinguish between them. We hold that “an ethical person” conveys the same sense as “a moral person,” and
we do not regard religious belief as a requirement for acting ethically in business and the professions.
Because we are all humans and in the same world, we should extend the same behavior to all. It is the right
way to behave, but it also burnishes our own professional reputation as business leaders of integrity.
Integrity—that is, unity between what we say and what we do—is a highly valued trait. But it is more than just
consistency of character. Acting with integrity means we adhere strongly to a code of ethics, so it implies
trustworthiness and incorruptibility. Being a professional of integrity means consistently striving to be the
best person you can be in all your interactions with others. It means you practice what you preach, walk the
talk, and do what you believe is right based upon reason. Integrity in business brings many advantages, not
the least of which is that it is a critical factor in allowing business and society to function properly.
Successful corporate leaders and the companies they represent will take pride in their enterprise if they
engage in business with honesty and fair play. To treat customers, clients, employees, and all those affected
by a firm with dignity and respect is ethical. In addition, laudable business practices serve the long-term
interests of corporations. Why? Because customers, clients, employees, and society at large will much more
willingly patronize a business and work hard on its behalf if that business is perceived as caring about the
community it serves. And what type of firm has long-term customers and employees? One whose track record
gives evidence of honest business practice.
LINK TO LEARNING
In this interview, Mark Faris, a white-collar criminal convicted of fraud, claims that greed, arrogance,
and ambition were motivating factors (https://openstax.org/l/53MarkFaris) in his actions. He also
discusses the human ability to rationalize our behavior to justify it to ourselves. Note his proposed
solutions: practicing ethical leadership and developing awareness at an individual level via corporate
training.
Many people confuse legal and ethical compliance. They are, however, totally different and call for different
standards of behavior. The concepts are not interchangeable in any sense of the word. The law is needed to
establish and maintain a functioning society. Without it, our society would be in chaos. Compliance with
these legal standards is strictly mandatory: If we violate these standards, we are subject to punishment as
established by the law. Therefore, compliance in terms of business ethics generally refers to the extent to
which a company conducts its business operations in accordance with applicable regulations, statutes, and
laws. Yet this represents only a baseline minimum. Ethical observance builds on this baseline and reveals the
principles of an individual business leader or a specific organization. Ethical acts are generally considered
voluntary and personal—often based on our perception of or stand on right and wrong.
Some professions, such as medicine and the law, have traditional codes of ethics. The Hippocratic Oath, for
example, is embraced by most professionals in health care today as an appropriate standard always owed to
patients by physicians, nurses, and others in the field. This obligation traces its lineage to ancient Greece
and the physician Hippocrates. Business is different in not having a mutually shared standard of ethics. This
is changing, however, as evidenced by the array of codes of conduct and mission statements many
companies have adopted over the past century. These have many points in common, and their shared
content may eventually produce a code universally claimed by business practitioners. What central point
might constitute
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Chapter 1 Why Ethics Matter 11
such a code? Essentially, a commitment to treat with honesty and integrity customers, clients, employees,
and others affiliated with a business.
The law is typically indebted to tradition and precedence, and compelling reasons are needed to support any
change. Ethical reasoning often is more topical and reflects the changes in consciousness that individuals
and society undergo. Often, ethical thought precedes and sets the stage for changes in the law.
Behaving ethically requires that we meet the mandatory standards of the law, but that is not enough.
For example, an action may be legal that we personally consider unacceptable. Companies today need to
be focused not only on complying with the letter of the law but also on going above and beyond that
basic mandatory requirement to consider their stakeholders and do what is right.
LINK TO LEARNING
Forbes provides an annual list of companies recently deemed the most ethical (https://openstax.org/l/
53EthicalBus) according to their standards and research.
The first normative approach is to examine the ends, or consequences, a decision produces in order to
evaluate whether those ends are ethical. Variations on this approach include utilitarianism, teleology, and
consequentialism. For example, utilitarianism suggests that an ethical action is one whose consequence
achieves the greatest good for the greatest number of people. So if we want to make an ethical decision, we
should ask ourselves who is helped and who is harmed by it. Focusing on consequences in this way generally
does not require us to take into account the means of achieving that particular end, however. That fact leads
us to the second normative theory about what constitutes ethical conduct.
The second approach does examine the means, or actions, we use to carry out a business decision. An
example of this approach is deontology, which essentially suggests that it is the means that lend nobility to
the ends. Deontology contends that each of us owes certain duties to others (deon is a Greek word for duty or
obligation) and that certain universal rules apply to every situation and bind us to these duties. In this view,
whether our actions are ethical depends only on whether we adhere to these rules. Thus, the means we use is
the primary determinant of ethical conduct. The thinker most closely associated with deontology is the
eighteenth-century German philosopher Immanuel Kant (Figure 1.3).
12 Chapter 1 Why Ethics Matter
Figure 1.3 Immanuel Kant was an eighteenth-century philosopher, now associated with deontology, who
spent nearly all his professional life teaching at the university in Königsberg (which today is Kaliningrad, the
westernmost point in Russia). (credit right: modification of “Kant foto” by “Becker”/Wikimedia Commons,
Public Domain)
The third normative approach, typically called virtue theory, focuses on the character of the decision maker
—a character that reflects the training we receive growing up. In this view, our ethical analysis of a decision is
intimately connected with the person we choose to be. It is through the development of habits, the routine
actions in which we choose to engage, that we are able to create a character of integrity and make ethical
decisions. Put differently, if a two-year-old is taught to take care of and return borrowed toys even though
this runs contrary to every instinct they have, they may continue to perfect their ethical behavior so that at
age forty, they can be counted on to safeguard the tens of millions of dollars investors have entrusted to
their care in brokerages.
Virtue theory has its roots in the Greek philosophical tradition, whose followers sought to learn how to live a
flourishing life through study, teaching, and practice. The cardinal virtues to be practiced were courage, self
control, justice, and wisdom. Socrates was often cited as a sage and a role model, whose conduct in life was
held in high regard.
E T H I C S A C R O S S T I M E A N D C U LT U R E S
The concept of practical wisdom dates back to Aristotle, who considered phronesis, which can also
be defined as prudence, to be a key intellectual virtue. Phronesis enables people to make ethically
sound judgments. According to the authors, phronetic leaders:
• practice moral discernment in every situation, making judgments for the common good that are
guided by their individual values and ethics;
• quickly assess situations and envision the consequences of possible actions or responses; •
create a shared sense of purpose among executives and employees and inspire people to work
together in pursuit of a common goal;
• engage as many people as possible in conversation and communicate using metaphors, stories, and
other figurative language in a way that everyone can understand; and
• encourage practical wisdom in others and support the training of employees at all levels in its use.
In essence, the first question any company should ask itself is: “Do we have a moral purpose?” Having a
moral purpose requires focusing on the common good, which precedes the accumulation of profit and
results in economic and social benefits. If companies seek the common good, profits generally will
follow.
Critical Thinking
In the article cited, the authors stress the importance of being well versed in the liberal arts, such
as philosophy, history, literature, and in the fine arts to cultivate judgment. How do you think a
strong background in the liberal arts would impart practical wisdom or help you make ethical
decisions?
Few directives in business can override the core mission of maximizing shareholder wealth, and today that
particularly means increasing quarterly profits. Such an intense focus on one variable over a short time (i.e.,
a short-term perspective) leads to a short-sighted view of what constitutes business success.
Measuring true profitability, however, requires taking a long-term perspective. We cannot accurately
measure success within a quarter of a year; a longer time is often required for a product or service to find its
market and gain traction against competitors, or for the effects of a new business policy to be felt. Satisfying
consumers’ demands, going green, being socially responsible, and acting above and beyond the basic
requirements all take time and money. However, the extra cost and effort will result in profits in the long run.
If we measure success from this longer perspective, we are more likely to understand the positive effect
ethical behavior has on all who are associated with a business.
14 Chapter 1 Why Ethics Matter
Profitability and Success: Thinking Long Term
Decades ago, some management theorists argued that a conscientious manager in a for-profit setting acts ethically by emphasizing
solely the maximization of earnings. Today, most commentators contend that ethical business leadership is grounded in doing right by
all stakeholders directly affected by a firm’s operations, including, but not limited to, stockholders, or those who own shares of the
company’s stock. That is, business leaders do right when they give thought to what is best for all who have a stake in their companies.
Not only that, firms actually reap greater material success when they take such an approach, especially over the long run.
Nobel Prize–winning economist Milton Friedman stated in a now-famous New York Times Magazine article in 1970 that the only “social
2
responsibility of a business is to increase its profits.” This concept took hold in business and even in business school education.
However, although it is certainly permissible and even desirable for a company to pursue profitability as a goal, managers must also
have an understanding of the context within which their business operates and of how the wealth they create can add positive value to
the world. The context within which they act is society, which permits and facilitates a firm’s existence.
Thus, a company enters a social contract with society as whole, an implicit agreement among all members to cooperate for social
benefits. Even as a company pursues the maximizing of stockholder profit, it must also acknowledge that all of society will be affected
to some extent by its operations. In return for society’s permission to incorporate and engage in business, a company owes a
reciprocal obligation to do what is best for as many of society’s members as possible, regardless of whether they are stockholders.
Therefore, when applied specifically to a business, the social contract implies that a company gives back to the society that permits it to
exist, benefiting the community at the same time it enriches itself.
LINK TO LEARNING
What happens when a bank decides to break the social contract? This press conference held by the National Whistleblowers Center
(https://openstax.org/l/53Birken) describes the events surrounding the $104 million whistleblower reward given to former UBS
employee Bradley Birkenfeld by the U.S. Internal Revenue Service. While employed at UBS, Switzerland’s largest bank, Birkenfeld
assisted in the company’s illegal offshore tax business, and he later served forty months in prison for conspiracy. But he was also the
original source of incriminating information that led to a Federal Bureau of Investigation examination of the bank and to the U.S.
government’s decision to impose a $780 million fine on UBS in 2009. In addition, Birkenfeld turned over to investigators the account
3
information of more than 4,500 U.S. private clients of UBS.
In addition to taking this more nuanced view of profits, managers must also use a different time frame for obtaining them. Wall
Street’s focus on periodic (i.e., quarterly and annual) earnings has led many managers to adopt a short-term perspective, which fails to
take into account effects that require a longer time to develop. For example, charitable donations in the form of corporate assets or
employees’ volunteered time may not show a return on investment until a sustained effort has been maintained for years. A long-term
perspective is a more balanced view of profit maximization that recognizes that the impacts of a business decision may not manifest
for a longer time.
As an example, consider the business practices of Toyota when it first introduced its vehicles for sale in the This OpenStax book is available for
free at http://cnx.org/content/col25722/1.3
United States in 1957. For many years, Toyota was content to sell its cars at a slight loss because it was
accomplishing two business purposes: It was establishing a long-term relationship of trust with those who
eventually would become its loyal U.S. customers, and it was attempting to disabuse U.S. consumers of their
belief that items made in Japan were cheap and unreliable. The company accomplished both goals by
patiently playing its long game, a key aspect of its operational philosophy, “The Toyota Way,” which includes a
4
specific emphasis on long-term business goals, even at the expense of short-term profit.
What contributes to a corporation’s positive image over the long term? Many factors contribute, including a
reputation for treating customers and employees fairly and for engaging in business honestly. Companies
that act in this way may emerge from any industry or country. Examples include Fluor, the large U.S.
engineering and design firm; illycaffè, the Italian food and beverage purveyor; Marriott, the giant U.S. hotelier;
and Nokia, the Finnish telecommunications retailer. The upshot is that when consumers are looking for an
industry leader to patronize and would-be employees are seeking a firm to join, companies committed to
ethical business practices are often the first to come to mind.
Why should stakeholders care about a company acting above and beyond the ethical and legal standards
set by society? Simply put, being ethical is simply good business. A business is profitable for many reasons,
including expert management teams, focused and happy employees, and worthwhile products and services
that meet consumer demand. One more and very important reason is that they maintain a company
philosophy and mission to do good for others.
Year after year, the nation’s most admired companies are also among those that had the highest profit
margins. Going green, funding charities, and taking a personal interest in employee happiness levels adds
to the bottom line! Consumers want to use companies that care for others and our environment. During the
years 2008 and 2009, many unethical companies went bankrupt. However, those companies that avoided
the “quick buck,” risky and unethical investments, and other unethical business practices often flourished. If
nothing else, consumer feedback on social media sites such as Yelp and Facebook can damage an unethical
company’s prospects.
Warren Buffet (Figure 1.4), whom many consider the most successful investor of all time, is an exemplar
of business excellence as well as a good potential role model for professionals of integrity and the art
of thinking long term. He had the following to say: “Ultimately, there’s one investment that supersedes
all
others: Invest in yourself. Nobody can take away what you’ve got in yourself, and everybody has
potential they haven’t used yet. . . . You’ll have a much more rewarding life not only in terms of how
much money you make, but how much fun you have out of life; you’ll make more friends the more
5
interesting person you are, so go to it, invest in yourself.”
16 Chapter 1 Why Ethics Matter
Figure 1.4 Warren Buffett, shown here with President Barack Obama in June 2010, is an investor and
philanthropist who was born in 1930 in Omaha, Nebraska. Through his leadership of Berkshire
Hathaway, he has become one of the most successful investors in the world and one of the wealthiest
people in the United States, with an estimated total net worth of almost $80 billion. (credit: “President
Barack Obama and Warren Buffett in the Oval Office” by Pete Souza/Wikimedia Commons, Public
Domain)
The primary principle under which Buffett instructs managers to operate is: “Do nothing you would not
6
be happy to have an unfriendly but intelligent reporter write about on the front page of a newspaper.”
This is a very simple and practical guide to encouraging ethical business behavior on a personal level.
Buffett offers another, equally wise, principle: “Lose money for the firm, even a lot of money, and I will be
7
understanding; lose reputation for the firm, even a shred of reputation, and I will be ruthless.” As we
saw in the example of Toyota, the importance of establishing and maintaining trust in the long term
cannot be underestimated.
LINK TO LEARNING
For more on Warren Buffett’s thoughts about being both an economic and ethical leader, watch
this interview (https://openstax.org/l/53Buffet) that appeared on the PBS NewsHour on June 6,
2017.
Managers do sometimes focus predominantly on stockholders, especially those holding the largest number
of shares, because these powerful individuals and groups can influence whether managers keep their jobs or
are dismissed (e.g., when they are held accountable for the company’s missing projected profit goals). And
many believe the sole purpose of a business is, in fact, to maximize stockholders’ short-term profits. However,
considering only stockholders and short-term impacts on them is one of the most common errors business
managers make. It is often in the long-term interests of a business not to accommodate stockowners alone
but rather to take into account a broad array of stakeholders and the long-term and short-term consequences
for a course of action.
Here is a simple strategy for considering all your stakeholders in practice. Divide your screen or page into
three columns; in the first column, list all stakeholders in order of perceived priority (Figure 1.5). Some
individuals and groups play more than one role. For instance, some employees may be stockholders, some
members of the community may be suppliers, and the government may be a customer of the firm. In the
second column, list what you think each stakeholder group’s interests and goals are. For those that play more
than one role, choose the interests most directly affected by your actions. In the third column, put the likely
impact of your business decision on each stakeholder. This basic spreadsheet should help you identify all
your stakeholders and evaluate your decision’s impact on their interests. If you would like to add a human
dimension to your analysis, try assigning some of your colleagues to the role of stakeholders and reexamine
your analysis.
Fig
ure 1.5 Imagine you are the CEO of a mid-sized firm—about five hundred employees—and your company is
publicly traded. To understand what matters most to all your stakeholders, complete the preceding exercise to
evaluate the impact of a particular action or decision. (attribution: Copyright Rice University, OpenStax, under
CC BY 4.0 license)
The positive feeling stakeholders have for any particular company is called goodwill, which is an important
component of almost any business entity, even though it is not directly attributable to the company’s assets
and liabilities. Among other intangible assets, goodwill might include the worth of a business’s reputation, the
value of its brand name, the intellectual capital and attitude of its workforce, and the loyalty of its established
customer base. Even being socially responsible generates goodwill. The ethical behavior of managers will have
a positive influence on the value of each of those components. Goodwill cannot be earned or created in a
short
18 Chapter 1 Why Ethics Matter
time, but it can be the key to success and profitability.
A company’s name, its corporate logo, and its trademark will necessarily increase in value as stakeholders view
that company in a more favorable light. A good reputation is essential for success in the modern business
world, and with information about the company and its actions readily available via mass media and the
Internet (e.g., on public rating sites such as Yelp), management’s values are always subject to scrutiny and
open debate. These values affect the environment outside and inside the company. The corporate culture,
for instance, consists of shared beliefs, values, and behaviors that create the internal or organizational context
within which managers and employees interact. Practicing ethical behavior at all levels—from CEO to upper
and middle management to general employees—helps cultivate an ethical corporate culture and ethical
employee relations.
Critical Thinking
Positive goodwill generated by ethical business practices, in turn, generates long-term business success. As
recent studies have shown, the most ethical and enlightened companies in the United States consistently
8
outperform their competitors. Thus, viewed from the proper long-term perspective, conducting business
ethically is a wise business decision that generates goodwill for the company among stakeholders,
contributes to a positive corporate culture, and ultimately supports profitability.
You can test the validity of this claim yourself. When you choose a company with which to do business, what
factors influence your choice? Let us say you are looking for a financial advisor for your investments and
retirement planning, and you have found several candidates whose credentials, experience, and fees are
approximately the same. Yet one of these firms stands above the others because it has a reputation, which
you discover is well earned, for telling clients the truth and recommending investments that seemed centered
on the clients’ benefit and not on potential profit for the firm. Wouldn’t this be the one you would trust with
your investments?
Or suppose one group of financial advisors has a long track record of giving back to the community of which
it is part. It donates to charitable organizations in local neighborhoods, and its members volunteer service
hours toward worthy projects in town. Would this group not strike you as the one worthy of your investments?
That
This OpenStax book is available for free at http://cnx.org/content/col25722/1.3
Chapter 1 Why Ethics Matter 19
it appears to be committed to building up the local community might be enough to persuade you to give it
your business. This is exactly how a long-term investment in community goodwill can produce a long
pipeline of potential clients and customers.
Critical Thinking
• Which elements of this case might involve issues of legal compliance? Which elements illustrate
acting legally but not ethically? What would acting ethically and with personal integrity in this
situation look like?
• How do you think this breach will affect Equifax’s position relative to those of its competitors? How
might it affect the future success of the company?
• Was it sufficient for Equifax to offer online privacy protection to those whose personal information
was hacked? What else might it have done?
time that they do well. This is a simplistic summation, but it speaks to how CSR plays out within any corporate
setting. The idea is that a corporation is entitled to make money, but it should not only make money. It should
also be a good civic neighbor and commit itself to the general prospering of society as a whole. It ought to
make the communities of which it is part better at the same time it pursues legitimate profit goals. These
ends are not mutually exclusive, and it is possible—indeed, praiseworthy—to strive for both. When a company
approaches business in this fashion, it is engaging in a commitment to corporate social responsibility.
LINK TO LEARNING
U.S. entrepreneur Blake Mycoskie has created a unique business model (https://openstax.org/l/53TOMS)
combining both for-profit and nonprofit philosophies in an innovative demonstration of corporate social
responsibility. The company he founded, TOMS Shoes, donates one pair of shoes to a child in need for
every pair sold. As of May 2018, the company has provided more than 75 million pairs of shoes to
10
children in seventy countries.
Business people sometimes apply different ethical standards in different contexts, especially if they are
working in a culture different from the one in which they were raised or with coworkers from other traditions.
If we look outside ourselves for ethical guidance, relying on the context in which we find ourselves, we can
grow confused about what is ethical business behavior. Stakeholders then observe that the messages we
send via our conduct lack a consistent ethical core, which can harm our reputation and that of the business.
To avoid falling back on ethical relativism, a philosophy according to which there is no right or wrong and
what is ethical depends solely on the context, we must choose a coherent standard we can apply to all our
interactions with others.
Some people who adopt multiple ethical standards may choose to exhibit the highest standards with their
families, because these are the people they most revere. In a business setting, however, this same person
may choose to be an unethical actor whose sole goal is the ruthless accumulation of wealth by any means.
Because work and family are not the only two settings in which we live our lives, such a person may behave
according to yet another standard to competitors in a sporting event, to strangers on the street, or to those in
his or her religious community.
Although the ethical standard we adopt is always a choice, certain life experiences can have more profound
effects on our choice than others. Among the most formative experiences are family upbringing and
cultural traditions, broadly defined here to include religious and ethnic norms, the standard patterns of
behavior within the context in which we live. Culture and family also influence each other because the family
exists in
and responds to its cultural context, as well as providing us with the bedrock for our deepest values.
Regardless of this initial coding, however, we can choose the ethical standards we apply in the
business context.
Why should we choose a single ethical code for all the contexts in which we live? The Greek philosophers and
later proponents of the normative ethical theories we discussed earlier would say that if you apply your
reason to determine how to behave, it makes rational sense to abide by a single ethical code for all
interactions with all persons in all contexts. By doing so, you maximize your ethical behavior no matter who
the other party is. Furthermore, you have an internally consistent behavior for all family, friends, customers,
clients, and anyone else with whom you interact. Thus, we need not choose different values in different
contexts, and when people see us in different situations, they are more likely to trust us because they see we
uphold the same values regardless of the context.
Indeed, proponents of all the normative ethical theories would insist that the only rational choice is to have a
single ethical standard. A deontologist would argue that you should adhere to particular duties in
performing your actions, regardless of the parties with whom you interact. A utilitarian would say that any
act you take should result in the greatest good for the greatest number. A virtue ethicist would state that you
cannot be virtuous if you lack integrity in your behavior toward all.
Adopting a consistent ethical standard is both selfless and in the manager’s self-interest. That is, would-be
customers and clients are more likely to seek out a business that treats all with whom it interacts with honesty
and fairness, believing that they themselves will be treated likewise by that firm. Similarly, business leaders
who treat everyone in a trustworthy manner need never worry that they might not have impressed a
potential customer, because they always engage in honorable commercial practices. A single standard of
business behavior that emphasizes respect and good service appeals to all.
Normative ethics is about discovering right and delineating it from wrong; it is a way to develop the rules and
norms we use to guide meaningful decision-making. The ethics in our single code are not relative to the time,
person, or place. In this world, we all wear different hats as we go about our daily lives as employees,
parents, leaders, students. Being a truly ethical person requires that no matter what hat we wear, we exhibit
a single
ethical code and that it includes, among others, such universal principles of behavior as honesty,
integrity, loyalty, fairness, respect for law, and respect for others.
Yet another reason to adopt a universal ethical standard is the transparent character it nurtures in us. If a
company’s leadership insists that it stands for honest business transactions at every turn, it cannot prosecute
those who defraud the company and look the other way when its own officers do the same. Stakeholders
recognize such hypocrisy and rightly hold it against the business’s leaders.
Business leaders are not limited to only one of the normative ethical theories we have described, however.
Virtue theory, utilitarianism, and deontology all have advantages to recommend them. Still, what should
not change is a corporate commitment to not make exceptions in its practices when those favor the
company at the expense of customers, clients, or other stakeholders.
Moving from theory to daily life, we can also look at the way our reputation is established by the implicit
and explicit messages we send to others. If we adopt ethical relativism, friends, family, and coworkers will
notice that we use different standards for different contexts. This lack of consistency and integrity can alter
their perception of us and likely damage our reputation.
22 Chapter 1 Why Ethics Matter
Critical Thinking
Summary
1.1 Being a Professional of Integrity
Ethics sets the standards that govern our personal and professional behavior. To conduct business
ethically, we must choose to be a professional of integrity. The first steps are to ask ourselves how we
define success
24 Chapter 1 Why Ethics Matter
and to understand that integrity calls on us to act in a way that is consistent with our words. There is a distinct
difference between legal compliance and ethical responsibility, and the law does not fully address all ethical
dilemmas that businesses face. Sound ethical practice meets the company’s culture, mission, or policies above
and beyond legal responsibilities. The three normative theories of ethical behavior allow us to apply reason to
business decisions as we examine the result (utilitarianism), the means of achieving it (deontology), and
whether our choice will help us develop a virtuous character (virtue ethics).
A long-term view of business success is critical for accurately measuring profitability. All the company’s
stakeholders benefit from managers’ ethical conduct, which also increases a business’s goodwill and, in turn,
supports profitability. Customers and clients tend to trust a business that gives evidence of its commitment
to a positive long-term impact. By exercising corporate social responsibility, or CSR, a business views itself
within a broader context, as a member of society with certain implicit social obligations and responsibility for
its own effects on environmental and social well-being.
The adoption of a single ethical code is the mark of a professional of integrity and is supported by the
reasoned approach of each of the normative theories of business ethics. When we consistently maintain
the same values regardless of the context, we are more likely to engender trust among those with whom
we interact.
Assessment Questions
1. Which of these concepts relates to utilitarianism?
A. consequences
B. actions
C. character
D. duty
2. True or false? According to the Greek system of logic introduced by Socrates, normative ethical
theories ultimately are grounded in reason.
6. True or false? According to Milton Friedman, a company’s social responsibility consists solely of bettering
the welfare of society.
10. True or false? Family is generally a strong influence on our ethical standards.
11. Which normative ethical theory supports the idea of holding multiple ethical
standards? A. deontology
B. utilitarianism
C. virtue ethics
D. none of the above
Endnotes
1. Ikujiro Nonaka and Hirotaka Takeuchi, “The Big Idea: The Wise Leader,” Harvard Business Review, May 2011. https://hbr.org/2011/05/the big-idea-
the-wise-leader.
2. Jia Lynn Yang, “Maximizing Shareholder Value: The Goal That Changed Corporate America,” Washington Post, August 26, 2013.
https://www.washingtonpost.com/business/economy/maximizing-shareholder-value-the-goal-that-changed-corporate-america/2013/08/
26/26e9ca8e-ed74-11e2-9008-61e94a7ea20d_story.html?utm_term=.524082979f63.
3. David Kocieniewski, “Whistle-blower Awarded 104 Million by IRS,” New York Times, September 11, 2012. http://www.nytimes.com/2012/09/
12/business/whistle-blower-awarded-104-million-by-irs.html.
4. Jeffrey Liker, The Toyota Way: Fourteen Management Principles from the World’s Greatest Manufacturer (New York: McGraw-Hill, 2005). 5. Zameena
Mejia and Margaret Ward, “Warren Buffett Says This One Investment ‘Supersedes All Others,’” CNBC Make It, October 4, 2017.
https://www.cnbc.com/2017/10/04/warren-buffett-says-this-one-investment-supersedes-all-others.html.
6. Laurence A. Cunningham, “The Philosophy of Warren E. Buffett,” New York Times, May 1, 2015. https://www.nytimes.com/2015/05/02/
business/dealbook/the-philosophy-of-warren-e-buffett.html.
7. Laurence A. Cunningham, “The Philosophy of Warren E. Buffett,” New York Times, May 1, 2015. https://www.nytimes.com/2015/05/02/
business/dealbook/the-philosophy-of-warren-e-buffett.html.
8. Peter Georgescu, “Doing the Right Thing Is Just Profitable,” Forbes, July 26, 2017. https://www.forbes.com/sites/petergeorgescu/2017/07/ 26/doing-
the-right-thing-is-just-profitable/#360853967488.
9. Tyler Durden, “Massive Data Breach At Equifax: As Many As 143 Million Social Security Numbers Hacked,” Zero Hedge, September 7, 2017.
http://www.zerohedge.com/news/2017-09-07/massive-data-breach-equifax-many-143-million-social-security-numbers-hacked. 10. Arezou Naeini,
Auditee Dutt, James Angus, Sarkis Mardirossian, and Sebastian Bonfanti, “A Shoe for a Shoe, and a Smile,” Business Today, June 7, 2015.
http://www.businesstoday.in/magazine/lbs-case-study/toms-shoes-shoes-for-free-cause-marketing-strategy-case-study/ story/219444.html;
TOMS.com, Giving shoes, https://www.toms.com/what-we-give-shoes.
26 Chapter 1 Why Ethics Matter This OpenStax book is available for free at http://cnx.org/content/col25722/1.3
2
Ethics from Antiquity to the Present
Figure 2.1 Their accuracy and practical use in the marketplace made scales, held aloft here by the figure of
Justice in Bruges, Belgium, a common symbol in jurisprudence and law in the East and the West. Even today,
the concept of counterbalancing different ideas and philosophies underlies many approaches to the law and
ethics. (credit: modification of “Golden Lady Justice” by Emmanuel Huybrechts/Flickr, CC BY 2.0)
Chapter Outline
2.1 The Concept of Ethical Business in Ancient Athens
2.2 Ethical Advice for Nobles and Civil Servants in Ancient China
2.3 Comparing the Virtue Ethics of East and West
2.4 Utilitarianism: The Greatest Good for the Greatest Number
2.5 Deontology: Ethics as Duty
2.6 A Theory of Justice
Introduction
From the time of barter to the age of bitcoin, most people engaged in business transactions have sought
trust. Without trust, which is a fundamental outcome of ethical behavior, not just business relationships but all
relationships would collapse. To develop insight into our own concepts of ethics, this chapter looks at how
ethical systems have developed over time, beginning with the distinction between ethics and the law.
Ethics are the standards of behavior to which we hold ourselves accountable in our personal and professional
lives. Laws and regulations set the minimal standards by which society lives out those ethical norms. Because
laws are minimal standards, it is not uncommon for an act to be legal but generally deemed unethical. The
fact is that law and ethics are not always the same. Always, however, they are in dialogue, and each informs
the other. The greatest challenge in business decision-making is moving beyond the letter of the law to create
a culture of ethics (Figure 2.1).
Can you identify a moment in your life when it was hard to follow your conscience, or your personal morality
28 Chapter 2 Ethics from Antiquity to the Present
conflicted with societal norms? What was the nature of the conflict, and how did you approach it?
It would be hard to overstate the influence of ancient Athens on Western civilization. Athenian achievements
in the arts, literature, and government have molded Western consciousness. Perennial themes, such as the
search for individual identity and each person’s place in the world, appear in countless novels and Hollywood
screenplays. The role of Athenian ethical theories in philosophy has been profound, and Athenian principles
continue to be influential in contemporary philosophy. Ethics, as a form of applied philosophy, was a major
focus among the leaders of ancient Athens, particularly teachers like Socrates, Plato, and Aristotle. They
taught that ethics was not merely what someone did but who someone was. Ethics was a function of being
and, as the guiding principle for dealings with others, it naturally applied as well to the sensitive areas of
money and commerce.
Ancient Athens
Like a modern metropolis, the city-state (polis) of Athens in the fifth century BCE drew people from far afield
who wanted a better life. For some, that life meant engaging in trade and commerce, thanks to the openness
of the new democracy established under the lawgiver Cleisthenes in 508 BCE. Others were drawn to Athens’
incredibly rich architecture, poetry, drama, religious practices, politics, and schools of philosophy. Youth
traveled there hoping to study with such brilliant teachers as the mathematicians Archimedes and
Pythagoras; dramatists like Sophocles and Euripides; historians Herodotus and Thucydides; Hippocrates, the
father of medicine; and, of course, the renowned but enigmatic philosopher Socrates. More than being the
equivalent of rock stars of their day, these thinkers, scholars, and artists challenged youth to pursue truth, no
matter the cost to themselves or their personal ambitions. These leaders were interested not in fame or even
in personal development but in the creation of an ideal society. This was the Golden Age of ancient Greece,
whose achievements were so profound and enduring that they have formed the pillars of Western civilization
for nearly two and a half millennia.
Philosophy, in particular, flourished during the Golden Age, with various schools of thought attempting to
make sense of the natural and human worlds. The human world was thought to be grounded in the natural
world but to transcend it in striking ways, the most obvious being humans use of reason and deliberation.
Philosophers like Socrates, Plato, and Aristotle tackled fundamental questions of human existence with
such insight that their ideas have remained relevant and universal even at the dawn of artificial intelligence.
As British mathematician and philosopher Alfred North Whitehead (1861–1947) observed, “the safest
general characterization of the European philosophical tradition is that it consists of a series of footnotes to
1
Plato.”
Why are the insights of these Greek philosophers still relevant today? One reason is their development of the
ancient concept of virtue. The person most closely associated with virtue in the West, and the development
of what is now known as virtue ethics—that is, an ethical system based upon the exercise of certain virtues
(loyalty, honor, courage) emphasizing the formation of character—is Plato’s famous pupil Aristotle (384–322
BCE) (Figure 2.2).
Figure 2.2 Nicomachean Ethics, by the ancient Greek philosopher Aristotle (a), is a rough collection of
Aristotle’s lecture notes to his students on how to live the virtuous life and achieve happiness; it is the oldest
surviving treatment of ethics in the West. The collection was possibly named after Aristotle’s son. This 1566
edition (b) was printed in both Greek and Latin. (credit a: modification of “Aristotle Altemps Inv8575” by
“Jastrow”/Wikimedia Commons, Public Domain; credit b: modification of “Aristotelis De Moribus ad
Nicomachum” by "Aavindraa"/Wikimedia Commons, Public Domain)
However, because humans are endowed not only with reason but also with the capacity to act in an
honorable and ethical manner, they may reject their end, either intentionally or by default. The great task of
life, then, is to recognize and pursue happiness, no matter the constraints placed on the individual, the most
dramatic of which are suffering and death. Birds and fish have little difficulty achieving their ends, and we can
assume that much of this is due to their genetic coding. Because happiness might not be genetically encoded
in human beings, they must learn how to be happy. How do they do that? According to Aristotle, eudaimonia is
achieved by leading a virtuous life, which is attained over time. “Happiness is a kind of activity; and an activity
4
clearly is developed and is not a piece of property already in one’s possession.”
Aristotle identified two types of virtues, which the philosophical community of his day agreed were
objective and not subjective. The two types were intellectual and moral. Intellectual virtues—including
knowledge (epistḗmē), wisdom (sophíā), and, most importantly for Aristotle, prudence (phrónēsis), or
practical wisdom—served as guides to behavior; that is, a person acted prudently based on the wisdom
gained over
30 Chapter 2 Ethics from Antiquity to the Present
time through the ongoing acquisition and testing of knowledge. To give an oversimplified but practical
application of Aristotelian thinking, a hiring manager acts prudently when assessing a pool of candidates
based on knowledge of their backgrounds and on insight gained after years of working in that role. The
manager may even use intuitive reason regarding a candidate, which Aristotle believed was another way of
arriving at truth. Understood in this way, the manager’s intuition is an impression regarding character and
someone’s potential fit in an organization. Among the intellectual virtues, prudence played the major role
because it helped individuals avoid excess and deficiency and arrive at the golden mean between the two.
Prudence has been translated as “common sense” and “practical wisdom” and helps individuals make the
right decision in the right way at the right time for the right reason. In Aristotle’s view, only the truly prudent
person could possess all the moral virtues.
The distinction Aristotle made is that the intellectual virtues are acquired purely through learning, whereas the
moral virtues are acquired through practice and the development of habits. In contrast to the intellectual
virtues, which focused on external acts, the moral virtues had to do with character. They included courage,
self-control, liberality, magnificence, honor, patience, and amiability. Some of these virtues had different
meanings in ancient Greece than they do today. “Liberal,” for instance, referred not to a political or economic
stance but rather to an aspect of personality. Someone would be considered liberal who was open and sharing
of him- or herself and his or her talents without fear of rejection or expectation of reciprocity. The paragon of
5
these virtues was the magnanimous individual, someone for whom fame and wealth held little attraction. This
person had self-knowledge; was not rash, quick to anger, or submissive to others; and acted with self-respect,
control, and prudence. The magnanimous individual achieved happiness by leading a life characterized by
reason and will. He or she remained in control of self and did not hand over his or her authority—or moral
agency—to others, whether in judgment or in decision-making. “So, magnanimity seems to be a sort of crown
of the virtues, because it enhances them and is never found apart from them. This makes it hard to be truly
6
magnanimous, because it is impossible without all-round excellence,” according to Aristotle.
The relationship between the intellectual and the moral virtues was not as clear cut as it may appear,
however, because Aristotle believed that action preceded character. In other words, the primary way to
change character was through consistent, intentional behavior in the direction of virtue. Aristotle gave the
example of courage. A person was not courageous first and then went about performing acts of courage.
Rather, courage resulted from incremental change, small steps taken over time that molded the person’s
character. It relied on a recognition of justice, so that courage was directed toward the right end. The
important task was developing the habit of leading the virtuous life. Anyone could do this; however, it was a
discipline that had to be learned and practiced with dedication. We can see that this habit of virtue is
especially relevant for business today, when the temptation to conform to an established organizational
culture is overwhelming even when that culture may permit and even encourage questionable practices. Add
the seductive power of money, and anyone’s courage might be tested.
The most notable feature of virtue ethics is that it viewed the basic ethical unit—the fundamental agent of
morality—as the individual, who lived out his or her worldview publicly. A life of virtue, therefore, took place in
the economic and political spheres so that others might participate in and benefit from it. In Athenian society,
it was important for business to be conducted competently and ethically. Even though Aristotle was
suspicious of business, he acknowledged its importance in preserving and nurturing Athenian democracy. He
also praised the creation of money to further the goal of justice, so that a shoemaker and a housebuilder, for
instance, could trade their wares on an equal basis. Virtue in the marketplace was demonstrated through
ethical behavior, according to Aristotle: “People do in fact seek their own good, and think that they are right to
act in this way. It is from this belief that the notion has arisen that such people are prudent. Presumably,
7
however, it is impossible to secure one’s own good independently of domestic and political science.” This
belief in the public nature of virtue was crucial for the flourishing of the city-state and also has implications
for contemporary business, which must consider the individual, organization, industry, and society in its
development and planning.
E T H I C S A C R O S S T I M E A N D C U LT U R E S
Athenian Democracy
Just as time and place influence people’s perception of ethics, so is their understanding of democracy
also subjective.
You might be surprised to learn the Athenian version of democracy was significantly different from our
own. For instance, although the word “democracy” comes from the Greek for people (dêmos) and power
(krátos), only adult men who owned property could vote, and voting was direct; Athens was not a
republic with elected representatives, like the United States. Resident aliens, or metics—those who
change their home—were not eligible for citizenship and could not vote. They had limited rights and
their status was second class, although this did not stop many of them from attaining wealth and fame.
They were often among the best artisans, craftspeople, and merchants in the city-state. Metics were
able to conduct business in the marketplace (agora) provided they paid special taxes yearly. One of the
most famous was Aristotle, who was born outside Athens in northern Greece.
Women, even those who were citizens, were not allowed to vote and had limited rights when it came
to property and inheritance. Their primary function in Athenian society was the care and management
of the home. “The Athenian woman must be the perfect Penelope—a partner to the husband, a guard
of
the house, and one who practices the virtues defined by her husband. Physical beauty was not to be a
goal, nor was it even a primary valued attribute. Total dedication to the welfare of husband, children,
8
and household was the ultimate virtue” (Figure 2.3).
Finally, not all transactions were as straightforward as selling Egyptian linen, dried fruit, or spices. Slave
traders, too, brought their “wares” to market. Slavery was a customary part of many cultures throughout
the ancient world, from Persia to Arabia and Africa and China. In Athens and its surrounding area, it is
estimated that during the Golden Age (fifth century BCE) there were 21,000 citizens, 10,000 metics (non
9
native Athenians who still shared some of the benefits of citizenship), and 400,000 slaves. Despite the
Athenian emphasis on virtue and honor, there was little or no objection to owning slaves, because they
formed an indispensable part of the economy, providing the labor for agriculture and food production.
Slavery persists even today. For instance, it is believed that nearly thirty million people worldwide are
10
living and working as slaves, including three million in China and fourteen million in India. Servitude
also exists for migrant workers forced to live and work in inhuman conditions without recourse to
legal help or even the basic necessities of life. Such conditions occur in industries as diverse as
11
commercial fishing in Southeast Asia and construction in Qatar.
Critical Thinking
• Consider how democracy has expanded since the Golden Age of Greece, eventually including
universal suffrage and fundamental rights for everyone. Although we try not to judge cultures
today as having right or wrong practices, we often judge earlier cultures and civilizations. How
might you assess a practice like slavery in antiquity without imposing modern values on a
civilization that existed more than two and a half millennia ago?
• Are there absolute truths and values that transcend time and space? If yes, where might these come
from? If not, why not?
Yet, business had an interesting effect that helped invigorate Athenian life and encouraged those engaged in
it to be virtuous (or else risk their reputation). This effect was association. Business was based on the free and
fair exchange of goods, which brought not only items of merchandise into association with each other but also
buyers, sellers, and public officials. The way to ensure ethically sound association was through the exercise of
prudence, especially in its demand that people act not rashly but deliberately. This deliberative aspect of
prudence provided a way for buyers, sellers, and everyone engaged in a transaction to act honorably, which
was of the utmost importance. Honor was not only a foundational virtue but the cultural environment in which
the ancient world existed. One of the worst offenses anyone could commit, whether man, woman, free, or
slave, was to act in a dishonorable way. Of course, although acting deliberately does not guarantee that one is
acting honorably, for Athenians, acting in a calculated way was not an indication of dishonor. Dishonorable
acts included any that disturbed the basic order (dikē) of life in which everyone had a role, including the gods.
Interestingly, the Aristotelian approach to business did not condemn money making or the accumulation of
riches. What concerned Aristotle, particularly because of its harmful effects on the individual and the city-
state, was greed. Aristotle considered greed an excess that tipped the scales of justice and led to scandal.
Money might constitute the bait, but greed causes the person to reach out and grab as much as possible,
falling into the trap of scandal. The Greeks considered the exercise of greed an irrational, and therefore
ignoble, act. Only attention to honor and deliberative prudence could save someone from acting so foolishly.
Honor in ancient Greece was not just an individual characteristic but also a function of the group to which an
individual belonged, and the person derived self-esteem from membership in that group. Civic virtue
consisted of honorable living in community. Business scandals today often arise not from conflicts of interest
but from conflicts of honor in which employees feel torn by their allegiance to a coworker, a supervisor, or the
13
organization. Although few people would use the term honor to describe contemporary workplace culture or
corporate mission, nearly everyone understands the importance of reputation and its impact, positive or
negative, on a business. Reputation is no accident. It is the product of a culture formed by individual and
group effort. That effort is directed, intentional, and ongoing.
According to Aristotle, and later thinkers who expanded upon his work, such as thirteenth-century
philosopher and theologian Thomas Aquinas, to act dishonorably casts disrepute on all concerned. Ends and
means had to be aligned, particularly in business, which provided people’s livelihoods and secured the
economic health of the city-state. Acting honorably meant trying to be magnanimous in all transactions and
rising above obsession with baser instincts. The honorable person was magnanimous, prudent, fair, and
interested in self advancement as long as it did not injure personal integrity or the body politic. The
importance of prudence is evident because, said Aristotle, it is “concerned with human goods, i.e., things
about which deliberation is
34 Chapter 2 Ethics from Antiquity to the Present
possible; for we hold that it is the function of the prudent man to deliberate well; and nobody deliberates
about things that cannot be otherwise, or that are not means toward an end, and that end is a practical good.
And the man who is good at deliberation generally is the one who can aim, by the help of his calculation, at
14
the best of the goods attainable.”
Aquinas further divided Aristotelian prudence into memory, reason, understanding, docility, shrewdness,
15
foresight, circumspection, and caution. To use these qualities in a constructive way, a business person had to
direct them toward an appropriate end, which applies to business today just as it did in fourth-century Athens.
A merchant could not make money in a random way but had to keep the needs of customers in mind and
conduct business with fair prices and fees. This exercise of prudence was part of the cosmic order that
ensured the right management of the home, the marketplace, and civilization itself. Similarly, committing
fraud or deception to achieve an end, even if that end were good or just, was not considered an honorable act.
Only when ends and means were aligned and worked in harmony were those engaged in the transaction
considered virtuous. This virtue, in turn, would lead to the happiness Aristotle envisioned and toward which
his entire system of virtue ethics aimed.
E T H I C S A C R O S S T I M E A N D C U LT U R E S
We can see these forms of justice at work today in very practical ways. For instance, within the
framework of commutative justice, businesses are often held responsible ethically and financially for
any harm caused by their products. And distributive justice is debated in such hotly contested issues as
corporate and individual tax rates, universal health coverage, state and federal income assistance,
subsidized housing, social security eligibility, college tuition aid (e.g., Pell grants), and similar programs
designed to create a “safety net” for those least fortunate. Some safety net programs have been
criticized for their excessive cost, inefficiency, and unfairness to those who pay into them while receiving
no benefit or say in their administration.
Critical Thinking
• How is the ancient concept of distributive justice understood in today’s political debate? •
What are the underlying values that inform each side of the debate (e.g., values like wealth
maximization and corporate social responsibility)?
• Can these sides be reconciled and, if so, what must happen to bring them together? Does virtue
have a role to play here; if so, how?
LINK TO LEARNING
For a further discussion of justice, read this article on justice and fairness (https://openstax.org/l/
53justice) from the Markkula Center for Applied Ethics.
How, exactly, did honor and deliberative prudence prevent someone from acting foolishly in life
and unethically in business? And what does it look like to follow these virtues today?
2.2 Ethical Advice for Nobles and Civil Servants in Ancient China
Learning Objectives
The teachings and writings of Confucius (551–479 BCE; also called Kung Fu Tzu or Master Kung) not only
have endured more than two and a half millennia but have influenced Chinese culture to such a degree that
they remain part of the national character. In classical Confucianism, the practice of virtue constitutes the
essence of governance. Differing from Aristotelian virtue (arête), Confucian virtue emphasizes relationships.
Aristotle shows how a self-determining person might live well in society. Confucius showed how a
relationship determining person can live well with others. The reasons for this distinction will become clearer
throughout the section.
As an iconic figure, Confucius had an impact on politics, literature, civil administration, diplomacy, and
religion in China. Yet, by most accounts, he considered himself a failure, never having achieved the position
and security he sought during his lifetime. However, his story is a testament to the reward of a life lived with
integrity and simplicity.
We might see this harmony in a contemporary business setting as a team of people bringing different
talents to bear on a specific project for the good (and profit) of the company. In this sense, li refers to doing
those tasks in collaboration with others to achieve the mission of the organization. For Confucius, li was
expressed through ritual acts. When the correct rituals were followed in the right way with the right
intention for the right end, all was well. Of course, corporate rituals also exist, and like all ritual acts, they
reinforce cohesion
36 Chapter 2 Ethics from Antiquity to the Present
and identity within the group. Identifying them helps improve employee awareness, productivity, and,
perhaps, happiness. One example of this would be new-employee orientation, which is intended to
acclimate newcomers to the corporate culture, the company ethos, and the traditions associated with the
way the firm does business. Finally, anticipating Aristotle’s golden mean, li emphasized the middle ground
18
between deficiency and excess. “Nothing in excess” was its guiding principle.
Huston Smith, noted historian of world religions, has observed that the widespread adoption of Confucius’s
19
teachings within a generation of his death was not due to the originality of his ideas. What made the humble
scholar the greatest cultural force in China’s history was chance. Confucius appeared on the scene at the right
time, offering a fractured country an alternative to two extremes, neither of which was working. These were a
realism that was tyrannical and relied on brute force to restrain the rivaling factions, and an idealistic
approach called Mohism that was based on universal love and mutual aid. Confucius rejected the first as
20
crude and the second as utopian. Instead, he offered a practical but empathetic approach, a sort of tough
love for the times.
LINK TO LEARNING
Read this article that gives a helpful historical background on Confucianism (https://openstax.org/l/
53Confucianism) to learn more.
The concept of junzi and the Aristotelian magnanimous individual have much in common, except that for
Confucius, there was added urgency. To be a junzi was a matter not just of honor but of survival. It is no
exaggeration to say that China’s very existence depended upon the ability of individuals—nobles and peasants
alike—to rise above the barbarity around them and embrace a way of life directed both outward toward social,
political, and administrative reform and inward toward spiritual development. Confucius (Figure 2.4) believed
that living the virtues he taught would achieve both these ends.
Figure 2.4 Confucius (Kung Fu-tzu or Master Kung), depicted here in front of the Confucius Temple in Beijing,
lived during a turbulent period in China’s history. He sought to end violence and chaos through a return to
order, harmony, and reverence, especially within the family. (credit: “KongZi, Confucius Temple with Gold
Roof, Main Statue” by “klarititemplateshop.com”/Flickr, CC BY 2.0)
The keystone of Confucius’s deliberate tradition was the dao of humanity, or the Way, which established
21
humanity as the answer to rampant lawlessness. Confucius believed people were inherently good and that
the way to stop inhuman behavior was to make them even better, or more human. He identified three
means to do this, which we explore next: “whole-hearted sincerity and truthfulness,” the “constant mean,”
22
and “expediency” (quan). Specific virtues like moral character, righteousness, wisdom, courage, respect,
filial piety, and simplicity formed part of these means. Someone who lived virtuously became more human,
which resulted in a flourishing individual and an ordered world.
“Whole-hearted sincerity and truthfulness” meant more than sincerity, because even liars can be convincing.
The sincerity Confucius had in mind was closer to loyalty, and the thing to which humans had to be loyal was
truth. Confucius intended to counter the blind loyalty that had contributed to the eruption of anarchy
throughout China. For instance, if a subject were called upon to offer advice, the subject had to be truthful,
even though the ruler might not like the advice, which actually happened to Confucius, causing him to resign
23
his post as minister of justice in Lu. What a subject owed the ruler was not cloying deference but the truth,
which would benefit everyone in the long run. The implications for ethical behavior in modern corporations
may be obvious. Reporting unethical behavior as a whistleblower or even standing up for truth in a meeting
is sometimes easier said than done, which is why living virtuously requires disciplined practice and the
support of like-minded individuals.
The “constant mean” refers to balance between excess and deficiency in an existential and in a practical sense.
We are to follow the middle path, avoiding extremes of thought and action through ritual acts. We cannot
claim to lead a balanced life; we must show it by performing acts that maintain personal and collective order.
The Book of Li catalogues many of these acts, which form a guide for proper living, indicating the correct way
to maintain the five great relationships that support Chinese society: parent/child, husband/wife, elder/junior
sibling, master/apprentice, and ruler/subject. Confucius and his peers believed that properly observing these
key five relationships was essential for social good and would invoke divine favor on the people.
38 Chapter 2 Ethics from Antiquity to the Present
Note that three of these are relationships within the family. The family was the basic unit of society and
Confucius’s hope for reform, because it was the primary and most influential school of character, virtue, and
conscience. Thus, the return to li takes on greater significance than a simple longing for an idyllic past. As
Huston Smith noted, “that three of the Five Relationships pertain within the family is indicative of how
important Confucius considered this institution to be. In this he was not inventing but continuing the Chinese
assumption that the family is the basic unit of society. This assumption is graphically embedded in Chinese
legend, which credits the hero who ‘invented’ the family with elevating the Chinese from the animal to human
24
level.”
Yijing
The five great relationships upon which Chinese civilization is built prescribed definite roles for the
social classes and sexes. As in ancient Greece, women in ancient China were in charge of domestic
duties and care of the family. They were neither expected nor believed able to assume duties outside
the home and certainly not in the competitive world of business. Yet consider the fictional case of Yijing.
Yijing was the daughter of the merchant Bei Li, who sold farming tools and agricultural products in Cao,
which bordered Lu. Bei Li’s business was very successful and he took great pride in it. He had three sons
who worked with him, but none had the head for business that his daughter Yijing had. Moreover, none
of them wanted to take over the business after his death. When Yijing begged for a chance to run the
business for her father, he agreed, but he insisted she disguise herself as a man when traveling and
doing business in the family name. If people knew she was a woman, they would ridicule the family and
take advantage of her. Although surprised by her father’s request, Yijing agreed and eventually took over
the business, making it extremely prosperous.
Critical Thinking
For Confucius, the third approach to the Way of humanity was the doctrine of expediency. Where Buddhism
and Taoism advocated compassion and Mohism advocated universal love, Confucianism defined
righteousness as the virtue that would temper compassion and love so that people could live together not
25
just peacefully but justly. Righteousness included a practical approach to problem solving that helped
politics, diplomacy, and civil administration to flourish. This expediency, or quan, is a noteworthy feature of
Confucianism. Originally referring to a piece of metal used in balancing scales, quan is applied when weighing
options in a moral dilemma and acts as a counterbalance to achieve fairness, enabling parties in a transaction
to arrive at an equitable agreement. Ultimately, quan allows people and institutions to prioritize responsive
action over ritual and serves as the way to align what people do with who they are, thus allowing them to
become more human. For the businessperson, it might mean not fleeing the “tawdry” world of the
marketplace but recognizing the humanity within it.
One example of the use of quan is the Broad Group, a Chinese manufacturer of central air conditioning
products. The company produces clean energy systems and has developed an alternative to Freon. The new
coolant has changed the way energy is delivered to such an extent that Zhang Yue, the company’s chief
executive officer, was awarded the Champions of the Earth prize by the United Nations in 2011 for his work
in
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Chapter 2 Ethics from Antiquity to the Present 39
26
green energy. Certainly, there is more opportunity for sustainable manufacturing and ethical
business practices throughout China, and the state is attempting to promote such efforts.
The other two Confucian ways of humanity also relate to business, because wholeheartedness and sincerity
can serve as models of risk assessment, requiring clearheaded thinking and action balanced with respect for
markets, competitors, and stakeholders. The dao of humanity rejects the premise that greed reigns supreme
by itself. Instead, its ethical counterpart is truth. Both qualities exist within business practices. In this ethical
framework, loyalty to truth is not just a stock phrase but a commitment to value in all aspects of an enterprise,
such as sales, finance, marketing, and the employment and hiring chain. An investment advisor might
recommend the constant mean to clients so their money is in a diversified portfolio with a long-term strategy.
The dao of humanity, wholeheartedness, sincerity, and the other virtues are treated in The Analects (Figure
2.5).
Figure 2.5 The Analects of Confucius is a collection of Confucius’s teachings and sayings regarding the
virtuous life and how to attain harmony. They were compiled by his followers and written with ink and
brush on strips of bamboo. (credit: “Rongo Analects 02” by “Fukutaro”/Wikimedia Commons, Public Domain)
Some have criticized Confucianism for impeding progress in China in areas like education, the natural
sciences, and business, because it has failed to adapt to the modern context. High-frequency trading,
blockchain technology, artificial intelligence, and robotics do not work with cultural values thousands of
years old, these critics say, so what we need is a new consciousness for a new era in human history.
However, these
40 Chapter 2 Ethics from Antiquity to the Present
criticisms miss the point. Confucius was interested in the same thing that concerned Aristotle—namely, the
character of the person or persons making decisions rather than the decisions themselves. The importance of
character has been proven repeatedly through business scandals like Enron, LIBOR, and the 2008 financial
crisis, as well as the recent problems of Uber and Volkswagen, in which personal irresponsibility resulted in
disaster. Indeed, business schools now offer seminars for executives integrating virtue ethics—both
Aristotelian- and Confucian-inspired models—in leadership development.
LINK TO LEARNING
For a concise breakdown of the rise and collapse of Enron, see The Crime Network’s episode on
Enron (https://openstax.org/l/53Enron) in its Corrupt Crimes series.
The recent campaign of China’s central government against unethical business practices has made a point of
prosecuting executives for corruption in the form of bribery, kickbacks, and embezzlement, demonstrating
that some Confucian thought has survived from ancient times. Jack Ma, cofounder of the giant Chinese
ecommerce site Alibaba, has called this “clean communism,” which might be another way of characterizing
27
the form of state-sponsored capitalism that exists in China. Of course, the former Communist regime did not
embrace Confucian virtue. Mao Zedong was deeply suspicious of Confucius, holding him to be a relic of the
Imperial Era and having little value for the new China he intended to create with the founding of the People’s
Republic of China in 1949.
LINK TO LEARNING
To what extent are children in China responsible for their parents’ businesses? In this article, Kelly Zong,
daughter of billionaire Zong Qinghua, explains how she believes modern-day China has “lost its soul”
(https://openstax.org/l/53China) through selfish individualism and an obsession with wealth. If Kelly
Zong is correct, would it be safe to say that China needs another return to ancient wisdom? Why or why
not? Do you agree with her assessment of the current generation and individualism?
• Compare the origins and goals of virtue ethics in the East and the West
• Describe how these systems each aimed to establish a social order for family and business
• Identify potential elements of a universally applied business ethic
Aristotle and Confucius each constructed an ethical system based on virtue, with Aristotle’s ultimate aim being
happiness and Confucius’s being harmony. Each addressed a particular problem. For Aristotle, happiness
consisted of the search for truth, which, in turn, required a centered, stable individual who could surmount
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Chapter 2 Ethics from Antiquity to the Present 41
misfortune or weak character. Confucius looked to settle the soul of the Chinese people by creating a
system that reflected the heavenly order on Earth. Both systems rely on reasoned means to achieve
reasoned ends.
Aristotelian and Confucian systems of virtue ethics have in common the theme of control, as this comparison
shows. (attribution: Copyright Rice University, OpenStax, under CC BY 4.0 license)
In a business context, control bears directly on managerial ethics, which is a way of relating to self,
employees, and the organization that balances individual and collective responsibility, and in which
28
management also includes planning, organizing, and leading to achieve organizational goals. A self
controlled, disciplined manager is able to work through layers of bureaucracy and the complexities of
human interaction to attain goals in a way that is responsible and profitable and that enhances the
organization’s mission and culture. These goals are achieved not at the expense of stakeholders but in a way
that is fair for all. We might even say that righteousness leads to justice, which includes profit. We saw earlier
that neither Aristotle nor Confucius disapproved of profit as long as it benefitted humanity in some way.
Both men would have a very definite opinion about the optimization of shareholder wealth.
Despite these similarities between the two traditions, there are differences—the most notable being the locus
42 Chapter 2 Ethics from Antiquity to the Present
of ethics. Aristotle placed this locus on individuals, who were called to fulfill their purpose honorably,
accepting fate with dignity and aplomb. The basis of this acceptance was reason. For Confucius, reflecting the
historical plight of China, the locus was the family, which he envisioned as putting an end to anarchy and
setting the nation on its proper course by providing the basic pattern of relationships for personal and
professional life. To be sure, family counted for Aristotle just as the individual counted for Confucius, but the
emphasis in each system was different. Aristotle acknowledged that “a solitary man has a hard life, because it
is not easy to keep up a continuous activity by oneself; but in company with others and in relation to others it
29
is easier.”
Regardless of the source of ethical behavior, those engaged in business were required to act with
accountability and responsibility. They were accountable to customers and suppliers when delivering
commodities like figs, pottery, or olive oil. And they had to conduct themselves responsibly to maintain
their personal and professional reputation. Thus, business was the perfect expression of ethics in both East
and West, because it provided a forum within which virtues were tested in very real ways. Confucius urged
30
each follower to be a great or humane person, or ru, not a small one. This was so important that the
school established after his death was known as the Ru School, and the principles it taught are called
31
Ruism.
What might the integration of personal and professional life look like, and how can we apply it within the
relationships that are the foundation of business? To answer this question, consider the essence of the
virtuous person that each ethical system strove to create. For Aristotle, the virtuous person saw the truth in
every kind of situation. Once acknowledged and recognized, the truth could not be denied without
compromising honor. Similarly, Confucius taught that “A gentleman will not, for the space of a meal, depart
33
from humanity. In haste and flurry, he adheres to it; in fall and stumble, he adheres by it.”
Despite the emphasis these systems placed on character, however, character was not ultimately what
defined the virtuous individual, family, city-state, or nation. Instead, it was the individual’s transformation,
through education, into a different kind of being who will act virtuously even if no one is watching. When the
person concentrates on the means used to achieve an end, eventually the means become a way of life even
more important than the end itself. It is not merely that the means must match the end, but that they come
to define the virtuous person.
The integration of personal and professional lives has two effects: motive and awareness. Motive is the
willingness to do the right thing because it is the right thing, even though there may be no perceived benefit.
Arguably, it is here that the individual’s true nature is revealed. The other effect, awareness, is the ability to see
the ethical dimension in all events, choices, decisions, and actions. Many business scandals could be avoided if
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Chapter 2 Ethics from Antiquity to the Present 43
more people understood the value of human capital and the need to see the larger picture; to put it
differently: responsibility over profitability. Or, as Confucius would say, it is the person who can broaden
34
the Way, not the Way that broadens the person.
It is possible that standards of ethical conduct could be created to guide business affairs fairly and justly. Such
standards already exist in most industries and professions. The Generally Accepted Accounting Principles
(GAAP) give direction to those working in accounting and finance in the United States. The International
Standards Organization offers guidelines and protocols for many industries. Together with governmental
regulation, these might serve as the basis for ethical behavior, perhaps even globally. Of course, those
fashioning guidelines would have to be sensitive to individual autonomy and national sovereignty, especially
when it comes to international jurisdiction, privacy, and human rights. For example, the International
Financial Reporting Standards serve as a kind of international GAAP to help companies report financial results
in a common accounting language across national boundaries.
Despite our best efforts, someone who wishes to conduct business selfishly and unethically always will be
drawn to do so unless given a compelling incentive not to. It is evident why Aristotle and Confucius stressed
the importance of schooling. Perhaps what is needed now, building on these two ancient approaches, is
business education focused on transformation rather than on conformity to guidelines. This proposal touches
the core of both Aristotelian and Confucian teachings: training and education. Training and education help
internalize in us more altruistic business practices. They also permit greater integration between our personal
and professional understandings of the way we should treat friends, family, customers, and clients. No
matter the context, we are then encouraged to treat others with honesty and respect, so that even someone
certain to get away with the most outrageous corruption or money-laundering scheme would not do it. Why
not? Because doing so would be a betrayal of the person’s conscience and identity. A business education that
is truly effective—one for the twenty-first century—would produce a graduate who could stand up and say no
to that kind of self-betrayal.
prohibits bribes and kickbacks to foreign officials. Chiquita claimed it was the victim of extortion and
had no choice. However, for its actions, it eventually paid $25 million in fines to the U.S. government. In
2007, a group of Colombians filed a lawsuit against the company under the Alien Tort Claims Act,
alleging that, because of its illegal payments, Chiquita was “complicit in extrajudicial killings, torture,
forced
disappearances, and crimes against humanity” perpetrated against plantation workers by the guerilla
36
“death squads.” The case went to the U.S. Supreme Court in 2015, but the Court declined to hear it.
Critical Thinking
• What do you suppose Confucius and Aristotle, teachers of virtue ethics, would say about the
Colombians’ case, and how would they go about assessing responsibility? What would they identify
as the crime committed? Would they think the executives at Chiquita had acted prudently,
cravenly, or deceitfully?
• What would you do if confronted with this case?
LINK TO LEARNING
The Business and Human Rights Resource Centre provides helpful, detailed information concerning
ethics cases and the role of business in society, including more information about the Chiquita
lawsuit (https://openstax.org/l/53Chiquita) and other interesting cases.
Although the ultimate aim of Aristotelian virtue ethics was eudaimonia, later philosophers began to question
this notion of happiness. If happiness consists of leading the good life, what is good? More importantly, who
decides what is good? Jeremy Bentham (1748–1842), a progressive British philosopher and jurist of the
Enlightenment period, advocated for the rights of women, freedom of expression, the abolition of slavery and
of the death penalty, and the decriminalization of homosexuality. He believed that the concept of good could
be reduced to one simple instinct: the search for pleasure and the avoidance of pain. All human behavior
could be explained by reference to this basic instinct, which Bentham saw as the key to unlocking the workings
of the human mind. He created an ethical system based on it, called utilitarianism. Bentham’s protégé, John
Stuart Mill (1806–1873), refined Bentham’s system by expanding it to include human rights. In so doing, Mill
reworked Bentham’s utilitarianism in some significant ways. In this section we look at both systems.
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Chapter 2 Ethics from Antiquity to the Present 45
Maximizing Utility
During Bentham’s lifetime, revolutions occurred in the American colonies and in France, producing the Bill of
Rights and the Déclaration des Droits de l’Homme (Declaration of the Rights of Man), both of which were based
on liberty, equality, and self-determination. Karl Marx and Friedrich Engels published The Communist
Manifesto
37
in 1848. Revolutionary movements broke out that year in France, Italy, Austria, Poland, and elsewhere.
In addition, the Industrial Revolution transformed Great Britain and eventually the rest of Europe from an
agrarian (farm-based) society into an industrial one, in which steam and coal increased manufacturing
production dramatically, changing the nature of work, property ownership, and family. This period also
included advances in chemistry, astronomy, navigation, human anatomy, and immunology, among other
sciences.
Given this historical context, it is understandable that Bentham used reason and science to explain human
behavior. His ethical system was an attempt to quantify happiness and the good so they would meet the
conditions of the scientific method. Ethics had to be empirical, quantifiable, verifiable, and reproducible
across time and space. Just as science was beginning to understand the workings of cause and effect in the
body, so ethics would explain the causal relationships of the mind. Bentham rejected religious authority and
wrote a rebuttal to the Declaration of Independence in which he railed against natural rights as “rhetorical
38
nonsense, nonsense upon stilts.” Instead, the fundamental unit of human action for him was utility—solid,
certain, and factual.
What is utility? Bentham’s fundamental axiom, which underlies utilitarianism, was that all social morals and
government legislation should aim for producing the greatest happiness for the greatest number of people.
Utilitarianism, therefore, emphasizes the consequences or ultimate purpose of an act rather than the
character of the actor, the actor’s motivation, or the particular circumstances surrounding the act. It has these
characteristics: (1) universality, because it applies to all acts of human behavior, even those that appear to be
done from altruistic motives; (2) objectivity, meaning it operates beyond individual thought, desire, and
perspective; (3) rationality, because it is not based in metaphysics or theology; and (4) quantifiability in its
39
reliance on utility.
E T H I C S A C R O S S T I M E A N D C U LT U R E S
The “Auto-Icon”
In the spirit of utilitarianism, Jeremy Bentham made a seemingly bizarre request concerning the
disposition of his body after his death. He generously donated half his estate to London University, a
public university open to all and offering a secular curriculum, unusual for the times. (It later became
University College London.) Bentham also stipulated that his body be preserved for medical instruction
(Figure 2.7) and later placed on display in what he called an “auto-icon,” or self-image. The university
agreed, and Bentham’s body has been on display ever since. Bentham wanted to show the importance of
donating one’s remains to medical science in what was also perhaps his last act of defiance against
convention. Critics insist he was merely eccentric.
46 Chapter 2 Ethics from Antiquity to the Present
Figure 2.7 At his request, Jeremy Bentham’s corpse was laid out for public dissection, as depicted here
by H.H. Pickersgill in 1832. Today, his body is on display as an “auto-icon” at University College, London,
a university he endowed with about half his estate. His preserved head is also kept at the college,
separate
from the rest of the body.) (credit: “Mortal Remains of Jeremy Bentham, 1832” by Weld Taylor and H. H.
Pickersgill/Wikimedia Commons, CC BY 4.0)
Critical Thinking
• What do you think of Bentham’s final request? Is it the act of an eccentric or of someone deeply
committed to the truth and courageous enough to act on his beliefs?
• Do you believe it makes sense to continue to honor Bentham’s request today? Why is it honored?
Do requests have to make sense? Why or why not?
Bentham was interested in reducing utility to a single index so that units of it could be assigned a numerical
and even monetary value, which could then be regulated by law. This utility function measures in “utils” the
value of a good, service, or proposed action relative to the utilitarian principle of the greater good, that is,
increasing happiness or decreasing pain. Bentham thus created a “hedonic calculus” to measure the utility of
proposed actions according to the conditions of intensity, duration, certainty, and the probability that a
40
certain consequence would result. He intended utilitarianism to provide a reasoned basis for making
judgments of value rather than relying on subjectivity, intuition, or opinion. The implications of such a system
on law and public policy were profound and had a direct effect on his work with the British House of
Commons, where he was commissioned by the Speaker to decide which bills would come up for debate and
vote. Utilitarianism provided a way of determining the total amount of utility or value a proposal would
produce relative to the harm or pain that might result for society.
character might obscure decision-making. Rather than making moral judgments, utilitarianism weighed acts
based on their potential to produce the most good (pleasure) for the most people. It judged neither the good
nor the people who benefitted. In Bentham’s mind, no longer would humanity depend on inaccurate and
outdated moral codes. For him, utilitarianism reflected the reality of human relationships and was enacted in
the world through legislative action.
To illustrate the concept of consequentialism, consider the hypothetical story told by Harvard psychologist
Fiery Cushman. When a man offends two volatile brothers with an insult, Jon wants to kill him; he shoots
but misses. Matt, who intends only to scare the man but kills him by accident, will suffer a more severe
penalty than his brother in most countries (including the United States). Applying utilitarian reasoning, can
you say which brother bears greater guilt for his behavior? Are you satisfied with this assessment of
41
responsibility? Why or why not?
LINK TO LEARNING
A classic utilitarian dilemma considers an out-of-control streetcar and a switch operator’s array of bad
choices. Watch the video on the streetcar thought experiment (https://openstax.org/l/53streetcar) and
consider these questions. How would you go about making the decision about what to do? Is there a
right or wrong answer? What values and criteria would you use to make your decision about whom to
save?
Mill’s father, James, was a contemporary and associate of Bentham’s who made sure his son was tutored in a
rigorous curriculum. According to Mill, at an early age he learned enough Greek and Latin to read the
45
historians Herodotus and Tacitus in their original languages. His studies also included algebra, Euclidean
46
geometry, economics, logic, and calculus. His father wanted him to assume a leadership position in
47
Bentham’s political movement, known as the Philosophical Radicals. Unfortunately, the intensity and
duration of Mill’s schooling—utilitarian conditions of education—were so extreme that he suffered a nervous
breakdown at the age of twenty years. The experience left him dissatisfied with Bentham’s philosophy of utility
and social reform. As an alternative, Mill turned to Romanticism and poets like Coleridge and Johann Wolfgang
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Goethe (1749–1832). What he ended up with, however, was not a rejection of utilitarianism but a synthesis of
utility and human rights.
Why rights? No doubt, Mill’s early life and formation had a great deal to do with his championing of individual
freedom. He believed the effort to achieve utility was unjustified if it coerced people into doing things they
did
48 Chapter 2 Ethics from Antiquity to the Present
not want to do. Likewise, the appeal to science as the arbiter of truth would prove just as futile, he believed, if it did not temper facts
with compassion. “Human nature is not a machine to be built after a model, and set to do exactly the work prescribed for it, but a tree,
which requires to grow and develop itself on all sides, according to the tendency of the inward forces which make it a living thing,” he
49
wrote. Mill was interested in humanizing Bentham’s system by ensuring that everyone’s rights were protected, particularly the
minority’s, not because rights were God given but because that was the most direct path to truth. Therefore, he introduced the harm
principle, which states that the “only purpose for which power can be rightfully exercised over any member of a civilized community,
50
against his will, is to prevent harm to others. His own good, either physical or moral, is not a sufficient warrant.”
To be sure, there are limitations to Mill’s version of utilitarianism, just as there were with the original. For one, there has never been a
satisfactory definition of “harm,” and what one person finds harmful another may find beneficial. For Mill, harm was defined as the set
back of one’s interests. Thus, harm was defined relative to an
individual’s interests. But what role, if any, should society play in defining what is harmful or in determining who is harmed by
someone’s actions? For instance, is society culpable for not intervening in cases of suicide, euthanasia, and other self-destructive
activities such as drug addiction? These issues have become part of the public debate in recent years and most likely will continue to be
as such actions are considered in a larger social context. We may also define intervention and coercion differently depending on where
we fall on the political spectrum.
Considering the social implications of an individual action highlights another limitation of utilitarianism, and one that perhaps makes
more sense to us than it would to Bentham and Mill, namely, that it makes no provision for emotional or cognitive harm. If the harm is
not measurable in physical terms, then it lacks significance. For example, if a reckless driver today irresponsibly exceeds the speed
limit, crashes into a concrete abutment, and kills himself while totaling his vehicle (which he owns), utilitarianism would hold that in the
absence of physical harm to others, no one suffers except the driver. We may not arrive at the same conclusion. Instead, we might hold
that the driver’s survivors and friends, along with society as a whole, have suffered a loss. Arguably, all of us are diminished by the
recklessness of his act.
LINK TO LEARNING
Watch this video for a summary of utilitarian principles (https://openstax.org/l/53utilitarian) along with a literary example of a central
problem of utility and an explanation of John Stuart Mill’s utilitarianism.
As a practical way of measuring value, Bentham’s system also plays a role in risk management. The utility This OpenStax book is available for free
at http://cnx.org/content/col25722/1.3
function, or the potential for benefit or loss, can be translated into decision-making, risk assessment, and
strategic planning. Together with data analytics, market evaluations, and financial projections, the utility
function can provide managers with a tool for measuring the viability of prospective projects. It may even
give them an opportunity to explore objections about the mechanistic and impractical nature of
utilitarianism, especially from a customer perspective.
Utilitarianism could motivate individuals within the organization to take initiative, become more responsible,
and act in ways that enhance the organization’s reputation rather than tarnish it. Mill’s On Liberty (Figure 2.8),
a short treatment of political freedoms in tension with the power of the state, underscored the importance of
expression and free speech, which Mill saw not as one right among many but as the foundational right,
reflective of human nature, from which all others rights derive their meaning. And therein lay the greatest
utility for society and business. For Mill, the path to utility led through truth, and the main way of arriving at
truth was through a deliberative process that encouraged individual expression and the clash of ideas.
Figure 2.8 In On Liberty (1859) (a), John Stuart Mill (b) combined utility with human rights. He emphasized
the importance of free speech for correcting error and creating value for the individual and society. (credit a:
modification of “On Liberty (first edition title page via facsimile)” by “Yodin”/Wikimedia Commons, Public
Domain; credit b: modification of “John Stuart Mill by London Stereoscopic Company, c1870” by
“Scewing”/Wikimedia Commons, Public Domain)
As for Mill’s harm principle, the first question in trying to arrive at a business decision might be, does this
action harm others? If the answer is yes, we must make a utilitarian calculation to decide whether there is still
a greater good for the greatest number. Then we must ask, who are the others we must consider? All
stakeholders? Only shareholders? What does harm entail, and who decides whether a proposed action might
be harmful? This was the reason science and debate were so important to Mill, because the determination
could not be left to public opinion or intuition. That was how tyranny started. By introducing deliberation, Mill
was able to balance utility with freedom, which was a necessary condition for utility.
Where Bentham looked to numerical formulas for determining value, relying on the objectivity of
numbers, Mill sought value in reason and in the power of language to clarify where truth lies. The lesson
for contemporary business, especially with the rise of big data, is that we need both numbers and
reasoned principles. If we apply the Aristotelian and Confucian rule of the mean, we see that balance of
responsibility
50 Chapter 2 Ethics from Antiquity to the Present and profitability makes the difference between sound business practices
Unlike Bentham and Mill, Immanuel Kant (1724–1804) was not concerned with consequences of one’s
actions or the harm caused to one’s individual interests. Instead, he focused on motives and the willingness
of individuals to act for the good of others, even though that action might result in personal loss. Doing
something for the right reason was much more important to Kant than any particular outcome.
Figure 2.9 First published in 1781, Immanuel Kant’s Critique of Pure Reason provided a new system for
understanding experience and reality. It defended religious faith against atheism and the scientific
method against the skepticism of the Enlightenment. (credit a: modification of “Immanuel Kant (1724-
1804)” by “Daube aus Böblingen”/Wikimedia Commons, Public Domain; credit b: modification of “Title page
of 1781 edition of Immanuel Kant's Critique of Pure Reason” by “Tomisti”/Wikimedia Commons, Public
Domain)
Kant credited the skepticism of empirical philosopher David Hume (1711–1776) with awakening him from
“dogmatic slumber,” although he disagreed with Hume, who claimed that the mind did not exist at all but was
52
the result of mental associations derived from sensory experience. For Kant, reality could be discerned not
through reasoning or sensory experience alone but only by understanding the nature of the human mind.
Kant argued that sensory experience did not create the mind but rather that the mind created experience
through its internal structures. And within the mind’s complex structures there also existed an inherent and
unconditional duty to act ethically, which Kant called the “categorical imperative,” first outlined in Groundwork
53
of the Metaphysic of Morals (1785).
In its initial form, Kant’s described his concept of the categorical imperative as follows: “Act only according to
54
that maxim whereby you can, at the same time, will that it should become a universal law.” Kant’s categorical
(or unconditional) imperative has practical applications for the study of ethics. The categorical imperative
contains two major suppositions: (1) We must act on the basis of goodwill rather than purely on self-interested
motives that benefit ourselves at the expense of others; (2) we must never treat others as means toward ends
benefitting ourselves without consideration of them also as ends in themselves. Kant held that observing the
categorical imperative as we consider what actions to take would directly lead to ethical actions on our part.
LINK TO LEARNING
Watch this video about the categorical imperative (https://openstax.org/l/53categorical) to learn more.
How do you see the imperative working in your own life? Within your family? In your personal and
professional relationships? Does Kant’s understanding of the relationship between art and beauty
accord with your own?
In Kant’s view, rationalism and empiricism prevented people from perceiving the truth about their own nature.
What was that truth? What was sufficient to constitute it? Kant identified an a priori world of knowledge and
understanding in which truth lay in the structures and categories of the mind that were beyond perception
and reason. This was a radical concept for the times.
In the end, Kant’s systematic analysis of knowing and understanding provided a much-needed counterweight
to the logic of Enlightenment rationalism. The existence of the mental structures he proposed has even been
confirmed today. For instance, the scientific consensus is that humans are born with cognitive structures
designed specifically for language acquisition and development. Even more surprising, there may be similar
55
cognitive structures for morality, conscience, and moral decision-making. So, it is quite possible that
conscience, if not happiness, may have a genetic component after all, although Kant himself did not believe
the categories of the understanding or the a priori structures of the mind were biological.
LINK TO LEARNING
Read a good survey of Kant’s critique of Enlightenment rationalism and of empiricism
(https://openstax.org/l/53KantCritique) in this article.
52 Chapter 2 Ethics from Antiquity to the Present
There is a definite contrast between utilitarianism, even Mill’s version, and Kant’s system of ethics, known as
deontology, in which duty, obligation, and good will are of the highest importance. (The word is derived
56
from the Greek deon, meaning duty, and logos again, here meaning organization for the purpose of study. )
An ethical decision requires us to observe only the rights and duties we owe to others, and, in the context of
business, act on the basis of a primary motive to do what is right by all stakeholders. Kant was not
concerned with utility or outcome—his was not a system directed toward results. The question for him was
not how to attain happiness but how to become worthy of it.
Rather like Aristotle and Confucius, Kant taught that the transcendent aspects of human nature, if followed,
would lead us inevitably to treat people as ends rather than means. To be moral meant to renounce
uninformed dogmatism and rationalism, abide by the categorical imperative, and embrace freedom, moral
sense, and even divinity. This was not a lofty or unattainable goal in Kant’s mind, because these virtues
constituted part of the systematic structuring of the human mind. It could be accomplished by living
truthfully or, as we say today, authentically. Such a feat transcended the logic of both rationalism and
empiricism.
Les Misérables
You may have seen the very popular Broadway show or movie Les Misérables, based on Victor Hugo’s epic
nineteenth-century French novel of the same name. The main character, Jean Valjean, steals a loaf of
bread to feed his sister’s starving family and is arrested and sent to prison. If we apply conventional
reasoning and principles of law to his crime, Valjean genuinely is guilty as charged and we do not need
to consider any extenuating circumstances. However, in a Kantian ethical framework, we would take into
account Valjean’s motives as well as his duty to treat his sister’s family as ends in themselves who
deserve to live. Valjean’s fate demonstrates what might occur when there is a gap between the legal and
the moral. Clearly, Valjean broke the law by stealing the bread. However, he acted morally by correcting
a wrong and possibly saving human lives. According to Kantian ethics, Valjean may have been ethical in
stealing bread for his family, particularly because the action was grounded in good will and provided
benefit to others more than to himself.
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Chapter 2 Ethics from Antiquity to the Present 53
Critical Thinking
• It has been said that in Kantian ethics, duty comes before beauty and morality before happiness.
Can you think of other instances when it is appropriate to break one moral code to satisfy
another, perhaps greater one? What are the deciding factors in each case?
• What would you do if you were Jean Valjean?
On the other hand, Kant’s categorical imperative is just that: categorical or unconditional. It calls for morally
upright behavior regardless of external circumstance or the historical context of a proposed act or decision.
Kant affirmed that “the moral law is an imperative, which commands categorically, because the law is
60
unconditioned.” Unconditional ethics could be a challenge for a global organization dealing with suppliers,
customers, and competitors in sometimes vastly different cultures. It raises a larger philosophical issue:
namely, was Kant correct in believing that morality and mental categories are independent of experience?
Or can they be culturally conditioned, and, if so, does that make them relative rather than absolute, as Kant
believed them to be?
This question whether ethics is universal is distinctly Kantian, because Kant believed that not only must a
moral agent act with others’ interests in mind and have the right intentions, but also that the action be
universally applicable. Think of how Kantian ethics might be applied not just on an individual level but
throughout an organization, and then society. Kant would judge a corporate act to be ethical if it benefitted
others at the same time it benefitted company leadership and stockholders, and if it did not place their
interests above those of other stakeholders. If loyalty to a coworker conflicted with loyalty to a supervisor or
the organization, for instance, then acts resulting from such loyalty might not meet the conditions of
deontology. Either the supervisor or the company would be treated as a means rather than an end. Although
the qualitative or humanizing element of Kantian ethics has broad appeal, it runs into limitations in an actual
business setting. Whether the limitations have good or bad effects depends on the organization’s culture and
leadership. In general, however, most companies do not adhere to strict Kantian theories, because they look
to the outcome of their decisions rather than focusing on motives or intentions.
54 Chapter 2 Ethics from Antiquity to the Present
CASES FROM THE REAL WORLD
Samsung
In the fall of 2016, Samsung Electronics experienced a massive public relations disaster when its Galaxy
Note 7 smartphones started exploding due to faulty batteries and casings. Initially, the company
denied there were any technical problems. Then, when it became obvious the exploding phones posed
a safety
and health threat (they were banned from airplanes), Samsung accused its suppliers of creating the
problem. In reality, the rush to beat Apple’s iPhone 7 release date was the most likely reason corners
were cut in production. Samsung finally owned up to the problem, recalled more than two million
phones worldwide, and replaced them with new, improved Galaxy Note 7s.
The company’s response and its replacement of the phones went a long way toward defusing the
disaster and even boosting the company’s share price. Whether management knew it, its response was
Kantian. Samsung focused on the end (i.e., customer safety and satisfaction) with the motive of doing
the ethically responsible thing. Although some might argue the company could have done far more
and much more quickly, perhaps it still acted in accordance with the categorical imperative. What do
you think?
Critical Thinking
• How might the categorical imperative become a part of organizational culture? Could it ever work in
business?
• Do you see the categorical imperative as applicable to your own interests and hope for a career?
This chapter began with an image of Justice holding aloft scales as a symbol of equilibrium and fairness. It
ends with an American political philosopher for whom the equal distribution of resources was a primary
concern. John Rawls (1921–2002) wanted to change the debate that had prevailed throughout the 1960s and
1970s in the West about how to maximize wealth for everyone. He sought not to maximize wealth, which was
a utilitarian goal, but to establish justice as the criterion by which goods and services were distributed among
the populace. Justice, for Rawls, had to do with fairness—in fact, he frequently used the expression justice as
fairness—and his concept of fairness was a political one that relied on the state to take care of the most
disadvantaged. In his justice theory, offered as an alternative to the dominant utilitarianism of the times, the
idea of fairness applied beyond the individual to include the community as well as analysis of social injustice
with remedies to correct it.
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Chapter 2 Ethics from Antiquity to the Present 55
Justice Theory
Rawls developed a theory of justice based on the Enlightenment ideas of thinkers like John Locke (1632–
1704) and Jean-Jacques Rousseau (1712–1778), who advocated social contract theory. Social contract theory
held that the natural state of human beings was freedom, but that human beings will rationally submit to
some restrictions on their freedom to secure their mutual safety and benefit, not subjugation to a monarch,
no matter how benign or well intentioned. This idea parallels that of Thomas Hobbes (1588–1679), who
interpreted human nature to be selfish and brutish to the degree that, absent the strong hand of a ruler,
chaos would result. So people willingly consent to transfer their autonomy to the control of a sovereign so
their very lives and property will be secured. Rousseau rejected that view, as did Rawls, who expanded social
contract theory to include justice as fairness. In A Theory of Justice (1971), Rawls introduced a universal
system of fairness and a set of procedures for achieving it. He advocated a practical, empirically verifiable
system of governance that would be political, social, and economic in its effects.
Rawls’s justice theory contains three principles and five procedural steps for achieving fairness. The principles
61
are (1) an “original position,” (2) a “veil of ignorance,” and (3) unanimity of acceptance of the original position.
By original position, Rawls meant something akin to Hobbes’ understanding of the state of nature, a
hypothetical situation in which rational people can arrive at a contractual agreement about how resources are
to be distributed in accordance with the principles of justice as fairness. This agreement was intended to
reflect not present reality but a desired state of affairs among people in the community. The veil of ignorance
(Figure 2.10) is a condition in which people arrive at the original position imagining they have no identity
regarding age, sex, ethnicity, education, income, physical attractiveness, or other characteristics. In this way,
they reduce their bias and self-interest. Last, unanimity of acceptance is the requirement that all agree to
the contract before it goes into effect. Rawls hoped this justice theory would provide a minimum guarantee of
rights and liberties for everyone, because no one would know, until the veil was lifted, whether they were
male, female, rich, poor, tall, short, intelligent, a minority, Roman Catholic, disabled, a veteran, and so on.
The five procedural steps, or “conjectures,” are (1) entering into the contract, (2) agreeing unanimously to the
contract, (3) including basic conditions in the contract such as freedom of speech, (4) maximizing the welfare
62
of the most disadvantaged persons, and (5) ensuring the stability of the contract. These steps create a
system of justice that Rawls believed gave fairness its proper place above utility and the bottom line. The steps
also supported his belief in people’s instinctual drive for fairness and equitable treatment. Perhaps this is best
seen in an educational setting, for example, the university. By matriculating, students enter into a contract
that includes basic freedoms such as assembly and speech. Students at a disadvantage (e.g., those burdened
with loans, jobs, or other financial constraints) are accommodated as well as possible. The contract between
the university and students has proven to be stable over time, from generation to generation. This same
procedure applies on a micro level to the experience in the classroom between an individual teacher and
students. Over the past several decades—for better or worse—the course syllabus has assumed the role of a
written contract expressing this relationship.
Rawls gave an example of what he called “pure procedural justice” in which a cake is shared among several
63
people. By what agreement shall the cake be divided? Rawls determined that the best way to divide the cake
is to have the person slicing the cake take the last piece. This will ensure that everyone gets an equal amount.
What is important is an independent standard to determine what is just and a procedure for implementing
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it.
56 Chapter 2 Ethics from Antiquity to the Present
The Problem of Redistribution
Part of Rawls’s critique of utilitarianism is that its utility calculus can lead to tyranny. If we define pleasure as
that which is popular, the minority can suffer in terrible ways and the majority become mere numbers. This
became clear in Mills’s attempt to humanize Bentham’s calculus. But Mills’s harm principle had just as bad an
effect, for the opposite reason. It did not require anyone to give up anything if it had to be done through
coercion or force. To extend Rawls’s cake example, if one person owned a bakery and another were starving,
like Jean Valjean’s sister in Les Misérables, utilitarianism would force the baker to give up what he had to satisfy
the starving person without taking into account whether the baker had greater debts, a sick spouse requiring
medical treatment, or a child with educational loans; in other words, the context of the situation matters, as
opposed to just the consequences. However, Mill’s utilitarianism, adhering to the harm principle, would leave
the starving person to his or her own devices. At least he or she would have one slice of cake. This was the
problem of distribution and redistribution that Rawls hoped to solve, not by calculating pleasure and pain,
65
profit and loss, but by applying fairness as a normative value that would benefit individuals and society.
The problem with this approach is that justice theory is a radical, egalitarian form of liberalism in which
redistribution of material goods and services occurs without regard for historical context or the presumption
many share that it inherently is wrong to take the property legally acquired by one and distribute it to
another. Rawls has been criticized for promoting the same kind of coercion that can exist in utilitarianism but
on the basis of justice rather than pleasure. Justice on a societal level would guarantee housing, education,
medical treatment, food, and the basic necessities of life for everyone. Yet, as recent political campaigns have
shown, the question of who will pay for these guaranteed goods and services through taxes is a contentious
one. These are not merely fiscal and political issues; they are philosophical ones requiring us to answer
questions of logic and, especially in the case of justice theory, fairness. And, naturally, we must ask, what is
fair?
Rawls’s principles and steps assume that the way in which the redistribution of goods and services occurs
would be agreed upon by people in the community to avoid any fairness issues. But questions remain. For
one, Rawls’s justice, like the iconic depiction, is blind and cannot see the circumstances in which goods and
services are distributed. Second, we may question whether a notion of fairness is really innate. Third, despite
the claim that justice theory is not consequentialist (meaning outcomes are not the only thing that matters),
there is a coercive aspect to Rawls’s justice once the contract is in force, replacing utility with mandated
fairness. Fourth, is this the kind of system in which people thrive and prosper, or, by focusing on the worst
off, are initiative, innovation, and creativity dampened on the part of everyone else? Perhaps the most
compelling critic of Rawls in this regard was his colleague at Harvard University, Robert Nozick (1938–2002),
66
who wrote A Theory of Entitlement (1974) as a direct rebuttal of Rawlsian justice theory. Nozick argued that
the power of the state may never ethically be used to deprive someone of property he or she has legally
obtained or inherited in order to distribute it to others who are in need of it.
Still, one of the advantages of justice theory over the other ethical systems presented in this chapter is its
emphasis on method as opposed to content. The system runs on a methodology or process for arriving at
truth through the underlying value of fairness. Again, in this sense it is similar to utilitarianism, but, by
requiring unanimity, it avoids the extremes of Bentham’s and Mill’s versions. As a method in ethics, it can be
applied in a variety of ways and in multiple disciplines, because it can be adapted to just about any value-
laden content. Of course, this raises the question of content versus method in ethics, especially because ethics
has been defined as a set of cultural norms based on agreed-upon values. Method may be most effective in
determining what those underlying values are, rather than how they are implemented.
This OpenStax book is available for free at http://cnx.org/content/col25722/1.3
Figure 2.10 The “veil of ignorance” in Rawls’s “original position.” Those in the original position have no idea
who they will be once the veil (wall) has been lifted. Rawls thought such ignorance would motivate people in
the community to choose fairly. (attribution: Copyright Rice University, OpenStax, under CC BY 4.0 license)
LINK TO LEARNING
The “veil of ignorance” is a central concept in Rawls’s justice theory. What is it? What does it attempt to
accomplish? Watch this video on how “ignorance can improve decision-making” (https://openstax.org/l/
53Rawls) to explore further.
Justice in Business
Although no ethical framework is perfect or fits a particular era completely, Rawls’s justice theory has distinct
advantages when applied to business in the twenty-first century. First, as businesses become interdependent
and globalized, they must pay more attention to quality control, human resources, and leadership in diverse
settings. What will give greater legitimacy to an organization in these areas than fairness? Fairness is a value
that is cross-cultural, embraced by different social groups, and understood by nearly everyone. However,
what is considered fair depends on a variety of factors, including underlying values and individual
characteristics like personality. For instance, not everyone agrees on whether or how diversity ought to be
achieved. Neither is there consensus about affirmative action or the redistribution of resources or income.
What is fair to some may be supremely unfair to others. This presents an opportunity for engaged debate and
participation among the members of Rawls’s community.
Second, as we saw earlier, justice theory provides a method for attaining fairness, which could make it a
58 Chapter 2 Ethics from Antiquity to the Present
practical and valuable part of training at all levels of a company. The fact that its content—justice and
fairness—is more accessible to contemporary people than Confucian virtue ethics and more flexible
than Kant’s categorical imperative makes it an effective way of dealing with stakeholders and
organizational culture.
Justice theory may also provide a seamless way of engaging in corporate social responsibility outwardly and
employee development inwardly. Fairness as a corporate doctrine can be applied to all stakeholders and
define a culture of trust and openness, with all the corresponding benefits, in marketing, advertising, board
development, client relations, and so on. It is also an effective way of integrating business ethics into the
organization so ethics is no longer seen as the responsibility solely of the compliance department or legal
team. Site leaders and middle managers understand fairness; employees probably even more so, because
they are more directly affected by the lack of it. Fairness, then, is as much part of the job as it is an ongoing
process of an ethics system. It no doubt makes for a happier and more productive workforce. An
organization dedicated to it can also play a greater role in civic life and the political process, which, in turn,
helps everyone.
Critical Thinking
• What are you willing to give up so that seniors—whoever they might be—are afforded care and
security in their later years?
• Should you have to pay into a system that provides medical coverage to other people less health
conscious than you? Why or why not?
beings will rationally submit to some restrictions on their freedom to secure their mutual safety
and benefit
unanimity of acceptance into effect utility function
in Rawls’s theory, the requirement that all agree to the contract a measure, in “utils,” of the value of a good, service, or proposed
before it goes action relative to the
utilitarian principle of the greater good, that is, increasing happiness or decreasing pain
veil of ignorance in Rawls’s theory, a condition in which people arrive at the original
position imagining they
have no identity regarding age, sex, ethnicity, education, income, physical attractiveness, or
other characteristics; in this way, they reduce their bias and self-interest
virtue ethics honor, courage)
an ethical system based on the exercise of certain virtues (loyalty,
emphasizing the formation of character
Summary
2.1 The Concept of Ethical Business in Ancient Athens
The role of ethics in Athens during Greece’s Golden Age (fifth century BCE) was substantial. Aristotle focused
on the role of virtue in developing individual character and social stability. He believed a person’s actions
60 Chapter 2 Ethics from Antiquity to the Present
determined whether he or she was virtuous, and the point of the virtuous life was happiness, or eudaimonia.
Aristotle identified two types of virtues: intellectual and moral. Intellectual virtues were acquired through
learning and served as guides to behavior by helping the individual discover truth. Moral virtues were
acquired through habit and built character by helping someone pursue what is beneficial and avoid what is
harmful in daily life. Aristotle considered phrónēsis, or prudence, the most important virtue, because of its
practical application.
The thirteenth-century philosopher and theologian Thomas Aquinas agreed with Aristotle that to act
dishonorably casts disrepute on all concerned. Ends and means had to be aligned, particularly in
business, which provided people’s livelihoods and secured the economic health of the city-state.
2.2 Ethical Advice for Nobles and Civil Servants in Ancient China
Confucius (551–479 BCE) attempted to revise ancient Chinese traditions and mores to counter the social
chaos of his times. His system of virtue ethics emphasized relationships and, when followed faithfully, led to
the dao of humanity, that is, true harmonious living. There were three ways to achieve dao: “whole-hearted
sincerity and truthfulness,” the “constant mean,” and “expediency” (quan). Someone who lived virtuously
became more humane, which resulted in a flourishing individual and an ordered nation.
In Confucian virtue ethics, business was viewed as a network of relationships dependent on trust and
righteousness. Righteousness was a form of justice that compelled everyone to act in good faith. Considered
in this way, justice allows for wealth creation, investment, and strategic planning as long as everyone fulfills
his or her role and acts in accordance with the basic pattern of relationships Confucius identified.
Aristotle and Confucius each constructed an ethical system based on virtue, with Aristotle’s anticipated result
being happiness and Confucius’s being harmony. For Aristotle, happiness consisted of the search for truth.
Confucius looked to create a system that put an end to civil chaos. Although both systems relied on reason
and control to achieve their ends, Aristotle placed the locus of ethical behavior on individuals, but he held
that a moral upbringing and good political governance also contributed to the formation of moral character.
Confucius saw this locus in the family, which provided the basic pattern of relationships for personal and
professional life. Reason prevailed throughout, as in the cultivation of a more just and humane person.
In a business context, reason and control bear directly on management, leadership, and corporate culture.
They constitute a way of cultivating individual virtue and corporate ethos such that the two go hand in hand.
The environment or culture of an organization needs individuals of character who can follow their
conscience and experience moral conversion. We might envision the emergence of universal values like
reason and control that nurture both the individual and the organization.
Jeremy Bentham developed a quantifiable method for determining what was beneficial and what was
detrimental. He called this method utilitarianism, because its basic unit, the “util,” acted like a monetary unit.
Bentham’s protégé, John Stuart Mill, refined this system to include human rights. His “harm principle” is an
outstanding element in his version of utilitarianism.
Utilitarianism in business can lead to a bottom-line mentality in which decisions are based on achieving the
greatest good for the organization as it pertains to the greatest number of stakeholders, including
shareholders and all others affected by the actions of the organization The outcome is the determining
factor, not the intent of the actors or whether people are treated humanely.
Rejecting dogmatic thinking of all kinds, Kant believed people were not the sum total of reactions to stimuli
but complex beings with innate structures of understanding and inborn moral sensitivity. In his view,
everyone had a duty to obey a categorical imperative to do the just and moral thing, regardless of the
consequences. The outcome of an act was not as important as the intent of the actor and whether the act
treated others as ends or means. Here, Kant reflected Aristotelian virtue ethics in seeing people as ends in
themselves and not as “living tools” or human resources.
This view does not typically govern most management decisions in business; arguably, utilitarianism is the
efficient, go-to theory on which corporate leaders often rely. Yet a Kantian understanding of business ethics
remains viable even today and sometimes displays itself in the most compassionate and humane actions
that evolving commercial organizations take.
Rawls developed a theory of justice based on social contract theory, holding that the natural state of human
beings is freedom, not subjugation to a monarch, no matter how benign or well intentioned. Rawls’s theory
views human beings as inherently good and, echoing Kant, inclined toward moral rectitude and action. In
his theory, Rawls included the “veil of ignorance,” which ensures objectivity in our choices and the avoidance
of
bias. Criticism of Rawls’s theory focuses primarily on the issue of distribution, because decisions made
in ignorance can neither reward innovation and enterprise nor encourage risk.
Assessment Questions
1. Which of the following is not an intellectual virtue according to Aristotle?
A. the basic order of life
B. knowledge
C. wisdom
D. prudence
4. True or false? It is possible to act deliberately and shrewdly in a good way or toward a good
8. True or false? Confucian virtue ethics is similar to the Aristotelian version in that both are very practical.
9. True or false? According to Confucius, the hope for reform of Chinese society was a centralized
planning system.
10. How can wholeheartedness and sincerity serve as models of risk assessment?
11. “Control” as used in this section does not refer to which of the following?
A. reverence
B. phrónēsis
C. temperance
D. Confucian self-regulation
13. True or false? In both East and West, the means used to achieve a certain end are often more
important than the end.
14. True or false? Individualism was the greatest value in Confucian ethics.
17. True or false? John Stuart Mill’s emphasis on human rights distinguishes him from Jeremy Bentham.
19. Does the value that John Stuart Mill placed on the deliberative process and individual expression as
the main ways of arriving at truth have any relevance for political debate today?
21. True or false? Immanuel Kant contended that people often interpret reason subjectively.
22. True or false? A criticism of Immanuel Kant’s categorical imperative is that its refusal ever to permit
exceptions in acting ethically is impossible to observe in life.
23. What are the essential differences between John Stuart Mill’s version of utilitarianism and Immanuel Kant’s
deontology?
29. What challenges does Rawlsian justice theory present when it comes to the redistribution of goods
and services in society?
Endnotes
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66 Chapter 2 Ethics from Antiquity to the Present This OpenStax book is available for free at http://cnx.org/content/col25722/1.3
3
Defining and Prioritizing Stakeholders
Figure 3.1 Starbucks, based in Seattle, Washington, is a company with more than 250,000 employees and
locations across the globe. It directly affects countless stakeholders beyond its institutional investors and
millions of customers, from coffee growers and milk producers, to urban and suburban communities and
developers, to local, state, and national governments. (credit: modification of “StarbucksVaughanMills” by
“Raysonho”/Wikimedia Commons, CC0)
Chapter Outline
3.1 Adopting a Stakeholder Orientation
3.2 Weighing Stakeholder Claims
3.3 Ethical Decision-Making and Prioritizing Stakeholders
3.4 Corporate Social Responsibility (CSR)
Introduction
In May 2018, in the wake of a global uproar after two black men in a Philadelphia Starbucks were arrested
while awaiting a friend, Starbucks closed its approximately eight thousand U.S. stores to conduct racial
1
bias training (Figure 3.1). The company also officially changed its policy to allow people to visit its stores
and restrooms without making a purchase, hoping to avoid more incidents like this one (sparked by a
white employee calling 9-1-1 when the men did not buy anything). The two men who were arrested
eventually settled with Starbucks for an undisclosed sum.
As one of the largest beverage retailers in the world, Starbucks directly affects countless stakeholders: food
and drink distributors; coffee and tea growers; milk producers; urban and suburban communities; local, state,
and national governments; more than 300,000 employees and 1,600 institutional investors; and millions of
2
customers. The company’s decision to close its U.S. stores for half a day was financially costly, and the
training session could never fully solve the problem of conscious or unconscious bias. But the firm believed it
was the right thing to do. Why does it matter to its stakeholders what Starbucks does? What role do
68 Chapter 3 Defining and Prioritizing Stakeholders
stakeholders play in a company’s decisions about its ethical behavior, and why?
Have you ever had a stake in a decision someone else was making? Depending on your relationship with
that person and your level of interest in the decision, you may have tried to ensure that the choice made was
in your best interests. Understanding your somewhat analogous role as a stakeholder in businesses large
and small, local and global, will help you realize the value of prioritizing stakeholders in your own
professional life and business decisions.
Stakeholder Relationships
Many individuals and groups inside and outside a business have an interest in the way it brings products or
services to market to turn a profit. These stakeholders include customers, clients, employees, shareholders,
communities, the environment, the government, and the media (traditional and social), among others. All
stakeholders should be considered essential to a business, but not all have equal priority. Different groups of
stakeholders carry different weights with decision makers in companies and assert varying levels of interest
and influence. As we examine their roles, consider how an organization benefits by working with its
stakeholders and how it may benefit from encouraging stakeholders to work together to promote their
mutual interests.
What are the roles of an organization’s many stakeholders? We begin with the internal stakeholders. The
board of directors—in a company large enough to have one—is responsible for defining and evaluating the
ongoing mission of a business after its founding. It broadly oversees decisions about the mission and
direction of the business, the products or services offered, the markets in which the business will operate, and
salary and benefits for the senior officers of the organization. The board also sets goals for income and
profitability. Its most important function is to select and hire the chief executive officer (CEO) or president. The
CEO is usually the only employee who reports directly to the board of directors, and he or she is charged with
implementing the policies the board sets and consulting with them on significant issues pertaining to the
company, such as a dramatic shift in products or services offered or discussions to acquire—or be acquired by
—another firm.
In turn, the CEO hires executives to lead initiatives and carry out procedures in the various functional areas
of the business, such as finance, sales and marketing, public relations, manufacturing, quality control,
human resources (sometimes called human capital), accounting, and legal compliance. Employees in these
areas are internal stakeholders in the success of both their division and the larger corporation. Some interact
with the outside environment in which the business operates and serve as contact points for external
stakeholders, such as media and government, as well.
In terms of external stakeholders for a business, customers certainly are an essential group. They need to be
able to trust that products and services are backed by the integrity of the company. They also provide
reviews, positive or negative, and referrals. Customers’ perceptions of the business matter, too. Those who
learn that a
business is not treating employees fairly, for instance, may reconsider their loyalty or even boycott the
business to try to influence change in the organization. Stakeholder relationships, good and bad, can have
compound effects, particularly when social media can spread word of unethical behavior quickly and
widely.
Key external stakeholders are usually those outside of the organization who most directly influence a
business’s bottom line and hold power over the business. Besides customers and clients, suppliers have a
great deal of influence and command a great deal of attention from businesses of all sizes. Governments
hold power through regulatory bodies, from federal agencies such as the Environmental Protection Agency
to the local planning and zoning boards of the communities in which businesses exist. These latter groups
often exercise influence over the physical spaces where businesses work and try to grow (Figure 3.2).
Figure 3.2 Maryland’s former Lieutenant Governor, Anthony Brown, hosts a 2014 small-business stakeholder
roundtable discussion. Governments consider local businesses to be stakeholders in economic decision-
making. Small businesses have their own local and regional stakeholders, who are influenced by the products
and services they offer and the decisions they make in building their businesses. (credit: modification of “Lt.
Governor Host MBE_Small Business Stakeholders Roundtable Discussion” by “Maryland GovPics”/Flickr, CC BY
2.0)
Businesses are responsible to their stakeholders. Every purchase of a product or a service carries with it a sort
of promise. Buyers promise that their money or credit is good, and businesses promise a level of quality that
will deliver what is advertised. The relationship can quickly get more complex, though. Stakeholders also may
demand that the businesses they patronize give back to the local community or protect the global
environment while developing their products or providing services. Employees may demand a certain level of
remuneration for their work. Governments demand that companies comply with laws, and buyers in business
to-business exchanges (B2B, in business jargon) demand not only high-quality products and services but on
time delivery and responsive maintenance and service should something go wrong. Meeting core obligations
to stakeholders is primarily about delivering good products and services, but it is also about communicating
and preparing for potential problems, whether from within the company or from external circumstances like
a natural disaster.
Any transaction between a stakeholder and a business organization may appear finite. For instance, after
you purchase something from a store you leave and go home. But your relationship with the store probably
continues. You might want to repurchase the item or ask a question about a warranty. The store may have
collected future marketing data about you and your purchases through its customer loyalty program or your
use of a credit card.
Samsung, based in South Korea, is a large, multinational corporation that makes a variety of products,
including household appliances such as washers and dryers. When Samsung’s washers developed a problem
with the spin cycle in 2017, the company warned customers that the machines could become unbalanced and
tip over, and that children should be kept away. The problem persisted, however, and Samsung’s responsibility
and legal exposure increased. The eventual fix was to offer all owners of the particular washer model a full
refund even if the customer did not have a complaint, and to offer free pick up of the machine as well. The
recall covered almost three million washers, which ranged in price from $450 to $1500. By choosing to spend
billions to rectify the problem, Samsung limited its legal exposure to potential lawsuits, settlement of which
would likely have far exceeded the refunds it paid. This example demonstrates the weight of the implicit social
contract between a company and its stakeholders and the potential impact on the bottom line if that contract
is broken.
When a product does not live up to its maker’s claims for whatever reason, the manufacturer needs to correct
the problem to retain or regain customers’ trust. Without this trust, the interdependence between the
company and its stakeholders can fail. By choosing to recognize and repay its customer stakeholders,
Samsung acted at an ethical maximum, taking the strongest possible action to behave ethically in a given
situation. An ethical minimum, or the least a company might do that complies with the law, would have
been to offer the warning and nothing more. This may have been a defensible position in court, but the
warning might not have reached all purchasers of the defective machine and many children could have been
hurt.
Each case of a faulty product or poorly delivered service is different. If laws reach above a minimum
standard, they can grow cumbersome and impede business growth. If businesses adhere only to laws and
ethical minimums, however, they can develop poor reputations and people can be harmed. The ethically
minimal course of action is not illegal or necessarily unethical, but the company choosing it will have failed to
recognize the value of its customers.