Business Ethics A Business: a privately-owned commercial enterprise whose intrinsec purpose is t o make a profit for its owners by means

of legally selling on the free market pr oducts and services designed to satisfy socially accepted human needs. Is profit the sale and ultimate purpose of any business? The answer depends on the broadness of our perspective. narrow point of view: Yes enlarging our perspective: No (efficient functioning = fulfill the needs&wants o f the people) Business needs society as means to make profit its intrinsec purpose. Society needs businesses as a means to satisfy human needs the purpose of market economy. How large should the profit be? maximum the supporters of the narrow perspective LOGICALLY claim that a competit ive management should aim at maximizing the companys profit reasonable the supporters of the large perspective IDEOLOGICALLY claim that a re asonable management should aim at the best fulfillment of the social needs & wan ts. 1 Acting ethically has to do with what my feelings tell me is wrong. Feelings are deeply subjective and intimate psyhological processes. Different in dividuals frequently experience opposite feelings under similar circumstances. o There should be a specific ethical behaviour for each individual o Ethical behaviour must be generally accepted by the members of a certain community. Feelings cant be fully controled by reason, usually their evolution is unpredicta ble and escapes our will power. o One and the same individual should behave ethically in different ways, d epending on his momentary state of mind One cannot decide how he/she feels each moment No rational argument on ethical issues could be possible. o Ethical behaviuor should be consistent, stable, and independent on ones a ccidental emotions Ethical behaviour is governed by our free will Ethical behaviour often makes people argue rationally The Western culture, being rationalistic and individualistic, makes people belie ve that reason is the best instrument of self-interest. Acting rationally means to be selfish, cold and concerned exclusively with your own benefits. This is a fa lse premise. On the other hand, these people suppose that ethical behaviour is more or less a ltruistic, implying to care for the others. This premise is correct. If reason makes us selfish, then acting ethically must imply a strong influence of the heart, which is warm and sensitive. But feelings are not always making us to act ethically. They are morally neutral . One and the same feeling can be associated both with ethical and unethical beh aviour. Ethical behaviour cannot be defined through emotional reactions. 2. Ethical means what is in agreement with my religious beliefs. Facts that deny the idea of a necessary and one-way connection between ethics an d religion: There are true believers who commit immoral deeds and atheits who behave ethical ly. There is a relative independence of the moral code and the dogmatic core of diff erent religions; antajunistic religions(christian, muslim, jewish, budahism etc) suppose compatible, in great part identical, moral rules. Religion is not the only active factor in its connection with morality. The spec ific ethos of a cultural community bears its influence upon the religious faith, giving it a particular flavour and a specific direction.

The value of work in the great Christian confessions: Ortodox Church: divine punishment Roman Catholics: work for God is highly valued, the humble work is depreciated Protestants: profitable business=a sign of divine protection 3.Ethics consists of the standards of behaviour our society accepts. The supporters of this claim make no difference between ethical rules of conduct and traditional customs, specific to a certain cultural community. But the conf usion leads to unacceptable conclusions. The traditional customs are imposed on the individual by the weight of history a nd by the pressure of the crowd. Morality is grounded on the individuals freedom to choose his/her way of life, assuming some responsability. The traditional customs are most often, incomprehensible. Why one must wear black at funeral? Because thats our tradition. Traditional customs are kept by virtue of mimetic conformism. Moral norms are supported with rational arguments. Why should one tell the truth? Because if one told the truth only when convenient, then no o ne would be reliable and the social life would be severely disturbed. Moral norms are kept because of their strong rationality. The traditional customs are always local and particular, being specific to a cer tain cultural environment and historical age. They support an extremely relativi stic perspectives. Moral rules claim to be universal. valid for each and every h uman being, at all times and everywhere. Even though this claim does not stand m ost often, the moral norms are universalizable. 4.Being ethical is doing what the law requires. Each and every law can be evaluated from a moral point of view. Certain legal re gulations could be judged as immoral by individuals or social groups. In principle, keeping the law is a moral duty. A weak individual or public moral ity makes any legal system no matter how well designated on paper inefficient. The law cant and must not regulate every aspect and each moment of our lives. The legal system enforces only a general normative framework of the economic life, that traces the limits of the individual freedom. The law tells us how to proceed, but not what should be done. The law is concern ed with the available means of our action but not with our purposes, decisions o r choices. The law is national, the moral norms claim to be universal. The legalist view le ads to ethical relativism. Moral norms: Most often, ordinary language makes no significant difference between ethics and morality; both words mean the principles of conduct governing an individual or a group. But in its precise meaning, used by scholars, ethics is the study of morality. E thics is a kind of investigation it includes both the activity of investigation as well as the results of that investigation whereas morality is the subject mat ter that ethics investigates. MORALITY=the standard codes that an individual or a group has about what is righ t or wrong, good or evil. The NORMS we have about the kinds of actions we believe are morally right and wr ong. The VALUES are kinds of objects we believe are morally good or bad. Moral norms: never lie, never kill, never steal. At a close examination, we notice that all these rules are both religious comman diments and legal prespcriptions. As a matter of fact, there are no PURE MORAL R ULES, belonging exclusivelly to morality and never functioning as religious, leg al or traditional norms. If we wish to define the specific elements which make a certian rule of conduct to value as a moral norm we should define first the concept of norm. A norm is a rule of conduct, explicitly stated as a social standard of behaviour , deliberately accepted and kept by the individuals.

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A norm would be meaningless if it demanded an impossible behaviour. A norm would be useless if it asked for an inevitable behaviour. Any norm supposes a free agent, who can do something but who does not have to do

Freedom of will: ones actual capability of choosing between several practical alt ernatives. Certian individual choices bear no serious consequences on the others; the indiv idual is entitled to make his/her decisions as he/she likes it. Many other choices of one individual bear serious consequences on the rest of us ; these choices are not socially indifferent; therefore they should be guided by norms. The first social function of norms is the socialization of individuals, making t he social life more or less uniform and predictable, for the benefit of both the individual and the social community. 1.The rule of action: the specific pattern of behaviour demanded by the normativ e authority, expressed as a normative sentence. 2.The normative authority: the force or instance that issues a certian norm, bei ng able to enforce it, and to make people keep it. 3.The subject of a norm: a category of people who are subordinated to the normat ive authority and who are supposed to comply with the rule. 4.The sanctions: consequences of ones actions, imposed by the normative authority (rewards for keeping the rule/punishments for breaking the rule) Normative expressions: most of them are prohibitions, doubled by moral interdictions; vice versa does n ot hold true. the legal interdictions aim at the enforcement of a minimum sociability both prohibitions and obligation that do not belong to the legal regulation when the law is stating only an interdiction, morality adds a duty that cannot b e enforced by the legal system (dont be greedy); morality aims at bringing forth a maximum sociability Legal Moral what only morality dares to demand Theft is a felony Never steal! Be generous! Lying is forbidden Never lie! Tell the truth! Murder is a capital crime Never kill! Save a life if you can! Authority: external or heteronomous: Parlament, Government, Administration Authority of moral norms: internal or autonomous personal will, moral conscience . Communicate.Educate.Execute.Moral Values When acting ethically, one is guided and governed by his/her moral conscience, w hich is telling from the inside what one should do as a rational and responsible human being. Value=something important, worth of respect. Value is by itself normative: we ourselves impose on us to do certain things bec ause we appreciate that some things are more important than others. Values are investigated by a specific branch of philosophy, named AXIOLOGY.There are 4 essenti axiological theories: subjectivism / objectivism / relativism / u niversalism Relativism subjectivism cultural & ethical Absolutism objectivism universalism Subjectivism > Value = individual taste or preference (guided by pleasure) Value has nothing to do with the evaluated object; it rests souly on the subject s needs, pleasures and tastes. Things are what they are there is no value in the m. We make things to be worth something or not. ex: John from UK likes socer, and finds Americans footbal and baseball stupid. J

ack from the US has opposite feelings. Value=spiritual form (truth is important, no matter if A or B like it or not) Preference=psychological fact (A likes X, and B hates X. So what?) Clear values belong to our spiritual identity with a certian cultural community. Our values make us more or less the same. Preferences are always personal, and values are impersonal, above the individual taste. Value should always exist. Subjective preferences express ones SELF. Our tastes make us all more or less dif ferent than the others. Making morality a matter of personal taste, subjectivism, is unacceptable.

Cultural and ethical relativism: Value social convention specific to a certain culture and civilisation revealed by an intuitive INSIGHT, that cannot be universally true or false. Each cultural community has a system of values, imposed on its members by means of education and by the premise of the group upon the rebels. Each cultural community has its own specific values, that define its uniqueness and cannot be properly perceived and understood by any other culture. Values are general but never universal. This is a normative viewpoint that claim there can be no objective or rational s tandards by which we can resolve disputes and disagreements. Counter Arguments: The fact that cultures disagree is not evidence that objective agreement is impo ssible (The Earth is flat!) We should not confuse tolerance and respect for diversity with relativism. Eithe r respect and tolerance are values that are rationally defensible or they are th emselves relative to ones own culture, with no objective meaning. Hence, the valu es of respect and tolerance are not reasons for accepting the legitimacy of ethi cal relativism. Distinguish disagreement about ethical principles from disagreements over the ap plication of general principles such as the right to life or liberty. Instead of certain proof we must accept a rational justification for ethical ju nts, just as we do in other fields (medicine, history and law) Why different races, ethnic and religious groups are compatible only with a spec ific system of values? There must be a mysterious collective soul, capable of perc eiving specific values, but incapable of understanding other groups values. Why no matter how different, all of the cultures, and civilazations worship the same species of values: vital force, utility, truth, beauty, goodness, justice, holyness? Cultures perceipe differently universal values - > ABSOLUTIVISM Objectivism: Value=intrinsic property of an object, just like weight, volume, or density. Thi s is revealed by an act of KNOWLEDGE that can be true or false. The prototype of obkectivism is the use value, defined by physical properties. A good car must posses certain necessary components (wheels,engine,breaks) and c ertain measurable properties (power,speed,security) best known by the experts: e ngineers and drivers. Objectivism is in trouble when it comes to spiritual values. What are the measur able, physical properties of a fine poem? MATERIAL VALUES are divisible and 2 or several people cannot fully enjoy one suc h value altogheter, at the same time. SPIRITUAL VALUES are indivisible and each one can be shared by no matter how man y poeple without any partition. Universalism: It doesnt deny the principles of relativism, on the contrary, it tries to push th

e boundaries. It claims that we cant exclude in principle the possiblity of unive rsal values, such as human life, health, freedom, happiness, even though in time and space different cultures disagree over the specific forms of promoting and protecting such values. The existence of the universal values is not smth given once and forever, but ra ther a historical process of development and evolution of mankind, a never compl ete project of creating rational standards for ethical behavious in all cultures and civilazations of the World. Conclusions: The purpose of business=profit ; no profit=no business How large the profit? As large as possible; no maximization of profit=no good bu siness This is ethically correct on several conditions: Profit must be the desired reward for those investors whose business activites s atisfy social needs, on good term fpr the buyers of their products and services; profit squeezed by means of speculative operations, which only transfer money f rom one party to another, without doing any service to the community is not mora lly correct. Profit must be made as a result of a fair competition between companies on a cle an, free market, allowing the consumers to decide the winners and the losers of the economic game, considering their efficiency and economic performance; profit squeezed on a imperfect market, disturbed by monopolistic practices, corruption and political influences is not ethically correct. The maximization of profit should be attained by means of legal competition. Keeping the law is important, but not enough for an ethical business the legal re gulations demand not to harm people the moral norms demand the same, but they al so demand to do good to others, beyond the legal obligations. Why should busines ses act ethically? This is an open question for future discussions. The ethical behaviour in business is guided by the rest of moral values which ar e cherished. In practice, different values conflict each other under very specifiv circumstan ces; solving such a conflict of values demands an ethical judgement. Competition and cooperation The most visible characteristic of business is COMPETITION. Indeed, business is a competitive activity and almost everyone can tell this is good for society: competition brings forth better products and services at cheap er prices, innovation, diversity and development. COOPERATION: many people do not understand clearly the meaning of competition an d its necessary connection with cooperation. EGOISM: every individual must and may seek only his personal happiness, which me ans the fulfillment of his desires and interests, regardless of the other people . If egoism is morally worth or not raises a difficult and rationally unresolvable problem. Reason cant proove that one should care uncondtionally about others; so me people believe and feel this way guided not only by their mind, but primarily by their heart while some other people do not. But plain or narrow minded egoism cannot be accepted as a reasonable theory. Competition is not an ultimate end, but a framework of relationships and interac tions between individuals and groups, in which all the players of the economic g ame pursue the best outcomes that can be obtained by everyone. Contrary to a prima-face perception, the best outcomes are brought forth not by a permanent agressive attitude, meant to destroy the other competitors, but by a strict combination of competitive attitude. But plain egoism must be rejected as an irrational strategy, because pursuing th e best outcomes for the individual and his personal interests by means of offens ive behaviour eventually everybody will be worse off. The notion that the pursuit of self-interest can sometimes be self-destructive f orms the basis for what is called social dilemma. What is good for one is bad for all. If everyone makes the most self-rewarding c

hoice, everyone sufferest the greatest loss. Von Neuman and Morgenstern (1944) introduced a model for analyzing situations in which peple are in conflict over some non-trivial outcome (money, power).It is variously called decision/game theory. Prisoners dilemma: not enough evidence to convict them Solution: convince one of them to testify against the ot her. If neither confesses, they will both get light sentences on the minor charge. If both confess and plead guilty, they will both receive moderate sentences. But if one confesses and the other stays silent, the confessing criminal will se cure immunity from prosecution while the silent criminal will pay the maximum pe nalty. The dilemma proves that when each of us individually chooses what is in his own interest, we can each turn out to be worse off than we would each have been if w e had made a choice that is our collective interest. The prisoners-dilemma is once in a lifetime situation. In other cases the situat ion will repeat in the future. Robert Axelrod set up a round-robin tournament, with many different players. Eac h player must play the game 200 times with one player. Each game involves the de cision of whether to play against or with the competitor. Each strategy has to p lay against itself. Tit for Tat = as you did, that is what you get in return Conclusion: Narrow-minded egoism is to be rejected in business because if generalized it prov es to be a self destrutive strategy for all the competitors. Enlightened self-interest: one should care about others because cooperation and reciprocity is much more profitable than a generalized conflict among all the pe ople. But ultimately the motive of altruistic behaviour is some sort of pragmatic real ism, concerned with the maximum good which a rational individual could obtain. UTILITARIANISM Enlightened self interest should convince rational business people that one busi ness person must consider moral standards in his business activities. But enlightened self interest does not clearly show what one business person sho uld do under different circumstances if he wished to behave both efficiently and morally. Most important types of ethical standards to be applied in business activities: Utilitarian ethic: smth is right to the extent to which it diminishes social cos ts and increases social benefits. Ethic of rights: peoples rights to freedom and well-being should always be consid ered and respected. Ethic of justice: refers to the fair ways of distributing benefits and burdens a mong the members of society Ethic of care: caring for the concrete well-being of those near to us. Ethic of virtue: evaluates the moral character of persons or groups. The Ford Pinto Case: Utilitarianism = a general concept that holds that actions and policies should b e evaluated on the basis of the benefits and costs they will impose on society. In any situation, the right action or policy is the one that will produce the grea test net benefits. Benefits=any desirable goods: pleasures, happiness Costs=any undesirable evils: pain, death UTILITY=the inelusice term used to refer to the net benefits if any sort produce d by an action.Hence the name utilitarianism is used for any theory that sustain s maximization of benefits (or decrease of costs) The utilitarian principle: the greatest good for the greatest number An action is right from an ethical point of view if and only if the total sum of utilities produces by that act is greater than the total sum of utilities produ ced by any other the player could have performed in its place.

The utilitarian principle assumes that we can somehow measure the quantities of benefits produced by an action and substract from them the measured quantities o f harm the action will have and thereby determine which action produces the grea test total benefits or the lowest total costs. Missunderstandings of the utilitarian principle(UP): The UP doesnt refer to that action which produces the most utility for the person performing the action; rather an action is right if it produces the most utilit y for all persons affected by the action. UP doesnt say that an action is right so long as its benefits outweigh its costs. It says that only one action is right: that action whose net benefits are great est by comparison to the net benefits of all other possible alternatives. UTILITARIAN DECISION MAKING 1.I must determine what alternative actions or policies are available to me on t hat occasion. 2.For each alternative action, I must establish the direct benefits and costs th at the action produces in the future. 3.The alternative that produces the greatest utility must be chosen as the ethic ally appropriate course of action. If in a certain situation more good consequences would derive from being dishone st than from any other act a person could perform in that situation, then accord ingly to traditional utilitarian theory, dishonesty would be morally right in th at particular situation. Both enlightened self interest and utilitarian are trying to find a way to bring forth the best consequences over the long-run. One major net of problems with utilitarianism is the way we measure utility. Som e benefits and costs seen intractable to measurement. How, for ex, can one measu re the value of health or life? Although utilitarianism ideally requires accurate quantifiable measurement of al l costs and benefits, this requirement can be relaxed when such measurements are impossible. Where quantifiable data is unavailable, one way legitimately rely on solved and commonsense jugdgement of the comparative values things have for most people. One commonsense criterion depends on the distribution between: 1. instrumental goods: things that are considered valuable only because they lead t o other good things intrinsic goods: things that are desirable independent of any other benefits the y may produce. Health is an intrinsic good, desired for its own sake. (intrinsic goods take priority over instrumental goods) 2. needs: to say that someone needs smth is to say that without it that person will be harmed in some way. wants: what a person desires because he believes it eill advantage his interests in some way A need, of course, may also be a want. Many wants are however simply desires for things without which the individual will not suffer any fundamental harm. In general, satisfying a persons basic needs is more valuable than satisfying his mere wants. These commonsense methods of weighing goods are only intended to aid us in situa tions where quantitative methods fail. In fact, the consequences of many decisio n are relatively amenable to quantification and thus is the utilitarians second m ajor reply to the measurement situations previously outlined. The most flexible method of providing a common quantitative measure for the bene fits and costs associated with a dessicion is in terms of their monetary equival ents. Basically, this implies that the value a thing has for a person can be measured by the price the person is willing to pay for it. The major difficulties with utilitarianism : human rights and justice.

RULE-UTILITARIANISM (new version of utilitarianism) The basic strategy of RU is to limit utilitarian analysis to the evaluation of m oral rules. When trying to determine whether a particular action is ethical, one is never su pposed to ask whether that particular action will produce the greastest amount o f utility. Instead one is supposed to ask whether the action is required by the correct moral rules that everyone should follow. RU has 2 parts: 1.An action is right from an ethical point of view if and only if the action wou ld be required by those moreal rules that are correct. 2.A moral rule is correct if and only if the sum of utilities produced if everyo ne were to follow the rule is greater than the sum of utilities produced if ever yone where to follow some alternative rule. -> The fact that a certain action wo uld max.utility on one particular accasion doesnt show that it is right from an e thical point of view. Kantian Ethics A person has certain legal rights because the person lives with a legal system t hat guarantees those rights. UTILITARIANS: People have immoral rights because the posession of moral rights m aximizes utility. It is doubtful, however, that utilitarianism can serve as adequate basis for mor al rights. To say that someone has a moral right to do smth is to say that the person is entitled to do it rega rdless of the utilitarian benefits it provides for others. Utilitarianism cannot easily support such a nonutilitarian concept. Kantian Ethic phylosophy is also known as ethics of duty. IMMANUEL KANT: There are certain moral right and duties all human beings posses regardless of any utilitarian benefits that the exercise of those rights and dut ies may provide for others. Kant provides at least 2 ways of formulating this basic moral principle. Each fo rmulation serves as an explanation of the meaning of this basic imoral right and correlation of duty. F1: Act only at that maxim whereby you can at the same time will that it should become a universal law. maxim=rule; the reason a person in a certain situation has for doing what he pla ns to do A maxim would become a universal law if every person in a similar situation choose s to do the same thing for the same reason. Sometimes it is not even possible to conceive of having everyone act on a certai n reason, much less be willing to have everyone act on that reason. A persons reasons for acting must be reversible : One must be willing to have all o thers use those reasons even against oneself (The first formulation of Kants cate gorical imperative) There is an obvious similarity then between the categorical imperative and the s o-called GOLDEN RULE: do unto other as you would have them do unto you. distinguish between -> GOLDEN RULE (pleasure/what you like) CATEGORICAL IMPERATIVE (ration) F1 incorporates 2 criteria for determining moral right and wrong: UNIVERSABILITY: The persons reasons for acting must be reasons that everyone coul d act on at least in principle.

REVERSABILITY: The persons reasons for acting must be reasons that he would be wi lling to have all others use, even as a basis of how they would treat him. Unlike the principle of utilitarianism, Kants F1 focuses on a persons interior mot ivations and not on the conseqences of external actions. Moral right and wrong a re not distinguished by a persons accomplishments but by the reasons he had for d oing this. F2: Act in such a way that you should always treat humanity, whether in your own person or in the person of any other, never simply as a mean, but always at the same time as an end. F2 implies that human beings have an equal dignity that sets them apart from thi ngs such as tools or machines and that is incompatible with their being manipula ted. deceived or otherwise unwillingly exploited to satisfy the self-interest of another. An action is morally right for a person if and only if the person performing th e action does not use others merely as a means of advancing his own interests, b ut also respects their capacity to choose freely for themselves. When analysing from a Kantian point of view we must consider 2 stages: F1 AND F2 . If one of them has a negative answer then the situation is not ethical.