Chapter 15: Business Ethics and Public Policy

Do public policy approaches resolve the problem of social responsibility based upon moral and ethical questions, i.e. if business adhered to the standards of performance expressed in the law and existing public policy, could it be judged as being socially responsive to the changing expectations of society???

Changing Views of Business Ethics

1. Traditional view is that ethical behavior conforms to the marketplace. Economizing on resources, meeting the competition, and successful economic performance.

2. Does the drive for efficiency that leads to unsafe workplaces, environmental pollution, inferior consumer products, etc. change business' social and ethical roles?

3. Should this task be left to government regulation?

Ethics and Decision Making

1. Business ethics is a subset of ethics in general. It is concerned with actions and practices that are directed to improving the welfare of people.

2. It is concerned with human conduct that is done knowingly and, to a large extent, willingly.

3. How does one identify the ethical dimensions of a decision? A decision that significantly affects human welfare where questions of justice and rights are serious and relevant moral considerations.

Ethical Theories

1. Utilitarianism

• Holds that the moral worth of an action or practice is determined solely by the consequences of the action or practice.
• It promotes human welfare by minimizing harms and/or maximizing benefits (cost/benefit analysis).
• Rule utilitarianism (as opposed to acts utilitarianism) involves less time costs but is more inflexible when applied to decisions.
• Utilitarianism does not consider the distribution of utility. The market system measures utility by the price people are willing to pay.
• Critics point out the difficulty in quantifying utility and measuring subjective costs versus benefits. How do you measure happiness or penalize adverse behavior?

2. Ethical Formalism (deontological approach)

• Actions are not justifies by their consequences but by the intrinsic value (right or wrong) of actions or practices.
• We must do things regardless of the consequences or circumstances (Ex. repay our debts because its the right thing to do.)
• The action must be consistently universal; moral for everyone.
• It must respect rational beings as ends in themselves; does not use others to advance themselves.
• It respects people's capacity to choose freely for themselves; it is self-imposed and self-recognized. (Golden Rule)

3. Justice (fairness or what is deserved)

• Distributive justice divides fairly society's benefits and burdens.
• Compensatory justice makes amends to people for their loss when wronged by others.
• Retributive justice penalizes those who do wrong.
• Egalitarian theories emphasizes equal access to primary goods and services. Radicals disregard need, ability, and effort.

Libertarian theories emphasize rights to liberty. Government action is permissible on to the extent that it protects these fundamental rights or entitlements. Entitlement rights depend upon how they came about. Criticized as ignoring the fact that freedom of one person imposes constraints upon other persons. It also is criticized as generating unjust treatment of the disadvantaged born into unfavorable circumstances.

4. Rights

• Emerge when enough people feel an injustice exists and are able to organize for a basic change. (women's rights, civil rights, etc.)
• Basic human rights might override property rights. (affirmative action)
• Moral rights form the basis for entitlements that may or may not be formulated by the legal system. Entitlements empower or permit persons to do something.
• Moral rights are closely correlated with duties, activities, or interest
• Rights and justice are correlated but have led to disagreements concerning negative rights (the duty not to interfere with the rights of others) and positive rights (equal access and opportunities to goods and services.)
• The market system is more geared toward libertarian theories based upon negative rights while government intervention emphasizes positive rights.
• When conflicts arise a balance or compromise is reached toward the political center of society's ideology that balances the right of liberty with the right of equality.
• Corporate managers must make decisions within this political and economic context.

Management and Ethics

• Only one of these four ethical theories might not give adequate insight in the complexities of a decision.
• Each of the alternative theories leads to a decision rule that has its limitations.
• Managers must find intrinsic rewards that are beyond economic rewards.
• May be good business by leading to better and more devoted workers and a better reputation among consumers or among the investment community.