It is vital for businesses to understand the importance of ethics in this dynamic environment. Organizations that are committed to long term success recognize and realize that creating a culture where ethical behaviors are rewarded and encouraged is the ultimate key to survival and growth. According to Joseph 2003, business ethics refers to clear standards and norms that help employees to distinguish right from wrong behavior at work, while in the other hand ethical theories are theories that involve learning what is right and wrong and doing the right thing but the fact that the right thing is not straight forward brings in the subject of ethical dilemmas. Normally ethical theories can be broken up into two separate groups, teleological and deontological. Teleological theories look to the rightness of actions and are determined by the amount of good consequences they produce and focus on outcomes that are based on decisions. In teleological theories these actions are justified by the virtue of what the actions achieve, rather than some feature of the actions themselves.
In other words, decisions that benefit the overall goal and/or objective is collectively believed as a way to justify what is right or wrong. The philosophy of utilitarianism is one of the most commonly used and accepted ethical theories in the teleological group and is linked to Jeremy Bentham and John S Mills. According to Crane and Matten (2010) utilitarianism is defined as an action which is morally right if it results in the greatest amount of good for the greatest amount of people affected by the action. This principle focuses solely on the consequences of an action and it weighs the good results against the bad results. It also encourages the action that results in the greatest amount of good for all people involved. Utilitarianism is very powerful in business since it puts at the centre of the moral decision a variable which measures the value of an action. Deontological by contrast to teleological, consequences are irrelevant when determining what is right and wrong. Deontological theory states that people should adhere to their obligations and duties when analyzing an ethical dilemma. This means that a person will follow his or her obligations to another individual or society because upholding one’s duty is what is considered ethically correct. For instance, a deontologist will always keep his promises to a friend and will follow the law.
A person who follows this theory will produce very consistent decisions since they will be based on the individual’s set duties. Deontological ethical systems are concerned with the nature of an action that is being judged, whereas teleological judges the consequences of the act rather than the act itself. Founded by Immanuel Kant, Kantian Ethics is the iconic representation of deontological theories. Kantianism emphasizes the principles behind actions rather than an action’s results. Acting rightly thus requires being motivated by proper universal principles that treat everyone with respect. When you’re motivated by the right principles, you overcome your animal instincts and act ethically. “Until the great mass of the people shall be filled with the sense of responsibility for each other’s welfare, social justice can never be attained” (Helen Keller). John Rawls, an American moral and political philosopher, whose major work, A Theory of Justice, had a profound impact on ethics and political theory, believed there must be an alternative view of justice than the view of the Utilitarianism where the action that benefits the greatest is the best. Rawls believed that the principles of justice and fairness among individuals must be fair.
John Rawls, social justice theory seeks to create a society where the principles of justice and fairness are provided and to ensure the protection of equal access to liberties, rights, and opportunities, as well as taking care of the least advantaged members of society. The concept is based around a social contract, which is the voluntary agreement among people with each another and the government which results in an organized society. On the other hand, the philosophy of virtue ethics, which primarily deals with the ways in which a person should live, has puzzled philosophers from the beginning of time. Recognized as one of the greatest philosophers in the world, Aristotle explains virtue as a character trait that manifests itself in habitual action. This theory claims that virtues are traits of character that you must practice actively so that they become a part of you and shapes you into becoming a virtuous ethical person. So when you are a virtuous person, you will lead a prosperous fulfilled life. Since there are many contrasting interpretations regarding a precise definition of virtue, Aristotle theory argues that the individual needs practical wisdom, which is what a person needs in order to live well.
On the contradictory side there is Milton Friedman, who is known as one of the greatest and most influential economists and public intellectuals in the world. He was a firm believer of free-market capitalism which would in turn contribute and adequately administer wealth throughout the nation. Conservative economists, such as Milton Friedman, claim that business is most responsible when it makes profit efficiently, not when it misapplies its energy on social projects, Friedman determines that it is in the best interests for firms to maximize profits. With this Friedman is invoking a deontological, not consequentialist, theory. A consequentialist reading Friedman’s work would look to identify an ‘ends justifies the means’ sense of reasoning. Friedman however makes clear the means of achieving the ends are important, as profits need to be maximized within the regulatory environment and main focus. Along the same steps as Friedman we have Friedrich Hayek, who follows the libertarianism theory. Libertarianism is a set of related political philosophies that uphold liberty as the highest political end.
This includes emphasis the primary of individual liberty, political freedom, and voluntary association. This theory and Hayek stress that the market will take care of itself, the ideal market is self-regulating and it limits government intervention and/or involvement in the marketplace. Libertarianism expresses that people have certain natural rights and deprivation of those rights is immoral. The entitlement theory just like Hayek, also supports a market system with little to none government intervention, this theory of justice is known by Robert Nozick. Nozick’s entitlement theory is based on the following three principles: one, a person who acquires a holding in accordance with the principle of justice in acquisition is entitled to that holding; second, a person who acquires a holding in accordance with the principle of justice in transfer, from someone else entitled to the holding, is entitled to the holding; and third, no one is entitled to a holding except by repeated applications of 1 and 2 (Anarchy, State, and Utopia 1974, p.151). According to the entitlement theory, people should only possess what they are actually entitled to according to these principles. Many of these theories are seen throughout the cases from the book Ethics and the Conduct of Business by John R. Boatright. Case 3.2 “Exporting Pollution” is perfect example that includes different perspectives and insights into such theories.
The case summarizes as follows, Rebbeca Wright, an assistant to the vice president of environmental affairs at Americhem, savors the opportunity to apply her training to public policy analysis that her company faces. She is convinced that cost-benefit analysis, her specialty, provides a rational decision-making tool that cuts through personal feelings and lays bare the hard economic realities. Jim Donnelly, Rebecca’s boss, started her with a draft of a memo that she thought would create a furor if it were ever made public. Jim is preparing a memo of where to establish the company’s new location of their chemical plant. The main problem is that atmospheric pollutants caused by the plant will produce a persistent haze and some of the particles have been known to cause liver cancer in a small portion of people exposed. Four main points about this location are further discussed of what would happen if this new plant opened. Milton Friedman’s, Kant, and deontological ethics can be seen in this case.
Friedman’s perspective for this case would have Rebecca to follow her duties because this would be doing what would bring the most profits and doing what the stakeholders would want. For deontological and Kant’s perspective on the other hand, it may be argued both ways. Rebecca must follow her duties regardless of the consequences she is working towards, because she has a specific duty she must perform. If she follows the rules she would benefit herself, the company, and all the stakeholders. At the time Kantian ethics still implies that one must follow moral law regardless of the consequences. So because this new plant may cause liver cancer and inflict pain on others, Rebecca can disagree with the company’s decision on manufacturing the new plant. For this case, it depends on which side Rebecca wishes to stand as to what is ethical or not. Whether to support or not the construction of the new plant has ethical attributes with both benefits and consequences.
“Lavish Pay at Harvard” is another example great example that applies to some of the theories explained. Jack R. Meyer, the head of Harvard University’s $20 billion endowment fund was under pressure to change the compensation plan for the funds top investment managers due to the high amount of endowment the top five employees were receiving. A few Harvard alumni protested, their collective concern was that they thought the amount of money being paid to those folks was obscene. The compensation of the endowment fund managers far exceeded the salaries of Harvard faculty member and administrators, including the president, who made around half a million dollars. Also, the 5% hike n tuition for Harvard students in 2004 was equal to the $0 million paid to the two highest earners. Although Harvard has the largest university endowment, the salaries and bonuses paid to the managers greatly exceeded the compensation paid at any other school. In response to the critics, Mr. Meyer noted that the alumni failed to recognize that the amount of bonuses paid does not add up to the value they are giving the university.
The schools large endowment was used in many ways to benefit students; such as the coverage of 72% financial aid for undergraduate students, no tuition for families earning less than $60,0000, and it also enable the school to increase the faculty in growing areas and to expand facilities. In the end, Harvard decided to cap the compensation of fund managers. The result was that Jack Meyer and his team of managers left to start their own investment companies, at which many could earn 10 times than they did at Harvard. Teleological and Utilitarianism theories are two great theories that can be applied to this case. With both of these theories we can argue that the amount of money that was being used to pay these managers/employees was a reasonable pay due to what they were giving back to the college. Millions of students and faculty were benefiting from Mr. Meyer and his team, which that’s the main focus on both of these theories: actions are right if they are useful or are for the benefit of the majority and the end justifies the means. Although they were getting paid large amounts of money their return on the student population had a higher impact. Some of Nozick’s beliefs can be seen in Case 3.4 “A Sticky Situation.” Kent Graham is an account manager for Dura-Stick Label Products, which has a well-deserved reputation for quality, technical knowledge, and service that enables the company to command a premium price for its products in a very competitive market.
Kent has been with Dura Stick for 2 years and his accomplishments have been going downhill and fears his time with company may end leaving his wife and children to provide for. Kent calls Jack Olson at Spray-On Inc. about landing a large account. Jack informs Kent of a new product of theirs they would need labels for, which Jack promises they can do. Although, Kent later finds out Dura-Stick cannot make the desired products so must use another company and mark up the prices so Dura-Stick can still make profit. Kent uses the company’s image as leverage to convince Jack to take the deal. This situation can be argued in different ways for Kent and Dura Stick. Kent knows that he has to land a big time account and he knows he must do so in order to provide for his family. Though he does lie to customer, he isn’t doing anything illegal. Nozick’s belief of just acquisition is an excellent example in this situation. As long as the seller had rightful ownership, the transaction is just and proper, but if not, then possession is not proper and victims have to be compensated or transaction undone.
In contradictive of Nozick, Aristotle’s theory of virtue would argue that this case is exactly what a person with virtuous ethics shouldn’t do. Virtues are traits of character that you must practice actively so that they become a part of you and shapes you into becoming a virtuous ethical person. Because of his actions, Kent is putting in jeopardy his honesty, loyalty, self-control virtues, shaping him in the wrong ethical approach. These theories emphasize different aspects of an ethical dilemma and lead to the most ethically correct resolution according to the guidelines within the ethical theory itself. People can use these theories and the wisdom of these philosophers to determine what is ethical and what is not. Though all decisions have their advantages and disadvantages, by applying this knowledge one can come closer to making the right ethical decision.