Chapter 1:

The Challenge of Corporate Ethics Today:

Introductory Ethical Concepts and Theories
Fr. Ozzie Mascarenhas SJ, PhD.
JRD Tata Chair Professor of Business Ethics
September 27, 2017

This first Chapter will cover Concepts, Ethical Theories and Moral Paradigms for identifying, understanding
and responding to the market challenges of today. The concept, nature and domain of ethics, business ethics,
managerial ethics, and corporate executive ethics will be clearly defined and differentiated for their
significance. The domain, scope and nature of related concepts such as legality, ethicality, morality and
executive spirituality will be distinguished and developed. Among normative and descriptive ethical theories
that we briefly review and critique here are: teleology or utilitarianism, deontology or existentialism,
distributive justice, corrective justice, ethics of malfeasance and beneficence, ethics of human dignity, ethics
of cardinal virtues, ethics of trusting relations, ethics of critical thinking, ethics of moral reasoning and
judgment calls, ethics of stakeholder rights and duties, ethics of executive and moral leadership, and ethics of
social and moral responsibility. Chapters nine to sixteen elaborate, analyze and apply each of the ethical
theories in detail. Several contemporary market cases will be featured to illustrate the contents of this
chapter. The thrust of this Book is positive: despite our not very commendable track record, our basic
questions are: where are we now? What are we now? Where should we as corporations go, and why? What
are the specific positive mandates and metrics to corporate executives to reach that desired destiny? This
Chapter hopes to explore responses to these strategic corporate questions.

Introduction
A typical week in USA: 10 billion shares of Americas 500 largest listed corporations will have
changed hands in frenzied trading; Silicon Valley upstarts are planning the downfall of firms and have
already unsettled some major industries. The corporate executives of these largest listed firms will have
been swamped by 750,000 incoming e-mails and a torrent of instant data about customers and their
rapidly changing values and lifestyles; in five days these firms will have bought back $11 billion of their
own shares, not far off from what they invested a week earlier; computers buy and dump shares in the
stock markets within milliseconds. With one eye on their smart phones and the other on their share
prices, corporate bosses seem to be the enviable captains of a hyperactive frenetic capitalism. Long-term
thinking and planning has been a luxury. When managers whose allegiance to firms is measured in
weeks, they are not striving to satisfy investors; they are pumping share prices in order to maximize their
own pay. Competition is becoming even more ferocious and yet not fierce enough. Investors cannot see
past their noses, and firms are reluctant to invest their profits in business. Short-termism and myopic
capitalism are rampant. In brief, this is the market battleground in which corporate executives function
today and corporate ethics is challenged.

Yet since the financial crisis of 2008, firms are back on longer business horizons. New corporate
bonds have an average maturity of 17 years, double the length since they had in the 1990s. In 2014
departing chief executives of S&P 500 firms served for an average of a decade longer than at any point
since 2002. The average holding period of an S&P share may be a pitiful 200 days, but that has doubled
since 2009. Larry Fink, the boss of BlackRock, the worlds biggest asset manager, asks firms to draw-up
five-year plans. The same system that is accused of myopia has just financed the $500 billion shale-
energy revolution, a boom in experimental biotech companies and the electric car ambitions of Elon
Musk, an accomplished maverick entrepreneur. i Corporate ethics must survive and thrive in the midst of
this market challenge, confusion and ambiguity.

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 If today is a typical day on planet Earth, writes David Orr (1990), a celebrated US environmentalist
we cited in the Prologue, we will lose 116 square miles of rainforest, or about an acre a second. We will
lose another 72 square miles to encroaching deserts, as a result of human mismanagement and
overpopulation. We will lose 40 to 100 species, and no one knows whether the number is 40 or 100.
Today the human population will increase by 250,000. And today we will add 2,700 tons of
chlorofluorocarbons to the atmosphere and 15 million tons of carbon. Tonight the Earth will be a little
hotter, its waters more acidic, and the fabric of life more threadbare.

The truth is that many things on which our future health and prosperity depend are in dire jeopardy:
climate stability, the resilience and productivity of natural systems, the beauty of the natural world, and
biological diversity. It is worth noting, says David Orr (1990), that this is not the work of ignorant
people. It is, rather, largely the result of work by people with BAs, BSs, LLBs, MBAs, and PhDs. We
must reverse this trend if this planet should continue to be inhabitable for humankind. A course in
business and corporate ethics should provide enough ecological sensitivity to reverse this trend.

Laments Ciulla (2015), a much respected business ethics scholar in the USA: In the 30 years that I
have worked in business ethics, I have been delighted to see how the field grew and developed around the
world. Nonetheless, it pains me that the battle to teach ethics courses in business schools continues, not
with the business community but with business schools. Many of them are still not interested in investing
in business ethics faculty and courses because, despite scandals and the crash of the global financial
system, they still do not think that business ethics is important.

Critical Importance of Corporate Ethics Today

Several multinational and global companies were involved in accounting irregularities. Enron
(October 2001) led the gang, followed by Quest Communications (February 2002), Global Crossing
(March 2002), World.com (March 2002), Adelphia Communications (April 2002), CMS Energy (May
2002), Dynergy (May 2002), El Paso (May 2002), Halliburton (May 2002), Peregrine Systems (May
2002), AOL Time Warner (July 2002), Bristol-Myers Squibb (July 2002), Duke Energy (July 2002), and
in India, Satyam (2009), 2G-3G scandals (2010-2013), CWG (2011), Coalgate (2012), to name a few.
More recent accounting scandals were associated with onetime respectable companies such as Arthur
Anderson, Ernst & Young, KPMG, JP Morgan, Merrill Lynch, Morgan Stanley, Citigroup, Salomon
Smith Barney, Marsh & McLennan, Credit Suisse First Boston, and even the New York Stock Exchange
(NYSE) itself.

Most of these failed companies represented bad business decisions and ethical failures. Most of the
top executives involved in such accounting scandals and financial irregularities were business graduates
of some of the topmost business schools of the United States. It was a massive failure in business ethics,
managerial ethics, corporate executive ethics and corporate governance.

Fraud and corruption rapidly infested also the non-corporate world: scandals in the Church,
fabrications by college football coaches, game-fixing in major basketball or base ball fields, professional
athletes on anabolic steroids, New York Times reporters inventing stories, corrupt courts favoring rich
clients, paid media flooding owner-sponsored news while blocking competition or political opponents,
organized lobbies and corporate bribery to influence government legislations and licenses, and the like.
Icons that we looked up to as paragons of meaningful life began to crumble and every level of society
seemed suddenly vulnerable. People we normally trusted let us down, filling us with doubts about the
structure of our values and beliefs. When the World Trade Center towers came down, they ushered a
series of global attacks against civilians in Madrid, London, Bali, Mumbai, and others (Seidman 2012:
45). This was followed by the mighty collapse of Lehman Brothers, AIG, Washington Mutual, Merrill
Lynch, Morgan Stanley, Wachovia, and host of other gigantic investment institutions in September-

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October 2008. Then, some destructive regional wars in the Middle East and the Crimea with wanton
economic sanctions have left us all destabilized, uneasy, and unsafe.

All these were bad, wrong, unethical and immoral, national and corporate decisions and choices.
Complex invasive security procedures now intrude even our day-to-day lives.

The world needs healing. The world needs forgiveness and compassion. The world needs
restoration of hope. A book on positive Corporate Ethics can jump-start this movement for global
wholeness and integrity, corporate transparency and honesty.

Toward a Strong Positive Approach to Corporate Ethics

Given human failure of repeated scandals and systematic accounting and financial irregularities,
corporate fraud, corruption and money laundering, a recapture of a strong sense of business and corporate
ethics is urgently imperative in every business school curriculum and corporation conduct. The massive
consequences of unethical executive behavior and unethical business institutions cannot be ignored.
Recent consumer boycotts of hitherto industrial icons such as Levi-Strauss, Gap, Home Depot,
McDonalds, Nike, Kmart, Wal-Mart, and Shell Oil are moral wake-up calls for all corporations and their
executives to renew their moral commitment to society.

We need strong corporate ethics at all levels. Luk Bouckaert (2015) forcefully argues that a spiritual
approach to business ethics is badly needed.ii Without a sense of greater intrinsic motivation, business
ethics will be reduced to an instrument for reputation and risk management while any genuine moral
commitment will be lost. It seems obvious that business gurus, students, academics and managers
benefit so greatly from feeding at the trough of corporate management education that they rarely lift their
snouts far enough to see what working life is like in the call center, burger bar or the export processing
zone, and the slums of big Indian cities. Corporate ethics is an invitation to look up and see the rest of the
world in its stark reality.

According to the Ethics Resource Center, Washington DC, companies that are dedicated to doing the
right thing, have a written commitment to social responsibility, and act on it as a way of life, are
consistently more profitable than those who do not. If your company is ethical and socially responsible, it
automatically cannot make you rich and successful, but it will definitely pave the way for you to become
successful. Ethics + competence = success, is a winning equation. This is the equation of ethics for
corporate advantage. On the other hand, companies that continually attempt to test the edge of ethics
inevitably go over the edge. Shortcuts, deception, cheating and cutting corners test the edge of ethics and
never pay off in the long run. In the long term, people and organizations always lose when they live
without ethics and guiding moral principles.

In 2002, the U. S. Congress passed the Sarbanes-Oxley Act (popularly known as the SOX Act) to
address the increasing wave of corporate accounting and financial scandals. Section 406 of this Act
mandates that corporations should have a code of ethics for senior officers that must include standards
that promote: a) honest and ethical conduct, especially in handling actual or apparent conflicts of interests
between personal and professional relationships; b) that all public financial statements of corporations
should be full, fair, accurate, timely and understandable, and authenticated by the CEO and CFO of each
firm, who will be held responsible for errors, and c) compliance with applicable government rules and
regulations. Despite this Act, corporate scandals have not significantly abated in the USA or in the
Western developed world. A solid course in Business Ethics, Managerial Ethics, or Corporate Ethics for
all MBA students and corporate executives could reinforce the importance of and empower compliance to
the SOX Act of 2002.

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On Definition of Definitions: Conceptual vs. Operational Definitions
In this first chapter we define introductory concepts such as ethics, morality, business ethics,
managerial ethics, executive ethics and corporate ethics. In order to do that, we need a definition of
definition to start with. The term definition comes from two Latin words [the noun finis (= limit or
end) and its verb form finire (= to finish to terminate)]. Definitions define limits or boundaries within
which you include the domain of the concept or practice you are defining. There are two basic types of
definitions:

Conceptual definition: this tells what the thing you want to define IS; that is, it tells what it is. For
example, man is a rational animal; an animal is a sentient being; a business is a buyer-seller exchange;
the corporation is a listed company, and the like, are conceptual definitions.

Operational definition: this tells you what the thing you intend to define DOES; it tells what it does.
For example: An man as an adult family member is a husband, father and a bread-winner; an animal
is a multi-legged mobile creature that hunts for its living; a business is where buyers and sellers meet to
exchange goods and services; a corporation serves the public as it lives by its capital and resources, and
the like, are operational definitions.

While we need both types of definitions, our emphasis is along operational definitions given, as we
shall see later, that the practical domain, nature and challenge of corporate ethics is to explore and
determine what it does to a corporation and its stakeholders..

In order to critique and assess the current troublesome business phenomena of home mortgage crisis
in the USA, global financial crisis of 2008, ecological degradation, lack of ethical sensitivity, and current
questionable behaviors of free enterprise capitalism everywhere in the world (see Chapters 3-4 that
follow), we need a strong conceptual and theoretical background of ethics and morality. We need to
understand relevant concepts, theories, paradigms, strategies and cases of ethics and morality in general,
and of business and corporate ethics, in particular.

What is Morality?
We first start a discussion on morality, as historically, morality has preceded ethics by centuries and
millennia and has helped to guide and formulate ethics. Morality is as old as humanity. Our first
ancestors had the same moral and social objectives as we have today: mutual existence, respect and peace
within a group or community.

Ethical scholars distinguish between morality and ethics. According to Vernon Jensen (1997: 4), a
communication-ethics scholar, ethics refers to theory, to abstract universal principles and their sources,
whereas the word morals implies practicing those principles of applied ethics, our culture-bound modes
of conduct. The first concept of ethics defines it conceptually, while the second concept of morals
defines ethics operationally. We need to go further than that.

Conceptually, morality (from the Latin moralitas) is the value-quality or character of a person,
family, group or society. It is rightness or wrongness, justice or injustice in action of a person, group, or
society. Morality constitutes principles of right or wrong, truth or falsehood, and fairness or unfairness in
human conduct. Thus, operationally defined, morality covers those beliefs and values, practices and
activities of people that are considered right or wrong, good or bad, truthful or untruthful, and fair or
unfair. Morality studies the rules and principles that govern these activities and the values that are
embedded in those activities (De George 1999: 19).

Thus, morality is generally used to describe a sociological phenomenon, namely, the existence of a
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society with rules and standards of social behavior. In this sense, moralities are best understood as special
forms of social control (such as corporate governance structures and rules) and special forms of practical
reasoning (Baier 1965). These are operational definitions of morality. Thus, we speak of the morality of
the Greeks, the morality of the Romans, the morality of 20th century Americans, the morality of 21st
Century Asians, the morality of the free enterprise capitalist system, and the like. Accordingly, we do not
usually speak about the ethics of Greeks or the ethics of Romans or Americans or Indians.

As Lincoln Steffensiii aptly said, morality is moral only when it is voluntary. Many of us abide by
rules, laws and social sanctions primarily for fear of being caught violating them and publicly exposed
and punished for such violations. Such attitudes and behaviors encourage hypocrisy. Corporate morality
is moral strength when you follow organizational rules because of their intrinsic moral values of justice,
integrity, social legitimacy and common good. Morality does not die out in the absence of laws and
injunctions; it thrives. Moreover, racism and discrimination based on gender, caste, creed, ethnicity and
nationality, can become increasingly vicious when it is cloaked in pseudo religion-based social and moral
sanctions. Thus, morality is moral when it is intrinsically motivated. Corporate morality is moral when
it is not driven just by law compliance or even by observance of a code of ethical conduct. Both these
behaviors, legal and ethical, should be intrinsically motivated by ones moral beliefs, principles and
convictions, ones moral and religious conscience, and by ones sense of duty and purpose in life.

What is Ethics?
Etymologically, the word ethics comes from the Greek word ethos which means custom or
convention or disposition. Thus, ethics denotes customary, conventional or dispositional character or
fundamental values peculiar to a specific person, people, culture, organization, or movement.
Conceptually, ethics is a science of values, an art and philosophy of human and societal values.
Operationally, ethics is an action program for the management of values and value-generation systems in
an organization. Thus, from a conceptual viewpoint, ethics are norms, codes, conventions, mores and
other value-based principles of a person, group or society. In this sense, ethics is a theory or system or
science of moral values. The Dictionary of Business (conceptually) defines ethics as the branch of
philosophy that tries to determine the good and right thing to do, and choices regarding right and wrong.
There is a big difference between what you have a right to do and what is right to do. The former is legal,
the latter is moral. There is a big difference between law compliance, ethical conformance, and moral
engagement. The first is being legal, the second, ethical, and the third, is being moral.

Operationally defined, ethics is the way we live, experience, generate and share values, and the way
we deliberate, judge, choose, act, or behave that reveals our underlying values, norms, principles and
standards. Defined thus, ethics is life, life at home, life in school and college, workplace and market
place, and especially in boardrooms and corporations, institutions and governments. Ethics should
pervade all things we think and do, be and become. Ethics is in planning and strategizing, in market and
industry scanning for new market niches, in designing new products and services, in crafting and testing
new products, in price and product bundling, in transportation and logistics, in distribution and retailing,
in pricing, displaying and promoting new brands. There should be strong ethics in customer relations
management (CRM), in employee relationships management (ERM), in supplier chain management
(SCM), in distribution partner relations management (PRM), and ethics in regulation and compliance
management. The more ethical codes and moral principles define and humanize the corporation or
institution, the better are the long-term prospects and sustainable competitive advantage (SCA).

On the other hand, ethics is also derived from the Greek word ethikos that generally refers to the
rules and norms of specific kinds of conduct or the code of conduct for specialized groups. Thus, we
speak about ethics of doctors, ethics of lawyers, ethics of engineers, ethics of the nursing profession,
ethics of commerce, ethics of the accounting profession, ethics of business executives, ethics of corporate

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executives, and so on, rather than morality of doctors, morality of lawyers or accountants or corporate
executives (Boatright 2003: 22-23).

Thus a more formal and comprehensive definition of ethics would be: Ethics is that branch of
philosophy that theoretically, logically and rationally distinguishes between and determines right from
wrong, good from bad, moral from immoral, fair from unfair, and just from unjust actions, activities and
decisions and behaviors. To do this, ethics establishes rules and standards that govern moral behavior of
individuals and groups, organizations and institutions, and these are based on various ethical theories and
paradigms that have come down through history of ethical thought. Applied ethics refers to moral
judgments and conclusions we arrive at based on these rules, standards, codes of conduct, and models.

We are not explicitly including all values in the definition of ethics as such. For some people values
are very relative and personal: e.g., to obtain a degree, to get a job, to make money, to hoard wealth, to
buy a home, to own an expensive car, to marry, to go abroad, and so on. But ethics is a science of
principled moral values and principled moral behavior. The value and behavior should stem from certain
well established moral principles, standards and rules, or from the moral judgments of people whom we
call wise and honest. That is, values are values when certain universal moral principles back them.
Values derive value from these moral principles, and not vice versa. The power of moral principles is that
they are universal, timeless truths. When we apply them and live by them, we generate values and best
practices. Such principles deal with meaning and truth, honesty and integrity, and not any specific
religion necessarily.

For instance, we value human life because of the moral principle of fundamental human dignity and
the inalienability of the God-given right to life, liberty and the pursuit of happiness. Nobody can take
these God-given or natural rights from us. Nor can we abdicate or abandon this right to life, liberty and
the pursuit of happiness. Similarly, we value honesty because of the fundamental moral principle and
mandate of speaking the truth. On the other hand, all our good works and best practices do not produce
quality of life results in our homes, institutions and corporations, countries and continents, if they are not
based on valid and solid moral principles.

Business Ethics and Managerial Ethics

Business ethics is a subset of ethics. Business ethics is a specialized study of moral right and wrong
in the business arena. It focuses on moral standards and rules as they specifically apply to business
strategies and choices, business policies and rules, business institutions and organizational behavior.

Managerial Ethics is a subset of business ethics. Managerial ethics focuses on transactional moral
values. Managerial ethics assures that all buyer-seller exchange processes, at all levels, create, design and
offer good, safe and healthy, legal, ethical and moral products and services that are profitable and growth-
oriented, but which are also affordably priced, justly distributed, that serve the needs, wants and desires of
the entire human family, and at the same time, support the ecological and sustainable resources of the
planet and the universe. This is a tall order for managerial ethics. That is because the scope of managers
in a chaotic and turbulent market environment is wide and widening. Where there are people, there is
behavior, and where there is behavior there is scope and demand for ethics. Where there is business there
is scope and challenge of business ethics, and there is role and scope for managerial ethics.

Managerial ethics is stewardship. It is responsibility and accountability to all stakeholders such as

customers, employees, suppliers, vendors and distributors, shareholders and promoter investors, banks
and creditors, governments and the media, the local and national and global communities, the planet and
the universe, and even the competition. Of course, managers should draw the specific boundaries of their
industry and markets, products and services, and hence define and characterize their specific stakeholders;
but the overall scope of ethics and morals is the same within these bounded functionalities.
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 If business is basically a buyer-seller exchange management process, then business ethics is the
science of social values that enables and empowers buyer-seller exchange management. Or,
operationally, business ethics is a principled action program of moral values that humanizes the buyer-
seller exchange management process. Business ethics brings the moral values of both intellectual virtues
(e.g., prudence, wisdom, transparency, due diligence, and objective investigation) and moral virtues (e.g.,
temperance, fortitude, honesty, integrity, justice, and compassion) to the marketplace, and specifically to
the buyer-seller exchange system of inputs, process and outcomes. Business ethics is the ethics of
commerce and e-commerce, the ethics of the marketplace with its produce and products, brands and
services, the ethics of building human, physical and money capital, and the ethics of the production,
distribution and consumption processes that define the markets.

This Book follows this latter approach of defining, operationalizing and assessing ethics as an
actionable program of responsible values that humanize societies. Ethics deals with human behavior.
Ethics becomes relevant wherever people interact and function together. Hence, every field of business
such as planning and strategy, accounting, finance, human resources management, business law
compliance, marketing, business research, and production management involves ethical issues and moral
challenges.

What is Corporate Ethics?

Corporate ethics is a subset of managerial ethics. It is highly professional and specialized executive
ethics behavior of corporate-wide decisions and choices, strategies and implementation processes, and
being accountable for the outcomes of ones corporate choices and decisions. The scope and domain of
corporate ethics is wider than in managerial ethics. Corporate ethics embraces the corporation as a whole
with all its divisions and subdivisions, branches and affiliates, joint ventures and wholly owned
subsidiaries, mergers, acquisitions and divestitures, corporate strategic alliances, products, brands and
services, and uses and renewals of its accumulated human, physical and money capital.

Hence, corporate ethics, par excellence, is an actionable program that seeks goodness in its corporate,
ethical and moral deliberations, decisions and actions. Business ethics, in general, and corporate ethics, in
particular, should empower ethical reasoning, critical thinking, rational explanation and understanding,
moral deliberation and choice, ethical judgment and decisions, and ethical decision making for business
practitioners and business corporate executives.

Business ethics should provide tools of ethical and moral reasoning, fortified with relevant theories,
models and paradigms of ethical and moral reasoning and values. Every field of business such as
business strategy, organizational behavior, accounting, finance, human resources management, business
law, marketing, business research, and production management involves people and behavior, and,
therefore, involves ethical issues and moral challenges.

Commonality between Ethics, Business Ethics and Corporate Ethics

As is apparent from the above three definitions, the first common element between ethics, business
ethics and corporate ethics is values, actually, human principled moral values. Moral values are our
fundamental meanings, beliefs and principles by which we define and distinguish what is right and
wrong, good and evil, just and unjust, and truth from falsehood. These values provide guidance and
standards for our daily lives and career ambitions. The word evaluate (derivative of values) implies the
use of rules and standards by which we compare different behaviors, and judge whether such behaviors
meet our standards. Human values are those benefits and principles that bring meaning and fulfillment in
our lives, both individually and socially. Such values include honesty, integrity, compassion, authenticity,

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transparency, courage, audacity, responsibility, patriotism, respect and fairness. Values deal with the
central Socratic question: How should we live? - A question that is also reiterated by Bernard Williams
(1985). This question deals with human motivation more than mere normative expectation or
mathematical expectation. Ethical deliberations cannot be totally inconsequential to actual human
behavior (Sen 1990: 3-4). iv

Secondly, even though not contained explicitly in each definition, the next common element across
all three branches of ethics, business ethics and corporate ethics is that these moral human values deal
with human judgment and decisions (ethics) that deal with business exchanges (business ethics), and
human judgment and decisions that deal with major corporate wide exchanges (corporate ethics) such as
mergers, acquisitions and divestitures, entering new industries and markets, developing new products and
brands, downsizing plants and labor, and the like.

Thirdly, business ethics and corporate ethics are interdisciplinary fields that entail the domain of at
least two or more distinct disciplines, a) business exchanges and decisions, b) economics, psychology and
sociology, and c) the philosophy and science of ethics. It is a dynamic interdisciplinary field, as all these
disciplines are refining, changing and expanding.

Corporate or business ethics is a treatise about ethical and moral process of business exchange
deliberations and decisions, judgments, choices and actions. Business and corporate ethics should
empower moral deliberation, ethical judgment, ethical decision making, serious foresight of the
consequences of our decisions, choices and strategies, and undertaking responsibility for harmful
consequences, if any. Business and corporate ethics should provide tools of ethical and moral reasoning,
fortified with relevant theories, models and paradigms of ethical and moral reasoning and values. Every
field of business such as accounting, finance, human resources management, business law, marketing,
business research, and production management involves ethical issues and moral challenges today.
Corporate ethics should identify, understand and address such ethical issues and moral challenges.

Further, if all business is defined as exchange between buyers and sellers, if business management is
the science of business exchange, and if ethics is the science of moral values and principles, then business
ethics is the science of moral values and principles in business exchanges. Accordingly, corporate ethics
is the science of executive moral values and principles in special corporate-wide exchanges such as
corporate deliberations and decisions, corporate choices and strategies that impact the whole corporation
and its stakeholders. Using a systems perspective, Table 1.1 distinguishes between Ethics, Business
Ethics, and Corporate Ethics.

Descriptive vs. Prescriptive Ethics

We also use the term ethics to denote a field of moral philosophy. Like logic, epistemology and
metaphysics, ethics as a moral normative philosophy in the West dates back to the time of ancient Greeks
[e.g., Socrates (470-399 BC), Plato (427-347 BC) and Aristotle (384-322 BC)]. In this view, ethics as a
philosophical endeavor is the study of morality. Ethics studies morality; ethics presupposes the existence
of morality and moral people who judge right from wrong (De George 1999: 19). Such a study can be
descriptive or normative. While descriptive ethics is a scientific inquiry into the actual moral beliefs and
behaviors of people, normative ethics, based on various philosophical theories and doctrines, prescribes
what our beliefs and behavior should be. A third division of ethics is called meta-ethics the study of the
language, syntax, grammar, expression and communication of ethics.

While ethical behaviors are external in source and motivation (e.g., ethical codes, regulation,
mandates, customs, pacts and agreements, norms and conventions), morals are internal in power,
motivation and dynamism (e.g., ones moral upbringing at home, ones moral conscience, ones moral
principles, and ones moral convictions). Ethics is the domain of the should while morals denotes the
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domain of the ought. That is, ethics tells me what I should do. While morals tells me what I ought to
do. Morality is powered from within us. Ethics is powered from without.

In this connection, a great philosopher, Michael Foucaultv writes For a rule of (ethical conduct) is
one thing; the conduct that may be measured by this rule is another. But another thing still is the manner
in which one ought to form oneself as an ethical subject acting in reference to the prescriptive elements
that make up the code. Foucault argued that ethics is a work of art where subjects (individual,
collective) explore different possibilities of being by experimenting while being in their present
conditions. That is, individuals develop their ethics conforming to existing codes, but also while
imagining new ways of being ethical. This process requires a continuous revision and modification of
what one is and what one thinks. In this sense, laws, ethics, morality and spirituality are not static but
dynamic social systems of self-control and humanization.

Major Ethical Theories

The distinctive aim of any scientific theory is to provide systematic and reasonably supported
explanation and prediction of phenomena. A theory, therefore, is a system of hypotheses, most of which are
law-like formulae deductively connected with each other (Suppe 1977). A theory is "set of propositions
which are consistent among themselves and are relevant to some aspect of the factual world" (Alderson
1957: 5). Some of these propositions are "non-observational, from which other propositions that are at least
testable in principle can be deducted," (Zaltman, Pinson, and Angelmar 1973, 78-79).

Howsoever defined, the major purpose of a theory is to increase scientific understanding through a
systematized structure capable of both explaining and predicting phenomena. Any systematized structure
that is not empirically testable will not be able to explain and predict real-world phenomena. All scientific
knowledge and theories are integral part of this knowledge, must be objective in the sense its truth can be
empirically testable or inter-subjectively certified by several investigators working independently. Thus,
minimally, a theory includes at least three constitutive elements: a) a set of law-like generalizations b)
systematically interrelated, and c) empirically testable, d) such that it can explain, predict and control real
world phenomena.

A set of discrete law-like generalizations is not enough; all the generalizations must be systematically
related (Kaplan), deductively connected (Bergman) and interrelated propositions (Blalock) such that they
generate a theory that is internally consistent and corroborating. The empirical test can be undertaken both
by traditional quantitative methods as well as by modern qualitative (non-number crunching) methods. The
latter are based on experiences, perceptions, feelings and values of people that can be expressed by symbols,
images, graphics, pictures, and narratives. Narratives are best subjected to qualitative analysis. Analysis of
narratives in the form of stories, vignettes, parables, proverbs, allegories and synecdoche offer tremendous
scope for research.

The Ethical Theory of Teleology

Table 1.2 states most of the known ethical moral rules that ground moral rule-based reasoning for
analyzing ethics of corporate decisions and actions. The ethical theory of teleology [or utilitarianism or
consequentialism] judges the morality of an action primarily by its good or harmful consequences. Its
basic moral rule can be framed thus: that action is moral (teleologically) if it produces decidedly more
benefits than costs and to the greatest number. When the emphasis is not merely on costs and benefits,
but from the perceived utility of such benefits at the expense of costs, the theory is called utilitarianism.
Since in the final analysis, costs and benefits are consequences or outcomes that come to be best known
after the action, the theory is also called consequentialism (Anscombe 1958). Under all forms, teleology,

9
utilitarianism or consequentialism, this ethical theory is very practical, pragmatic, and seemingly easy to
apply. Hence it commands appeal and popularity in USA.

In applying this theory, however, several problems arise. For instance:

What is a benefit? What is a cost? To whom: One mans meat is another mans poison. A cost to
one is benefit to the other, and vice versa.
Costs and benefits are consequences or outcomes. When are they known fully: before, during or
after the executive action? If after the action, how can teleology, utilitarianism or consequentialism
be diagnostically applied before the action?
What is the greatest number: 1.2 billion people in India or China or 320 million in the USA? Or the
majority of a countrys population?

The Ethical Theory of Deontology

The theory of deontology is the ethical theory that is primarily geared to analyze the ethics of inputs
and processes (i.e., the ACT), and the duties and obligations associated with responsibility. It states: That
action is (deontologically) moral if it respects and upholds more rights than it violates corresponding
duties, and in relation to the greatest number. As in teleology, the ethical theory of deontology poses
several problems in its rule application, such as:

What is a right? What is a duty? Whose: One mans right is another mans duty to respect that
right. A duty to one is right for another.
Rights and duties are given and defined by whom: God, state, society, or employers?
Rights and duties are both antecedents to action. When are they known fully: before, during or
after the executive action?
What is the greatest number: 1.2 billion of India?

The Ethical Theory of Distributive Justice

Justice is based on individual and moral rights, and the moral right to be treated as a free and equal
person lies behind the theory of distributive justice that benefits and burdens should be distributed equally
(Vlastos 1964). Thus, distributive Justice considers both deontological and teleological aspects of human
actions and consequences. While deontological distributive justice reviews the "act" for its proper
distribution of rights and duties among people affected by the act, teleological distributive justice looks at
the consequences of costs and burdens, to see if they are properly distributed among all people concerned.
Thus, distributive justice is construed as considering both the "act" and "consequences" of an (executive)
act.

Justice and fairness are interchangeable terms, even though some (e.g., Rawls 1958: 67; Hare 1978:
119) consider the concept of fairness as more fundamental. Justice is fairness. It is giving each one one's
due. For instance, corporate executives act justly when they give customers and clients what they (or
their monies) deserve.

The theory of distributive justice judges the morality of an action by both the ACT (for its capacity
for distributing costs and benefits equitably across all people concerned) and the consequences (for their
actual distribution of costs and benefits across all members of society affected by the act). A useful rule
is: that executive action is moral (by distributive justice standards) if it decidedly distributes all costs and
benefits, all rights and duties evenly or equitably across all relevant stakeholders. Even this rule presents
several problems in its concrete application. Some are:

10
 What is equality? What is equity?
How is equality or equity determined: by need, want, abilities, efforts, contributions, market value,
social status, or entitlement?
Who distributes: government, state, society, company, status, caste?
What should be the goal of distribution: income equality or economic equality or social equality or
opportunity equality, and why?

Rawls (1971) proposed two principles of distributive justice: 1) the Equality Principle: each person
engaged in an institution or affected by it has an equal right to the most extensive liberty compatible with
a like liberty for all; 2) the Difference Principle: inequalities as defined by the institutional structure or
fostered by it are arbitrary unless they work out to everyone's advantage, and provided that the positions
and offices are open to all. The first principle requires basic equal liberty for all. The second principle
admits existing inequalities and differences, if a) they work to the advantage of all, and b) if the social
system offers equal opportunity for all to combat or compensate for these differences.

R1: An executive action is ethical if it offers all stakeholders fair opportunity for benefits
(Libertarian Fair Opportunism).

The morality of this act will depend upon the correct choice of a basic structure of society that
defines and ensures its fundamental system of rights and duties. The basic structure includes the political
constitution and the principal economic and social institutions that together define peoples' rights, duties,
and liberties and that together affect people's life-prospects and expectations.

R2: An executive action is ethical if it seeks to nullify among firm's stakeholders the advantages
stemming from the accidents of biology, geography and history.

This is Rawls' (1971) Libertarian Egalitarianism. Rawls' central thesis is that a social arrangement
should be a communal effort to advance the good of all who are part of the society. Inequalities of birth,
sex, ethnicity, color, natural endowment, and other discriminating circumstances are "undeserved," cause
naturally disadvantaged members of the society, and should be progressively eradicated. Those who are
naturally endowed with intelligence, skills, health, wealth or luck, and those who are born in
geographically more productive zones (such as Western Europe and North America), are the more
fortunate in our society, but they do not deserve these advantageous properties any more than the
disadvantaged deserve their misfortunes.

By libertarian ethic, one should distribute all vital primary economic goods and services (basic food,
health, shelter, employment) equally, unless an unequal distribution would work to everyone's advantage
(Beauchamp and Childers 1989). People born into a social system at different positions, in different
social classes, and with different natural attributes have varying life-prospects and expectations
determined by the system of rights, liberties and opportunities available in that social class. Equality of
opportunity does not entail equality of expectations - the latter are inevitable in a social structure.
Inequalities are just only if the social structure allowing or generating them, works out for the advantage
of all engaged in it, especially the least advantaged.

A corporate executive action is ethical if it offers all stakeholders (e.g., creditors, employees,
suppliers, distributors, retailers, clients and customers) fair opportunity for benefits (Libertarian Fair
Opportunism). This may not be necessarily moral. An executive action is ethical if it treats all people
equally (Egalitarianism). This may be moral, even though ideal or impractical. An executive turnaround
action is ethical if it treats all stakeholders with an equal share of all goods (Strict Egalitarianism). This is
moral, even though ideal or impractical.

Pre-emptive and protective justices are really subsets of procedural justice, which, in turn, is a subset
of distributive justice. Procedural justice demands that structures and procedures be set up in society
11
which are just and which produce just outcomes. Structures and procedures are relative to each group,
society, state or country. Hence, procedural justice is another instance of comparative distributive justice.

A distinction is made between 'just procedures' that ensure just outcomes (procedural justice) and 'just
results' (consequential justice). In some cases, just procedures are solely sufficient to ensure just results
(e.g., state lottery procedures that result in fair outcomes). In some cases procedures may be just, but not
the results. For instance, despite excellent and objective legal jurisprudence and procedures, one may
occasionally punish the innocent or acquit the guilty.

Sometimes, just results may stem from unjust or imperfect procedures, when, for example, a society
may create a legal system that protects more the innocent than punish the guilty. Distributive justice that
looks at both the act (procedures) and the results (consequences) implies both procedural justice and
consequential justice. The latter two forms of justice are often called "justice principles" (Mascarenhas
1990: 219).

The Ethical Theory of Corrective Justice

Corrective justice is the idea that liability rectifies the injustice inflicted by one person on another.
This idea received its classic formulation in Aristotle's treatment of justice in Nicomachean Ethics (Book
V:1). Aristotle speaks about corrective and distributive justice as two contrasting forms of justice.
Corrective justice that deals with voluntary and involuntary transactions, today's contracts and torts,
focuses on whether one party has committed and the other has suffered a transactional injustice.
Distributive justice deals with the distribution of whatever is divisible (Aristotle mentions honors and
goods) among the participants in a political community. For Aristotle, justice in both these forms relates
one person to another according to a conception of equality or fairness. Injustice arises in the absence of
equality, when one person has too much or too little relative to another.

The two forms differ, however, in the way they construe equality. Distributive justice divides a
benefit or burden in accordance with some criterion that compares the relative merits of the participants.
Distributive justice, therefore, embodies a proportional equality, in which all participants in the
distribution receive their shares according to their respective merits under the criterion in question.

Corrective justice, in contrast, features the maintenance and restoration of the notional equality with
which the parties enter the transaction. This equality consists in persons' having what lawfully belongs to
them. Injustice occurs when, relative to this baseline, one party realizes a gain and the other a
corresponding loss. The law corrects this injustice when it re-establishes the initial equality by depriving
one party of the gain and restoring it to the other party. vi Obviously these considerations offer serious
challenges and mandates to corporate ethics.

An action is moral (by corrective justice standards) if it decidedly sets up just procedures to bring
about a just distribution among the greatest number, when the previous three ethical theories and rules
have failed. However, corrective justice also poses new problems:

What are just procedures: those that minimize harm?

Those that prevent harm? Those that protect people from harm? Those that do good to people?
Who sets up these just procedures, why, when and where: the nation, the state, the district, the
municipality, ones company?

The entire process of executive inputs, process and outputs can be further analyzed and enhanced by
the ethical theories of responsibility, which in turn, are supported by the ethical theories of human
personhood, ethics of virtue, ethics of trust, ethics of moral worth, and the ethics of moral reasoning. We
will be covering all these theories in later chapters. Specific moral rules under each ethical theory and the
12
associated problems are also stated in Table 1.2. Theoretical advances cum pro and con arguments on
each theory will also be covered in a later volume on Corporate Ethics.

Corporate Value Ethics

Value ethics is the theory and practice of good, good action, and good life.1 What we need, in order
to live well, is a proper appreciation of the way in which such goods as friendship, honor, promise,
commitment, virtue, wealth and pleasure fit together as a whole. In order to apply that general
understanding to particular cases, we must acquire, through proper upbringing and habits, the ability to
see, on each occasion, which course of action is best supported by reasons. Therefore, practical wisdom,
as Aristotle conceived it, cannot be acquired solely by learning general rules.vii We must also acquire,
through practice, those deliberative, emotional, and social skills that enable us to put our general
understanding of well-being into practice in ways that are suitable to each occasion. Value Ethics in the
best sense, therefore, is practical wisdom experiential and rational skills of intellectual and moral virtues
that help us to discern right from wrong, truth from falsehood, justice from injustice, and give us the
courageous skills of pursuing right and avoiding wrong, seeking truth while rejecting falsehood, and
striving for justice while combating against unjust structures and their harmful consequences
(Mascarenhas 1995).

Operationally, if ethics is a principled action program of deriving and experiencing moral values, then
Organizational Value Ethics is a hierarchically or democratically or consensually derived and guided
action program in an institution that consistently seeks new values, new directions, new meanings and
imperatives, new visions and missions, new goals and objectives, and new ends and ideals.
Organizational Value Ethics seeks to serve humanity better through principled institutions such as the
family, the school, the college and the university, the company and the corporation, the venture and the
startup, the government and the NGOs, the media and the marketplace, the church, the temple, the
mosque and the synagogue. We study ethics in order to improve our lives, said Aristotle, and therefore,
its principal concern is the nature of human well-being. In this sense, wherever there are people, there is
behavior, and wherever there is behavior, it has moral and ethical content, challenges and implications

The Grey Area in Corporate Ethics

Thus defined, ethics bears two important implications: a) as cultures change over time, ethics change;
hence, ethics is a dynamic and not a static concept; b) as values change over time, ethics change across
cultures; values define what we consider acceptable ways of working; hence, by its very definition, ethics
has a contextual or relativistic and not absolute connotation. Most societies, however, agree there is a
base level of black and white absolute values and ethics consistent across cultures (e.g., do not kill; do
not cheat; do not lie; be honest; honor contracts, and keep promises). Treat others the way you want
others to treat you, the Golden Rule, is an absolute value too. These are absolute universal values that
define and characterize human beings and society.

Nevertheless, there is a large spectrum of grey area in ethics where values and cultures are involved
(e.g., be non-hierarchical; be inclusive; be good; be caring; be compassionate; be fair; be just; do not
fraud; be generous; be contributing; be cooperative). It is the grey area that tests corporations, its leaders
and chief executives. Values such as social compliance, legal compliance, ethical conformance, moral

1
Aristotle follows Socrates and Plato in taking the virtues to be central to a well-lived life. Like Plato, he regards the ethical
virtues (justice, courage, temperance and so on) as complex rational, emotional and social skills. But he rejects Plato's idea that
training in the sciences and metaphysics is a necessary prerequisite for a full understanding of the good or human well-being. The
good of human beings cannot be answered with the exactitude of a mathematical problem since mathematics starts with general
principles and argues to conclusions. Aristotle conceptualized ethical theory as a field distinct from the theoretical sciences.

13
obedience, industrial codes of conduct, consumer privacy, personal security, patent rights and duties,
intellectual property rights and duties, and employee rights and duties may not be similar across countries
and continents.

As also, certain questionable strategies such as aggressive competitive practices, international

dumping of goods, wash trading, insider trading, and other financial shenanigans, acceptable in certain
countries and cultures may not be so in others, thus creating grey areas of ethical values and moral
interests. Most of the times business and corporate executives will have to operate in this grey area that
is prone to personal conflicts and choices, each of which tests individual ethical sensitivities, decision
abilities and personality characters (see Narasimhan 2011).

[See Corporate Ethics Exercises 1.1 and 1.2].

Epistemologically and axiologically speaking, the good and the bad, the true and the false
are not necessarily incompatible (Bahm 1975). A solution can be both true and good at the same time; it
can even be false but good at the same time. A solution can be true and good from one perspective and
false and bad from another perspective. For instance, stem cell research is good when it is based on adult
cells but bad when it is solely based on embryonic cells, especially when human embryos have to be
killed for saving victims of presently incurable diseases.

A course in or book on Corporate Ethics should empower business executives, management students
and other business practitioners readily to identify and effectively to address ethical and moral problems
and challenges that each functional business field or discipline involves. We also need a moral
awakening, a quick recovery of ethical values of corporate integrity and honesty, and a great sense of
corporate citizenship and stewardship (Mascarenhas 1995).

This book targets such audiences and challenges them with practical wisdom skills for ethical
reasoning, moral explanation, moral judgment and deliberation, ethical assessment of business decisions
and actions, and undertaking moral responsibility for harmful consequences of corporate decisions.

Corporate Ethics: Exploration Methodology

In general, methodology is the science of method the science of finding the best method for
identifying, defining, characterizing, formulating and resolving problems in a given field or discipline.
Any methodology must match its subject matter. Thus, the methodology of studying value ethics must
match its subject matter a principled action program of deriving and experiencing moral values. Value
ethics methodology seeks constantly to identify, define, characterize and formulate values that can render
any activity into a principled action program for experiencing and witnessing moral values.

Similarly, the methodology of studying business ethics must match its subject matter buyer-seller
exchange management processes. Its value ethics methodology constantly strives to identify, define,
characterize and formulate buyer-seller exchange management process values that can render any market
activity into a principled action program for experiencing and witnessing moral values in the marketplace.

The methodology of studying corporate ethics should match its subject matter executive life of
corporation-wide business choices and decisions. Its value ethics methodology should constantly strive
to identify, define, characterize and formulate corporate-wide buyer-seller exchange management process
values that can render any corporate organizational decision and activity into a principled action program
for experiencing and witnessing moral values in the marketplace.

At the corporate level, CEOs and most of their decisions impact the entire corporation, often the

14
industry, and the country that the industry dominates. Thus, the major corporate decisions of Bill Gates,
Steve Jobs, Michael Dell, Narayana Murthy, Natarajan Chandrasekharan and Azim Premji have affected
the IT world, especially in India. Major corporate decisions of Michael Dell, Lenovo, and Compaq have
also affected the distribution and diffusion of personal computers in the world. Major decisions and
products of Apple, Sony, and Microsoft have affected the entertainment or electronic game industries of
the world. Corporate ethics deals with such deliberations, choices, decisions and strategies that impact
corporation-wide, industry-wide, countrywide, continent-wide, or globe-wide.

Morality as a System
As part of our methodology for exploring corporate ethics, we now introduce some preliminary
concepts and terms of systems and systems-thinking in order to understand better the dynamic nature of
morality in general, and of corporate ethics and morality in particular. Morality is primarily a system of
beliefs, principles and drivers of good behavior and good outcomes in in any organization,

The word system originates from a Greek verb sunisthnai, which originally meant to cause to
stand together. Etymologically, therefore, a system implies a structure that holds the parts together in a
functional whole. A system is a perceived whole whose elements hang together because they continually
affect each other over time and operate toward a common purpose. In this sense, the human body, the
heart and its organs, the home and the factory, the ecology and the atmosphere, diseases and epidemics,
are systems or structures that hang together via forces of interrelationships and interactions (Senge et al.,
1994: 90).

A system is anything (subjects, objects, properties or events - SOPE) that is made up of two or more
parts. Each part of the system interacts with other parts within the system to produce a holistic effect that
transcends the effects of individual parts. Everything in the universe has two or more parts, and,
therefore, is a system. The universe with all its constellations, galaxies, stars and planets is a system. Our
mother earth is a unique planetary system of geo-, hydro-, thermo- and atmo- spheres that make plant,
animal and human life possible. Ethics, morality, business ethics, managerial ethics, executive ethics and
corporate ethics all are systems that we need to explore.

Everything there is, is a system. As human beings we are bio-rational systems, our homes and
workplaces are socio-physical systems, our schools and universities are education and knowledge
generating systems, our corporations and governments are management or governance systems, our planet
and the universe are terrestrial and cosmic systems. Our businesses and markets, our work and human
endeavors are systems bound by an inevitable fabric of interrelated forces and actions that often take
years to fully play out their effects on each other. Since we are part of the lacework, it is doubly difficult
for us to see the whole pattern of the fabric and pace of change. Instead, we often focus on snapshots of
isolated parts of the system, and wonder why our complex problems never get solved.

All reality is a system. Every system has at least three dynamic elements: inputs, processes and
outputs. Inputs are subjects and objects as antecedents, determinants, materials, infrastructure, and
resources that are the starting elements of any system. The inputs are converted into outputs by elements
called processes such as policies, procedures, organization learning routines, patents, technologies,
regulations and enforcements. Thirdly, outputs are outcomes or consequences, intended or unintended,
good or bad, just or unjust that result from inputs and processes.

If from a systems-thinking viewpoint we consider ethics, business ethics, and corporate ethics as
systems, and if each system has its own specific inputs, specific processes, and specific outputs, then we
may distinguish ethics, business ethics, and corporate ethics as in Table 1.1. A similar table can also be
drawn to distinguish between morality, business morality, and corporate executive morality.

15
Organizational Morality as Systems Thinking
Systems-thinking is more than a powerful problem-solving tool; it is a powerful language, augmenting
and changing the ordinary ways we think and talk about complex issues and problems. It is a dynamic
language for describing how to achieve fruitful change in organizations. Jay Forrester and his colleagues
at MIT, USA developed this language as systems dynamics over the last 50 years. It has its own tools
and methods, links and loops, archetypes, stock-and-flow modeling, all of which help us to understand
how complex feedback processes can generate problematic patterns of behavior within organizations and
large-scale human systems (Senge et al. 1994: 89-90).

Systems-thinking is one form of holistic organizational learning. It is thinking for people who want
to make their organization more effective, more ethical, and more moral, while realizing their personal
vision and mission. It seeks to blend the individual development of every person in the organization with
superior economic performance. It is for managers who are facing an array of problems that resist current
ways of thinking. It helps to deal with the problems and opportunities of today, and invest in our capacity
to embrace tomorrow, because people who do systems-thinking are continually focused on enhancing and
expanding their collective awareness and capabilities. Systems-thinking creates an organization that
learns. Change and learning may not be synonymous, but they are inextricably linked. If there is one
single thing that a learning organization should do well, it is to help people to embrace change. People in
learning organizations react more quickly when their environment changes because they know how to
anticipate changes that are going to occur (which is different from trying to forecast or predict the future),
and how to create the kinds of changes they want.

You cannot practice systems-thinking as an individual you need many perspectives from different
cross-functional disciplines to bear upon complex problems and issues. Hence, systems thinking by its
very nature points out and thrives on interdependencies and the need for collaboration it is a collective
and collaborative team discipline. Without learning about the industry, the business, its specific vision
and mission, as well as their own tasks, employees cannot make the contributions of which they are
capable. This requires dramatic learning efforts, both for the employees who must learn to act in the
interest of the whole enterprise, and for the senior managers who must learn how to extend mastery and
self-determination throughout the organization (Senge et al. 1994: 11). Systems thinking can enable this
process.

At the heart of a learning organization is a shift of mind from seeing ourselves as separate from the
world to being connected to the world, from seeing problems as created by someone else out there to
seeing how our own actions create the problems we experience. In a learning organization, people should
continually discover how they create their reality and change it, and empower themselves or impoverish
from it. Archimedes said, Give me a lever long enough and single-handed I can move the world
(see Senge 1990; 2006: 12-13).

There are many paradoxes in organizational life. For instance, the time of our greatest growth is the
best moment to plan for harder times. The policies that gain the most for our current dominant market
position may ultimately drain our resources most quickly. The harder we strive for what we want, the
more we may undermine our own chances of achieving it. Systems principles like these are meaningful
not so much in themselves, but because they represent a more effective way of thinking and acting.
Incorporating them into our corporate strategic behavior requires peripheral vision - the ability to pay
attention to the world as if through a wide-angle lens, so you can see how your actions interrelate with
other areas of activity (Senge et al. 1994: 87-88). [See Corporate Executive Exercise 1.4].

16
The Domain of Ethical Theories
Ethics is an evaluative enterprise. The best of ethics is an ethics of change how to recognize the
need for change and bring it about with the right set of vision, mission and resource alternatives. From a
leadership perspective, such a process must be a collective discernment and consensual decision approach
between leaders and followers. How leaders and followers collectively decide the right action to be taken
to be implemented in the right way with the right people amidst various contingencies can be very
challenging in moral and ethical leadership.

The search for a completely satisfactory ethical theory is an endless project (De George 1999:52).
There is no single ethical theory on which all people and all philosophers agree. Hence, throughout the
history of moral philosophy several ethical theories and ethical systems have been proposed and followed.
Through centuries, two approaches have been predominant: teleology and deontology, and more recently,
a third system, distributive justice (e.g., Mascarenhas 1990, 1991, 1992; Mascarenhas et al., 1996, 2006).
Still more recent is the theory of corrective justice (e.g., Mascarenhas, Kesavan and Bernacchi 2008).
This chapter provides the ethical foundations for sound corporate moral reasoning and justification by
systematically applying major theories of moral reasoning and metaphors using the ethical theories of
deontology and teleology, and especially focusing on distributive and corrective justice theories and their
sub-theories for analyzing and assessing corporate executive decisions in terms of their ethical inputs,
processes and outputs.

Inputs, Processes and Outputs of Corporate Ethical and Moral Systems

Executive behavior or corporate conduct in general, and business executive decisions, actions and
strategies in particular, may be characterized as involving a system of ethical "inputs," ethical "outputs,"
and an ethical "process" that converts inputs into outputs. Most of these inputs, processes and outputs
have ethical content, and hence, involve a decision process that has ethical and moral, elements and
consequences. Thus, if the outputs are good and beneficial to society, then the business executive must be
praised and rewarded appropriately. If the outputs bring about harmful effects or costs greater than
corresponding benefits to society, then the executive or the corporation responsible for them must accept
"responsibility" for the harm or cost burdens. The process flows of these three constituents, namely,
inputs, process, outputs or consequences, may be characterized as in Figure 1.1.

Basic ethical inputs to corporate or business conduct may be twofold: "personal ethical inputs" that
each corporate executive brings to the decision-action situation, and "corporate ethical inputs" that come
from the corporation.

"Personal ethical inputs" can be classified under three heads:

Cognitive or intellectual development that includes one's innate and learnt conceptual, intellectual and
reasoning skills (Goolsby and Hunt 1992).

Moral development that includes one's ethical-moral reasoning skills, moral attitudes and beliefs, moral
rules and principles, often corresponding to the stages of moral development described by Kohlberg
(1969) and as empirically verified by scholars (e.g., Baxter and Rarick 1987; Penn and Collier 1985).
Advanced moral development presupposes advanced cognitive development and logical reasoning skills
(Blasi 1980; Kohlberg 1969; Rehrauer 1996; Rest 1979).
Personality or volitional development that may include character-skills such as will-power," ego
strength" and "field dependence" (Trevino 1986), the former two reflecting the strength of one's moral
and intellectual convictions, and the latter, one's dependency on significant others in ethical decision-
making. Personality development also includes moral development that results in good moral decisions
and executions that presuppose good character (Aristotle 1985; Hauerwas 1981). Ethical beliefs are

17
 closely linked with personal values of top-level executives (Lincoln, Pressley, and Little 1982).

Analogously, the corporation or institution as a body is a moral entity that has its own "ethical input"
structure of cognitive, moral and personality development. Corporate ethical inputs are norms and values
that define the corporation in its everyday business operations. These ethical inputs, in as much as they
affect individual and corporate ethical behavior, may be grouped under three heads: [See Corporate
Ethics Exercise 1.5].

Corporate cognitive development that reflects the level of corporate skills in manpower, materials,
money, finance, accounting, marketing, law, and technology management the corporation controls for
sustaining competitive advantage in the domestic and global industry. Most of these corporate skills
and competencies have ethical content and implications (Blasi 1980; Goolsby and Hunt 1992).

Corporate moral development reflect ethical and moral skills the corporation has developed for
internalizing and fulfilling government and industry laws, trade norms, market conventions, corporate
ideologies and policies, corporate goals and objectives, corporate and industrial codes of ethical
conduct, environmental regulations, and corporate social responsibility. Company morale and
corporate conscience (Good aster and Matthews 1982) are expressions of corporate moral development
(Ferrell and Skinner 1988; Hunt and Chonko 1985; Rehrauer 1996).

Corporate personality or volitional development reveal the combined result of corporate cognitive and
moral developments: This is often expressed in attributes such as corporate culture and climate,
organizational design (Galbraith 1977), structure of hierarchies (Mintzberg 1979), lines of authority
and "locus of control" (Trevino 1986), "role set-configurations" and "differential association" (Ferrell
and Gresham 1985), and corporate challenges or "opportunity matrix" (Ferrell and Gresham 1985)

The "corporate ethical process" that converts "personal" and "corporate" ethical inputs into ethical
outputs or outcomes may also involve three components:

Corporate planning that implies choosing ends, goals and objectives, given ones choice of business or
industry or country of operation, and prioritizing goals in relation to one's goals and ideologies,
principles, and responsibilities to major stakeholders (Ansoff 1977; O'Connor 1978).

Corporate strategy that implies choosing specific action-programs to realize these goals and objectives
such that the net social and economic benefits of decision-outcomes are maximized and differentiated
from ones competition (Ansoff 1965, 1980; Porter 1980, 1996; Mascarenhas 2011);

Corporate ethical-moral dilemma: in the process of corporate planning, formulating corporate strategy,
and subsequent decision-making that strives to maximize net benefits to all stakeholders, executives
may encounter several ethical or moral dilemma that deal with stakeholder rights versus duties, their
costs versus benefits, equity versus inequity. With the challenge posed by ethical dilemmas the
executives must constantly decide and choose between alternative goals, objectives and strategies - all
of which bear severe ethical stresses (Cavanaugh and McGovern 1988; Ferrell and Gresham 1985;
Mascarenhas 1995, 2008, 2011; Rehrauer 1996).

Lastly, basic "corporate ethical outputs" are realized values in terms of satisfied or dissatisfied
"stakeholders" who include stockholders, suppliers, creditors, employees, unions, customers,
governments, and domestic and international sectors (Ansoff 1965; Freeman 1984; Goodpaster 1991).
Stakeholder dissatisfaction could arise from many social costs or externalities. Typical turnaround social
costs are of two types: proximate costs such as unsafe working conditions, racial or sexual harassment,
unjust wages, unjust plant closing and massive layoffs, harmful products, exorbitant prices, customer
rights denied, and air-water-earth pollution. Remote externalities include planned obsolescence of plants
and consequent ruthless plant closings, accelerated obsolescence of products, lifestyles and employee
skills, with the attendant phenomena of forced unemployment, underemployment, inflation, stagflation,
recession and depression. [See Corporate Ethics Exercises 1.6 and 1.7].
18
 Stated differently, basic corporate ethical outputs are:

Realized short-term or intermediary values such as satisfied customers, appeased governments, fulfilled
employees, satisfied shareholders, reconciled creditors, suppliers, and distributors
Targeted long term and quasi "terminal" (Rokeach 1968) ethical values such as company growth and
prosperity, increasing market share and profitability, company reputation and integrity

Imputed to intermediary and terminal corporate value-realizations are social costs and benefits for
which the corporation must assume full responsibility and accountability.

Scientific, Practical, Ethical and Moral Judgments

In linguistic discourse we make several utterances such as statements, descriptions, opinions, and
judgments that could be practical, factual, scientific, historical, economic, political, religious, cultural,
ethical or moral. Some of these are observations, comments, opinions, and judgments, while others are
expressions of and reaction to customs, conventions, mores and morals, codes of conduct, social
agreements, laws and generalizations. All these are utterances that bear varied degrees of interest,
seriousness, value and attitudes, beliefs and persuasion, clarity and ambiguity, intellectual rigor and moral
obligation. Each domain of utterances raises different questions, and, accordingly, invokes different
measures of validation and verification, truth and correctness, ethics and morals, rightness or wrongness,
justice or injustice. In this regard, Table 1.2 is a sample listing of major utterances of language and moral
discourse, distinguished by domain of utterances, corresponding major discursive questions, and criteria
of validation.

We make certain practical value judgments that can be verified given certain criteria, standards or
instruments (e.g., This house is bigger than that; this real estate is more valuable than that; this business
proposition is better than the competing one; this product is better than its competition; John has a better
character for salesmanship than Paul, and the like). Most of these are comparative if not ranking
judgments. In comparing, we want to know which of two objects has a given property to a higher degree.
In ranking, we want to know the degree to which one object or subject has the property in question.
Every ranking implies a standard, though we may not know or define that standard fully. Every ranking
makes a claim based on that standard. Such a claim can be verified given the precision and universality
of the standard. But when we verify value judgments such that they are unambiguous, we turn them into
factual judgments.

Factual judgments are decisively confirmed if they are empirically verified. Value judgments need
both verification (i.e. if certain criteria are verified) and validation (i.e. if these are the right criteria).
However, declaring criteria as right or wrong is itself a value judgment hence certain circularity or an
argumentum ad infinitum is implicit in validating value judgments. But the rightness of the criteria can
be objectively assessed by the purpose for which the things are made. Thus, the right criteria for
evaluating cars, fountain pens, artists, athletes, and major league teams are determined by the purpose of
the product, activity, or enterprise in question. For instance, knowing the purpose of the car enables us to
judge one car better than the other by speed, safety, gas mileage, comfort, trunk space, style, roominess
and the like. To the extent, however, that the purpose of a product or enterprise is relative to the buyer,
owner, or user, the rightness of the criteria may be relative or value-based. Purpose is something we give
to the product or person or enterprise (Baier 1965: 19-23).

There can be multiple standards in comparisons and ranking. Parker 51 may be better than
Waterman under certain criteria like style, inking, replacement, brand name, and signature product. This
house is bigger than that in height, width, depth, and number of rooms, spacious rooms, number of square
feet, stone or brick, better roofing material, better flooring, better plumbing, and the like. In such cases,
the comparisons and rankings are more complex, but still objectively verifiable. Most often, the
19
comparisons or rankings are also verifiable after use, experience or expertise. Some value judgments are
opinions of users, experts, teachers, retailers or manufacturers e.g., Plato was a better philosopher than
Aristotle; cars are better today than they were fifty years ago; this brand of toothpaste is best for teeth-
whitening; this cola is best for thirst quenching; this restaurant is the best in town; that retail outlet is the
best for ambience, and the like. Some of these statements are puffery. These value judgments are not
conclusively verifiable; verifiability or validation may not be always necessary, meaningful or relevant.

Statements of science, on the other hand, are more objective, data-driven, verifiable or falsifiable.
They are often stated as discoveries of existing order in observed phenomena (e.g., inventions,
discoveries, formulae, patterns, and movements of nature) or by empirically verifiable constructs,
theories, hypotheses that when proved (or falsified) become laws, generalizations, and paradigms that
explain nature and natural phenomena.

Then there are moral value judgments (e.g., John is more honest than James; Jane as a PR Director is
more trustworthy and reliable than Joan; this company is more socially responsible than that; this
negotiating model and behavior is more ethical and moral than its competing one; this brand version of
adult entertainment is more moral than all others we offer, and the like). These are evaluative judgments.
These are also comparative judgments, but as moral value comparison judgments we not only affirm the
existence of a moral property in these people or institutions, but also make a judgment about the ethical or
moral appropriateness of these properties or certain lines of behavior.

Lastly, we have moral value imperative judgments and principles for instance, executive honesty
and integrity are better than executive efficiency and performance; honesty is the best policy; telling truth
is better than telling a lie no matter what the cost; giving is better than receiving; altruism is more moral
than individualism, and treat others as you would have them treat you (the golden rule). These are
terminal values that are moral. Some terminal moral values may be expressed differently by each
religion or civilization. For instance, Table 1.3 illustrates how the terminal value of the Golden Rule
was understood and expressed by various religions down the centuries. Most of these are Kantian
categorical imperatives that are universalizable (i.e., they must be applicable to all) and reversible
(including you). [See Corporate Executive Exercise 1.8].

Legal, Ethical, Moral and Spiritual Executive Conduct

Throughout our discussions thus far we have used certain terms frequently such as legal, ethical,
moral and spiritual. Given these discussions we should now be able to define them more precisely and
comprehensively. Clear-cut distinctions, however, between what is legal, ethical, moral and spiritual are
not yet emerging, much less converging. Based on the introductory discussion of major ethical and moral
theories, we may conclude the following:
Laws promote common good, but are basically reactionary in origin, and in general preempt injury or
evil (based on the principle of non-malfeasance). Legality is basically law compliance.
Ethicality is predicated on conformance to external (social) norms and customs; it is primarily defined
by principles based on teleological (consequentialist) ethical theories. Ethicality safeguards, promotes
and defines social good in terms of outputs or consequences. Decisions and actions are ethical if and
only if their social benefits clearly outweigh social costs.
Morality is obedience to inner categorical imperatives. It is primarily predicated on ones inner beliefs
and strengths, good reasons, intentions and motivations, one's character, personality and (religious)
conscience. Decisions and actions are moral if and only if they stem from right intentions and
motivations, regardless of consequences and circumstances. Right intentions and motivations are
defined principally by their consonance with deontological theories of human rights and dignity and
distributive justice principles of basic human equality. Morality safeguards, promotes and defines
personal and social rights and duties.

20
 Spirituality goes beyond the legal, ethical and moral aspects of life to include and ground upon virtues
such as honesty, integrity, wisdom, commitment and moral audacity, and especially the cardinal virtues
of prudence, temperance, justice and fortitude. Spirituality has several dimensions. It is all
embracing. It is best not defined and hence limited or compartmentalized but holistically experienced.
It is best not conceived, hypothesized, constructed, theorized and speculated. It needs to be lived,
witnessed, and then written about. It is surrender to God who alone can rescue us from our greed,
selfishness, and avarice and jealousy. It is experiencing God and thereby fighting our addictions of
mind, body and matter. It is believing in God, accepting Gods reign in our life, accepting his presence,
providence and intervention into humanity and human history. It is a journey to God with God and
humankind, a voyage into destiny, into eternity. It is community, community-building, mutual trust,
mutual respect, mutual hope, mutual love. It is freedom; it is liberty; it is life; it is pursuit of
happiness. It is bliss. It is an inalienable God-given right and duty. It is a universal call to detachment
or renunciation. It is finding God in all things good and bad; it is experiencing God in all things good
and bad; it is seeking truth amidst darkness, risk, uncertainty, ambiguity and chaos of todays markets.
It is reverential fear of God not enslaving timidity. It is obedience to God not slavery. It is humility
not arrogance.

Virtue ethics deals with what is good life and what is happiness for the community. Without a theory
of good life and the good society, there is no check on legal maneuvering, political expediency, market
opportunism, and business turnaround malpractice. In a secular society, if moral rules and injunctions
are to derive their binding force, they must do so from a theory of moral law or from the assent of
virtuous individuals who choose the rules and the society they live in as part of their self-definition
(Anscombe 1981: 30). According to MacIntyre (1981), the authority of moral law is best when it is
theological (i.e., based on divine law and revelation). But in a secular society such as ours, we must rely
on the virtues of people it is only from the debate and shared life of virtuous people that we may
obtain a consensus on what is common good and what is good life. A business turnaround or
transformation situation constitutes a moral community in which the debate about common good for
society should take place within the context of executive virtues.

Hence, the following definitions and corollaries may be deduced:

An act is legal if it fulfills legitimately promulgated laws, regulations, ordinances and written contracts.

An act is ethical if additionally it conforms to publicly held norms and customs, corporate codes of
conduct and unwritten social pacts, respects social rights and fulfills social duties. In general, ethical
acts are consonant with ethical universals and teleological principles.

An act is moral if additionally it is grounded on good reasons, intentions and motivations, virtuous
character, clear conscience and one's categorical imperatives. In general, morality is predicated on
deontological and distributive justice principles.

An act is spiritual if additionally being legal, ethical and moral, it is also grounded on certain cardinal
virtues like honesty and integrity, wisdom and prudence, moral courage and fortitude, and on certain
transcendental principles of faith, hope love, detachment, renunciation, compassion and altruism.

What is legal may not be ethical or moral or spiritual (e.g., some states have legalized abortion and
legalized civil unions between couples of the same sex).

What is ethical is not necessarily moral or spiritual (e.g., some employment rules or corporate codes of
conduct may discriminate against the elderly, women, the poor or ignore the marginalized).

Table 1.4 summarizes the above discussion and elaborates on the domain, definition, the predominant
ethical theory, and the dilemma, mandate and aspiration of legality, ethicality, morality and spirituality.
All these four concepts can also be distinguished in relation to their source of empowerment, predominant
virtue challenge, grounding responsibility, assessment criteria, and their formula of executive success.

21
Corporate executives need to excel in all four domains of law, ethics, morals and spirituality.

The Dynamics of Corporate Ethics

Thus, business ethics and corporate ethics are interdisciplinary fields and practices that entail the
domain of at least two distinct disciplines, a) business exchanges and decisions and b) the science of
ethics as science of values and principles. It is a dynamic interdisciplinary field, as both disciplines are
refining, changing and expanding. The field of business is expanding into new areas such as revenue
management, motivation management, sustainability management, social analysis, e-business, e-
advertising, Internet marketing, cyber surveys and marketing research, social electronic networking,
globalization, social entrepreneurship, greening and global ecology, and steadily contracting from
traditional areas such as classic micro and macroeconomics, international trade theory and abstract
quantitative methods, statistical methodologies and high-powered management science.

Ethics is currently also shrinking from the classical philosophical ethics and absolute values of
ancient Greek and Medieval philosophers and dogmatic theologians. While expanding into modern and
postmodern ethics of consensual values and moral principles, corporate ethics should enhance critical
thinking and moral reasoning, ethics of dynamic business exchanges, rights and duties, moral worth and
obligation, executive spiritual development, corporate and social responsibility, distributive and
corrective justice, virtue ethics, relational ethics, ethics of trust, cyber ethics, ethics of cyber safety and
privacy, ethics of terrorism and ethics of war on terrorism, ethics of global poverty, disease and
inequality, and ethics of global ecology and sustainability.

Moreover, the veteran concept of business management, as represented by the over 110-year old
MBA curriculum and structures, is radically changing from the traditional silos of accounting, finance,
marketing, operations research and management, decisions sciences, human resources management,
business law, and economics into modern integrated business management that views all fields of
business as networked and interdependent, interacting and synergizing business solutions to simple,
complex, unstructured and wicked business problems of current markets. Specifically, with a
significant majority of domestic, international and global businesses, industries, markets and trade regions
floundering or disappearing from the business radar, there has emerged a new discipline business
turnaround and transformation management that researches and applies new integrated business
management solutions to problems of under-performance, business downturns and recessions, corporate
cash flow crisis, financial distress, financial turbulence, worker apathy, insolvency and imminent
bankruptcy (Mascarenhas 2011).

Every part and discipline of business (e.g., accounting, finance, marketing, OB, HR, production, and
business law) implies ethics. Every stakeholder of business (e.g., customers, producers, employees and
employers, suppliers and creditors, distributors and promoters, domestic and international governments,
local and global communities) involves moral rights and duties, moral and ethical responsibilities and
obligations that, in turn, invoke ethical values and moral principles. A comprehensive and integrated
course in corporate or business ethics should include every part of business, as also every stakeholder of
business. This book relates to corporate ethics that deals with major moral corporate executive leaders,
their specific skills, personality, and critical thinking inputs, their moral reasoning processes, their
decisions and choices, their mental models and business models, their strategies and actions, and above
all, executive moral obligations regarding the consequences of their decisions.

22
 Concluding Remarks

In general, the ethical-moral reasoning advocated in this book involves a five-dimensional ethical
appraisal: 1) a teleological analysis of positive/negative effects of executive decisions; 2) a deontological
analysis of the moral principles, rights and duties underlying these decisions; 3) a distributive social
justice based analysis of the spread of costs and benefits and rights and duties of corporate executive
decisions, 4) a distributive corrective justice based on setting up processes and procedures whereby
current and past wrong distributions of costs and benefits and rights and duties of all stakeholders may be
rectified, and 5) a virtue-ethics analysis of the physical, functional and moral well-being effects of
corporate decisions and strategies.

Ethics has meant different things to different generations. While to the Greek philosophers Socrates,
Plato and Aristotle ethics was a science of human values derived from certain philosophical concepts and
theories and as lived by exemplary peoples and societies, over the centuries and millennia, ethics to
modern generations has come to mean something more practical, livable, applicable and demonstrable in
human conduct. Ethics is currently reckoned as a responsible action program for the betterment of
humankind represented by individuals, groups, organizations and societies. Ethics empowers us to chart
and live a new value-laden direction and meaning in life.

Business ethics, however, should go beyond certain pragmatic values that most business executives,
business management students and business institutions work for. Most top B-School students consider a
course in Business or Managerial Ethics as not value-adding as it may not support their desired set of
pragmatic values. Most of these values (e.g., graduating with honors, securing a job in a multinational
company, and striving up the executive success ladder) are instrumental and temporary, and are means
and not ends. B-school students focused only on these values are ill-prepared to meet the tough
challenges of todays uncertain, ambiguous and chaotic markets and economies, and hence, often
fraudulent and corrupt world.

But conceptually ethics is a science of principled moral values and principled moral behavior,
operationally, ethics is life itself, is living, experiencing, and sharing moral values. The value and
behavior should stem from certain well established moral principles, moral standards and rules, or from
the moral judgments of people whom we call wise and honest. That is, values are values when certain
universal moral principles ground and support them. Values derive value from these moral principles, and
not vice versa. The power of moral principles is that they are universal, timeless truths. When we apply
them and live by them, we generate values, we create values and best practices that become legacy and
posterity. Such principles deal with meaning and truth, honesty and integrity, wisdom and justice.

23
 Figure 1.1: The Anatomy of Corporate Executive Action and the
Application of Ethical Principles

Distributive Justice Principles:

Ethics of Distributive and Corrective Justice

INPUTS: PROCESS: OUTPUTS:

Personal and Business Management Business or Market
Corporate Inputs & Corporate Consequences
Governance Processes:
Executive Reasoning,
Decisions & Strategies

Teleological
Principles:
Deontological Principles: Ethics of Costs and
Ethics of Rights and Duties Benefits

Ethics of Responsibility;
Ethics of Human Personhood; Ethics of Virtue; Ethics of Trust;
Ethics of Moral Worth; Ethics of Moral Reasoning

24
 Table 1.1: Distinguishing between Ethics, Business Ethics, and Corporate
Ethics: A Systems Perspective
Type of Inputs
Moral
Discipline
Ethical concepts,
Ethical theories,
Ethical axioms,
Ethical rules & principles,
ethical codes of conduct and
Ethics ordinances,
Ethical values and
Real business cases
involving ethics and morals.
Ethical business concepts
and theories,
Business axioms, rules and
principles,
Business or Ethical codes of conduct and
Managerial ordinances,
Ethics Organizational ethical
values and real cases as
applied to business ethical
and moral exchanges.
Ethical concepts, theories,
axioms, rules and principles,
ethical codes of conduct and
ordinances,
Corporate ethical values and real cases
or as applied to corporate-wide
Executive domains of executive
Ethics decisions and boardroom
behaviors and conduct.
Processes
Ethical reasoning,
Ethical understanding,
Ethical deliberation,
Ethical argumentation,
ethical explanation,
Ethical rationalization,
Ethical justification and
consequent ethical decision-
making.
Ethical business reasoning
and understanding,
Ethical deliberation and
choices,
Ethical argumentation and
explanation,
Ethical rationalization and
justification, and consequent
ethical decision-making
Ethical monitor and control,
as and when applied to
business exchanges and
markets.
Ethical reasoning and
understanding,
Ethical deliberation and
choices,
Ethical argumentation and
explanation,
Ethical rationalization and
justification, and consequent
Ethical decision-making,
Ethical monitor and control,
when applied to corporate
executive behaviors in
boardrooms and about.
25
Outputs
Ethical decisions, choices, and
their ethical consequences and
responsibilities. Hence,
Newly evolving ethical mores
and conventions,
Newly evolved ethical standards
and benchmarks,
New ethical models and icons,
New ethical leaders and
champions.
[All the above become inputs
at the next stage of ethical
evolution].
Ethical business decisions,
choices, exchanges, and their
ethical business exchange
consequences and
responsibilities. Hence, newly
evolved:
Ethical business exchange mores
and conventions,
Ethical business exchange
standards and benchmarks, and
newly generated business
Ethical models and icons, leaders
and champions.
Ethical corporate executive
decisions, choices, exchanges,
and their ethical corporate-wide
consequences and
responsibilities. Hence newly
evolved
Ethical corporate-wide exchange
mores and conventions,
Standards and benchmarks, and
Corporate ethical models and
icons, leaders and champions.
 Table 1.2: Basic Moral Rule-Based Reasoning for Analyzing Ethics of
Corporate Decisions and Actions
Ethical Theory Rule Based on Ethical Theory:
(Focus on: ) That corporate action of designing,
producing, distributing and marketing new
and old products is:
Teleology Moral (teleologically) if it decidedly
produces more benefits than
(Consequences)
corresponding costs and to the greatest
number
Deontology Moral (deontologically) if it decidedly
upholds more rights of stakeholders than
(Inputs and
it violates corresponding duties, and in
processes) relation to the greatest number.
Distributive Moral (by distributive justice standards)
if it decidedly distributes all costs and
Justice
benefits, all rights and duties evenly or
(Inputs, equally or equitably across all relevant
processes and
stakeholders
outputs (IPO))
Corrective Moral (by corrective justice standards) if
it decidedly sets up just procedures to
Justice
bring about a just distribution among the
(IPO) greatest number, when the previous three
rules have failed.
Ethics of Moral (by human dignity standards) if it
decidedly sustains and empowers human
Human Dignity
dignity of people affected by the action
(IPO) and under all situations regardless of
nationality, color, creed, gender or age.
Ethics of Moral (by ethics of virtue) if it is
decidedly based on the practice of at least
Virtue
the four cardinal virtues of prudence,
(Inputs and temperance, justice, and fortitude, and in
Processes (IP)) relation to the greatest number.
Ethics of Trust Moral (by ethics of the virtue of trust) if it
is decidedly based on the practice of
(IP)
mutually benefiting trust between
exchange partners, and under all
circumstances of contingency.
Ethics of Moral (by ethics of the moral
responsibility) if it duly owns and is
Responsibility
answerable to the action before the act,
(IPO) and fulfills after the act all accountability,
obligations, duties, and liabilities to all
affected parties in relation to the greatest
number.
Ethics of Moral (by ethics of the virtue of
compassion) if it is decidedly treats all
Compassion
people with compassion, and under all
(IPO) circumstances of contingency.
26
Major Problems in the Rule Application of this
theory: In relation to the design, production, distribution, and
marketing of new or old products and services:
What is a benefit? What is a cost? To whom: One mans meat is another
mans poison. A cost to one is benefit to the other.
Costs and benefits are both consequences and outcomes. When are they
known fully: before, during or after the executive action?
What is the greatest number: 1.2 billion in India?
What is a right? What is a duty? Whose: One mans right is another
mans duty to respect that right. A duty to one is right for another.
Rights and duties are given and defined by whom: God, state, society or
employer? Rights and duties are both antecedents to action. When are
they known fully: before, during or after the executive action?
What is the greatest number: 1.2 billion in India?
What is equality? What is equity?
How is equality or equity determined: by need, want, abilities, efforts,
contributions, market value, social status, or entitlement?
Who distributes: state, society, company, status, caste?
What should be the goal of distribution: income equality or economic
equality or social equality or opportunity equality, and why?
What are just procedures: those that minimize harm? Those that prevent
harm? Those that protect people from harm? Those that do good to
people?
Who sets up these just procedures, why, when and where: the nation, the
state, the district, the municipality, ones company?
What is human dignity? Is there an objective or universal standard or a
categorical imperative? What does sustaining and empowering human
dignity mean? Who defines this, and for whom, and by what rules or
standards?
What is virtue? What is vice? Is virtue power (virtus in Latin)? Is it
excellence (following its Greek derivation arte)? Hence, is it power of
excellence or power of greatness? Why are cardinal virtues cardinal (i.e.,
upon which all other virtue are hinged)? Prudence should discipline
temperance, fortitude and justice. Hence, prudence should be the
cardinal virtue. Is prudence practical wisdom? But how does one
cultivate it? Via virtue? This is circular thinking? Via experience of
being wise? Then ethics of virtue makes sense, as long we grow wise
through good experience or experience of doing good.
What is trust? When do you begin to trust somebody? Through mutual
interaction and knowledge? Then how do you trust strangers? How does
a patient trust the doctor whom she has never met before? All trust is a
blind leap into believing in the goodness of the other hence vulnerability
is built into trust. Does one have to be vulnerable in order to trust?
What is responsibility? Answerability? Accountability? Obligation?
Duty? Imputability? Liability? Acting or compensating to allay ones
guilt or blame? When is one responsible to the action itself, rather than
to its outcomes? To what extent are our choices and actions deterministic
or owned by our free-will? Are they freely initiated and posited or
constrained? If constrained, is responsibility exonerated proportionate to
the constraint or pressure? When do we act voluntarily? When
involuntarily? And when under duress? Responsibility is a function of
all three. If so, how assessed?
What is compassion: kindness, mercy, graciousness, forgiveness,
condescension, being benign? Real compassion is never judgmental, never
condemnatory, always forgiving, and always giving. Is this real or surreal,
doable and practical, viable and desirable? If not, how can it be a rule of
moral or ethical action?
 Table 1.3: Various Utterances, Questions and
Validating Criteria of Human Discourse
Domain of Utterances & Questions Validation Criteria
Utterances
Practical, Factual, John is smarter than Jane. Are these statements true or false?
James is more intelligent than his siblings. Who or what has a certain property to a higher
Comparative
This real estate is more valuable than its going price. (or lesser) degree and how can you measure it?
Judgments This house is more spacious than what is described.

Practical Factual This is the best company to work for. Are these statements valid and reliable?
This is the largest company in the industry. What is the highest degree to which one (object
Ranking This is the most profitable concern in the world. or subject) has the property in question, and how
Judgments or This company is the industry champion. can you measure it?
Opinions What are the criteria for ranking?
Are these the right criteria for ranking?

The earth is round and orbits around the sun.
The moon is a planet orbiting around the earth.
The universe is expanding with a high expansion
Scientific velocity.
Judgments Our increasing carbon emissions are affecting global
climate.
Matter is indestructible.
There seems to be no extraterrestrial life.
Laws of thermodynamics. Laws of gravity.
What are the rules underlying terrestrial
phenomena?
What are generalizable laws and principles that
explain global phenomena?
Are these empirically observable, testable,
verifiable or falsifiable?
What theory best explains the origins of our
world and the universe?

Over-speeding is against law. Are these statements lawful?

You shall not dodge taxes. Are these laws just and non-discriminating?
You shall not litter. Are these laws duly promulgated?
Legal Judgments Product liability laws. Are these laws effectively enforced?
Patent and intellectual property laws. Are these laws humanizing?

Moral Judgments Usury is wrong. Are these statements true in a given culture?
A man should marry his brothers widow if the brother Are these customs and conventions real?
relative to ones dies childless. Are these customs morally defensible in any
Culture It is wrong to take more than one wife. culture?
Wives should be submissive to their husbands. Are these mores humanizing society?

All employees as human beings deserve respect.
All wages and salaries should be based on social need.
Ethical Judgments All employees must be responsible and accountable for
their job tasks.
All employees should abide by the company code of
ethics.
Are these statements intuitively correct or
incorrect?
How do you define and measure employee
responsibility and accountability for ones job?
Is the code of company ethics correct?

Moral Judgments Honor your father and mother. Are these statements objectively and universally
You shall not harm others. true or false?
or Principles
You shall not kill, steal or lie. Are these moral principles universally binding?
Absolute to You shall not commit adultery, or covet your neighbors Are these timeless moral rules?
Human Nature wife. Are these supreme moral principles that override
You shall not covet they neighbors goods. others?
You shall not break promises.
You shall not misuse institutions.

Moral Categorical The golden rule: Do unto others as you would others do
to you.
Imperatives Kantian principles of Universalizability.
Kantian categorical principles of reversibility.
All human beings are ends in themselves.
All human being are born equal.
All human beings have a right to life.
All human beings have a right to liberty and the pursuit
of happiness.
Are these statements, even though not proven
nor disproven, intuitively clear, based on human
nature, and categorical?
Are they universally binding in every culture?
Are they universally reversible in every culture?
Are these absolutely binding all peoples?

27
Table 1.4: The Universal Golden Rule as a Defining Moral Principle in
World Religions
Religion Religious Philosophy
Hinduism The goal in life is Moksha (liberation) from
(2400 BC?) the body or rebirth. The lives of Hindus are
governed by three doctrines or principles:
Dharma (universal law), Karma (cumulative
residue of personal actions), and Samsara
(the cycle of rebirth).
Judaism A monotheistic religion based on the laws
(2000 BC?) and the teaching of the Holy Scripture and
the Talmud
Zoroastrianism Believes in afterlife and in the continuous
(650 BC?) struggle of the universal spirit of good
(Ormazd) with the spirit of evil (Ahriman),
but the good will ultimately prevail.
Buddhism Buddhism teaches that suffering ensues from
(630 BC) wrong desire, and that right thinking and
self-denial will enable the soul to achieve
Nirvana, a divine state of release from
misdirected desire.
Jainism Jainism emphasizes asceticism, nonviolence,
(600 BC) and reverence for all living things.
Confucianism Ethical teachings formulated by Confucius
(520 BC) and introduced into Chinese religion,
emphasizing devotion to parents, family, and
friends, cultivation of the mind, self-control,
and just social activity.
Christianity Christianity believes that Jesus is Christ, the
(30 AD) Prophet, the Messiah, Savior and God. His
central tenet was love: Love one another as I
have loved you. He preached nonviolence,
forgiveness, mercy and compassion as a
source of happiness.
Islamism Orthodox Islamism advocates universal
(600 AD) brotherhood, nonviolence, mercy and
compassion; refrains from pork; legislates
prayer five times a day, and Mecca (in Saudi
Arabia) is its most sacred city.
Bahai Forbids begging, polygamy, drinking
(1844 AD) alcoholic drinks, buying and selling slaves,
and stresses principles of universal
brotherhood, social equality etc.
28
Golden Rule
Version
Do naught unto others what
you would not have them do
unto you (Mahabharata 5,
1517)
What is hateful to you, do
not to your fellowman
(Talmud, Shabbat 31a)
Whatever is disagreeable to
yourself, do not unto others
(Shast-na-shayast13:29)
Hurt not others with that
which pains yourself
(Udana-Varga 5:1)
Treat all others as you would
like to be treated
(Sutrakritanga 1.11.33).
What you do not want done
to yourself, do not do to
others (Analects 15:23)
Whatever you want others to
do unto you, do also to them
(Matthew 7:12); you must
love your neighbor as
yourself (Rom 13:8-10). Do
unto others even if you do
not expect them to do such
things unto you (Lk. 6: 32-
42).
No one of you is a believer
until he loves his neighbor
what he loves for himself
Choose for your neighbor
that which you choose for
yourself (Epistle to the Son
of the Wolf: 30)
Comments
The principal and most
ancient religious traditions in
India.
Judah was the fourth son of
Jacob from Leah (Gen 29:35);
the Judaic tribe descended
from him, the strongest of the
twelve tribes of Israel
(Num1:26).
A religious philosophy of the
Persians before they
embraced Islam; founded by
Zoroaster, its principles are
contained in Zend-Avesta.
Siddhartha Gautama Buddha
was enlightened (= Buddha) c.
637 BC in India. He founded
Buddhism
A religion of India, offshoot of
Hinduism founded in India in
the 6th century BC
Confucius (Kung Futzu 551-
479 BC) was a philosopher
and teacher in China
Christ (Christos = anointed in
Greek, Messiah in Hebrew)
was prophesied in the OT and
was born as Jesus of Nazareth
c. 6 BC. He was sent to
establish the Kingdom of God
on earth.
Islamism or the Muslim
monotheistic religion believes
that the supreme deity is Allah
and that Mohammed is the
chief prophet and founder
Bahai stems from Babism, a
modern Persian religion
founded c. 1844 by the Bab
(Mirza Ali Mohammed) from
Persia.
 Table 1.4: Distinguishing Legality, Ethicality, Morality and Spirituality
Dimension of Legality Ethicality Morality Spirituality
Distinction
Law, Legislature, Ethics; Codes of Morals Virtues
Jurisprudence, conduct; Mores, Moral principles Integrity, honesty, trust
Enforcement all customs; pacts and Moral rules Wisdom, prudence
Domain local and national agreements Moral imperatives Moral courage timeless
values organizational and Universal and and eternal values,
executive values reversible imperatives attitudes and beliefs.

Law compliance Compliance with Internalization of Experiencing and

Definition professional codes of moral rules, standards witnessing high levels of
conduct, mores and and principles virtues such as integrity,
conventions honesty, wisdom,
prudence and moral
courage
Predominant Teleology of costs Distributive justice Deontology of rights Virtue ethics, especially
Ethics Theory and benefits and duties based on trust and wisdom

Legal dilemma: Ethical dilemma: Moral dilemma: Spiritual dilemma:

Dilemma Conflicting laws conflicting ethical Conflicting moral conflicting demands of
codes and pacts principles and duties virtues, drives and habits

Mandate Do what is legal. Do what is right. Do what is good. Do what is right rightly
with virtue, trust and good
intentions.
Aspiration Legal compliance Ethical excellence Moral goodness and Spiritual quest and trust
imagination
Laws, ordinances, Mores, conventions, Moral rules, precepts; Cardinal virtues of
Source of Acts, Bills, Codes of conduct; Moral convictions; prudence, wisdom,
Legal rights Ethical rights Moral beliefs; courage and fortitude;
empowerment Sociality Immanence Religious conscience Personality/character;
Individuality Moral rights Spiritual rights
Moral transcendence Spiritual transcendence

Predominant Honesty, Prudence, Moral integrity Integral spirituality

virtue Transparency Frugality Wisdom Compassion & trust
Accountability Fortitude Moral courage Unconditional love
challenge
Legal responsibility Social responsibility; Moral responsibility Spiritual responsibility
Responsibility Do not harm. Prevent harm Protect from harm Do good unto others;
Law of malfeasance Preemptive justice Protective justice Beneficent justice
Compensatory Procedural justice Virtuous justice
justice Building trust

Are laws: Are mores and Are intentions: Underlying character:

Assessment Fair or unfair? codes: Right or wrong? Virtue or vice?
Just or unjust? True or false? Good or evil? Wise or unwise?
criteria Correct or incorrect? Courageous or cowardly?

Success Reactive legal Proactive/competent Interactive acceptance Prophetic and charismatic

equation or compliance and compliances of pacts, of adherence to living and witness of great
greening of America codes and universally binding virtues and moral values
formula agreements for moral principles, that flow from an abiding
global sustainability especially, the golden moral and spiritual
rule character.

29
 Corporate Ethics Executive Exercises
1.1 There is a large spectrum of grey area in corporate ethics where diverse customs and mores, pacts and agreements,
values and cultures are involved (e.g., be non-hierarchical; be inclusive; be good; be caring; be fair; be just; do not
fraud; be generous; be contributing; be cooperative). It is the grey area that tests corporations, its leaders and chief
executives. Investigate what are the source, domain, severity and treatment of greyness in the following corporate
action dyadic areas:

a) Legal compliance versus Social conformity;

b) Ethical conformance versus Moral striving;
c) Adherence to industrial codes versus company codes of conduct;
d) Consumer sovereignty versus privacy;
e) Consumer safety versus security;
f) Patent rights and duties versus Intellectual property rights and duties;
g) Employee rights and duties versus Shareholder rights and duties;
h) Fairness to versus firefighting competitors;
i) Stakeholder rights and privileges versus duties and obligations.

1.2 As also, certain questionable corporate strategies thrive in ambiguity and greyness. Investigate the source, domain,
severity and treatment of greyness in the following corporate action areas:

a) Aggressive competitive marketing;

b) Wash trading or round trip sales practices;
c) Insider trading among board members;
d) Financial shenanigans in invoicing, billing and issuing trade credit;
e) Accounting irregularities in invoicing, billing and issuing consumer credit;
f) Consulting as well as auditing a client firm;
g) Corporate strategic alliance in core versus end products;
h) Promoter investor pressure on CEOs or managing directors.

1.3 How could you apply the following fundamental principles of Systems Thinking to detect and avert the long-term
deleterious effects of bad debts created by over-leveraging the corporation with debt, and why?

a) Systems-thinking is more than a powerful problem-solving tool; it is a powerful language, augmenting and
changing the ordinary ways we think and talk about complex issues and problems. It is a dynamic language for
describing how to achieve fruitful change in organizations.
b) You cannot practice systems-thinking as an individual you need many perspectives from different cross-
functional disciplines (e.g., sociology, Institutional or Organizational Psychology, Mathematics, Statistics and
Economics) to bear upon complex problems and issues.
c) Systems thinking by its very nature points out to and thrives on interdependencies and the need for
collaboration it is a collective and collaborative team discipline.
d) Without learning about the industry, the business, its specific vision and mission, as well as their own tasks,
employees cannot make the contributions of which they are capable. This requires dramatic learning efforts,
both for the employees who must learn to act in the interest of the whole enterprise, and for the senior managers
who must learn how to extend mastery and self-determination throughout the organization (Senge et al. 1994:
11). Systems thinking can enable this process.
e) We fragment the complex world in order to understand it. This makes complex tasks and subjects more
manageable. If we just admire the broken pieces, however, our vision remains fragmented, each of us
mistaking the piece for the whole (as did the blind men trying to define the elephant). If we reassemble and
reorganize the pieces, however, we see connections, interactions and interrelationships between parts and
components we have never seen before nor registered, and eventually see a larger whole, and understand reality
around us better. This is systems thinking.
f) Systems thinking helps us to destroy our illusion that the world is created of separate and unrelated forces.
When we do this, our homes, our schools, our universities, our organizations, our institutions and we ourselves
truly become learning organizations.
1.4 In understanding the distinctive features and benefits of systems thinking, how will you internalize, organize and
implement the following in your corporation?
30
 a) Systems-thinking is a discipline for seeing wholes. It is a framework for seeing interrelationships rather than
linear cause-effect chains and things, for seeing processes and patterns of change rather than static snapshots.
b) Systems-thinking is a sensibility for the subtle interconnectedness that gives living systems their unique
character.
c) It is a discipline for seeing the structures that underlie complex situations, and for discerning high from low
leverage change.
d) It is a shift of mind from seeing parts to seeing wholes, from reacting to the present to creating the future,
from seeing ourselves as helpless reactors to changing reality to seeing ourselves as active participants in
shaping that reality.
e) More specifically, systems-thinking is a way of thinking about, and a language for describing and
understanding, the forces and interrelationships that shape the behavior of systems. The discipline helps us to
see how to change systems more effectively, and to act more in tune with the larger processes of the natural
and economic world.
f) Systems-thinking is a fundamental shift from linear thinking to circular thinking, from seeing things as static
structures or objects to viewing them as processes. A tree is not an object, but an expression of process, such
as photosynthesis, which connect the sun and the earth. A human being is not just a subject, but also a
dynamic process of inhaling and exhaling, metabolism and anabolism, growth and renewal.
g) The art of systems thinking lies in seeing through complexity to the underlying structures generating change.
Systems-thinking does not ignore complexity; on the contrary, it organizes complexity into a coherent story
that empowers us to detect and distinguish between causes and effects of problems, their separation in space
and time, and how we can remedy them in enduring ways.
h) The greatest benefit of systems thinking is to distinguish between high-leverage from low-leverage changes
in highly complex situations.

1.5 Using the methodology of probing the ethical and moral content of corporate actions and strategies described
under The Domain of Corporate Ethics, and applying the six ethics theory criteria do the following in relation
to case 1.1:

a) Discuss the morality of corporations that borrow indiscriminately.

b) Discuss the morality of over-leveraged companies.
c) Discuss the ethics of banks trying to feed the debt-ridden business groups.
d) Discuss the ethics of politically pressured public sector bank loans to floundering companies.
e) Discuss the morality of rating agencies that continue to rate failing companies with investment grade (i.e.,
BBB) and above.
f) Discuss the legality and morality of the new hybrid financial instruments such as Cocos and ERNs. To
what extent do they ingeniously support the corporation and corporate debt at the expense of investors and
the general public, and why?

1.6 As an executive ready to take on corporate challenges, how would you assess your personal ethical inputs under
the following three heads?

a) Cognitive or intellectual development that includes one's innate and learnt, conceptual, intellectual and
reasoning skills.
b) Moral development that includes one's ethical-moral reasoning skills, moral attitudes and beliefs, moral rules
and principles, often corresponding to the stages of moral development described by Kohlberg (1969). Note
that advanced moral development presupposes advanced cognitive development and logical reasoning skills.
c) Personality or volitional development that may include character-skills such as will-power," ego strength"
and "field dependence" (Trevino 1986), the former two reflecting the strength of one's moral and intellectual
convictions, and the latter, one's dependency on significant others in ethical decision-making. Personality
development also includes moral development that results in good moral decisions and executions that
presuppose good character. Ethical beliefs are closely linked with personal values of top-level executives.

1.7 As an executive ready to undertake corporate challenges of the company entrusted to you, how would you assess
your corporate ethical inputs under the following three heads?

31
 a) Corporate cognitive development that reflects the level of corporate skills in manpower, materials, money,
finance, accounting, marketing, law, and technology management the corporation controls for sustaining
competitive advantage in the domestic and global industry. Most of these corporate skills and competencies
have ethical content and implications.
b) Corporate moral development which is reflected in the ethical and moral skills the corporation has developed
for internalizing and fulfilling government and industry laws, trade norms, market customs, corporate
ideologies and policies, corporate goals and objectives, corporate and industrial codes of ethical conduct,
environmental regulations, and corporate social responsibility. Company morale and corporate conscience are
expressions of corporate moral development.
c) Corporate personality or volitional development that reflects the combined result of corporate cognitive and
moral developments: This is often expressed in attributes such as corporate culture and climate, organizational
design, structure of hierarchies, lines of authority and "locus of control, "role-set-configurations" and
"differential association," and corporate challenges or "opportunity matrix."

1.8 As an executive having undertaken executive challenges of the company entrusted to you, how would you assess
your corporate ethical outputs under the following three heads?

a) Basic "corporate ethical outputs" are realized values in terms of satisfied or dissatisfied "stakeholders" who
include stockholders, suppliers, creditors, employees, unions, customers, governments, and domestic and
international sectors.
b) Realized short-term or intermediary values such as satisfied customers, appeased governments, fulfilled
employees, satisfied shareholders, reconciled creditors, suppliers, and distributors.
c) Targeted long-term and quasi "terminal" ethical values such as company growth and prosperity, increasing
market share and profitability, company reputation and integrity

1.9 Stakeholder dissatisfaction could arise from many social costs or externalities. As a corporate executive having
undertaken corporate challenges of the company entrusted to you, how would you assess your corporate
ethical costs under the following heads?

a) Proximate costs such as unsafe working conditions, racial or sexual harassment, unjust wages, unjust plant
closing and massive layoffs, harmful products, exorbitant prices, customer rights denied, and air-water-earth
pollution.
b) Remote externalities include planned obsolescence of plants and consequent ruthless plant closings,
accelerated obsolescence of products, lifestyles and employee skills, with the attendant phenomena of forced
unemployment, underemployment, inflation, stagflation, recession and depression.

32
Endnotes:

iSee Hyperactive, yet Passive, The Economist, December 5, 2015, p. 13.

ii
Luk Bouckaert (1941- ) is emeritus professor of ethics at the Catholic University of Leuven, Belgium. He is a philosopher and an
economist by training. His research and publications fall within the fields of economic and business ethics and spirituality.

iii
Lincoln Steffens (1866-1936) was the most famous of the American muckraker journalists of the period 1903-1910. His
exposs of corruption in government and business helped build support for reform. Lincoln Steffens was born on April 6, 1866,
in Sacramento, California. A New York reporter, he launched a series of articles in McClure's, called Tweed Days in St. Louis,
which was later published together in a book titled The Shame of the Cities.

iv
Amartya Sen (1990: 2) comments on the surprising feature of modern economics to make it value-free or non-ethical.
Historically, he observes, the evolution of modern economics has largely been an offshoot of ethics. The subject of economics
was for long considered as a branch of ethics. At the very beginning of The Nicomachean Ethics, Aristotle relates the subject of
economics to human ends or ethics. Aristotle in his Politics connected both politics and economics to ethics. Adam Smith
(1976), the father of modern economics, was a Professor of Moral Philosophy at the University of Glasgow. Until recently,
economics was taught at Cambridge as part of moral science. Kautilya, an advisor and minister of the Indian emperor
Chandragupta, the founder of the Mauryan Dynasty (and grandfather of Ashoka), wrote around 400 BC his Arthashastra
(Instructions on Material Prosperity) that includes four distinct fields: a) metaphysics, b) ethics (as the science of right and
wrong), c) the science of government, and d) the science of wealth. This book also dealt with related engineering problems. In
fact, modern economics has a definite logistic and engineering approach as evidenced in the writings of William Petty, David
Ricardo, Augustine Cournot, and Leon Walras. However, modern positive economics has distanced itself from ethics, thereby
impoverishing itself seriously (Sen 1990: 7-14).

v
(See Foucault, M. (1984), The History of Sexuality, Volume 2: The Use of Pleasure, Penguin: London, p. 26). Paul-Michel
Foucault (1926-84) a French philosopher and historian, was one of the most influential and controversial scholars of the post-
World War II period. The son and grandson of a physician, Michel Foucault was born to a bourgeois family. He resisted what he
regarded as the provincialism of his upbringing and his native country, and his career was marked by frequent sojourns abroad. A
distinguished but sometimes erratic student, Foucault gained entry at the age of 20 to the cole Normale Suprieure (ENS) in
Paris in 1946. After graduating in 1952, Foucault taught at the University of Lille, spent five years (195560) as a cultural attach
in Uppsala, Sweden; Warsaw, Poland; and Hamburg, West Germany (now Germany). Foucault defended his doctoral dissertation
at the ENS in 1961, translated as Madness and Unreason: A History of Madness in the Classical Age. It won critical praise but
a limited audience. He became famous in 1966 for Les Mots et les Choses (Words and Things; Eng. trans. The Order of
Things) as one of the most original and controversial thinkers of his day. Between 1971 and 1984 Foucault wrote several works,
including Surveiller et Punir: Naissance de la Prison (1975), (Discipline and Punish: The Birth of the Prison), a monograph on
the emergence of the modern prison; three volumes of A history of Western sexuality; and numerous essays. Foucault continued
to travel widely, and as his reputation grew he spent extended periods in Brazil, Japan, Italy, Canada, and the United States. He
became particularly attached to Berkeley, California, and the San Francisco Bay area and was a visiting lecturer at the University
of California at Berkeley for several years. Foucault died of a septicemia typical of AIDS in 1984, the fourth volume of his
history of sexuality still incomplete.

vi
Aristotle likens the parties' initial positions to two equal lines. The injustice upsets that equality by adding to one line a
segment detached from the other. The correction removes that segment from the lengthened line and returns it to the shortened
one. The result is a restoration of the original equality of the two lines. More recently, it has become central to contemporary
theories of private law.

vii
Aristotle follows Socrates and Plato in taking the virtues to be central to a well-lived life. Like Plato, he regards the ethical
virtues (justice, courage, temperance and so on) as complex rational, emotional and social skills. But he rejects Plato's idea that
training in the sciences and metaphysics is a necessary prerequisite for a full understanding of the good or human well-being. The
good of human beings cannot be answered with the exactitude of a mathematical problem since mathematics starts with general
principles and argues to conclusions. Aristotle conceptualized ethical theory as a field distinct from the theoretical sciences.

33