Ethics & Values in Management

Module 4: Ethical Theories

EIV Mod 3 Ethical Theories

Why study ethical theories?

One needs to study the language & concepts of economics and management to make good decisions
Consumer surplus
The consumer surplus is the amount that consumers benefit by being able to purchase a product for a price that is less than they would be willing to pay

So also, one needs to be aware of key theories and concepts of ethics to make sound ethical decisions
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Two main schools of thought

Teleological theories
Telos (Gr):End Logos: Discourse

Determine the ethics of an act by the probable consequences of the action (the ends)
Go-getter

Deontological theories
Determines the ethics by looking at the process (the means) independent of the consequences Ethics as a matter of principle, duty, justice and fairness
Infosys would not pay any bribe Neither would Tata pay a ransom
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Teleological Theories
The most representative of teleological theories is the Utilitarian Theory also called the Consequentialism
Read Utilitarianinsm by John Stuart Mill Ethical act is one that which is expected to result in greatest good (Utility) for the greatest numbers
Bahu Jana Hitaya, Bahu Jana Sukhaya Example: Hydropower plant

The other theory is the Distributive Justice

Read Distributive Justice by John Rawls Concept of fairness Equitable distribution of goods & services Often, the fairest result is the one that is unequal
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Utilitarianism
Utilitarianism or Consequentialism
Determining in terms of consequences
Not only to ourselves but also for all the parties affected by the action Stakeholder Approach

Does High CEO pay result in a better social consequence? If yes, it is justified
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Utilitarianism
Utilitarian thinkers Roots of utilitarian thinking
Thomas Hobbes (1588-1679) David Hume (1711-1776) Adam Smith (1723 1790)

Classic formulations
Jeremy Bentham (1748 1832) John Stuart Mill (1806 1873)
Read Utilitarianism by John Stuart Mill
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Utilitarianism
In understanding, good or utility, which is central to Utilitarianism, following concepts will help Intrinsic value
That which can be valued for itself Happiness is the ultimate good

Instrumental value
Money per se does not give happiness, it is only instrumental in buying goods and services that bring in happiness Lest you may mistake, money is important but only as an instrumental value in obtaining intrinsic values
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What is Happiness?
Experiencing pleasure & avoidance of pain, according to Bentham, is happiness
Nature has placed mankind under the governance of two sovereign masters, pain and pleasure

EIV Mod 3 Ethical Theories

Problems of measurement
If both you and I like to get a job
Can you get under the skin of each and know the utility?

Some benefits and costs are intractable to measurement

How do you value life to be $ 200000 as in Fords Pinto car case

Difficulty in predicting future costs and benefits

Could one have predicted the benefit and cost of Einsteins research E = mc2

What counts as benefit and what counts as cost?

Is setting up a liquor shop a cost or a benefit?

How do you utility of noneconomic goods?

EIV Mod 3 Ethical Theories

Problems of measurement
Noneconomic goods
Goods, such as Happiness, life, love, freedom, equality, health, beauty, whose value is such that no quantity of any economic good is equal in value to the value of noneconomic good
Amulya, Invaluable

GNH (Gross National Happiness) vs GDP

The term coined in 1972 by Bhutan's former King Jigme Singye Wangchuck
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Problems of measurement
Problems of measurement Different people have different experience with the same utility Whose happiness measures most?
Everybody to count for one, Nobody for more than one
Bentham

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Problems of measurement
If an action renders one exquisitely happy and three moderately unhappy, does the happiness of that one outweigh the unhappiness of the three?

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Critique of Utilitarainism
One major criticism of consequentialism : You may intend to have certain consequence
But there can be unintended consequences

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Critique of Utilitarianism
Does one consider the good of the animals?
See Video the To drill or not to drill? and read the case Gas or Grouse? Does a contended sheep count the same as contended philosopher?

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Problems with Rights & Justice

Utilitarianism runs into difficulties with Rights & Justice What are Rights?
Individuals entitlements to freedom of choice and well-being

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Problems with Rights

Read and answer the case on To kill or not to kill your uncle By killing your uncle, are you not interfering with his right to live, even if suffering? Right to life is a fundamental right

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Problems with Rights

Consider the Ford case of Pinto cars on page 6061 of Business Ethics by Manuel Velasquez As Ford decided by cost-benefit analysis that the society has to pay $ 137 million for a prevention loss of $ 49.15 million, and hence decided to waive the modification in the gas chamber,
Do the customers have the right to know that they are riding a car with a certain amount of risk?
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Problems with Rights & Justice

What is justice?
Distributing benefits and burdens fairly among people
Distributive Justice: How the burdens and benefits are shared in the society - John Rawls Retributive Justice: Assignment of merited rewards and punishments Compensatory justice: Making up for losses suffered Caring justice: From compassion to near and dear
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Problem with Justice

By not changing Pintos design, the Ford managers were in effect forcing 180 (who may die) to absorb all the costs Is it just to have 180 people absorb all the cost or distribute the costs among all buyers? Which is the fairest way of distributing the costs?
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Ethics of care
Read the case To pay or not to pay, the case of the Ship Builder.
Applying ethical standards when survival is at stake Dont take such decisions alone, buy time Apply the ethics of care Apply the ethics of utilitarianism Is there an alternate way out?
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Deontological ethics
Deontological theories
Universalism Divine Command (Religion) Virtue ethics

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Universalism
Tradition of the German Philosopher Immanuel Kant (1724-1804) Why is it termed Universalism?
Universalism suggests that in reaching a decision, consider if the decision would be acceptable if everyone, in every situation, made the same decision
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Universalism
Suppose you are advertising a falsehood regarding your product in order to increase the sales
Forgot for a moment that your competitors are also doing likewise!

Does it pass the test of universalism? To determine, ask a question regarding another product that you use:
Would I have liked false advertisement about a product used by me? The answer of the conscience is a clear No

Therefore, false advertisement fails the test of universalism

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Universalism
Universalism Read Grounding for the Metaphysics of Morals by Immanuel Kant Ethical duty explained by the principle of Categorical Imperative
Imperative is a command or duty Categorical means without exception
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Universalism
For example, Kant would oppose child labour on the grounds that every child has a right to education, protection and others have duties towards children Thus, even though it may be economically beneficial, it would be ethically incorrect to practice child labour as per deontological school of ethics
Would a Utilitarian philosopher also believe the same way?
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Difficulties with Kants views

Golden Rule 1
Do unto others what you want others to do to you

One weakness of the Golden Rule is that it could be circular:

If everybody in a society is a crook, it would be ethical to cheat in a land of cheats Transparency International rating of India
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Difficulties with Kants views

Golden Rule 2 Though shall not lie
Classic case of a mad axe-man asking as to where your children are sleeping?
Should the mother lie?

A plane in distress
Pilots announcement There is no danger may be literally false but puts passengers in a better frame of mind And is said in service of a higher truth
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Difficulties with Kants views

I & you would say
White lies in such cases are all right

But not Kant! He has grasped the nettle Kants handling of Kante
Handled difficult problem

Central to moral scheme of Kant is prohibition to lying is simple and absolute

No exception!

And the reaction of the mother facing axe-man would be To heck with that. If thats what morality demands, then I am opting out
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Divine command
Perspective of religion The authority of Vedas or the Bible or the Quran
Though shall not kill
Why?
Ten commandments say so..

The religious point of view is no different from Kant except that the universal principles come directly from religious beliefs rather than elsewhere
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Divine Command
Class presentation Three teams to highlight the ethical treatment from the various religions
15 minutes for each team

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Virtue ethics
The key to good ethics lies not in rules, rights or responsibilities but in the classic notion of character Plato (see picture) and Aristotle encourage character traits such as honesty, fairness, compassion and generosity
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Case of the ship-builder

Read the given case What should the protagonist of the case, Andrew Marshal, do? Apply Teleological theories and Deontological theories in resolving the dilemma What would you do if you were in a similar situation?
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Summary of module
Studying key theories & concepts of ethics helps in appreciation of ethics and provide a framework for resolving ethical dilemmas Teleological & Deontological theories are the two main schools of thoughts
Teleological theories determine whether an act is ethical or otherwise by the probable end results Deontological theories are concerned with the means
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Summary of module
Utilitarianism and Distributive are two main teleological theories
Utilitarianism is concerned with greatest good (Utility) for the greatest numbers
Not only to ourselves but also for all the parties affected by the action Stakeholder Approach

Distributive justice is concerned with a system that ensures equitable distribution of goods & services
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Summary of module
Utilitarianism or consequentialism is by far the most popular of the theories but has its pitfalls
Unintended consequences Can the good of majority take away the rights of the minority?

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Summary of module
The deontological theories are Universalism, Divine Command (Religion), Virtue ethics
Universalism requires that in reaching a decision, consider if it would be acceptable if everyone, in every situation made the same decision Divine command derives its authority from religion According to virtue ethics, the key to good ethics lies not in rules, rights or responsibilities but in the classic notion of character
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Summary of module
Universalism is explained by Kant by the principle of Categorical Imperative, which means duty with without an exception Certain difficulties with this are
Truth at all costs and time Circular logic: It is fair to cheat in a land of cheats
The end of module
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