Business Ethics

Readings and Cases in Corporate Morality

W. Michael Hoffman, Robert E. Frederick, Mark S. Schwartz, W. Michael Hoffman, Robert E. Frederick, Mark S. Schwartz

• Publisher: Wiley-Blackwell
• Year: 2014
• ISBN:
  9781118722770
• Edition: 5
• Topic: Commerce
• Subtopic: Déontologie des affaires

The fifth edition of Business Ethics addresses current, intriguing, often complex issues in corporate morality through 53 readings and 30 pertinent case studies. Now significantly updated, it includes new leading articles, related current cases, and mini-cases based on MBA student dilemmas.

• Addresses a broad range of the most current, intriguing, often complex issues and cases in corporate morality
• Provides impartial, point-counterpoint presentations of different perspectives on the most important and highly contended issues of business ethics
• Updated and significant case studies are included to reinforce student learning
• Now contains mini-cases based on actual MBA student dilemmas
• Each author has substantial experience in teaching, writing, and conducting research in the field

Part 1

Ethics and Business From Theory to Practice

Introduction

In exploring the ethical dimensions of business activity it is not always enough to focus attention on specific ethical problems. Issues such as the rights and duties of employees, product liability, and the responsibility of business to the environment arise in the context of a comprehensive economic system which deeply influences our values and structures the range of choices available to us. Often we will find that the most important ethical question is not “What is right or wrong in this particular situation?” but rather “What is the ethical status of a situation which forces such a choice on the agent?” or “How can the situation be restructured to provide a more satisfactory climate for ethical decision making?” Some ethical problems are not isolated but systemic; for this reason Chapter 1 examines the free-market system itself from an ethical and legal perspective. What we seek when we evaluate economic systems ethically, at least in part, is a framework for business transactions and decisions, as well as a set of procedures which, if followed, will generally bring about just results. Justice of this kind – called procedural justice – can be illustrated by the familiar method of dividing a piece of cake between two children: Assuming that the children should receive equal slices, if one child cuts the cake and the other chooses the first slice, justice should be served. Not all just procedures produce results as just as this one does. But in choosing an economic system we look for one which provides as much justice as possible. Traditionally, it has been held in America that capitalism is such a system; critics challenge this claim. An examination of this controversy requires a clear conception of what justice is, and the first three articles in Chapter 1 provide the groundwork for such a conception by presenting important theories of economic justice.

Even if the free-market system is just it may not mean that every event which occurs according to the rules of the system is just. Just procedures are not always sufficient to ensure just results. Suppose, for example, that a person owns one of the five waterholes on an island and that the other four unexpectedly dry up, leaving the owner with a monopoly over the water supply and the opportunity to charge exorbitantly high prices for water. It might be argued that even if the owner of the waterhole acquired it legally, did not conspire to monopolize, and allowed her prices to be determined by the fluctuations of the market, this situation is unjust. Although procedural justice may be necessary to bring about ethical outcomes, it may not be sufficient by itself to do so. Thus, although a just economic system is essential for an ethical business climate, we may also find it necessary to examine the relationships and transactions which take place within the system and to make ethical reasoning a part of business decision making at a more specific, less general level. Chapter 2 suggests some ways in which this might be done.

Distributive Justice

Questions of economic justice arise when people find themselves in competition for scarce resources – wealth, income, jobs, food, or housing. If there are not enough of society’s benefits – and too many of society’s burdens – to satisfy everyone, we must ask how to distribute these benefits and burdens fairly. One of the most important problems of economic justice, then, is determining the fair distribution of limited resources.

What does it mean to distribute things justly or fairly? To do justice is to give each person what he or she deserves or is owed. If those who have the most in a society deserve the most and those who have the least deserve the least, that society is a just one. If not, it is unjust. But what makes one person more, another less, deserving?

Philosophers have offered a wide range of criteria for determining who deserves what. One suggestion is that everyone deserves an equal share. Others hold that benefits and burdens should be distributed on the basis of need, merit, effort or hard work, or contribution to society. John Rawls, Robert Nozick, and J. J. C. Smart each emphasize one or more of these criteria in constructing a theory of economic justice.

The theory of economic justice underlying American capitalism has tended to emphasize contribution to society, along with merit and hard work, as the basis of distribution. We do not expect everyone to end up with an equal share of benefits and burdens under a capitalist system. But supporters of capitalism hold that those who receive more do so because of their greater contribution, and that for this reason the inequalities are just. Recalling the Kantian ethical principles examined in the General Introduction to this book, however, it might be argued that rewarding people on the basis of what they contribute to the general welfare implies treating them as merely a means to an end rather than as ends in themselves and overlooks the intrinsic value of persons. Each person’s contribution, furthermore, depends largely on inborn skills and qualities and circumstances which permit the development of these traits. Ought people to be rewarded in proportion to accidents of birth over which they have no control? Some philosophers, such as John Rawls in the first article, “Justice as Fairness,” think not.

As an egalitarian, Rawls believes that there are no inborn characteristics which make one person more deserving than another; there are no differences between people which justify inequalities in the distribution of social benefits and burdens. Everyone deserves an equal share. That this is true does not mean that Rawls finds all inequalities unjust; but his theory permits only inequalities which benefit everyone and to which everyone has equal access.

Rawls argues that the principles of distribution he proposes are just because they are the principles which would be chosen by a group of rational and self-interested persons designing a society – assuming they are ignorant of their own abilities, preferences, and eventual social position. We ought to choose our principles of justice, Rawls claims, from behind a “veil of ignorance,” a position strikingly similar to that of the child who cuts the cake, unsure of which piece he or she will eventually have. Although all those in Rawls’s hypothetical situation seek to protect their own interest, they are prevented from choosing a principle of distribution which will benefit themselves at the expense of others. Thus they are likely to reject a utilitarian principle of justice under which the happiness of a few might be sacrificed to maximize total well-being, or a notion of justice in which distribution depends in part upon luck, skill, natural endowments, or social position. Rawls believes that they would select egalitarian principles.

Some critics have challenged Rawls’s claim that rational persons acting from behind a veil of ignorance would choose egalitarian principles of justice. Rawls assumes that all people are self-interested, but he fails to take account of the gamblers and risk-seeking entrepreneurs among us. Others ask whether the choice of egalitarian principles by people essentially unaware of their own identity is really enough to justify them ethically. A possible defense of Rawls’s argument involves an appeal to the Kantian ethical principle examined in this book’s General Introduction. Kant held that one test of the ethical acceptability of a principle is whether it can be made into a universal law without contradiction. By placing us behind a hypothetical veil of ignorance, Rawls asks us to choose principles of justice which apply to ourselves and all others equally. As a universal law, Rawls seems to be saying, only an egalitarian theory of justice is fully consistent.

Because he gives everyone a voice in what the principles of justice are to be, and because equal treatment seems to recognize every person’s intrinsic worth, Rawls’s theory of justice also seems to satisfy the second Kantian test, the treatment of all people as ends in themselves. It is not clear, however, that the egalitarian way is the only way to treat people as ends in themselves. Robert Nozick’s libertarianism, which emphasizes individual rights instead of equal distribution, might also be open to a Kantian defense.

Unlike Rawls, Nozick in his article “Distributive Justice” focuses his attention not on what each person ends up with, but on how each person acquired what he or she has. Justice for Nozick is historical and procedural; it resides in the process of acquisition. A theory of justice thus consists of setting forth rules for just acquisition. And something which has been justly acquired justly belongs to its owner even if this means that some people will receive a far greater share of benefits or burdens than others.

Nozick objects to the attempt to bring about justice by imposing a preconceived pattern of distribution, such as the egalitarian one, because he believes that no such pattern can be realized without violating people’s rights. As the word “libertarian” suggests, the right most heavily emphasized by Nozick is a barrier right, the right of freedom, or noninterference. Interference, he holds, is permitted only when the rights of others are being violated. Second is the right to property which has been justly acquired. Under a libertarian theory of justice, taxation to redistribute and equalize wealth is a violation of human rights, an appropriation of the fruit of other people’s freedom akin to forced labor. One might also look upon it as the treatment of others as means. The only way to treat people as ends in themselves, a libertarian might argue, is to guarantee them freedom from coercion. The only just pattern of distribution, libertarians claim, is not a pattern at all, but the product of a multitude of free, individual choices.

Critics of the libertarian theory generally attack what they view as its truncated conception of human rights. It may be true, they say, that persons have rights of noninterference. But surely there are other human rights more positive in nature. If persons have a right to life, for example, it could be argued that they also have welfare rights to the basic things they need in order to live: food, clothing, shelter, and so on. If this is true, their right to these things might sometimes override someone else’s right to noninterference. For example, Nozick himself admits that it is unjust for one person to appropriate the entire supply of something necessary for life, as in the example of the waterhole mentioned above. If it is correct that there are welfare rights which supersede the right to noninterference, libertarianism needs re-examining.

J. J. C. Smart in his article “Distributive Justice and Utilitarianism” differs from both Nozick’s and Rawls’s theory of justice in that he neither attempts to make distribution conform to a specific pattern nor focuses on the process by which distribution takes place. As a utilitarian, Smart is concerned with the maximization of happiness or pleasure, and approves of any distribution of goods which accomplishes this goal. Thus, utilitarian justice could be compatible with either an equal or an unequal distribution of goods, depending on which of the two is shown to provide the greatest total happiness. Although in general Smart believes that an egalitarian distribution of benefits and burdens is most likely to maximize happiness, he is in no way committed to equality as a principle of distribution. On the contrary, if he were to find that extreme inequalities maximize happiness, he would be committed to these strategies. Utilitarianism, in short, is interested in the maximization of happiness and not in its distribution.

Some thinkers find utilitarianism’s stress on the sum total of happiness to be incompatible with the very idea of justice, and Smart admits that justice is only a subordinate interest for utilitarians. Under utilitarianism, people may be denied what they deserve because that denial increases total happiness. On the other hand, and for the same reason, they may be given more than they deserve.

Justice and the Practice of Capitalism

Rawls, Nozick, and Smart offer different theories of economic justice. They say little, however, about how their principles apply in a capitalist economic system such as that in the USA. In articles by Jan Narveson entitled “The ‘Invisible Hand’” and by Kent Greenfield entitled “Corporate Ethics in a Devilish System” we examine the implications for justice of a free-market system operating in the context of a complex system of laws. Narveson offers a defense of what he views as the morality of free-market capitalism; Greenfield places capitalism in the context of the laws under which it operates.

Perhaps the two most important characteristics of capitalism are (1) the private ownership of the means of production (as opposed to common or government ownership), and (2) a free-market system, in which prices and wages are not controlled by the government or by a small, powerful group, but are allowed to fluctuate based on supply and demand. The key word here is freedom. Essential to the system is free competition: Workers must be able to move freely from job to job as they choose, and everyone must be free to enter the market to buy and sell as they choose.

Clearly, a free-market system will not provide everyone with an equal share of income or wealth. Narveson argues, however, that the fact that capitalism is consistent with economic inequality does not make it unfair. He claims that the only way to achieve economic equality is through the redistribution of wealth by a government authority – a solution that violates individual liberty. Like Nozick, he defends the capitalist conception of justice because he believes that it best respects people’s rights and maximizes freedom.

Moreover, Narveson argues, provided the market is constrained by rules prohibiting violations of the personal and property rights of others, i.e. force and fraud are illegal, a free-market system will benefit not only individuals who enter into market transactions, but society in general. This is true even though doing so is not the purpose of any individual market participant, and even though no one is compelled to provide social benefits to others, but because free markets generate positive externalities. Examples of positive externalities are the social benefits of entrepreneurial creativity, and the charity and philanthropy made possible by accumulated wealth. Thus, Narves...