Culture Relativism Topic 3.ppt
MGMT 21034: Business Ethics and Sustainability
Culture, values and relativism
Associate Professor Michael Segon
The objectives of this topic are:
Buchholz (1989) states that morality refers to judgements of Right and wrong, good and bad.
Three characteristics are associated with such judgements.
- 1. whether the judgements are universal
- 2. Whether the importance overrides other considerations
- 3. Whether moral praise and blame can be accorded to morally right and wrong actions
Cross Cultural Studies
- Research to date suggests strongly that different national cultures have different perspectives regarding ethical values and norms.
- It is also apparent that national culture plays a central role in shaping moral values and standards of ethical behaviour (Becker and Fritzsche, 1987; Hofstede, 1980; Langlois and Schlegelmilch, 1990; Vitell et al., 1993).
- Strong cross-cultural differences make it difficult to develop universal moral values, reasoning, and behaviours that will be meaningful and adhered to across national boundaries.
Cross Cultural Challenge
- It is likely, therefore, that, whereas some general ethical principles might be shared across cultures, there will always be some national-cultural idiosyncrasies on particular issues.
- Beyond the assertion of basic moral values, then, it is important to provide some mechanism to determine the appropriate actions in a given international business situation, particularly in those cases in which competing values and practices may exist.
Understanding Culture: Layers of Culture
- Schien (2001) provides a useful description of the interconnectedness of culture:
1. Explicit culture or Artifact: the observable reality of language, food, buildings, houses, monuments, shrines, agriculture fashion and art
2. The middle layers:
norms are consistent of expectations of how people should behave in different situations can be at a formal level- rules and laws or informal
values: values are the defined right and wrong.
3. The core Assumption and Implicit beliefs: often informed by spiritual philosophical or spiritual beliefs about existence
- Culture is relatively stable when values and norms are consistent
However a potential disconnect can exist when norms conflict with values and core!
Visible Reality/Artifacts & Patterns of Behaviour
Norms and Values
Basic Assumptions /Implicit Beliefs
A Cultural Model:
Trompenaars and Wollliams, 2003, Schein, 2001
The Global Ethical Challenge
- Organisations are increasingly transnational in focus operating in multiple international locations with varying degrees of autonomy.
- Clearly this presents significant challenges for an organisation due to the differing interpretations of ethics and morality in addition to business practices in countries that may or may not be consistent with local laws or the legal system in the organisation’s home country.
- This is the challenge of ethical or cultural relativism.
Sanyal and Guvenli (2009) acknowledge that national cultures may influence behaviour within organisations that In turn influences the ethics of business executives within that culture.
Sims (2006, p.101) suggests that “attitudes toward business ethics may vary so greatly even within one culture that trying to come to a consensus across cultures can become nearly impossible”.
Donaldson and Dunfee (1999 p. 47) identify that “the importance of cultural differences to business are highlighted by Kluckhorn, Hofstede, Hamden-Turner and Trompenaars, yet the ethical implications remain largely unexplored”.
Ethics- Is it Cultural?
Do different cultures have different ethical standards are are they just different practices?
Can practices that are unacceptable in one country be part of the culture of another?
Common Values and Business Practices
Ferrell, Fraedrich and Ferrell (2015) and Donaldson (1996) discuss the concept of common or shared value sets, sometimes referred to as hypernorms or universal values.
They relate to those values that seem to be consistent across national boundaries and are usually derived from the major religions of Christianity, Judaism and Islam, which are all Abrahamic religions, and those sometimes referred to as Eastern religions or spiritual beliefs of Hinduism, Buddhism and Confucianism.
How Different Are We?
- Buddhism: “Hurt not others in ways that you yourself would find hurtful.”
- Christianity: “Whatsoever you wish that men would do to you, do so to them, for this is the law and the prophets”
- Confucianism: Tsze-Kung asked, saying,”is there one word which may serve as a rule of practice for all one’s life? The Master said, “Is not reciprocity such a word? What you do not want done to yourself, do not do to others”
- Hinduism” This is the sum of duty: Do naught to others which would cause pain if done to you”
- Judaism: What is hateful to you do not to your fellow man. This is the entire law, the rest is commentary”
- Islam: “No one of you is a believer until he desires for his brother that which he desires for himself”
- Ferrell, Fraedrich and Ferrell (2015) identify a second category of shared values, which they refer to as country cultural values that are specific to groups, sects, regions or countries that express similar actions, intent or behaviour.
- This may apply to countries that share common ancestry such as Australia, New Zealand, South Africa the US and Canada, which were all at one-point colonies of the United Kingdom.
- Similarly Latin based cultures of Europe including Italy, France, Spain etc have values in common as do their former colonies of Mexico, Argentina, Chile etc.
- However even within these groups, differences and misunderstandings occur.
A Bridge to far?
- Hooker (2009) contends that cultures differ in their conceptions of human nature. He suggests that behavioural differences may be partially due to different norms and etiquette, but he also maintains that they differ in what they value and this is a more reasonable explanation of cultural differences.
- Weltzien Hovik (2007) and Vogel (1992) suggest that cultural differences including variations in understanding of justice, right and wrong, trust and relationship building etc, often means that western management practices and concepts are not effective outside of European and Anglo-Saxon countries.
- Ethical relativism claims that differing views held by different societies can both be right.
- This is based on assumptions that moral judgements are neither right nor wrong but simply reflect differing opinion or feeling and that judgements are culturally determined, or may change over the passing of time.
- Velasquez, Andre, Shanks and Meyer (1992); LaFollett (1991) and Buchholz (1989) similarly describe ethical relativism as the theory that morality, and ethical principles or judgments, are relative to the norms of one’s culture and whether an action is right or wrong depends on the moral norms of the society in which it is practiced and the time in which it was practiced.
- According to Velasquez, Andre, Shanks and Meyer (1992) for the ethical relativist, there are no universal moral standards — standards that can be universally applied to all peoples at all times.
- The only moral standards against which a society’s practices can be judged are its own.
- If ethical relativism is correct, there can be no common framework for resolving moral disputes or for reaching agreement on ethical matters among members of different societies.
Cultural relativism advances the view that no culture can be seen as superior when considering interpretations of morality, religion, law, political systems, business practice, etc.
The philosophical notion is that different cultural beliefs and perspectives are equally valid and what can be seen as truth is also relative dependent on the cultural environment.
moral relativism (ethics depend on a social construct),
situational relativism (right or wrong is based on the particular context), and
cognitive relativism (truth has no objective standard and thus is contextual).
Hinman (2007) suggests relativism is only feasible when cultures don’t have to interact with one another.
Relativism- “When in Rome”
Donaldson and Dunfee suggest that some companies, recognize these cultural differences and adopt the “when in Rome” approach. They accept these as the way business is conducted in a host country, thus engage in those practices, even if these practices are considered unethical or even illegal in their home country.
They argue that this strategy is a “mistake because it exposes the company (and its brand names) to corruption and public affairs disasters, and because it misses the opportunity to find the glue that cements moral and cooperative strategy.
It neglects the important role for hypernorms. It substitutes unmitigated relativism for good sense.” (1999 p. 46).
Problems with Relativism
- If ethical relativism is correct, it becomes impossible to establish a common framework for resolving moral disputes or for reaching agreement on ethical matters among members of different societies.
- Managers would be required to accept activities and practices that many would find unacceptable, immoral or illegal in one country but practiced in another because these would be only matters of opinion, not fact.
- It would also create the paradox of an organisation possibly accepting and prohibiting behaviours purely according to geography.
Problems with Relativism
- Velasquez, Andre, Shanks and Meyer (1992) argue that it may be the case that some moral beliefs are culturally relative whereas others are not.
- Some practices are culturally dependent, such as dress and decency, however other practices, such as slavery, torture, or political repression, may be governed by universal moral standards and judged wrong despite the many other differences that exist among cultures.
- Simply because some practices are relative does not mean that all practices are relative.
Problems with Relativism
- Velasquez, Andre, Shanks and Meyer (1992) state that the the strongest argument against ethical relativism comes from those who assert that universal moral standards can exist even if some moral practices and beliefs vary among cultures.
- In other words, we can acknowledge cultural differences in moral practices and beliefs and still hold that some of these practices and beliefs are morally wrong.
The Illogic of Relativism
- Relativism by its very nature is a contradiction.
- If relativism is correct then all perspectives are correct.
- Thus the view that relativism is wrong must be true. Is this not, is contradictory?
- Relativists argue all truth is relative. But this is an absolute position which relativist say cannot exist so the statement cannot be absolute and thus it is false.
Relativism allows people and cultures to have their own position and thus truth- but truth is relative thus it cannot be true.
Absolutism purports a single view of morality.
The implication of this approach is that all other cultures that do not fit or align themselves with one particular view are seen as unethical (Buchholz 1989).
This will clearly result in culture clashes and conflicts when organisations establish operations in foreign countries and try to implement, not only the same values and ethics from their home country, but the same management strategies as well.
The most common example of this is the use of global codes of conduct that establish the same policy for company employees irrespective of location.
Ethics or Business Etiquette?
- The “when in Rome” approach to business is arguing that such practices are part of business etiquette.
- Etiquette can be defined as convention or rules that govern behaviour.
- Just because something is accepted etiquette does not mean that it is necessarily ethical.
- Grace and Cohen (2005) note that ethics is more than just rules and custom as such etiquette exists in many forms, yet ethical challenges persist.
Categories of Authentic Global Norms
Donaldson and Dunfee (1999) propose a model of “norms” that help navigate the challenges of global business dealings.
- Hyper-norms- fundamental human rights or basic prescriptions common to most religions- values acceptable to all cultures
- Consistent Norms- culturally specific values but consistent with hyper-norms and other legitimate norms- i.e. codes of ethics
- Moral Free space- norms that are inconsistent with hyper-norms and other legitimate norms yet are firmly held by specific cultures
- Illegitimate norms- norms that are not only incompatible but transgress permissible limits-
Categories of Authentic Global Norms
Illegitimate Norms incompatible with Hypernorms
Illegitimate Norms incompatible with Hypernorms
Illegitimate Norms incompatible with Hypernorms
Illegitimate Norms incompatible with Hypernorms
Global Ethical Frameworks-
Georges Enderle has identified four types of approach, each of which is analogous to a posture taken historically by nation-states
- Foreign Country Type : organisation conforms to local customs, assuming that what prevails as morality in the host climate is an adequate guide
- Empire Type: this organsiation applies domestic concepts and theories without making any serious modifications. Empire-type companies export their values in a wholesale fashion—and often do so regardless of the consequences
- Interconnection Type: this type of organisations regard the international sphere as differing significantly from the domestic sphere, and one in which the interconnectedness of companies transcends national identities. In this model, the entire notion of national interest is blurred
- Global Type: this type of organisations views the domestic sphere as irrelevant. From this vantage point the citizens of all nations, whether they are corporate or individual citizens, must become more cosmopolitan. The nation-state is vanishing, and in turn, only global citizenry makes sense.
Organisation Types and Cultures
It is helpful to analyze Enderle’s has identified four types these basic types of corporate approaches from the standpoint two key concepts of moral free space and hyper-norms.
The Foreign Country type does not limit the moral free space of the host-country culture. If a culture accepts corruption and environmental degradation, then so be it. No rules of thumb restrain granting an automatic preference to host-country norms—whatever they are.
The Global and the Empire types succeed in avoiding the vicious relativism that characterizes the Foreign Country type, but manage to fall prey to exactly the opposite problem. Since each type acts from a fixed blueprint of right and wrong, each suffocates the host country’s moral free space and leaves no room for legitimate local norms.
The Empire type displays a version of moral imperialism Instead of imposing its home morality on a host culture, it imposes its interpretation of a global moral- ity on a host culture. Because only global citizenry makes sense, the company can be numb to the moral differences that mark a culture’s distinctiveness. The opportunity for host cultures to define their moral and economic identity is lost.
(Donaldson and Dunfee, 1999)
International Ethics Strategies.
Several Global Strategies or Principles have been developed in recent years to assist business cope with working in diverse cultures.
The two best known are:
the United Nation’s Global Compact and
the Caux Round Table’s international business ethics principles.
The UN’s Global Compact
- The Global Compact Programme, was launched in 2000 by the then United Nation’s Secretary Mr. Kofi Annan, for business worldwide, with the fundamental principles of social responsibility and sustainable growth.
- Its aim is to not only great wealth for business, but for societies across the global by fostering responsible practice and social development.
The UN’s Global Compact- 10 Principles
There are a series of core values including human rights, labor, environment and anti-corruption and ten universally accepted principles which companies are asked to commit to:
1. Business should support and respect the protection of internationally proclaimed human rights.
2. Make sure they are not complicit in human rights abuses.
3. Business should uphold the freedom of association and the effective recognition of the right to collective bargaining.
4. The elimination of all forms of forced and compulsory labor.
5. The effective abolition of child labor.
6. Eliminate discrimination in respect to employment and occupation.
The UN’s Global Compact- 10 Principles
7. Business should support a precautionary approach to environmental challenges.
8. Undertake initiatives to promote greater environmental responsibility.
9. Encourage the development and diffusion of environmentally friendly technologies.
- 10. Businesses should work against all forms of corruption, including extortion and bribery
The Caux Round Table
- The CRT Principles were developed in the late 1980’s and early 1990’s by company executives from from Europe, Japan, and the United States.
- The CRT Principles for Business can be described as a worldwide vision for ethical and responsible corporate behaviour, and as a set of world standard against which behavior can be measured.
- The principles were developed using two ethical ideals:
- “Kyosei”: a Japanese concept of living and working together for the common good enabling cooperation and mutual prosperity to coexist with healthy and fair competition.
- “Human dignity” a western referring to the sacredness or value of each person as an end, not simply as a means to the fulfillment of others’ purposes or even majority prescription.
The 7 Caux Round Table Principles
- Principle 1. The Responsibilities Of Businesses: Beyond Shareholders toward Stakeholders
- Principle 2. The Economic and Social Impact of Business: Toward Innovation, Justice and World Community
- Principle 3. Business Behavior: Beyond the Letter of Law Toward a Spirit of Trust
- Principle 4. Respect for Rules
- Principle 5. Support for Multilateral Trade
- Principle 6. Respect for the Environment
- Principle 7. Avoidance of Illicit Operations
Dealing With Global Ethics
The most common approach used by organisations to deal with differing cultures and ethics, is to establish a consistent framework within the organisation that it applied wherever their organisation operates.
Global Codes of Conduct or Ethics is the extension of ethics framework) with clear policies related to acceptable behaviours and non-acceptable behaviours.
The issue is the extent to which such frameworks are compliance or aspirational in nature.
Global Ethical Frameworks- Enthocentric
Sanyal and Guvenli (2009) identify an ethnocentric approach as companies using their existing organisational values and practices, primarily based on their home country’s practices.
- It has the clear advantage of not increasing costs through the creation of new policies and procedures.
- Existing employees already be inculcated and able to apply the ethics framework in the new location.
- The disadvantage is that the existing ethics framework, designed on home country’s values may not translate effectively to the host country causing cultural conflicts.
- This strategy would be an example of ethical absolutism.
Global Ethical Frameworks- Polycentric
Sanyal and Guvenli (2009) identify a polycentric approach as the creation of new values and practices adapting to local practices of the host country .
- It has the clear advantage of allowing employees to engage in business activity with confidence that they are consistent with accepted practice.
- The disadvantage is that these practices may be inconsistent with the organisation’s values and policies in other countries.
- It may also be a high risk strategy when such practices are deemed illegal in the home country. i.e. foreign corrupt practices legislation
- This is an example of ethical relativism and may create difficulties for organisations when they are ask to justify their actions
Global Ethics- A considered “mean”
These two set of guidelines and principles illustrate an important point in the development of an organisational framework for international business dealings. Neither the absolutist nor relativist perspective provides the answers to the challenges of differing cultures.
As Donaldson (1996) suggests, the answer is likely to be somewhere in between the two.
Organisations need to develop ethical frameworks that will allow a degree of flexibility and respect local traditions, yet at the same time are consistent with a principled approach and ensure that laws are not broken and individuals and companies are not put at risk.
DeGeorge (1993) argues that each situation requires judgment and moral imagination.
He identifies three types of ethical conflicts:
- 1) pressures on individuals to violate personal norms,
- 2) inconsistent cultural norms, and
- 3) host versus home country interests and values.
Cross-Cultural Conflicts 2
- Velasquez (1995) argues that the utilitarian framework used by DeGeorge must be placed in the context of microeconomic theory to make it more relevant. Further, Velasquez concludes that DeGeorge’s approach would be further strengthened by including principles of justice, particularly with respect to the activities of powerful MNCs operating in less developed countries.
- Key Variables Influencing the Selection of Strategies Based on the literature review, we propose that three situational variables are key in determining the appropriate strategy for conflict resolution:
- moral significance,
- and urgency.
Cross-Cultural Conflicts 3
- There are several ethical criteria implicit in Velasquez ‘s model.
- 1. the higher the moral significance of the values at stake the more one is justified in pressing for conformity with one’s views, especially when it appears that the issues have less significance to the other party to the conflict.
- 2. the less the moral significance, the more one is justified in accommodating or compromising, especially when the issues appear to be highly significant for the other party to the conflict.
- 3. as far as possible, the position of the other party, especially when it represents fundamental values of the culture, must be treated respectfully. This requires listening, empathy, and attempting to understand the value priorities of the other party.
- 4. as far as possible, the freedom and autonomy of those who differ should be respected.
MGMT20134 Topic 4.docx
MGMT20134 Business Ethics and Sustainability
Topic 5 Ethical Theories & Perspectives 1
Table of Contents Introduction 2 Learning objectives 2 Overview: 3 The ethical decision context 3 Why do we need to influence ethical decision making 5 Approaches to ethics 6 Ethics by outcome- Utlitarianism 7 Ethics by Process- Deontology & Rights 9 Ethics by Character- Virtue Ethics 14 Responsible decision making 16 Guided Readings 10 Journal Readings 11
At some point in our business careers we will be asked “why did you make that decision?” The answer “because I thought it was the right thing to do” will not necessarily be enough to explain the reasons why we took a certain course of action. As we saw in our last Topic there are a variety of different ways of justifying a decision.
In Topic 4 we considered a number of factors that affect the way people develop values and their perspectives on what is right and wrong, including the influence of national culture. Of great importance to this topic is the cognitive moral development model of which looked at how people see the world and their sense of what is right. In our next topic we look at concepts of Justice and how these inform not only our economic systems but also our understanding of fairness.
In this topic we begin to focus specifically on the individual and the work place and the factors that can affect the decision making process. We will consider two different perspectives on ways people might make decisions before examining in more depth the major ethical theories of consequentialism, deontology and virtue ethics and how we would use them to make better quality and more ethical decisions. As we will see, these three concepts are actually already very familiar to us.
This Topic has the following learning objectives:
1. To identifying three primary ethical theories of
· Deontology or process approaches
· Virtue ethics
2. To identify the various approaches that fall within these three groups
3. To recognise the advantages and disadvantages for each; and
4. To develop an approach that incorporates all three in a comprehensive and integrated decision making model
There are many ways of studying and analysing management decision-making and action from an ethical perspective. McDonald (2015) suggests that good way to think of these different ethical theories is as different lenses through which we can view an ethical circumstance. Each theory, or lens, will give us a slightly different perspective on what we are looking at. By examining the existing body of ethical theory, we are able to gain insights into the various distinctions and categories of moral thought. The more familiar we become with ethical theory and the traditions of ethical reflection, the greater our capability to examine the ethical context of decisions.
What is important to keep in mind is that by introducing these perspective we are increasing the quality and scope of our decision.
The Ethical Decision Context
Ferrell, Fraedrich and Ferrell (2015) state that managers and leaders so not make decisions in isolation; rather they are subjected to a variety of influences. In order to make better decisions it is important to understand the influences that exist in the decision context and how we incorporate them into our thought process.
Trevino and Nelson (2011) provide a three factor model that seeks to explain how people make ethical or unethical decisions that includes our ability to understand the moral complexity, individual or personal variables including: ego strength, field dependence and locus of control, and situational factor is including the influence of the external environment and one’s co-workers.
Ferrell, Fraedrich and Ferrell (2015) have expanded these concepts and suggest that there are six factors that need to be considered and some of which are clearly interrelated. Similar to Trevino they discuss the importance of cognitive moral development and other individual factors; however they also stress a number of other key areas related to organisational contexts.
· Ethical Issue Intensity: This can be described as the perceived relevance or importance of an ethical issue to the individual, work group, and/or organisation. They suggest that it reflects the ethical sensitivity or ethical awareness of the individual or work group and in effect commences the ethical decision process. They identify that the positive or negative incentives or impacts of the issue can affect the perceived its importance. This highlights the importance of educating managers in ethics so that they can analyze the ethical dimension of an issue rather than rely on perceptions or “gut feel”
· Role of Opportunity in Influencing Ethical Behaviours: This can be described as the availability or access that individuals have to situations that may result in ethical or unethical behaviours. This clearly can be linked to a managers access to control systems, information and resource utilization, as such it relates to the employee’s immediate job context. Without such access or the ability to influence those with access then the opportunity for unethical practices to occur are greatly diminished. This highlights the importance of transparency in organisations as a means to reduce unethical practices.
· Role of Structure Corporate Culture and Ethical Climate: Corporate culture is addressed in a number of courses in the CQU MBA. Governance and Leadership highlights the importance of senior leaders in establishing the “tone” which flows throughout the organisation. Ferrell, Fraedrich and Ferrell (2015) and Sims and Brinkmann (2002) argue that one of the most critical aspects of corporate culture is the moral tone and example set by top leadership. They have identified that the relationship between leadership and ethical culture or climate, determines the level of behavioural consistency and that unethical leaders tend to attract more attention than ethical ones and as such have greater potential to influence employee behaviour. People and Organisations directly considers organisational culture as a behavioural tool whilst Organisational Change Management looks at how culture can be used both as an engine and inhibitor of change.
James (2000) suggests that the primary way in which organisational structure promotes ethical behaviour is by ensuring that the formal aspects of structure do not undermine the ethical sensitivities and attitudes of workers. This is clearly consistent with Mintzberg’s concept of structural fit between all aspects of the internal organisation and the external environment in which it operates (Mintzberg 2008). Weiss (2008), Adams and Tashchian (2001, White and Lam (2000) and Vidaver-Cohen (1999) suggest an organisation can enhance the ethical behaviour of its workforce by improving corporate culture. Numerous authors, Trevino and Nelson (2011); Longstaff (1999); Preston (1996); Ritchie (1996); Petrick and Quinn (1997) support this view. Solomon (in Woldring, 1996) goes further identifying that corporate culture is a primary determinant of ethical or unethical behaviour. Based on Solomon’s view, it is clear that not only does behaviour need to be altered, but also the culture of the organisation so as to encourage the actions of staff to be ethical at all times
· Role of Significant others: Ferrell, Fraedrich and Ferrell (2015) describe significant others as colleagues, workmates and immediate supervisors who have a direct relationship and thus influence over an employee. They consider that the influence of significant others is the one most important factors in determining how an individual responds to ethical issues as it is to these people that an individual will look for guidance and approval of appropriate behaviour. The significant other is in contact with the individual almost a daily basis providing help and advice on unfamiliar tasks. Hall (1985) suggests that such influence will be greater for new members of an organisation who are unaware of organisational rules and norms.
Ashford and Anand (2003) describe a process within organisations by which individuals accept unethical practice as organisational norms – in other words a process by which people engage in unethical practice but believe them to be acceptable. Whilst this will be discussed further in Topic 12, Anand, Ashforth and Joshi, (2005) suggest that the desire for group acceptance reduces individual concerns, which leads to acceptance of and the development of a social cocoon. They identify two key aspects which are relevant to the role of significant others and organisational culture. Veterans and organisational leaders, which can include immediate superiors, role model the unethical behaviour, and secondly individuals are encouraged to affiliate, bond with and develop desires to identify with, emulate, and please veterans and leaders.
A Balancing Act
A large international restaurant franchise has often been criticised as producing fast food that is high in sugars and fats, which can lead to dietary problems. Criticisms have also been made regarding the environmental impact of their packaging and their marketing campaign that directly targets children. This organisation also establishes a charity, which funds a semi-hotel or “house” for the parents of sick children in hospital, who cannot afford conventional hotels. Consider the actions of the franchise that are directly related to its core business, and then review its charitable activities.
Is this an example of Corporate Social Responsibility or an “ethics bank” scenario, or both?
Do you believe it is reasonable for organisations that may cause harm as a result of their business operations to “square the ledger” by making a social contribution?
Do you think that such firms actually put back equal value?
Why do we need to influence decision-making?
As we identified in Topic 4, organisations are artificial constructs, “people” in law but not in reality. They do not have a conscious and as such do not make decisions, rather, the individuals within it do. However once employed by an organisation, people must act as its agents and are obliged to make decisions consistent with the goals and objectives of the organisation. An organisation cannot simply assume that employees will be able to consistently interpret and resolve ethical dilemmas that occur within the organisation.
Adams and Tashchian (2001) purport that organisations need formal mechanisms to inform their agents as to required behaviour, from a legal perspective. This is so as to protect the organisation in the event of one of its agents acting illegally. This would also enable the organisation to have congruent behaviour even when new employees join the organisation or replace other employees.
This concept is consistent with the purpose of formalisation, that of ensuring behavioural consistency (Robbins and Barnwell 2006). This would seem to support the need for an established formal system within organisations to encourage appropriate behaviour on the part of its agents.
According to Ferrell Fraedrich and Ferrell (2015) the way in which individuals in organisations resolve ethical dilemmas devolve from three factors:
a) Recognition of an issue as an ethical issue — an issue that requires a decision to be made between two or more competing objectives referred as “ethical issue intensity”;
b) The individual factors — the ethical standards of the person who is called upon to make an ethical decision; and
c) The corporate culture — the influences on the mind of the individual called upon to make an ethical judgment.
Ethical Decision Making and Leadership
The authors of our text book, Dr. Linda and OC Ferrell discuss the ethical decision making process and leadership skills for the Business Ethics Certificate Program. They make reference to the factors that influence decision making and broader issues rather than the specific theories of ethics.
Approaches to Ethics
Whilst there are numerous ethical theories or approaches to thinking we can summarise these into three distinct categories:
1. determining ethics by focusing on the outcome or consequences of a decision,
2. determining ethics by focusing on principles or processes that guide the decision,
3. determining an ethics by focusing on the characteristics or virtues of those making the decision.
In order to become better or superior managers we need to recognise the research of Henry Mintzberg who found that managers are not reflective thinkers, their work is characterised by brevity, variety and is fragmented and they make decisions with incomplete information (1990, 2009). If we consider the ethical dimensions we have examined to date in this course- we can begin to understand why managers and leaders not only make poor decisions but unethical ones as well. As Velasquez, (2006) suggests the first step in analysing moral issues is obvious but not always easy: Get the facts. Some moral issues create controversies simply because we do not bother to check the facts, we fall into the same trap that Mintzberg notes most managers do- making decisions with incomplete information. This first step is also among the most important and the most frequently overlooked
Ethics by Outcome: Utilitarianism, Egoism and Altruism
This group of theories is perhaps the most attractive to the business community because it uses an analytical approach that parallels the cost benefit analysis used in most business decision-making. Because they focus on the outcome of a decision these approaches are often referred to as teleology or consequentialism. The word teleology is derived from the Greek word ‘telos’, which means goals, result or consequences. The approaches are also linked to economic analysis, with the most common method, utilitarianism, encompassing the word “utility” which in the discipline of economics means value. Thus this approach is concerned with measuring the value of a particular outcome relative to another. Utilitarianism holds that the moral evaluation will depend on the good or bad consequences produced for everyone by the action. The primary way of determining the moral worth of an action is to evaluate all the social cost or benefit associated with it. As McDonald (2015) notes Consequential theories hold that the moral worth of action is determined solely by the consequences of the action.
English economists and philosophers Jeremy Bentham and John Stuart Mill are generally acknowledged as the originators of Utilitarianism. They devised a decision making process to assist legislators in parliament to determine which piece of legislation had the greatest merit or would benefit the greatest number.
This approach has its main objective to generate the greatest possible benefit for the largest number of people whilst minimising the damage or harm to others. The issue here is not how these outcomes are achieved but rather the cost or benefit that is incurred.
Forms of utilitarianism
Act utilitarianism dictates that one ought to perform the action that will maximise utility for all persons in the situation. As situations vary, separate and time-consuming analysis must be carried out for each circumstance to determine the right, moral or correct action.
Rule utilitarianism would, however, establish a guiding principle, or rule, that would be used in each evaluative situation when determining the greater good, and that rule would be adhered to into the future.
Professor Philip Schofield of University College London, provides an overview of not only Bentham’s utilitarianism but also some of the significant contributions made by Bentham to philosophy, political and social thinking.
Egoism and Altruism
Consequentialism also applies to individuals as Egoism and Altruism suggests. Both are concerned with evaluating the cost and benefits of a decision; however, egoism focuses on the benefits to the self, whereas the Altruist is concerned with maximising benefits for others.
McDonald (2015) suggests that when a moral agent (a manager) is faced with an ethical dilemma, egoism will place him/herself as the primary recipient of any beneficial outcomes that may accrue from the decision.
Ethical egoism is embodied in the principle that an individual will promote their own self-interest.
Problems with Consequentialism.
The major problem with outcome or consequentialist theories is that they attempt tocalculate morality by focusing on the value of the outcome. They hold that the moral or ethical worth of an action or practice is determined solely by the consequences of the practice or action and not on the intent of the person committing the act or on the nature of the act or decision. This means that how we arrive at a decision is not considered relevant, providing the outcome or the value of the benefit derived is considered moral. It is therefore possible for a business decision to be made that advances the interests of the firm, but in an unethical manner. For example, the securing a major international contract through the paying of bribes may achieve a desired outcome, the contract, but it does so using illegal or unethical means. Do the ends justify the means in such cases?
Two other problems can be immediately identified with outcome based approaches: whose interests are evaluated and what is actually measured.
It is often difficult to identify all the parties and stakeholders affected by a decision therefore utilitarianism in particularly is often restricted to those of immediate interests. In the business world this is often limited to shareholders, consistent with the objective of maximising shareholder wealth. This has the danger of key stakeholders with the potential to affect a business being excluded from consideration- to the organisation’s detriment.
The other problem is that of measurement. An often quoted phrase in management is that if it’s measureable, then it’s valued . Unfortunately the converse is also true- if we cannot quantify or measure it, we ignore it. Thus major omissions in consequentialism are those issues that by their very nature are nebulous or difficult to quantify such as emotional well-being, psychological harm etc.
Calculating the Right Thing to Do
You are a member of a State Government and involved in preparing the budget for the next 5 years.
You need to allocate a limited amount of funds across just one of the following
1. Supporting a worldwide motor sporting event over the next 5 years that runs at an operation loss of $55-70 million per year- (the government contribution) but does generate an economic benefit of between $90-120million per year and provides worldwide exposure assisting tourism.
2. Building of a new $270 million cancer ward at the state run hospital- identified as a critical health requirement as the state existing facility is over capacity and patients are dying on the waiting list. The ongoing staffing and expenditure are expected to be $20 million per annum with $ 7milion per annum from private patient revenues
3. The building of a passenger rail link to the International airport- you are the only state in the country that does not have such a service. It is estimated to reduce road congestion during peak hour on the major freeways by 35-40% (approximately $6 million savings per year in rad maintenance savings, but $15 million per year loss in freeway tolls) and will also result in 30% of taxi drivers losing their jobs as demand for taxis to the airport declines, at $65-80,000 per year.
Which one is the “correct” decision for the Government?
Ethics by Process: Duty, Rights, Justice and Fairness, Due Process
The next branch of ethics addresses the inadequacies of consequentialism by arguing that actions and practices cannot be justified solely in terms of the consequences or outcomes, but rather that the actions and practices have intrinsic moral or ethical value e.g., some actions and practices may be morally wrong, no matter how good their outcomes might be. This group of theories includes concepts related to duty and obligation (deontology), using rights as a moral guide, and using principles as the basis for decision making and following rational and clear decision making process.
McDonald (2015) states that deontology is derived from the Greek word ‘deon’, meaning duty or obligations. Deontological theories are considered to be non-consequential, in that the outcome is not the main driver of the decision; one’s duty or principles will drive the decision.
Deontologists suggest that the business world is complex and characterised by uncertainty making it extremely difficult if not impossible to identify all stakeholders and the impacts our decisions would have. Therefore, the ethical decision should be determined by ensuring that the decision does not violate rights of individuals, is consistent with an accepted principle such as fairness and or followed a transparent and agreed decision making process.
Kant and the Categorical Imperative
The theory which is considered the principal deontological theory was developed by German philosopher Emmanuel Kant in the eighteenth century… Kant advocated an approach based solely on (a priori or non-empirical) reason. Kant believed that doing things for the right reason was important. The will to act must be a good one. Essentially Kant argued that moral worth must be based on the intent of the person performing the decision (McDonald, 2015).
What is the duty that is to motivate our actions and to give them moral value? Kant distinguishes two kinds of law produced by reason. Given some end we wish to achieve, reason can provide a hypothetical imperative, or rule of action for achieving that end.
Kant’s significant contribution is the categorical imperative, which is a means by which we can test morally correct duties and actions. It views duties and obligations as absolute and binding in all situations. (This can be a problem in itself. There are two criteria by which we can test moral adequacy and these criteria can be in two formulations.
First Formulation of the Categorical imperative:
An action is morally right for a person, in a specific context, if the reason for doing so is something that they would be happy for every person to also do in any similar situation. This first formulation possesses both universality and reversibility.
McDonald (2015) stats that universality is when an act or decision may be judged to be morally correct if everyone must perform the same at or reach the same decision given similar circumstances.
Reversibility poses the question what if everybody in a comparable situation acted in a similar way? The principle would then be seen as a universal law.
Second Formulation of the Categorical Imperative
In the second formulation Kant examines the relationship between people. A decision and subsequent action is only morally acceptable if, in performing the action, the person does not treat others as a means for advancing their own interests. Rather there is a requirement to respect others and their freedom to choose freely for themselves.
Kant believed that everyone should be treated in the same way- equal to everyone else as a free person and never as a means to the ends of others.
We can make a distinction between Hypothetical and Categorical imperatives.
Hypothetical imperatives tell us what to do if we want a particular outcome (e.g. study hard if you want to get a High distinction).
Whereas the categorical imperatives are unconditional for all people regardless of consequences (e.g. you should be honest even if you do not care about doing well in business).
MacGregor (1996, p.429) provides a different interpretation of the categorical imperative identifying at least three formulations:
1. “Act only according to that maxim by which you can at the same time will that it should become a universal law.”
2. “Act as though the maxim of your action were by your will to become a universal law of nature.”
3. “Act so that you treat humanity, whether in your own person or in that of another, always as an end and never as a means only.”
Another way to understand Kant’s concept is to consider the proposition that what is considered right is not just what people actually do or accept, but what they rationally would or ought to accept. Consider the practice of racial or gender discrimination in employment. Some people accept the practice even saying it’s a managerial prerogative. However just because this is an accepted practice does not mean it is right.
Kant believed that we are all valuable as rational creatures and we should never treat people as if they are just a means to making a profit. He thinks people see their own worth and (rationally) do not want to be treated as an end.
Besides Kant’s theory there are other rule-based (deontic) theories including Moral rights. According to this philosophy, what makes human beings different from mere things is that people have dignity based on their ability to choose freely what they will do with their lives, and they have a fundamental moral right to have these choices respected.
Velasquez (2010) notes that many different, but related, rights exist and these other rights these can be thought of as different aspects of the basic right to be treated as we choose.
· The right to the truth: We have a right to be told the truth and to be informed about matters that significantly affect our choices.
· The right of privacy: We have the right to do, believe, and say whatever we choose, so long as we do not violate the rights of others.
· The right not to be injured: We have the right not to be harmed or injured unless we freely and knowingly do something to deserve punishment or we freely and knowingly choose to risk such injuries.
· The right to what is agreed: We have a right to what has been promised by those with whom we have freely entered into a contract or agreement.
Principles and Due Process.
In our first Topic we canvassed the notion of principles as a means of guiding behaviour and decision making. Many societal and organisational laws are based in principles of justice and fairness such as equal employment opportunity legislation in employment or antidiscrimination. As we noted in the previous Topic due process is also an important way in which we evaluate ethics. Many laws and internal organisational policies and procedures are formulated so that people simply follow a process in order to arrive at the “right” decision. When such process is ignored or circumvented then we often describe this as a failure to follow due process or that people have been denied natural justice.
Decision-making and problem solving use rational analytical approaches can often enable the verification of justification of the process etc.
Problems with Process.
We need to accept that simply following laws, principles and processes blindly without question may not necessarily result in an ethical outcome. As an example in Australia unfair dismissal laws allows employees, who may have committed serious offenses worthy of dismissal, to challenge a former employer on the grounds that they may not have been taken through an approved performance management process. In such cases an industrial court may rule in favour of the employee because due process was not followed- irrespective of what the employee many have done (within reason). In other words the consequences are seen as largely irrelevant- what is critical is the ethical process and in these sorts of cases people are considered to have been denied their rights to a fair hearing- dur process.
In terms of the rights approach, whilst we would recognise the value of having rights, one of the problems of making them explicit in a legal sense, such as the American Bill of Rights, is that when they are violated, an individual has the right to compensatory justice, as we identified in the previous Topic. This can lead to an extremely litigious environment, even for inconsequential matters.
In terms of legal principles as we discussed in earlier Topics, the law can be said to have two components, the spirit or intent of the law, and the actual wording which is sometimes referred to as black letter law- the literal meaning. For example are organisations that explore the tax laws to find loopholes that allow them to reduce taxation acting in the spirit or the letter of the law? Just because it’s legal does not to always mean it is ethical. Similarly if a person is charged with a serious crime but the evidence has been collected inappropriately and thus inadmissible in a court of law, yet still indicate guilt, and should that person be exonerated?
Perhaps the major problem with deontology and process approaches is their rigidity. It is the action or process that is ethical and they must always be applied, irrespective of other issues.
Exercise 1 To Claim or not to Claim
Within the Australian tax system, deductions against tax paid are allowable under certain situations. As a “professional” if you have purchased relevant trade or professional journals but for which you have lost the receipt, you may claim up to a $200 deduction. That means even if you have not purchased these you could still make the claim.
Do you follow the letter of the law and claim- irrespective of whether you actually spent the money?
Ethics by Character – Virtue Ethics
The final perspective that will consider is that of virtue ethics which seeks to emphasise the concept of character rather than a calculus or the following of a principle as a means of determining what is ethical. Its origins lie in the tradition of Greek philosophers such as Plato and Aristotle, indeed the area is sometimes called Aristotelian ethics; however, there are many parallels to eastern thinking including Vedantic principles and Confucianism.
Essentially the virtue approach argues that people should act in a manner which is consistent with the advancement of specific characteristics that we would all agree are characteristics of ethical people.
According to McDonald (2015) virtue ethics places the emphasis on the individual rather than the decision, action or outcome. The virtue approach to ethics advances that people should act in a manner which is consistent with a set of specific behavioural characteristics that we would all agree are those of ethical people.
So what is a Virtue?
A virtue is a pattern of behaviour and feeling: a tendency to act, desire and feel in a particular way in appropriate situations
Aristotle believed that experiencing particular emotions was central to the art of leading a good life (Solomon, 2005)
We can distinguish four categories of Aristotelean virtues which are also referred to as the “cardinal” virtues:
1. moral virtues such as justice, fairness & honesty
2. prudential virtues such as temperance, modesty, restraint
3. intellectual virtues such as wisdom and some that are hard to classify such as courage
In the 13th Century, Tomas Aquinas synthesised the four virtues of prudence, justice, temperance, and courage and added the “theological” virtues of:
2. Hope and
They are the principle habits on which the rest of the virtues hinge (Rickaby, 2003).
Virtue, Aristotle & Aquinas
Here are two videos that discuss virtue ethics. In the first Professor Edwin Hartman discusses the importance of character as a means of addressing ethical issues and pursuing a good life.
The second video has Assistant Professor Fr Lombardo from the American Catholic University discussing Thomas Aquinas and his approach to emotions and virtue
So what is a Vice?
Conversely we should actively discourage characteristics or vices than are undesirable such as lying, stealing, cheating, ambition (yes ambition is seen as a vice!) and licentious behaviours.
According to Hinman (2010) Aristotle suggests, that the objective is to achieve a “strength of character” which involves finding the proper balance between the two extremes of excess and deficiency. This is often referred to as the “Golden Mean”
For Aristotle virtue is a characteristic that needs to be practiced so that it becomes a habit and thereby learned. Thus for Aristotle you can teach people to be virtuous.
The strength of the virtue approach is also its weakness- it is not specific or black and white about the virtues. For example if you are people to accurately define “integrity” you will get many variations about what the word actually means, however we would all have a similar understanding of what it means to act with integrity.
We can see the application of Virtue Ethics in many organisations in their mission and value statements- terms such as “integrity” “Innovative” “Caring” ‘Committed” “Loyal” etc., are often used to describe the sort of characteristics that the organisation wishes to promote or aspire.
Its application to decision making is somewhat similar to principle based approaches but rather than ask is this decision consistent with the principle of say fairness, the virtue approach asks us to consider the person making the decision and whether their decision displays the characteristic of fairness.
Virtue ethics asks us to consider who we want to be and is this something that will contribute to flourishing of society
Responsible Decision Making
As suggested above one of the problems with integrating ethical perspectives into business decision-making is that we use some of these principles unconsciously or in a restricted fashion. Rarely do we seek to integrate the three categories of ethics as filters to our decision making, yet doing so will help improve the quality of our decisions but altering us to possible violations of individual rights or duties, ignoring key stakeholders or acting in a way others would see as unacceptable. Ronald Francis, the former Professor of Business Ethics at the Centre for International Corporate Governance in Melbourne Australia, suggests that the first reference point in resolving ethical questions are these key principles in ethics. He puts forward a decision tree which business people can use as a “quick guide” when confronted with ethical dilemmas, which seek to establish the ethical validity of the question or action.
Velasquez (2010) puts forward a similar series of questions that seeks to articulate the ethical dimension of a decision or action. If it fails at any point it should alter us to possible ethical challenges and we should revisit the decision or action.
1. What benefits and what harms will each course of action produce, and which alternative will lead to the best overall consequences
2. What are the rights of those involved and does the proposal involve risk or harm to persons, animals or property?
3. Is the proposal consistent with the law?
4. Is the action consistent with professional codes of ethics?
5. Which course of action treats everyone the same, except where there is a morally justifiable reason not to, and does not show favouritism or discrimination?
6. Which course of action is and will be seen as consistent with virtues or characteristics such as integrity, honesty, etc.?
The family and newspaper test.
Another way of including a very simple ethics filter is to personalise the consequences of the decision by asking what would your mother think of you if she knew you were responsible for this decision? This type of test is to generate an emotional link to someone who would normally provide a moral compass during our upbringing.
The second question is would you be happy for your decision and a picture of you to be on the front page of the major daily newspaper. This type of test appeals to our sense of self interest because if we were so say no to this publicity, it probably suggests we fear a personal backlash due to the decision which typically suggests that there might be something wrong with the decision or the consequences.
Whether we use a sophisticated model or perhaps something simpler, we need to recognise that solely using economic paradigms or reference to organisational goals and objectives will not guarantee our decisions will be ethical or generate the greatest good, or follow accepted practice to encourage the development of virtuous character. What is required is an ethical approach to decision making.
The Ford Pinto- An Ethical Lesson or Just a Business Decision?
This was the Ford Motor Company’s answer to cheap small compact cars from Europe and Japan that threatened the competitive position of American car manufacturers in the early 1970s.
Like any “good” business Ford decided to meet the competition head on with their own small car called the Pinto.
Ford streamlined the design process bring the car from the drawing board to manufacture in little over 2 years – as distinct from the usual 42 months it typically took. It also designed the car to meet all existing safety standards. During testing they identified that if rear-ended, the car’s petrol tank was prone to rupture and possible fire that may possibly injure the driver or passenger. However they also identified that addressing this issue would increase the cost of the car.
Ford accessed independent road safety figures from the National Highway Traffic Safety Authority to determine possible accident numbers, likelihood of deaths etc., and calculated the total cost of this, estimated at just under $50mil US against the cost of re-engineering the vehicle at over $137mil US. Production and sale of the vehicle proceeded.
Conservative estimates suggest that over 500 people were killed as a result of accidents in this vehicle. Other sources claim that the figure is much higher.
Adapted from “Velasquez G (1982) Business Ethics Concepts and Cases, Prentice Hall, Englewood Cliffs, and Dowie M Pinto Madness,” from Mother Jones, September/October 1977.
What approaches can you identify that Ford followed in its decision?
Assume that you the Senior Executive responsible for the final decision as to whether to re-engineer the vehicle or to allow production to proceed.
Apply the seven key questions to the scenario.
Ferrell, O.C., Fraedrich, J., & Ferrell, L. (2015). Business Ethics Ethical Decision making and Cases, Cengage Learning, Stamford. Ch 5 & 6
Chapter 5 provides and a framework for ethical decision making relating them to the four categories of ethical issues discussed earlier in the text, and the factors that affect individual decision-making. The chapter also provides a discussion of the importance of ethical leadership as a factor in influencing decision-making and also the leader’s role in the creation and maintenance of ethical culture. This discussion is clearly linked to the next Topic of Ethical Leadership
Chapter 6 provides important background to a range of issues discussed in this Topic. Not only do Ferrell, Fraedrich and Ferrell (2015) provide an overview of ethical theories including consequentialist, deontological and virtue approaches, the chapter also reviews the Kohlberg Cognitive Moral Development model and other individual influences in understanding ethics that we canvassed in our earlier Topics.
McDonald, G. (2015). Business ethics: A contemporary approach, Cambridge University Press, Melbourne. Chapter 10 & 11
Gael McDonald provides two chapters that provide valuable background to ethical theories and then an integrated decision making approach. IN chapter 10 on ethical theories, utilitarian and deontological approaches are discussed quite well; however you should note that the virtue approach is not given quite the same attention and needs to be supplement with other reading. Chapter 11 provide an integrated approach to decision making that revisits some of our earlier concepts including moral awareness and moral reasoning. She outlines a six stage model that parallels much of the discussion in this Topic, however she also includes important aspects of moral identify, and moral courage and in the event of a wrong decision being taken, moral repair.
Donaldson, T., Werhane, P. & Van Zandt, J. (2008) Ethical Issues in Business: A Philosophical Reader, 8tyh ed. Prentice Hall, Upper Saddle River. Introduction.
The introduction to this ethical reader provides a concise overview of the three ethical theories and application issues. Note that Donaldson and Werhane refer to Virtue ethics as Human Nature Ethics. Included in this introduction is a paper by 1998 Noble Prize winning Economist Amartya Sen “Does Business Ethics Make Economic Sense” in which he highlights that much of the economic literature of the past 20-30 years, principally monetarism, has been devoid of ethical perspectives, yet at its heart economics is about people and thus must include fundamental issues of morality.
Journal Reading 1
Maddalena, V. (2007), “A practical approach to ethical decision-making” Leadership in Health Services, 20(2), pp 71-75
This short article by Maddalena outlines a useful checklist of questions that managers should ask themselves when making decisions. The questions are linked to ethical principles that encourage the identification of the ethical complexities associated with any decision.
Journal Reading 2
Carroll, A.B, (1993) The Principles of Business Ethics: their role in decision-making and an initial consensus”. Management Decision,28(8), pp 20-24
This article by noted American philosopher Archie Carroll provides a concise overview of some of the principle ethics theories and their role in decision-making. It discusses the common ways by which managers make decisions and aligns these with concepts such as “gut feel” “do unto others” etc. Carroll also introduces an ethical decision making framework that encourages us to use multiple ethical perspectives in management decision making as forms of “filters” so as to clearly identify the ethical c=dimension of our decisions.
Journal Reading 3
The author provides a useful summary and review of eight four research articles on ethical decision–making between 2004 to 2011. Individual findings are categorized by their application to individual variables, organizational variables, or the concept of moral intensity. James Rest’s four-step model for ethical decision–making is used to summarize findings by dependent variable-awareness, intent, judgment, and behaviour. A discussion of findings in each category is provided in order to uncover trends in the ethical decision–making literature.
Journal Reading 4
Velasquez, M, Andre, C, Shanks, T & Meyer, MJ V 1996, “Thinking Ethically: A Framework for Moral Decision Making ” Issues in Ethics, Vol. 7 No. 1.
This article can currently be accessed at: http://www.scu.edu/ethics/practicing/decision/thinking.html
This is a concise article that summarises the main theories of ethics canvassed in this Topic along with the guiding principles or how and when to use each. Similar to Maddalena’s article, Velasquez and his colleagues provide five key questions we should ask ourselves when trying to resolve a moral issue.
MGMT20134 | Topic 5 | Page 19
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