Tj maxx merchandise associate hourly pay

Ethics From Antiquity To Present

Select an article that touches on the ethical concepts you learned from this week. Post a summary of your article for discussion with your classmates, and answer the following question:

What ethical dilemmas did you notice in your article review for this week? Provide examples and incorporate concepts you learned from the textbook (include reference)

This week we will be learning about Ethics from Antiquity to Present. This week's materials will provide you with the ability to:

Assess the role of ethics in a business environment.
Distinguish between ethical and legal responsibilitie
Critique various types of ethical theories
And second article 300 words

A classic utilitarian dilemma considers an out-of-control streetcar and a switch operator’s array of bad
choices. Watch the video on the streetcar thought experiment (https://openstax.org/l/53streetcar) and
consider these questions.
How would you go about making the decision about what to do?
Is there a right or wrong answer?
What values and criteria would you use to make your decision about whom to save?

Business Ethics

SENIOR CONTRIBUTING AUTHORS STEPHEN M. BYARS, USC MARSHALL SCHOOL OF BUSINESS KURT STANBERRY, UNIVERSITY OF HOUSTON-DOWNTOWN

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TABLE OF CONTENTS

Preface 1

1 Why Ethics Matter 7

1.1 Being a Professional of Integrity 8 1.2 Ethics and Profitability 13 1.3 Multiple versus Single Ethical Standards 20

2 Ethics from Antiquity to the Present 27

2.1 The Concept of Ethical Business in Ancient Athens 28 2.2 Ethical Advice for Nobles and Civil Servants in Ancient China 35 2.3 Comparing the Virtue Ethics of East and West 40 2.4 Utilitarianism: The Greatest Good for the Greatest Number 44 2.5 Deontology: Ethics as Duty 50 2.6 A Theory of Justice 54

3 Defining and Prioritizing Stakeholders 67

3.1 Adopting a Stakeholder Orientation 68 3.2 Weighing Stakeholder Claims 72 3.3 Ethical Decision-Making and Prioritizing Stakeholders 78 3.4 Corporate Social Responsibility (CSR) 83

4 Three Special Stakeholders: Society, the Environment, and Government

93

4.1 Corporate Law and Corporate Responsibility 94 4.2 Sustainability: Business and the Environment 103 4.3 Government and the Private Sector 117

5 The Impact of Culture and Time on Business Ethics 131

5.1 The Relationship between Business Ethics and Culture 132 5.2 Business Ethics over Time 139 5.3 The Influence of Geography and Religion 144 5.4 Are the Values Central to Business Ethics Universal? 149

6 What Employers Owe Employees 159

6.1 The Workplace Environment and Working Conditions 160

6.2 What Constitutes a Fair Wage? 169 6.3 An Organized Workforce 177 6.4 Privacy in the Workplace 184

7 What Employees Owe Employers 195

7.1 Loyalty to the Company 196 7.2 Loyalty to the Brand and to Customers 203 7.3 Contributing to a Positive Work Atmosphere 207 7.4 Financial Integrity 212 7.5 Criticism of the Company and Whistleblowing 218

8 Recognizing and Respecting the Rights of All 231

8.1 Diversity and Inclusion in the Workforce 232 8.2 Accommodating Different Abilities and Faiths 239 8.3 Sexual Identification and Orientation 244 8.4 Income Inequalities 247 8.5 Animal Rights and the Implications for Business 252

9 Professions under the Microscope 265

9.1 Entrepreneurship and Start-Up Culture 266 9.2 The Influence of Advertising 271 9.3 The Insurance Industry 276 9.4 Ethical Issues in the Provision of Health Care 280

10 Changing Work Environments and Future Trends 295

10.1 More Telecommuting or Less? 296 10.2 Workplace Campuses 301 10.3 Alternatives to Traditional Patterns of Work 306 10.4 Robotics, Artificial Intelligence, and the Workplace of the Future 314

11 Epilogue: Why Ethics Still Matter 325

11.1 Business Ethics in an Evolving Environment 326 11.2 Committing to an Ethical View 329 11.3 Becoming an Ethical Professional 332 11.4 Making a Difference in the Business World 336

A The Lives of Ethical Philosophers 341

This OpenStax book is available for free at http://cnx.org/content/col25722/1.3

B Profiles in Business Ethics: Contemporary Thought Leaders 347

C A Succinct Theory of Business Ethics 357

Index 365

This OpenStax book is available for free at http://cnx.org/content/col25722/1.3

Welcome to Business Ethics, an OpenStax resource. This textbook was written to increase student access to high-quality learning materials, maintaining highest standards of academic rigor at little to no cost.

About OpenStax OpenStax is a nonprofit based at Rice University, and it’s our mission to improve student access to education. Our first openly licensed college textbook was published in 2012, and our library has since scaled to over 25 books for college and AP® courses used by hundreds of thousands of students. OpenStax Tutor, our low-cost personalized learning tool, is being used in college courses throughout the country. Through our partnerships with philanthropic foundations and our alliance with other educational resource organizations, OpenStax is breaking down the most common barriers to learning and empowering students and instructors to succeed.

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Preface

Preface 1

Format You can access this textbook for free in web view or PDF through OpenStax.org, and for a low cost in print.

About Business Ethics Business Ethics is designed to meet the scope and sequence requirements of the single-semester standardized business ethics course across all majors. This title includes innovative features designed to enhance student learning, including case studies, application scenarios, and links to video interviews with executives, all of which help instill in students a sense of ethical awareness and responsibility. The book provides an important opportunity for students to learn the core concepts of business ethics and understand how to apply those concepts to their professional lives.

Coverage and scope Our Business Ethics textbook adheres to the scope and sequence requirements of introductory business ethics courses nationwide. We have endeavored to make the core theories and practical concepts of business ethics engaging, relevant, and accessible to students. The guiding themes of the textbook are to promote high ethical standards and to assist the integration of ethical thinking across the business school curriculum, with an end result of encouraging even greater ethical consciousness on the part of business practitioners beyond their graduation. We particularly emphasize the reality of today’s global business community and observe that geography, culture, and time contribute to ethical concepts and constructs. With awareness of these issues in mind, the content of this textbook has been developed and arranged to emphasize the necessity—and difficulty—of ethical decision-making. The authors seek to help students recognize legal and moral issues, reason through the consequences of different courses of action, and promote social responsibility. The text emphasizes connections between topics such as ethical theories, legal responsibilities, the prioritization of stakeholders, and corporate social responsibility. The organization and pedagogical features were developed and vetted with feedback from business ethics instructors dedicated to the project.

Engaging feature boxes Throughout Business Ethics, you will find features that engage students by taking selected topics a step further. Each feature box contains either a link to a deeper exploration of the topic at hand or critical thinking questions that may be geared toward class discussion, student projects, or written essays. Our features include:

• Cases from the Real World. This feature presents brief examples of real companies making ethical decisions in the midst of hectic competition. Each example includes follow-up critical thinking questions that encourage reflection on the case and how it relates to chapter concepts and themes.

• What Would You Do? This feature presents brief, fact-based scenarios in which students are challenged to put themselves into the shoes of ranking executives and balance a host of interests—some conflicting—as they make decisions for their businesses. Students provide an answer to a practical problem or ethical issue, as well as their reasoning.

• Ethics across Time and Cultures. This feature considers how geography, culture, and time influence the ethical values we have. Follow-up critical thinking questions allow for broader reflection on the chapter topics and encourage deeper integration of the chapter content.

• Link to Learning. This feature provides a very brief introduction to online resources and videos that are pertinent to students’ exploration of the topic at hand. Link to Learning boxes allow students to connect easily to some of the most important thought leaders and concepts in the field of business ethics. The

2 Preface

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purpose is to highlight the complexities of ethical decision-making.

Module materials that reinforce key concepts • Learning Objectives. Every module begins with a set of clear and concise learning objectives. These

objectives are designed to help the instructor decide what content to include or assign, and to guide students on what they can expect to learn. After completing the module and end-of-module exercises, students should be able to demonstrate mastery of the learning objectives.

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• Key Terms. Key terms are bold and are followed by a definition in context. Definitions of key terms are also listed in the glossary, which appears at the end of the chapter.

• Assessments. Multiple-choice and short-answer review questions provide opportunities to recall and test the information students learn throughout each module.

Additional resources

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About the authors

Senior contributing authors Stephen M. Byars, USC Marshall School of Business

Stephen Byars received his BA from Claremont McKenna College, his MA from the University of San Diego, and his PhD from the University of Southern California. He teaches business ethics and oral and written communication at the Marshall School of Business at USC to both graduate and undergraduate business majors. He has served as associate director of the USC Writing Program, temporary director of the Writing

Preface 3

Center within the Writing Program, and as director of the USC Marshall Consulting Program. His scholarly interests include business and professional ethics, the constructive mediation of disputes in the workplace, and those best practices that permit leaders to direct business in ways that engender community, social, and corporate good.

Kurt Stanberry, University of Houston–Downtown

Kurt Stanberry is a professor of legal studies in the College of Business at the University of Houston Downtown and has held the PLM Endowed Professorship since 2011. He is also a licensed attorney. He received his BA from Yale University, an MBA from the Graduate School of Business at Temple University, and a JD from the University of Houston College of Law.

Kurt teaches courses at the undergraduate and graduate level in business law, contracts, employment law, negotiations, ethics, and other related topics. He also conducts continuing education seminars in topics such as negotiations, leadership, diversity, and ethics for CPAs, CFPs, attorneys, and business executives, through organizations such as the AICPA, FEI, and TSCPA at the state and national levels. He has published numerous articles in scholarly journals, two textbooks, various practice manuals, and cases. Prior to joining the faculty at UHD, Kurt was a professor in the California State University System and was also a visiting professor in international programs in London, Bonn, Tokyo, and Seoul. He has been teaching and practicing law for over 30 years.

Contributing authors Barbara Boerner, Brevard College

Robert Brancatelli, Fordham University

Wade Chumney, California State University, Northridge

Laura Dendinger, Wayne State College

Bill Nantz, Houston Community College

Mark Poepsel, Southern Illinois University Edwardsville

David Shapiro, Pennsylvania State University

Reviewers Justin Bateh, Florida State College at Jacksonville

Ronald Berenbeim, New York University

Kenneth Bigel, Touro College

Cindy Briggs, Salt Lake Community College

Barbara Chappell, Walden University

Maureen Chisholm, Quincy College

Valerie Collins, Sheridan College

Dixon Cooper, Ouachita Baptist University

Anastasia Cortes, Virginia Polytechnic Institute

Sarah Esveldt, Carroll University

Rand Fandrich, New England College of Business

Charles Fenner, State University of New York Canton

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Mehran Ferdowsian, Wilkes University

Betty Fitte, Tidewater Community College

Robert Freeborough, Berkeley College

Martha Helland, University of Sioux Falls

Amy Jordan, Loyola University Chicago

Stephanie Jue, University of Texas

Cheryl Keymer, North Arkansas College

Nai Lamb, University of Tennessee at Chattanooga

Jolene A. Lampton, Park University–Austin Campus

Barbara Limbach, Chadron State College

Marilyn Marousek, Barry University

Russ Meade, Husson University

Michael Pakaluk, Catholic University

Tatyana Pashnyak, Bainbridge State College

Roslyn Roberts, California State University, Sacramento

Amber Ruszkowski, Ivy Tech Community College

Richard Savior, State University of New York Empire State College

Lon Schiffbauer, Salt Lake Community College

Nathan Smith, Houston Community College

Anne Snell, Tulane University

Chris Suprenant, University of New Orleans

Glen Taylor, Paradise Valley Community College

Sonia Toson, Kennesaw State University

Joel Webb, Loyola University New Orleans

Andy Wible, Muskegon Community College

Jeffrey Yoder, Fairfield University

Preface 5

Preface

This OpenStax book is available for free at http://cnx.org/content/col25722/1.3

Chapter Outline

1.1 Being a Professional of Integrity 1.2 Ethics and Profitability 1.3 Multiple versus Single Ethical Standards

Introduction Ethics consists of the standards of behavior to which we hold ourselves in our personal and professional lives. It establishes the levels of honesty, empathy, and trustworthiness and other virtues by which we hope to identify our personal behavior and our public reputation. In our personal lives, our ethics sets norms for the ways in which we interact with family and friends. In our professional lives, ethics guides our interactions with customers, clients, colleagues, employees, and shareholders affected by our business practices (Figure 1.1).

Should we care about ethics in our lives? In our practices in business and the professions? That is the central question we will examine in this chapter and throughout the book. Our goal is to understand why the answer is yes.

Whatever hopes you have for your future, you almost certainly want to be successful in whatever career you choose. But what does success mean to you, and how will you know you have achieved it? Will you measure it in terms of wealth, status, power, or recognition? Before blindly embarking on a quest to achieve these goals, which society considers important, stop and think about what a successful career means to you personally. Does it include a blameless reputation, colleagues whose good opinion you value, and the ability to think well of yourself? How might ethics guide your decision-making and contribute to your achievement of these goals?

Figure 1.1 Each of us makes innumerable decisions every day. In a business context, these choices have consequences for ourselves and others whom we must take into account in our decision-making process. (credit: modification of “business paper office laptop” by “rawpixel”/Pixabay, CC0)

1 Why Ethics Matter

1.1 Being a Professional of Integrity Learning Objectives

By the end of this section, you will be able to:

• Describe the role of ethics in a business environment • Explain what it means to be a professional of integrity • Distinguish between ethical and legal responsibilities • Describe three approaches for examining the ethical nature of a decision

Whenever you think about the behavior you expect of yourself in your personal life and as a professional, you are engaging in a philosophical dialogue with yourself to establish the standards of behavior you choose to uphold, that is, your ethics. You may decide you should always tell the truth to family, friends, customers, clients, and shareholders, and if that is not possible, you should have very good reasons why you cannot. You may also choose never to defraud or mislead your business partners. You may decide, as well, that while you are pursuing profit in your business, you will not require that all the money on the table come your way. Instead, there might be some to go around to those who are important because they are affected one way or another by your business. These are your stakeholders.

Acting with Integrity Clients, customers, suppliers, investors, retailers, employees, the media, the government, members of the surrounding community, competitors, and even the environment are stakeholders in a business; that is, they are individuals and entities affected by the business’s decisions (Figure 1.2). Stakeholders typically value a leadership team that chooses the ethical way to accomplish the company’s legitimate for-profit goals. For example, Patagonia expresses its commitment to environmentalism via its “1% for the Planet” program, which donates 1 percent of all sales to help save the planet. In part because of this program, Patagonia has become a market leader in outdoor gear.

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Figure 1.2 Stakeholders are the individuals and entities affected by a business’s decisions, including clients, customers, suppliers, investors, retailers, employees, the media, the government, members of the surrounding community, the environment, and even competitors. (attribution: Copyright Rice University, OpenStax, under CC BY 4.0 license)

Being successful at work may therefore consist of much more than simply earning money and promotions. It may also mean treating our employees, customers, and clients with honesty and respect. It may come from the sense of pride we feel about engaging in honest transactions, not just because the law demands it but because we demand it of ourselves. It may lie in knowing the profit we make does not come from shortchanging others. Thus, business ethics guides the conduct by which companies and their agents abide by the law and respect the rights of their stakeholders, particularly their customers, clients, employees, and the surrounding community and environment. Ethical business conduct permits us to sleep well at night.

Nearly all systems of religious belief stress the building blocks of engaging others with respect, empathy, and honesty. These foundational beliefs, in turn, prepare us for the codes of ethical behavior that serve as ideal guides for business and the professions. Still, we need not subscribe to any religious faith to hold that ethical behavior in business is still necessary. Just by virtue of being human, we all share obligations to one another, and principal among these is the requirement that we treat others with fairness and dignity, including in our commercial transactions.

L I N K T O L E A R N I N G

Are business ethics an oxymoron? Read “Why Ethics Matter” to understand (https://openstax.org/l/ 53oxymoron) just a few of the reasons to have values-driven management.

Chapter 1 Why Ethics Matter 9

https://openstax.org/l/53oxymoron
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For this reason, we use the words ethics and morals interchangeably in this book, though some philosophers distinguish between them. We hold that “an ethical person” conveys the same sense as “a moral person,” and we do not regard religious belief as a requirement for acting ethically in business and the professions. Because we are all humans and in the same world, we should extend the same behavior to all. It is the right way to behave, but it also burnishes our own professional reputation as business leaders of integrity.

Integrity—that is, unity between what we say and what we do—is a highly valued trait. But it is more than just consistency of character. Acting with integrity means we adhere strongly to a code of ethics, so it implies trustworthiness and incorruptibility. Being a professional of integrity means consistently striving to be the best person you can be in all your interactions with others. It means you practice what you preach, walk the talk, and do what you believe is right based upon reason. Integrity in business brings many advantages, not the least of which is that it is a critical factor in allowing business and society to function properly.

Successful corporate leaders and the companies they represent will take pride in their enterprise if they engage in business with honesty and fair play. To treat customers, clients, employees, and all those affected by a firm with dignity and respect is ethical. In addition, laudable business practices serve the long-term interests of corporations. Why? Because customers, clients, employees, and society at large will much more willingly patronize a business and work hard on its behalf if that business is perceived as caring about the community it serves. And what type of firm has long-term customers and employees? One whose track record gives evidence of honest business practice.

Many people confuse legal and ethical compliance. They are, however, totally different and call for different standards of behavior. The concepts are not interchangeable in any sense of the word. The law is needed to establish and maintain a functioning society. Without it, our society would be in chaos. Compliance with these legal standards is strictly mandatory: If we violate these standards, we are subject to punishment as established by the law. Therefore, compliance in terms of business ethics generally refers to the extent to which a company conducts its business operations in accordance with applicable regulations, statutes, and laws. Yet this represents only a baseline minimum. Ethical observance builds on this baseline and reveals the principles of an individual business leader or a specific organization. Ethical acts are generally considered voluntary and personal—often based on our perception of or stand on right and wrong.

Some professions, such as medicine and the law, have traditional codes of ethics. The Hippocratic Oath, for example, is embraced by most professionals in health care today as an appropriate standard always owed to patients by physicians, nurses, and others in the field. This obligation traces its lineage to ancient Greece and the physician Hippocrates. Business is different in not having a mutually shared standard of ethics. This is changing, however, as evidenced by the array of codes of conduct and mission statements many companies have adopted over the past century. These have many points in common, and their shared content may eventually produce a code universally claimed by business practitioners. What central point might constitute

L I N K T O L E A R N I N G

In this interview, Mark Faris, a white-collar criminal convicted of fraud, claims that greed, arrogance, and ambition were motivating factors (https://openstax.org/l/53MarkFaris) in his actions. He also discusses the human ability to rationalize our behavior to justify it to ourselves. Note his proposed solutions: practicing ethical leadership and developing awareness at an individual level via corporate training.

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such a code? Essentially, a commitment to treat with honesty and integrity customers, clients, employees, and others affiliated with a business.

The law is typically indebted to tradition and precedence, and compelling reasons are needed to support any change. Ethical reasoning often is more topical and reflects the changes in consciousness that individuals and society undergo. Often, ethical thought precedes and sets the stage for changes in the law.

Behaving ethically requires that we meet the mandatory standards of the law, but that is not enough. For example, an action may be legal that we personally consider unacceptable. Companies today need to be focused not only on complying with the letter of the law but also on going above and beyond that basic mandatory requirement to consider their stakeholders and do what is right.

Ends, Means, and Character in Business How, then, should we behave? Philosophy and science help us answer this question. From philosophy, three different perspectives help us assess whether our decisions are ethical on the basis of reason. These perspectives are called normative ethical theories and focus on how people ought to behave; we discuss them in this chapter and in later chapters. In contrast, descriptive ethical theories are based on scientific evidence, primarily in the field of psychology, and describe how people tend to behave within a particular context; however, they are not the subject of this book.

The first normative approach is to examine the ends, or consequences, a decision produces in order to evaluate whether those ends are ethical. Variations on this approach include utilitarianism, teleology, and consequentialism. For example, utilitarianism suggests that an ethical action is one whose consequence achieves the greatest good for the greatest number of people. So if we want to make an ethical decision, we should ask ourselves who is helped and who is harmed by it. Focusing on consequences in this way generally does not require us to take into account the means of achieving that particular end, however. That fact leads us to the second normative theory about what constitutes ethical conduct.

The second approach does examine the means, or actions, we use to carry out a business decision. An example of this approach is deontology, which essentially suggests that it is the means that lend nobility to the ends. Deontology contends that each of us owes certain duties to others (deon is a Greek word for duty or obligation) and that certain universal rules apply to every situation and bind us to these duties. In this view, whether our actions are ethical depends only on whether we adhere to these rules. Thus, the means we use is the primary determinant of ethical conduct. The thinker most closely associated with deontology is the eighteenth-century German philosopher Immanuel Kant (Figure 1.3).

L I N K T O L E A R N I N G

To see an example of a corporate ethical code (https://openstax.org/l/53J&Jcredo) or mission statement, visit Johnson & Johnson and read “Our Credo” written by former chair Robert Wood Johnson.

Forbes provides an annual list of companies recently deemed the most ethical (https://openstax.org/l/ 53EthicalBus) according to their standards and research.

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Figure 1.3 Immanuel Kant was an eighteenth-century philosopher, now associated with deontology, who spent nearly all his professional life teaching at the university in Königsberg (which today is Kaliningrad, the westernmost point in Russia). (credit right: modification of “Kant foto” by “Becker”/Wikimedia Commons, Public Domain)

The third normative approach, typically called virtue theory, focuses on the character of the decision- maker—a character that reflects the training we receive growing up. In this view, our ethical analysis of a decision is intimately connected with the person we choose to be. It is through the development of habits, the routine actions in which we choose to engage, that we are able to create a character of integrity and make ethical decisions. Put differently, if a two-year-old is taught to take care of and return borrowed toys even though this runs contrary to every instinct they have, they may continue to perfect their ethical behavior so that at age forty, they can be counted on to safeguard the tens of millions of dollars investors have entrusted to their care in brokerages.

Virtue theory has its roots in the Greek philosophical tradition, whose followers sought to learn how to live a flourishing life through study, teaching, and practice. The cardinal virtues to be practiced were courage, self- control, justice, and wisdom. Socrates was often cited as a sage and a role model, whose conduct in life was held in high regard.

E T H I C S A C R O S S T I M E A N D C U LT U R E S

Aristotle and the Concept of Phronesis, or Practical Wisdom Phrónēsis (fro-NEE-sis) is a type of practical wisdom that enables us to act virtuously. In “The Big Idea: The Wise Leader,” a Harvard Business Review article on leadership and ethical decision-making, Ikujiro Nonaka, a Japanese organizational theorist, and Hirotaka Takeuchi, a professor of Management Practice at Harvard Business School, discuss the gap between the theory and practice of ethics and which characteristics make a wise leader.1 The authors conclude that “the use of explicit and tacit knowledge isn’t enough; chief executive officers (CEOs) must also draw on a third, often forgotten kind of knowledge, called practical wisdom. Practical wisdom is tacit knowledge acquired from experience that enables people to make prudent judgments and take actions based on the actual situation, guided by values and morals.”

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1.2 Ethics and Profitability Learning Objectives

By the end of this section, you will be able to:

• Differentiate between short-term and long-term perspectives • Differentiate between stockholder and stakeholder • Discuss the relationship among ethical behavior, goodwill, and profit • Explain the concept of corporate social responsibility

Few directives in business can override the core mission of maximizing shareholder wealth, and today that particularly means increasing quarterly profits. Such an intense focus on one variable over a short time (i.e., a short-term perspective) leads to a short-sighted view of what constitutes business success.

Measuring true profitability, however, requires taking a long-term perspective. We cannot accurately measure success within a quarter of a year; a longer time is often required for a product or service to find its market and gain traction against competitors, or for the effects of a new business policy to be felt. Satisfying consumers’ demands, going green, being socially responsible, and acting above and beyond the basic requirements all take time and money. However, the extra cost and effort will result in profits in the long run. If we measure success from this longer perspective, we are more likely to understand the positive effect ethical behavior has on all who are associated with a business.

The concept of practical wisdom dates back to Aristotle, who considered phronesis, which can also be defined as prudence, to be a key intellectual virtue. Phronesis enables people to make ethically sound judgments. According to the authors, phronetic leaders:

• practice moral discernment in every situation, making judgments for the common good that are guided by their individual values and ethics;

• quickly assess situations and envision the consequences of possible actions or responses; • create a shared sense of purpose among executives and employees and inspire people to work

together in pursuit of a common goal; • engage as many people as possible in conversation and communicate using metaphors, stories, and

other figurative language in a way that everyone can understand; and • encourage practical wisdom in others and support the training of employees at all levels in its use.

In essence, the first question any company should ask itself is: “Do we have a moral purpose?” Having a moral purpose requires focusing on the common good, which precedes the accumulation of profit and results in economic and social benefits. If companies seek the common good, profits generally will follow.

Critical Thinking

In the article cited, the authors stress the importance of being well versed in the liberal arts, such as philosophy, history, literature, and in the fine arts to cultivate judgment. How do you think a strong background in the liberal arts would impart practical wisdom or help you make ethical decisions?

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Profitability and Success: Thinking Long Term Decades ago, some management theorists argued that a conscientious manager in a for-profit setting acts ethically by emphasizing solely the maximization of earnings. Today, most commentators contend that ethical business leadership is grounded in doing right by all stakeholders directly affected by a firm’s operations, including, but not limited to, stockholders, or those who own shares of the company’s stock. That is, business leaders do right when they give thought to what is best for all who have a stake in their companies. Not only that, firms actually reap greater material success when they take such an approach, especially over the long run.

Nobel Prize–winning economist Milton Friedman stated in a now-famous New York Times Magazine article in 1970 that the only “social responsibility of a business is to increase its profits.”2 This concept took hold in business and even in business school education. However, although it is certainly permissible and even desirable for a company to pursue profitability as a goal, managers must also have an understanding of the context within which their business operates and of how the wealth they create can add positive value to the world. The context within which they act is society, which permits and facilitates a firm’s existence.

Thus, a company enters a social contract with society as whole, an implicit agreement among all members to cooperate for social benefits. Even as a company pursues the maximizing of stockholder profit, it must also acknowledge that all of society will be affected to some extent by its operations. In return for society’s permission to incorporate and engage in business, a company owes a reciprocal obligation to do what is best for as many of society’s members as possible, regardless of whether they are stockholders. Therefore, when applied specifically to a business, the social contract implies that a company gives back to the society that permits it to exist, benefiting the community at the same time it enriches itself.

In addition to taking this more nuanced view of profits, managers must also use a different time frame for obtaining them. Wall Street’s focus on periodic (i.e., quarterly and annual) earnings has led many managers to adopt a short-term perspective, which fails to take into account effects that require a longer time to develop. For example, charitable donations in the form of corporate assets or employees’ volunteered time may not show a return on investment until a sustained effort has been maintained for years. A long-term perspective is a more balanced view of profit maximization that recognizes that the impacts of a business decision may not manifest for a longer time.

As an example, consider the business practices of Toyota when it first introduced its vehicles for sale in the

L I N K T O L E A R N I N G

What happens when a bank decides to break the social contract? This press conference held by the National Whistleblowers Center (https://openstax.org/l/53Birken) describes the events surrounding the $104 million whistleblower reward given to former UBS employee Bradley Birkenfeld by the U.S. Internal Revenue Service. While employed at UBS, Switzerland’s largest bank, Birkenfeld assisted in the company’s illegal offshore tax business, and he later served forty months in prison for conspiracy. But he was also the original source of incriminating information that led to a Federal Bureau of Investigation examination of the bank and to the U.S. government’s decision to impose a $780 million fine on UBS in 2009. In addition, Birkenfeld turned over to investigators the account information of more than 4,500 U.S. private clients of UBS.3

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United States in 1957. For many years, Toyota was content to sell its cars at a slight loss because it was accomplishing two business purposes: It was establishing a long-term relationship of trust with those who eventually would become its loyal U.S. customers, and it was attempting to disabuse U.S. consumers of their belief that items made in Japan were cheap and unreliable. The company accomplished both goals by patiently playing its long game, a key aspect of its operational philosophy, “The Toyota Way,” which includes a specific emphasis on long-term business goals, even at the expense of short-term profit.4

What contributes to a corporation’s positive image over the long term? Many factors contribute, including a reputation for treating customers and employees fairly and for engaging in business honestly. Companies that act in this way may emerge from any industry or country. Examples include Fluor, the large U.S. engineering and design firm; illycaffè, the Italian food and beverage purveyor; Marriott, the giant U.S. hotelier; and Nokia, the Finnish telecommunications retailer. The upshot is that when consumers are looking for an industry leader to patronize and would-be employees are seeking a firm to join, companies committed to ethical business practices are often the first to come to mind.

Why should stakeholders care about a company acting above and beyond the ethical and legal standards set by society? Simply put, being ethical is simply good business. A business is profitable for many reasons, including expert management teams, focused and happy employees, and worthwhile products and services that meet consumer demand. One more and very important reason is that they maintain a company philosophy and mission to do good for others.

Year after year, the nation’s most admired companies are also among those that had the highest profit margins. Going green, funding charities, and taking a personal interest in employee happiness levels adds to the bottom line! Consumers want to use companies that care for others and our environment. During the years 2008 and 2009, many unethical companies went bankrupt. However, those companies that avoided the “quick buck,” risky and unethical investments, and other unethical business practices often flourished. If nothing else, consumer feedback on social media sites such as Yelp and Facebook can damage an unethical company’s prospects.

C A S E S F R O M T H E R E A L W O R L D

Competition and the Markers of Business Success Perhaps you are still thinking about how you would define success in your career. For our purposes here, let us say that success consists simply of achieving our goals. We each have the ability to choose the goals we hope to accomplish in business, of course, and, if we have chosen them with integrity, our goals and the actions we take to achieve them will be in keeping with our character.

Warren Buffet (Figure 1.4), whom many consider the most successful investor of all time, is an exemplar of business excellence as well as a good potential role model for professionals of integrity and the art of thinking long term. He had the following to say: “Ultimately, there’s one investment that supersedes all others: Invest in yourself. Nobody can take away what you’ve got in yourself, and everybody has potential they haven’t used yet. . . . You’ll have a much more rewarding life not only in terms of how much money you make, but how much fun you have out of life; you’ll make more friends the more interesting person you are, so go to it, invest in yourself.”5

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Stockholders, Stakeholders, and Goodwill Earlier in this chapter, we explained that stakeholders are all the individuals and groups affected by a business’s decisions. Among these stakeholders are stockholders (or shareholders), individuals and institutions that own stock (or shares) in a corporation. Understanding the impact of a business decision on the stockholder and various other stakeholders is critical to the ethical conduct of business. Indeed, prioritizing the claims of various stakeholders in the company is one of the most challenging tasks business professionals face. Considering only stockholders can often result in unethical decisions; the impact on all

Figure 1.4 Warren Buffett, shown here with President Barack Obama in June 2010, is an investor and philanthropist who was born in 1930 in Omaha, Nebraska. Through his leadership of Berkshire Hathaway, he has become one of the most successful investors in the world and one of the wealthiest people in the United States, with an estimated total net worth of almost $80 billion. (credit: “President Barack Obama and Warren Buffett in the Oval Office” by Pete Souza/Wikimedia Commons, Public Domain)

The primary principle under which Buffett instructs managers to operate is: “Do nothing you would not be happy to have an unfriendly but intelligent reporter write about on the front page of a newspaper.”6

This is a very simple and practical guide to encouraging ethical business behavior on a personal level. Buffett offers another, equally wise, principle: “Lose money for the firm, even a lot of money, and I will be understanding; lose reputation for the firm, even a shred of reputation, and I will be ruthless.”7 As we saw in the example of Toyota, the importance of establishing and maintaining trust in the long term cannot be underestimated.

L I N K T O L E A R N I N G

For more on Warren Buffett’s thoughts about being both an economic and ethical leader, watch this interview (https://openstax.org/l/53Buffet) that appeared on the PBS NewsHour on June 6, 2017.

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stakeholders must be considered and rationally assessed.

Managers do sometimes focus predominantly on stockholders, especially those holding the largest number of shares, because these powerful individuals and groups can influence whether managers keep their jobs or are dismissed (e.g., when they are held accountable for the company’s missing projected profit goals). And many believe the sole purpose of a business is, in fact, to maximize stockholders’ short-term profits. However, considering only stockholders and short-term impacts on them is one of the most common errors business managers make. It is often in the long-term interests of a business not to accommodate stockowners alone but rather to take into account a broad array of stakeholders and the long-term and short-term consequences for a course of action.

Here is a simple strategy for considering all your stakeholders in practice. Divide your screen or page into three columns; in the first column, list all stakeholders in order of perceived priority (Figure 1.5). Some individuals and groups play more than one role. For instance, some employees may be stockholders, some members of the community may be suppliers, and the government may be a customer of the firm. In the second column, list what you think each stakeholder group’s interests and goals are. For those that play more than one role, choose the interests most directly affected by your actions. In the third column, put the likely impact of your business decision on each stakeholder. This basic spreadsheet should help you identify all your stakeholders and evaluate your decision’s impact on their interests. If you would like to add a human dimension to your analysis, try assigning some of your colleagues to the role of stakeholders and reexamine your analysis.

Figure 1.5 Imagine you are the CEO of a mid-sized firm—about five hundred employees—and your company is publicly traded. To understand what matters most to all your stakeholders, complete the preceding exercise to evaluate the impact of a particular action or decision. (attribution: Copyright Rice University, OpenStax, under CC BY 4.0 license)

The positive feeling stakeholders have for any particular company is called goodwill, which is an important component of almost any business entity, even though it is not directly attributable to the company’s assets and liabilities. Among other intangible assets, goodwill might include the worth of a business’s reputation, the value of its brand name, the intellectual capital and attitude of its workforce, and the loyalty of its established customer base. Even being socially responsible generates goodwill. The ethical behavior of managers will have a positive influence on the value of each of those components. Goodwill cannot be earned or created in a short

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time, but it can be the key to success and profitability.

A company’s name, its corporate logo, and its trademark will necessarily increase in value as stakeholders view that company in a more favorable light. A good reputation is essential for success in the modern business world, and with information about the company and its actions readily available via mass media and the Internet (e.g., on public rating sites such as Yelp), management’s values are always subject to scrutiny and open debate. These values affect the environment outside and inside the company. The corporate culture, for instance, consists of shared beliefs, values, and behaviors that create the internal or organizational context within which managers and employees interact. Practicing ethical behavior at all levels—from CEO to upper and middle management to general employees—helps cultivate an ethical corporate culture and ethical employee relations.

Positive goodwill generated by ethical business practices, in turn, generates long-term business success. As recent studies have shown, the most ethical and enlightened companies in the United States consistently outperform their competitors.8 Thus, viewed from the proper long-term perspective, conducting business ethically is a wise business decision that generates goodwill for the company among stakeholders, contributes to a positive corporate culture, and ultimately supports profitability.

You can test the validity of this claim yourself. When you choose a company with which to do business, what factors influence your choice? Let us say you are looking for a financial advisor for your investments and retirement planning, and you have found several candidates whose credentials, experience, and fees are approximately the same. Yet one of these firms stands above the others because it has a reputation, which you discover is well earned, for telling clients the truth and recommending investments that seemed centered on the clients’ benefit and not on potential profit for the firm. Wouldn’t this be the one you would trust with your investments?

Or suppose one group of financial advisors has a long track record of giving back to the community of which it is part. It donates to charitable organizations in local neighborhoods, and its members volunteer service hours toward worthy projects in town. Would this group not strike you as the one worthy of your investments? That

W H A T W O U L D Y O U D O ?

Which Corporate Culture Do You Value? Imagine that upon graduation you have the good fortune to be offered two job opportunities. The first is with a corporation known to cultivate a hard-nosed, no-nonsense business culture in which keeping long hours and working intensely are highly valued. At the end of each year, the company donates to numerous social and environmental causes. The second job opportunity is with a nonprofit recognized for a very different culture based on its compassionate approach to employee work-life balance. It also offers the chance to pursue your own professional interests or volunteerism during a portion of every work day. The first job offer pays 20 percent more per year.

Critical Thinking

• Which of these opportunities would you pursue and why? • How important an attribute is salary, and at what point would a higher salary override for you the

nonmonetary benefits of the lower-paid position?

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it appears to be committed to building up the local community might be enough to persuade you to give it your business. This is exactly how a long-term investment in community goodwill can produce a long pipeline of potential clients and customers.

A Brief Introduction to Corporate Social Responsibility If you truly appreciate the positions of your various stakeholders, you will be well on your way to understanding the concept of corporate social responsibility (CSR). CSR is the practice by which a business views itself within a broader context, as a member of society with certain implicit social obligations and environmental responsibilities. As previously stated, there is a distinct difference between legal compliance and ethical responsibility, and the law does not fully address all ethical dilemmas that businesses face. CSR ensures that a company is engaging in sound ethical practices and policies in accordance with the company’s culture and mission, above and beyond any mandatory legal standards. A business that practices CSR cannot have maximizing shareholder wealth as its sole purpose, because this goal would necessarily infringe on the rights of other stakeholders in the broader society. For instance, a mining company that disregards its corporate social responsibility may infringe on the right of its local community to clean air and water if it pursues only profit. In contrast, CSR places all stakeholders within a proper contextual framework.

An additional perspective to take concerning CSR is that ethical business leaders opt to do good at the same

C A S E S F R O M T H E R E A L W O R L D

The Equifax Data Breach In 2017, from mid-May to July, hackers gained unauthorized access to servers used by Equifax, a major credit reporting agency, and accessed the personal information of nearly one-half the U.S. population.9

Equifax executives sold off nearly $2 million of company stock they owned after finding out about the hack in late July, weeks before it was publicly announced on September 7, 2017, in potential violation of insider trading rules. The company’s shares fell nearly 14 percent after the announcement, but few expect Equifax managers to be held liable for their mistakes, face any regulatory discipline, or pay any penalties for profiting from their actions. To make amends to customers and clients in the aftermath of the hack, the company offered free credit monitoring and identity-theft protection. On September 15, 2017, the company’s chief information officer and chief of security retired. On September 26, 2017, the CEO resigned, days before he was to testify before Congress about the breach. To date, numerous government investigations and hundreds of private lawsuits have been filed as a result of the hack.

Critical Thinking

• Which elements of this case might involve issues of legal compliance? Which elements illustrate acting legally but not ethically? What would acting ethically and with personal integrity in this situation look like?

• How do you think this breach will affect Equifax’s position relative to those of its competitors? How might it affect the future success of the company?

• Was it sufficient for Equifax to offer online privacy protection to those whose personal information was hacked? What else might it have done?

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time that they do well. This is a simplistic summation, but it speaks to how CSR plays out within any corporate setting. The idea is that a corporation is entitled to make money, but it should not only make money. It should also be a good civic neighbor and commit itself to the general prospering of society as a whole. It ought to make the communities of which it is part better at the same time it pursues legitimate profit goals. These ends are not mutually exclusive, and it is possible—indeed, praiseworthy—to strive for both. When a company approaches business in this fashion, it is engaging in a commitment to corporate social responsibility.

1.3 Multiple versus Single Ethical Standards Learning Objectives

By the end of this section, you will be able to:

• Analyze ethical norms and values as they relate to business standards • Explain the doctrine of ethical relativism and why it is problematic • Evaluate the claim that having a single ethical standard makes behaving consistently easier

Business people sometimes apply different ethical standards in different contexts, especially if they are working in a culture different from the one in which they were raised or with coworkers from other traditions. If we look outside ourselves for ethical guidance, relying on the context in which we find ourselves, we can grow confused about what is ethical business behavior. Stakeholders then observe that the messages we send via our conduct lack a consistent ethical core, which can harm our reputation and that of the business. To avoid falling back on ethical relativism, a philosophy according to which there is no right or wrong and what is ethical depends solely on the context, we must choose a coherent standard we can apply to all our interactions with others.

Some people who adopt multiple ethical standards may choose to exhibit the highest standards with their families, because these are the people they most revere. In a business setting, however, this same person may choose to be an unethical actor whose sole goal is the ruthless accumulation of wealth by any means. Because work and family are not the only two settings in which we live our lives, such a person may behave according to yet another standard to competitors in a sporting event, to strangers on the street, or to those in his or her religious community.

Although the ethical standard we adopt is always a choice, certain life experiences can have more profound effects on our choice than others. Among the most formative experiences are family upbringing and cultural traditions, broadly defined here to include religious and ethnic norms, the standard patterns of behavior within the context in which we live. Culture and family also influence each other because the family exists in

L I N K T O L E A R N I N G

U.S. entrepreneur Blake Mycoskie has created a unique business model (https://openstax.org/l/53TOMS) combining both for-profit and nonprofit philosophies in an innovative demonstration of corporate social responsibility. The company he founded, TOMS Shoes, donates one pair of shoes to a child in need for every pair sold. As of May 2018, the company has provided more than 75 million pairs of shoes to children in seventy countries.10

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and responds to its cultural context, as well as providing us with the bedrock for our deepest values. Regardless of this initial coding, however, we can choose the ethical standards we apply in the business context.

Why should we choose a single ethical code for all the contexts in which we live? The Greek philosophers and later proponents of the normative ethical theories we discussed earlier would say that if you apply your reason to determine how to behave, it makes rational sense to abide by a single ethical code for all interactions with all persons in all contexts. By doing so, you maximize your ethical behavior no matter who the other party is. Furthermore, you have an internally consistent behavior for all family, friends, customers, clients, and anyone else with whom you interact. Thus, we need not choose different values in different contexts, and when people see us in different situations, they are more likely to trust us because they see we uphold the same values regardless of the context.

Indeed, proponents of all the normative ethical theories would insist that the only rational choice is to have a single ethical standard. A deontologist would argue that you should adhere to particular duties in performing your actions, regardless of the parties with whom you interact. A utilitarian would say that any act you take should result in the greatest good for the greatest number. A virtue ethicist would state that you cannot be virtuous if you lack integrity in your behavior toward all.

Adopting a consistent ethical standard is both selfless and in the manager’s self-interest. That is, would-be customers and clients are more likely to seek out a business that treats all with whom it interacts with honesty and fairness, believing that they themselves will be treated likewise by that firm. Similarly, business leaders who treat everyone in a trustworthy manner need never worry that they might not have impressed a potential customer, because they always engage in honorable commercial practices. A single standard of business behavior that emphasizes respect and good service appeals to all.

Normative ethics is about discovering right and delineating it from wrong; it is a way to develop the rules and norms we use to guide meaningful decision-making. The ethics in our single code are not relative to the time, person, or place. In this world, we all wear different hats as we go about our daily lives as employees, parents, leaders, students. Being a truly ethical person requires that no matter what hat we wear, we exhibit a single ethical code and that it includes, among others, such universal principles of behavior as honesty, integrity, loyalty, fairness, respect for law, and respect for others.

Yet another reason to adopt a universal ethical standard is the transparent character it nurtures in us. If a company’s leadership insists that it stands for honest business transactions at every turn, it cannot prosecute those who defraud the company and look the other way when its own officers do the same. Stakeholders recognize such hypocrisy and rightly hold it against the business’s leaders.

Business leaders are not limited to only one of the normative ethical theories we have described, however. Virtue theory, utilitarianism, and deontology all have advantages to recommend them. Still, what should not change is a corporate commitment to not make exceptions in its practices when those favor the company at the expense of customers, clients, or other stakeholders.

Moving from theory to daily life, we can also look at the way our reputation is established by the implicit and explicit messages we send to others. If we adopt ethical relativism, friends, family, and coworkers will notice that we use different standards for different contexts. This lack of consistency and integrity can alter their perception of us and likely damage our reputation.

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W H A T W O U L D Y O U D O ?

Taking Advantage of an Employee Discount Suppose you work in retail sales for an international clothing company. A perk of the job is an employee discount of 25 percent on all merchandise you purchase for personal use. Your cousin, who is always looking for a bargain, approaches you in the store one day and implores you to give him your employee discount on a $100 purchase of clothes for himself.

Critical Thinking

• How would you handle this situation and why? • Would it matter if the relative were someone closer to you, perhaps a brother or sister? • If so, why?

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business ethics

compliance

corporate culture

corporate social responsibility (CSR)

deontology

ethical relativism ethics goodwill

integrity

long-term perspective

normative ethical theories

shareholder

short-term perspective social contract

stakeholders

stockholder

utilitarianism

virtue theory

Key Terms the conduct by which companies and their agents abide by the law and respect the rights of

their stakeholders, particularly their customers, clients, employees, and the surrounding community and environment

the extent to which a company conducts its business operations in accordance with applicable regulation and statutes

the shared beliefs, values, and behaviors that create the organizational context within which employees and managers interact

the practice in which a business views itself within a broader context, as a member of society with certain implicit social obligations and responsibility for its own effects on environmental and social well-being

a normative ethical theory suggesting that an ethical decision requires us to observe only the rights and duties we owe to others, and, in the context of business, act on the basis of a primary motive to do what is right by all stakeholders

a view that ethics depends entirely upon context the standards of behavior to which we hold ourselves in our personal and professional lives

the value of a business beyond its tangible assets, usually including its reputation, the value of its brand, the attitude of its workforce, and customer relations

the adherence to a code of moral values implying trustworthiness and incorruptibility because there is unity between what we say and what we do

a broad view of profit maximization that recognizes the fact that the impact of a business decision may not manifest for a long time

a group of philosophical theories that describe how people ought to behave on the basis of reason

an individual or institution that owns stock or shares in a corporation, by definition a type of stakeholder; also called stockholder

a focus on the goal of maximizing periodic (i.e., quarterly and annual) profits an implicit agreement among societal members to cooperate for social benefit; when

applied specifically to a business, it suggests a company that responsibly gives back to the society that permits it to incorporate, benefiting the community at the same time that it enriches itself

individuals and entities affected by a business’s decisions, including customers, suppliers, investors, employees, the community, and the environment, among others

an individual or institution that owns stock or shares in a corporation, by definition a type of stakeholder; also called shareholder

a normative theory of ethics suggesting that an ethical act is the one whose consequences create the greatest good for the greatest number of people

a normative theory that focuses on proper conduct guided by the training we received growing up

Summary

1.1 Being a Professional of Integrity

Ethics sets the standards that govern our personal and professional behavior. To conduct business ethically, we must choose to be a professional of integrity. The first steps are to ask ourselves how we define success

Chapter 1 Why Ethics Matter 23

and to understand that integrity calls on us to act in a way that is consistent with our words. There is a distinct difference between legal compliance and ethical responsibility, and the law does not fully address all ethical dilemmas that businesses face. Sound ethical practice meets the company’s culture, mission, or policies above and beyond legal responsibilities. The three normative theories of ethical behavior allow us to apply reason to business decisions as we examine the result (utilitarianism), the means of achieving it (deontology), and whether our choice will help us develop a virtuous character (virtue ethics).

1.2 Ethics and Profitability

A long-term view of business success is critical for accurately measuring profitability. All the company’s stakeholders benefit from managers’ ethical conduct, which also increases a business’s goodwill and, in turn, supports profitability. Customers and clients tend to trust a business that gives evidence of its commitment to a positive long-term impact. By exercising corporate social responsibility, or CSR, a business views itself within a broader context, as a member of society with certain implicit social obligations and responsibility for its own effects on environmental and social well-being.

1.3 Multiple versus Single Ethical Standards

The adoption of a single ethical code is the mark of a professional of integrity and is supported by the reasoned approach of each of the normative theories of business ethics. When we consistently maintain the same values regardless of the context, we are more likely to engender trust among those with whom we interact.

Assessment Questions

1. Which of these concepts relates to utilitarianism? A. consequences B. actions C. character D. duty

2. True or false? According to the Greek system of logic introduced by Socrates, normative ethical theories ultimately are grounded in reason.

3. Explain why ethical responsibilities go beyond legal compliance.

4. Describe the difference between normative and descriptive ethical theories.

5. Which of the following is not a stakeholder? A. the media B. corporate culture C. the environment D. customers

6. True or false? According to Milton Friedman, a company’s social responsibility consists solely of bettering the welfare of society.

7. What is corporate social responsibility (CSR)?

8. Describe a practical way to prioritize the claims of stakeholders.

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9. Describe how a company’s ethical business practices affect its goodwill.

10. True or false? Family is generally a strong influence on our ethical standards.

11. Which normative ethical theory supports the idea of holding multiple ethical standards? A. deontology B. utilitarianism C. virtue ethics D. none of the above

12. Describe the benefits of having a single ethical standard.

Endnotes 1. Ikujiro Nonaka and Hirotaka Takeuchi, “The Big Idea: The Wise Leader,” Harvard Business Review, May 2011. https://hbr.org/2011/05/the-

big-idea-the-wise-leader. 2. Jia Lynn Yang, “Maximizing Shareholder Value: The Goal That Changed Corporate America,” Washington Post, August 26, 2013.

https://www.washingtonpost.com/business/economy/maximizing-shareholder-value-the-goal-that-changed-corporate-america/2013/08/ 26/26e9ca8e-ed74-11e2-9008-61e94a7ea20d_story.html?utm_term=.524082979f63.

3. David Kocieniewski, “Whistle-blower Awarded 104 Million by IRS,” New York Times, September 11, 2012. http://www.nytimes.com/2012/09/ 12/business/whistle-blower-awarded-104-million-by-irs.html.

4. Jeffrey Liker, The Toyota Way: Fourteen Management Principles from the World’s Greatest Manufacturer (New York: McGraw-Hill, 2005). 5. Zameena Mejia and Margaret Ward, “Warren Buffett Says This One Investment ‘Supersedes All Others,’” CNBC Make It, October 4, 2017.

https://www.cnbc.com/2017/10/04/warren-buffett-says-this-one-investment-supersedes-all-others.html. 6. Laurence A. Cunningham, “The Philosophy of Warren E. Buffett,” New York Times, May 1, 2015. https://www.nytimes.com/2015/05/02/

business/dealbook/the-philosophy-of-warren-e-buffett.html. 7. Laurence A. Cunningham, “The Philosophy of Warren E. Buffett,” New York Times, May 1, 2015. https://www.nytimes.com/2015/05/02/

business/dealbook/the-philosophy-of-warren-e-buffett.html. 8. Peter Georgescu, “Doing the Right Thing Is Just Profitable,” Forbes, July 26, 2017. https://www.forbes.com/sites/petergeorgescu/2017/07/

26/doing-the-right-thing-is-just-profitable/#360853967488. 9. Tyler Durden, “Massive Data Breach At Equifax: As Many As 143 Million Social Security Numbers Hacked,” Zero Hedge, September 7, 2017.

http://www.zerohedge.com/news/2017-09-07/massive-data-breach-equifax-many-143-million-social-security-numbers-hacked. 10. Arezou Naeini, Auditee Dutt, James Angus, Sarkis Mardirossian, and Sebastian Bonfanti, “A Shoe for a Shoe, and a Smile,” Business Today,

June 7, 2015. http://www.businesstoday.in/magazine/lbs-case-study/toms-shoes-shoes-for-free-cause-marketing-strategy-case-study/ story/219444.html; TOMS.com, Giving shoes, https://www.toms.com/what-we-give-shoes.

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Chapter Outline

2.1 The Concept of Ethical Business in Ancient Athens 2.2 Ethical Advice for Nobles and Civil Servants in Ancient China 2.3 Comparing the Virtue Ethics of East and West 2.4 Utilitarianism: The Greatest Good for the Greatest Number 2.5 Deontology: Ethics as Duty 2.6 A Theory of Justice

Introduction From the time of barter to the age of bitcoin, most people engaged in business transactions have sought trust. Without trust, which is a fundamental outcome of ethical behavior, not just business relationships but all relationships would collapse. To develop insight into our own concepts of ethics, this chapter looks at how ethical systems have developed over time, beginning with the distinction between ethics and the law.

Ethics are the standards of behavior to which we hold ourselves accountable in our personal and professional lives. Laws and regulations set the minimal standards by which society lives out those ethical norms. Because laws are minimal standards, it is not uncommon for an act to be legal but generally deemed unethical. The fact is that law and ethics are not always the same. Always, however, they are in dialogue, and each informs the other. The greatest challenge in business decision-making is moving beyond the letter of the law to create a culture of ethics (Figure 2.1).

Can you identify a moment in your life when it was hard to follow your conscience, or your personal morality

Figure 2.1 Their accuracy and practical use in the marketplace made scales, held aloft here by the figure of Justice in Bruges, Belgium, a common symbol in jurisprudence and law in the East and the West. Even today, the concept of counterbalancing different ideas and philosophies underlies many approaches to the law and ethics. (credit: modification of “Golden Lady Justice” by Emmanuel Huybrechts/Flickr, CC BY 2.0)

2 Ethics from Antiquity to the Present

conflicted with societal norms? What was the nature of the conflict, and how did you approach it?

2.1 The Concept of Ethical Business in Ancient Athens Learning Objectives

By the end of this section, you will be able to:

• Identify the role of ethics in ancient Athens • Explain how Aristotelian virtue ethics affected business practices

It would be hard to overstate the influence of ancient Athens on Western civilization. Athenian achievements in the arts, literature, and government have molded Western consciousness. Perennial themes, such as the search for individual identity and each person’s place in the world, appear in countless novels and Hollywood screenplays. The role of Athenian ethical theories in philosophy has been profound, and Athenian principles continue to be influential in contemporary philosophy. Ethics, as a form of applied philosophy, was a major focus among the leaders of ancient Athens, particularly teachers like Socrates, Plato, and Aristotle. They taught that ethics was not merely what someone did but who someone was. Ethics was a function of being and, as the guiding principle for dealings with others, it naturally applied as well to the sensitive areas of money and commerce.

Ancient Athens Like a modern metropolis, the city-state (polis) of Athens in the fifth century BCE drew people from far afield who wanted a better life. For some, that life meant engaging in trade and commerce, thanks to the openness of the new democracy established under the lawgiver Cleisthenes in 508 BCE. Others were drawn to Athens’ incredibly rich architecture, poetry, drama, religious practices, politics, and schools of philosophy. Youth traveled there hoping to study with such brilliant teachers as the mathematicians Archimedes and Pythagoras; dramatists like Sophocles and Euripides; historians Herodotus and Thucydides; Hippocrates, the father of medicine; and, of course, the renowned but enigmatic philosopher Socrates. More than being the equivalent of rock stars of their day, these thinkers, scholars, and artists challenged youth to pursue truth, no matter the cost to themselves or their personal ambitions. These leaders were interested not in fame or even in personal development but in the creation of an ideal society. This was the Golden Age of ancient Greece, whose achievements were so profound and enduring that they have formed the pillars of Western civilization for nearly two and a half millennia.

Philosophy, in particular, flourished during the Golden Age, with various schools of thought attempting to make sense of the natural and human worlds. The human world was thought to be grounded in the natural world but to transcend it in striking ways, the most obvious being humans use of reason and deliberation. Philosophers like Socrates, Plato, and Aristotle tackled fundamental questions of human existence with such insight that their ideas have remained relevant and universal even at the dawn of artificial intelligence. As British mathematician and philosopher Alfred North Whitehead (1861–1947) observed, “the safest general characterization of the European philosophical tradition is that it consists of a series of footnotes to Plato.”1

Why are the insights of these Greek philosophers still relevant today? One reason is their development of the ancient concept of virtue. The person most closely associated with virtue in the West, and the development of what is now known as virtue ethics—that is, an ethical system based upon the exercise of certain virtues (loyalty, honor, courage) emphasizing the formation of character—is Plato’s famous pupil Aristotle (384–322 BCE) (Figure 2.2).

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Figure 2.2 Nicomachean Ethics, by the ancient Greek philosopher Aristotle (a), is a rough collection of Aristotle’s lecture notes to his students on how to live the virtuous life and achieve happiness; it is the oldest surviving treatment of ethics in the West. The collection was possibly named after Aristotle’s son. This 1566 edition (b) was printed in both Greek and Latin. (credit a: modification of “Aristotle Altemps Inv8575” by “Jastrow”/Wikimedia Commons, Public Domain; credit b: modification of “Aristotelis De Moribus ad Nicomachum” by "Aavindraa"/Wikimedia Commons, Public Domain)

Aristotelian Virtue Ethics For Aristotle, everything that exists has a purpose, or end, and has been designed to meet that end. For instance, the proper end of birds is to fly, that of fish to swim. Birds and fish have been designed with the appropriate means (feathers, fins) to achieve those ends. Teleology, from the Greek telos meaning goal or aim, is the study of ends and the means directed toward those ends. What is the telos of human beings? Aristotle believed it to be eudaimonia, or happiness. By this, he did not mean happiness in a superficial sense, such as having fun or being content. Rather, he equated happiness with human flourishing, which he believed could be attained through the exercise of the function that distinguishes humans from the natural world: reason.2

For Aristotle, reason was supreme and best used to increase not wealth but character. “But what is happiness?” he asked. “If we consider what the function of man is, we find that happiness is a virtuous activity of the soul.”3

However, because humans are endowed not only with reason but also with the capacity to act in an honorable and ethical manner, they may reject their end, either intentionally or by default. The great task of life, then, is to recognize and pursue happiness, no matter the constraints placed on the individual, the most dramatic of which are suffering and death. Birds and fish have little difficulty achieving their ends, and we can assume that much of this is due to their genetic coding. Because happiness might not be genetically encoded in human beings, they must learn how to be happy. How do they do that? According to Aristotle, eudaimonia is achieved by leading a virtuous life, which is attained over time. “Happiness is a kind of activity; and an activity clearly is developed and is not a piece of property already in one’s possession.”4

Aristotle identified two types of virtues, which the philosophical community of his day agreed were objective and not subjective. The two types were intellectual and moral. Intellectual virtues—including knowledge (epistḗmē), wisdom (sophíā), and, most importantly for Aristotle, prudence (phrónēsis), or practical wisdom—served as guides to behavior; that is, a person acted prudently based on the wisdom gained over

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time through the ongoing acquisition and testing of knowledge. To give an oversimplified but practical application of Aristotelian thinking, a hiring manager acts prudently when assessing a pool of candidates based on knowledge of their backgrounds and on insight gained after years of working in that role. The manager may even use intuitive reason regarding a candidate, which Aristotle believed was another way of arriving at truth. Understood in this way, the manager’s intuition is an impression regarding character and someone’s potential fit in an organization. Among the intellectual virtues, prudence played the major role because it helped individuals avoid excess and deficiency and arrive at the golden mean between the two. Prudence has been translated as “common sense” and “practical wisdom” and helps individuals make the right decision in the right way at the right time for the right reason. In Aristotle’s view, only the truly prudent person could possess all the moral virtues.

The distinction Aristotle made is that the intellectual virtues are acquired purely through learning, whereas the moral virtues are acquired through practice and the development of habits. In contrast to the intellectual virtues, which focused on external acts, the moral virtues had to do with character. They included courage, self-control, liberality, magnificence, honor, patience, and amiability. Some of these virtues had different meanings in ancient Greece than they do today. “Liberal,” for instance, referred not to a political or economic stance but rather to an aspect of personality. Someone would be considered liberal who was open and sharing of him- or herself and his or her talents without fear of rejection or expectation of reciprocity. The paragon of these virtues was the magnanimous individual, someone for whom fame and wealth held little attraction.5 This person had self-knowledge; was not rash, quick to anger, or submissive to others; and acted with self-respect, control, and prudence. The magnanimous individual achieved happiness by leading a life characterized by reason and will. He or she remained in control of self and did not hand over his or her authority—or moral agency—to others, whether in judgment or in decision-making. “So, magnanimity seems to be a sort of crown of the virtues, because it enhances them and is never found apart from them. This makes it hard to be truly magnanimous, because it is impossible without all-round excellence,” according to Aristotle.6

The relationship between the intellectual and the moral virtues was not as clear cut as it may appear, however, because Aristotle believed that action preceded character. In other words, the primary way to change character was through consistent, intentional behavior in the direction of virtue. Aristotle gave the example of courage. A person was not courageous first and then went about performing acts of courage. Rather, courage resulted from incremental change, small steps taken over time that molded the person’s character. It relied on a recognition of justice, so that courage was directed toward the right end. The important task was developing the habit of leading the virtuous life. Anyone could do this; however, it was a discipline that had to be learned and practiced with dedication. We can see that this habit of virtue is especially relevant for business today, when the temptation to conform to an established organizational culture is overwhelming even when that culture may permit and even encourage questionable practices. Add the seductive power of money, and anyone’s courage might be tested.

The most notable feature of virtue ethics is that it viewed the basic ethical unit—the fundamental agent of morality—as the individual, who lived out his or her worldview publicly. A life of virtue, therefore, took place in the economic and political spheres so that others might participate in and benefit from it. In Athenian society, it was important for business to be conducted competently and ethically. Even though Aristotle was suspicious of business, he acknowledged its importance in preserving and nurturing Athenian democracy. He also praised the creation of money to further the goal of justice, so that a shoemaker and a housebuilder, for instance, could trade their wares on an equal basis. Virtue in the marketplace was demonstrated through ethical behavior, according to Aristotle: “People do in fact seek their own good, and think that they are right to act in this way. It is from this belief that the notion has arisen that such people are prudent. Presumably, however, it is impossible to secure one’s own good independently of domestic and political science.”7 This

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belief in the public nature of virtue was crucial for the flourishing of the city-state and also has implications for contemporary business, which must consider the individual, organization, industry, and society in its development and planning.

E T H I C S A C R O S S T I M E A N D C U LT U R E S

Athenian Democracy Just as time and place influence people’s perception of ethics, so is their understanding of democracy also subjective.

You might be surprised to learn the Athenian version of democracy was significantly different from our own. For instance, although the word “democracy” comes from the Greek for people (dêmos) and power (krátos), only adult men who owned property could vote, and voting was direct; Athens was not a republic with elected representatives, like the United States. Resident aliens, or metics—those who change their home—were not eligible for citizenship and could not vote. They had limited rights and their status was second class, although this did not stop many of them from attaining wealth and fame. They were often among the best artisans, craftspeople, and merchants in the city-state. Metics were able to conduct business in the marketplace (agora) provided they paid special taxes yearly. One of the most famous was Aristotle, who was born outside Athens in northern Greece.

Women, even those who were citizens, were not allowed to vote and had limited rights when it came to property and inheritance. Their primary function in Athenian society was the care and management of the home. “The Athenian woman must be the perfect Penelope—a partner to the husband, a guard of the house, and one who practices the virtues defined by her husband. Physical beauty was not to be a goal, nor was it even a primary valued attribute. Total dedication to the welfare of husband, children, and household was the ultimate virtue”8 (Figure 2.3).

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Figure 2.3 Penelope and Odysseus in a scene from Homer’s Odyssey, as depicted in 1802 by the German painter Johann Tischbein. For the ancient Greeks, Penelope represented all the virtues of a loving, dutiful partner. She remained faithful to her husband Odysseus despite his absence of some twenty years during and after the Trojan War. (credit: “Odysseus and Penelope” by H. R. Wacker and James Steakley/Wikimedia Commons, Public Domain)

Finally, not all transactions were as straightforward as selling Egyptian linen, dried fruit, or spices. Slave traders, too, brought their “wares” to market. Slavery was a customary part of many cultures throughout the ancient world, from Persia to Arabia and Africa and China. In Athens and its surrounding area, it is estimated that during the Golden Age (fifth century BCE) there were 21,000 citizens, 10,000 metics (non- native Athenians who still shared some of the benefits of citizenship), and 400,000 slaves.9 Despite the Athenian emphasis on virtue and honor, there was little or no objection to owning slaves, because they formed an indispensable part of the economy, providing the labor for agriculture and food production.

Slavery persists even today. For instance, it is believed that nearly thirty million people worldwide are living and working as slaves, including three million in China and fourteen million in India.10 Servitude also exists for migrant workers forced to live and work in inhuman conditions without recourse to legal help or even the basic necessities of life. Such conditions occur in industries as diverse as commercial fishing in Southeast Asia and construction in Qatar.11

Critical Thinking

• Consider how democracy has expanded since the Golden Age of Greece, eventually including universal suffrage and fundamental rights for everyone. Although we try not to judge cultures today as having right or wrong practices, we often judge earlier cultures and civilizations. How might you assess a practice like slavery in antiquity without imposing modern values on a civilization that existed more than two and a half millennia ago?