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Copyright

James Fieser

Introduction to Business Ethics, Second Edition

Editor in Chief, AVP: Steve Wainwright

Sponsoring Editor: Christina Ganim

Development Editor: Shannon LeMay-Finn and Dan Moneypenny

Assistant Editor: Teresa Bdzil

Editorial Assistant: Julie Mashburn

Production Editor: Catherine Morris

Media Editor: Laura Scott

Cover Design: Ryan Fleetwood

Printing Services: Bordeaux

Production Services: Lachina

Permission Editor: Karen Ehrmann

Cover Image: (top left) DigitalVision/Thinkstock; (top right) Stock Connection/Superstock; (bottom left) iStock/Thinkstock; (bottom right) iStock/Thinkstock

ISBN-13: 978-1-62178-252-0 Copyright © 2015 Bridgepoint Education, Inc. All rights reserved.

GRANT OF PERMISSION TO PRINT: The copyright owner of this material hereby grants the holder of this publication the right to print these materials for personal use. The holder of this material may print the materials herein for personal use only. Any print, reprint, reproduction or distribution of these materials for commercial use without the express written consent of the copyright owner constitutes a violation of the U.S. Copyright Act, 17 U.S.C. §§ 101-810, as amended.

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About the Author

Dr. James Fieser is a professor of philosophy at the University of Tennessee at Martin. He received his B.A. from Berea College and his M.A. and Ph.D. in philosophy from Purdue University. He is author, co-author, or editor of ten textbooks, including Ethics: Discovering Right and Wrong (8/e 2016), Business Ethics (2/e 2016), Philosophy: A Historical Survey with Essential Readings (9/e 2014), Scriptures of the World’s Religions (5/e 2014), A Historical Introduction to Philosophy (2003), and Moral Philosophy through the Ages (2001). He has edited and annotated the ten-volume Early Responses to Hume (2/e 2005) and the dive-volume Scottish Common Sense Philosophy (2000). He is the founder and general editor of the Internet Encyclopedia of Philosophy web site (www.iep.utm.edu (http://www.iep.utm.edu) ). His personal website can be accessed at www.utm.edu/staff/jNieser (http://www.utm.edu/staff/jNieser) .

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Acknowledgments

The author would like to express his gratitude to Alexander Moseley, who helped author much of the original material in the dirst edition of this book. Special thanks are also due to Christina Ganim, Executive Editor; Shannon LeMay-Finn and Dan Moneypenny, development editors; Teresa Bdzil, assistant editor; Julie Mashburn, editorial assistant; Catherine Morris, production editor; Laura Scott, media editor; and the rest of the gifted editorial staff at Bridgepoint for their expertise and good nature throughout the production of this new edition.

The author and publisher would also like to thank the following reviewers, as well as other anonymous reviewers, for their valuable feedback and insight about this edition:

Jeffrey Bowe, Catawba College William Brown, Marist College Kenneth Clapp, Catawba College Edward Fubara, Campbell University Lindsey Gibson, Hawaii Pacidic University Marcus Goncalves, Nichols College

Justin Harrison, Ashford University Kimberly Horton, Ashford University Suzanne Humphrey, Ashford University Michael Papazian, Berry College Melodie Toby, Kean University

Roger Ward, Georgetown College Gloria Zúñiga y Postigo, Ashford University

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Preface

Businesses are among the most important institutions that we have. They make our lives easier with products that we could never construct on our own. They give us jobs that help dedine who we are as people. And, more generally, they push society forward through cultural advancement.

However, there is a sinister side to the business world, where a company may do anything in its power, moral or immoral, to beat the competition and make prodits. The insatiable drive for money fuels society’s progress yet, at the same time, oppresses workers, misleads consumers, destroys the environment, and cannibalizes the very economy that gives it life. By ignoring its good, we fail to give credit to the driving force that pulled humans out of the Stone Age. But by ignoring its bad, we unleash a conscienceless predator upon society. This is a real-life drama that we all witness and participate in as workers, consumers, and entrepreneurs. The task of business ethics is to understand that drama and suggest ways to maximize the good and minimize the bad.

Discussions of business ethics are exceptionally varied. Some approaches are theoretical and explore the nature of ethical obligation, human greed, and the limits of economic freedom. Other business ethics inquiries are more concrete and attempt to itemize and describe the numerous types of questionable business practices that have outraged society. These include deceptive advertising, price dixing, and unsafe working conditions, just to name a few. In many ways, the heart of business ethics involves identifying and describing the most common unethical practices. By knowing concretely what these various areas of concern are, we may be more alert to abuses when we enter into those territories on the job.

Still other discussions of business ethics emphasize specidic cases in which businesses have notoriously gone astray, such as the Union Carbide chemical plant explosion in India, the Exxon Valdez oil spill in Alaska, and the Enron dinancial collapse. We learn by example, and when we see dramatic instances of corporate moral failure, the stories stick with us.

Finally, there are business ethics discussions that offer practical advice for avoiding unethical business decisions. For example, we might learn that apathy toward society promotes governmental intervention, or that heavy pressure from top management to meet performance goals sets a climate for illegal action. The practice of drawing a moral conclusion at the close of a business ethics discussion is itself a skill that everyone in business can and should learn. Here is an area of corporate abuse: What can we learn from it to help us avoid going down that path?

This book adopts all of these approaches. The dirst three chapters are more theoretical, establishing a broad framework of ethical and social concepts. Specidically, they deal with ethical principles, capitalism, and the corporation. The three next chapters focus on business issues that affect people individually: specidically, as consumers, as minorities who might face discrimination, and as workers. From here, the scope broadens to include internal practices of dinance, including accounting and investing. The scope then widens further with chapters on multinationals, the environment, and investments.

Throughout this book, the discussions redlect an appreciation of the free market system: what it has done to advance both the personal lives of people and civilization as a whole. At the same time, it exposes how unethical business practices can transform a benedicial social institution into one that can potentially cause great harm and human suffering. As ethical people, we must respect the rights and dignity of those around us, and this is the fundamental moral lesson that children learn from their parents from the start. As ethical business people, we must continue that lesson regarding how we treat consumers, coworkers, and society at large. That, ultimately, is what it takes for a business to be ethical.

To be sure, many business ethics issues covered in this book are hotly debated, such as the nature of capitalism, corporate personhood, and worker’s rights. However, these debates teach us that some of our most important social and economic values may not be as dirmly established as we might think, and we must show respect toward those on the opposite side of the issue. We cannot be good business colleagues—or good citizens for that matter—if we are contentious on value issues where reasonable people may disagree.

This newly revised second edition substantially updates each of the book’s ten chapters. As with most textbook revisions, the inclusion of new material in this edition required the deletion of a comparable amount of previously existing material. Among the most noticeable changes in this edition are the following:

Each chapter now includes a lengthy case study on an important topic.

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Most of Chapter 6, “Employees,” has been rewritten. Dozens of older business ethics examples have been updated or replaced with newer ones. Additional “What Would You Do” features have been added throughout the book. New photos and digures have been included.

In addition to these, minor changes have been made throughout for claridication and ease of reading.

Textbook Overview and Features

An Introduction to Business Ethics, Second Edition includes a number of features to help students understand key concepts and think critically about the material:

Business ethics case studies that provide an in-depth look at real-world scenarios appear at the end of each chapter. Videos and critical thinking questions that further illustrate important concepts are embedded throughout the eBook.

“What Would You Do?” features present example situations and critical thinking questions that encourage readers to further consider the role of ethical decision making in business. Interactive resources include situational examples that give readers an opportunity to redlect upon ethical dilemmas and consider possible options.

Learning objectives at the beginning of each chapter identify what the reader should be able to do after completing each chapter. They provide a guide for important elements of each chapter and serve as a teaching tool for the instructor. Chapter summaries provide a brief review of the primary concepts in each chapter. Discussion questions at the end of each chapter provide thought-provoking questions relevant to the reading. Key terms appear in bold in each chapter and are also listed at the end of the chapter and in the glossary.

Accessible Anywhere. Anytime.

With Constellation, faculty and students have full access to eTextbooks at their dingertips. The eTextbooks are instantly accessible on web, mobile, and tablet.

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To download the Constellation iPhone or iPad app, go to the App Store on your device, search for "Constellation for Ashford University," and download the free application. You may log in to the application with the same username and password used to access Constellation on the web.

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Android Tablet and Phone

To download the Constellation Android app, go to the Google Play Store on your Android Device, search for "Constellation for Ashford University," and download the free application. You may log in to the Android application with the same username and password used to access Constellation on the web.

NOTE: You will need a tablet or phone running Android version 2.3 (Gingerbread) or higher.

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1 Ethical Principles and Business Decisions

Learning Objectives

After reading this chapter, you should be able to:

Describe moral objectivism, moral relativism, and divine command theory.

Wavebreak Media/Thinkstock

Explain the theories of moral psychology, including psychological egoism, psychological altruism, and the relation between gender and morality.

Explain how virtue theory, duty theory, and utilitarianism provide standards of morality.

Describe the relation between morality and government in social contract theory, human rights theory, and the four principles of governmental coercion.

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Introduction

National surveys are routinely conducted to reveal public attitudes about various professions; some jobs have higher moral reputations than others. One poll asked people to rate the honesty and ethical standards of people in different dields. The results of the survey are shown in Figure 1.1.

It is important to understand that these survey results only report people’s perceptions of professional ethical behavior and are not evaluations of actual professional behavior. But business is an area where perception is often everything, and businesspeople in advertising and public relations certainly know this. Figure 1.1 shows a clear pattern: The highest- ranking professions involve helping people, and nurses, who are at the very top, are clear examples. Among the lowest- ranking occupations are those associated with the business world: bankers, business executives, advertisers, and, near the very bottom, car salespeople.

What is it that makes us have such low opinions of the moral integrity of the business world? Part of it may be that, in contrast with nurses, businesses have the reputation of caring only for themselves and not for others. Part of it may also be that the competitive nature of business pushes even the most decent of people to put prodits above responsibility to the public. Businesses, of course, respond to these negative perceptions in creative ways. For example, Costco, Walgreens, Kroger, and other retailers now provide inexpensive dlu shots to customers. This performs a genuine social service and at the same time bolsters their ethical reputation by reinforcing their link with health care.

Figure 1.1: Perceptions of ethical professions, 2014

Numbers indicate the percentage of those surveyed who ranked the respective vocations very high in terms of honesty and ethical standards. Of the 805 adults surveyed, 80% rate nurses highest.

Source: Based on RifIkin, R. (2014). Americans rate nurses highest on honesty, ethical standards. Gallup. Retrieved from

http://www.gallup.com/poll/180260/americans-rate-nurses-highest-honesty-ethical-standards.aspx (http://www.gallup.com/poll/180260/americans-rate-nurses-highest-honesty-ethical-standards.aspx)

The concept of business ethics is by no means new; in fact, some of the earliest written documents in human civilization wrestle with these issues. The Mesopotamian Code of Hammurabi, from almost 4,000 years ago, had this to say about the responsibility of building contractors:

If a builder builds a house for someone, even though he has not yet completed it, if then the walls seem toppling, the builder must make the walls solid from his own means. . . . If a shipbuilder builds a boat for someone, and

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does not make it tight, if during that same year that boat is sent away and leaks, the shipbuilder shall take the boat apart and put it together tight at his own expense. (King, n.d., sections 233 and 235)

This book is devoted to understanding the ethical challenges that businesses face and what can be done to meet those challenges. In this chapter, we will explore several basic and time-tested principles of morality. Ethical theory is a complex dield of study, and, within the limited space of this chapter, we can only introduce some of the main principles, illustrating them with examples from the dield of business.

Some of history’s greatest minds have redlected on the nature of morality and devised theories of where morality comes from and how moral principles should guide our conduct. As we examine these theories, several will be associated with famous digures like Plato, Aristotle, Kant, and Mill. Although these thinkers may have provided the classic expressions of these concepts, in many cases they did not invent them, nor did they single-handedly integrate them into notions of morality. We dind these principles important today because each redlects a way that we naturally think about moral issues. This chapter provides not just a lesson in the history of ethics but an examination of the features that we currently believe are relevant to ethical behavior.

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1.1 Where Moral Values Come From

A good dedinition of ethics is that it is an organized analysis of values relating to human conduct, with respect to an action’s rightness and wrongness. Ethics is not the same as etiquette, which merely involves customary codes of polite behavior, such as how we greet people and how we seat guests at a table. The issue in ethics is not what is polite, but what is obligatory. Ethics is closely related to morality, and although some ethicists make subtle distinctions between the two, they are more often used interchangeably, as will be done throughout this book.

One of the most basic ethical issues involves understanding where our moral values come from. Consider the moral mandates that we should not kill or steal, which most of us adopt. If I asked you where you got those values, you’d likely answer that they were passed on to you from your parents, friends, teachers, and religious institutions. Indeed, we are all products of our surroundings: If you hunt, you probably do so because your parents do; if you like country music, that may also be because of your parents. However, when it comes to understanding why we have values like “we should not kill or steal,” we need to examine not just our immediate social indluences but also ask where society itself got those principles. Are these universal and unchanging truths that are somehow embedded in the fabric of the universe, or are they changeable guidelines that we humans have created ourselves to suit our needs of the moment?

The question of where our moral values come from often involves two issues: The dirst is a debate between objectivism and relativism, and the second concerns the relation between morality and religion. Let’s look at each of these.

Moral Objectivism and Moral Relativism

Some years ago, the Lockheed Corporation was caught offering a quarter of a billion dollars in bribes overseas. A major U.S. defense contractor, Lockheed had fallen on economic hard times. The U.S. government commissioned the company to design a hybrid aircraft, but after one crashed, the government canceled orders. Because of this and other mishaps, Lockheed believed that the solution to its dinancial woes was to expand its aircraft sales into foreign countries. In order to get military aircraft contracts with foreign governments, it made a series of payoffs to middlemen who had political indluence in West Germany, Japan, Saudi Arabia, and several other countries. The company was eventually caught and punished with a heavy dine, and its chairman and president were forced to resign.

A consequence of this event was the creation of the U.S. Foreign Corrupt Practices Act, which includes an anti-bribery provision that involves stiff dines and prison terms for offenders. The message of the law is that, when in Rome, you should not do as the Romans do. There are overarching standards of ethical conduct that businesses are expected to follow, regardless of where they are in the world and what the local business practices are there.

When Lockheed engaged in systematic bribery, did it violate a universal standard of morality that is binding on all human societies, or did it just violate a standard of morality that is merely our personal preference in the United States? On the one side of this question is the theory of moral objectivism, which, in its classic form, has three key components:

1. Morality is objective: Moral standards are not created by human beings nor by human societies. According to many objectivists, they exist in a higher spirit realm that is completely apart from the physical world around us.

2. Moral standards are unchanging: Moral standards are eternal and do not change throughout time or from location to location. No matter where you are in the world or at what point in history, the same principles apply.

3. Moral standards are universal: There is a uniform set of moral standards that is the same for all people, regardless of human differences such as race, gender, wealth, and social standing.

The classic champion of the moral objectivist view is the ancient Greek philosopher Plato (424 BCE–347 BCE), who argued that moral truths exist in a higher level of reality that is spiritual in nature. According to Plato, the universe as a whole is two-tiered. There is the lower physical level that consists of rocks, trees, human bodies, and every other material object that we see around us. All of this is constantly changing, either decaying or morphing into something else. Within this level of the universe, nothing is permanent.

On the other hand, Plato argued, there is a higher level of the universe, which is nonphysical and is the home of eternal truths. He called this the realm of the forms, which are perfect patterns or blueprints for all things. Mathematical principles are good examples. They are completely unchanging and in no way dependent for their existence on the

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changing physical world. Even if the entire physical universe were destroyed and another emerged, the principles of mathematics would remain the same, unchanged.

According to Plato, moral principles are just like mathematical principles in that respect, and they also exist in the higher realm of the forms. Just as the principle that 1 + 1 = 2 exists permanently in this realm, so too do moral principles of goodness, justice, charity, and many others. The greatest appeal of Plato’s theory is that it gives us a sense of moral stability. When someone is murdered, we often believe that an absolute and unchanging moral principle has been violated that goes well beyond the shifting preferences of our particular human community.

On the other side of this issue is the theory of moral relativism, which has three contrasting key features:

1. Morality is not objective: Moral standards are purely human inventions, created by either individual people or human societies.

2. Moral standards are not unchanging: Moral standards change throughout time and from society to society.

3. Moral standards are not universal: Moral standards do not necessarily apply universally to all people, and their

application depends on human preference.

Defenders of moral relativism are typically skeptical about the existence of any higher realm of absolute truth, such as Plato’s realm of the forms. Although notions of eternal moral truths are appealing, the fact is, says the moral relativist, we do not have any direct experience of such higher realms’ existence. What we know for sure is the physical world around us, which contains societies of human beings that are always changing. The moral values that we see throughout these societies are ones that are created by human preference and change throughout history and with geographical location. Simply put, morality is a human creation, not an eternal truth.

Wavebreak Media/Thinkstock

Is stealing something, like a drug, as this nurse is demonstrating, always wrong? Would your answer change if you knew the person stealing the drug needed it for her cancer treatment? What if she were stealing it for her child?

Which is right—moral objectivism or moral relativism? Some philosophical questions are not likely to be answered any time soon, and this is one of them. However, we can take inspiration from both sides of the debate. With the Lockheed bribery incident, the position of the U.S. government was that there is a standard of integrity in business that applies worldwide, not just within U.S. borders. This is a concession to moral objectivism. On the other hand, some business practices are culturally dependent and rest on deeply held moral or religious convictions. In Japan, new businesses typically have an opening ceremony in which a Shinto priest blesses the company building. U.S. companies operating in Japan often follow this practice, and this is a concession to moral relativism.

Religion and Morality

An organization called the Center for Christian Business Ethics Today offers a Christian approach to ethical issues in business. According to the organization, God is the ultimate source of moral values: “God’s standards as set forth in God’s Word, the Bible, transcend while incorporating both the law and ethics” (Center for Christian Business Ethics Today, n.d.). This view is by no means unique, and is in fact part of a long history of efforts to ground morality in some aspect of religion. According to the classic view of religious ethics, true morality does not emerge from human thought processes or human society alone. It begins with God establishing moral truths, instilling moral convictions within human nature, and reinforcing those moral truths through scripture. Religious believers who follow God’s path will be motivated to follow God’s established moral truths, perhaps more so than non-believers who view ethics as a purely human invention. This classic view of religious ethics raises two questions:

1. Is God the creator of moral values?

2. Do religious believers have better access to moral truth than non-believers?

Regarding the dirst question—whether God creates moral values—a position called divine command theory answers

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yes: Moral standards are created by God’s will. In essence, God creates them from nothing, not even basing them on any prior standard of reason or logic. God pronounces them into existence through a pure act of will. There are two challenges that divine command theory faces:

1. It presumes in the dirst place that God exists, and that is an assumption that non-believers would reject from the start. Many religious believers themselves would hold that belief in God is a matter of personal faith, not absolute proof, and so we must be cautious about the kinds of activities that we ascribe to God, such as creating absolute moral truths.

2. The moral standards that God creates would be arbitrary if they were made purely as an act of the will without relying on any prior objective standard of reason. What would prevent God from willfully creating a random set of moral values, which might include principles like “lying is okay” or “stealing is okay”? God could also willfully change his mind about which moral principles he commands. Maybe he could mandate that stealing is wrong on Monday, Wednesday, and Friday, but that stealing is okay during the rest of the week.

Many ethicists throughout history—even ones who were devout religious believers—have rejected divine command theory for this reason. To avoid arbitrariness, it seems that morality would need to be grounded in some stable, rational standard, such as with Plato’s view of absolute moral truths. That is, God would merely endorse these absolute moral truths because they seem rationally compelling to him; he does not literally create them from nothing. If morality, then, is really grounded in preexisting objective truths, then we humans can discover them on our own and do not need to depend on God for our moral knowledge.

Again, the second question raised by the classic view of religious ethics is whether believers have better access to moral truth than non-believers. The answer to this throughout much of history was yes: Religion is an essential motivation for moral conduct. To behave properly, people need to believe that a divine being is watching them and will punish them in the afterlife for immoral conduct. The French moral philosopher Voltaire (1694–1778) famously stated that if God did not exist, it would be necessary to invent him, precisely because moral behavior depends so much on belief in divine judgment (Voltaire, 1770). In more recent times, this position has fallen out of favor, and there is wider acceptance of the view that believers are not necessarily more moral than non-believers.

One reason for this change in attitude is that our society as a whole has become much more secularized than Voltaire’s was, and, from our experience, non-believers do not appear to be particularly bad citizens. Also, it appears that believers fall into the same moral traps as everyone else.

The upshot is that both components of classic religious ethics are difdicult to establish: It is not clear that God creates moral values, assuming that God exists, and it is not clear that believers have a special advantage in following moral rules. It is undeniable that, for many believers, religion is an important source of moral inspiration, and that fact should not be minimized. Undoubtedly, this is true for the above-mentioned members of the Center for Christian Business Ethics Today.

At the same time, however, there are plenty of nonreligious motivations to do the right thing, such as a fear of going to jail, a desire to be accepted by one’s family and friends, or a sense of personal integrity. In the business world there are additional motivations to be moral, such as the desire to avoid lawsuits, costly dines, or tarnishing the company name.

What Would You Do?

One of the consequences of religious ethics in the workplace is the shaping of company policy in ways that sometimes clash with secular social norms. Retail arts and crafts supply chain Hobby Lobby is a case in point. The company, based in Oklahoma City, opposed on religious grounds a Federal government requirement to provide emergency contraception as part of its employee healthcare benedits. Defending his company’s position, company founder and CEO David Green stated; “We’re Christians, and we run our business on Christian principles . . . Being Christians, we don’t pay for drugs that might cause abortions” (Green, 2012). The case went to the Supreme Court, which, in a landmark decision, ruled in favor of the company on the grounds that the Federal law posed a substantial burden on the company’s exercise of religion (Burwell v. Hobby Lobby Stores, Inc., 2014).

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1. Suppose that you were a Supreme Court Justice deciding this case. One factor in the case involved balancing Hobby Lobby’s religious interests against society’s larger interest in allowing women access to emergency contraception. How would this affect your decision as a Supreme Court Justice?

2. One of the issues in this case was whether corporations are entitled to religious freedom in the ways that individuals are. How would this affect your decision as a Supreme Court Justice?

3. In this case, the Supreme Court recognized that its decision in favor of Hobby Lobby could lead to “a host of claims made by litigants seeking a religious exemption” on other religion-related issues. How would that affect your decision as a Supreme Court Justice?

4. Suppose that you are a female cashier at Hobby Lobby and did not share David Green’s religious convictions on the issue of emergency contraception. Would you protest, or quit, or just live with it? Be sure to provide a rationale for your answer.

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1.2 Ethics and Psychology

An important set of ethical issues involves our psychological makeup as human beings. There is no doubt that our personal expectations, desires, and thought processes have an impact on what motivates us to behave morally. Thus, the question of “where does morality come from?” might be at least partially answered by looking at human psychology. In this section, we will look at two central issues of moral psychology: One focuses on our psychological inclination to be seldish, and the other on how gender shapes our moral outlook.

Egoism and Altruism

When Hurricane Sandy pounded the U.S. East Coast, the home improvement company Lowe’s teamed up with the Red Cross to deliver dinancial assistance and disaster relief to stricken areas. Lowe’s CEO stated “Our thoughts are with all the families who have been impacted by this historic storm, and we’re focused on working closely with our partners in the days and months ahead to deliver funding, supplies and volunteer support to the hardest-hit areas. . . . We’re proud to stand by the Red Cross as they continue to respond to the needs of local communities” (Business Wire, 2012).

Some years earlier Lowe’s provided similar disaster relief to areas impacted by Hurricane Katrina. Why does it do this? Is it purely from a sense of goodwill towards those in need, or does the company expect to get some benedit out of it, such as free publicity? We can ask this same kind of question about our conduct as individuals: Are we capable of acting solely for the benedit of others, or do we always act in ways that ultimately benedit ourselves? There are two competing theories that address this question:

Psychological egoism: Human conduct is seldishly motivated and we cannot perform actions from any other motive. Psychological altruism: Human beings are at least occasionally capable of acting seldlessly.

Both of these theories are “psychological” in the sense that they are making claims about what internally motivates human behavior.

Diane Bondareff/ASSOCIATED PRESS

PNizer Consumer Healthcare employees work to rebuild homes damaged by Hurricane Sandy as part of the company's Advil Relief in Action campaign. Do companies act charitably out of a sense of goodwill towards those in need, or do they expect to get some other beneNit out of it?