ETHICS 2

BACHELOR OF COMMERCE DEGREE IN

ACCOUNTING

ETHICS 2

STUDY GUIDE

Copyright © 2017
REGENT Business School
All rights reserved; no part of this book may be reproduced in any form or by any means, including
photocopying machines, without the written permission of the publisher.

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Chapter Title of Section Page

Introduction 2

1 Ethics and Business 6

2 Exploring Authoritative Sources on Ethics 21

3 Ethical Theories: Deontological Approaches 37

4 Ethical Theories: Consequentialist And Virtue Approaches 50

5 Ethical Theories: Justice And Society 61

6 Ethical Theories: Psychological Perspectives 72

7 Managing Ethics in Business : Accountability, 90

responsibility and corporate governance

8 Managing Ethics in Business : Codes of Ethics, and 106

Whistleblowing

9 Ethical Issues In Business : Marketing and Advertising 119

10 Ethical Issues In Business : Global Business World 133

11 Ethical Issues In Business : Sustainable Business and 153

The

Environment
12 Ethical Issues In Business: Technology and Future 170
Business
Bibliography 186

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INTRODUCTION
Greetings and welcome to the Bachelor of Commerce Degree in Accounting Program
and the Ethics 2 module.

In this module we will be working together to try to understand concerns around

business ethics, which, frequently manifest themselves in increasing societal scrutiny
of business activities as these are carried on in government and corporate institutions.
Consideration of business ethics has become entrenched in business, in business
schools, and in wider Southern African society and internationally. There is no denying
the importance of ethics for global corporate future.

Business can no longer limit its focus on issues such as finance and marketing . The
current business scenario of the world presents a depressing array of issues, which
have serious negative effects on business. These include inter alia fraudulent identity
documents, theft of a wide variety , fraud in relation to medical schemes, nepotism,
vast amounts owing to Revenue offices by jet-setting millionaires and billionaires,
unauthorized personal expenses by people occupying top positions this reflecting
basic greed and dishonesty, high consumerism projecting images of unlimited luxury,
avalanche of corporate scandals some of which can even question the legitimacy of
the US being regarded as an economic power over decades. All this indicates the low
priority given to ethical standards in business, to a downward trend in morality and a
steady slipping into moral decay and weakening of human values.

An immense concern for business should be the fact that unethical and immoral
activities are not confined to mafia-type gangsters and drug lords, but such unsavoury
activities also occur in legitimate business organizations and government.

Business worldwide, therefore, faces specific ethical issues and dilemmas around
various omissions and commissions in business activity that involves business
institutions, government and society. Issues of relationships between business and
government, and business and society, constantly arise. There is a marked focus on
moral problems and choices and on the process and nature of moral decision–making.

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Questions arise on the nature of business culture and the role that ethical and
professional codes can play, especially when existing laws and law-enforcement
agencies are perceived to be ineffective.

As we realize that more and more of you are or will be engaged in business at various
levels, it will be very important for you to be equipped with the necessary “tools” for
critical thinking and moral/ethical analysis in order to operate as effectively as possible
in our new democratic environment. To this end, it is hoped that this elective will prove
attractive and valuable to students concerned about business ethics and who wish to
pursue directions that will enable them to deal with ethical issues in business.

Course Overview

The broad areas covered by this module include:

• different conceptions of business as a human activity and the wider historical,
cultural and ethical context in which business takes place;
• ethics, and several major aspects of business ethics from a philosophical
perspective;
• an overview of various approaches, classical and modern, to ethical theory; the
study of the roles of ethics, morality and social responsibility in the business
environment, through a systematic coverage of a wide range of ethical issues and
viewpoints in business;
• reflection on the level of integrity at which one wishes to lead one’s professional
life.

AIMS OF THE MODULE:

In this area of learning you should be able to:

• define and understand concepts of ethics and business ethics;
• increase awareness and understanding of moral issues in the business
environment and recognize and think through ethical issues related to business;
• develop greater awareness and a more holistic understanding of the role and
nature of business activity;

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• examine and evaluate business situations and decisions from an ethical

perspective;
• articulate and defend the ethical dimensions of the decision-making processes in
a business environment;
• identify ways in which values are/can be embedded in business organizations;
understand better the mechanisms in developing a more ethical corporate culture.

Ethical Theory:

In relation to ethical theories and systems you should be able to:

• study classical and modern approaches to business ethics;
• develop knowledge of and describe several theories or systems for ethical
decision-making;
• be able to apply basic ethical theories and moral philosophies in reaching a
decision when faced with an ethical dilemma in the business world;
• critically evaluate the strengths and weaknesses of different ethical theories and
become aware of the benefits and limitations of bringing ethical theory into
managerial decision-making processes;
• describe and discuss the theoretical explanations that govern particular decision-
making choices.

Personal Values:

In relation to this area of learning you should be able to :

• practise self-reflection through associated readings and series of exercises in order
to arrive at a greater awareness of your own moral values and the level of integrity
at which you may wish to lead your professional life;
• become more sensitive to the consequences of your own decisions (and/or those
of others);
• understand the necessity for relying on personal values and how these may be
integrated in business and decision-making roles.

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CORE READINGS FOR THIS MODULE

The major texts for this Module are:

BOATRIGHT, John.R. (2000) Ethics and the Conduct of Business. New

Jersey: Prentice Hall.

CHRYSSIDES, George. D. & KALER. John H. (1993) (C & K) An

Introduction to Business Ethics. London: Chapman & Hall.

DAVIES, Peter. W.F. (ed) (1997) Current Issues In Business Ethics.

London: Routledge.

KING COMMITTEE on CORPORATE GOVERNANCE(2002)

King Report on Corporate Governance for South Africa, Parktown:
Institute of Directors in Southern Africa

ROBINSON, Dave & GARRAT, Chris (1996) Ethics for Beginners.

Cambridge: Icon Books Ltd.

ROUSSOUW, Deon (2002) Business Ethics in Africa. Cape Town : Oxford Press

SHAW, William H.(2002) Business Ethics (4th edition) Bangalore, Thomson

Wadsworth

TREVINO, L.K. & Nelson, K.A. (1992) Managing Business Ethics. USA : John Wiley
& Sons

VELASQUEZ, Manuel. G. (1998) Business Ethics: Concepts and Cases.

New Jersey: Prentice Hall.

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CHAPTER 1

ETHICS & BUSINESS

At the end of this chapter the student should be able to have learnt:

• facilitate the development and awareness of what is/is not ethical

• define ethics and its value for business

• demonstrate perception of the ethical dimension of business

activities

• enhance curiosity and concern about discussing moral problems

openly in the workplace.

Introduction
Many people have reservations on the relevance or necessity of ethics for business
activities. The phrase “business ethics” is often regarded as a contradiction in terms,
especially when one regularly comes across negative publicity about many business
activities. While a rigid position is not advocated, it nevertheless can be argued that
ethics is relevant to business transactions since business does not operate in a
vacuum. Business has its ethics which implies notions of right and wrong and it is
expected of business to behave responsibly. This may be so because of the link
between power and responsibility. Business is a powerful institution and it derives this
power from a kind of social contract between business and society whereby it can
produce and distribute goods and services to society in a responsible manner. If this

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transaction creates harmony, society will be happy to continue to grant business the
“licence to operate”.

(See Appendix 1 for an example of how a business firm may implement its social
responsibility role).

Regrettably, not all business activities make society happy. There is a progressively
growing gap between society’s expectations of how business should behave, and how
it actually conducts its activities. If this trend continues then business tends to lose its
power.

Business as influenced by Society

According to Pratley (1995) society may influence the ethical standards of business
behaviour in three ways:

Unitarian View where the moral beliefs of society as a whole apply fully to business
which itself is seen as a part of that society. Today this coherence and unanimity of
beliefs in any society are replaced by increasing diversity which is exacerbated by
globalisation.

Separatist View: Society influences business through market demands and the law.
If society is not happy about the conduct of business it can simply stop buying, thus
using its consumer power, and/or have laws changed.

Integratist View: A combination of the Unitarian and Separatist views influencing

current issues in business and professional ethics. It is society’s perception that a
more direct influence is needed without discarding market demand and the law.

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? THINK POINT
Which one of these do you consider to be most effective in the modern
Business world?

Why?

Definition of Ethics

The Concise Oxford Dictionary defines ethics as “relating to morals”, “set of principles
of morals”, “rules of conduct”. Most ethics literature in considering ethics as a
philosophical inquiry, use the terms “ethics” and “morals” interchangeably.

Most writers in this field refer to ethics as it reflects beliefs about right and wrong
conduct or questions of moral right, wrong, duty and obligation and moral responsibility
(Beauchamp & Bowie,1983, Shaw & Barry,1989). Charles Powers & David Vogel (in
Chryssides & Kaler,1993:53) define ethics as follows: “…ethics is concerned with
clarifying what constitutes human welfare and the kind of conduct necessary to
promote it.”

? THINK POINT
Take a couple minutes and list FIVE things that come to mind when you hear
the word “ethics”.

Appendices 2 & 3 distinguishes between three major areas of ethics. Our focus will be
mainly on Normative or Prescriptive Ethics and Descriptive Ethics without disregarding
Meta-ethics.

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What Ethics is not

Ethics aside, there are other standards that influence our behaviour and beliefs but
which should not be confused with ethics. Not all rules and standards are part of
morality.

Etiquette and Prudence

Etiquette concerns manners, e.g. when eating one does not speak with one’s mouth
full. This is a breach of etiquette but not a moral wrong like taking money from
someone else’s purse.

Prudence is a rule not necessarily linked to morality, e.g. look both ways before
crossing the street focusing on being prudent not moral.

Professional Codes
Because commitment to high ethical standards and self-regulation are integral to a
profession, most professional groups have developed codes of ethics to which their
members are generally required to subscribe, e.g. physicians’ Hippocratic Oath and
codes of conduct of various other professions, e.g. Accounting, Social Work, Law, etc.

There is a fine line between professional codes and ethics. According to Weiss
(1993:128) professional codes are a necessary but not sufficient means of assisting
professionals with managing moral conduct. Boylan (1995:21-28) suggests that codes
of ethics may have similarities, differences, may not necessarily be connected with
ethics nor be very effective in a broad ethical sense, but may yet be perceived as an
important tool for fostering ethical conduct. However, professional codes need to be
critically assessed in order to avoid compromising own personal and/or organizational
values and principles.

The Law
Law is a body of enacted or customary rules, ideas, beliefs and moral values
recognized by society as binding. Law and ethics are not identical but they can

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coincide, e.g. laws that prohibit murder, rape, theft, fraud, etc. also violate moral
standards. Just as one has an obligation to be moral one also has to obey such laws.

Law and morality do not necessarily coincide. Some laws have nothing to do with
morality, e.g. parking laws. There are laws that actually violate moral standards and
are obviously unethical, e.g. S.A. Apartheid laws, American Slavery laws, Nazi
Germany’s Anti-Semitic codes, etc. There is no case for simply following such laws.

However, ethics is not completely unrelated to law.

If people feel strongly enough that a moral standard should be enforced by the
pressure of a legal system then moral standards should be incorporated into the law.
In South Africa there are laws for the prevention of organised crime, domestic violence
etc.

On the other hand, laws may sometimes be criticized and eliminated when it becomes
obvious that they blatantly violate moral standards, e.g. the diverse laws of the
apartheid era that were considered morally wrong as they applied in most areas of
South African life and were either repealed or replaced.

Morality, therefore, shapes and influences many laws which we have the moral
obligation to obey as long as they do not clearly require of us to behave unjustly. One
can say, therefore, that in most cases it is morally wrong to break the law. However,
serious conflicts can be created when one is obliged to obey certain laws that a large
number of people regard as morally wrong, e.g. laws pertaining to the death penalty.

(See also Appendix 4)

The error of equating ‘unethical’ and ‘illegal’ and ‘ethical’ and ‘legal’ can produce
serious confusion since not everything that is immoral is illegal nor are all legal matters
ethically objectionable. Even if an act is not illegal it does not make it morally right.

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ACTIVITY 1a
Fill in the four boxes below with examples relating to business
activity.
LEGALITY
Legal Illegal

Ethical

Ethicality
Unethical

The Nature of Business

Business is an institution that has an “economic” character and has a great deal of
influence within society. It exists to achieve two primary ends: production of goods and
services that society wants and needs, and distribution of goods and services to
various members of society.

Definition of Business Ethics

Velasquez’s (1998:13) definition includes the following broad concepts: Business

ethics is a specialized study of moral right and wrong, concentrating on moral
standards as they apply to systems and organizations through which modern societies
produce and distribute goods and services, and to the people who work within these
organizations.

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In this way it includes business policies, institutions and behaviour. Business ethics is
a process of rationally evaluating moral standards and applying them to business
situations.

Weiss (1998:7) cites Laura Nash (1990:5) as pointing out that business ethics “…is
not a separate moral standard, but the study of how the business context poses its
own unique problems for the moral person who acts as an agent of this system.”

Since business ethics operates at multiple levels and from different perspectives, it
presents complexities.

Why Business Ethics?

Major Arguments Against Business Ethics (Velasquez,1998:35-37)

Persons involved in business should single-handedly pursue the financial interests of

their firms and not side-track their energies or their firm’s resources into “doing good
works”.

To support this argument it has been put forward that in perfectly competitive free
markets the pursuit of profits itself ensures that society is served in the socially most
beneficial ways.

Counter-argument: Are there such things as “perfectly competitive markets”? Are

ways in which profits are increased always socially beneficial? Is it possible that they
can injure society? What about the poor and disadvantaged who cannot afford to
participate in the marketplace?

To be ethical: it is sufficient to obey the law.

Counter-argument: Is it always right to see law and ethics as identical? (See earlier
notes on What Ethics is Not)

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Case for Ethics in Business (Velasquez,1998:38-43)

Ethics should govern all voluntary human activities; business is a voluntary human
activity; therefore ethics should also govern business

Everyone involved in business together with the surrounding community should

adhere to some minimal standards of ethics.

Ethical considerations are consistent with the pursuits of profits. There may be no
inherent conflicts. (Results of studies in this area of research have generally been
mixed regarding the correlation between ethics and profitability.) However, ethics does
not necessarily detract from profit. It could actually contribute to it although it may not
be the only factor to increase profitability. Ethical behaviour creates goodwill and
reputation that expand opportunities.
(See also Appendix 5)

? THINK POINT
As a customer how would you react to a firm with a reputation for
dishonesty and crookedness? Continue transactions ? Why ?
Discontinue transactions ? Why ?

Seek a middle Road ? How ? Why

There are other similar arguments for and against business ethics and the social
responsibility of business. Appendices 5 and 6 illustrate the range of opinions held
about business and its nature and role.

ACTIVITY 1 b

The range of opinions as seen in Appendices 5 and 6 fall into 4 or 5

categories.

Identify these, putting the appropriate names against each category.

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A Brief Look at The Market System

The market system which is a relatively new world system, is characterized by

profitability. As a self-organising system it has produced many technical advances
over the years and has placed business organizations in very powerful positions. But
the system is being questioned especially in relation to its immense power, its
accountability and its role in contemporary society.

Government regulation alone is not enough. There are many grey areas in which self-
regulation, restraint and discretion should be exercised. Business ethics lies
precariously between the forces of the market on the one hand and on the other, the
law.

Contemporary Forces Affecting Business

Business organizations are embedded in and interact with multiple changing local,
national and international environments which include: economic, political, legal,
technological, demographic, social, and government/regulatory environments, all of
which influence business.

Other Forces

Organisational Changes: Decentralisation and empowerment are giving more scope

for individuals to act autonomously. Unethical actors may damage a company’s
reputation.

Macro-Social Changes: For instance, in South Africa there is no longer an apartheid

society in which certain common beliefs propped up authoritarianism. Not only is South
Africa multi-cultural but also enjoys a human rights culture entrenched in its new
constitution, and also emphasizes transparency.

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Stakeholderism: Employees, customers, suppliers and local communities are

becoming more ethically discerning with a focus on good ethical reputation of
businesses (Weiss, 1998).

Section Summary

In relation to Ethics this section considered the definitions of Ethics and Business
Ethics showing ways in which they are complementary. Also discussed were ethical
standards vis-àvis other standards such as etiquette and prudence, professional
codes and the law, ethics and social responsibility in business, and arguments for and
against business ethics and the inherent complexity in relation to diverse business
situations which directly or indirectly impact on human welfare.

The upshot of all this was that Business has its Ethics.

Business was considered in terms of its nature and role, its position of power, and its
social responsibilities, the ‘social contract’ and the market system.

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SELF ASSESSMENT ACTIVITY 1

Despite the increasing attention given to the matter of Business Ethics,

one constantly comes across business activities that are conspicuously
unethical. Taking at least THREE examples known to you where business
has been perceived to have acted unethically, consider the
consequences of such scandals.

(see end of section for some suggested answers)

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SUGGESTED ANSWERS TO ACTIVITY 1 (a)

Business activity – legality and ethicality

LEGALITY

Legal Illegal

Producing and Use of oligopoly

selling most goods, power.
clothes, food etc.
Ethical Assisting
unemployed to fish in
prohibited waters

Ethicality

Producing and Producing and selling

selling certain cocaine, LSD, dagga.
Unethical armaments, paying
wages below
standard. Landmines, certain
competitor
intelligence gathering
Dumping toxic activities
waste in developing
countries

Note: Answers will vary according to different countries, laws, cultures, etc.

SUGGESTED ANSWERS TO ACTIVITY 1 (b)

Opinions on business and ethics

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1. The Business of Business should be Business ( i.e: Business is a separate game

to make profits, and operates in a sphere apart from society) ( Levitt, Carr and
Friedman).

2. Business should serve the community (Sheldon and Barry).

3. Business should be a pro-active force for positive social change (Henry Ford ll &
Willard.

4. Business should provide a vehicle for personal and professional development

(Goyder.)

5. Good Ethics = Good Business ( Henry Ford l & Business Roundtable).

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SELF-ASSESSMENT ACTIVITY 1 – SUGGESTED ANSWERS

In the operations of British owned, Thor Chemicals factory in Cato Ridge, Kwa Zulu
– Natal, workers died as a result of mercury poisoning.

More than 7500 people who worked or lived close to the asbestos mines owned by
the Cape plc group of Britain, suffered asbestos – related illness.

In both cases lawyers were able to institute legal action in British courts but the
payment process has not yet been completed . Justice remains elusive for the
victims of corporate abuse.
Mining house giant, Gencor and Impala Platinum are also involved.

***************
In 1984 a leak at Union Carbide’s pesticide plant in Bhopal, India caused one of
history’s worst industrial calamities. Thousands died, hundreds of thousands were
seriously injured and to this day suffer long term chronic illness, deformities and
death. It is alleged that the Company did nothing to alleviate the human suffering.
Survivors are still battling for adequate compensation. Greenpeace released a study
report asserting that the ground water around the factory site is still highly
contaminated by toxic chemicals, and has called on Union Carbide to clean up.
Union Carbide disputes these assertions.
A document entitled the Ten Bhopal Principles of Corporate Responsibility was
launched by Greenpeace at the Johannesburg World Summit in September 2002.
Amongst these principles are the following :
• Corporations should respect the human rights of all citizens, and states should
ensure that Corporations adhere to these commitments.
• Companies must disclose all relevant safety information. Commercial secrecy
should not outweigh the public’s right to know about the dangers of a Company’s
operations.
(Sources: Fortune Magazine : 3 April 2000, 21-22; Sunday Tribune : 1 September
2002, p4; Daily News: 11 September 2002)
***************

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Recent international and corporate crises as in the American companies Enron,

Xerox, WorldCom, etc, have had a devastating impact on public trust and consumer
confidence. In South Africa companies such as Regal Bank, Leisurenet, etc, have
collapsed indicating how the country has been plagued by greed and failure of Chief
Executives and the management teams to maintain ethical standards. All of these call
for vigorous implementation of codes of conduct that strive for good corporate
governance.

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CHAPTER 2:

EXPLORING AUTHORITATIVE

SOURCES ON ETHICS

At the end of this chapter the student should be able to have learnt:

• Understand the strengths and weaknesses of Conscience,

Religious Tradition and Self- Interest as authoritative sources of
guidance on issues of ethics

• Understand the arguments for and against Relativism

• Assess the effectiveness of these authoritative sources in their

application to the analysis of matters of business

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Introduction

We have thus far considered ethics with all its implications for notions of right and
wrong, good and evil, relating to morals, moral principles and rules of conduct in life
generally and in business. It has been seen in the previous section that ethics and
values and moral standards play a major role in business culture. An example of this
is truth-telling which denotes what obligations exist for individuals and organizations
to communicate honestly. While business integrity may present many ambiguities, it is
an area that deserves closer scrutiny, hence the self-assessment exercise at the end
of this section.
The questions now arise:

• Where did these notions of right and wrong originate?

• Are we endowed with an inexplicable power of discerning right and wrong? Or

• Are our moral judgments explicable by reference to development, environment,

education and our own personal experiences?

• What makes us say that something is categorically right or categorically wrong?

How do we know that one act is right and the other wrong?

• From where do our ‘theories’ of ethics and morality derive?

Are our views on ethics based on something we just ‘feel’ about events and
actions, through our senses?

• Is it a passing on from one generation to the next of a kind of ‘wisdom’ about

responsible moral commitment in complex contexts?

• Is it a matter of there being “nothing right or wrong, but thinking makes it so”?

One thing is certain – our viewpoints whatever they may be, have not originated in an
ethical vacuum without some moorings of moral standards. We should like to believe
that our judgments do not derive from a moral and ethical void.

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? THINK POINT
Name one action you strongly consider to be right and one action that you
equally strongly consider to be wrong. To what do you ascribe your views?

Three Popular Authoritative Sources on Ethics

Conscience
Conscience is a term derived from the Latin “con-scientia” literally meaning
“knowledge with”. Its specific ethical significance was only gradually acquired and it
has not been used as a technical term by classical philosophers (Urban, 1930:364).
Urban goes on to say that an individual may sense or be conscious of moral worth or
value or their opposites, in conduct, behaviour or character, at the same time sensing
a personal obligation to act in accordance with consciousness of morality and of merit
or guilt in so acting.

Conscience may be defined as an inner voice that dictates what is right and wrong,
good and evil.

The Intuitionist theory of conscience as a source of ethics views knowledge of right

and wrong as immediate and intuitive and not the result of processes of association
and reflection. In this sense, it becomes the source of profound reaction deeper than
reason, e.g. repugnance toward acts such as incest, cannibalism, genocide etc.
(Urban, 1930:365). To this could be added sexual abuse of babies.

Its appeal lies in the fact that everyone has a conscience and is therefore, on an
equal footing; everyone at some time or other experiences a warning bell from an
“inner voice”; and we find that our conscience offers us a quick and simple way of
identifying right and wrong.

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Criticisms

Since the authority of conscience is tied up with its intuitive and inexplicable nature,
and immediacy and innateness, it presents a problem. Society now is too sophisticated
historically and psychologically to accept this. The same applies in business
considerations.

It is not sufficient or reliable a source of ethics. There is always a great variation from
person to person, from time to time and from place to place, affected by circumstances
and training or upbringing. It is also subject to whims and impulse and can be a
rationalization for immoral acts, e.g. political assassinations (Bowie & Beauchamp,
1983:10)

Any behaviour may be justified as a dictate of conscience, need not evoke dialogue,
and be left as a matter of “my conscience versus yours”. In the case of the behaviour
of a psychopath, does the matter of conscience arise in the first place? Negative acts
can be committed in the belief that the deed was carried out with a “clean” conscience.
This raises the question: is the conscience an ethical guide?

The intuitionist theory of conscience is unacceptable to the empirical view of

conscience.

As human beings we have the capacity for personal moral judgment which is a
reflective and reasoned act. Neither conscience nor any external authority should be
unthinkingly obeyed but should be subjected to an examination before an act is
committed. Reflection and reason, and not merely conscience or any outside authority,
should guide our action.

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? THINK POINT
Take your mind back to at least two instances where you had no regrets about
obeying your conscience. Consider your reasons.

Religious Tradition

Most people look to religion for ethical guidance as it has always been regarded as an
obvious source of morality. It is a widely held belief that in religion, morality has found
its authority and sanction and its fundamental reason for being. It is a strong belief that
God is omniscient and an infallible authority on matters of ethics – God knows what is
right and wrong and has revealed or willed it to be so. Therefore, one should be guided
by this belief. In addition, it makes it easier to decide on what is right and what is wrong,
because God says so.

Moreover, the human being’s constant search for meaning to life goes beyond the
here and now and God could be that ethical guide required for this search.

The world’s major religions and philosophies have upheld the basic principle “Do unto
others as you’d have them do unto you” and over the ages other similar principles
common to most religions have had a strong influence on matters ethical. Also see
Appendix 7 for the Golden Rule common to the world’s main religions.

Criticisms

Religious tradition as an authoritative source on ethics is, however, not accepted in its
entirety. For many there is the problem of proving that God exists, and if so, how do
we prove that we know God’s will, yet one prays “Thy will be done”. There are many
things that human beings do not know in relation to what is regarded as the Supreme
Power.
(Limitations of the human intellect, and of mortality ?).

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If God decides what is right and wrong for humanity to comply with unquestioningly,
then could it be possible that God may be perceived by human beings in the image of
a dictator?

God’s commands must be based on some grounds, e.g. why should one not steal? If
the reason is given as one of avoiding human suffering, then human welfare would be
the basis of morality, not the command alone. It is believed by many that there have
to be reasons other than God’s will alone to explain right and wrong action. Many
others may not agree with this argument.

Chryssides & Kaler (1993:87) hold that it is perfectly possible to have morality without
religion and that religious morality ultimately draws on reasons which are independent
of religion.

Taking Chryssides and Kaler’s argument further, it can be asserted that one does not
have to be religious to be moral. Many who do their duty naturally in a positive and
acceptable way may have very little or no religion. One also comes across people who
are, or profess to be, religious but their actions may not be moral at all. It is not true to
say that one cannot be good without religion. While it is possible that ethics and religion
in some ways depend on each other, it is equally probable that they can be
independent of each other too.

Finally, there may be many principles common to most religions and strong
agreements between religious traditions, but there are also strong disagreements and
competing understandings of religious truth among and within religions. Very
frequently they differ on the “rightness” and “wrongness” of issues such as abortion,
gay rights etc. etc.

? THINK POINT
Think of some examples of business actions or decisions that were based on
morality – YES – but not necessarily religious tradition.

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Self-Interest

Self-interest is an interest in one’s own good. To act self-interestedly is to act with the
motive of advancing one’s own good.

Self-interest justifies that all activities should be motivated by a desire to achieve one’s
own self-interest – that one should consider what benefits one, then act for its
gratification (Friedman’s “Business is for Business”?).

Further arguments in favour of self-interest being part of moral action highlight the
concept Enlightened Self-Interest. Enlightened self-interest and the interests of
others are identical in the long run since the true nature of an individual cannot be
defined apart from its relations to others and its place in the whole (Urban, 1930:144-
145). Urban also refers to a “morality of common sense” which implies the need to
strike a balance between “self-regarding” and “other regarding” (Help yourself to help
others). Alone, neither is enlightening but rather self-defeating and irrational. In the
business world for example, the self-defeating character of an individual is seen in the
area of wages. A just wage is determined by the law of supply and demand. In terms
of natural law, however, an employer will seek to buy labour as cheaply as possible.
Enlightened self-interest moves away from this principle to one where increased
wages lead to increased purchasing power and greater consumption which in turn
creates the need for greater production (Urban, 1930:230). In the long term interests
of all – employer, employee and consumers – are served.

Enlightened self-interest also indicates that there is nothing non-moral about

engaging in self-interest (not self-denial), but at the same time bringing into one’s
world, others in a way that they matter.

Meaningfulness is an important element of a good life. If self-interested action is

motivated by advancing one’s own good, then meaning is secured through enlightened
self-interest which allows for and promotes meaningful activity in one’s life. It is not
always that the “self” is a problem, and the “other” is the solution.

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? THINK POINT

Is it morally acceptable for one to act always in one’s own self-interest? Think
of an instance in your experience, of enlightened self-interest, in the
business world.

Criticisms

Contemporary moral philosophy, however, regards self-interest as a non-moral

issue. Reconciling self-interest and a regard for others is a central concern of moral
theory (Paul et al, 1997:xiv). This refers to the need for a proper balance between
pursuits of one’s own good and that of others. According to some philosophers, self-
interest is generally taken to be outside the realm of the moral, while “other-regarding”
reflects moral action.

A strong criticism of self-interest is directed to its subjective aspect which is considered

not to be enough to be moral. Too strong a self-interest results in the moral failing of
selfishness.

ACTIVITY 2A
Perhaps no disease has challenged the ethical and moral principles of society
as has HIV/AIDS especially in the area of developing a vaccine and making
anti-retrovirals available and affordable to HIV/AIDS patients.

From the perspective of self-interest, how do you judge the role of the
pharmaceutical companies in the debates on this issue?

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The Relativist Argument

The Relativist argument raises the question: is the search for moral objective truth a
futile one?

The gist of the Relativist or Non-Cognitivist argument is that it is not possible to

know moral right from wrong, whereas the Cognitivists or Non-Relativists adhere
to the belief that it is possible to know right from wrong. The debate on the merits and
demerits of the Relativistic stance is an on-going one.

The Relativistic standpoint is based very much on the anthropological focus on

cultural diversity.

According to Relativism, in the context of cultural diversity in which different societies

have different ethical beliefs, there is no rational, objective and independent way of
determining whether an action is morally right or wrong, other than by asking whether
the members of that society believe it to be so. Ethical values and principles are
relative to one’s personal feelings, culture, education, religion, emotion, etc, and are
therefore, subjective.

Ethical relativism also holds that there are no absolutely true ethical standards, and
standards that apply universally to people of all societies (Velasquez, 1998:22-24;
Ladd,1973:1; Donaldson & Werhane, 1983:19-21). In other words, moral rightness
and wrongness of action varies from society to society and depends on or is relative
to the society to which one belongs – what is right in one society may well be wrong
in another, and neither right nor wrong in the third. Thus rightness and wrongness are
regarded as being very much society specific.

Taken seriously, as it should be, relativism should be acknowledged as a moral

doctrine with important practical and moral consequences of its own. By questioning
any kind of moral chauvinism and any view of morality that ascribes an exclusive and
exalted position to the morality of one’s society, it has naturally drawn the attention of
the morally sensitive (Ladd,1973:Preface). Cultural diversity, on which relativism is

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founded, is a long-standing fact and reality which can be accepted and respected in
the arguments for and against this moral doctrine.

ACTIVITY 2B
With reference to some moral dilemmas that arise from cultural relativism
indicate how one may deal with these.

Criticisms

The practical importance of ethical relativism is obvious; its theoretical formulation

raises many conceptual problems.

Relativists assert that one ought to respect the customs of others even to the extent
of following the principle of “When in Rome do as the Romans do”, and that one
ought to treat the moral norms of other societies with the same kind of respect and
restraint that one feels is proper with regard to their customs. According to Ladd
(1973:10) this presents a problem since morals and customs are not the same.
Customs can be criss-crossed and universally valid, but the validity of moral principles
is not limited to a particular society. Certain customs, e.g. bribery, can be criticized and
repudiated on moral grounds.

Is following the “When in Rome………” principle a reasonable view to hold? The

answer seems to be No when one considers that one cannot necessarily rule out the
fact that there are moral standards that bind on people everywhere, e.g. all societies
have norms against killing, injuring, stealing, and for the upholding of truth telling
(Velasquez,1998:22).

Chryssides & Kaler (1993:510-511) refer to the principle of “When in Rome…..” as the
cultural relativists’ motto, and while the authors regard moral relativism as appearing
to offer easy solutions to some ethical dilemmas in business, they nevertheless believe
that on an international level, relativism could reflect inherent intolerance to cultural
diversity with disastrous consequences for business relations.

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According to Rachels cited in Velasquez (1998:23-24) cultural diversity proves nothing

and the theory presents incoherent consequences. If the theory could be wholly
accepted, it would make no sense to criticize practices of other societies as long as
they conformed to their own moral standards, e.g. the Nazi treatment of Jews in the
1930s, or the treatment of the majority during the South African apartheid regime. By
the same token, it would make no sense, and in fact be considered morally wrong, to
criticize any of the moral standards or practices accepted by one’s own society. It
implies that a majority held belief (or in the case of South Africa, a dominant minority
held belief and ideology) is automatically correct. This raises the question: Are moral
standards of a society the only criteria by which actions in that society can be judged?
Moral standards even if given a privileged position beyond all criticism, can be
mistaken.

Cultural diversity can be accepted and respected but it is incorrect to conclude that all
moral beliefs are equally acceptable and that the only criteria of right and wrong are
moral standards prevalent in a given society (Velasquez,1998:24).

In criticizing the cultural diversity and the society-specific basis of relativistic theory,
Beauchamp & Bowie (1983:11) base their argument on the universal structure of
human nature and the universal set of human needs which lead to the adoption of
similar or identical basic moral principles in all cultures. Differences arise in the
application of moral principles in particular situations. This argument supports the view
that there are some moral norms that are universal, and that apparent moral
differences may on closer examination have deeper underlying similarities

? THINK POINT
If the moral standards of society are manifested in actions considered to be
wrong, then should criticising such actions be considered as interference.

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Section Summary

In this section our search for authoritative sources on ethics explored Conscience,
Religious Tradition and Self-Interest. These sources were broadly defined and their
strengths and weaknesses. It was established that while they offered some leads to
the search for moral truths, they also had some inherent limitations.

At the same time, examining Relativism presented more grey areas than categorical
direction for establishing moral truth.

These sources as initially explored, bore doubts and limitations and seemed to
perpetuate a world in which “everything goes” resulting in confusion and chaos, and
further doubts and dilemmas. It becomes imperative to look at other established
theories in which right and wrong can be more satisfactorily examined. This will be
done in the next three sections to follow.

SELF ASSESSMENT ACTIVITY 2

The two articles in Chryssides & Kaler (Carr:108-118, and Bowie:118-
124) are claim and counterclaim respectively that business is
essentially a separate “game” with its own separate set of rules that
one would not normally follow outside of the business context. Read
Carr’s article first and jot down where and why you might think his
argument to be wrong; then compare your notes with Bowie’s
reasoning.

(see end of section for some suggested answers)

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SUGGESTED ANSWERS TO ACTIVITY 2 (A)

Self-interest of Pharmaceutical Companies

From a follow-up of various media coverage and proceedings of conferences and

workshops on the grave issue of HIV/AIDS, the following emerged:

The cost of drugs poses the greatest single challenge to individuals and to the health
care system. This is exacerbated by the disease being most prevalent in low-income
countries in which affordability and accessibility are matters of real concern.

Drug companies did not consider the supply of vaccines at lower prices, an attractive
proposal. They appeared to be of the view that with high prices a globally attractive
picture could be achieved, and this by the way, would also include a profit from the
high-prevalence, low-income countries.

Another development was the problem of the giant pharmaceutical companies versus
the generic drug manufacturers. The large pharmaceutical companies, as could be
expected, raised strong objections and discredited the generic drug manufacturers,
accusing them of cashing in on a ‘multi-million’ rand trade. They talked in terms of
billions in respect of their approved products backed by research and testing. It was
apparent that the large drug companies approached the supply of the drugs solely
from their narrow self-interested perspective. The dire needs of victims of HIV/AIDS
nor the inability of poorer countries to pay were a priority for them.

Had the drug companies adopted an enlightened self-interest approach, they would
have ensured that the people for whom the drugs were required, as a reality factor –
indeed, a life and death matter – were brought into the equation in a way that they too
mattered.

The world is well positioned to produce successful AIDS vaccine and other drugs, and
giant pharmaceutical companies could well afford to step beyond their self-interest
motives.

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Other ethical theories (Kantian and Utilitarian) could also be applied in the analysis of
the moral issues in this case from their respective perspectives.

SUGGESTED ANSWERS TO ACTIVITY 2 (B)

Ethics-related situations – moral dilemmas

Moral dilemmas arise in ethics-related situations such as abortion, torture, gender and
human rights violations, bribery, etc. In some cultures it is not morally wrong to have
abortions, to torture, to violate human rights and to bribe. Yet many do not find it
acceptable when in Rome to do as the Romans.

While it is important to respect the values and moral customs of all cultures, one should
guard against ignoring rigorous moral reasoning when faced with decision-making in
some such situations. Condemnation of such occurrences should not be regarded as
a matter of subjective reality.

In some countries, e.g. Saudi Arabia, their treatment of women is a culturally accepted
norm but is questionable. In other countries, e.g. the U.S. or South Africa where there
are laws protecting women’s rights, the question arises: must business conducted in
Saudi Arabia by these countries ignore individual rights and justice and treat women
there as they are treated in Saudi Arabia?

Similarly, how does a country with relatively better human rights records design its
foreign policy in relation to countries with blatant human rights violations or corrupt
practices?

To deal with such dilemmas is not easy but it means that every effort must be made
to uphold principles of rights, justice, freedom, etc, even if these conflict with other
cultures’ belief systems and standards. One cannot claim that cultural relativism is
acceptable just because cultures have different moral standards. These have to be
tested against universal moral principles. If sacrifices have to be made and a price
paid for maintaining moral (and legal) standards, then so be it. When cultural

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 ETHICS 2

standards clash it is possible to develop moral reasoning from conversation,

interaction and argument. Communication, sharing and remaining open to change
help to validate or disprove ethical reasoning and moral judgments. Moreover, the
strategy of negotiation can bring about agreement and understanding based on
reason, not coercion.

SELF-ASSESSMENT ACTIVITY 2 - SUGGESTED ANSWERS

Albert Carr's main arguments Norman Bowie's counter-arguments

“The essential point is....that the ethics “... corporations that have played the
of business is game ethics” (p.108) game of business like the game of
“Cunning deception and concealment poker have suffered badly. Moreover, if
of one's strength and intentions, not business consisted of conscious mis-
kindness and open heartedness, are statements, exaggerations and the
vital in poker. No-one thinks any worse concealment of pertinent facts...
of poker on that account. And no-one business practice would be inherently
should think any worse of the game of unstable... business can only be stable
business because its standards of right if the {CEO} has a set of moral
and wrong differ from the prevailing standards higher than those that govern
traditions of morality in our society”. the game of poker”. (p.124)
(p.111)
“My point is that in their office lives they “... unless business adheres to a
cease to be private citizens; they minimum standard of justice, business
become game-players who must be practice would be impossible”. (p.119)
guided by a somewhat different set of
ethical standards” (p.111)
“As long as they comply with the letter “Japanese labor-management relations
of the law, they are within their rights to are not so adversarial and this fact
operate their businesses as they see accounts for part of their success”.
fit”. (p.113) (p.122)
“The poker model...is a competitive
“‘We don't make laws. We obey them.... model. What the model overlooks is the
We're not in business to promote fact that the production of a good or
ethics’”. service in any given plant or office is a
(p.113) cooperative exercise”. (p.123)
“If an executive allows himself to be torn “Kant's point is that morality requires
between a decision based on business consistency of action and judgement
considerations and one based on his when you are both on the receiving and
private ethical code, he exposes himself giving ends”. (p.119)
to grave psychological strain”. (p.115)

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 ETHICS 2

“Whatever the form of the bluff, it is an “For if lying were universally permitted,
integral part of the game, and the people would never know whether an
executive who does not master its assertion was true or false, and hence
techniques is not likely to accumulate both the purpose of telling the truth and
much money or power”. (p.118) of lying would be defeated”. (p.120)
“...bluffing...tends to undermine trust”.
(p.122)

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CHAPTER 3:

ETHICAL THEORIES: DEONTOLOGICAL

APPROACHES

At the end of this chapter the student should be able to have learnt:

• Present an overview of the principal schools of ethical thought

• Demonstrate an understanding of the main Deontological approaches to ethics,

their appeal and limitations

• Explain their relevance in your attempts to resolve ethical issues and dilemmas in
business

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Introduction

As a branch of philosophy ethics explores the nature of moral virtue and evaluates
human beings and their actions. It is a means of studying morality through a rational,
secular outlook grounded in notions of human happiness and well-being.

Modern ethics has developed two competing traditions that focus on determining the
ethical character of actions. Both these traditions address the question: What actions
are right? The competing traditions are:

Deontological – Non-Consequential – that claims that actions are inherently right,

e.g. telling the truth, or inherently wrong, e.g. stealing, cheating. In other words,
rightness and wrongness depend on the nature of the action, e.g. bribery is wrong by
its very nature irrespective of consequences.

Teleological – Consequential –argues that the rightness of actions is determined

solely by the amount of good consequences that flow from them, and not by any
feature of the actions themselves.

Virtue Ethics – asks: What kind of person should I be? The emphasis is on moral
character rather than right action – the Aristotelian – good life is possible only for
virtuous persons.

Justice like Rights is an important moral concept with a wide range of application in
the evaluation of the actions of individuals and broader societal institutions and
practices.

In Summary: the main Ethical Schools and Theories are:

Deontology : Kantianism, Natural Law (Human Rights) Justice and Fairness

Consequentialism: Utilitarianism : Rule and Act Virtue Ethics : Aristotle

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Justice (as a wider concept): Capitalism Socialism Egalitarianism Libertarianism

Utilitarian Social Welfarism

? THINK POINT
Identify situations in the workplace to which you think these four major
theories would apply.

Deontology – Non-Consequentialism

Emphasises rules, duty and rights.

Actions are right if they respect rules and wrong if they violate them.

Other examples of non-consequential reasoning in ethics relate to arguments based

on principles such as: the Golden Rule – Do unto others as you would have them
do unto you – reversibility of an action; those that appeal to basic notions of human
dignity and respect for persons; and obligation and duty as the fundamental
principle in Deontology.

? THINK POINT
Think back on a rule or law that you might have broken during the apartheid
years.
Justify your action.

Kant and Kantianism

Immanuel Kant (1724-1804) is well known for his famous ethical treatise Foundations
of the Metaphysics of Morals (1785) in which he set out to restore reason to what
he regarded as its rightful place in our moral life.

The ethical theory developed by him provided a foundation for moral rights. An
outstanding explanation of Kant’s moral theory will be found (amongst others) in Roger
Sullivan’s Immanuel Kant’s Moral Theory (1989) New York: Cambridge University
Press.

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Kant put forward the notion that there are some things that we ought to do and other
things that we do not, merely by virtue of being rational. Moral obligations arise solely
from moral law that is binding on all rational beings. Reason according to Kant makes
possible free-will. A rational being is one who is autonomous.
Kant based his theory on the moral principle that he called the Categorical Imperative
that requires that everyone should be treated as a free person equal to everyone else.
Everyone has a moral right to such treatment and a correlative duty to treat others in
this way.

The Categorical Imperative was regarded by Kant as a command that held, no matter
what the circumstances. This command or imperative is according to him
unconditional:

Act so that you treat humanity whether in your own person or in that of
another, always as an end and never as a means only.

Kant believed that reason dictates that the principle according to which one is acting (
an action’s maxim) should be able to be a universal law:

Act only according to that maxim by which you can at the same time
will it that it should become a universal law of nature.

A person’s reason for acting must be universalisable.

The categorical imperative placed the moral authority for taking an action on an
individual’s duty toward other individuals and humanity. Performing an action solely
because it is our duty is what Kant refers to as a good will – being good without
qualification.

The theory is based on two formulations of the Categorical Imperative each explaining
the meaning of basic moral right and correlative duty. (See Velasquez,1998:94-96).

The appeal of Kant’s theory may be summarized as follows:

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It seems to capture some fundamental aspects of our moral views, e.g. “How would
you like it if he did that to you?” invokes reversibility, and “What if everybody did that
unacceptable thing?” invokes universalisability.

Many philosophers regard favourably the principle of Categorical Imperative and the
universalisability of judgments. They offer consistency and counter temptations to
make exceptions or apply double standards.
Both principles of universalism and respect for persons (even if insufficient for deciding
all questions of ethics) are important avenues of ethical reasoning.

Provides a strong foundation for rights as these exist in our nature as distinct from
those rights that are bestowed by external agents and which may not be as resilient.

Makes sense of cases in which consequences seem to be irrelevant, e.g. a

manufacturer’s obligation to honour a warranty on a defective product even if costs
exceed the benefits of satisfying consumers.

The theory offers a good way of evaluating motives from which actions are performed,
i.e. genuine concern and duty or self-aggrandisement and insincerity. (Read Boatright
and Velasquez)

ACTIVITY 3 a
Overall, what do you consider to be some of the major limitations of
Kantianism.

Natural Law and Human Rights

Another approach in Deontology which can be seen as complementary to Kantianism

is Natural Law Theory.

During the very early classical period human beings would have found themselves in
an almost near-perfect state of nature in which the law of nature operated. This law of
nature was based on moral principles that human beings would have searched for and

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discovered by the use of what was regarded as their God-given reason The law of
nature was considered to be of a higher order than mere human laws. However, the
state of nature also had its perils and gradually the law of nature took on a political
dimension creating government whose primary purpose was to provide protection of
the natural rights of people, and this later developed into a comprehensive political
and legal theory.
( Somewhat simplistic? Calls for a lot more reading!).
The following are natural rights:

Right to Freedom/Liberty – freedom from coercive powerful rulers

Right to Ownership and Property – Each person has a right to ownership over
own body and own labour, etc. and is free to decide what will be done with
what he or she owns, without interference.

Moral rights are usually thought of as rights that all human beings possess by virtue of
being human beings. They are not limited to particular jurisdictions such as race,
nationality, sex, etc. They are inalienable rights as they are reflected, for instance, in
the United States Declaration of Independence. Each right has a corresponding duty
and these duties may be Perfect or Imperfect (Chryssides & Kaler, 101-103).

Rights in social life pertain to one’s right to issues such as abortion, and to rights
entrenched in the Universal Declaration of Human Rights of 1948.

Rights play an important role in Business Ethics. Employers, employees, consumers

and the general public have rights. Issues of rights repeatedly occur in business at
various levels.

? THINK POINT
It is said that Henry Ford was known to have invaded the privacy of workers in
his company in blatant and crude ways, and dismissed those who failed to
meet his standards of personal conduct. Are there employers today who
demonstrate this type of might-is-right ethics. What about workers and their
natural rights of freedom from invasion of their privacy?

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Limitations

In its traditional form it fails to provide a wholly satisfactory basis for the full range of
rights in modern society.

Many rights come into conflict and there is difficulty in deciding whose right receives
priority e.g. rights of victims vs rights of criminals. Applies equally in business.

Because of the moral significance attached to rights there is a tendency to stretch the
concept to a point where its meaning could be diluted or even lost, or they could be
described as political goals.

In business as in other situations, there could arise disagreements over the very
existence of a right, e.g. should an employee have a right to due process in discharge
decisions?

Justice and Fairness

This Deontological approach deals with fairness and equality and is a crucial aspect
of morality. The moral authority that decides what is right and wrong, concerns the fair
and equitable distribution of opportunities and hardships to all.

Justice and Fairness are concerned with comparative treatment given to members
of a group when:

• Benefits and burdens have to be distributed

• Rules and laws are administered
• Members of a group cooperate or compete with each other
• People are punished for the wrongs they have done
• People are compensated for the wrongs they have suffered.

Justice and fairness are usually divided into the following categories:

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Distributive Justice: is concerned with fair distribution of society’s benefits and

burdens, e.g. if there is a shortage , who gets what’s available? If there is a burden
such as taxes, then everyone should bear their fair share of the burden. The moral
rights of some individuals cannot be sacrificed in order to secure a somewhat better
distribution of benefits for others; at the same time correcting extreme injustices may
justify restricting some individual’s right, e.g. property rights may legitimately be
redistributed for the sake of justice.

Cooperation and Competition

Justice implies taking only a proper share of some good. An unjust person (lacking
virtue) will grasp at the lion’s share, while a shirker will avoid bearing a fair share of
some burden e.g. tax evaders. While cooperation and competition are accepted, they
have to be underscored by what is just and fair.

Procedural Justice
This designates fair, decisive practices, procedures and agreements among parties. It
asks: Have the rules and processes that govern the distribution of rewards and
punishments, and benefits and costs, been fair? Similar cases should be treated alike.

Retributive Justice
This is the just imposition of punishment and penalties upon wrong-doers. A criterion
for applying this principle is: Does the punishment fit the crime? – Not too lenient, not
too severe?

? THINK POINT
It is often said that a just person always has the worst of it. Is injustice more
profitable than justice. What do you think?

Compensatory Justice
This is the just way of compensating people for the losses they have suffered when
they were wronged by others, that is, the past harm and injustice experienced. The
compensation should in some sense be proportional to the loss suffered, e.g. loss of
properties under the Group Areas Act in South Africa; reparation payments through

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the Truth and Reconciliation Commission to those who suffered loss of life, property,
dignity, etc, under the apartheid regime; affirmative action programmes for centuries
of injustice.

Corrective Justice
This pertains to laws themselves which as instruments of justice, should be considered
just.

Distribution has to take into account who has suffered an unfair share of the costs of
a policy, e.g. as in any form of business scenario, and if there are others who have
unfairly benefited from a policy.

? THINK POINT
In restorative justice how easy is it for perpetrators to admit the crime and
then ask the victim for forgiveness? What assurance is there that true
repentance is the motive and that the offender feels real remorse and will not
recommit the crime.

In business justice also requires that compensation be made available to: victims of
discrimination (racial, gender, disability, etc); consumers receiving defective products
(without abusing the warranty); victims of industrial accidents, etc.

Justice is also an important concept in the evaluation of different forms of social

organization, e.g. one can ask if the economic system in which business activities are
carried on is a just system. Similarly, this can apply to educational, health, welfare and
other such systems.

Practical problems of using the principle of justice do arise. Within the jurisdictions of
the State and the legal system ethical dilemmas are solved by procedure of law. The
problem arises when the dilemma or issues are solved outside the legal system. The
questions that arise then are: Who decides who is right and who is wrong? Who has
moral authority to punish whom? Can opportunities and burdens be fairly distributed
to all when it is not in the interest of those in power to do so?

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ACTIVITY 3 B
Identify at least three different situations known to you, in which the principles
of justice and fairness maybe questioned.

Despite the shortcomings, the principle of Justice adds an essential and unique
contribution to other ethical principles. It forces one to ask how fairly benefits and costs
are distributed to everyone regardless of power, position, wealth, station in life etc.

Section Summary

The main ethical schools and theories have been presented. The focus in this section
has been on the Deontological or Non-Consequential theory and concepts and the
fundamental moral principles on which they are based. In order to answer the
question: what actions are right, Kant emphasized the Categorical Imperative and
rationality.

Natural Law theory was seen as complementary to Kantian theory from which flowed
the concepts of rights and corresponding duties.

Justice and Fairness, as crucial aspects of morality, were also considered.

Focus in the next section will be on the Consequentialist theories.

SELF ASSESSMENT ACTIVITY 3

Human Rights are internationally recognised in the Universal Declaration of
Human Rights approved by the United Nations in 1948. ( See appendix 8)
Comment on the fulfillment or otherwise of economic and other related
rights.
(See end of section for suggested answers)

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SUGGESTED ANSWERS TO ACTIVITY 3(A)

Limitations of Kant’s Theory

1. Theory is not precise enough to always be useful. It is vague and unclear and
lacks practical utility.

2. There does not appear to be agreement concerning limits of each right or how
each should be balanced against conflicting rights, e.g. his right to playing loud
music and my right not to be disturbed. It is impractical not to consider degrees of
differences, power, etc.

3. Details of philosophy are complex and may not be applicable in the context of
differences in time and cultures.

4. The principle of categorical imperative does not allow one to prioritise one’s duties.
The approach is inflexible and there is a total lack of compromise, therefore
difficult to live by, e.g. lying is condemned even if it produces more good than
harm as in misleading someone intent on killing, on the location of the potential
victim. (What about the so-called harmless lies?).

5. Fails to provide plausible reasons to explain how do we know when to accept

certain rules and not others.

6. Rigid objectivity and rationality ignores the facts of subjectivity and emotional
considerations.

7. The principle of universalisability can have limitations, e.g. is it alright to accept

fanatics who would be content for everyone to act as they do.

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SUGGESTED ANSWERS TO ACTIVITY 3(B)

Justice and Fairness

1. Ways in which government at all levels, and business especially at top

management levels, decide on their salaries and actually allocate the lion’s share
to themselves. The wide gap between their salaries and the earnings of the vast
majority of workers justifiably question the fairness of this disparity and the way in
which such decisions are taken.

2. Distribution of benefits/burdens in relation to tax payment: More and more affluent

people indulge in tax evasion, and many more because of their economic
situations, do not even qualify as taxpayers. This places an unfair burden on the
middle class people who are earning and have to pay their taxes

3. Recently there has been a great deal of community reaction in the form of
demonstrations and protests questioning the justice and fairness of courts allowing
bail to perpetrators of serious sexual child abuse, and rapists, and also
questioning the relatively lenient sentences given to them.

SELF-ASSESSMENT ACTIVITY 3 – SUGGESTED ANSWERS

A right is a claim for a basic need to be recognized and dealt with fairly by people. All
humans have a right to freedom, justice, education, health and the right to choose the
way they are governed. Most rights depend on the ability of people to act justly.

Article 23 of UN Declaration of Human Rights states that “ everyone has the right to
work, to free choice of employment, to just and favourable conditions of work and to
protection against unemployment-------’ ’ Vital needs included in Article 25 are food ,
shelter , health care, education, necessary social security in the event of
unemployment, illness, disability, etc., under circumstances beyond individuals’

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control. As one looks around the world today, all this rings hollow. Meeting many of
these basic rights is reduced to lip service.

No doubt, the fulfilment of these rights is influenced by the stage of a country’s

economic development. Action or inaction on the part of government can uphold or
violate these rights. An example of violation is when vast amounts of a country’s limited
resources are diverted to corrupt officials, or to the creation of luxuries for an elite,
while millions endure hunger , starvation and overall deprivation and hardships. Even
very poor people have the need for freedom of various kinds.

On the other hand, the issue of human rights has progressively touched a responsive
chord in an increasing number of countries. In Africa , there is growing recognition of
the vast disparities between the rich and the poor. Development programmes to
provide better standards of life are gradually being undertaken. In Latin American
countries, land reform is being pursued as a way of giving people a stake in their own
country and an opportunity for economic advancement.

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CHAPTER 4

ETHICAL THEORIES: CONSEQUENTIALIST

AND VIRTUE APPROACHES

At the end of this chapter the student should be able to have learnt:

• Demonstrate an understanding of the Consequentialist approaches

and their limitations

• Demonstrate an understanding of Virtue approaches and their

limitations

• Evaluate the relevance of both in your attempts to resolve ethical

issues and dilemmas that arise in business activities

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Introduction
Consequentialism
Consequentialism is a teleological principle derived from the Greek “telos” meaning
“end” and holds that the rightness of actions is determined solely by the amount of
good consequences they produce. Actions are goal-directed and are justified by virtue
of the end achieved. The greatest happiness of all is the right and proper and
universally desirable end of human action.

? THINK POINT
Consider the statement: Business will not survive in an environment
where lying, cheating, breaking contracts, etc., are the accepted
norms. Does business have to be practised as a form of applied
ethics in order to promote prosperity?

Utilitarianism contends that something is morally good to the extent that it produces
a greater balance of pleasure over pain for the largest number of people involved –
the greatest good of the greatest number.

The moral character of actions depends on the extent to which the actions actually
help or hurt people. Why should such actions be regarded as moral or ethical? An
answer to this may be: because ethics is about seeking (or maximizing) the ‘goods’ or
‘ends’ that people regard as worthy pursuits and which are relevant to human
happiness and well-being.

Jeremy Bentham (1748-1832) is generally acknowledged as the creator of classical

Utilitarianism. Classical Utilitarianism holds that pleasure is ultimately the only good
and pain is the only evil. Goodness is defined as human well-being, so what benefits
is good and what harms is evil.

For Bentham the two concepts of importance were:

That pleasure and pain govern our lives

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That pleasure makes life happier and pain makes it worse.

Pleasure and only pleasure was ultimately good thus pleasure acquired a hedonistic
feature.

From this flowed his notion of utility viz. the net benefits and usefulness of any sort
produced by an action. This utilitarian principle may be seen in the following:

An action is right from an ethical point of view if and only if the sum total of
utilities (net benefits) produced by that act is greater than the sum total of
utilities produced by any other act that the agent could have performed in its
place – that one action whose net benefits are greatest by comparison to the net
benefits of all other possible alternatives.

Bentham attempted to make ethics practical and even proposed a system whereby
the amount of pleasure and pain that an action produces could be measured – which
he called the Hedonistic Calculus.

John Stuart Mill (1806-1873) refined Bentham’s theory by developing a more

defensible version of the Utilitarian position. He introduced the element of quality in
pleasure, the higher order pleasures such as arts and intellectual pursuits that human
beings enjoy over and above the lower order or basic pleasures.

Act and Rule Utilitarianism

There are two versions of Utilitarianism – one in which each act is judged on its
consequences – Act Utilitarianism (AU) and the other in which an act is judged on its
consequences of following the relevant rule – Rule Utilitarianism (RU). These may be
formally expressed as follows: (AU) An action is right if and only if it produces the
greatest balance of pleasure over pain for everyone.

(RU) An action is right if and only if it conforms to a set of rules the general acceptance
of which would produce the greatest balance of pleasure over pain. AU seems to be a

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simpler theory providing an easily understood decision procedure. RU seems to give

a firmer ground to rules of morality and to role obligations considered to be problems
for all teleological theories.

The appeal of Utilitarianism may be summarized as follows:

It is a powerful, widely accepted and highly influential theory in economics with special
reference to issues and dilemmas in business and as a basis for cost/benefit analysis

It offers a highly prized value, viz. efficiency

The principle of utility provides a foundation for rights and justice and a relatively firm
and coherent basis for business ethics by fitting in with the intuitive criteria used in
discussions of moral conduct and moral obligations taking everyone’s interest into
account.

Its limitations may be seen in the following:

• The hedonistic thesis does not consider higher order

pleasures It lacks guidance for comparing quality with

quantity of pleasure

• There is the problem of measuring “utility”.

? THINK POINT
Consider the recent ban on smoking in South Africa from a utilitarian point
of view.
Virtue Theory
The focus of ethical theories examined thus far has been on action as the key subject
matter. The concern has been with what actions are right and what actions are wrong
– an action based focus that invariably overlooked motivations and feelings. Emphasis
has been on ethical principles that ask: what should I do?

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We also need to examine the character of the agent (person) who carries out the
action. An agent-based focus examines a person’s moral character and whether or
not this exhibits virtue or vice. It asks the question: what should I be? This is
necessary in order to be able to make judgments about the moral character of a person
and about the morality of the person’s actions.

? THINK POINT

Is this a matter of: I am what I do and I do what I am!

According to Aristotle a moral virtue is a habit that enables one to exercise reason
in all actions. One lives according to reason when one knows and chooses the
reasonable middle ground between excesses and deficiency in one’s actions,
emotions and desires – neither too much nor too little. Virtues avoid unreasonable
extremes while vices are habits that go to extremes. Prudence guides one on what is
reasonable in a given situation.

Some Examples

Action of giving people goods they exactly deserve is justice (virtue) or giving too
little or too much is injustice (vice).

Emotion of fear – responding with courage (virtue) in a reasonably daring way or

responding with recklessness (vice) which is too daring or with cowardliness (vice)
not daring enough.
Desire for food met with temperance (virtue) – not under- or over-indulging. Gluttony
(vice) is unreasonably excessive and austerity (vice) is unreasonably too lttle.

A definition of moral virtue will reflect the following :

• An acquired disposition – not merely a natural character like intelligence, beauty

or strength

• Something we actually practise as exhibited in our habitual behaviour

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• Something we admire in a person and that is praiseworthy because it is an

achievement

ACTIVITY4 a
What drives a person who already has a great deal of wealth to make even
more money even if it means deliberately breaking the law to do so? How
does one explain the moral basis of his behaviour?

Virtues are means to and constituents of happiness. There are character traits that are
essential to a good life, e.g. honesty. Moral virtues are those dispositions that are
generally desirable for people to have in the kinds of situations they typically encounter
in their daily lives. They help us to deal well with all the exigencies of human life, e.g.
if in a situation tempers flare, we need the virtue of tolerance and tact. Since good
must be distributed by consistent criteria, we need the virtues of fairness and non-
discrimination.
Virtue ethics makes being virtuous an essential element in leading a moral life.

? THINK POINT
The company you work for has decided to send you to an overseas
conference during the Northern summer. You agree to go, but wonder
whether you should attend the conference or simply enjoy an all-paid-for
holiday!!?

Virtue Ethic and Business ( see Boatright, 2000:64)

Virtue ethics presupposes a view about human nature and the purpose of life. Applying
virtue ethics to business also depends on a context that includes some conception of
the nature and purpose of business.

Virtues of a good business person need not be altogether different from those of any
good person; but one must not overlook the fact that business faces situations that are
peculiar to business and need certain business-related traits. Therefore, some virtues
of everyday life are not necessarily wholly applicable to business e.g. a manager

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cannot continue to be caring of employees when situations demanding laying off of

employees is unavoidable, or when some ‘bluffing’ or ‘concealment’ is accepted in
certain negotiations. (Remember Carr’s and Bowie’s views?)

In the consideration of a theory of virtue and theories of ethics it may be observed

that there is no single simple relationship between a theory of virtue and theories of
ethics. However, an ethic of virtue enhances moral principles by looking at the
character that people are required to have. Ethical principles agree that certain virtues
are essential and important.

ACTIVITY 4 b
(A brief review of moral principles)

Various ethical philosophers are known for certain moral principles they have upheld.
List at least five moral principles and the philosophers for whom these were important.

Section Summary

The moral principles of Consequentialism give us a sense of what the consequences

of our actions would be, actions being goal-directed towards greatest happiness and
benefits.

The appeal and limitations of utilitarianism were also considered.

Virtue theory was examined as it pertained to the character of people performing
certain acts as this also helps in making judgments about the morality of peoples’
actions.

It is not correct to say that virtue cannot be applied to business since persons of virtue
will be virtuous in situations outside or within business situations, contexts peculiar to
business notwithstanding. A person who it inherently virtuous does not have to wear
two hats!!

The next section will cover Justice in a wider societal context.

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SELF ASSESSMENT ACTIVITY 4

The Caltex Operations in South Africa during Apartheid years (Read

Chapter 2 in Velasquez).

During the 1980s at the height of the apartheid regime in South Africa, Caltex,
an American Oil Company jointly owned by Texaco and Standard Oil, was
operating several oil refineries in South Africa. It had repeatedly expanded its
refinery operations from which the then S.A. government benefited.

Caltex met with vehement opposition from shareholders of Texaco and

Standard Oil, objecting to American companies investing in apartheid South
Africa whose overriding goal was to maintain White supremacy. They also
opposed participation in business transactions that had inherent political
overtones.

Caltex management disagreed and insisted on doing business in South

Africa.

The debate over this issue was essentially a moral debate and arguments on
both sides appealed to moral considerations.

Discuss the morality of Caltex operations in South Africa at the time, from the
points of view of stockholders and of the Caltex company in South Africa.

(See end of section for suggested answer)

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SUGGESTED ANSWERS TO ACTIVITY 4(a)

Breaking the law to make more money

Firstly, the morality of the actions: From a utilitarian perspective the action could
promote the person’s happiness, but if he/she is breaking the law, then he/she has not
given thought to the consequences of his/her actions. The end that this person is
concerned with is to make as much money as possible for him/herself and not with the
greatest good for the greatest number. Morality of action is questioned.

From a Kantian point of view, he/she ought never to have acted except in such a way
that he/she could also will his/her maxim to become a universal law. Cheating, stealing
would certainly not be acceptable morally. What would the world be like if such actions
were made unreversalisable?

The morality of his/her character is open to question: It is one of excessiveness and

greed. The person seems to have no self-control, lacks integrity and honesty. He/she
seems to display an abnormal obsession with accumulating wealth like a sickness
beyond his/her control. The moral character of this person is of a flawed nature and
exhibits vice, not virtue.

SUGGESTED ANSWERS TO ACTIVITY 4(b)

Philosophers and the moral principles favoured by them

Treat others with respect – Kant

Strive to maximize pleasure and minimize pain – Bentham, Mill

Worthwhile ends often justify efficient means – Machiavelli.

Inequalities are permitted only if they maximise benefits to the worst off in society -
Rawls A moral virtue is a habit that enables a human being to act in accordance with
the specific purpose of human beings.

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- To exercise reason in all their activities –Aristotle.

SELF-ASSESSMENT ACTIVITY 4 - SUGGESTED ANSWERS

Point of View of Stockholders

Their opposition was based on South Africa’s ideology and its dominance over a Black
majority by a White minority. They opposed the over-riding goal of White South
Africans to maintain their status quo in which a vast Black majority was vote less and
voiceless and whose civil and political rights were violated. This majority was denied
their basic human rights.

This kind of judgment about violations of peoples’ rights are based on moral principles
that indicate areas that demand that peoples’ rights to freedom and well-being must
be respected. In the South African situation Black people were not respected as
persons but were used as a means of production and wealth from which they did not
benefit. There was no fairness or justice in a system in which the oppressed carried
the burdens of production and the White rulers benefited from the wealth of the
country.

The opposition did not support the unjust policies of the country as they could have
seen this as a violation of moral principles that identify fair ways in which benefits and
burdens are distributed among all the members of S.A. society.

The stockholders saw Caltex as propping up an unpopular system by continuing to do

business in S.A. especially since all business transactions had political overtones.

Arguments given by Caltex

Caltex obviously used utilitarian arguments. It claimed that doing business in S.A.
helped Black S.Africans in the long run and particularly the company’s Black workers.
It further claimed that the company had special responsibilities towards them. This
was some indication of an ethic of care. Caltex was satisfied that remaining in S.A.
would be in the best interests of all races in S.A. To what extent this was validated is
not known. If this had materialized then it would have met the utilitarian principle of the
greatest good for the greatest number.

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In claiming that if the company left S.A. the Blacks would suffer greatly, further
appealed to utilitarian standards of morality in which a moral principle that claims that
something is right to the extent that it diminishes social costs and increases social
benefits, operates.

Caltex also stated that its employment policy was based on a system of equality, equity
and better prospects for the future. This again was laudable but needed to be
validated.
It would be interesting to see if Caltex operations did test successfully against for
example, the Sullivan principles. Desmond Tutu himself had rejected the argument
about the basis of pay, etc, since this was regarded as a superficial argument. The
important thing for Archbishop Tutu was not to support a fundamentally flawed society.

This case also brings up issues of moral character. Archbishop Tutu called on the
world’s nations to exert economic pressures on S.A. This call came repeatedly from a
person known for his virtuous character and his great passion for justice.

The stockholders who opposed Caltex operations in S.A. also demonstrated virtue on
their part as they saw the wrongness of the rulers in an undemocratic country
benefiting from foreign investments.

The S.A. laws were in themselves not morally appropriate, and knowingly Caltex
operated in a nation whose government was based on such laws. This was unethical.

For Caltex to have acknowledged that it was providing a strategic resource to a racist
regime and still choose and decide to remain in the country says something about the
presence or absence of virtue in the company’s decision-makers.

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CHAPTER 5

ETHICAL THEORIES: JUSTICE AND SOCIETY

At the end of this chapter the student should be able to have learnt:

• Demonstrate an understanding of five theories of justice

• Evaluate the relevance of these theories to business life

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Introduction
It has been seen that justice is an important moral concept on an individual level. On
a societal level it is an equally important moral concept used in evaluating actions of
society’s institutions, essentially around issues of the most just distribution of goods
such as wealth, income, status, power and control as these are reflected in social,
legal, political and economic practices and institutions.

? THINK POINT
Think of one example in current society, of what Marx referred to as
“alienation of labour.”

Capitalism

Capitalism is a worldwide system. The economies of capitalist nations are

interconnected in complex ways even though their specific systems of capitalism vary.
It is no more the monolithic system it was believed to be especially since the collapse
of communism. The new century with its simultaneous upheavals in politics,
economics and technology may well usher in the development of different forms of
international capitalism.

It is an economic system whose major portion of production and distribution is in

private hands in the form of companies and business organizations that exist
separately from people associated with them.

It is also an economic system based on profit motive which is a value, based on a

critical assumption about human nature that characterizes human beings as basically
economic creatures who recognize and are motivated by their financial interests. In
turn, this pursuit of self-interest gives the system the characteristic of uneven
distribution of wealth.

Capitalism is also used interchangeably with the concept of competition of the free
market – another one of its values. It generally rejects central economic planning

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preferring to let the market forces determine production and distribution, which implies
that government regulation is not necessary. Yet it has been observed that imbalances
and inequalities still exist.

? THINK POINT
Capitalism has shown itself to be capable of reform & improvement in some
countries such as the U.S., Western Europe & Japan. In your view does
capitalism hold the same hope for developing countries.

Libertarianism
Libertarianism rests on the value of liberty. It is based on the presumption that
freedom from human constraint is necessarily good and all constraints imposed by
others are necessarily evil, except when needed to prevent the imposition of greater
human constraints.

Robert Nozick, one of the exponents of Libertarianism claimed that the only basic
right that everyone possesses is the negative right to be free from the coercion of other
human beings. The only circumstances under which coercion may be exerted on a
person, is when it is necessary to keep that person from coercing others.
The Libertarian view justifies free use of property, freedom of contract, institution of
free markets in which exchange of goods can take place as people choose and without
restrictions, and the elimination of taxes for social welfare programmes. Thus there
appears to be no place for positive rights in this system.
Nozick strongly believed in the ability of people to forge their own destinies without
communal interference. This claim in effect means:
“From each according to what he chooses to do, to each according to
what he makes for himself (perhaps with contracted aid of others),
and what others choose to do for him and choose to give him of what
they’ve been given previously. In other words: From each as they
choose, to each as they are chosen” (Marcus, 1998:186).

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This for Nozick, constitutes a just society.

One of the criticisms of this stance is that: since there are so many different kinds of
freedoms, allowing one kind of freedom to one group entails restricting some other
kind of freedom for some other group. Therefore, if constraints require justification,
then so will freedom.

ACTIVITY 5 a
One of the Libertarian views is that there is no place for positive rights in the
scheme of things. Challenge this view in relation to social welfare.

Socialism
Justice in Socialism is based on the values of needs and abilities, hence:
“From each according to his ability, to each according to his needs” (Velasquez,
1998:110). In other words, work burdens should be distributed according to peoples’
abilities, and benefits should be distributed according to peoples’ basic needs. This
socialist view underscored the thinking and writings of Lenin and Marx.

Benefits produced through work should be used to promote human happiness and
well-being. This, according to socialism, is the only way that justice will be promoted
in society.

Among the criticisms of this principle is: the theory if enforced, would obliterate
individual freedom since the type of work a person enters into is determined by his/her
ability and not his/her choice. Also, goods one gets are determined by needs and not
free choice, therefore if one needs a pair of shoes and some flowers for the house,
one would have to take the shoes only.

In socialist societies, some central government agency decides what tasks should be
matched to ability and what goods are allotted to needs – all this at the expense of
people’s freedom of choice.

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? THINK POINT
Consider this principle in relation to incentive, productivity and economy.

Utilitarian Social Welfarism

In Utilitarian Social Welfarism, the underlying value is happiness which is a desirable

end. The doctrine of utilitarianism has come to be used in the search for balance
between freedom for self-realisation (individual) and a collective concern for the
general well-being – what produces the most good (utility, happiness) for the most
people. This then becomes an index of a just society. Attempts at reshaping social
caring programmes usually resort to the utilitarian philosophy and personal freedoms
as dominant motifs but with some necessary adjustments.

Sometimes own happiness has to be sacrificed for the happiness of others, e.g. where
the majority forms an underclass, the need arises for a search for a moral rule that will
maximize human happiness if it were universally followed. Rule Utilitarianism will be
the answer. One cannot perpetuate a situation in which the underclass has a function
for the advantaged. This would be morally wrong, therefore, unjust. Rule utlitarianism
will yield a higher level of social utility because it requires wider respect for other
people’s rights and for one’s own specific obligations (Chryssides & Kaler ,1993:135).

? THINK POINT
Society has an obligation to assist those in absolute poverty. Consider this in
relation to the Utilitarian Welfarism approach.

Egalitarianism ( Compulsory reading: Chryssides & Kaler : 213-220 or

White:89-100).

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In his book A Theory of Justice published in 1971, John Rawls, an American

philosopher, aimed to give an account of justice that embodies a Kantian conception
of equality, and as a modern alternative to Utilitarianism. Rawls combines Kant’s
respect for each individual with the utilitarian preference for the greatest good for the
greatest number.

Rawls argues from the principles of the social contract theory. He starts off
interestingly, with a purely hypothetical situation of equal liberty and an initial position
of equality. In this situation the principles of justice are chosen “behind a veil of
ignorance” as it were. The assumption is that this is an appropriate status quo and
therefore, the fundamental agreements reached in it are fair – justice as fairness –
principles of justice being agreed to in an initial situation that is fair.

Rawls’ Principles of Justice ( White: 94-95)

Each person has to have an equal right to the most extensive basic liberty compatible
with a similar liberty for others.

Social and economic inequalities are to be arranged so that they are both :
Reasonably expected to be to everyone’s advantage, and Attached to positions and
offices open to all.

These principles, Rawls maintains, are a special case of a more general concept of
justice that can be expressed as follows:

All social values – liberty and opportunities, income and wealth,

and the bases of self-respect – are to be distributed equally
unless unequal distribution of any, or all of these values, is
to everyone’s advantage.

Rawls considered justice as the first virtue of social institutions. He maintained that in
a just society the liberties of equal citizenship is a given. Certain assumptions
underlined his principles of justice:

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A society is a more or less self-sufficient association of persons who in

their relations to one another recognize certain rules of conduct as
binding and who for the most part act in accordance with them

These rules specify a system of cooperation designed to advance the good

of those taking part in it

Despite the above society is typically marked by a conflict as well as by an

identity of interests

Social cooperation and an identity of interests make possible a better life for all

Conflict of interests comes about because persons are not indifferent to

how the greater benefits produced by their cooperation, are distributed.
Each prefers a larger share to pursue their ends.

Thus Rawls arrived at the need for a set of principles that would provide a way of
assigning rights and duties in the basic institutions of society and that would define the
appropriate distribution of the benefits and burdens of social cooperation. These
constituted his principles of social justice.

The basic structures of society that Rawls had in mind were political, economic and
social arrangements. The various social positions contained in this structure present
especially serious inequalities. The principles of social justice apply to these
inequalities which presumably are inevitable in the basic structure of any society. To
Rawls, the justice of a social arrangement depended essentially on “ how fundamental
rights and duties are assigned and on the economic opportunities and social
conditions in the various sectors of society” ( White: 90).

Questions of justice arise primarily when free and equal persons attempt to advance
their own interests and come into conflict with others pursuing their self-interests.
According to Rawls, in a well-ordered society there should be institutions that enable

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individuals with conflicting ends to interact in mutually beneficial ways, hence the focus
on social justice ( See also Boatright: 82)

ACTIVITY5 b
Rawls pointed to two ambiguous phrases in the second principle. These
phrases are everyone’s advantage and open to all. Comment on these,
giving an example of how easy it is to disregard this principle.

Section Summary

Five theories of justice relating to differing value assumptions have been discussed
each pointing out what is or should be valued highly by any society. The fifth theory
(Egalitarianism) based on Rawls’ theory of social justice was seen as an attempt to
transcend the arguments presented by the other theories. The key thinking is around
distribution of the good and the bad in society. Moral issues in relation to distribution
of wealth, income, status, power and control, etc., were considered as was the most
just distribution of these through political, economic and social institutions.

SELF ASSESSMENT ACTIVITY 5

Capitalism is known to be a worldwide system, yet there always seems to be
a barrage of criticisms levelled against it. What for you, would be some ethical
questions and concerns, around which you may ponder, and for which you
may be anxious to seek answers?

(see end of section for some suggested answers)

SUGGESTED ANSWERS TO ACTIVITY 5(a)

Libertarian view on positive rights

This view is oblivious to the reality of those people who (invariably for no fault of their
own) are not able to support themselves and who do have positive rights which can
conflict with negative rights. They do not have freedom from the coercion of other

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human beings; nor do they have the unrestricted freedom to choose, otherwise they
would not be in dire straits.

In society generally, there are the ‘haves’ and the ‘have-nots’, the former getting
wealthier, the latter having to depend on outside help – inequalities. This outside help
is largely through government intervention, without which the gap can get wider and
the poor will remain at a subsistence level – a form of coercion? Who sustains this
coercion? So there has to be compulsory taxation to fund welfare programmes in order
to help the poor. (Gone are the days of mutual aid!) Therefore, the Libertarian view
that taxes for social welfare should be eliminated, is not justified. This, together with
wishing away positive rights is a utopian dream. Mind you, if it did work we might not
be struggling with concepts such as the ‘Welfare State’ or ‘Sustainable Social
Development’.

It may be a better proposition to look for justice in the theories of Rule Utilitarianism or
Social Justice!

SUGGESTED ANSWERS TO ACTIVITY 5(b)

Rawls’ two major principles
Rawls’ principles of justice rest on equal liberties of all in a just society in which all
should have same basic rights.

The second principle refers to those aspects of the social system that specify and
establish social and economic inequalities. These inequalities are to be arranged so
that they are attached to positions and offices open to all under conditions of fair
equality of opportunity. Discrimination violates this principle. Arbitrarily giving some
individuals less of an opportunity to compete for positions, than others, is unjust.
According to Rawls even if distribution of income and wealth is not equal, it
nevertheless, must be to everyone’s advantage. Be rational, accept less; it will be to
the advantage of all. Violations of this, principle is known to be operating in various
companies and organisations especially in relation to awarding contracts and filling of
vacant posts. The manner in which the whole tender process and the process involved
in the filling of vacancies , is seriously flawed.

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SELF ASSESSMENT ACTIVITY 5 – SUGGESTED ANSWERS

Questions and Concerns around Capitalism

On the right to own property: Is this right morally defensible? Should it be subject to
any restrictions?

In a capitalist economy, goods and services for sale are supposed to stem from what
consumers want, but many products present ethical problems relating to addiction and
harm e.g. tobacco and alcohol consumption, gambling, use of guns and other lethal
weapons. Should the freedom of the market be respected or should government
restrict what can or cannot be bought and sold? Will a democratic society tolerate this?
Besides, what about governments, multinationals and organizations such as sports
bodies themselves being involved in deals?

The process of buying and selling frequently involves negotiations and it is known that
the most skilful negotiators get the best deals. Are the tactics used by them always
above board, should they be or can they be defended as ethical strategies? What
about cut-throat actions and shady deals that are known to go on in most transactions.

On the competitive feature of Capitalism: Does it breed hostile and anti-social

attitudes? Does it make people in different business organizations regard one another
as enemies to conquer or is there room for mutual cooperation?

Capitalism encourages generation and accumulation of wealth but is characterized by

an uneven distribution of wealth and extremely so in developing countries. How can
one reconcile this form of economic system with the high levels of poverty in the
developing world? How can this inequality bring about the greatest good for the
greatest number? Puzzling questions are: should it have to? How can extreme wealth
juxtaposed with extreme poverty in the same economy be justified? If it cannot be
justified, then what? Should wealth be limited? Should the wealthy invest in projects
that would produce greater social benefits? Then what about violation of individual
freedom, rights to ownership and personal control of own property? (“My wealth is an

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outcome of my hard work – why should anyone else have a say in it or grudge me for
it?”)

Capitalism claims that it promotes freedom throughout all its activities – everything is
voluntary. There is no compulsion or coercion in respect of activities of all stakeholders
– employers, workers, suppliers, consumers, etc. Does capitalism actually deliver as
much freedom as it seems to promise? What would be the views of Deontologists on
this?

Ironically capitalism invariably operates in democracies and even in these contexts it

is known to have labels such as selfishness, greed, callous indifference, exploitation,
etc., thrown at it. Is this morally justifiable or can it be challenged? What is the role of
democracy within capitalism?

Finally, globalisation an off-shoot of capitalism, has become a dirty word globally

(excuse the pun!). How will the odds play out between the developed and the
developing worlds within the current dynamics between these polar positions? We
have now an Africa Union just as we have a European Union.

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CHAPTER 6

ETHICAL THEORIES: PSYCHOLOGICAL

PERSPECTIVES

At the end of this chapter the student should be able to have learnt:

• Understand four schools of thought, with a psychological perspective, relating

ethics to changing people’s behaviour

• Appreciate an organizational model of psychology and ethical development

• Demonstrate awareness of gender similarities and differences in ethics and

decision-making

• Learn more about discourse ethics – a neglected area of ethical theory

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Introduction
Previous discussions on ethical theories showed what should or should not be done.
We now have to examine our capabilities in behaving ethically and changing our
behaviour where this is called for, mindful of individual and group differences.

Other disciplines especially from Psychology will be considered in order to establish

how they may be used in relation to ethical behaviour. These psychological
perspectives may help one to understand how what one calls good and evil tendencies
of human beings, have come about, and to explore if they can furnish reasons why
what we call good is preferable to what we call evil.

The field of Organisational Behaviour (OB) is interested in understanding human

behaviour in organizations. It is also concerned with predicting and controlling human
behaviour for improved organizational performance. Organisations are in part micro-
political systems. Part of the process of making political decisions work, is the
acceptance of decisions made on a proper basis. It makes compliance obligatory.
Grounds for criticism in ethical terms arise, when people are deceived by the
withholding of information, by manoeuvring, etc. The fact that people do comply when
it is proper to do so bears testimony to the force of moral commitment.

Our concern lies with the fact that business operates in a context of changing ethical
values. This is overwhelmingly borne out by the volume of allegations and evidence
on unethical behaviour that gives rise to scandals, declining public confidence,
influence-peddling by political appointees, cheating, theft, fraud, collusion among
military contractors, bribery etc. etc. Ethical predicaments present themselves in
situations of actual or potential harm in which we see value-conflicts, opposition
between individuals and groups, controversy about means and ends, etc.

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? THINK POINT
Think of one instance of instinctive behaviour and another of rational
behaviour.
What makes them different?

Psychoanalytical Approaches

Sigmund Freud (1856-1939) presented a psychoanalytical framework for human

behaviour. He found that behaviour could not always be explained consciously,
therefore the major motivating force in humans was unconscious in nature.

The personality structure according to Freud could be explained within the

unconscious framework by three inter-related often conflicting psychoanalytic entities:
the Id, the Ego and the Super-ego.

The Id is the core of the unconscious and is constantly struggling for gratification and
pleasure manifested through the libido (sexual urges), and aggressive instincts. As
individuals develop and mature they learn to control the Id, although it remains a
driving force throughout life. It is an important source of thinking and behaving.

The Ego is the conscious. It represents logic in the Freudian approach. It is

associated with the reality principle. It keeps the Id in check through the realities of the
external environment and interprets reality for Id through reason and intellect – the
whole socialization process. Attempts to resolve conflicts between the Id and the Ego
are made by the Super-ego.

The Super-ego is depicted as the conscience. It provides norms that enable the Ego
to determine what is right and wrong. It is developed by the absorption of cultural
values and morals of society e.g. unconscious identification with parental values and
morals. It assists the Ego to combat the impulses of the Id but can sometimes be in
conflict with the reality seeking Ego when it violates conscience.

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Obviously a balance in these interrelationships is needed since too little socialization

leads to anti-social behaviour and too much socialization may manifest in a strong
need to fit in, to conform, etc.

? THINK POINT
Can you recall anytime when you fell under the hypnotic spell of a leader and
became like a helpless dependent child following the internalized voices of
it’s parents.

Carl Jung (1875-1961) spoke about archetypal awareness and entered into another
realm of thinking about consciousness and the manner in which persons make contact
with the world of experience. He emphasized that people are different in fundamental
ways despite the same multitude of instincts to drive them from within. Our preference
for how we function is important as it gives us our uniqueness, hence our ‘types’.
Jung described three levels of personality:

A conscious level at which we keep in touch with our daily reality

An unconscious level in which our uniqueness operates
A collective unconscious in which are stored our universal evolutionary
experience. (Davies, 2000: Section 6. p.4).

Jung’s introvert-extrovert typology also presented a way to type personalities in terms

of behaviour or psychological factors. Of course this is not usually so neatly separated,
human personality being the complex entity that it is.
Central to Jung’s system is the concept of:
Individuation – a striving for self-actualisation – is the ongoing process
of personal emergence and growth over the period of a person’s total
existence. It does not just happen. It depends on the way in which the
individual comes to realize the essential nature of the self.

Other aspects of the personality identified by Jung are:

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The darker self – the inborn, indwelling aspects of the human animal
The shadow – the private and personal characteristics that we hide from
our own awareness and from the observation of others – frequently the
personality containing characteristics that we reject and cannot accept
within ourselves The persona – the mask of conventional attitudes and
behaviours adopted to adjust to our social milieu – the roles we can play
– the personality that we expose in our social relations.

ACTIVITY 6 (a)
We all know that there is a transparent side and a ‘dark’ side to business
organizational life. What behaviour and activities may be interpreted as an
organisation’s ‘dark’ side?

Learning Approaches
Behaviourism
The classical stimulus-response conditioning considered by Pavlov is only a very small
part of human learning. It is a microscopic approach to behaviour change based on
methods of conditioning and reinforcement. We have to know what in the environment
acts as a stimulus to evoke inappropriate response, e.g. a violent reaction to the
slightest indication of disappointment ( behaviour that can arise within an
organization). We also have to ask: if there is a linkage between stimulus and
response, what acts as a means of continued reinforcement, rewards and gains that
perpetuate a learned pattern? The theory, therefore, proposes that if the stimulus or
reinforcing mechanism were changed, then response would cease.

Gestalt Theory
The founding of Gestalt theory is usually attributed to Max Wertheimer around 1912.
Gestalt theorists did not agree that involuntary stimulus-response conditioning alone
adequately applied to the more complex human behaviour. Adherents of the Gestalt
school believed that the whole is greater than the sum of its parts, i.e. the whole is
perceived differently from the sum of the ways of the parts would be perceived.

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Gestaltists say that we learn through processes such as introspection and insight, not
through the behaviourist trial and error.

? THINK POINT
From an ethical perspective what type of Manager will make your life easier –
a Behaviourist or a Gestaltist?

Social Learning
Social learning theory moves away from the individual. It is essentially an interpersonal
experience in which exchanges and transactions that foster learning and change may
be enacted in a dyadic relationship or in more complex multiple relationships, the latter
characterizing families, groups, work teams and other collectivities. It is in such groups
that impressions, meaning and intentions also need to be discovered and brought into
the open.

? THINK POINT
Have you experienced changes in your attitude that you can ascribe to your
relationships within your family and those with your colleagues at work or
friends?

Social Group Approaches

These approaches study individual behaviour in relation to social environment,
especially other persons in it, individually and collectively. It is also a study of individual
behaviour within a group. A group refers to the transactions of small face-to-face
clusters of people and takes account of the processes of problem-solving, decision-
making, conflict stimulation and reduction, communication, division of labour,
leadership development, cohesion and task fulfillment. It has its own ethical climate.
One can belong to a secondary group as distinct from primary groups such as the
family, out of choice, necessity or interest. Joining a group meets the need for
affiliation and association, and remaining a member of the group offers a sense of

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cohesion. The focus is on structural- functional aspects of the group to the extent that
they affect individual behaviour.

The influence of the group may not always be positive or benign. There could be some
threat to the individual self. Depending on the stability of the self as it confronts the
power of the group, some dissonance may be inevitable.

The group influences the individual in the following ways:

• sacrifice some part of our belief system in order to remain an active and
accepted part of the group ( effect-dependency, group approval)
• individual aspirations may have to be set aside in favour of the general good
• (loss of identity – sense of individual responsibility is diffused)
• one’s usual patterns of relating and one’s essential convictions may
shift some what out of harmony with the group norms (awareness of
conflict)
• balance that shaped the wholeness of the self comes into question; values that
supported the self-image may become doubtful; rational processes may have
to be realigned.

On the plus side, the tension creating mechanism and experience within the group can
offer the individual impetus for learning and change (social facilitation).

Group dynamics are concerned with interactions and forces among group members
in a situation. Ideally, group dynamics should characterize the group as an organism
in its own right without violating the essential values of its members. This is a
frequently used social work method for problem-solving and behaviour change for
instance. In business organizations many instances of group norms versus individual
norms arise, focusing on conflicts, rights, obligations and dilemmas.

? THINK POINT
In the recent past have you experienced any group constraints at your
workplace; how have you coped with this?

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Cognitive-Developmental Approaches
One of the central aims of the study of ethics is the stimulation of moral development.
Moral standards are absorbed from family, friends, religious and social organizations.
A sense of ethics arises when a person questions whether or not moral standards are
reasonable, and looks at their meanings for situations and issues.

There is the mistaken assumption that a person’s values are formed during childhood
where any further change stops. It has been established that as people mature their
values change in profound ways. As one grows older the ability to deal with moral
issues develops as physical, emotional and cognitive abilities develop. By the same
token, just as physical development goes through identifiable stages of growth, the
ability to make reasonable moral judgments also develops in identifiable stages
(Velasquez, 1998:24-25).

Jean Piaget broke away from Freud’s idea of the instinctive unconscious being the
critical variable in developing personality. His focus was on the conscious. His
research concerned children and their moral and intellectual development.

His three stages of the development process included:

Pre-operational (4-7 years) characterized by ego-centredness and
acceptance of authority
Concrete Operational (7-12 years) characterized by differentiation from
others; Socially and externally oriented; fairness in competition on the basis
of cooperation, interaction and reciprocity rather than authority
Formal operational (13-18+ years) – capable of handling abstract thought and
hypothetical concepts – beginning to reason on a rational basis

Piaget pointed out that in the normal development of children the ability to deal with
abstractions and concepts in a formal and organized fashion does not take place until
the mid-teens and represents the last stage of cognitive maturation. He underscored
the importance of education. Lawrence Kohlberg presented moral development

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through three levels each containing two stages. The second stage of each level is
the more advanced and organized form of the general perspective of the level.

1) Pre conventional Level: Primary motivation is self-centred:

Stage 1: Punishment and obedience orientation
Stage 2: Instrument and relativity orientation – actions to satisfy own needs
2) Conventional Level: Conformity to group norms, subordinating needs of individual
to those of the group:
Stage 3: Interpersonal concordance orientation - seeking approval - being the
“good” performer
Stage 4: Law and order orientation – loyalty to larger society – duties and obligations
are defined
3) Post conventional Level: Autonomous or principled stages – fairness, justice,
human rights, society’s overall welfare:
Stage 5: Social contract orientation – reaching consensus by agreement, contract and
due process
Stage 6: Universal ethical principles orientation – dealing with justice, equality, respect
etc.
(Velasquez, 1998:25-27).
It is important to note that Kohlberg pointed out that people do not progress through
the stages in the same sequence; that some do not go through all the stages and could
remain at one of the earlier stages.

A criticism of Kohlberg’s model indicates that it implies that the second stage at each
level denotes progress in the sense of being morally preferable. Further argument is
required to make it more acceptable.

For an Organisational Model of Psychology and Ethical Development designed by

Petrick & Wagley (1992) see Appendix 9.

? THINK POINT
What do you think is the specific way in which right and wrong are defined at
each of the three levels of Kohlberg’s moral development model?

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Gender Bias in Psychological Research

One of the critics of the research conducted by Kohlberg and other psychologists in
the area of moral development was Carol Gilligan who criticized Kohlberg’s theory as
having a male bias and that it provided no knowledge and in fact ignored, the aspect
of the pattern of development and moral thinking of women. In her book In a Different
Voice: Psychological Theory and Women’s Development (1982), Gilligan presented
the female approach to morality and highlighted the “caring” and “being responsible”
for others with whom one is involved in personal relationships, as against the matter
of adhering to impartial and impersonal rules attributed to men. She presented the
moral development of women following the levels of Kohlberg’s model as follows:

At Pre-conventional Level, a woman’s moral development is marked by caring for

oneself.

At Conventional Level, women internalize conventional norms about caring for

others but neglect themselves.

At Post-conventional Level – the most mature level – women become critical of

conventional norms they had earlier accepted and achieve a balance between caring
for others and caring for themselves.

(Velasquez,1998:28-29; Davies,1997: Ch.11)

One has to guard against overlooking similarities between men and women, and the
fact that differences may be due to factors other than gender.

An interesting extension of the feminine perspective of caring may also be found with
regard to ethics and environment (ecofeminism) as discussed in Velasquez
(chapter 5, pp.288-289).
ACTIVITY 6 (b)
What are some of the biases that enter into the hiring of women to fill
managerial positions?

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Discourse Ethics
Berleur & Brunnstein (1996:246) refer to Jurgen Habermaus’ ideas on ‘the ethics of
the discussion’ or ‘discourse ethics’ as a concept that theorises the way the ‘life-
world’ of individuals may become the source of a common and consensual action,
being morally founded.

Argumentative procedures established in discourse ethics provide the living actors

with the capacity to overcome their own particular interests and define common norms
about the way to live and act together.

From a philosophical point of view discourse ethics aims to overcome dilemma and
impasses, e.g. as it could apply to a consideration of Kant’s categorical imperative.
Through this argumentative procedure particular discourses may reconcile or at least
define a ‘horizon of universalisation’ for the norms: the moral principle takes the form
of a procedural principle of universalisation which states that valid moral norms must
satisfy the condition that

All affected can accept the consequences and the side effects its
general observance can be anticipated to have for the satisfaction of
everyone’s interests (and these consequences are preferred to
those of known alternative possibilities for regulation)

The appeal of this theory lies in its capacity of thinking of ethics in terms of
deontological statements, i.e. founded on some universal principles by giving to them
an appropriate realization; that it allows us also to include the participation of many
and to give its real place to codes of ethics/conduct, etc. It may also give indications
of how to define self-regulation.

In this sense discourse ethics through the process of communication and discussion,
can serve the purpose of stimulating moral development among participants.

Velasquez (1998:30) suggests that “ Intense interaction and discussion of moral issues
with others develops our ability to move beyond a simple acceptance of the moral
standards we may have uncritically absorbed from family, peers, organization, nation

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or culture. By discussing, analyzing and criticizing the moral judgments we and others
make, we come to acquire the habits of thinking that are needed to develop and
determine for ourselves a set of moral principles to which we can reasonably assent.”

Referring to the debate initiated by Gilligan on Kohlberg’s model, Velasquez indicates

that one set of moral principles can be “better” when it has been processed through
rigorous, rational and reasoned examination, discussion and challenge with others. In
this process also, people improve their reasoning skills, they grow in their
understanding and knowledge of human life, and interact with others to develop a
firmer and more moral perspective.

? THINK POINT
What do you think may be some of the limitations of Discourse Ethics?

Section Summary
A range of psychological theories have been used to examine moral development of
individuals in wider society and to establish their impact on organizational behaviour.
Ethical behaviour in business organizations have acquired a negative image of great
concern to all. An attempt has been made to direct the search for the unravelling of
some of the moral dilemmas, to theories that offer insight into moral development,
learning and behaviour change.

SELF ASSESSMENT ACTIVITY 6

Despite prejudices and biases, there is a steady increase of women entering
the business world. What characteristics of women are likely to impact on the
management style in business and how different are they from those of men?

(see end of section for some suggested answers)

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SUGGESTED ANSWERS TO ACTIVITY 6(a)

The ‘dark side’ of organisations

The side of the organization transparent to the public may include: who the decision
makers are, who most influences decisions, if there are sufficient funds for projects,
the process involved in decision-making, etc.

The “dark side” of organizations include a whole range of features such as:
conspiracies of silence, jobs for pals, hidden agendas, collusion, black-mailing, shock
tactics, exaggerating and dramatizing to conceal the real things, bullying, deceit,
secrets, deviance, prejudice, horizontal and vertical ‘oppression’, etc.

There is also the grip of self-interest – striving for power and personal gain – also
striving for survival in a competitive corporate environment.

Succumbing to darker side within human society – unconsciously or consciously

supported by all – a kind of connivance.

Unconscious motives of managers and workers may be based on a blind belief that it
is all for the ‘collective good’ (Manager), and uncertainty and anxiety for a whole range
of reasons, e.g. fear of redundancy, lack of skills and knowledge (employees).
Need for recognition may also be a motive.

Controlling what should be revealed to others. This is governed by a range of factors:

stresses the organization is experiencing, poor impulse controls of managers and
workers ( perhaps their personalities), the actual problem situation, power relations,
self-interest. Insight and awareness of these factors make it possible for people in the
organization to manipulate responses.

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SUGGESTED ANSWERS TO ACTIVITY 6(b)

Prejudice against women in managerial positions

Prejudice against appointing women to managerial positions exist even where there is
supposed to be an affirmative action policy. So women may not get plum positions
easily.
Much of this prejudice stems from mere perception. Frequently, women are not
perceived to be as highly qualified as they really are even when their qualifications
compare more favourably than those of other candidates.

Past prejudices against women in society generally is a factor that explains why
males simply do not take women seriously. This attitude downgrades women’s
apparent quality and introduces subjective elements in evaluations that lead to
systematic lowering of women’s perceived qualifications. Very often the conclusion
arrived at is that the woman simply did not “look the part” – whatever that means!
The fact that she was accepted at an accredited tertiary institution where she recived
her qualifications on merit, and which equip her for such positions, and the fact that
she might have good experience (if she was lucky enough to get any!), are completely
ignored.

The male attitude also diminishes the woman’s choice of obtaining a prestigious
position for which she may well have the competence, and where she will have the
opportunity of undertaking important responsibilities. Having a woman in the
Boardroom is just not kindly entertained by men.

Present prejudice builds up against women candidates for senior jobs especially in
some societies, in the light of the introduction of affirmative action. Thus even if a
woman is recognized as having done a good job in some previous post her
performance is more likely to be attributed to factors other than ability. Yet a man’s
unsuccessful performance may very well be attributed to ‘a bit of bad luck’. The fact
that a woman can have future repeated success is not even considered since this may
pose a threat to the male ego.

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Even references on women tend to be ‘wishy-washy’ and to emphasise personal

appearance and a ‘friendly disposition’ rather than any account of her previous
commendable experience and her demonstrated intellectual ability, nor any
information of the value of the work previously performed by her.

Women are, therefore, systematically undervalued with respect to some of the most
widely used indicators of quality.

Lack of objective criteria for judging the worth of a person also prejudices the case
against women getting managerial positions. Even if criteria are objective, subjective
interpretations and conclusions mar their chances. It is, in short, an all-round battle for
survival for women in a traditionally male-dominated competitive business
environment.

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SELF-ASSESSMENT ACTIVITY 6 - SUGGESTED ANSWERS

Management styles of men and women

Two viewpoints, one from a Management Consultant, Marilyn Loden and the other
from a researcher in this field, Judy Rosener, adapted from White (1993: 158-159) are
presented.

Loden views the management style of a male manager in a large organization with a
bureaucratic hierarchy as based on authority; orders flowed from management to
labour. Goals and procedures were set by managers. It was taken for granted that
managers were more knowledgeable and more capable of making decisions focusing
on efficiency and profitability in the business. Workers simply followed the manager’s
instructions. This was a style embedded in the very nature of business.

With the advent of women in current business activities, gender has been seen to play
an important role in management style.

Women’s style of management is characterized not so much by authority as it is by

communication, consensus building, cooperation, empowerment and mutual
respect between manager and worker.

The structural differences in the traditional social upbringing of men and women in
most societies may have a great deal to do with the differences between men and
women managers in business. Each gender displays different value traits and world
views.

In Loden’s view the male could well value competition, the need for control, more
aggressive behaviour and perhaps the ability to think more analytically and
strategically. His leadership may employ a competitive operating style; his basic
objective may be to win or come out on top, and his problem-solving style may be
rational.

The key characteristics of a masculine model of leadership may be identified as: high
control, strategic, unemotional and analytical. One may add: high ambition.

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By contrast, women tend to rely on emotional data and value the aesthetic, social
and religious dimensions of life. This does not mean that they are not rational. They
are more caring. They prefer a cooperative operating style in an organization
structured around a team rather than a hierarchy. Their main objective is quality output
and while their problem-solving style is rational, it is also guided by so-called women’s
intuition.

Key characteristics of a feminine model of leadership may be identified as: less

controlling, empathic, collaborative and high performance standards. To this
may be added: nurturance and a knack of knowing how to get the cooperation of
everyone in the team.

Women tend to maintain positive working relationships, are open to considering

feelings in as much as they do take into account basic facts in decision-making.
According to Loden women will strive for solutions in which everyone is a winner (not
only the manager) and they tend to avoid situations where someone must lose. They
also focus on the improvement of the long-term soundness of the organization.

Rosener reports on similar findings.

Men describe themselves as “transactional” leaders – they view their performance
as a series of transactions with subordinates – exchanging rewards for services
rendered or punishment for inadequate performance. They are more likely to use
power that comes from their organizational position and formal authority.

Women see themselves as “transformational” leaders – getting subordinates to

transform their own self-interest into group interest through concern for a broader goal.
They ascribe their power to personal characteristics such as charisma, inter-personal
skills, hard work, personal contacts rather than to organizational stature – positive
interaction with subordinates to everyone’s advantage.
Women encourage participation, share power and information, enhance other
people’s self-esteem and encourage others to get excited about their work in order to
give workers a feeling of empowerment and importance that could bring about a win-
win situation – good for all.

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These categorizations need not be so cut and dried. It is possible to find traits that
characterize management styles of both men and women shared and operating in
their respective modes of practice. A good blend of management styles should be
used to enhance effectiveness in business and contribute to profits.

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CHAPTER 7

MANAGING ETHICS IN BUSINESS:

ACCOUNTABILITY, RESPONSIBILITY
AND CORPORATE GOVERNANCE
At the end of this chapter the student should be able to have learnt:

• Evaluate business ethics from a business point of view

• Critique two views of the relationship between business and society in

a Capitalist, free market system

• Demonstrate knowledge of the validity of transferring notions of

individual responsibility to corporate responsibility

• Evaluate proposals to improve corporate governance (accountability in

business organizations)

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Introduction
The structure of Capitalist economy raises fundamental ethical questions to which no
easy answers are given. Similarly, the main institution that conducts business in such
an economy – the corporation – also raises ethical questions around which there is
ongoing debate.

The focus in this section will, therefore, be on matters of social responsibility, corporate
governance and accountability in these contexts. These issues are addressed via two
opposing views on the role of business in society.

The Business Context and Business Ethics

Revisit Section 1 of this Module and the two Appendices marked 2 and 3.

In Appendix 10 Gordon Pearson (1995) shows the evolution of a business company

and the ethical rules that emerge, also indicating how the changing patterns of
ownership directly impacts on the company’s philosophy, ethic and spirit.

In Appendix 11 Pearson links ethics to company strategy, objectives and goals. The
Appendix shows a hierarchy of objectives, an emphasis on transactions with certain
stakeholders, and a level of integrity adapted from Kohlberg’s taxonomy on moral
development.

Pearson focused on the level of integrity for successful business operations,

dependent on both changing ownership and on company goals.

Before proceeding with an examination of the two opposing views on the nature of
business and their social responsibility, it may be of value briefly to look at some
popular and unexamined notions about business ethics, such as:

• Ethics is a personal and individual affair, not a public or a debatable matter

• Business and ethics do not mix
• Ethics in business is relative

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• Good business means good ethics

ACTIVITY 7 (a)
Do you agree/disagree with any of these statements? Give your reasons.

Two Opposing Views

The consideration of the two opposing views of business and society is based on the
accepted but still debatable arguments on the social responsibility of business.
Business corporations have economic and legal responsibilities; in addition, they have
corporate social responsibility which they may express as: a voluntary assumption of
responsibilities that go beyond purely economic and legal responsibilities. The social
responsibilities may be ethical and not necessarily codified into law but are expected
of business by society. They may also be discretionary, not legally required nor even
demanded by ethics, but corporations accept them to meet society’s expectations.

The issue of corporate social responsibility in a Capitalist, free market economy clearly
sits between two opposing views of business and society – one based on a restricted
position stating that corporations have no social responsibilities beyond making a
profit; the other coming from a position that states that corporations ought to assume
a more active role in addressing major social problems.

The ‘Business of Business is Business’ View

The classical view of business as expounded by Adam Smith in his Wealth of Nations
(1776) referred to the ‘hidden hand’ – the more a person pursued self-interest the more
the person would unwittingly – by means of the ‘hidden hand’ – enrich society. In
increasing one’s wealth the individual engages in deals with other people that
unintentionally benefits society by increasing its wealth – a ‘trickle down’ approach.

Milton Friedman who echoes Adam Smith’s ideas is the more recent advocate of this
view which holds that the primary responsibility of business is to maximize returns to
shareholders within the confines of law and ethical principles. He believes that
corporations should engage in purely economic activity and be judged in purely

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economic terms. He does not totally disregard social concerns as unimportant but says
that they should be left to government and other institutions in society. He believes
that as long as business is played by the ‘rules of the game’ (legitimately) in ‘open and
free competition without deception or fraud’ (within the free market system) it would
unintentionally benefit society and should be left to carry on with its specified activities.
The ‘invisible hand’ and restraints from market forces and government regulations will
promote an end which Friedman believes has no part in the purely business intentions.

? THINK POINT
There are developing countries in which a capitalist economy (or even a
modified form of mixed economy) prevails. How would Friedman’s view work
in countries with sophisticated business organizations on the one hand, and
mass poverty on the other? Has it ever been seen to work with any degree of
sustainable success?

The Social Contract View

There were reactions to what was regarded as Friedman’s hard and narrow line of
arguing against the claim of corporate social responsibility.

The social contract view argues that business serves as the justification for the
existence of the corporation. The social contract is regarded by its proponents as a
moral ideal, as a law higher even than the State, against which even the State may
have to be evaluated.

The case for the social contract in business rests on the following: Corporations, (i.e.
firms, businesses or companies) exist through the cooperation and commitment of
society. Business draws its employees from society, sells its goods to society and is
given its status and licence to operate, by society. All this implies an agreement of
some kind between business and society. If a corporation depends on society for
providing the conditions of its existence, then there must be something for which
society could hold a corporation responsible.

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The social contract between corporations and their stakeholders is often based on
implicit and explicit agreements. Acting in an ethical manner that shows concern for
the public that invests and for the consumers, is important for gaining public
confidence. Werhane cited in Weiss (1998:100) refers to the non-economic basis that
binds corporations to their stakeholders and to the contractual understanding among
corporation, stakeholders and employees based on trust and dependence.

The view that corporations are analogous to individuals, have a conscience and act
as moral agents in its stakeholder relationships, to some extent appeals to Goodpaster
and Matthews (1982) the exception being that they do not subscribe to the analogy
with individuals. Nevertheless, they believed that understanding organizations as
persons provided a framework superior to that of corporations being impersonal
institutions. They accepted corporations as no more nor less morally responsible than
ordinary persons.

? THINK POINT
Does a corporation have a conscience? Is a corporation morally responsible
to society? What is the source and basis of it’s moral responsibility? If a
corporation is more than a profit making institution, then to whom is it
responsible beyond it’s economic obligation.

Stakeholder Theory

Goodpaster in an article Business Ethics and Stakeholder Analysis cited in White

(1993:205) states that stakeholder was invented in the early 1960s as a deliberate
play on the word stockholder signifying that there are other parties having a stake in
the decision-making of the modern publicly held corporations in addition to those
holding equity positions. A stakeholder in an organization is (by definition) any group
or individual who can affect or be affected by the achievement of the organisation’s
objectives. Examples of stakeholder groups beyond shareholders and directors are
employees, suppliers, customers, creditors, competitors, governments, communities
and the environment.

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Since all these parties have a stake in modern business corporations , it can be argued
that a corporation is responsible to these stake-holders and that its business activities
have moral implications for it’s stakeholders.

Individual and Corporate Responsibility

Unincorporated businesses are owned by individuals or natural persons while the

ownership of corporations lie in indirect forms of shareholdings not legally identified
with people at all. They are separate from people and are treated as ‘juristic’ persons,
with perpetual succession. The same company can be continued for example, under
new management. The company has the legal right to use the company’s assets in
whatever way it wants regardless of who the shareholders are. Another feature is that
shareholders and employees enjoy limited liability and absolve themselves from any
debts which become that of the corporation. This negatively affects moral
responsibility of such persons. In these ways an overall separation of ownership from
responsibility, results.

? THINK POINT
What are the ethical problems that could arise when ownership is separated
from responsibility?

Friedman states that only people, (individuals, proprietors and managers), not
businesses, have responsibilities. He maintained that when stockholders bring a
company into existence through purchasing stocks, and it is the function of the
corporate managers to make a profit for the shareholders; it is a moral obligation for
managers to serve as fiduciaries for profit making for investors – not to use
stockholders’ money for social responsibility purposes. It was his view that if
shareholders want to give to social causes they can make their own decisions to use
their money to do so.

Managers are seen as trustees or agents of shareholders who in turn are principals
whose interests managers must serve. Invariably, for various reasons (practical and

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physical) managers carry out actions that ideally should be carried out by shareholders
themselves.

Another debatable matter is that of the other interests of managers that take
precedence over interests of shareholders. How do shareholders monitor managers’
actions? How do shareholders guarantee that managers have obeyed and made
correct decisions?

While modern corporations draw capital from a variety of sources of investors, their
greatest economic power is concentrated in the hands of a few managers.

In reality, managers dominate shareholders and control the corporations. A

managerialist premise is that the corporation is dominated by self-interested managers
who take actions contrary to shareholders’ interests, and maximize their own wealth
at the expense of shareholders. Active power and control are in the hands of
managers. Boards of directors are supposed to control managers through latent
power, in the name of shareholders, but there is a widespread belief that CEOs and
top level managers are all-powerful and that Boards are merely rubber stamps.

The debate continues over whether or not business and managers’ roles include
serving social stakeholders as well as economic stockholders. Questions raised on
this aspect are based on changing demographic and educational characteristics in the
workplace and the advent of laws, policies and procedures that recognize a greater
awareness of employee and other stakeholder rights, e.g. provision of child- care
facilities for women employees with very young children. On this score also distinctions
are being made about the responsibility of business to its employees and to the larger
society, e.g. funding health care clinics in rural areas and making contributions towards
the building of schools, etc.

Accountability and Responsibility

Much of the debate around accountability and responsibility revolve around the matter
of the organization or company as a juristic person and the individuals and natural
persons who form part of the company.

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Some people reflect the view that it is the people inside the corporation, not the
corporation itself, who carry the social responsibilities and must be held accountable
for any illegitimate and immoral acts. They are of the view that corporations cannot be
expected to display the same moral attributes as expected of persons. To yet others,
moral integrity does not belong in a company.

ACTIVITY 7 (b)
In the light of CEO’s actions in the recent international scandals in various
business Corporation, what would you see as acceptable qualities of a manager?

Goodpaster & Matthews disagree with the view that responsibilities of ordinary
persons and those of artificial persons like corporations, are separate. They regarded
these views as impediments to the development of business ethics “both as a field of
inquiry and as a practical force in managerial decision-making” (Chryssides & Kaler :
267).

Corporate behaviour can be evaluated according to ethical standards just as individual

behaviour is. Corporations act with intentionality (despite ideas to the contrary) and
therefore, should be held accountable for their actions not only because they are
legally and morally liable for their actions but they should also perform socially
responsible acts in their capacity as good citizens ( a categorical imperative).

While it may be conceded that corporations as legal entities and as collectives of

individuals and groups must maximize profits for owners and shareholders, they must
for this very reason and to survive and to succeed, also respond to legal, social,
political and environmental claims of a host of stakeholders inside and outside their
boundaries. Corporations are, therefore, socially and morally responsible to their
constituencies to the extent that they maintain responsible relationships with their
stakeholders, and respond to their legitimate rights and claims according to ethical
standards of fairness and justice.

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? THINK POINT
In the case of Thor Chemicals and mercury poisoning of employees and
members of the community, was the Company morally responsible for the
harm done to the victims of poisoning? Who in the company over the past
decades should be held responsible for the mercury poisoning?

Corporate Governance
The matter of corporate governance begs the questions:
Who should control a corporation?
Whose interests should a corporation serve?
( See Boatright, 2000:348-359)
A corporation brings together many different groups for the purpose of conducting
business. There are sometimes differing and conflicting interests among them. Whose
interests are to be served? The answer to this depends on the nature of the
corporation.

Is it the private property of stockholders who choose to do business in the corporate

form? This is an extension of property rights and the rights of contract that belong
to all persons.
Those who argue that corporations are accountable only to their Boards of Directors
who are shareholders who should entrust their governance to their CEOs and other
leaders, view the corporation as private property. As joint holders of shares they are
entitled to receive full proceeds.

If the corporation is a public institution sanctioned by the State for some social
good the right to incorporate is a privilege granted by the State and the corporate
property has an inherent public aspect. It is not merely a private association
created for the purpose of personal enrichment but a public enterprise intended
to serve some larger social good since they are part of a democratically
governed and constitutionally ruled society, e.g. Telkom, Transnet, etc.

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If the corporation results from the property right and the right of contract of every
corporate constituency, it is one where shareholders with other stakeholders
each own assets that they make available to the corporation. Shareholders alone
are not the sole owners. The rights of contract belong to all.

? THINK POINT
What are the values of the company you work for and what form of ethics do
they reflect? Are values taken at face value only or are they practised and
implemented by all stakeholders?

Whither Business Ethics?

Any effort to bring about change in the business system in relation to ethics will have
to be directed to: firstly, revisiting corporate strategies, structure, leadership, roles
and culture to see how they influence moral responsibility; and secondly, looking at
the need for corporations to identify and address social and moral responsibility issues
when implementing and evaluating their strategic plans – social audits may be
employed to monitor performance on social responsibility issues – changes in
society’s values and consequent demands on business reflect a growing need for
ethical standards as an integral part of corporate policy.
The future of business ethics will be largely influenced by society’s changing
perceptions about the contribution of business to society. These perceptions include
the adequacy of the free market system alone to contribute to society’s general
welfare.
Leonard J. Brooks (1989) gives reasons why corporations are increasing their present
and future focus on business ethics, and Richard Evans (1991) refers to a concept of
“total ethics” and a shift from the notion of business coexisting with society, to one
where it intentionally and actively participates in society as an integral member of
society.

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Section Summary

This section focused on the corporation (used interchangeably with terms such as
company, firm and business organization) in a capitalist economy in relation to ethical
questions and issues.

Social responsibility, corporate governance and accountability were examined as

affected by changing patterns of ownership and control.

The two opposing views of business and society discussed, offered a clear terrain in
which pros and cons of issues of responsibility, accountability and governance could
be argued.

What emerged from the attention given to these fundamental aspects is an immense
challenge to further examine issues of business structure, culture, control, etc.
especially in relation to ethical questions that are increasingly being raised by society
generally on what are the responsibilities of business to the society in which it exists.

SELF ASSESSMENT ACTIVITY 7

What does social responsibility mean to you? Give examples of events that
raised serious questions of social and moral responsibility and accountability,
and any others where social responsibility was seen to be met.

(see end of section for some suggested answers)

SUGGESTED ANSWERS TO ACTIVITY 7 (a)

Popular notions about business ethics

Assumption 1: Individuals do make moral choices in life (this includes business), but
this is not done in a vacuum. What about the roles of societal and organizational
culture in shaping and influencing members’ attitudes, perceptions and behaviour?
Moreover, business ethical decisions involve societal, organizational and even
international levels.

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Assumption 2: Business is not only an ‘economic’ activity but also a human activity
and can, therefore, be evaluated from a moral perspective. The belief (in relation to
ethics) that business operates in free markets is open to debate. What about
questionable practices of some firms and unjust methods of wealth and power
accumulation and distribution, e.g. through monopolies, oligopolies, etc? Protective
legislation may be required. In a free market and in mixed economies where injustices
thrive, ethics is a viable and lively topic.

Assumption 3: To a degree the claim that ethics is not based on absolutes has some
truth but not all ethics is relative. If ethical relativism were carried to its logical extreme,
no one could argue or disagree with anyone about moral issues since each person’s
values would be right and true for that person. How could interaction, communications,
transactions and negotiations be completed if ethical relativism were carried to its
limit?

Assumption 4: Where executives and firms maintain a good corporate image,

practise fair and equitable dealings with customers and employees and earn profits by
legitimate means, they are de facto, ethical. But there is no correlation between
‘goodness’ and material success. What about “excellent” companies whose activities
have gone beyond the profit motive and into arenas of shady dealings? Excellence
need not be restricted to material and technical things. There are such things as
customer service, maintenance of meaningful relationships, corporate integrity, etc.
Ethics is not something ‘value-added’ to business operations but is integral, necessary
and central to managing successfully. It is more accurate and logical to say “good
ethics means good business”.

No agreement with any of these assumptions – all being highly debatable.

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SUGGESTED ANSWERS TO ACTIVITY 7 (b)

Acceptable Qualities of Managers

Managers should be acutely aware of the importance of good principles and ethical
standards in the company and should ensure that these are espoused by the
company.

A Manager should truly care about business ethics and corporate social responsibility
and not merely pay lip service to it.

A Manager has to be proactive in working out business strategies that could be linked
to ethics, and be able to balance non-economic values with economic interests.

It is important for a Manager to steer clear of ethically questionable business

opportunities.

Managers should avoid doing business with people whose moral stance his/her
company cannot condone.

A good Manager will ensure that the values and behaviour of employees and new
recruits match those of the company.

A good Manager’s mode of functioning will always reflect integrity and high ethical
standards.

SELF-ASSESSMENT ACTIVITY 7 - SUGGESTED ANSWERS

Social Responsibility
Corporations accept social responsibilities when they take their objectives beyond
what business and economy, and the law require, to what they feel are ethically and
socially desirable – where they make room for non-economic ends.

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The social responsibilities of business are also located in its core clear- cut basic
economic functions around matters of production, provision of jobs and general
economic growth. These also carry social responsibilities, e.g. safety standards of
products, well-being of workers and serving consumers.

Business has to be sensitive to changing social values and priorities, e.g.

environmental conservation, employment policies, expectations of customers, etc.

In addition to all this, business should become involved in actively improving society.
There are major problems that affect society. Business may not be held entirely
responsible for these problems, but they do possess the wherewithal to bring about
positive change in social conditions and human misery.

Ways in which business can show social responsibility are:

-By being ethically aware and articulating non-economic values
-By contributing to non-governmental and non-profit organizations that
strive to improve the plight of society invariably under trying
circumstances
-By making every effort to maintain highly desirable standards of operation
as these affect products, employees, consumers, the environment, etc.
-By being proactive and including social responsibility and
accountability into strategic plans and policies – being ready to
respond by having policies and procedures in place so that should
crises arise, business is not found lacking in its ability and
preparedness to assist, nor displaying a knee-jerk reaction nor an
unwillingness to help nor a ‘don’t care’ attitude.

Business should bear in mind the spirit of the social contract between society and
itself.

Regrettably things go wrong with disastrous consequences for society and one is
compelled to ask questions surrounding responsibility and accountability although for
many of these questions there are no satisfactory answers forthcoming.

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Examples
Oil spills from tankers around coastlines that cause incredible environmental damage,
e.g. the fate of thousands of penguins along the coast of Cape Town. Who is
accountable? The captain? The oil companies?

A growing number of unsolved disasters of plane and train crashes, bus and coach
accidents, in all of which thousands of lives are lost. Are these due to human error or
are there other causes not revealed?

When companies like the South African mines have grown and reaped a vast amount
of material wealth over time and provided a sense of security to people depending on
them for jobs, decide to close down or scale down operations for economic reasons,
as a result of which many workers lose their jobs, how responsibly are such decisions
conveyed to workers? Do moral elements come into this process?

A very large number of gas explosions in S.A. mines have claimed hundreds of lives.
While government regulations exist and the cause of explosions is known, much more
responsibility has to be taken by mining companies to research ways by which such
accidents may be averted.

Who takes blame for products that do not meet safety standards, e.g. faulty motor car
parts, side effects of medicines and drugs, etc?

Where is the accountability of so-called drug lords who accumulate billions of rands at
the expense of young and old who take life-threatening drugs? They never account
for the damage they cause to humanity.

Also, how responsible are night clubs that exploit children under the legally stipulated
age, serve them drinks and other drugs and fail to be accountable when disasters
occur?

Recently there has been a spate of deaths and serious injuries as a result of
stampedes at sports stadiums. Many questions as to how, why, who arise. There are

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reasons and, therefore, there should be accountability on the part of administrators,

managers and organizers.

Rapid growth of industry and proliferation of new processes have not all been benign
to the physical and social environment. Pollution with its harmful effects has been rife
and there are many case studies available and yet the activities that cause the problem
continue. It is expected that industry with its advanced knowledge of everything
involved in the process of production would take the necessary precautions to inform
the public about potential harm more adequately and to exercise exceptional caution
in carrying out their production operations.

Finally, a positive example of a corporation that seems to be aware of its social

responsibility and accountability is Makro – one of its warehouses burnt to the ground
and management immediately made a decision to deploy permanent staff to its other
branches and expedite reconstruction of the burnt down premises in order to return to
business as quickly as possible, despite its loss of millions of rands. This is a case of
fulfilling contractual obligations and observing the principle of moral consideration. The
fate of casual workers was not clear. (Also see Appendix 1)

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CHAPTER 8

MANAGING ETHICS IN BUSINESS:

CODES OF ETHICS AND WHISTLEBLOWING

At the end of this chapter the student should be able to have learnt:

• Appreciate the rationale for both corporate and professional codes of

ethics and to evaluate their roles and limitations

• Demonstrate an understanding of the role of whistleblowing

• Analyse the organizational issues surrounding whistleblowing

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Introduction
In recent years there has been a proliferation of codes of practice in a variety of
contexts and increasing attention has been given to ethics in the conduct of employees
at all levels of the business organization.

Ethical principles and practices in business start with the top leaders’ expressed,
shared and implemented values embodied in corporate culture. Ethical conduct in
corporations must be reflected in a shared vision, and practices that are actively
communicated and modelled by executives, managers and employees on an ongoing
basis. This broad view of ethics seeks to build relations of trust and emphasizes the
responsibility of each employee for ethical conduct. It is what Paine cited in Boatright
(2000:362) refers to as ‘integrity strategy’.

Corporate ethics, therefore, address the need to guide individual decision-making and
to develop an ethical workplace environment. Unethical business practice is not
restricted to one single employee in the company, but may result from factors in the
organization which lend themselves to unethical conduct on the part of employees of
any category. It is, therefore, necessary to create and maintain an organization that
fosters ethical conduct.

When such efforts to sustain an ethical workplace environment fail, then conditions
emerge that are conducive to actions such as inter alia, whistleblowing.

Lest the concept of corporate codes of practice conjures up an image of everything

going well in the organization ethically, and lest the idea of whistleblowing is limited
to just the opposite view, viz. that it is wrong to blow the whistle, it becomes
necessary to weigh the benefits and limitations of these two closely related areas.

? THINK POINT
Does the organization in which you are working, have a Code of Practice
(Ethics)? Has it made any difference to the behaviour of those who work
there? Are these changes of the kind that you would like to see?

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Codes of Conduct – Codes of Ethics

Codes of ethics, codes of practice and conduct, are sets of working rules, model
procedures and agreements expressed as political statements toward responsibility,
related to social responsibility of business and company philosophies.

Components of a corporate ethics programme include:

Rules and policies of the organization, culture and values and formal documents
of the organization, e.g. mission statements, codes of ethics, policy/personnel
manuals, training material, management directives

Procedures and systems for orientation, training, auditing, promotion, investigation,

compensation, etc.

While discussions and debates about codes of conduct and their value, acceptance
and implementation and effectiveness continue and are desirable, a deeper inquiry
into the progressive adoption of corporate codes of practice or their equivalents, may
well point to what seems like a far-fetched question: will issues that have been raised
in the study of business ethics over the years, largely evaporate if most companies
were to adopt and genuinely and stringently implement codes of ethics, behaviour,
conduct? Human nature being such as it is, one can only hope!

? THINK POINT
How do such codes fare when tested against principles such as autonomy,
the Golden Rule, etc.? How do they reflect standard ethical theories of
deontology, utilitarianism, fairness, justice, virtue, etc ?

Corporate Codes of Ethics

Writing of Code

As an instrument for guiding moral conduct, codes of ethics should reflect inter alia,

the following:

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• Clarity of objectives and rationale

• Content, procedures, values, e.g. respect for individuals, honesty, trust,

integrity, teamwork, fair treatment, etc.

• Topics pertaining to conflict of interest, use of company’s resources, gifts,

entertainment, confidentiality of information, workplace behaviour, etc

• Clear support of top level management but not to be imposed top-

down Ideally everyone should have “ownership” of the code. Interests

of all employees – to be represented and their support indicated

• Common understanding and agreement between employers and employees

• Clear and simple write-up, unambiguous in language, content and

procedures, legally defensible but avoiding legal jargon – no grey areas

• Indication of awareness of latest developments in the specific industry that

necessitate revisiting the code

• Concrete programmes and procedures regarding implementation,

administration, and flexibility to meet new or changing situations, needs and

challenges.

Procedures for Implementation

Proper steps have to be followed in implementing the provisions of the code in daily
activities and when unethical conduct arises. The approach to deal with
transgressions, violations and unethical behaviour should not focus so much on being
punitive but rather on being humane but strictly disciplined.

Benefits of Codes of Ethics

In managing public relations with external constituencies, the code shows the
organisation’s serious intent to adhere to high ethical standards, giving the public an

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assurance of the ethical nature of the company, trustworthiness and avoidance of the
costs of scandals.

Guiding principles are aimed at prevention of unlawful, unprofessional behaviour,

violation of law and government regulations.

Avoids highly damaging whistleblowing.

Code is a vehicle of training and a means of communication with employees about

matters of ethics, thereby reinforcing standards for all stakeholders, and protecting the
company from self-interested actions of employees of any category.

Codes are guiding principles for specific operational standards.

It is a reporting mechanism for enabling employees to report illegal wrongdoing.

It is an audit system for detecting wrongdoing.

The code is a mechanism for conducting investigations and for taking corrective action.

It provides a managerial tool for adapting the organization to rapid change, e.g.
increased competition, development of new technologies, increased regulations,
mergers/acquisitions, globalisation of business.

It is a forum for the discussion of moral issues that if implemented properly, can
contribute to a reduction of stress and avoidance of corporate disasters.

Limitations of Codes

Because of the complex nature of the issues and dilemmas that arise in business
activities, intentions no matter how noble, and the document’s content, procedure and
guidelines no matter how clearly theorized, are not easily operationalised within the
business culture. The larger picture of how moral problems arise in the first place, is

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invariably overlooked under a spotlight that is focused on specific instances of

misconduct on the part of isolated individuals.
ACTIVITY 8 (a)
Bearing in mind that a company is made up of personnel of varying
categories, operating at various levels, with different responsibilities and
rights, what would be at least six important moral principles that you would
like to see incorporated into the code of ethics implemented in your
organization?

Professional Codes of Ethics vis-à-vis Corporate Codes

Most professions such as medical, legal, nursing, social work, etc., are based on
values intrinsic to professionalism, so that a practitioner has to be professional in order
to be ethical and vice versa. This does not apply in the same way in business. It is
asserted that business need not be professional to be ethical. To comply with what is
required in ethical practice, business must behave morally within its own terms and
according to its own values (Pritchard in Davies (ed) p.87). Similarly, professions too
need not bend over backward to give a business image of themselves, as this retracts
from their inherent professionalism.

Neither the different professions nor business should contrive behaviour that does not
fit into their respective occupational mould, nor dilute each other’s images, but each
should establish their respective morality within their own value systems and with the
guidance of their specific codes of ethics. In both business and the professions
different codes of ethics will be the statement of core values, vision, philosophies,
specific rules and standards that will guide their behaviour.

What is Whistleblowing?

Generally, whistleblowing has been defined as “the voluntary release of non-public

information as a moral protest, by a member or former member of an
organization outside the normal channels of communication, to an appropriate

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audience about illegal and/or immoral conduct in the organization, or conduct

in the organization that is opposed in some significant way to the public
interest” (Boatright, 2000:109).

Whistleblowing may be the last resort after all other channels have been utilized with
no success in rectifying the situation or bringing about the desired change.
Important factors related to whistleblowing include: freedom of speech (as a legal
argument and a moral argument), contractual duty, loyalty and confidentiality,
propensity (based on ethical principles) of individuals to take risks and to expose
themselves to retaliation, and the question of protection for the whistleblower.
Arguments for and against these factors are ongoing.

? THINK POINT
Is whistleblowing ethically different from “truth-telling”? If whistleblowing is
viewed as a betrayal of loyalty and trust, how would it fare from a
deontological perspective?

An important development has come about regarding protection of whistle-blowers

against harsh retaliation. Even on the question of protection there has been much
ongoing debate.

Some arguments against protection include: the possibility of abuse and the creation
of an informer ethos; encroachment of the traditional right of the employers to run their
business as they see fit; and the addition of another layer of regulation.

Arguments for protection assert that the contribution that whistle-blowers make to
society is a utilitarian one; and that it makes it easier to enforce existing laws and bring
about desirable changes in corporate behaviour.
ACTIVITY 8 (b)
What sort of policy will an organization have to put in place in order to avert
whistleblowing and any associated scandal?

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Legal Provisions for the Protection of Whistle-blowers

In South Africa the recently promulgated Protected Disclosures Act of 2000, draws
extensively on the UK Public Interest Disclosure Act and goes further than the
Australian and the US legislation.

Amongst its major objectives are:

The promotion of ethical conduct, transparency and fairness in the private and public
sectors The eradication of corruption in both public and private sectors, and raising
the levels of public morality
The protection of bona fide whistle-blowers from victimization and reprisal for
reporting malpractice and fraud or other criminal and unethical activities in the
workplace. ( See Appendix 12 )

The Act makes “good faith” the most important criterion for disclosure together with
“substantially true” disclosures, and disclosures made “not for personal gain”.

There are in South Africa also, watchdog type organizations to put a brake on or
prevent misdeeds from escalating, e.g. Whistle-blowers, Tip-Offs Anonymous (TOA),
Institute for
Security Studies, the Open Democracy Advice Centre (ODAC) and Transparency
International.

Section Summary

The subject of the code of conduct (ethics) has been discussed in relation to the
importance of an ethical workplace environment and the importance of a business
organization that fosters ethical conduct.

The matter about codes of ethics have been examined from the aspects of their value-
base, content, how they are written, procedures for implementation and benefits and
limitations of codes.

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Whistleblowing has been seen as one of the likely outcomes of an ethically weak or
poor workplace environment. Important factors associated with whistleblowing have
been highlighted. The issue of protection for the whistle-blower has been considered
in relation to recent legislative provisions for protection for the whistle-blower, in South
Africa and in other countries.

SELF ASSESSMENT ACTIVITY 8

Appendix 12 is a summary of the major provisions of the recently
promulgated South African legislation, the Protected Disclosures Act of
2000. Analyse the benefits and limitations of these provisions in terms of your
knowledge and understanding of factors pertaining to the concept of
whistleblowing.

(see end of section for some suggested answers)

SUGGESTED ANSWERS TO ACTIVITY 8(a)

Important moral principles for company’s code of ethics

1. Inclusion of employer and employee rights or terms of employment to ensure
transparency and to facilitate open communication and mutual understanding and
appreciation of expectations.

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2. Confidentiality, while accepted as vital, should not be so restrictive that it

prohibits open and honest consultations among fellow employees regarding ethical
questions.

3. A fair and objective hearing process with provisions for some form of neutral
mediation where necessary.

4. Assurance that employee rights with respect to discrimination, retrenchment,

compensation, etc., will be protected.

5. Executive support of the code should be demonstrated in the form of clear

sanctions against those who violate the code, in order to give a clear message about
the seriousness with which misconduct is viewed, and to entrench the value and
importance of the code of ethics.

6. There should be no exceptions with regard to compliance especially if the code

has been drawn up as a result of team effort and has organization-wide ownership.

SUGGESTED ANSWERS TO ACTIVITY 8(b)

Policy to avert whistleblowing

No company is immune from wrongdoing. Company policy should reflect the following:

An effectively communicated statement of responsibility

A clearly defined procedure for reporting. Most organizations provide for initial
reporting to immediate supervisors, or submission of a report in writing to the
CEO with the assurance of confidentiality

Well-trained personnel to receive and investigate reports. Some

organizations have designated officials such as ombudspersons. Many
companies have implemented programmes to overcome problems such
as whistleblowing, e.g. ethics hotlines, toll-free telephone number to ethics
officer whose primary responsibilities are to conduct full investigations and

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take results to higher management, and if necessary, to the audit

committee of the Board.

A commitment to the serious implementation of policy and to taking appropriate

action

A guarantee against retaliation

A proper and effective, strengthened internally, policy can affirm

company’s commitment to good ethics and create ethical corporate
climate in which there will be no need for unpleasant disclosures

Policy should provide employees with a channel of communication

internally but there should be a sincere attempt to reduce mistrust and
intimidation in the work environment

A good and clear policy makes it possible for the company to learn early about
wrongdoing and correct it before it goes out of control or goes public

A good policy will assign to the manager the responsibility of listening and
responding to employees especially regarding illegitimate and immoral acts
observed by them

The organization should have effective internal grievance procedures and

processes that can be utilized by employees to report wrongdoings

People should be rewarded for using these channels. Large fines

may be considered for illegitimate actions. This should apply to any
member of the organization – including executives and professionals
– who file false or illegitimate reports, who knowingly market
dangerous products, who offer bribes or receive kickbacks.

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SELF ASSESSMENT ACTIVITY 8 - SUGGESTED ANSWERS

Analysis – Protected Disclosures Act of 2000

There is no doubt about the crisis of confidence that has emerged with escalating
corruption, malpractice, fraud and other unethical behaviour and conduct in corporate
organizations as well as government and non-government organizations.

Whistleblowing has become a progressively frequent mode of bringing such conduct

to the public eye. Perhaps this is one way of reducing and eradicating much of the
suspected connivance that exists.

The Act is therefore, a welcome vehicle for restoring lost public morality and
encouraging honest employees to report wrongdoing.

Whistle-blowers are often regarded as troublemakers, ‘snitches’, ‘rats’ and ‘downright

disloyal’. The Act’s stringent provision on acting in good faith and in the public interest
makes it possible for a whistle-blower to justify his or her action especially since most
of those employees who feel strongly that they should blow the whistle, are the ones
whose moral standards cause them to bristle in an unethical environment. The
potential whistle-blower must surely grapple with issues and dilemmas of rights and
duties, fairness, justice, obedience of rules and laws, conscience, before the decision
to blow the whistle is ultimately made.

The requirement in the Act that a whistle-blower has to meet certain requirements
before he/she blows the whistle, ensures that no frivolous, false personally directed
accusations are made.

The fact that a whistle-blower eventually takes the risk of victimization, recrimination
and even dismissal should demonstrate his/her strong feelings about wrongdoings that
are not in the public interest. For this reason at least, the whistle-blower needs the
protection that this Act can provide.

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The emphasis of the Act is on bona fide whistle-blowers and this together with
requirements for reporting, obviates abuse of this method of reporting.

Protection of whistle-blowers means encouragement to report corruption, etc. If there

is no such legal protection many employees could remain silent and consequently
become part of a culture fostering such improprieties.

The Act also engages employers in ensuring the protection of whistle-blowers. In this
way corporate ethics is brought to the fore and companies and other types of
organizations should surely feel compelled to review internal policies that would avoid
whistleblowing.

Legislation covering both private and public sectors is desirable.

One of the shortcomings of the Act is that it does not clearly indicate reporting by
former members/employees. Also, the provisions are restricted to employer-employee
situations. This excludes a large segment of the population in South Africa, viz.
pensioners, who as current events have shown, are the victims of a great deal of
corruption. It has been noted in media reports that this is a matter that will receive
further attention of the S.A. Law Commission.

Doubtless, like other legislation, this Act too will be governed by more detailed rules
and regulations prescribing procedures to be followed. It would then have a clear
education and information-giving function for all parties concerned – employers,
employees, the media, and the general public.

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CHAPTER 9

ETHICAL ISSUES IN BUSINESS:

MARKETING AND ADVERTISING

At the end of this chapter the student should be able to have learnt:

• Demonstrate understanding of the links between marketing and

Capitalist ideology

• Demonstrate recognition of key ethical issues in the 4 Ps model of the

marketing mix

• Critique in depth the ethical issues in just one aspect of marketing, i.e.
advertising – the promotion aspect of the 4 Ps model

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Introduction
Marketing and advertising are two integral parts (among others) of a capitalist
economic system. In the context of a free market economy there is constant interaction
between marketing and sales managers and customers and consumers. In free
market capitalism, every decision made by buyers, sellers and producers are
supposed to be carried out freely, sellers wanting to sell and buyers wanting to buy.
Together, marketing and advertising are yet other aspects around which ethical issues
are vigorously debated.

Marketing and advertising are activities closely associated with the 4 Ps namely,
product, pricing, promotion and place, around which numerous questions are
raised most of which are related to ethical issues.

Marketing, Advertising and Ideology

An accepted definition of marketing is that it consists of the performance of business

activities that direct the flow of goods and services from producer to consumer or user.
Its primary function is to sell products to prospective buyers.

In the spirit of a capitalist market system, advertising informs consumers about

available goods and services. In this way, it is designed to help consumers decide how
best to meet their needs. In this sense it is a beneficial service. Besides, it is only one
form of promotional activity.

The kind of society that one is looking at wherein the processes of marketing and
advertising operate briskly, is one in which the way of life reflects affluence and high
living as ideals for which one should strive.

In contemporary western-oriented economic systems, the good life is characterized by

the values of a materialistic ideology. It is the kind of philosophy that encourages
materialistic status symbols, the constant search for creature comforts, rapid
accumulation of wealth, a growing battalion of ‘yuppies’, etc. In short, an increasingly
acquisitive society.

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If the goal is to bring about a society capable of aspiring toward and reaching a happy
and contented life, and if marketing together with advertising, is the channel through
which a range of material goods can be objectively brought to as large a number of
members of society as possible, then the argument goes that there should be no cause
for concern. ( But it is a reality that more people are living in the depths of poverty than
in the lap of luxury!).

We are also aware that this arena is fraught with complex issues and questions for
which there are no conclusive solutions. Moral issues raised by advertising involve
several as yet unsolved ethical problems. There are the critics and there are the
defenders of advertising who debate the many aspects related to it, most of which
revolve around the 4 Ps - which will be discussed later.

? THINK POINT
Consider some ways in which advertising is said to support the dominant
ideology (materialism). Do you think that it is possible for advertising to be
ideologically neutral?

Major areas for ongoing debate focus on two primary functions of advertising:
informing consumers about goods and services and persuading them to buy.

Aspects that have come in for sharp criticism are inter alia: truthfulness of information,
negative aspects of persuasive advertising, deception, lack of transparency,
manipulation, exaggeration, creation of consumer desires and control of consumer
behaviour, consumer safety and welfare, health risks, creation of stereotypes,
advertisements directed to children, the role and responsibilities of managers,
producers, manufacturers, growing consumerism, a waste of money that could be put
to other more efficient uses ad infinitum!

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? THINK POINT
To what extent does advertising create rather than respond to consumer
desires? Has it ever done this to you? If so, were those desires strong enough
to lead you to buy something you otherwise would not have bought?

On the issue of information: the argument is that advertisements rarely do more

than give barest indications of basic features of a product. Information giving is
invariably exaggerated and misrepresents products. Critics push for full and perfect
information.

Questions arising are: is it ever possible and practical to give full information? (How
would you like to have your TV or radio programme interrupted by thirty minutes or
more of listening to all the good things about a product?). Moreover in a business
context, is it the function of advertisers to provide unbiased information – is there a
guarantee that this will sell ?

Persuasion which is very closely tied to information and communication, is given even
more ruthless criticism. It is usually grouped with manipulation and deception and their
effects on consumers.

The crucial question is: should these two functions be separated; should one of them
be played down; will doing this remove the threat to consumer autonomy or facilitate
it? Will this lessen the negatives highlighted by critics?
The problem around these questions is the difficulty of defining “persuasion” and
“deception” and of the ability to determine when does effective selling cross the line
and become ethically objectionable manipulation.
ACTIVITY 9 (a)
Give at least five possible reactions of business to the barrage of criticisms
levelled at advertising.

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The 4 Ps - Product, Price, Promotion and Place

How do these pervasive criticisms impact on the 4 Ps?

Product
Does the quality of the product itself ensure consumer safety and protection? Facts,
not half-truths, about products have to be given and information should also bear out
what is in the fine print of the warranty. Then too, there are the problems of
disregarding harmful products hazardous to health such as tobacco and alcohol,
products that may be unsafe, e.g. edibles and toys aimed at children, and gadgets and
appliances that might have escaped safety standards and cause accidents, injuries
and sometimes even death.

Does the product link up with stereotypes (only women use washing powders and only
men use lawnmowers?)

Does the information given constitute gross exaggeration? ( 4x4s “flying” through the
air, riding roughshod over rugged mountainous terrain or through rapidly rushing
rivers!).
Spare us the “puffery” say the critics.

? THINK POINT
Suppose you as an employee of an advertising agency felt that one of the
advertisements for which you were responsible presented false or misleading
information about a product, would you request a change in the
advertisement?

Price

Pricing is affected by the market system, but even within this system price-cutting can
take place among suppliers, forms of competition that may be regarded as unfair can
distort prices, massive advertising campaigns can achieve and maintain monopolies

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that increase prices – monopolies being confident that consumers will remain loyal to
certain brands and buy even if the price is high.

Ethical questions also arise in ‘hidden’ costs of goods, the operation of sales
techniques such as “low billing” – non-coercively shaping the alternative open to
people through multiple pricing – “buy two, get one free”; and inflating prices of certain
health promoting products by playing on customers’ emotions such as fear, especially
people who are unduly preoccupied with health products and will pay any price in the
hope and belief that these products will help them.

All this then makes one ask: are suppliers entitled to charge whatever they want to, or
is there such a thing as a fair and just price?

Promotion

Ideally companies should seek to inform consumers truthfully using unmanipulative

persuasive techniques. Promotional activities are widely criticized as exaggerated
claims, outright falsehood, lacking taste, irritating, repetitive, offensive,
underestimating consumers’ intelligence, etc. One would expect that marketing and
sales managers’ responsibility is to create and maintain customer interest and loyalty,
determine and manage the company’s advertising, scrupulously covering all 4-P
areas, and obviating accusations levelled against him or her of concentrating mainly
on increasing the firm’s revenue at the expense of customer welfare – or is the critic
being too naïve?

Very often the number one rule in market exchanges between buyers and sellers , is
for the consumer: “buyer beware”.

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ACTIVITY 9 (b)
i. What are some of the important ethical questions in advertising, that need
serious consideration.
ii. Despite numerous criticisms levelled against advertising, it hardly seems
fair or realistic to discuss it as a non-functional activity that society can do
without. Consider ways in which problems associated with advertising
maybe negotiated.

Place

The place of trading influences availability of products. Goods may be withdrawn from
places where it is not profitable to use those outlets. The unavailability of such goods
in turn spells problems for both the small retailer and the buyers especially in remote
geographical areas. In a poor neighbourhood in under-developed areas lacking proper
physical infrastructures for selling, and in places where the physical terrain causes
transport problems and inaccessibility, supplies cannot reach potential customers, e.g.
deep rural areas where one may only come across what is known as “spaza shops”.
Under these circumstances people in those places are subjected to
deprivation of the so-called good things in life, and to
discrimination.
There is also the matter of places where manufacturing takes place under multinational
corporations, which in itself raises huge ethical and moral questions. This will be
examined later.

Ethical Issues as they relate to Marketing and Advertising

These can be organized around various features such as:

• The moral dilemma of the marketing manager when he or she has to implement
advertising campaigns that are not true, open, frank and not in the consumers’
interests. The manager has a choice between a profit-making decision or a socially
responsible one, and he has to work out how to balance the two.

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• The two-fold purpose of advertising is an ethical responsibility – do things in ways

that do not deceive, conceal, withhold truth, insult and so on. However, it does not
always happen this way.

• Advertising is a costly business and billions are involved in advertising expenditure.

Who pays? Are costs covered by prices that customers have to pay for goods they
want, need and buy? How open a transaction is this?

• There is a great deal of concern about the ethics of marketing and advertising in
so far as these relate to children. It questions the effects advertising has on
children, e.g. developing false beliefs, unreasonable expectations and
irresponsible consumer desires. Critics claim that as consumers, children,
especially very young ones, who insist on having articles because they have been
attracted to them by the advertisements are not mature enough to make decisions
about buying. Advertising is seen to be capitalizing on this. It is claimed that
advertisers treat children as instruments for their own gain rather than children as
ends in themselves, and that this lacks fairness and respect.

• A whole range of questions arise in relation to the ethics of persuasion.

Difficult ethical questions concern the dividing line between acceptable and
unacceptable marketing practices.

• Serious ethical issues are involved in the accusation that advertising inculcates
material values only and ideas about how happiness is achieved through material
values. It is claimed that the emphasis on material goods leads people to forget
the importance of spiritual and philosophical ways of achieving self-fulfillment that
is more likely to increase happiness (a deontological argument) and utilitarian.

Section Summary

Advertising and consumers meeting as they do at the interface of selling and buying
activities of the market system, have been the subject of a great deal of concern and

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criticism. Much of the criticisms are of an ethical nature. No conclusive solutions are
easily available, but one thing seems certain – advertising as a promotional activity of
business is here to stay.

Therefore, government, business and the public (consumers) have to work together
shifting focus away from the negative image given to what may be regarded as an
essential part of business and the economy on the one hand, and the well-being of
consumers on the other hand.

Attention has to be directed to mould advertising as a business activity embracing

glamour and discretion. Obviously delicate balancing acts between business interests
and ethical interests will have to be taken in stride.

SELF ASSESSMENT ACTIVITY 9

The sale of so-called “blood diamonds” or “conflict diamonds” has been used
to bankroll wars across Africa. Consider some of the ethical issues involved.

What would be appropriate forms of intervention in dealing with this type of

buying and selling of a commodity?

( see end of section for some suggested answers)

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SUGGESTED ANSWERS TO ACTIVITY 9(a)

Reactions of business to criticisms

Advertising enables companies to be more competitive locally and globally thus

helping to maintain a prosperous economy, and thus in turn contributing to society’s
well-being. The saying goes: “A rising tide lifts all ships.”

It is not true that advertising sets out to create desires in consumers. Desires have
origins that are already there within the consumers – advertising merely translates
these desires into practical things that people want to buy. If desires are created – in
what way is this a bad thing?

Customers have freedom of choice – they are not coerced to buy, and it is not only
because of advertising that people buy.

About advertisements aimed at children – what has happened to parental guidance?!

On matter of creating stereotypes – as society changes, the advertisements will reflect

these changes and move away from stereotypes. Advertisers try to keep pace with
these changes.

SUGGESTED ANSWERS TO ACTIVITY 9(b)(i)

Ethical Questions in Advertising

Is the consumer being treated as means to an end or as ends in themselves? (

Kantian) Also, what end ? Whose end?
Whose rights are being protected or violated? Is it intentional or inadvertent? And at
what and whose cost and benefits?
What about the consumers’ freedom to choose instead of having their autonomy
denied ? On the other hand, does the company not have its right to promote its
products through advertising? Is treatment given to the consumers, just and fair?

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Are public welfare and good taken into account for the effects as well as intentions of
advertisements? ( a consequential concern)

SUGGESTED ANSWERS TO ACTIVITY 9(b)(ii)

Ways in which problems associated with advertising may be negotiated

Government regulations may solve some of the problems and satisfy some critics.
However, to what extent will this be desirable in a democratic society ?

Self regulation may promote ethical advertising and manage matters of changing and
differing perceptions and judgements that are bound to enter into the equation. In
business there should surely be an “ethics of trading” that prohibits the use of false
advertising or deceptive claims. It is not expected of marketing and advertising to be
extended to matters of “social reform” but nonetheless these activities should be aware
of and make sincere effort to function within parameters of moral standards. However,
on balance it does not appear that market forces by themselves can deal with
consumer concerns. A concerted effort by all parties is required for this.
Granted that advertising is not quite innocent of all the claims made against it, it has
to be conceded that it still has value as a service to society. Could it be possible that
some anti – advertising claims themselves are sometimes exaggerated ? Also, it is not
possible that advertisements have a limited potential to harm ?

Whatever the argument, one thing is certain : advertising all of society. For this reason
it may be necessary to consider setting up reasonable constraints to counter what is
regarded as being negative and unethical.

On an ethical level policies and decisions will have to be revisited to take in

deontological imperatives of honesty, truthfulness, rationality and integrity and
treatment of consumers as ends and not as means to ends – to respect their ability to
comprehend and make their decisions and choices about what to buy and what not to
buy.

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Even if the information is given for practical reasons not full enough, it should be the
kind of information on which consumers can rely.

While the mode of marketing and sales promotion is an absolutely vital component
from a moral point of view, its consequences present another area of intensive debate.
If the consequences of advertising are good in the sense that they bring about
widespread human happiness, then they are acceptable. Even this utilitarian argument
will still have to establish whether or not the end justifies the means.

SELF-ASSESSMENT ACTIVITY 9 - SUGGESTED ANSWERS

“Blood diamonds” or “Conflict diamonds”

Major ethical issues

Wars were not about ethnic differences or ideology, but were based on sheer greed
in trying to make illegal profit with the sale of diamonds (means) to fund the purchase
of weapons for war (end). Both means and ends were neither desirable, justifiable nor
acceptable – illegitimate trade. Greed was reported in London’s Global Witness
reflecting that rebels earned R1.2 billion a year from 1991-1999 in diamond sales.

In that time the consequences of diamond sales and the purchase and use of war
weapons were: enormous suffering of innocent children and adults; and tens of
thousands killed. This showed no respect for life and violated Kantian second order
duty – Thou shalt not kill – violated peoples’ right to life.

Killings on such a large scale is no indication of the maximization of happiness for

maximum number of people – negative consequences going against utilitarian
principles – no net overall happiness.

Actions of revolutionaries were totally wrong and bad – not motivated by any good
will. Revolutionaries demonstrated bad character, lacking virtue. Acts cannot be
morally accepted.

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Gross violations of human rights and enormous amounts of injustices were

committed. There was no justice in acquiring diamonds by infringing the rights of
others.
Finally, the extraction of huge numbers of diamonds had serious environmental
implications – it was a plundering of irreplaceable raw material to be put to evil use
and not for the benefit of people on the continent.

Appropriate forms of intervention

• Stamp out sale of “blood diamonds” since business should not promote warfare.
Together with this, a new regime should be worked out for legal mining and
export of diamonds. Any effort to achieve this should be on an international
level since these evil operations occur across countries.

Some Practical ways of dealing with problem have to be found:

• Stiff penalties for dealers involved in illegal trade.

• Pressure on banks and insurers used by the diamond trade to push for
compliance with legal codes
• A globally initiated and monitored scheme to eliminate this negative use of
diamonds
• imposition of embargoes on countries where there are civil wars financed by
the sale of diamonds.
• Since it is suspected that middlemen are involved, it is necessary to identify the
“blood diamond” route that the trade takes – where can middlemen be located?-
to which countries are they re-selling the diamonds? Perhaps this will also flush
out the origins from which the war weapons come- which countries produce the
weapons for this purpose? To what extent are the governments of these
countries aware of this trade- are they supporting it, conniving at it, or are
genuinely concerned about eliminating it?
• International greed knows no boundaries and there is always the temptation to
continue to harvest ill-gotten gains – hence need to draw in diamond merchants
as well as the middlemen.

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Fortunately, the international community , including : the UN Security Council, the

British government, the international diamond giant – DeBeers – and other
diamond producing countries, has given this whole matter urgent and minute
attention. South Africa has been the venue for some of the meetings of this
concerned group.

Among the positive outcomes of international intervention and initiative is an

international treaty to stop trade in “conflict diamonds” the bankroll wars across
Africa, which it is hoped will become effective during this year (2001).

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CHAPTER 10
ETHICAL ISSUES IN BUSINESS:
GLOBAL BUSINESS WORLD

At the end of this chapter the student should be able to have learnt:

• Evaluate minimum rules for Multi National Companies (MNCs)

operating in foreign countries, usually less developed (host countries)

• Know the arguments for and against cultural relativism

• Consider to what extent MNCs should adapt their ethics to host

countries and understand the arguments for and against cultural
imperialism

• Assess the use and limitations of an “ethical algorithm” designed to

solve ethical dilemmas of MNCs

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Introduction

Multinational Corporations (MNCs) or Transnational Corporations (TNCs) emerged

around about the second half of the 20th century. They are firms that have direct
investments in two or more countries. Their country of origin is usually referred to as
‘home country’ and the foreign countries in which they operate are referred to as ‘host
countries.’ Owners and managers are usually from the home country although they
may also come from the different nationalities.
MNCs invariably operate in less developed countries, e.g. Africa, parts of Asia, etc.,
but their mutual presence is also seen in developed countries such as the USA, Japan
and Europe. Our focus is mainly on MNC operations in the less developed countries.
No matter where the MNCs are located, and perhaps because of this, facing issues
and dilemmas of an ethical nature is inevitable. While there are so many facets of
business operations that are in themselves very interesting, the aspects related to
moral standards are those that never fail to intrigue or fascinate, especially when
considered in international contexts.

Consideration of the moral nature of international business is always linked to the

differences in political, legal, economic and social systems between home and host
countries – their beliefs, customs, notions of right and wrong, good and bad, stage of
development, etc. Operating abroad creates dilemmas that lead to charges of serious
ethical failings, and while they may give rise to challenges, they also create
opportunities (temptations?) for misconduct.

Some of the forms of misconduct attributed to MNCs and their managers and that
have received wide criticism are: shifting and relocating whenever not satisfied –
looking for cheaper material etc; playing one country against another; looking for
countries with less stringent laws, and those that give more hospitable treatment;
indulging in transfer of raw materials, goods, capital among its plants in different
countries to escape taxes and fiscal obligations – maximizing profits in low-tax
countries (it is not always easy for host governments to formulate and enforce
regulations in this respect). Misdeeds of a more practical nature are seen in the acts
of dumping products below cost, extraction of raw materials from countries with few

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other resources, violation of patents and other protection for intellectual property, and
being accused of double standards generally.

? THINK POINT
Think of some dilemma of an ethical nature that confront MNC’s and their
managers in host countries.

MNC Decision-Making – Reconciling International Norms

Minimal and Maximal Duties of MNCs

When a problem of corporate ethics is viewed against a backdrop of national moral

consensus, it is difficult enough, but when this view shifts to the moral inconsistent
backdrop of international opinion, it becomes very much more problematic. Conflict of
norms between home and host countries inevitably emerge.

Host country norms appear substandard from the perspective of the home country.
MNCs may find it acceptable to adopt these lower standards which although
acceptable in the host country are not permitted in the home country. Donaldson, cited
by White (1993:799) specifies that the presence of lower standards in host countries
justifies their adoption by MNCs only in certain well-defined contexts. MNCs must
possess certain types and degrees of responsibilities. One must distinguish between
responsibilities that hold as minimum conditions and those that exceed the minimum
although MNCs do not necessarily have to assume imperfect burdens ( refer to Kant’s
perfect and imperfect duties).

In discussing minimal conditions regarding MNCs one can recast this distinction to one
between what Donaldson refers to as “minimal” and “enlightened” duties.

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Minimal Duty is one which if the MNC persistently fails to observe, would deprive it of
its moral right to exist. In other words, a minimal duty is a strictly mandatory one.

Enlightened Duty if fulfilled deserves praise but is not necessarily mandatory.

Donaldson advises that the determination of minimal duties has priority. Thus whether
or not an MNC’s practice is permissible in the host country, the notion of permissibility
must be decided in terms of minimal standards.

Invoking the language of rights – is essential because rights are entitlements that
impose minimum demands on the behaviour of others.

A minimal demand holds that an MNC may not ignore the universal duty to avoid
depriving persons of the basic rights – respect fundamental human rights (as in
Natural Rights discussed in Section 3) and as given explicit recognition in documents
such as the Universal Declaration of Human Rights (UDHR),(See also Appendix 8) –
rights that no person or institutions including MNCs are morally permitted to violate.

Equally important is the “no-harm” principle applied to MNCs. This is a rights-based

approach that emphasizes right to liberty – allowing maximal liberty to each so long
as each inflicts no avoidable or intentional harm on others. Comparison of home and
host country standards become irrelevant. The important thing is for an MNC practice
to meet a universal objective minimum and not be incompatible with rights.

MNCs are expected to produce more good than bad for the host country - application
of general utilitarian principle – the benefits must be for the host country.

ACTIVITY10 (a)
Using moral criteria already discussed in this module assess the nature of
business practice of MNCs through banks and financial institutions, drug
companies and hazardous industries, and through extractive industries.

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Donaldson (1989:70) cites Shue who indicates that the essence of a basic right is its
status as a prerequisite for the enjoyment of other rights. Shue’s argument utilizes the
following simple propositions:
Proposition 1. Everyone has a right to something
Proposition 2. Some other things are necessary for enjoying the first thing as a right
(whatever that right is)
Proposition 3. Therefore, everyone also has rights to the other things that are
necessary for enjoying the first thing as a right.

James Nickel cited by Donaldson (1989:73) in an effort to determine the status of

international rights moved beyond Shue’s simple specification of basic rights to the
establishment of conditions that any would-be international company must pass:

The right must protect something of very great importance; the right must be subject
to substantial and recurrent threats; the obligations or burdens imposed by the right
must satisfy a “fairness-affordability” test – “affordable” meaning “capable of being
paid for” and “fairness” meaning “a fair arrangement for sharing duties and costs”.

The compatibility proviso indicates that the list of rights will not conflict and one right
does not have to be sacrificed for the sake of honouring another. But, rights do
sometimes conflict or outweigh another right – a matter of concern in the situation of
high crime rate and violence in South Africa and the rights of victims and those of
perpetrators.

The rights that Donaldson includes as fundamental international human rights are:

➢ The right to freedom of physical movement

➢ The right to ownership of property
➢ The right to freedom from torture
➢ The right to a fair trial
➢ The right to physical security
➢ The right to freedom of speech and association
➢ The right to minimal education

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➢ The right to political participation

➢ The right to subsistence

(Boatright, 2000:384)

? THINK POINT
Reflect on at least three types of MNC operations in South Africa alone, that
have been incompatible with employees’ rights not to be harmed.

Cultural Relativism and Cultural Imperialism

[To be read with detailed relativistic arguments presented in Section 2]

Cultural Relativism holds that all moral beliefs are equally acceptable and that the
only criteria for right and wrong are moral standards prevalent in a given society; that
there are no ethical standards that are absolutely true and that apply or should be
applied to people of all societies. It follows the adage: When in Rome do as the
Romans do.

By this token MNCs should always follow local practices – the only guide for MNCs to
conduct business abroad being what is legally and morally accepted by the host
country.

Cultural Imperialism holds that MNCs are bound by laws and prevailing morality of
their home countries and should act everywhere as they do in their own country.
Business ought to be conducted in the same way the world over with no double
standards. An adage that these arguments could follow may easily be: When in Rome
or anywhere else, do as you would do at home.

The rationale for this is that standards at home are higher and more stringent and it is
always better to adopt the higher practices of developed countries.

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This imposition of home country standards is criticized as a form of ethical imperialism

that follows the adage: There is our way (which is always right) and other ways (
which are always wrong) OR There is our way and the wrong way.

ACTIVITY10 (b)
Give your view of the following in relation to ethical standards for MNCs
in host countries: - When in Rome do as the Romans do, and
- When in Rome or anywhere else, do as you would do at
home.

Illustrate where possible.

Value Systems – Differing or Shared?

Concern here is with ethical issues and moral concepts in a global business world,
therefore, fundamental human values such as rights, freedom, well-being, etc., bear
legitimacy beyond boundaries of self-interest. They provide standards that guide the
choices of individuals, different groups or shared humanity. International decision-
making is also based on time tested fundamental moral precepts as already
discussed.

To the question: are home country standards universal, one can answer – not all home
country standards may express universal moral requirements. Moral standards carry
values that differ in developed western countries from those in the less developed
countries, e.g as in activities such as bribery.

One of the ways in which values are transmitted is language and differences in
language criss-cross all over the globe. How does one overcome the obstacles to
communication, that this presents? It is a problem even on an intra-country level. The
complexity it presents on an international level, therefore, needs to be looked at more
closely without encouraging the imposition of cultural imperialism.

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Delving into various religious and moral systems and cultures, (differences of cultures,
religions and languages notwithstanding) affirm certain universal values such as
respect for human dignity and for minimal human rights, equality, liberty, integrity,
truthfulness in relationships, good citizenship, fairness and virtue, and economic well-
being.

This entrenches the principle that every human being must be treated humanely by
virtue of the fact that they are human beings – what you do not wish to be done to
yourself, you do not do to others. These values occur across cultures.

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? THINK POINT
Did you know that:

More than750 million people already speak English well enough to

use it for business and computing, and that 1 billion are in the
process of learning the language?

Eager natives from other countries believe that they will be left
behind in the global marketplace if they don’t learn English?

Of the 6000 languages spoken around the world more than half may
die by the year 2025 (when languages die, concepts, ways of
thinking, self-belief and value systems die too)?

Specialists believe no language can survive unless 100,000 people

speak it?

Millions of Britons believe they have no need to learn other

languages and that the world should ------- well speak English?
Foreigners feel exactly the same way about their languages?

(Conceit and indifference can annihilate oral traditions).

Some things to think about!

Source: British Council (Council of what? – unknown).

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Donaldson’s Ethical Algorithm

The ethical algorithm is a pragmatic aid or interpretive mechanism to help MNCs

determine the ethical implications of their own moral views about the permissibility of
a practice morally and/or legally permitted in the host country but not in the home
country.

The first step is to isolate the distinct sense in which the norms of both countries
conflict.
Two types of conflict can arise:

The moral reasons underlying the host country’s view that the practice is
permissible refer to the host country’s relative level of economic
development, i.e. for economic reasons alone. This is the Type 1 conflict.

The moral reasons underlying the host country’s view that the practice is
permissible are independent of the host country’s relative level of
economic development, i.e. to do with culture rather than economics. This is
the Type 2 conflict.

The next step is to follow up each one respectively as follows:

For Type 1

The practice is permissible if, and only if……… the members of the
home country would, under conditions of economic development
relatively similar to the host country, still regard the practice as
permissible.

On the other hand, the practice is not permissible if ………the

members of the home country would not, under conditions of
economic development relatively similar to the host country, regard
the practice as permissible.

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The home country’s powers of empathy are considerably greater in instances where
merely economic welfare is at stake, than in one dominated by embedded cultural
values.

For Type 2

The practice is permissible if, and only if…….

The practice is not a direct violation of a fundamental international
right and
It is not possible to conduct business successfully in the host country
without undertaking the practice.

Thus in Type 2 cases the practice would be permissible if, and only if, the answers to
both the questions below is “NO”

Is the practice a clear violation of a fundamental international right?

Is it possible to conduct business successfully in the host country without

undertaking the practice?

? THINK POINT
Think of a practical example that would pass a Type 1 test and one that would
pass a Type 2 test.

Practical Considerations of and Objections to the Ethical “Algorithm”

( White, 1993: 807-809)

Does not obviate the need for MNC managers to appeal to moral concepts both more
general and specific than the algorithm itself.

It is not intended as a substitute for a general theory of morality or even an

interpretation of the basic responsibilities of MNCs.

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Its power lies in its ability to tease out implications of the moral presuppositions of a
manager’s acceptance of “home” morality and in this sense to help clarify MNC
decision-making.

It is not a substitute for more specific guides to conduct such as the numerous codes
of ethics now appearing on the international business level.

It tends to display a mild paternalism.

Despite its limitations, the algorithm has important application in countering the well
documented tendency of MNCs to mask immoral practices in the rhetoric of “tolerance”
and “cultural relativity”.

To apply the algorithm the MNCs will have to enhance their decision-making
mechanisms – alter established patterns of information flow and collection in order to
accommodate information pertaining to moral principles – introduce a new class of
employee to provide expertise in these areas.

Bribery and Global Business

As illustrated in the Lockheed case in Japan, for instance, bribery is one of the most
common and controversial issues that MNCs face. It is acknowledged as a fact of life
in global business but is universally condemned. No government legally permits
bribery. The issue of bribery is very complex and MNCs and home countries will have
to decide on how to confront it more effectively, because basically bribes are illegal in
business transactions.

What is bribery?
The term is vague and applies to many different kinds of payments with different
interpretations. It ranges from gift-giving and influence-peddling to kickbacks and
extortions. In whatever form one finds bribery, it nevertheless reflects moral
bankruptcy and a crisis of legitimacy. It is, therefore, a clear moral problem.

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It is invariably a payment made with the intention to corrupt. In business, a purchasing

agent’s acceptance of a bribe or kickback in return for placing an order, for example,
constitutes a clear conflict of interest. When bribes are used to secure purchase of a
commodity, the net effect is a decline in market competition. Over a protracted period
of time, bribery seriously weakens moral and ethical standards of society and
damages principles underlying democracies. Bribery also creates double standards
when MNCs do abroad what is prohibited at home.

Are there some ways of dealing with bribery?

From a moral perspective, a new set of values is obviously needed.

It is necessary clearly to define bribery and draw a clear line between bribery and other
kinds of payments genuinely considered ethical.

Definite steps must be taken to reduce the incidence of bribery around the world. Some
countries like the US have laws. Good governance with a political will to put legislation
in place and create a climate for the promotion of ethical conduct, is very essential.
Clear and unambiguous policies on bribery must be adopted.

Proper infrastructure, increased transparency, a reduction of developed world

complicity and international cooperation are additional essential elements to deal with
the problem.

Happily, world attitudes are changing – at United Nations, the International Monetary
Fund, World Bank and at levels of NGOs such as Transparency International – all of
which have the potential of applying concerted effort to the elimination of bribery.

Section Summary

With ongoing globalisation, MNCs have become central to considerations of moral

standards of business practice in international contexts. Operating abroad exposes
MNCs to issues and dilemmas of an ethical nature which also open them to criticisms
of misconduct.

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Differences between home and host countries present MNCs and their managers with
problems of deciding on the most appropriate way of conducting business in foreign
countries – usually in the lesser developed parts of the world – and this is no easy
matter.

Seeking answers in Cultural Relativism and Cultural Imperialism was not adequate.

Minimal and maximal duties of MNCs and an appeal to rights offered a direction for
reconciling international norms, taking into account also the value systems that are
shared by developed and developing countries and that could contribute to unravelling
some of the ethical issues that arise in conducting business in a global context.
Donaldson’s “algorithm” was presented as a pragmatic, though limited, way of
deciding on practices that are and those that are not, permissible in other countries.

SELF ASSESSMENT ACTIVITY 10

The world of business is very much a part of the changing global
landscape. What do you think are some of the forces underlying these
changes? What are your views of their impact on the global business
world?

(see end of section for some suggested answers)

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SUGGESTED ANSWERS TO ACTIVITY 10(a)

Banks and Financial Institutions

Do not offer employment to too many people. They provide loans, e.g. in South Africa
they did not do much to undermine apartheid by lending to and strengthening the
hands of the apartheid government. In this instance the banks did more harm than
good for the majority.

On the other hand, banks contribute towards development, but face moral dilemmas
in view of the poor prognosis of payback time in developing countries.

Drug Companies and Hazardous Industries

The onus should be on them to provide information for the protection of the local
people and not to cause direct harm (even if not intentional) by not observing local
laws and regulations in this respect. It will be immoral of MNCs to leave workers
completely unprotected and not provide safety measures in the workplace, e.g. the
asbestos industry
(Cape plc in KwaZulu-Natal). In most of these industries, not only are the workers
affected, but the communities around the industrial areas also suffer negatively from
the industrial operations .

The pharmaceutical companies in South Africa for instance, are involved in huge
controversies with regard to the issue of affordable retro-viral drugs for HIV/AIDS
patients.

Extractive Industries

Mining companies remove minerals from the host country, and unless they can show
that they do more good than harm to the host country and they do not benefit only
themselves or their home country, they could open themselves to charges of
exploitation and to resource depletion and environmental degradation.

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SUGGESTED ANSWERS TO ACTIVITY 10(b)

When in Rome do as the Romans do

The theory has been widely criticized and regarded as being seriously flawed. If it were
acceptable, the whole question of what is or what is not ethical in an MNC’s practice
in host countries, would not arise.

Judging practices as immoral in some countries and deemed morally acceptable by

others, e.g. bribery, does not mean that there are no moral standards binding on
people everywhere. Indeed, there are certain moral standards on which our very
survival depends, e.g. norms regarding killing; or those on which much of our social
interaction is based, e.g. truth-telling and trust; or norms that govern actions such as
stealing.

To accept that right and wrong must be determined by the standards of any particular
society means that the majority belief is automatically right. This is not acceptable.

Also, if actions of other societies cannot be criticized on the grounds that they conform
to their standards, then perhaps South Africa would never have shed its burden of
apartheid as the world would have had to accept discrimination and could not have
considered it morally wrong. Therefore, moral standards a society accepts are not the
only criteria for judging right and wrong.
The appeal of the theory is that it reminds us that different societies have different
moral beliefs that should not be lightly dismissed if they do not match our own. We
have to be selectively tolerant and respect their cultural differences. One cannot totally
discount the possibility that widespread acceptance of what is right and what is wrong
can, in specific situations, bring about positive change, e.g. elimination of slavery.

When in Rome or anywhere else, do as you would at home

This whole attitude in cultural imperialism smacks of arrogance. It begs the question:
who are we to impose our standards on the rest of the world? More telling is the

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question: How dare MNCs impose on the host countries where after all, they are at
best ‘corporate guests’? Moreover, has it been firmly established that home country
standards are universal?

It is not correct to say: adopt “higher” practices of developed countries. Ignoring local
conditions and level of development in the host country can produce more harm than
good.

Its appeal may lie in the MNC’s sincere effort in the course of its operations, to
contribute to the host country’s development and not be seen as exploiting for the
benefit of the home country at host country’s costs – a utilitarian argument.

Neither of the two “Rome” positions can be accepted as they stand.

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SELF - ASSESSMENT ACTIVITY 10 - SUGGESTED ANSWERS

Globalisation associated with corporate activities is concerned with the economies of

the developed industrialized nations and the less developed countries – an
economically polarized world. It is also the subject of a great deal of criticism, largely
negative. Recent years have witnessed several world summits and conferences and
much rhetoric has been recorded on the economic aspects of globalisation.

Forces underlying changes

Whereas there was an awareness of growing dissatisfaction with global trends, and a
call to boycott and reject global trade, it was very likely a call by none other than Nelson
Mandela for a revival of the South through political change, economic reform and a
united stand for equity and prosperity, that must have contributed to raising the voice
of the less developed countries and altering their pessimism to some degree. Instead
of ignoring or demonizing globalisation, developing countries realized that they have
to respond to it in a more positive way. It has been accepted that globalisation cannot
be reversed.

A new struggle has begun on the global economic front – a will to succeed permitting
no situation that denies any human community its dignity. People power seems to be
aggressively taking center stage.

Developing countries are not satisfied remaining passive acquiescing spectators in the
global economic arena and are determined to shrug off the image of a begging
mentality.

A more activist stance has emerged from the realization that poorer countries can
never pull themselves up by their bootstraps as long as they carried the overwhelming
burden of debts of the past. Vociferous claims for debt relief are being made on the
justifiable basis that the debts incurred in the past did not benefit them in the first place,
and that it is not fair that they should spend their lifetime servicing those debts. They
argue that much of these debts was an outcome of complicity between MNCs and

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dictators in their own countries (developing). There is a strong feeling of not allowing
the west always to be calling the shots and dragging their heels on debt relief issues.

An acceptance of the need for change has also come from international sources in the
west. Governments and corporate leaders are aware of the need for a new paradigm
that will incorporate the needs of society as a whole. Members of the G7 economies
have reaffirmed their commitment to the so-called HIPC ( Heavily Indebted Poor
Country) Initiative.

Impact on Global Business World

Responsibility of developed economies to take the lead – shift from traditional profit-
making MNC business objectives to a form of trade encompassing economic
partnerships with, opening markets to developing world and breaking down barriers –
helping and sharing to create a genuinely ‘global economy’ creed. Real globalisation
will reduce restrictions for everyone.

From a moral perspective – global justice, an unjust economic world – a fairer world
order of international trade not at the cost of the poorest and most vulnerable, e.g.
slave labour (in the 21st century!) is plainly immoral – guaranteed rights for everyone
everywhere, decent work and minimum social standards worldwide – the acceptance
of a common humanity.

The values of human development and equity should be combined with GDP as key
indicators of national and global economic well-being.

The whole question of benefits has implications for distributive justice. Benefits of
globalisation must reach the poorer nations too. Thus far, policies have shaped
globalisation in one direction only – in favour of developed countries. World leaders
have to level the playing field in international trade in which everybody should play by
the same rules.

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Greater flexibility of movement of knowledge, products and ideas is necessary.

Gargantuan systems of patents and copyrights seem to be the monopoly of MNCs.
Need for free global market where anyone can manufacture the best for the cheapest
– whether it be the giant pharmaceutical companies of the west or countries like India,
Thailand or Brazil. Recent court case in South Africa bears reference – loosen up
forms of protectionism.
Spectre of HIV/AIDS – an urgent priority since it poses serious threats to business and
the people of the developing world. Wisdom of avoiding countries with a high AIDS
burden is questionable. Stopping foreign investment in such countries where there is
a rapid reduction of human capital, will eventually hurt foreign companies. There are
also ethical issues involved. Debt relief is considered as one possible way that
resources could be released for this purpose.

Implications for global structures – indications for new structures, new forms of
international cooperation and global governance with consensus on the ultimate goals
envisaged by any form of change. International economic institutions, e.g. IMF, World
Bank, WTO, etc. – are still dominated by powerful and rich countries. Greater need for
crisis management institutions especially at a time of difficult transition for the
underdeveloped world. Enhanced international leadership for advancement of all
humanity – not only the affluent West and the North.

Where global apartheid is still being practised, the globalisation train should pause and
let the under-represented and under-developed get on board too. This is an age when
speed of communication defies imagination. Poorer nations should not risk being
relegated to the pavement of irrelevancy when affluent nations are driving swiftly along
the main highway of economic prosperity.

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CHAPTER 11

ETHICAL ISSUES IN BUSINESS:

SUSTAINABLE BUSINESS AND
THE ENVIRONMENT

At the end of this chapter the student should be able to have learnt:

• Demonstrate understanding of the arguments in favour of ecological

survival as an ethical imperative

• Evaluate the responsibilities of business to the environment

• Recognize the value of sustainable alternative ways of doing business

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Introduction

There is a growing and acute awareness by people all over the world of the necessity
to protect and save the environment. Locally and globally we are extremely aware of
the threat to the very survival of our planet Earth. We are progressively coming to
realize that there is no fair market price for replacement of our most precious resources
such as our rivers and oceans, rain forests, the very air we breathe, etc. Of concern
also is the worth of human and non-human life affected by environmental degradation
and by resource depletion. It has now become imperative for us to view these
problems in earnest.
How we approach them, whose responsibility is it to do so, and what are the ethical
issues involved, as well as the very important matter of a sustainable future, are vital
questions that will be addressed in this section.

Definitions (for our specific purpose in this section)

Ecological System is an interrelated and interdependent set of organisms and

environments – human and non-human – in which the activities of any one part will
affect all other parts and the survival of each part depends on the survival of all other
parts. Achieving and maintaining equilibrium in the ecosystem is an important
consideration.

Development from an economic perspective is the efficient utilization of resources

depending on a matrix of political and social factors, public policy and human capital.
Seen in economic terms, the environment favourable to development has three
components:

- the physical, institutional and human infrastructure

- the macroeconomic framework
- the microeconomic incentive structure

Sustainable Development may be conceptualized simply as: “….paths of human

progress which meet the needs and aspirations of the present generation without

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compromising the ability of future generations to meet their needs” (World

Commission on Environment and Development, 1987).

Sustainability in Business does not mean sustained economic growth and is not just
business as usual. For business to be sustainable there must be a shift in priorities
and values from the prevailing growth-centred, profit-making, consumer-driven
philosophy, to one which values nature, promotes conservation, minimizes waste,
reduces consumption and protects the environment.

Emphasis in these definitions of concepts of development and sustainability is on the

need for new conceptions of global development, inter-alia: to recognize that only
through sustainable approaches to social and economic development, can the planet’s
fragile ecosystems be protected and nurtured, and the aims of human development
be furthered.

? THINK POINT
Are you willing to curb some of your demands on environmental resources
and to accept the impact that this would have on your life? Reflect on your
reasons.

Ethics of Ecology

Rights of Future Generations

Present generations have to bear a disproportionate burden for the sake of future
generations. How much of the environment can we use or destroy to advance our own
welfare? We have seen that human beings have the capability of undoing the world
order in a way that can ultimately lead to the ecosystem’s destruction. John Rawls
stated that justice requires that we hand over to our immediate successors a world
that is not in a worse condition than the one we received from our ancestors. It will be
grossly unjust of us to leave nothing for future generations (not necessarily restricted

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to ‘immediate successors’). We have to develop new ways of thinking and to practise

self-restraint in the interests of those still to come.

Right to a Liveable Environment

Every individual has a moral and a legal right to a decent livable environment – a
principle that is based on the belief that human life and survival are not possible without
a liveable environment. Others have a duty to allow one to have a liveable
environment. A liveable environment, it is said, is essential to the fulfillment of our
human capacities. If this is so, then how do we account for the most appalling
conditions under which millions of people within and outside South Africa live? –
conditions that in themselves are a serious threat to the total ecosystem.
(See Clause 24 of the Bill of Rights, Chapter 2 of the S.A. Constitution and Article
25(1) of the Universal Declaration of Human Rights ).

An Ethic of Ecological Holism

(Includes the deep greens and the light greens). Not only do human beings suffer
because of the harm done to the environment but non-humans also bear the burdens
of human interference with nature. Some regard it as our moral duty to protect both
human and nonhuman parts of the ecosystem – the latter for their own sake, not just
as a means for human beings to achieve their own selfish ends. Welfare of some non-
humans is intrinsically valuable. They have moral rights to be treated with respect, e.g.
animals should not be used for testing of any kind. (The story goes of the American
Indian Chief who prohibited the extraction from a certain type of plant for the production
of oil, on the grounds that although those plants could not speak for themselves, they
had rights that had to be protected from exploitation.) Thus one sees that this principle
extends to non-animate things, e.g. rivers, lakes, oceans, mountains, plants, minerals,
etc., all of which at some time or other, are negatively affected by the actions of human
beings. In fact, the entire “biotic community” has a right to have its “integrity” “stability
“ and “beauty” preserved (Velasquez, 1998:272).

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? THINK POINT
Do you believe that trees, rivers, mountains, animals have rights? Consider
this in terms of corporate responsibility towards the environment.

Some causes of environmental problems

• Growing consumer affluence – increase of wealth- spending – consumption –

waste

• Increasing materialistic cultural values – consumption over conservation

• Population explosion – more industrialization, product use, waste and pollution

• Increasing urbanization – increasing pollution

• New and uncontrolled technologies produced by firms that prioritise profits,

convenience and consumption over the environment

• Industrial activities – depletion of natural resources, destruction of environment for

economic reasons leading to environmental decay (Weiss, 1998:156)

Major manifestations of environmental abuse

Global warming, depletion of ozone layer, pollution of air, water and land, resource
depletion, solid, nuclear and other toxic wastes and major health risks, etc.

Why target business?

Why is business regarded as the main culprit of environmental problems?

Business firms are part of the larger ecological system – what one may regard as the
‘spaceship earth’ – in which it is a powerful player. Mainly business activities (mining,
manufacturing, industries and so on) create environmental problems such as waste
production, pollution, depletion, etc.

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For centuries businesses have operated on some mistaken notions that caused them
to ignore the impact of their activities on the natural environment.

Some of these mistaken notions were:

• Treatment of water, air and other natural things as being free goods – not privately
owned, therefore, lacking adequate protection – do not have to pay for them so
use them freely – also ignore the damage done to them – there appeared to be
nobody to whom one had to be accountable

• The environment is an unlimited good. Its carrying capacity can go on indefinitely

and rapid deterioration cannot set in

• The earth can carry a virtually infinite amount of pollution and other forms of
environmental damage

? THINK POINT
Could it be possible that these may be some of the reasons why Europe
impoverished Africa?

Obviously, these are self-defeating beliefs and, therefore, businesses now have to
face the most pressing challenge to be environmentally conscious and responsible.
There are limits to our natural resources. These cannot be exploited indefinitely.
Substitutes too are limited, e.g. we are still a long way from effectively harnessing,
developing and using solar energy, wind, etc.

The natural world is the source of critical resources, and also the receptacle for waste
by-products of business activities. This natural system is rapidly losing its capacity to
absorb this waste. Then too, there are certain types of waste that will not be easy to
dispose of even in the very long-term, e.g. nuclear waste.

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ACTIVITY 11 (a)
List at least three dimensions of pollution and their negative impact on a
liveable environment and quality of life. What would be some of your choices
in dealing with these?

Business is not the only (although it is the major) source of environmental abuse.

Consumers also have to bear guilt to a certain extent. What business manufactures
and produces, consumers buy and use. Business draws raw materials from the natural
environment and transforms them into finished products. Waste products remain after
consumption – foodstuff, packaging, cans and other forms of litter that deface the
environment. Consumers contribute to the emission of gases that pollute the air by
their increasing demand for and use of motor vehicles. As population multiplies the
volume of pollution increases especially in urban centres with population
concentration.

The Environmental Movement is a worldwide movement that made people

conscious of environmental degradation caused by economic production. It advocated
an alternative in the form of environmentally responsible economics. In this process it
drew attention to the affluent North and the poverty-stricken South that posed large
problems for the attainment of sustainability.

A stark reality to which the movement drew attention was that nearly every economic
benefit has an environmental cost and that the sum total of costs in affluent societies
often exceeded benefits

Since environmental problems have different origins and raises concerns at various
points in society, their treatment requires different solutions coming from different
directions. The environmentalists form one of these directions. The others are ordinary
citizens who may also be environmentalists, and the law. Business is also included
among these sources for solutions. None of these sources of action can alone tackle
the problem. Society needs the ethical vision and cooperation of all players to solve

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one of our most urgent problems – one involving the very survival of our planet and
one that begs the whole question of sustainability.
ACTIVITY 11 (b)
As an environmentalist what would be at least five principles that you would
prioritise in your efforts to save the environment?

Business, Environment and Ethics

From an ethical point of view the roles of corporations as economic systems based
primarily on the utilitarian approach have been open to much criticism. It is argued that
the utilitarian approach alone is not sufficient to justify the negligence and abuse of the
earth as the stakes are far too high. One cannot focus only on efficiency and ignore
values of justice, equality, dignity, self-respect, the magnificence of our natural
heritage, and the quality of life generally.

Business has to consider principles of rights, duty and justice in ensuring a liveable
environment for present and future generations. It has to seriously think about and find
answers to questions such as: how large a damage does business activity pose for
the welfare of the total environment? What values must be given up in order to halt or
slow down such damage? How long will our natural resources last? What obligations
does business have to future generations on issues of environmental preservation and
resource conservation? If business fails to save the environment whose rights will be
violated and whose duty will it be to pay for the costs of dealing with environmental
abuse?

Business has to give serious attention to extricating itself from its position of being a
part of the problem and creatively find ways to become part of the solutions. The
sooner it develops an environmental conscience, the greater the benefits to the entire
ecosystem. Business has to demonstrate moral leadership even at the risk to its self-
interest. This will most surely require of it moral vision, commitment, courage, and
involves risks and sacrifice. The hard truth of the matter is that resources are limited,

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that not all interests can be satisfied, and that the challenge for business is to decide
whose interests to defend and what resources willingly to sacrifice.

One of the most important areas for the attention of business is that of economic
growth. From the no-limit growth perspective, business exacerbates environmental
and resource problems. Immediate attention has to be given to the issue of limits to
growth and business should fight against its myopic approach characterized by short-
term gain and long-term pain.
This proactive approach will obviate forceful legal intervention.

Legislation

Business and government are two major role players who must clarify the proper
relationship between them when faced with a social problem of the magnitude of
environmental crises.

Legislation is necessary to ensure the elimination of gross malpractice with regard to

environmental matters.

Legislation already covers some aspects contributing to environmental problems, e.g.

reduction of noise levels, minimum standards for the disposal of some industrial waste,
banning the use of propellants, regulatory urban planning, etc.

Government regulatory agencies have to develop and be seen to enforce policies and
laws to protect general and workplace environments. Monitoring and ensuring
compliance could, however, present problems, e.g. in South Africa there are laws
governing the mine dumps of mines that have been closed, but companies do not
appear to be complying with the provision of the law that requires them to rehabilitate
the dumps. The consequences of this noncompliance are extremely detrimental to the
people living in the vicinity and to the overall condition of the area itself.

Vested interests of governments at different levels also pose a huge problem with
regard to legislation and compliance, since business substantially funds political

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parties and the latter would not like to support legislation that business may frown
upon. Could this also be the reason for the ‘soft’ treatment given to companies that fail
to rehabilitate mine dumps?!

All this calls for business to cooperate with government in solving environmental
problems and to recognize its moral responsibility to become the more active partner
in dealing with these concerns. Thus it must lobby for good environmental legislation,
against bad legislation, and not fight back any legislation that it perceives as not
serving business interests, or isolate itself from any government effort to promote
positive environmental legislation.

Just as ethical principles underlie issues of benefits and costs, so should they influence
ecological legislation, e.g. laws should incorporate the principle of compensatory
justice – those responsible for the problem should compensate those who have
suffered negative effects, e.g. Thor Chemical (mercury poisoning), Cape Plc (asbestos
victims), Chernobyl, Bhopal victims, etc.

The evolution of laws, regulations, corporate practices and restrictions regarding the
use and abuse of the natural environment must continue if sustainability is to become
a reality.

? THINK POINT
Is a high consumption nation morally justified in continuing to appropriate for
its own use the non-renewable energy sources and other raw materials of
more frugal nations too weak economically and socially to use these
resources productively, or to protect them ?

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Some Views on Sustainability

The growing concern around the issue of sustainability arises simply because we
have not as yet developed sufficient confidence about the sincerity and earnestness
with which all stakeholders will play their parts.

Looking back at the development decades, Lusk & Hoff (1994:21) point out that these
decades “…….have produced forms of economic organization which are extremely
destructive of the environment. Ironically these models also led to policies which
generated highly stratified societies in which the only thing that is universally shared
has been pollution”.

Sustainability supports social development by pursuing production, distribution and

conservation of wealth through forms of social, political and economic organization
which maintain and nurture the physical environmental foundation of human welfare.

The 1990s witnessed a call on all countries to make sustainability a compulsory part
of their development agendas because environmental challenges had assumed a
worldwide character. Local issues had global implications and global issues in turn
had origins in personal consumption at local levels – a vicious cycle.

Development theorists focus on environmental sustainability; ecologists and human

rights advocates stress the need for government and business to concern themselves
more actively with promoting and ensuring clean production processes and
responsible business practices.

What has to be done differently?

There is a need to break out of our attachment to development paradigms that evolved
in early industrial revolution and open up to the challenges and opportunities of
development in a post-industrial, indeed, a technological, world.

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A new approach should go beyond money to include people and their struggle to
sustain an acceptable lifestyle for the next generation. Development theorists now
believe that development should be needs-oriented, this emanating from the people
themselves. As in all development ventures, it should emphasise self-reliance and be
ecologically sound in order to effect a whole-society transformation.

It is argued that growth macro indicators such as GNP and per capita income are no
longer accepted as the most critical and definitive indicators of development. Social
investments in health, housing, education and an economic system in which
participation is meaningful and equitable are vital for socio-economic development.

Theorists maintain that the best ways of achieving sustainable social and economic
development are:
• to have in place a democratic market-oriented economy
• to be accompanied by state investment in health, housing and education
• to measure sustainability of development in human terms, i.e. taking cognisance
of : cultural patterns of households and community-based structures, and the
extent to which individuals demonstrate a significant improvement in feelings of
self-respect, selfreliance and cultural tolerance.

The challenge to reverse current global trends toward sustainable alternatives requires
massive re-education of the world’s citizens and mobilization of all sources of social
power that can be mustered. Leaders in all walks of life must take into account the
long-term accumulative effects of policies, plans and actions. The current world
communities cannot absolve themselves from the responsibility of doing something
about the state in which the world finds itself today – a state that admittedly could be
ascribed to policy-makers, planners and business communities of the past.

While the ecosystem view requires a global perspective and while business operates
in settings where environmental conditions, movements and laws vary, it is not easy
to get international agreements on laws or treaties to deal with problems of the
environment. A good example of this is the US (known as the world’s greatest polluter)
refusal to sign the Kyoto Protocol.

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The obvious question that arises is: who has the authority to regulate global business
activity? In view of the magnitude of the crisis and the pervasive and frightening nature
of its effects, the problem has to be tackled globally and urgently. Achieving a
sustainable course for the future of our planet is surely the responsibility and challenge
for the present generation that inhabits this planet. Therefore, a concerted,
collaborative and consensual effort from all is an imperative. How else will nations be
able to control harmful actions and their consequent blunders?
Ongoing summits and endless talks without visible implementation and monitoring will
not save the earth. Effective measurement instruments have to be devised on a global
basis of measure any progress desired.

Should giant corporations be perpetuated? – a matter of optimum size The other

side of the coin asks: Is small beautiful?

Biodiversity has been put forward as an alternative to giant corporations. This

embraces a system of smaller organizations, more regional control, alternative
business structures, decentralization and constituency control.

Section Summary

The central concern in this section was economic activity and the destruction of the
environment and ultimately the very survival of the Earth.

The responsibility of business, the law (government, policy and legislation), consumers
and ordinary concerned citizens, to deal with this imperative, was highlighted.

Major ethical issues of rights, duties, justice, equality, etc, in relation to present and
future generations of human beings and the non-human segments of the ecosystem,
were considered.

An underlying factor in the consideration of problems of environmental degradation

and resource depletion as they relate to economic practices, is sustainability. Since
no amount of cosmetic, half-hearted and superficial approaches would reverse the

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environmental crisis, some thoughts had to be given to things that had to be done
differently. A “whole- society” transformation was emphasized that included a change
in economic organization, more people participation, etc. in order to make a start in
pursuing a sustainable future in which all stakeholders had a place.
SELF ASSESSMENT ACTIVITY 11
You are a major stockholder in a large company. What would you consider to
be imperatives for you in the light of sustained criticism of business in relation
to environmental concerns and sustainability?

(see end of section for some suggested answers)

SUGGESTED ANSWERS TO ACTIVITY 11(a)

Three dimensions of pollution

Air Pollution: potentially disastrous long range effects on climate – “greenhouse” effect,
global warming, expansion of world’s deserts; melting of ice-caps – increase in tidal
levels and floods, extinction of some animal and plant life, disruption of farming, acid
rain threatening forests.
Increase in severe respiratory diseases in human beings, cancer.

Water pollution: includes organic waste, bacteria, viruses, radio-active material, oil
spills, hazardous and toxic substances.
Increase in water-borne diseases, e.g. cholera.

Abandoned dumps: mining and garbage – unsightly, hazardous health problems – TB,
asbestosis, mercury and chlorine poisoning, food poisoning, skin complaints, etc.

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Choice of dealing with these

Lobby for stricter laws and regulations and stricter penalties for not complying.
Negotiate with companies to stop pollution at its source by installing pollution control
devices.

Lobby for the manufacture of certain goods to be reduced or stopped altogether.

Establish if companies are making serious efforts to deal with pollution problems, for
example, are they including waste risk analysis in their strategic planning process; do
they have proper information systems installed to detect environmental
problems?
Last but not least, analyse the problems in terms of ethical principles of rights, duties,
justice, etc., e.g. whose rights are being violated, who is gaining excessive benefits at
whose cost?

SUGGESTED ANSWERS TO ACTIVITY 11(b)

Principles to save the environment - priorities

Sustainable use of natural resources because of finite nature of these resources.

Reduction and disposal of waste because of the harm it could cause to human and
natural environment and because of the limits of the earth and the atmosphere to
absorb these waste products.

Damage compensation – someone has to pay for the ill-effects on the environment –
many ill-effects are caused by business and business can afford to pay.

Wiser use of energy. Economic growth makes energy resources scarce – what about
future generations? A brake has to be put on the excessive use of energy.

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Protection of the biosphere – preventing or minimizing unwarranted harm and avoiding

irreversible damage to the entire ecosystem – guard against manipulation and
destruction of the environment especially by business – a watchdog role.

SELF-ASSESSMENT ACTIVITY 11 - SUGGESTED ANSWERS

Environmental concerns and sustainability – company’s responsibilities

The criticisms will not be ignored or be dismissed as being unimportant. Since the
Company is fully aware of these criticisms and has conceded the serious implications
of business activities generally on the environment, and has given attention to
strategies that will render the Company less culpable, the following are some areas
that are being considered for action:

Reduction of resource depletion. It will be necessary to look for substitutes

especially for replaceable resources, to re-use and recycle resources.

Give serious consideration to the wisdom of any future expansion

without degrading the environment. If social costs are going to be
high then focus will shift to aspects such as: product durability, energy
efficiency, recycling, long-term goals instead of Company-biased
short-term returns, and other similar efforts that will constantly evolve
toward making sustainability a reality.

As a moral imperative, business considerations will not stop at purely

economic and material matters but will include human beings, flora and
fauna as they negatively experience the impact of business operations.

A major undertaking will have to be an assessment of the modes of waste

disposal adopted by the Company and to research further scientific
methods that will be more environmental – friendly.

Objective attention will be given to the issue of damage compensation as a

necessary though unpleasant, avenue for future prevention and control.

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The production team will have to revisit earlier models such as the
economies of ‘permanence’ when creative and productive energy went
into maximizing quality and durability of products and when business
operating on a smaller scale, did not have to guzzle huge amounts of
resources. Thereafter, it will be necessary to review the current trend of
economies of ‘transiency’ – goods are not manufactured to last a
lifetime (quality-wise and because of excessive consumerism).
Tendency to give rise to increasing disposability (hence problems of
waste disposal). All this is based on the belief of business and the
public that this model of production helps to turn the wheels of the
economy towards greater profitability – so we have all become part of a
‘throw-away’ culture.

The Company will have to accept that any lag between

environmental degradation and the Company’s response to it will
produce a future shock too dreadful to contemplate.

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CHAPTER 12

ETHICAL ISSUES IN BUSINESS:

TECHNOLOGY AND FUTURE BUSINESS

At the end of this chapter the student should be able to have learnt:

• Reflect on technological development as distinct from accepting it as a

given. This includes an understanding of how the technological world
impacts ethically on society

• Evaluate the relationship between business and technology

• Demonstrate an understanding of the broader issues surrounding the

control of technology

• Weigh up the pros and cons of needing more or less technology

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Introduction

The Age of Invention was associated with the first Industrial Revolution. The second
Industrial Revolution is synonymous with the Age of Intervention. In this Age, what
used to be regarded as ‘mysteries’ of the natural world have been reduced to ‘technical
problems’ that can be ‘solved’ in a routine way in operational terms, e.g. software
stored in the data bank.

The core technology of our times are computers that are accepted as new paradigms
and by some, even as ‘new common sense’. Technology in its myriad forms has come
along in the 20th century bringing with it a technological revolution that has exceeded
the industrial revolution in terms of social significance.

Modern technology has undoubtedly become a constituent part of our collective life
and nobody can deny its influence on the world and on our actions in the world.

In view of the acceleration of technological innovation and its influence on our lives, it
is important to consider the values and moral standards embedded in this process,
e.g. the technological and ethical issues surrounding the conception and birth of
babies – test tubes, in-vitro fertilization, surrogate pregnancy, etc. Today, we have the
technological capability of doing just about everything we want, e.g. organ transplants,
control of personality, landing on the moon, using space technology to collect
information from space, etc.

As far as business is concerned, technology has also become a vital factor in

underpinning modern business in addition to the market system, in spurring economic
growth. Ethical issues arise in this sphere too that need further consideration.
Computers have powers to help but also have considerable capacity of misuse and
damage.

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? THINK POINT
What are your comfort zones and/or your anxiety levels when you think about
or experience new technologies?

The Technological Ethos

Refers to a cluster of norms and values implicit in the operations of technology.

While technology brings promise, it often comes into conflict with people’s fears about
its unforeseen dangers (refer to people’s earlier fears about the unpredictability of
nature).

Technology is seen as both a cause of many of the world’s environmental problems,

and yet it could be the best (the only?) hope for its remedy.

All classical economists (Adam Smith, Ricardo, Mill) stressed technology as a critical
component of economic development. Marcus (1993:479) cites Sociologist Daniel Bell
who constructed the model of a post-industrial society to explain the diverse changes
that were occurring in society.

According to Bell, a post-industrial society differed from an industrial society in five

ways:

• Economic sector changed from producing goods to producing services.

• A professional and technical class became dominant in society.
• Theoretical knowledge became the central source of innovation.
• The control of technology and technological assessment became primary activities.
• New intellectual technologies influenced decision-making.

An interesting reference by Marcus is to the writer George Gilder who extended Bell’s
vision of post-industrial society to one in which material wealth (in the form of physical
resources) was losing value and importance to what he called the powers of the
mind. So ideas and technology became the hallmarks of ascendant nations and
business corporations. (Let us come back to the “powers of mind” concept later.)

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Many were the critics of the technological ethos. These were largely humanists who
viewed the ethos with suspicion. Their suspicions were generally ignored or derided
by mainstream professional and scientific authority.

The critics expressed the view that the industrial and technological “progress” brought
in its trail, a succession of unanticipated consequences; that we have been made
aware of this by the ‘new science’ of ecology; that these consequences have raised
the public consciousness and brought about something akin to a shock of recognition
inherent in which was fear. Jacques Ellul cited by Matson (1974:74) presents the all
but overwhelming vision of a “technological Armageddon”.

A representative critique of the technological ethos and its dehumanizing potentialities

and who built upon arguments presented by Ellul (1964) and other critics, was Erich
Fromm who argued that technology and human individuality were on a collision
course.

His view was that “the requirement of maximal efficiency and output” which
characterizes the technical process leads to ‘ the requirement of minimal
individuality”.
He regarded this as a relentless order – loss of self-direction and self-control. “Man’s
passiveness” was a symptom of the “syndrome of alienation”. The Sociologist
Yablosky talks about people becoming “robopaths” – simulating machines, their
existential state being a human. Thus on the one hand we have individual alienation
and on the other a kind of “collective anomie” (Matson, 1974:74-75).

The Concept of Power and Control

The rise of the mind as a source of wealth that spanned industries is among the most
important forces in the 21st century. The technological revolution of our time has
enormously enhanced the power of human beings to control natural forces which at
one time they regarded as being beyond human capacity to alter or affect. Now human
beings have in their hands the power to change both external and internal worlds. The
sheer magnitude of this power is probably a first in human history and imagination.

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The word control is a key term in the vocabulary of the new technology, but it is a
double-edged sword. Whereas the new techniques have given people extraordinary
control over the natural and human world, the same techniques have created new
dilemmas concerning the control of these techniques themselves. On a more obvious
level one sees the problems manifested in pollution-control and control of resource-
depletion, etc. At a more subtle level, at the point of intersection of values and
contradictory frames of reference, the problem is a much greater one. So we have
what Matson (1974:72) refers to as the “paradox of power”, i.e. expanding
technological control matched by diminishing social control and disappearing self-
control. (Man as machine? Man as technician?).

? THINK POINT
Should the interests and imperatives of the “scientific technological elite”
guide a society and imperil its fundamental values?

Technology

What is and what is not technology?

Technology is a highly abstract and broadly diffuse concept. As a word “technology”

has multiple meanings, although when most people see the word “technology” or
“technique” it automatically conjures up an image of machines. The machine is the
result of a certain technique and for its social and economic application, still other more
advanced techniques are required.

One has to draw a distinction between creativity as it is used in arts, crafts and similar
activities, and technology that refers to any complex of standardized means for
attaining a predetermined outcome. It, therefore, is deliberate and rational.

Contemporary society differs from its precursors in that it has a large group of
technologists with the assigned task of inventing, developing and disseminating new

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ways of doing things. These things themselves must also be of a new kind – outcomes
of a systematized form of change or technological innovation. The technologists
dominate the innovation process. The technical person is committed to a never-ending
search for “the one best way” to achieve any designated objective (Ellul,
1964:Preface: x).
Another key characteristic of technology is its clear preponderance of innovations –
from toothbrushes to space shuttles.

The rate at which technological change is occurring, obviously has decisive

consequences for our way of life and yet for many it is seen as apolitical. In some
circles it is referred to as the “sunrise industry” (Goldhaber, 1986:4), because of
sunrise being an astronomical occurrence beyond human control. In the same way, it
is argued, technology too will happen. It cannot be ignored or rejected. There is a
grain of truth in this, but otherwise it is basically false. Technology is a human activity
after all and develops as a direct result of wider political choices that could be made
differently – so it is far from being apolitical.
Technology policy must necessarily be a key part of a larger programme. It shapes
what is economically and socially possible. To have a say in our future we cannot
hover between acceptance and rejection. Our choices will have to be based on what
we hold as most central – viz. specific sets of values.

Similarly, to the question: is technology autonomous? – again the answer is “no”. It is

a human activity that in the final analysis is always guided by values and interests that
come from outside technology.

ACTIVITY 12 (a)
Do you have any major concerns with regard to on-the-job practical
application of modern technology?

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Business and Technology

The advent of the Information Age, facilitated by the rapidly increasing internet and
telecommunications innovations, is also changing the world’s financial markets,
production processes, the way in which business is conducted, and jobs. The increase
in information and communications technology has had a major impact on world
economy. In world production systems, increasingly investors look for a production
site where they have Information Technology (IT) – where computers work, where
products can be taken rapidly to the world market. Online technologies are now an
integral part of corporate practices. We now go shopping by visiting the website and
do transactions via e-business. Everything moves at e-speed!

New techniques have made a huge impact on large and small corporations, so much
so that today a business with no lap-top, no fax machine and no salesperson with a
cell phone is practically unheard of and markedly so in the developed world’s large
urban metropolitan as well as smaller areas. In the developed world business has
obviously integrated with and become dependent on computer technology. The world
is rapidly getting used to its new Information Age. IT is a part and parcel of every
business person’s life and a household word for everybody including children, in the
developed world.

Gadgets, bytes, e-stuff, cell phones, fax machines, beepers, computers, make us work
faster, no doubt, and are rapidly changing the way we work. The art of letter-writing
has given in to e-mail. E-mail addresses rather than street addresses are considered
preferable on business cards – no more concern with ‘snail mail’ postal services!
Communication and information dissemination have reached lightning proportions. A
commonly heard question is: how did we ever manage before all this? Yet when it
comes to services to human beings directly, e.g. payment of pensions, technology
(especially computers) is always blamed for its errors and its slowness!

Economic activity in earlier periods was centred on physical labour, natural resources
and capital. Economic growth depended on such factors and management values that
encouraged hard work, diligence and thrift. Today, business views the promise of

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technology and ideas as critical elements for economic growth and prosperity. All
major industrial nations have technology policies. Technology is important because
scientific discoveries bring about new products and production techniques. Computers
have changed corporate management styles.

More and more, business realizes that it is not sufficient to have global market
exposure alone, if goods produced did not incorporate the latest in technology.
Technological innovations are required to produce high quality, low cost goods, e.g.
the Japanese method of production applying innovative technology to improve already
existing products. A high level of technology and the utilization of the knowledge of
this technology to convert factors of production to goods and services are vitally
important. Technology leads to increasing mechanization and gives rise to what has
been accepted as efficient division of labour, which in turn improves productivity and
permits the accumulation of capital.

Technological forecasting has now become an important role of managers.

Technology is always dynamic and has many implications for expansion and
contraction in business. Technological forecasting enables managers to identify
indicators of change and the need for constructing alternative scenarios.

? THINK POINT
To say that technological innovation is a worldwide phenomenon is a myth. It
is a greater truism to say that there is a not-so obvious digital divide in the
world.

Consider the following:

- In Africa (excluding South Africa) there are only plus/minus 14 million phone
lines – fewer than in Manhattan alone or Tokyo alone!
- Half the world has no access to telephones!
- Only about 5% of the world population is connected to the Internet!

(U.N.Report)

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The New Technologies and Corporate Ethics

According to Goldhaber (1986:5) technology should be consistent with a specific set

of values – largely democratic values with commitments to: fullest possible democracy;
equal respect and decent treatment for each person; as thoroughgoing as possible an
equality of opportunity; support for a rich community life; peaceful and respectful
international relations; worthy inheritance for future generations; and a sustainable
natural environment.

Technology is significant precisely when the goals it adopts are related to values and
interests – what values and whose interests, one may ask. Goldhaber (1986:28) gives
the “Golden Rule” of technology as:
Do not develop anything you would not want your worst enemy to have,
e.g. weapons for germ warfare - a categorical imperative, and

Develop only that which will contribute to the general good when
everyone has it e.g. surplus food – a utilitarian view.

Goldhaber maintains that a substantial majority of current technological developments

ignores these rules. A sound technology policy would emphasise them. He argues that
technology itself intrinsically includes anti-democratic elements.( see also
Lanford,2000).

Decisions affecting large areas of people’s lives – most especially their work – are
made without their direct involvement. Technology has to find ways to change it to an
inherently more democratic form of innovation. This argument is also borne out by the
view that the natural course of any rapidly progressing technology leads directly to a
socio-political order in which the instrumental values of efficiency, impersonality, and
a purely technical rationality predominate over the human values of liberty, dignity,
privacy and responsibility.

Using computers as things devoid of humanity deprives users of an immediate sense

of the fact that the computer affects people. Computer users have to have standards

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of conduct ingrained into their minds so that errors can be captured before they
develop into moral catastrophes.

Observations establish that there is conflict between the imperatives of technology on

the one side and the needs of people on the other. This poses a problem of the
ambiguity of ethics, e.g. as seen in national data banks. Such institutions are valuable
as they do serve some positive and essential purposes. However, they also lend
themselves to possibilities of misuse or manipulation.

A whole lot of issues surround the question of privacy and confidentiality which are
fundamental rights clearly not to be violated. Data could be innocently statistical,
intelligence purposes included. The values are at stake when privacy and personal
security are critically endangered by conditions and consequences of high-speed,
high-density mass society and an extremely rapidly moving information highway.

A challenge to privacy is a challenge to liberty. It signals an erosion of the capacity of

respect for persons, that civilization accepts as a basic ethical principle. A challenge
to a person’s privacy is an assault on his/her person. The idea of a person rests on
the moral perception of the human being as subject rather than object – a conception
alien to the technical mind and the technological order.

ACTIVITY 12 (b)
What would be the basic concerns of business ethicists with regard to the
concepts of information and communication as these are used in IT?

Future IT professionals must possess high ethical skills. They have incredibly powerful
tools at their disposal that empower them to change society for better or worse.
Therefore, it is important for them to know the fundamentals of ethics and apply their
skills appropriately. Their knowledge and awareness must cover areas ranging from
privacy to negligence in software testing, internet freedom of speech vs. pornography
etc.

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Development of low quality software is a real ethical problem for the IT industry e.g. if
a computer expert does not programme an incubator thermostat properly, the chances
are that the inaccuracy can result in the death of an infant. All of us globally
experienced the uncertainties that resulted from the Y2K bug incident. It is said that
lack of foresight and inadequate thought given to future implications caused a global
stir raising questions such as:
Would airplanes be able to fly? What would financial ramifications be? and so on.
Problems of global significance indeed, but who was responsible?

? THINK POINT
Write down 3 examples of activities related to technology in the workplace that
you consider to be unethical

Insofar as technological risks are concerned questions arise around moral obligations
and responsibilities. The need to see how moral concepts can help to unravel the
moral complexities of global risk is important. What are the obligations of those who
use highly hazardous and high risk technology in less developed cultures subjecting
foreign citizens to such risks, for instance, what are their obligations to the victims of
any catastrophe such as the Union Carbide disaster in Bhopal, India in1984?

In e-business ethics is no longer a rhetorical word. The key to survival in the new e-
business environment depends upon the management’s ability to adapt to a new more
collaborative corporate competition model. Modern business that values the network
relationship places new limits on the traditional self-interested use of information. Trust
is now a critical value without which companies may be deliberately excluded from
profitable e-business opportunities. Management is often privy to their business
partner’s internal strengths and weaknesses, trade secrets, unique know-how, market
positioning, key personnel and other valuable corporate assets. Trust , security and
comfort or peace of mind are crucial elements for the deep integration of e-business
to operate.

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Moreover, in the new economy where knowledge, not equipment, drives profits,
employees can no longer be considered “outsiders”. They are the source of
competitive advantage and important stakeholders. An ethical sense underlines these
various relationships in e-business.

The Future?

The future of technology is unknowable in all possible details but following trends one
can accept that it is here to stay. Any realistic social order will have to find ways to
redirect technology if it is going to avoid disasters or any of the negative aspects
already experienced. Any effort to redirect technology will have to take into account
values, rights and social visions we would want a new social order to exemplify. Ways
have to be found to utilize and reshape much of current technology as a system that
can better meet the needs of society and provide maximum happiness.

The leaders of the developing countries see in modern technology, especially IT, their
hopes of more accelerated social development, improved quality of life and ultimately,
the eradication of poverty.

Section Summary

The immense significance of the technological revolution together with the concept of
power and control within the technological ethos have been considered, highlighting
the development of ideas and mind-power from industrial and post-industrial society
and its transition to the Information Age.

Business within the new economy has felt the huge impact of modern day technology
especially in the developed world. While technological development has offered
opportunities in what may no more be regarded as far-fetched dreams and visions
beyond human control, it has also presented human society with issues overwhelming
enough for society to seek protection (computer viruses, information leakage) and to
hold a certain degree of reservation about the rapid rate of its development and
progress.

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From an ethical point of view, and since technological developments have touched
every aspect of human life and the natural world, it is incumbent upon society to use
mind-power to redirect future technology respecting long-cherished human values and
rights – a humbling and challenging feat indeed.

SELF ASSESSMENT ACTIVITY 12

Looking ahead in this new century what thoughts and expectations do you
have of the future impact (both positive and/or negative) of technology on
society

(see end of section for some suggested answers)

SUGGESTED ANSWERS TO ACTIVITY 12(a)

Practical application – major concerns

Inherent danger in some technologies that even under the best circumstances are
difficult to manage or control – but there are too the not-so-risky technologies. Either
way technology needs to be properly regulated at both macro and micro levels.

Risks and uncertainty – but business is willing to take the risks and the concern is: at
what and whose costs? This could have ethical implications.
Misuse of technology, e.g a computerized payroll being manipulated to cheat staff of
part of their salaries.

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How safe is safe? Risks to operators of machinery, passengers, innocent bystanders

and even future generations, can cause irreparable harm or be fatal. How much is
human life and the general environment worth in relation to technological risks?

Concerns about computing behaviour e.g. hacking , cracking, spamming, etc. The dark
side of human nature can also migrate into cyberspace.

(Langford 2000). Rights and responsibilities of individuals. All aspects surrounding

information integrity e.g. confidentiality , security , accuracy, privacy must be taken
into account .

Technologies are complex entities made up of many components and procedures all
of which interact in unexpected ways. How capable are we to deal with these should
inherent risks lead to disasters, and how to avert these disasters? Is there always
sufficient time in which to rectify happenings? (Mining accidents occur regularly).

Capability of Managers – are they sufficiently geared, do they have adequate

knowledge to make judgments, rational risk assessments, etc.? (Not everyone
undergoes the rigorous training that NASA requires!)

SUGGESTED ANSWERS TO ACTIVITY 12(b)

Concern of business ethicists – information and communications

Not all ethical issues have clearly gelled as yet. Internet ethics is a virgin territory yet
to be explored further. Business ethicists will have to watch developments closely and
identify problems before they reach harmful proportions and become embedded in the
ways of doing business. No need to wait for after-the-fact analysis. Ethicists will need
to apply or revise existing ethical concepts and norms to serve the new environment.

Challenges that face ethics are : the global scale of technology, increased scope for
anonymity, endless possibilities for interacting, uncontrollability and rapid
responsibility as manifested in ease of duplication and distribution of material and
facilitation of recording material.

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An important area that requires the careful analysis of ethicists is the concept of
information and communication. This analysis should take into account the following:

Look at its virtues and vices, understand the nature of the IA and its promises and
pitfalls – see how it changes major business activities and how these changes affect
people.
• Establish if data is useful and reliable reflecting true knowledge, not
disinformation, misinformation and falsehood. This will also alleviate libellous
situations and will uphold virtues of truth and accuracy.
• Ensure that virtues are relevant to the IA so as not to become dysfunctional.

• Ethics is about people and their relations, and the computer has the capacity
to affect our concept of what it is to be human . Guard against the computer
making us techniques, strategies or machines. Be aware of hazards to many
aspects of human existence and social values such as privacy, equity,
personal responsibility and individual identity.

• Probe further into issues of privacy and the avoidance of abuse of information.

• Undertake intensive study of modern technology in relation to information

integrity and the relationship of the internet to demonstrate values.

Ethics of communication shares similar analysis since information without

communication is useless and communication without information is empty or can be
deadly dangerous. Trust, trustworthiness and reliability are the ethical values to follow.

Watch communication explosion and information overload on the internet all of which
is characterized by anonymity that encourages irresponsibility, e.g. no peer review or
editorial overview seem to be needed for publications these days.
Watch also the problem of freedom of speech used under the guise of information and
communication.

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SELF-ASSESSMENT ACTIVITY 12 - SUGGESTED ANSWERS

Thoughts on Future Impact of Technology on Society – 21st Century

There are many uncertainties surrounding technology in the future but the following
may be some impact of technology on society:

Increased availability of offensive or dangerous material on the Internet affecting

society as a whole.
Invasion of privacy by governments for the wrong reasons.
Invasion of privacy by business also for the wrong reasons.
Loss of person-to-person contact and consequent growing alienation.
Too much accumulation of personal data in computer database to the point where the
‘person’ is lost or forgotten or remembered only as a representative of certain data.
Displacement of workers by technology contributing to further social and economic ills.
Monopolies in the software or information industries shutting the door to healthy
competition.
Government efforts to limit freedom of speech on the Internet. Technology and the
law, how much regulation should there be?
If solutions are sought they should employ ethical actions. Organisations must ensure
that along with new technology they also provide guidelines, support and direction for
their appropriate usage.
Technology is here to stay and organizations must be vigilant about how it is used and
ensure that it creates both a technological and an ethical society for the future. In a
borderless world of networked organisations, it is imperative that modern technology
and it’s benefits be made available in developing countries.

The challenge to information integrity is intensified in the digital environment of

cyberspace which is very porous allowing easier access to data and efficiently
thwarting security through security breaches, destructive viruses, unwanted intrusions,
electronic eavesdropping and so forth.

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