Applied Ethics in Business

Introduction

Under what conditions is an abortion morally permissible?  Does a citizen have a moral obligation to actively participate (perhaps by voting) in the democratic process of one’s nation (assuming one is living in a democracy)?  What obligations, if any, does one have to the global poor?  Under what conditions is female genital excision morally permissible?  If there are conditions under which it is morally wrong, what measures, if any, should be taken against the practice?  These are just some of the thousands of questions that applied ethicists consider. Applied ethics is often referred to as a component study of the wider sub-discipline of ethics within the discipline of philosophy. This does not mean that only philosophers are applied ethicists, or that fruitful applied ethics is only done within academic philosophy departments. In fact, there are those who believe that a more informed approach is best gotten outside of the academy, or at least certainly outside of philosophy. This article, though, will mostly focus on how applied ethics is approached by trained academic philosophers, or by those trained in very closely related disciplines.

We must first locatesapplied ethics as distinct from, but nevertheless related to, two other branches of ethics. Since the content of what is studied by applied ethicists is so varied, and since working knowledge of the field requires considerable empirical knowledge, and since historically the pursuit of applied ethics has been done by looking at different kinds of human practices, it only makes sense that there will be many different kinds of applied ethical research, such that an expert working in one kind will not have much to say in another. For example, business ethics is a field of applied ethics, and so too is bioethics. There are plenty of experts in one field that have nothing to say in the other. We discusses each field, highlighting just some of the many issues that fall within each. Throughout the presentation of the different areas of applied ethics, some methodological issues continue to come up. Additionally, the other two branches of ethics are consulted in dealing with many of the issues of almost all the different fields. So, what may be a methodological worry for a business ethics issue may also be a worry for bioethical issues.

One particular kind of applied ethics that raises distinct concerns is bioethics. Whereas with other kinds of applied ethics it is usually implicit that the issue involves those who we already know to have moral standing, bioethical issues, such as abortion, often involve beings whose moral standing is much more contentious. Our treatment of non-human animals is another area of bioethical research that often hinges on what moral standing these animals have. As such, it is important that this article devote a section to the issues that arise concerning moral standing and personhood.

This article ends with a discussion of the role of moral psychology in applied ethics, and in particular how applied ethicists might appropriate social psychological knowledge for the purpose of understanding the role of emotion in the formation of moral judgments. Additionally, to what extent is it important to understand the role of culture in not only what is valued but in how practices are to be morally evaluated?

1. Applied Ethics as Distinct from Normative Ethics and Metaethics

One way of categorizing the field of ethics (as a study of morality) is by distinguishing between its three branches, one of them being applied ethics. By contrasting applied ethics with the other branches, one can get a better understanding what exactly applied ethics is about. The three branches are metaethics, normative ethics (sometimes referred to as ethical theory), and applied ethics. Metaethics deals with whether morality exists. Normative ethics, usually assuming an affirmative answer to the existence question, deals with the reasoned construction of moral principles, and at its highest level, determines what the fundamental principle of morality is. Applied ethics, also usually assuming an affirmative answer to the existence question, addresses the moral permissibility of specific actions and practices.

Although there are many avenues of research in metaethics, one main avenue starts with the question of whether or not moral judgments are truth-apt. The following will illuminate this question. Consider the following claims:  ‘2+2=4’, ‘The volume of an organic cell expands at a greater rate than its surface area’, ‘AB=BA, for all A,B matrices’, and ‘Joel enjoys white wine.’  All of these claims are either true or false; the first two are true, the latter two are false, and there are ways in which to determine the truth or falsity of them. But how about the claim ‘Natalie’s torturing of Nate’s dog for the mere fun of it is morally wrong’?  A large proportion of people, and perhaps cross-culturally, will say that this claim is true (and hence truth-apt). But it’s not quite as obvious how this claim is truth-apt in the way that the other claims are truth-apt. There are axioms and observations (sometime through scientific instruments) which support the truth-aptness of the claims above, but it’s not so clear that truth-aptness is gotten through these means with respect to the torturing judgment. So, it is the branch of metaethics that deals with this question, and not applied ethics.

Normative ethics is concerned with principles of morality. This branch itself can be divide into various sub-branches (and in various ways):  consequentialist theories, deontological theories, and virtue-based theories. A consequentialist theory says that an action is morally permissible if and only if it maximizes overall goodness (relative to its alternatives). Consequentialist theories are specified according to what they take to be (intrinsically) good. For example, classical utilitarians considered intrinsic goodness to be happiness/pleasure. Modern utilitarians, on the other hand, define goodness in terms of things like preference-satisfaction, or even well-being. Other kinds of consequentialists will consider less subjective criteria for goodness. But, setting aside the issue of what constitutes goodness, there is a rhetorical argument supporting consequentialist theories:  How could it ever be wrong to do what’s best overall?  (I take this straight from Robert N. Johnson.)  Although intuitively the answer is that it couldn’t be wrong to do what’s best overall, there are a plentitude of purported counterexamples to consequentialism on this point – on what might be called “the maximizing component” of consequentialism. For example, consider the Transplant Problem, in which the only way to save five dying people is by killing one person for organ transplantation to the five. Such counterexamples draw upon another kind of normative/ethical theory – namely, deontological theory. Such theories either place rights or duties as fundamental to morality. The idea is that there are certain constraints placed against persons/agents in maximizing overall goodness. One is not morally permitted to save five lives by cutting up another person for organ transplantation because the one person has a right against any person to be treated in this way. Similarly, there is a duty for all people to make sure that they do not treat others in a way that merely makes them a means to the end of maximizing overall goodness, whatever that may be. Finally, we have virtue theories. Such theories are motivated by the idea that what’s fundamental to morality is not what one ought to do, but rather what one ought to be. But given that we live in a world of action, of doing, the question of what one ought to do creeps up. Therefore, according to such theories, what one ought to do is what the ideally virtuous person would do. What should I do?  Well, suppose I’ve become the kind of person I want to be. Then whatever I do from there is what I should do now. This theory is initially appealing, but nevertheless, there are lots of problems with it, and we cannot get into them for an article like this.

Applied ethics, unlike the other two branches, deals with questions that started this article – for example, under what conditions is an abortion morally permissible?  And, what obligations, if any, do we have toward the world’s global poor?  Notice the specificity compared to the other two branches. Already, though, one might wonder whether the way to handle these applied problems is by applying one of the branches. So, if it’s the case that morality doesn’t exist (or: moral judgments are not truth-apt), then we can just say that any claims about the permissibility of abortion or global duties to the poor are not true (in virtue of not being truth-apt), and there is therefore no problem; applied ethics is finished. It’s absolutely crucial that we are able to show that morality exists (that moral judgments are truth-apt) in order for applied ethics to get off the ground.

Actually, this may be wrong. It might be the case that even if we are in error about morality existing, we can nevertheless give reasons which support our illusions in specified cases. More concretely, there really is no truth of the matter about the moral permissibility of abortion, but that does not stop us from considering whether we should have legislation that places constraints on it. Perhaps there are other reasons which would support answers to this issue. The pursuit and discussion of these (purported) reasons would be an exercise in applied ethics. Similarly, suppose that there is no such thing as a fundamental principle of morality; this does not exclude, for one thing, the possibility of actions and practices from being morally permissible and impermissible/wrong. Furthermore, suppose we go with the idea that there is a finite list of principles that comprise a theory (with no principle being fundamental). There are those who think that we can determine, and explain, the rightness/wrongness of actions and practices without this list of non-fundamental principles. (We’ll look at this later in this article)  If this is the case, then we can do applied ethics without an explicit appeal to normative ethics.

In summary, we should consider whether or not the three branches are as distinct as we might think that they are. Of course, the principle questions of each are distinct, and as such, each branch is in fact distinct. But it appears that in doing applied ethics one must (or less strongly, may) endeavor into the other two branches. Suppose that one wants to come to the conclusion that our current treatment of non-human animals, more specifically our treatment of chickens in their mass production in chicken warehouses, is morally impermissible. Then, if one stayed away from consequentialist theories, they would have either a deontological or virtue-based theory to approach this issue. Supposing they dismissed virtue-theory (on normative ethical grounds), they would then approach the issue from deontology. Suppose further, they chose a rights-based theory. Then they would have to defend the existence of rights, or at least appeal to a defense of rights found within the literature. What reasons do we have to think that rights exist?  This then looks like a metaethical question. As such, even before being able to appeal to the issue of whether we’re doing right by chickens in our manufactured slaughtering of them, we have to do some normative ethics and metaethics. Yes, the three branches are distinct, but they are also related.

2. Business Ethics

Some people might think that business ethics is an oxymoron. How can business, with all of its shady dealings, be ethical?  This is a view that can be taken even by well educated people. But in the end, such a position is incorrect. Ethics is a study of morality, and business practices are fundamental to human existence, dating back at least to agrarian society, if not even to pre-agrarian existence. Business ethics then is a study of the moral issues that arise when human beings exchange goods and services, where such exchanges are fundamental to our daily existence. Not only is business ethics not something oxymoronical, it is important.

a. Corporate Social Responsibility

One important issue concerns the social responsibility of corporate executives, in particular those taking on the role of a CEO. In an important sense, it is stockholders, and not corporate executives (via their role as executives), who own a corporation. As such, a CEO is an employee, not an owner, of a corporation. And who is their employer?  The stockholders. Who are they, the CEO and other executives, directly accountable to?  The board of directors, representing the stockholders. As such, there is the view taken by what’s called stockholder theorists, that the sole responsibility of a CEO is to do what the stockholders demand (as expressed by the collective decision of the board of directors), and usually that demand is to maximize profits. Therefore, according to stockholder theory, the sole responsibility of the CEO is to, through their business abilities and knowledge, maximize profit. (Friedman, 1967)

The contesting viewpoint is stakeholder theory. Stakeholders include not just stockholders but also employees, consumers, and communities. In other words, anyone who has a stake in the operations of a corporation is a stakeholder of that corporation. According to stakeholder theory, a corporate executive has moral responsibilities to all stakeholders. Thus, although some corporate ventures and actions might maximize profit, they may conflict with the demands of employees, consumers, or communities. Stakeholder theory very nicely accounts for what some might consider to be a pre-theoretical commitment – namely, that an action should be assessed in terms of how it affects everyone involved by it, not just a select group based on something morally arbitrary. Stakeholder theorists can claim that the stakeholders are everyone affected by a business’s decision, and not just the stockholders. To consider only stockholders is to focus on a select group based on something that is morally arbitrary.

There are at least two problems for stakeholder theory worth discussing. First, as was mentioned above, there are conflicts between stockholders and the rest of stakeholders. A stakeholder account has to handle such conflicts. There are various ways of handling such conflicts. For example, some theorists take a Rawlsian approach, by which corporate decisions are to be made in accordance with what will promote the least well-off.  (Freeman, 2008)  Another kind of Rawlsian approach is to endorse the use of the veil of ignorance without appeal to the Difference Principle, whereby it might result that what is morally correct is actually more in line with the stockholders (Dittmer, 2010). Additionally, there are other decision making principles by which one could appeal in order to resolve conflict. Such stakeholder theories will then be assessed according to the plausibility of their decision making theories (resolving conflict) and their ability to achieve intuitive results in particular cases.

Another challenge of some stakeholder theories will be their ability to make some metaphysical sense of such entities as community, as well as making sense of potentially affecting a group of people. If a corporate decision is criticized in terms of it affecting a community, then we should keep in mind what is meant by community. It is not as if there is an actual person that is a community. As such, it is hard to understand how a community can be morally wronged, like a person can be wronged. Furthermore, if the decisions of a corporate executive are to be measured according to stakeholder theory, then we need to be clearer about who counts as a stakeholder. There are plenty of products and services that could potentially affect a number of people that we might not initially consider. Should such potential people be counted as stakeholders?  This is a question to be considered for stakeholder theorists. Stockholder theorists could even us this question as a rhetorical push for their own theory.

b. Corporations and Moral Agency

In the media, corporations are portrayed as moral agents: “Microsoft unveiled their latest software”, “Ford morally blundered with their decision to not refit their Pinto with the rubber bladder design”, and “Apple has made strides to be the company to emulate”, are the types of comments heard on a regular basis. Independently of whether or not these claims are true, each of these statements relies on there being such a thing as corporations having some kind of agency. More specifically, given that intuitively corporations do things that result in morally good and bad things, it makes sense to ask whether such corporations are the kind of entities that can be moral agents. For instance, take an individual human being, of normal intelligence. Many of us are comfortable with judging her actions as morally right or wrong, and also holding onto the idea that she is a moral agent, eligible for moral evaluation. The question relative to business ethics is:  Are corporations moral agents?   Are they the kind of thing capable of being evaluated in such a way as to determine if they are either morally good or bad?

There are those who do think so. Peter French has argued that corporations are moral agents. It is not just that we can evaluate such entities as shorthand for the major players involved in corporate practices and policies. Instead, there is a thing over and above the major players which is the corporation, and it is this thing that can be morally evaluated. French postulates what’s called a “Corporate Internal Decision Structure” (CID structure), whereby we can understand a corporation over and above its major players as a moral agent. French astutely observes that any being that is a moral agent has to be capable of intentionality – that is, the being has to have intentions. It is through the CID structure that we can make sense of a corporation as having intentions, and as such as being a moral agent. (French, 1977). One intuitive idea driving CID structures as supporting the intentionality of corporations is that there are rules and regulations within a corporation that drives it to make decisions that no one individual within it can make. Certain decisions might require either majority or unanimous approval of all individuals recognized in the decision-making process. Those decisions then are a result of the rules regulating what is required for decision, and not any particular go ahead of any individual. As such, we have intentionality independent of any particular human agent.

But there are those who oppose this idea of corporate moral agency. Now, there are various reasons one might oppose it. In being a moral agent, it is usually granted that one then gets to have certain rights. (Notice here a metaethical and normative ethical issue concerning the status of rights and whether or not to think of morality in terms of rights respect and violation.)  If corporations are moral agents with rights, then this might allow for too much moral respect for corporations. That is, corporations would be entities that would have to have their rights respected, in so far as we’re concerned with following the standard thoughts of what moral agency entails – that is, having both obligations and rights.

But there are also more metaphysical reasons supporting the idea that corporations are not moral agents. For example, John Danley gives various reasons, many of them metaphysical in nature, against the idea that corporations are moral agents (Danley, 1980). Danley agrees with French that intention is a necessary condition for moral agency. But is it a sufficient condition?  French sympathizers might reply that even if  it is not a sufficient condition, its being a necessary condition gives reason to believe that in the case of corporations it is sufficient. Danley then can be interpreted as responding to this argument. He gives various considerations under which theoretically defined intentional corporations are nevertheless not moral agents. In particular, such corporations fail to meet some other conditions intuitively present with other moral agents, namely most human beings. Danley writes “The corporation cannot be kicked, whipped, imprisoned, or hanged by the neck until dead. Only individuals of the corporation can be punished” (Danley, 1980). Danley then considers financial punishments. But then he reminds us that it is individuals who have to pay the costs. It could be the actual culprits, the major players. Or, it could be the stockholders, in loss of profits, or perhaps the downfall of the company. And furthermore, it could be the loss of jobs of employees; so, innocents may be affected.

In the literature, French does reply to Danley, as well as to the worries of others. Certainly, there is room for disagreement and discussion. Hopefully, it can be seen that this is an important issue, and that room for argumentative maneuver is possible.

c. Deception in Business

Deception is usually considered to be a bad thing, in particular something that is morally bad. Whenever one is being deceptive, one is doing something morally wrong. But this kind of conventional wisdom could be questioned. In fact, it is questioned by Albert Carr in his famous piece “Is Business Bluffing Ethical?”  (Carr, 1968). There are at least three arguments one can take from this piece. In this section, we will explore them.

The most obvious argument is his Poker Analogy Argument. It goes something like this:  (1) Deception in poker is morally permissible, perhaps morally required. (2) Business is like poker. (3) Therefore, deception in business is morally permissible. Now, obviously, this argument is overly simplified, and certain modifications should be made. In poker, there are certain things that are not allowed; you could be in some serious trouble if it were found out what you were doing. So, for example, the introduction of winning cards slid into the mix would not be tolerated. As such, we can grant that such sliding would not be morally permissible. Similarly, any kind of business practice that would be considered sliding according to Carr’s analogy would also not be permissible.

But there are some obvious permitted kinds of deception involved in poker, even if it’s disliked by the losing parties. Similarly, there will be deceptive practices in business that, although disliked, will be permitted. Here is one objection though. Whereas, the loser of deception in poker is the player, the loser of deception in business is a wide group of people. Whether we go with stockholder theory or stakeholder theory, we are going to have losers/victims that had nothing to do with the poker/deceptive playing of the corporative executives. Employees, for example, could lose their jobs because of the deception of either corporate executive of competing companies or the bad deception of the home companies. Here is a response, though:  When one is involved in corporate culture, as employee for example, they take on the gamble that the corporate executives take on. There are other ways to respond to this charge, as well.

The second reason one might side with Carr’s deception thesis is based on a meta-theoretical position. One might take the metaethical position that moral judgments are truth-apt, but that they are categorically false. So, we might think that a certain action is morally wrong when in fact there is no such thing as moral wrongness. When we make claims condemning a moral practice we are saying something false. As such, condemning deception in business is really just saying something false, as all moral judgments are false. The way to reply to this worry is then through a metaethical route, where one argues against such a theory, which is called Error Theory.

The third reason one might side with Carr is via what appears to be a discussion, on his part, of the difference between ordinary morality and business morality. Yes, in ordinary morality, deception is not morally permissible. But with business morality, it is not only permissible but also required. We are misled in judging business practices by the standards of ordinary morality, and so, deception in business is in fact morally permissible. One response is this is:  Following Carr’s lead, one is to divide her life into two significant components. They are to spend their professional life in such a way that involves deception, but then spend the rest of their life, day by day, in a way that is not deceptive with their family and friends, outside of work. This kind of self looks very much like a divisive self, a self that is conflicted and perhaps tyrannical.

d. Multinational Enterprises

Business is now done globally. This does not just mean the trivial statement of global exchange of goods and services between nations. Instead, it means that goods and services are produced by other nations (often underdeveloped) for the exchange between nations that do not partake in the production of such goods and services.

There are various ways to define multiple national enterprises (MNE’s). Let us consider this definition, though: An MNE is a company that produces at least some of its goods or services in a nation that is distinct from (i) where it is located and (ii) its consumer base. Nike would be a good example of a MNE. The existence of MNE’s is motivated by the fact that in other nations, an MNE could produce more at lesser cost, usually due to the fact that in such other nations wage laws are either absent or such that paying employees in such countries is much less than in the host nation. As a hypothetical example, a company could either pay 2000 employees $12/hr for production of their goods in their own country or they could pay 4000 employees $1.20/hr in a foreign country. The cheaper alternative is going with the employment in the foreign country. Suppose an MNE goes this route. What could morally defend such a position?

One way to defend the MNE route is by citing empirical facts concerning the average wages of the producing nation. If, for example, the average way is $.80/hr, then one could say that such jobs are justified in virtue of providing opportunities to make higher wages than otherwise. To be concrete, $1.20 is more than $.80, and so such jobs are justified.

There are at least two ways to respond. First, one might cite the wrongness of relocating jobs from the host nation to the other nation. This is a good response, except that it does not do well in answering to pre-theoretical commitment concerning fairness:  Why should those in a nation receiving $12/hr be privileged over those in a nation receiving $1.20/hr?   Why do the $12/hr people count more than the $1.20/hr people?  Notice that utilitarian responses will have to deal with how the world could be made better (and not necessarily morally better). Second, one might take the route of Richard Miller. He proposes that the $1.20/hr people are being exploited, and it is not because they are doing worse off than they would otherwise. He agrees that they are doing better than they would otherwise ($1.20/hr is better than $.80/hr). It’s just that their cheapness of labor is determined according to what they would get otherwise. They should not be offered such wages because doing so exploits their vulnerability of already having to work for unjust compensation; being compensated for a better wage than the wage they would get under unjust conditions does not mean that the better wage is just (Miller, 2010).