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Ethics & Values in ManagementModule 2: Moral Development, Moral

Reasoning and Ethical Dilemma

Prof N. R. Govinda SharmaJanuary 2015

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Moral Standards Moral Standards are

The norms about the kinds of actions believed to be morally right and wrong

The values placed on the kinds of objects believed to be morally good and morally bad

Non-moral standards Apply to judging non moral things such as

etiquettes, grammar etc

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Moral Standards Standards of non-moral vs moral standards Moral standards are (p 9 of Manuel Velasquez)

Involved with serious injuries or benefits Life of men as compared grammatical mistakes

Exception: Hang him not, leave him / Hang him, not leave him!

Not established by law Just because a parliament accepts apartheid policy as legal, it is not

moral Should be preferred over other values including self-interest

Saving life over keeping a well-paid job This does not mean self interest is always bad; it only

means it is wrong to choose self interest over morality Based on impartial considerations

Each counts for one and none for more than one Associated with special emotions and vocabulary

Guilt, remorse, shame

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Moral evolution

Are moral standards acquired early on in life and that can not be changed? Most people believe that it is so!

This is the biggest obstacle to learning ethics Ethics cant be taught!

But mercifully, Kohlberghs Seven Stages of Moral Evolution (Page 25 of Business Ethics by Manuel Velasquez), says otherwise

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Kohlbergs model Level One: Pre-conventional stage

Stage One: A childs right & wrong governed by physical consequences

If a ask a child as to why it is wrong to steal, it will answer

Because mummy will punish me if I steal Stage Two: Child identifies others needs &

respects them to obtain rewards & avoid punishments to satisfy its own need

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Kohlbergs model

Level Two: Conventional Stages Stage Three: The interpersonal concordance

orientation Right action is conformity with what is expected in

role as a friend, son, daughter Stage Four: Law and Order

Loyalty ones own nation or larger society

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Kohlbergs model Level Three: Post Conventional, Autonomous and

Principled Stages Stage Five: Recognizing that people hold variety of

views, and opinions and one arrives at reaching consensus by agreement, contract

Stage Six: Universal Ethical Principles orientation: Right actions are those that are chosen because of their universality and consistency, Abstract principles (like justice, love (agape love)) rather than concrete concepts such as Ten Commandments govern the decisions

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Application of Kohlbergs model

Why is Kohlbergs theory useful? Most think that morals are developed in

childhood but this model lets us know moral capacities develop with development of sophisticated and critical reasoning

It is possible that some people get stuck at any one stage Dont let it happen to you!

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Application of Kohlbergs model

Persons at higher levels, say post conventional stage will be able to able to justify their actions based on reasoning that can appeal any reasonable person

Higher levels are better not because they come later in life but because they are based on reason rather than just sayingmummy will punish me

People at a later stage have the ability to see wider & fuller perspective than in the earlier stages

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Application of Kohlbergs model See page 31: An important point not be missed Discussion moves us from mere acceptance

because of authority to acceptance based on critical reasoning Shravana (Listening not just hearing), Manana

(Reflection), Nididhyasana (being stationed in truth) Developing critical moral reasoning is one of the

purposes of education

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What is moral reasoning?

Moral reasoning is the reasoning process by which human behaviour, institutions or policies are judged to be in accordance with or in violation of moral standards For example

Transparency International has certain moral standards with respect to corruption

Communities will be judged against this standard

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Process of moral reasoning To carry out moral reasoning:

An understanding of what reasonable moral standards Require or prohibit, Value or condemn

Evidence or information to show that a particular person, policy, institution or behaviour has kind of feature that the moral standards require or prohibit, value or condemn

Take a moral judgment comparing evidence against the moral standard

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Moral Standards An understanding of what reasonable moral standards require, prohibit,

value or condemn Reasonable:

Reasonable profit Require: Board of Directors has a fiduciary responsibility and

therefore required to act in the interest of the investors Held in Trust

Prohibit: CEO are prohibited from misuse of the trust Value: Business value the Trust of the customers (Tatas) Condemn: Society condemns adulteration of medicine

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Analysing moral reasoning Moral reasoning must be logical

One truth leading to another Factual evidence cited must be accurate, relevant

and complete Moral standards must be consistent

If it is morally right for me to engage in price fixing because I want high profits, it must be equally moral if my suppliers too would like to fix the price for the same reason

Do not have double or multiple standards

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Moral Reasoning Process

See page 32 of Business Ethics by Manuel Velasquez Is American society just?

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Moral Reasoning

A society that does not treat its minorities equal to majority is unjust

In America, 41% of non-whites fall below poverty line as compared to 12% whites

American society is unjust

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What is ethical dilemma? Ethical dilemma sets in when two or more

values conflict You are a manager with two cherished values

Justice & Mercy

Your subordinate has made a glaring mistake and

His son is hospitalised Do you overlook the error?

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Example of dilemma Justice:

Rendering what is due or merited Justice argues

Punish! Mercy:

Compassionate treatment of an offender Mercy argues

Let him go! Both are right! This is the dilemma between Right and

Right! See Joseph Badaraccos talk on You Tube at http:

//www.youtube.com/watch?v=A2SKTP43oRQ

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Ethical Dilemma Now you are in an ethical dilemma! You have to decide You are paid to decide! You can adopt some form of decision making based

on gut feeling But gut may not always be trained to make complicated

ethical decisions Train in a cool & composed atmosphere Hope to be equipped to handle the situation when it

actually occurs

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Why models?

The resolution of ethical dilemmas in business is difficult

Even in firms with a code of ethics and culture committed to ethical compliance

Therefore, managers need guidelines in making ethical decisions

So, we will see some models

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Models or Some simple tests

Some simple tests for resolving ethical dilemmas Model by Peter Drucker: Above all do no

harm, knowingly Decision making model by Laura Nash The oracle of the Omaha:

Warren Buffetts the Front-Page-of- Newspaper-Test

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Model by Peter Drucker

In resolving a dilemma use the concept Above all, do no harm, knowingly From the tradition of medical practitioners,

the model requires that in taking a decision check whether it does harm any body

If it does, it is not ethical

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Model by Peter Drucker Illustration: Consider the case Tobacco on fire: Advertising a

harmful product (See Business Ethics- Ethical Decision Making and Cases by Ferrell et al, Sixth edition) Was advertising in 1929 unethical?

Physicians spoke of benefits to nose and throats it clears the throat!

So, at that level of awareness, advertisement by the tobacco company Lucky Strike advertising that its cigarette is less irritating than its competitors products may not be unethical! (as you did no harm, knowingly)

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Is cigarette ad unethical? But in 1964, US Surgeon General Luther Terry

declared cigarette to be a cause of cancer Fairness Doctrine: Equal time for anti-smoking

ads (1967) Cigarette ad was banned in 1971 But in 1980, tobacco industry discovered

endorsement by movie stars Sylvester Stallone paid $500,000 to smoke Brown &

Williamson cigarette

This is unethical!

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Why is it unethical? Advertising cigarettes is unethical because Cigarette smoking while benefiting the company

places Burden on state to treat tobacco related diseases

Benefit to company, burden to state! Profits are private, losses are public!

So, cigarette companies were asked to pay billions of dollars every year to states to Reduce the burden of health care Fund campaigns to discourage smoking, especially

amongst children the new recruits

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Model by Laura Nash Laura, Harvard Divinity school suggests 12

questions to be asked in deciding an ethical dilemma:

1. Have you defined the problem accurately? Would you steal to save yourself from hunger? Rephrase the question as Are there ways other than

stealing to satisfy your hunger? Relate to Q3- How did you get into this situation in

the first place?; all these questions in this model are interrelated

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Model by Laura Nash1. Have you defined the problem accurately?Activity Based Learning Somu needs a job badly to support his ailing mother. His

resume is not impressive. Is it right to puff his resume to get the job to help his

mother?

Are there other way of getting the job other than puffing the resume?

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Model by Laura Nash

2. How would you define the problem if you stood on the other side of the fence?

ABL Slum dwellers vs developers If you are working for developers, can you see

from the perspective of the slum dwellers?

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Model by Laura Nash3. How did this situation occur in the first place?

ABL: You are the boss and suppose your subordinate asks for a recommendation letter but you were never happy with him, you are in a dilemma if

You had never discussed the shortcomings with him / her earlier

This analysis helps to avoid future dilemmas- Relate to question 1: How did you get into a

situation wherein you could not satisfy your hunger?

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Model by Laura Nash4. To whom and with what are your

loyalties? ABL: If your manager padded his expense

statement, and accounts is unlikely to find out, whether you let the company know about it depends upon whether your loyalty is with

The company or the boss

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Model by Laura Nash

5. What are your intentions in making this decision?

ABL: You are a finance officer and you may say

that you is cooking the books to smooth out the earnings to help the company but your intention may be

to earn bonus!

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Model by Laura Nash6. How does these intentions compare with likely results? Continuing with last illustration, the company will have to

face the truth some time and in which case, under the Financial Act, the financial officer reporting false financial data will have to return the bonus and face criminal charges

ABL: Somu had puffed the resume and got the job Background check revealed the truth He may lose his job when most needed

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Model by Laura Nash

7. Whom could your decision or action injure? In Enron case, the statement of CEO, Kenneth

Lay, that In his personal opinion, Enron shares are incredible bargain at current prices was misleading as he himself was selling blocks of share

Think of an ABL

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Model by Laura Nash

8. Can you engage the affected party in a discussion before decision?

If you cant, it indicates that you have your own interest over others (with whom you may have a relation or responsibility) and that you have crossed an ethical line

Think of an ABL

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Model by Laura Nash9. Are you confident that your decision will

be justified over a long period of time now? Suppose you buy a term paper on internet to

satisfy the expediency of time now, (it appears very clever), but down later in your career, some of your classmate may come out with this when you need good reputation most

Talk of Shreyas and Preyas!

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The oracle of Omaha:

What is oracle? Oracle is a seat of deity, such as Apollo at

Delphi, where prophesies are given in answer to queries

A person of unquestioned wisdom or knowledge

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The oracle of Omaha:Warren Buffets Front-Page-of-the-Newspaper Test

What is meant by oracle of Omaha? A nickname for Warren Buffett, who is

arguably one of the greatest investors of all time

He is called the "Oracle of Omaha" because his investment picks and comments on the market are very closely followed by the investment community, and he lives and works in Omaha, Nebraska.

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The oracle of Omaha:Warren Buffets Front-Page-of-the-Newspaper Test

This simple model asks that a decision maker envision how a reporter would describe a decision or action on the front page of a local or national news paper

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Warren Buffets Front-Page-of-the-Newspaper Test

A sedate newspaper like the Hindu Business Line had a headline news:

Former Satyam CEO Raju, his brother and CFO arrested and detained in profit-fraud

scandal Business Line, 12 January 2009

Would Ramalinga Raju made the same decision if he had envisioned or foreseen the headline?

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Warren Buffets Front-Page-of-the-Newspaper Test

The purpose of this test is to help you step back from the business settings and view from the perspective of a objective outsider

Their views are not the same as they are not subject to the same pressures and biases

ABL: Write a headline news caption for a potentially unethically task you are contemplating

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Summary of the module

Moral standards are the basis of moral reasoning

Moral reasoning must be logical But the base truth must be correct Belief is the base for values Hold on to your belief but allowing your

intellect to grow

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Summary of the module

Consider the Kohlbergs model of Moral Development Level One: Pre-conventional stage

Stage One: A childs right & wrong governed by physical consequences

Stage Two: Child identifies others needs & respects others needs in order to obtain rewards & avoid punishments that satisfy its own need

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Summary of the module Level Two: Conventional Stages

Stage Three: The interpersonal concordance orientation Stage Four: Law and Order

Loyalty to ones own nation or larger society Level Three: Post Conventional, Autonomous and

Principled Stages Stage Five: Recognizing that people hold variety of views, and

opinions and one arrives at reaching consensus by agreement, contract

Stage Six: Universal Ethical Principles orientation

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Summary of the module

Models available for resolving dilemmas Model by Peter Drucker: Above all do no

harm Decision making model by Laura Nash The oracle of the Omaha:

Warren Buffetts the Front-Page-of- Newspaper-Test

End of module