business ethics
What is business?
The combination of heterogeneous forms of capital to create and capture value
It involves experimentation to find novel combinations of valuable resources
It involves collaboration because work is often a matter of team production
What is ethics?
The search for and pursuit of a worthy goal
All action is goal directed, ethics seeks a worthwhile goal
Includes but is not reducible to a code of rules or set of principles
What is business ethics?
Ethics in the context of contemporary organizations – firms.
Organizations are ubiquitous in modern society so ethics must be business ethics
Living well in an organizational context.
The atomistic view of business and society
This is the dominant view of business
This view has a number of limitations
Individuals are isolated social atoms
Individuals only interact with others in order to achieve their individual goals
The firm and society are an only matter of contracts (the social contract and the nexus of contracts view of the firm)
What is wrong with the atomistic view?
Business needs laws and social institutions to function well – a concern for the common good
An excessive focus on individual interests undermines trust and identification with society and business needs these things.
Persons gain an understanding of worthy aims from social relationships
Personal identity is a product of a social relationship
Persons are always dependent upon others
Why we need the virtues
In order to identify and pursue worthy goals
In an organizational context externally in order to preserve institutional environment needed for business practice
Internally in order to promote cooperation needed for increased trust, efficiency, innovation, and excellent work
Business ethics in the firm
Cultivating the practice or craft in an organization
The activity that captures the fundamental purpose of the firm
Requires virtues such as justice, truthfulness and courage
The formal organization
Increasing profits and preserving the craft
There is always a tension between short and long-term
In the long term ethical business practices are profitable
Good accounting firms make money by doing good accounting
Networks of giving and receiving and the firm as a community of persons
Organization members are vulnerable
At times org members must go beyond their role and come to the assistance of fellow members
Organization members must not allow internal competition to undermine personal relations
Virtuous relationship with stakeholders
Recognizing the many ways that business serves the common good
Enabling employees to define and understand the mission of the firm
Promoting environmental sustainability
Ethical business is often good business
What is an organization?
A purposive aggregation of individuals who exert concentered effort toward a common and explicitly recognized goal
Shared purpose
Contrast with a crowd
Structured relationships
Roles
Statuses/ authority
Contrast with open source communities
Why do organizations exist?
The growth of technology
Team production – joint production is more efficient
Lower transaction costs
Development of knowledge
Theories of the firm
A means of minimizing transactions costs
A nexus of contracts
Team production/ knowledge-based view of the firm
CSR and Business Ethics
CSR focuses on the firm’s relationships with external stakeholders
Business ethics often focuses on compliance or malfeasance
In this course we focus on human flourishing in an organization context
CSR
Organizational level:
Normative – stakeholder theory
Strategic – expected return
Political – corporate citizenship
Social – legitimacy
Limitations of CSR?
Not directly related to the purpose of the business
Abstract
What does “social” mean?
Are moral notions relevant?
What is business ethics?
Individual level
Drawn from moral philosophy
Utility
Rights
Universalizability
Two dominant approaches – deontology and utilitarianism are principle-based
Draw up abstract principles
“applied” to business situation
Practice / institution
Schema:
Firms as practices and institutions
Practices or crafts
Internal goals that develop over time
Contribute to participants’ and societal wellbeing
Institutions
Formal organizations
Focused on profits status and power
Definition:
“by a practice I am going to mean any coherent and complex form of socially established cooperative human activity through which goods internal to that form of activity through which goods internal to that form of activity are realized in the course of trying to achieve those standards of excellence which are appropriate to, and partially definitive of, that form of activity, with the results that human powers to achieve excellence, and human conceptions of the ends and goods involved, are systematically extended”.
Practices
Professions (doctors)
Crafts
Occupations
Organizations/ management
Virtue
Are lasting qualities that motivate you to act.
Reasons for action appeal to the virtues
Reasons for action ultimately appeal to one’s conception of the good life
Virtue ethics – seven characteristics
Virtue ethics is actor – or person- oriented and concerned about the development of character. But this does not mean that it is unconcerned about actions.
There is a very strong emphasis on the idea of purpose or telos; the virtues are the qualities of character which enable us in the pursuit of the projects and purposes, the ends and the good, in our lives.
Virtues are different from the knowledge and technical skills are essential to performing a role well, they are not enough. In addition, we need the virtues.
Virtues are deep-seated dispositions so that in possessing them there should be a harmony between our feelings, desires, thoughts, and actions. The person of true virtue possesses and exercises all the virtues in concert.
The teleological nature of virtue ethics means that we are on a narrative quest, continually attempting to understand what more and what else our purposes in life might be.
But this is not just an individual quest. We are also members of various communities and our good and the common good of these various communities are intertwined.
Involves pursuit of excellence in whatever it is that we undertake, benefiting both ourselves and the community or communities of which we are a part.
Virtues are not something you think about they typically become very important in the workplace.
Virtues are reasons for action:
appeal to the virtues.
Ultimately appeal to one’s conception of the good life.
Macintyre’s organizational ethics
Goods of excellence
Goods of effectiveness
Virtues
Crafts, professions, practices
Institutions as formal organizations
Goodness of purpose
Goods of excellence
Specific to the activity
Perfection of the agent
Excellent products and services
Life of excellence
Goods of effectiveness
Money, power, status, market share, profit, etc.
Zero-sum
Instrumental goods
The role of the virtues
Justice, courage & truthfulness
Perseverance and magnanimity
Humility
Integrity and constancy
Practices
Professions
Crafts
Sports
Management
Formal organizations
The institutionalization of practices
Focused on money, power and status
Management as a craft
Does management have a purpose?
Balancing profit and excellence
Shaping the organization toward the needs of society
Goodness of purpose
Contributes useful goods and services
Promote development/ excellence within members
The ethical quality of the organization can make a difference in being successful
In business ethics we are concerned about effectiveness, excellence and virtue.
The moral obligation to seek profits
Put in a formal way, the argument runs as follows:
In a publicly held firm the managers (CEOs and the top management team) have entered into a contract with the stockholders.
A contract is a type of promise
The terms of the contract are that the managers should attempt to seek profits for the stockholders.
Keeping a promise is a perfect duty.
Therefore, managers have a moral obligation – indeed a perfect duty – to seek profit.
Why do humans beings need the virtues?
In order to achieve excellence in practices?
In order to maintain organizations?
Because we are vulnerable???
Human beings as dependent rational animals
We are vulnerable to anything that we need for wellbeing
We are dependent on others because we operate under bounded rationality
We often refuse to acknowledge our vulnerability
Networks of giving and receiving
Relationships of uncalculated giving and receiving
We are dependent upon others for care in such relationships
They are vital for our wellbeing
The virtues of acknowledged dependence
Just generosity: reciprocal gift-giving
Mercy: meeting the needs of others
Beneficence: doing good for others
Becoming an independent rational practical reasoner
Good counsel – a potential part of prudence
Care facilities practical reasoning
We continually depend upon others to be independent
Networks of giving and receiving in an organizational context
OCB and helping behavior
“thick” ties: you want to have them because if you have a problem and you have a supplier that you have a relation with they will help you out.
OCB & Helping
Extra-role behavior directed toward fellow organization members
Cooperative behavior that benefits others
“thick” ties
Business friendships that improve production
Both parties benefit
Givers and takers
Some are givers with pro-social motives
Some are takers with self-interested motives
Most are matchers who give when given and take when taken by others
Organizational governance systems which crowd in virtue
Need for the recruitment of a sufficient proportion of givers, those with a pro-social intrinsic motivation who naturally pursue the common good.
Focus on recruitment strategy needed to find mechanisms for assessing the character of potential members.
Without enough givers the matchers will begin to act like takers.
Rights and relationship in the firm
Can we talk about employee rights?
Why is right-talk important?
What are some employee rights?
Revisiting the employee employer relationship
What is an employee?
A member of a profession or craft
A member of the joint production process of the organization
A member of various networks of giving and receiving
Professions as practices
Shared goods internal to the profession
Common standards of excellence/ professionalism
Supports the common good of society not just the organization
Promotes well being person
Employees are expected
To promote the aims of the profession &
To observe the standards professionalism
To promote the wellbeing of society
To be virtuous
Joint production in the firm
Work in the firm is a common project including all members
Employees are expected to cooperate
Loyalty to the organization is required
Employees must use judgment and take responsibility
Networks of giving and receiving in the organization
Uncalculating relationships
Reciprocal gift-giving
Directed toward urgent needs
Crosses formal organizational lines
Promotes individual and organizational wellbeing
What do employers expect from employees?
Exercise professional judgment
Exercise virtues including loyalty
To act generously toward others (helping behavior)
To go beyond the contract
Professional judgment
To act rationally – good reasons
Cannot be merely rule-following
Implicitly or explicitly involves a concern for common good
Loyalty
To cooperate for the good of the organization
To go beyond the contract
To give a damn about the organization
To be a good organizational citizen
To engage in helping behavior
To participate in networks of giving and receiving
To be a good community member
Do employees have rights?
Yes – because relationships go beyond contracts
The basis of employee rights
Relationship in the firm are structured in terms of duties
These relationships entail corresponding rights
Due process
basic legal right in the US. Employees should be given due process.
Involves when someone is fired or laid off. There is a commitment to explain the reasons why did they do it.
So they should be giving good reasons.
Employees should be given explanations on why is the company reorganizing the employees.
Terminations
Shifting jobs
Non-discrimination
Transparency
Participation in governance
Employee voice (having a voice).
Consultation
Governance
Employability: a basic component of the employment relationship
Safe working conditions
Living wage
For the exam: talk about the quality of the relationship between employees and employers.
The golden rule
Don’t do to others what you wouldn’t like to be done to you.
In decision theory it is just a formalization.
the sociological foundation of the virtues
The common goods of society
Practices/ professions/ crafts
Formal organizations
Narratives
Professional ethics
Aiming for internal good
Caution about the formal organization
Build community at work
Practice the virtues
Implications of practice/ institutional for individuals
Individual narratives
Roles
Community narratives
Virtues
Constancy:requires that those who possess it pursue the same goods through extended periods of time, not allowing the requirements of changing social contexts to distract them from their commitments or to redirect them. We are dependent upon others for care in such relationships.
To have integrityis to refuse to be, to have educated oneself so that one is no longer able to be, one kind of person in one social contexts. It is to have set inflexible limits to one’s adaptability to the roles that one may be called upon to play…(to) exhibit the same moral character in different social contexts.
Reasons for action
Goods within practice
Good of life as a whole
The good of my community
Good of my traditions
Meaningful of work
What is meaningful work?
Subjective
Objective
Constitutive dimensions
How work contributes to;
Individual wellbeing
The common good
The role of virtues
Virtue and meaningful work
Subjective dimension
Objective dimension
Constitutive role of the virtues
Subjective dimension of meaningful work
Self-conscious extension of your abilities
Extension of both skills and judgment
Job design for meaningful work
Skill variety
Task identity:
Do employees do the job from start to finish?
Task significance
What is the impact of the work
Autonomy
Do employees have decision rights?
Task identity
Do employees do the job from start to finish?
Job recognition
Objective dimension of good work
Excellent products and services
Development of employees
Development of other stakeholders
Virtues and meaningful work
Constitutive of meaningfulness/ shape agency from the inside
Direct agents to act for excellence and good purpose
Avoid instrumentalizing work for success (goods of effectiveness)
The role of virtues
Temperance: the lure of comfort
Courage: willingness to stand up for the standards of the practice
Justice and truthfulness
Practical wisdom
Integrity and constancy
Meaningful work as a need
Meaningful work contributes to the development of freedom and sense dignity
Without meaningful work we may experience alienation
“The harms of non-meaningful work undermine an individual’s ability to participate in the work of social cooperation over a lifetime by: stunting the development of her capabilities for free and autonomous action; undermining her sense of self-esteem and self-worth, of her standing in relation to others; and thwarting her sense of efficacy, of being able to act with others upon the world. Together, these harms to capabilities, status and efficacy reduce a person’s ability to build the practical identity necessary to securing a sense that her life has meaning.”
Benefits of meaningful work
Increased motivation/ job satisfaction
Performance
Organization identification
Decreased absenteeism and stress
Two types of practice: professions
Professions/ crafts
Accountants, doctors, nurses, lawyers, architects, engineers, plumbers, electricians, carpenters
Clearly defined role that extends beyond any specific organization?
Does this model fit every job?
Accounting as a practice
Provides a moral identity
A respectable way that persons contribute to society
Offers norms of conduct
Requires virtues
Joint production as a practice
The organization as a practice
How does the organization as a practice differ from professions as practices?
What are some characteristics of joint production as a practice?
There is a difference in the role of institutions
What are the characteristics of management as practice?
Domain-relative
Based upon core practice(s)
Provides values and purposes to core practice
Promotes unity and cooperation of members
Gains support/legitimacy from outside stakeholders
Capability development work
Setting up, enacting, and refining routinized ways of reliably performing a coordinated set of tasks for the sake of achieving an intermediate end, which contributes to the organizational purpose at hand.
Differentiation work
Relating the products and services of core practices to the changing needs of customers to ensure the ongoing economic viability of core practices.
Undertaken by senior managers and/or heads of designated units (via strategic planning analysis, strategy, workshops, or ad hoc committee decisions, etc.) to examine its competitive advantages and explore ways these may be sustained, developed, or changed, in light of evolving stakeholder values and needs.
Characteristics of the good manager
Concern for a good purpose
Concern for the integrity of the craft
Promote meaningful work
Pursuit of profitability
Promote suitability institutional form
Concern for a suitable environment
Promote a virtuous organization
Competence
Do managers need virtues?
Practical wisdom
Courage
Justice
Zeal
Topic 9 : creating and sustaining a virtuous organization
What are some requirements of a virtuous organizations
Meaningful work
Job design
Good purpose
Long-term success
Profitable strategy
Sustainable business model
Characteristics of a virtuous organization
1.Centered on core practice (why?)
1.Firms make commitments through the core practice
2.Focused on excellence in the core practice.
3.Promotes meaningful work
4.Successful strategy
5.Good mode of institutionalization
6.Conducive external environment
7.Organizational Virtue
Successful strategy
Capability Development work
Setting up, enacting, and refining routinized ways of reliably performing a coordinated set of tasks for the sake of achieving an intermediate end, which contributes to the organizational purpose at hand.
Differentiation Work
Relating the products and services of core practices to the changing needs of customers to ensure the ongoing economic viability of core practices.
Undertaken by senior managers and/or heads of designated units (via strategic planning analysis, strategy workshops, or ad hoc committee decisions, etc.), to examine its competitive advantages and explore ways these may be sustained, developed, or changed, in light of evolving stakeholder values and needs
Mode of institutionalization
For-profit bureaucracy
Employee-owned cooperative
Holocracy
For-profit bureaucracy
Shareholders control de company
Board appoints CEO
CEO faces pressure from the stock market
Could face a buyout
Enabling bureaucracy
Repair
Internal/ Global transparency
Flexibility
Participation
Professionalism
Employee-owned cooperatives
Owned by employees
Governed by participatory-governance practices
Self-financed (or financed through debt)
Limited in the ability to acquire capital
Holocracy
Non-hierarchial
Highly formalized
Participatory governance
Institutional work
Creation of new professional standards
Seeking new regulations