Review the project instructions and only use the references attached and located in the references attachment as well. 

Project will be 4-6 pages.

Running head: 1

Project 1: News Event (20%)

Project 1 is due Sunday at 11:59 p.m. eastern time of week 3 unless otherwise changed by the instructor.

Purpose:

 

 In the first assignment, you have the opportunity to see how ethics can play out in a real world scenario.  You will read the case scenario and answers the questions in a narrative format. Use headings for each question.  Headings are not the question.  You are required to use the course material to support your reasoning and the conclusions made. 

Outcomes met by completing this project:

1. identify ethical issues that arise in domestic and global business environments using an understanding of ethical concepts and of legal and business principles

Case Scenario:

Pacific Gas and Electric Corporation (PG&E) that supplies electricity and natural gas to 16 million people, owns the transmission lines attributed to causing the November 2018 California “Camp Fire” that killed 85 people and destroyed thousands of acres of land including wildlife and the town of Paradise, California. Facing more than $30 billion in liability costs, the company has filed for bankruptcy protection.   

Recent investigations including documents obtained under the Freedom of Information Act, reveals disturbing historical facts about the company’s knowledge and management of its infrastructure.  The information shows that the company knew of 49 steel towers needing replacement long before the November fire (WSJ, 2019).  Built in the early 1900s, much of PG&E’s original equipment remained in service including towers with a life expectancy of 65 years but kept in operation up to 108 years (WSJ, 2019).  More than 2500 towers in the system were installed in the 1900s and 1910s, and an additional 6900 towers were kept in operation without knowing their age (WSJ, 2019).  

According to Federal Regulatory findings PG&E repeatedly delayed upgrades to the older equipment, opting instead to spend billions on projects like sub-station upgrades.  California’s rules for electrical transmission are a simple three sentences stating that each utility company must come up with its own procedures and follow them.    

The danger was exacerbated in 2013 when historic drought dried up California land.  In 2017 the company acknowledged in its internal documents that a plan was needed to prevent structural failure and ground fires.  State officials concluded that equipment failure on the Caribou-Palermo line, built in 1921 was the cause of the deadly California fire.   

According to an attorney representing victims in a lawsuit against PG&E, the company spent money from customers to boost corporate profits and compensation, rather than infrastructure maintenance and safety (CNBC, 2018).   

The lawyer further stated that while other utilities routinely shut power lines down when windy conditions prevailed, PG&E’s pattern was to remain in service.  He attributed this to management bonuses that were tied to customer complaints, rather than safety adherence (CNBC, 2018).  On June 18, 2019 PG&E agreed to pay the town of Paradise $569.5 million in settlements to help rebuild the destroyed community (KRCR, 2019).   Other lawsuits are ongoing and pending without final rulings.  

PG&E stated it has begun repairs and spot fixes to the most severe problems and has closed the Caribou-Palermo line all together.  Its website dedicates a page to reorganization under Chapter 11 including specific infrastructure and safety measures.   PG&E’s CEO and President, William D. Johnson is supported by a host of vice presidents including a Chief Ethics and Compliance Officer and a VP of Community Wildfire Safety (PG&E website). 

How to Set Up the Paper

Create a Word or Rich Text Format (RTF) document that is double-spaced, 12-point font.  The final product will be between 4-6 pages in length excluding the title page and reference page.  Write clearly and concisely.

Create a title page with a title, the course number and section, the instructor’s name and your name. 

Instructions:

Course Material

For this project, you are required to use the case scenario facts and the course material.   External sources are not permitted.  You are not researching on the Internet or using resources from outside the course.  You are expected to answer the requirements identified below showing the connection between the case scenario facts and the course material.   Using course material goes beyond defining terms and are used to explain the ‘why and how’ of a situation.  Avoid merely making statements but close the loop of the discussion by explaining how something happens or why something happens, which focuses on importance and impact.  In closing the loop, you will demonstrate the ability to think clearly and rationally showing an understanding of the logical connections between the ideas presented in a case scenario, the course material and the question(s) being asked.  Using one or two in-text citations from the course material throughout the entire paper will not earn many points on an assignment.  The use of a variety of course material is expected consistently supporting what is presented.  The support must be relevant and applicable to the topic being discussed.  Points are not earned for mentioning a term or concept but by clearly and thoroughly explaining or discussing the question at hand.

NOTE: If external sources are used, what is presented will not count and a penalty for following instruction will apply.

Project Requirements

Introduction

· Write an Introduction paragraph.  The Introduction paragraph is the first paragraph of the paper and will be used to describe to the reader the intent of the paper explaining the main points covered in the paper.  This intent should be understood prior to reading the remainder of the paper so the reader knows exactly what is being covered in the paper.

· Consider writing the introduction last to ensure that all of the main points are covered.

 Ethical Issue(s)

·  Identify and discuss the ethical issue(s) related to Pacific Gas and Electric Corporation.

 Stakeholders Implications

· Identify the stakeholders involved in the Pacific Gas and Electric Corporation ordeal.

· Discuss the potential implications of the company’s actions on each stakeholder or stakeholder group.  Give examples.

Kantian Viewpoint

Explain how Kant would view the actions of Pacific Gas and Electric Corporation.

Utilitarianism Viewpoint

· Explain how a utilitarian would view Pacific Gas and Electric’s actions.

Moral Responsibility

· Discuss whether Pacific Gas and Electric had a moral responsibility to be honest with customers even when doing so may reduce company’s profits?  Why or why not?

 Conclusion

· Write a concluding paragraph that is brief and summarizes the main points.  Provide specific information related to the major topics discussed in the paper. 

Review the Paper 

Read the paper to ensure all required elements are present.

The following are specific requirements that you will follow.  Use the checklist to mark off that you have followed each specific requirement.  

Checklist

Specific Project Requirements

 

Proofread your paper

 

Read and use the grading rubric while completing the paper to ensure all requirements are met that will lead to the highest possible grade. 

 

Third person writing is required.  Third person means that there are no words such as “I, me, my, we, or us” (first person writing), nor is there use of “you or your” (second person writing).  If uncertain how to write in the third person, view this link:  http://www.quickanddirtytips.com/education/grammar/first-second-and-third-person. 

 

Contractions are not used in business writing, so do not use them.  

 

Paraphrase and do not use direct quotations.  Paraphrase means you do not use more than four consecutive words from a source document.  Removing quotation marks and citing is inappropriate.  Instead put a passage from a source document into your own words and attribute the passage to the source document.  There should be no passages with quotation marks.  Using more than four consecutive words from a source document would require direct quotation marks.  Changing words from a passage does not exclude the passage from having quotation marks.   If more than four consecutive words are used from source documents, this material will not be included in the grade.  

 

You are expected to use the research and weekly course materials to develop the analysis and support the reasoning.   There should be a robust use of the course material.  Material used from a source document must be cited and referenced.  A reference within a reference list cannot exist without an associated in-text citation and vice versa.  Changing words from a passage does not exclude the passage from having quotation marks.   

 

Use in-text citations and provide a reference list that contains the reference associated with each in-text citation.

 

You may not use books in completing this problem set unless part of the course material.  Also, do not use a dictionary, Wikipedia or Investopedia or similar sources.

 

Provide the page or paragraph number in every in-text citation presented.  Since the eBook does not have page numbers, include the chapter title and topic heading.  If using a video, provide the minutes and second of the cited material.

Submit the paper in the Assignment Folder (The assignment submitted to the Assignment Folder will be considered the student’s final product and therefore ready for grading by the instructor.  It is incumbent upon the student to verify the assignment is the correct submission.  No exceptions will be considered by the instructor).

Self-Plagiarism: Self-plagiarism is the act of reusing significant, identical or nearly identical portions of one’s own work.  You cannot re-use any portion of a paper or other graded work that was submitted to another class even if you are retaking this course.   You also will not reuse any portion of previously submitted work in this class.  A zero will be assigned to the assignment if self-plagiarized.  Faculty do not have the discretion to accept self-plagiarized work.

NOTE:  All submitted work is to be your original work. You may not use any work from another student, the Internet or an online clearinghouse.  You are expected to understand the Academic Dishonesty and Plagiarism Policy, and know that it is your responsibility to learn about instructor and general academic expectations with regard to proper citation of sources as specified in the APA Publication Manual, 6th Ed. (Students are held accountable for in-text citations and an associated reference list only). 

 

RESOURCES

https://www.iep.utm.edu/aris-eth/

Utilitarianism, Act and Rule

https://www.aol.com/2012/11/19/8-ways-employers-can-discriminate-against-workers-legally/

Lifestyle Discrimination: Is it Legal?

https://www.hr.com/en/communities/legal/legal-discrimination-in-four-letters-bfoq_eacylj3d.html

https://fas.org/sgp/crs/misc/R44204

OSHA’s Wall of Shame: Agency Targets ‘Severe Violators’

TERMSIN AND TYPES OF ETHICAL THEORY

TELEOLOGICAL – This describes an ethical theory which judges the rightness of an action

in terms of an external goal or purpose. So, according to a teleological theory,

consequences always play some part, be it small or large, in the determination of what one

should or should not do. Not all teleological theories are consequentialist. John Rawls’

theory of justice is teleological, but not consequentialist because it claims that

consequences are only part of what must be considered when determining what policy is

morally just. (Rawls)

Benefits – 1. There is room in some theories for good intentions, even if the action didn’t

active the desired end. 2. Active attempt to connect morality with the “real” world. 3. By

allowing for the consideration of consequences, teleological theories can adapt to

different circumstances and situations. (Also see “utilitarianism”)

Problems – Depends on the theory. See “utilitarianism” for an example.

CONSEQUENTIALIST – Under a consequentialist theory, the consequences of an action

determine its moral value. A key question in consequentialist theory is how to measure the

moral worth of the consequences. Consequences can be good, neutral, or evil. Another

relevant question is which consequences count (intended or actual). If only actual

consequences count, then do all consequences count? Consequences can be distinguished by

direct/indirect, individuals/objects affected, influence of complicating factors, etc.

All of these considerations go into shaping the ethical theory. For example, Jeremy

Bentham and John Stuart Mill were both act utilitarians. So they judged individual an

action to be good or bad depending on the actual consequences of that action. Bentham

defined good as pleasure and evil as pain. (Bentham) Thus when choosing an action,

according to Bentham, one should the action which produces the greatest amount of

pleasure compared to pain for all affected. Since pleasure and pain were the foundation

for good and evil, “all affected” would include all sentient things. J. S. Mill differed from

Bentham in that he believed that happiness and unhappiness were the basis for good and

evil. (Mill) Under his evaluation then, while pleasure and pain were important

considerations, they were only the basic minimum. This sets up an ability for Mill to claim

that consequences to more sentient beings may be more important than those to less

sentient beings and to characterize some pleasures as higher than others.

Benefits – 1. Consequentialism is grounded in actual effect. So, moral action always

improves life on earth (in some manner). Acting morally can improve your lot in life. So,

there is an incentive to act morally even if you do not believe in an afterlife. 2.

Consequentialist theories are often attentive to the particulars of the situation. 3. These

theories will allow for exceptions to the rule when warranted by the outcome. 4.

Utilitarianism follows the cause and effect reasoning in science. It can be proven wrong or

right by referring to empirical evidence, instead of a theoretical ideal. 5. All sentient

beings understand pain and pleasure. Thus many have claimed that utilitarianism is

transcultural. 6. On a related note, utilitarianism avoids the charge of speciesism in ethical

theory by using a moral foundation that is shared by other species, thus requiring their

consideration.

Problems – 1. Consequences are difficult to predict. Your actions may have good intentions

and a high probability of causing good results. But, if something happens and the

consequences are actually bad, then your action was morally wrong. Also, as the situation

involves more people and alternatives, it becomes more difficult to determine which action

would produce the best consequences. How can we ever know that we actually chose the

“best” alternative. There is no opportunity for comparison of actual cases, just similar

ones. 2. “Does the end always justify the means?” A consequentialist theory would justify

many actions that we normally would consider wrong, if it turned out that the

consequences were good. 3. This theory undermines trust in others and intimate

relationships since we can never be sure that the consequences might not justify a

betrayal of trust and in many of these theories, each individual is treated the same

regardless of one’s relationship. So, for example, one’s duty to prevent pain to a stray cat

would be equal to one’s duty to prevent pain to one’s own cat.

DEONTOLOGICAL – This type of theory claims that there are features within the actions

themselves which determine whether or not they are right. These features define the

extent to which the actions conform with recognized moral duties. For example, driving

while drunk violates the duty to “above all do no harm.” The duties derive from various

sources, such as religion, biology, psychology, metaphysics, culture, language, etc.

Depending on the deontological theory, these duties may be absolute (no exceptions),

prima facie (can only be overridden by a more important duty), or conditional (only hold

under specified circumstances).

Deontological theories do not consider consequences to be important when determining

whether or not an action is ethical. It doesn’t matter if the drunk driver made it home

safely. Driving drunk was still wrong because the intention to drive drunk was wrong (or to

drink alcohol when one knows one needs to drive).

Immanuel Kant’s ethical theory is deontological. He claims that actions are only morally

right when they are done out of duty. He sees moral duties as unchanging laws for human

conduct. He believes that morality is derived from the ability to think rationally, which

enables beings to be free. If one is not free, then one cannot be held responsible. Thus

only free individuals are moral agents and all free individuals are capable of acting out of

reason. Kant’s moral theory is largely focused on protecting and promoting the free action

of rational beings. Three formulations of his categorical imperative are derived from this

moral foundation: (Kant)

Always act out of duty, in accordance with a good will (I.e. One does the right thing

because one recognizes that it is the right thing to do, not because it pleases you to do it

or will promote good consequences.). (pp. 25-26.)

Always act as if the maxim of thy action were to become by thy will a Universal Law of

Nature (i.e. Are you willing to allow any other rational being to act on the same reasoning

you used to justify your action?) (p. 49.)

Act as to treat the capacity for rationality, whether in thine own person or in that of

any other, in every case as an end withal, never as a means only. (i.e. Never treat a rational

being as a mere means to an end.) (p. 62.)

Benefits – 1. Right and wrong actions are easily determined by considering one’s duties. In

some cases, these are explicitly spelled out (i.e. religion). However, the use of judgement is

usually necessary to determine which duties apply and how. 2. Unlike utilitarianism, the end

does not justify the means. Deontological theories provide a sound basis for inalienable

rights and inherent value. 3. Since duties do not change, there is a greater sense of

security/predictability in the accepted behavior of others. Right and wrong don’t vary with

the consequences, although there may be a various according to circumstances (i.e. in the

case of conflicting duties). 4. Good motives are valued, even if the outcome wasn’t what

you expected..

Problems – 1. There is no agreement on a single standard for morality. 2. Ignoring

consequences can cause pain and suffering. 3. The imposition of a specific moral belief

system on others has been a cause of significant harm throughout history. Some

deontological theories are not equipped to respect diverse beliefs. However there are

some deontological theories that incorporate respect for the beliefs of others. There are

even some religious-based theories which, while espousing one true way also respect

diverse beliefs amongst individuals (i.e. Buddhist ethics).

RELATIVISM/SUBJECTIVISM – This type of theory denies that there is any uniquely

right moral theory, standard, or value. Everything is subjective. For example, Jean Paul

Sartre claimed that each individual creates his or her own morality based solely on one’s

own decisions about what is valuable. There are no moral standards to turn to that have

any more authority than those that you create. Things (including other people) only have

value because you gave them value. (Sartre)

Benefits – 1. Adjusts for changing factors in society and allows for true multiculturalism.

2. Each individual is fully responsible for his/her own moral beliefs since he/she chose to

create and value them.

Problems – 1. This leads to social anarchy. Moral theories are tools that are supposed to

help people live together with some degree of harmony and security. But, if you accept

that morality is truly relative, you have to accept that there is no standard by which you

can judge the moral beliefs of others.(ex. The Nazis, KKK, etc.) 2. What is the meaning of

morality if it lacks any standard to judge such claims other than individual choice?

VIRTUE BASED THEORIES – Teleological theories consider the goals of actions.

Deontological theories focus on acting in accordance with moral duties and obligations.

Virtue based theories focus on the character of the person. According to virtue based

theories, ethics is about what sort of person one should strive to become. The qualities

that one should develop in oneself are called virtues (ex. honesty, fairness, kindness,

faithfulness, generosity, prudence, integrity, bravery, etc.).

One should act in ways that develop these virtuous qualities within oneself. For example,

Aristotle claimed that in order to become an honest person, one should tell the truth.

(Aristotle) Eventually it becomes a habit. Along, the way one learns how to tell the truth

appropriately, without being brutally honest all of the time or lying whenever it is easier to

do so. There are many virtues that one ought to develop through practice over one’s

lifetime. Becoming virtuous is excelling at all of the virtues that make a good human being,

health care professional, etc. It is a learning process that continues throughout your life.

Benefits – 1. This type of theory recognizes that individuals and circumstances are unique.

For example, the virtue of compassion may be expressed by two people in two different

ways. Similarly, running into a burning building may be courageous action for a fire

professional but foolhardy for an untrained individual with no protective equipment. 2.

Virtue ethics allows each individual to use his/her own judgement when making difficult

moral decisions, yet recognizes certain common goals. 3. Mistakes are expected and

recognized as learning opportunities.

Problems – 1. Some argue that too much is left to individual judgement, thus opening the

door to bias and prejudice. 2. Similarly, virtues can be interpreted very differently. For

example, consider the many ways that fairness may be interpreted. 3. Virtue ethics

depends on modeling for some of the education. However, one may choose a poor role-

model and therefore develop a false sense of virtue.

Other terms in ethics:

Rights – Rights are claims that you deserve something from someone or some group.

Rights can be legal, contractual, or moral. Primarily, we are discussing moral rights in this

class. These types of rights are derived from moral theories or beliefs and entail

duties/obligations for others. For example, if a moral theory contains the principle that

you should respect the autonomy of other individuals, then you have a duty to respect the

autonomy of others and they have a right to your respect of their autonomy.

Rights are also categorized as positive and negative. This categorization indicates the kind

of claim and obligation that the right entails.

Positive Right – If I have a positive “Right to X,” then that means that society has an

obligation to provide me with X. This is also called an entitlement right.

For example, if the right to health care is a positive right of all American citizens, then

American society must provide health care to all American citizens.

Negative Right – If I have a negative “Right to X,” then that means that society has an

obligation to prevent undue interference from my obtaining and keeping X if I choose to

do so. Essentially protective measures must be provided to ensure fair access to X and to

prevent X from being unfairly taken away. This is also called a freedom right.

For example, if the right to health care is a negative right of all American citizens, then

American society must prevent undue interference with citizens’ access to and use of

health care services.

Rights, duties, obligations, and responsibilities can also be categorized as universal, prima

facie or conditional –

Any right, duty, etc. that is universal must always be observed. There are no exceptions to

universal rules.

Prima facie duties, rights, etc. must always be respected unless two or more of them

conflict. In that case the moral agent must decide which is the most important in this

situation and act in accordance with that, while respecting the overridden right/duty/etc.

to the greatest extent possible.

Any right, duty, etc. that is conditional may be overridden by a more important

consideration or may not apply to a specific situation. Conditional rules allow for

exceptions based on the relevant conditions.

Moral Agent – an individual who consciously acts and can therefore be held responsible for

his/her actions. Newborns infants are not considered moral agents because they lack the

capacity for agency. Usually capacity for agency includes, consciousness, sense of self,

ability to reason (degree depending on what is necessary for the task at hand), and the

ability to interact and form relationships with others. However, there are ongoing debates

about the criteria for agency and the importance of agency for moral worth. Another issue

is the extent to which freedom is necessary for one to be a moral agent. Sartre argued

that you are a moral agent as long as you are capable of making a choice, even if the only

choice you have is whether or not to continue to exist.

Motive – A motive is what caused the agent to choose this action. For example, if a person

was moved by compassion to act, the motive was compassion. Motives may be conscious or

unconscious. David Hume argued that all actions are motivated by emotions. Reason can

direct the motivating force, but cannot cause one to act. Immanuel Kant, on the other

hand, argued that to be moral, an action must be motivated by the rational decision to do

the right thing. Emotional motives, like love, interfered with moral action according to

Kant.

Intention – An intention is the desired purpose or aim of the agent’s action. Intentions are

conscious. People disagree about the degree to which intentions matter in determining

whether an action is right or wrong. For example, imagine two people, Ann and Jan. Each

hits their husband with the car, killing him. Ann intended to kill her husband. Jan intended

only to back out of the driveway. She hit her husband by accident. Most would agree that

Ann’s action is morally worse than Jan’s because of the intention. Utilitarians would

disagree however. In their theory, the only thing that counts is what actually occurred,

not what one intended. For a utilitarian, Jan’s action would be as bad as Ann’s.

References:

Aristotle. The Nicomachean Ethics, Welldon, J. trans. Prometheus Books (Buffalo, NY:

1987).

Bentham, J. Introduction to the Principles of Morals and Legislation in Warnock, M ed.

Utilitarianism, On Liberty, Essay on Bentham: together with selected writings of Jeremy

Bentham and John Austin, Meridian/New

American Library (New York, NY: 1974).

Hume, D. A Treatise of Human Nature, Penguin Books Ltd. (London: 1969).

Kant, I. Fundamental Principle sof the Metaphysic of Morals, tr. by T. K. Abbott,

Prometheus Books (Buffalo, NY:1987).

Mill, J. S. Utilitarianism in Warnock, M ed. Utilitarianism, On Liberty, Essay on Bentham:

together with selected writings of Jeremy Bentham and John Austin, Meridian/New

American Library (New York, NY: 1974).

Rawls, J. A Theory of Justice, The Belknap Press of Harvard University Press (Cambridge,

MA:1971).

Sartre, J. Existentialism and Humanism, Mairet, P. Trans. & Intro. Eyre Methuen Ltd.

(London, UK: 1973).

©2015 Business Ethics Quarterly 25:2 (April 2015). ISSN 1052-150X
DOI: 10.1017/beq.2015.17

pp. 243–265

Imprudence and Immorality: A Kantian
Approach to the Ethics of Financial Risk

Tobey K. Scharding
Bloomsburg University of Pennsylvania

ABSTRACT : This paper takes up recent challenges to consequentialist forms of eth-
ically evaluating risks and explores how a non-consequentialist form of deliberation,
Kantian ethics, can address questions about risk. I examine two cases concerning
ethically questionable fi nancial risks: investing in abstruse fi nancial instruments
and investing while relying on a bailout. After challenging consequentialist eval-
uations of these cases, I use Kant’s distinction between morality and prudence to
evaluate when the investments are immoral and when they are merely imprudent.
I argue that the investment practices are imprudent when they do not take adequate
precautions to secure the fi rm’s long-term fl ourishing. They are immoral in a
Kantian sense when they risk the destruction of the fi nancial system upon which
the fi rms depend. The upshot of my analysis is that moral actions require more risk
aversion than prudent actions and prudent actions require more risk aversion than
expected-value-maximizing actions.

KEY WORDS: Ethics of Risk , Financial Risk , Kantian Ethics , Formula of Universal
Law , Investment Ethics , Too Big To Fail

0. INTRODUCTION

IN MAKING RECOMMENDATIONS ABOUT WHAT TO DO IN RISKY CIR-CUMSTANCES, which present the possibility of material loss, theorists generally
calculate the probability that various outcomes—adverse, neutral, or positive—will
come to pass. They establish each action’s “expected value” by multiplying the
numerical utility of each possible outcome by the probability that the outcome will
occur and summing the probable-utility calculations. With these numbers, decision
makers can begin debating what to do. Typically, the action with the highest overall
expected value is preferred. As fruitful as this decision-making procedure is as regards
questions concerning risk, it represents only a “consequentialist” viewpoint, focused
on the outcomes of action and excluding other features of action. In this paper, I take
up recent challenges to consequentialist forms of ethically evaluating risks and explore
how a non-consequentialist form of deliberation, Kant’s moral theory—which offers a
strategy for ethically evaluating actors’ plans for acting, rather than the consequences
of their actions—can be used to address ethical questions about risk. 1

I begin by explaining the prevailing consequentialist strategy for evaluating risk.
My focus is fi nancial risk; 2 the risk takers that concern me are investment fi rms, espe-
cially as regards their brokerage activities of buying and selling fi nancial securities

Business Ethics Quarterly244

that present a risk of fi nancial loss. 3 I am particularly interested in the role of such
risks in precipitating the 2008 fi nancial crisis and I use examples from the run up
to this crisis to illustrate and develop my theoretical concerns. These are, primarily,
two ethical questions about fi nancial risk. First, may investment fi rms risk money
in abstruse fi nancial instruments that are highly complicated and interconnected in
intricate, hard-to-parse ways? Second, may investment fi rms rely on being bailed out,
or rescued by an outside agency, when they put money at risk? I begin by exploring
several challenges that consequentialist decision making faces in answering these
questions. The worries involve (1) two ways in which consequentialist answers
to these questions rely on probabilities that are controversial and (2) two ways in
which consequentialist answers to these questions fail to address relevant values,
such as how the fi nancial risk is distributed.

Next, I explain how Kant’s distinction between acting for reasons of prudence
and acting for reasons of morality can avoid many of the problems associated with
consequentialism. 4 Drawing on Kant, I build an analytic framework for addressing
questions of morals and prudence as they relate to business activities. I then use this
framework to reconsider the two ethical questions about fi nancial risk, evaluating
when (if ever) these fi nancial activities are immoral and when (if ever) they are
imprudent.

My thesis is that these investment practices are sometimes imprudent, when
they do not take adequate precautions to secure the fi rm’s long-term fl ourishing.
The practices are sometimes immoral in a Kantian sense—violating a rule of right
conduct that the fi rm simultaneously recognizes as being generally binding, i.e., to
which it makes itself an exception—when they risk the integrity of the fi nancial
system upon which the fi rm depends. An upshot of my analysis is that Kantian
moral reasoning appears to require more risk aversion than prudential reasoning
and prudential reasoning appears to require more risk aversion than expected-value
reasoning. Relatedly, acting morally assures that key standards of prudence are met
and acting prudently captures important aspects of expected value maximization. 5

1. CONSEQUENTIALISM AND RISK

In this section, I set forth (1.1) the predominant, consequentialist form of reasoning
about risk, expected value theory. I perform some rudimentary expected value
calculations on two examples: (1.1.1) an abstruse investment and (1.1.2) a bailed-
out investment. I then consider (1.2) objections to this way of reasoning about risk.

1.1 Expected Value Theory and Risk

“Expected value” decision makers rely on probabilistic, consequentialist forms of
reasoning to deliberate the advisability of risky actions. Using this form of rea-
soning to decide questions about risk seems eminently appropriate. The problem
that risky actions present concerns the probability of good or bad consequences; in
deliberating whether to undertake risky actions, decision makers focus on achieving
the former and avoiding the latter. Expected value relies on three analyses, related to
the advisability of a particular action: (1) what are the possible consequences of the

Imprudence and Immorality 245

action, (2) what is the probability that each of these consequences will occur, and
(3) what is the utility of each of the possible consequences. 6 Decision makers multiply
the probability of each consequence by its utility and add together these values for
all of the action’s possible consequences to determine the “expected value” of the
action. After computing the expected values of each of the possibilities for action
that they face, decision makers choose the action with the highest expected value.

1.1.1 The Abstruse Investment

To demonstrate this kind of deliberation, consider the case of the abstruse invest-
ment . 7 In this scenario, a fi rm questions whether it should risk money in an investment
in which highly complicated fi nancial instruments are interconnected in intricate,
hard-to-parse ways that make the implications and risk profi le of the investment
diffi cult to discern (hereafter, in an investment that is “abstruse”). To use expected
value theory to answer this question, decision makers perform calculations to deter-
mine which action, risking money in the abstruse investment or not risking money
in the abstruse investment, has the higher expected value.

As an example, take a fi rm’s decision about whether to invest in one of the very
complicated fi nancial securities that were heavily traded prior to the 2008 fi nancial
crisis, the synthetic collateralized debt obligation (or “synthetic CDO”). Banks create
synthetic CDOs in reference to other fi nancial securities, such as mortgage-backed
securities (MBS). Whereas MBS are based in real assets—the collateral-backed
mortgages that homeowners owe on their properties—synthetic CDOs only refer
to MBS: they are bets about whether borrowers will default on their loans and are
not based in real assets. As wagers, CDOs require both “long” investors, who
bet that the borrowers will pay, and “short” investors, who bet that the borrowers
will default. “Long” investors include both “funded” long investors—who buy the
securities referenced by the CDO and receive interest as the loans are repaid,
losing their investment if the borrowers default—and “unfunded” long investors,
who wager on the loan’s repayment but have no assets invested in the loan itself.
Unfunded long investors receive premium payments from the short investors as
long as the loan is being repaid but must pay premiums if the borrowers default
(FCIC, 142).

In 2004, the U.S. bank, Goldman Sachs, created a synthetic CDO, Abacus 2004-1,
referencing residential MBS, existing CDOs, and commercial MBS. The German
bank, IKB, the asset management fi rm, TCW Group, and the U.S. bank, Wachovia,
invested $195 million in the funded long position. Goldman itself was the largest
funded long investor, holding $1.8 billion in that position. These investors stood
to make millions if the loans were repaid. TCW and GSC Partners, another asset
management fi rm, became unfunded long investors (FCIC, 142-43). These unfunded
long investors did not pay initial investments but would owe short investors if the
borrowers defaulted. As such, they could potentially gain, or lose, millions. The
short investor was also Goldman Sachs. In its role as an investment fi rm engaging
in brokerage activities, Goldman bet $2 billion that the borrowers referenced by
Abacus 2004-1 would default. This short investment limited Goldman’s loss potential
as a long funded investor.

Business Ethics Quarterly246

It is obvious from the above description that the investors faced a complicated
decision about whether, and how, to invest in Abacus 2004-1. I consider, in particular,
GSC’s decision to take an unfunded long position. The fi nancial engineering behind
this investment—including the combination of so many different kinds of MBSs and
the investment’s independence from cash assets—made it hard to understand and price.
Using expected value theory, GSC would calculate the probabilities that various loans
would default and use these calculations to determine whether the probability of profi ts
outweighs the probability of losses. As an unfunded long investor, GSC’s potential for
profi t was huge—$2 billion at stake in the loans—but its potential for loss was equally
high. In a simplifi ed expected value calculation about Abacus 2004-1—deciding between
actions (A1) invest long, (A2) invest short, and (A3) do not invest—it is obvious how
expected value theory could recommend that GSC take the unfunded long position. It
would recommend that position whenever investing unfunded long in Abacus 2004-1
had the highest expected value of GSC’s possible actions, such as when borrowers were
more likely to pay off their loans than to default. Because the instrument was abstruse,
though, GSC’s reasons for believing that the unfunded long position had the highest
expected value would have been hard to discern—perhaps even to itself.

1.1.2 The Bailed-out Investment

In the case of a bailed-out investment , a fi rm questions whether it should rely on
being “bailed out,” or rescued by an outside agency, when risking money. Expected
value theory would recommend relying on the bailout—and risking money that
would not otherwise be risked—whenever doing so has a higher expected value
than not relying on the bailout (and not risking the money).

As an example, consider decisions made by the Federal National Mortgage Asso-
ciation (“Fannie Mae”) shortly before the 2008 crisis. During this time, the fi rm was
actively purchasing mortgages from commercial banks. The U.S. government created
Fannie Mae to encourage home ownership by establishing a “secondary market” for
mortgages, such that commercial banks could sell their existing mortgages, receiving
funds with which to make more mortgages. It became a publicly traded corporation
in 1968 but maintained close ties with the U.S. Treasury as a “government-sponsored
enterprise” (GSE). These close ties provided Fannie Mae—and a related GSE, the
Federal Home Loan Mortgage Corporation (“Freddie Mac”)—with exemptions from
state and local taxes and $2.25 billion credit lines from the Treasury. The Federal Reserve
System (“the Fed”) also allowed Fannie Mae and Freddie Mac to borrow money at
very low rates, almost as low as the Treasury itself. Because of such privileges, many
investors believed that the government “implicitly” guaranteed the GSEs (FCIC, 38).

In the summer of 2007, commercial banks became increasingly unwilling to grant
new mortgages. The U.S. home mortgage market had weakened: home prices had
declined and more borrowers were defaulting on their loans. At this time, the GSEs
were already exposed to signifi cant risk: they were responsible for $5.3 trillion in
mortgages, very close to the limit of how many loans they could legally fund. Even in
the weakening housing market, though, there were opportunities for profi t. Because
fewer investors wished to purchase MBSs, the available MBSs would cost the GSEs
less than they would in a booming market. On August 1, 2007, Fannie Mae CEO

Imprudence and Immorality 247

Daniel Mudd requested that the U.S. government lift its limits and allow Fannie to
buy $150 billion of additional loans (FCIC, 309-12).

In this situation, we can see how considerations about bailouts might fi gure into
an investment decision. Mudd wished to purchase more MBSs in order to maximize
Fannie’s profi ts. Using expected value theory—fueled by information about profi ts
on other mortgages, by information about the housing market, and by estimations
of how the housing market was likely to change—Mudd could calculate the profi t
potential of purchasing additional MBS. As part of these calculations, he would
also consider possible gains or losses associated with the MBSs that Fannie already
owned or guaranteed. If Mudd can rely on being bailed out, the possible losses need
not advise against making the further investments. Should Mudd rely on being
bailed out when deciding whether to purchase $150 billion more in loans?

In order for the decision to buy more mortgages to make sense for Fannie Mae
from an expected value standpoint, Mudd must calculate that making more loans
is likely to maximize profi t. The consequences that concern him are: (C1) the loans
are repaid, producing large profi ts, (C2) the loans are not repaid and the govern-
ment provides a bailout, producing neither profi ts nor losses, and (C3) the loans are
not repaid and the government does not provide a bailout, producing large losses.
Mudd must estimate both exactly how large the profi ts or losses are likely to
be as well as how probable it is that the government will provide a bailout if the
loans are not repaid.

Assume, for the purposes of demonstrating how expected value theory would
address this decision, that there is a 50% chance that the loans will be repaid and a
50% chance they will not be repaid. Assume that profi ts and losses have the same
magnitude: 10% of the original investment, or $15 billion. Under these conditions,
if the possible actions are (A1) make $150 billion in additional loans (relying on a
bailout) or (A2) don’t make the loans (assuming that the government will not provide
a bailout), expected value theory is indifferent only when there is a 0% chance that
the government will provide a bailout. Whenever there is greater than 0% proba-
bility of a bailout, expected value theory advises Fannie to make the loans, given
the assumptions that there is a 50/50 chance the loans will be repaid and possible
profi ts and losses have the same magnitude.

The latter assumption, though, could be false when Fannie is already responsible
for $5.3 trillion in mortgages, some of which could produce losses when the $150
billion in new mortgages produce losses. In a second expected value calculation,
then, continue to assume that the possible profi ts are 10% but assume now that the
possible losses are larger: 20% of initial investment. For the two possible actions,
(A1) add $150 billion in loans to the $5.3 trillions in loans that have already been
made and (A2) do not add $150 billion in loans, the expected value calculations
are as follows, given the assumption of 10% profi ts and 20% losses and using the
three consequences defi ned above:

U(C1|A1) = $545 billion
U(C2|A1) = 0
U(C3|A1) = -$1,090 billion

Business Ethics Quarterly248

U(C1|A2) = $530 billion
U(C2|A2) = 0
U(C3|A2) = -$1,060 billion

Given these assumptions, expected value theory is indifferent between the two
actions when the probability of a bailout is 50%. Expected value theory prefers
A1, making the further $150 billion in loans, whenever there is a greater-than-50%
probability of a bailout. With the admonition that many informed people thought
(prior to the 2008 crisis) that it was extremely likely that Fannie would be bailed out,
even assumptions of far larger losses could still produce this expected-value-theory
recommendation: make the further $150 billion in loans in the declining housing
market.

1.2 Problems With Expected Value Calculations As Regards Risk

It is clear that there are many areas of potential weakness in the consequentialist
reasoning performed above. In this section, I discuss two main problems, each of
which has two subparts. First, it is diffi cult for expected value decision makers to
make their probabilities precise because of problems concerning (1.2.1) judgment:
either in assigning the reference group by which the probabilities are estimated or
in estimating probabilities when there is no reference group. Second, expected value
neglects values that seem ethically relevant to decisions about risk, including (1.2.2)
the distribution of the risk and (1.2.3) the “free-fl oating fear” created by the risk.

1.2.1 Problems In Judgment

In order to determine the probability that abstruse investments will produce profi ts,
decision makers require data from many comparable situations. The data must be
analyzed and the abstruse investments assigned to a group of similar investments.
Decision makers then examine how many of the similar investments were profi table
and how many lost money in order to establish the probability that their abstruse
investments will succeed.

The problem in assigning the abstruse investments to a suitable reference group
(hereafter the problem of assigning reference ) is that many different kinds of invest-
ments are “comparable” to the abstruse investments and the “suitable” reference
group can be construed in many different ways. Some investments will have been
made in similar domains: commercial real estate, or residential. Some will have been
made in similar geographical areas: the Midwest, San Francisco, Georgia. Some
will have been similar sizes, numerically. Whichever reference group the decision
maker assigns, the assignment will be to some extent a matter of the decision
maker’s own judgment. As Perry notes, each probability-affected entity “belongs
to an indefi nitely large number of reference classes” (2007, 335). Thus, the decision
maker’s calculation of probabilities could be controversial. Indeed, this problem is
associated with virtually all assignments of probability. Selecting a (uncontroversially)
“best” reference class is often practically infeasible.

A related problem is that each investment is to some extent unique and governed
by forces not found in the same combination in any previous investment. For abstruse

Imprudence and Immorality 249

investments, this diffi culty is acute. As an example of the problem, consider the
strategies that fi rms used to manage risk prior to the 2008 crisis. The predominant
model was “Value at Risk” (VaR) developed by J.P. Morgan, the American bank.
VaR claimed to predict, with 95% certainty, how much a fi rm could lose if market
prices changed. The model used historical data to make its predictions; with respect
even to MBSs and especially to the more abstruse fi nancial instruments to which
MBSs lead, such as synthetic CDOs, the models had almost no data from which to
draw (FCIC, 44). This left fi rms poorly prepared to assess their risk exposure prior
to the crisis. Even if they had been inclined to limit exposure, then, they were ill
equipped to do so. Call this the problem of no reference .

The challenge facing bailed-out investments is also serious. Very few banks have
been considered “too big to fail” (TBTF)—or eligible to be bailed out when they
become overextended—in the history of Wall Street. Prior to the 2008 bailouts, only
one bank had received federal assistance because of its systemic importance to the
overall economy. 8 In 1984, the U.S. government loaned the Continental Illinois Bank
$4 billion in order to keep it from collapsing. This bailout inaugurated the idea of
TBTF but no doctrine was ever clearly set forth. In particular, the government never
specifi ed criteria for what makes a bank TBTF. The practice was employed for
a second time in 1998 when the Fed arranged for fourteen banks to provide $3.65
billion to a hedge fund, Long-Term Capital Management (LTCM) when LTCM’s
investments produced huge losses at the end of the 1990s (Williams 2010 , 87-88).
This extremely weak track record challenges expected value theory’s ability to
determine the probability that a particular bank will be bailed out.

In response to such worries, an expected value theorist might note that the theory
does have resources to account for such concerns. In particular, expected value
calculations can include not only (a) estimated probabilities of consequences but
also (b) estimated probabilities of how confi dent the decision makers are about (a),
their estimated probabilities of outcomes. In this sense, expected value theorists
can specify when their calculations are more uncertain, such as in those concerning
abstruse and bailed-out investments.

Adding additional probability calculations can clearly mitigate the problems
of assigning reference and no reference. But such additional probability fi gures
will be diffi cult to calculate—and dependent on judgment—for the reasons
discussed above. As such, they will not remove judgment from expected value
calculations.

1.2.2 Problems As Regards The Distribution of Risk

Secondly, consequentialist reasoning fails to account for other values that seem
relevant to decisions about investment risk. In particular, expected value reasoning
does not consider the distribution of risks of harm (Hayenhjelm and Wolff 2012 , 14)
(hereafter, the problem of distribution ). The calculations performed above consider
risk to the investment fi rm, only. But the fi rm’s actions may affect many other parties.
In particular, the calculations neglect possible consequence (C4): the investments
produce catastrophic losses for the economy as a whole, undermining the economic
system itself.

Business Ethics Quarterly250

Consider the 2008 crisis, in which ordinary homeowners were permitted to
suffer foreclosures, depleting their life savings, even as large fi nancial institutions—
including ones that were partially responsible for the crisis—received billions in
bailout funds. Long-lasting catastrophe was avoided for the country as a whole
by the government bailout: but it was taxpayers who bore the burden, while many
wealthy investors were spared.

1.2.3 Problems About “Free-Floating Fear”

The consequentialist framework also does not account for the “free-fl oating fear”
created by risky environments, as discussed by Nozick (1974, 65-69). People—
including those who do not suffer material harms—can be traumatized by the risk
of harm. A risk-fi lled environment might directly undermine welfare or might disin-
cline people from taking welfare-producing actions. Needless to say, it is diffi cult to
establish a clear line of causality from such an environment to the harms that people
affected by the environment experience. Such diffi culties challenge consequentialism
to the extent that consequentialist calculations must be able reliably to predict the
consequences of actions in order to take them into account.

Consider, for example, the various kinds of fearful behavior that Americans exhib-
ited following the fi nancial crisis of 2008. As one commentator noted, Americans
bought more guns, took more money out of the bank, bought more gold, and went
to church more (Noonan, 2009 , A9). This behavior probably infl uenced some
fi rms’ profi tability but it would be strange for those fi rms to take social effects,
whose occurrence and effect on productivity is highly uncertain, into account
in their expected value calculations.

In response, an expected value theorist might argue that expected value calcu-
lations can simply assign a disutility value to free-fl oating fear. Again, although this
strategy would help to mitigate the problem presented by free-fl oating fear, it would
be very diffi cult to calculate precisely the disutility value (due to the problems in
establishing chains of causality, as discussed above). In this sense, the problem can
be mitigated but not fully addressed.

2. PRUDENCE AND MORALS IN KANT

Although expected value theory is clearly very helpful in examining questions
about risk, the discussion offered above demonstrates that it is subject to certain
weaknesses. These weaknesses motivate interest in other strategies for addressing
ethical questions about risk, which might be free from the problems considered above.
In this section, I investigate how one of the dominant forms of non-consequentialist
reasoning, Kantian ethics, can evaluate risk. I am especially interested in Kant’s
distinction between standards of prudence and standards of morality as regards the
permissibility of risky actions. Moral actions, for Kant, are motivated by respect for
the moral law and seek to conform to the moral law, without regard for the actions’
consequences. “Merely” prudent actions, by contrast, focus on consequences, seeking
to achieve long-term prosperity and avoid catastrophe (rather than maximize expected
value). In this section, I explain the textual basis for the distinction and describe

Imprudence and Immorality 251

how I will use prudential decision-making and Kantian moral decision-making to
recommend decisions about fi nancial risk.

2.1 Textual Basis for Prudential and Moral Decision-Making

Kant illustrates 9 the difference between moral actions and actions that serve merely
prudent ends via the case of the honest shopkeeper . The honest shopkeeper returns
the proper change to his young customers even though the customers are unable
to count that change. 10 Kant points out that an observer cannot determine whether
the shopkeeper’s action in returning the correct change is moral , or undertaken
because the businessman recognizes that it is his moral duty to return the correct
change, i.e., because his store depends upon a moral norm in which shopkeepers
never intentionally fail to return the correct change to their customers. An observer
cannot confi rm that the action is moral because this action is also prudent for the
shopkeeper. Returning the correct change to customers who are incapable of dis-
cerning fraud serves the shopkeeper’s long-term material self-interest by preserving
his good reputation: though the children won’t complain about being shirked on
change, their parents would.

2.2 Prudential- and Moral Decision-Making Procedures in Kant

2.2.1 Prudential Decision-Making Procedures

Based on this example, I understand prudential reasoning as recommending actions
that serve the decision maker’s long-term material prosperity. In particular, prudent
actions must not undermine the decision makers’ abilities to satisfy their future
interests in the same manner by which they satisfy their present interests, e.g., by way
of their present good reputations or their present businesses. Considering whether an
action is prudent appears to be a form of consequentialist thinking by Kant’s lights.
The shopkeeper, in acting prudently, is concerned to assure that the consequences
of his action—returning the correct change to a customer who cannot count the
change—are positive.

I add two provisos to the understanding of prudence offered above, not discussed
by Kant but consistent with his account of the honest shopkeeper. First, prudent
actions do not guarantee good outcomes; rather, they establish appropriate
safeguards against bad outcomes. The shopkeeper could still lose his business.
Second, assessments of prudence are relative; whether a decision maker’s pre-
cautionary activities count as prudent varies from decision maker to decision
maker based on, among other things, the decision maker’s individual objectives
and preferences. What would be prudent for one shopkeeper might not be pru-
dent for another.

To make a decision about what is the right thing to do according to this conception
of prudential reasoning, decision makers must consider what are their long-term
interests and must act so as to assure that these interests remain viable. Interestingly,
prudent decision makers may avail themselves of expected value calculations; it
might even be prudent, in the sense of promoting their long-term material prosperity,
for them to do so. The answer to their question, “What is the right investment for

Business Ethics Quarterly252

me at this time?” will likely differ from the one offered by expected value theory,
however, as discussed further in sections 3.1 and 3.2, below.

2.2.2 Moral Decision-Making Procedures

To understand whether an action is moral in a Kantian sense, decision makers must
fi rst formulate the “rule” governing the action, or describe the action to be performed
in the form of a general counsel that anyone in suffi ciently similar circumstances
could follow. There is rough agreement among Kantians that the rule should include
the action taken and the circumstances in which the action is taken. 11 The rule should
be formulated neutrally: in a way that both decision makers and outside observers
can endorse. Then, decision makers test whether everyone in similar circum-
stances can follow the rule. 12 If the action becomes self-defeating when the rule
is universalized—such that the actor would be unable to achieve his or her aims in
acting if everyone acted in this way—then the action is an exception to a universally
binding moral rule, i.e., is morally prohibited. If the rule can be universally followed,
however, such that the rule holds the actor to the standard the actor expects from
others, then the action is morally permissible.

In evaluating the action to be performed from a non-consequentialist, Kantian
perspective, decision makers may consider the idea that the outcome of their action
is risky: it could turn out well or badly. Kantian decision makers may even avail
themselves of expected value calculations to determine exactly how risky is the
proposed action. The difference between using expected value calculations to reason
about risk from a non-consequentialist, as opposed to a consequentialist, perspective
is that in the case of the former, the outcomes of the expected value calculations are
not what determine the permissibility of the action. From the non-consequentialist,
Kantian perspective, what determines the permissibility of the action is whether the
action can be carried out universally.

3. IMPRUDENCE IN A CONTEXT OF RISK

In this section, I begin using my Kantian framework for prudential decision-making to
evaluate questions about investment risk. I begin by revisiting the cases introduced
above: (3.1) the abstruse investment and (3.2) the bailed-out investment. Then,
I consider some (3.3) problems with prudential reasoning about risk.

3.1 Is the abstruse investment prudent?

Whereas expected value calculations, such as those discussed in section one, gener-
ally seek to maximize fi nancial profi t, considerations of prudence need not aim for a
materially optimal outcome. Rather, in resolving to act prudently, decision makers
seek primarily to preserve their ability to pursue similar courses of action in the future.
This naturally motivates them to avoid disastrous outcomes 13 but does not require them
to seek optimal outcomes. The honest shopkeeper, for example, acts to avoid ruining
his business by sullying his reputation. He does not aim to maximize profi t but, rather,
to stay in business. Indeed, shirking some of his customers on change would be more
likely to maximize the shopkeeper’s profi t, at least in the short term.

Imprudence and Immorality 253

In this sense, an investment fi rm, reasoning prudently, would take an interest in
the probabilities and utilities discussed above. Those calculations can help the fi rm
to promulgate a prudent investment plan. The expected value analysis recommended,
for example, that the fi rm invest in abstruse fi nancial instruments when the value of
profi table investments multiplied by the likelihood of achieving those profi ts was
greater than the value of unsuccessful investments multiplied by the probability that
the investments would lead to losses.

From a prudential perspective, a wider range of numbers could be interesting.
A risk-averse investment fi rm, for example, might prefer not to invest in abstruse
fi nancial instruments when there was only a slight likelihood that the investments
would produce profi ts. The risk-averse fi rm might choose to invest in such fi nancial
instruments only when they were very likely to produce profi ts. Similarly, a profi t-
hungry, risk-loving investment fi rm might choose to make the risky, complicated
investments even when there was some likelihood that the investments would not
produce profi ts. Such an investment fi rm would pursue the investments because of
their inherent risk—assuming, of course, that the fi rm had a theory about why the
investments were likely to succeed despite that risk—and, as such, would not be
deterred by (someone else’s calculation of) a high probability of loss.

Furthermore, evaluating the investments from the standpoint of prudence rather
than expected value encourages the fi rm to take a wider perspective on the risky
investments. As noted above in the discussion of expected value calculations, it is
somewhat arbitrary which possible consequences the expected value theorist selects
to evaluate. Because the prudent investment fi rm makes decisions that aim to secure
its long-term prosperity—and stave off disaster—it is more motivated to consider
consequences that have a lower probability but a larger downside.

The prudent investment fi rm would not necessarily include possible consequence
C4—that the investments produce catastrophic losses for the economy as a whole—in
its decision-making process. Because the prudent fi rm is (like the honest shopkeeper)
self-interested, the fate of the overall economy enters its considerations only insofar
as this possibility would produce catastrophic losses for the fi rm itself. However,
the prudent investment fi rm is more motivated to include the possibility of fi nancial
disaster in its considerations: for the reason that fi nancial disasters deplete the fi rm’s
money along with everyone else’s.

Moreover, the prudent investment fi rm would worry more about the challenges
to probabilistic calculation than the decision maker who calculates expected values
without the further aim of making prudent decisions. As the prudent investment
fi rm wishes to avoid catastrophe, it would be more likely to include the additional
probabilistic calculations, discussed in section 1.2.1, above, that help to mitigate
the weaknesses in expected value theory discussed in that section.

Perhaps most importantly, the prudent investment fi rm would modify the
expected value consequentialist calculations discussed above by demarcating its risk
tolerance—how much money it is willing to put at risk and at how much risk—and
holding itself to this limit. This is not to say that the prudent investment fi rm can
avoid all of the problems with consequentialist, expected value thinking, as discussed
above. Some of these problems are endemic to consequentialist thinking and cannot

Business Ethics Quarterly254

be avoided, as discussed further in section 3.3, below. However, I have discussed
several ways in which a prudent frame of mind would help investment fi rms to use
consequentialist, expected value thinking in a less problematic way.

For an example of prudent reasoning, consider Goldman’s investments in the
synthetic CDO discussed above, Abacus 2004-1. As the bank underwriting $1.8
billion of the loans associated with Abacus, Goldman was an unfunded long investor.
Perhaps due to the abstruse nature of these investments, including diffi culties in
making reliable predictions about the likelihood that borrowers would repay those
loans, Goldman also took a short position on the synthetic CDO, betting $2 billion
that the loans would fail. These actions helped Goldman to assure that its long-term
outcome would be satisfactory—it would stay in business and avoid catastrophe—to
a greater extent than other investors in the abstruse Abacus 2004-1.

3.2 Is the bailed-out investment prudent?

In section one, above, I performed expected value calculations to evaluate whether
an investment fi rm should rely on an external agency to bail out its investments if
they become unprofi table. This analysis determined (for a certain set of assump-
tions) that investment fi rms should rely on bailouts whenever there is almost any
probability that an external agency will bail out the fi rm if its investments became
unprofi table.

Examining this problem from a prudential perspective—thinking consequen-
tially about the long-term viability of an investment plan, with an eye to assuring
sustainability and avoiding disaster rather than seeking to maximize present value,
merely—brings up several concerns. As in the abstruse investment fi rm’s pruden-
tial calculations, the bailed-out fi rm would worry that the lack of past evidence of
bailouts makes it diffi cult to determine whether it will be considered too important
to fail and be rescued from insolvency. The established practice and track record
of TBTF, as noted above, suggests that it would not have been beyond reason for a
large investment fi rm to presume that it would be rescued. But determining a prob-
ability with any degree of precision based on such scant evidence is very diffi cult.
As such, most investment fi rms (reasoning prudently) would not count on external
agencies to rescue them if their investments prove unsuccessful. 14

Fannie Mae CEO Mudd’s decision, discussed above, to take on additional, very
risky loans—while owning or guaranteeing $5.3 trillion in mortgages with only
$100 billion in real assets—might seem somewhat different from this estimation,
however. At the time of that decision, it seemed close to certain that the U.S. gov-
ernment would bail out Fannie Mae if its investments failed. In this sense, Mudd’s
decision to buy $150 billion of bad loans, or loans that were very likely bad, might
seem prudent. Although this point is somewhat subtle, it seems to me that Mudd’s
decision was not prudent, in the sense of aiming to preserve long-term sustainability.
As discussed above, the decision was probably favored by expected value theory and,
as a matter of historical fact, did not cause Fannie Mae to fail (because the GSE was
subsequently bailed out). The decision to rely on a bailout while pursuing ruinous
practices seems imprudent, though, for the reason that the ruinous practices do in
fact threaten—even if they do not destroy—the long-term profi tability of the fi rm.

Imprudence and Immorality 255

3.3 Problems With Prudential Reasoning About Risk

In this section, I consider how well prudential decision-making can address the
weaknesses in expected value theory that I discussed above, concerning: (3.3.1)
judgment, (3.3.2) paralysis (free-fl oating fear), and (3.3.3) distribution. I argue that
prudential reasoning is adept at addressing some of these worries but that certain
problems persist.

3.3.1 Judgment

Whereas expected value calculations rely on judgment to determine which possi-
ble consequences will be evaluated and which sources of probability estimates are
the most reliable, the prudent decision maker employs judgment to question those
probability estimates in depth. Using judgment may, in this sense, help the prudent
investment fi rm to reach a better decision about whether to make an abstruse invest-
ment or rely on a bailout. But the reliance on judgment also renders the decision
more personal, less objective, and more controversial.

In response, a prudent decision maker might note that judgment is what gives
prudent decision making its decisive advantage over expected value calculations.
Because decision makers can refer to their own experiences and expertise to deter-
mine what course of action is most likely to secure their long-term interests, they
are more likely to achieve their personal goals. In this sense, the worry helps to
establish the nature of prudent reasoning: it is more subjective and personal than
expected value maximization. Although this challenges prudential reasoning as
an objective decision-making strategy—one that will offer recommendations to
everyone about what it is best for them to do—it strengthens prudential reasoning
as a decision-making strategy for personal decision making that seems well suited
to help decision makers reach their distinctive goals.

3.3.2 Distribution

In the discussion of problems with expected value theory as regards risk, above,
I noted that expected value reasoning does not consider the distribution of risks of
harm in its calculation. This means that it could recommend actions that make a
small number of people extremely wealthy while imposing losses and risks on a
much larger group. Prudential reasoning seems to have a similar problem.

Moreover, prudential reasoning, like expected value theory, is not directly con-
cerned with consequence C4, in which the economic system is undermined. Pruden-
tial reasoning does do more than expected value theory, though, to avoid C4, in the
sense that all prudent decision makers explicitly attempt to secure their long-term
prosperity and C4 undermines everyone’s long-term prosperity, as discussed above.

3.3.3 Paralysis (Free-fl oating Fear)

A third worry is that the prudent investment fi rm—which is deeply concerned with
the problems in consequentialist thinking—will be paralyzed by these worries and
will be unable to continue investing. This worry is related to, though distinct from,
the concern about free-fl oating fear discussed above. As the prudent investment fi rm

Business Ethics Quarterly256

fully recognizes how the problems in consequentialist thinking challenge human
abilities to determine the probabilities that various outcomes will occur or even
what outcomes are possible, the prudent fi rm recognizes that any investment plan
is deeply fallible.

The prudent investment fi rm might resolve simply to err on the side of caution
when performing prudential analyses—given that so much is uncertain—without yet
halting action. In this sense, prudential reasoning offers a strategy for addressing the
worries about free-fl oating fear discussed above: it is imprudent to be immobilized
by fear about risk. A prudent decision maker would strive to move beyond this fear.
This point is again subtle, though, in the sense that prudential reasoning offers no
fi rm guidelines about how to address fear or paralysis. As such, even to the extent
that prudential thinking can mitigate some of the problems associated with conse-
quentialist decision making, as discussed in section one, it does not eliminate them.

4. IMMORALITY IN A CONTEXT OF RISK

In this section, I consider whether the (4.1) abstruse and (4.2) bailed-out invest-
ments are immoral independent both of their prudence or imprudence and of their
expected value. I use Kantian moral reasoning to evaluate whether risking money
in these investments is moral, i.e., whether in so investing fi rms make themselves
exceptions to moral norms upon which the investments simultaneously rely. I aim
to ascertain whether adding moral evaluations to decisions about risk can help to
avoid the problems with expected value- and prudential reasoning discussed above.
A further aim is to explore the extent to which Kantian moral reasoning—with its
non-consequentialist orientation on the plans for acting rather than the actions’
consequences—can address questions about risk, which unavoidably involve the
consequences of actions. I conclude by considering several (4.3) objections to
Kantianism.

4.1 Is the abstruse investment immoral?

As noted above, Kantian moral decision-making analyzes decisions in terms of the
rules underlying the proposed actions, seeking to determine whether those rules can
be universally followed. For the abstruse investment decision, I propose to test the
following rule, R1: “When I believe that it will maximize profi t, I invest in abstruse
fi nancial instruments.” This could have been the rule underlying GSC’s decision
to take a long unfunded position in the Abacus 2004-1 synthetic CDO. If R1 were
universalized then in every opportunity in which an investor could bet on an abstruse
fi nancial instrument, the investor would invest if it thought—e.g., because of expected
value calculations—that the investment would maximize profi ts.

To evaluate this rule from a non-consequentialist, Kantian perspective, the deci-
sion maker considers whether the proposed action requires that other actors take
different actions. Could all fi rms invest in abstruse fi nancial instruments? Or do the
abstruse fi rm’s risky investments depend on a social norm in which most fi rms take
a different action—namely, refraining from abstruse investments—in order for it
to be possible for the abstruse fi rm to make its risky investments in the fi rst place?

Imprudence and Immorality 257

If all fi rms invest in fi nancial instruments whose risk levels and implications are
diffi cult to ascertain due to their abstruse nature, it seems plausible that there would
be many more failed investment strategies and many more failed fi rms. Those bad
consequences , though, do not establish that the rule is immoral from a Kantian
perspective. To do that, decision makers would need to show that the action of
making abstruse investments requires other fi rms to act less rashly and take more
precautions in their investing activities: perhaps by making sure that they grasp the
risk and implications of every investment they make, perhaps by hedging against
abstruse bets, as Goldman did with respect to Abacus 2004-1, discussed above. 15

Indeed, a fi rm can only recklessly bet on fi nancial instruments whose potentially
catastrophic implications for the economy as a whole 16 are opaque to the fi rm if other
fi rms follow a more conservative investment strategy, on the following rationale. If all
fi rms take abstruse risks, some investments (and some fi rms) will fail, while others
will succeed. Because the investments are interconnected, however—fi rm A depends
on premiums paid by fi rm B in order to pay the premiums it owes to fi rm C—even
fi rms that win their abstruse-investment bets will lose money when R1 is a universal
law. The signifi cance of this bad consequence from a non-consequentialist, Kantian
perspective is that it causes the (deeply interconnected) fi nancial system, in which
investment bets are placed, to break down. Winning fi rms have counted on losing
fi rms for loan repayments. Because losing fi rms are now insolvent, however, they
will not honor their obligations. Thus, fi rms that have money (i.e., winning fi rms)
will be unwilling to loan, as those who need money (i.e., losing fi rms) are the same
as those who have just failed to meet repayment obligations. Trust will evaporate.
No one will be able to borrow money and the fi nancial system, which depends on
a ready supply of cash to pursue investment opportunities, will be at a standstill.

Abstruse investing requires, in this sense, some fi rms to adopt a more informed,
risk-averse approach to investing, so that those fi rms will be there to provide trust—
and credit—when abstruse investments fail. Such risk-averse fi rms refrain from
relying on abstruse-investing fi rms and, as such, are not stung when (some of) the
abstruse investments fail. The risk-averse fi rms will still be willing to make loans.
In order to seek high profi ts, then, abstruse investors make themselves exceptions to
the moral standard to which they hold the fi rms with which they interact. If everyone
invested with the willful abandon of the abstruse investor, no one could achieve
their aim of maximizing profi t through investing because trust would break down
and investment activities would cease. Abstruse investing becomes self-defeating
when universalized.

4.2 Is the bailed-out investment immoral?

With respect to the second case, the bailed-out investment—deciding whether to rely
on a bailout from an external agency when risking money—I propose the following
rule (R2): “When I believe that I have a fi nancial rescuer, I make riskier investments
than I would if I did not believe that I had a rescuer.”

If this rule were universalized, then whenever an investment fi rm believes it
has a guarantor to underwrite its fi nancial responsibilities, it will take risks that
it otherwise would not take. As in the case of the abstruse investment, we consider

Business Ethics Quarterly258

the outcomes of these risky actions without allowing the outcomes to determine the
permissibility of the risky action. In some cases, the risks will allow the fi rm to earn
greater profi ts than it would have absent the risks. In other cases, the additional risks
will not prove profi table but will not prove catastrophic: the investment fi rm will be
able to meet its fi nancial obligations. In the fi nal kind of case, the additional risks
will prove catastrophic and the investment firm will be forced to depend upon
its presumed rescuer. As noted in section one, above, there are two possibilities: the
rescuer will rescue the fi rm or the rescuer will be unable, or unwilling, to rescue
the fi rm. If the rescuer is unable or unwilling to rescue the investment fi rm then the
fi rm will fail to meet its fi nancial obligations.

In this scenario, the integrity of the economic system would be straightforwardly
undermined if the fi rm’s insolvency cascades—the fi rms to which it owes money
become unable to pay the fi rms to which they owe money and, ultimately, all fi rms
become unable to invest—like that of the abstruse investment fi rm described in sec-
tion 4.1, above. R2, like R1, would refute itself when universalized. Because I have
not assumed in the case of the bailed-out investment that fi nancial obligations are
deeply interconnected, however, the self-refutation cannot be obtained this way. Two
alternative analyses, consistent with my assumptions, each secure the self-refutation.

First, in an economic system, whenever someone loses money in an investment—
say, Fannie Mae or GSC partners—someone else makes money: such as the
commercial banks that sold Fannie mortgages or Goldman Sachs. Even following
transactions that cause some parties to become insolvent, then, the economic
system may appear intact: some parties have lost but others have won. The problem
here is that in order for those who have lost to be rescued, the rescuer—typically,
the federal government—must obtain rescue money. Governments obtain money
by taxing their citizens. But the only citizens who have money in this economy are
the ones who have earned profi ts. Thus, the “winners” must bail out the “losers.”
If this were the normal course of investing, though, investing would be impossible:
if all parties ended up with the same resources, no one would risk money in the fi rst
place. R2 is self-refuting when universalized.

Second, in actual economic system like the U.S. economy, the U.S. government
is the guarantor of last resort. But the U.S. government would not be unable, or even
unwilling, to bail out a fi rm when that fi rm’s insolvency would undermine the U.S.
economy as a whole. Widespread bailouts would, however, change the nature of the
economy: in particular, the economic system would cease being based in private
property, directed by individual self-interest, and conducive to investments. The
government would own key economic players; the economy would be centralized. 17
As people in centralized economies lack private property to invest, making invest-
ments (that riskily rely on rescuers, or otherwise) in the context of such economies
is impossible. Again, R2 refutes itself when universalized.

4.3 Problems With Kantian Moral Reasoning About Risk

In this section, I consider Kantian moral reasoning’s resources to address the
weaknesses in expected value theory and prudential reasoning that I discussed
above, including: (4.3.1) distribution, (4.3.2) paralysis (free-fl oating fear), and

Imprudence and Immorality 259

(4.3.3) judgment. Like prudent reasoning, Kantian moral reasoning is adept at
addressing some of these worries but certain problems remain irresolvable.

4.3.1 Distribution

Like expected value theory and prudential reasoning, Kantian moral theory says
nothing explicit about the distributional consequences of its recommendations.
Uniquely among these three decision-making strategies, however, Kantianism
explicitly considers the decision-making strategies available to each person if the
rule under examination were followed universally. Moreover, unlike expected
value theory and prudential reasoning, Kantianism considers consequence C4, even
though Kantianism is the theory, among the three, that is least concerned with the
consequences of action.

4.3.2 Paralysis (Free-fl oating Fear)

Kantianism is also the theory, of the three, most likely to take an interest in
paralysis, or free-fl oating fear. Consider R3, “When I believe that it will maximize
profi ts, I make risky investments that create free-fl oating fear,” and R4, “When
my prudential reasoning is unable to vanquish all uncertainty, I am paralyzed
by uncertainty and refrain from investing.” To the extent that the risky investments
would produce paralysis and free-fl oating fear, and to the extent that paralysis and
free-fl oating fear would undermine the economic system, Kantian morality would
prohibit making investments that create free-fl oating fear or undertaking prudential
reasoning that produces paralysis.

4.3.3 Judgment

Expected value calculations relied on judgment to determine which possible conse-
quences will be evaluated and which sources of probability estimates are the most
reliable. Prudent decision makers used judgment to question the expected value
probability estimates in greater depth. Kantian moral reasoning relies on judgment
to express the rule to be evaluated and to consider the rule’s universalization. (It also
relies on probabilistic judgments to determine that an action under consideration is
risky, as discussed in section 1.2.1, above.) Guidelines for writing and universalizing
the rule were offered above. Although such guidelines limit the extent to which
personal biases can distort the moral evaluation, it seems indisputable that decision
makers must employ (subjective, personal) judgment in writing and evaluating the
rules, at least to some extent.

A further concern about judgment arises in determining how risky is a particular
investment. Morally speaking, investors may not risk money in abstruse or bailed-
out investments any time the investments risk C4. It is immoral for fi rms to make
complicated investments when those investments risk the integrity of the economic
system itself for the reason that, in those circumstances, the investment fi rms
except themselves from a moral rule that they regard as being generally binding.
If the investments do not involve systemic risk, then the above analysis does not
explicitly prohibit them. (And, as broached above, some risks are highly benefi cial.)

Business Ethics Quarterly260

So it is especially important to ascertain when investments risk economic ruin.
Its risk profi le is one of the things that is abstruse about abstruse investments, how-
ever, so it might be diffi cult to establish that a particular abstruse investment is too
risky and is, thus, immoral by Kantian lights. Given the diffi culties in determining
whether an abstruse investment risks consequence C4—and thus whether the rule
underlying that investment decision is morally permissible—risk-involving rules
seem to require enhanced scrupulousness from the standpoint of Kantian morality.

There is a further, related worry about judgment in Kantian moral theorizing about
risk that is important to address, though I will not be able to do so fully here. Just as
it could be morally permissible to risk money in abstruse and bailed-out investments
when the overall economy is not also risked, it could be morally permissible to risk
undermining the economy so long as the risk is trivial. 18 In this sense, the extent
of the risk is not all that matters to our calculation, but also how likely it is that the
harm threatened by the risk will actually occur. If the probability of a catastrophe
is truly trivial, investments that risk this outcome could be morally permissible.

In response to this worry, I develop the conclusions broached above and propose
that investment strategy rules that (a) risk the economic system itself (b) above
probability P are prohibited by the Kantian morality; investment strategies that
risk recoverable loss—or irrecoverable loss below probability P—are not (on that
ground) morally impermissible. Although different levels of risk tolerance are
morally permissible—and might be prudent—for various fi rms, we need to know
whether the worst-case scenario is threatened with some probability P. When the
worst-case scenario is threatened with probability P, the risk is morally prohibited.

5. CONCLUSION

A key insight of Kant’s moral law is that a fi rm may never act in a way that would
destroy, if universalized, what the fi rm needs in order to act. Imprudence focuses
only on the fi rm’s own success or failure; morality concerns conditions for the possi-
bilities of success or failure more broadly construed. In this conclusion to the paper,
I sketch some guidelines as regards that limit on permissible action and discuss the
relationship between immorality and imprudence that I have developed in this paper.

The abstruse investment puts money into complicated fi nancial instruments that
are interconnected in intricate and hard to parse ways, i.e. that are very risky. The
intricate nature of the instruments—and the fact that their particular risks cannot
be formulated in detail—prevents the abstruse investment fi rm from having an ade-
quate conception of the risk it undertakes in buying and selling these instruments.
Expected value maximization has a diffi cult time grappling with this problem,
due to the diffi culties attendant upon formulating the probabilities correctly. It can
make general recommendations about when the investments are to be preferred but
given the diffi culties of making precise calculations, it offers little certainty as to
the best course of action.

In order to address this problem, I turned to Kant’s distinction between prudence
and morality. According to Kant, prudence and morality sometimes intersect but we
can conceptually distinguish choosing the plan for action that best furthers long-term

Imprudence and Immorality 261

self-interest from choosing a moral plan for action. I used the idea of prudence to
interpret the expected value calculations in a way that allowed them to gain more
certainty in the context of risk. My prudential evaluation relied on the consequen-
tialist expected value reasoning but was not identical to that reasoning. One addition
that prudential thinking brings to the consequentialist calculation is the idea of a risk
tolerance. Although the prudent investment fi rm will not be able to determine with
certainty to how much risk the abstruse investments exposes it, the fi rm can decide
upon a risk tolerance as part of its prudential calculations to help decide when it is
prudent, according to the fi rm’s lights, to make the investments and when it is not.

Next, I examined the investments from the point of view of Kantian morality,
seeking to understand if the abstruse investment fi rm, in trading the complicated
fi nancial instruments, makes itself an exception to a rule to which it holds other
fi rms, e.g. by relying on them to make less risky trades. My examination was
notable for the way in which it included the consequences of an action while eval-
uating the action in a non-consequentialist manner. I determined that it is immoral
for the abstruse investment fi rm to trade complicated fi nancial instruments when
such investments risk the destruction of the entire economy.

Regarding the second case, the bailed-out investment, I questioned when it would
maximize expected value to rely on a bailout if one’s investments fail, when it would
be imprudent to do so, and when it would be immoral to do so. Expected value
calculations recommend that investment fi rms rely on a bailout when (assuming a
50% chance of investment success and that the size of probable profi ts and probable
losses is identical) there is a greater than 0% probability that the external agency
will bail out the investment fi rm if its investments fail.

Turning to prudential calculations to try to achieve more helpful guidance (espe-
cially in light of uncertainties about probabilities and other aspects of consequentialist
reasoning), I determined that fi rms, thinking prudently, should assume that it is highly
improbable that an external agency will bail them out when their investments prove
unsuccessful. Prudent fi rms should rely on outside rescuers only when it is possible
to minimize the possible adverse consequences of doing so.

When I examined moral issues concerning the bailed-out fi rms’ decisions, I resolved
that a moral fi rm might rely on an external rescuer only when doing so would not risk
an economic catastrophe. As in the prudent fi rm’s evaluations, the circumstances in
which a moral fi rm may permissibly rely on a bailout will be highly circumscribed.

The primary aim of this paper has been to motivate interest in non-consequentialist
accounts of the ethics of risk and describe one such account, based in Kantian
morality. One interesting upshot of this work concerns the different levels of risk
aversion associated with expected value-, prudential-, and moral reasoning. Although
I have not fully established the relationships among levels of risk aversion in these
various forms of reasoning, my paper suggests that the requirements of (2) prudence
vis-a-vis risk aversion seem more demanding than the requirements of (1) expected
value maximization and the requirements of (3) morality seem more demanding
than (2) prudence as regards the regulation of risk. Expected value permits any
investment that is likely to maximize profi t. Of these, prudence prohibits invest-
ments that threaten the investor’s long-term interests. Of prudent investments,

Business Ethics Quarterly262

the moral law prohibits those that risk of the integrity of the economic system
(on the grounds that, if universalized, such risks would undermine the economy,
making any further investments impossible). In this sense, the Kantian moral
standard for investments would impose more risk aversion on the fi nancial system
than what currently exists, helping both to address the theoretical problems with
consequential reasoning addressed in this paper and, more perhaps more crucially,
the crises to which they lead.

ACKNOWLEDGEMENTS

I am grateful to audiences at the 2014 Annual Meeting of the Society for Business
Ethics, High Point University, and Bloomsburg University, for useful feedback on
previous versions of this paper. Matthew Brophy and Jeffrey Moriarty provided
invaluable written comments. Conversations about earlier drafts with Waheed
Hussain, Michael Santoro, Eric Orts, Amy Lynn MacArthur, Joe Blosser, Robert
Moses, Scott Lowe, Steven Hales, Kurt Smith, Gary Hardcastle, Wendy Lynne
Lee, Richard Brook, and Michael Simonetti were especially helpful. I also wish
to acknowledge Alan Strudler and two anonymous reviewers at Business Ethics
Quarterly for extremely valuable comments on earlier drafts of this paper.

NOTES

1. No one has yet defended an approach to questions about risk based in Kant’s formula of universal law,
as I do in this paper. The paper does build on a number of criticisms of consequentialist decision-making
frameworks as regards ethical question about risk. In the interest of motivating interest in and introducing
the Kantian view, I must unfortunately forgo detailed responses to much of this excellent work. Oberdiek
has objected that consequentialist frameworks objectionably trade “lives for convenience” and societies
should seek a less objectionable way of making decisions that affect large numbers of people (2004, 201).
Hansson raises two crucial objections: (1) consequentialist decision-making frameworks omit issues that
are relevant to ethical evaluation, such as the risk-taker’s intention in imposing a risk on someone else
(2010, 587), and (2) consequentialist decision-making frameworks unrealistically assume that actors are
certain of the consequences of their various possible actions, along with the likelihood that those actions
will come about (2010, 587-88). Hayenhjelm and Wolff also object that consequentialist decision-making
frameworks omit morally relevant aspects of the decision: in particular, the distribution of the risk
of harm across the population that is put at risk (2012, 11–20). Oberdiek, Hansson, Hayenhjelm and
Wolff are interested in contractualist solutions to ethical questions about risk in the Scanlonian tradition:
risks are ethically permissible only when everyone whom they expose to a risk of harm would consider the
risk worth running.

2. As discussed in Hansson, the appropriate form of risk regulation may vary among different kinds
of risk. Risks arise in different social sectors and regulation should consider the particular aspects of
society—workplace organization, community planning, the provision of basic goods—that most directly
relate to the risk (2005, 12). Financial risk, as elaborated below, addresses concerns about the organization
and regulation of the economic system.

3. Throughout this paper, I assume that the investment fi rm is a rational actor—which forms inten-
tions and acts on them—as discussed in French ( 1979 ). The actual agents are usually corporate executives,
such as the CEO and the fi rm’s risk advisory board, who act on behalf of the fi rm’s shareholders. Where
relevant, I discuss how individual employees contribute to the fi rm’s risky investing activities. Various
challenges can be raised against French’s view. The most infl uential is Jackall (1988, 2009 ), who argues
that corporate organization is decentralized and bureaucratic; thus, the fi rm (qua fi rm) cannot act rationally.
Another important worry is Altman ( 2007 ), who argues that businesses are incapable of the kind of agency
Kant requires for ethical evaluation. I believe that such worries can be adequately addressed, though I do
not attempt to do so here.

Imprudence and Immorality 263

4. This is, of course, not the use to which Kant puts his distinction. My paper appropriates for its
own purposes, rather than interpreting in the context of Kantian ethics, the distinction between acting for
reasons of prudence and acting for reasons of morality. For a discussion of how Kant intends the distinction
in his own exegesis, see Wood ( 1999 , 27–33).

5. This aspect of my argument—if standards of Kantian morality (as regards risk aversion) are met
then standards of prudence (as regards risk aversion) are met—may be formulated logically as: M(r)—>P(r).
Note that this counterfactual has the standard logical entailments. In particular, I do not seek to challenge
the (sadly) well-established fact that many immoral actions can be prudent.

6. I address a rudimentary form of expected value theory here. More sophisticated forms may include
additional analyses. For example, in my discussion of an objection to expected value theory (section 1.2.1,
below), I include an estimate of decision makers’ probability of correctness regarding the probability
estimates they employ.

7. In this context, abstruse can be seen as a relative term. For some very well informed people,
such as very knowledgeable research scientists, certain highly complicated investments are much less
abstruse. My example focuses on investments that are truly abstruse: either in the sense that they are
abstruse even to the very well informed or that they are abstruse because decision makers are not very
well informed.

8. The U.S. government has rescued other fi nancial institutions—including hundreds of savings and
loan (S&L) associations in the S&L crisis of the 1980s-90s—and other businesses, including Lockheed
Aircraft and the Chrysler Corporation. These institutions were not bailed out because of concerns about
systemic risk, however.

9. As broached above in note 4, most Kant scholars hold that Kant’s aim in discussing this example is
to isolate a key point in his moral philosophy: the phenomenon of acting from duty rather than inclination.
My discussion of this example does not challenge that interpretation of the passage. Rather, I seek to use
Kant’s distinction to demonstrate his view’s resources to evaluate questions about fi nancial risk.

10. Although no one has examined this case in the context of the ethics of fi nancial risk, the example
has been extensively discussed. Wood raises the problem of determining in which proportion the 23 two
motives—morality and prudence—infl uenced the shopkeeper’s action. Kant believes that the answer
to this question is unknowable (1989, 472–73). Thomas examines how the example relies upon certain
knowledge about human life (1993, 16). Herman (1981, 366), Smith (1991, 288), and Hills (2009, 114–15)
examine what would need to be the case (counterfactually) to make this example a matter of morality rather
than prudence. McCarthy locates the wrong in the shopkeeper’s action in the fact that in a possible world
where the shopkeeper will no longer interact with the youthful customer or his affi liates, the shopkeeper’s
rule commits him to giving the incorrect change and thus acting immorally (2002, 637). Of these, the inter-
pretation offered in Herman ( 1981 ) is most crucial to the present work.

11. E.g., Rawls (2009, 168), Korsgaard (1996, 57–58), Scharding (forthcoming).
12. As is well known, Kant gives three formulations of the moral law as he understands it: the formula

of universal law (FUL), the formula of humanity (FH), and the formula of the realm of ends (FRE).
My analysis focuses on FUL, only. For purposes of convenience, I refer to FUL as Kant’s decision making
strategy for morality, setting aside worries that FUL expresses the moral law only incompletely. For a
discussion of those worries, see (Wood 1999 ).

13. This idea about prudence resembles Rawls’s maximin. Whereas maximin nudges decision makers
towards risk aversion by requiring them to choose whatever course of action has the least-bad worst
outcome—in a distributional sense, as discussed below—my account of prudence avoids bad outcomes
more generally and in a more self-interested sense. Maximin would reject an outcome in which the bottom
quintile of the population was very badly affected while decision makers—such as investment fi rms engaging
in brokerage activities—fl ourished. My simpler account of prudence could endorse that decision, prohibiting
very bad outcomes for the bottom quintile of the population only when such bad outcomes make it impos-
sible for the decision makers to continue their brokerage activities in the future. For an insightful account
of maximin’s role in risk aversion for Rawls, see (Freeman 2014).

14. This is not to say that relying on bailouts is not often benefi cial. For example, bankruptcy laws
allow people to take risks and then start again if the risks have bad consequences. Social welfare, like health
and pension guarantees, allows people to take more physical risks. Even the federal funding of research is
a kind of bailout: providing a safety net for researchers that encourages innovation and creativity. My point
is that it is (typically) imprudent to rely on these benefi ts.

Business Ethics Quarterly264

15. Most fi rms—not just Goldman—typically hedge by purchasing short and long positions in a
pattern that is likely to allow them to meet their fi nancial obligations even if some investments are unsuc-
cessful. Goldman’s strategy with respect to Abacus 2004–1 was more risk averse than these typical hedges,
though, in the sense that Goldman bet both for and against the same synthetic CDO.

16. Only abstruse investments that risk consequence C4 seem self-refuting. Consider, for example, an
abstruse investment that does not risk C4, such as when someone makes a $10 bet on a horse race without
understanding horse racing. This investment is “abstruse” to the investor in the relative sense discussed
in note 7, above. This investor is likely to lose $10. While it would be rejected by expected value theory
and prudence, the investment seems permissible under Kantian moral reasoning. It would be possible for
everyone to invest in this manner; the bets do not threaten to undermine the institution of horse racing.

17. This is not to say that the economy becomes state run whenever there is a bailout. Certain, more
limited forms of bailouts—such as bankruptcy protection or limited liability for people who invest in
publicly-traded fi rms—could be available universally without causing the economy to become state-run.

18. Thomson (1986, 185–86) sketches this point, though she does not fully establish it. Thomson is
not working in a Kantian framework when she discusses the possible moral permissibility of trivial risks
of serious harm.

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Altman , Matthew . 2007 . “The Decomposition of the Corporate Body: What Kant Cannot
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The Financial Crisis Inquiry Commission (FCIC) . The Financial Crisis Inquiry Report:
Final Report of the National Commission on the Causes of the Financial and
Economic Crisis in the United States . Pursuant to Public Law 111–21. Date issued:
February 25, 2011 . http://www.gpo.gov/fdsys/pkg/GPO-FCIC/pdf/GPO-FCIC

French , Peter A . 1979 . “The Corporation as a Moral Person.” American Philosophical
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Chapter 7

Employee’s Ethics: Making the Best of the Job You
Have as You Get from 9 to 5

Chapter Overview

Chapter 7 “Employee’s Ethics: Making the Best of the Job You Have as You Get from 9 to 5” examines

some ethical decisions facing employees. It considers the values guiding choices made over the course of a

workday.

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7.1 Taking Advantage of the Advantages: Gifts, Bribes, and

Kickbacks

L E A R N I N G O B J E C T I V E S

1. Define a conflict of interest.

2. Show how gifts in the business world may create conflicts of interest.

3. Delineate standard practices for dealing with gifts.

4. Consider how receiving gifts connected with work may be managed ethically.

5. Define bribes and kickbacks in relation to gifts.

6. Show how the ethics of bribes and kickbacks can be managed inside the ethics of gifts.

Living the High Life

If you’re young, looking for work, and headed toward a big city (especially New York), then you could do a

lot worse than landing a job as a media buyer for an advertising agency. According to an article in New

York magazine, it’s working out well for twenty-four-year-old Chris Foreman, and it’s working out despite

a salary so measly that he can’t afford his own place, a ticket to a movie, or even to add meat to his

homemade spaghetti.
[1]

This is what makes the job click for Foreman: as a media buyer, he oversees where big companies like

AT&T place their advertisements. And because those ads mean serious money—a full page in a glossy,

top-flight magazine costs about five times what Foreman earns in a year—the magazines line up to throw

the good life at him. Thanks to the generosity of Forbes magazine, for example, Foreman spends the

occasional evening on the company’s vast Highlander yacht; he drinks alcohol almost as old as he is,

munches exquisite hors d’oeuvres, and issues orders to white-suited waiters. While guests arrive and

depart by helicopter, Foreman hobnobs with people the rest of us see only on movie screens. A scan of the

Highlander guest book turns up not just celebrities but serious power too: Margaret Thatcher was a guest

once.

A night on the Highlander is a good one, but it’s far from the only event lighting up Foreman’s glitzy life. A

few of his other recent outings are listed in the article, with some estimated cash values attached: An all-

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expenses-paid ski weekend (worth almost $1,000, in Foreman’s estimation); tickets to see Serena

Williams at the US Open ($75 each); invites to the Sports Illustrated Swimsuit Issue party, where he

chatted with Heidi Klum and Rebecca Romijn-Stamos; prime seats for sold-out Bruce Springsteen

concerts ($500 each); dinners at Cité, Sparks, Il Mulino, Maloney & Porcelli, and Monkey Bar, to name a

few of his favorites ($100 a pop).

Foreman observes the irony of his life: “It’s kind of crazy, I had dinner at Nobu on Monday [the kind of

restaurant few can afford, even if they’re able to get a reservation], but I don’t have enough money to buy

socks.”
[2]

The Highlander’s spectacularly wealthy owner is Steve Forbes. If he invites former British Prime Minister

Margaret Thatcher aboard for a holiday weekend, you can understand why: she’s not just an interesting

person; she’s living history. Serena Williams would be an interesting guest, too, in her way. The same goes

for Heidi Klum and Ms. Romijn-Stamos, in a different way. What they all have in common, though, is that

you know exactly what they’ve got, and why a guy with a big bank account would treat them to an evening.

But what, exactly, does Mr. Forbes expect to get in return for inviting media buyer Chris Foreman? The

answer: “We media buyers are the gatekeepers—no one at AT&T actually purchases the ads. If at the end

of a buying cycle, your budget has an extra $200,000, you’ll throw it back to the person who treated you

best.”
[3]

The answer, in a word, is money.

What’s Wrong with Gifts and Entertainment?

The fundamental problem with the gifts Foreman received and the free entertainment he enjoyed is that

they create a conflict of interest, a conflict between professional obligations and personal welfare. As a

paid media buyer, it’s Foreman’s job and obligation to buy ads in the magazines that will do his clients the

most good, that’ll deliver the biggest bang for the buck. But against that, as a single twenty-four-year-old

guy in New York City, it’s in his personal interest to purchase ads in Forbes magazine since that probably

gets him invited back to the Highlander with its free drinks, exquisite dinners, and, if he’s lucky, some face

time with women he’s already seen quite a bit of in Sports Illustrated. This is a tough spot, and there are

two broad ways it can play out:

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1. Foreman can do the parties at night, go home, sleep, wake up with a clear head, and buy the best ads for

his client. Let’s say the advertising money he’s spending belongs to AT&T and they’re trying to attract new

clients in the forty-five to fifty-five demographic of heavy cell phone users. He takes that target, checks to

see what magazine those people like to read more than any other, and buys a full pager there. If the

magazine happens to be Forbes, great, if not, then Forbes doesn’t get anything back for its party. In this

case, Foreman knows he’s done right by AT&T and his employer. To the best of his ability, he guided

advertising money to the spot where it’ll do the most good. There remains a potential problem here,

however, which is the appearance of a conflict of interest. Even though Foreman didn’t let the parties

affect his judgment, someone looking at the whole thing from outside might well suspect he did if it

happens that Forbes gets the ad buy. This will be returned to later on in this chapter.

2. The darker possibility is that Forbes isn’t the best media buy, but they get the ad anyway because

Foreman wants to keep boarding the Highlander. In this case, Foreman is serving his own interest but

failing his obligations to his employer and to his client.

In pure ethical terms, the problem with the second possibility, with selling out the client, can be reduced

to an accusation of lying. When Foreman or any employee signs up for a job, shows up for work, and then

accepts a paycheck, they’re promising to be an agent for the organization, which is formally defined in

commercial law as someone acting on behalf of the organization and its interests. In some situations it

can be difficult to define exactly what those interests are, but in Foreman’s it’s not. He does well for his

employer when he gives the clients the best advice possible about spending their advertising dollars.

That’s his promise and he’s not fulfilling it.

Redoubling the argument, in the case of the typical media buyer, there’s probably also an explicit clause in

the employment contract demanding that all media advice be objective and uncorrupted by personal

interest. Even without that formal step, however, the shortest route to an ethical condemnation of buying

ads because a night on the Highlander (or some other gift) has been received is to underline that the act

turns the media purchaser into a liar. It makes him or her dishonest every time they come into work

because they’re not providing the objective and impartial advice they promise.

In discussing conflicts of interests, it’s important to keep in mind that those who find themselves caught

up in one haven’t necessarily been corrupted. Just because Foreman finds himself torn between giving

impartial advice to his client and giving the advice that gets him good parties doesn’t mean his judgment

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is poisoned. That said, it’s extremely difficult to walk away from a conflict of interest unstained: any time

serious gifts or rich entertainment gets injected into a business relationship, suspicious questions about

professionalism are going to seep in too.

Finally, there are two broad ways of dealing with gifts, especially those creating conflicts of interest. They

can be flatly refused, or rules can be formulated for accepting them responsibly.

Refusing Gifts and Entertainment

One way to avoid the gift and conflict of interest problem altogether for Chris Foreman or anyone in a

similar situation is to simply refuse any gifts from business partners. Far more frequently than private

businesses, government organizations take this route. The approach’s advantage, obviously, is that it

wipes out the entire question of wrongdoing. The disadvantage, however, is that it dehumanizes work; it

seems to forbid many simple and perfectly appropriate gestures of human interaction.

Here’s an example of what can happen when efforts to eradicate conflicting interests go to the extreme:

it’s from a New York Times front-pager about the state governor:

Governor David A. Paterson violated state ethics laws when he secured free tickets to the opening

game of the World Series from the Yankees last fall for himself and others, the New York State

Commission on Public Integrity charged on Wednesday.
[4]

So, the governor is in trouble because he got some tickets to watch his home team play in the baseball

championship? That’s going to make Chris Foreman’s head swim. Without getting into the details of the

Paterson case, accepting these tickets doesn’t seem like a huge transgression, especially for someone

whose job pays well and is already packed with gala events of all kinds. It’s not as though, in other

words,

Peterson’s going to be blown away by the generosity or become dependent on it. In the case of Foreman

who could barely afford to eat, it’s reasonable to suspect that he may come to rely on his occasional trip to

the Highlander, but it just doesn’t seem likely that the governor’s judgment and ability to fulfill

professional obligations are going to be distorted by the gift provided by the New York Yankees baseball

club. More, as the state’s elected leader, a case could probably be made that the governor actually had a

professional responsibility to show up and root for the home team (as long as the visitors aren’t the Mets).

As a final note, since the now former governor is legally blind, the value of the gift seems limited since he

couldn’t actually see the game he attended.

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Despite this case’s apparent frivolity, the general practice of eliminating conflict of interest concerns by

simply banning gifts can be justified. It can be because so many gifts, just by existing, create the

appearance of a conflict of interest. An appearance of conflict exists when a reasonable person looking at

the situation from outside (and without personal knowledge of anyone involved) will conclude from the

circumstances that the employee’s ability to perform his or her duties may be compromised by personal

interest. This is different from an actual conflict because when there’s really conflict, the

individual feels torn between professional obligations and personal welfare. Almost certainly, Foreman

was tempted to help out Forbes because he really liked the parties. But the case of Governor Paterson

presents only the appearance of a conflict of interest because we don’t know whether he even wanted the

tickets to the Yankees game. Given the fact that he’s blind, he may well have preferred staying home that

night. Still, for those of us who can’t know his true feelings, it does seem as though there might,

potentially, be some incentive for Paterson to return the Yankee favor and provide them some special

advantage. It’s almost certain that at some time in the future, the baseball club will have an issue up for

debate by the state government (perhaps involving the construction of a stadium or maybe just a license

to sell beer inside the one they currently have), and as soon as that happens, the appearance of conflict is

there because maybe Paterson’s response will be colored by the tickets he got.

Conclusion. Refusing to accept any gifts from business associates is a reasonable way of dealing with the

ethical dilemma of conflicting interests. By cutting the problem off at the roots—by eliminating not only

conflicts but the appearance of them—we can go forward with confidence that a worker’s promise to

represent the organization faithfully is uncorrupted by the strategic generosity of others.

What Other Remedies Are Available for Conflict of Interest Problems Stemming

from Gifts?

Categorically refusing gifts may be recommendable in some cases, but in most economic situations a total

ban isn’t realistic. People make business arrangements the same way they make friendships and romance

and most other social things—that mean invitations to the Highlander if you’re lucky, or just to a few

Budweiser’s in the hotel bar. And if you turn everyone down every time, it’s probably going to dampen

your professional relationships; you may even lose the chance to get things done because someone else

will win the contract between drinks.

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So where does the line get drawn for accepting gifts with ethical justification? Whether you happen to be a

renowned politician in a large state or someone just out of school trying to make a go of it in the world,

there are a number of midpoints between Governor Paterson’s obligation to refuse tickets to a game he

couldn’t see anyway and Chris Foreman’s raucous partying on the Highlander. Three of the most common

midpoints are

1. transparency,

2. recusal,

3. organizational codes.

Transparency, as the word indicates, manages the acceptance of gifts by publicly recognizing their

existence. The idea is that if Foreman is willing to openly acknowledge exactly what he’s getting

from Forbes magazine, then we can trust that there’s nothing underhanded going on, no secret

agreements or deals. Of course the gifts may still influence his judgment, but the fact that they’re public

knowledge at least removes the sense that he’s trying to get away with something.

Recusal is abstaining from taking part in decisions contaminated by the appearance of a conflict of

interest. Foreman could, for example, keep going to Highlander parties but not manage any media buying

for the demographic that reads Forbes. It’s fairly easy to imagine a team of media buyers working together

on this. Every time something comes up that might be right for Forbes, Foreman passes the decision on to

Sam Smith or whoever and so removes himself from the conflict.

In the public sphere, especially politics and law, it’s common for judges and legislators to remove

themselves from considering issues bearing directly on their welfare. A judge who owns stock in the

Omnicom communications group may recuse herself from hearing a civil case brought against the

company. Legislators deciding what the salary should be for legislators may ask for recommendations

from an independent panel.

Organizational codes are one of the theoretically easiest but also one of the more practically difficult

ways to handle gifts. The advantage of a code is that it can provide direct responses for employees trying

to decide whether they can accept a gift. In Oregon, for example, legislators are prohibited from accepting

gifts valued at more than fifty dollars. Assuming the code is reasonable—and in this case it was judged so

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by the state’s supreme court—legislators may assert that by implication accepting a gift valued under that

amount is, in fact, ethical.
[5]

However, the problem with codes is that, like laws, they frequently leave gray areas. That’s especially true

in a media buyer’s world where so much is spent on entertaining. In that kind of reality, it’s very difficult

to put a specific price on everything. A night on the Highlander, obviously, is worth a lot to Foreman, but

how does it appear in the accounting books of dollars and cents? Because it’s hard to know, monetary

limits provide only vague ethical guidance for those in Foreman’s line of work.

The broader lesson is that gifts come in so many forms—and with values that can be so difficult to

accurately measure—that it’s virtually impossible to write something encompassing all the specific

possibilities. Many codes of conduct, therefore, end up sounding noble but are really just saying, “Figure it

out for yourself.” Take a look at the last lines from the Code of Conduct from Omnicom, a massive group

of companies including many leading advertising firms that purchase ads in Forbes:

We expect each employee to exercise good judgment and discretion in giving or accepting any

gift. No set of specific rules can anticipate or capture every possible instance in which an ethical

issue may arise. Instead, all of us must be guided by the overarching principle that we are

committed to fair and honest conduct and use our judgment and common sense whenever

confronted with an ethical issue.
[6]

Questions to Ask before Accepting a Gift

In their book Moral Issues in Business, authors William Shaw and Vincent Barry formulate a list of

questions that, when answered, can provide support and clarity for making decisions about whether a gift

may be accepted. They’re not going to tell you what to do—there’s no magic guide—but they can help you

see things more clearly. In modified form and with some additions and subtractions, here’s the list.
[7]

 Is there a conflict of interest, or the appearance of a conflict, that arises because of the

gift? Not every gift raises conflict of interest concerns. Maybe a marketer at Forbes gets a late

cancellation for a Highlander night and can’t find any targeted media buyer to fill the spot, so the invite

gets handed off to a buyer specializing in purchasing ads for young teenagers. Why not? It’d just go to

waste otherwise. And should that lucky media buyer say yes? It’s difficult to find an ethical reason not to

since no conflict of interest concerns seem to arise.

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 What’s the gift’s value? This can be an easy one. When Foreman was invited to a Springsteen concert

he could just look at the tickets and see that he’d been offered something worth $500. On the other hand,

getting the chance to chat up a Sports Illustrated swimsuit model on the Highlander is going to be harder

to quantify. In those cases where a value can be set, the number allows a clean dividing line: anything

above the a specified amount gets categorized as potentially influencing a decision and so causing a

conflict of interest, while any gift worth less may be considered nominal, too small to threaten

professionalism. What’s the magic number? That depends on who’s involved and the general context, but

many organizations are currently setting it at $25, which is, not incidentally, the limit the IRS sets for

business deductions for gifts to any single person during one year.

 Is the gift provided out of generosity or for a purpose? No one can peer into the soul of another,

but something offered during the holiday season may be more acceptable than the same thing offered just

before a major advertising buy is being made.

 What’s the gift’s purpose? Just because a gift isn’t an outpouring of generosity so much as an

expression of self-interest doesn’t mean there’s a corrupting intent. For example, if Forbes magazine

sends Foreman a free copy of each issue, that’s more like advertising for themselves than an attempt to

buy the guy off. Almost all of us have had the same experience: we’ve received calendars or notepads in

the mail from a local real estate agent or insurance seller. These aren’t attempts to buy us, just ways to

present their services. On the other hand, it’s hard to see how tickets to a Springsteen concert given by a

magazine can be anything but an attempt to induce the receiver to give a gift back by throwing some ad

money the publication’s way.

 Is it a gift or entertainment? Traditionally, a distinction has been drawn between giving gifts and

paying for entertainment. As a rule of thumb, the former is something you can take home and the latter is

enjoyed on the spot. Presumably, entertainment raises fewer ethical concerns because it isn’t a payoff so

much as a courtesy extended to a media buyer in exchange for hearing a pitch. If someone

from Forbes wants to convince Foreman that her magazine is the best place for advertising dollars, then it

doesn’t seem so bad, buying him a lunch or a few beers while he hears (endures) the pitch. After all, it’s

her job to sell the magazine and it’s his to know the advantages all the magazines offer. This is just normal

business. Gifts, on the other hand, seem much more like bribes because they don’t exist in the context of

normal business conversations. Take the tickets to a Springsteen concert; they have nothing to do with

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business and can’t be justified as a courtesy extended within the boundaries of normal exchanges between

magazines and ad buyers. Finally, with respect to the parties on the Highlander, those are technically

entertainment since Foreman can’t take the yacht home afterward. It doesn’t sound, though, like a lot of

business talk was going on.

 What are the circumstances? There’s a difference between Forbes magazine handing concert tickets

to media buyers to mark the launching of a new column in the magazine and their constant, ongoing

provisioning. As part of the launch campaign, it’s much easier for Foreman to accept the gift without

feeling trapped by an obligation to throw business Forbes’ way since he can respond to the gesture simply

by being aware that the new column is there and taking it into account when he makes future buying

decisions.

 What power do I have to bestow favors in return for gifts? Foreman’s job title is assistant media

buyer, meaning he probably doesn’t actually decide which magazine gets the business. He just gathers

research data and makes a recommendation to the boss. Does this free him to enjoy the Highlander

night’s guilt free? Hard to be sure, but it definitely helps him fulfill his professional obligations: it’s just

much easier to do the data mining and recommendation writing in the back office than it is to be the guy

sitting out front telling Forbes magazine the answer’s “no,” even though the parties were great. If that’s

the way things go, Foreman may be a coward for letting his boss deliver the bad news to Forbes, but that’s

a personal ethical failure, not a business one.

 What’s the industry accepted practice? In New York state government, as the Paterson case shows,

the accepted practice is no gifts, period. In the looser world of Manhattan media business, New York

magazine sums things up: “Everybody in our industry is guilty of it. Many of those who travel for work

take their boyfriends and call it a vacation.”
[8]

Care should be taken here to avoid the conclusion that

whatever everyone else is doing is OK. That’s not it at all. But it is true that if everyone’s guilty—if all the

magazines are lavishing gifts on media buyers, and all the buyers are accepting—it’s going to be much

easier for Foreman to satisfy his professional obligations. It’s going to be easier for him to tell Forbes “no”

(assuming the demographic facts recommend that) when all the magazines are gifting about equally and

everyone’s accepting than it would be if Forbes were the only magazine giving the gifts and he was the

only one accepting.

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 What’s the organization’s policy? As the Omnicom Code of Conduct illustrates, sometimes policy

provides words but no guidance. As the New York government policy (which prohibits all gifts) shows,

however, sometimes there is guidance. When true guidance is provided, an employee may fairly reason

that following it is fulfilling professional obligations to the employer.

 What’s the law? Generally, laws on gift giving and receiving apply to public officials and those working

with them (politicians, judges, lawyers, businesses doing work for the government). As is always the case,

the legal right doesn’t in itself make ethical right. It can, however, provide the foundation for making an

ethically recommendable decision, assuming other factors—many of which will come up through the set of

questions just listed—have not been ignored.

Conclusion. Gifts cause a conflict of interest when they threaten to corrupt an employee’s judgment on

business matters related to the interests of the person or organization providing the gift. Sometimes gifts

are given with that intention, sometimes not. Regardless, and no matter what the law or corporate

philosophy may be, it’s frequently the employee who ends up deciding whether a gift will be accepted. If it

is, a responsibility follows to justify accepting it.

What’s the Difference among Gifts, Bribes, and Kickbacks?

One advantage of the developed framework for thinking ethically about gifts in the midst of advertising

business relationships is that it provides a compact way to manage the ethics of bribes and kickbacks.

Bribes are gifts—everything from straight cash to entertainment—given to media buyers with the direct

purpose of corrupting their professional judgment by appealing to their personal welfare. When a

representative from Forbes magazine gives Chris Forman tickets to the Springsteen show with the

intention of spurring Foreman to consider buying ad space in Forbes, that’s a gift; it’s left to Foreman to

decide whether he can accept it without betraying his obligation to serve his employer’s interests. When,

on the other hand, the rep gives the same tickets with the intention of getting Forman to directly buy the

space, that’s a bribe. A bribe, in other words, is an extreme conflict of interests where the individual’s

personal interest completely overwhelms the professional responsibilities implied by his job. If Foreman

accepts this kind of gift—one where he knows the intention and accepts that the objectivity of his

judgment will be blinded—then he’s crossed into the zone of bribery. Receiving bribes, finally, seems

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unethical for the same reason that accepting gifts can be unethical: it’s betraying the promise to act as an

agent for the organization.

Kickbacks resemble bribes except that instead of the gift or entertainment being given over first and then

the ad space getting purchased, the ad space is purchased and then a portion of that revenue is sent back

to the media buyer as cash or Springsteen tickets or whatever. Regardless of whether the media buyer gets

his reward first and then buys the ad space, or buys the space and then gets rewarded, what’s happening

on the ethical level doesn’t change. Personal interest is being exploited to corrupt professional judgment.

That means accepting the reward becomes a form of lying since it’s a betrayal of the implicit promise

made to do the job right when you sign the contract.

In the Real World, What’s the Difference among Gifts, Bribes, and Kickbacks?

In actual day-to-day business it can be extremely difficult to distinguish among gifts, bribes, and

kickbacks because at bottom all of them spark conflicts of interest. All of them, consequently, are also

going to incite at least remote suspicions of corruption. Of course it’s always easy to find examples at one

extreme or the other. On the safe side, if a woman seeking your business pays for one cup of coffee for you

once, it’s unlikely that you’ll give her proposal any special consideration, and it’s doubtful that she’d

expect it. If she offers to make your car payments on the other hand, it’s pretty clear something’s going on.

Usually, however, the lines are blurry and the reality more like the one Foreman lived through. The exact

monetary value of what he received wasn’t certain. Did he get the invitations with the intention of having

his judgment tainted or were they extended as a courtesy and in accordance with the industry’s common

practice? Would he get more and better invitations if he sent Forbes magazine some extra dollars? While

these questions don’t have certain answers, the ethics can be rendered in straightforward form. Agents of

an organization have a duty to act in favor of the organization’s interests regardless of what happens after

hours.

K E Y T A K E A W A Y S

 Conflicts of interest arise when an individual’s professional judgment is challenged by an appeal to

personal interest, as occurs when a prospective client offers a gift.

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 Because suspicions of unethical practices arise almost immediately when a conflict of interest exists, even

appearances of a conflict of interest present problems in business.

 Standard practices for dealing with gifts include outright refusal, acceptance of gifts with only nominal

value, acceptance in accord with industry practices, and good sense within a clearly understood situation.

 In certain contexts, gifts of significant value may be accepted ethically, as long as they don’t corrupt

professional judgment.

 Bribes and kickbacks can be managed ethically within the framework constructed for gifts. Both bribes and

kickbacks function as gifts that do, in fact, corrupt an employee’s professional judgment.

R E V I E W

Q U E S T I O N S

1. Why do gifts create conflicts of interest?

2. What is the main advantage and disadvantage of dealing with gifts and conflicts of interest by prohibiting

the acceptance of gifts?

3. What questions could you ask yourself to help frame the question as to whether you can ethically accept a

business-related gift?

4. What’s the difference between a conflict of interest and the appearance of a conflict?

5. What’s the difference between a gift and a bribe?

6. What’s the difference between a bribe and a kickback?

[1] Sarah Bernard, “Let Them Eat Crab Cakes,” New York, accessed May 19,

2011,http://nymag.com/nymetro/news/media/features/2472.

[2] Sarah Bernard, “Let Them Eat Crab Cakes,” New York, accessed May 19,

2011,http://nymag.com/nymetro/news/media/features/2472.

[3] Sarah Bernard, “Let Them Eat Crab Cakes,” New York, accessed May 19,

2011,http://nymag.com/nymetro/news/media/features/2472.

[4] Nicholas Confessor and Jeremy “Paterson’s Ethics Breach Is Turned Over to Prosecutors,” New York Times,

March 3, 2010, accessed May 19, 2011,http://www.nytimes.com/2010/03/04/nyregion/04paterson.html?hp?hp.

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[5] Bill Graves, “Oregon Supreme Court Upholds $50 Gift Limit for Legislators, Public Officials,” OregonLive.com,

December 31, 2009, accessed May 19,

2011,http://www.oregonlive.com/news/index.ssf/2009/12/oregon_supreme_court_upholds_5.html.

[6] “Code of Conduct,” Omnicom Group, last updated October 16, 2008, accessed May 19,

2011, http://www.omnicomgroup.com/corporategovernance/codeofconduct.

[7] William Shaw and Vincent Barry, Moral Issues in Business (Belmont, CA: Thomson Wadsworth, 2007), 398–99.

[8] Sarah Bernard, “Let Them Eat Crab Cakes,” New York, accessed May 19,

2011,http://nymag.com/nymetro/news/media/features/2472.

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7.2 Third-Party Obligations: Tattling, Reporting, and Whistle-

Blowing

L E A R N I N G O B J E C T I V E S

1. Define third-party obligations.

2. Elaborate three standard responses to third-party obligations.

3. Define whistle-blowing.

4. Consider justifications and requirements for whistle-blowing.

Caught in the Crossfire

A hypothetical situation. You work at Omnicom, at the desk next to Chris Foreman. Like him, you’re an

assistant media buyer. Though your area of concentration is distinct (you’re in charge of placing ads on

radio stations) you team up with him from time to time to run numbers, and you know enough about how

it all works to recognize when something’s going wrong. In your opinion, it is. Chris is sending ads

to Forbes that would deliver more for the client if they’d been placed in Business Week. Further, you

believe he’s doing it in exchange for the gifts. You can’t prove that but you do know this: he’s occasionally

supplementing his lousy income by selling some of what he’s receiving—concert tickets, vouchers for limo

service, things like that—on eBay. You’ve tried talking about it, bringing the subject up one way or

another, but he doesn’t want to talk back. And when you say it directly, when you ask whether it’s right to

accept gifts from Forbes and convert them to money, he laughs. “Everyone does it,” he says.

This situation is different from most of those discussed so far for an important reason: you’re not directly

faced with an ethical dilemma; you’re not the one placing the ads or accepting the gifts. Still, you do work

with Chris, sometimes even sending over marketing data that he uses for his accounts. You’re a

third party, which in this situation means you’re not directly responsible for what’s going on but you’re

caught in the cross fire between Foreman and Forbes magazine.

There are infinite variations on this kind of predicament. The financier-fraudster Bernie Madoff asked his

secretary to cover up his affairs by answering his wife’s phone calls and saying he was in a meeting and

couldn’t be interrupted. In the student union of your campus, maybe the breakfast menu offers omelets

cooked with fresh eggs, but you work there and know the manager occasionally messes up the stocking

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order and so ends up selling omelets made from a preordered mix of egg-like chemicals. What do you do?

It can be a hard call and at least two questions arise on the way to making it:

1. You need to decide if something truly unacceptable is happening.

2. You’ve got to determine whether it’s any of your business.

If, finally, something unacceptable is happening and you should do something about it, you’re facing

a third-party obligation. This is an ethical responsibility to correct something you’re not actually doing.

Why Should I Get Involved? Ethics and Self-Interest

When confronted with a third-party obligation, employees may get involved for a number of reasons. One

is as a response to an ethical responsibility. Another: as an opportunity to benefit themselves.

Tattling, as any child knows, is revealing an ethical transgression involving others, and revealing it for

your own benefit. Take the case of assistant media buyer Chris Foreman and another assistant media

buyer who learns that Foreman is shortchanging the ad agency’s client for personal benefit. If you’re that

other assistant media buyer and you’re crafty, you may see not only an ethical lapse here but also your

own personal chance. Every senior media buyer has several assistants underneath, and when the time

comes for promotion, there’ll be space, presumably, for only one assistant to advance. Getting Foreman

out of the way may not be a bad career move.

It’s an extremely ambiguous ethical move, however. On one hand, there’s solid justification for getting the

truth known about Foreman. He’s clearly not fulfilling his professional obligations to the company.

However, if you turn him in because that’ll give you a leg up on the promotion ladder, you can hardly say

that ethical righteousness has driven your action. On the other side, this should also be noted: the fact

that you may benefit from revealing unethical behavior probably can’t justify keeping everyone in the

dark.

Typically, we think of ethical restrictions as painful, as obstacles you put between yourself and what you

really want. That’s not always the case, though; they don’t necessarily make you suffer, they may make

others suffer and serve your interests. When they do, you have weaponries ethics—that is, perfectly

reasonable moral dictates used to attack others and benefit yourself. Tattling, finally, is the use of

weaponries ethics; it’s doing the right thing for selfish reasons.

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Responding to a Third-Party Obligation: Reporting

Regardless of the motivation for responding to a third-party obligation, there are two broad paths the

response can take: reporting and whistle-blowing.

Reporting ethical transgressions means bringing them to light, but only within the organization. In most

situations, this route is the most direct way for third parties to balance their basic and immediate

obligations. Staying with the advertising scenario where you believe Foreman is essentially accepting

bribes from Forbes, you have an obligation not only to halt the bribery but also to protect the agency’s

interests. Obviously, a noisy public blowup about Foreman misspending a client’s money is going to

damage the advertising company’s business. Reporting—because it stays inside agency walls—promises to

rectify the bribery without causing larger publicity problems.

Bringing this into the real world, because reporting ethical problems does allow them to be addressed

without harming the agency, the Omnicom Code of Conduct includes this:

All reports of possible violations about which management becomes aware will be promptly

considered. We will not punish any employee or representative for making any report in good

faith.
[1]

It’s in Omnicom’s interest to get ethical dirty laundry washed in-house.

Up to here, the situation’s resolution has come easily. But there’s another, potentially complicating,

obligation to consider: the human link to Chris Foreman. Almost all organizations rely on and seek to

nurture bonds of shared responsibility and dependence between employees: in working life, when

someone’s sick or just having a bad day, the others have to pick up the slack. That nurturing explains why

anyone who’s entered a fast-food restaurant knows the workers aren’t “coworkers” but “teammates.” In

most organizations, some form of the camaraderie holds, and you can’t just break those bonds from one

moment to the next. That means if you’re working with Foreman and you know he’s doing wrong, you

may well feel an obligation to not report anything because you don’t want to cause him problems.

Reporting, the conclusion is, a coworker for ethical lapses is easy. But in the real world there are no

coworkers; there are only flesh and blood people.

Next, even if those human connections to others don’t move you, you also have obligations to yourself and

your own welfare to consider, and turning others in to company authorities can ultimately come back

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against you. By giving rise to distrust and possibly resentment among other colleagues who fear they may

be the next ones to get reported, you may be in essence isolating yourself in your own cubicle.

In the end, seeing what Foreman is doing and stretching ethical obligations through the situation, you

may find yourself torn between reporting him and not. There’s no automatic resolution to this dilemma,

only the attempt to weigh the obligations and get a sense of which outweigh the others.

Responding to a Third-Party Obligation: Whistle-Blowing

Whistle-blowing is bringing ethical transgressions to light publicly outside the organization. A recent case

involved one of the many advertising agencies gathered under the Omnicom umbrella, Leo Burnett. Two

employees—Vice President Greg Hamilton and Comptroller Michelle Casey—alleged, and a subsequent

federal investigation backed them up, that Leo Burnett was overbilling the government for their work on

the US Army’s “Army of One” recruiting campaign.

The agency was supposed to calculate its hourly rate with a formula dividing charges between the more

expensive work done directly in Leo Burnett’s offices and the less costly hourly labor performed by

subcontractors. What Leo Burnett did was simple: they billed subcontractor work at the higher in-house

rate. The accounting in these massive campaigns—TV, radio, and prints ads as well as sponsorships and

events—is so knotted that a virtual army of accountants is required to keep track of where all the money is

going. In that kind of numerical chaos, the agency could expect that switching a few hours from one

column to another deep inside the mountain of paperwork would go unnoticed by outside auditors. It did

go unnoticed—until Hamilton and Casey told the government what was going on.

Almost inevitably a lot of dust gets kicked up when employees turn on their employers noisily and

publicly. In this case, the US Justice Department lawyers rode in, and they probably wanted a scalp on

their wall: they have limited resources, limited time and money, and when they take something on they

want to win, and they want people to know about it. Back on the agency’s side, they’re going to defend

themselves, and that typically entails attacking their accusers, maybe labeling them disgruntled,

incompetent, or worse. In this case, there was also a tug-of-war over money. The agency obviously wanted

to keep as much as it could, the government wanted money back, and thanks to the False Claims Act,

Hamilton and Casey also demanded their share, which came to almost $3 million.

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The False Claims Act is a federal law designed to encourage whistle-blowing on private contractors who

are attempting to defraud the government. Whistle-blowers are entitled, under the law, to 30 percent of

the damages the government obtains. The incentive doesn’t apply to situations involving only private

companies, but even there whistle-blowers may encounter suspicions that ulterior motives—not a

dedication to doing the right thing—finally spurred their loud assertions about misdeeds.

Finally, with respect to the Leo Burnett fraud, the full details will never be known. Because the case never

went to trial, there was little public exhibition of evidence and testimony. To head the whole mess off, Leo

Burnett agreed to settle. In the words of a published report, “Leo Burnett denied any wrongdoing and said

in a statement that it agreed to the settlement ‘to avoid the distraction, burden and expense of

litigation.’”
[2]

Every case of whistle-blowing is different, but a few questions get to the heart of most instances:

 What, exactly, is whistle-blowing?

 What justifies whistle-blowing?

 What weighs against whistle-blowing?

 Can the whistle-blower expect protection?

 Is whistle-blowing morally required?

What Is Whistle-Blowing?

Whistle-blowing is bringing an organization’s ethical transgressions to public light. Spilling the beans to

the family over dinner, however, doesn’t count; the truth must be exposed to an authority or institution

capable of taking action. In the case of the advertising agency, Hamilton and Casey took their information

to the federal government. They also could have selected one of the important industry publications—

say, Advertising Age magazine. Any information published there would draw attention from those

involved and give the client (in this case the US Army) the opportunity to act on behalf of its own

interests. The news media—a newspaper, a TV station—may have been a possibility in this case, given the

large scope of the fraud and the national interest underneath it. Other possibilities could be listed, but

what’s important is that the report of misdeeds goes to someone who can do something about it (or at

least provoke others to do something). Finally, whistle-blowing may be anonymous. However, in practical

terms, that’s frequently not a real option because government authorities, like private ones (editors of

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industry publications and so on), are far less likely to spend time tracking down the truth about

accusations when even the accuser is unwilling to stand behind them.

What Justifies Whistle-Blowing?

Whistle-blowing needs careful justification because it requires violating the obligation any employee has

to protect the interests of the employer. Here are five items that could be checked before publicly lighting

up an organization’s misdeeds from the inside. Importantly, the fact that the items may all be

checked doesn’t oblige action, but it does raise the possibility as ethically justifiable.

1. There is clear evidence of continuing wrongdoing by the organization or continuing effects of past

wrongdoing. In the business world, actions that are entirely locked in the past are the subject of history,

not ethics.

2. The wrongdoing must be serious. In the case of Leo Burnett, the case wouldn’t cross this threshold if only

one hour of labor had been attributed to the higher-cost office. But the threshold would be crossed if the

agency significantly overcharged many hours for years, bleeding the account of its resources and

ultimately damaging the army’s ability to recruit new, top-flight soldiers.

3. The organization’s established, internal channels for reporting and correcting problems have been

exhausted. Most organizations provide clear ways for employees to voice concerns internally. A

conversation with a supervisor is an obvious example. At larger organizations, sometimes an entire

internal department has been mounted to receive and act on the concerns of employees. Here’s the web

page of a typical example; it links to Wal-Mart’s internal department for

ethics:http://ethics.walmartstores.com/Statementofethics/RaiseAConcern.aspx. Whether, finally, there’s

a clear, formal route for internal reporting or not, employees have a responsibility to try to resolve

problems in ways that benefit—or do the least possible damage to—the organization, and therefore the

possibility of raising concerns internally needs to be explored fully. (As always, there are special cases. If,

for example, the CEO of a small advertising company is robbing its client’s money, there may be no

internal route to resolution, leaving external whistle-blowing as the only moral corrective. Also, though

whistle-blowing is defined as taking action outside the organization, the definition could be stretched to

include the act of bringing wrongdoing to light directly before high officials within an organization by

skipping over the normal chain of authority.)

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4. There’s unmistakable and convincing evidence of misconduct. The evidence must be unmistakable in the

sense that it clearly indicates wrongdoing; it can’t be that an innocent explanation seems as likely as a

guilty one. In the Leo Burnett accounting books, if it turns out that on one page all the internal hours are

in the external hour’s column and vice versa, that may be an attempt to defraud the government, or it may

just be that the data-entry guy came to work one morning hung over and ended up confusing the

numbers. Further, the evidence must also be compelling in the sense that there’s enough of it for a

reasonable person to conclude the misdeeds are actually occurring. So even if you’re certain numbers are

being entered incorrectly intentionally, but it turns out that the difference—the amount of extra money

Leo Burnett is making—is trivial, then it’s going to be hard to justify creating a stink. It may be, for

example, that someone in the accounting department is making small adjustments in order to balance

errors found elsewhere in the giant balance sheet.

5. There’s reason to believe that whistle-blowing will resolve the problem. In the case of Leo Burnett—or

any business that’s overcharging a client—you can be pretty sure that bringing the fraud to light will spark

action, at least by the defrauded client. On the other hand, if you’re in the production department of the

advertising agency (in other words, you’re actually filming commercials) and you regularly get shipped

down to Mexico to shoot campaigns because everything’s cheaper down there and you learn that some of

the extras in the commercial’s background are working longer hours than local regulations allow, you

might reasonably figure that you can talk all you want in public, but it’s not going to make any difference.

What Weighs against Whistle-Blowing?

The three heaviest arguments against whistle-blowing are

1. legal requirements for confidentiality,

2. prudential concern for one’s career and personal welfare,

3. an employee’s sense of loyalty to the organization.

A legal requirement for confidentiality may weigh against whistle-blowing by binding employees to not

share a company’s internal information. The requirement traces back to a section contained in many work

contracts. Called a confidentiality clause, here’s a basic version:

Employees may have access to records and other information about customers and other

employees, including proprietary information, trade secrets, and intellectual property to which

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the Company holds rights. Employee agrees to keep all such information strictly confidential and

to refrain from discussing this information with anyone else without proper authority.

While this is most directly aimed at protecting consumer information (say, credit card numbers) and

company trade secrets (Coke’s secret formula), it may also be read as safeguarding the kind of information

a whistle-blower wants to make public. In the case of the Leo Burnett agency, what Vice President

Hamilton and Comptroller Casey told the government did, in fact, involve “records and other information

about customers.”

The second major argument against whistle-blowing, self-interest operates in both the professional and

personal sense. Turning against the company may be the right thing to do, but it’s almost inevitably a

painful thing to do, at least according to a survey published in the New York Times. What condition, the

study sought to determine, do whistle-blowers find themselves in a few years afterward?

 One hundred percent who worked for private business were fired.

 Twenty percent could still not find work at the time this survey was taken.

 Seventeen percent lost their homes.

 Fifty-four percent had been harassed by peers at work.

 Fifteen percent viewed their subsequent divorce as a result of whistle-blowing.

 Eighty percent suffered physical deterioration.

 Eighty-six percent reported significant emotional stress (depression, anxiety).

 Ten percent reported having attempted suicide.
[3]

It doesn’t sound good. Of course every case is different, and if you look on the other side of these numbers,

they leave room for the possibility that at least some people do the right thing and get on with their lives

just fine. Still, there are no guarantees and ethics isn’t only about duties to others and the world outside,

all of us have equal duties to ourselves: duties to maximize our potential, protect those nearest to us, and

defend our own welfare.

Finally, the values and reasons supporting loyalty as a reason for not blowing the whistle will be

considered in their own section further on.

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Protecting the Whistle-Blower

As the survey data about whistle-blowers reveal, there’s not a lot of protection for them. That isn’t for a

lack of trying, however. At both the state and federal levels, reams of laws have been enacted to protect

those who expose wrongdoing organizations. Perhaps the most notable is the Sarbanes-Oxley Act. Passed

in 2002 by the federal government as a response to a series of disastrous accounting frauds at large

companies, Sarbanes-Oxley is a massive piece of legislation intervening in many parts of the business

world, and especially in aspects connecting to an organization’s finances and transparency.

Specifically with respect to whistle-blowers, the law attempts to encourage it by protecting whistle-

blowers at publicly traded companies that report activities to government agencies. (The act doesn’t apply

to privately held firms dealing exclusively with other private firms.) Employers are prohibited from taking

retaliatory action (firing, demoting, harassing), and whistle-blowers are provided clear avenues for

lawsuits should such retaliation occur. Here’s the legislative language: “In order to establish a case under

Sarbanes-Oxley, an employee must prove that she (1) reasonably believed that her employer was breaking

the law; (2) engaged in whistle blowing activity as defined by the statute; (3) suffered an adverse

employment action; and (4) that there was a causal connection between the whistle blowing activity and

the adverse employment action.”
[4]

The problem is that last clause. Everyone who’s ever had a job knows that mistakes happen every day.

Deadlines are missed, projects contain errors, and goals aren’t met. Bosses who have it in for you aren’t

going to have many difficulties converting those mishaps into reasons for denying wage hikes and even

outright firing. In your heart you may know—everyone may know—that you’re suffering retaliation for

reporting the company, but proving it can be difficult.

The bottom line is—and as the previous survey shows—if you publicly divulge information seriously

damaging your employer, you’re probably going to be gone. And even if you find some protection in one or

another law, it’s difficult to imagine that your career is going anywhere inside the company. Worse still,

prospective new employers are, very likely, going to hesitate before extending a job to someone who has

already caused serious problems for a former employer. Taken all together, the bleak reality is that in

most cases whistle-blowers can’t count on getting back the life they had before they publicly disclosed

their organization’s misdeeds.

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Is Whistle-Blowing Morally Required?

Given the abundant reasons—financial, professional, emotional, and ethical—against whistle-blowing, are

there any cases where a moral argument can be formed to require publicizing an organization’s unethical

actions? Probably, but they’re few. Here’s a possible rule of thumb: whistle-blowing is required when the

act can prevent harm to others in ways that are serious and go beyond the bottom line. If someone is

getting ripped off, the reasoning goes—if an advertising company is overcharging its clients—whistle-

blowing may be justified, but not required. All that’s at stake is money. On the other hand, if a nuclear

power plant is being constructed near a residential area and you learn the contracting company you work

for is using cheap cement to boost the profit margin, it seems as though you have little choice—the weight

of elementary personal integrity in the face of potentially lethal wrongdoing probably requires personal

sacrifice.

What about the hypothetical Chris Foreman situation? You’re working with him and have acquired

sufficient evidence to know that he’s selling out his client by sending their ad dollars to Forbes magazine

in exchange for Highlander nights. You’ve reported the matter internally and received no response. Do

you go public? You’d certainly be justified in taking the story to Ad Age magazine. Just running down the

list of conditions justifying whistle-blowing, they all get checked:

1. There’s clear evidence of continuing wrongdoing by the organization.

2. The wrongdoing is serious (at least in the world of advertising).

3. The organization’s established, internal channels for reporting and correcting problems have been

exhausted.

4. There’s unmistakable and convincing evidence of misconduct.

5. There’s reason to believe that whistle-blowing will resolve the problem.

The question remains, however, whether the issue affects life beyond business and the bottom line. It

doesn’t appear to. At bottom, this is the case of a client—AT&T mobile phone services—getting poor

service from an Omnicom company. That should be corrected, and presumably market forces will correct

it sooner or later, but whether they do or don’t, there’s no requirement here to seriously jeopardize your

own financial, professional, and emotional welfare.

What about the case of Leo Burnett? Again here a client is getting a raw deal, but there’s an important

difference: this is the army, not a telephone company. If it’s true that the recruiting budget is being

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seriously hindered, the situation may be crossing the line from justified whistle-blowing to justified and

required. If it does cross that line, the reason will be that protecting your own financial and emotional

welfare is trumped by the responsibility to help soldiers in war resist mortal danger as totally as possible.

The fact that the army isn’t getting the best recruits possible doesn’t just affect people in the pocketbook,

it threatens those on a live battlefield. Faced with that reality, it will be hard for individuals including

Burnett employees Hamilton and Casey to keep quiet just because they don’t want to lose their jobs.

K E Y T A K E A W A Y S

 Third-party obligations arise when you know of wrongdoing by an organization or by individuals within it,

and though you aren’t directly at fault, you’re in a position to correct the problem.

 In some cases, third-party obligations can be opportunities to sabotage a fellow worker for personal gain.

 Responses to third-party obligations include reporting the problem inside the organization for correction

and publicizing the problem, also known as whistle-blowing.

 Because whistle-blowing harms the organization, employees must take into account their responsibility to

defend the organization’s interests before publicly decrying the wrongdoing.

 In some cases whistle-blowing is not justified, in some it is, and in some extreme cases, whistle-blowing

may be ethically required.

 In practical terms, whistle-blowing can be devastating for the employee.

R E V I E W Q U E S T I O N S

1. Create a hypothetical third-party obligation involving an employee of a major company.

2. What does it mean to deploy weaponries ethics?

3. What questions can be asked to help determine whether whistle-blowing is justified?

4. What questions can be asked to help determine whether whistle-blowing is ethically required?

5. Why might an employee hesitate before whistle-blowing?

6. The Sarbanes-Oxley Act tries to protect whistle-blowers. Why is it not very effective?

[1] “Code of Conduct,” Omnicom Group, last updated October 16, 2008, accessed May 19,

2011, http://www.omnicomgroup.com/corporategovernance/codeofconduct.

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[2] Mehhen Streit, “Leo Burnett Settles Suit for $15.5 Million,” Chicago Business, January 6, 2009, accessed May

19, 2011, http://www.chicagobusiness.com/cgi-bin/news.pl?id=32498.

[3] Survey cited in Manuel Velasquez, Business Ethics: Concepts and Cases, 6th ed. (Upper Saddle River, NJ:

Pearson, 2006), 378.

[4] Welch v. Cardinal Bankshares Corp., 2003-SOX-15 at 35 (ALJ 2004).

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7.3 Company Loyalty

L E A R N I N G O B J E C T I V E S

1. Define company loyalty.

2. Elaborate three degrees of company loyalty.

Two Kinds of Loyalty

There is narrow company loyalty and broad company loyalty. The narrow definition pertains to

employment: the loyal employee sticks with the company instead of looking for work elsewhere, especially

during economic booms when jobs are plentiful and moving on is easy.

This kind of loyalty, however, is in trouble according to an article from the Harvard Business School: “The

very nature of the relationship between employers and employees has undergone a fundamental shift:

Today, workers not only don’t expect to work for decades on end for the same company, but they don’t

want to. They are largely disillusioned with the very idea of loyalty to organizations.”
[1]

Part of the reason for the shift—and part of the reason employees don’t stay at companies for decades—is

that many employers don’t hesitate to fire their workers at the drop of the hat when it serves the

company’s interest. On the other side, according to the article, it’s also true that today’s workers don’t

hesitate to move on to a new job when a better one, or maybe just a different one, comes along. Regardless

of who went first, the fact is company loyalty—whether it’s going from the company to the worker or the

worker to the company—isn’t what (we are told) it once was.

The broad definition of company loyalty goes beyond employment questions and measures an employee’s

willingness to sacrifice income, leisure time, personal relationships, family responsibilities, and general

life aspirations in the name of the organization. To create this dynamic of sacrifice, two distinct kinds of

relationships with the organization are required:

1. Attachment to the organization that is non-instrumental. This means the attachment isn’t maintained

only because it serves the employee’s concrete interests, such as the need for a salary to pay the rent and

grocery bills.

2. A deposited value in the organization that goes beyond any individual and their attachment; the

organization’s value continues even without those who currently feel it.

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Probably, there’s not a lot of this kind of deep loyalty in the advertising field. Agencies are constantly

stalking new clients, even trying to steal them from others. For their part, most clients are constantly

looking for better deals and ways to refresh their image, and they are usually open to proposals from new

firms interested in handling their communication. More, companies that employ advertising agencies

constantly “put their account up for review,” which means the current account holder has to compete with

new entrants just to maintain the business. There are exceptions, of course, but for the most part

advertising agencies are constantly clinging to the business they have, seeking new opportunities, and

always on the lookout for fast money. In that kind of cutthroat environment—one where it’s your job to

sing the praises of Burger King one day and McDonald’s the next—it’s going to be difficult for workers to

feel as though they should (or even can) be true to their current employer.

Other kinds of organizations seem more likely to instill feelings of loyalty. A religious hub—a church, a

synagogue, a mosque—is one obvious example. Most priests are attached to, and deeply concerned by, the

welfare of their church; they serve their institution and aren’t working there for the money (which

probably isn’t great). Further, most also believe their institution has value beyond them: the importance

was there before they arrived (or were even born) and will continue after they leave. Taken together, these

elements create space for true employee loyalty to the organization. Something similar—the existence of a

space for labor that’s not about money and similar rewards—could be found surrounding many who work

for Greenpeace, Doctors Without Borders, political parties, the CIA, the United Nations.

Other professions open on both sides of the line—that is, there’s ample space for an instrumental

relationship (I keep this job because it makes me happy) and one based on broad loyalty. Some medical

doctors are in it for the money but others for the care, for the principle that bringing health to others is a

good cause. Law is another example. Ambulance-chasing lawyers just want payoffs, but some judges

believe in the law as something larger than themselves and a basic force for civilization that’s worth

serving. Moving down to street level, there are police officers who just like a steady paycheck and others in

the field to serve and protect: they see their work as improving the lives of others and the general

community.

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Three Degrees of Loyalty

Within a dynamic of employee loyalty, there are three levels of dedication: obedience loyalty, balanced

loyalty, and free agency.

Obedience loyalty, which is an extreme case, works from the idea that the organization is worthy and the

employee is comparatively worthless or only worthwhile to the extent he or she serves the organization.

This extreme will be reached only rarely, but there are glimmers of it in some professional activities. One

quick way to identify these kinds of labors is to check whether the truly dedicated are willing to sacrifice

even their lives for the cause their organization embodies. The armed forces come to mind here. Some

political organizations command this devotion, especially in revolutionary times. Some workers’ devotion

to their labor union has been sufficient to put their lives in danger. The exploring scientist Charles Darwin

believed in accumulating knowledge and put his life at risk in the field as he tracked rare species and

ecosystems.

Not so dramatic or extreme, some professions and organizations can suck the emotional life out of

employees. Or they may take vast chunks of the employee’s time. Undercover police work exemplifies by

requiring a loyalty reflected as self-sacrifice to an extent few of us would contemplate. April Leatherwood,

for instance, went undercover in Memphis for an entire year. Almost entirely separated from family and

friends, she lived on the street, wore the same clothes every day, went without brushing her teeth, and

rarely bathed. That was an ugly year of her life, one sacrificed for the job.
[2]

Balanced loyalty is a situation where both the employee and the organization recognize in each other an

independent value. In this case, the employee can be expected to make sacrifices—possibly even do things

he or she would normally consider unethical—in the name of serving the larger organization. One example

would be a lawyer working in a public defender’s office, one who believes that the system of law and the

rules of its enforcement are noble and should be respected to some important extent that is independent

of the particular lawyer’s welfare and beliefs. The loyalty can be reflected in a number of ways. First, it’s

simply the case that most public defender positions don’t pay as well as similar posts in private firms.

Pushing further, the public defender may be asked to represent and defend a client she knows

(or strongly suspects) is guilty. In this case, presumably, she’s being asked to do something she wouldn’t

do in her day-to-day life—that is, serve the interests of a guilty man. More, presenting a full-blown legal

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case for the defendant’s innocence would essentially be lying and, again, something the lawyer might not

typically do.

At the same time, this lawyer probably won’t be sacrificing everything; she’ll recognize that her life and

aspirations have value also, and there may come a point where she decides the sacrifices demanded by the

job are too great to bear. Perhaps she’s just had a child and needs to up her income, or, maybe a man she

helped set free has committed a gruesome crime. However the situation might be, when the lawyer leaves

the office of the public defender for a higher paying job at a large private firm, she has demonstrated a

balanced sense of loyalty. She’s willing to sacrifice in the name of a larger organization she respects. But

only up to a point.

Other demonstrations of balanced loyalty to the organization could include

 buying the company’s products (though they aren’t the personal preference),

 evangelizing in public life (telling your friends how great the company or its products are),

 voting for the political candidate the company affirms will best serve its interests,

 moving for the company.

Free agency is the extreme on the bottom end: the absence of loyalty. Some theorists propose that this

should be the default state for most employees for this reason: it’s ultimately impossible to be loyal to a

typical company because profit-making institutions just aren’t the kinds of things that can properly

demand or receive any loyalty. The entire idea of loyalty, the argument goes, only exists in a reality where

individuals stand by others to some extent without conditions (example: parents who love each other and

their children unconditionally). Money-making businesses, on the other hand, are incapable of that kind

of unconditional fidelity. On the contrary, the only desire most private enterprises know is the one to

serve its own interests by making more profits. If that’s right—if companies have no loyalty to give—then

its employees can’t enter into that kind of relationship. Instead, in the business world at least, you and I

are forced to pursue our own interests—a higher salary or whatever—just as the larger company pursues

its own.

Translating this into the working world, the absence of company loyalty is the idea that workers find value

in their organization only because it serves their own interests. Of course it’s impossible to know the souls

of others, or exactly what their deepest values are, but there might be a hint of this free-agent loyalty in

the Leo Burnett case. Two high-level and highly paid workers served the company well—and were

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compensated well—until they turned whistle-blower against the firm. When vice president Hamilton and

comptroller Casey alleged that Leo Burnett was overbilling the government for their work for the US

Army, they weren’t just doing the right thing, they were doing a lucrative thing for themselves since the

False Claims Act promised 30 percent of damages the government obtained. If the money is

the reason they turned on the agency, they exemplify free-agent loyalty. They worked hard for the

organization because the pay was good, but the moment they saw the chance to get even more money by

turning against it, they jumped. At bottom, that means, their loyalty is only to themselves.

K E Y T A K E A W A Y S

 Company loyalty defined narrowly concerns employees sticking with the organization instead of looking

for work elsewhere.

 Company loyalty defined broadly emerges from the idea that the organization possesses nobility that’s

worth serving, even if employees don’t benefit personally from the contribution.

 The three degrees of company loyalty are obedience loyalty (the worker exists to serve the organization’s

interests), balanced loyalty (workers and organizations share interests), and free agency (the organization

exists to serve the worker’s interests).

R E V I E W Q U E S T I O N S

1. Name an organization that might inspire obedience loyalty. Why is obedience inspired? What does the

loyalty look

like?

2. Name an organization that might inspire balanced loyalty. Why is it inspired? What does the loyalty look

like?

3. Name an organization that might inspire an attitude of free agency. Why is it inspired? What does the free

agency look like?

4. Take a career you’re (considering) pursuing. On the scale from obedience loyalty to free agency, where do

you imagine most employees in that line of work are located? Why?

5. [1] Lauren Keller Johnson, “Rethinking Company Loyalty,” Harvard Business School Working Knowledge,

September 19, 2005, accessed May 19, 2011,http://hbswk.hbs.edu/item/5000.html.

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6. [2] Kristina Goetz, “A Year of Living Dangerously Takes a Toll on Undercover Memphis

Officer,” Commercial Appeal, August 30, 2009, accessed May 19,

2011,http://www.commercialappeal.com/news/2009/aug/30/year-of-living-dangerously-takes-its-toll.

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7.4 Stress, Sex, Status, and Slacking: What Are the Ethics of Making It through the

Typical Workday?

L E A R N I N G O B J E C T I V E

1. Consider ethical questions attached to several issues commonly arising during the workday.

Bringing the Office Home: High-Stress Work

No book can cover the ethics of everything happening on every job, but four issues arising in most

workplaces sooner or later are stress, sex, status, and slacking off. Starting with stress, what happens if

the workday doesn’t end when the workday ends? For those enduring—or choosing—high-stress jobs,

there’s no five o’clock whistle; even if they’re shopping or watching a baseball game, the job’s effects hum

in the background. One simple example—and also one all of us see on the street every day—come from an

article in the USA Today. It recounts an academic journal’s finding that overweight people pack on still

more pounds when their work continually produces serious anxiety. If you’re overweight, the study shows,

and you’re stressed in the office, there’s a high likelihood your stomach or your thighs are going to keep

growing.
[1]

One of the central arguments Aristotle made in ancient Greece was that doing right isn’t the highest goal

of ethics. The careful understanding of our values and purposes centers on, ultimately, living a good life.

Doing the right thing is part of that goodness, but happiness is there too, so one of the issues stress at

work brings forward is this: how is my decision to accept stressful employment affecting my happiness

and the happiness of those around me? Here are some more specific questions that could be asked on the

way to pinning down the ethics of stress:

 What positive returns, exactly, am I getting from my stressful job?

 Are there prospects for reduced stress in the future?

 What are the costs of the stress? Is it affecting my weight, my leisure time, my friends, my marriage and

family?

 Who is affected? Is anyone else suffering stress because I’m stressed out? Are people suffering from my

stress in other ways?

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Stress at work isn’t only a psychological problem or a medical one—it’s also laced with questions about

value. It’s the most fundamental ethics: what’s worth doing and what isn’t? It’s impossible to know, of

course, exactly where the line should be drawn and when stress is worth accepting. Any answer that will

be justifiable, however, will have to begin with a clear understanding of exactly what the costs and benefits

are.

Office Romance

Hooking up at work is one eternal way of making the time fly, but what’s going on in today’s offices is

somewhat different from the past. An article from the Wall Street Journal indicates how the meaning of

sex in the office is shifting: “Marriage is a priority for most Americans—more than 90 percent of American

adults eventually marry—but these days it may not happen, as it so often did before, in the immediate

post-high-school or post-college years. The truth is that we’re marrying later.”
[2]

When marriages were typically celebrated at the end of the schooling years, work-related romances went

hand in hand with infidelities. In that environment, questions arose about the organization’s role in any

affair that may be occurring during company time.

The entire context of discussion changes, however, when a large number of people flowing into the

workforce are unmarried and are looking to wed. Inevitably, the office is going to become a mating

ground—people pass eight hours a day there—and one of the questions young workers are going to start

asking when they think about jobs and careers is, will I be able to meet someone if I get into one or

another line of work?

The aspiration to connect introduces a thorny dimension to employment decisions made by young people

(and some older ones too). If you’re a guy working on a heavy construction job, the pay may be good, but

there’s probably not going to be a woman in sight. On the other hand, doing the coursework to earn

paralegal certification may be a headache, but getting into the field isn’t a bad way to meet successful and

interesting women.

What’s going on here is that as society changes—as marriage and family life get pushed back into time that

used to be reserved for work—the factors shaping the way we think about which jobs are more desirable

than others simply on a day-to-day basis are changing, and part of your responsibility to yourself is to

keep track of what you really want from your 9 to 5 time. One of the standard moral obligations we share

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is the responsibility to be sincere not only with others but also with ourselves about important decisions

touching the business part of life. And if romance is part of what you want from work, then the

possibilities have to be taken into account just like salary and other benefits.

Status

Chris Foreman, the media buyer who enjoyed yacht evenings on the Highlander and tickets to all kinds of

major events, received a piddling salary. He thought about changing jobs but decided not to. One reason

was that all the entertainment added a lot of indirect money to his income. There was another reason

too—the special, VIP privileges he constantly received from his benefactors: “There’s a feeling of

superiority. When you pass by a line at a screening because you’re on the list you do get that ego boost.

You’re thinking, Ha, ha! I’m not a chump.”
[3]

Status on the job makes a difference in quotidian working life, but it’s hard to quantify; it’s not like a

salary, which is an objective number and can be directly compared with others on a pay scale. How much

is it worth, the question is, to wing by others forced to stand in line?

Knotting matters further, defining exactly what counts as status isn’t easy, and any answer is going to

move and slide depending on who you talk to. For some, being a lawyer is impressive and lucrative, for

others it’s dirty and, well, lucrative. For some, being a test pilot is exciting and respectable, for others it’s

scary and weird. Many people seated in first class on an airplane rush to get on early so that all the

economy travelers get to see them as they file past. Some of those people headed toward the back of the

plane see the first-class passengers as legitimate power elites, but others get the feeling that most of them

are really chumps: the reason they’re in first class is because they used frequent-flyer miles to bump up,

and the reason they have a lot of those is because their bosses always make them take the trip to see

clients instead of bothering to do it themselves.

More generally, in the world of New York City media buyers, status seems linked with superiority, with

being visibly more privileged than those forced to stand in lines. For others, however, status will be

quieter. The teacher, the nurse—they find status not as superiority but as social importance.

Conclusion. Status means different things to different people, but anyone looking to get it from a job

should ask how much is really there, and how much is it going to help me get out of bed in the morning

and want to go to work?

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Slacker’s Paradise

Typical ways of getting through the day include throwing yourself into your work (frequently with the

hope of a promotion or pay raise), firing up an office romance, and enjoying the status a post allows.

Another way of making it from 9 to 5 is by trying to avoid doing work, by working to do as little as

possible. This is the slacker reality, and there are two routes into it: Personal slackers adopt the attitude

for their own private reasons. The context slacker is dedicated to not working because the incentive

system of the labor contract—or some other external factor—encourages slacking off.

Beginning with the personal slacker, the attitude starts with a decision: You take a typical job and make it

your project to expend as little effort as possible. The reasons for adopting this stance depend on the

person. Maybe there’s a passive-aggressive element, some personal frustration with life or perhaps a

somewhat idealistic attempt to make a statement. In any case, the motives behind this kind of behavior

should be pursued in a psychology course. Here all that matters is that for one reason or another the

private decision gets made to get through the day by working to not work.

The second slacker pathway starts with a context. Here’s an example from an online discussion board:

“Haha I worked in a union job and they were there to punch in…take a lunch…take 2 15min breaks…and

punch out. They had n0 incentive to work hard because they would get a 0 dollar raise.”
[4]

The key here is the incentive, the idea that working hard doesn’t benefit the worker because labor

agreements are so protective and constricting that, on one side, it’s almost impossible to fire a worker, and

on the other, it’s nearly impossible to reward one for superior performance. That means there are islands

in the general economy where the traditional rule regarding performance and reward—the rule that doing

well gets you ahead—doesn’t apply very well.

One of the curiosities of these islands is that it’s not right to conclude that there’s no incentive to do

anything. Actually, there is an incentive system in place even when, as the discussion board poster writes

it, “hard work gets a 0 dollar raise.” In this case, the incentive is negative. If union rules (or whatever rules

happen to be in effect) mean workers can’t compete against each other with the best performer winning a

better post, the workers can still compete. It’s just that since wages are fixed, the competition turns

negative: the most successful worker is the one who manages to do the least work. It makes perfect sense:

if you do less work than anyone else, and you’re paid the same amount as everyone else, you have, in fact,

found a way to win. You get the highest salary; you’re the one paid most for the least work.

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Is slacking ethically acceptable? Whether someone is a contextual or personal slacker, when success is

defined not as how well you do but how little you do, two basic questions arise:

1. Is someone or some organization being cheated?

2. Is there something fundamentally unethical about being a slacker?

The first question applied to those trapped—willingly or not—in contextual slackerism leads quickly to the

conclusion that the organization bears at least as great a burden of responsibility as the employee for

deficient work motivation. Applied to the personal slacker, the question about whether an employer was

cheated becomes more difficult. There does seem to be an element of reneging on implicit or explicit

pledges to fulfill responsibilities here, but it’s also true that most employment contracts in the United

States (though not so much in Europe where this question would require more prolonged consideration)

leave the organization broad latitude for dismissing workers whose performance is inadequate.

Next, is there something fundamentally unethical about slacking off? Most basic ethical theories are going

to return some form of a yes verdict. From a utilitarian perspective—one trying to maximize the common

good and happiness—it seems like problems are going to arise in most workplaces when coworkers are

forced to pick up assignments the slacker was supposed to complete or could have completed easily with

just a bit more effort. Similarly, basic ethics of duties include the one we all have to maximize our own

potential and abilities, and rigorously avoiding work seems, in most cases, to run against that aspiration.

Probably, a satisfying ethical defense of the slacker lifestyle would need to be founded on a personal

project going well beyond the limited economic world. Slacking off, in other words, would need to be part

of someone’s life ambition, and therefore its questions belong to general ethics, not the more limited field

of economic values treated here.

K E Y T A K E A W A Y S

 Stress at work invites ethical considerations of workers’ obligations to their own happiness.

 Office romance may broaden the range of values applying to career choices.

 Status deriving from one’s work can be an important compensation, but it is difficult to quantify.

 Slacking off—working to not work—may result from an employee’s work environment or it may be a

personal choice.

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R E V I E W Q U E S T I O N S

1. What are some of the ways stress at work can cause unhappiness in life?

2. Why the office is an important scene of romance in today’s world?

3. What do you imagine the rewards of status to be?

4. What kind of work contract would encourage slackerism?

5.

6. [1] Nanci Hellmich, “Study: Overweight People Gain More When Stressed by Work,” USA Today, July 8,

2009, accessed May 19, 2011,http://www.usatoday.com/news/health/weightloss/2009-07-08-obesity-

stress_N.htm.

7. [2] Christine Whelen, “Older but Wiser,” The Wall Street Journal, November 3, 2006.

8. [3] Sarah Bernard, “Let Them Eat Crab Cakes,” New York, accessed May 19,

2011,http://nymag.com/nymetro/news/media/features/2472.

9. [4] Eazy E, “IS it me or are most Union workers lazy?,” Yahoo! Answers, accessed May 19,

2011, http://answers.yahoo.com/question/index?qid=20081008004353AAn1iL7.

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7.5 Case Studies

Payola and the iPhone App

The word payola traces back to rock and roll’s early days, back when the only large-scale way new acts

could get their name and music out was on the radio. Deejays in the 1960s controlled their own playlists

much more than today, so a band could drive into town, play a few concerts, and pay off a few deejays to

get their songs into the rotation. When they rolled out toward the next stop, they left behind the

impression that they were the next big thing.

It’s not illegal for a deejay, radio station, or anyone at all to accept money in exchange for playing

someone’s music, but US law does make pay for play illegal if the sponsorship isn’t openly divulged, if the

song isn’t treated, in other words, as a commercial.

Today’s media world provides almost infinite ways for musicians, video commentators, moviemakers, and

iPhone app developers to get word out about what they’re doing. Anyone can post a video on YouTube or

give away software on a web page. Payola is still out there, though. Wired magazine ran a story about it in

the world of iPhone apps.

It works like this. You invent an iPhone app but can’t get anyone to notice. What do you do? One

possibility is offer money to one of the well-known iPhone app review sites in exchange for a review of

your creation. That gets the word out pretty well, so developers are starting to pay up. This modern payola

scheme is enraging the iPhone community, however. Jason Snell, who works for Apple’s own app-review

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website complains, “Readers need to know that true editorial reviews are fair, and aren’t the product of

any quid pro quo involving money or any other favors.”
[1]

Michael Vallez, owner of the app-review site Crazy Mike’s Apps, disagrees. He charges for reviews without

disclosing that to his readers, but he doesn’t guarantee a positive report. If he thinks the app isn’t worth

buying, he sends the money back and cancels the review.

The Wired article concludes with an opinion from Kenneth Pybus, a professor of journalism and mass

communication: “Undisclosed paid reviews are indisputably unethical because they manipulate the

public. That’s an easy call to say it’s ethically wrong because that is a disservice to readers. It ought to be

information that applies to readers and not information that advances you financially.”

Q U E S T I O N S

1. Professor Pybus believes there’s a conflict of interest operating when Vallez accepts money to write

reviews for his website Crazy Mike’s Apps. What, exactly, is the conflict?

2. Vallez says that his actions do not cause a conflict of interest, only the appearance of a conflict.

o What’s the difference between a conflict of interest and the appearance of a conflict of interest?

o How could Vallez argue that in his case there’s only an appearance, and, on close inspection, there

really is no conflict here?

3. Three standard strategies for alleviating ethical concerns surrounding conflicts of interest are

o transparency,

o recusal,

o organizational codes.

How could each of these strategies be applied to the conflict-of-interest issue at Crazy Mike’s

Apps?

4. You develop an iPhone app and you pay Vallez to review it. He tries the app, likes it, and writes up

a positive paragraph.

o Make the case to defend the payment as an ethically acceptable gift. Are there limits to how much

you could give before it would shift from a gift to a bribe? If there is a limit, how was the number

chosen?

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o Vallez says that if he doesn’t like an app he returns the money and refuses to review it. Does this

fact interfere with the possibility of justifying the payments as a standard, business-type gift?

5. Old style payola—paying to get a rock band on the airwaves isn’t dead. According to a story from

ABC News, the practice is alive and well; the only difference is that it’s no longer the deejays who

get the cash, it’s high-level executives because they’re the ones who set today’s playlists. Here’s a

comment from Foo Fighters drummer Taylor Hawkins: “I think back in the ’70s they used to pay

people with hookers and cocaine, and now they’re just doing it with straight-up money. So they

can all go out and buy their own hookers and cocaine.”
[2]

There’s a difference in the business world between providing entertainment and giving gifts. What

is the distinction?

o Why might entertainment be considered less ethically objectionable than gifts?

o Leaving aside moral concerns about hookers and drugs, ethically, is there a difference between a

rock group’s manager inviting radio executives out on a hooker and cocaine evening on one side

and just sending those cash on the other? If there’s a difference, what is it? If not, why not?

The Decorator’s Kickback

On a message board, Ms. G. C. from Miami writes,

Here’s the problem: an interior decorators bid is broken down into two parts-(A) the decorator’s

services and (B) the cost of labor and supplies. Most customers think (B) is a fixed cost-they forget

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it’s not the decorator’s fault if cabinetmakers charge an arm and a leg. So, where do customers

look the closest when they’re comparing costs? That’s right, (A)-the decorator’s fee.

Well, decorators are creative people and for years they’ve been doing some very creative bidding.

They’ve been low balling (A) and padding (B), expecting the laborers to kick back a percentage of

their inflated fees to the decorator. Surprised? Everyone’s doing it. Everyone, that is, except me.

It’s deceptive. And as a Christian, I think it’s just plain wrong.

The customer’s final cost is about the same either way you cut it, so most decorators don’t feel

they’re doing anything wrong. Are they right?

Needless to say, “blowing the whistle” on such a widespread and accepted practice would only

damage my professional reputation.
[3]

Q U E S T I O N S

1. Mrs. G. C. confronts a third-party obligation. What is it?

2. Ethics can be weaponries—that is, used in your personal interest. Show how this could be the case here.

Does the fact that she would benefit by getting these kickbacks eliminated somehow make her position

less morally respectable? Why or why not?

3. Typically, according to Mrs. G. C, a client contracts an interior decorator. Later that decorator hires a

laborer, and the laborer gives the designer a kickback. There’s a conflict of interest here, what is it? What

is the ethical case against this kickback scheme?

4. Consequence theories of ethics represent the point of view that acts themselves are not good or

bad; all that matters are the consequences. Therefore, lying isn’t bad if it happens that a fleeing

criminal is asking you which way is the best escape route, and you point him down the street

leading to the police station. Duty theorists, by contrast, believe that certain acts including lying

and stealing are wrong regardless of the context and consequences.

o Do you suppose Mrs. G. C. adheres to a consequence ethics or a duty ethics? Why?

o Could you use the idea of consequence ethics to try to convince her to simply join the crowd and

do what everyone else is doing? What would that case look like?

5. If you wanted to put an end to this pervasive kickback practice in the interior decorating world

and only had time to present one argument, which of the following would you choose?

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o The practice should be stopped because it involves unethical kickbacks.

o It should be stopped because it’s dishonest in the sense that consumers are misled.

o It should be stopped because the straight shooter is getting the shaft.

Why did you choose that argument and how could it be elaborated more fully?

6. Imagine that Mrs. G. C. from Miami reveals her name and makes a whistle-blowing cause out of

her unhappiness with the standard practice in her profession.

o What kind of reprisals and negative effects might she expect?

o Do you believe whistle-blowing is justified in this situation? Why or why not?

o Is it required? Why or why not?

Sex, Money, and Whistle-Blowing

Like all recent NBA All-Star players, Kevin Johnson made a lot of money during his pro basketball career.

It drained out fairly quickly too. A few hundred-thousand went to the family of a sixteen-year-old high-

school girl in Phoenix after a he-said, she-said sex accusation. A decade later, a similar story emerged, but

at a different place: this time it was three girls in Sacramento, California, who attended St. Hope

Academy. They took their stories—each told of a similar incident involving Johnson—to the recruitment

advisor, Jacqueline Wong-Hernandez. Soon after, Ms. Wong-Hernandez was gone. Her resignation was a

protest over the way the complaints were handled internally at the school, which was by dismissing them.

Not only did St. Hope Academy take no action, the local police also decided not to press any charges in a

case that essentially came down to one person’s word against another’s.

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St. Hope Academy, as it happens, wasn’t a public school but a private business, and Kevin Johnson was

the founder and CEO. A lot of the money flowing into the young institution came from the federal

government as grants from the AmeriCorps program. After accusations surfaced that the grant money

wasn’t spent appropriately, the school agreed to pay back $423,836.50 to the government (about half of

what the school had received). The first payment, about $73,000, was made by Kevin Johnson himself.

So things probably would have ended, except for an AmeriCorps inspector general named Gerald Walpin.

He believed Johnson had gotten way too good a deal: the school should have been forced to pay back

much more of the grant money it had received. On May 5, 2009, he took the accusation to a California

congressman who in turn brought public attention to the issue. On June 10, Mr. Walpin was fired. In an

editorial statement, the Washington Times complained, “Mr. Walpin was fired with no explanation and

no warning to Congress; even though the act governing inspectors general says IGs can be removed only

after the president gives Congress 30 days’ notice and a reason for the firing. Rather than investigate the

IG’s serious complaints, Mr. Obama fired him. In short, he snuffed out the whistleblower rather than heed

the whistle.”
[4]

A local Sacramento TV station doing some follow-up uncovered a report detailing hush money payments

at St. Hope and noted that the former NBA All-Star “often described himself as a personal friend” of

another avid basketball player, President Obama.
[5]

Q U E S T I O N S

1. How were the following two faced with a third-party obligation?

o Jacqueline Wong-Hernandez

o Gerald Walpin

2. In general, there are three possible responses to third-party obligations, do nothing, report the

problem, become a whistle-blower. How would you categorize the response made by

o Wong-Hernandez?

o Walpin?

3. What questions can be asked to help determine whether whistle-blowing is justified? How might

they be answered in the case of

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o Wong-Hernandez?
o Walpin?
4. What questions can be asked to help determine whether whistle-blowing is ethically required?

How might they be answered in the case of

o Wong-Hernandez?
o Walpin?

Loyal to the Badge

When police officer April Leatherwood went undercover in Memphis, she changed her name to Summer

Smith. She didn’t change her socks for a year—no showers or brushing her teeth either.

Her daily routine was to hang out on the street smoking and trying to befriend drug addicts. They’d take

her to their dealers, where she’d make a buy and then try to find out who was the next person up the

ladder. Her work resulted in about three hundred arrests, everyone from two-bit drug sellers to major

movers who organized the street-level crime from luxury apartments.

Why’d she do it? According to the newspaper article relating her story, she loved the camaraderie of the

department and its protect-and-serve mission.

When she emerged from the undercover program, she was promoted to detective. Unfortunately, her

three-year romantic partner had moved on, and it was difficult to get the bad memories out of her mind.

Still, when the reporter asked whether she’d do it again, she said, “Yeah.”
[6]

Imag
e rem

oved
due t

o cop
yrigh

t issu
es.

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Q U E S T I O N S

1. The two ideas on which company loyalty—or organizational loyalty to broaden the title—is built

are the following:

o An attachment to the organization that is non-instrumental, meaning the attachment is not

maintained only because it serves the employee’s concrete interests, such as the need for a

salary.

o A deposited value in the organization that goes beyond any individual and their attachment: the

organization’s value continues even without those who currently feel it.

How are these ideas manifested in the case of April Leatherwood?

2. Three measures on the scale of loyalty intensity are obedience loyalty, balanced loyalty, and free agency.

Given what you’ve read about Leatherwood, where would you put her on this scale? Why?

3. Think about one of the career lines you’re considering, or the one you’re currently on, and

imagine your company loyalty was similar to Leatherwood’s.

o What kinds of sacrifices do you imagine you’d make for the organization?

o Thinking about yourself, really, would you be able to make those sacrifices?

4. Leatherwood’s pay is not high, about $50,000 a year. That works out to about $7 an hour for the

twelve undercover months. Obviously she enjoyed no status while she was undercover. Now,

however, she has appeared in the newspaper and made detective grade in the department. In

your opinion from what you’ve read, do you believe she has acquired a level of status through her

work?

o If she has acquired a status, how would you describe it, what is it based on, how is it different

from the status enjoyed by, say, a senator or a movie star?

o Does this status—assuming she’s acquired it—compensate what she suffered? Explain.

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The Gawker Sex Tape

All kinds of things happen in advertising agencies. Part of the reason is the diversity: a typical medium-to-

large agency requires many different kinds of work, and that brings together a rainbow of people. There

are suited, business types in the client services section. They work with budgets and bulleted lists and

connect the agency with the corporate client. Down the hall the planners dress more casually and study

demographics and culture. They invent market segments with names like soccer moms and then devise

strategies for appealing to soccer moms’ distinct interests and tastes. Further down the hall, there are the

agency’s actual commercial makers. They call themselves creative talent and are free to appear for work

in jeans and ratty t-shirts. For their paycheck, they plan the short films the rest of us call TV commercials.

The typical large agency also needs some HR people, accountants, computer techs, and lawyers.

Most advertising agencies have a pretty good mix of men and women, and in general, there are a lot of

young people in the field because the long hours and short deadlines tend to lead workers to seek

employment elsewhere eventually.

Most agencies are good places for romance. The chemicals are right: young workers, long hours, the

excitement of million-dollar accounts, and lots of different types of people for different tastes. Those are

also, as it happens, good ingredients for sex, as people at BBDO (an Omnicom agency) in New York City

discovered when a grainy cell phone movie went viral. Shot by a guy in the creative department, he stuck

his camera over the top of a cubicle and caught a nude couple wedged into the back corner.

As far as the scandal went, it didn’t take long for industry insiders to figure out who’d been caught, and

from there, the information spread that they were both married to other people. The website Gawker.com

followed the action closely, posting the original film and then running follow-ups. In a nutshell, this is

Image
remo

ved d
ue to

copyr
ight is

sues.

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what happened. The romantic couple continued at their jobs. No word about how their marriages are

doing. The filmer got fired. He downloaded the footage onto his computer and then sent it around to a few

friends. He had nothing to do—he says—with the fact that a few weeks later it was all over the web. In his

words,

It ended up on Gawker and Media bistro and then the word got back to me that all the creative’s

were sending it around. I freaked. I thought it was amazing how something could go viral and

end up online so quickly when I had nothing to do with it really.
[7]

Well, he was the one who filmed and originally distributed it.

The discussion posted on the Gawker web page is probably hotter than the sex that got everything going.

Many issues come up, including: Why did the filmer get fired while the adulterers got to keep their

jobs? One answer someone wrote in is that filming and distributing a sex tape is unethical (and possibly

illegal if minors end up seeing it). A poster who calls himself BritSwedeGuy responds:

How could you be sacked for filming something you could see at work?

Would he have been sacked if he’d taken the video to HR?

Probably not.

So is he being sacked for withholding evidence then?

That only makes sense if the evidence was of a sackable offence.

Has he been sacked for passing the video on? Surely he’s a whistle-blower in that case and ought

to be protected.

This is his argument. First, it doesn’t make sense to fire the filmer for recording the sex, since the act took

place in public, and anyone (tall) could’ve seen it. The perpetrators couldn’t reasonably object to being

filmed if they were exhibiting themselves so openly. Second, if the filmer had taken the film to HR to

report the fact that sex was going on, he probably wouldn’t have been fired, and the entire episode

would’ve been managed internally (and quietly) inside the agency. That means the only justifiable reason

for firing the guy was that he digitalized the video and, in essence, made it possible for others to beam it

across the Internet. If that’s what he did, though, then he’s a whistle-blower and should be protected.

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Q U E S T I O N S

1. If the filmer did take the video to the human resources department, what would he be reporting?

What ethical misdeeds are happening?

o With respect to those misdeeds, where does the line get drawn between flirting for a second and

stripping down for a fifteen-minute frolic?

2. On the question of whistle-blowing—and the possibility that the filmer’s action was ethically

justifiable as a form of whistle-blowing—a poster named Bad Uncle isn’t buying it. He writes, “OK,

I’ll be less glib. I don’t see how f***ing someone is a major ethical violation worthy of whistle-

blowing (fnar)…it’s hardly damaging to a company, its clients, or its employees. Wake me when

their monotonous thrusting implants the seed of fraud into an earnings statement.”

Bad Uncle doesn’t think the filmer could defend himself by claiming to be a whistle-blower. In

your own words, why not? Do you agree? Explain.

3. Do you believe the filmer sensed a company loyalty? Would a stronger sense of company loyalty have

encouraged him to erase the tape instead of disseminating it? Why or why not?

4. Advertising agencies are notorious for fast money and little loyalty to their employees. Many agencies, if

they lose an account, straight off fire many of those who worked on the account even if the loss had

nothing to do with the employee’s work performance (the client may have discontinued a line of products,

for example, and for that reason discontinued the advertising). Given that business attitude, does the

company have a right to demand that employees think of the agency’s interests when doing things like

filming? Why or why not?

5. Work in advertising—especially in the creative department where people often have to actually make ads

for air right now—is very stressful. There’s a lot of money involved and a lot of competition among

creative’s. Do you believe sex at work is an ethically defensible way of alleviating the stress comparable

with taking a cigarette break or just a quick walk around the block? How could the argument be made in

favor?

6. If someone told you they wanted to work in advertising because it’s a good spot to meet someone and get

married (which is probably true at most agencies), do you believe that’s a reasonable decision, one in

harmony with the ethical responsibility to pursue one’s happiness and welfare? Why or why not?

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7. If someone told you they were going to work in advertising because they’d heard it’s a good place for fast,

cheap sex (which it probably is at most agencies), do you believe that’s a reasonable decision, one in

harmony with the ethical responsibility to pursue one’s happiness and welfare? Why or why not?

[1] Brian X. Chen, “Fallout from Wired.com’s iPhone App Payola Story,” Wired, Gadget Lab, March 24, 2010,

accessed May 19, 2011, http://www.wired.com/gadgetlab/2010/03/app-review-payola-reaction.

[2] Brian Ross, Richard Esposito, and Vic Walter, “Pay to Play: Music Industry’s Dirty Little Secret,” ABCNews.com,

February 8, 2006, accessed May 19, 2011,http://abcnews.go.com/Primetime/story?id=1591155&page=1.

[3] Ms. G. C. from Miami, “The Case of the Casual Kickback,” Urbana.org.

[4] “Editorial: Stonewalling on Walpin-gate,” The Washington Times, July 10, 2009, accessed May 19,

2011,http://www.washingtontimes.com/news/2009/jul/10/stonewalling-on-walpin-gate.

[5] “Report: Johnson Offered to Pay Accuser,” KCRA.com, November 20, 2009, accessed May 19,

2011, http://www.kcra.com/news/21679385/detail.html.

[6] Kristina Goetz, “A Year of Living Dangerously Takes a Toll on Undercover Memphis Officer,” Commercial Appeal,

August 30, 2009, accessed May 19, 2011,http://www.commercialappeal.com/news/2009/aug/30/year-of-living-

dangerously-takes-its-toll.

[7] Hamilton Nolan, “The Cameraman Speaks: He’s Fired but the Sex Tape Couple Keep Their Jobs,” Gawker,

November 26, 2008, accessed May 19, 2011,http://gawker.com/5099143/the-cameraman-speaks-hes-fired-but-

the-sex-tape-couple-keep-their-jobs.

• Structure Bookmarks

Chapter 7: Employee’s Ethics: Making the Best of the Job You Have as You Get from 9 to 5
Chapter 7: Employee’s Ethics: Making the Best of the Job You Have as You Get from 9 to 5
Chapter 7: Employee’s Ethics: Making the Best of the Job You Have as You Get from 9 to 5
Chapter 7: Employee’s Ethics: Making the Best of the Job You Have as You Get from 9 to 5
from The Business Ethics Workshop was adapted by Saylor Academy and is available under a
Creative Commons Attribution-NonCommercial-ShareAlike 3.0 Unported
Creative Commons Attribution-NonCommercial-ShareAlike 3.0 Unported
license without attribution as requested by the work’s original creator or licensor.

Chapter8: Manager’s Ethics: Getting, Promoting, and Firing Workers from The Business Ethics

Workshop was adapted by Saylor Academy and is available under a Creative Commons

Attribution-NonCommercial-ShareAlike 3

.

0 Unported license without attribution as requested by

the work’s original creator or licensor. UMGC has modified this work and it is available under
the original license.

http://www.saylor.org/site/textbooks/The%20Business%20Ethics%20Workshop

https://creativecommons.org/licenses/by-nc-sa/3.0/

https://creativecommons.org/licenses/by-nc-sa/3.0/

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Chapter 8

Manager’s Ethics: Getting, Promoting, and Firing
Workers

Chapter Overview

Chapter 8 “Manager’s Ethics: Getting, Promoting, and Firing Workers” examines some ethical decisions

facing managers. It considers the values that underlie and guide the hiring, promoting, and firing of

workers.

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8.1 Hiring

L E A R N I N G O B JE C T I V E S

1. Locate ethical tensions affecting the breadth of a hiring search.

2. Define applicant screening and mark its ethical boundari

es.

3. Define applicant testing and consider what makes an appropriate test.

4. Draw the lines of an ethical interview process.

Help Wanted, but from Whom?

The Central Intelligence Agency’s hiring practices are widely known and well depicted in the movie The

Recruit. After discretely scouting the special capabilities of a young bartender played by Colin Ferrell, Al

Pacino catches him at work, orders a drink, carries on a one-sided and cryptic conversation, performs a

magic trick with a ripped newspaper, announces that “things are never quite as they appear,” and finally

admits that he’s actually a job recruiter.

Ferrell seems annoyed by the man’s presence.

Pacino returns to the newspaper, pulls out a page covered by an ad announcing “Two Day Specials.” He

circles the letters c, i, and a in “Specials” and walks out. Colin Ferrell follows.
[1]

Actually, that’s not true. The CIA doesn’t hire that way. They advertise on CareerBuilder just like any

other company. You can understand, though, why they wouldn’t mind scouting out their applicants even

before allowing people to apply; they don’t want to end up hiring double agents.

Something like that happened soon after Procter & Gamble grew jealous of a competitor’s hair-care

products. Salon Selective, Finesse, and Thermasilk were all doing so well for Unilever that P&G contracted

people to get hired over at Unilever and bring back secrets of their success. The corporate espionage—

which P&G executives characterized as a “rogue operation”—led to a multimillion-dollar settlement

between the companies and left behind the lesson that when you’re the boss and you’re hiring, you’ve got

to make sure that the people you bring in will be loyal to the company.
[2]

The problem is you’ve also got to make sure that they’re going to do good work, the best work possible.

Between the two requirements there’s a tension stretching through every decision to hire a new worker.

On one side, you want to limit the people you even consider to those few who, for one reason or another,

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you know won’t be a total disaster. On the other side, no company can survive playing it safe all the time;

generally, the corporations able to hire the best talent will win over the long run.

And

one way to get the

best talent is to cast as large a net as possible, let a maximum number know that a position is available,

and work through the applications carefully no matter how many pour in.

Conclusion. Hiring employees can be safe or risky depending on how broadly you announce a job opening.

Three Strategies for Announcing a Job Opening: Nepotism, Internal Public

Announcement, Mass Public Announcement

Start on the safe side of hiring. Nepotism is granting favored status to family members. In the case of

hiring, it means circulating information about open jobs only to your relatives. Naturally this happens at

many small businesses. A sales representative at a small firm importing auto accessories meets a woman

at work. She’s also a rep. Marriage follows. A year later he decides to quit his job and strike out on his own

with a new website project that reviews and sells the same kind of car products. Things go well, page hits

climb, sales increase, and soon he needs help so he hires…his wife. They’ve worked together before, and

they both know the field. Most important, the risk is minimal. Since he’s waking up with her in the

morning he can figure she’s not going to skip out on work just because it’s a nice spring day. And is she

going to steal office supplies? A little money from the payroll? An important client? Probably not. This is a

case where nepotism makes sense.

But what about the other way? What if the husband’s solo venture flops, and at the same time, his wife’s

career flourishes. Now he needs a job, and she’s got the power to hire. A job opens up. Probably, she’s got

junior staff ready for the post, but can she push them aside and bring her husband in?

There is some justification: she’s worked with him before, and she knows he performs well. Plus, as a boss

of his own (failed) business, he’s obviously got leadership experience and he has demonstrated initiative.

All that counts for something. But if she goes with him she’s going to breed resentment in her group. You

can hear it:

“Hey, what do you need to get a promotion around here?”

“A last name.”

And

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Now you might be asking why nepotism bugs me so much. It’s the presumption. It’s the attitude.

It’s just one more example of how life isn’t fair. Am I jealous? I don’t know. I guess I take

advantage of the company in other ways…LOL. What can I learn from this? That life is good if

you’re born into the right family? That I need to control my attitude and stop letting petty crap

drive me to drink?
[3]

That last paragraph comes from a blog entry titled “Nepotism Sucks.” It does for his company too: few

firms can be successful with employees musing about how they “take advantage of the company” while

they’re punctuating comments about their work with LOL. As for the central issue, he’s right. Basic

fairness isn’t being honored: people are getting considered for a job because of who they’re related to, and

it’s not this blogger’s fault that his last name is wrong.

On the other hand, “Is Nepotism So Bad?” titles an article on Forbes.com that compiles a list of large

companies—including Forbes—where nepotism has been the norm…and successful. According to the

article, experts estimate that executive-level nepotism works out about 40 percent of the time. What are

the advantages to bringing in your own? Familiarity with the business and trust are noted. Another

advantage is also underlined: frequently, relatives don’t want to let their own relatives down. Sons work

harder for fathers, cousins for cousins, brothers for sisters. There’s a productivity advantage in nepotism.

Arguably, that factor weighs more heavily than the bitterness arising when deserving workers already

employed don’t get a chance to apply for a job because it already went to the boss’s sister-in-law.
[4]

Finally, at least theoretically, there’s a creative solution to the bitterness caused by nepotism: make

virtually every post a nepotism-first position. Oil-Dri, a producer of absorbent materials, celebrated its

fiftieth anniversary with a party for all employees. “Would everyone,” the group was asked at one point,

“who is related to someone else in the company please stand up?” Of the seven hundred employees, about

five hundred left their seats.

Internal public job announcements occupy a middle spot on the continuum between playing it safe (only

letting selected people you’re certain will be loyal and at least moderately capable know when a job is

available) and going for the best talent (broadcasting the post as broadly as possible and accepting

applications from anyone).

An example of an internal public job announcement comes from the National Review, a political

magazine and website run by the kind of people who wear suits and ties to baseball games. Their blog is

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called The Corner, and the magazine’s editors fill it with thoughts and arguments about the day’s political

debates in Washington, DC. There’s also a bit of insider humor, provocation, and satire tossed back and

forth between posters. If you keep reading for a few weeks, you’ll start to sense an intellectual soap opera

developing along with the libertarian-conservative politics; there’s an undercurrent of shifting alliances,

snarkiness, and thoughtful jabs.

You’ll also notice that National Review places job announcements on The Corner blog. There aren’t a lot

of openings, but every couple of weeks a little announcement appears between posts.

The National Review Online is seeking an editor with web capabilities. Send applications to

____@nationalreview.com.

It’s pretty ingenious. The only people who are going to be reading The Corner are

 sincerely interested in the wonkish subjects these guys publish about;

 not out there just looking for any job (at the time they see the announcement, they’re not looking for a job

at all because it’s not a job site);

 compatible on a personal level with the National Review crew. The posters let personalities shine

through, and if you don’t have chemistry with their style of humor and talk, you’re simply not going to be

reading them.

What an internal public job announcement seeks to do is get the most applications in the hopper as

possible, and so the announcement is published on a free Internet page that anyone can see. That’s the

public part. But because the page is only commonly followed by people who are already inside the world

of public policy defining the employees at National Review, the bosses don’t need to worry about the

wrong kind of people sending in résumés. That’s the “internal” part. Recruiters can get a lot of

applicants—increasing their chances of finding really talented people—without worrying too much about a

bunch of lefties who really prefer websites like Daily Kos trying to fake their way into the organization.

Mass public job announcements are just what they sound like. You need someone and you post the

position at Monster, CareerBuilder, and The Ladders. Here you’re giving up confidence that applicants

will fit into the organization naturally, and you’re even risking corporate spying moles like those that

infested Unilever. In exchange, however, you’re getting the broadest selection possible of people to toss

their hat into the ring, which maximizes your chances of finding stellar work performance.

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Beyond the advantage of many applicants, there are good ethical arguments for mass public job

announcements. The simplest is fair play: everyone should get an equal opportunity to take a run at any

job. Just past that, there are concerns about discrimination that are eased by mass announcements. While

there’s no reason to launch charges of inherent racism at nepotistic hiring practices, it might well be true

that if a small business is initiated by an Asian family, and they start hiring relatives, the result at the end

of the day is a racial imbalance in the company. Again, no one is equating nepotism with racism, but the

appearance can develop fairly easily whenever job announcements are not publicized as widely as

possible. The parallel case can be made with respect to internal public job announcements. If 90 percent

of the people who come in contact with the “help wanted” message happen to be women, sooner or later,

there’s going to be some guy out there who complains. So, one argument in favor of mass announcements

is the stand it helps take against illegal and unethical discrimination.

Another argument for mass announcements is reciprocity. If a company is trying to sell a product to the

general public, to anyone who’s willing to pay money for it, then shouldn’t they allow everyone a shot at

becoming an employee? It doesn’t seem quite right to profit from anyone—to try to sell, say, a car to

anyone who walks in the door—and then turn around and not give all those consumers a decent chance at

earning a living there at the dealership.

Conclusion. Announcing a job opening is not automatic. You can announce the spot more publicly or less

so. There are advantages and disadvantages to the various approaches, but there’s always an ethical

responsibility to clearly account for the reasons why one approach is selected over another.

Ethical Perils of Job Announcements

Ethical perils of job announcements include

1. describing a position in ways that don’t correspond with the reality,

2. announcing a post to people who really have no chance for the job.

Once you’ve identified the demographic pool you’d like to recruit from, it’s easy to oversell the job in the

announcement you post. The most blatant cases—You can earn $300 per hour working from home!—are

obvious frauds, but even sincere attempts can cause misunderstandings. Say a job requires “occasional

travel.” Fine, but does that mean occasionally during the year or occasionally during the month?

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The much more severe case of insincerity in job announcements is posting one before an audience that

has no reasonable chance of getting the job. When Hooters posts a “server wanted” sign, we all know what

they’re looking for just like when the rough bar next door advertises for a bouncer. But what if it’s a formal

restaurant advertising for a waiter? If the place is across town, you can’t just drop in to check out the kind

of people they hire. So maybe you go through the application process and make the telephone calls and

finally go in for the interview. As you walk through the door, the first thing they check out is your weight

profile. Then your jaw line, haircut, eyes, and the rest. They want to see how you compare with the other

waiters who all look like they model on the side.

If you’re lucky, you see yourself fitting right in, but if you’re like most of us, you know the interview’s over

before it started; the whole thing has been a huge waste of time.

Now put yourself on the other side. As the restaurant manager trying to fill the position, you know

you should put the requirement that applicants be devastatingly handsome into the ad. The duty to be

honest requires it. The duty to treat others as an end and not a means requires it. The idea that our acts

should be guided by the imperative to bring the greatest good to the greatest number requires it. Almost

every mainstream ethical theory recommends that you tell the truth about what you’re looking for when

you announce a job. That way you don’t waste peoples’ time, and you spare them the humiliation of being

treated as irrelevant. So you should want to put in the ad something about how only potential movie stars

need apply.

But the law virtually requires that you don’t put the line in. If you explicitly say you’ll only consider

exceptionally attractive men for your job, you open yourself to a slew of lawsuits for unfair and

discriminatory hiring practices. In fact, even Hooters aren’t safe. In 2009 the chain was sued by a Texas

man named Nikolai Grushevski because they refused to hire servers who looked, well, like him. When it

gets to that point—when hairy guys can get away with calling lawyers because they aren’t hired to serve

food in short shorts and halter tops—you can understand why restaurants don’t want to publicly admit

exactly what they’re looking for.
[5]

Bottom line: if Hooters just comes out and states what it is that makes their kind of employee, they can get

sued. So they’re much better off just making the announcement ambiguous. That way, when it turns out

that no hairy guys ever seem to get hired, they can always say it’s because they didn’t seem so adept at

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dodging tables while shooting around with trays of beers and sandwiches. Or whatever. One lie is as good

as another so long as it keeps the restaurant out of the courtroom.

For managers, this is a tight spot. They’re caught between what’s right and the law. In ethical terms,

they’re stretched between two conflicting duties: to tell the truth and to get the famous Hooters Girls into

the restaurant.

Screening

Reducing a large pool of applicants to a manageable selection of people for serious consideration

is applicant screening, sometimes referred to as filtering. Screening begins with the job announcement.

Requirements like “three or more years of experience” and “willingness to work the night shift” go a long

way toward eliminating applicants.

It’s impossible, though, to completely define the perfect applicant beforehand, and even if you could,

there’s almost always going to be someone like Nikolai Grushevski who shows up. So screening continues

as the preliminary review of applications and applicants to see who can be quickly crossed off the list

without any serious consideration.

Legally, who can be crossed out? The default response is no one. In its broadest form, civil rights

employment law guarantees equal opportunity. All applicants deserve to be considered and

evaluated solely on their ability to do the job, and the federal government’s Equal Employment

Opportunity Commission is stocked with lawyers who are out there doing their best to make sure the rules

are upheld. For managers, that means they’ve got to take all applicants seriously; they’ve got to pursue

interview questions about ability, training, experience, and similar. Now, this is where a guy like

Grushevski can come in the door and say, “Look, I can deliver a round of burgers and beer as well as any

woman.” He’s probably right. Still, he’s not the right person for the job; there’s no reason for a manager to

lose valuable time dealing with him.

Similarly, a wheelchair-bound man shouldn’t be a beach lifeguard; an eighty-year-old shouldn’t be flying

commercial jetliners; the seven foot one and 330-pound Shaquille O’Neil isn’t going to be a horse jockey.

There is a legal way for companies to summarily screen out inappropriate applicants: by appealing

tobona fide occupational qualifications (BFOQs). BFOQs are exceptions granted to equal opportunity

requirements. A form of legalized discrimination, they let managers cross off job applicants for reasons

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that are normally considered unfair: gender, physical size, religious belief, and similar. (As a note, race

isn’t allowed to be considered a BFOQ.)

When do bosses get this easy way out? When they can show that the otherwise discriminatory practices

are required because of a business’ nature. So while it’s clear that Shaquille O’Neil’s intimidating size

doesn’t mean he’ll be a bad accountant, the nature and rules of horse racing require that riders be

diminutive, and that means Shaq would be a disaster. A horse owner can show that the job requires a

physically little person to be successful. Thus size becomes a BFOQ and a legitimate way of screening

applicants for that particular

job.

A maker of men’s clothes can reasonably screen out women from the applicant pool for models—but they

can’t eliminate female applicants from consideration for a sales position. Or they could, but only if they

could show that maintaining a masculine public image was integral to the success of the company. For

example, you could imagine a company called Manly Incorporated, which sold products based on the

premise that every employee was a quality control officer.

Along similar lines, a Catholic school may screen atheists from the search for a teacher, but it’s harder to

justify that filter for janitors. At the airport security line women can be assigned to pat down women and

men to men, but either may apply for the job to hand check the carry-on bags.

Another common screen is education. Imagine you have just opened a local franchise of Jan-Pro, which

offers commercial cleaning services to car dealerships, gyms, banks, churches, and schools.
[6]

What level

of education will you be looking for in potential employees? Since the job involves mixing chemicals, it

seems like requiring some basic education is a fair demand, but is a college degree necessary for the work?

You may have one as a manager, but that doesn’t mean you should necessarily demand that much from

employees. And on the other side, is it fair to screen out someone who’s got too much education, say a

master’s degree in chemistry? It does seems reasonable to suspect that this kind of person will soon

become bored pushing a vacuum over carpets.

Then again, do you know that will happen? Is it fair to screen based on what you suspect might occur?

Another type of screening catches high-risk lifestyles. Smoking is one of the most often cited, and the

Humana company in Ohio is one of a growing number that’s directly banning smoking—on or off work—

by new employees.
[7]

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These healthy lifestyle policies set off firestorms of ethical debates. With respect to smoking and in broad

strokes, the company has an interest in prohibiting smoking because that should mean healthier workers,

fewer sick days, lower health insurance premiums, and higher productivity. In short: better working

workers. On the other side, job applicants (at least the smokers) don’t believe that they’re less productive

than everyone else, and anyway, they resent being excluded for a recreational habit pursued on their own

time. In long discussion boards—there are hundreds online—the debate plays out. Here’s one exchange

from a typical board:

bonos_rama:

I wouldn’t hire anyone that has a habit of leaving their desk every hour to stand outside for

10 minutes. Doesn’t matter if it’s to smoke, drink coke, or pass gas that they’re leaving, it’s

bad for productivity.

Mother of a

Dr.:

But it’s OK to stand by the coffee pot and discuss sports and politics? Productivity actually

improves when you get away from the computer every hour.

matt12341:

Even discounting the productivity argument, smokers tend to have more long-term health

problems, leading to higher insurance premiums so companies end up paying more.

jamiewb:

What if we apply this logic to people who are overweight? What about people who have a

family history of cancer? Or a higher incidence of diabetes? As long as it doesn’t impact job

performance, I don’t think it’s fair to refuse to hire smokers.

happily-

retired:

I think it is a great idea to not hire smokers. Up next should be obesity, as it leads to diabetes,

heart problems, joint problems, etc. Companies following that path would be demonstrating

good corporate citizenship by fostering a healthier America.

Zom Zom:

Yes, the good citizenship of fascism. Now my employer has the right to dictate what I do with

my body? “Land of the free,” unless your boss doesn’t like the choices you make. [8]

You can see that underneath the back-and-forth, this is ultimately a debate about ethical perspectives.

One side tends toward a utilitarian position: the greater good in terms of health and related issues justifies

the filtering of smokers in hiring decisions. The other side tends toward a fundamental rights position:

what I do with my time and body is my decision only. Both sides have strong arguments.

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Criminal record screening is another common filter for job applicants. Most states won’t allow employers

to deny someone fair consideration for a job only because of a prior criminal conviction. There’s wiggle

room, though. In New York, Article 23-A of the correction law certifies that employment may be denied if

 there’s a direct relationship between the criminal offense committed and the employment sought,

 the applicant would pose an unreasonable risk to property or the safety or welfare of others.

Those are big loopholes. The first one means the Brinks armored car company can legally refuse to

consider ex-bank robbers for a position. It may also apply to the shoplifter who wants to be a cashier or

the drug dealer who wants a job in the pharmacy.

The second exception is still broader and applied in Grafter v. New York City Civil Service

Commission.
[9]

In that case, the Fire Department of New York refused to hire Grafter because he’d been

caught drunk driving on his last job. A potentially drunken fireman does seem like a risk to the welfare of

others. Pushing that further out, the same would probably go if he applied to be a taxi driver. In fact, the

list of jobs that may seem dangerous for others if the worker is drunk extends a long way, probably

everything in construction, transportation, or anything with heavy equipment. So the law does allow

employers to resist hiring convicts across a significant range of wrongdoing.

Finally, the basic ethical tension pulls in three competing directions for any manager facing a criminal

hiring decision:

1. The ethical responsibility to recovering criminals. Rehabilitation (via honest work) is good for ex-

convicts.

2. The manager’s responsibility to the company. Managers need to avoid problems whenever

possible and keep the machine running smoothly so profits flow smoothly too.

3. The company’s responsibility to the general public. If a taxi syndicate is hiring ex-drunk drivers,

you’ve got to figure something’s going to go wrong sooner or later, and when it does, the person who put

the driver behind the wheel will be partially responsible.

Social media is another potential filter. Fifty-six percent of millennial believe that the words and pictures

they put on Facebook and Twitter shouldn’t be allowed to factor into hiring decisions.
[10]

Recruitment

officers, they’re saying, shouldn’t be going through online photo albums to check out the kinds of things

you and your buddies do on Friday nights.

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From the employers’ side, however, the argument in favor of checking the pages is simple. If an applicant

is sufficiently incautious to leave pictures of massive beer funnel inhalations available for just anyone to

see—and if they do that while they’re trying to put their best face forward as job seekers—then God knows

what kind of stuff will be circulating once they’ve got a job. As a manager, it’s part of your job to protect

the company’s public image, which means you’ve got to account for clients and others maybe running the

same Google and Facebook searches that you are.

It’s an easy scenario to imagine: you hire someone with a flamboyant online life. Soon after, a client

working with her gets nosey does a Google image search, and what comes in at the top of the list is a

picture of your new employee slamming beers, chain-smoking cigarettes, or maybe inhaling something

that’s not legal. This isn’t good and the person who looks really bad is the supposedly mature manager

who allowed the whole thing to happen by hiring her.

Of course there’s always the standard but still powerful argument that what employees do after hours is

their own business, but one of the realities inherent in the Internet is that there is no such thing as “after

hours” anymore. Once something goes online, it’s there all the time, forever. Managers need to take

account of that reality, which might mean rethinking old rules about privacy.

Testing

Once an ad has been placed, and applicants have been pooled, and the pool has been screened, the real

hard work of hiring begins: choosing from among apparently qualified people. One tool used in the

selection process is applicant testing. There are various sorts of tests, but no matter the kind, for it to be

legitimate; it should itself pass three tests. It ought to be

 Valid. The test must measure abilities connected to the specific job being filled. A prospective roadie for

Metallica shouldn’t be asked to demonstrate mastery of Microsoft Excel, just as there’s no reason to ask an

accountant to wire up his cubicle with speakers blasting 115 decibels.

 Normalized. The test must be fair in the sense that results are adjusted for the circumstances of the

testing session. If you’re checking to see how frequently applicants for the post of TV weatherman have

predicted sunshine and it turned out to rain, and one woman gets tested in Phoenix while another takes

Seattle, it’s pretty easy to see who’s going to win in terms of raw numbers. Those numbers need to be

adjusted for the divergent levels of difficulty.

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 Constant. The results any test taker achieves over time should be similar. Just like a broken clock is right

twice a day, an applicant for an interior design job who happens to be color-blind might once in a while

throw together a carpet-sofa combination that doesn’t clash. A good test eliminates the lucky hits, and

also the unlucky ones.

Of the many kinds of hiring tests now in use, the most direct try to measure the exact skills of the

job. Skill tests can be simple. They’re also relatively easy to control for validity, normalization, and

constancy. For example, applicants for a junior-level position in copyediting at a public relations firm may

be given a poorly written paragraph about a fictional executive and asked to fix up the spelling and

grammar.

Psychological and personality tests are murkier; it’s more difficult to show a direct link between the

results and job performance. On one side, you’ve got a test that probes your inspirations and fears, your

tastes and personal demons. On the other side, the test’s goal is to reveal how well you can handle plain

work assignments. Here’s an example of the disconnect. The following is a true-or-false question that

Rent-A-Center placed on one of its employee application tests: I have no difficulty starting or holding my

bowel movement.
[11]

Well, it’s hard to see the link between bathroom performance and the ability to rent washer and drier sets.

Rent-A-Center wouldn’t be asking, though, if they didn’t think the link was there. And they could be right;

there may be some connection. One of the firmest sources of belief in the link between personality profile

and job performance is the very interesting Minnesota Multiphasic Personality Inventory (MMPI). That

specific test is the origin of the bathroom question. Other true-or-false choices on the long test include the

following:

 I am very attracted to members of my own sex.

 Evil spirits possess me sometimes.

Now, the MMPI is a real test with a long and noble history. One of the things it tries to do is

establish correspondences. That is, if we take a group of successful executives at Rent-A-Center and we

discover that they nearly universally have trouble in the bathroom, then it may make sense to look for

people who suffer this discomfort when looking to recruit future company leaders. As for the why

question—as in why is there a link between bathroom habits and success?—that doesn’t matter for a

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correspondence test; all that matters is that some link is there. And if it is, then you know where to look

when you’re hiring.

Theoretically, correspondence testing makes sense. Still, it’s hard to know how applicants are going to

react to questions about sexual attraction and evil spirits. Obviously, some are going to find the whole

thing too weird and not turn in responses that actually match their profile. As for applicants and

employees of Rent-A-Center, they filed a lawsuit.
[12]

Inescapably, correspondence-type personality tests are vulnerable to lawsuits because they’re explicitly

based on the premise that no one knows why the results indicate who is more and less suitable for a post.

The administrators only know—or at least they think they know—that the correspondence is there. It’s not

obvious, however, like it is with a simple skill test, so it makes sense to imagine that some are going to

doubt that the test is valid; they’re going to doubt that it really shows who’s more and less qualified for a

job.

So the problems with psychological tests include validity failure and lawsuits. Problems with constancy

and normalization could also be developed. Added to that, there are invasion of privacy questions that are

going to get raised whenever you start asking perspective employees about their bathroom habits and

bedroom wishes.

On the other hand, it needs to keep being emphasized that the tests do happen, and that’s not a

coincidence. At the Universal Studios Hollywood theme park, recruiter Nathan Giles reports that the tests

he administers—with true-or-false questions including “It’s maddening when the court lets guilty

criminals go free”—actually do produce valuable results. They correlate highly, he says, with personal

interviews: if you do well on the test, you’re going to do well face to face. And though the application and

interpretation of these tests are expensive, in the long run they’re cheaper than interviewing everyone.

Finally, if that’s true, then don’t managers have a responsibility to use the tests no matter how heated the

protests?
[13]

Lie detectors in the Hollywood sense of wires hooked up to the fingers for yes-or-no interrogations are

illegal except in highly sensitive and limited cases, usually having to do with money (bank guards) and

drugs (pharmaceutical distribution). Written honesty tests are legal. Generally, the questions populating

these exams resemble those found on psychological tests, and deciphering the results again works through

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correlation. Obviously, the test can’t work directly since both honest and dishonest people will answer

“yes” to the question “are you honest?” Here are some typical questions that do get asked:

 I could help friends steal from my company.

 I’m not an honest person and might steal.

 I return quarters I find on the street to the police station.

Medical tests are generally only considered appropriate when the specific job is labor intensive. As always,

there’s a difference between testing and prying, and it’s your responsibility as a manager to limit the

questioning to specifically work-related information. Questions about past physical problems are

generally considered off limits as are future problems that may be indicated by family health history. A

simple example of an appropriate medical test would be a vision examination for a truck driver.

When Michael Phelps—the thick-grinned Olympic swimming hero—got photographed pulling on a bong,

he immediately failed the drug test with one of his employers: Kellogg’s breakfast cereal. He wouldn’t be

hired again, the company explained, because smoking pot “is not consistent” with the company’s image.

The National Organization for Reform of Marijuana Laws rushed to disagree, insisting that the problem’s

not that the drugs are bad; it’s the law that’s outdated and wrongheaded. They were supported, NORML

claims, by the Washington Post and Wall Street Journal.
[14]

However that might be, it’s seems difficult to object to Kellogg’s argument. The reason they’d hire Michael

Phelps in the first place is to brand their product with the image of beaming, young health, not zoning out

in front of the TV eating Doritos. Whether it’s legal or not, pot smoking is going to clash with the job

description.

But what if he hadn’t been caught by someone with a camera? Would Kellogg’s have the right to demand a

drug test before signing Phelps up as a representative? It depends where you are. Because there’s no

broad federal law on the subject, the rules change depending on your state, even your city. If you’re

looking for a job and you share a pastime with Michael Phelps, you may be in trouble in Alaska where any

employer can test any applicant at any moment. In Arizona, on the other hand, you have to get written

warning beforehand, which might allow for some cleanup. And if you’re applying for a government job in

Berkeley, California, you can party on because a local ordinance prohibits testing.
[15]

Looking at the Berkeley law allows a sense of the central ethical conflict. On one side, the employers’, the

obvious and strong argument is that drug use negatively affects work performance, so evaluating job

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prospects in terms of their future productivity implies, it almost requires, making sure they’re not

distracted or disoriented by drug habits. In contrast, the Berkeley ordinance persuasively states that

mandatory drug testing fails two distinct tests:

1. It assumes guilt instead of innocence.

2. It invades the individual’s privacy.

Deciding about drug tests seems to come down to deciding whose legitimate rights deserve higher billing:

the employer’s or the employee’s.

In 1971 the US Supreme Court banned intelligence quotient (IQ) testing except in very limited

circumstances after finding that the tests disparately affected racial minorities. Further, serious IQ tests

(as opposed to seven-question Internet quizzes) are extremely expensive to apply, so even if it were legal,

few employers would use the test with any frequency.

Conclusion. Tests applied by employers to job applicants include those probing skills, psychological

profile, honesty, medical condition, and drug use.

Interviewing

In 1998 the Indianapolis Colts had a very good problem. Holders of the top pick in the National Football

League draft, they had to choose between two exceptional players: two that everyone agreed radiated

Super Bowl talent. Both were quarterbacks. Peyton Manning had a better sense of the field and smoother

control of the ball; Ryan Leaf had a larger frame and more arm strength. Which would make the better

employee? The call was so close that the team with the second choice, the San Diego Chargers, didn’t care

much who the Colts selected; they’d be happy with either one.

The Colts didn’t have the luxury of letting the choice be made for them, and as draft day approached they

studied film of the players’ college games, poured over statistics, measured their size, speed, and how

sharply and accurately they threw the ball. Everything. But they couldn’t make a decision.

So they decided to interview both candidates. The key question came from Colts coach Jim Mora. He

asked the young men, “What’s the first thing you’ll do if drafted by the Colts?” Leaf said he’d cash his

signing bonus and hit Vegas with a bunch of buddies. Manning responded that he’d meet with the rest of

the Colts’ offense and start going over the playbook. Mora saw in Manning a mature football player ready

for the challenges of the sport at its highest level. In Leaf he saw an unpredictable kid.

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More than a decade later, Peyton Manning heads into another season as starting quarterback. Having won

the Super Bowl, set countless team and NFL passing records, and assured himself a spot in the NFL Hall

of Fame, you can understand that the Colts are happy with their selection.

Ryan Leaf has recently been indicted on burglary and drug charges in Texas. He got the news while in

Canada at a rehab clinic. As for football, after a rocky first few seasons, his performance collapsed entirely.

He hasn’t been on a field in years.

Interviews matter. Grades, recommendation letters, past successes, and failures on the job—all those

numbers and facts carry weight. But for most hiring decisions, nothing replaces the sense you get of a

candidate face to face; it’s the most human part of the process.

Because it’s so human, it’s also one of the most ethically treacherous. Two factors usually weigh heavily in

deciding which questions should and shouldn’t be asked:

1. Fairness

2. Pertinence

Fair questioning means asking similar questions to all applicants for a post. If the position is entry level,

many candidates will be young, inexperienced, and probably easily flustered. That’s normal. So too there’s

nothing necessarily wrong with trying to knock applicants off rhythm with a surprise or trick question.

The problem comes when one candidate gets pressed while another gets softballs.

What do tough questions look like? One answer comes from Google. There are always blog entries

circulating the Internet from applicants talking about the latest weird questions asked by that successful

and unpredictable company:

 How many golf balls can fit in a school bus?

 You are shrunk to the height of a nickel and your mass is proportionally reduced so as to maintain your

original density. You are then thrown into an empty glass blender. The blades will start moving in 60

seconds. What do you do?

 How much should you charge to wash all the windows in Seattle?

 Every man in a village of 100 married couples has cheated on his wife. Every wife in the village instantly

knows when a man other than her husband has cheated, but does not know when her own husband has.

The village has a law that does not allow for adultery. Any wife who can prove that her husband is

unfaithful must kill him that very day. The women of the village would never disobey this law. One day,

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the queen of the village visits and announces that at least one husband has been unfaithful. What

happens?

 Explain a database in three sentences to your eight-year-old nephew.
[16]

We’re a long way from “why do you want to work at Google?” and even further from “what was your

biggest accomplishment or failure in your last job?” Those are softballs; anyone going into Google for an

interview is going to have prepared answers to those. It’s like reading from a script. But looking at the

hard questions Google actually poses, there is no script, and you can see how things could go south

quickly. You can’t figure out about golf balls and school buses, and you start to get nervous. Next, the

blender question seems odd and threatening, and it’s all downhill from there. Some interviews just don’t

go well and that’s it. As an applicant, you probably don’t have too much to complain about as long as the

next guy gets the same treatment. But if the next guy gets the softballs, the fairness test is getting failed.

As a manager, you can go hard or soft, but you can’t change up.

On the question of pertinent interview questions, the Google queries seem, on the face, to be troublesome.

Is there any job that requires employees to escape from a blender? No. But there are many jobs that

require employees to solve unfamiliar problems calmly, reasonably, and creatively. On that ground, the

Google questions seem perfectly justifiable as long as it’s assumed that the posts being filled require those

skills. By confronting prospective employees with unexpected problems demanding creative solutions,

they are, very possibly, rehearsing future job performance.

When the Colts were interviewing Peyton Manning and Ryan Leaf, something similar happened at the key

moment. At first glance, it seems like the question about the first thing each player would do after draft

day wouldn’t reveal much about all the other days to come. But the guys probably weren’t prepared for the

question, and so they had to reveal how they’d face a rapidly shifting reality that they had no experience in

dealing with, a reality just like the one they’d face the day after the draft when they’d go from being college

students on campus to wealthy adults in the big world. That makes the question pertinent. And that

explains why the answers that came back were telling. They distinguished a great hire from one of the

sports world’s monumental bungles.

On the other side, what kinds of questions reveal employees’ personalities’ but not their job skills?

Interview consultants typically warn managers to avoid asking about these subjects:

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 Sex life

 Opinions about homosexuality

 Beliefs about contraception

 Personal finances

 Religious faith

 Political affiliations

Except in special circumstances (a job is with a church, a political party, or similar), these kinds of

questions fall under the category of privacy invasion.

Finally, there are legal red lines to respect. While managers should ensure that applicants are old enough

to work and so can confirm that people are, say, eighteen or older, it’s discriminatory in the legal sense to

hire one person instead of another because of an age difference. This means asking “how old are you?” is

an off-limits question. It’s also illegal to ask about citizenship, though you can ask whether applicants are

legally authorized to work in the United States. It’s illegal to ask about disabilities, except as they relate

directly to the job. It’s illegal to ask about past drug and alcohol use, though you may ask applicants

whether they are now alcoholics or drug addicts.

The interviewer’s fundamental responsibility is to choose the best applicant for the job while giving

everyone a fair shot. Being fair isn’t difficult; all you need to do is just ask everyone the standard

questions: Why do you want to work for our company? What are your strengths? How do you work with

others? Do you stay cool under pressure? The problem here, though, is that it’s easy to get gamed. It’s too

easy for applicants to say, “I love your company, I’m a team player, and I never get mad.” Since everyone

knows the questions and answers, there’s a risk that everything will be fake. And that makes identifying

the best applicant nearly impossible.

One response to this is to junk the standard questions and come up with surprising and (seemingly) crazy

questions like they do at Google. Another strategy is a different kind of interview. A situational or

behavioral interview asks candidates to show how they work instead of talking about it.

Here’s how it goes. Instead of asking an applicant, “Do you stay cool under pressure?” (the correct

response is “yes”), the question gets sharpened this way:

You know how jobs are when you need to deal with the general public: you’re always going to get

the lady who had too much coffee, the guy who didn’t sleep last night and he comes in angry and

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ends up getting madder and madder…at you. Tell me about a time when something like this

actually happened to you. What happened? How did you deal with it?

It’s harder to fake this. Try it yourself, try inventing a story. Unless you’re a real good liar, you’re going to

hear the slipperiness in your own voice, the uncertainty and stammering that goes with making things up.

Probably, most people who get hit with situational questions are going to opt for the easiest route, which

is tell the truth and see how it goes. So the advantage to this kind of interview is that it helps sort out

qualified candidates by giving an unvarnished look at how they confront problems. On the other side,

however, there’s also a disadvantage here, one coming from the fairness side. If candidate A has spent

years at the counter of Hertz and candidates B through G have all been working in the Hertz back office, of

course the counter person is going to do better.

K E Y T A K E A W A Y S

 In publicizing a job opening, a tension exists between limiting the job announcement to ensure that

applicants are appropriate, and widely publicizing the announcement to ensure that applicants include

highly qualified individuals.

 Decisions about how broadly to publicize a job opening can be implemented through nepotism, internal

public job announcements, and mass public job announcements.

 Screening job applicants makes the hiring process more efficient but raises ethical

concerns.

 Common screening techniques involve BFOQs, educational requirements, high-risk lifestyles, criminal

record, and an applicant’s social media history.

 Testing allows applicants’ suitability for a post to be measured but raises ethical concerns.

 Common tests include skill tests, psychological and personality tests, honesty tests, medical tests, and

drug tests.

 Applicant interviewing provides valuable information for evaluating job candidates, but questions ought to

be fair and pertinent to job-related concerns.

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R E V I E W

Q U E ST I ON S

1. Why might an employer opt for nepotism when hiring?

2. What is an advantage of a mass public job announcement?

3. Invent a job description that would allow applicants to be screened by a BFOQ.

4. Why might an applicant pool be screened for use of social media?

5. List the three requirements for a fair and legitimate job-applicant test.

6. How do psychological and personality tests work through correspondence?

7. Imagine a job and then an interview question for applicants that would not be pertinent and one that

would be pertinent.

8. Why might a behavioral interview be used?

[1] R. Donaldson (director), The Recruit (Burbank, CA: Touchstone Pictures, 2003), film.

[2] “Fortune: P&G Admits Spying on Hair Competitors,” Business Courier, August 30, 2001, accessed May 24,

2011,http://cincinnati.bizjournals.com/cincinnati/stories/2001/08/27/daily43.html.

[3] Marti’s Musings, “Nepotism Sucks,” August 30, 2004, accessed May 24,

2011,http://businessethicsworkshop.com/Chapter_8/Nepotism_sucks.html.

[4] Klaus Kneale, “Is Nepotism So Bad?,” Forbes, June 20, 2009, accessed May 24,

2011,http://www.forbes.com/2009/06/19/ceo-executive-hiring-ceonewtork-leadership-nepotism.html.

[5] “Texas Man Settles Discrimination Lawsuit Against Hooters for Not Hiring Male Waiters,” Fox News, April 21,

2009, accessed May 24, 2011,http://www.foxnews.com/story/0,2933,517334,00.html.

[6] “2011 Fastest-Growing Franchise,” Entrepreneur, accessed May 24,

2011,http://www.entrepreneur.com/franchises/fastestgrowing/index.html.

[7] Megan Wasmund, “Humana Enforces Mandatory Stop Smoking Program,” wcpo.com, June 16, 2009, accessed

June 7, 2011,http://www2.wcpo.com/dpp/news/local_news/Humana-Enforces-Mandatory-Stop-Smoking-

Program.

[8] “Humana: We Won’t Hire Smokers,” Newsvine.com, June 16,

2009,http://sorrelen.newsvine.com/_news/2009/06/16/2935298-humana-we-wont-hire-smokers.

[9] Grafter v. New York City Civil Service Commission, 1992.

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[10] Wei Du, “Job Candidates Getting Tripped Up By Facebook,” MSNBC.com, August 14, 2007, accessed May 24,

2011, http://www.msnbc.msn.com/id/20202935/page/2.

[11] Martin Carrigan, “Pre-Employment Testing—Prediction of Employee Success and Legal Issues,” Journal of

Business & Economics Research 5, no. 8 (August 2007): 35–44.

[12] Karraker v. Rent-A-Center, 2005.

[13] Ariana Eunjung Cha, “Employers Relying on Personality Tests to Screen Applicants, “Washington Post, March

27, 2005, accessed May 24, 2011,http://www.washingtonpost.com/wp-dyn/articles/A4010-2005Mar26.html.

[14] Paul Armentano, “The Kellogg Company Drops Michael Phelps, The Cannabis Community Drops

Kellogg’s,” NORML (blog), February 6, 2009, accessed May 24, 2011,http://blog.norml.org/2009/02/06/the-

kellogg-company-drops-michael-phelps-the-cannabis-community-drops-kelloggs.

[15] American Civil Liberties Union, “Testing Chart,” aclu.org, accessed May 24,

2011,http://www.aclu.org/FilesPDFs/testing_chart .

[16] Michael Kaplan, “Want a Job at Google? Try These Brainteasers First,”CNNMoney.com, August 30,

2007,http://money.cnn.com/2007/08/29/technology/brain_teasers.biz2/index.htm.

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8.2 Wages

L E A R N I N G O B JE C T I V E S

1. Explore the limits of wage confidentiality.

2. Delineate the uses and ethics of wages as a work incentive.

Two Salary Issues Facing Managers

Two salary issues facing managers are wage confidentiality and the use of wages as a work incentive.

Starting with wage confidentiality, in the private sector it’s frequently difficult to discover what an

organization’s workers are paid. Because of freedom of information laws, many salaries in government

operations and contracting are available for public viewing, but in the private sector, there are no laws

requiring disclosure except in very specific circumstances.

The main ethical reason for keeping wage information concealed is the right to privacy: agreements struck

between specific workers and their companies are personal matters and will likely stay that way. Still,

ethical arguments can be mounted in favor of general disclosure. One reason is to defend against

managerial abuse. In a law firm, two paralegals may have similar experience, responsibilities, and

abilities. But Jane is single and living in a downtown apartment while John has just purchased a home

where his wife is living and caring for their newborn. Any boss worth his salt is going to see that Jane’s got

no local commitments and, who knows, she may just up and decide to spend a few months traveling, and

then make a run at living in some different city. Maybe she likes skiing and a few years in Denver don’t

sound bad. John, on the other hand, is tied down; he can’t just walk away from his job. He can always get

a new one, of course, but if money’s tight and a recession is on, there’s an incentive to raise Jane’s salary

to keep her and not worry so much about John who probably won’t be going anywhere anyway. That

seems to be taking unfair advantage of John’s personal situation, and it also seems like paying someone

for something beyond the quality of the work they actually do. But if no one knows what anyone else is

making, the boss may well get away with it.

Stronger, the boss may actually have an obligation to try to get away with it given his responsibility to

help the company maximize its success.

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Another argument against confidentiality is the general stand in favor of transparency, and in this case,

it’s transparency as a way of guaranteeing that ethical standards of equality are being met. Since the

signing of the Equal Pay Act in 1963, the ideal of “equal pay for equal work” has become a central business

ethics imperative in the United States. But it’s hard to know whether the equality is really happening

when no one knows how much anyone else is making.

Of course, workers do frequently know how much other people are getting. In an extreme case, if you’re

laboring in a union shop, it’s probable that your wage scale will be set identically to those of your

companions. Even if you’re not unionized, though, people still talk at the water cooler. The result is, in

practice, that some wage transparency is achieved in most places. From there, arguments can be mounted

for the expansion of that transparency, but in most cases, the weight of privacy concerns will carry the

day.

Another wage issue concerns its use to provide a work incentive. Many sales positions have the incentive

explicitly built in as the employees receive a percentage of the revenue they generate. (That’s why

salespeople at some department stores stick so close after helping you choose a pair of pants; they want to

be sure they get credit for the sale at checkout.) In other jobs, generating a motivation to work well isn’t

tremendously important. The late-night checkout guy at 7-Eleven isn’t going to get you out of the store

with cigarettes and a liter of Coke any faster just because his salary has been hiked a dollar an hour.

Between the two extremes, however, there are significant questions.

Probably, the main issue involving the use of wages as a carrot in the workplace involves clarity. It’s quite

common, of course, for managers to promise an employee or a team of workers a pay hike if they win a

certain account or meet productivity goals. Inevitably, the moment of the promise is warm and fuzzy—

everyone’s looking forward to getting something they want, and no one wants to sour things by

overbearingly demanding specifics. The problems come afterward, though, if the terms of the agreement

have been misunderstood and it begins to look like there’s an attempt to worm out of a promised salary

increase. It is management’s responsibility as the proposers of the accord to be sure the terms are clearly

stated and grasped all around:

 What, exactly, needs to be accomplished?

 How much, exactly, is the wage hike?

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The mirror image of promised wage hikes to encourage improved worker performance is the bonus paid

at year’s end to employees marking a job well done. In a letter to the editor of the Greensboro News-

Record in North Carolina, a teacher cuts to the central ethical problem of the bonus: on the basis of what

do some employees receive one while others don’t? Some teachers, the writer states, “at schools with high

‘at-risk’ populations and students coming from homes where education is just not valued, work

themselves into a tizzy every year, but because of the clientele they serve, will never see that bonus money.

Inversely, schools with middle-class clienteles have teachers who work hard, but also others who merely

go through the motions but usually can count on that bonus because their students come from homes that

think education matters. Where is the justice in this?”
[1]

It’s not clear where the justice is, but there’s no doubt that bonuses aren’t serving their purpose. The

problem here isn’t a lack of clarity. No one disputes that the rules for assigning a bonus are clear. The

problem is that the rules don’t seem to account for divergent working conditions and challenges.

The important point, finally, is that even though a bonus is extra money outside the basic salary structure,

that doesn’t mean it escapes the question, “Where’s the justice in this?,” coming with every decision about

who gets how much.

K E Y T A K E A W A Y S

 Wage confidentiality pits the right to privacy against the desire for, and benefits of, transparency.

 Wages and bonuses are used to provide a work incentive, but problems arise when the pay increments

don’t obviously align well with promises or with job performance.

R E V I E W Q U E ST I ON S

1. Why might a company want to maintain wage confidentiality?

2. What is an example of a payment bonus becoming disconnected from work performance?

[1] Bill Toth, “Entire State ABC Bonus System Unfair,” News-Record.com, Letters to the Editor, August 19, 2008,

accessed May 24, 2011, http://blog.news-record.com/opinion/letters/archives/2008/08/.

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8.3 Promoting Employees

L E A R N I N G O B JE C T I V E S

1. Distinguish criteria for promoting employees.

2. Locate and define ethical issues relating to promotion.

The Drinking Strategy

If you want a promotion, does going out for drinks with the crew from work help the cause? Here’s a blog

post; it’s about two uncles—one who goes drinking with the crew and one who doesn’t—and you’ll see why

the answer might be yes:

Look at my uncles, they both work for Ford and one has been in his position for 10-plus years and

still doesn’t have a company car, while my other uncle has a company car, increase salary, paid

training. Even though he comes home to my auntie blinded drunk in the end it’s all worth it if you

want to be noticed.
[1]

Get hammered to get promoted! Too good to be true? Probably.

But not entirely, the Reason Foundation commissioned a report on the question of whether drinkers earn

more money than nondrinkers.
[2]

The title “No Booze? You May Lose” pretty much tells what the study

concluded about the link between social drinking with workmates and promotions. A few things should be

noted, though. Drinking doesn’t mean coming home blind drunk every night; it just means taking down

alcohol in some amount. And the payoff isn’t huge, but it is respectable: about 10 percent pay advantage

goes to the wet bunch compared to those workers who stay dry. The really interesting result, though, is

that guys who drink in bars at least once a month get another 7 percent pay advantage on top of the 10

percent. The bad news for drinking women is that for them, going to the bars doesn’t seem to help.

So there are two findings. First, just drinking is better than not drinking for your wallet. Second, at least

for men, drinking socially at bars is even better. One of the study’s authors, Edward Stringham, an

economics professor at San José State University, comments on the second result: “Social drinking builds

social capital. Social drinkers are networking, building relationships, and adding contacts to their

Blackberries that result in bigger paychecks.”
[3]

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Now, going back to the blog comment about the drunken uncle, isn’t this more or less what the blogger

sees too? Here are the next lines from the entry:

No senior management wants to promote a boring old fart. They want outgoing people, in and

outside of work. They want social people. If you can display your social abilities to them, it means

that you want more than the 9am to 5pm, thank God, time to go home. They want people who

enjoy working with the company and the people who they work for.
[4]

That sounds reasonable, and it may explain why there’s some serious scientific evidence that partying

with the workmates does, in fact, lead to promotions in the company.

The link between lifting a glass and moving up may be solid, but is it right? From the worker’s side,

there’s not a lot you can do about the situation so you may want to leave some Thursday and Friday

evenings available for happy hour regardless of whether you think that’s the way promotions ought to be

arranged. From management side, however, there is a stark issue here. When you sit down to look at two

candidates in your company for one promotion, do you have a right to consider how well they mix after

hours? Do you have a duty or responsibility to consider it?

There are two issues:

1. Should you consider a worker’s party aptitude?

2. If you do, how should you manage it?

The reasons for not considering party ability are many. Two stand out. First, workers are being paid for

what they do from nine to five. That’s the job. If you’re going to start considering other things, then why

stop at parties? You could give the promotion to the better player on the company softball team, or the

one who’s got curlier hair, or whatever. Second, workers may not have an equal opportunity to party. The

guy who lives closer to work and isn’t married obviously holds an advantage over the guy who has diabetes

when gin and tonics become job qualifications.

On the other hand, when workmates gather after work to drink, what do they talk about? Well, work.

That’s why people say a new advertising campaign or a fresh product idea got scratched onto a napkin. It’s

not a metaphor. Further, the ability to labor together with others—teamwork—that’s a real job

qualification, and it’s reasonable to suppose that people who get along well drinking will carry the

camaraderie over to the next morning’s breakfast meeting (where coffee and tea are served). This explains

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why companies including Deloitte Consulting encourage and even to some extent pressure employees to

socialize outside the office.
[5]

Finally, it’s a hard call—there are reasonable arguments to be made on both sides. It’s also difficult to be

absolutely certain how the party qualification should be managed if it’s included in the performance

evaluation. On one hand, a strong case can be made for transparency and openness, for simply stating

that after-hours socializing is, in fact, a part of the job. To not inform workers, the argument goes, that

hanging out is a job requirement is really a form of lying: it’s dishonest because the default understanding

typical employees are going to have is that what counts in determining the quality of work is the work,

period. Whether the assigned task got outlined in a cubicle or on a bar stool is irrelevant. Therefore, any

manager who secretly totes up the social aptitude of the workers is not being honest about the way

workers are graded. It’s the equivalent of a college teacher assigning grades partially based on class

participation without listing that in the syllabus.

On the other hand, all teachers know that listing class participation as part of a student’s grade can lead to

brown nosing, and there’s a similar threat in the workplace: if employees are told to party, then at least a

few are going to tag along for drinks even when they really don’t want to go and end up souring the

evening for everyone. If you as a manager believe in honesty above all, then you may accept that cost. On

the other hand, if your vision of corporate responsibility dovetails more closely with profit maximization,

you may be able to build an ethical case around the idea that in the name of evaluating employees as

perfectly as possible some elements of that evaluation may have to remain close to the vest.

Three Considerations for Promotion: Work Performance, Seniority, Projected

Work Performance

When managing a promotion, there are three fundamental considerations; work performance is the most

obvious. The person most deserving to step up to a higher level of responsibility is the one who’s best

managed current responsibilities. This may be measured by accounts won, contributions to a larger

group, or some other work-related factor, but the key is that the measured performance be related with

the job.

The problem comes in determining exactly what that word related means. When read narrowly, it means

that the employee who looks best on paper—the one who’s written the best reports, achieved the highest

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sales, won the most cases—will be the most deserving. When read broadly, however, the range of

considerations can expand dramatically to include contributions having to do with personality, chemistry,

and other characteristics tangential to nine-to-five tasks. This is where questions about going out for

drinks after work start to gain traction and importance. Finally, it’s not clear that after-hours socializing

should be considered part of work performance, but the fact that it can be included shows how broad this

category is.

The second consideration when weighing a promotion is seniority. Seniority is preference for promotion

granted to the person who’s been with the company the longest. A strong or pure seniority system simply

reduces the choice to comparisons of time with the firm: the promotion goes to the longest-serving

employee. There’s a taste of fairness here since no one will be overlooked for a job because of a personal

conflict with the boss, or because he doesn’t smile enough at work, or because her skirt is too short or his

necktie too absurd or whatever. More, there’s an inherent tranquility in the fact that all employees know

exactly where they stand. The connected problem, obviously, is that good work is not directly rewarded.

This explains why the seniority system seems especially suited to production line jobs or any kind of labor

where experience is more important than analytic skills, high-level training, or creativity. If it’s true that

experience is what matters on a job, then a seniority system should produce promotions that more or less

dovetail with expertise and the ability to do a good job.

A weak seniority system considers time with the company as a positive element, but only as one

component in evaluating candidates for a promotion. The advantage of this kind of system is the

encouraging of worker loyalty. The retention of good workers is nearly the highest human resources

priority of any company, and rewarding seniority plus performance gives good workers a reason to stick

around. Equally important, it helps retain good, loyal workers without forcing the company to promote

old-timers who’ve never really learned to get the job done well.

The third promotion consideration is projected performance, which evaluates candidates in terms of what

they’ll be able to do in the future. A tool used by companies to groom young people for future leadership

roles, the escalation normally goes to highly qualified individuals currently working at a level beneath

their ability. For example, a health insurance company may hire a college graduate with a strong premed

profile and hope to keep that person out of medical school by pulling her up the career ladder at a crisp

rate. She simply doesn’t have the experience, however (no one does), to just start near the top. In order

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for her to play a leadership role in the future, she does need to be familiar with how the company works at

every level, including the lowest. That means spending some time on the front lines, say, manning

telephones, answering questions from (frequently frustrated or angry) customers. Of course it’s difficult to

really stand out in this kind of work, so if she’s going to move up, it’s going to have to be because she’s

expected to stand out at something more demanding later on.

Other employees are going to be tempted to resent the rapid ascension since many of them have done just

as well at the same job for a longer time. Within the narrow view of performance evaluation (your job

performance equals how well you do the work) their resentment is justified. The rule of equal treatment is

being severely broken. But if you’re in management, you have a responsibility to the company (and to

shareholders if the company is public) to be successful. And you need to face the problem that highly

educated and qualified young people have options. Arguably, retaining them is a higher priority—not just

financially but also ethically—than keeping more replaceable talent content.

K E Y T A K E A W A Y S

 Work performance is defined in diverse ways, and managers may have a right to consider after-hours

activities as part of that definition.

 Three common criteria for awarding promotions are seniority, work performance, and projected

performance. Each contains specific ethical tensions.

R E V I E W Q U E ST I ON S

1. Why might someone’s social skills be considered a factor in receiving a promotion?

2. What are some advantages and disadvantages of seniority promotion?

3. Why might a promotion be based on projected performance?

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[1] Maya, “Alcohol: Income Booster?,” Monster (blog), September 20, 2006, accessed May 24,

2011, http://monster.typepad.com/monsterblog/2006/09/alcohol_ income_.html.

[2] Bethany L. Peters and Edward Stringham, “No Booze? You May Lose,” Reason Foundation, September 1, 2006,

accessed May 24, 2011,http://reason.org/news/show/127594.html.

[3] Bethany L. Peters and Edward Stringham, “No Booze? You May Lose,” Reason Foundation, September 1, 2006,

accessed May 24, 2011,http://reason.org/news/show/127594.html.

[4] Maya, “Alcohol: Income Booster?,” Monster (blog), September 20, 2006, accessed May 24,

2011, http://monster.typepad.com/monsterblog/2006/09/alcohol_ income_.html.

[5] Deloitte Consulting: WetFeet Insider Guide (San Francisco: WetFeet), accessed May 24,

2011, http://www.wellesley.edu/Activities/homepage/consultingclub/wetfeet%20-%20deloitte_consulting .

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8.4 Firing

L E A R N I N G O B JE C T I V E S

1. Define legal guidelines on firing employees.

2. Elaborate justifiable reasons for deciding to fire.

3. Set standards for the actual firing process.

4. Consider ways of limiting the need to terminate employees.

Optimal Level Firing

A study funded by the CATO Institute and titled “The Federal Government Should Increase Firing Rate”

concludes this way: “The rate of ‘involuntary separations’ is only about one-fourth as high in the federal

government as in the private sector. No doubt private-sector firing is below optimal as well since firms are

under threat of expensive wrongful discharge lawsuits.”
[1]

There is, in other words, an optimal level for firing, and in both the public and private sectors it’s not

being met. People aren’t being fired enough.

The strictly economic question here is, “What is the optimal firing level?” No matter the answer, there’s an

ethical implication for the workplace: firing workers is a positive skill. For managers to perform well—for

them to serve the interest of their enterprise by maximizing workplace performance—the skills of

discharging employees must be honed and applied just like those of hiring and promoting.

On the ethical front, these are the basic questions:

 When can an employee be fired?

 When should an employee be fired?

 How should an employee be fired once the decision’s been made?

 What steps can management take to support workers in a world where firing is inevitable?

When Can an Employee Be Fired?

In the world of for-profit companies, most work contracts offer at-will employment. Within this scheme, a

clause is written into the contract offering employment only as long as the employer desires. Stated more

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aggressively, managers may discharge an employee whenever they wish and for whatever reason. Here’s a

standard version of the contractual language:

This is an “At Will” employment agreement. Nothing in Employer’s policies, actions, or this

document shall be construed to alter the “At Will” nature of Employee’s status with Employer,

and Employee understands that Employer may terminate his/her employment at any time for

any reason or for no reason, provided it is not terminated in violation of state or federal law.

The legal parameters for firing seem clear.

Things blur, however, once reality hits. As the Cato study authors note, simply the fear of a possible

lawsuit does impinge to some extent on the freedom to fire, especially when the discharged worker fits

into a protected group. This means older workers, foreigners, or disabled workers may protest that no

matter what reasons are given for termination—assuming some are given—the real reason is their age,

nationality, or disability. Further, gender protection may be claimed by women fired from largely male

companies and vice versa.

Another round of blurring occurs on the state level where legislation sometimes adds specific employee

protections, and so curtails employers’ rights. In Minnesota, for example, firing may not be based on a

worker’s participation in union activities or the performance of jury duty.

These varied and frequently changing legal protections are the reason managers are typically instructed to

keep detailed records of employee performance. If those can be produced to show a pattern of

incompetence or simply inadequate results, they can justify a dismissal before a judge, if it ever comes to

that.

Even though legal complexities mean managers are well advised to be careful about firing workers, and

it’s prudent to be sure that there are directly work-related reasons for the dismissal, none of that changes

the fact that at-will hiring gives wide latitude to the company, and fired workers are typically left with few

good avenues of protest. One way to see how tilted the table is toward the employer and away from the

employee is to compare the American at-will firing system with the European model, where a reasonable

cause for termination must be demonstrated. In the United States, employers may more or less fire

anyone for any reason, and the burden of showing the termination was illegal or unfair falls entirely on

the worker. In Europe, by contrast, the legal burden falls largely on the employer. Instead of the worker

having to show the firing was wrong, now the company has to show the firing was right. This is a big deal.

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It’s like the difference between innocent until proven guilty and guilty until proven

innocent. Just because firing means the company holds the burden of proof: it must demonstrate that the

worker wasn’t holding up his or her end of the employment contract. That’s a lot harder to do than just

producing some work evaluations to buttress the claim that she wasn’t fired because she’s Jewish or he

wasn’t let go because he’s Asian. As opposed to the European reality, the conclusion is, employees in the

United States hired at will have little recourse against a company that wants them out.

Finally, it’s worth noting that elements of just cause law have been working their way into the American

legal system in recent years.

When Should an Employee Be Fired?

Because the legal footing is usually more or less solid for American managers, the real hard questions

about terminating employees aren’t legal ones about what can’t be done but ethical ones about what

should be done.

Sometimes firing is unavoidable. Economic slowdowns frequently bring furloughs and terminations.

When the company’s books turn red, and after the entire easy cost cutting has been done, people need to

be cut. Who? There are three broad philosophies:

1. Inverted seniority

2. Workload

3. Recovery preparation

Inverted Seniority occurs when the last worker hired is the first released. This works especially well for

assembly-line-type labor where one worker can replace another easily. As long as replacement is possible,

dismissing the most recently hired allows clear and impersonal rules to make downsizing orderly.

Workload firings focus the pain of job cuts on that part of the company suffering most directly from a

falloff in business. An office furniture supply company may find its line of hospital products unaffected by

an economic downturn (people keep getting sick even if they don’t have a job) so layoffs are taken from

other divisions. This may mean losing workers with higher seniority or better job performance, but it

minimizes cash-flow disruption.

Recovery preparation takes the long view on an economic slowdown: firings and layoffs are executed not

so much to compensate for the present downturn but to sharpen the company for success when the

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economy bounces back. Staying with the office furniture supply company, the owner may see better long-

term opportunities for profits in the nonhospital units, so the downsizing may occur across the board. The

idea is to keep those slow-moving units at least minimally prepared to meet new demand when it

eventually comes.

Sometimes economic slowdowns don’t reflect a problem with the larger economy, they’re the result

of fundamental changes in the market, frequently brought on by technological advance. For example, the

popularization of digital photography has shrunk the market for old fashioned film. Seeing this coming,

what can a company like Kodak do? They’re probably going to let workers from the old film side go to

create room for new hires in the digital division. This is potentially unfair to terminated workers because

they may be doing exemplary work. Still, it would be unfair—and financially disastrous—to the company

as a whole to not change with the times.

Rank and yank is a management philosophy promoted by former General Electric Company CEO Jack

Welch. Every year, he counsels, the entire workforce should be ranked and the bottom 10 percent

(“There’s no way to sugarcoat this,” he says) should be fired to make room for new employees who may be

able to perform at a higher level. Here, the responsibility to the company is being weighed far heavier than

the one to the employee because, theoretically at least, those in the bottom 10 percent may be doing fine

on the job—fulfilling their responsibilities adequately—it’s just that others out there who could be hired to

replace them may do it better. In the hope they will, workers who’ve done nothing wrong are sacrificed.
[2]

There are two main criticisms of this practice. First, it’s a betrayal of employees who are fulfilling their

contractual obligations (they’re just not over performing as well as others). Second, it’s counterproductive

because it lowers morale by drowning workers in the fear that even though they’re doing what’s being

asked, they may end up in that dreaded bottom 10 percent.

Employee misbehavior is the least controversial reason to fire a worker. Here, the ethics are relatively

clear. Employees aren’t being mistreated when they’re dismissed because it’s their own actions that lead

to their end. Standard definitions of misbehavior include

 rudeness toward clients or customers,

 drinking or drugs on the job,

 theft of company property or using company property for personal business,

 frequent and unexplained absences from work,

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 entering false information on records,

 gross insubordination,

 fighting or other physical aggression,

 harassment of others (sexual, sexual orientation, religious, racial, and similar).

How Should an Employee Be Fired Once the Decision’s Been Made?

At the Friday all-staff meeting the office manager stands up to announce, “The good news is the following

people have not been fired!” He reads a list of seventeen names. There are nineteen people at the meeting.

That’s from a (perhaps unemployed) comic’s stand-up routine. Unfortunately, people have written into

the CNNMoney.com with real stories that aren’t so far removed:

 An employee received news of her firing in a curt letter delivered to her home by FedEx.

 A man tells of being halted at the building door by security and being humiliatingly sent away.

 People report that they arrived at their office to find the lock changed and their stuff thrown in a box

sitting on the floor.
[3]

All these are inhumane firings in the sense that no flesh and blood person took the trouble to present the

bad news.

It’s easy to understand why inhumane firings occur: not many people enjoy sitting down with someone

and telling them they’re out. So it’s tempting to yield to cowardice. Instead of facing the worker you’ve

fired, just drop a note, change the lock, and talk to security. On the ethical level, however, firing an

employee is no different from working with an employee: as a manager, you must balance your duties to

the company and the worker.

How can the manager’s duty to the organization be satisfied when terminating a worker? First, to the

extent possible, the fired person should leave with a positive impression of the organization. That means

treating the employee with respect. No mailed notices of termination, no embarrassing lockouts, just a

direct, eye-to-eye explanation are probably the most reliable rule of thumb.

Second, the terminated employee should not be allowed to disrupt the continued work of those who

remain. If deemed necessary, security personnel should be present to ensure the ex-worker leaves the

premises promptly. Also, if the worker is involved in larger projects, a time for severance should be found

when their contribution is minimal so that other members of the team will be able to carry on near

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normally. (It may be recommendable to arrange the termination to coincide with the finishing of a larger

project so that everyone may start fresh with the new, substitute employee.)

Third, the financial costs of the termination should be minimized. This means having clear reasons for the

termination and documents (pertaining to worker performance or behavior) supporting the reasons to

guard against lawsuits. Also, there should be clear understandings and prompt payment of wages for work

done, as well as reimbursements for travel expenses and the full satisfaction of all monetary obligations to

the employee. This will allow the human resources department to close the file.

With duties to the company covered, how can the manager’s duty to the employee be satisfied?

Consultants—both legal and ethical—typically share some bullet-point answers. First, the employee

should be addressed honestly and directly with a clear explanation for termination. Speak firmly, the

advice is; don’t waver or provide any kind of false hope. Further, the termination should not come as a

total surprise. Previous and clear indications should have been given concerning employee performance

along with specific directions as to what areas require improvement. Many companies institute a structure

of written warnings that clearly explain what the employee’s job is and why their work is not meeting

expectations.

Second, getting fired is embarrassing, and steps should be taken to minimize the humiliation. The

employee should be the first to know about the discharge. Also, the severance should occur in a private

meeting, not in view of other workers. To the extent possible, the employee should have an opportunity to

say good-bye to workmates or, if this is the preference, to leave discreetly. For this reason, a meeting late

in the day may be chosen as the appropriate time for notice to be given.

Third, to the extent possible and within the boundaries of the truth, an offer should be extended to

provide a recommendation for another job.

Fourth, make sure the employee gets all the money coming for work done, without having to jump

through hoops.

What Steps Can Management Take to Support Workers in a World Where Firing

Is Inevitable?

One response to the inescapable reality that firing happens is preemptive; it’s to reduce the moral

uncertainty and hardship before they arise. Two strategies serve this purpose: actions can be

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implemented to minimize the occasions when firing will be necessary, and steps can be taken to reduce

the severity of the firing experience for employees when it happens.

In her book Men and Women of the Corporation, Rosabeth Moss Kanter generates a list of measures that

corporations use to diminish firings, and reduce the professional impact for those who are let go. Here’s

an abbreviated selection of her recommendations, along with a few additions:

 Recruit for the potential to increase competence, not simply for narrow skills to fill today’s slots.

 Rotate assignments: allow workers to expand their competence.

 Retrain employees instead of firing them.

 Offer learning opportunities and seminars in work-related fields.

 Subsidize employee trips to work-related conferences and meetings.

 Provide educational sabbaticals for employees who want to return to school.

 Encourage independence and entrepreneurship: turn every employee into a self-guided professional.

 Keep employees informed of management decisions concerning the direction of the company: What units

are more and less profitable? Which ones will grow? Which may shrink?

 Ensure that pensions and benefits are portable.
[4]

K E Y T A K E A W A Y S

 At-will firing grants employers broad legal latitude to discharge employees, but it does not erase ethical

concerns.

 Justifiable worker firings include cases where workers bear none, some, or all of the blame for the

discharge.

 The act of firing a worker requires managers to weigh responsibilities to the organization and to the ex-

employee.

 Steps can be taken to limit the need for, and effects of, employee discharge.

R E V I E W Q U E ST I ON S

1. What’s the difference between at-will and just cause firing?

2. How might fundamental changes in the marketplace require a company to fire workers?

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3. What is rank and yank?

4. When managers fire employees, what duties do they hold to the organization, and what are the duties to

the dismissed worker?

5. What are some steps organizations can take to protect their workers from the effects of discharge if firing

becomes necessary?

[1] Chris Edwards and Tad DeHaven, “Federal Government Should Increase Firing Rate,” Cato Institute, Tax and

Budget, no. 10 (November 2002), accessed May 24, 2011,http://www.cato.org/pubs/tbb/tbb-0211-10 .

[2] Allan Murray, “Should I Rank My Employees?,” Wall Street Journal, accessed May 24,

2011, http://guides.wsj.com/management/recruiting-hiring-and-firing/should-i- rank-my-employees.

[3] “Worst Ways to Get Fired,” CNNMoney.com, September 6, 2006, accessed May 24,

2011, http://money.cnn.com/blogs/yourturn/2006/09/worst-ways-to-get-fired.html.

[4] List adapted from Rosabeth Moss Kanter, Men and Women of the Corporation (New York: Basic Books, 1993),

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8.5 Case Studies

Fashionable

In her blog Love This, MJ (full name not provided) relates that she’s been an aspiring clothes designer

since she started sewing tops for her Barbie dolls. Things weren’t going well, though, as she tries to break

into the industry. One thing she notices is that there aren’t a lot of female fashion designers out there—

Vera Wang, Betsey Johnson, and a few more. Not many. So she starts trying to figure it out with questions

like these:

 Do women want straight guy designers to dress them because they dress to please the men? It could make

sense: what that designer likes, the man in her life is going to love too.

 Do women prefer gay men to dress them because gay men are their new girlfriends? Gay men are usually

more receptive to trends and physical appearances too.

 Do women prefer women designers because she knows a woman’s body better?

 Do men have the same issue? Do some men prefer a lesbian designer? Would they balk at being dressed

by a gay designer?
[1]

Q U E ST I ON S

1. Assume MJ is right when she hypothesizes that most women like straight male designers because straight

guys are the ones they’re trying to impress, so they want clothes straight guys like. Now imagine you’ve

been put in charge of a new line of women’s clothes. Your number one task: sales success. You’ve got five

applicants for the job of designing the line. Of course you could just ask them all about their sexual

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orientation(s), but that might leave you open to a discrimination lawsuit. So could you devise a test for

new applicants that’s fair—that gives everyone an equal chance—but still meets your requirement of

finding someone who produces clothes that straight guys get excited about?

2. Four standard filters for job applicants are

o education level,

o high-risk lifestyle,

o criminal record,

o flamboyant presence in social media.

Which of these might be used to winnow out applications for a job as a clothes designer? Explain

in ethical terms.

3. MJ wonders whether women might prefer women designers because she knows a woman’s body better. Is

there a bona fide occupational qualification for a women’s fashion company to hire only women

designers? Is there a difference between a BFOQ based on sex and one based on sexual orientation?

4. MJ asks, “Do women prefer gay men to dress them because gay men are their new girlfriends?” Assume

you think there’s something to this. Could you design a few behavioral interview questions that test the

applicants’ ability to become girlfriends (in the sense that MJ means it) with their clients? Would these be

ethically acceptable interviews, or do you believe there’s something wrong and unfair about them?

God at Work

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The University of Charleston is a private, nonreligious institution with a very particular job opening: the

Herchiel and Elizabeth Sims “In God We Trust” Chair in Ethics. According to the job description, the

successful candidate for this job as a professor “must embrace a belief in God and present moral and

ethical values from a God-centered perspective.”
[2]

Q U E ST I ON S

1. You’re in charge of getting applicants for this post and you’ve got a small advertising budget. What ethical

responsibilities should you consider when determining where to place the ad? How broadly should you

advertise the position?

2. According to Erwin Chemerinsky, a law professor at Duke University, “The description that

‘candidates must embrace a belief in God and present moral and ethical values from a God-

centered perspective,’ violates the Civil Rights Act as religious discrimination in

employment.”
[3]

Imagine you’re in charge of every step of the process of filling this job. How

could you respond in terms of

o bona fide occupational qualifications (BFOQs),

o testing,

o interviewing?

3. You’re the university president. The person who currently holds the In God We Trust

Professorship has, by all accounts, been doing a mediocre to poor (but not directly unacceptable)

job. One day you happen to trip across the person’s blog page and notice that your professor

claims to be a sadist and practices a mild form of devil worship (also, the prof’s favorite movie

is The Omen). Right now the In God We Trust Professor of ethics is down the hall lecturing to

seventy-five undergrads. You sneak to the door and listen from outside. The professor sounds just

like always: dull and passionless, but the talk is about the Bible, and nothing’s being said that

seems out of line with the job description. Still, you decide to terminate the relationship.

o In a pure at-will working environment, you can just fire the professor. But imagine you want to

demonstrate just cause. How does this change the way you approach the situation? What would

your just causes be?

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o The professor’s classes are passionless because he doesn’t believe in what he’s teaching. Still, his

teachings are not directly wrong. Does this case show why a manager may be ethically required in

certain situations to implement a strategy of rank and yank?

Explain.

Testing Baseball Players’ DNA

The New York Times reports that there’s a “huge difference between sixteen and nineteen years old,”

when you’re talking about prospects for professional baseball. A kid whose skills knock your socks off for a

sixteen-year-old just looks modestly good when he practices with nineteen-year-olds.
[4]

This is a significant problem in the Dominican Republic, which produces excellent baseball players but

little in the way of reliable paperwork proving who people really are and when they were born. The

Cleveland Indians learned all about that when they gave a $575,000 bonus to a seventeen-year-old

Dominican named Jose Ozoria, only to later find out he was actually a twenty-year-old named Wally

Bryan.

This and similar cases of misidentification explain why baseball teams are starting to apply genetic tests to

the prospects they’re scouting. Typically, the player is invited to provide a DNA sample from himself and

his parents to confirm that he’s no older than he claims. The player pays for the test and is reimbursed if

the results show he was telling the truth.

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Q U E ST I ON S

1. Many experts in genetics consider testing an unethical violation of personal privacy.

o What does it mean to “violate personal privacy”?

o Can a utilitarian argument (the greatest good for the greatest number should be sought) in favor

of DNA testing in the Dominican Republic be mounted? What could it look like?

2. In the baseball world, other tests that clearly are allowed as part of the hiring process include testing a

player’s strength and speed. Is there anything in the fair application of these tests that may ethically

allow—even require—that baseball teams extract DNA to confirm the age?

3. Assume you accept that testing a prospect’s age is a bona fide occupational qualification (after all,

the job is to be a prospect: a developing player, not an adult one). Once you accept that, how do

you draw the line? Couldn’t teams be tempted to use DNA facts for other purposes?

The Times article interviews a coach who puts it this way:

I know [the baseball teams taking the DNA samples] are looking into trying to figure out

susceptibility to injuries, things like that. If they come up with a test that shows someone’s

connective tissue is at a high risk of not holding up, can that be used? I don’t know.
[5]

Can you formulate an ethical argument in favor of teams secretly using DNA tests to do just that,

check for as many yellow and red flags as possible in the young prospect’s genetic code?

4. Baseball scouting—the job of hiring excellent future players and screening out mediocre ones—is very

competitive. Those who do it well are paid well; those who don’t are cycled out quickly to make room for

someone else. You have the job, you have the DNA sample. What do you do? Why?

5. You decide to do the test in question four. The problem is people aren’t trees; you can’t age them

just by counting genetic rings—you also need to do some cross-testing with the parents’ DNA. You

do that and run into a surprise: it turns out that the young prospect’s father who’s so proud of his

athletic son isn’t the biological dad. Now what?

o Is there an argument here against DNA testing, period? What is it?

o Remember, the family paid for the test. Do you have a responsibility to give them these results?

Explain.

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6. Lou Gehrig was the first athlete ever to appear on a box of Wheaties. From 1925 to 1939 he played for the

Yankees in every game: 2,130 straight appearances, a record that lasted more than fifty years. He was

voted into the baseball Hall of Fame in 1939. He died in 1941 from a genetic disorder—yes, Lou Gehrig’s

disease—that today’s DNA tests would identify. Is there an ethical argument here against DNA testing of

prospects or one in favor? Or is the argument about this more theoretical—should the rules be decided

regardless of what has actually happened at some time or place? Explain.

7. In a different sport, the sprinter Caster Semenya won the world eight-hundred-meter challenge in 2009

with a time that few men could equal. She looked, in fact, vaguely like a man, which led the International

Athletics Federation to run a genetic gender test. She is, it turns out, neither a woman nor a man; she’s a

hermaphrodite: a little bit of both. Does the fact that genetic tests don’t always return clean, black-and-

white results make their use less advisable from an ethical perspective? Why or

why not?

Windfall at Goldman

Goldman Sachs is an expansive financial services company. Many clients are institutional: private

companies and government organizations wanting to raise cash seek Goldman’s help in packaging and

then selling stock or bonds. On the other side, private investors—wealthy individuals wanting to multiply

their riches—receive a hearty welcome at Goldman because they have the cash to purchase those stocks

and bonds. Ultimately, Goldman Sachs is a hub where large companies, governmental powers, and

wealthy people come and do business together.

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Executives at Goldman Sachs are among the world’s highest paid. According to a New York Times article,

“At the center of Goldman’s lucrative compensation program is the partnership. Goldman’s partners are

its highest executives and its biggest stars. Yet while Goldman is required to report compensation for its

top officers, it releases very little information about this broader group, remaining tightlipped about even

basic information like who is currently a partner.”
[6]

The rest of the article investigates this shadowy partnership. The conclusions: “Goldman has almost 860

current and former partners. In the last 12 years, they have cashed out more than $20 billion in Goldman

shares and currently hold more than $10 billion in Goldman stock.”

This tally of accumulated wealth in Goldman stock doesn’t even include the standard salary and cash

bonuses the partners receive, but leaving that aside, here’s the math: $30 billion divided by 860 divided

by 12 should give some sense of the wealth each of these corporate stars is accumulating over the course of

a year. To give a provisional idea of how large the number of dollars is here, when you try plugging $30

billion into an iPhone calculator, you find the screen can’t even hold a number that long. Using a different

calculator yields this result: $2.9 million per partner every year.

The 2.9 million can be compared with the salary earned by the average American: $50,000 a year. The

Goldman partner gets that in less than a week. This huge money explains the clawing fight that goes on

inside Goldman to become a partner. The odds are long. Each time the books are opened to admit a new

class, only 1 of 330 Goldman employees makes the cut. It is, in the words of one former partner, “a very

Darwinian, survival-of-the-fittest firm.”

In the public comments section of the New York Times story about Goldman, a person identified as GHP

picks up on the firm’s characterization as a “Darwinian, survival-of-the-fittest” place. He wrote, “The

French revolution was also very Darwinian, let’s give that a try.” During the French Revolution, the

wealthy and powerful were rewarded with a trip to the guillotine.

Probably, GHP isn’t just annoyed about how much money executives at Goldman make, he, like a lot of

people, is peeved by the fact that the company was bailed out by the federal government during the 2008–

9 financial crisis. Had the taxpayers (people making $50,000) not kicked in, Goldman might’ve gone

bankrupt, and all that money its partners accumulated in stock would’ve vanished. As it happens, the US

government’s bailout was masterminded by US Treasury Secretary Henry Paulson. His previous job was

CEO (and partner) at Goldman.

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Q U E ST I ON S

1. Goldman is dominated by a “Darwinian, survival-of-the-fittest” mentality. What does that mean?

o In ethical terms, how can this mentality be justified?

o Would a company dominated by this mentality, whether it’s Goldman or not, be more likely to

announce job openings to a limited public, or as a massive public announcement? Why?

2. Describe the advantages of a “behavioral interview.” If you were in charge of hiring for a company seeking

employees who flourish in a survival-of-the-fittest environment, what kind of question might you ask in a

behavioral interview? Why?

3. One contributor to the New York Times comments section writes, “There are sure to be lots of

pointed, angry posts about how unfair it is that these guys make so much money etc. But if we are

honest, there is a fair amount of envy and pure remorse that we weren’t bright enough to go

down that path! And these guys are very bright.”

How could these comments be construed to explain why high wages and big bonuses are used by

Goldman to motivate its workers? What is it that makes big money (or the possibility of big

money) function as a powerful motivator to encourage employees to work hard and well?

Ethically, how can this use of big money be justified?

4. One difference between offering an employee a wage increase and offering a bonus is that the

latter doesn’t come automatically the next year. The employee has to earn it from scratch all over

again.

o Why might managers at Goldman award their best workers with a bonus instead of a wage

increase?

o By appeal to an ethical theory, could you make the case that, in general, employees should be

paid mainly through a bonus system? How would the theory work at two extremes: wealthy

Goldman executives and waitresses at a corner diner?

5. Given the kind of work that’s done at Goldman—bringing wealthy people and powerful organizations

together to make deals—why might party aptitude (the ability to mix socially after hours) be considered

when deciding who does and who doesn’t make partner at Goldman? How could that decision be justified

ethically? How could it be criticized ethically?

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6. Make the case that in theoretical terms, managers at Goldman have an ethical responsibility to institute

the process of rank and yank.

The Five O’Clock Club

A Washington Post story about firing employees relates that some companies use “the surgical method:

terminations that last about 15 seconds, after which former employees are ushered off company

property.”
[7]

It doesn’t have to be that way, though. For about $2,000 per fired employee, the outplacement company

Five O’Clock Club will help employers manage the actual termination moment more compassionately.

Later on, the fired worker receives a year of career coaching to help get back on track.

What do the Five O’Clock Club recommend managers do at the critical moment when giving the bad

news? To answer, according to the Post, they offer a booklet titled How to Terminate Employees While

Respecting Human Dignity, which “asks managers to approach layoffs with the understanding that,

‘unlike facilities and equipment, humans have an intrinsic worth beyond their contribution to the

organization.’”
[8]

Then some catchphrases are provided for managers to use:

 George, you’ve been a trooper. I’m sorry that this organization has moved in a different direction.

 George, you have made many good friends here. We hope those friendships will continue.

 George, you have made considerable and long-lasting contributions and they are acknowledged and

appreciated.
[9]

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Five O’Clock Club vice president Kim Hall—who downs a lot of Tylenol and coffee on the job—relates

several other phrases that may be helpful:

 I know this is hard, but you’ll get back on your feet.

 The timing could actually work in your favor. A lot of people take vacation in the summer. There’s no

competition for job hunters.

 Maybe this is a chance to begin your dream career. Follow your heart.
[10]

In sum, the Five O’Clock Club helps workers feel better when they’re fired, and helps them get on with

their lives. Meanwhile, employers get a hedge against lawsuits. The outplacement service, according to the

Five O’Clock Club literature, “can redirect anger or anxiety away from the organization and…encourage

the newly-fired to sign their severance agreements so they can get on with their lives.”
[11]

Q U E ST I ON S

1. The Five O’Clock Club charges $2,000 per firing. If you were fired, would you prefer to receive the

compassionate end the Five O’Clock Club provides, or just get shown the door but also get to keep

that $2,000 for yourself?

o If you’re the boss, do you have the right to decide this for the fired employee? Why or why not?

o If you’re the boss, do you have the responsibility to decide this for the fired employee? Why or

why not?

2. According to the Five O’Clock Club, “Unlike facilities and equipment, humans have an intrinsic

worth beyond their contribution to the organization.”

o Does this sound like utilitarian ethical thinking to you, or is it more in line with the notion of an

ethics guided by basic duties and rights? Why?

o Probably, everyone agrees that humans aren’t just machines that can be installed and replaced.

But can an ethical argument be made to treat people in the workplace as machines—that is, to

abruptly hire them when they’re useful and fire them when they’re not? What ethical theory (or

theories) could help you make the case?

3. In general terms, here are three firing situations:

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o an economic downturn (good workers are sacked because the company can’t afford to keep

them)

o rank and yank (workers are fulfilling their duties but not as well as most of the others)

o misbehavior (a worker is fired directly because of something done or not done)

Looking at these three contexts and the Five O’Clock Club, do you think their services should be

hired in all three situations? Do the ethics of firing change depending on why the person is being

fired? Explain.

4. Recall some of the Five O’Clock Club’s pre-packed firing sentences:

o George, you’ve been a trooper. I’m sorry that this organization has moved in a different direction.

o George, you have made many good friends here. We hope….

o George, you…are acknowledged and appreciated.

o Maybe this is a chance to begin your dream career. Follow your heart.

The contrasting method of firing employees—the surgical method—is to look the person in the

eye, say you’re fired, and have security march the ex-employee out the door, all in less than a

minute.

o Is it possible to make the case that the surgical method is actually more compassionate and

respectful?

o Is there a place for compassion in business? From a manager’s perspective, how should

compassion be defined within a business context?

5. Maybe the Five O’Clock Club gets hired because a company really wants to help and support fired

employees. Or maybe the company doesn’t really care about them; all they want is to avoid wrongful

termination lawsuits. Ethically, does it matter why the company contracts the Five O’Clock Club? Explain.

[1] “Sexual Orientation in the Fashion Industry,” Love This! (blog), accessed May 24,

2011,http://lovethis.wordpress.com/2007/07/28/sexual-orientation-in-the-fashion-industry.

[2] Rob Capriccioso, “Divinely Inspired Bias?,” Higher Ed, March 1, 2006, accessed May 24,

2011, http://www.insidehighered.com/news/2006/03/01/charleston.

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[3] Rob Capriccioso, “Divinely Inspired Bias?,” Higher Ed, March 1, 2006, accessed May 24,

2011, http://www.insidehighered.com/news/2006/03/01/charleston.

[4] Michael S. Schmidt and Alan Schwarz, “Baseball’s Use of DNA Raises Questions,” New York Times, July 21, 2009,

accessed May 24, 2011,http://www.nytimes.com/2009/07/22/sports/baseball/22dna.html?hp.

[5] Michael S. Schmidt and Alan Schwarz, “Baseball’s Use of DNA Raises Questions,” New York Times, July 21, 2009,

accessed May 24, 2011,http://www.nytimes.com/2009/07/22/sports/baseball/22dna.html?hp.

[6] Susanne Craig and Eric Dash, “Study Points to Windfall for Goldman Partners,” New York Times, January 18,

2011, accessed May 24, 2011,http://dealbook.nytimes.com/2011/01/18/study-points-to-windfall-for-goldman-

partners/?hp.

[7] Eli Saslow, “The Art of Letting Employees Go,” Washington Post, August 9, 2009, accessed May 24,

2011, http://www.washingtonpost.com/wp-

dyn/content/article/2009/08/08/AR2009080802659.html?hpid=topnews.

[8] Eli Saslow, “The Art of Letting Employees Go,” Washington Post, August 9, 2009, accessed May 24,

2011, http://www.washingtonpost.com/wp-
dyn/content/article/2009/08/08/AR2009080802659.html?hpid=topnews.

[9] Eli Saslow, “The Art of Letting Employees Go,” Washington Post, August 9, 2009, accessed May 24,

2011, http://www.washingtonpost.com/wp-
dyn/content/article/2009/08/08/AR2009080802659.html?hpid=topnews.

[10] Eli Saslow, “The Art of Letting Employees Go,” Washington Post, August 9, 2009, accessed May 24,

2011, http://www.washingtonpost.com/wp-
dyn/content/article/2009/08/08/AR2009080802659.html?hpid=topnews.

[11] Eli Saslow, “The Art of Letting Employees Go,” Washington Post, August 9, 2009, accessed May 24,

2011, http://www.washingtonpost.com/wp-
dyn/content/article/2009/08/08/AR2009080802659.html?hpid=topnews.

• Structure Bookmarks

Chapter 8: Manager’s Ethics: Getting, Promoting, and Firing Workers
Chapter 8: Manager’s Ethics: Getting, Promoting, and Firing Workers
Chapter 8: Manager’s Ethics: Getting, Promoting, and Firing Workers
Chapter 8: Manager’s Ethics: Getting, Promoting, and Firing Workers
from The Business Ethics Workshop was adapted by Saylor Academy and is available under a
Creative Commons Attribution-NonCommercial-ShareAlike 3.0 Unported
Creative Commons Attribution-NonCommercial-ShareAlike 3.0 Unported
license without attribution as requested by the work’s original creator or licensor.

Chapter3: Theories of Consequence Ethics: Traditional Tools for Making Decisions in Business

when the Ends Justify

the Means

from The Business Ethics Workshop was adapted by Saylor

Academy and is available under a Creative Commons Attribution-NonCommercial-ShareAlike 3.0

Unported license without attribution as requested by the work’s original creator or licensor.

UMGC has modified this work and it is available under the original license.

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Chapter 3

Theories of Consequence Ethics: Traditional Tools for
Making Decisions in Business when the Ends Justify

the Means

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Chapter Overview

Chapter 3 “Theories of Consequence Ethics: Traditional Tools for Making Decisions in Business when the

Ends Justify the Means” examines some theories guiding ethical decisions in business. It considers ethics

that focuses on the consequences of what is done instead of prohibiting or allowing specific acts.

3.1 What Is Consequentialism?

L E A R N I N G O B J E C T I V E

1. Define consequentialism in ethics.

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Consequentialism Defined

What’s more important in ethics—what you do or what happens afterward because of what you did?

People who believe ethics should be about what happens afterward are labeled consequentialists. They

don’t care so much about your act; they want to know about the consequences.

If someone asks, “Should I lie?,” one answer is, “No, lying’s wrong. We all have a duty not to lie and

therefore you shouldn’t do it, no matter what.” That’s not the consequentialist answer, though.

Consequentialists will want to know about the effects. If the lie is about Bernie Madoff assuring everyone

that he’s investing clients’ money in stocks when really he plans to steal it, that’s wrong. But if a

defrauded, livid, and pistol-waving client tracks Madoff down on a crowded street and demands to know

whether he’s Bernie Madoff, the ethically recommendable response might be, “People say I look like him,

but really I’m Bill Martin.” The question, finally, for a consequentialist isn’t whether or not I should lie,

it’s what happens if I do and if I don’t?

Since consequentialists are more worried about the outcome than the action, the central ethical concern

is what kind of outcome should I want? Traditionally, there are three kinds of answers: the utilitarian,

the altruist, and the egoist. Each one will be considered in this chapter.

K E Y T A K E A W A Y

 Consequentialist ethicists focus on the results of what you do, not what you do.

R E V I E W

Q U E S T I O N S

1. Under what scenario could a consequentialist defend the act of stealing?

2. Could a consequentialist recommend that a toy company lie about the age level a toy is designed for?

What would be an example?

3.2 Utilitarianism: The Greater Good

L E A R N I N G O B J E C T I V E S

1. Define utilitarian ethics.

2. Show how utilitarianism works in business.

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3. Distinguish forms of utilitarianism.

4. Consider advantages and drawbacks of utilitarianism.

The College Board and Karen Dillard

“Have you seen,” the blog post reads, “their parking lot on a Saturday?”
[1]

Its packed. The lot belongs to

Karen Dillard College Prep (KDCP), a test-preparation company in Dallas. Like the Princeton Review,

they offer high schoolers courses designed to boost performance on the SAT. Very little real learning goes

on in these classrooms; they’re more about techniques and tricks for maximizing scores. Test takers

should know, for example, whether a test penalizes incorrect answers. If it doesn’t, you should take a few

minutes at each section’s end to go through and just fill in a random bubble for all the questions you

couldn’t reach so you’ll get some cheap points. If there is a penalty, though, then you should use your time

to patiently work forward as far as you can go. Knowing the right strategy here can significantly boost

your score. It’s a waste of brain space, though, for anything else in your life.

Some participants in KDCP—who paid as much as $2,300 for the lessons—definitely got some score

boosting for their money. It was unfair boosting, however; at least that’s the charge of the College Board,

the company that produces and administers the SAT.

Here’s what happened. A KDCP employee’s brother was a high school principal, and he was there when

the SATs were administered. At the end of those tests, everyone knows what test takers are instructed to

do: stack the bubble sheets in one pile and the test booklets in the other and leave. The administrators

then wrap everything up and send both the answer sheets and the booklets back to the College Board for

scoring. The principal, though, was pulling a few test booklets out of the stack and sending them over to

his brother’s company, KDCP. As it turns out, some of these pilfered tests were “live”—that is, sections of

them were going to be used again in future tests. Now, you can see how getting a look at those booklets

would be helpful for someone taking those future tests.

Other stolen booklets had been “retired,” meaning the specific questions inside were on their final

application the day the principal grabbed them. So at least in these cases, students taking the test-prep

course couldn’t count on seeing the very same questions come exam day. Even so, the College Board

didn’t like this theft much better because they sell those retired tests to prep companies for good money.

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When the College Board discovered the light-fingered principal and the KDCP advantage, they launched a

lawsuit for infringement of copyright. Probably figuring they had nothing to lose, KDCP sued back.
[2]

College Board also threatened—and this is what produced headlines in the local newspaper—to cancel the

scores of the students who they determined had received an unfair advantage from the KDCP course.

As Denton Record-Chronicle reported (and as you can imagine), the students and their families freaked

out.
[3]

The scores and full application packages had already been delivered to colleges across the country,

and score cancellation would have amounted to application cancellation. And since many of the students

applied only to schools requiring the SAT, the threat amounted to at least temporary college cancellation.

“I hope the College Board thinks this through,” said David Miller, a Plano attorney whose son was

apparently on the blacklist. “If they have a problem with Karen Dillard, that’s one thing. But I hope they

don’t punish kids who wanted to work hard.”

Predictably, the episode crescendo with everyone lawyered up and suits threatened in all directions. In the

end, the scores weren’t canceled. KDCP accepted a settlement calling for them to pay $600,000 directly to

the College Board and provide $400,000 in free classes for high schoolers who’d otherwise be unable to

afford the service. As for the principal who’d been lifting the test booklets, he got to keep his job, which

pays about $87,000 a year. The CEO of College Board, by the way, gets around $830,000.
[4]

KDCP is a

private company, so we don’t know how much Karen Dillard or her employees make. We do know they

could absorb a million-dollar lawsuit without going into bankruptcy. Finally, the Plano school district in

Texas—a well-to-do suburb north of Dallas—continues to produce some of the nation’s highest SAT score

averages.

One Thief, Three Verdicts

Utilitarianism is a consequentialist ethics—the outcome matters, not the act. Among those who focus on

outcomes, the utilitarian’s distinguishing belief is that we should pursue the greatest good for the

greatest number. So we can act in whatever way we choose—we can be generous or miserly, honest or

dishonest—but whatever we do, to get the utilitarian’s approval, the result should be more people

happier.

If that is the result, then the utilitarian needs to know nothing more to label the act ethically

recommendable. (Note: Utility is a general term for usefulness and benefit, thus the theory’s name. In

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everyday language, however, we don’t talk about creating a greater utility but instead a greater good or

happiness.)

In rudimentary terms, utilitarianism is a happiness calculation. When you’re considering doing

something, you take each person who’ll be affected and ask whether they’ll end up happier, sadder, or it

won’t make any difference. Now, those who won’t change don’t need to be counted. Next, for each person

who’s happier, ask, how much happier? Put that amount on one side. For each who’s sadder, ask, how

much sadder? That amount goes on the other side. Finally, add up each column and the greater sum

indicates the ethically recommendable decision.

Utilitarian ethics function especially well in cases like this: You’re on the way to take the SAT, which will

determine how the college application process goes (and, it feels like, more or less your entire life). Your

car breaks down and you get there very late and the monitor is closing the door and you remember

that…you forgot your required number 2 pencils. On a desk in the hall you notice a pencil. It’s gnawed and

abandoned but not yours. Do you steal it? Someone who believes it’s an ethical duty to not steal will

hesitate. But if you’re a utilitarian you’ll ask: Does taking it serve the greater good? It definitely helps you

a lot, so there’s positive happiness accumulated on that side. What about the victim? Probably whoever

owns it doesn’t care too much. Might not even notice it’s gone. Regardless, if you put your increased

happiness on one side and weigh it against the victim’s hurt on the other, the end result is almost certainly

a net happiness gain. So with a clean conscience you grab it and dash into the testing room. According to

utilitarian reasoning, you’ve done the right thing ethically (assuming the pencil’s true owner isn’t coming

up behind you in the same predicament).

Pushing this theory into the KDCP case, one tense ethical location is the principal lifting test booklets and

sending them over to his brother at the test-prep center. Everything begins with a theft. The booklets do

in fact belong to the College Board; they’re sent around for schools to use during testing and are meant to

be returned afterward. So here there’s already the possibility of stopping and concluding that the

principal’s act is wrong simply because stealing is wrong. Utilitarian’s, however, don’t want to move so

quickly. They want to see the outcome before making an ethical judgment. On that front, there are two

distinct outcomes: one covering the live tests, and the other the retired ones.

Live tests were those with sections that may appear again. When students at KDCP received them for

practice, they were essentially receiving cheat sheets. Now for a utilitarian, the question is, does the

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situation serve the general good? When the testing’s done, the scores are reported, and the college

admissions decisions made, will there be more overall happiness then there would’ve been had the tests

not been stolen? It seems like the answer has to be no. Obviously those with great scores will be smiling,

but many, many others will see their scores drop (since SATs are graded on a curve or as a percentile). So

there’s some major happiness for a few on one side balanced by unhappiness for many on the other. Then

things get worse. When the cheating gets revealed, the vast majority of test takers who didn’t get the edge

are going to be irritated, mad, or furious. Their parents too. Remember, it’s not only admission that’s at

stake here but also financial aid, so the students who didn’t get the KDCP edge worry not only that maybe

they should’ve gotten into a better school but also that they end up paying more too. Finally, the colleges

will register a net loss: all their work in trying to admit students on the basis of fair, equal evaluations gets

thrown into

question.

Conclusion. The theft of live tests fails the utilitarian test. While a few students may come out better off

and happier, the vast majority more than balances the effect with disappointment and anger. The greater

good isn’t served.

In the case of the theft of “retired” tests where the principal forwarded to KDCP test questions that won’t

reappear on future exams, it remains true that the tests were lifted from the College Board and it remains

true that students who took the KDCP prep course will receive an advantage because they’re practicing the

SAT. But the advantage doesn’t seem any greater than the one enjoyed by students all around the nation

who purchased prep materials directly from the College Board and practiced for the exam by taking old

tests. More—and this was a point KDCP made in their countersuit against the College Board—stealing the

exams was the ethically right thing to do because it assured that students taking the KDCP prep course

got the same level of practice and expertise as those using official College Board materials. If the tests

hadn’t been stolen, then wouldn’t KDCP kids be at an unfair disadvantage when compared with others

because their test practices hadn’t been as close to the real thing as others got? In the end, the argument

goes, stealing the tests assured that as many people as possible who took prep courses got to practice on

real exams.

Conclusion. The theft of the exams by the high school principal may conceivably be congratulated by a

utilitarian because it increases general happiness. The students who practiced on old exams purchased

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from the College Board can’t complain. And as for those students at KDCP, their happiness increases since

they can be confident that they’ve prepared as well as possible for the SAT.

The fact that a utilitarian argument can be used to justify the theft of test booklets, at least retired ones,

doesn’t end the debate, however. Since the focus is on outcomes, all of them have to be considered. And

one outcome that might occur if the theft is allowed is, obviously, that maybe other people will start

thinking stealing exam books isn’t such a bad idea. If they do—if everyone decides to start stealing—it’s

hard to see how anything could follow but chaos, anger, and definitely not happiness.

This discussion could continue as more people and consequences are factored in, but what won’t change is

the basic utilitarian rule. What ought to be done is determined by looking at the big picture and deciding

which acts increase total happiness at the end of the day when everyone is taken into account.

Should the Scores Be Canceled?

After it was discovered that KDCP students got to practice for the SATs with live exams, the hardest

question facing the College Board was, should their scores be canceled? The utilitarian argument

for not canceling is straightforward. Those with no scores may not go to college at all next year. This is

real suffering, and if your aim is to increase happiness, then counting the exams is one step in that

direction. It’s not the last step, though, because utilitarian’s at the College Board need to ask

about everyone else’s happiness too: what’s the situation for all the others who took the exam but has

never heard of KDCP? Unfortunately, letting the scores be counted is going to subtract from their

happiness because the SAT is graded comparatively: one person doing well means everyone getting fewer

correct answers sees their score drop, along with college choices and financial aid possibilities. Certainly

it’s true that each of these decreases will be small since there were only a handful of suspect tests. Still, a

descent, no matter how tiny, is a descent, and all the little bits add up.

What’s most notable, finally, about this decision is the imbalance. Including the scores of KDCP students

will weigh a tremendous increase in happiness for a very few against a slight decrease for very many.

Conversely, a few will be left very sad, and many slightly happier. So for a utilitarian, which is it? It’s hard

to say. It is clear, however, that this uncertainty represents a serious practical problem with the ethical

theory. In some situations you can imagine yourself in the shoes of the different people involved and,

using your own experience and knowledge, estimate which decision will yield the most total happiness. In

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this situation, though, it seems almost impossible because there are so many people mixed up in the

question.

Then things get still more difficult. For the utilitarian, it’s not enough to just decide what brings the most

happiness to the most individuals right now; the future needs to be accounted for too. Utilitarianism is a

true global ethics; you’re required to weigh everyone’s happiness and weigh it as best as you can as far into

the future as possible. So if the deciders at the College Board follow a utilitarian route in opting to include

(or cancel) the scores, they need to ask themselves—if we do, how will things be in ten years? In fifty?

Again, these are hard questions but they don’t change anything fundamental. For the utilitarian, making

the right decision continues to be about attempting to predict which choice will maximize happiness.

Utilitarianism and the Ethics of Salaries

When he wasn’t stealing test booklets and passing them on to KDCP, the principal in the elite Plano

school district was dedicated to his main job: making sure students in his building receive an education

qualifying them to do college-level work. Over at the College Board, the company’s CEO leads a

complementary effort: producing tests to measure the quality of that preparation and consequently

determine students’ scholastic aptitude. The principal, in other words, is paid to make sure high schoolers

get an excellent education, and the CEO is paid to measure how excellent (or not) the education is.

Just from the job descriptions, who should get the higher salary? It’s tempting to say the principal.

Doesn’t educating children have to be more important than measuring how well they’re educated?

Wouldn’t we all rather be well educated and not know it than poorly educated and painfully aware of the

fact?

Regardless, what’s striking about the salary that each of these two actually receives isn’t who gets more;

it’s how much. The difference is almost ten times: $87,000 for the principal versus the CEO’s $830,000.

Within the doctrine of utilitarianism, can such a divergence be justified?

Yes, but only if we can show that this particular salary structure brings about the greatest good, the

highest level of happiness for everyone considered as a collective. It may be, for example, that objectively

measuring student ability, even though it’s less important than instilling ability, is also much harder. In

that case, a dramatically higher salary may be necessary in order to lure high-quality measuring talent.

From there, it’s not difficult to fill out a utilitarian justification for the pay divergence. It could be that

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inaccurate testing would cause large amounts of unhappiness: students who worked hard for years would

be frustrated when they were bettered by slackers who really didn’t know much but managed to score well

on a test.

To broaden the point, if tremendous disparities in salary end up making people happier, then the

disparities are ethical. Period. If they don’t, however, then they can no longer be defended. This differs

from what a libertarian rights theorist might say here. For a libertarian—someone who believes

individuals have an undeniable right to make and keep whatever they can in the world, regardless of how

rich or poor anyone else may be—the response to the CEO’s mammoth salary is that he found a way to

earn it fair and square, and everyone should quit complaining about it. Generalized happiness doesn’t

matter, only the individual’s right to try to earn and keep as much as he or she can.

Can Money Buy Utilitarian Happiness? The Ford Pinto Case

Basic questions in business tend to be quantitative, and money is frequently the bottom line: How many

dollars is it worth? What’s my salary? What’s the company’s profit? The basic question of utilitarianism

is qualitative: how much happiness and sadness is there? Inevitably, it’s going to be difficult when

businesses accustomed to bottom-line number decisions are forced to cross over and decide about general

happiness. One of the most famous attempts to make the transition easier occurred back in the 1970s.

With gas prices on the rise, American car buyers were looking for smaller, more efficient models than

Detroit was manufacturing. Japanese automakers were experts in just those kinds of vehicles and they

were seizing market share at an alarming rate. Lee Iacocca, Ford’s president, wanted to rush a car into

production to compete. His model was the Pinto.
[5]

A gas sipper slated to cost $2,000 (about $12,000 today); Ford rushed the machine through early

production and testing. Along the way, unfortunately, they noticed a design problem: the gas tank’s

positioning in the car’s rump left it vulnerable to rear-end collisions. In fact, when the rear-end hit came

faster than twenty miles per hour, not only might the tank break, but gasoline could be splattered all the

way up to the driver’s compartment. Fire, that meant, ignited by sparks or anything else could engulf

those inside.

No car is perfectly safe, but this very scary vulnerability raised eyebrows. At Ford, a debate erupted about

going ahead with the vehicle. On the legal end, the company stood on solid ground: government

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regulation at the time only required gas tanks to remain intact at collisions under twenty miles per hour.

What about the ethics, though? The question about whether it was right to charge forward was

unavoidable because rear-end accidents at speeds greater than twenty miles per hour happen—every day.

The decision was finally made in utilitarian terms. On one side, the company totaled up the dollar cost of

redesigning the car’s gas tank. They calculated

 12.5 million automobiles would eventually be sold,

 eleven dollars would be the final cost per car to implement the redesign.

Added up, that’s $137 million total, with the money coming out of Pinto buyers’ pockets since the added

production costs would get tacked onto the price tag. It’s a big number but it’s not that much per person:

$11 is about $70 today. In this way, the Pinto situation faced by Ford executives is similar to the test

cancellation question for the College Board: one option means only a little bit of suffering for specific

individuals, but there are a lot of them.

On the other side of the Pinto question—and, again, this resembles the College Board predicament—if the

decision is made to go ahead without the fix, there’s going to be a lot of suffering but only for a very few

people. Ford predicted the damage done to those few people in the following ways:

 Death by burning for 180 buyers

 Serious burn injuries for another 180 buyers

 Twenty-one hundred vehicles burned beyond all repair

That’s a lot of damage, but how do you measure it? How do you compare it with the hike in the price tag?

More generally, from a utilitarian perspective, is it better for a lot of people to suffer a little or for a few

people to suffer a lot?

Ford answered both questions by directly attaching monetary values to each of the injuries and damages

suffered:

 At the time, 1970, US Government regulatory agencies officially valued a human life at $200,000. (That

would be about $1.2 million today if the government still kept this problematic measure.)

 Insurance companies valued a serious burn at $67,000.

 The average resale value on subcompacts like the Pinto was $700, which set that as the amount lost after a

complete burnout.

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The math coming out from this is (180 deaths × $200,000) + (180 injuries × $67,000) + (2,100 burned-

out cars × $700) = $49 million. The result here is $137 million worth of suffering for Pinto drivers if the

car is redesigned and only $49 million if it goes to the streets as is.

Ford sent the Pinto out. Over the next decade, according to Ford estimates, at least 60 people died in fiery

accidents and at least 120 got seriously burned (skin-graft-level burns). No attempt was made to calculate

the total number of burned vehicles. Shortly thereafter, the Pinto was phased out. No one has final

numbers, but if the first decade is any indication, then the total cost came in under the original $49

million estimate. According to a utilitarian argument, and assuming the premises concerning dollar

values are accepted, Ford made the right decision back in 1970.

If every Pinto purchaser had been approached the day after buying the car, told the whole Ford story, and

been offered to change their car along with eleven dollars for another one without the gas tank problem,

how many would’ve handed the money over to avoid the long-shot risk? The number might’ve been very

high, but that doesn’t sway a utilitarian conclusion. The theory demands that decision makers stubbornly

keep their eye on overall happiness no matter how much pain a decision might cause certain individuals.

Versions of Utilitarian Happiness

Monetized utilitarianism attempts to measure happiness, to the extent possible, in terms of money. As the

Ford Pinto case demonstrated, the advantage here is that it allows decisions about the greater good to be

made in clear, objective terms. You add up the money on one side and the money on the other and the

decision follows automatically. This is a very attractive benefit, especially when you’re dealing with large

numbers of individuals or complex situations. Monetized utilitarianism allows you to keep your happiness

calculations straight.

Two further varieties of utilitarianism are hedonistic and idealistic. Both seek to maximize human

happiness, but their definitions of happiness differ. Hedonistic utilitarian’s trace back to Jeremy Bentham

(England, around 1800). Bentham was a wealthy and odd man who left his fortune to the University

College of London along with the stipulation that his mummified body be dressed and present at the

institution. It remains there today. He sits in a wooden cabinet in the main building, though his head has

been replaced by a wax model after pranking students repeatedly stole the real one. Bentham believed

that pleasure and happiness are ultimately synonymous. Ethics, this means, seeks to maximize the

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pleasures—just about any sensation of pleasure—felt by individuals. But before dropping everything and

heading out to the bars, it should be remembered that even the most hedonistic of the utilitarian’s believe

that getting pleasure right now is good but not as good as maximizing the feeling over the long term.

(Going out for drinks, in others words, instead of going to the library isn’t recommendable on the evening

before midterms.)

A contemporary of Bentham, John Stuart Mill, basically agreed that ethics is about maximizing pleasure,

but his more idealistic utilitarianism distinguished low and highbrow sensations. The kinds of raw, good

feelings that both we and animals can find, according to Mill, are second-rate pleasures. Pleasures with

higher and more real value include learning and learnedness. These aren’t physical joys so much as the

delights of the mind and the imagination. For Mill, consequently, libraries and museums are scenes of

abundant pleasure, much more than any bar.

This idealistic notion of utilitarianism fits quite well with the College Board’s response to the KDCP

episode. First, deciding against canceling student scores seems like a way of keeping people on track to

college and headed toward the kind of learning that rewards our cerebral inclinations. Further, awarding

free prep classes to those unable to pay seems like another step in that direction, at least if it helps get

them into college.

Versions of Utilitarian Regulation

A narrow distinction with far-reaching effects divides soft from hard utilitarianism. Soft utilitarianism is

the standard version; when people talk about a utilitarian ethics, that’s generally what they mean. As a

theory, soft utilitarianism is pretty laid back: an act is good if the outcome is more happiness in the world

than we had before. Hard utilitarianism, on the other hand, demands more: an act is ethically

recommendable only if the total benefits for everyone are greater than those produced by any other act.

According to the hard version, it’s not enough to do well; you must do the most good possible. As an

example, think about the test-prep company KDCP under the microscope of utilitarian examination.

 When a soft utilitarian looks at KDCP, the company comes out just fine. High schoolers are learning test-

taking skills and tricks that they’ll only use once but will help in achieving a better score and leave behind

a sense that they’ve done all they can to reach their college goals. That means the general happiness level

probably goes up—or at worst holds steady—because places like KDCP are out there.

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 When a hard utilitarian looks at KDCP, however, the company doesn’t come off so well. Can we really say

that this enterprise’s educational subject—test taking—is the very best use of teaching resources in terms

of general welfare and happiness? And what about the money? Is SAT prep really the best way for society

to spend its dollars? Wouldn’t a hard utilitarian have to recommend that the tuition money collected by

the test-prep company get siphoned off to pay for, say, college tuition for students who otherwise wouldn’t

be able to continue their studies at all?

If decisions about businesses are totally governed by the need to create the most happiness possible, then

companies like KDCP that don’t contribute much to social well-being will quickly become endangered.

The demands of hard utilitarianism can be layered onto the ethical decision faced by the College Board in

their courtroom battle with KDCP. Ultimately, the College Board opted to penalize the test-prep company

by forcing it to offer some free classes for underprivileged students. Probably, the result was a bit more

happiness in the world. The result wasn’t, however, the most happiness possible. If hard utilitarianism

had driven the decision, then the College Board would’ve been forced to go for the jugular against KDCP,

strip away all the money they could, and then use it to do the most good possible, which might have meant

setting up a scholarship fund or something similar. That’s just a start, though. Next, to be true to hard

utilitarianism, the College Board would need to focus on itself with hard questions. The costs of creating

and applying tests including the SAT are tremendous, which makes it difficult to avoid this question:

wouldn’t society as a whole be better off if the College Board were to be canceled and all their resources

dedicated to, for example, creating a new university for students with learning disabilities?

Going beyond KDCP and the College Board, wouldn’t almost any private company fall under the threat of

appropriation if hard utilitarian’s ran the world? While it’s true, for example, that the money spent on

steak and wine at expensive Las Vegas restaurants probably increases happiness a bit, couldn’t that same

cash do a lot more for the general welfare of people whose income makes Las Vegas an impossibly

expensive dream? If it could, then the hard utilitarian will propose zipping up Las Vegas and rededicating

the money.

Finally, since utilitarianism is about everyone’s total happiness, don’t hard questions start coming up

about world conditions? Is it possible to defend the existence of McDonald’s in the United States while

people are starving in other countries?

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Conclusion. In theory, there’s not much divergence between soft and hard utilitarianism. But in terms of

what actually happens out in the world when the theory gets applied, that’s a big difference. For private

companies, it’s also a dangerous one.

Two further versions of utilitarian regulation are act and rule. Act utilitarianism affirms that a specific

action is recommended if it increases happiness. This is the default form of utilitarianism, and what

people usually mean when they talk about the theory. The separate rule-based version asserts that an

action is morally right if it follows a rule that, when applied to everyone, increases general happiness.

The rule utilitarian asks whether we’d all be benefitted if everyone obeyed a rule such as “don’t steal.” If

we would—if the general happiness level increases because the rule is there—then the rule utilitarian

proposes that we all adhere to it. It’s important to note that rule utilitarian’s aren’t against stealing

because it’s intrinsically wrong, as duty theorists may propose. The rule utilitarian is only against stealing

if it makes the world less happy. If tomorrow it turns out that mass stealing serves the general good, then

theft becomes the ethically right

thing to do.

The sticky point for rule utilitarian’s involves special cases. If we make the rule that theft is wrong,

consider what happens in the case from the chapter’s beginning: You forgot your pencil on SAT test day,

and you spot one lying on an abandoned desk. If you don’t take it, no one’s going to be any happier, but

you’ll be a lot sadder. So it seems like rule utilitarianism verges on defeating its own purpose, which is

maximizing happiness no matter what.

On the other hand, there are also sticky points for act utilitarian’s. For example, if I go to Wal-Mart

tonight and steal a six-pack of beer, I’ll be pretty happy. And assuming I don’t get caught, no one will be

any sadder. The loss to the company—a few dollars—will disappear in a balance sheet so huge that it’s

hard to count the zeros. Of course if everyone starts stealing beers, that will cause a problem, but in

practical terms, if one person does it once and gets away with it, it seems like an act utilitarian would have

to approve. The world would be a happier place.

Advantages and Disadvantages of Utilitarian Ethics in Business

Basic utilitarianism is the soft, act version. These are the theory’s central advantages:

 Clarity and simplicity. In general terms, it’s easy to understand the idea that we should all act to

increase the general welfare.

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 Acceptability. The idea of bringing the greatest good to the greatest number coheres with common and

popular ideas about what ethical guidance is supposed to provide.

 Flexibility. The weighing of individual actions in terms of their consequences allows for meaningful and

firm ethical rules without requiring that everyone be treated identically no matter how different the

particular situation. So the students whose scores were suspended by the College Board could see them

reinstated, but that doesn’t mean the College Board will take the same action in the future (if, say, large

numbers of people start stealing test booklets).

 Breadth. The focus on outcomes as registered by society overall makes the theory attractive for those

interested in public policy. Utilitarianism provides a foundation and guidance for business regulation by

government.

The central difficulties and disadvantages of utilitarianism include the following:

 Subjectivity. It can be hard to make the theory work because it’s difficult to know what makes happiness

and unhappiness for specific individuals. When the College Board demanded that KDCP give free classes

to underprivileged high schoolers, some paying students were probably happy to hear the news, but

others probably fretted about paying for what others received free. And among those who received the

classes, probably the amount of resulting happiness varied between them.

 Quantification. Happiness can’t be measured with a ruler or weighed on a scale; it’s hard to know

exactly how much happiness and unhappiness any particular act produces. This translates into confusion

at decision time. (Monetized utilitarianism, like that exhibited in the case of the Ford Pinto, responds to

this confusion.)

 Apparent injustices. Utilitarian principles can produce specific decisions that seem wrong. A quick

example is the dying grandmother who informs her son that she’s got $200,000 stuffed into her mattress.

She asks the son to divide the money with his brother. This brother, however, is a gambling alcoholic

who’ll quickly fritter away his share. In that case, the utilitarian would recommend that the other

brother—the responsible one with children to put through college—just keep all the money. That would

produce the most happiness, but do we really want to deny grandma her last wish?

 The utilitarian monster is a hypothetical individual who really knows how to feel good. Imagine that

someone or a certain group of people were found to have a much greater capacity to experience happiness

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than others. In that case, the strict utilitarian would have no choice but to put everyone else to work

producing luxuries and other pleasures for these select individuals. In this hypothetical situation, there

could even be an argument for forced labor as long as it could be shown that the servants’ suffering was

minor compared to the great joy celebrated by those few who were served. Shifting this into economic and

business terms, there’s a potential utilitarian argument here for vast wage disparities in the workplace.

 The utilitarian sacrifice is the selection of one person to suffer terribly so that others may be pleasured.

Think of gladiatorial games in which a few contestants suffer miserably, but a tremendous number of

spectators enjoy the thrill of the contest. Moving the same point from entertainment into the business of

medical research, there’s a utilitarian argument here for drafting individuals—even against their will—to

endure horrifying medical experiments if it could be shown that the experiments would, say, cure cancer,

and so create tremendous happiness in the future.

K E Y T A K E A W A Y S

 Utilitarianism judges specific decisions by examining the decision’s consequences.

 Utilitarianism defines right and wrong in terms of the happiness of a society’s members.

 Utilitarian ethics defines an act as good when its consequences bring the greatest good or happiness to

the greatest number of people.

 There are a variety of specific forms of utilitarianism.

 Theoretically, utilitarianism is straightforward, but in practical terms it can be difficult to measure the

happiness of individuals.

R E V I E W Q U E S T I O N S

1. What is a utilitarian argument in favor of a college education? How does it differ from other reasons you

might want to go to college or graduate school?

2. How could a utilitarian justify cheating on an exam?

3. What is a “global ethics”?

4. What practical problem with utilitarianism is (to some degree) resolved by

monetized utilitarianism?

5. What are two advantages of a utilitarian ethics when compared with an ethics of duties?

6. What are two disadvantages of a utilitarian ethics when compared with an ethics of duties?

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7. What’s an example from today’s world of a utilitarian monster?

8. What’s an example from today’s world of a utilitarian sacrifice?

[1] “CB-Karen Dillard Case Settled-No Cancelled Scores,” College Confidential, accessed May 15,

2011, http://talk.collegeconfidential.com/parents-forum/501843-cb-karen-dillard-case-settled-no-cancelled-

scores.html.

[2] Paulina Mis, “College Board Sues Test-Prep Company, Countersuit Filed,” Scholarships.com, February 26, 2008,

accessed May 15, 2011,http://www.scholarships.com/blog/high-school/college-board-sues-test-prep-company-

countersuit-filed/161.

[3] Staci Hupp, “SAT Scores for Students Who Used Test Prep Firm May Be Thrown Out, “Denton Record Chronicle,

February 22, 2008, accessed May 15, 2011.

[4] “AETR Report Card,” Americans for Educational Testing Reform, accessed May 15,

2011, http://www.aetr.org/college-board.php.

[5] Case facts taken from Manuel Velasquez, Business Ethics, Concepts and Cases, 6th ed. (Upper Saddle River, NJ:

Pearson Prentice Hall, 2006), 60–61.

3.3 Altruism: Everyone Else

L E A R N I N G O B J E C T I V E S

1. Define altruistic ethics.

2. Show how altruism works in and with business.

3. Consider advantages and drawbacks of altruism.

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TOMS Shoes

There is no Tom at TOMS Shoes. The company’s name actually came from the title for its social cause:

Shoes for Tomorrow. Tomorrow shoes—TOMS Shoes. The shoes are given away to needy children in

Argentina at a one-to-one rate: for every pair bought in the United States, TOMS delivers a pair down

there.

They’re needed in Argentina’s poverty-stricken regions to prevent the spread of an infectious disease, one

that flourishes in the local soil and rises up through the feet. A pair of shoes is all that’s needed to block

the problem.

The project started when young Texan entrepreneur Blake Mycoskie vacationed in Argentina. Not the type

to luxuriate in the hotel pool, he got out and learned about the country, good and bad, the food, the

sweeping geography, the poverty and diseases. The foot infection, he discovered, was so devastating yet so

easy to block that, according to his company’s website, he decided he had to do something about

it.
[1]

Initially, he contemplated a charitable fund to buy shoes for the needy children, but that left his

project subject to the ebb and flow of others’ generosity. It’d be better and more reliable, he determined,

to link the community-service project with private enterprise and use revenues from a company to fund

the charity. Quickly, Mycoskie determined that he could make the whole machine work most efficiently by

starting a shoe company. Simultaneously, he could produce shoes for donation and shoes for sale to

finance the effort. So we have TOMS Shoes.

Next, a kind of shoe to produce and sell was required. Mycoskie found inspiration in Argentina’s

traditional alpargata. This is a cheap, workingman’s shoe, a slip-on made from canvas with rope

soles.
[2]

For the American adaptation, Mycoskie strengthened the sole, styled and colored the canvas, and

added a brand label. The price also got jacked up. The originals cost a few dollars in Argentina; the

adaptations cost about forty dollars here.

They’re a splashy hit. You find TOMS Shoes at trendy footwear shops, at Whole Foods grocery stores, and

all over the Internet. At last check, about half a million pairs have been sold and an equal number

donated. Total sales in seven figures aren’t far off, and the company was recently featured on a CNBC

segment as an American business success story. Notably, TOMS achieved recognition on national TV

sooner after its inception than almost any other enterprise in the program’s history. It all happened in

fewer than four years.

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Question: how did it get so big so fast? How did some guy transform from a wandering tourist to a captain

of the shoe industry in less time than it takes to get a college degree? Answer: celebrities.

Blake Mycoskie’s got a warm, round face and a perfect smile. He’s got money from his pre-shoe projects

and he’s smart too. He’s also got that contemporary bohemian look down with his bead necklace and

wavy, shoulder-length hair. There’s no letdown beneath the chin line either; he’s fit (he was a tennis pro

until nineteen). You get the idea. He commands attention from even Hollywood women, and he ended up

coupled with the midrange star Maggie Grace. He introduced her to his TOMS Shoes concept, gave her a

few pairs to wear around and show friends, and the ball started rolling.
[3]

A few parties later, Scarlett Johansson, Jessica Biel, Benicio Del Toro, Tobey Maguire, Sienna Miller, and

Karl Lagerfeld were parading around in TOMS Shoes. There was no stopping it.
[4]

Today, when Blake Mycoskie introduces himself, it’s not as the CEO of his company; he says he’s the Chief

Shoe Giver at TOMS Shoes, reflecting the idea that charity drives the thriving business, not the other way

around.

Is TOMS Shoes Altruistic?

An action is morally right according to the altruist, and to the ethical theory of altruism, if the action’s

consequences are more beneficial than unfavorable for everyone except the person who acts. That means

the actor’s interests aren’t considered: the altruist does whatever can be done so that others will be

happier.

It’s common to imagine the altruist as poverty stricken and self-sacrificing. When you live for everyone

else as the altruist does, it’s no surprise that you can end up in pretty bad shape. You might get lucky and

run into another altruist like yourself, but if you don’t, there’s not going to be anyone particularly

dedicated to your well-being. On the positive side there’s nobility to the idea of dedicating everything to

everyone else, but the plain truth is not many of us would choose to live like Gandhi or Mother Teresa.

It doesn’t have to be that way, though. A suffering life may be an effect of altruism, but it’s not a

requirement. Living for others doesn’t mean you live poorly, only that there’s no guarantee you’ll live well.

You might, however, live well. Blake Mycoskie demonstrates this critical element at the heart of altruism:

it’s not about suffering or sacrificing; it’s about making clear-eyed decisions about the best way to make as

many others as happy as possible. If you happen to live the good life along the way—partying with Maggie

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Grace, Sienna Miller, and friends because that’s the fastest route to publicize the TOMS Shoes

enterprise—that doesn’t count against the project. It doesn’t count in favor either. All that matters, all that

gets tallied up when the question gets asked about whether the altruist did good, is how things ended up

for everyone else.

In the case of TOMS Shoes, the tallying is easy. The relatively wealthy shoe buyers in the United States

come off well; they get cool, politically correct footwear to show friends along with a psychological lift

from knowing they’re helping the less fortunate. On the other side, the rural Argentines obviously benefit

also.

Some Rules of Altruism

Altruism is a consequentialist ethics. Like utilitarianism, no specific acts are prohibited or required; only

outcomes matter. That explains why there aren’t lifestyle requirements for the altruist. Some live stoically

like Gandhi while others like Mycoskie get the high life, but they’re both altruists as long as the goal of

their lives and the reason for their actions is bringing happiness to others. Similarly, the altruist might be

a criminal (Robin Hood) or a liar (see Socrates’ noble lie).

Like the utilitarian, most of the hard questions altruists face concern happiness. They include:

 The happiness definition. Exactly what counts as happiness? In the case of TOMS donating shoes to rural

Argentines, the critical benefit is alleviation of disease and the suffering coming with it. Happiness, in

other words, is defined here as a release from real, physical pain. On the other hand, with respect to the

shoes sold in the States, the happiness is completely different; it’s a vague, good feeling that purchasers

receive knowing their shopping is serving a social cause. How do we define happiness in a way that ropes

in both these distinct experiences?

 Once happiness has been at least loosely defined, another question altruist’s face is the happiness

measure: how do we know which is worth more, the alleviation of suffering from a disease or the warm

happiness of serving a good cause? And even if the answer to that question is clear, how great is the

difference, how can it be measured?

 Another altruism difficulty is happiness foresight. Even if donating shoes helps in the short term, are the

recipients’ lives really going to be happier overall? Conditions are hard in the abandoned regions of the

third world, and alleviation of one problem may just clear the way for another. So TOMS Shoes saves

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poverty-stricken Argentines from suffering a debilitating foot disease, but how much good are you really

doing if you save people only so that they’re free to suffer aching hunger, miserable sickness in places

lacking antibiotics, and hard manual labor because there’s no other work?

Altruism is a variety of selflessness, but it’s not the same thing; people may deny themselves or they may

sacrifice themselves for all kinds of other reasons. For example, a soldier may die in combat, but that’s not

altruism; that’s loyalty: it’s not sacrificing for everyone else but for a particular nation. The same may go

for the political protestor who ends up jailed and forgotten forever. That’s self-sacrifice, but she did it for

the cause and not for all the others. The fireman may lose his life rescuing a victim, but this is because he’s

doing his job, not because he’s decided to live for the sake of others. All altruists, finally, are selfless, but

not all those who sacrifice themselves are altruists.

Personal versus impersonal altruism distinguishes two kinds of altruists: those who practice altruism on

their own and leave everyone else alone and those who believe that everyone should act only to benefit

others and without regard to their own well-being.

The Altruist in Business and the Business That Is Altruistic

TOMS Shoes shows that a business can be mounted to serve the welfare of others. A company aiming to

serve an altruistic purpose doesn’t have to be organized altruistically, however. An individual truly

dedicated to everyone else could start a more traditional company (a real estate firm, for example), work

like a dog, turn massive profits, and in the end, donate everything to charity. It may even be that during

the profit-making phase the altruist CEO is ruthless, exploiting workers and consumers to the maximum.

All that’s fine as long as the general welfare is served in the end when all the suffering is toted up on one

side and the happiness on the other. A business operation that isn’t at all altruistic, in other words, can be

bent in that direction by an altruistic owner.

Going the other way, the business operation itself may be altruistic. For example, this comes from the

College Board’s website, the About Us page: The College Board is a not-for-profit membership association

whose mission is to connect students to college success and opportunity.
[5]

That sounds like a good cause. The company doesn’t exist to make money but to implement testing that

matches students with their best-fit colleges. It is, in other words, an altruistic enterprise, and the world,

the argument could be made, is a better place because the College Board exists. But—and this is the

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important distinction—that doesn’t mean everyone who works at the College Board is selfless. Far from it,

the CEO takes home $830,000 a year. That money would buy a lot of shoes for the poverty-stricken in

Argentina. So, there can be altruistic business organizations driven by workers who aren’t altruists.

A church is also a business organization with cash flows, budgets, and red and black ink. The same goes

for Goodwill. Here’s their mission statement: “Goodwill Industries International enhances the dignity and

quality of life of individuals, families and communities by eliminating barriers to opportunity and helping

people in need reach their fullest potential through the power of work.”
[6]

So, the Salvation Army fits into

the group of altruistic enterprises, of organizations that exist, like the College Board, to do public good.

It’s distinct from the College Board, however, in that a very healthy percentage of those working inside the

organization are themselves altruists—they’re working for the cause, not their own welfare. Think of the

Salvation Army red kettle bell ringers around Christmas time.

Conclusion. Altruism connects with business in three basic ways. There are altruists who use normal,

profit-driven business operations to do well. There are altruistic companies that do good by employing no

altruistic workers. And there are altruistic organizations composed of altruistic individuals.

Advocating and Challenging Ethical Altruism

The arguments for and against an altruistic ethics overlap to a considerable extent with those listed under

utilitarianism. The advantages include:

 Clarity and simplicity. People may disagree about exactly how much good a company like TOMS Shoes

is really doing, but the overall idea that the founder is working so that others can be happier is easy to

grasp.

 Acceptability. The idea of working for others grants an ethical sheen. No matter what you might think of

someone as a person, it’s very difficult to criticize them in ethical terms if they really are dedicating

themselves to the well-being of everyone else.

 Flexibility. Altruists have many ways of executing their beliefs.

The disadvantages of altruism include:

 Uncertainty about the happiness of others. Even if individuals decide to sacrifice their own welfare

for the good of others, how do they know for sure what makes others happy?

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 Shortchanging yourself. Even though altruism doesn’t require that the altruist live a miserable life,

there doesn’t seem to be any clear reason why the altruist shouldn’t get an at least equal claim to

happiness as everyone else (as in a utilitarian approach). Also, some critics suspect that altruism can be a

way of escaping your own life: if you spend all your time volunteering, could it be that deep down you’re

not a good soul so much as just afraid of going out into the competitive world and trying to win a good

place for yourself?

K E Y T A K E A W A Y S

 Altruism defines ethically good as any act that ends up increasing net happiness (or decreasing net

unhappiness) when everything is taken into account except the actor’s increased or diminished happiness.

 Altruism doesn’t require living a miserable life.

 Altruism intersects with the business world in various ways.

R E V I E W Q U E S T I O N S

1. Theoretically, could the most devoted altruist in a society also be its richest and happiest member? How?

2. Does Blake Mycoskie have to be an altruist for TOMS Shoes to be considered an altruistic enterprise?

3. Does TOMS Shoes have to be an altruistic enterprise for Mycoskie to be considered an altruist?

4. What are some other motives that may lead someone to live the life of an altruist?

[1] TOMS Shoes, “One for One Movement,” accessed May 15, 2011,http://www.toms.com/our-movement.

[2] TOMS Shoes, accessed May 15, 2011,http://cdn2.tomsshoes.com/images/uploads/2006-oct-vogue .

[3] Sharon_b, December 14, 2008 (5:24 p.m.), “Blake Mycoskie—he’s handsome, rich and helps children in the

Third World,” Gossip Rocks, accessed May 15, 2011,http://www.gossiprocks.com/forum/news/90958-blake-

mycoskie-hes-handsome-rich-helps-children-third-world.html.

[4] Lesley M. M. Blume, “You Are What You Wear,” Huffington Post, July 30, 2008, accessed May 15,

2011, http://www.huffingtonpost.com/lesley-m-m-blume/you-are-what-you-wear_b_65967.html.

[5] “About Us,” College Board accessed May 15, 2011, http://about.collegeboard.org.

[6] “Our Mission,” Goodwill Industries International, Inc., accessed May 15, 2011,http://www.goodwill.org/about-

us/our-mission.

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3.4 Egoism: Just Me

L E A R N I N G O B J E C T I V E S

1. Define ethical egoism.

2. Show how egoism works in and with business.

3. Consider advantages and drawbacks of egoism.

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Ethical Egoism

Ethical egoism: whatever action serves my self-interest is also the morally right action. What’s good for

me in the sense that it gives me pleasure and happiness is also good in the sense that it’s the morally right

thing to do.

Ethical egoism mirrors altruism: If I’m an altruist, I believe that actions ought to heighten the happiness

of others in the world, and what happens to me is irrelevant. If I’m an egoist, I believe that actions ought

to heighten my happiness, and what happens to others is irrelevant.

Could someone like Blake Mycoskie—someone widely recognized as an altruistic, social-cause hero—

actually is an egoist? Yes. Consider things this way. Here’s a young guy and he’s out looking for money,

celebrity, good parties, and a jaw-dropping girlfriend. It wouldn’t be the first time there was a guy like

that.

Put yourself in his shoes and imagine you’re an ethical egoist: whatever’s good for you is good. Your

situation is pretty clear, your moral responsibility lists what you should be trying to get, and the only

question is how can I get it all?

That’s a tall order. Becoming a rock star would probably work, but there are a lot of people already out

there going for it that way. The same goes for becoming a famous actor. Sports are another possibility;

Mycoskie, in fact, made a run at pro tennis as a younger man, but like most who try, he couldn’t break into

the upper echelon. So there are paths that may work, but they’re hard ones, it’s a real fight for every step

forward.

If you’re smart—and Mycoskie obviously is—then you might look for a way to get what you want that

doesn’t force you to compete so brutally with so many others. Even better, maybe you’ll look for a way that

doesn’t present any competition at all, a brand new path to the wish list. The idea of a celebrity-driven

shoe company that makes a profit but that also makes its founder a star in the eyes of the Hollywood stars

is a pretty good strategy.

Obviously, no one can look deep into Mycoskie’s mind and determine exactly what drove him to found his

enterprise. He may be an altruist or an egoist or something else, but what’s important is to outline how

egoism can actually work in the world. It can work—though of course it doesn’t work this way every time—

just like TOMS Shoes.

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Egoism and Selfishness

When we hear the word egoist, an ugly profile typically comes to mind: self-centered, untrustworthy,

pitiless, and callous with respect to others. Some egoists really are like that, but they don’t have to be that

way. If you’re out to maximize your own happiness in the world, you might find that helping others is the

shortest and fastest path to what you want. This is a very important point. Egoists aren’t against other

people, they’re for themselves, and if helping others work for them, that’s what they’ll do. The case of

TOMS Shoes fits right here. The company improves the lives of many; it raises the level of happiness in

the world. And because it does that, the organization has had tremendous success, and because of that

success, the Blake Mycoskie we’re imagining as an egoist is getting what he wants: money, great parties,

and everyone loving him. In short, sometimes the best way to one’s own happiness is by helping others be

happier.

That’s not always the way it works. Bernie Madoff destroyed families, stole people’s last dimes, and lived

the high life all the way through. For an ethical egoist, the only blemish on his record is that he got caught.

Madoff did get caught, though, and this too needs to be factored into any consideration of egoists and how

they relate to others. Just as egoists may help others because that serves their own interests, so too they

may obey social customs and laws. It’s only important to note that they obey not out of deference to others

or because it’s the morally right thing to do; they play by the rules because it’s the smart thing to do. They

don’t want to end up rotting in jail.

A useful contrast can be drawn in this context between egoism and selfishness. Where egoism means

putting your welfare above others’, selfishness is the refusal to see beyond yourself. Selfishness is the

inability (or unwillingness) to recognize that there are others sharing the world, so it’s the selfish person,

finally, who’s callous and insensitive to the wants and needs of others. For egoists, on the other hand,

because working with others cooperatively can be an excellent way to satisfy their own desires, they may

not be at all selfish; they may be just the opposite.

Enlightened Egoism, Cause Egoism, and the Invisible Hand

Enlightened egoism is the conviction that benefitting others—acting to increase their happiness—can

serve the egoist’s self-interest just as much as the egoist’s acts directly in favor of him or herself. As

opposed to altruism, which claims that it’s our ethical responsibility to serve others, the enlightened

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egoist’s generosity is a rational strategy, not a moral imperative. We don’t help others because we ought

to: we help them because it can make sense when, ultimately, we only want to help ourselves.

One simple and generic manifestation of enlightened egoism is a social contract. For example, I agree not

to steal from you as long as you agree not to steal from me. It’s not that I don’t take your things because I

believe stealing is morally wrong; I leave you alone because it’s a good way to get you to leave me alone.

On a less dramatic level, all of us form mini social contracts all the time. Just think of leading a group of

people through one of those building exits that makes you cross two distinct banks of doors. If you’re first

out, you’ll hold the door for those coming after, but then expect someone to hold the next door for you.

Sure, some people hold the door because it’s good manners or something like that, but for most of us, if no

one else ever held a door open for us, pretty soon we’d stop doing them the favor. It’s a trivial thing, of

course, but in the real world people generally hold doors open for others because they’ve agreed to a social

contract: everyone else does it for me; I’ll do it for them. That’s enlightened egoism, and it frequently

works pretty well.

TOMS Shoes can be understood as a more sophisticated version of the same mentality. It’s hard to discern

exactly what the contract would look like if someone tried to write it down, but it’s not hard to see the

larger notion of enlightened egoism. Shoes are donated to others not because of a moral obligation but

because serving the interests of others helps Blake Mycoskie serve his own. As long as shoe buyers keep

holding up their end of the bargain by buying his product, Mycoskie will continue to help them be

generous and feel good about themselves by donating pairs to people who need them.

Cause egoism is similar to, but also distinct from, enlightened egoism. Enlightened egoism works from the

idea that helping others is a good way of helping me. Cause egoism works from the idea that giving

the appearance of helping others is a promising way to advance my own interests in business. As opposed

to the enlightened egoist who will admit that he is out for himself but happy to benefit others along the

way, the cause egoist claims to be mainly or only interested in benefiting others and then leverages that

good publicity to help him. Stated slightly differently, enlightened egoists respect others while pursuing

their own interests, while cause egoists just fake it.

Adam Smith (1723–90) is known for making a connected point on the level of broad economic trade and

capitalism. In the end, it usually doesn’t matter whether people actually care about the well-being of

others, Smith maintains, because there exists an invisible hand at work in the marketplace. It leads

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individuals who are trying to get rich to enrich their society as well, and that enrichment happens

regardless of whether serving the general welfare was part of the original plan. According to Smith, the

person in business generally

Intends only his own gain, but is led by an invisible hand to promote an end which was no part of

the original intention. By pursuing his own interest he frequently promotes that of the society and

does so more effectively than when he directly intends to promote it.
[1]

What’s the invisible hand? It’s the force of marketplace competition, which encourages or even requires

individuals who want to make money to make the lives of others better in the process.

The invisible hand is a central point defenders of egoism in business often make when talking about the

virtues of a me-first ethics. Egoism is good for me, but it frequently ends up being good for everyone else,

too. If that’s right, then even those who believe the utilitarian ideal of the general welfare should guide

business decisions may be forced to concede that we should all just become egoists.

Here’s a quick example. If you open a little takeout pizza shack near campus and your idea is to clear the

maximum amount of money possible to pay your tuition, what kind of business are you going to run?

Does it make sense to take a customer’s twelve dollars and then hand over an oily pie with cheap plastic

cheese and only three pepperonis? No, in the name of pursuing your own happiness, you’re going to try to

charge a bit less than Domino’s and give your customers something slightly better—maybe you’ll spread

richer cheese, or toss on a few extra pepperonis. Regardless, you’re not doing this for the reason an

altruist would; you’re not doing it because you sense an ethical obligation to make others’ lives better. As

an egoist, you don’t care whether your customers are happier or not. But if you want your business to

grow, you better care. And because you’re ethically required to help your business grow in order to make

tuition money and so make yourself happier, you’re going to end up improving the pizza-eating

experience at your school. Better food, less money. Everyone wins. We’re not talking Mother Teresa here,

but if ethical goodness is defined as more happiness for more people, then the pizza place is ethically

good. Further, anybody who wants to start up a successful pizza restaurant is, very likely, going to end up

doing good. If you don’t, if you can’t offer some advantage, then no one’s going to buy your slices.

Going beyond the quality-of-life benefits of businesses in society, Smith leaned toward a second claim

that’s far more controversial. He wrote that the entrepreneur trying to do well actually promotes society’s

well-being more effectively than when directly intending to promote it. This is startling. In essence, it’s

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the claim that for the most dedicated altruist the most effective strategy for life in business is…to act like

an egoist. Within the economic world at least, the best way for someone who cares only about the well-

being of others to implement that conviction is to go out and run a successful profit-making enterprise.

Clearly, this is a very powerful argument for defenders of ethical egoism. If it’s true that egoists beat

altruists at their own game (increasing the happiness of everyone else), then egoism wins the debate by

default; we should all become egoists. Unfortunately, it’s impossible to prove this claim one way or the

other. One thing is clear, however: Smith’s implicit criticism of do-gooders can be illustrated. Sometimes

individuals who decide to act for the good of others (instead of seeking profit for themselves) really do end

up making the world a worse place. Dr. Loretta Napoleoni has shown how attempts by Bono of U2 to help

the destitute in Africa have actually brought them more misery.
[2]

Bono threw a benefit concert and

dedicated the proceeds to Africa are most needy. The intention was good, but the plan wasn’t thought all

the way through and the money ended up getting diverted to warlords who used it to buy guns and bullets.

Still, the fact that some altruistic endeavors actually make things worse doesn’t mean they’re all doomed.

Just as surely as some fail, others succeed.

The same mixed success can be attributed to businesses acting only for their own welfare, only for profit.

If it’s true that the pizza sellers help improve campus life, what about the entrepreneurial honor student

who volunteers to write your term paper for a price? It’s hard to see how a pay-for-grades scheme benefits

students in general, even though the writer may make a tidy profit, and that one student who paid for the

work may come out pretty well.

The invisible hand is the belief that businesses out in the world trying to do well for themselves tend to do

good for others too. It may even be that they do more good than generous altruists. It’s hard to know for

sure, but it can be concluded that there’s a distance between ethical egoism in reality and the image of the

egoist as a ruthless destroyer of broad social happiness.

Some Rules of Egoism

Egoism, like altruism, is a consequentialist ethics: the ends justify the means. If an egoist were at the helm

of TOMS Shoes and he cared only about meeting beautiful people and making huge money, he’d have no

scruples about lying all day long. There’d be no problem with smiling and insisting that the reason TOMS

Shoes exists is to generate charitable shoe donations to the poor. All that matters for the egoist is that the

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lie works, that it serves the goal of making TOMS as attractive and profitable as possible. If it does, then

deviating from the truth becomes the ethically recommendable route to follow.

Personal egoism versus impersonal egoism distinguishes these two views: the personal egoist in the

business world does whatever’s necessary to maximize his or her own happiness. What others do,

however, is considered their business. The impersonal egoist believes everyone should get up in the

morning and do what’s best for themselves and without concern for the welfare of others.

An impersonal egoist may find comfort in the invisible hand argument that the best way for me to do right

with respect to society in general is to get rich. Of course it’s true that there’s something crude in

shameless money grubbing, but when you look at things with rational eyes, it is hard to avoid noticing

that the kinds of advances that make lives better—cars affordably produced on assembly lines; drugs from

Lipitor to Chap Stick; cell phones; spill-proof pens; whatever—often trace back to someone saying, “I want

to make some money for myself.”

Rational egoism versus psychological egoism distinguishes two reasons for being an ethical egoist. The

rational version stands on the idea that egoism makes sense. In the world as it is, and given a choice

between the many ethical orientations available, egoism is the most reasonable. The psychological egoist

believes that, for each of us, putting our own interests in front of everyone else isn’t a choice; it’s a reality.

We’re made that way. Maybe it’s something written into our genes or it’s part of the way our minds are

wired, but regardless, according to the psychological egoist, we all care about ourselves before anyone else

and at their expense if necessary.

Why would I rationally choose to be an egoist? Maybe because I figure that if I don’t look out for myself,

no one will. Or maybe I think almost everyone else is that way, too, so I better play along or I’m going to

get played. (The Mexicans have a pithy phrase of common wisdom for this, “O te chingas, o te chingan,”

which means “either you screw everyone else, or they’ll screw you.”) Maybe I believe that doing well for

myself helps me do well for others too. The list could be drawn out, but the point is that there are

numerous reasons why an intelligent person may accept ethical egoism as the way to go.

As for those who subscribe to the theory of psychological egoism, obviously there’s no end of examples in

business and history to support the idea that no matter how much we may want things to be otherwise,

the plain truth is we’re made to look out for number one. On the other hand, one problem for

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psychological egoists is that there do seem to be examples of people doing things that are irreconcilable

with the idea that we’re all only trying to make ourselves happier:

 Parents sacrificing for children. Any mom or dad who works overtime at some grinding job for cash to pay

their children’s college tuition seems to be breaking the me-first rule. Here, the psychological egoist

responds that, when you really think about it, there may be something there for the parents after all: it

could be the pride in telling friends that their children are getting their degrees.

 Mother Teresa or similar religious-based advocates for the needy. Anyone spending their time and energy

making things better for others, while living painfully modestly, seems like a good candidate to break the

rule of psychological egoism. Here, the psychological egoist responds that perhaps they see a different

reward for themselves than earthly pleasures. They may believe, for example, that their suffering on this

earth will be more than compensated by paradise in heaven.

The Four Relations between Egoism and Business

Structurally, there are four possible relations between ethical egoism and business life:

1. You can have egoists in egoist organizations. This is mercenary capitalism. Individuals do whatever work

is required so long as it benefits them to the maximum. Naturally, this kind of person might find a good

home at a company entirely dedicated to maximizing its own health and success, which can mean one

looking to maximize profits without other considerations. A good example is executives at the

Countrywide mortgage firm. They OK’ed thousands of mortgages to clients who had no way to repay the

money. Then they bundled and sold these mortgages to banks and other financial institutions, making a

quick profit. When the loans later collapsed, those institutions fell into bankruptcy. The Countrywide

executives quickly formed a new company to buy those same loans back at pennies on the dollar, thus

once again turning millions in profits.
[3]

2. You can have egoists in nonegoist organizations. Possibly, the CEO of the College Board fits into this

category. His salary of just under a million dollars annually sounds pretty good, especially when you

consider that he gets it working for a nonprofit company that exists to help high school students find the

college best fitted to them. It’s also possible that Blake Mycoskie of TOMS Shoes fits this profile: he lives

an extremely enviable life in the middle of a company set up to help people who almost no one envies.

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3. You can have nonegoists in egoist organizations. Somewhere in the Countrywide mortgage company we

could surely find someone who purchased shoes from TOMS because they wanted to participate in the

project of helping the rural poor in Argentina.

4. You can have nonegoists in nonegoist organizations. Think of the red kettle bell ringers popping up

outside malls around the holiday season.

Advocating and Challenging Ethical Egoism

The arguments for an egoistic ethics include the following:

 Clarity and simplicity. Everybody understands what it means to look out for them first.

 Practicality. Many ethical theories claim to protect our individual interests, but each of us knows

ourselves and our own interest’s best. So doesn’t it make sense that we as individuals take the lead?

Further, with respect to creating happiness for ourselves, there’s no one closer to the action than us. So,

again, doesn’t it make sense that each of us should be assigned that responsibility?

 Sincerity. For those subscribing to psychological egoism, there’s a certain amount of honesty in this

ethics not found in others. If our real motive beneath everything else is to provide for our own happiness

first, then shouldn’t we just recognize and say that? It’s better to be sincere and admit that the reason we

don’t steal is so that others don’t steal from us instead of inventing some other explanations which sound

nice but are ultimately bogus.

 Unintended consequences. In the business world, the concept of the invisible hand allows egoists to

claim that their actions end up actually helping others and may help them more than direct charity or

similar altruistic actions.

 Finally, there’s a broad argument in favor of egoism that concerns dignity. If you’re out in the world being

altruistic, it’s natural to assume that those benefiting from your generosity will be grateful. Sometimes

they’re not, though. Sometimes the people we try to help repay us with spite and resentment. They do

because there’s something condescending about helping others; there’s a message wrapped up in the aid

that those who receive it are incapable of taking care of them and need someone superior to look out for

them. This is especially palpable in the case of panhandlers. If you drop a dollar into their hat, it’s hard to

not also send along the accusation that their existence is base and shameful (you refuse to look them in

the eye; you drop the money and hurry away). To the extent that’s right, an egoism that expects people to

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look out for themselves and spurns charity may actually be the best way to demonstrate respect for others

and to acknowledge their dignity.

Arguments against ethical egoism include the following:

 Egoism isn’t ethics. The reason we have ethics is because there are so many people in the world and in

business who care only about themselves. The entire idea of ethics, the reasoning goes, is to set up some

rules for acting that rescue us from a cruel reality where everyone’s just looking out for number one.

 Egoism ignores blatant wrongs. Stealing candy from a baby—or running a company selling crappy

baby food—strikes most of us as unacceptable, but the rules of egoism dictate that those are

recommendable actions as long as you can be assured that they’ll serve your interests.

 Psychological egoism is not true. The idea that we have no choice but to pursue our own welfare

before anything else is demonstrated to be false millions of times every day; it’s wrong every time

someone makes an anonymous contribution to a cause or goes out of their way to help another without

expecting anything in return.

K E Y T A K E A W A Y S

 Egoism defines ethically good as any act that raises the actor’s overall happiness (or decreases

unhappiness) without counting anyone else’s increased or diminished happiness.

 Egoism does not mean ignoring the existence and welfare of others, though they are not necessarily

advocated either.

 Though egoists act in the name of their own happiness, others may benefit.

 Egoism intersects with the business world in various ways.

R E V I E W Q U E S T I O N S

1. What’s the difference between egoism and selfishness?

2. In what situation would an egoist decide that a lie is morally wrong?

3. In the real world, is there any way to distinguish an enlightened egoist from a cause egoist?

4. What are some reasons someone may become a rational egoist?

5. What is the invisible hand?

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6. If you were starting a small business, would you prefer that your partner is a utilitarian, an altruist, or an

egoist? Why?

[1] Adam Smith, An Inquiry into the Nature and Causes of the Wealth of Nations (London: Strahan and Cadell,

1776), bk. 4, chap. 2.

[2] Can Tran, “Celebrities Raising Funds for Africa End Up Making Things ‘Worse,’” Ground Report, May 14, 2008,

accessed May 15, 2011,http://www.groundreport.com/World/Celebrities-Raising-Funds-For-Africa-End-Up-

Making/2861070.

[3] Eric Lipton, “Ex-Leaders of Countrywide Profit from Bad Loans,” New York Times, March 3, 2009, accessed May

15, 2011,http://www.nytimes.com/2009/03/04/business/04penny.html.

3.5 Case Studies

Cheaters

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KDCP is Karen Dillard’s company specialized in preparing students to ace the Scholastic Aptitude Test. At

least some of the paying students received a solid testing-day advantage: besides teaching the typical tips

and pointers, KDCP acquired stolen SAT tests and used them in their training sessions. It’s unclear how

many of the questions that students practiced on subsequently turned up on the SATs they took, but some

certainly did. The company that produces the SAT, the College Board, cried foul and took KDCP to court.

The lawsuit fell into the category of copyright infringement, but the real meat of the claim was that KDCP

helped kids cheat, they got caught, and now they should pay.

The College Board’s case was very strong. After KDCP accepted the cold reality that they were going to get

hammered, they agreed to a settlement offer from the College Board that included this provision: KDCP

would provide $400,000 worth of free SAT prep classes to high schoolers who couldn’t afford to pay the

bill themselves.
[1]

Q U E S T I O N S

1. Can you form a quick list of people who’d benefit because of this decision and others who’d end up on the

losing side? Then, considering the situation globally and from a utilitarian perspective, what would need to

be true for the settlement offer to be ethically recommendable?

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2. As for those receiving the course for free—it’s probably safe to assume that their happiness

increases. Something for nothing is good. But what about the students who still have to pay for

the course? Some may be gladdened to hear that more students get the opportunity, but others

will see things differently; they’ll focus on the fact that their parents are working and saving

money to pay for the course, while others get it for nothing. Some of those who paid probably

actually earned the money themselves at some disagreeable, minimum wage McJob. Maybe they

served popcorn in the movie theater to one of those others who later on applied and got a

hardship exemption.

o Starting from this frustration and unhappiness on the part of those who pay full price, can you

form a utilitarian case against the settlement’s free classes?

o From a utilitarian perspective, could the College Board have improved the settlement by adding

the stipulation that the settlement’s terms (and therefore the free classes) not be publicly

disclosed?

o Once word got out, could a utilitarian recommend that the College Board lie or that it release a

statement saying, “No free classes were part of the settlement”?

3. There was talk about canceling the scores of those students who took the SAT after benefitting from the

KDCP classes that offered access to the stolen exam booklets. The students and their parents protested

vigorously, pointing out that they’d simply signed up for test prep, just like students all across the nation.

They knew nothing about the theft and they presumably didn’t know they were practicing on questions

that might actually appear on their exam day. From the perspective of rule utilitarianism, what’s the case

for canceling their scores? From the perspective of act utilitarianism, what’s the case for reinstating the

scores?

4. The College Board CEO makes around $830,000 a year.

o What is a utilitarian case for radically lowering his salary?

o If you were a utilitarian and you had the chance—and you were sure you wouldn’t get caught—

would you steal the money from the guy’s bank account? Why or why not?

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5. It could be that part of what the College Board hoped to gain through this settlement requiring

free classes for the underprivileged was some positive publicity, some burnishing of their image as

the good guys, the socially responsible company, the ones who do the right thing.

o Outline the case for this being an act of an altruistic company.

o Outline the case for this being an act of an egoistic company.

UFC

Ultimate Fighting Championship (UFC) got off to a crushing start. In one of the earliest matches, Tank

Abbott, a six-footer weighing 280 pounds, faced John Matua, who was two inches taller and weighed a

whopping four hundred pounds. Their combat styles were as different as their sizes. Abbott called himself

a pit fighter. Matua was an expert in more refined techniques: he’d honed the skills of wrestling and

applying pressure holds. His skill—which was also a noble and ancient Hawaiian tradition—was the

martial art called Kuialua.

The evening went poorly for the artist. Abbott nailed him with two roundhouses before applying a skull-

cracking head butt. The match was only seconds old and Matua was down and so knocked out that his

eyes weren’t even closed, just glazed and staring absently at the ceiling. The rest of his body was

convulsing. The referee charged toward the defenseless fighter, but Abbott was closer and slammed an

elbow down on Matua’s pale face. Abbott tried to stand up and ram another, but the referee was now close

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enough to pull him away. As blood spurted everywhere and medics rushed to save the loser, Abbott stood

above Matua and ridiculed him for being fat.
[2]

The tape of Abbott’s brutal skills and pitiless attitude shot through the Internet. He became—briefly—

famous and omnipresent, even getting a guest appearance on the goofy, family-friendly sitcom Friends.

A US senator also saw the tape but reacted differently. Calling it barbaric and a human form of

cockfighting, he initiated a crusade to get the UFC banned. Media executives were pressured to not beam

the matches onto public TVs, and doctors were drafted to report that UFC fighters (like professional

boxers) would likely suffer long-term brain damage. In the heat of the offensive, even diehard advocates

agreed the sport might be a bit raw, and the UFC’s original motto—“There are no rules!”—got slightly

modified. Head butting, eye-gouging, and fish-hooking (sticking your finger into an opponent’s orifice and

ripping it open) were banned.

No matter what anyone thinks of UFC, it convincingly demonstrates that blood resembles sex. Both sell

and people like to watch. The proof is that today UFC events are among the most viewed in the world,

among the most profitable, and—this is the one part that hasn’t changed since the gritty beginning—

among the most brutal.

Q U E S T I O N S

1. Two of the common arguments against ultimate fighting—and the two main reasons the US

senator argued to get the events banned—are the following:

o They’re brutal; UFC celebrates violence and hatred and injury, and therefore, it’s immoral.

o Besides the bumps, bruises, and broken bones—which usually heal up—the fighters also suffer

long-term and incurable brain damage. Therefore, the sport is immoral even though it might be

true that in their prime, the fighters make enough money to compensate the physical suffering

endured in the octagon.

How could a utilitarian defend the UFC against these two criticisms?

2. How could the concept of the utilitarian sacrifice apply to John Matua?

3. How would a hedonistic utilitarian’s reaction to UFC differ from an idealistic utilitarian’s reaction? Is there

anything at all in UFC that might convince an idealistic utilitarian to promote the sport as ethically

positive?

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4. How could a proponent of monetized utilitarianism begin portioning up the experiences of Abbott, Matua,

the UFC sponsors, and the spectators in order to construct a mathematical formula (like Ford did with the

Pinto) to decide whether UFC should be banned?

5. Think of UFC as a business, one compared to a biotech company that pioneers cutting-edge, life-saving

drugs. Now, how would a utilitarian decide which one of these two companies was the more ethically

respectable?

6. Why might an altruist sign up to be a UFC fighter? Why might an egoist sign up to be a UFC fighter?

Lottery

In her blog Majikthise, Lindsay Beyerstein writes, “State lotteries are often justified on the grounds that

they raise money for social programs, especially those that target the neediest members of society.

However, the poorest members of society tend to spend (and, by design lose) the most on lottery tickets.

Some state lottery proceeds fund programs that benefit everyone, not just the poor. Often state lottery

money is being systematically redistributed upward—from lotto players to suburban schools, for

example.”
[3]

Q U E S T I O N S

1. How is the lottery an example of the utilitarian monster?

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2. How can you set yourself up to argue in favor of or against the ethical existence of the lottery in terms of

monetized utilitarianism?

3. Lotteries are about money and about fun—that is, even for the losers, there’s a benefit in the thrill of

watching the numbers turn up. Could the case be made that, from a hedonistic utilitarian standpoint, the

lottery is ethically recommendable because it serves the welfare not only of the winner but also of the

millions of losers?

4. One of Lindsay Beyerstein’s concerns is that the lottery tends to redistribute money from the poor

toward the rich.

o Does a utilitarian necessarily consider this redistribution unethical?

o What kinds of things would a utilitarian have to look into to decide whether the inverse Robin

Hooding is necessarily a bad thing?

5. The lotteries under discussion here are run by states, and Lindsay Beyerstein is not a big fan. She calls

these lotteries “a tax on idiocy” meaning, presumably, that people are just throwing their money away

every time they buy a ticket. Now, one of the arguments in favor of egoism as an ethical stance is that no

one knows what makes each of us happy better than each of us. So, it follows, we should all just try to get

what we want and leave other people alone. How can this view of egoism be fashioned to respond to the

idea that the lottery is a tax on idiocy?

Honest Tea

Seth Goldman founded Honest Tea in 1998. He calls himself the Tea EO (as opposed to CEO) and his

original product was a bottled tea drink with no additives beyond a bit of sugar. Crisp and natural—that

was the product’s main selling point. It wasn’t the only selling point, though. The others aren’t in the

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bottle; they’re in the company making it. Honest Tea is a small enterprise composed of good people. As

the company website relates, “A commitment to social responsibility is central to Honest Tea’s identity

and purpose. The company strives for authenticity, integrity and purity, in our products and in the way we

do business…Honest Tea seeks to create honest relationships with our employees, suppliers, customers

and with the communities in which we do business.”
[4]

Buy Honest Tea, the message is, because the people behind it are trustworthy; they are the kind of

entrepreneurs you want to support.

The mission statement also relates that when Honest Tea gives business to suppliers, “we will attempt to

choose the option that better addresses the needs of economically disadvantaged communities.”
[5]

They’ll

give the business, for example, to the company in a poverty-stricken area because, they figure, those

people really need the jobs. Also, and to round out this socially concerned image, the company promotes

ecological (“sustainability”) concerns and fair trade practices: “Honest Tea is committed to the well-being

of the folks along the value chain who help bring our products to market. We seek out suppliers that

practice sustainable farming and demonstrate respect for individual workers and their families.”
[6]

Summing up, Honest Tea provides a natural product, helps the poor, treats people with respect, and saves

the planet. It’s a pretty striking corporate profile.

It’s also a profile that sells. It does because when you hand over your money for one of their bottles, you’re

confident that you’re not fattening the coffers of some money grubbing executive in a New York penthouse

who’d lace drinks with chemicals or anything else that served to raise profits. For many consumers, that’s

good to know.

Honest Tea started selling in Whole Foods and then spread all over, even to the White House fridges

because it’s a presidential favorite. Revenues are zooming up through the dozens of millions. In 2008, the

Coca-Cola Company bought a 40 percent share of Honest Tea for $43 million. It’s a rampantly successful

company.

Featured as part of a series in the Washington Post in 2009, the company’s founder, Seth Goldman, was

asked about his enterprise and his perspective on corporate philanthropy, meaning cash donations to

good causes. Goldman said, “Of course there’s nothing wrong with charity, but the best way for companies

to become good citizens is through the way they operate their business.” Here are two of his examples:
[7]

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 Switching from Styrofoam to postconsumer waste might help a packaging company make a more

meaningful contribution to sustainability than a token donation to an environmental nonprofit.

 Investing in a local production facility or even a community bank could help support a local economy

more effectively than a donation to a nearby jobs program.

Organizations in the economic world, Goldman believes, can do the most good by doing good themselves

as opposed to doing well (making money) and then outsourcing their generosity and social responsibility

by donating part of their profits to charities. That may be true, or it may not be, but it’s certain that

Goldman is quite good at making the case. He’s had a lot of practice since he’s outlined his ideas not just

in the Post but in as many papers and magazines as he can find. Honest Tea’s drinks are always featured

prominently in these flattering articles, which are especially complimentary when you consider that

Honest Tea doesn’t have to pay a penny for them.

Q U E S T I O N S

1. Make the case that Seth Goldman founded Honest Tea as an expression of his utilitarian ethics.

o What kinds of people are affected by the Honest Tea organization? Which groups might benefit

from Honest Tea and how? Which groups might not benefit?

o Would this be a hedonistic or idealistic utilitarianism? Why?

o Would it be possible to construe Honest Tea within a framework of monetized utilitarianism?

o Would this be a soft or hard utilitarianism?

2. Make the case that Seth Goldman founded Honest Tea as an expression of his ethical altruism.

o Altruists serve the welfare of others. How does Honest Tea serve people’s welfare?

o What would have to be true about Goldman in terms of his particular abilities and skills for this

enterprise to fall under the heading of altruism?

o Does Goldman sound more like a personal or an impersonal altruist?

3. Make the case that Seth Goldman founded Honest Tea as an expression of his ethical egoism.

o What are some of the benefits Goldman could derive from Honest Tea?

o Before running Honest Tea, Goldman was a big-time mutual fund manager. What kind of benefits

could Honest Tea have offered that he couldn’t find in the world of finance?

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o Does Goldman sound more like a personal or an impersonal egoist?

o In the real world, does it make any difference whether Goldman does enlightened egoism or

cause egoism?

4. In this case study, two kinds of drink manufacturers are contrasted: Honest Tea and the hypothetical drink

company run by some mercenary businessman lacing drinks with bad chemicals to maximize profits.

Looking at this contrast, how could a defender of egoism claim that the best way for healthy drinks to

make their way into the general public’s hands (in the medium and long term, anyway) is for

Goldman and the mercenary businessman and everyone else to all be egoists?

5. Assume that Seth Goldman is a cause egoist, someone faking concern for the general welfare in order to

provide for his own happiness and pleasure. How could the concept of the invisible hand be introduced to

make the claim that Goldman is actually doing more good for the general welfare than he would if he were

a utilitarian or even an altruist?

Your Business

Think about something you do with passion or expertise—a dish you like to cook and eat, a sport you play,

any unique skill or ability you’ve developed—and figure out a way to turn it into a small business. For

example, you like baking cookies, so you open a bake shop, or you like hockey and could imagine an

improved stick to invent and market.

Im
age

rem
ove

d d
ue
to c
opy

righ
t is

sue
s.

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Q U E S T I O N S

1. If your business is like most others, you’re going to need some money to get it up and going, more money

than you’ve got right now. That means you’ll need to find a partner for your venture, someone to help you

get the cash together and then run things afterward. Would you prefer a utilitarian, an altruist, or an

egoist for your partner? Why?

2. Do you think the invisible hand would be in effect for your business? Just by trying to make money, do you

imagine you’d end up improving people’s lives? If this business works, is it even possible that you’d help

others more than you would by volunteering time for a charity organization? Elaborate.

3. Assume that doing well in society and not just doing well (making money) is important to you.

Within the business you have in mind, with which of these three options do you suspect you’d

accomplish more general good?

o Just making money and trusting the invisible hand to take care of the rest

o Making money and donating part of it to charity—that is, to people specialized in serving the

general welfare

o Attempting to do good within your business by, for example, buying recycled materials or by

paying wages slightly above what people could get for the same work at other companies

4. Is there a potential cause egoism angle to your business? Could you set it up to make it seem like

the reason you’re running your enterprise is to help others when really you’re just trying to make money?

For a consequentialist, is there anything wrong with that?

[1] missypie, April 29, 2008 (2:22 p.m.), “CB-Karen Dillard case settled-no cancelled scores,” College Confidential,

accessed May 15, 2011,http://talk.collegeconfidential.com/parents-forum/501843-cb-karen-dillard-case-settled-

no-cancelled-scores.html.

[2] David Plotz, “Fight Clubbed,” Slate, November 17, 1999, accessed May 15,

2011,http://www.slate.com/id/46344.

[3] Lindsay Beyerstein, “Lotteries as Regressive Taxes,” Majikthise (blog), January 23, 2006, accessed May 15,

2011,http://majikthise.typepad.com/majikthise_/2006/01/lotteries_as_re.html.

[4] “Our Mission,” Honest, accessed May 15, 2011,http://www.honesttea.com/mission/about/overview.

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[5] “Our Mission,” Honest, accessed May 15, 2011,http://www.honesttea.com/mission/about/overview.

[6] “Our Mission,” Honest, accessed May 15, 2011,http://www.honesttea.com/mission/about/overview.

[7] “On Leadership: Seth Goldman,” Washington Post, accessed May 15,

2011,http://views.washingtonpost.com/leadership/panelists/2009/11/the-biggest-dollars.html.

• Structure Bookmarks

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Chapter 4

Theories Responding to the Challenge of

Cultural

Relativism

Chapter Overview

Chapter 4 “Theories Responding to the Challenge of Cultural Relativism” examines some theories guiding

ethical decisions in business. It considers reactions to the possibility that there are no universal

definitions of right and wrong, only different customs that change from one society to

another.

4.1 What Is Cultural Relativism?

L E A R N I N G O B J E C T I V E S

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1. Define cultural relativism.

2. Show how cultural relativism defies traditional ethics.

Nietzsche and the End of Traditional Ethics

“God is dead,” the declaration attributed to Friedrich Nietzsche, stands along with “I think, therefore I

am” (René Descartes, 1641) as philosophy’s most popularized—and parodied—phrases. The t-shirt

proclaiming “Nietzsche is dead, signed, God” is funny, but it doesn’t quite answer what Nietzsche was

saying in the late 1800s. What Nietzsche meant to launch was not only an assault on a certain religion but

also a suspicion of the idea that there’s one source of final justice for all reality. Nietzsche proposed that

different cultures and people each produce their own moral recommendations and prohibitions,

and

there’s no way to indisputably prove that one set is simply and universally preferable to another. The

suspicion that there’s no final appeal—and therefore the values and morality practiced by a community

can’t be dismissed as wrong or inferior to those practiced elsewhere—is called

cultural relativism.

Example: For most of us, the killing of a newborn would be among the most heinous of immoral acts; a

perpetrator would need to be purely evil or completely mad. The Inuit Eskimos, however, regularly

practiced female infanticide during their prehistory, and it was neither evil nor insane. Their brutal living

conditions required a population imbalance tipped toward hunters (males). Without that gender

selecting, the plain fact was the entire group faced starvation. At another place and time, Bernal

Diaz’s The Conquest of New Spain recounts the Spanish invasion of the Americas and includes multiple

reports of newborns sacrificed in bloody ceremonies that made perfect sense to the locals, but left

Spaniards astonished and appalled. The ethics of infanticide, the point is, differ from one culture and time

to another. Further, these differences seem irreconcilable: it’s extremely difficult to see how we could

convince the Inuit of the past to adopt our morality or how they could convince us to adopt theirs. And if

that’s right, then maybe it no longer makes sense to talk about right and wrong in general terms as though

there’s a set of rules applying to everyone; instead, there are only rights and wrongs as defined within a

specific society.

Finally, if you accept the cultural relativist premise, then you’re rejecting the foundation of traditional

ethics. You’re rejecting the idea that if we think carefully and expertly enough, we’ll be able to formulate

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rules for action that everyone—people in all times, places, and communities—must obey if they want to

consider themselves ethically responsible.

Cultural Relativism in Business Ethics

In the world of international business, Entrepreneur magazine introduces the pitfalls of ethical variation

across cultures with this statement from Steve Veltkamp, president of Biz$hop, an American import-

export business: “Bribery is a common way of doing business in a lot of foreign places.”
[1]

If that’s true, then US businesses trying to expand into markets abroad—and competing with local

businesses already established there—are probably going to consider doing what everyone else is doing,

which means getting in on the bribery action. As the Entrepreneur article points out, however, this leads

to a problem: “While bribes are expected in many countries, the United States’ 1977 Foreign Corrupt

Practices Act prohibits payments made with the aim of gaining or maintaining business.”

So American hands are tied. If a construction company is bidding on the contract to build an airport in a

foreign nation, one where the local politicians will be expecting to get their palms greased, they’re at a

distinct disadvantage since they’re not allowed to play by the local rules. Still there is (as there almost

always is) a loophole: “Not all payments are prohibited by the act. Some payments are acceptable if they

don’t violate local laws. Gifts, for instance, to officers working for foreign corporations are legal.”

There’s no bribing, but gifting, apparently, gets a green light. There’s a problem here, too, however: “It can

be difficult to determine the difference between a gift and a bribe in a given situation. ‘If you give a gift to

someone and it leads to a business deal, is that a bribe or a gift?’ asks Veltkamp. ‘In some cultures, gift-

giving is an entrenched part of doing business. If you look at it in a certain sense, maybe it’s a bribe, since

they won’t talk to you until you’ve made that gesture.’”

Now what? Over there, cash changes hands and it’s called an acceptable gift, while those watching from

back here see an illegal bribe.

There are two ways of looking at this dilemma. One is to say, well, this has to be one or the other, either a

gift or a bribe; it has to be either moral or immoral. Given that, we need to take out our traditional tools—

our basic duties, the utilitarian doctrine that we should act to serve the greater good, and so on—and

figure out which it is. Nietzsche went the other way, though. He said that situations like this don’t show

that we need to use ethics to figure out which side is right; instead, the situation shows what moral

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rules really are: just a set of opinions that a group of people share and nothing more. In the United States

we believe it’s wrong to grease palms, and so it is. In some other places they believe it’s honorable to hand

money under the table, and so it is.

If that’s true, then specific convictions of right and wrong in business ethics will never be anything but

cultural fashions, beliefs some community somewhere decides to hold up for a while until they decide to

believe something else. Anything, the reasoning goes, may be morally good or bad in the economic world;

it just depends on where you happen to be, at what time, and who else is around.

K E Y T A K E A W A Y S

 Cultural relativism is the suspicion that values and morality are culture specific—they’re just what the

community believes and not the result of universal reason.

 For cultural relativists, because all moral guidelines originate within specific cultures, there’s no way to

dismiss one set of rules as wrong or inferior to those developed in another culture.

R E V I E W

Q U E S T I O N S

1. Why do you imagine the term cultural relativism was chosen to mean what it does?

2. Do you believe cultures are irreconcilably different? Or is it that deep down people are people and we’re

really all the same? How does this distinction relate to the difference between cultural relativism and

traditional theories of ethics?

[1] Moira Allen, “Here Comes the Bribe,” Entrepreneur, October 2000, accessed May 12,

2011, http://www.entrepreneur.com/magazine/entrepreneur/2000/october/32636.html.

4.2 Nietzsche’s Eternal Return of the Same

L E A R N I N G O B J E C T I V E S

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1. Define Nietzsche’s eternal return of the same.

2. Show how the idea of the eternal return provides guidance for professional life.

3. Consider the advantages and a drawback of the eternal return.

Responding to Cultural Relativism by Leaving Common Morality Behind

If, along with cultural relativists, you accept that rules distinguishing right from wrong shift around from

place to place and time to time, it becomes difficult to keep faith in morality. It’s difficult because verdicts

seem flimsy and impermanent, and because this hard question seems inescapable: Why should I go out of

my way to do the right thing today if what counts as the right thing might change tomorrow?

One response to the question is to give up on morality, disrespect the whole idea by labeling all

the

customary regulations—don’t lie, don’t steal, strive for the greatest good for the greatest number—a giant

sham. Then you can live without the inhibiting limits of moral codes. You can go beyond any idea of good

and evil and lead an unconstrained life exuberantly celebrating everything you want to do and be.

Wallace Souza: TV Reporter, Politician, and Dealer

Some careers are more vivid and alive than others. TV crime reporting is intense work, especially the

action-type shows where the reporter races to the scene, interviews witnesses, and tracks down shady

characters. Politics is another throbbing life; the adrenalin of crime chasing isn’t there, but you get the

brimming confidence and energy that comes with power, with deciding what others can and can’t do.

Drug dealing excites too, in its way, with thrilling danger and the pleasures of fast money. People, finally,

who want to live exuberantly, who prefer risk to caution and find it easy to say things like “you only go

around once” are probably going to find something attractive in these lines of work and may opt for one or

another.

Then there’s Wallace Souza. He opted for all three. At the same time. The most visible of his roles—TV

reporter—also yielded the most visible success. His program aired from the Brazilian state of Amazonas, a

jungley place far from cosmopolitan São Paulo and touristy Rio de Janeiro. Known as a haven for cocaine

cartels, and as a training ground for revolutionary militants charging into neighboring Columbia and

Venezuela, it’s a natural spot to bring cameras and look for dramatic action. A number of reporters were

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stationed in the region, but none seemed so uncannily skilled at reaching scenes first and getting video

over the airwaves than Mr. Souza. In fact, on occasion, he even reached scenes before the police.

The dogged TV reporting, along with Souza’s editorializing complaints about the region’s jaded criminals,

made him a popular hero and sealed his bid for a seat in the local congress. He didn’t allow his state

capital work to interfere with his TV role, however. Actually, the two jobs fit together well: one day he was

reporting on the deplorable free-for-all in the jungle and the next he was in the capital meeting with high-

ranking police officers, reviewing their strategies and proposing laws to fix things.

The perfect image began to crack, though, when it was revealed that the reason Souza so frequently

reached the best crime scenes first is that he was paying hit men to assassinate local drug dealers. He

wasn’t, it turned out, just the first to know about the crimes, he knew even before they happened. In an

especially brazen move, during one of his last TV programs, he put up pictures of several notorious

criminals and asked his viewers to phone in and votes on which one they’d like to see killed.

At this point, Souza seemed like an overzealous crusader: he was drawing vivid attention to the crime

plague and doing something about it with his hit men. You could doubt his methods, but his dedication to

his community’s welfare seemed noble—until it was revealed that he was actually also a major drug

dealer. And the criminals getting killed and shown on his program weren’t just random outlaws; they were

Souza’s drug-trade competitors.
[1]

What Is the Eternal Return of the Same?

One report on Souza’s exploits included the suggestion that his willingness to cross every moral line—to

lie, traffic drugs, order killings, whatever—fit him for the title of the Antichrist.
[2]

That title, as it turns out, was one Nietzsche enjoyed assigning to himself. It’s definitely also a fit for Souza

in the sense that he seemed to live without shame, fear, or regard for good and evil. What’s notable about

Souza’s business ventures is that they pay no heed to the very idea of morals. It’s not that they skirt some

rules or follow some guidelines while disobeying others; it’s not like he’s trying to get away with

something—it’s much more like morality doesn’t exist. Now, bringing this back to Nietzsche, who shared

the sentiments, the question Nietzsche asked himself was, if morality really is canceled, then what? How

should we live? The answer was a thought experiment called the eternal return of the same.

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Imagine, Nietzsche proposed, that every decision you make and everything you feel, say, and do will have

to be repeated forever—that is, at the end of your life, you die and are immediately reborn right back in

the same year and place where everything started the time before, and you do it all again in exactly the

same way. Existence becomes an infinite loop. With that disturbing idea established, Nietzsche converted

it into a proposal for life: we should always act as though the eternal return were real. Do, Nietzsche says,

what you would if you had to live with the choice over and over again

forever.

The eternal return, finally,

gives us a reason to do one thing and not another: it guides us in a world without morals.

How Does the Eternal Return Work?

Start with the eternal return as it could be applied to an altruist, to someone dedicating life to helping

others. One way to do altruism would be by working for a nonprofit international organization that goes

to poverty-wrecked places like Amazonas and helps coca farmers (the coca leaf is the base for cocaine)

shift their farms to less socially damaging crops. This would be difficult work. You might figure on doing it

though, getting through it, and feeling like you’ve done some good in the world. But would you do it

infinitely? Would you be willing to suffer through that existence once and again forever? Remember, the

world would never get better; every time you’d just go back to being born on earth just the way it was

before. Obviously, people can make their own decisions, but it seems fairly likely that under the condition

of the eternal return there’d be fewer people dedicating themselves—and sacrificing their own comfort

and interests—to social well-being.

What about some other lines of work? Would there be fewer snowplow operators, long-haul pilots,

teachers willing to work in troubled schools? What kind of professional lives, Nietzsche forces us to ask,

would be too hellish, bothersome, or exhausting to be repeated forever? Those lives, whatever they are,

get filtered by the eternal return; they get removed from consideration.

If certain careers and aspirations are out, then what’s in? What kind of existence in the economic world

does the eternal return recommend? One possibility is Wallace Souza. The question is, why

would his career trajectory fit the eternal return?

The job of a reporter is fast and dramatic, the kind of thing many imagine themselves doing if they weren’t

tied down by other commitments. People with children frequently feel an obligation to get into a safe and

conservative line of work, one producing a steady paycheck. Others feel a responsibility toward their aged

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parents and a corresponding obligation to not stray too far just in case something goes wrong. So trekking

off into the Brazilian jungle in search of drug operations may well be exciting—most of us would probably

concede that—but it’d be irreconcilable with many family responsibilities. One thing the eternal return

does, however, is seriously increase the burden of those responsibilities. When you sacrifice something

you want to do because of a sense of obligation, you may be able to swallow the loss once, but Nietzsche is

demanding that you take it down over and over again. Family responsibilities may count, but at what

point do you say “enough”? Can anyone oblige you to sacrifice doing what you really want

forever?

Taking the next step into Souza’s amoral but dramatic career, assuming you do decide to become a crime

reporter, and you’re inside the eternal return where everything will recur infinitely, then aren’t you going

to go about making your reporting work as exciting and successful as possible? Probably, yes. So why not

hire some hit men to fire things up a bit? Normally, of course, our moral compass tells us that killing

others to get ahead isn’t really an option. But with all morality canceled, it becomes an option, one just

like any other. Be a banker, be a reporter, be a killer, there’s no real difference. Just choose the one you’d

most like to do repeatedly without end.

Souza also chose to be a drug dealer. Again, this is one of those jobs many would find exciting and

satisfying. Thrills and easy money are attractive; that’s part of the reason Hollywood produces so

many

films about traffickers and their lives. Most of us wouldn’t actually do something like that, though, at least

partially because dealing drugs feels morally wrong. But inside the eternal return, that shame factor falls

away; when it does, the number of people entering this field of work might well increase.

It’s critical to note that Nietzsche’s eternal return is not the idea that you should go off and be a crime-

reporting, hit man–hiring drug dealer. Instead, Souza’s life just exemplifies one thing that could happen

in the world of your career if you accept Nietzsche’s proposal of living beyond any traditional moral limit.

Regardless, what the eternal return definitely does do is force you to make decisions about your

professional life in very different terms than those presented by traditional ethical theories. There’s no

consideration of sweeping duties; there’s just you and a simple decision: the life you choose now will be

repeated forever, so which will yours be?

What’s the Reward of Morality?

One of the strengths of Nietzsche’s idea is that it forces a very important question: Why should I want to

be morally responsible? Why should a salesman be honest when lying could win her a healthy

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commission? Why should a factory owner worry about pollution spewing from his plant when he lives in a

city five hundred miles away? Now, a full elaboration of this question would be handled in an airy

philosophy class, not an applied course in business ethics. Nietzsche, however, allows a taste

of the

discussion by puncturing one of the basic motivations many feel for being virtuous: the conviction

that there’ll be a reward later for doing the right thing today.

The certainty of this reward is a critical element of many religious beliefs: when you die, there’ll be a final

judgment and you’ll enjoy heaven or suffer punishment at the other extreme, depending on how you

behaved on earth. A similar logic underwrites Hinduism’s concept of reincarnation: the life you are born

into next will be determined by the way you live now. This discussion could be drawn out in more

directions, but no matter what, Nietzsche spoils the idea that you take the moral high road because you’ll

be repaid for it later. Within the eternal return, there is no later; all that ever happens is exactly

the same

thing again.

Advantages and a Drawback of the Eternal Return

One advantage of the eternal return is that it adds gravity to life. Forcing you to accept every decision you

make as one you’ll repeat forever is compelling you to take those decisions seriously, to think them

through. Another connected advantage of the eternal return is that it forces you to make your own

decisions. By getting rid of all guidelines proposed by ethics, and by making your reality the one that will

repeat forever, Nietzsche forces you to be whom you are.

The disadvantage of the eternal return is Wallace Souza. If everyone is just out there being themselves,

how are we going to live together? How can we make peaceful and harmonious societies when all anyone

ever thinks about is what’s best for themselves forever?

K E Y T A K E A W A Y S

 The eternal return is a thought experiment in which you imagine that the life you choose will repeat

forever.

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 According to the eternal return, when faced with a dilemma in the business world—what career should I

choose, should I kill (or maybe just lie or cheat) to get ahead?—you should imagine living the decision over

and over again forever.

 The eternal return maximizes individuality but does little to help individuals live together in a community.

R E V I E W Q U E S T I O N S

1. In your own words, what is the eternal return?

2. Why might the eternal return be considered a reasonable response to cultural relativism?

3. Write down some factors leading to a significant decision you’ve made. It could be about choosing a field

of study or a career path. Now, can you walk through each of the factors within the eternal return? Are

there any decisions you made that you’d take back and change?

4. If you knew the eternal return was true, could you still make the reasonable decision to choose an

altruistic profession? Why or

why not?

[1] Dom Phillips, “Brazil Crime Show Host ‘Used Murder to Boost Ratings,’” Times, August 13, 2009, accessed May

12, 2011,http://www.timesonline.co.uk/tol/news/world/us_and_americas/article6793072.ece.

[2] Danny Gallagher, “Brazilian Crime Show Host Kills for Ratings?,” TV Squad, August 14, 2009, accessed May 12,

2011, http://www.tvsquad.com/2009/08/14/brazilian-crime-show-host-kills-for-ratings.

4.3 Cultural Ethics

L E A R N I N G O B J E C T I V E S

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1. Define cultural ethics.

2. Consider how cultural ethics works in the business world.

3. Examine the truth of cultural ethics.

4. Consider advantages and drawbacks of a culturist’s ethics.

What Is Cultural Ethics?

Culturists embrace the idea that moral doctrines are just the rules a community believes, and they accept

that there’s no way to prove one society’s values better than another. Culturists don’t, however, follow

Nietzsche in taking that as a reason to turn away from all traditional moral regulation; instead, it’s a

reason to accept and endorse whichever guidelines are currently in effect wherever you happen to be. The

old adage, “when in Rome, do as the Romans do,” isn’t too far from where we’re at here.

Gift or Bribe or Both?

The Entrepreneur magazine article posed a problem for Americans going overseas to do business. In

some places, passing money under the table is necessary to spark negotiations and win contracts.

However, bribery is illegal in the United States, and US law makes it illegal for Americans to do that kind

of thing abroad. Gifts, on the other hand, are allowed. But, according to the Entrepreneur article, it can be

difficult to determine the difference between a gift and a bribe. In some cultures, a gesture may be seen as

a gift, and in others it looks like a bribe.

Looking at this uncertainty, what a culturist sees is not ambiguity about whether handing the money over

to a potential client is a legal gift or an illegal bribe. That’s not it at all. A culturist sees it as both a gift and

a bribe. In one culture—a nation overseas where the payment is occurring and where similar payments

always occur when business is getting done—there are no moral qualms. It’s right to give a cash gift

because that’s the rule of the country; it’s the way things are commonly and properly done there. By

contrast, from the perspective of American business culture, the conclusion that’s drawn with equal force

is that it’s an immoral bribe because that’s what US customs and normal practices tell us.

Cultural Ethics and International Bribery

Culturists see moral rules as fixed onto specific societies, but that doesn’t help anyone know what to do

when confronted with an unfamiliar set of beliefs. How, the really important question is, does a

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culturist act when forced to make decisions in a place and among people whose beliefs are different and

unfamiliar? The Entrepreneur interview with Steve Veltkamp provides one answer.

What can you do if your overseas associate demands a bribe? Veltkamp doesn’t recommend

asking embassies or consulates for assistance, as “they have to stick to the official line.” Instead,

he believes “the best resource in almost every country of the world is the U.S. Chamber of

Commerce, where you can find Americans who live in the country and understand how things

are done.”
[1]

Immediately you can see how different the culturist approach is to moral dilemmas. The message is: get in

touch with the locals and try to do as they would in the same

situation.

Most traditional ethical theories go in exactly the opposite direction. They say that it doesn’t necessarily

matter what people are actually doing. Stronger, the entire point of studying ethics has normally been

to escape conventional wisdom and ingrained habits; the idea of doing what we ought to do requires a

step away from those things and a cold, rational look at the situation. So, a morality based on duties sets

up guidelines including don’t lie, don’t steal and appeals to men and women in business to follow

them.

Acting in an ethically responsible way in the world means obeying the dictates and refusing to be swayed

by what the guy in the next cubicle is up to. Handing someone money under the table, consequently, while

publicly insisting that everything’s on the up and up can’t be condoned no matter what anyone else does;

it can’t be right because it entails at least implicit lying.

More specifically for the culturist, Entrepreneur advises overseas business people to avoid seeking

guidance from embassies or consulates because those people have to stick to “the official line.” What’s the

official line? Presumably, it’s the set of practices delineated and approved by the State Department back in

Washington, DC. The strength of these practices is that they’re formed to be universal, to work at every

embassy everywhere in the world. A culturist, however, looks at that and says it’s silly. There are no

practices that work everywhere in the world. The advice government bureaucrats give is worthless; it’s

less than worthless because it departs from the error of conceiving ethics as a set of rules fitting a

transnational reality. What people in business should actually do is get in contact with people who really

know something about ethics, and that requires turning to the locals, including the chamber of commerce,

because they’re on the scene.

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Conclusion. The culturist deals with the question about whether a bribe is ethically respectable by

ignoring all dictates received from other places and obeying the customs and standard practices of those

who live and work where the decision is being made.

Cultural Ethics and the News Reporting of Wallace Souza

Another example of how culturist ethics works comes from the flamboyant TV reporter Wallace Souza.

Like many action crime reporters the world over, he raced to violent scenes hoping to get the first and best

video. What counts, however, as good video in Brazil is different from what typically gets shown in the

United States. Here’s a description of what Souza sent over the airwaves: “In one of Mr. Souza’s shows on

his Canal Livre programme, a reporter approached a still-smoldering body in a forest. ‘It smells like a

barbecue,’ he says. ‘It is a man. It has the smell of burning meat. The impression is that it was in the early

hours…it was an execution.’”
[2]

This is not the kind of report we see in the US media, and one of the differences is the ethics. Typically in

the United States, a certain respect is accorded to the deceased, even if they’re criminals. It’s considered

an exploitation to directly show dead bodies, especially smoldering ones. There’s quite a bit of

cultural

analysis that would go into this prohibition, but simplifying, it’s not just that reporters hold an ethical

responsibility to others to not exploit their deaths graphically; they also have a responsibility to viewers to

not show images that may be (or probably would be) disturbing. By contrast, and as the Souza report

shows, in Brazil the rules are different and this kind of visual makes it over the airwaves without raising

eyebrows or triggering moral objections.

More generally, the question about what you’re allowed to show on TV to boost the ratings and so make

more money is an extremely rich area of examples for cultural ethics. How graphic is the violence allowed

to be on CSI Miami? How far is the wardrobe malfunction allowed to go on the Real Housewives of

Orange County? These kinds of basic questions about decency and ratings (which means advertising

revenue) seem tailor made for those who believe the answers don’t depend on anything more than what

people in a certain culture will accept. They seem cut out for those believing that the value we call decency

is nothing more (or less) than the line drawn between the number of people who will watch and the

number who turn the TV off in disgust.

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Is Culturalist Ethics True?

If it’s true that there’s no ethics but the kind a culturalist proposes, then this book loses a good deal of its

usefulness. It’s lost because the main object is to help readers form and justify rules to guide their

professional lives. Conceding that the culturalists are right, however, is also admitting that there’s no

reason to carefully analyze problems: you’re far better served just checking around to see what most other

people are doing in similar situations. Ethics isn’t a test of your ability to think reasonably and

independently; it’s more a responsibility to follow the crowd.

Culturalism isn’t true, however, at least not necessarily. You can see that in the reasoning underneath the

cultural approach. The reasoning starts with an observation:

In certain societies, handing money under the table is commonly considered an appropriate,

ethically respectable part of business activity, and in others it’s considered both illegal and

unethical.

And moves quickly to a conclusion:

Right and wrong in the business world is nothing more than what’s commonly considered right

and wrong in a specific community.

On the surface, this argument looks all right, but thinking it through carefully leads to the conclusion that

it’s not valid. A valid argument is one where the conclusion necessarily follows from the premises. For

example, if you start from the definition that all unmarried men are bachelors, and then you observe that

your friend John is an unmarried man, you can, in fact, conclude that he’s a bachelor. You must conclude

that. But that’s not the situation with the culturalist argument because the conclusion doesn’t necessarily

follow from the premise. Just because no broad international agreement has been reached about what

counts as bribery doesn’t mean no agreement will ever be reached. Or making the same point more

generally, just because no trans-cultural theory based on universal reason has yet to conquer all local

beliefs and habits everywhere on the globe doesn’t mean no such theory will ever accomplish that goal.

Taking the same situation in the less ambiguous world of the physical sciences, there was a time when

some believed the earth centered the sun and planets, while others believed the sun was at the center, but

that didn’t mean the dispute would linger forever. Eventually, tools were found to convince everyone that

one side was right. So too in business ethics: one day an enterprising ethicist may find a way to

indisputably prove on the grounds of a universal and reasonable argument that greasing palms is a bribe

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and not a gift, and it’s immoral, not moral. We don’t know if that will happen, but it might. Consequently,

the fact that we’re unsure now as to whether any single ethics can deal with the whole world doesn’t

require shooting to the other extreme and saying there’ll never be anything but what people

in specific

nations believe and that’s it. The culturalist argument, in other words, isn’t necessarily persuasive.

It is worrisome, though. And until someone can find a way to do for ethics what scientists did for the

question about the earth’s relation to the planets, there will always be individuals who suspect that no

such proof will ever come. Count Nietzsche among them. In the field of contemporary philosophy and

ethics, those who share the suspicion—those who doubt that no matter how hard we try we’ll never be able

to get beyond our basic cultural perspectives and disagreements—belong to a movement

named postmodernism.

What Are Some Advantages and Drawbacks of Culturalist Ethics?

One general advantage of a culturalist ethics is that it allows people to be respectful of others and their

culture. A deep component of any society’s existence, uniqueness, and dignity in the world is its signature

moral beliefs, what the people find right and wrong. A culturalist takes that identity seriously and

makes

no attempt to change or interfere. More, a culturalist explicitly acknowledges that there’s no way to

compare one culture against another as better and worse. Though you can describe differences, you can’t

say one set of moral truths is better than another because all moral truths are nothing more than what a

society chooses to believe.

A more specific advantage of a culturalist ethics in the economic and business world is that it adapts well

to contemporary reality. Over the last decades we’ve seen an explosion of international commerce, of large

corporations tearing loose from specific nations and functioning globally. This economic surge has

outpaced the corresponding understanding surge: we have no trouble switching dollars for euros or for

yen, and we can buy Heineken beer from Germany and ride in a Honda made in Japan, but few of us

speak English, German, and Japanese. In that kind of situation, one where some dilemmas in business

ethics end up involving people we can’t really talk to, culturalism provides a reasonable way to manage

uncertainties. When we’re in the United States, we follow American customs. If we’re sent on an overseas

trade venture to Germany or Japan, we pretty much do as they normally do there. Just in practical terms,

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that may well be the easiest way to work and succeed in the world, and a culturalist ethics allows a

coherent justification for the strategy.

The Disadvantages

The major disadvantage of a culturalist ethics is that it doesn’t leave any clear path to making things

better. If a community’s recommended ethical compass is just their customs and normal practices, then

it’s difficult to see how certain ingrained habits—say business bribery—can be picked up, examined, and

then rejected as unethical. In fact, there’s no reason why bribery should be examined at all. Since

moral

right and wrong is just what the locals do, it makes no sense to try to change anything.

This view stands in stark contrast with what we usually believe—or at least would like to believe—about

ethics: there can be progress; we can become better. In science, we know progress occurs all the time. Our

collective knowledge about the sun’s position relative to the planets went from wrong to right with time

and effort, and we’d like the same to happen for moral uncertainties. That’s why it’s so easy to imagine

that bribery is a dirty, third-world practice, and part of our responsibility as a wealthy and developed

nation is to lead the way in cleaning it up. We clean the moral world of bad business ethics just like our

scientists rid the physical world of misperceptions. More, that’s a central aim of America’s anti-bribery

legislation as it applies to overseas acts: it’s to cure other cultures of their bad habits. If you’re a

culturalist, however, then the bad habit isn’t bribery; it’s one nation trying to impose a morality on

another.

However you may come down on the question about whether nations should be trying to improve ethical

customs in other places, what’s inescapable is that if you’re a culturalist, you don’t have any ground to

stand on when it comes to criticizing the moral practices of businessmen and women in foreign countries.

You don’t because what’s going on elsewhere is an independent and legitimate ethical system and can’t be

judged inferior to our own.

Another problem with a culturalist ethics is that it provides few routes to resolving conflicts within a

society. For example, should I be allowed to go into business for myself on the land I bought in the middle

of a residential neighborhood by opening a motorcycle bar? In Houston, the answer’s yes. There’s a

community consensus there that owning a piece of land allows you to do (almost) whatever you want with

it. In legal terms, that translates into Houston being the only major American city without zoning

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regulations. Up the road in Dallas, however, there’s a similar community consensus that the rights of

landownership are curtailed by the rights of nearby landowners. The result is strict zoning laws likely

prohibiting Harley conventions in the middle of family neighborhoods. At this point, a culturalist has no

problem; people in Houston have their codes of right and wrong and people in Dallas have theirs.

What

happens, though, in Austin, Texas, which is about midway between Houston and Dallas? What if about

half the population believes in landowner rights at all costs and the other half goes for a more community-

oriented approach? A cultural ethics provides few tools for resolving the dispute beyond sitting and

waiting for one side or the other to take control of the town. This means ethics isn’t helping us solve

disagreements; it only arrives when, really, it’s no longer needed.

K E Y T A K E A W A Y S

 Proponents of cultural ethics embrace the idea that moral doctrines are just the rules, beliefs, and

customs of specific communities.

 Doing the right thing within a culturalist framework relies less on traditional ethical reasoning and more on

detecting local habits.

 The culturalist view of ethics is neither true nor false. It’s a reaction to the world as it is: a place with vastly

divergent sets of moral codes.

 A culturalist ethics respects other societies and their practices but loses solid hope for ethical progress.

R E V I E W Q U E S T I O N S

1. If you’re doing business overseas as a cultural ethicist, why would it make sense to consult the local

chamber of commerce? Who else might you consult for moral guidance? Why?

2. You go abroad to win a contract and discover that a cash gift is necessary, so you hand it over and win the

business. On returning to the United States, you put the $200 gift on your expense report. The boss is

infuriated, calls your act an “unethical, wrongheaded bribe” and says she won’t reimburse you the $200.

What arguments could you use to convince her that you did the right thing and should be reimbursed?

3. Souza’s bloody TV program is popular in Brazil, especially the parts where he shows video of horridly dead

bodies. How could a culturalist argue that the episodes should not be shown on American TV?

4. A cultural ethics is neither true nor false. Explain.

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[1] Moira Allen, “Here Comes the Bribe,” Entrepreneur, October 2000, accessed May 12,

2011, http://www.entrepreneur.com/magazine/entrepreneur/2000/october/32636.html.

[2] Dom Phillips, “Brazil Crime Show Host ‘Used Murder to Boost Ratings,’” Times, August 13, 2009, accessed May

12, 2011,http://www.timesonline.co.uk/tol/news/world/us_and_americas/article6793072.ece.

4.4 Virtue Theory

L E A R N I N G O B J E C T I V E S

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1. Define virtue ethics.

2. Elaborate basic virtues and show how they work in business.

3. Indicate how virtue is acquired.

4. Note an advantage and drawback of the theory.

What Is Virtue Ethics?

Contemporary virtue ethics is an updated version of a theory first proposed in ancient Greece. Today’s

proponents acknowledge that it’s very difficult to set up a list of moral rules that are going to solve ethical

dilemmas across cultural lines. Typically, they don’t go quite so far as the culturalists; they don’t believe

that basic regulations of right and wrong are completely independent from one community to another. In

practical terms, however, there’s agreement that the world is too diverse and changing to be controlled by

lists of recommendations and prohibitions. So proponents of virtue suggest that we change the focus of

our moral investigations. Instead of trying to form specific rules for everyone to follow—don’t bribe, don’t

exploit the deceased on TV—they propose that we build virtuous character. The idea is that

people

who are good will do the good and right thing, regardless of the circumstances: whether they’re at home

or abroad, whether they’re trying to win new clients or making a decision about what kind of images are

appropriate for public TV.

In a vague sense, we all know what it means to have a virtuous character; we all know people who can be

counted upon to do the right thing. Think of a business situation where true character shines through. A

local TV station has seen advertising revenue plummet and layoffs have to be made. Who should go?

Should Jim get to stay because his wife just had their first child? Should Jane get to stay because she’s

fifty-seven and probably won’t be able to find another job? Should John—who’s a tireless worker and the

station’s best film editor—be laid off because he was hired only two months ago? It’s a hard choice and

there’s no way to know for sure what’s right. It is certain, however, that there are better and worse ways of

handling the situation.

One strategy is to not think too much about it, to just know that two employees have to go, so you take the

names that happen to come to mind, you send them an e-mail, and you instruct security to make sure

they’re escorted from the building. Then you go hide in the bathroom until they’re gone. In other words,

you weasel out. In the same situation, another person will draw up criteria for making the decision and

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will stand up and inform those who are being let go why the decision was made. The thoughts

(complaints, regrets, excuses) of those being released will be honored and heard attentively, but the

decision will stand. From the person in charge of deciding, there’ll be honesty, respect, and firmness. This

is virtue. You can’t read it in a book, you can’t memorize principles, and you can’t just follow some

precooked decision-making process. You have to have certain qualities as a person to do the right thing in

a hard situation.

Virtue ethics is the idea that we can and should instill those qualities in people and then let them go out

into the complex business world confident that they’ll face dilemmas well. What decisions will they make?

What will they do when faced with questions about who should be laid off or, in another case, whether to

hand over a bribe in a place where everyone is bribing? We don’t know. But we rely on their good

character to be confident they’ll do right.

Under this conception, these are the primary tasks of ethics:

 Delineate what the virtues are.

 Provide experience using the virtues.

The experience is especially important because virtue isn’t so much a natural characteristic like height or

hair color; it’s more of an acquired skill: something you need to work at, practice, and hone. Also, like

many acquired skills, doing it—once a certain level of mastery has been reached—is rewarding or

satisfying. Typically, a person driven by virtue has nurtured a moral instinct for acting in consonance with

the virtues. Doing right feels right. Conversely, not acting in consonance with the virtues is discomforting;

it leaves a bad taste in the mouth. At the risk of trivializing the subject, there’s a very limited comparison

that can be made between learning virtue and learning more rudimentary activities like golf or dancing.

When someone has acquired the skill, hitting a good shot or taking the right steps in perfect time feels

good. Conversely, missing a putt or stepping on your partner’s foot leaves you consternated.

What Are the Virtues and Vices?

Every advocate of virtue ethics will present a constellation of virtues that they believe captures the essence

of what needs to be acquired to be virtuous. Typically, there’ll also be a set of anti-virtues or vices to be

avoided to fill out the picture. Here’s a set of virtues overlapping with what most proponents will offer:

 Wisdom (both theoretical and practical)

 Fairness

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 Courage

 Temperance

 Prudence

 Sincerity

 Civility

On the outer edges, here’s a common pair of vices to be avoided. Notice that what counts as a vice here

isn’t synonymous with the common use of the word, which implies a weakness of the physical body

manifested as the inability to resist drunkenness, drugs, and similar:

 Cowardice

 Insensibility

How Do the Virtues and Vices Work in a Business Environment?

Wisdom as a virtue is frequently divided into theoretical and practical variations. Theoretical wisdom is

what you get reading books and hearing college lectures. It’s the acquired ability to concentrate and

understand sentences like the one you’re reading now, even though it’s not very exciting and allows

almost no cheap thrills—words like sex and drugs don’t come up much. Those possessing theoretical

wisdom know the scholarly rules of the world in the abstract but not necessarily in practice. In the world

of business, for example, someone may be able to explain the fine points of Immanuel Kant’s complicated

and dense ethical ideas, but that doesn’t mean they’ll be able to apply the lessons when sitting in

someone’s office in a foreign country.

Practical wisdom (sometimes called prudence) is the learned ability to take a deep breath and respond to

situations thoughtfully. For example, everyone feels like exploding sometimes, especially at work after

you’ve had too much coffee and you didn’t get the raise you wanted. After that, some guy in a meeting

takes a cheap shot and jokes about how you didn’t win an overseas account because you didn’t bribe the

right person. What do you do? Scream the guy’s head off? Talk about it quietly after the meeting? Let it

pass like nothing happened? Practical wisdom doesn’t give an answer, but in the heat of the moment, it’s

the virtue of making the decision coolly, of doing something you won’t regret later. Frequently, an

association is set between practical wisdom and finding a spot between extremes. In this case, perhaps it

would be excessive to go off right there in the meeting room (because the outburst would tend to confirm

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that you’re not real smart), but it might also be excessive to let the jab go as though nothing had happened

(because the same guy may feel emboldened to keep poking at you). So practical wisdom would be the

ability to navigate a middle, prudent, route—perhaps one leading to the decision to discuss the matter

quietly but sternly after the meeting.

Fairness is the virtue of judging people’s acts dispassionately, evenhandedly, and from all points of view.

When forming judgments about a potential client who seems to be asking for a bribe, the verdict is going

to partially depend on where the client is. If he’s in the United States, that’s one thing; if he’s in a country

where clients customarily get cash under the table, that’s another. No one is saying the first is wrong and

the second right, but the different contexts need to be considered, and fairness is the ability to consider

them, to make evenhanded judgments even in very different

situations.

Courage is the virtue of moderate boldness. If you’re an action crime reporter, you won’t hide in a bush

while pushing your cameraman out into the open to try to get some exciting footage. You won’t, in other

words, be a coward. At the same time, you won’t be rash either, you’ll know that sometimes you need to

take a risk to get a good story, but it doesn’t make a lot of sense to stand up and film from the middle of a

gunfight.

Temperance is the virtue of self-control with respect to pleasure, especially the pleasures of the body and

the senses. Curiously, Wallace Souza stands as an embodiment of this skill. As a major league drug dealer,

he no doubt had constant access to good, cheap, feel-good substances. Even so, he managed to control his

intake, not letting it interfere with his day job as a TV reporter, and his other day job as a legislator.

More generally in the workplace, temperance mixes well with the learned ability to delay gratification. For

example, doing good work is frequently rewarded with a better job, but it’s hard to find someone who feels

as though they get everything they deserve every time. Temperance enters here as the ability to bear down

and keep trying. It’s also, on the other side, the ability to know when a larger change (perhaps looking for

work at another company) may be necessary to get ahead.

Sincerity is the ability to reveal yourself to others with confidence that you’ll be respected. It fits

between

the extremes of frigidity and emoting. Souza or any TV reporter has to do more than just give cold facts;

some human, emotional component must be added to the mix. On the other hand, no one’s going to watch

a reporter who arrives at a crime scene, reports that he feels sad, and breaks down in tears. Similarly in

international business negotiations, to establish good contact across cultures, there has to be some

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sharing of humanity. You need to reveal what kind of food you like or something similar to the people on

the other side. You don’t want to go too far, though, and talk about how Japanese food reminds you of a

childhood vomiting episode (especially when doing business in Tokyo).

Civility is the virtue of showing consideration for others without humiliating yourself. As a virtue it

doesn’t mean eating with the right fork or remembering to say “thank you” to clients. Instead, it’s the

disposition to show others that you take them seriously while also respecting yourself. This means

establishing ground rules for behavior that are independent and neutral. In essence, the idea is, when

having lunch with your boss, you don’t eat like you’re sitting in front of the TV in your family room; you

respect her, and you expect the same from her. Civility is the virtue of habitually being and expressing

yourself in a way that establishes your presence solidly without threatening or impinging on others.

Vices

On the outside of the virtues, there are vices. Just as the accomplishment of a virtue—acting in harmony

with it—yields a sense of satisfaction and confidence that you’re living well, living a good life, so too the

vices produce a sensation of unease. It’s not exactly a sting of conscience (like a child feels when caught

stealing); it’s more a sense of weakness, deflation, and failure. Cowardice, for example, is a vice. It may

save your job if you mess up and don’t confess to the problem being your fault; but for the person trained

in virtue, the job will have lost its dignity. Insensibility is another vice. Had Souza understood that, he

may have thought twice about those people’s dead bodies he rolled out for television. He may have

thought of their living parents, their children. And even if he hadn’t, after he’d presented the images he

would’ve felt that he’d lapsed, that he hadn’t done as well as he could.

How Do I Become Virtuous?

Virtues aren’t a list of actions you can write on the back of your hand and refer to; they’re ways of living,

and the only route to becoming virtuous is to actually live those ways. Every society will have its own

institutions for instilling virtue, and within societies different institutions will seem more apt for some

than for others. In the United States, the kinds of groups that are sought out as instillers of virtue include

the family, churches, schools, sports teams, Boy and Girl Scouts, volunteer and community organizations,

the armed forces, AmeriCorps, and similar.

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Companies play a role, too. The virtuous organization will be led by individuals who are virtuous, and it

will reward workers—at least partially—based on their progress toward being good people. This kind of

organization won’t rely on employee handbooks and compliance rules to dictate behavior; instead, it will

devise strategies for nurturing the skills of a good life. They may include mentor programs, carefully

calibrated increases in responsibility and independence for employees, and job performance assessments

that not only measure numerical results but also try to gauge an individual’s moral contributions

to the

organization’s undertaking.

Finally, when confronted with moral questions—“What kind of images should I broadcast on my TV

report?” or “Should I hand money under the table?”—the answer won’t be yes or no. It’s never a yes or no;

it’s always to do what my good character dictates.

An Advantage and Drawback of Virtue Ethics

The principal advantage of virtue ethics is its flexibility, the confidence that those who are virtuous will be

equipped to manage unforeseeable moral dilemmas in unfamiliar circumstances. The principal drawback

is the lack of specificity: the theory doesn’t allow clear, yes-or-no responses to specific problems like

whether I should offer a bribe.

K E Y T A K E A W A Y S

 Virtue ethics concentrates on forming good character and then trusting people to do the right thing. At the

heart of ethics, the formation of good character replaces the defining of specific guidelines for action.

 A society’s institutions play a key role in instilling virtue.

 The basic virtues tend to stress moderation, the ability to avoid taking extreme action in the face of

dilemmas.

 Virtue ethics grants flexibility insofar as those who are virtuous should manage any situation well.

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R E V I E W Q U E S T I O N S

1. Would you call Souza’s colorful professional life a profile of the virtue of courage? Why or why not?

2. How might the virtue of civility come forward in the case of international bribery, in the case that you’ve

gone abroad in pursuit of a contract and the prospective client demands some cash under the table?

3. What are some societal institutions you’ve come in contact with that could be understood as teaching

virtue? What virtue(s) do they instill, and how?

4.5 Discourse Ethics

L E A R N I N G O B J E C T I V E S

1. Define discourse ethics.

2. Show how discourse ethics can function in a business context.

3. Note an advantage and drawbacks to the theory.

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What Is Discourse Ethics?

Proponents of discourse ethics reverse the order in which we normally address ethical uncertainties.

Instead of starting with one theory or another and then taking it out into the world to solve problems, they

start with a problem and try to create a moral structure to solve it. Ethical solutions become ad hoc,

custom generated to resolve specific conflicts. It doesn’t matter so much, therefore, that people come to an

issue like bribery from divergent moral terrains because that difference is erased by the key element of

discourse ethics: a foundational decision to cut away from old ideas and make new ones.

How Does Discourse Ethics Work?

When a dilemma is faced, those involved gather and try to talk it out. The discussion is constrained by

two

basic limits: conversation must be reasonable and civil, and the goal is a peaceful and

consensual

resolution. As long as these ideals control what we say, we can call the result ethically respectable.

Take the dilemma of international bribery: you’ve left your home office in New Jersey and gone to

Somalia seeking to win construction business on a new airport. As the recent Transparency

International Corruption Perception Index shows,
[1]

you’re going to discover that its customary to pass

some cash to a prospective client before he’ll be willing to do serious business. Company policy, however,

prohibits bribes.

What do you do? If you’re playing by hometown, American rules, your responsibility to company policy

and to broad honesty and fairness requires you to walk away. But if you’re playing Somali rules where

greasing a palm seems fair and acceptable, your obligation to win contracts for the company that’s paying

your salary requires you to pass some cash. Discourse ethics comes in here with this: instead of trying to

impose one side’s convictions on the other, the effort will be to overcome the divide by constructing a new

and encompassing moral framework through common agreement. American rules and Somali rules are

both thrown out, and new ones get sought. Here are steps on the way:

1. Define the immediate stakeholders—that is, those who’re most affected by the dilemma and may be

gathered to resolve it. In this case, they include you and your client. Since your responsibilities to the

company are reported through your supervisor, she too could be included.

2. Establish a language for discussion. In the international world this is actually a real problem. Sensibilities

must be respected, and if you’re in Somalia, just assuming that everyone will speak English might be a

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step backward. On the other hand, you probably don’t speak Somali. This step then becomes a rehearsal

for the larger problem—just as you’re separated by moral codes, so too you’re separated by languages—

and you’re going to have to find a solution. You may choose a third language, you may hire an interpreter,

or maybe your client will be able to speak English. In any case, an agreement must be reached.

3. Establish the goal, which in discourse ethics is always the peaceful and consensual resolution to the

dilemma.

4. Define the problem. Here, it’s that when cash passes from you to the client, you feel like you’re handing

over an illegitimate bribe, but he feels like he’s receiving a typical and acceptable gift. This stage of the

process would require fairly lengthy elaborations by all those involved of exactly what they understand

their obligations and interests to be. Your supervisor would need to explain the company policy, why it

exists and how she’s responsible for upholding it. Your client might point out that his salary is quite low,

and the reason for that is simple: everyone accepts that his income will be supplemented by gifts. (Here,

he might sound something like a waitress in New York City explaining to a foreign diner that her salary is

absurdly small, but everyone expects there’ll be some tipping, and it’ll be more than two shiny quarters.)

You, finally, explain how you’re being stretched between two obligations: the one to respect company

policy and the other to do the job of winning contracts.

5. Propose solutions. Discourse ethics is open, a kind of ethical brainstorming: those involved offer

solutions, modify each other’s’ proposals, and try to discern whether a common ground can be mapped. In

this case, someone may propose that the prospective client offer substantial evidence that money is

expected and customary for someone in his position in Somalia. If the evidence can be produced, if it

shows that payments are nearly universal, and it shows about how much they normally are, then perhaps

all parties can be satisfied. Your supervisor, seeing that the amount actually forms part of a normal salary

and isn’t some extraordinary payment, may be able to reason that the money isn’t a bribe because it’s not

doing what bribes typically do, which is afford an unfair advantage. In this case, if everyone’s paying, then

no advantage will be had. It’s important to note here that the logic isn’t if everyone does it then it’s all

right, because discourse ethics doesn’t generalize like that. All conversations and solutions are about

getting agreement on this one case. So your supervisor feels like handing cash over isn’t a bribe any more

than tipping a waitress is. Your client, having received the money, will obviously be satisfied. You, finally,

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will be free to fulfill your professional obligation to win the client without sacrificing your obligation to

respect company policy and your obligation to yourself to work in a way that’s honest.

If this—or any—solution is reached, then discourse ethics will have done what it promised: open a way for

concerned parties to reach agreements alleviating conflicts. Whatever the agreement is, it’s an ethically

recommendable solution because the definition of what’s ethically recommendable is just agreements

reached through discussion.

An Advantage and Drawbacks to Discourse Ethics

The main advantage of discourse ethics is that the search for solutions opens the door all the way.

Everything’s on the table. That gives those involved just about the best hope possible for a resolution

benefitting everyone joined in the discussion.

There are two main drawbacks to discourse ethics. The first is that everything’s on the table. If what’s

morally acceptable can be as broad as anything a group agrees to, there’s the potential for ugly solutions.

On the face of it, the international bribery resolution—hand some money over because it’s not really a

bribe and it’s more like tipping a waiter—seems pretty harmless. But it doesn’t take much to see a

slippery slope developing. If this kind of gifting is OK in Somalia where salaries are low, then why not in

the United States too if it happens that a particular client has a low salary relative to others in that line of

work? Or why not every client because, really, pay in that line of work is substandard? This can go on and

on, and before you know it, the entire economy is corrupted. Obviously, that won’t necessarily happen,

but it could, and this is one of the reasons so many insist that any serious attempt to do ethics must begin

with some basic defining of inbounds and out-of-bounds, some dividing of right from wrong.

Discourse

ethics doesn’t do that.

The second drawback to discourse ethics is that for every ethical dilemma faced, you have to start over.

Since the entire idea is to clear the deck and make a new solution, anyone facing a significant number of

ethical dilemmas in their line of work is going to be constantly clearing the deck and beginning anew. Of

course there may be some components of past discussions that could be carried forward—what you

learned on the trip to Somalia may be helpful in Uzbekistan—but that doesn’t change the fact that the

ethical recommendation to start from zero and talk problems out is going to lead to a lot of talking.

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K E Y T A K E A W A Y S

 Discourse ethics solves dilemmas by asking those involved to discuss the matter reasonably until they can

find a consensual and peaceful solution.

 Discourse ethics allows tremendous latitude in the search for solutions to conflicts, but it risks allowing

solutions that many would consider unethical.

R E V I E W Q U E S T I O N S

1. A five-step process was discussed to chart the advance of discourse ethics. Summarize each of these steps

in your own words.

2. Describe a business situation where discourse ethics might work well. Why might it succeed?

3. Describe a business situation where discourse ethics might not work well. Why might it fail?

[1] “Corruption Perceptions Index 2009,” Transparency International, accessed May 12,

2011,http://www.transparency.org/policy_research/surveys_indices/cpi/2009/cpi_2009_table.

4.6 Ethics of Care

L E A R N I N G O B J E C T I V E S

1. Define the ethics of care.

2. Show how an ethics of care functions in a business context.

3. Note advantages and drawbacks to the theory.

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The Rules of an Ethics of Care

Sometimes advocated under the titles of community ethics or feminist ethics, an ethics of care switches

the focus of moral regulation from the individual to networks of social relationships. The basic question

isn’t about yourself; it’s not “What should I do?” Instead, it’s always about a larger us: “What should be

done to nurture the connections among those of us closest to each other?”

A quick example dilemma: There’s a flaming car wreck involving your sister and a Nobel Prize–winning

medical scientist, and you have the strength to rescue only one of the two. Which should you save? A strict

utilitarian—someone believing we should always act to bring the greatest good to the greatest number—

will go for the scientist. Saving him will likely produce future medical breakthroughs in turn saving many

others, which means the greater good will be served by dragging him out. But how many of us would

actually do that? Wouldn’t you go for your own sister before some scientist you’ve never met? And

wouldn’t most of the rest of us agree that we’d do the same thing? If the answer is yes, an ethics of

care

provides a way of understanding and justifying the impulse, which is, before anything else, to

protect

those bound to us.

There are three critical steps on the way to formalizing care as a coherent ethical orientation. Each is a

shift away from traditional ethics.

1. At the center of attention, independent actors are replaced by a web of interrelated individuals. (Ethics is

not about me and you; it’s about us.)

2. The impartial application of abstract principles is replaced by the maintenance and harmonizing of

human relationships. (Ethics is less about the fair imposition of rules and more about crafting social

integration.)

3. Tensions between the rights of individuals get replaced by conflicts of responsibility to others in

established relationships. (Ethical tensions aren’t my rights versus yours; it’s me being torn between those

I care for.)

In the international bribery example up to now, we’ve treated all those involved as anonymous

individuals: it hasn’t mattered whether or how long they’ve known each other. It’s only important to know

that there’s a supervisor X back at the US company headquarters, and there’s the person Y who’s gone

abroad to win a contract, and there’s the prospective client Z expecting a bribe. That’s it. Maybe the three

have never exchanged more than fifty words in a single conversation, or maybe they’re all cousins who

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meet for family blowouts every two months. We haven’t asked because it hasn’t mattered what their

personal relationships may be. That will have to change, however, within an ethics of care because there

are no anonymous, single individuals: everyone has a place—near or far, integral or accidental—within a

social network. For that reason, all morality resembles the car wreck. It’s charged with human

attachment, and because the ethics of care makes those attachments the center of deliberation, you have

to know how people are related to each other before beginning to know how they should treat each other.

Turning this perspective toward the bribery example, the overseas client, let’s say, is an old and loyal

client of the company, and also one who’s always gotten a little extra from one or another employee.

About the company, it’s not an anonymous multinational but a medium-sized, extended-family concern.

Brothers, uncles, nieces and nephews, and a hodgepodge of others all work there. For years, it can be

added, this overseas contract has been vital to the company’s success. Now all this counts for something

within an ethics of care. As opposed to the traditional idea that the best moral lessons show us how to

coldly, impersonally, and impartially apply abstract rules, here we’re checking to see who’s involved,

because the reason we have morality is to vitalize our human

relationships.

An ethics geared to strengthen bonds isn’t necessarily easy to enact. Take a company like Oil-Dri, about

which Forbes recounts,

Oil-Dri now makes about $240 million a year in revenues. At the company’s 50th anniversary

party, the CEO asked anyone related to anyone else at the organization to stand up. Of the

company’s 700 or so employees, almost 500 rose.
[1]

This is obviously an organization where relationships matter and where management is accounting for

human concerns and networks when hiring people. No doubt there’s a lot of camaraderie in this

workplace, but imagines how difficult it must be to dole out promotions when everyone knows

everyone

else in that personal, almost familial way. Within a more traditional ethics, one of the first steps to making

a promotion decision is to clear away all the personal stuff before evaluating each employee directly and

simply assess his or her professional merits. Within an ethics of care, however, any promotion decision—

more or less any decision at all, for that matter—is going to require the subtle, complex, and difficult

balancing of many individual and highly emotional situations and circumstances.

Something similar happens within typical families. Most parents trot out the idea of treating all their

children identically—they all get their first car at the same age and so on—but if a sibling has special

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problems at one stage of their development, they’ll normally get special treatment in the name of

preserving the family unit. The other brothers and sisters probably complain, but if they’re old enough

they understand that protecting those who are vulnerable is one of the first imperatives of caring for each

other as a group. An ethics of care in essence takes that model from the family and extends it out into the

world of business. Applying it to the promotion question, if there’s a member of Oil-Dri saddled by, let’s

say, a difficulty with alcohol, then that might actually be a positive consideration within care-based

thought. Promoting someone who has had problems and reinforcing their attempt to get past them may

serve the general harmony of the entire group. As a result, someone who’s less qualified in purely

professional terms may get the promotion in the name of caring for the social web.

How Might the Case of International Bribery Be Managed within an

Ethics of

Care?

Traditionally, ethics features questions about the competing rights of individuals. For example, when I

offer a bribe, am I impinging on the right of another to compete on a level playing field for the same

business? Starting from an ethics of care poses a different question: does giving a bribe reinforce or

weaken the bonds of human relationships defining my place in the world? The answer, obviously,

depends. If the company is Oil-Dri where everyone’s deeply connected, and it’s an old client, and a little

gift of cash has always been slid under the table, then the maintenance of that network’s vitality and

human health becomes a powerful argument in favor of continuing the practice.

Keeping the wheels turning isn’t the only solution, however. Discomfort with doing something that seems

underhanded may lead the overseas representative to try a different way of keeping the contract going,

one that’s based less on money under the table and more on aboveboard selling points. Quality of service

as proven by work performed in previous years may offer a way to keep the business and personal link

intact. There may be, in other words, a less controversial route to the same end of maintaining and

enforcing existing relationships.

Alternatively, a different client, one not demanding a bribe, may be sought to purchase the company’s

goods and services. Nothing in an ethics of care requires those participating to preserve every bond.

Sometimes it happens in families that a member becomes so toxic and damaging to the rest that the

connection needs to be severed in the name of maintaining the larger whole. The overseas bribery

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relationship may be one of those cases. It’s hard, of course, to break away, but there are other potential

clients out in the world and going after them may, in the final analysis, do more for the social health of the

core group than clinging to a problem at all costs.

Finally, enrolling in an ethics of care doesn’t mean going blind to what’s going on outside the circle of

care. One fact from the larger world that should be taken account of comes from a recent article in

the Washington Post about foreign business bribes: prosecutions of international bribery by the US

government are picking up.
[2]

Ethical concerns should normally be distinguished from legal

considerations, but there’s no doubt that few events interrupt human relationships like a jail term. Cutting

the bribery relationship, therefore, may be necessary regardless of how important the particular client and

business are for the larger whole.

Conclusion. The activation of an ethics of care may justify continuing to pay money under the table. Or it

may lead toward a less controversial way of maintaining the business relationship. Or it may cause a break

between the company offering services and the overseas client demanding a bribe. There’s no way to know

for sure which path will be the right one, but in every case the choice will be made in the name of

preserving and nurturing the human relationships surrounding the decision.

Advantages and Drawbacks of an Ethics of Care

The advantages of a care-based ethics include the following:

 It can cohere with what we actually do and think we ought to do, at least in cases like the car accident

cited at this section’s beginning. In a certain sense, it corresponds with our natural instincts to act in favor

of and protect those under our care and those involved in our lives.

 It humanizes ethics by centering thought on real people instead of cold rules. Presumably, everyone

agrees that ethics is ultimately about people: unlike the hard sciences, the end results of morality are

tallied in human lives. To the extent that’s right, an emphasis on care seems well suited to the general

practice of ethics.

 It allows us to focus our energy and concern on those who are closest to us. Everyone knows that there’s

injustice in the world, just as we all know we can’t solve every problem. The ethics of care allows us to

focus our energy naturally on the most immediate human needs.

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The main disadvantage of an ethics of care is that it threatens to devolve into tribalism: There’s my group,

and I take care of them. As for all the rest of you, you’re in your groups and in charge of yourselves. This

isn’t every man for himself, but it comes close to every social group for itself.

K E Y T A K E A W A Y S

 An ethics of care makes the nurturing of our immediate communities and the protecting of those closest

to us the highest moral obligation.

 In business, an ethics of care asks us to review decisions not in terms of hard rules but in terms of how

they will affect the people with whom we share our lives.

 An ethics of care humanizes moral decisions, but it threatens tribalism.

R E V I E W Q U E S T I O N S

1. What are the three major steps an ethics of care takes away from most traditional theories? Can you put

each one in your own words?

2. An ethics of care is frequently compared to the morality guiding a family. Can you think of another

comparison that encapsulates how this ethics works?

3. Imagine that you had two parents and a sister working for Oil-Dri in the United States. The overseas client

you’ve been sent to do business with is a half-brother from your father’s first marriage. He demands a

bribe. How could the ethics of care be used to justify accepting or refusing?

[1] Klaus Kneale, “Is Nepotism So Bad?,” Forbes, June 20, 2009, accessed May 12,

2011,http://www.forbes.com/2009/06/19/ceo-executive-hiring-ceonewtork-leadership-nepotism.html.

[2] Carrie Johnson, “U.S. Sends a Message by Stepping Up Crackdown on Foreign Business Bribes,” Washington

Post, February 8, 2010, accessed May 12, 2011,http://www.washingtonpost.com/wp-

dyn/content/article/2010/02/07/AR2010020702506.html.

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4.7 The Cheat Sheet: Rules of Thumb in Applied Ethics

The following tables summarize the theories considered in this textbook. The first includes the

traditional theories and the second encapsulates the contemporary theories built to respond to

cultural relativism.

Table 4.1 The Traditional Theories

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Name

Guidance

for ethical

action

Focus of our

efforts

Typical

questions

asked in

the effort

to

fulfill

obligations

Conception

of the

person

implied by

the theory

Strengths and

weaknesses Type of theory

Duty

Learn the

basic duties

to ourselves

and others,

and obey

them. The duties.

 To whom do

I have

obligations?

 What are the

obligations?

 How do the

obligations

weigh

against each

other?

We are

rational

actors.

Gives clear

guidance in

many

situations but

is inflexible in

the face of

special cases.

Non-

consequentialist

Fairness

Treat

people

identically

unless they

differ in

ways

relevant to

the
situation.

(Treat

equals

equally and

un-equals

unequally.)

Resist

prejudice and

personal

feelings.

Does

everyone

get an

equal

chance? (If

they don’t,

how are

the

differences

justified?)

We are
rational
actors.

Promises

egalitarianism,

but can be

difficult to

implement in

complex

reality.

Non-

consequentialist

Kant

Learn the
basic duties
to ourselves
and others,
and obey

The categorical

imperative in

two

articulations:

actions must

 Is the act

I’m

considering

We are
rational
actors.
Gives clear
guidance in
many
situations but

is inflexible,

Non-
consequentialist

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Name
Guidance
for ethical
action
Focus of our
efforts
Typical
questions
asked in
the effort
to fulfill
obligations
Conception
of the
person
implied by
the theory
Strengths and
weaknesses Type of theory

them. be

universalizable

and treat

others as ends

and never as

means.

universaliza

ble?

 Am I being

careful not

to treat

others as

means to an

end?

especially in

the face of
special cases.

Rights theory

Maximize

freedom.

Learn the

individual’s

basic rights,

live them, and

respect others’

right to live

them.

Does doing

what I want

impinge on

the basic

freedoms

of others?

We are

distinguished

by the

possession of

dignity.

Allows

individuality,

but does little

to resolve

conflicts

between

individuals.

Non-
consequentialist

Egoism

Increase my

well-being

and

happiness.

Learn about

my desires and

welfare, and

serve them

What

makes me

happy over

the long

term? How

can I get

that?

We are

driven

toward

pleasure and

away from

pain.

Good for me in

the short term,

but might not

help us live

together as a

society. Consequentialist

Altruism

Increase the

well-being
and

happiness

of others.

Learn about

others’ desires

and welfare,

and serve

them.
What
makes

others

happy over
the long
term? How

can I help

We are
driven
toward
pleasure and
away from
pain.

Others benefit,

but it may be

difficult to

justify

devaluing

yourself. Consequentialist

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Name
Guidance
for ethical
action
Focus of our
efforts
Typical
questions
asked in
the effort
to fulfill
obligations
Conception
of the
person
implied by
the theory
Strengths and
weaknesses Type of theory

them get

that?

Utilitarianism

Increase the
well-being
and
happiness

of everyone

collectively.

Learn about

the desires and

welfare of

everyone,

understood as

an aggregate,

and serve
them.
What

brings the

greatest

happiness

and good

to the
greatest

number

over the

long term?

How can I

help us get

that?
We are
driven
toward
pleasure and
away from
pain.

The general

welfare is

served, but

injustices at

the individual

level may

persist. Consequentialist

Table 4.2 The Contemporary Theories Responding to Cultural Relativism

Guidance for

ethical action

Focus of our
efforts
Typical

questions asked

in the effort to

fulfill
obligations
Strengths and

weaknesses

Reaction to

cultural

relativism

Eternal
Be myself.

Think through Would I do this if Maximizes individual Abandons

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Guidance for
ethical action
Focus of our
efforts
Typical
questions asked
in the effort to
fulfill
obligations
Strengths and
weaknesses
Reaction to
cultural
relativism

return of

the same

the eternal

return.

it had to be

repeated in the

same life, which

recurred

forever?

authenticity but

provides no specific

recommendations for

action.

morality

altogether.

Cultural

ethics

Follow local

customs and

practices.

Learn local

customs and
practices.

What do the

locals do?

Helps you fit in but

allows little hope for

ethical improvement.

Accepts the

proposal that

moral rules are

just a particular

community’s

beliefs.

Virtue

ethics

Develop good

moral

character.

Learn and

practice the

virtues.

Am I acting with

integrity and in

accordance with

values learned?

Allows flexibility but

provides little specific

guidance.

Tries to protect

against cultural

relativism by

developing an

adoptable but

consistently

moral character.

Discourse
ethics

Produce

solutions to

moral

dilemmas.

Talk it out: use

rational

conversation to

reach a

peaceful,

consensual

agreement.

What do you

think? How

about this

possibility?

Provides a broad

range of possible

solutions but every

conflict must be

addressed from

scratch.

Replaces a

culture’s moral

rules with the

attempt to

fabricate new

rules to function

in specific
situations.
Ethics of
care

Nurture and

protect

immediate

relationships.

Respond to the

needs of those

nearest us.

Which solution

preserves

healthy and

harmonious

relationships

among those

Humanizes morality

but risks tribalism.

Replaces a
culture’s moral

rules with loyalty

to those whose

lives touch our

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Guidance for
ethical action
Focus of our
efforts
Typical
questions asked
in the effort to
fulfill
obligations
Strengths and
weaknesses
Reaction to
cultural
relativism

involved? own.

4.8 Case Studies

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I Wouldn’t Change a Thing

Tamica Tanksley graduated from Temple University in Philadelphia in 2000. About a decade later she

worked her way into an important role in the office of Pennsylvania State Senator Vincent Hughes: she’s

co-director of his community affairs outreach and efforts. Though not a celebrity or mightily important in

politics, what she’s done with her life up to now earned her a brief write-up and a chance to answer a few

interview questions in Temple’s Internet Alumni magazine.
[1]

She describes her job responsibilities as linking the senator with “community leaders, educators, religious

organizations, constituents and various institutions within the public and private sector.” It all comes

naturally to her. As she puts it, “I didn’t choose politics, politics chose me. And if I had to do it all over

again, I wouldn’t change a thing…Working in the government sector where my daily responsibilities

afford me the opportunity to empower and inspire everyday people is a career that ignites my passion for

people.”

It’s not just heavy, public service trudging, though; Tanksley also finds the job “fun” because it allows her

“creative juices to flow into a sea of possibilities,” and in a different part of the interview she calls the

work, in a sense, victorious: “As a citizen and voter, I’ve learned that this game of life is not won by

standing on the sidelines. In order to provoke change and improve the quality of life for everyone, we

must get into the game because victories are won on the field.”

How’d she get the job? The way a lot of people start off in politics, by serving in that same office as a

volunteer worker.

Ima
ge

r

em
ove

d d
ue

to
cop

yrig
ht

issu
es.

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Finally, since it’s a Temple University website, the interviewer tries to get in a plug for the school and

succeeds with this memory Tanksley produces of Dr. Jean Brody’s public relations course and the prof’s

infamous (at least on the Temple campus) red pen: “While I was often saddened by my white paper being

flooded by red pen marks, I quickly learned that Dr. Brody and her red pen refined the best in me. With

each passing assignment, the red marks lessened and my knowledge and experience increased. Moreover,

it was the red that encouraged me to do my best work, which has ultimately contributed to the dedicated

worker I am today.”

Q U E S T I O N S

1. Tanksley reports about her young life up to this point that “if I had to do it all over again, I

wouldn’t change a thing.” Can you use this as a point of departure for

o defining Nietzsche’s eternal return and showing how it works?

o characterizing Tanksley’s professional life as one fit for approval by Nietzsche’s eternal return?

2. The values guiding Wallace Souza’s work as a news reporter in remote Brazil—especially the kinds of

images judged appropriate for TV there—are quite different from those guiding TV reporting in the United

States. Why does Nietzsche believe this kind of cultural clash is a reason to subscribe to the eternal return

and simultaneously abandon traditional ethical theories, which attempt to pertain universally?

3. Tanksley reports about her young life up to this point that “working in the government sector where my

daily responsibilities afford me the opportunity to empower and inspire everyday people is a career that

ignites my passion for people.” How might an advocate of the eternal return respond to this sentiment?

Explain.

4. Whose life seems more in tune with how you imagine yourself living the eternal return, Souza’s or

Tanksley’s? Why?

5. For virtue ethics, knowing what to do with your life—responding to its problems, choosing goals

to reach for—isn’t something you can just figure out no matter how intelligent you may be or how

many ethics classes you’ve taken. To succeed, you also need a good society, one that does two

things:

o Teaches the virtues through its institutions

o Provides a way to practice using the virtues

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How could Dr. Jean Brody be considered a teacher of virtue? What particular virtues did she teach

Tanksley, and how did she provide a way to practice using them?

Mordidas

In Mexico City, police salaries are extremely low. They live decently enough, though, by adding bribes

(mordidas in Spanish) to their wages. During a typical week they pull in bribe money that more or less

equals their monthly salary. All the locals know how it works, especially when it comes to the most avid

collectors, the traffic cops. In the standard procedure, the officer pulls a car over, takes out his codebook,

walks up, and hands it to the driver. Ostensibly, he’s allowing confirmation that the law actually prohibits

whatever was done. This is what actually happens: the driver slips about fifty pesos (a little under five

dollars) into the book, closes it, hands it back, and is free to go.
[2]

The practice is so routine that frequently

the procedure is abbreviated and participants don’t even bother trying to hide the payoff or going through

the codebook pantomime. They may approach the officer’s patrol car and directly drop the money onto

the guy’s lap.
[3]

Or they may stay in their own car and just hand cash out to be directly

pocketed.
[4]

Regardless, the transaction is smooth and efficient.

Despite the bribery’s efficiency and its penetration to society’s core, not everyone in Mexico City is happy

with the constant mordidas. According to a story in the city’s largest circulation daily, a mayor in one of

the suburbs decided to take a lonely stand against the informal police action. Since all the police are in on

Im
age

re
mo

ved
du

e t
o c

op
yri

gh
t is

sue
s.

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it, he couldn’t resort to an Untouchables-styled internal affairs operation. And since all the citizens

considered the payoffs perfectly normal, he couldn’t appeal to them for help either. Really, he was left

with only one choice. To interrupt the habit, he made traffic tickets illegal. His suburb became a free

driving zone where anybody could do whatever they wanted in their car and the police couldn’t respond. A

lot happened after that, but there’s no doubt that the payoffs stopped.
[5]

Q U E S T I O N S

1. About the bribery in Mexico City, not only is it the way things have been done as long as anyone

can remember, but the process actually makes a lot of sense; it’s even very economically efficient

because the middlemen are being cut out. Instead of having to pay an administrative staff to

process traffic tickets, then accept deposits into the city’s account, and then redistribute the

money back out as part of police salaries, here the money goes straight into the officer’s pocket.

o What is cultural relativism, and how does the vision of ethics associated with it diverge from the

traditional ethical theories?

o The Mexico City process of getting and paying off a traffic ticket is different from the US process.

What values and advantages can be associated with the process in Mexico City? How can it be

justified in ethical terms?

o The Mexico City process of getting and paying off a traffic ticket is different from the US process.

What values and advantages can be associated with the process in the United States? How can it

be justified in ethical terms?

o The Mexico City process of getting and paying off a traffic ticket is different from the US process.

How can that difference be converted into an argument in favor of the idea that cultural relativism

is the right way to look at things? Does the argument convince you? Why or why not?

o Your company, FedEx, has sent you to Mexico to open a branch in Mexico City. You’ll be there for

three months, with all expenses paid. Can you make the case with a culturalist ethics that FedEx

should reimburse not only your car rental and gas but also the two mordidas you had to pay even

though you obviously don’t have any receipts?

o After you return from your successful overseas experience, FedEx assigns you to train a set of

recruits to go to Mexico and open more branch offices. When you to talk about the police and

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mordidas, would you counsel a culturalist approach, or would you advise them to go by the book

(as that phrase is understood in the United States)? How would you justify your decision?

o For owners of office buildings in Mexico City, FedEx is a great client. They pay their rent every

month and they’re probably willing to negotiate an amount in dollars, which is extremely

attractive because the Mexican peso is prone to the occasional and steep devaluation. As a result,

if you’re opening up a new FedEx office, you’re going to have building owners lining up, trying to

rent you space. Does a decision to play by local rules and pay mordidas to cops also allow you to

play by local real estate rules, which allow you to take a generous cash gift in exchange for renting

in one building instead of the place across the street? Why or why not?

o You are sent to Mexico City to rent office space. You find two equally good spaces only

distinguished by the fact that one owner offers a larger bribe than the other. No one’s watching,

no one will ever know, you can do whatever you want. What do you do? Why?

2. Think of yourself as a virtue ethicist.

o Very quickly, what are some of the virtues you personally attempt to live by, and what social

institutions played a role in shaping your character?

o If you were sent to Mexico on a work assignment and found yourself in the situation typically

faced by local drivers after being caught driving a bit fast, how would you handle the situation?

Which virtues might come into play?

o Most advocates of virtue ethics believe companies—like other organizations including schools,

churches, and community associations—play a role in instilling virtue. If you were training FedEx

recruits destined to open branch offices in Mexico City and you wanted to prepare them for the

ethical challenges of bribery, what virtues would you seek to instill in them? Can you think of any

life experiences that some recruits may have had that may have formed their character to

respond well to the situation on the Mexican streets?

o The mayor in suburban Mexico City who decided to cancel traffic tickets was, in fact, fighting

against what he saw as corruption. Most advocates of virtue ethics believe government

organizations play a role in instilling virtue in its citizens. Could this action be considered part of

that effort? What virtues might it instill? How would it help people become better practitioners of

those virtues?

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3. The video Mordida in the Booklet (http://businessethicsworkshop.com/Chapter_4/C4.html) shows

a motorcycle officer getting paid off. One curious aspect is how long and intense the discussion

stretches between the officer and the pulled-over driver. What they’re doing is negotiating the

amount. The fifty peso price tag is a good average, but the number can drop or climb depending

on the give and take.
[6]

o What is the five-step process of discourse ethics? How could this bribery negotiation be

understood within it?

o According to Transparency International’s Corruption Perception Index, Mexico is a place where

people doing business make many informal agreements involving bribery, kickbacks, insider

dealing, and all sorts of similar practices. Except for the fact that those involved are wearing suits,

most of these scenes resemble the one between the motorcycle police officer and the driver:

people talk for a while, come to a mutually satisfying, peaceful conclusion, and some money

changes hands. Do you see this as an indictment of discourse ethics, a justification of the

approach, or something else? Justify.

4. In the newspaper article about the Mexico City suburb where the Mayor decided to ban traffic

tickets, the reporter interviewed a police officer described as “an old transit cop whose juicy

bribes had helped buy his gold necklaces and bracelets.” This was the old cop’s reaction to the

situation (translated from Spanish): “I got my buddies together and I told them, ‘This sucks, now

what’re we going to do for money?’”

An ethics of care shifts the focus of moral thought away from the fair imposition of rules and

toward the maintenance of immediate personal relationships. Ethics isn’t about treating everyone

equally so much as it is about keeping companions together.

o Listening to this officer, who do you suppose exists within his web of social responsibility?

o Assuming this officer practiced the ethics of care, would he treat these two drivers differently

after pulling them over: his nephew and some out-of-towner he’s never seen before? Why might

he (not) treat them differently? Are there circumstances under which he’d actually demand more

money from the nephew? What could those be?

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o According to the newspaper article, in the first two months of ticketless existence in the suburb,

about two hundred people were struck by moving vehicles, and twenty were killed. From the

perspective of the ethics of care, can these numbers be used to form an argument against this

policy and in favor of a return to the previous, corrupted reality?

Money for Nothing

In his blog the z spot, author Z raises two questions about people receiving unemployment paychecks.

Both are laced with suspicion of fraud. First, people who are collecting unemployment checks are required

to show they’re at least trying to get a job, but Z writes that some are “showing up for interviews in jeans

and t-shirts.” Then he asks, “Do these people really want the job, or are they just showing up to say that

they are actively seeking work?”
[7]

He goes from there to a second critical point. “Some people,” Z says, “are collecting unemployment checks

even though they’re actually working.” What they do is turn in their unemployment form listing the days

they worked, and those are deducted from the check they receive. That sounds OK in the abstract, but, he

adds, “The problem is that these people who are ‘on call’ are not taking shifts that are offered to them.

Those shifts don’t get deducted from their unemployment. So, while there are people who are actually

unemployed, struggling and looking to find work, there are Union employees sitting at home deciding

when they do and don’t want to come in. And collecting unemployment.”

From the posting’s response section, here are two contributions:

1. It’s not easy for me to swallow that my taxes are supporting people who could be working.

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ove
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es.

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2. I have a question. I live in Wisconsin and I know of somebody who is collecting unemployment but is not

actually going to any job interviews or is even applying for jobs. Is this illegal? If so, how can I report this

without them knowing?

Q U E S T I O N S

1. If you were using the eternal return to chart your way through life, would you have any problem “sitting at

home deciding when you do and don’t want to come in while collecting unemployment”? If you’re all right

with that, how would you respond to the complaint from the response section that someone is paying

taxes to support your lifestyle?

2. Thinking about the people showing up for job interviews in jeans and t-shirts, what might be lacking in

their character according to a virtue ethicist? If the government is one of those institutions proponents of

virtue look to for the instillation of good character, what might the government do in this situation in the

name of encouraging virtue?

3. The second cited response to Z is a question about how an unemployment cheat can be reported

“without them knowing.”

o About this silent reporting, why is this not what a proponent of discourse ethics would

recommend?

o How could the five-step process of discourse ethics be applied to the situation? Would the guy

complaining about paying taxes be included in the discussion? What kind of proposals might be

voiced to rectify the situation?

4. Starting from the ethics of care, is there a situation you could imagine that would justify the actions of

workers who take some shifts but decline others, and collect unemployment for those declined hours?

A Single Parent in the Army

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The post of cook in the mess hall is probably one of the Army’s least dangerous assignments, the closest

you get to actual battle is a food fight, but it’s still a military job where you go and do what your orders

command. For Specialist Alexis Hutchinson, a twenty-one-year-old Army cook, that meant catching a

flight to Afghanistan. She missed hers, though, intentionally. She regretted abandoning her unit, but felt

she had no choice. The single mother of a ten-month-old, she says she couldn’t find anyone to care for her

child during the absence; the only potential help, her mother, was already overwhelmed by caring for

three other relatives with health problems. Hutchinson’s fear, according to her lawyer, was that if she

showed up at the airport, the Army “would send her to Afghanistan and put her son with child protective

services.”

For its part, a military spokesman says, “the Army would not deploy a single parent who had nobody to

care for a child.”

The situation is under review, but for the present, just like anyone else who refuses deployment, she’s

under military arrest on her base in Georgia.
[8]

Q U E S T I O N S

1. Virtue ethics

o The military is cited by virtue ethicists as a potential character-building institution, one of the

places a society molds a good citizenry. What are some of the virtues the military could be

expected to instill? How are those reflected in this situation?

Ima
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em
ove

d d
ue t

o co
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igh
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ues
.

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o Families are a cited source of virtue. What values should we expect family life to instill? How are

those virtues reflected in this situation?

o Is there any way to bring the military virtues and the family virtues together for Hutchinson? If so,

what might it be? If not, why not and what should she do?

2. Proponents of discourse ethics walk through a five-step process on the way to reaching a negotiated

settlement to moral conflicts. What might the five steps look like here?

3. One of the objections to discourse ethics is that it can set up a slippery slope—that is, the people involved

can form a solution that bends the rules a little bit, and next someone else wants a little flexibility too, and

then someone wants a little more, and before long, the rules have completely disappeared and everyone’s

doing whatever they want. Could you sketch out how this process could happen here, with the end result

being the Army more or less losing the values at the core of its existence?

4. Ethics of care

o One of the key elements composing an ethics of care and distinguishing it from traditional ethical

theories is this: At the center of attention, independent actors are replaced by a web of

interrelated individuals. Ethics, in other words, isn’t about me and you, it’s about us. In

Hutchinson’s case, she finds herself in the midst of at least two networks of “us,” two

communities of people to whom she owes an allegiance and care. Describe these communities

and the links binding them.

o Another of the key elements composing an ethics of care and distinguishing it from traditional

ethical theories is this: The impartial application of abstract principles is replaced by the

maintenance and harmonizing of human relationships. Ethics, in other words, is less about the fair

imposition of rules and more about crafting social integration. Can you find an example of this

conflict between an ethics of rules on one side, and an ethics of relationships on the other, in

Hutchinson’s situation?

o Another of the key elements composing an ethics of care and distinguishing it from traditional

ethical theories is this: Tensions between the rights of individuals get replaced by conflicts of

responsibility to others in established relationships. Ethical tensions, in other words, aren’t my

rights versus yours, it’s me torn between those I care for. In the case of Hutchinson, how is she

torn?

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o In general, do you believe there’s a place for an ethics of care in the military? If so, where? If not,

why not?

[1] “Tamica Tanksley, SCT ’00,” Temple University, accessed May 12,

2011,http://www.myowlspace.com/s/705/index.aspx?sid=705&gid=1&pgid=1021&cid=1612&ecid=

1612&ciid=3725&crid=0.

[2] Business Ethics Workshop video, accessed May 12,

2011,http://businessethicsworkshop.com/Chapter_4/Mordida%20in%20the% 20booklet.html.

[3] Business Ethics Workshop video, accessed May 12,

2011,http://businessethicsworkshop.com/Chapter_4/How_to_purchase_a_police_ officer.html.

[4] Business Ethics Workshop video, accessed May 12,

2011,http://businessethicsworkshop.com/Chapter_4/Quick_mordida.html.

[5] Alejandro Almazán, “Fin de la mordida,” El Universal, November 16, 2003, accessed May 12,

2011, http://www2.eluniversal.com.mx/pls/impreso/noticia.html?id_nota= 54910&tabla=ciudad.

[6] Business Ethics Workshop video, accessed May 12,

2011,http://businessethicsworkshop.com/Chapter_4/Mordida%20in%20the% 20booklet.html.

[7] Business Ethics Workshop, accessed May 12,

2011,http://businessethicsworkshop.com/Chapter_4/Unemployment_fraud.html.

[8] “Mother Refuses Deployment,” New York Times, November 16, 2009, accessed May 12,

2011, http://www.nytimes.com/2009/11/17/us/17soldier.html.

• Structure Bookmarks

Chapter 4: Theories Responding to the Challenge of Cultural Relativism
Chapter 4: Theories Responding to the Challenge of Cultural Relativism
Chapter 4: Theories Responding to the Challenge of Cultural Relativism
Chapter 4: Theories Responding to the Challenge of Cultural Relativism
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