Values, Ethics and Business Decisionsmarc-lemenestrel.net/IMG/pdf/ethics_rationality_jt.pdf · From...
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Values, Ethics and Business Decisions International MBA - Antai College of Economics & Management, Shanghai Jiao Tong University, Oct 2011
From Ethics to Ethical Rationality Marc Le Menestrel
Economic Rationality
The rational actor (you, a team, a company) 1. Anticipates the consequences of his actions 2. Evaluates these consequences according to his interest 3. Chooses the action that leads to the best consequence.
Interest of the consequence
How do actors behave in the face of such dilemmas?
Ethical Dilemmas: tough choices
Less ethical
More ethical
An Ethical Dilemma arises when the action that best favors the interest of the actor conflicts with the action that is the most
ethical
Best interest of the actor
Worse interest of the actor
What Should you do?
Less ethical More Ethical
Bet
ter
Wor
se
Ethical Values B
usin
ess-
Inte
rest
There is no point of talking about ethics in business if we don’t talk about how much it costs
Ethics vs. Business Interest
First Discourse: Economic Rationality
Less ethical More Ethical
Bet
ter
Wor
se
Ethical Values
Rational
Business interest should be the sole and unique criterion of rational choice
Irrational Bus
ines
s-In
tere
st
Second Discourse: Idealism
Less ethical More Ethical
Bet
ter
Wor
se
Ethical Values
Rational
Ethical values should be the sole and unique criterion of choice
Irrational
Bus
ines
s-In
tere
st
Third Discourse: Corporate Social Responsibility
Less ethical More Ethical
Bet
ter
Wor
se
Ethical Values
Rational
Business interest and ethics should always combine
Bus
ines
s-In
tere
st
Ethical Rationality
Less ethical More Ethical
Bet
ter
Wor
se
Ethical Values
Inte
rest
Ideal
Irrational
Priority
to
interest
Priority
to
ethics
Marc Le Menestrel, UPF & INSEAD, for
Rational choices between interest and ethics are often kept hidden, but they are the most difficult: We can rationally give priority to interest, and sacrifice ethics We can rationally give priority to ethics, and sacrifice interest
What does it mean to be ethical?
Are you an ethical person?
Do you work for an ethical company?
Is business ethical?
You feel good, full of energy
You may not be very credible
And you may be blind to
risks
You are honest
It feels bad
But you are more aware
and anticipate
Looking at the good side
Looking at the bad side
Thinking Ethics as a Grey Zone
Your ethical judgments are bounded and biased by your emotions, your interest, your
mental habits and self-image, your cultural context and work environment, etc.
This psychological phenomenon is not necessarily intentional, but it can have significant
consequences. It can be used by others to influence or even control you.
With training and effort, you can develop, refine and structure your ethical consciousness.
It requires to open your mind and be able to think beyond the justification of your ethical
opinion.
Purely
ethical You are
here!
Purely
unethical
Enlighten your Ethical Blindspot
Which stakeholders can be harmed? How
much? When?
Can this be wrong? According to law? To some ethical principle? If everyone
does the same? All the time?
Am I having bad feelings? A sense of discomfort? An early warning signal
inside?
Would this be better kept secret? Is this taboo? Could it be publicly known?
Which stakeholders can benefit? How
much? When?
Is this right? Is this legal? Is this respecting ethical principles, code of values? Can this be universalized?
What good feelings do I have? What virtue
do I incarnate? Why is this respecting my personal integrity?
What would I like to be known? To be
transparent? is transparent?
To which extent is this unethical?
To which extent is this ethical?
Some Ethical Questions
Are you an ethical manager? Do you work for an ethical company? Is it ethical to close a profitable plant? Is it ethical to influence a government? Is it ethical to compromise on the safety of a
product? Is it ethical to shape customers desires? Is economic progress ethical? Is it ethical to work as hard as possible?
Aristotle: The Stagirite
Born 387 b.c. in Greece.
Student of Plato.
Studied and wrote about a wide range of subjects: logic, mathematics, physics, biology, politics, ethics, metaphysics, …
A Holistic Approach
Nature is a whole that acts upon us
Nature shows the mean, between excess and deficiency
Virtue is the reflect of the natural mean
A Hedonic Answer:
Good emotions are produced when acting virtuously
A Natural Model:
We should act virtuously, in harmony with the essence of things, without excess nor
deficiency
Born 1724 in Prussia. Modernity: emancipation of thought from
nature and religion, the subject becomes central, society is perceived from the point of view of the subject.
Kant’s systematic inquiry How do we think? (pure reason) How do we act? (practical reason) How do we perceive? (faculty to judge) What is a moral act? (metaphysics of morals)
Kant: a Systematic Approach
Reason, Intentions and Norms
Ethics is based on reason alone and not on human nature or emotions.
Intentions count, independently of the consequences.
Norms (principles, rules, rights, duties) are the criterion of right intentions.
An Idealist Answer:
There is no right to do wrong, neither in theory or in practice
A Rational Model:
We should act according to a rule that can be universally applied
J.S. Mill: A Science of Liberty
Born in 1806 in London. In search of a science that would reflect the
human dimension of society: System of Logic; Principles of Political Economy; On Liberty; Utilitarianism; The Subjection of Women.
Practical engagement for liberty. Heritage of J. Bentham’s utilitarianism.
Function & Consequences
Right and wrong are a function of the consequences of our actions.
We should act so as to attain the greatest possible balance of good consequences over bad consequences for everyone affected by our actions.
“Good” means happiness and pleasure.
A Word From John Stuart Mill
Of two pleasures, if there is one that all or almost all prefer, by experience of it,
irrespective of any feeling of moral obligation, that is the more desirable
pleasure Utilitarianism
How to act?
Good consequences when lying
Bad consequences without lying
Calculation of consequences drives ethical behavior
A Pragmatic Answer:
When judgments conflict, experienced facts are the sole answer
A Consequentialist Model:
We should act so as to attain the overall best consequences
Three Approaches to Ethics
Holism: Nature as a model Emotions as a criterion Idealism: Reasoning as a model Principles as a criterion Consequentialism: Consequences as a model Preferences as a criterion
Emotions, Principles & Consequences
Looking for a criterion, these ethical perspectives identify the true answer to the tension between
Does it feel good? (Emotions)
Is this right? (Principles) Does it harm others? (Consequences)
Ethical Dilemmas
Is there always a ‘true’ solution to these dilemmas?
A preferred consequence
A not preferred consequence
Lying
Not Lying
An On-going Question?
Maybe ethics is the question itself.
We may learn to accept the tension between how things are and how they should be.
We can structure this tension and mature our
feelings about it.
Then, we may even like this tension, and use it as a source of energy
A Teaching from the Vedantas
Swami Vivekananda Vedanta: its Theory and Practice, XLIII
Materialism says, the voice of freedom is a delusion.
Idealism says, the voice that tells of bondage is delusion.
Vedanta says, you are free and not free at the same time; never free on
the earthly plane, but ever free on the spiritual.
A Word from Swami Vivekananda
XLIII, Vedanta: its Theory and Practice
Do not think that good and evil are two, are two separate essences, for
they are one and the same thing appearing in different degrees and in
different guises and producing differences of feeling in the same
mind.
From the Philosophers
Keep asking you questions, this is ethical thinking Assume your responsibility, this is ethical behavior. Listen to Nature, to Yourself and Others to enrich your
ethical judgment and to better anticipate consequences
Managing the ethical tension is an on-going process source of energy
A Framework of Ethical Rationality
1. Economic Analysis
2. Ethical Analysis
3. Ethical Dilemma
4. Dynamic Analysis
1. Economic Analysis
The rational actor (you, the team, the firm) 1. Anticipates the consequences of the available actions 2. Evaluates these consequences according to their interest for the actor 3. Identify the action that leads to the best consequence
Interest of the consequence
?
Step 1: What is the action that leads to the best consequence for you?
2. Ethical Analysis
To which extent is it ethical? Emotions/Virtue:
Do I feel good? Is this a natural way to act?
Deontology/Idealism: What sort of principle, rule or norm do I
respect? What happens if everybody does the same? What happens if I always act like this?
Utilitarianism/Consequentialism: What are the good consequences for others? Would I like these consequences for myself? What are the good consequences for the
environment? Would the children of my children like these
consequences?
To which extent is it unethical? Emotions/Virtue:
Do I feel bad? Is this an unnatural way to act?
Deontology/Idealism: What sort of principle, rule or norm do I violate? What happens if everybody does the same? What happens if I always act like this?
Utilitarianism/Consequentialism: What are the bad consequences for others? Would I suffer these consequences for myself? What are the bad consequences for the
environment? Would the children of my children dislike these
consequences?
Step 2: What is the ethics of the action that leads to the best consequence for you?
?
Here you raise an ethical dilemma! Here you justify your interest!
3. Ethical Dilemma Step 3: Facing the extent to which there is a dilemma
Prudence: Could the unethical aspects lead to unexpected negative consequences?
?
Unethical aspects of behavior
More ethical alternative
Vision: Can you find a more ethical alternative?
Imagination: If the consequences of the alternative affect your interest, cannot they be improved?
?
?
4. Dynamics Analysis
Ideal
If you are in the ideal position, you may not be lucky for very long
Irrational
Priority to interest
Priority to ethics
Lack of transparency Legal pressure Liabilities Bad Reputation PR costs Negative motivation Managerial inertia
Transparency Social involvement & support New scope of activities New business processes Long term thinking Strategic investment Positive motivation Learning process
Increasing demands (legal, social) Credibility ambiguous Contentment, lack of vigilance Unawareness, rationalization
If you give priority to interest, you will need reactive strategies to survive
If you give priority to ethics, you may find help for your proactive strategies
A Difficult Strategy…
Few ones are going to believe it, Outside or inside the company…
Ideal
Irrational
Priority to interest
Priority to ethics
A Reactive Strategy…
We wait for change to become necessary But it can be very dangerous…
Ideal
Irrational
Priority to interest
Priority to ethics
A Proactive Strategy…
We are likely to be more credible, And more motivated for change… Visionary Leaders Welcome!
Ideal
Irrational
Priority to interest
Priority to ethics
Conclusions
It is easy not to see ethical dilemmas: you just have to find a good justification for the action leading to the best consequence!
It is not easy to see ethical dilemmas: it questions ourselves and it does not look fun…
It can be rational to be ethical sacrificing your interest, or to sacrifice ethics for your interest: the choice remains yours
It is difficult, but helpful, to search for ethical dilemmas beforehand if you want to have a chance not to be trapped by them and anticipate their dynamics