WHAT IS ETHICS AND WHY IMPOTANT

Imagine a situation where there is no moral structure for one's actions, no legal system, no power greater than the
individual's to adjudicate conflict, and where all people are free to pursue their own interests. This is the state of
nature that the seventeenth-century English philosopher Thomas Hobbes describes with great clarity. Although
the prospect of pursuing our own self-interest, unhampered by bureaucrats, environmental protection laws,
taxation policies, restraint of trade legislation, and other limitations on our conduct, might at first seem attractive,
Hobbes shows why it is not. In such a state everyone would be at war with everyone else, and all would be
constantly at risk of losing property and life. The standards of behavior of civil society would be absent, and
violence would be the order of the day. The words justice and injustice would have no meaning. Hobbes calls this
condition of wår the "state of nature, " l and in such a state each person would become the enemy of the other.
Unrestrained self-interest might seem attractive, but in the state of hostility that would result, only the interests of
the strongest would prevail. In the state of nature human existence would be miserable or, to use Hobbes's
famous words, life would be "solitary, poor, nasty, brutish, and short." All rational persons, Hobbes thinks, would
want to find a way out of the brutish hostilities of the state of nature.

From the State of Nature to Civil Society

Getting ourselves out of the state of nature, Hobbes argues, is simply a matter of good sense and reason. We will
be better off when pursuing our own self-interests if we accept some constraints on our actions in return for
restraints being accepted by others. Only in an organized and civil society can the forces of business and industry
function well. Hobbes, however, thinks that most people are not sufficiently enlightened to seek their own best
interests, so he advocates the development of a strong sovereign power to force people to follow the laws of
nature.
Being in a civil society means that we accept the responsibility of obeying the law, abide by our private
agreements, and submit disputes to impartial judges. The following are some of the natural laws drawn from
Hobbes's discussion that are most applicable to the practices of business:

•                We should claim as much liberty as we are willing to grant to others.

•                We should keep promises and perform contracts to which we have agreed.
•                We should acknowledge the equality of all.
•                We should not demand of others things we are unwilling to do ourselves.
•                Judges should be impartial.
•                Things that cannot be divided should be shared in common.
•                People who disagree should submit their dispute to arbitrators.
•                We should not do to others what we don't want them to do to us.
This is an interesting list not only because it seems to reflect the moral precepts that we have learned from many
other sources but also because its doctrine of self-restraint starts from the premise that selfinterest is the
motivating force behind human behavior. 

Hobbes's analysis remains important because it argues that social cooperation is necessary for any truly human
society. Businesses, no less than individuals, need such standards of cooperative conduct. Unless a majority in a
society accepts a standard of moral conduct— tells the truth, doesn't steal, keeps promises, does not harm others
—it would be hard to see how any organization could function at all, to say nothing of functioning well. 

The Limits of Self-Interest

A word of caution about self-interest. There are cases where several individuals see their self-interest in conflicting
terms. The egoism of individuals, no matter how enlightened in their self-interest, prevents resolution of moral
conflict unless a standard of evaluating decisions other than self-interest is in place. 

THE ROLE OF THEORY IN ETHICS

Casuistry and Its Problems

Another alternative to self-interest is to force moral behavior through comprehensive sets of rules that guide not
only individual conduct but also provide for the general welfare. Called "casuistry," this approach to ethical
decision making leaves much to be desired. 

1. the rulegoverned approach to behavior leaves open the question of what to do when there is no specific
rule to apply to a given situation. The obvious answer is to develop more rules; but as these rules prove to
be inadequate, the need will appear for still more rules. A casuistic approach to ethics, therefore, will
result in a constantly expanding set of increasingly detailed rules.
2. problem with casuistry is that we need another set of rules to help us decide what to do when our rules
conflict with each other. There are rules for applying the rules, rules that tell us which rules to use in
which situation, and still more rules for telling us when to apply the rules.
3. difficulty is that obeying the rules leads to the sense of having acted ethically, whereas actually one might
have done only what is minimally required and not fulfilled the spirit of the rules at all. Closely related to
this problem is a 
4. rule-bound forms of conduct tempt us to look for loopholes, ways of satisfying the technical demands of
the rules while still doing things that the rules were intended to prevent. 

This distinction is important in discussing the difference between doing what is merely legal and doing what is
moral. When accused of misconduct, business leaders will frequently claim that they broke no laws, or that the
government did not prohibit their behavior, or that the standards in use at the time were fully met. Although such
statements are true, the question of the moral acceptability of such actions still remains.

PROBLEMS WITH CASUISTRY

1 Requires continual growth of rules to cover new situations.

2 Requires rules for applying rules.

3 Creates false sense of morality through meeting minimal requirements. 

4 Encourages the search for loopholes.

CHALLENGES TO BUSINESS ETHICS
 One of the challenges to business ethics comes from philosophers who think that ethics cannot be taught.
If a statement could not be verified—that is, proved either true or false by methods of scientific analysis—
these philosophers rejected it on the grounds that it was not meaningful.
 Known as "positivism," and sometimes referred as logical positivism because it uses logical techniques of
formal analysis, this point of view initially attracted a great deal of support because it seemed to be
scientific. But further reflection showed that this was not the case.
 For one thing, such a limiting attitude toward what counts as worthy eliminates most scientific theories
and laws because they cannot stand up to the tests of empirical proof demanded by positivism Because
scientific theories and laws themselves determine what counts as empirical proof and are generally
viewed as organizing principles for the analysis of empirical data and not verifiable by the empirical
means. 
 Worse for positivism, When a positivist argues that "only statements that can be empirically tested are
meaningful," the positivist is making a statement that itself cannot be empirically tested, These and
similar difficulties with the positivist approach have pretty much caused it to be abandoned.
Though positivism may be dead as a philosophical theory, it is still alive and well in some business approaches.
There is an approach to business ethics that devotes most of its concerns to the gathering of empirical data and to
analyzing the views of people in business regarding their business practices. But this approach does not capture
the important issues raised by values and ethics and really reflects a limited, positivistic view of ethics. Ethics deals
with values, and values are not the same as empirical facts.

Many statements are mixtures of both modes of discourse, but even in such mixed discourse we can separate out
the descriptive from the prescriptive elements.

1                     The sales goals for this year are higher than last year's.
2                     The management principles of this company are similar to those of other companies in our
industry.
3                     The management principles of this company are better than those of other companies in our
industry.P
4                     It is wrong to steal proprietary information from others.P
5                     Many people in business believe that stealing proprietary information is wrong.
6                     Although many business leaders treat employees as so many cogs in a machine, I believe such
an attitude is wrong and will result in decreased productivity.
7                     Even though bribery is an expected practice in many developing countries, such practices stifle
creativity and make industries uncompetitive in a global market.
8                     The prevalent presentation of business executives by the entertainment industry is that of
greedy, scheming, and unscrupulous individuals.
9                     Good ethics is good business.
10              One ought to encourage ethical business practices.P

Challenges from the Right

Another challenge to business ethics comes from those who argue that the only duty of business is to make a
profit. In a completely free marketplace, where people are allowed to seek their own self-interest, the forces of
competition will produce the quantity and variety of material goods essential to civil society. This was basically the
point of view of the eighteenth-century philosopher and economist Adam Smith.
Smith feels that the market should be balanced by social institutions and personal relationships.
Friedman's view is simple: keep government out of the marketplace. Let business do what it will, and the
forces of the marketplace will restrain the greed of unscrupulous entrepreneurs who produce a shabby product at
exaggerated prices. 
 Consumers will not buy a shoddy product, so its producer will be driven out of business. If a producer places
too high a price on products brought to the marketplace, other producers will enter the market, creating an
oversupply and driving down prices. Eventually the market will produce a kind of equilibrium where enough
producers produce enough products to satisfy consumer demands at a reasonable price.
Friedman argues that individual freedom and economic freedom go hand in hand. One cannot have a truly free
society unless the marketplace is free as well. Friedman, however, is nothing if not consistent. He extends his
model of economic freedom broadly, including the issuing of licenses to practice a profession. 
Friedman argues, when they keep to their true mission, which is to make a profit. If by "business ethics" we mean
the social responsibilities of business, Friedman counsels business to stick to business and leave social concerns to
others..

Challenges from the Left

Critics of business activity on the left of the political spectrum often see business as inherently immoral. If one
starts with this premise, to speak of business ethics is an oxymoron. 
Marx based his analysis of the state of industrialized Europe on Much of Marx's analysis is a strong humanistic
concern and a determination to suggest a more just distribution of the products of an industrialized economy.
The classic model of economics is that there are three factors in economic growth: land, labor, and capital. 
The workers have no land or capital. All they have is their labor, and the organization of the productive
capacity of industrial states conspires to protect the interests not of the workers but of the owners of the means
of production—that is, the owners of the mills, factories, shipping lines, railroads, and other productive capacities
of the society. Similarly, the government uses its power to protect and extend the control of those who own the
means of production and will even use the police or military to enforce the claims of the owners.

Marx expresses these criticisms of industrialized economies in many ways, but three of the claims that are
prominent in his critique are 

the inevitability of the class struggle, 

the surplus value theory of labor, and 

the alienation of the workers. 

Marx begins his analysis with the claim that the most fundamental facts about any society are the economic
arrangements whereby people produce goods and services. He called these arrangements the "economic
substructure." From this economic substructure flows the "social superstructure," which includes all the social and
cultural arrangements of that society, the educational system, art, and even religion.
In industrialized cultures, primacy shifted from the ownership of land to the ownership of capital, the means of
production. Marx calls these owners the "bourgeoisie," as opposed to those who only had their labor to sell, the
"proletariat." The class struggle Marx envisions was between bourgeoisie and proletariat, a struggle that he
thought would become so intense that it would inevitably result in revolution
Also included in Marx's analysis of the proletariat was their relation to the labor they sold, the only economic
factor under their control. There is the surplus value of labor that the owners of the means of production
appropriate for their own benefit. 
For example, let's say a worker produces $20 worth of value and receives only $8 in wages. The $12-dollar
difference represents surplus value, which the worker gives up to the owners. For Marx, the seizure of this surplus
value by the owners is tantamount to robbery. 
In a capitalistic society, the owners convert this surplus value of labor into additional wealth that they use to
expand their control of capital further in the form of larger factories, bigger production facilities, and even more
powerful industrial empires. Marx argues, is to force workers into ever longer workdays at ever lower pay.
The economic forces that Marx describes not only lead to the inevitable clash between bourgeoisie and proletariat
but also produce an alienated worker. workers in a capitalistic economy are alienated from each other because
they compete for the opportunity to sell their labor and are often forced into ever lower wages in order to survive.
For Marx, alienation includes three things: 
workers are separated from the products produced by their labor; 
the capitalist owner converts the surplus value of labor into more capital, further alienating workers from the fruit
of their labor; and 
workers are alienated from each other when forced to compete for scarce opportunities to sell their labor.
Throughout Marx's writings is the sense that he has discovered scientific laws of social development. He sees
revolution in industrial societies as the outcome of the inevitable class struggle between proletariat and
bourgeoisie.

IMPORTANCE OF ETHICS

 Good ethics is also good business because it allows businesses to avoid outside restrictions. If business is
not self-regulated, it will be regulated by others. 
 Unethical conduct brings about those things that businesses least desire: government regulations and
restrictions, hostile employee relations resulting in an unproductive work force, and consumer rejection
of its products and services. 
The point is that we cannot have two sets of moral standards, one for businesses and another for the rest of the
world. We see increasing pressure from society—expressed through legislation and in the courts—to hold
businesses accountable to the same standards of conduct imposed on individuals,9
analysis of Thomas Hobbes's natural laws the repeated use of the term "should." Should, must, ought: this is the
language of ethics. Philosophers describe this as the prescriptive use of language. 

When we use such terms we are not describing how people behave but are making claims about how they should
behave. Ethics, then, is prescriptive, not descriptive. Moral philosophers have developed theories that allow us to
give account of such questions as how we can justify moral values, how to determine what our duties and
obligations are, and how to evaluate moral pronouncements. A good deal of philosophical thinking over the years
about ethics involves not the analysis of specific moral issues but the questioning of the nature of ethical
judgments and moral decisions themselves.

Advantages 

 The limitations of casuistry have led philosophers away from sets of rules for guiding conduct and towards
ethical theory. 
 Ethical theory searches for principles for guidance, and general understanding that helps us make moral
decisions in a variety of situations and assist us in discovering the morally relevant aspects of our
decisions.
 It means that the ethical /philosophical approach looks for a moral framework within which to assess our
actions and for general principles to apply to a variety of individual cases. 
 Individual case studies may help clarify these principles, but the goal of business theory is to discover those
general approaches that will help managers deal with a wide range of specific cases. 
  For example, a rule such as treat your customers right if you want your business to succeed does not give
specific guidance in each individual case, but it does provide a general principle that a skillful manager can
appeal to in making individual decision.
 Each moral theory contributes important insights to our ethical thinking, but none of them alone seems
adequate to address all ethical issues with which we are faced. 
 Hence, we need to look at several moral theories. PS: It is a misuse of ethical theory to use a ‘cookbook’
approach, i.e. to look up the theory, finds the recipe for action, applies it, and thereby make a moral
decision. 
 The great advantage of ethical theories help us penetrate the complexities of a real-world situation. And
isolate the morally relevant aspects of actions. But none of them completely captures within its theoretical
structure all the relevant moral features of actions
 For example, Mill’s Utilitarianism emphasizes the greatest good for the greatest number of people. Thereby
increasing the total sum of happiness. This is certainly an admirable goal , but Utilitarianism runs the risk
of sacrificing the interest of the minority for the greatest of the majority.
 Rights of individuals and minority is better protected by theories , such as Kant’s theory of duty, that
emphasizes respect for individual and the importance of fairness as moral criteria. 
 So it seems that different theories identify different moral features of which some are likely to conflict each
other.
 But indeed this is not so much a contradiction among ethical theories. For in this situation we could make a
judgment call in which some morally relevant features of this specific moral problem are deemed to take
precedence over other morally relevant features.

General contribution of ethical theories are two-fold: (1) Ethical theories give us a vocabulary for discussion of
ethical choices; (2) They help us identify the morally relevant aspects of our actions.

A vocabulary for discussion of ethical choices: :No human activity can proceed very well without a shared
vocabulary among its participants. : A shared vocabulary does two things (i) It ensures that all participants in the
discussion mean the same thing when they use a term. (ii) such discussion can only proceed after carefully defining
the term. 

Identification of the morally relevant aspects of our actions : Moral theory highlights the morally significant aspects
of a specific issue. When we look at a particular situation, a plant closing , say, if we want to raise moral issue we
will have to do more than look at the effect of the closing on the balance sheet. Example: General motor’s decision
of closing a plant. The main concern here is to know how to balance the competing obligations–to stockholders,
workers, community, bondholders. But it is not that easy.
One of the major objectives of this module is thus to deal with three principal views on ethics : Virtue theory,
Utilitarianism, and the Ethics of Duty.