Title: How do we take ethical decisions?
Course: Corporate Social Responsibility online > Section: Part 1: Business ethics and Sustainability

/30 minutes/

How do we make decisions?

Let us think for a moment about the way in which people take decisions?

1. First, it is necessary to identify the problem and formulate a basic question.
2. Secondly, in order to identify the different possible options of acting, we gather information and all necessary data.
3. Next, when we already have all important data, we need to critically appraise and analyze them so as to be able to make a right choice.
4. Now, we need to filter the gathered data through our expertise. It is important here to be aware of the mental model we are using for interpreting the data, as this has a great impact on our decision.
5. Here it comes - we take the decision, which also often requires us to communicate this decison.
6. Last but not least, we should monitor the outcomes that result from our decision to be aware of the kind of consequences it brings. Based on this, we may be happy with the decision, or when recognizing it was not the best choice, we can go through the process again to take a different decision.

This is what a typical model for decision making looks like.

We should be aware that even before the decision making process begins, we have certain preconceptions that strongly influence it. We could call this 'step 0'. Within the decision making process, when we are analyzing our mental models, we also take into account our own preconceptions and  patterns that we use in taking opinions and judging things.

This step is very important, especially while dealing with moral issues in business.

What is, however, a moral issue?

In general, we can say that morality is an ability to decide what is right and what is wrong.

A moral issue is present when a person's freely performed actions may harm or benefit others. In other words, our actions in which we can take decisions (we are free to choose) have consequences for others. Ultimately, many decisions are moral decisions simply because they have a moral component. It can even happen that a person makes a moral decision whithout recognizing that moral issues are at stake.

To sum up:
An ethical decision is concerned with a judgement about right and wrong. This means that it has to do with moral issues. There are a number of factors that indicate the moral status:

The decision is likely to have significant effect on others – it is concerned with harms and benefits, consideration of social good, i.e. considerations of others beyond the self.
The decision is likely to be characterized by choice, since alternative courses of action are open. A moral decision assumes that the decider has a choice.

The decision is perceived as ethically relevant by one or more parties. Regardless of whether the decision-maker sees a decision as having ethical content or not, if others do, than the decision immediately incurs some degree of ethicality.

Questions to consider:

Do you think that interests other than those of investors should be considered in business decision making? What should these interests be?
Do you think that economic aspects are the only aspects that should be considered to make “good” business decisions? Why?
In what ways do you consider the alleviation of suffering (as a particular human good) to be an appropriate goal for business?
Do you think it makes sense that there are ideas about ethics that are always right and always wrong?

Ethical theories

The ability to assess whether something is right or wrong requires basic knowledge about how we can assess it (ethical reasoning) and reflection on the criteria we use to make the assessment.

There are two major ethics theories that attempt to specify and justify moral rules and principles: utilitarianism and deontological ethics.

Focuses on the act and compares it with a given code. Certain acts are intrinsically right or wrong (e.g. Immanuel Kant's ethics, 10 Commandments)

Focuses on the consequences of an act to determine if the act is moral or immoral (e.g. utilitarianism)

Please watch the video to better understand both approaches:

https://youtu.be/aDMedWiZ_Iw

Source: SixReligions, Moral Philosophy - Deontology Vs Utilitarianism (4:24 min) [access 13.06.2020]. Available from Youtube: https://www.youtube.com/watch?v=aDMedWiZ_Iw

Utilitarianism

Utilitarianism (also called consequentialism) is a moral theory developed and refined in the modern world in the writings of Jeremy Bentham (1748-1832) and John Stuart Mill (1806-1873).

"There are several varieties of utilitarianism. Basically, a utilitarian approach to morality implies that no moral act (e.g. an act of stealing) or rule (e.g. “Keep your promises”) is intrinsically right or wrong. Rather, the rightness or wrongness of an act or rule is solely a matter of the overall nonmoral good (e.g. pleasure, happiness, health, knowledge, or satisfaction of individual desire) produced as a result of doing that act or following that rule." (Moreland, 2009)

If you want to practice utilitarian thinking try to decide how to solve the Trolley problem:

https://youtu.be/bOpf6KcWYyw

Source: BBC Radio 4, The Trolley Problem (1:37 min) [access 13.06.2020]. Available from Youtube: https://www.youtube.com/watch?v=bOpf6KcWYyw

For some thinkers, utilitarian approaches are reasonable, but the strict mathematical nature of the hedonic calculus fails to represent, for them, the way human beings live their lives and make decisions. John Stuart Mill (1806-1873) is one of these thinkers. He made a few updates to Bentham’s utilitarianism that many may find compelling. One of the things that Mill suggests is that there are certain pleasures which will always be qualitatively better than other pleasures.

Do you agree with this statement, based upon your own experience?

You can try to apply this idea presented by Mill in business ethics. For example think about an employee who worked for a long time for your company and performed well, yet he got ill and due to the treatment now he cannot perform that good and, because of this, your company is not as competitive as it used to be.

What kind of conflicting values do you see in this case? What could utilitarian reasoning look like? (Barnes, 2014)

Negative Utilitarianism is a compelling update to classical utilitarian thought that avoids the problem of justice, often leveled at Bentham. This theory promotes alleviation of suffering over maximization of pleasure. So, it flips the basic utilitarian principle of promoting the greatest good first. Or, if you like, it determines that the greatest good for humans is the alleviation of suffering. You can find out what you think about Karl Popper’s (1902-1994) reasoning on this theory by reading Karl Popper and Negative Utilitarianism.

Criticism

The majority of moral philosophers and theologians have found utilitarianism defective. One main problem is that utilitarianism, if adopted, justifies as morally appropriate things that are clearly immoral. For example, utilitarianism can be used to justify punishing an innocent man or enslaving a small group of people if such acts produce a maximization of consequences. But these acts are clearly immoral regardless of how fruitful they might be for the greatest number (Moreland 2009).

For example, you can think about using cost-benefit analysis in Ford Pinto case. A similar situation is described by Joel Balkan in his book "The Corporation" (2004). The author comes up with an example of consequentialist ethics. He describes the decision-making process at General Motors in the face of a design problem with its Chevrolet Malibu model (1999).

“Throughout the book he condemns the practice of cost-benefit analysis conducted by corporations when deciding what safety measures to pursue. He cites the story of a woman who was driving her 1979 Chevrolet Malibu when another car slammed into her as she was waiting at a red light. The impact caused the fuel tank to explode and caused a fire that burned her children. She sued General Motors (GM) for the negligent design of the fuel tank. She alleged that it was too close to the rear bumper and that it had no proper metal brace to separate the tank from the rear. During the trial, a memo written in 1973 by a GM engineer was revealed to conclude that maintaining the current fuel tank was cheaper than designing a tank that would not explode in a crash. The analysis was done assuming that there would be 500 fatalities and that each fatality would cost 5,200,000. He then estimated that since there were 41 million GM automobiles on the road, the cost per car to GM would be S2.40. On the other hand, the cost of designing a non-exploding fuel tank was $8.59 per car, and hence GM would save over $6 per car by maintaining the status quo." (Balkan 2004, p. 162)

References:

- Balkan J. (2004) The Corporation. The Pathological Pursuit of Profit and Power, Toronto: Viking Canada.
- Barnes B.G. (2014) Critical thinking structures for business ethics. University of Louisville TinkIR: e University of Louisville's Institutional Repository, https://ir.library.louisville.edu/cgi/viewcontent.cgi?article=1072&context=etd (Accessed 3.06.2020)
- Moreland J.P. (2009) Ethics Theories: Unilitarianism vs. Deontological Ethics, Article ID: DE197-1 | By: Christian Research Institute, https://www.equip.org/article/ethics-theories-utilitarianism-vs-deontological-ethics/ (Accessed 3.06.2020)
- BLTC, Karl Popper and Negative Utilitarianism, https://www.utilitarianism.com/karl-popper.html (Accessed 3.06.2020)

Deontological Ethics

Many thinkers have advocated a second type of moral theory, deontological ethics. Deontological ethics evolves from natural moral law, and intuitions from common sense. The word “deontological” comes from the Greek word deon which means “binding duty.”

Deontological ethics has at least three important features (Moreland 2009):

Duty should be done for duty’s sake.
The rightness or wrongness of an act or rule is, at least in part, a matter of the intrinsic moral features of that kind of act or rule. For example, acts of lying, promise breaking or murder are intrinsically wrong, and we have a duty not to do these things.

This does not mean that consequences of acts are not relevant for assessing those acts. For example, a doctor may have a duty to benefit a patient, and he or she may need to know what medical consequences would result from various treatments in order to determine what would and would not benefit the patient. But consequences are not what makes the act right, as is the case with utilitarianism. Rather, at best, consequences help us determine which action is more in keeping with what is already our duty. Consequences help us find what is our duty, they are not what make something our duty.

Humans should be treated as objects of intrinsic moral value; that is, as ends in themselves and never as a mere means to some other end (say, overall happiness or welfare).
This notion is very difficult to justify if one abandons the theological doctrine of man being made in the image of God. Nevertheless, justified or unjustified, deontological ethics imply that humans are ends in themselves with intrinsic value.

A moral principle is a categorical imperative that is universalizable; that is, it must be applicable for everyone who is in the same moral situation.
Moral statements do not say, “If you want to maximize pleasure vs. pain in this instance, then do such and such.” Rather, moral statements are imperatives or commands that hold for all examples of the type of act in consideration, such as truth telling. Moral statements say, “keep your promises,” “do not murder,” and so forth.

Immanuel Kant

The ethics work of Immanuel Kant (1724-1804) represents well the “deontological theory”, as it  is linked to the notion that our correct ethical behavior relies upon knowing what we must and must not do (our “duties”), and then acting accordingly. This is tied to the basics of our humanity. Human beings are special kinds of creatures, according to Kant:

We have freedom (autonomy).
We possess the ability to reason (rationality).

These two characteristics cause us to have the highest sort of value: intrinsic value. Intrinsically valuable things, like Kant’s human beings, are always of the highest value, and they should be treated as such. Human beings should not be used merely for the benefit of others, and this idea makes Kant a valuable thinker for business ethics. Kant does not want any human beings to be used as instruments or tools only. Kant is also opposed to utilitarian thinking, since he feels that boiling value down to pleasure trivializes human dignity. By the way, for Kant, human beings have value far in excess of non-human animals, which may be used instrumentally without those actions being “wrong”.

Kant has two central phrases that we can focus on for our own thinking about business ethics:

The first is called “the categorical imperative”. Kant is saying here that our principles for acting, at their most basic level, are principles that should apply to anyone trying to make a decision in our situation. He is talking about all of our actions. He is saying that we must act, not for individual outcomes, but so that the ideas driving our actions can be made into rules that apply to everyone (universal law). So, for Kant, it is not acceptable for us only to think about the benefit to ourselves or only for our shareholders, unless benefit to self or shareholders is actually what a person should be deciding in this situation.

So, for Kant, human beings are too valuable to only be used as we would use tools, for means only. This idea has relevance for labor rights and human resources concerns. How should we treat our employees? What kind of culture should we be participating in at work? Is it ever acceptable to discriminate against others? What about social and product experimentation on customers in the open marketplace? For Kant, the most obvious expression of the ideas of duty and dignity in the categorical imperative is its first prohibiting the treatment of human beings as means only (Barnes 2014).

If you want to exercise thinking according to Kant's moral theory, watch the short video below:

https://youtu.be/x_uUEaeqFog

Source: BBC Radio 4, Kant's Axe (1:33 min) [access 13.06.2020]. Available from Youtube: https://www.youtube.com/watch?v=x_uUEaeqFog

If you are interested in how ethical decisions can be made in practice, here you may find an example of a well known case from the automotive industry "General Motors: A Recall Nightmare (2014)".

References:

- Barnes B.G. (2014) Critical thinking structures for business ethics. University of Louisville TinkIR: e University of Louisville's Institutional Repository, https://ir.library.louisville.edu/cgi/viewcontent.cgi?article=1072&context=etd (Accessed 3.06.2020)
- Bateman Ch. (2015) General Motors: A Recall Nightmare (2014) Business Ethics Cases Analyses, http://businessethicscases.blogspot.com/2015/11/general-motors-recall-nightmare-2014_23.html (Accessed 3.06.2020)
- Moreland J.P. (2009) Ethics Theories: Unilitarianism vs. Deontological Ethics, Article ID: DE197-1 | By: Christian Research Institute, https://www.equip.org/article/ethics-theories-utilitarianism-vs-deontological-ethics/ (Accessed 3.06.2020)

The Milgram experiment

Ok, so we've discussed the core ethical theories. Now we'll change the topic and talk about an experiment that shows some important aspects of psychological mechanisms of decision making.

Let's start with the question:

Do you think it is possible that you give up your own free choice about how to treat other people without intending to do so?
Unfortunately, the answer is yes. It is possible.

The mechanism might be shown based on the Milgram experiment (1961-1962) on obedience to authority figures. It was a series of social psychology experiments conducted by a Yale University psychologist, Stanley Milgram. They measured the willingness of study participants, men from a diverse range of occupations with varying levels of education, to obey an authority figure who instructed them to perform acts conflicting with their personal conscience. The experiment found, unexpectedly, that a very high proportion of people were prepared to obey, albeit unwillingly, even if apparently causing serious injury and distress.

Source: Wikipedia, The Milgram experiment derived from: https://en.wikipedia.org/wiki/Milgram_experiment (access: 13.06.2020)

The experiment goes like this:
The experimenter (E) orders the teacher (T), the subject of the experiment, to give what the latter believes are painful electric shocks to a learner (L), who is actually an actor and confederate. The subject is led to believe that for each wrong answer, the learner was receiving actual electric shocks, though in reality there were no such punishments. Being separated from the subject, the confederate set up a tape recorder integrated with the electro-shock generator, which played pre-recorded sounds for each shock level (McLeod 2017).

This is a documentary on what it looked like:

https://www.youtube.com/watch?v=xOYLCy5PVgM

Source: Milgram Experiment - Big History NL, threshold 6 (5:04 min) [access 16.03.2021]. Derived from Youtube: https://www.youtube.com/watch?v=xOYLCy5PVgM

Let's consider the following questions:

How much of a role does authority play in your decision making?
Is it credible that a stranger in our society will kill another stranger from that same society simply because an authority figure has told him or her to do so?
What is it about your personal experiences in the workplace that causes you to trust fellow workers to the extent that you do?
Do business activities that harm people ever occur intentionally but without the consent of those who are harmed?

The Milgram Experiments are loaded with big ideas about how we value things. How much faith can we put in others to respect our safety and our lives? How much more is this the case at the office, when we are forced to interact with groups of strangers who may or may not have our interests at heart? Workers in corporations often believe in the work that they are doing, just like the participants in Milgram’s experiments believed in the value of those experiments. What about when our co-workers or business leaders have no one’s interests at heart, when their only interest is making of profit without regard for others? (Barnes 2014)

The Milgram Experiments are no longer allowed, due to the ethics of informed consent. Medical ethics, among other areas of applied ethics, require experimental human subjects to be briefed about all of the things that could happen to him or her during experiments. Milgram, though, did not gain informed consent from his experimental subjects. Likewise, business actions can also  harm people who are not expecting to be harmed by an action, primarily because these people have not been made aware of the amount of stress, overload or expectations towards a difficult decision (also a moral decision) that they have to take in their jobs. As a result, people bear often very hard physical and psychological consequences of their work, which they didn't expected (Barnes 2014).

The Milgram Experiments prompt us to consider the extent to which we support a purely economic consideration of business or whether there might be other aspects.

Question 1:  Consider a situation in which someone instructs you to follow their authority at work, and you can foresee that harms will occur to others from the business activity at hand, but you are tempted to follow the order because of your own financial benefit. Would you follow the order or refuse it? Explain why.

Question 2: Now turn the situation and imagine you want to buy a product from a salesman who is confronted with this kind of dilemma. If he offers you a product that might hurt you, he will get paid. If he refuses to do so, he won't bring money back home.  Would you like the salesman to follow the orders or refuse them?

Question 3: Explain why and confront your justification from the previous question with your way of reasoning in this question. Can you identify any elements of consequencialist or deontological ethics? Explain how these two ways of reasoning may differ.

Think about these questions, as you will be asked to answer them in the Task 2: Ethical reasoning

Lastly, what can these experiments tell us about our own ability to make good choices in difficult situations? The business world is full of pressure to grow, to earn, to present a particular appearance, and to climb. To what extent do these pressures cause us to compromise our other values as we succeed under a this behavioral model? In ethics, we use the word agency to identify that feature of human beings that allows us to choose what we want to do. European Enlightenment thinkers like John Locke and John Mill refer to this feature as liberty. We are all born free, and we represent our own interests, just like sports agents represent the interests of the athletes they work for. As long as we freely represent our own desires, we are free to act, and we are responsible for what we have freely done. In ethics, a person whose agency is compromised, for example, through coercion, is no longer considered to be acting freely, and so may not be responsible for his or her own choices due to the loss of control over his or her agency (Barnes 2014).

References:

- Barnes B.G. (2014) Critical thinking structures for business ethics. University of Louisville TinkIR: e University of Louisville's Institutional Repository, https://ir.library.louisville.edu/cgi/viewcontent.cgi?article=1072&context=etd (Accessed 3.06.2020)
- McLeod S. (2017) The Milgram Shock Experiment, https://www.simplypsychology.org/milgram.html (Accessed 3.06.2020)
- https://en.wikipedia.org/wiki/Stanley_Milgram (Accessed 3.06.2020)
- https://en.wikipedia.org/wiki/Milgram_experiment (Accessed 3.06.2020)

Externalities

Taking an analogy with the Milgram Experiments, we can observe that, in many cases, business activities amount to experiments within the market that are designed to directly affect customers, employees, and other stakeholders. Often, in order to maintain competitive advantage or in order to cultivate surprise or shock value from stakeholders, businesses disclose to the public few, if any, of the risks they are taking.

These largely unintended (but often foreseeable) negative actions that harm stakeholders are  called externalities. In the 2003 Canadian documentary, "The Corporation", a Nobel Prize-Winning Economist Milton Friedman defines an externality as, “The effect of a transaction between two individuals on a third party who has not consented to or played any role in the carrying out of that transaction.”

Friedman admits in the same film that, “There are real problems in that area [of externalities]. There’s no doubt about it.” So, why are harms allowed through various externalities, while they are not allowed in areas like medical testing? Each could be hailed as being “for the common good,” so what’s the difference?

Watch the video and think about different externalities in your environment. What kind of externalities can you recognize?

https://www.youtube.com/watch?v=yC5R9WPId0s

Source: mjmfoodie, Episode 32: Externalities (7:38 min) [access 13.06.2020]. Derived from Youtube: https://www.youtube.com/watch?v=yC5R9WPId0s

Question 4: Think about 3 different kinds of negative externalities that are caused by business and that you think may harm different groups of stakeholders (customers, employees, local society, suppliers, media, government) or environment. Describe them as well as possible consequences resulting from these externalities.

Question 5: Chose one externality from the above-mentioned ones, and bring at least 3 deontological  and at least 3 utilitarian (consequentialists) arguments against the company that has caused this externality. (You may take a perspective of any group of stakeholders)

Question 6: Now, try to think about contrary arguments that the company may bring just to justify its action. Present at least 3 deontological and at least 3 utilitarian (consequentialists) arguments.

Think about these questions, as you will be asked to answer them in the Task 2: Ethical reasoning.

References:

- Balkan J., Achbar M. and Abbott J. (2003) The Corporation, documentary film written by University of British Columbia, https://thecorporation.com/ (Accessed 3.06.2020)