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Ethics & Values in Management

Module 2: Moral Development, Moral


Reasoning and Ethical Dilemma
Prof N. R. Govinda Sharma
January 2015

EVM Module 2

Moral Standards
Moral Standards are
The norms about the kinds of actions believed to be
morally right and wrong
The values placed on the kinds of objects believed to be
morally good and morally bad

Non-moral standards
Apply to judging non moral things such as
etiquettes, grammar etc

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Moral Standards
Standards of non-moral vs moral standards
Moral standards are (p 9 of Manuel Velasquez)
Involved with serious injuries or benefits
Life of men as compared grammatical mistakes

Exception: Hang him not, leave him / Hang him, not leave him!

Not established by law


Just because a parliament accepts apartheid policy as legal, it is not
moral
Should be preferred over other values including self-interest
Saving life over keeping a well-paid job

This does not mean self interest is always bad; it only


means it is wrong to choose self interest over morality
Based on impartial considerations
Each counts for one and none for more than one

Associated with special emotions and vocabulary


Guilt, remorse, shame
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Moral evolution
Are moral standards acquired early on in life
and that can not be changed?
Most people believe that it is so!

This is the biggest obstacle to learning ethics


Ethics cant be taught!
But mercifully, Kohlberghs Seven Stages of
Moral Evolution (Page 25 of Business
Ethics by Manuel Velasquez), says otherwise
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Kohlbergs model
Level One: Pre-conventional stage
Stage One: A childs right & wrong governed
by physical consequences
If a ask a child as to why it is wrong to steal, it will
answer
Because mummy will punish me if I steal

Stage Two: Child identifies others needs &


respects them to obtain rewards & avoid
punishments to satisfy its own need

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Kohlbergs model
Level Two: Conventional Stages
Stage Three: The interpersonal concordance
orientation
Right action is conformity with what is expected in
role as a friend, son, daughter

Stage Four: Law and Order


Loyalty ones own nation or larger society

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Kohlbergs model
Level Three: Post Conventional, Autonomous and
Principled Stages
Stage Five: Recognizing that people hold variety of
views, and opinions and one arrives at reaching
consensus by agreement, contract
Stage Six: Universal Ethical Principles orientation:
Right actions are those that are chosen because of their
universality and consistency, Abstract principles (like
justice, love (agape love)) rather than concrete concepts
such as Ten Commandments govern the decisions

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Application of Kohlbergs model


Why is Kohlbergs theory useful?
Most think that morals are developed in
childhood but this model lets us know moral
capacities develop with development of
sophisticated and critical reasoning
It is possible that some people get stuck at
any one stage
Dont let it happen to you!
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Application of Kohlbergs model


Persons at higher levels, say post conventional
stage will be able to able to justify their actions
based on reasoning that can appeal any reasonable
person
Higher levels are better not because they come
later in life but because they are based on reason
rather than just sayingmummy will punish me
People at a later stage have the ability to see wider
& fuller perspective than in the earlier stages
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Application of Kohlbergs model


See page 31: An important point not be missed
Discussion moves us from mere acceptance
because of authority to acceptance based on
critical reasoning
Shravana (Listening not just hearing), Manana
(Reflection), Nididhyasana (being stationed in truth)

Developing critical moral reasoning is one of the


purposes of education

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What is moral reasoning?


Moral reasoning is the reasoning process by
which human behaviour, institutions or
policies are judged to be in accordance with
or in violation of moral standards
For example
Transparency International has certain moral
standards with respect to corruption
Communities will be judged against this standard

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Process of moral reasoning


To carry out moral reasoning:
An understanding of what reasonable moral
standards
Require or prohibit,
Value or condemn
Evidence or information to show that a particular
person, policy, institution or behaviour has kind of
feature that the moral standards require or prohibit,
value or condemn
Take a moral judgment comparing evidence against the
moral standard
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Moral Standards
An understanding of what reasonable moral standards require, prohibit,
value or condemn
Reasonable:

Reasonable profit
Require: Board of Directors has a fiduciary responsibility and
therefore required to act in the interest of the investors
Held in Trust

Prohibit: CEO are prohibited from misuse of the trust


Value: Business value the Trust of the customers (Tatas)
Condemn: Society condemns adulteration of medicine

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Analysing moral reasoning


Moral reasoning must be logical
One truth leading to another

Factual evidence cited must be accurate, relevant


and complete
Moral standards must be consistent
If it is morally right for me to engage in price fixing
because I want high profits, it must be equally moral if
my suppliers too would like to fix the price for the same
reason
Do not have double or multiple standards
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Moral Reasoning Process


See page 32 of Business Ethics by
Manuel Velasquez
Is American society just?

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Moral Reasoning

A society that
does not treat its
minorities equal to
majority is unjust

In America, 41% of nonwhites fall below poverty


line as compared to 12%
whites

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American
society is unjust

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What is ethical dilemma?


Ethical dilemma sets in when two or more
values conflict
You are a manager with two cherished values
Justice &
Mercy

Your subordinate has made a glaring mistake


and
His son is hospitalised
Do you overlook the error?
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Example of dilemma
Justice:
Rendering what is due or merited
Justice argues
Punish!
Mercy:
Compassionate treatment of an offender
Mercy argues
Let him go!
Both are right! This is the dilemma between Right and
Right!
See Joseph Badaraccos talk on You Tube at http:
//www.youtube.com/watch?v=A2SKTP43oRQ
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Ethical Dilemma

Now you are in an ethical dilemma!


You have to decide
You are paid to decide!
You can adopt some form of decision making based
on gut feeling
But gut may not always be trained to make complicated
ethical decisions

Train in a cool & composed atmosphere


Hope to be equipped to handle the situation when it
actually occurs

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Why models?
The resolution of ethical dilemmas in
business is difficult
Even in firms with a code of ethics and
culture committed to ethical compliance
Therefore, managers need guidelines in
making ethical decisions
So, we will see some models
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Models or Some simple tests


Some simple tests for resolving ethical
dilemmas
Model by Peter Drucker: Above all do no
harm, knowingly
Decision making model by Laura Nash
The oracle of the Omaha:
Warren Buffetts the Front-Page-of- NewspaperTest

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Model by Peter Drucker


In resolving a dilemma use the concept
Above all, do no harm, knowingly
From the tradition of medical practitioners,
the model requires that in taking a decision
check whether it does harm any body
If it does, it is not ethical

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Model by Peter Drucker


Illustration:
Consider the case Tobacco on fire: Advertising a
harmful product
Was advertising in 1929 unethical?

(See Business Ethics- Ethical Decision Making and Cases by Ferrell et al, Sixth edition)

Physicians spoke of benefits to nose and throats it


clears the throat!
So, at that level of awareness, advertisement by the
tobacco company Lucky Strike advertising that its
cigarette is less irritating than its competitors products
may not be unethical! (as you did no harm, knowingly)
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Is cigarette ad unethical?
But in 1964, US Surgeon General Luther Terry
declared cigarette to be a cause of cancer
Fairness Doctrine: Equal time for anti-smoking
ads (1967)
Cigarette ad was banned in 1971
But in 1980, tobacco industry discovered
endorsement by movie stars
Sylvester Stallone paid $500,000 to smoke Brown &
Williamson cigarette

This is unethical!
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Why is it unethical?
Advertising cigarettes is unethical because
Cigarette smoking while benefiting the company
places
Burden on state to treat tobacco related diseases
Benefit to company, burden to state!
Profits are private, losses are public!

So, cigarette companies were asked to pay billions


of dollars every year to states to
Reduce the burden of health care
Fund campaigns to discourage smoking, especially
amongst children the new recruits
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Model by Laura Nash


Laura, Harvard Divinity school suggests 12
questions to be asked in deciding an ethical
dilemma:
1. Have you defined the problem accurately?

Would you steal to save yourself from hunger?


Rephrase the question as Are there ways other than
stealing to satisfy your hunger?
Relate to Q3- How did you get into this situation in
the first place?; all these questions in this model are
interrelated
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Model by Laura Nash


1. Have you defined the problem accurately?
Activity Based Learning
Somu needs a job badly to support his ailing mother. His
resume is not impressive.
Is it right to puff his resume to get the job to help his
mother?

Are there other way of getting the job other


than puffing the resume?

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Model by Laura Nash


2. How would you define the problem if you
stood on the other side of the fence?
ABL
Slum dwellers vs developers
If you are working for developers, can you see
from the perspective of the slum dwellers?

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Model by Laura Nash


3. How did this situation occur in the first place?
ABL: You are the boss and suppose your
subordinate asks for a recommendation letter
but you were never happy with him, you are in
a dilemma if
You had never discussed the shortcomings with
him / her earlier
This analysis helps to avoid future dilemmas Relate to question 1: How did you get into a
situation wherein you could not satisfy your
hunger?
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Model by Laura Nash


4. To whom and with what are your
loyalties?
ABL:
If your manager padded his expense
statement, and accounts is unlikely to find out,
whether you let the company know about it
depends upon whether your loyalty is with

The company or the boss

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Model by Laura Nash


5. What are your intentions in making this
decision?
ABL:
You are a finance officer and you may say
that you is cooking the books to smooth
out the earnings to help the company but
your intention may be
to earn bonus!
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Model by Laura Nash


6. How does these intentions compare with likely results?
Continuing with last illustration, the company will have to
face the truth some time and in which case, under the
Financial Act, the financial officer reporting false financial
data will have to return the bonus and face criminal
charges
ABL: Somu had puffed the resume and got the job
Background check revealed the truth
He may lose his job when most needed

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Model by Laura Nash


7. Whom could your decision or action
injure?
In Enron case, the statement of CEO, Kenneth
Lay, that In his personal opinion, Enron shares
are incredible bargain at current prices was
misleading as he himself was selling blocks of
share
Think of an ABL
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Model by Laura Nash


8. Can you engage the affected party in a
discussion before decision?
If you cant, it indicates that you have your
own interest over others (with whom you
may have a relation or responsibility) and
that you have crossed an ethical line
Think of an ABL

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Model by Laura Nash


9. Are you confident that your decision will
be justified over a long period of time
now?
Suppose you buy a term paper on internet to
satisfy the expediency of time now, (it appears
very clever), but down later in your career,
some of your classmate may come out with this
when you need good reputation most
Talk of Shreyas and Preyas!
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The oracle of Omaha:


What is oracle?
Oracle is a seat of deity, such as Apollo at
Delphi, where prophesies are given in
answer to queries
A person of unquestioned wisdom or
knowledge

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The oracle of Omaha:


Warren Buffets Front-Page-of-the-Newspaper Test

What is meant by oracle of Omaha?


A nickname for Warren Buffett, who is
arguably one of the greatest investors of all
time
He is called the "Oracle of Omaha" because his
investment picks and comments on the market
are very closely followed by the investment
community, and he lives and works in Omaha,
Nebraska.
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The oracle of Omaha:


Warren Buffets Front-Page-of-the-Newspaper Test

This simple model asks that a decision


maker envision how a reporter would
describe a decision or action on the front
page of a local or national news paper

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Warren Buffets
Front-Page-of-the-Newspaper Test
A sedate newspaper like the Hindu Business Line
had a headline news:
Former Satyam CEO Raju, his brother and
CFO arrested and detained in profit-fraud
scandal
Business Line, 12 January 2009

Would Ramalinga Raju made the same decision if


he had envisioned or foreseen the headline?

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Warren Buffets
Front-Page-of-the-Newspaper Test
The purpose of this test is to help you step
back from the business settings and view
from the perspective of a objective outsider
Their views are not the same as they are not
subject to the same pressures and biases
ABL: Write a headline news caption for a
potentially unethically task you are
contemplating
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Summary of the module


Moral standards are the basis of moral
reasoning
Moral reasoning must be logical
But the base truth must be correct
Belief is the base for values
Hold on to your belief but allowing your
intellect to grow
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Summary of the module


Consider the Kohlbergs model of Moral
Development
Level One: Pre-conventional stage
Stage One: A childs right & wrong governed by
physical consequences
Stage Two: Child identifies others needs & respects
others needs in order to obtain rewards & avoid
punishments that satisfy its own need

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Summary of the module


Level Two: Conventional Stages
Stage Three: The interpersonal concordance orientation
Stage Four: Law and Order
Loyalty to ones own nation or larger society

Level Three: Post Conventional, Autonomous and


Principled Stages
Stage Five: Recognizing that people hold variety of views, and
opinions and one arrives at reaching consensus by agreement,
contract
Stage Six: Universal Ethical Principles orientation

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Summary of the module


Models available for resolving dilemmas
Model by Peter Drucker: Above all do no
harm
Decision making model by Laura Nash
The oracle of the Omaha:
Warren Buffetts the Front-Page-of- NewspaperTest

End of module
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