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Chapter 16

Moral Justification of Corporate Outcomes


Ozzie Mascarenhas, S.J., Ph.D.
JRD Tata Chair Professor of Business Ethics
November 12, 2018

"One of the Greatest Diseases is to be nobody to anybody,” - Mother Teresa.

This chapter provides the ethical foundations for sound corporate moral reasoning, moral judgment, and
moral justification of corporate decision-outcomes by systematically applying major theories of moral reasoning
and metaphors, such as deontology, teleology, distributive and corrective justice theories and their sub-theories,
for analyzing and assessing corporate executive decisions in terms of their ethical inputs, process, and outputs.
From earlier chapters we assume that the corporate executive moral decision and moral act and actions are
framed in their constitutive components of ethical inputs, ethical process, and ethical outputs. Input and process
elements are assumed to constitute the executive decision or ACT, while the output elements are understood to
constitute the CONSEQUENCES under a concrete decision action situation. We present three cases to illustrate
the contents of this Chapter: Case 16.1 deals with the recent Maggi controversy in India. Case 16.2 reviews the
Maruthi plant massacre at Manesar, and Case 16.3 reflects on the current list of India’s Superrich. There are
two parts to this chapter: Part I: Major Normative Ethical Theories for Assessing the Morality of Corporate
Outcomes; Part II: Deriving Moral Rules from Ethical Theories for Assessing Morality of Corporate Outcomes

Case 16.1: The Maggi Controversy and the FSSAI Response

For the nine years Sudha H C worked in the garment industry, sewing buttons, stitching labels and doing sundry
other jobs, she often turned to Maggi, a foolproof timesaving meals-aid. Several times a week, when her mornings
got consumed up filling water from the municipal tap outside her tiny home in Balajinagara in southern Bangalore,
she fed her husband and her school going son Maggi noodles for breakfast with minimal time and fuss in the
kitchen. She herself relished the noodles and then bundled her son into the school auto before rushing off to make
the garment factory’s punch-in time. On some days, she returned to find that her son had rustled up to snack on
Maggi. On other days, when she came back bone-tired from long factory hours, she gave herself respite from
cooking by preparing instant noodles for dinner — sometimes adding a vegetable or two picked up on her way back
from the factory.

It has been two years since Sudha, 38, quit the garment industry and started working as a cook. But old habits
die hard. She chops, grinds and steams in the homes she cooks in. But in her own home, where she is always
confronted with a pile of washing, a mound of dishes and house-mopping, she takes recourse to the Maggi quick-fix.
Her son, now a college student, eats it every other day too. “He loves the taste and I like the convenience,” she said.
Traditional foods like idli, dosa, akki rotti (rice pancakes) and ragi mudde (millet mounds) are still part of their
intake but if the family had a food pyramid, it would be Maggi occupying the base. Quite naturally, the recent
controversy over the high lead content in Maggi has upset Sudha. “How can I eat the noodles now? They say it is
poison,” she said, adding that the stores near her home no longer stock Maggi.

The allure of the two-minute noodles has been the strongest for lower middle- and middle-class Indian women
as they stormed into the urban labor force, working in factories, supermarkets and offices in the mid-1980s. For this
category of women, who almost singlehandedly manage their kitchens and tend to their children while
supplementing the family income by working outside the home, packaged instant noodles have eased the burden of
grinding, prepping and cooking traditional Indian foods. Besides the convenience, the cost has been a draw. Instant
noodles help busy working mothers save time outside the kitchen too, with elaborate Indian meals consisting of
grains and vegetables giving way to “one pot” noodles meals. [See more at: http://indianexpress.com

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/article/opinion/columns/fifth-metro-without-maggi-its-absence-leaves-a-huge-hole-in-the-lives-of-middle-class-
working-women/#sthash].

A Timeline of Major Maggi Events

June 3, 2015: The Food Safety and Drug Administration (FDA) in Uttar Pradesh had collected more than two
dozen packs of instant noodles from stores across the state. According to a Reuters report, they found a lead
concentration of 17.2 parts per million (ppm), which is way beyond the permissible limit. They also found very high
levels of MSG (monosodium glutamate). [NDTV Food, Modified: June 03, 2015 17:17 IST]

June 4, 2015: A Mumbai retailers’ organization on Thursday ordered all members to immediately stop stocking
or selling Maggi noodles till the controversy over its safety aspects is cleared. “We have directed all our 25,000
provision stores to stop stocking and selling Maggi till the results of the Maharashtra government tests are declared,”
Federation of Retail Traders Welfare Association (FRTWA) president Viren Shah told IANS (See India Trending
Network (ITN), Front page, June 4, 2015, Mumbai). “All food and provision stores are requested to stop selling
Maggi products till the same is replaced by the company and certified by the government authority to be safe for
consumer,” the directive issued on Thursday morning said. Besides, all other retailers have also been urged to halt
Maggi sales with immediate effect, he added. In the past few days, Shah said, retailers have reported a sharp drop of
50 percent in Maggi noodles sales.

June 11, 2015: The U.S. Food and Drug Administration (FDA) is testing samples of Maggi, a Nestlé instant
noodle brand, which was recalled from stores across India last week, a spokeswoman for the Swiss food group said
on Thursday. [#World #US #NewsTracker #Nestle #FDA #Maggi #instant noodles #MSG #lead #Maggi
Controversy]

June 15, 2015: FSSAI bans Nestlé’s Maggi, saying it was "unsafe and hazardous" for consumption after finding
excessive levels of lead and violation of labeling regulations on taste enhancer monosodium glutamate (MSG).
Nestle India had recalled Maggi from markets since.

July 8, 2015, New Delhi, India News: The Parliamentary Standing Committee on Food and Consumer Affairs,
headed by JC Divarkar Reddy, will deliberate on recent food safety issues in packed food as well as packaging and
labeling regulations, among others, sources said.

July 30, 2015: Affected by a countrywide Maggie recall, its ban on June 5, 2015, and the consequent destruction
of its instant noodle brand, Nestlé suffers first loss in 17 years. Maggie, India’s largest food firm by revenue took a
one-time charge of Rs 452 crore that hit its bottom line, and Nestlé India reported a net loss of Rs 64.4 crore for
April-June 2015, Nestlé India’s most challenging quarter to date. The quarter ending in June 2015 experienced a
drop in sales to Rs 1,934 crore, compared to Rs 2,419 crore a year ago. Meanwhile, Nestlé India is making every
effort to engage with authorities to bring Maggi Noodles back to the shelves, said Suresh Narayanan, MD-designate
of Nestlé India (Business Standard, Thursday, July 30, 2015, p.1).

The Maggi Controversy

Some time back, Food Safety and Drug Administration (FDA) of Uttar Pradesh found monosodium glutamate
(MSG) and excessively high quantity of lead in sample testing. MSG, which is used as a flavor enhancer can cause
headache, nausea, and the like ailments. The lead amount was 7 times more than what was permitted. FDA claims
that they tested two dozen packets of Maggi for this. While Nestlé claims that they do not use MSG in Maggi, and
that they are awaiting their own test results over this issue. With Maggi in India enjoying 80% of market share for
instant noodles, and 30% of Nestlé India's revenue coming from Maggi, it is a cause of big concern for Maggi.

The development came a day after the Maharashtra government cracked down on multinational Nestlé’s popular
Maggi brand of noodles and sent samples collected from around the state for testing in government laboratories.
Food & Civil Supplies Minister Girish Bapat said the test results are expected on Friday, June 5, 2015, and
depending on the outcome the government will take further steps. The samples have been picked up from Mumbai,
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Thane, Nasik, Pune, and Nagpur and are being tested in government labs in Mumbai and Pune. The samples are
being tested for metallic lead content and the amount of aginomoto salt (aka MSG) which is used for flavoring the
noodles. Maharashtra Food & Drugs Authority (FDA) officials said that 25 samples, including four from Mumbai
and Thane and 15 from Pune, are being tested in the FDA lab in Mumbai and a central government lab in Pune. “If
the reports of the Maggi noodles and the accompanying masala are positive, then we have the powers to ban the
product from sale or distribution in the markets. The FDA can also initiate action against the celebrities endorsing
the product in such a case,” the official, requesting anonymity, said. Referring to the losses suffered by retailers,
Shah said it hardly matters since the dealers’ margin on Maggi is barely 10 percent.

In the wake of the controversy over the presence of lead and monosodium glutamate (MSG) beyond permissible
limits in Nestlé’s popular noodles brand Maggi, India’s national focus has shifted towards improving food safety in
the country. The Maggi phenomenon seems to have made Food Safety and Standards Authority of India FSSAI)
more accountable.

For the first time in Indian history, a global food brand is being recalled and banned for sale by multiple state
governments. The overall public mood as reflected in media debates seem to be strengthening and raising food
safety standards in the country. But, that cannot happen without making the Food Safety and Standards Authority of
India (FSSAI) more accountable. The agency was established as an independent statutory authority under Food
Safety and Standards Act, 2006. Before the act, there were a plethora of acts and orders handled by various
ministries and government departments often resulting in chaotic situations, which ultimately transpired into
ineffective administrative response. As a single reference point, the FSSAI is supposed to lay down standards for
food articles and to regulate “their manufacture, storage, distribution, sale and import to ensure availability of safe
and wholesome food for human consumption.”

While the FSSAI did act promptly in the Nestlé Maggi issue, the agency has underperformed, if not entirely
failed, in implementing its mandate since its creation. Inadequate regulation and standards have created a highly
toxic and ineffective system for providing food that is safe, nutritious and accessible to all.

The use of cancer causing chemicals on vegetables and fruits produce, and the contamination of milk with
chemical additives have become common practice due to weak and fragmented standards for food safety and lack of
enforcement across the supply chain. In fact, a recent survey by the FSSAI in 33 state-districts found that 68.4% of
1,791 samples were contaminated with milk powder, fat, glucose, water, bleach, and even fertilizer. Various studies
from food safety advocacy groups point that the use of fertilizers, pesticides and insecticides in the agricultural
sector post-Green Revolution is rampant. It has ensured a slow accumulation of toxins within water, soil, food, and
humans. Traders and sellers further contaminate vegetables and fruits by using toxic colors and chemicals for
ensuring attractive look on the produce.

The “long and low-tech” supply-chains in India augment the tendency of producers and sellers to resort to
unnatural and artificial ways to preserve, present and sell the product. These problems afflict especially the urban
areas. In quantitative terms, as much as 70% of our cities’ food supply-chains face the problem. Already
condemned to bear the enormous pollution levels in our cities like Delhi and Mumbai, toxic food items severely
depreciate the quality of an average Indian’s life. Incidents of food contamination have injured and killed thousands
and will result in serious illnesses for many in the future.

National Newspaper columns wrote: As an agency responsible for enforcing food safety regulations in India, the
FSSAI must increase audits, inspections, and training programs to improve standards and create a modernized,
comprehensive, and cost-effective system to guarantee food safety in India. In fact, the FSSAI is trying to
implement safety standards on street food for the first time, as well as adopting new food packaging requirements.
FSSAI needs to strengthen both its own capabilities vis-à-vis staff, research and inspection laboratories, and
benchmarking. It can learn and adopt best international practices like the U.S. Food and Drug Authority (USFDA),
which has stringent quality testing procedures and capabilities.

India needs to initiate reforms in supply-chain operations so as to ensure that farm produce is transported safely
and at affordable prices to all, particularly in the urban areas. Advanced technology will help modernize safety
standards and create a more transparent and efficient system to ensure food safety. But for all this to happen, the
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FSSAI must rise to the challenge and enforce food safety regulation to feed the growing and young population of
India.

On July 29, 2015, the Maharashtra Food and Drug Administration (FDA) argued in the Bombay High Court that
Nestlé India had burnt several tons of Maggi after the state’s ban order on Maggi was imposed, instead of opting for
a retest of the samples. If Nestlé India was so sure about the safety of its products, it should have cooperated with
FDA for further testing. The Bombay High Court was hearing a petition filed by Nestlé India against FASSAI’s
June 5 order banning nine variants of Maggi, said FDA Counsel Darius Khambata. FDA randomly selected 20
samples of Maggi and found five of them tested positive for containing lead beyond permissible limits. This was
enough for FDA to issue notice to stop production and sale of all the nine variants of Maggi, Khambata said.
Meanwhile, Nestlé sent Maggi samples to labs in London, New York, and Paris and placed 2,700 test reports before
FDA to show that lead content was within proper limits, Khambata said (Business Standard, Kolkata, Thursday, July
30, p. 3).

References:
“Maggi Noodles Controversy: Nestlé India to Be Prosecuted,” NDTV Food, Modified: June 03, 2015 17:17 IST
MBA Forum d’Assistance, Tuesday, 09 June, 2015 11:40 AM
“US FDA to test Maggi samples for excess lead and MSG,” #World #US #NewsTracker #Nestlé #FDA #Maggi #instant noodles
#MSG #lead #Maggi Controversy, Jun 11, 2015
http://indianexpress.com/article/opinion/columns/fifth-metro-without-maggi-its-absence-leaves-a-huge-hole-in-the-lives-of-
middle-class-working-women/#sthash.U7WN77UW.dpuf
“Parliamentary panel to take up food safety issues on 10 July following Maggi controversy,” Jul 8, 2015 15:44 IST
Dutta, Arnab (July 30, 2015), “Maggi cuts deep; Nestlé suffers first loss in 17 years,” Business Standard, Thursday, July 30,
2015, p.1.
“Nestlé India did not opt for re-test, instead burnt Maggi: FDA,” Press Trust of India, Mumbai, Business Standard, Thursday,
July 30, 2015, p.3.

Ethical Questions:

1. What are the legal issues in the Maggi Case, and why?
2. What are the ethical issues in this Case, and why?
3. What are the moral issues in this Case, and why?
4. What are the spiritual issues in this Case, and why?
5. If, as later developments attested, there could have been contamination or sabotage by competitors, how would you
handle this grave injustice, and why?
6. Apparently, there was a clash of test results from Maharashtra FDA and Nestlé’s independent tests from London,
New York, and Paris. How would you legally, ethically and morally resolve such conflicts when the safety of millions
of consumers is at stake?
7. Did the Food Safety and Standards Authority of India (FSSAI) act too slow or too quick, and with what effect?
Discuss.
8. How would you resolve the problem of Maggi from a deontological view of rights and duties? Apply deontological
moral rules R01 - R09. Which Rule applies best, and why?
9. How would you resolve the problem of Maggi from a teleological viewpoint? Apply teleological moral rules R10 to
R12. Which Rule applies best, and why?
10. How would you resolve the problem of Maggi from a distributive justice perspective? Apply distributive justice
moral rules R13 to R28. Which Rule applies best, and why?
11. How would you resolve the problem of Maggi from a corrective justice mandate?
12. Since Maggi enjoys an 80% market share of the noodle market in India, what should have been the legal, ethical and
moral responsibilities of Nestlé in the wake of this controversy? Discuss.
13. If you were CEO of Nestlé India, what would be your ethical and moral judgment and subsequent marketing
strategy in this regard, and with what presumed effect?
2.1

Case 16.2: Maruti Plant Violence at Manesar and Thereafter

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July 18, 2012: MANESAR in Haryana: Awanish Kumar Dev, Maruti Suzuki's General Manager (Human
Resources) was burned beyond recognition to death in the violence that erupted at the Maruti car plant allegedly
triggered by workers for which 91 workers were arrested. Some 100 others were injured. Kumar's body was
identified by his family the next day. Maruti alleged that the violence was an orchestrated act of mob, which has
implications beyond one company or region. The 91 workers that were arrested were produced before a local
magistrate who remanded them to 14 days judicial custody. They have been accused of various charges including
rioting with weapons, murder, attempt to murder, unlawful assembly, assault and trespass. The violence in which
several executives, managers and supervisors were attacked and office facilities, security office and fire safety
section gutted arose out of an alleged caste remarks by an official against a worker.

Maruti Suzuki India Ltd. has been having a harrowing time since Wednesday (July 17, 2014) when about 3,000
workers rioted, leaving a senior manager dead, more than 100 people injured, and part of the premises charred.
India’s largest car maker by volume was wracked by labor unrest for much of last year at its plant at Manesar, in the
northern state of Haryana. But a nearby plant at Gurgaon, a suburb of New Delhi, has been functioning relatively
smoothly. [Gurgaon, an industrial hub neighboring the national capital, was the scene of large scale violence by
workers and outside forces at the Honda Motorcycle and Scooter India's unit and subsequent strikes in other units.
Maruti has witnessed strikes on three occasions last year (2011), and has already announced plans to set up a new
plant in Gujarat at an investment of Rs 4,000 crore, a move which was interpreted as coming against the backdrop of
violence in the region].

Underlying the tension at the Manesar plant has been a year of strained relations, especially between managers
and the new Maruti union, whose leaders have been accused by the car maker of instigating Wednesday’s violence.
The labor problems at the Manesar facility, located about 50 kilometers from New Delhi, date back to June 2011
when workers halted all activity and demanded recognition from Maruti’s management of their newly-formed
Maruti Suzuki Employees Union. Workers had pressed for a union that, they said, fairly represents them and
functions independently from the one at Maruti’s Gurgaon plant, which they claim is pro-management.
A 10-day agitation then ended after the management agreed to take back 11 workers who were fired for
disciplinary reasons. The company, however, did not agree to recognize the new Manesar union. In August 2011,
Maruti asked workers from Manesar to sign a so-called “good conduct bond” after the company found what it
claimed were “serious and deliberate” quality problems in cars made at the plant. Workers were prevented from
entering the factory before they signed the bond, leading to an impasse that lasted more than a month.

The workers at Manesar finally relented, signed the bond, only to re-organize their protests within the factory
premises. Production was stalled for another two weeks. Their principal demand was recognition for the union
though they also called for the reinstatement of more of the fired workers. The strike ended on Oct. 21 only after
intervention from the Haryana state government. As part of a tripartite agreement between Maruti’s management,
the workers’ union and the Haryana government, Maruti agreed to take back 64 suspended workers but continued its
inquiry against 30 other suspended employees.

The 30 workers who remained under suspension included two of the top office bearers of the Maruti Suzuki
Employees Union, Sonu Gujjar and Shiv Kumar. In November, 2011, The Economic Times reported that Maruti paid
Mr. Gujjar and Mr. Kumar 4 million rupees ($72,365) to leave the company. The report also alleged that the
remaining 28 expelled workers were asked to quit their jobs in exchange for 1.6 million rupees each.

Later, R. C. Bhargava, chairman of Maruti, said that the 30 workers took voluntary retirement but declined to
elaborate. Sonu Gujjar and Shiv Kumar have been unavailable for comment since last year. With that, Maruti may
have thought its days of unrest were over. But workers at the plant found new leaders and regrouped under union
chiefs Ram Mehar Singh and Sarabjeet Singh. They began negotiating with the management on issues such as
wages and the registration of their union.

This time, Maruti agreed to recognize the workers’ union. “The state government, taking a cue from the
incidents in the past, wasn’t interested in registering the union. But we insisted and the union was finally registered
in February this year,” S.Y. Siddiqui, Maruti’s chief operating officer for administration, said on Saturday. “In fact
the workers sent me a box of sweets after we helped them in registering the union.” The new Maruti Suzuki
Workers’ Union took charge at Manesar with Ram Mehar Singh and Sarabjeet Singh spearheading it as its president
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and general secretary, respectively. The two men today are among 12 union leaders and several others workers
wanted by the Haryana state police for their alleged involvement in Wednesday’s riot. They were not available for
comment.

“The relations were improving bit-by-bit. We learnt our lessons and established a communication channel that
never broke down,” Mr. Bhargava said on Saturday, July 20, 2012 at New Delhi. The Wednesday’s incident came as
a complete shock to us; we were still talking to the workers. Maruti Suzuki said last week’s violence began after a
worker and a supervisor got into a scuffle. Workers claim that the supervisor made a caste-based insult, but both the
company and police deny that. The Manesar union is not affiliated to any of the umbrella organizations of trade
unions in India. But, expressing its solidarity with the Maruti workers, D. L. Sachdev, national secretary of the All
India Trade Union Congress, blamed the Maruti management for the current crisis. “The discontent among regular
and contract workers has been going on. Unfortunately, the management hasn’t been able to resolve the issue,” Mr.
Sachdev said.

Maruti Suzuki India Ltd has announced an indefinite lockout at their plant at Manesar, Haryana. Maruti
Chairman, Mr. R. C. Bhargava described Thursday’s incident as an “absolutely unforeseen event”. “No outstanding
issues from previous strikes were left unresolved,” he said and dismissed suggestions that prolonged wage-
settlement negotiations could have contributed unrest at the plant. The Manesar facility has an annual capacity of
about 5,50,000 cars and accounts for about a third of Maruti’s total production and produces almost all of its diesel
cars and all versions of the best-selling Maruti Swift, Swift Dzire, SX4 sedan and A Star hatchback. Last year
(2011), analysts estimated that labor troubles at the facility had cost the company about $500 million in lost
production. The company ruled out importing cars to meet domestic demand and reiterated its commitment to its
Manesar facility in the backdrop of persistent rumors that Maruti would shut down the facility once their plant in
Gujarat was complete.

Two Years Later

Sushma’s husband is one of the 147 workers of the Maruti Suzuki’s Manesar plant who have been languishing
in jail for two years now, charged with one murder, and some rioting and criminal conspiracy following the death of
HR Manager Awanish Kumar Dev in a fire on July 18, 2012, the result of a violent clash between workers and
security guards. According to Sushma, the media has never asked to this day the most obvious question: Why and
how could 147 poor workers come together to kill one man? Of the 147 workers jailed, seven claimed to have been
away on leave, seven to have been on morning or night shifts, and several claim to have been working in units 1.5
kilometers away. Defense lawyer Rajender Pathak says, “The judiciary is biased, 100 of the arrested are casual
workers, with no union connections. Why would they join the violence?”

While the post-mortem report on Awanish Kumar says that the death was caused due to shock and asphyxiation,
defense lawyer Rajender Pathak argues that it is almost impossible for the workers to have started a fire, as they are
thoroughly checked for any items like matchboxes, lighters and cigarettes before they enter the factory, as per a
standing order issued by Maruti and approved by the Haryana government. On the contrary, continues Pathak, it is
only the top management that is allowed to carry matchboxes or lighters. Vikram Khazanchi, prosecution witness
and chief of plant operations, accepted in court that officers were allowed to smoke within the factory premises.

What arouses further suspicion is that a police contingent, summoned by the Maruti management in anticipation
of violence, was present outside when the incident happened. Narendra Kumar, then ASI of the Gurgaon police
station, says that the plant security-in-charge Captain Deepak Anand had asked him not to send the police inside.
When Vikram Khazanchi, prosecution witness and chief of plant operations, was asked by the court if the security-
in-charge had been indicted for the lapses and violence, he admitted in court that no action was taken against him.

With the charge-sheet already filed, and the investigation complete, lawyers say there is no reason for the
workers to be still in jail. Nobody has been granted bail yet. Meanwhile, the Punjab and Haryana High Court state
extraneous reasons of a possible impediment in foreign investment as a reason for not granting bail. This is
extremely unfortunate, says the defense lawyer in the high court, Vrinda Grover. While the Supreme Court held that
eyewitnesses have to be examined before bail is granted, Grover says the prosecution has deliberately withheld
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eyewitnesses to prolong the case. Twenty one of the twenty three eyewitnesses are yet to be examined (Supreme
Court, February 2014). While bail has been granted to the accused even in cases like the 2013 Muzaffarnagar riots
(death toll 62) and the 2G spectrum scam, the failure in granting bail even to one of the 147 Maruti workers for the
last two years is seen as a sign of Maruti’s clout in Gurgaon and over the police and the judiciary in Haryana.
Special prosecutor K. T. S. Tulsi says the prosecution hopes to complete examining of witnesses in August 2014.

The Manesar workers always claimed that they had been fond of Awanish, who they claim was sympathetic to
the workers’ cause. Moreover, Awanish’s relations with Manesar plant workers were very cordial; they had no
reason to kill him. So was it just an accident? Or was there an ulterior motive to get rid of Awanish? These
questions have not been raised nor answered by the Haryana police since July 18, 2012. The final trial is yet to
commence and witnesses are yet to be examined (District Court, December 2012). Meanwhile, the violence has cost
Maruti a loss of Rs 500 crore (Punjab & Haryana High Court, May 2013), but the loss has been duly claimed from
the insurance companies.

T. T. Ram Mohan, Professor, Finance and Accounting Area, Indian Institute of Management Ahmedabad, who
has spent considerable time on this case has this to say: “We cannot take seriously the insinuation that the problems
are the work of 'Naxalites' who have infiltrated the workers at the plant. Nor can we subscribe to the notion that it
was the result of vaulting aspirations of a new generation of workers, who are keen to have the good things of life
without regard for issues of affordability or productivity. It takes a lot for workers to rebel seriously in a situation
such as Maruti's because the odds are stacked against them. There is a fundamental asymmetry in management-
worker relationships: the management has financial muscle and staying power, backed by support from the
government which includes the police force and the labor department of the state. Workers eke out a precarious
living and cannot do without their wages for long. To risk disruption and jobs and to incur the wrath of the law
enforcement authorities would require serious provocation” (Ram Mohan 2012).

Maruti SuZuki, meanwhile, has been moving on regardless of the Manesar tragedy. Its net profit for FY 2012-
2013 stood at Rs 23,921 million; it declared a dividend of 160% compared to 150% in the previous year.

References:

Maruti's Manesar plant GM (HR) burned to death, 91 workers arrested; government says business confidence intact, PTI | July
19, 2012, 07.22PM IST
“Maruti declares lockout at Manesar plant,” The Hindu, July 21, 2012.
Nikhil Gulati and Santanu Choudhury (2012), “In Manesar, Months of Tension Then Tragedy,” Economy & Business, 8:30 am
IST, Jul 25, 2012
Pavithra S. Rangan (2014), “Those Men of Manesar,” Outlook, 11 August 2014, pp. 12-15.
Ram Mohan, TT (2012), “Maruti's Manesar Plant,” The Big Picture, Monday, August 20, 2012

Ethical Questions:
1. What are the legal issues in the Manesar Case, and why?
2. What are the ethical issues in this Case, and why?
3. What are the moral issues in this Case, and why?
4. What are the spiritual issues in this Case, and why?
5. A stitch in time saves nine: How would you have reacted and intervened in this strike much before it escalated to
its current proportions, and why?
6. Analyze this case with the Hohfeldian analysis. What additional insights do you garner, and how useful in
resolving this issue?
7. How would you have resolved the problem of Maruti-Manesar from a deontological view of rights and duties?
Apply deontological moral rules R 01 - R 09. Which Rule applies best, and why?
8. How would you have resolved the problem of Manesar from a teleological viewpoint? Apply teleological moral
rules R10 to R 12. Which Rule applies best, and why?
9. How would you have resolved the Maruti problem from a distributive justice perspective? Apply distributive
justice moral rules R13 to R 28. Which Rule applies best, and why?
10. How would you have resolved the Maruti-Manesar problem from a corrective justice mandate?
11. How would you have handled this case with insights from the ethics of virtue, and why?
12. How would you have handled this case with insights from the ethics of trust, and why?
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13. How would you have handled this case with insights from the ethics of responsibility, and why?
14. Finally, if you were the HR Director of Maruti, how would you have handled this case with insights from the
ethics of corporate moral and social responsibility, and why?

Case 16.3: India’s Super Rich: The High Jumpers


2.2
2.3 A runaway rise in stock prices has catapulted a handful of promoters into the super-rich league in India.
The share prices of a company often fluctuate wildly, often despite no growth in operations, earnings or profits.
Poor and delayed disclosure and the inability on the part of the promoters to explain their business model make
some of these companies difficult for analysts and investors to understand. “Companies like Globus Constructors,
Trinity Tradelink, HPC Bio-Sciences, and Esteem Bio-Organics have witnessed significant rise in promoter wealth,
mainly because of unexplained stock market outperformance,’ reports Business World Super Rich Survey 2014 (see
Business World, July 14, 2014, p. 62). Exhibit 16.3.1 lists ten high jumper companies with surprising market
capitalization gains. Often, rise in stock prices cannot be linked to fundamentals of a company. Unexplained spurt
is not very healthy, says Ambareesh Baliga of Edelweiss Financial Services.
2.4
2.5 Exhibit 16.3.1: India Super Rich: The High Jumpers
2.6 [See Menn, Shailesh (2014), “India’s Super Rich: Up, Up and Way,” Business World, July 14, p. 60-62].

2.7
Promoter Family Company Market Cap Market Cap Absolute %
in FY 2012- in FY 2013- Difference Change
2013 2014 (Rs.
(Rs. Crore) (Rs. Crore) Crore)
Arush Tandon & Akash Khanna Globus Constructors ….Globus 2.132 1,216 1,214 569.23
Power Generation
Ramsh Chandra Partani & Fly Matra Kausahl Enterprise 1.091 280 279 255.71
Vikrant Kayan, Sukumar Das & Fly Trinity Tradelink 5.658 895 889 157.14
Madhu Anand & Tarun Chauhan HPC Bio-Sciences 14.354 184 170 11.81
AS Bisht, BK Sabharwal & Fly Eco-friendly Food Processing Park 23.535 285 261 14.11
& Esteem Bio-Organic Food
Processing
Dinesh Ramlal Shah, Jaymoni Keni Sunrise Asian 90.882 628 537 5.91
Yalal Joshi, Mukesh Chauhan & Fly
Ajay Relan & Fly Bharat Seats & Sharada Motor 28.983 159 131 4.53
Industries
Ketan B. Kothari & Fly Finkurve Financial Services 25.185 127 102 4.05
Amarchand Rander & Fly Rander Corporation 38.485 151 113 2.94
Girdhari Lal Goenka & Fly Golden Goenka Fincorp 30.289 109 79 2.61
2.8
2.9 For instance, Globus Constructors promoted by Arush Tandon and Akash Khanna, has had frequent
changes in its core business in recent years. Till 2008, the company was in the business of manufacturing carpets
and woolen garments. Subsequently, it switched to construction and real estate, and changed its name to Globus
Constructors and Developers. In 2012, it changed its mission and forayed into the clean energy generation business,
and once again rechristened its name to Globus Power Generation. In spite of no growth in operations and
earnings, its stock rose from Rs 5 to Rs 35 between August 2010 and March 2013. Worse still, between April 1,
2013 and March 31, 2014, its shares have surged over 20 times (i.e., over 2,000%). Meanwhile, promoters’ wealth
has increased from Rs 2 crore to Rs 1,216 crore in less than a year, an absolute increase of 1,214 crore over 2 crore
in 2013 – a percent annual growth of 56,923%! But the company’s performance is dismal – it posted a loss of Rs
1.9 crore on a turnover of Rs 36 lakh in the quarter ending March 31, 2013. Despite repeated attempts, Business
World could not get in touch with the promoters to understand their business (Menon 2014: 60).
2.10
2.11Similar is the Saga of Trinity Tradelink. The company was incorporated in 1985 as Sharp Trading &
Finance with a mission of general trading and financial activities. In 2010, it had a change of management, and its
new promoters, Vikrant Kayan and Sukumar Das, changed the mission of the company to oil, gas and petroleum,
8
and renamed the company Omnitech Petroleum. Currently, the company is called Trinity Tradelink. It is yet to file
its March 2014 earnings. It has suffered losses in all the quarters preceding December 2013. Low performance and
profitability have seemingly not affected its stock performance. Shares of Trinity Tradelink zoomed 140% to Rs 99
in Fiscal 2014. Subsequent rise in promoter wealth, Trinity recorded market cap of Rs 895 crore in 2014 (from Rs 6
crore in 2013), a meteoric rise of 15,714%!
2.12
2.13
However, some promoters have really deserved the market cap gains. For instance, Secunderabad-based
Matra Kaushal Enterprises promoted by Ramesh Chandra Patrani & Fly, reported profits of Rs 79 lakh on a turnover
of Rs 7.18 crore. Its share skyrocketed from Rs 11 to Rs 550 during FY 2013-2014, and the corresponding wealth
impact was market cap of Rs 1 crore in FY 2013 to Rs 280 crore by FY 2014, an absolute jump of Rs 279 crore or a
percentage annual jump of 25,571. According to Patrani, the company underwent an amalgamation with a larger
company during fiscal year 2013-2014 that increased its capital base from Rs 3 crore to Rs 22 crore. The company
is well capitalized now and is well positioned for further expanding its markets. Their sales and earnings numbers
look even better since April 1, 2014, and the company plans to do some diversification in its product range.

Bloomberg’s latest (July 31, 2015) list of India’s Billionaire Club includes among the ten richest Indians a new
addition: Micky Jagtiani, a retail baron and owner of the unlisted Dubai-based retail chain Landmark, whose net
worth is estimated at $6.6 billion. [For a longer list of India’s superrich, see Case 10.1, in Chapter 10]. Jagtiani has
reaped the benefits of a retail boom in India and the West Asia. Close runner up with Micky is Birla who is currently
facing a price down cycle with the share price of flagship Hindalco Industries falling. Bloomberg has excluded
Bharti group Chairman Sunil Mittal, who according to Forbes, had an estimated wealth of $7.8 billion, and the
Hinduja brothers with estimated wealth of $13.3 billion in 2014 (Chatterjee, Dev, 2015: 1).

Micky Jagtiani, 63, a college dropout, started with $6,000 in 1973. After cleaning hotel rooms and driving
taxis in Bharain, his first business was to sell baby food in Bharain. He opened his first Shoe Mart in Dubai in 1990.
The Group today has over 50,000 employees, sells 25 of its own labels and 40 franchise brands, and generates $5
billion in revenue from 1,900 stores across the region. The Group is the largest importer of non-food items in the
Persian Gulf. With active support from wife Renuka, Micky operates the Lifestyle branded stores in India and has a
stake in Debenhams, UK’s second largest apparel retailer. In India, the company grew 25% in 2014-2015 to report
Rs 4,700 crore of revenue. The Group plans to open 7 Lifestyle stores, 4 Home Center stores, and 25 Max stores in
India in 2015. Jagtiani plans to expand his food chain, Foodmark. He also set up Mark Trust in 2000 to improve the
quality of education in India (Chatterjee, Dev, 2015: 1).

References:
Menon, Shailesh (2014), “India’s Super Rich: Up, Up and Way,” Business World, July 14, p. 60-62.
Mitra, Geore (2014), “India’s Super Rich: Good Times Coming for I-Banks,” Business World, July 14, p. 72-74.
Motilal, Oswal (2014), “India’s Super Rich: Economic Moat is Key,” Business World, July 14, p. 68.
Mukherjea, Saurabh (2014), “India’s Super Rich: Battle for Legitimacy,” Business World, July 14, p. 70.
“India’s Super Rich: Methodology of Listing Wealth,” Business World, July 14, p. 84.
“India’s Super Rich: The Ivy League,” Business World, July 14, p. 46-51.
“India’s Super Rich: Market Movers,” Business World, July 14, p. 52-55.
“India’s Super Rich: Making the Cut,” Business World, July 14, p. 56-59.
“India’s Super Rich: Market Movers,” Business World, July 14, p. 52-55.
“India’s Super Rich: Making the Cut,” Business World, July 14, p. 56-59.
“India’s Super Rich: The High Jumpers,” Business World, July 14, p. 62.
Chatterjee, Dev (2015), “Micky Jagtiani among 10 Richest Indians,” Business Standard, Weekend, Saturday, August 1, 2015, p.1.

2.14
Ethical Questions:
Legal, Ethical, Moral and Spiritual Questions and Concerns:

1. What are the legal issues in India’s Superrich Case, and why?
2. What are the ethical issues in this Case, and why?
3. What are the moral issues in this Case, and why?
4. What are the spiritual issues in this Case, and why?
9
5. Even though billionaires in India (e.g., Mickey Jagtiani) might have aggregated wealth legitimately, how would you
ethically and morally justify wealth maximization in India by few of its billionaires when the gap between India’s
rich and the poor is widening irreversibly?
6. How would you morally justify India’s superrich? Apply deontological moral rules R 01 - R 09. Which Rule applies
best, and why?
7. How would you morally justify India’s superrich? Apply teleological moral rules R10 to R 12. Which Rule applies
best, and why?
8. How would you morally justify India’s superrich? Apply distributive justice moral rules R13 to R 28. Which Rule
applies best, and why?
9. A runaway rise in stock prices has catapulted a handful of promoters into the super-rich league in India (see Exhibit
16.3.1). Is this a distributive justice based process that is good for the overall growth and development of the
country?
10. What corrective justice procedures do you suggest such that innocent investors, both retail and institutional, are not
trapped and harmed thereby?
11. Rise in stock prices cannot be linked to fundamentals of a company. Unexplained spurt is not very healthy, says
Ambareesh Baliga of Edelweiss Financial Services. Explain the ethical and moral implications of support in market
cap with no real company progress and performance to account for it.
12. “Companies like Globus Constructors, Trinity Tradelink, HPC Bio-Sciences, and Esteem Bio-Organics have
witnessed significant rise in promoter wealth, mainly because of unexplained stock market outperformance,’ reports
Business World Super Rich Survey 2014, Business World, July 14, 2014, p. 62. Is this spurt of wealth economically
sustainable, culturally divisive, and ethically justifiable? Discuss.

The Ethics of Moral Justification of Corporate Outcomes


The search for a completely satisfactory ethical theory is an endless project (De George 1999:52).
There is no single ethical theory on which all people and all philosophers agree. Hence, throughout the
history of moral philosophy several ethical theories and ethical systems have been proposed and followed
or rejected. Through earlier centuries, two approaches have been predominant: teleology and deontology,
and more recently, a third system, distributive justice, and a fourth theory, corrective justice, which is a
subset of distributive justice. We will discuss all four theories and their derivative versions. This chapter
provides the ethical foundations for sound corporate moral reasoning and justification by systematically
applying major theories of moral reasoning and metaphors, such as deontology, teleology, distributive and
corrective justice theories and their sub-theories, for analyzing and assessing corporate executive
decisions in terms of their ethical inputs, process, and outputs.

There are two parts to this chapter: Part I: Major Normative Ethical Theories for Assessing the
Morality of Corporate Outcomes; Part II: Deriving Moral Rules from Ethical Theories for
Assessing Morality of Corporate Outcomes

Part I: Major Normative Ethical Theories for Assessing the


Morality of Corporate Outcomes
All moral reasoning in general, and business executive moral reasoning in particular, occurs in a
concrete situation of people as actors and observers in a given time, space, polity and place, in a concrete
situation of actions and interactions between reason and will, thoughts and emotions, knowledge and
desire of actors and observers, amidst several obstacles to moral reasoning such as ignorance, pressure,
passion, force and fear, and several subtle impediments such as habits, prejudices, biases, personalities
and temperaments, and sometimes, mental illness. Yet, in spite of all these positive and negative forces

10
that affect human and moral reasoning, there is some sanity and stability to human reasoning, and to
moral executive reasoning in particular, which we explore now.

The Structure of Executive Moral Judgment, Choice and Action


Moral judgments, decisions and actions involve moral intentions or moral intentionality. Thus:

 Moral intentions primarily define moral choices.


 Moral choices often imply moral consequences.
 Moral consequences imply moral responsibilities.

Moral decisions and choices are more than just economic, political, legal, cultural, technological or
ideological choices. Real moral judgments, decisions and choices involve choices between human values
and human disvalues, between right and wrong, between good and evil, fair and unfair, between just and
unjust, ethical and unethical, and between moral or immoral subjects, objects, properties or events.

Like other moral acts, executive moral choices or acts are never single isolated acts. They are
complex unities involving decisions, company's historical contexts surrounding the decisions, goals
intended by the decision makers, and consequences that follow on the decisions. All these elements
imply relationships with human and corporate meaning. The integral order or intelligibility that unifies
this complete set of relationships of meaning constitutes the real (formal) object of executive moral
choice and executive moral action (Lonnergan 1970; Melchin 1990).

In the business context, Figure 16.1 visualizes a comprehensive set of relationships and meanings
that business executive acts or decisions confront and generate. Any business firm may be said to have
three basic environmental systems (Emery and Trist 1973):

 The internal environment system (made up of technology, patents, R&D, personnel, production,
finance & accounting, marketing and service) which defines a company;
 The transactional environment of industry drivers (cost, competition, governments, customers
and corresponding technology under each) as portrayed by Porter (1985) or the direct
"stakeholders" (suppliers, creditors, stockholders, consumers, competitors, distributors,
employee unions, and governments) that define the local or national domain of company's
business transactions (Ansoff 1965; Freeman 1984) and
 The contextual environment of indirect external stakeholders (international and global
government communities with their pacts and agreements, regulation structures, laws and order;
global suppliers; global promoter- and investor shareholders; global banks and financial
markets; global labor markets and trade unions; continental and global trade regions; global
distributor networks and retailers, and global communities, advocacies, cultures and
civilizations) which the company scans, monitors and responds to.

All three systems (internal, transactional, and contextual) interact with each other as pointed out by
the multiplicity of arrows connecting them. Currently, the four major drivers of the company (cost,
competition, customers and governments) represent their impact by the technology that defines them
(Porter 1996). That is, whatever is offered in the market, a brand, product or service, what really defines
them and the firm is their unique competitive technology and convenience its offers. That is the four
drivers should be characterized as cost technology, customer technology, competition technology, and
governmental technology. Technology is the central pivotal point or the innermost core of a business
system. Dependent upon one’s technology and translating technology to its transactional environment are
four major functions of a company: production, personnel, financing and marketing. Each of these four
11
functions is immediately determined by at least three transactional environment systems, and remotely
affected by at least four contextual environment systems (Emery and Trist 1973).

For instance, the production system of a company is proximately determined transactionally by its
"suppliers" of materials, "its creditors", and by "governments" (laws and agencies that regulate
production, quality, advertising, liability). Its production system is also, even though remotely, affected
by at least four contextual systems: domestic versus global suppliers, domestic versus global producers,
domestic versus global financial markets, and domestic versus international governments. The other three
functions of the business entity (finance, personnel and marketing) are characterized similarly in terms of
their transactional and contextual systems.

A typical business choice, decision or action can affect one or more components of the internal,
transactional and contextual environments of a company, producing a series of cost- or benefit- effects
(teleological effects), generating a series of rights or duties (deontological effects), and involving several
equitable or inequitable spreads of costs and benefits, rights and duties (distributive justice effects). A
complete characterization of an executive moral object or moral choice must take into account the entire
"action-effects" complex involving all three environments of the company. The consequences of day-to-
day business decisions can reach into the future, into remote sectors of the world, into the lives of
millions of people. Such consequences may promote and sustain structures of development or
oppression, affect the global ecosystem positively or negatively, and can promote economic, political and
cultural ideologies whose effects could be developmental or detrimental to the long-range future of one's
civilization (Melchin 1990: 398).

Characterizing the Executive Act


From earlier chapters we assume that the corporate executive moral decision and moral act and
actions are framed in their constitutive components of ethical inputs, ethical process, and ethical outputs.
Input and process elements are assumed to constitute the executive decision or ACT, while the output
elements are understood to constitute the CONSEQUENCES under a concrete decision action situation.

The executive decision and act, from a systems viewpoint, can be divided into corporate inputs,
corporate process, and corporate outputs (see Figures 16.2 and 16.3 that are imported from Chapter 01).
For the sake of simplicity, if we may combine corporate "inputs" and "process" into one major component
of business conduct designated as the executive act, and consider ethical "outputs" and "consequences"
under one component designated as the corporate consequences, then in general, the morality of a given
decision or act can be judged by:

a) Only the act;


b) Only its consequences;
c) Both the act and its consequences, and
d) Neither the act nor its consequences.

This four-fold categorization provides the taxonomy for a mutually exclusive and collectively
exhaustive (MECE) typology of ethical-moral assessment of human conduct, in general, and corporate
conduct, in particular. 1 The treatment of major ethical-moral theories applicable for assessing executive
conduct uses this four-fold taxonomy. Table 16.1 details a taxonomy of such ethical theories.

1
For other taxonomies of ethical systems, see Ashley and O'Rourke (1989: 149), Broad (1930), Feinberg (1974) and Leys
(1954).

12
For reasons discussed later, we assume that:

 Deontological theories are best suited to assess executive conduct as an ACT composed of
rights and duties, antecedents, determinants, concomitants, decisions and actions.
 Teleological theories are most appropriate for evaluating executive conduct in its
CONSEQUENCES that also includes consequences of consequences.
 Distributive justice theories are best deployed to judge the spread of right and duties, costs
and benefits of both the "ACT" and the "CONSEQUENCES" of corporate conduct, and
 Non-cognitive theories do not per se analyze the ACT or the CONSEQUENCES for deriving
ethical conclusions regarding executive or corporate behavior. 2

Table 16.1 lists specific ethical-moral theories that apply to specific components of corporate
conduct or executive action. Table 16.1 incorporates the non-cognitive system of logical positivism (see
footnote 3 below) and emotivism in moral assessment even though no concrete rules can be specified
regarding one's emotions and feelings. Emotivism is a non-cognitive ethical system. That is, it is not
based on knowledge, reason or theory in arriving at ethical-moral conclusions. 3 It reduces all values of
"acts" and their "consequences" to subjective feelings or emotional attitudes about them (Ayer 1936). It
judges the morality of an action by instinctive feelings about an act or its consequences, without
necessarily analyzing either the act or its consequences. "I feel it should be right" or "my gut feelings tell
me that this decision is wrong" are some emotivist expressions. Emotivism comes in different forms:
individual emotivism as expressed by one's own strong emotions and feelings; social emotivism as
revealed in strong ethnic or cultural stereotypes, and national emotivism often expressed by national
opinion (e.g., gallop polls) or patriotic sentiment.

Certainly, not all feelings are wrong, but neither can all feelings be trusted. Believing that the
common, unsophisticated human being is close to nature implies real and genuine feelings that are right,
2
One knows unity through distinction (Maritain 1959). The purpose of distinction is to unite in such a way that the richness of
the unity is appreciated as the internal coherence and integration of its contributory parts (Mahoney 1992). The richness of the
unity of the moral act is best seen by dissecting it into parts: ethical inputs, process and outputs, or as "act" and "consequences."
Similarly, the fourfold classification of ethical-moral theories presented here is not to divide but unite. Deontology as a science
of duty, is a science of the act, but does not exclude the consequences. Teleology is par excellence a science of the
consequences, but does not exclude the act as the source of the consequences. In this sense, deontology is limited teleology, and
teleology is limited deontology (Mieth 1989), and distributive-corrective justice is limited deontology and limited teleology
combined.
3
The emotivist view is pioneered by A. J. Ayer (1936) and further expanded by Stevenson (1944). For a discussion on
Emotivism, see Urmson (1969). C. K. Ogden and I. A. Richards first introduced the term "emotive meaning” in The Meaning of
Meaning [London: Routeledge and Kegan Paul, 1921]. Ayer is more famous for his Logical Positivism than for Emotivism, the
latter theory being based on the former. Logical Positivism, originally expounded in Ayer's doctoral dissertation [Language,
Truth and Logic (1936)], maintains that only tautological sentences (e.g., 2 + 2 = 4) and empirically verifiable propositions are
meaningful. All other sentences, such as theological (e.g., God is love), and ethical (e.g., to kill is immoral) are "non -sense"
since they are neither tautological nor empirically verifiable. Moral judgments are non -scientific statements that merely express
emotions: one cannot prove or disprove them by the "verification principle." Moral judgment and analysis is beyond sense data,
or is "non-sense." If we do judge any ethical value, then it is based on our instinctive feelings about an act or its consequences,
without necessarily analyzing either the act (deontology) or its consequences (teleology). However, some ethical judgments are
useful even though non-sense, for they express emotions and help to persuade others to act in desirable ways. This view has
come to be known as Emotivism, a non-cognitive ethic that opposes the classical view that ethics is based on reason. Emotivists
hold that ethical statements are really expressions of emotions designed to influence people's behavior. Emotivism reduces all
ethical values and propositions to subjective feelings or emotional attitudes about them (Ayer 1936; Stevenson 1944). Another
non-cognitive ethical theory is Prescriptivism of R. M. Hare [The Language of Morals, Oxford University Press, 1952]. On the
other hand, cognitive ethical theories that deny objectivity of moral values and rules are not, for that purpose, included in our
taxonomy. Such major theories include Meta-ethics of G. E. Moore [Principia Ethica, Cambridge University Press, 1903],
Moral Skepticism of J. L. Mackie [Ethics: Inventing Right and Wrong, Penguin 1977], and Moral Nihilism of Gilbert Harman
[The Nature of Morality, Oxford University Press, 1977].

13
and one often construes these feelings to be "common sense" or the basis of one’s national or ethnic
culture and confidence. This is the justification of opinion polls. One assumes that what most Americans
"feel" is right (via Gallup polls) is probably right. Analogously, what the executive instinctively and
genuinely feels to be good could probably be moral. However, as Aristotle maintained (1985), emotions
and feelings can be trusted only when they are refined, educated, and disciplined by virtue, or when they
emanate from men and women of "character" (Hauerwas 1981; Melchin 1990).

It is conventional to distinguish between an act and the rule application of ethical theories. An act
application judges the morality of a strategy or an institution by applying a given moral principle directly
to the act, strategy or institution without any intermediary rules, while the rule application judges
morality only after verifying if the act, strategy or institution conforms to firm and publicly advocated
moral rules derived from moral principles.

In this Chapter, we invoke both act and rule applications of ethical theories. Moreover, since this
Chapter relates to ethical-moral reasoning for executives, and since by definition non-cognitive theories
do not emphasize reasoning, we will not deal with non-cognitive ethical theories. On the other hand, the
thrust of deontological, teleological and distributive justice theories is moral reasoning (Toulmin 1950),
and we invoke these three theories regularly.

Cognitive Ethical-Moral Theories


As stated earlier, Anglo-American ethics distinguishes at least three positions in judging the moral
rectitude of human actions (Schuller 1979):

a) The moral correctness of all actions is determined EXCLUSIVELY by its consequences - this is
utilitarian teleology or consequentialism, a moral philosophical theory that judges an act solely by its
consequences.
b) The moral correctness of all actions is ALWAYS ALSO, BUT NOT ALWAYS ONLY, determined by
its consequences, but also determined by certain principles, rules, rights and duties of involved
subjects. This is deontology or situationalism, a moral philosophical theory that judges an executive
act also by its antecedents, i.e., intentions or motivations that inform the act, and by the standards,
rights and duties that precede and characterize the act.
c) The moral correctness of AT LEAST SOME ACTIONS is in no way solely determined by their
consequences. That is, while teleologically an action may have positive net benefits, and
deontologically it may not violate any known moral principle, standard, right or duty, yet in the
distribution of its costs and benefits, rights and duties, the act may promote certain injustices.
Hence, the need for a third ethical system - that of distributive justice. The moral philosophy of
distributive justice looks first at the act itself, whether by its very nature it is geared to spread the net
costs or benefits equitably or proportionately across all social units affected by the act. Next, it looks
at the actual spread of costs and benefits in terms of equity and equality.

The other ethical theories such as Relativism, Egoism, Hedonism, Utilitarianism, Eudaimonism,
Formalism, Proportionalism, Situationalism and Existentialism discussed in ethics literature (e.g.,
Beauchamp and Bowie 1993; De George 1986; Ferrell and Fraedrich 1989; Velasquez 1992) might be
subsumed under the three major ethical theories, as indicated in Table 16.1. The taxonomy of Table 16.1
incorporates the act versus rule distinction of ethical-moral theories.

Deontological Moral Reasoning: Based on Rights and Duties


Deontology (deon in Greek is obligation) literally means the science of duty. It is a moral philosophy
that judges the rightness or wrongness of actions based on the rights and duties of individuals involved in
14
the decision or action, and on the intentions and reasons of those who decide and/or act. It argues that the
concept of duty is independent of the concept of good, and that right actions are morally not determined
exclusively by their consequences (Broad 1930). The essence of deontology is that some actions are right
or (wrong) for reasons other than their consequences. Hence, deontology may be construed as more
suitable to analyze the act than its consequences.

Deontological theory is traceable to Immanuel Kant (1724-1804) and his seminal work Groundwork
of the Metaphysics of Morals (1964). Kant proposed two guidelines or “categorical imperatives”
(Velasquez 1992: 79-86):

 Principle of Universalizability: all moral norms or maxims must take the form of the following
categorical imperative: "Act so that the rule of your action can be the norm for all persons equally."
Act as if you are acting for humanity; that is, every act should be based on a reason that everyone can
act on, at least in principle.

 Principle of Reversibility: The action must be based on reasons that the actor would be willing to have
all others use to judge even the actor's action.

Both rules offer no actual ethical content but contain the form of pure disinterestedness or
universalizability that any moral rule must have in order to be truly moral (Frankena 1980). According to
Kant, an action is morally right for a person in a certain situation if and only if the person's reason for
acting is a reason the person would be willing to have every person act on in any similar situation.

Both rules, therefore, focus on a person's reasons and interior motivations, and not on the
consequences of the action. The form (intentions or reasons) of the act determines the morality of the act.
This position may be designated as formalism (Feinberg 1973, 1980; Frankena 1980).

Simpler and more practical versions of these two Kantian rules or categorical imperatives are:

 Treat others as they would have them treat you – the golden rule.
 Respect the dignity of every human being.
 Respect the fundamental human and moral rights of others.
 Treat people as autonomous persons with personal freedom.
 Treat all persons as ends in themselves and never only as means to your own ends.
 Treat subjects as capable of living their own lives and not as mere objects that exist for your
purposes.
 Cease treating employees as mere factors of production or mere “resources” to be managed.

Kant's formalist ethic in its original form is not practical. Psychologists maintain that pure altruism
does not exist, and hence, pure disinterestedness (Principles of Universalizability and Reversibility) is
more conceptual than real. The Kantian principles as stated are hardly applicable in real life. Exception-
less absolute rules are theoretically possible but historically non-existent (Fuchs 1984).

Thus, in determining human acts as right or wrong, deontologists invoke various principles such as
intuition or common sense (e.g., Ross 1930), social contract (e.g., Rawls 1971) or rights-based theory
(e.g., Nozick 1974, 1981). Rawls' (1971) version of Kantian formalism attempts to found morality on an
implied contract by which human persons agree to protect each other’s rights. Frankena's (1980) version
of Kantian ethic relies on the two principles of beneficence and justice to which all other moral rules can
be reduced. Different deontological theories compete with each other and with utilitarian theories, thus
offering more diversity of theory than in teleology.

15
Kant gave great importance to motives for acting—making the right decisions for the right reasons
being the ultimate goal. Kant was quite explicit regarding appropriate reasons for moral actions—that is,
moral obligation. An act performed for reasons of personal satisfaction (or the benefit of the firm) carries
less moral weight than it would if it were performed because of a duty to do so. Kant also argued that the
principles ought to be universalizable; that is, if everyone adopted the principle, it should not be self-
defeating. For example, if promise-breaking were to become universal law, promises would have no
meaning. The idea behind this prescription is that no moral code ought to apply only to oneself. Kant is
also credited with the idea that principles ought to be reversible, a notion well-captured by the Golden
Rule: “Do unto others as you would have them do unto you” (Jones, Felps, and Bigley 2007: 139).

Act versus Rule Deontological Reasoning

ACT deontologists argue morality from the act itself without the intermediary step of moral rules.
They affirm that there is some feature of the moral act rooted in its unique situations that must be taken
into account in its moral evaluation. This position may be construed as deontological act situationalism.
An extreme form of Situationalism is that of Jean Paul Sartre, often called existentialism. Sartre denied
the existence of divine laws, revolted against the injustice of positive (State) laws, and denied the power
of human reason to legislate for itself in advance of the unique situations that every individual must
confront (Jeanson 1980). Hence, he argued, the unique set of situations that every human act confronts
defines the morality of the act. In this sense, action precedes rule, reaction precedes law, and existence
precedes essence. This position is also called situationism.

RULE deontology, on the other hand, judges the morality of a given act by verifying if it upholds or
violates any derived moral rules. It may be studied under Formalism, Legalism, and Parenesis. 4 All
systems are often invoked when intermediary or derived deontological moral rules conflict. Thus, it is
often difficult to know which principles are right, which are wrong, which are universally true, and which
can be applied right now for assessing the morality of a given action.

Rule deontological theories may be monistic or pluralistic. A monistic theory holds that there is a
single principle or rule (e.g., the Golden Rule: treat others as you would like others treat you), or the
"categorical Imperative" of Kant from which all other rules or judgments about right and wrong can be
derived. Thus Donagan (1977: 66) cites the principle: "It is impermissible not to respect every human
being as a rational creature" as the fundamental principle. Ramsey (1978) cites love or "covenant
fidelity" as the prime principle. Veatch (1981) argues the principle of equality to be monistic, while
Engelhardt (1986) considers the priority principle of respect for autonomy as his monistic principle.

Pluralistic deontologists affirm more than one basic rule or principle. Thus, Ross (1930) maintains
several basic irreducible principles such as fidelity, beneficence and justice. When principles conflict we
use various methods for reconciling them (e.g., Rawls 1971; Rescher 1966; Ryan 1942). Pluralists
arrange the principles of (distributive) justice in a serial or lexical order using the concept of "social
justice" (Ryan 1942), or the "principle of legitimate claims" (Rescher 1966), or the "principle of fair
opportunity" (Rawls 1971).

Deontological theory, in so far as it speaks of rights, includes contractual rights (Contractualism), or


legal rights (Legalism). All laws (criminal or civil), acts and ordinances bind. Legitimately promulgated
4
Parenesis is closely connected to the lex praemians (the law that rewards) as opposed to the lex poenalis (the law that
punishes), to the lex praecipiens (the law that prescribes) and to the lex prohibens (moral law that prohibits). Normative ethics
calls for responsibility. Parenetic ethics exhorts and recommends and defines reprehensibility. Biblical parables, allegories,
metaphors and other literary forms are exhortatory or parenetic, while the commandments are normative (Spohn 1990).

16
laws are a type of rule that we must follow, even when it does not promote happiness. For instance, we
have a duty to pay taxes, stop at red lights, obey traffic speed limits, and refrain from illegal drugs, even
though following these rules is not always pleasant, convenient or efficient. This law-based ontological
position may be called legalism. On the other hand, Contractualism or contractarianism as a theory of
social contract maintains that the ultimate determinant of the structure and performance of any society is a
set of reciprocal, institutionalized duties and obligations that are broadly accepted by its citizens. The
acceptance itself may be regarded as an implicit or explicit social contract.

Deontological theory speaks of "binding principles." It should be carefully distinguished from


parenesis, which refers to general exhortations that relate to ethical practice. Parenesis is thus different
from normative ethics. The latter binds, the former exhorts (Schuller 1979).

Industry conventions, market customs, and international trade agreements are often strongly
recommending or parenetic, but not legally binding. A company's agreed upon code of ethical behavior
or an association's code of conduct is more parenetic than normative. Some rules are based on our social
roles as parents (love and discipline children), neighbors (do not gossip about friends; do not blast your
radio or TV when living in close neighborhoods), athletes (workout regularly; obey the referee), students
(do not plagiarize or cheat), citizens (do vote), church-goers (do tithe), and the like. These are parenetic.
They are our social contracts.

Teleological Moral Reasoning: Based on Costs and Benefits


Teleology as a moral philosophy advocates that a corporate act is considered morally right solely if it
produces some decidedly desired results such as: pleasure over pain, benefits over costs, good over evil,
justice over injustice, win-win over loss-loss, profits over losses, growth over decline, development over
underdevelopment, employment over unemployment, prosperity over poverty, concord over discord,
harmony over disharmony, democracy over despotism, peace over war, life over death, and the like.

Teleology, particularly its version of consequentialist utilitarianism, judges the morality of corporate
conduct (e.g., hiring, firing, organizational downsizing, plant closings, massive labor layoffs), by
considering the positive and negative effects of executive actions. If positives clearly outbalance the
negatives, then the executive action is ethically justified by utilitarian considerations. 5 While teleology,
and specifically utilitarian teleology, is future-oriented in terms of assessing consequences, deontology
examines the past antecedents and the present circumstances defining the act. Utilitarianism adopts a
teleological approach to ethics and claims that actions are best judged by their consequences. Thus,
according to this view, actions are not good or bad in themselves. Actions subsume moral value only
when one considers their effects on all people (De George 1999: 58).

We may trace the foundations of contemporary market capitalism to Adam Smith’s Book: The Wealth
of the Nations (1776). Smith’s ethical goals were dominantly utilitarian. He argued that economic
institutions should be arranged in ways that would promote the overall wealth of the nation, rather than
the personal wealth of royalties, nobilities and aristocracies. Smith argued that if society adopted certain
5
Utilitarianism has its roots in 18 th and 19th century social and political philosophy. It is usually credited to David Hume
(1711-1776), A Treatise of Human Nature, (1771). The classical version of utilitarianism is represented by Jeremy Bentham
(1789), An introduction to the Principles of Morals and Legislation, and John Stuart Miller (1861), Utilitarianism. Two
important later developments of utilitarianism are those of Henry Sedgwick (1874), The Method of Ethics, and G. E. Moore
(1912), Ethics. Contemporary versions of utilitarianism include those of Richard Brandt (1963), “Toward a Credible Form of
Utilitarianism,” and R. M. Hare (1981), Moral Thinking. Limitations of Utilitarianism are discussed in Smart and Williams
(1982) and Miller and Williams (1982).

17
economic principles, such as those that we now call market capitalism, then the pursuit of individual self-
interest would as if “led by an invisible hand” result in greater prosperity for all. Smith was a utilitarian
who believed that a free market economy was the most efficient means to attain the utilitarian goals
(Hartman and Desjardins 2007: 68).

Utilitarianism proposes that we should act in ways that produce better overall consequences than the
alternatives we are considering. In general, the “better” consequences are those that promote human well-
being such as happiness, health, dignity, integrity, freedom, and respect for all the people affected.
Teleology has spawned several versions depending upon the nature and scope of the utility value of the
results of the action. Major versions are:

 Egoism: Some desired results are exclusively personal, and when personal good takes primacy over
social good, this extreme teleological position is called egoism.

 Enlightened Egoism: when personal good is sought in conjunction with long-term social good, this
teleological position is called enlightened egoism.

Teleological enlightened Egoism primarily appears under three versions depending upon the specific
rule applied:

 Hedonism: when the social good desired is pleasure and gratification of the maximum number, this
position is Hedonism. In its crudest form, it maintains that human actions must be judged from their
capacity to arouse gratification either individually or socially. Hedonism reduces all utility values
ultimately to pleasure.

 Utilitarianism: when a teleologist defines that action right that maximizes total utility (personal and
social good) of the greatest number, this position is called Utilitarianism. Utilitarianism holds that an
executive action is right if it produces, of if it tends to produce, the greatest amount of good for the
greatest number of people affected by that action. Otherwise, the action is wrong. Alternately, an act
is ethical only if the sum total of utilities generated by this act is greater than the sum total of
comparable utilities produced by any other alternative to this act. As far as the utility concerned is
solely related to the consequences of an act and not the act itself, this utilitarian position is also called
consequentialism.

 Eudemonism: when the social good sought after is happiness and self-fulfillment of the maximum
number this position is Eudemonism.

This concept of happiness may also be translated as blessedness or prosperity; “it is the state of being
well and doing well in being well” (MacIntyre 1984: 148). Cooper (1985: 89), following Anscombe
(1958), translated eudemonia using a postmodernist term “human flourishing.” Human flourishing
implies the possession, use and fulfillment of one’s mature powers or natural capacities over a long period
of time. It maintains that the highest good or ultimate end of a human being is happiness, fulfillment,
beatitude, and human actions must be judged according to their relationship to this end. As long as the
action is conducive to happiness of all persons affected by it, it is ethical (J. S. Mill 1969: 36). The
ethical systems of Plato and Aristotle are eudemonistic.

Utilitarianism invokes a mixture of criteria for maximizing good. In so far as utilitarian theory
regards "justice" itself as one of the utilities to be maximized, not to the exclusion of other competing
utilities, some utilitarians classify distributive justice as a subset of utilitarianism. Utilitarianism was part
of the same social movement that gave rise to modern democratic market capitalism. Much of
neoclassical economics, and its embedded model of business and management, has its roots in utilitarian

18
thinking (Hartman and Desjardins 2007: 67). The emphasis on producing the greatest good for the
greatest number makes utilitarianism a social philosophy that provides strong support for democratic
institutions and market capitalism.

A strong criticism of utilitarianism is that ethical and unethical acts are determined by their
consequences. That is, the end can justifies the means! Common sense tells us that under certain
conditions ends cannot justify the means. That is, there are certain decisions and actions that we must
undertake no matter what the consequences. Deontologically, we have certain duties or responsibilities
that we must fulfill, even when doing so would produce less overall happiness. The duty of parents for
disciplining children, the fidelity-duty of spouses unto each other, one’s professional duty (as a doctor,
lawyer, teacher) to confidentiality, one’s civic duties as a citizen, an employee’s loyalty to the company,
and the like are some actions that are ruled by the opposite rule: The ends do not justify the means. We
make certain commitments and we have certain duties that cannot be violated even if doing so would
increase the net overall happiness.

Business contracts and agreements are such commitments that we ought to honor even if the
consequences turn out unfavorable. There are certain actions, such as slavery, child labor, torture,
terrorism, unjust war, murder and the like that violate fundamental ethical principles of human dignity,
human respect, equality, justice, and charity. Such actions cannot be justified no matter what their
beneficial consequences. Some decisions must be based on deontological principles of rights and duties,
regardless of consequences. Alternately, there are certain principles or rules we ought to follow, even if
doing so could prevent good consequences from happening or even it results in some bad consequences.
In other words, the ends do not always justify the means. For instance, the presumed ends of preventing
attack on the United States may not justify using severe treatment bordering on torture to extract
information from the prisoners captured in Afghanistan and Iraq. The presumed end of saving Enron or
Satyam cannot justify the corporate fraud its CEO and CFO got embroiled in during 1999-2001 (in the
case of Enron) or 2005-2008 (in the case of Satyam).

Distributive Justice Based Moral Reasoning:


Justice is commonly defined as giving unto others what rightfully belongs to them (Rawls 1971).
Justice, therefore, deals with the deontological aspects of one's rights and duties in society. Minimally,
“good behavior” intends no harm and respects the rights of all affected and, accordingly, “bad behavior”
is willfully or negligently trampling on the rights and interests of others (Rawls 1985: 223-51). The way
justice is defined, determined and executed has certain teleological consequences on society. However,
standards of justice are generally taken to be more important than purely teleological or utilitarian
considerations (Rawls 1971: 3-4). For instance, slavery or child labor is unjust, even if it makes society
more productive. Moral rights of slaves and children to be free and equal cannot be sacrificed in order to
secure more benefits for the landowners or manufacturers.

According to Rawls, given the presence of others and our need of these others both to survive and to
thrive, ethics is elementally an ethic of justice, fair play, and equity. Hence, ethics has to do with
developing standards for judging the conduct of one party whose behavior affects another.

Justice is based on individual and moral rights, and the moral right to be treated as a free and equal
person lies behind the theory of distributive justice that benefits and burdens should be distributed equally
(Vlastos 1964). Thus, distributive Justice considers both deontological and teleological aspects of human
actions and consequences. While deontological distributive justice reviews the "act" for its proper
distribution of rights and duties among people affected by the act, teleological distributive justice looks at
19
the consequences of costs and burdens, to see if they are properly distributed among all people concerned.
Thus, distributive justice is construed as considering both the "act" and "consequences" of an (executive)
act.

Justice and fairness are interchangeable terms, even though some (e.g., Rawls 1958: 67; Hare 1978:
119) consider the concept of fairness as more fundamental. Justice is fairness. It is giving each one one's
due. For instance, corporate executives act justly when they give customers and clients what they (or
their monies) deserve.

Justice confers an entitlement - a claim based on justice is an entitlement right. Injustice involves a
wrong where one has been denied that to which one is entitled. What persons are entitled to is based on
certain morally relevant properties they possess. Thus, one could deserve a promotion based on one's
established track record of loyalty, productivity and profitability. Another could claim federal welfare
based on one's naturally disadvantaging disabilities or historical circumstances. Both fairness and
entitlement (deserts) are central to the understanding of justice (Beauchamp and Childers 1989).

Aristotle (1985, Book V) distinguishes between universal justice and particular justice. The former
refers to the virtue of being a just or morally upright person who always does what is morally right and
obeys the law. Particular justice concerns specific situations, and Aristotle distinguished three such forms
- distributive, compensatory, and retributive. These three classic forms of particular justice or fairness are
distinguished, depending upon the specific moral rule or standard used:

 Distributive justice that deals with an equitable distribution of rights and duties, benefits and
burdens, and states that equals should be treated equally and unequals, unequally.

 Retributive justice that maintains that one should adequately reward a person for right done and
punish (blame) a person for wrong perpetrated.

 Compensatory justice that affirms that one should compensate the wronged person for the wrong
done by restoring the person to his/her original position.

Compensatory justice corrects "involuntary" wrongs such as those that result from accidents or
harmful products, and compensation should at least restore the wronged person to his/her original
equilibrium. Retributive justice corrects "voluntary" wrongs such as those resulting from assaults, sexual
harassment, crimes, and thefts. Besides compensating the victims, retributive justice prescribes adequate
punishment for the evildoer.

The classic theory of distributive justice is based on the minimum principle of distributive justice,
traditionally attributed to Aristotle. This principle states that equals must be treated equally, and
unequals must be treated unequally.6 In so far as distributive justice applies the Aristotelian rule, it may
6
More precisely, the fundamental principle of distributive justice has been expressed as follows: "Individuals who are similar in
all respects relevant to the kind of treatment in question should be given similar benefits and burdens, even if they are dissimilar
in other irrelevant respects; and individuals who are dissimilar in a relevant respect ought to be treated dissimilarly, in proportion
to their dissimilarity" (Velasquez, 1992: 91). This principle does not specify the "relevant aspects". Are race, color, religion,
gender, age, nationality and the like "relevant aspects" in distributing jobs, taxes, health care, education, voting rights, holding
public office, property rights, and other resources among citizens? A "monistic" theory of distributive justice will invoke one
"relevant aspect" (e.g., human nature) as a guarantee for an equal treatment of all. Pluralistic theories of distributive justice will
claim multiple "relevant aspects." Thus Egalitarianists [e.g., Ake (1975), Nielsen (1978), and Vlastos (1964)] hold there are no
relevant differences and that all should be given exactly equal shares of society's benefits and burdens. Opponents of
egalitarianism [e.g., Bernard Williams (1962), Feinberg (1973), and Bowie (1971)] reject this as unjust and offer other "relevant
aspects" as basis for distributive justice (e.g., libertarianism, utilitarianism). Others arrange the relevant aspects in a serial or
lexical order based on "social justice" (Ryan 1942), "principle of legitimate claims" (Rescher 1966) or "principle of fair
20
be designated as rule distributive justice. As an elementary principle of formal justice or formal equality,
distributive justice applies to retributive and compensatory justice, and hence the latter two are considered
as subsets of rule distributive justice (see Table 16.1). As defined, compensatory and retributive justice
are concerned with correcting wrongs (Boatright 1993: 92). Basically, all wrongs are corrected using the
distributive justice rule.

The minimum principle of distributive justice is called "formal" justice (Feinberg 1973; Nielsen
1978) since it states no criteria for judging what can constitute or institute equality or inequality in a given
society, nor does it furnish criteria by which people can be classified as equals versus unequals. It merely
asserts that, regardless of what aspects or criteria are considered, no person should be treated unequally
among equals. Abstract or formal principles of justice can provide only rough guidelines when specific
actions must be taken. Moral argument is needed to affix the "relevant properties" against each case so
that proper material justice principle could be generated and applied.

Giving each one his or her due without any a priori moral rule is act distributive justice. If one
follows just one's intuition in (giving) distributing dues, this act distributive justice may be called
intuitionism (Ross 1930). If one uses no other principle other than love or "loving action" to determine
what belongs to whom, how and when, then this position is similar to situationism of Fletcher (1982).

The theory of distributive justice is particularly relevant when different people put forth conflicting
claims on society's rights and duties, benefits and burdens, and when not all claims can be satisfied. In
such cases, the standards of justice are generally taken more seriously than utilitarian considerations
(Hare 1978; Rawls 1958). For instance, slavery may be more productive and hence, moral as per
utilitarianism, but in as much as it violates the individual moral rights of slaves (to be free and equal
persons), it violates deontologist and distributive justice. The moral right to be treated as free and equal
person is the basic foundation of distributive justice (Vlastos 1962).

According to Ryan (1942), distributive justice looks at two important factors: a) W hat is distributed; b)
How it is distributed. What is distributed (e.g., healthcare, welfare, employment, unemployment
compensation) must itself be generated by production, whether one produces agricultural products,
manufactured goods and commodities, or information services (Ryan 1942: 181). On the other hand,
one's share of what is distributed would also depend upon one's differential claims and deserts (e.g.,
efforts, abilities, contribution, need, and merit). Distributive justice consists in treating people according
to each one's claim or entitlement as outlined in Exhibit 16.1.

Exhibit 16.1 includes some sub-theories of rule distributive justice, as well as those that are later
discussed. These well-reasoned comparative theories of rule distributive justice have been advanced to
determine how goods and services could be justifiably and unequally distributed. For instance,

 Egalitarianism emphasizes equal access to the goods of life that every rational person desires based
on need and equality.
 Libertarianism focuses on equal access to social and economic liberty, and invokes fair procedures
and free-market systems rather than substantive outcomes.
 Naturalist Justice rewards one's innate merit or ability.
 Utilitarianism invokes a mixture of criteria so that public utility is maximized.

opportunity" (Rawls 1971).

21
As far as utilitarian theory regards "justice" itself as one of the utilities to be maximized, not to the
exclusion of other competing utilities, it classifies distributive justice as a subset of utilitarianism. Exhibit
16.1 provides the classical canons of Distributive Justice (Ryan 1942; Rescher 1966; Rawls 1971).

Exhibit 16.1: A Schema of Distributive Business Justice Canons


Entitlement Relevant Justice Relevant Major Business Justice Problems: How do you reward
Based on Canon or punish based on this canon of distribution?
Stakeholder:
Equality Egalitarian Canon 1 of What is equality in a corporation?
Justice Equality What is equalizandum (should be equalized) in a firm (e.g., income,
opportunity, training, …) and among whom, and why?
Need Socialist Justice Canon 2 of What is customer or employee or supplier need?
Need What or who determines it and how? When and why?
Merit Evaluative justice Canon 3 of What is objective versus subjective merit among employees or
Merit executives? Is it contingent on circumstances? How do you assess it?
Ability Naturalist Justice Canon 4 of What is ability in a firm? Is it inherited, innate or DNA based?
Ability Is it cultivated by the organization? Among whom?
Effort Contributive Canon 5 of What is effort in a business context? How do you assess efforts of
Justice Effort workers naturally disabled, disadvantaged or mentally challenged?
Contribution Capitalist Justice Canon 6 of What is productivity? How measured? What if one’s age, gender,
Productivity race, nationality, history of oppression and suppression, chronic
poverty, and the like have affected contributive productivity?
Social Utility Social Canon 7 of What is common good in an organization? What is common, social
Libertarian Common Good or public utility? Who determines it and how? What is common good
Justice by the doctrine of Eminent Domain?
Market Individual Canon 8 of Is one’s market exchange value based on luck or serendipity? Then
Exchange Libertarian Supply- why reward it? What is a just system of supply or demand in a
Value Justice Demand competitive or unjust world? Or vice versa?

Rescher (1966) criticized all eight canons of Ryan (see Exhibit 16.1), and proposed his own, a
combination of all the above eight canons, and called it the Canon of Legitimate Claims. This canon
invokes the ethical principle of justice itself. Questions and issues about distributive justice arise mostly
in the assessment of how our social, economic and political systems distribute the benefits and burdens of
their activities over people affected by these activities. The major thrust of the principle of distributive
justice is to distribute benefits and burdens (costs) justly across concerned groups and members of
society. In some instances, a just distribution is one in which each person shares equally. This is the
stance of Egalitarianism that emphasizes equal access to the goods of life that every rational person
desires based on need and equality. 7 In other instances, unequal sharing may be justified if the inequality
is in accord with some principle of distribution that promotes greater common good.

Distributive justice is comparative if it considers the distribution of costs and benefits to a given
individual not in absolute amounts but relative to others in the social system. When distribution of costs
and benefits is done individually with no reference to others, then this is non-comparative distributive
justice (Feinberg 1974, 1980). Thus, graduated income tax which taxes the wealthy more than the poor,
or tobacco and liquor taxes which tax the purchasers/users more for deterring excessive use are instances
of unequal sharing of burdens and comparative distributive justice. To the extent that wrongs done to one
7
For a discussion of Egalitarian justice see Bedau (1971), McCloskey (1966), Nielsen (1979), Rawls (1958, 1971), and
Vlastos (1962). [See also footnote 11]. Moderate egalitarianism defines human equality relatively. Equality is not something
fixed or mathematical (e.g., sales tax common across all) but something relative or differential (e.g., graduated income tax).
Equality could be of rights or duties (deontological justice), of opportunity or prospects (Rawls), of risk, burdens, and benefits
(teleological justice), and of sacrifice or effort (canon of effort), access or consideration (retributive justice). The notion of "equal
share" or "equal treatment" is very important, though the relevant properties of an equal or fair share or treatment are far from
established.

22
are considered absolute or "non-comparative," retributive and compensatory principles of distributive
justice are non-comparative, and are classified, accordingly, in Table 16.5.

Rawlsian Concept of Social Justice


The American philosopher John Rawls has developed one of the most powerful and influential
accounts of justice (Hartman and Desjardins 2007: 81). Rawls (1971) proposes a contemporary version
of the social contract theory that understand basic ethical rules as part of an implicit contract necessary to
ensure social cooperation. His theory of justice has two major components: a) a method of determining
the principles of justice that should govern society, and b) the specific principles that are derived from (a).
Following Kant, Rawls proposes a society that recognizes its members as free and equal moral persons.
For Rawls (1958), questions of justice or injustice arise primarily when free and equally moral persons
attempt to advance their own interests and come into conflict with others pursuing their self-interests.
The key to a well-ordered society is the creation of institutions that enable individuals with conflicting
ends to interact in mutually beneficial ways to come up with a system of basic rules of social justice that
they all agree in and abide by. Fairness is the primary underlying value in the Rawlsian concept of
justice.

In arriving at this basic system of social justice principles, Rawls (1958, 1971) proposes the following
method, which is a version of the hypothetical social contract:

 The Veil of Ignorance: A fair decision or rule is an impartial decision. According to Rawls (1958),
equal rights are a fundamental element of social justice. A group with the greatest care and equality
is the only one that can arrive at fair decisions or equal rights or equal share. Hence, imagine
rational and self-interested individuals (as members of a constitutional convention) planning to
choose and agree on the fundamental social justice principles for our society. To ensure that the
principles are fair and impartial, imagine further that these individuals are ignorant of their social
standing (e.g., race, lineage, social talent, abilities, their social structure, and their social status in that
structure). This veil of ignorance will presumably empower them to generate fair and impartial
principles of social justice such as: all people are free and equal moral persons; treat each individual
as an end and not as a means.

 The Original Position: In the original position, individuals would demand as much freedom as
possible. However, no rational or self-interested individual would be willing to sacrifice his own
equality simply to secure more freedom for others. These conditions of impartiality constitute the
“original position” that guarantees that the principles chosen are fair. The idea of this “original
position” of having to make decisions behind a veil of ignorance, is at the heart of Rawl’s theory -
that fairness is the central element of a just decision or just organization (Hartman and Desjardins
2007: 81).

Given the hypothetical social constructs of the “veil of ignorance” and the “original position,” Rawls
(1971) developed a material libertarian justice principle called Fair Opportunism, which is another
version of comparative distributive justice. Fair opportunism implies two principles:

 Each individual should have an equal right to the most extensive system of liberties. This first
principle, therefore, argues that equal rights are a fundamental element of social justice.

 Benefits and burdens of a society should generally be distributed equally. An unequal distribution
could be justified only if it would benefit the least advantaged members of the society and only if
those benefits derive from positions for each person has an equal opportunity.

23
Differences between persons are relevant in distributional rules only if those persons are responsible
for and deserve these differences, or if they would benefit everyone. Fair opportunism maintains that no
persons should be granted social benefits on the basis of undeserved advantaging properties (e.g., white
color, male gender, aristocracy, blue blood or nobility) because no persons are responsible for having
these properties, and that no persons should be denied social benefits on the basis of undeserved
disadvantaging properties (e.g., blacks, minorities, congenitally disabled) because they are also not
responsible for these properties. Properties distributed by the lottery of social and biological life are not
grounds for morally acceptable discrimination between persons, if they are not the sorts of properties that
people have a fair chance to acquire or overcome. Both principles of fair opportunism can ground
specific socio-economic policy conclusions such as affirmative action, banishing slavery, criminalizing
child labor, differential tax policy, and executive compensation, unemployment compensation, and
government regulation.

Principle of Non-malfeasance for Corporate Executives


The principle of non-malfeasance inscribed in the Latin dictum "primum non nocere" (above all, do
no harm) states that an act should do no harm to anyone at any cost and at any time. This principle, often
proclaimed as the fundamental principle in medical ethics, is incorporated in the Hippocratic Oath both as
a combined principle of non-malfeasance and beneficence: "I will use treatment to help the sick according
to my ability and judgment, but I will never use it to injure or wrong them".

Hart (1961: 190) invokes the principle of non-malfeasance as a rule-utilitarian maxim. "The common
requirements of law and morality consist for the most part not of active services to be rendered but of
forbearances, which are usually formulated in negative form as prohibitions. Of these the most important
for social life are those that restrict the use of violence in killing or inflicting bodily harm." Others (e.g.,
Rawls 1971: 114; Ross 1930: 21-36) claim the principle of non-malfeasance as a rule-ontological theory
of duty-ethics that obliges all to beneficence. 8 We prefer to classify it under the ethic of distributive
justice since non-malfeasance looks both at the act itself and its consequences, with an added emphasis on
the just distribution of rights/duties and benefits and burdens prior and during the act, and just distribution
of costs/benefits after the act. In so far as the principle of non-malfeasance relates to individual acts, it is
an instance of non-comparative distributive justice. The principle of non-malfeasance as applied to any
act can imply four elements (Frankena 1973: 47):

 The act should not inflict evil or harm: strict liability justice or non-malfeasance justice;
 the act should prevent evil or harm: preventive justice;
 the act should remove evil or harm: protective justice;
 The act should do or promote good: beneficent justice.

The fourth element may not amount to a moral obligation, and constitutes the principle of
beneficence. The principle of non-malfeasance is primarily incorporated in the first element. The
remaining three elements are more principles of beneficence than of non-malfeasance. Preventing harm
8
Ross (1930: 21-32) regards "not injuring others" as synonymous with the principle of non-malfeasance. Some type of moral
rules of non-malfeasance (e.g.: "Do not cause pain," "Do not disable," "Do not deprive one of freedom,") could be formulated as
far as the seriousness and comprehensiveness of the specific harm is concerned and some priority can be assigned to them. The
highest priority should be accorded to those that involve serious magnitude of harm such as death, blackmail, rape, capture,
captivity, or invasion (Davis 1980). Gert (1973, 1992) justifies a moral system or morality that applies to all moral agents based
on rules prohibiting causing five harms that all rational persons want to avoid: 1) do not kill; 2) do not cause pain; 3) do not
disable; 4) do not deprive freedom (of opportunity), and 5) do not deprive pleasure. To these Gert (1992) adds five more, failure
to follow which increases harm: 6) do not deceive; 7) do not break your promise; 8) do not cheat; 9) do not break the law and 10)
do not neglect your duty.

24
and removing harm are alternate forms of promoting good (Frankena 1973). Table 16.5 classifies
preventive, protective and beneficent justice under comparative distributive justice since they reflect the
principle of beneficence, which is a comparative concept.

The concept of "harm" needs explication. When X harms Y, the term "harm" may mean many things
such as X wronged Y, X treated Y unjustly, or that X invaded and thus thwarted, defeated, or set back Y's
interests (Feinberg 1984: 32-36; Gert 1973). Similarly, the companion word "injury" may mean many
things such as harm, disability or death on the one hand, or injustice or wrong on the other. Thus Ross
(1930: 21-32) regards "not injuring others" as synonymous with the principle of non-malfeasance.

Procedural Justice: Standards and Procedures


Pre-emptive and protective justices are really subsets of procedural justice, which, in turn, is a subset
of distributive justice. Procedural justice demands that structures and procedures be set up in society
which are just and which produce just outcomes. Structures and procedures are relative to each group,
society, state or country. Hence, procedural justice is another instance of comparative distributive justice.

A distinction is made between 'just procedures' that ensure just outcomes (procedural justice) and 'just
results' (consequential justice). In some cases, just procedures are solely sufficient to ensure just results
(e.g., state lottery procedures that result in fair outcomes). In some cases procedures may be just, but not
the results. For instance, despite excellent and objective legal jurisprudence and procedures, one may
occasionally punish the innocent or acquit the guilty.

Sometimes, just results may stem from unjust or imperfect procedures, when, for example, a society
may create a legal system that protects more the innocent than punish the guilty. Distributive justice that
looks at both the act (procedures) and the results (consequences) implies both procedural justice and
consequential justice. The latter two forms of justice are often called "justice principles" (Mascarenhas
1990: 219). If we follow Case 16.3, the superrich billionaires (“just” results) may come from just
processes (e.g., creative innovations, timely market entries, market success, market luck or serendipity) or
from unjust procedures (e.g., unjust bidding processes, unfair license grants, money laundering, or just
fraudulent accounting practices).

Part II: Deriving Moral Rules from Ethical Theories for


Assessing Morality of corporate Decisions
Given the taxonomy of ethical-moral theories detailed in Part I, the corporate "act" is morally
assessed best by deontological principles, the corporate "consequences" are best evaluated by teleological
principles, while the entire system of "personal ethical inputs," "corporate ethical inputs," "ethical
process" and "ethical outputs" can best be analyzed holistically based on distributive justice principles.

Distributive justice theory when applied to assess the morality of business conduct takes into account
the whole process of executive action: inputs (antecedents and determinants), process (the act with
concomitants), and outputs (results or consequences). In as much as distributive justice theory looks into
rights and duties, intentions and objectives of an act, this theory has deontological dimensions. In as
much as it evaluates consequences of the act in terms of its costs and benefits to different stakeholders,
distributive justice bears teleological properties. Finally, in as much as it prescribes responsibility and
accountability for these consequences, distributive justice prescribes a just distribution of net benefits and
burdens of executive acts.

25
Moral Rules, Axioms and Corollaries from Ethical-moral Theories
Moral philosophy concerns human conduct. It contains moral theories, moral principles, moral
standards and rules that help people arrive at right moral judgments, decisions, and actions, and to avoid
wrong or unethical judgments, decisions, and actions (see AOL5). Business ethics as a science of
business or corporate conduct is also governed by ethical-moral theories, moral principles, moral
standards, and moral rules that can help executives arrive at right (ethical) judgments, decisions and
actions, and avoid wrong (unethical) judgments, decisions and actions. In the remaining sections of this
Chapter, we gradually unfold and justify the taxonomy of deontological, teleological and distributive
justice ethical-moral theories and sub-theories, and derive from them useful moral rules for assessing
turnaround executive decisions and actions.

Webster's Unabridged Dictionary defines "rules" in about eleven meanings, (1983: p. 1584) three of
which are pertinent here:

1. An established guide or regulation for action or conduct;


2. A fixed principle that determines conduct, habit or custom;
3. A criterion or standard.

The same Dictionary (p. 132) distinguishes three meanings of the word "axiom" (in Greek axioma =
authority):

1. A self-evident truth or a proposition whose truth is so evident at first sight that no process of
reasoning or demonstration can make it plainer; e.g., the whole is greater than a part;
2. An established principle in some art or science; a principle received without new proof;
3. A statement universally accepted as true; a maxim. We use the word "axiom" in the first and the
third sense.

The word "corollary" has also three meanings (Webster's Unabridged Dictionary 1983: p. 408):

1. A proposition which follows from another that has been proved;


2. An inference or deduction;
3. Anything that follows as a normal result; e.g., improved health is a corollary of slum clearance.

We use the word corollary in its second or third meaning. The usefulness of axioms and assumptions
in scientific and social inquiry and research has never been questioned, but scholars still debate the
concept and content of both axioms and assumptions. In order to understand axioms and assumptions as
used in modern scientific inquiry, one needs the notions of "fundamental" and "derivative" laws. Hempel
(1965) suggested that all law-like statements in any theory could be categorized as either fundamental or
derivative. The fundamental laws of a theory (e.g., Newton's laws of thermodynamics) are those that are
used to deduce other laws (e.g., Kepler's laws of planetary motion). Fundamental laws cannot themselves
be deduced from other laws in the same theory. The fundamental laws are the "axioms" of that theory and
derived laws are often "theorems."

The derivative laws of a theory are deduced from its axioms. Laws that are fundamental in one
theory may be derived (as theorems) in some other theory (e.g., Newton's laws of mechanics can be
derived from Einstein's Theory of Relativity). Hence, the fundamental versus derivative (axioms versus
theorems) categorization is theory-specific. Being law-like, axioms are "analytically" true, but they can
be empirically tested. Axioms are "assumed" to be true for strictly analytical purposes. That is, we
assume axioms to be true for the purpose of generating derivative laws (or moral rules in our case) and
other obligation-propositions. We assume axioms to be true for the purpose of constructing theory rather
26
than evaluating a theory [see Hunt 1991: 129-131 on which this concept of axioms and assumptions is
based].

Given the formal language of deontological, teleological and distributive justice ethics, and some
fundamental axioms, we will "axiomatize" 9 or derive some fundamental statements or propositions that
will directly help us in assessing executive decisions and actions in general, and corporate outcomes and
strategies in particular.10 Theoretically, many statements may be generated, but one must select just a few.
Popper (1959: 71) provides four criteria for selecting appropriate fundamental statements propositions:

1. They should be free from contradiction or internally consistent (i.e., mutually exclusive outcomes
or statements cannot be deduced from the fundamental statements);
2. They should be independent: no statement in the final set of fundamental statements can be
deducible from the other statements;
3. They should be sufficient: all statements which are part of the theory proper can be derived from
the set of fundamental statements; and
4. They should be necessary: there should be no superfluous statements; all the statements in the
fundamental set are used to derive other statements.

The process of formalization normally starts after the theory has been proposed. Any premature
formalization of a theory can actually inhibit scientific creativity. The complete formalization of a theory
is a very difficult (if not impossible task), and hence, few theories in any science have been fully
formalized.

Applying Deontological Theories and Moral Rules


Deontological theory does not deny the fact that many actions must be often judged teleologically by
“ends” or results. It denies, however, that this is generally the case. While teleology, and specifically
utilitarian teleology, is future-oriented in terms of assessing consequences, deontology examines the past
antecedents (such as "personal ethical inputs" and "corporate ethical inputs," see Figure 16.2) and the
present circumstances defining the act. Thus, it asserts that some actions must be judged by several
(non-consequential) "means" such as one's personal commitment and obligations, one's intentions or
motivations, one’s relationships between persons (e.g., customer loyalty, business affiliations, sanctity of
contracts) involved in the act, and the like, no matter what the future ends or consequences are. Given
technology, domestic and international competition, and other market forces, one could not always
foresee or control the future consequences of one's executive actions. But one can certainly control its
antecedents and concomitants, especially one's motives, goals and objectives. Corporations and
9
A theory goes through many stages before it is fully developed and accepted. It should first have some formal language - in our
case the language of ethics and ethical theories. Next, it should have some axioms or fundamental laws that are assumed to be
true for analytical purposes. Next, we need to combine axioms and the formal language by using certain "transformation rules"
to generate statements - a process called axiomatization. Lastly, the axiomatic formal language system becomes a fully
formalized theoretical system through a complete system of semantic rules of interpretation. Thus, a fully formalized theoretical
system consists of a formal language system that has been axiomatized and completely interpreted. The axiomatization of a
formal language requires the adoption of rules of transformation and the selection of appropriate fundamental statements or
axioms. Transformation rules detail how axioms and formal language can be combined to generate rules or propositions in the
system.
10
An axiomatic formal language system becomes a fully formalized theoretical system when a complete set of appropriate
semantic rules of interpretation of the terms in the formal language have been developed. Given that theories are used to explain,
predict and therefore control phenomena, the elements in a theory must somehow be linked to observable objects, their properties
and events in the real world. The semantic rules of interpretation that accomplish this linkage are referred to as operational
definitions or measures, correspondence rules or epistemic correlations [See Ernest Nagel (1961), The structure of Science, New
York, NY: Harcourt Brace Jovanovich, p. 93].

27
employers have special antecedent moral obligations to their employees and customers, independent of
the general consequences of their operations, products and services. Deontologists are convinced that
there are actions that, independent of any extenuating circumstances or positive net benefits, are morally
wrong if they violate certain rights of social units affected by the act.

In judging a corporate or executive "act," the following deontological axioms and rules may be
derived from our discussions under Part I:

Axiom 1:

1.1 An executive act is judged by its intentions.


1.2 Intentions are principles and/or motivations "informing" the act.
1.3 Intentions as principles could be true or false, particular, universal, or universalizable.
1.4 Intentions as motivations could be good or evil, right or wrong.
1.5 An executive act should be based on motivations every one can act on (Principle of
Universalizability), and on intentions that the executive would be willing to have all other
executives use, even as a basis to judge one's act or action (Principle of Reversibility).

Rule 1: This moral rule is based on the Kantian categorical imperative principles of universalizability
and reversibility.

R01: An executive act is moral if its underlying intentions, motivations, or grounding moral principles
are universalizable and reversible.
Axiom 2:

2.1 An executive act is also judged by the reasons that ground it.
2.2 Some reasons of the agent may be moral convictions.
2.3 An executive act should be based on moral reasons everyone can act on (Principle of
Universalizability), and on reasons that the executive would be willing to have all other
executives use, even as a basis to judge his or her action (Principle of Reversibility).

R02: An executive act is moral if one's underlying reasons or moral convictions for the act are
universalizable and reversible.

This moral rule is also based on Kant's categorical imperative principles of universalizability and
reversibility, according to which an act is also judged by the reasons that ground it. Some reasons of the
agent should be universal moral convictions. Application of rules R01 and R02 presupposes high levels
of executive's cognitive, moral, and personality development (see Figure 2.1). Since both rules are based
on "formal" principles of Universalizability and Reversibility, rarely realizable in actual practice, a
derived rule having a direct ethical content is suggested:

Axiom 3:

3.1 Every right has a corresponding duty.


3.2 Some rights/duties are personal - they belong to one as a human being or person.
3.3 Some rights/duties are social - they belong to one as a member of a given society.

R03: An executive act is ethical if it does not violate personal or social rights of any of its
stakeholders, especially the underprivileged. This act may not be necessarily moral since social
rights could be arbitrarily defined.

28
Violating rights of stakeholders is a practice that cannot be universalized or reversed. An executive
act based on R03 may not be necessarily moral since social or positive rights could be arbitrarily defined.
Corporations and employers have special moral obligations to their employees and customers,
independent of the general consequences of their operations, products and services. Deontologists are
convinced that there are actions that, independent of any extenuating circumstances or positive net
benefits, are morally wrong if they violate certain rights of social units (e.g., stakeholders) affected by the
act.

R04: An executive act is moral if it upholds personal rights of the decision makers and/or actors
themselves.

There can be some situations when two or more rights or duties may conflict with each other. For
instance, one's duty of loyalty to the company may conflict with the duty of whistle blowing. Not all
rights and duties bind equally or universally. Rights of the underprivileged (poor, disabled, minorities,
employees, dependents) should prevail over those of the privileged, since the former are powerless to
defend themselves. When confronted with conflicting rights or duties, it is moral to act letting the
situation with all its circumstances define whose rights should prevail, however, after giving additional
protection to the rights of the marginalized and underprivileged.

Application Rules under Situationalism


There can be some situations when two or more rights or duties may conflict with each other. For
instance, one's duty of fidelity to the spouse may conflict with the duty of justice (e.g., the spouse is
unfaithful or incorrigibly addicted). Similarly, is one bound to be honest, even when such an action can
hurt a third party? For example, by honestly denouncing one's boss for wrongdoing, one may jeopardize
the trust that other subordinates have on the boss. In such cases one could follow situationalism; that is,
do the best under the unique situational circumstances.

In the early 1960s, Dr. Joseph Fletcher, Dean of St. Paul’s Cathedral in Cincinnati, Ohio, published a
book called Situation Ethics, in which he maintained that love was the only viable standard for
determining right from wrong. According to Situation Ethics, right or wrong is determined by the
situation, and love can justify anything (e.g., lying, cheating, and even murder). This pragmatic approach
appealed to many constituencies such as politicians, moralists, theologians, educationists, and especially,
the business world. The result is ethical chaos – everyone has one’s own standards that change from
situation to situation. This is ethics in reverse – whereas once our decisions were based on ethics, now
ethics are based on our decisions (Maxwell 2003: 8). If it is good for me, then it is good for all – this is
Egoism revisited.

Axiom 4:

4.1 Not all rights and duties bind equally or universally.


4.2 Rights of the underprivileged (poor, disabled, minorities, employees, dependents) should prevail
over those of the privileged.

R05: When confronted with conflicting rights or duties, it is moral to act letting the situation with all
its circumstances define whose rights should prevail, however, giving additional protection to
the rights of the underprivileged.

Applying Existentialism
29
Existentialist morality consists in being responsible, that is, in "responding" to life's situations in one's
own way and accepting the consequences without blaming anyone else. Plausible as this system of
morality may seem, it is not always realistic, since in one's moral life one most often uses some moral
rules or general norms to assess the situations one confronts while acting. But Existentialism does
provide some useful direction to executive action.

Axiom 5:

5.1 In doubt, liberty (or act freely). [In dubio, libertas].


5.2 But act as if you are acting for all humanity (Kant).
5.3 They only can act for humanity who are known for their moral character (Hauerwas 1981).
5.4 Act first, and rightness will follow (Kant).

R06: If after serious investigation one still doubts which principles are right or which principles bind
more universally than others do, then one is morally permitted to act, as long as the agent owns
the consequences.

Applying Formalism, Legalism and Parenesis


Kant's formalist ethic in its original form is not practical. Psychologists maintain that pure altruism
does not exist, and hence, pure disinterestedness (Principles of Universalizability and Reversibility) is
more conceptual than real. Exceptionless absolute rules are theoretically possible but historically
non-existent (Fuchs 1984). Laws are made for humankind, but not vice versa. Rawls' (1971) version of
Kantian formalism attempts to found morality on an implied contract by which human persons agree to
protect each other’s rights. Frankena's (1980) version of Kantian ethic relies on the two principles of
beneficence and justice that all other moral rules can be reduced to.

Axiom 6:

6.1 Laws (e.g., Sabbath) are made for people, and not vice versa.
6.2 All legitimately promulgated laws bind.
6.3 Conscientious objection to binding laws is valid under certain circumstances.

R07: An executive act is legal if it does not violate relevant national, state, and local industry laws.

Such an act may not be necessarily ethical or moral since some laws may not have any ethical
content (e.g., zonal laws, traffic laws). Laws and duties are necessary, but what makes laws and duties
righteous or obligatory is "their helpfulness in guiding prudential decisions to successful goal
achievement" (Ashley and O'Rourke 1989: 161). Certain countries de-criminalize abortion or mercy-
killing or even make them lawful, but that does not make the laws or their subsequent applications ethical
or moral.

R08: An executive act is ethical if it does not violate any contractual duties that bind.

Such an act may not be necessarily ethical or moral. Most contracts bind under industry laws. A
contract between two or more parties is valid if all the parties have full knowledge of the terms of the
contract properly represented to them, if they enter the contract freely, and if the contract is not for an
unethical or immoral act. Human freedom is expanded by the recognition of contractual rights and duties
(Rawls 1971). A person has a duty to honor one's contracts, and thus treat the other contracting parties as
an end, and not as means to an end. Failing to honor one's contract is a practice that cannot be
universalized (Kant 1964).
30
Axiom 7:

7.1 Corporate codes of conduct exhort - they are parenetic.


7.2 They signify, symbolize and represent corporate will.

R09: An executive act is ethical if it fulfills corporate code of conduct. It may not be necessarily
moral.

Applying Teleological Principles


Teleology in its popular version of Consequentialism states that all actions must be judged
exclusively by all their foreseeable consequences (Anscombe 1958; Knauer 1979). Consequences as
results or effects of deliberate (human) actions can be good or evil, harmful or safe, just or unjust, or fair
or unfair. Consequences can be personal or social, national or international.

An objective teleological assessment of an executive action would imply that one can:

a) Foresee all the major or critical, present and future consequences, even consequences of
consequences of the action.
b) Pre-estimate their impact on various people concerned: individuals, groups, society, organizations
and environment.
c) Ascertain that consequences are willed explicitly, and which implicitly built in.
d) Judge the net benefits of the willed action.
e) Look for other alternative actions that can do better.
f) Accordingly, judge the merits of this action.

All six steps call for serious research and objective reflection. There could be lingering doubts
whether all consequences have been foreseen, and if their impact on all actors concerned has been
pre-assessed. Lack of time and data, inadequate investigating skills and subjectivity, and lack of
monetary resources often make proper application of teleology very difficult, if not impossible. Given
technology, domestic and international competition, information-intensive and turbulent environments
(Glazer 1991; Glazer and Weiss 1993), one could not always foresee nor control the consequences of
one's executive actions. Hence teleology has spawned many versions (e.g., egoism, utilitarianism and
eudaimonism), each trying to render teleology more practical than the other.

Axiom 8:

8.1 Consequences are results or effects of deliberate (human) actions.


8.2 Consequences can be good/evil, harmful/safe, just/unjust, or fair/unfair.
8.3 Consequences can be personal or social, national or international.
8.4 Consequences can be satisfactory or dissatisfactory.

R10: An executive act is ethical if it generates satisfaction or gratification to the maximum number of
stakeholders (Hedonism of Jeremy Bentham).

R 10 may not be necessarily moral since "satisfaction" is subjective.

R11: An executive act is ethical if the sum total of its utilities is greater than the sum total of utilities
produced by any comparable or competing alternative act (utilitarianism).

31
An act based on R11 may not be necessarily moral since "utility" is relative to each person. However,
the following corollaries are more practical and applicable versions of R11:

R11a: An executive act is ethical if it maximizes utility to the maximum number of stakeholders
(Utilitarianism of John Stewart Mill).
R11b: An executive act is ethical if it minimizes the harmful effects of its consequences to the maximum
number of stakeholders (Consequentialism of Elizabeth Anscombe).

Utilitarianism of the consequences is not always a safe rule to follow. Some things should (or cannot) be done
no matter what the consequences. At least we should minimize harm of the consequences to all innocent
stakeholders

Two Corollaries follow:

C 01: It is unethical to select an act that leads to an inefficient use of resources.


C 02: It is unethical to engage in an act that leads to personal gain at the expense of the society in
general (Ferrell and Gresham 1985).

R12: An executive act is ethical to the extent that it makes the greatest number happy or fulfilled.
(Eudemonism of Aristotle).

Such an act may not be necessarily moral since "happiness" is relative to people experiencing it.
However, much would depend upon the definition and content of happiness. As discussed earlier, if
happiness is blessedness or prosperity of all human beings, then it becomes more ethical and moral
(MacIntyre 1984: 148). Cooper (1985: 89), following Anscombe (1958), translated eudemonia using a
postmodernist term “human flourishing.” Human flourishing implies the possession, use and fulfillment
of one’s mature powers or natural capacities over a long period of time. It maintains that the highest
good or ultimate end of a human being is happiness, fulfillment, beatitude, and human actions must be
judged ethical and moral according to their relationship to this end. As long as the action is conducive to
happiness of all persons affected by it, it is ethical (J. S. Mill 1969: 36).

Rules derived from Applying Distributive Justice Principles


We act justly when we give a person what he or she deserves. Justice confers an entitlement - a claim
based on justice is an entitlement right. Injustice involves a wrong where one has been denied that to
which one is entitled. What persons are entitled to or can legitimately claim is based on certain morally
relevant properties they posses. Thus, one could claim a Ph.D. based on demonstrated academic
excellence, independent capacity for scholarly research and for advancing the field of knowledge. One
could deserve a promotion based on one's established track record of loyalty, productivity and
profitability in one’s company. One could claim federal welfare based on one's naturally disadvantaging
disabilities or cruel historical circumstances. Both fairness and entitlement (deserts) are central in the
understanding of justice (Beauchamp and Childers 1989).

Equally important is the notion of "equal treatment," though the relevant properties of an equal or
fair treatment are far from being established. The principle of need declares that a distribution based on
need is just, but does not specify what need is. The principle of need is often designated as a material
principle, as it provides material content or specification to the formal or more general principle of
distributive justice. Material principles specify relevant properties that one must possess in order to
qualify under a particular distributive principle. Thus, if one speaks only of fundamental needs, (those
needs which if not granted the person may be harmed or detrimentally affected in a fundamental way),
then, by the material principle of (fundamental) need, it is unjust, for instance, to deny food to the mal-
32
nutritioned, shelter to the destitute homeless, asylum to the refugees and economic migrants (see “Boat
People” under Case 1.2), health care to the critically ill, or education to the illiterate. The notions of
fundamental need and need for primary (basic) goods could serve as a valid starting point for a full theory
of distributive justice. By contrast, if one accepts only a principle of free-market distribution, then one
would be opposed to the use of a principle of need for developing public policy.

Principles of Distributive Justice


Some well-reasoned principles of rule distributive justice (e.g., Egalitarianism, Libertarianism,
Utilitarianism, and Fair Opportunism) have been advanced to determine how goods and services could be
justifiably distributed unequally. These principles help choosing between social arrangements that
determine a uniform or equitable distribution of rights and duties, benefits and burdens across all
members of the society. These principles "provide a way of assigning rights and duties in the basic
institutions of society and they define the appropriate distribution of the benefits and burdens of social
cooperation" (Rawls 1971: 4).

In Part I, we briefly reviewed some well-known principles, such as those of Aristotle (1985), Ryan
(1942), Rescher (1966), and Rawls (1971). There are problems associated with all modes or canons of
distribution. The acceptability of any theory of justice would depend upon the quality of its moral
argument that some one or more selected material criteria or distributive principles ought to be given
priority or exclusive consideration over others.

The following eight material principles of distributive justice are presumptively valid based on
entitlement and fairness (Ryan 1942; Rescher 1966):

Axiom 9: Distribute common good (e.g., jobs, electricity, drinking water, basic food groceries):

9.1 To each person according to one's equality - egalitarianism.


9.2 To each person according to one's need - socialist justice.
9.3 To each person according to one's merit - evaluative justice.
9.4 To each person according to one's ability - naturalist justice.
9.5 To each person according to one's effort - retributive or personalist justice.
9.6 To each person according to one's contribution - capitalist justice.
9.7 To each person according to one's social utility - social libertarianism.
9.8 To each person according to one's free-market value exchange - individual libertarianism.

Based on Axiom 9 and other considerations of distributive justice, the following rule is formulated:

R13: An executive action is ethical if it at least treats all equal stakeholders equally, and unequals
unequally (egalitarian justice).
This rule is based on the Canon of Equality that invokes the ethical distributive principle of
egalitarianism. Justice is a kind of equality (Aristotle 1985), but what sort of equality justice is, is still not
clear. Egalitarianism does not define what equality is. An extreme form of Egalitarianism advocates that
all people should be treated exactly alike.

R14: An executive action is ethical if it treats all stakeholders at least according to each one's need.
This moral rule is based on the Canon of Need that invokes the ethical principle of socialism. But
this canon does not specify what needs are, whether they are real, felt, or desired. Who decides one's
needs? Should society take care only of present needs or also of the immediate future? Or, if one speaks
only of fundamental needs, (those needs which if not granted, the person may be harmed or detrimentally
33
affected in a fundamental way), then by this canon it is unjust, for instance, to deny food to the mal-
nourished, asylum or shelter to the critically homeless, health care to the critically ill, or education to the
illiterate.

R15: An executive action is ethical if it at least treats all stakeholders according to each one's merit or
ability.
This moral rule based on the Canon of Ability or Merit invokes the Aristotelian principle of natural
aristocracy or naturalist justice. This canon does not define what abilities are. Thus, natural or innate
abilities are more gifts than one's merits. If natural ability or merit alone is a criterion, then this canon
may reward workers with great innate ability but who exert little effort, which violates the canon of effort.
Acquired or demonstrated abilities as determined by one's achievements may be merits, but if justice is
distributed according to one's demonstrated abilities or contribution, then this canon is reduced to that of
productivity.

R16: An executive action is ethical if it treats all stakeholders at least according to each one's effort.
This moral rule is based on the Canon of Effort that invokes the puritanical principle of work ethic:
one's assets and acquisitions should be in proportion to one's labors. This canon does not define what
efforts are, whether they are fruitful or futile efforts, well-directed or misguided efforts, planned or
unplanned efforts. Should efforts be rewarded regardless of their achievements? This may imply labor
disincentives. Should efforts be rewarded even though ill-willed or misguided? This fails to make a
distinction that makes a difference. The canon of effort may reward workers with less ability but who put
more efforts to make the same contribution as the more able, thus violating the canon of merit or ability.
What if one’s country or economy or job does not provide opportunity to stimulate one’s efforts, as it
often happens in the developing countries?

R17: An executive action is ethical if it treats all stakeholders at least according to each one's
contribution.
This moral rule based on the Canon of Productivity invokes the economic principle of free-enterprise
capitalism. This system rewards services rendered, capital advanced, risks run, and profits generated. As
with other canons discussed earlier, this canon also does not define what productive contributions are.
Thus, productive contributions could be a function of chance, serendipity, or even one's physical power.
For instance, two persons of differing physical strengths and stamina, but spending equal time on the
same job with the same technology, may produce variedly, one more than the other, and thus claim
differential rewards. The higher reward is owed to one's superior strength (which may be genetic and
undeserved), and not to one's level of productivity or personal efforts. What if disabled, aging, or
unskilled persons cannot produce? What if one is not given an opportunity (e.g., gainful or meaningful
employment) to produce?

R18: An executive action is ethical if it treats all stakeholders at least according to each one's
contribution to the common good.
This moral rule invokes the Canon of Social Utility (common good) that distributes surplus (e.g.,
wages, profits, jobs, land, welfare) according to one's value to society or the common good. Common
good may be either collective ("pro bono publico" or social utility) or individual (personal utility). This
canon does not define what common or individual social good is. Social good, even though common, is
relative: it changes with technology, the economy, consumer lifestyles, cultures and sub-cultures. The
primacy debate between individual and social good is far from settled: for instance, whether an individual
could be sacrificed for a public common good that one does not believe in, or has conscientious objection
to. On the other hand, should society be sacrificed for one individual's vision of common good as Adolf

34
Hitler did? Moreover, one's best prospects for advancing common good or public welfare may often be
circumstantial, situational, locational, inherited (aristocracy), or in general, undeserving.

R19: An executive action is ethical if it at least treats all stakeholders according to each one's market-
exchange value.
This rule is based on the Canon of Supply-Demand that distributes wealth according to the market
evaluation of one's socially useful contributions. This canon invokes the economic principle of
laissez-faire that defines (socially) useful contributions by the law of supply and demand. For example,
the market reward more scarce skills; more desirable skills (e.g., athletic or entertainment capacities) are
paid better as they respond to higher popular demand, and accordingly generate more profits. The reward
is not based on the intrinsic merit of the contribution, but upon the community (market forces) that
considers such contributions desirable, essential or necessary. Hayek (1960) argues that since we cannot
know enough about each person's situation to distribute to each according to one's (moral) merit, in a free
society one can arrive at a just distribution based on an objective market-exchange "value" of a person's
actions and services to others. But how stable and ethical are market-exchange values?

The U.S. has largely accepted the libertarian free-market rule for distributing regular health care
services and goods, thus accepting the material principle of one's ability to pay as its distributive theory of
justice. Taxing individuals and businesses to promote and protect public interest is equivalent to
extracting financial resources from one set of individuals to benefit another set of individuals. Thus,
non-uniform taxation violates libertarian justice. It is unjust for governments (especially in socialist
countries) to redistribute the wealth freely acquired by individuals in the free market. According to
Nozick's (1974) libertarian theory of entitlement, there is no pattern of just distribution other than that of
the free-market system based on three principles: acquisition, transfer, and rectification.

By Rule 19, an executive action is ethical if it treats all peoples (e.g., employees, suppliers, and
customers) according to free-market exchange (Libertarian Justice). This may not be necessarily moral.
By libertarian ethic, one should also distribute all vital primary economic goods and services (basic food,
basic health, and basic shelter) equally, unless an unequal distribution would work to everyone's
advantage (Beauchamp and Childers 1989). The acceptability of any theory of justice, however, would
depend upon the quality of its moral argument that some one or more selected material criteria or
distributive principles ought to be given priority, or exclusive consideration, over others.

R20: An executive action is ethical if it treats all stakeholders according to each one's legitimate
claims.
This rule is based on the Canon of Legitimate Claims (Rescher 1966). This canon may be useful
when different people put forth conflicting claims on society's benefits and burdens, and all claims cannot
be satisfied. Benefits such as jobs, food, health care, housing, income and wealth, are most often in (real
or forced) short supply, and burdens such as military service, taxes, community service, unpleasant or
risky tasks, most often command low demand. Distribution of these benefits and burdens equitably
across all members of a society is perhaps best achieved according to the canon of legitimate claims.
According to Rescher (1966), as long as the claims are legitimate, no matter what the source, the person
should be equitably rewarded. Distributive justice requires the establishment and accommodation to
legitimate claims of all people, regardless of any undeserving features such as race, color, sex, age,
nationality or religion. For instance, in setting wages, employers might award higher pay to workers with
better training and experience, and hence greater merit (talent), or to workers who apply themselves more
diligently (more effort), or who have a track record of high contributions to the firm, or to workers who
have large families to support (need).

35
Rules 13 to 20 do not ensure morality ipso facto since the concept and measure of need, effort,
contribution and merit may not be universally accepted or binding. Following Rescher (1966), one could
use one, two or more justice principles in formulating one's corporate distributive justice strategy.

In the United States, unemployment compensation, welfare payments, and some health-care
subsidies (Medicare, Medicaid) are distributed on the basis of need. Sometimes unemployment
compensation is pegged on one's contribution (e.g., previous length of employment, one's last salary).
Jobs and promotions are awarded or distributed on the basis of demonstrated achievement or merit.
Corporate hierarchies and executive prerogatives are examples of distributive justice in practice (Ferrell
and Gresham 1985). The high salaries of top executives and celebrities (e.g., CEO’s of Fortune 500
companies, major sports stars) are justified (distributed) on the basis of free-market wage-exchanges or
contribution.

Affirmative action and equal employment opportunity laws (e.g. EEOC Guidelines) are based on
basic human equality regardless of gender, age, race, color, creed, or nationality. When rival material
principles of distributive justice conflict, one should give proper weight to each principle, given
circumstances of the case in question.

Rawls' Theory of Fair Opportunism


Rawls (1971) proposed two principles of distributive justice: 1) the Equality Principle: each person
engaged in an institution or affected by it has an equal right to the most extensive liberty compatible with
a like liberty for all; 2) the Difference Principle: inequalities as defined by the institutional structure or
fostered by it are arbitrary unless they work out to everyone's advantage, and provided that the positions
and offices are open to all. The first principle requires basic equal liberty for all. The second principle
admits existing inequalities and differences, a) if they work to the advantage of all, and b) if the social
system offers equal opportunity for all to combat or compensate for these differences.

R21: An executive action is ethical if it offers all stakeholders fair opportunity for benefits
(Libertarian Fair Opportunism).

The morality of this act will depend upon the correct choice of a basic structure of society that
defines and ensures its fundamental system of rights and duties. The basic structure includes the political
constitution and the principal economic and social institutions that together define peoples' rights, duties,
and liberties and that together affect people's life-prospects and expectations.

R22: An executive action is ethical if it seeks to nullify among firm's stakeholders the advantages
stemming from the accidents of biology, geography and history.

This is Rawls' (1971) Libertarian Egalitarianism. Rawls' central thesis is that a social arrangement
should be a communal effort to advance the good of all who are part of the society. Inequalities of birth,
sex, ethnicity, color, natural endowment, and other discriminating circumstances are "undeserved," they
cause naturally disadvantaged members of the society, and should be progressively eradicated. Those
who are naturally endowed with intelligence, skills, health, wealth or luck, and those who are born in
geographically more productive zones (such as Western Europe and North America), are the more
fortunate in our society, but they do not deserve these advantageous properties any more than the
disadvantaged deserve their misfortunes.

By libertarian ethic, one should distribute all vital primary economic goods and services (basic food,
health, shelter, employment) equally, unless an unequal distribution would work to everyone's advantage
36
(Beauchamp and Childers 1989). People born into a social system at different positions, in different
social classes, and with different natural attributes have varying life-prospects and expectations
determined by the system of rights, liberties and opportunities available in that social class. Equality of
opportunity does not entail equality of expectations - the latter are inevitable in a social structure.
Inequalities are just only if the social structure allowing or generating those works out for the advantage
of all engaged in it, especially the least advantaged.

A corporate executive action is ethical if it offers all stakeholders (e.g., creditors, employees,
suppliers, distributors, retailers, clients and customers) fair opportunity for benefits (Libertarian Fair
Opportunism). This may not be necessarily moral. An executive action is ethical if it treats all people
equally (Egalitarianism). This may be moral, even though ideal or impractical. An executive turnaround
action is ethical if it treats all stakeholders with an equal share of all goods (Strict Egalitarianism). This is
moral, even though ideal or impractical.

Nozick's Theory of Distributive Justice


Nozick (1974) rejects the canons of distribution of Ryan (1942) and Rescher (1966) as "patterned"
(on some artificial rule of distributive justice), and proposes an "unpatterned" principle based on his
theory of entitlement. He maintains that the term "distributive justice" is not a neutral concept. It
generally refers to a principle or criterion by which something is distributed in a given constituency. It
often connotes "re-distribution" if existing distribution is somewhat unjust. Distribution of welfare to the
needy or distribution of employment to the unemployed, are similar issues that need to be dealt by
distributive justice principles.

Following a libertarian theory of justice, Nozick (1974) offers an "unpatterned" principle of


distributive justice: from each as they choose, to each as they are chosen. Distributive justice should have
two components: from each (contribution) and to each (distribution), and the two component principles
are related. What society chooses to do for one may be a function of what one chooses to do for society.
Hence, there is no pattern of just distribution other than that of the unpatterned free -market system based
on three principles: acquisition, transfer, and rectification (Nozick 1974):

a) The principle of justice in acquisitions: it relates to original acquisition of holdings; it is the principle
and process whereby originally "unheld things" began to be appropriated in the first place.
b) The principle of justice in transfers: it relates to transfer of holdings; it is the principle and process
whereby people acquire and transfer holdings from one to another.
c) The principle of rectification in acquisitions: it relates to rectification of acquisitions and transfers if
the original principles and processes of acquisitions and transfers were unjust.

A person who acquires a holding in accordance with any of these three principles is entitled to that
holding. If principles (a) and (b) are just, then we have a just distribution of holdings; given (a) and (b),
the complete principle of distributive justice states that a distribution is just if all are entitled to the
holdings they possess under a given distribution. A distribution is just if it legitimately arises from
another just distribution.

R23: An executive action is ethical if it at least treats all stakeholders by the principle: from each as
they choose, and to each as they are chosen.
Nozick's principle differs from the socialist slogan: from each according to one's abilities (canon of
merit), and to each according to one's needs (canon of need). However, his principle seems equally
"patterned" as the canons of distribution. In a patterned society one ultimately is bound to choose, or is
37
chosen by, an existing pattern. Even the historical modes of existing distribution (acquisition, transfer,
and rectification) are patterned.

Applying the Principle of Non-Malfeasance


The principle of non-malfeasance states that an act should do no harm to anyone at any cost and at
any time. Non-malfeasance considers both the act itself as well as its consequences, judging whether the
act itself or its consequences are per se harmful, with an added emphasis on the just distribution of
rights/duties prior and during the act, and on the just distribution of costs/benefits after the act. The
principle of non-malfeasance relates to individual acts, and is an instance of non-comparative distributive
justice (see Table 16.1).

Axiom 10:

10.1 No one is duty-bound by the impossible.


10.2 All responsibility implies prior duty.
10.3 Duty may relate to commission or omission of an act.
10.4 Imputability accrues with breached duty.
10.5 Accountability accrues with harm caused by breached duty.

Corollary 03:

Whenever possible and feasible:


 It is the duty of an executive not to inflict any harm or evil;
 It is the duty of an executive to prevent all harm or evil;
 It is the duty of an executive to remove all harm or evil;
 It is a moral duty of an executive to promote or do good.

R24: An executive action is ethical as long as it does not inflict evil or harm on any one affected by that
action (Principle of Strict Liability). Such an act may not be necessarily moral.

To be ethically responsible for a violation of the duty of non-malfeasance, the following elements are
essential (Curd and May 1984): a) the executive must have a duty to the affected party; b) the executive
must breach that duty; c) the affected party must experience a harm, and d) this harm must be caused by
the breach of duty. When elements of the principle of non-malfeasance conflict, one may fall back upon a
utilitarian maxim such as: maximize good and minimize evil, or if harm occurs inevitably, then one could
invoke the compensatory justice principle: restore the injured party to the original position.

Corollary 04:

To be ethically responsible for a violation of the duty of non-malfeasance, the following elements are
essential (Curd and May 1984):

1. The executive must have a duty to the affected party.


2. The executive must breach that duty.
3. The affected party must experience some harm.
4. This harm must be caused by the breach of duty.

Condition 4 of causal connections may be difficult to establish. It may not be necessary when strict
liability justice (R 24) applies.

38
R 25: An executive action is more ethical if, besides refraining from inflicting harm or evil, (Rule 24) it
also prevents evil or harm on any one affected by that action (Principle of Pre-emptive Justice).
Such an act may not be necessarily moral.

Duties of non-malfeasance include not only not inflicting actual harm, but also of not imposing "risks
of harm." By strict liability laws, it is not necessary to act maliciously or be even aware of or intending
the harm or risk of harm. The harm can be legally "recovered" when the duty of non-malfeasance is
violated. Such violation may involve commission or omission. Negligence is a failure to guard against
risks of harm to others. It fails below the "standards of due care" established by law and morality for the
protection of others from the careless or unreasonable imposition of risks (Prosser 1971). The actual
"standards of due care" should be determined by the principle of protective justice (Jonsen 1977).

R26: An executive action is more ethical if, besides refraining from (R24) and preventing (R25) all
harm and evil, the action also removes all evil or harm from anyone who may be affected by that
action (Principle of Protective Justice). Such an act may not be necessarily moral.

Corollary 5:

An executive action is ethical if it strives to serve the well-being of customers and all other stakeholders
by employing standards of due care, carefully assessing risk-benefits versus detriment-benefits of the act
(Jonsen 1977). Such an act may be moral when accompanied by wholesome intentions and motivations.

For executives, the legal and moral standards of due care include proper training, due diligence,
cognitive and moral skills. In designing and offering new products and services, corporate executives, by
their office and responsibility, create the customer expectation that they will observe the legally and
morally binding professional "standards of due care." If their conduct falls below these standards, they
act negligently.

In determining whether the executive has exercised the degree of skill, care and diligence that the law
requires, one must reckon the advanced state of the production, distribution and marketing of the
product/service in the state where the company operates. The due care requirements cannot eliminate all
mistakes or prevent all harms. They can only reduce the probability of causing harm in the production,
distribution, use and disposal of products and services.

In the application of Corollary 5, "detriments" should be distinguished from "risk of harm."


Detriments occur during the act, while risks are associated with harms that probably occur after the
action. For example, in amputating a limb, the detriment is losing the limb, and the risks are possible
infections that might occur if the limb is or is not amputated. In opting plant shut-downs, the detriment is
actual firing, joblessness and immediate deprivation of wages and insurance health benefits, while the
risks of harm are loss of customer good will, union litigations, union boycott, ghost towns and the like. In
the famous ethical case of Dalkon Shield (Steiner and Steiner 1991: 230-242), the detriment is the
insertion of foreign mechanical devices in the naturally sterilized area of the uterus, and the risks of harm
are "wicking" through the nylon filament infections and inflammations of the uterus, and possible higher
pregnancy rate than comparable competing contraceptive devices.

R27: An executive action is ethical if it at least sets up just procedures to treat all people fairly
(Procedural Justice). Such an action may not be necessarily moral.

If just procedures prevent or remove all harm, then such procedures ensure both pre-emptive and
protective justice. Rule 27 supports Rules 21 (Rawl’s Equality Principle) and Rule 22 (Rawl’s Difference
39
Principle). Pre-emptive and protective justices are subsets of procedural Justice. The latter is a subset of
corrective justice, and corrective justice is a subset of distributive justice. Corrective justice seeks to
rectify past and present, structured and unstructured forms of injustices (e.g., global poverty and
inequality, global inequality of resources, ills and damages of genocide, ethnic cleansing, or neo-Nazism
movements). Most comprehensive measures of corrective justice can be ethical and moral (Mascarenhas,
Kesavan, and Bernacchi 2008).

Such an action may not be necessarily moral. In business situations such as performance appraisal,
promotional awards, and sex discrimination suits, there are most often only imperfect procedural justice
systems where the right outcome is not guaranteed by the procedure. But an imperfect procedure is better
than a pure procedural justice system that conditions rightness of the outcome on the procedure itself.
Often, there are independent standards of decision-making, but there is no procedure to guarantee that
decisions or outcomes will match those standards. A right outcome is often ensured as long as the
imperfect procedure at least safeguards the principle of non-malfeasance.

Can a procedure guarantee a right or just outcome? John Rawls (1971: 85-86) analyzed three
possible relations between procedures and outcomes. In perfect procedural justice, there is independent
standard of a right outcome, and it is possible to devise a procedure to guarantee that outcome (e.g., state
lottery; open public bidding; Dutch auctions). In imperfect procedural justice, there is an independent
standard of a right outcome (e.g., convict the guilty and only the guilty), but the actual procedure is
imperfect to ensure the right outcome always. In the pure procedural justice case, any outcome of the
procedure is right as long as the correct procedure is followed, but the outcome is totally dependent upon
the procedure; e.g., in gambling it does not matter who wins as long as the game is fair.

In illustrating perfect procedural justice Rawls (1971: 85-86) cites the example of a birthday cake
distribution at a children's party: the standard of a right outcome is equal shares, and it is possible to
guarantee a right outcome by telling the child designated to cut the cake, and that the distributor must take
the last piece after all the other children have chosen theirs.

R28: An executive action is moral if, besides observing rules R24 to R27, it strives to serve the well
being of customers and employees by actively striving to promote good among them (Beneficent
Justice).

Whenever possible, it is an executive's ethical duty a) not to inflict any harm or evil, b) to prevent all
harm or evil, c) to remove all harm or evil, and d) it is a moral duty to promote or do good.

As stated earlier, Frankena (1973: 47) has serially ordered the implications of the principle of non-
malfeasance as applied to any act: the act should a) not inflict evil or harm, b) should prevent evil or
harm, c) should remove evil or harm, and d) should do or promote good. Other things being equal, (a)
takes moral precedence over (b), (b) over (c), and (c) over (d). The principle of non-malfeasance is an
over-riding principle, but not an absolute principle. Sometimes, one may have to cause harm (e.g., in the
form of painful surgery) to avoid greater harm such as serious disease or death [this topic is dealt in a
separate section under Proportionalism and the Theory of Double Effect in Chapter 06]. Chapter derived
two rules (Rule A and Rule B) from the theory of Double Effect and Proportionalism. The principle of
non-malfeasance obliges one, while the principle of beneficence may be more hortatory or "parenetic"
than normative - hence a moral duty. When elements of the principle of non-malfeasance conflict, one
may fall back upon a utilitarian maxim such as: maximize good and minimize evil, or if harm occurs
inevitably then one can invoke the compensatory justice principle: restore the injured party to his/her
original position.

40
As an illustration, and following Case 16.3, Table 16.5 assesses the morality of India’s Superrich
wealth maximization outcomes by applying moral rules based on distributive justice ethical theories. As
argued in Table 16.5, wealth maximization is ethically and morally justified as long as it does not violate
any of the distributive justice rules (R13 to R28). Table 16.5 is a general argument for or against wealth
maximization. More specific argument can be made based on the particulars of individual superrich
mentioned in Case 16.3.

Synthesis of All Rules: Equity versus Equality Justice Rules

Justice is both outcome-related - to bring about a just distribution of what is being distributed, and
process-related - a just process assures just outcomes. The following characterization of justice rules is
defensible:
Exhibit 16.2: Classifying Moral Rules by their Primary Domain of Action
Theory of Justice Process-related Outcome-related
Rules Rules
Deontological Justice R01 to R04, R09 R05 to R08
Teleological Justice R10 to R12
Distributive Justice R13, R21 to R23, R28 R14 to R20, R24, RA and RB
Corrective Justice R25- R27 R25 to R27

According to Deutsch (1985), distributive justice concerns not only the distribution of economic
goods, but also with the distribution of conditions and goods that affect human well-being in all its
individual and social aspects. While Rules 14 to 20 primarily relate to the distribution of economic
goods, all other moral rules relate to antecedent conditions that bring about a just distribution of goods
and services.

In general, distributive justice rules fall into two categories: equity and equality (Deutsch 1985;
Meindl 1989). Equity distributes economic goods or rewards (e.g., salesperson wages, executive salaries,
cost-savings, trade commissions, sales bonuses, profits) among stakeholders according to each one's
inputs or contributions (Rawls 1958, 1971; Rescher 1966; Ryan 1942) judged by one's need (R14), one’s
natural ability (R15), one’s effort (R16), one’s productivity or contribution (R17), social utility or
common good (R18), demand or market-value (R19), legitimate claims (R20), or entitlement (R23).
Other equity considerations are based on law (R07), contracts (R08), business executive rights (R04),
stakeholder rights (R03) and duties (R01 and R02).

Summary and Concluding Remarks


Executive moral reasoning studies the relationship between the executive who acts, the action
performed in a given corporate or social or political context, the consequences of the act, the people
affected by the consequences, and others who observe and respond to the action. Moral reasoning thus
implies an ongoing and constant interaction between human persons in which, thought, emotion, action
and responses are creatively (or destructively) intertwined. Moral reasoning presupposes, therefore, a
sufficiently high level of shared knowledge and behaviors, individual and social experiences with
sufficiently high level of shared metaphors of moral concepts, values, judgments, activities, behaviors and
cultures. All these shared aspects of moral reasoning fundamentally flow from the fact that the people
engaged in moral reasoning are human persons endowed with immanence and transcendence,
individuality and sociality, intellection and volition, freewill and freedom. Reason, reasoning, action and

41
interaction often imply some mutual control between actors via judgment and attribution, accountability
and responsibility, reward and punishment, and recompense or vindication.

Moral reasoning does not exclude or condemn fierce competition (e.g., price wars, predatory pricing,
and market entry barriers) or profits (e.g., bottom line management, shareholder wealth creation,
maximizing dividends or retained earnings). These are challenges or the maker and citizen metaphors of
moral executive reasoning. Corporate ethics can incorporate competition and profits as parts of one’s
social capital (Maiti 2009). But moral reasoning must look at the consequences of, say, wealth
maximization in the hands of the few (e.g., wealth concentration, income inequality, money laundering)
and the consequences of consequences (e.g., poverty, crime, social violence, destruction, revolution) of
wealth maximization. Moral reasoning and judgment review the act retrospectively (e.g., how wealth
maximization occurred) and prospectively (the direct and indirect effects of wealth concentration in the
future).

When executives wish to evaluate ethically their policies, decisions, and strategies primarily from the
view of intentions, motivations, rights and duties, laws and contracts, then Rules 01 to 09 apply. If
executives want to assess ethically their concrete actions and strategies primarily from the view of their
costs and benefits to all stakeholders concerned, Rules 10 to 12 apply. Finally, if executives wish to
ethically examine their entire system of corporate planning, corporate policies, strategic decisions and
actions, from the view of their potentiality for, and actuality of, equitably distributing rights and duties,
costs and benefits, across all affected stakeholders, then Rules 13 to 28 apply. These Rules judge the
morality of the executive act, but do not assess its attributional or appropriational responsibility. That is,
the Rules judge the executive act, but not the executive actor.

The eight canons (Rules 13-20) of distributive justice (Ryan 1942; Rescher 1966), individually or
collectively, do not ensure morality ipso facto since the concept and measure of equality, need, merit or
ability, effort, contribution or productivity, common good or social utility, market-exchange value, and
legitimate claims, may not be universally accepted or binding. One could use as many canons in
formulating one's corporate distributive justice strategy, provided Rules 03, 08, 17-18, and 20 are
safeguarded. In the United States, unemployment compensation, welfare payments, and some health-care
subsidies (Medicare, Medicaid) are distributed on the basis of need. Sometimes, unemployment
compensation is pegged on one's contribution (e.g., previous length of employment, one's last salary).
Jobs and promotions are awarded or distributed on the basis of demonstrated achievement or merit.
Corporate hierarchies and executive prerogatives are examples of distributive justice in practice (Ferrell
and Gresham 1985). The high salaries of top executives are justified only on the basis of their free
market-exchange value. When rival material principles of distributive justice conflict, one should give
proper weight to each principle, given circumstances of the case in question.

The taxonomic approach proposed here makes no fixed assumptions regarding the organizational
design or structure (Galbraith 1977) of the corporation the executive functions in. In the post-industrial
corporate world of information-intensive (Glazer 1991) and turbulent (Emery and Trist 1965; Glazer and
Weiss 1993) environments, the structure of the executive moral decision-act will basically remain the
same in terms of its antecedents, process and consequences. To the extent that executives react to,
interact with, and are determined by situational and environmental factors in their decisions and actions,
and to the extent that they act after much consultation and partnership with their superiors and fellow
executives, the responsibility of unethical decisions may be considerably exonerated (Mascarenhas 1995;
2007).

Equality is a more complex concept, and historically has taken three major forms (Aristotle 1985;
Bedau 1971; Nielsen 1979, 1985; Vlastos 1962): a) equal treatment for equals (R13); b) fundamental
42
equality that states that all human beings are equal or of equal worth, and hence should be treated
universalizably and reversibly (R01), equally (R02), or should share all goods equally (R22); c) social
equality which states that within a democratic set up by social consensus all are politically equal
regardless of age, gender, race, color, nationality, and religion, and hence should be given basic social
rights, especially when naturally disadvantaged (R05), should be given equal opportunity (R21), and
should be treated in such a way that undeserved differences are nullified (R22).

Equity and equality, even though opposites at the extreme ends, can be conceived as a continuum
(Deutsch 1985; Kabanoff 1991). When a blend of equity and equality considerations is used as a basis of
judgment, then distributive justice prescribes that nobody should be harmed (R24; R29 and R30), and
hence, everybody should have basic needs met (R14), be prevented (R25) and protected (R26) from all
harm by proper structures and procedures (R27), and if harmed, should be adequately compensated.
More positively, one should do and promote good unto all (R28), by maximizing happiness of the greatest
number (R12), maximizing utility of the maximum number (R11), or by maximizing satisfaction of the
most (R10).

Today, most management theorists and ethicists believe that corporate powers are held in trust not only
for the shareholders the corporation deals with, but also for the community the corporation operates in
(Donaldson 1992; Goodpaster 1991). All 30 rules imply equity-based moral obligations to shareholders and
stakeholders; they also imply moral obligations but to larger groups of stakeholders such as communities,
community nonprofit institutions, and public facilities (e.g., universities, libraries, parks, museums).
Corporations have a moral obligation to put back into the community what they got from the community
they operate in (Goodpaster 1991). Moral justification Rules 01-30 are moral obligations, and not just good
deeds that a corporations or turnaround executives may or may not do. Long-term loyalty relationships with
all stakeholders are generated more by observing equality than equity rules. This Chapter summons all
executives to go beyond equity to equality, and despite being market-driven, to be socially oriented towards
all their stakeholders and communities.

43
Figure 16.1: Internal, Transactional and Contextual Relationships
That Trigger Executive Decisions+

Global
Labor Skills, Global
Global Banks and
Markets &
Suppliers Money
Unions
Markets

Cost

Global Global
Markets Compe- The Govern Govern
and Trade tition Firm -ments -ments
Regions

Custome
Custome
rs
rs

Global Global Global


Distributors Communities, Stockholders
and Retailers Cultures and and
Civilizations Investors

+ The innermost circle constitutes the internal environment of the firm. The four small circles around the firm with
their respective technology form the transactional environment, and the outermost eight larger squares pose as the
global contextual environment.

44
Figure 16.2: The Anatomy of Business Executive Action and the
Application of Ethical Principles

Distributive Justice Principles:


Ethics of Distributive and Corrective Justice

INPUTS: PROCESS: OUTPUTS:


Personal and Business Business
Corporate Inputs Management& Consequences
Corporate Governance
Processes:
Executive Reasoning,
Decisions & Strategies

Teleological
Principles:
Deontological Principles: Ethics of Costs and
Ethics of Rights and Duties Benefits

Ethics of Responsibility
Ethics of Human Personhood; Ethics of Virtue; Ethics of Trust;
Ethics of Moral Worth; Ethics of Moral Reasoning

45
Corporate
Outputs:

Cognitive:
Brand Image
Figure 16.3: Modeling the Business Executive
BrandDecision-Act:
Quality
Brand Value
Ethical Inputs, Process, Outputs and Consequences
Satisfaction
Brand Delight

Moral:
Business Executive Act: Business
Rights Upheld Business
Deontology Consequences:
Duties Fulfilled Responsibility:
Justice Realized
Teleology Justice
Personality:
Corporate Growth
Corporate
Renown
Personal Corporat Corporat Corporate
Corporate Success Corporate
Ethical e e Ethical Social
Inputs Ethical Ethical Outputs Responsi-
Inputs Process bility

Executive’s Corporate Corporate Corporate


Development: Development Planning: Responsibility:
:
Cognitive: Cognitive: Cognitive:
Conceptual Cognitive: Ends, goals, Causal,
Reasoning Technology Objectives, Agent,
Management Ideologies,
Skills Attributional,
Skills Principles and
Emotional Priorities Appropriational
intelligence
Moral:
Will power Moral: Moral:
Willingness Rights-Duties Teleological,
Moral:
Commitment Costs-benefits Deontological
Corporate
Conscience Justice-injustice Distributive
Corporate Justice
Personality:
Morale
Ego-Strengths@ Personality: Personality:
Field- Decisions Corporate Social
Personality:
Dependencies@ Strategies Responsibility,
Organizational
Design, Roles# Implementation Proactive
Opportunity# Responsibility

Distributive & Corrective Justice Principles; Ethics of Responsibility; Ethics of Moral Worth;
Ethics of Moral Reasoning; Ethics of Virtue; Ethics of Trust.

Bi-directional arrows indicate feedback and interdependence of environment and decision components.
* For details, see Kohlberg's (1969) Theory of Moral Development.
@ For details, see Trevino (1986).
# For details, see Ferrell and Gresham (1985).

46
Table 16.1: A Taxonomy of Ethical-Moral Theories
Applicable to Assessing Corporate Executive Strategies

Morality of the Major Ethical Ethical Further Ethical Theory


corporate Theory Sub-theories Developments
Executive Act
Judged by:
Neither the Individual Nihilism
Logical Emotivism Absolute relativism
Act or the Group Emotivism Consensualism
Consequences Positivism Social Emotivism Postmodernism
Emotivism National Emotivism
Act Deontology Situationalism Existence precedes essence; Life precedes law;
Existentialism Life defines nature
Formalism Essence precedes and defines existence;
Only the Act Rule Deontology Contractualism Nature defines life
Legalism
Only the Act Teleology Egoism Hedonism: Pleasure defines acts
Consequences Rule Teleology Enlightened Egoism Utilitarianism: Cost/benefit ratio defines acts
Eudemonism: Happiness defines acts
Act Distributive Intuitionism Intuitions define acts
Justice Situationism Situations define acts
Retributive Justice
Non-Comparative Compensatory Justice
Justice Non-malfeasance
Strict Liability
Formalist Justice
Egalitarian Justice
Both the Rule Distributive Socialist Justice
Act and the Justice Naturalist Justice
Capitalist Justice
Consequences Fair Opportunity Justice
Comparative Justice Libertarian Justice
Preventive Justice
Protective Justice
Procedural Justice
Corrective justice
Beneficent Justice

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Table 16.2: A Taxonomy of Distributive Justice Principles

First Basic Second Basic Basic Underlying Ethical Judgment by


Division Division: Principle Examples
Sub theories of
Justice
Retributive or Quid pro quo: principle of Punitive damages; Capital
punitive justice retaliation punishment
Compensatory justice Restore the harmed person to one’s Compensatory damages in product
original status liability judgments
Commutative Justice Distribute to each one by one’s Distribution of jobs, wages,
deserves healthcare, or welfare
Rights/Duty or Distribute to each one by one’s Distribution as human beings, good
deontological rights and fulfilled duties citizens
Justice
Individual Entitlement Justice Nozick’s Principle: distribute to Distribution by one’s merits, efforts,
each one by one’s original position performance
Justice or entitlement
(Corrective Cost-benefit or Distribute such that benefits exceed Distribution by net growth, net
Justice) Utilitarian Justice costs for each one benefits
Egoism Primacy of self over society Despotism, autocracy
Ethical Egoism First seek self; others via self. Greed, amassing wealth

Enlightened Egoism Society may deserve primacy over Socialism, communism


self
Nihilistic Justice No deserves, no rights: distribute Command economies
randomly
Liability Justice Distribute such that all harm is Hippocratic oath; product liabilities
avoided
Protective Justice Distribution should protect all Law and order; traffic laws
people from current harm
Preemptive Justice Distribution should prevent all EPA, OSHA, SAFE, Vaccines
people from future harm
Corrective Justice Rectify unjust structures Lack of due process under
Homeland Security; Changing
regimes of Sovereign Nations
Social Procedural Justice Distribution set up procedures to Due process; just laws and
avoid all harm ordinances
Justice Egalitarian Justice Distribution should be equal for all Basic clean air, water, shelter,
(Corrective healthcare, education and
Justice) employment
Aristotle’s Minimum Distribute equally among equals Equal wages among peers; different
Justice but unequally among unequals among non-peers
Rawls First Principle Distribution should not merit Distribution by color, lineage,
of Egalitarian Justice undeserved advantages of people ethnicity, religion, native brilliance,
social inheritance
Rawls Second Distribution should nullify Nullify economic disadvantages of
Principle of undeserved disadvantages of people race, color, creed, gender,
Egalitarian Justice nationality, and geography
Beneficent Justice Distribution should promote good Golden rule; be good to all; promote
of all people good among all.

48
Table 16.3: A Synthesis of Moral Rules Based on the Taxonomy of
Deontological and Teleological Ethical Theories

Moral Rule Ethical Theory Morality of the Moral Rule


corporate Executive Applicable to the
Act based on: Corporate Executive
Deontological Rules

R01 Kantian Formalism Principles of Universalizability Act inasmuch as your act is


and Reversibility motivated by a law that can
apply to all.
R02 Kantian Formalism Principles of Universalizability Act inasmuch as your act is
and Reversibility grounded on moral reasons
that convince all.
R03 Deontological Justice Deontological rights of all Act inasmuch as your act
stakeholders, especially the poor. safeguards personal and
social rights of all
stakeholders.
R04 Deontological Justice Deontological rights of corporate Act inasmuch as your act
Executives upholds the rights and duties
of corporate executives
R05 Situationalism (J. P. When rights/duties conflict, the When rights/duties conflict,
Sartre) actual situation should act freely but own
determine the response-act. responsibility for the
consequences
R06 Existentialism (R. When right or wrong, truth or Act amidst uncertainty, risk
Niebuhr; D. falsehood, and good or evil are and ambiguity, but own the
Bonhoeffer) not clearly distinguishable, act in consequences.
the midst of doubt.
R07 Legalism Legitimacy of government laws Obey legitimate laws and
and industry ordinances ordinances
R08 Contractualism Binding capacity of freely agreed Honor mutually agreed upon
on contracts. contracts.
R09 Parenesis: A Code of Credibility and validity of Comply with agreed upon
ethics that counsels industry and corporate ethical codes of conduct. The
and exhorts action. code of conduct obligation is hortatory.
Teleological Rules

R10 Hedonism (Jeremy Satisfaction of the majority Maximize satisfaction of all.


Bentham)
R11a Utilitarianism (J. S. Utility of the maximum Maximize net benefits to all.
Mill)
R11b Consequentialism (E. Utility of the Consequences. Minimize harm of the
Anscombe 1920-2001) Some things should (or cannot) consequences to all innocent
be done no matter what the stakeholders
consequences.
R12 Eudemonism Happiness of the maximum Maximize happiness of all.
(Aristotle)

49
Table 16.4: A Synthesis of Moral Rules Based on the Taxonomy of
Distributive Justice Ethical Theories

Distributive Ethical Theory Morality of the corporate Moral Rule for the
Justice Executive Act based on: corporate Executive - Act
Rules in as much as you can
treat everyone by:

R13 Formal Justice: Aristotle’s Canon of Equality One’s level of equality


Egalitarianism
R14 Socialist Justice The Canon of Need One’s level of need

R15 Naturalist Justice The Canon of Natural Ability One’s level of innate merit or
ability
R16 Retributive Justice The Canon of Effort One’s level of effort

R17 Capitalist Justice The Canon of Productivity One’s level of contribution

R18 Libertarian Justice The Canon of Social Utility One’s level of social value

R19 Libertarian Justice The Canon of Supply-demand One’s level of market-exchange


value

R20 Individual Justice Rescher’s Canon of Legitimate One’s level of legitimate claims
Claims

R21 Fair Opportunist Rawls’ Equality Principle Offering equal opportunity


Justice

R22 Libertarian Egalitarian Rawls’ Difference Principle Nullifying undeserved


Justice advantages along all
stakeholders

R23 Libertarian Justice Nozick’s Principle of One’s level of original


Distributive Justice entitlements

R24 Non-malfeasance Principle of Strict Liability Doing no harm or evil


Justice
R25 Preemptive Justice Principle of Preventive Justice Preventing all evil

R26 Protective Justice Principle of Protective Justice Protecting all from evil

R27 Procedural Justice; Principle of Procedural Justice Setting up just procedures for
Corrective Justice and Corrective Justice equitable distribution of
benefits or correcting current
structured injustice systems

R28 Beneficent Justice Principle of Beneficent Justice Doing and promoting good

50
Assurance of Learning (AOL 6):
Table 16.5: Assessing the Morality of India’s Superrich Wealth Maximization Outcomes
[See Case 16.3: India’s Superrich]

Table 16.5A: Applying Deontological Justice Rules to Justifying Wealth Maximization by the Superrich
Justice Ethical Theory of Ethical Rule based on the Ethical Theory of Deontological Justice:
Rules Deontological Justice Did the National or International Did Wealth Maximization Outcomes of
Markets treat India’s Superrich by: India’s Superrich treat others by:

R01 Kantian Formalism: Act Principles of Universalizability? YES: Principles of Universalizability? NO:
inasmuch as your act is As long as maximization or Maximization or aggregation of wealth as a
motivated by a law that can aggregation of wealth as a moral moral principle, decision and strategy are not
apply to all. principle, decision and strategy can be universalized among the non-superrich,
universalized. special the marginalized.
R02 Kantian Formalism: Act Principles of Reversibility? YES: As Principles of Universalizability? NO:
inasmuch as your act is long as maximization or aggregation Maximization or aggregation of wealth as a
grounded on moral reasons of wealth as a moral principle, moral principle, decision and strategy are not
that convince all. decision and strategy can be reverse yet reverse verified and justified among the
verified among all. non-superrich, special the marginalized.
R03 Principle of Deontological Principle of Deontological Justice Principle of Deontological Justice among the
Justice: Safeguard economic among the marginalized? NO: marginalized? NO: Maximization of wealth
and social rights and duties Maximization of wealth does not does not safeguard the deontological rights of
of the marginalized safeguard the deontological rights of all other stakeholders in the system.
all stakeholders, especially the poor.
R04 Prince of Deontological Principle of Deontological Justice Principle of Deontological Justice among all
Justice: Also safeguard among the corporate executives: YES, the corporate executives: NO, to the extent
rights and duties of to the extent maximization of wealth maximization of wealth safeguards wealth
corporate executives safeguards wealth aggregation rights aggregation rights of just a few superrich
of corporate Executives. connected corporate Executives
R05 Situationanism: When Principle of Existential Situationism: Principle of Existential Situationism: NO: If
rights/duties conflict, the YES: If maximization of wealth is maximization of wealth is deliberately
actual situation should mostly situational despite conflicts of fraudulent and situation-exploitative, and
determine the decision ad rights and duties conflict, and if the particularly, when the superrich do not
judgment but one must own superrich take responsibility for the willingly own responsibility for the
the act and its consequences. consequences of wealth maximization. consequences of wealth maximization.
R06 Existentialism: When Principle of Existentialism: YES: Principle of Existentialism: NO: if most
amidst uncertainty, risk and since most wealth maximization wealth maximization that occurs because of
ambiguity, right or wrong, occurs because of the risk, uncertainty the risk, uncertainty and ambiguity of
truth or falsehood, and good and ambiguity of markets that the markets that the superrich creatively and
or evil cannot be clearly superrich creatively and innovatively innovatively combat, does not own the
distinguished, then act in the combat. consequences, nor use wealth to life the poor.
midst of doubt.
R07 Legalism: Legitimacy of Compliance to legitimately Compliance to legitimately promulgated
government laws and promulgated and enforced and enforced government laws and industry
industry ordinances government laws and industry ordinances? NO, if wealth maximization
ordinances? YES, as long wealth occurs by lobbying and prevaricating law.
maximization was within legal Good laws should include wee-being of all
observances. stakeholders.
R08 Contractualism: Binding Compliance to freely agreed on Compliance to freely agreed on contracts to
capacity of freely agreed on contracts? YES: if wealth help the non-superrich? N O: very few
contracts. maximization includes freely agreed wealth-maximizers include freely agreed upon
upon contract to use wealth for the contracts to deploy their wealth for the
benefit of all. benefit of all, especially the disadvantaged.
R09 Parenesis: A Code of ethics Is wealth maximization ruled by Compliance to agreed upon codes of conduct?
that counsels and exhorts credible and valid industry and NO: Unless wealth maximization includes a
action. The obligation is corporate ethical codes of conduct? social contract with the country to circulate
parenetic or hortatory. NO: Most of wealth maximization wealth for the development of more jobs,
occurs despite such codes of conduct. wealth and prosperity to all.

51
Table 16.5B: Applying Teleological Justice Rules to Justifying Wealth
Maximization by the Superrich

Justice Ethical Theory of Ethical Rule based on the Ethical Theory of Teleological Justice:
Rules Teleological Justice Did the National or Did Wealth Maximization Outcomes
International Markets treat of India’s Superrich treat others by:
India’s Superrich by:

R10 Hedonism: Satisfaction Principle of Universal Hedonism: Principle of Universal Hedonism: Did
and Pleasure of all Did wealth maximization promote wealth maximization promote happiness
(Jeremy Bentham) happiness and satisfaction of all? and satisfaction of all others, especially
NO: Most facts prove the the poor and disadvantaged? NO:
contrary. Wealth maximization often occurs at the
dissatisfaction and losses of the others,
especially the uninformed and Most facts
prove the contrary. Universal hedonism
seeks to maximize satisfaction of all.

R11a Utilitarianism (J. S. Principle of utility-maximization Principle of utility-maximization of the


Mill): Maximize utility of of the greatest number fulfilled? greatest number fulfilled? NO: However,
all NO: Most facts prove the wealth maximization can be encouraged
contrary. Wealth maximizations for the service and emancipation of all,
has created in India enclaves of especially the powerless and the
luxury and extravagance disadvantaged.
surrounded by slums and squalor.
R11b Consequentialism (E. Maximize Utility of good Did wealth-maximization of the
Anscombe 1920-2001): Consequences to all? NO: unless superrich minimize harmful
Maximally reduce wealth maximization occurs in consequences to all innocent
harmful consequences to tandem with reduction of harm of stakeholders? NO: But wealth-
all. all. Some things should (or maximization of the superrich can at
cannot) be done no matter what least strive to eradicate poverty, disease
the consequences. and illiteracy in India.
R12 Eudemonism (Aristotle): Principle of happiness of the Principle of happiness of the maximum
Principle of happiness of maximum fulfilled? NO: Unless fulfilled? NO: But wealth maximization
the maximum wealth maximization of the of the superrich can automatically be
superrich automatically is geared streamlined to promote happiness of the
for promoting happiness of the maximum in India.
maximum

52
Table 16.5C: Assessing the Morality of India’s Superrich Wealth Maximization Outcomes
by Applying Moral Rules Based on Distributive Justice Ethical Theories
[See Case 16.3: India’s Superrich]

Distri- Ethical Ethical Rule based on the Ethical Theory of Distributive Justice:
butive Theory of Did the National or International markets Did Wealth Maximization Outcomes of
Justice Distributive treat India’s Superrich by: India’s Superrich treat others by:
Rules Justice (DJ)
R13 Formal Justice: Aristotle’s Canon of Equality: The level of equality The level of equality among the others (i.e., non
Egalitarianism among the superrich? YES. superrich? NO: Not as long inequality continues.
R14 Socialist Justice The Canon of Need: The level of need among the Their level of need? No, as poverty (or non-
superrich? Yes, and much beyond need. fulfillment of basic needs) is unabated in India.
R15 Naturalist The Canon of Natural Ability: The level of innate merit Their level of innate merit or ability? No: Merit and
Justice or ability among the superrich? YES. ability of the most are not yet fully challenged or
rewarded by maximized wealth.
R16 Retributive The Canon of Effort: The level of effort of among the Their level of effort? No: Despite or because of
Justice superrich? YES. Wealth maximization could be wealth maximization, most efforts of others go
matching their efforts. unrecognized or under-rewarded.
R17 Capitalist The Canon of Productivity: The level of contribution of The level of contribution of the non-superrich? NO:
Justice the superrich? Yes, and far beyond. Until wealth maximization stimulates the
contribution of others
R18 Libertarian The Canon of Social Utility: The level of social value of Their level of social value? No, until maximized
Justice the superrich? YES. wealth raises the social value of others.

R19 Libertarian The Canon of Supply-demand: The level of market- Their level of market-exchange value? NO: Unless
Justice exchange value of the superrich? YES. maximized wealth of the few leverages the market-
exchange value of others.
R20 Individual Rescher’s Canon of Legitimate Claims: The level of The level of legitimate claims of the non-superrich?
Justice legitimate claims of the superrich? Yes, and far beyond. NO: Until wealth maximization of the few increases
the level of legitimate claims of all others.
R21 Fair Rawls’ Equality Principle: Did wealth-maximization of Did wealth maximization of the superrich offer
Opportunist the few offer equal opportunity to all? No. equal opportunity to all? No, until wealth
Justice maximization of the few offers equal opportunity
for all.

R22 Libertarian Rawls’ Difference Principle: Did wealth maximization Nullifying undeserved advantages among all
Egalitarian of the superrich nullify undeserved advantages among stakeholders? No, until maximized wealth can
Justice all stakeholders? NO. Most of the superrich seemingly nullify undeserved disadvantages among all others.
had undeserved advantages for wealth maximization.
R23 Libertarian Nozick’s Principle of Distributive Justice: By the level One’s level of original entitlements? NO: Most
Justice of original entitlements of the superrich? YES. “others” in India have their original level of
entitlements progressively diminished because of
wealth maximization of the few.
R24 Non- Principle of Strict Liability: Doing no harm or evil to Doing no harm or evil to others? Yes, as long
malfeasance the Superrich? YES. maximized wealth among the few does not harm
Justice others.
R25 Preemptive Principle of Preventive Justice: Preventing all evil to the Preventing all evil to the non-superrich? Yes, as
Justice super rich? YES. long maximized wealth among the few prevented
harm to all others.
R26 Protective Principle of Protective Justice: Protecting the superrich Protecting the non-superrich from evil? Yes, as long
Justice from evil? YES. maximized wealth among the few protected the non-
superrich from harm.
R27 Procedural Principle of Procedural Justice and Corrective Justice: Did wealth maximization of the few set up just
Justice; Was wealth maximization of the few possible because of procedures for wealth maximization for the others
Corrective just procedures for correcting current structured in India? NO, unless maximized wealth dismantles
injustice systems? YES. Possibly, despite unjust current structured injustice systems.
Justice
systems.
R28 Beneficent Principle of Beneficent Justice: Enabling the superrich Did maximized wealth of the few empower others to
Justice in doing or promoting good to others? Yes, if they do or promote good in India? Yes, if maximized
willed to do so. wealth was invested in developmental projects in
India.

53