Handout 07 Managerial Ethics XLRI 2014

Ethics of Executive Moral Reasoning and Moral Judgment

Ozzie Mascarenhas, S.J., Ph.D.
July 11, 2014

Case 7.1: Dassault Aviation and the Defense Ministry, India

The Medium Multi-Role Combat Aircraft (MMRCA) competition, also known as the MRCA tender, was a
competition to supply 126 multi-role combat aircraft to the Indian Air Force (IAF). The Defense Ministry has
allocated 82000 crore (US$14 billion) for the purchase of these aircraft, making it India's single largest defense
deal. The MRCA tender was floated with the idea of filling the gap between its future Light Combat Aircraft and its
in-service Sukhoi Su-30MKI air superiority fighter.
The bid contest featured six fighter aircraft: Boeing F/A-18E/F Super Hornet, Dassault Rafale, Eurofighter
Typhoon, Lockheed Martin F-16 Fighting Falcon, Mikoyan MiG-35, and Saab JAS 39 Gripen. On 27 April 2011,
after an intensive and detailed technical evaluation by the IAF, it reduced the bidders to two fighters Eurofighter
Typhoon and Dassault Rafale. On 31 January 2012, Ministry of Defense (MOD), India announced that Dassault
Rafale won the competition due to its lower life-cycle cost. Contract negotiations were underway.
The decision was received in France with the French President Nicolas Sarkozy, Minister of State for Foreign
Trade, Pierre Lellouche, and Dassault Aviation - all issuing statements in support of the decision. Dassault Aviation
shares soared more than 21% on the Paris Stock Exchange immediately after the news broke. Nicolas Sarkozy said
that the selection of Dassault's Rafale multi-role fighter "goes far beyond the company that makes them, far beyond
aerospace it is a vote of confidence in the entire French economy."
Eurofighter issued a statement saying that although they are disappointed, they respect the decision: "India took
the decision to select our competitor as the preferred bidder in the Medium Multi-Role Combat Aircraft (MMRCA)
tender. Although this is not yet a contract signature and contract negotiations are still ahead, we are disappointed.
However, we respect the decision of the MOD. With the Eurofighter Typhoon, we offered the Indian Air Force the
most modern combat aircraft available. Based on the Indian Government feedback, we will now carefully analyze
and evaluate this situation together with our European Partner Companies and their respective Governments."
Officials at the British High Commission in Delhi also said they were disappointed with the decision but added that
it was expressly said this was about the cost of the contract, not a reflection on the health of bilateral relations
between India and the countries.
After the announcement of Dassault Rafale as the L1 bidder, the Eurofighter Consortium also decided to lower
the price of the Typhoon jets to stay in the race. This decision came after extensive discussion amongst the member
nations. However, the Indian MOD officials ruled out any possibility of a comeback by the Eurofighter Typhoon in
the competition. According to them, Dassault Rafale beat the Typhoon by a huge margin in terms of life cycle costs
as well as direct acquisition costs. In March 2012, UK defense minister Gerald Howarth told the British House of
Commons that the Eurofighter Consortium respects the Indian government's decision but stands ready to enter
further negotiations if possible.
Currently, however, Indias $12 billion Medium Multi-role Combat Aircraft (MMRCA) program has run into
turbulence due to a disagreement over delivery commitments, according to an Indian Defense Ministry source. The
Defense Ministry, India, in concurrence with the Defense Minster A. K. Antony, had short-listed Dassault Aviation, a
French Company, to supply the multi-role medium-combat Rafale aircraft. The Rafale combat aircraft was selected

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by India as the lowest and preferred bidder two years ago (2012) for supplying 126 fighter aircraft planes at a cost of
$12 billion. The deal has been reported to cost US$28-30 billion in 2014.

On behalf of Dassault, the French government has been urging India to expedite the multi-billion dollar deal,
fearing the new government that comes to power after the Lokh Sabha elections of May 16, 2014 may stall the
negotiations further. France wants India to sign a pact to provide government guarantee for completion of the
Dassault-Defense ministry negotiations, but the Defense Minister A K Anthony has refused to do so. Anthony
argued that government guarantee cannot be provided when negotiations are still under way.

For the last two years the Defense Ministry has still been negotiating the price and terms and conditions of the
contract with Dassault Aviation. The Indian Air Force has told the new Modi government that Dassault Aviation,
maker of the Rafale jet, and Hindustan Aeronautics Ltd. (HAL), which will produce the aircraft in India, must put
their delivery guarantees in writing before the Ministry of Defense (MOD) signs the contract. But HAL is unwilling
to give any written guarantee on the delivery schedule for the Indian-made Rafales, and instead wants Dassault to
guarantee deliveries of the Indian-made aircraft, a condition the French have already rejected, the MOD source said.
The Dassault deal proposal stipulates that the first 18 aircraft will be supplied by the vendor Dassault in flyaway condition and the remaining 108 aircraft will be manufactured in this case, by HAL through technology
transfer from Dassault. The delivery of the aircraft should begin three years after the contract is signed.

One of the more recent terms stalling the deal has been the issue of the life cycle costs (LCC) relating to
Rafale. The MMRCA contract negotiations have also been delayed because HAL has not finalized the cost of the
India-made Rafale. No date is available for when the final cost of the Indian-made Rafale will be provided to the
MOD, according to a senior HAL official.

There are complaints about the procedure of calculating the life cycle costs, and this issue is far from being
settled. Before bringing the deal to the Cabinet Committee on Security for final approval, the defense ministry
wants clarification on LCC, defense Minister Anthony said. Moreover, LCC has to be taken into the equation in
determining the lowest bidder. Meanwhile senior BJP leader and former finance minister Yashwant Sinha has
written to Anthony raising several questions over the conceptual shift in the defense procurement policy, and has
expressed fears that the LCC concept may lead to corruption. [See Deccan Herald, Monday, March 31, 2014, p.1].

In January 2014, the cost of the aircraft had reportedly escalated by 100% to US$28-30 billion. The cost of the
program was projected at US$12 billion (Rs 42,000 crore) in 2007. The cost increased to US$18 billion (Rs 90,000
crore) in January 2012 when the lowest bidder was declared. In February 2014, it was reported that contract had not
been signed owing to the fact that the department's budget had been spent for the year, but that it was expected to be
signed in the next fiscal year, not before six months after the new government takes charge after the elections.

Some References (chronologically sequenced):

1.

Pandey, Vinay (2008). "F-16 maker Lockheed mounts an India campaign". The Times of India, January 17, 2008.

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2.
3.
4.

Pandit, Rajat (2009). "India ready for war? Forces grapple with delays, red tape". The Times of India. January 20, 2009.
"India says to have fifth generation jets in 2018". The Times of India. 23 April 2010.
Watt, Nicholas (2013). "David Cameron to press India over Eurofighter jet sales". The Guardian (London), February 15,
2013.
5. "Dassault CEO talks of hope and uncertainty". The Hindu. 26 July 2013.
6. "Reliance, Dassault planning facility to produce warplane wings: report". NDTV. 10 December 2013.
7. "RIL, Dassault plan to set up Rs 1,000-cr warplane facility". Financial Express. 10 December 2013.
8. Pandit, Rajat (2014). "Mega 126-fighter jet deal will be inked next fiscal, defense minister AK Antony says".
indiatimes.com. TNN, February 7, 2014.
9. See also Deccan Herald, Monday, March 31, 2014, p.1.
10. Vivek Raghuvanshi (2014), India's Fighter Jet Negotiations Stall over Delivery Commitments, filed under World News,
Asia & Pacific Rim, June 16, 2014, 3:45 am.
11. Indian MRCA competition, Wikipedia, the free encyclopedia, retrieved July 6, 2014.

Ethical Issues:
1.
2.
3.
4.
5.
6.
7.

Was the process by which the IAF and the MOD selected Dassault as the finalist in the MRCA tender closed bid
legal and ethical, and why?
Is the Indian Defense ministry morally justified in prolonging the Dassault-Rafale deal negotiation for over two
years, almost doubling the cost originally agreed upon?
Is this prolongation an example of good moral reasoning and good moral judgment?
Given that Indias air defense based on aging and obsolete MIGs was progressively weakened, to what extent
was the long delay in the Dassault-Rafale deal a prudent and brave proactive defense strategy? In short, was this
delay a violation of the four cardinal virtues?
Is the French government justified in putting pressure on India for expediting the Dassault-Rafale deal?
Is the LCC conceptual shift valid and necessary? Explain. Will it spur corruption?
How can legal, ethical and moral reasoning skills and processes on the part of buyers and sellers bring this deal
to a closure?

Case 7.2: Arun Jaitley, Modiys Chanakya

[See Nivedita Mookerji and Veenu Sandhu (2014) Modis Chanakya, Business Standard, Weekend, July 5, 2014, p.1. Rakesh
Joshi (2014), Five Big Ideas for Jaitleys Budget, Business India, Cover Feature, June 9-22, 2014, pp. 34-40]

Arun Jaitley, 61, is at the center of politics in New Delhi. The most powerful leader after Prime Minister
Narendra Modi, Jaitley heads two critical weighty ministries, Finance and Defense, two of the top four ministries in
India, the other two being Home (Rajnath Singh) and External Affairs (Sushma Swaraj). He also handles Corporate
Affairs. All these three big portfolios for a man who had just lost the first parliamentary election he had contested
from Amritsar (his birthplace), and had expressed his reluctance to accept a ministerial assignment on moral
grounds (Business India: Cover Feature, June 9-22, 2014, p. 35). Jaitleys long-standing relationship with Modi is
one of the reasons the latter has entrusted him with so many big portfolios. All party spokespersons run to him for
advice. Ministerial colleagues like Nirmala Sitharaman (Commerce & Industry Minister) and Piyush Goyal (Power)
rush to seek his guidance. He is Modis ace troubleshooter on almost all issues. Modi depends upon on Jaitleys
sharp legal mind for taking critical decisions. Besides his legal background, Jaitleys large circle of friends in the
media, judiciary, big business, bureaucracy and even sports, makes him a critical asset in the Modi government.
Jaitleys friends cut across party lines. He shares a good relationship with Congress leaders Jyotiraditya
Scindia, Ahmed Patel and P. Chidambaram. It is said that for the forthcoming Budget he even consulted
Chidambaram and ex-Prime Minister ManMohan Singh. Soon after taking office, Jaitley had an hour-long meeting
with RBI Governor Raghuram Rajan. Among other things, the two discussed ways to contain inflation and revive
economic growth. Marketing consultant Suhel Seth calls Jaitley the Amol Palekar of Indian Politics. Suhel Seth,
who has known Jaitley for well over two decades, asserts there isnt an iota of change in the man, whether hes in
or out of power. Hes truly a 2 am friend. Though a disciplined man who loves his early morning walk in Lodi
Garden, Jaitley is known to party regularly. Besides Seth and Karanjawala, his close friends include Attorney
General Mukul Rohatgi, Hindustan Times Group Chairperson Shobana Bhartia, and bureaucrat turned politician N.

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K. Singh.

The Makings of Arun Jaitley

Jaitley is a Brahmin, and a BJP spokesperson described him as Modis Chanakya, recalling Chandragupta
Mauriyas advisor around 400 BC. Jaitleys parents are from Punjab. His father, Maharaj Kishen Jaitley, a lawyer,
came from Lahore, while his mother, Ratna Prabha, belonged to Amritsar. The couple was in Amritsar expecting
their first child, Aruns older sister, when the Partition riots broke out. The family decided to stay on in India. Later
they moved to Naraina Vihar in Delhi into a house vacated by a Muslim family that had left for Pakistan. MK Jaitley
resumed his legal practice, while the growing boy Arun Jaitley was schooled at St. Xaviers Delhi, a missionary
school, and later was admitted by the prestigious Sri Ram College of Commerce (SRCC), where he soon became the
college union president. Arun was smart, articulate, and a good debater, recalls his classmate at SRCC, Raian
Karanjawala, senior advocate and founder of Karanjawala & Co. From SRCC Arun proceeded to study law in Delhi
where he became the president of the Delhi Students Union when Indira Gandhi declared emergency. The day
Emergency was declared I slipped out of my residence. The police took my father into detention but being a lawyer
he was released immediately, Arun Jaitley told Business Standard recently. The next day of Emergency, Arun
Jaitley organized a massive protest at the Delhi University campus and was promptly arrested under the
Maintenance of Internal Security Act. He spent the next 19 months in prison, opting not to seek early release
through an apology or an assurance that he would not participate in any political activity. He handled his time in
prison in a stoic manner. The only time I thought he was a little low when, on one occasion, he was not allowed to
sit for his exams and he missed a year recalls Karanjawala.
In 1980, when Indira Gandhi returned to power, Jagmohan, the Lieutenant Governor of Delhi, tried to demolish
the Indian Express building. Arun Jaitley challenged it in the Courts (on the other side was Abhishek Manu Shingvi,
later Congress leader). That incident brought Arun Jaitley into close contact with Ramnath Goenka, Arun Shourie,
Fali Nariman, and Swaminathan Gurumurthy, Goenkas chartered accountant and legal advisor. It was this
association that brought Arun Jaitley to the notice of Vishwanath Pratap Singh in 1986-87. When VP Singh became
Prime Minister in 1989, Arun Jaitley was appointed Additional Solicitor General, one of the youngest to hold the
post.
Arun Jaitley became a minister in 1999 when the National Democratic Alliance (NDA) came to power. Arun
handled the Law, Information & Broadcasting, Disinvestment, Shipping, and Commerce & Industry portfolios.
While he found the Law Ministry intellectually challenging, Arun enjoyed and governed better as a minister of
commerce. He took on the US and the European Union over trade liberalization in Doha, drew the blueprint for the
Special Economic Zone Act, pushed for opening Indian retail to foreigners, and convinced the government and the
RBI to allow Indian companies to buy lands overseas. Now as Finance Minister, its good to see someone with an
exploring mind, says Ajay Shriram, Chairman, Shriram Group.
Arun Jaitley took care of his staff as a lawyer beyond the call of duty. Traditionally, lawyers are entitled to
charge 10% of their fees as clerkage (charge for clerical work) from clients, but not many lawyers share this money
with their staff. Arun Jaitley always did, says Om Prakash Sharma, his one-time political secretary and now a Delhi
MLA from Vishwas Nagar. Jaitley founded a clerkage corpus fund whereby he ensured that the children of all his
staff go to good schools. Some of them have grown up to become dentists and engineers. He also used this money
to help his employees own a house, adds Om Prakash Sharma who has known Jaitley since 1972.
Arun Jaitley is married to Sangeeta (Dolly Aunty of many BJP juniors), and has a daughter Sonali, now a
lawyer with her own practice and who also campaigned for her father in the recent Amritsar MP seat campaign. Not
less than forty of Jaitleys relatives had turned their homes into campaign offices. Being so astute and so much
supported by his campaign crew, how and why did Arun Jaitley lose the Amritsar seat to Congress opponent
Amarinder Singh? That will remain a mystery for some time. Recently, however, Sangeeta and Sonali went back to
Amritsar to feed orphans on Sonalis birthday. Arun and Sangeeta have a son, Rohan, who just completed masters in
law at Cornell University, USA.

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Arun Jaitley is a man of simple tastes. His family often travels by trams and buses on vacations abroad.
Recalls a friend, while on a holiday in Vancouver, he chose Sarvana Bhavan over fancy restaurants. Though a
workaholic, he does not let work stress him, say his colleagues. You will never hear him shout, even if he is
annoyed, says a BJP junior leader. Critics sometimes suggest that he rules too much by the head and too little by
the heart, but I have not found him to be a heartless person said Abhishek Manu Singhvi.
Those who campaigned for him in Amritsar say that he ensured that even the street-play actors called from
Delhi were looked after. Known to enjoy a hearty meal, Jaitley, however, is frugal and temperate and keeps his
indulgence in check. His other passions are cricket and old Bollywood films and songs. While Jaitley lived at his
house in Kailash Colony, his official residence, 9 Ashoka Road, was open for use for others. It is here that cricketer
Virender Shewag got married, as did BJP National Secretary Vani Tripathi.
Arun Jaitley, along with Narendra Modi, Sushma Swaraj, and Pramod Mahajan, was among the most popular
leaders groomed by L. K. Advani in the 1990s. After Mahajan passed away and Modi shifted to Gujarat, Jaitley
acquired the mantle of being BJPs chief strategist, managing several assembly polls and the 2009 general elections.
Jaitley stoutly defended Modi when the latter came under post-Godhra fire from the media and the politicians. The
most critical point in the Modi-Jaitley relationship came when Vajpayee wanted to fire the then chief minister of
Gujarat after the 2002 riots. In a tension-filled meeting in April 2002, along with Advani, Arun Jaitley preempted
Vajpayees move to dethrone Modi. Jaitley flew to Gujarat and travelled with Modi to the national executive
meeting in Goa where, before Vajpayee could proceed, Modi offered to quit only to be rejected unanimously by the
gathering. It was a master strategy that worked, and the bond between Modi and Jaitley has grown stronger since.
Currently all eyes are on Arun Jaitley as Finance Minister as he prepares to present his first National Budget
before July 31, 2014. He has taken charge at a time when Indian GDP growth has got stuck below 5% for the
second year in succession, and there is fear that the fiscal deficit may exceed 5% of GDP in 2014-2015. In his initial
comments after taking over the Finance Ministry, Jaitley acknowledged the challenging times the Indian economy is
facing. We have to restore the pace of growth, contain inflation, and obviously concentrate on fiscal consolidation
itself said Jaitley. Despite the mess that government finances are in, expectations are high. The country hopes his
Budget will reflect the quality and challenge the country deserves.

Ethical Issues:
1.
2.

3.

4.
5.
6.

What are the moral economic and political challenges to Arun Jaitley as the Union Defense Minister of India,
and what are the modes of ethical and moral reasoning and judgment does this Office need for fulfilling the
sacred duty of defending and protecting our country and enhancing peace along all its borders?
What are the moral economic and political challenges to Arun Jaitley as the Union Finance Minister of India,
and what are the modes of ethical and moral reasoning and judgment does this Office need for fulfilling the
paramount duty of fighting inflation, sustaining growth, global trade surplus, and eradicating poverty and
disease in India?
What are the moral economic and market challenges to Arun Jaitley as the Union Corporate Affairs Minister of
India, and what are the modes of ethical and moral reasoning and judgment does his Office need for fulfilling
his critical duty of bringing about economic recovery and growth, full employment with meaningful work, just
wages and salaries, financial market buyer-seller transparency, fiscal honesty and corporate citizenship?
If you were the corporate Chanakya to Arun Jaitley for bringing about social harmony and solidarity, and
eradication of gender and caste discrimination in the country, what advice will you give to bring about
distributive and corrective justice in areas marked with structured injustices?
If you were the corporate Chanakya to Arun Jaitley for bringing about educational, social, economic and
political reform in the country, what advice will you give to him based upon the ethics of virtue and the ethics of
mutual interpersonal trust?
If you were the corporate Chanakya to Arun Jaitley for bringing about strong and sustained economic growth in
the country via creativity, imagination, innovation, entrepreneurship and adventure in the educational systems,
what bureaucratic and regulatory structures would you dismantle based on the principles of teleology,

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deontology, distributive justice, and corrective justice, and why?

Case 7.3: Mukesh Ambani: The New Media Moghul in India!

[Daksesh Parikh (2014), The New Media Moghul, Business India: The Magazine of the Corporate World, Special Report,
June 9-22, 2014, pp. 42-46].

Towards the end of May 2014, the board of directors (BOD) of Reliance Industries Ltd (RIL) decided to acquire
control in Raghav Bahals Network 18 Media and Investments Ltd (market cap: Rs 5,665 crore) and its subsidiary,
TV 18 Broadcast Ltd (market cap: Rs 5,700 crore) [See Exhibit 7.3.1 for product offerings]. This was done by the
BOD empowering RIL to invest Rs 4,000 crore in Independent Media Trust (IMT), an entity whose sole beneficiary
is RIL. This meant that with money power, RIL, Indias second largest company by market capitalization, was
taking control of the Indian media. Obviously, such corporatization of media would seriously weaken all
independent media houses in India. If media should be objective and reliable, then it should be independent from
big businesses.
However, Professor Kanu Doshi, dean: finance, Weingkar Institute, argues that media, be it print or electronic,
is highly capital-intensive and can easily face cash flow problems. Earlier reports said that Raghav Bahal and some
of his key members decided to step down in order to make way for Mukesh Ambani and his team to take effective
control. Raghav Bahal, a first generation entrepreneur, who founded the media and entertainment house, initially
divested part of his equity some time ago, and still found it difficult to survive the competitive onslaught coming
from Times Now and ET Now, feted and fattened by Indias largest media house, Bennet, Coleman & Co Ltd, now
controlled by the Jains. Finding it increasingly difficult, Raghav Bahal has now decided to sell his enterprise to the
Mukesh Ambani team and use the realized sales revenue in another business venture. Professor Kanu Doshi sees
nothing wrong about this divestment; it is just a part of a global trend, he argues. For instance, Warren Buffet bailed
out owners of The Washington Post. Consultants Frost & Sullivan also rationalize this deal by saying that this is
the new reality in business.

Exhibit 7.3.1: Network 18 + TV 18: Assortment of Offerings

[Source: Daksesh Parikh (2014: 43)]

News
Business News
CNBC TV 18
CNBC Awaaz
IBN 7
General News
Regional News
CNN-IBN
Regional News
ETV MP
ETV - UP
Rajasthan
Bihar
Urdu
Kannada
Haryana
IBN Lokmat

Entertainment
Colors
Rishtey
MTV
MTV Indies
VH1
Nick
Sonic
Comedy Central
ETV Marathi
ETV -Gujarati
ETV - Oriya
ETV Bengali
ETV Kannada
Infotainment
History 18

Film
Production

Portal Business

Distribution &
Aggregation

Investments

Famous Titles
Bhag Milkha Bhag
Queen
Madras Caf
Bombay Talkies
Sons of Sardar
Kahani
Singh is King
OMG
Gangs of Wassepur

In.com
Moneycontrol.com
IBNLive.com
Firstpost.com
Burp
News 18
E-Commerce
selling products
through portals,
and TV Channels
through
HOMESHOP 18

Distribution of
ETV
TV 18
Viacom 18

Channels:
ETV Telugu
ETV Andhra
ETV Telangana

Publishing and
distribution of:
Magazines
Including:
Forbes
Chip
Overdrive
Modern Pharma
Entrepreneur
Auto Monitor

Financial Investments in start-ups:

Bookmyshow.com
Yatra.com
Ubona-VAS
Stargaze (multitheatre screen)
Colosceum
Production House
Topper Channel
for kids

In fact, the Indian TV industry as well as the cable/DTH service segments, have been struggling over the past
few years. Advertising is taking a beating. Conflict within the advertising industry over content carriage rights and
fees, poor regulatory support, heavy taxation, resource churn and the demand for digital content has seriously
impacted the advertising business in the negative. Increasing viewership, moreover, has not translated into profitable
bottom lines, and it is has been hard to sustain growth. Under such dire circumstances, consolidation seems to be
the only way to streamline operations, cut costs, and survive. Throughout multi-media and international distribution,
companies are working towards consolidation. The oft-repeated term convergence has been occurring in the
telecom, media and entertainment industries over the last few years (Gupta 2014: 42-43). For instance, Comcast, the
USs biggest cable multi-service operator, has recently proposed to buy Times Warner Cable for $45 billion

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another example of convergence or consolidation of two big companies, whose combined presence may reach every
third household in America. Earlier, Comcast had bought NBC Universal, a media and entertainment company, in
two stages, from GE the first lot in 2009 and the balance 49% stake in 2012.
Whether Mukesh Ambani has become a Media Moghul in India by 2014 is still debated, and possibly irrelevant.
The fact is that one of Indias largest business houses has taken stake in the media sector through investments from a
listed company. K. K. Birla, another media baron, had invested in The Hindustan Times, but it was through his
private funds. How Mukesh Ambani is going to ensure editorial independence and build a framework for keeping
commercial dealings at an arms length will be carefully watched and even emulated by others, who may even
contemplate similar media ventures, said Vimal Bhandari, CEO, Indostar Finance, a Mumbai-based NBFC.
Moreover, Mukesh Ambanis foray into media is part of an overarching strategy towards achieving leadership in the
telecom space, and not guided by any ambition of being a media Moghul. Planning to acquire a majority stake in
Network 18 and TV 18 is a well-thought-out strategy that fits in with RILs overall telecom roll-out plans. It is
synergistic with Reliances 4G plans, says Ashish Chugani, head, investment banking, Centrum Finance. In a
strategic deal, valuation is not relevant, argues Chugani. The deal cannot be examined as a stand-alone action in
isolation; it is part of the groups foray into telecom. By taking over Network 18 and TV 18, Mukesh Ambani has
ensured that he gets a head-start in the media and entertainment segment, one of the important building blocks that
ensure a leadership position in the telecom space. This acquisition will give Ambani a lot of content in education, ecommerce and entertainment. It will get RIL a presence across several verticals (see Exhibit 7.3.1) of news and
entertainment channels. It is, therefore, a smart strategy says Deven Choksey, CEO of KR Choksey Shares and
Securities, a Mumbai-based broking house. The takeover will allow RIL not just news and entertainment content,
but also facilitate e-commerce and offer interactive platforms to his telecom subscribers. RIL will control not just
content in news, entertainment and film production but also in the distribution mechanisms. Consumers are trying
new platforms to seek faster and accessible platforms to view content. Content is the prime driver in the digital
media. The world is going digital and new platforms are emerging. The leader will have to demonstrate not only
the quality of content but also leadership in packaging and delivering the contents on the platforms of consumers
choice, argues Smita Jha, leader, media and entertainment, PwC India.
Having full ownership of media content, platforms and distribution would give RIL a better bargaining power
with other content providers, especially when the telecom majors start charging for the content. In which case,
content companies will always remain cost centers for telecom companies, given the mushrooming of content (print,
television or internet) providers. Consolidation is the only way forward in this industry, says M. M. Gupta, CMD,
Jagran Prakashan, one of the few listed media houses in India that is making profits. Ambanis deal is sure to spark
off more such deals in the media space, adds Rasesh Shah, founder chairman, Edelweiss Group. Shah had earlier
facilitated capital flows to the TV 18 Group.
But, while everyone may agree that RILs forays into media is a long-term 4G strategic move, will Mukesh
Ambani deliver quality products and platforms and enable the media to grow to desired global levels of excellence?
Most business houses, foreign and domestic, that have taken to media have made yet another commodity. Content,
platforms, films production, distribution, technology - each component of the media value chain needs a specific
mind set and creative skills, says Pritish Nandy, chairman, Pritish Nandy Communications, a listed company focused
on the production of films and having a string content library. The Ambanis may have an edge over others in
content, delivery, and technology, says Pritish, but this may not ensure quality and excellence along the entire media
value chain. It is best left to small entrepreneurs or start-ups to develop new technologies, and content is best left to
creative hub-shops. Pritish Nandy opines that conglomerates should focus on delivery and distribution, and not on
content that must be left to young artists spread all over the globe.
Meanwhile, other investors with deep pockets like the Ambanis are indeed making inroads into the media space.
Kumar Managalam Birlas Aditya Birla group is another industrial house venturing into media. It has picked up a
minority stake in the India Today group which, like Network 18 and TV 18, has also a presence across verticals,
including production of original content for television, Indias largest printing press and magazines of repute like
India Today, across several languages and Business Today.

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Ethical Questions:
1.
2.
3.
4.
5.

The ability to exploit media content over various distribution mechanisms may give Ambanis the edge, but is this
ethically and morally good for India in terms of objective news content, quality entertainment content, radical
technological breakthroughs in 4G platforms, and marketing breakthroughs in films production?
Do you fear that control of the entire media value chain that the Ambanis are aspiring as a good 4G strategy may
eventually commoditize media, and ethically and morally compromise the ultimate symbol of free India and the
bastion of Indian democracy? Explain.
Is convergence or consolidation in the culture-intensive media industry a morally and ethically healthy development
given the rich social, religious, cultural and linguistic diversity of India?
Media dominance will compromise and even threaten economic freedom, political choice, moral national conscience,
and value-education among the youth, as it happened in India during the 2014 elections and in other parts of the
world. Will this be another threat to free enterprise capitalism? Explain.
What ethical and moral reasoning and moral judgment skills will you deploy for stalling the current consolidation
moves in the Indian media industry, and to what effect?

The Ethics of Executive Moral Reasoning and Moral Judgment

Besides providing materials for addressing ethical questions raised under Cases 7.1, 7.2, and 7.3, this
Handout 07 addresses a crucial moral question: What ethical theories enable me to arrive at the moral
justification of my corporate business strategies, decisions and actions? Business managers, in general,
and corporate executives, in particular, could use various ethical theories or ideologies in arriving at
ethical judgments and moral justifications. There is a wide distribution of ethical ideologies and moral
philosophies among corporate decision makers (Fraedrich and Ferrell 1992a), and executives may often
switch moral philosophies between home and work environments (Fraedrich and Ferrell 1992b).
While individual personality factors, ethical ideologies, and moral philosophies influence corporate
decision making processes, ethical scholars have researched a number of other factors that are also found
to influence ethical decision-making among executives, such as corporate culture, organizational culture,
one's significant others, opportunity to be unethical, and the individual's role and function within a
decision-making team. It has also been found that these latter factors provide more insight into how
ethical decisions are made on a daily basis (see also Fraedrich and Ferrell 1992a, b; Fritzsche and Becker
1984; Laczniak and Inderrieden 1987; Mayo and Marks 1990).
Hence, recently there has been an increasing tendency among corporations to ground their company
ethics-training programs more on relativistic sociological sources such as corporate and organizational
culture, behavioral and cultural universals, than on universally normative ethical ideologies, theories,
moral principles and philosophies. This is an unfortunate shift, and possibly, moral philosophers must
take the blame for it. This shift primarily results from philosophies and principles that are rather
absolutistic, dogmatic, abstract, and non-practical - features typically detested by the business world.
This handout revisits the major ethical theories of teleology, deontology, distributive justice and
corrective justice briefly stated in handout 01 but from the viewpoint of intrinsic versus instrumental
good, moral worth and moral obligation, moral conscience and moral justification. Such advance reviews
and synthesis of major ethical theories can provide additional insights as practical and readily applicable
principles for ethical reasoning and assessment. The focus throughout this chapter is how to apply ethical
theories of moral reasoning and moral judgment to executive decisions and moral obligations. Some
practical "business executive exercises" for ethical-moral reasoning and assessment are added. This
handout has two parts: Part I: General Application of Moral and Ethical Theories to Executive Decisions and
Moral Dilemmas, and Part II: Applying Specific Moral and Ethical Theories to Executive Decisions and Moral
Obligations

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Part I: General Application of Moral and Ethical

Theories to Executive Decisions
Ethics is all about making good and moral decisions. As a corporate executive our moral and ethical
concerns and decisions should be:

What should I do? What should I not do?

What ought I to do? What I ought not to do?
What am I obliged to do? What am I not obliged to do?
What should I become? What should I not become?
What should I be? And what should I not be?

Kohlbergs Theory of Phases in Moral Reasoning

It is generally agreed among psychologists (e.g., Kohlberg 1969, 1984) that ethical reasoning attains
full maturity through three main phases as one's decisions and actions get predominantly based on:

The immediate consequences of an action such as rewards and punishments (Pre-conventional

Phase);
On social approval, compliance or conformity (Conventional Phase),
On personal, moral or ethical, standards (Post-conventional Phase).

We assume that most business students and executives have reached the second stage of
conventional or the third stage of post-conventional moral reasoning During the third stage, maturity
increases through the internalization of moral judgments, and the standards of society are often a subject
of criticism. Executives may use, more implicitly than explicitly, some major ethical theories (e.g.,
teleology, deontology, distributive justice, corrective justice, virtue ethics, and ethics of trust) for ethically
analyzing and justifying corporate decisions and strategies. For instance:
Pre - conventional Phase: We do things because of the immediate consequence of an action such as rewards and
punishments.
1. I obey at work lest I should be fired (reward/punishment)
2. I obey at work as it benefits both the company and me (cost/benefits).
3. I obey at work that I may learn and grow on my job. (instrumental)
4. I obey at work for my colleagues and superiors (interpersonal).
5.
6.
7.
8.

Conventional Phase: We do certain things for social approval, compliance or conformity.

I obey at work, as everybody does it (social compliance)
I obey at work, as I need to be recognized (social approval)
I obey at work, because of my contract to do so (contractual)
I obey at work, as this is my duty (obligation).
Post-conventional Phase: We do certain things based on personal, moral or ethical standards and convictions.
9. I obey at work, for work unites humankind regardless of race, color, age, gender or creed (sociological).
10. I obey at work, because everybody should work for a living (deontological)
11. I obey at work, for work is human and humanizes me (philosophical)
12. I obey at work, for work is a divine mandate (theological).

As students of business and corporate executives to be, we could check where we stand in relation to the above sets
of motivations. For instance:

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a)
b)
c)
d)

Personally, where would we like to be on this ethics phase, and why?

Ideally or normatively, where should we be at this stage of your executive life?
How do we argue for higher forms of ethical and moral reasoning from the pre-conventional to the conventional
to the post-conventional phase, and why?
Does our executive moral reasoning become more objective, universalizable and reversible (in the Kantian sense
of categorical imperatives) as we ascend from the pre-conventional to the conventional to the post-conventional
phase, and why?

These are equivalent, if not identical, ethical questions that a course in business ethics should include.
These questions relate to commissions and omissions, rights and duties, moral obligations and
responsibilities. The word I in these questions can easily be substituted by institutions such as a
business, a venture, a corporation, a school, a university, a church, a government, and the like. The main
purpose of any ethical theory is to provide consistent and coherent answers to these practical questions.
In general, an ethical theory is the reasoning process by which we justify our particular ethical
decisions. An ethical theory helps us to organize complex information regarding an ethical problem (or
dilemma) at hand, the competing values and alternatives available to resolve the problem, and thus, arrive
at a solution to the above ethical questions.
In the past, teleological considerations were mostly emphasized; presently deontological norms are
getting attention; distributive justice and corrective justice considerations are just emerging. Even more
recently, corrective justice theory considerations and empirical applications are entering business ethics
literature (e.g., Mascarenhas, Kesavan, and Bernacchi 2008). We need all four ethical systems, including
virtue ethics and ethics of trust, especially for analyzing controversial cost-containment and revenuegenerating business strategies such as market dominance, consolidation, strategic alliances, joint ventures,
plants closings, mass labor layoffs, offshore outsourcing, and seeking strategic bankruptcy.

Major Normative Ethical Theories or Systems

A well-developed ethical-moral reasoning process or methodology should be guided by a framework
of theories, moral principles, moral rules or norms, whereby moral judgments regarding right or wrong,
good or bad, fair or unfair, and just or unjust may be derived and assessed. There are various theories in
ethics that attempt to do so. These theories try to answer the basic dichotomous questions of what is right
or wrong, truth or falsehood, ethical or unethical, moral or immoral, good or evil, and just or unjust, or,
the more general question: what should I do and what should I not do.
In general, ethical scholars distinguish at least three positions in judging the moral rectitude of human
actions (Beauchamp 1993; Frankena 1973; Schuller 1976): 1
1 The distinction between teleological and deontological ethical theories is usually attributed to C. D. Broad (1930: 206ff), Five
Types of Ethical Theory, (London: Routledge & Kegan Paul). In a subsequent Essay (1946) Some of the Main Problems in
Ethics, Philosophy, 21, Broad identified any teleological argumentation with a consequential one. According to Broad, one
characteristic that tends to make an action right is that it will produce at least as good consequences as an alternative open to the
agent in the circumstances. Broad also characterizes non-teleological actions such as an obligation to perform what one has
promised, regardless of consequences. The term consequentialism was coined by G. E. M. Anscombe (1953) and the term
Utilitarianism is traced to John Stuart Mill (1964). The distinction between the goodness and the rightness of an action was
introduced by W. D. Ross (1930), The Right and the Good (oxford: Clarendon Press). The terms right-making versus wrongmaking characteristics or good-making versus bad-making properties of an action were first discussed by Broad (1946) in
the article cited above. Consequentialists emphasize the fundamental difference between the moral rightness (or right-making
properties) and the moral goodness (i.e., good-making properties) of an action. The former concerns properties in the action-

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The moral correctness of all actions is determined EXCLUSIVELY by its consequences. To the question:
What should I do? this theory responds by the following guideline: Act in a such way that your action brings
about the greatest number of advantages over disadvantages, more benefits over costs, or the greatest good for
the greatest number of people. This theory justifies an ethical action by the outcomes or consequences of the
action in a given situation. Hence, this position is often called utilitarian teleology or consequentialism or
situation ethics.

This is an output-based version of teleology since it judges the moral correctness of the executive action from
its benefits versus costs, advantages versus disadvantages to the greatest number. But the problem is when and how
does the executive know the nature and degree and seriousness of benefits versus costs, or advantages over
disadvantages? Often, it may take days, weeks or months to do that moral and ethical assessment. Hence, this
version of out-based teleology fails to be a useful rule of moral assessment of executive judgment or action. A later
version (Broad 1946, see footnote 1 below) of teleology argues thus: Act in such a way that your action is geared to
produce at least more good consequences than evil ones, or more advantages than disadvantages to the greatest
number. This traces the morality of the act to the process than to the outputs. But even this version begs or urges
the same question: how and when do you know that your action is geared to produce better consequences? To this
the teleologists would counter by saying: Act in such a way that your pre-disposition is to do good and make it right
rather than the opposite. This as an input-based version of teleology, and boils down to striving right and being good
in all our actions, a position that Ross (1930; see footnote 1) held all the while, and which Broad (1946) adopted as
the final teleological rule.
A second theory of moral reasoning argues thus:

The moral correctness of all actions is ALWAYS ALSO, BUT NOT ALWAYS ONLY, determined by its
consequences. Certain conventions, principles, rules, rights and duties of involved subjects also determine it.
To the question, What should I do? this theory offers the following guideline: Act in such a way that you
violate no moral conventions or pacts, rules or principles, rights or duties, and, at the same time, you uphold
and fulfill most of your obligations, responsibilities and duties toward others. This position is called deontology
(deon = duty in Greek) or existentialism or situationalism.

This is a process-based version of deontology since it judges the moral correctness of an executive
action from its conformance or fulfillment of moral conventions or pacts, rules or principles, rights or
duties that concern the greatest number. But the problem is when and how does the executive know the
nature, extent and seriousness of moral conventions or pacts, rules or principles, rights or duties that
matter, especially if they are non-existent or not fully evolved and accepted? Often, it may take years and
decades to arrive at such pacts and conventions. Hence, this version of process-based deontology often
fails to be a readily applicable rule for pre-moral assessment of executive judgment or action. Hence,
Emmanuel Kant would argue thus: Act in such a way that your action is a norm for all mankind whatever
you do and wherever you are. This traces the morality of the act to the universalizability principle of
Kant that we internalize as an input to all our actions.
The third theory of moral reasoning is:

The moral correctness of AT LEAST SOME ACTIONS is in no way determined by their consequences. Thus,
while teleologically an action may have positive net benefits, and while deontologically the same action may
not violate any known moral principles, rights or duties, yet in the distribution of these net benefits there may be
some injustice: the rich may become richer while the poor become poorer. Hence, the need for a third ethical
system: that of distributive justice. To the question: what should I do? This theory answers: Act in such a way

situation that make it right or wrong, whereas the latter relates to the properties of the free will of the agent (e.g., benevolence,
love of justice, fairness) that makes an action good or bad.

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that, while fulfilling most of your duties and moral obligations, the benefits of your action clearly exceed the
costs, and that the costs and benefits, rights and duties are equitably spread across all people affected by the
action.

This is once again an output-based version of teleology-deontology combined since it judges the
moral correctness of the executive action from its benefits versus costs, rights versus duties, conformance
to pacts and agreements that bring greater advantages than disadvantages to the greatest number. But the
problem is when and how does the executive know the nature and degree and seriousness of benefits
versus costs, or advantages over disadvantages, rights over duties, pacts and agreements over non-existent
ones? Often, it may take days, weeks or months to do that. Hence, this version of process or out-based
distributive justice also fails to be a useful rule of moral assessment of executive judgment or action.
With utilitarians, we may be concerned with maximizing the good in society, and most of us would
not consider this alone as right. No doubt, an efficient society is one that is most capable of maximizing
the good of its citizens, but such a society is not a moral one unless its goods are justly distributed
(Grassian 1999: 88). Hence, teleology and deontology need to be supplemented by distributive justice,
and distributive justice by corrective justice.
There are other ethical evaluation systems (e.g., Egalitarianism, Libertarianism, Egoism), all of
which can be construed as subsets under any of the above three major ethical theory-systems. In general,
business ethics literature has used ethical theories of teleology (primarily utilitarianism) and deontology
(rights-based norms) (e.g., Hunt and Vitell 1986; Laczniak 1983; Murphy and Laczniak 198; Robin and
Reidenbach 1987, 1988a). Recent studies report also the use of distributive and corrective justice
principles. Business is filled with relationships in which power is uneven and chance can operate to both
the benefit and detriment of different publics (Robin and Reidenbach 1993: 100). Such inequitable
relationships need to be specifically addressed by distributive justice principles and unjust structures need
to be rectified by corrective justice principles. "The application of distributive justice system that is part
of capitalism affords the opportunity for abuse of power and marketers must attempt to understand how
and why abuse can occur" (Robin and Reidenbach 1993: 103).

Moral Judgments and Moral Justification

Judgments express a decision, verdict or conclusion about a particular action or about a person's
character based on our intuition or learning. Moral judgments express a decision, verdict or conclusion
about a particular action or about a person's character based on our understanding of moral theories and/or
their principles. The average executive in most circumstances has no difficulty making moral judgments
such as whether to tell the truth, whether a given decision is morally right or wrong, whether there is
conflict of interest, and so on. Our moral life is usually composed of a rich blend of directives,
experiences, parables, vignettes and virtues that suffice to guide us to moral judgments.
Moral reasoning is process of arriving at moral judgments. Moral judgments are followed by moral
justification of our moral judgments, decisions and their outcomes. A typical moral justification starts
with a moral judgment. It upholds the judgment by moral rules specific to the context and restricted in
scope. The moral rules are justified by certain moral principles, which are more general and fundamental
than moral rules. Finally, the moral principles are justified by moral theories, which integrate bodies of
principles, rules and action guides. The theories backing moral principles may themselves need to be
defended unless they are already well accepted among moral philosophers. If the proclaimed ethical
theories and moral principles are not commonly accepted, then one could further inquire if they need to

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be replaced, rejected, revised or expanded. Most executives defend their moral judgments in terms of
rules; few in terms of principles; and very few relate them to ethical theories.
Moral justification goes further to deliberate about these moral judgments and justifies them or the
principles underlying them. Moral dilemmas occur at the level of moral justification and not so much at
the level of moral judgment.

The Process of Justifying Executive Moral Judgments

In general, any moral justification of one's corporate judgment and decision involves five supporting
sets of beliefs and values held by a particular person in one or more of the following hierarchical series of
moral values:
A.
B.
C.
D.
E.

A set of normative ethical theories;

A set of moral principles derived from set A;
A set of moral standards derived from sets A and B,
A set of moral rules derived from set C, and
A set of moral judgments resulting from applying sets A, B, C or D while assessing concrete actions

Briefly, each set may be described as follows:

Moral or ethical theory is the reasoning process that one uses to justify one's moral judgments and ethical
actions. Major moral or normative ethical theories are deontology, teleology, and distributive and corrective
justice. More recent theories include personhood ethics (see Handout 03), virtue ethics (Handout 05), ethics of
trust (Handout 06), ethics of moral reasoning (Handout 07), ethics of rights and duties (Handout 08), ethics of
leadership (Handout 09), and ethics of responsibility ethics (Handouts 10-11).

Moral principles are more general moral axioms or guidelines derived from moral theories that pertain to
human or social welfare (teleological moral principles), to personal or social rights/duties (deontological moral
principles), to social justice (distributive justice moral principles), or to a sense of personal and spiritual fairness
or righteousness (e.g., virtue ethics, responsibility ethics). Example: The deontological principle of nonmalfeasance: Do not harm others; or the Golden axiom: Do unto others what you would like others to do unto you.

Moral standards are less general or more specific moral norms of behavior that require, prohibit or allow certain
actions. Such norms are derived from moral theories and their moral principles. Moral standards are
teleological if they relate to social costs and benefits; they are deontological if they uphold rights and duties; they
are related to distributive justice if they deal with issues of fairness and justice, and fourthly, they are related to
virtue ethics if they promote a general sense of physical, functional and moral wellbeing. Examples of
deontological standards: Do not kill; do not steal; do not lie; do not be avaricious.

Moral rules are concrete applications of moral principles and moral standards to a society, corporation,
government or any social institution, given the situational context of economy, politics, culture, science and
technology. Example: Do not produce or market harmful products since: every consumer has a right to product
safety (deontological), a harmful product harms consumers and society (teleological), harmful products bring
about serious injustices to the public (distributive justice), and any harm destroys the physical, functional and
moral well-being of people (virtue ethics).Table 7.1 provides some well-known distributive justice moral rules.

Moral judgments: These are practical moral assessments of concrete executive decisions, strategies and actions
based on sets A, B, C and D. Some of these could be considered moral judgments applicable to several actions
over longer time-periods; then, these are tantamount to corporation standards of ethical conduct or the
corporate Code of Ethics. Statements of corporate codes could be typically moral standards or norms, which
are also derived from moral theories, but they are less general than moral principles or moral rules. Some
examples of moral judgments: Capital punishment is wrong. Child labor is evil. Sweatshops are dehumanizing.

Two criteria characterize moral principles:

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Supremacy: moral principles override other considerations such as contingencies, situations, self-interest, group
interest or politics. Examples: Do not harm. Speak the truth. Do not lie.
Universal: moral principles apply to all people under comparable conditions with no exceptions based on any
socio-biological factors such as gender, age, race, color, religion, nationality or social status. Examples: Kants
Universalizeable principle: Whatever you do should be a moral rule for all others. Kants reversible principle:
What all others do should be a moral principle that you should follow.

Besides moral theories, principles, standards and rules, there may be specific conditions and
circumstances that render a given moral judgment morally defensible. Moral justification is needed when
one has to defend one's moral convictions or judgments under a given situation.
Thus, particular judgments are justified by moral rules; moral rules are justified by moral standards;
moral standards are derived from moral principles, and moral principles are derived from appropriate
ethical theories. Table 7.2 captures this hierarchical process of moral reasoning. The derivation of moral
justification based on ethical theories is deductive. Moral justification based on the application of moral
principles is deductive-inductive, since this process may have some inductive elements of deriving the
moral principles through empirical inquiry. Moral justification via moral rules is inductive, as both moral
rules and their concrete applications to a given situation require search and empirical inquiry. Moral
justification through moral judgments is situational, as most moral judgments consider the concrete
business situation.

Rule versus Act Applications of Ethical Theories

Application problem: teleology, deontology, and distributive justice are all based on principles. However,
what is the ultimate source of appeal under each theory for the determination of morally right and wrong
actions? In this regard, it is conventional to distinguish between Act application and Rule application of
ethical theories.
The ACT application judges the morality of an act by applying a given moral principle directly to the
human act without any intermediary rules, while the RULE application judges the morality of a given act
only after verifying if the act conforms to firm and publicly advocated moral rules derived from that
moral principle or moral standards set up by past considered moral judgments. Thus:
RULE APPLICATION: Apply principles to rules, and rules to particular judgments or actions and
then judge the morality of the executive action.
ACT APPLICATION: Apply principles directly to particular actions or judgments to judge the
morality of the executive action.

Figure 7.1 traces the process that links the four sets (A: moral theories; B: Moral Principles; C: Moral
Standards and D: Moral Rules) to the derivations of moral judgments. This process may be based directly
on the normative moral theories and moral principles as ACT ethical applications; application of these via
moral standards (considered moral judgments) or moral rules is designated as RULE ethical applications.
From everyday executive moral judgments result executive moral choices, decisions and strategies, which
in turn may be ethically assessed using ACT or RULE assessments as indicated in Figure 7.1. From
executive actions follow the action effect complex of consequences, which we also need to assess by ACT
or RULE applications of the four belief sets (A, B, C and D). Finally, from resulting from executive

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action effect complex of consequences are executive responsibilities, which also may be ethically
assessed by ACT or RULE ethical application processes. In other words, one could start with ethical and
moral theories and arrive at moral judgments deductively using Figure 7.1 downwards. Alternatively, one
could start with ones actual moral judgments and decisions, and work ones way upwards in Figure 7.1
and derive their moral justification via moral rules, moral standards, moral principles and moral theories.
The vertical bi-directional arrows in Figure 7.1 indicate this upward-downward dynamic of assessing
executive decisions.
Figure 7.1 characterizes the process of assessing executive moral decisions and actions by linking
belief-sets A, B, C, and D with the corresponding act and rule applications. Act applications can derive
from the interaction (indicated by a bi-directional arrow) of both ethical theories and their moral
principles. Similarly, rule applications can arise from the interaction (also indicated by a bi-directional
arrow) of both moral rules and considered moral judgments. Executive moral decision-actions can result
from either act or rule applications of major normative ethical theories such as deontology, teleology,
distributive justice, and virtue ethics with their respective moral principles.
Given these executive decisions and actions, the underlying intentions and reasons, duties and rights,
could be deontologically assessed by act and/or rule applications of deontological theories and principles.
Similarly, the social consequences of these executive decisions-actions could be teleologically assessed
by act and/or rule applications of teleological theories. The moral responsibilities of the social
consequences, particularly, in relation to the fair distribution of rights and duties, costs and benefits, could
be distributively assessed by act and/or rule applications of distributive justice principles. Lastly, the
executive moral responsibilities of promoting physical, functional and moral well-being of all
stakeholders affected by executive action could be morally assessed by act and/or rule applications of
virtue ethics principles.

Executive Moral Dilemma and Challenges

The word dilemma is commonly understood as a "challenging problem" implying a "forced choice"
for the agent between two or more equally unfavorable (or fatal) choices or alternatives. Most moral
problems are usually posed as irreducible value-conflicting dilemmas, quandaries, predicaments or as a
multiple-choice problem (Whitebeck 1992). The attempt to force most moral problems into dilemmas
stems from one's neglect of what actually goes into the agent's deliberations, intentions, motivations and
reasoning processes. Kohlberg (1969) seems to assess one's moral development by one's forced choice
among limited alternatives proposed (Gilligan 1982).
Many business situations involve moral dilemmas where executives experience moral perplexity,
moral conflict or moral disagreement. As stated earlier, moral dilemmas originate at the level of moral
justification and not so much at the level of moral judgment. Executive moral dilemmas involve
concerns of moral obligation or moral rightness of a given executive action.
Business problems in general are best described as ethical-moral dilemmas that involve multiple
constraints, all of which may not be simultaneously satisfiable but which are definitely not just
dichotomous or multi-chotomous choices (Whitebeck 1992). Most business situations imply a real
human narrative form that extends over time, and not just faceless theoretical dichotomous dilemmas.

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Ethical Dilemma and Corporate Executive Decisions

An ethical dilemma is an undesirable or unpleasant choice relating to a moral principle or practice
(Maxwell 2003: 5). What do we do in such situations the easy thing or the right thing? What should I
do when a clerk gives me too much change? What should I say when a convenient lie can cover a
mistake? How far should I go in my promises to win a business contract? How do I deal with executive
pressure by cutting corners and over-rationalizing my downsizing decisions? How far do I doctor the
data in order to prove that I am turning around the company I am contracted with? How far should I go in
my promises to win a client?
In such circumstances, do we do the easy thing (ethics of convenience) or the right thing (ethics of
morality)? Many people believe that embracing ethics would limit their options, their opportunities, and
their very ability to succeed in business. In todays culture of high debt and me-first living, ethics may be
the only luxury some people are choosing to live without! Hence, morality becomes a private and costly
luxury. In order to be ethical, we must be honest with ourselves before we can be honest with others. And
this could be very challenging and inconvenient. Practicing the honesty discipline is inconvenient.
Paying a high price for success is inconvenient. Losing a high potential client or a much desired
promotion is inconvenient. (Maxwell 2003).
There are really only two important challenges when it comes to ethics: a) a standard to follow, and b)
the will to follow it. Such a standard can be the Golden Rule. This Rule has been expressed in every
living culture (see Table 1.8, Chapter 01). Using the standard we should have the ability to discern right
from wrong, good from evil, just from unjust, fair from unfair, and propriety from impropriety. The
second challenge is that we have the dedication and commitment to do what is right, good, just, fair and
proper and that we have the moral courage to consistently avoid what is wrong, evil, unjust, unfair and
improper. Ethics entails decision and action, commission and omission (Maxwell 2003: 24-25).

Moral Dilemma and Executive Decisions

If we believe we have only two choices: a) win by doing whatever it takes, including being unethical,
and b) to be ethical and lose we are faced with a real moral dilemma.
A moral dilemma is a situation in which an agent is morally obliged to do an action X and is also
morally obliged to do another action Y, when at the same time the agent is precluded by circumstances
from doing both.2 For instance, if X is to win by doing whatever it takes, even if it is unethical, Y is to
be ethical and lose! Few executives set out with a desire to be dishonest, but nobody wants to lose
(Maxwell 2003: 7). At the same time, while we desire honesty and plain dealing, we are still not winning
the battle of ethics. Companies are even teaching remedial ethics to employees via online ethics
courses, not because they need ethics, but in order to evade punishment. Under federal guidelines,
companies that have ethic programs are eligible for reduced fines if convicted of wrongdoing (Ryan
2002).

2Technically, a

trilemma (a conflict between three equally compelling choices), a quadrilemma, and so on are conceivable,
depending on the number of close competing economic alternatives we confront in making economic decisions that also have
moral implications. For instance, today free enterprise capitalism poses as an economic and moral trilemma: a) If we allow labor
productivity to grow faster than the growth of GDP, then we create less employment; b) When the real interest rate exceeds the
real growth rate of GDP, then debtors are impoverished and creditors are enriched; c) An increase of real GDP growth violates the
condition of ecological sustainability.

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The reasons supporting X and Y are weighty, but neither set of reasons is dominant to force action.
That is, each set of reasons, considered in itself, is a good set, but may not be sufficient to oblige or justify
an action. If one acts on one set of reasons, the action will be desirable in some aspects but undesirable in
others. Hence, one needs both good and sufficient reasons to act morally.
In general, moral dilemmas may take two forms:
a) Some evidence indicates that act X is morally right while some evidence suggests that act X is morally
wrong, and the evidence on both sides is inconclusive; e.g., seeking downsizing via massive layoffs;
seeking bankruptcy to resolve chronic insolvency.
b) The agent believes that on moral grounds act X ought or ought not to be performed; e.g., plant
closing; forced retirement of employees.

Moral dilemma of form (a) deals with the rightness of the act, while that of form (b) concerns
obligation. Most moral dilemmas are created by conflicting moral principles that generate conflicting
demands.3 Moral dilemmas and disputes not only involve conflicts between moral rules, principles and
theories but also on factual beliefs about the situation to which the rules, principles and theories are
concretely applied. Often factual beliefs reflect our current scientific, metaphysical and theological
(religious) thinking. The latter underlie our beliefs and help us to interpret current phenomena that create
moral dilemma. Factual beliefs often revolve around cost and benefits, and risks and uncertainties
associated with obliging actions.4

Resolving Moral Corporate Executive Dilemmas

Many situations involve ethical dilemmas created by conflicting moral principles, which in turn
generate conflicting moral demands. Typical examples are:

3 Some moral philosophers argue that there are many types of practical dilemmas but never genuine moral dilemmas.

A genuine
moral dilemma is a situation in which two moral oughts are in a type of conflict in which an action that one ought to perform
cannot be performed without forgoing another action one also ought to perform. This is form (b) moral dilemma. These
philosophers advocate one supreme moral value that overrides all other values, moral or non -moral, with which it might be in
conflict. The only real ought, in this theory, is the ought generated by the supreme value (Gowans 1987, Santurri 1987). The
major problem here is to identify, establish and socially accept this one supreme moral value outside the context of one's religious
beliefs. Often it is difficult to determine which moral value is so supreme as to override other oughts (Beauchamp and
Childress 1989).

Moral dilemmas should be distinguished from "moral weakness". The latter revolves around the old Socratic problem: how
can one know what is right and yet do what is wrong? Hare's (1964) version is slightly different: If moral principles guide moral
judgments, and moral judgments guide moral conduct, then how can we think, e.g., that we ought not to be doing a certain thing,
and then not be guided by it? The normal answer to these questions is in terms of "moral weakness" or "weakness of the will" or
"overpowering desires", all of which are similar but not identical terms (Matthews 1966). In general moral weakness is a
tendency not to do something that we commend, or do something that we condemn. According to Aristotle (1984), moral
weakness may lead to two behaviors: 1) a marketing executive could cheerfully accept bad principles, act in accordance with
them, and not feel compunction, 2) a marketing executive may follow one's desires against one's moral principles, act on them,
and feel remorse. The former is "corruption", and the latter "weakness". Other forms of moral weakness are procrastination
(needlessly postponing moral decisions), backsliding (slipping from moral to immoral behavior type), irresolution (vacillating
from moral decisions) and intemperance (lack of self-control).

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a) John, a recently hired salesperson is sure of a serious product flaw in a medical drug that the
company has been selling to generate revenues. If he does not continue to sell it, he may be fired; if
he pushes it well, he may turn the company around and reap high success bonuses. What should
he do?

b) Jane, another salesperson in the same company, finds that Jack Doe has been doing exceedingly well
in prospecting and realizing sales of that flawed medical drug. Jane has also found that Jack has
been bribing purchasing managers (e.g., offering kickbacks) to stimulate purchasing. Should Jane
let Jack continue his marketing strategy, or should she discourage him from bribing, even at the risk
of depressing sales?
c)

Jim, a recruiter, has the authority and responsibility of filling a position in his firm. His friend John
applied and was qualified. However, another applicant, Jane, seems even more qualified. Jim wants
to give the job to John, but he feels guilty. He applies the moral principle that one should be
impartial. Nevertheless, Jim also argues from the virtue of friendship: friendship has a moral
importance that permits, or even requires, partiality in some circumstances. He hires John and
rejects Jane. Was he morally right?

In resolving these dilemmas, corporate executives may adopt the following procedure:
1.
2.

3.

4.
5.

Specify the conflicting moral (teleological, deontological, distributive justice and virtue ethics) principles
involved in the dilemma.
Identify the conflicting moral (teleological, deontological, distributive justice and virtue ethics) obligations
involved. Thus for Case (a): duty to users, to prescribing doctors, and to USDA; also duty to the corporation, to
his own sense of executive integrity (virtue ethics), job security and performance. Case (b): duty to code of ethics
and virtue ethics that forbids bribes in the form of kickbacks; duty to consumers who must eventually pay for
the kickbacks; on the other hand, duty to the company, to the consumers of the drug, to self, and duty to
perform well. Case (c): duty to be impartial in hiring; duty to both John and Jane; duty to the company that
needs best skills, and duty to perform well as an executive. Hiring John in the place of Jane may involve conflict
of interest.
Identify other feasible alternatives to the one in question. Case (a): rectify the product flaw; warn the doctors;
warn prospective users; withdraw the product from the market. Case (b): let Jack progressively reduce
kickbacks; change kickbacks to alternative favors that are accepted by the corporation; change Jack's sales
territory. Case (c): recommend John to another company; hire Jane now, but John later if Jane proves
inefficient; or hire John and Jane on a part-time basis dividing the budgeted salary between them.
Consider which alternative would you choose if by fulfilling one obligation (alternative) another must be
contravened, and why?
What crucial circumstance would change the priority of obligations (alternatives) you have identified?

Other things being equal, an executive choice is more ethical if he or she seriously investigates more
competing alternatives before selecting the most socially beneficial alternative.

Executive Moral Conflict Management

Conflict has been perceived as a major problem in all organizations throughout the centuries.
Classical organization theorists argued that conflict produced inefficiency and was therefore undesirable,
even detrimental to organizations, and hence should be eliminated or minimized to the extent possible.
But with the emergence of social systems and open system theory, the older view of conflict has changed.
Organizational conflicts are now considered as legitimate, inevitable, and sometimes even positive and
desirable indicators of effective management (Rahim 1983). It is even believed that within certain limits
conflict may be essential to heighten productivity. Lobel (1994) even argues that the absence of conflict

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might be a sign of an unhealthy organization. When dealt constructively, conflicts enhance creative
definition, formulation and solution of problems (King 1999:1); it can lead to change, adaptation, and
survival. However, much would depend upon two factors: the intensity of the conflict, and the way the
conflict is managed. In general, if the conflict intensity is moderate and if managed well will impact the
organization positively (Schermerhorn 2001 339). The issue then is to design and engage techniques that
empower individuals and organizations to handle conflicts productively (McNary 2003). In fact, most
scholars view today that conflicts, if properly channeled, can be an engine of innovation and change
(Dressler 1998:511).
People respond to conflicts in different ways, depending upon the degree of assertiveness versus
cooperation people bring in to conflict management. Assertiveness is the desire to satisfy ones own
needs, desires and dreams. On the contrary, cooperativeness is the desire to satisfy anothers needs,
concerns and desires. Using these opposite concepts of cooperation and assertiveness, Schermerhorn and
Chappell (2000: 218) distinguished and empirically verified five interpersonal styles of conflict
management:
Assertiveness

Cooperativeness

Hypothesized Interpersonal Style for Conflict

Management

High

High

High

Low

Low

High

Low

Low

Medium

Medium

Accommodating or Smoothing
(Playing down conflict and seeking harming among parties)
Collaborating or Problem Solving
(Searching for a solution that meets each others need)
Avoidance
(Denying the existence of conflict and hiding ones true feelings)
Competing or Authoritative Commanding
(Forcing a solution to impose ones will on the other party)
Compromise
(Bargaining for gains and losses to each party).

Part II: Applying Specific Moral and Ethical

Theories to Executive Decisions
The first questions moralists want to ask are, what actions are morally correct? and what actions
are morally wrong? That is, what actions are morally right or what actions are morally obligatory?
Specifically, moral questions relative to corporate business executives are: As a corporate executive what
should I do? What should I not do? What ought I to do? What I ought not to do? What am I obliged to
do or not obliged to do? These are equivalent, if not identical, ethical questions. Other moral general
questions include what things in life are worthwhile or desirable?
Various theories of moral value or obligation respond to these questions, as well as the moral
dilemmas we illustrated in Part I. In addressing concerns such as these, moral philosophers make a
distinction between instrumental and intrinsic good.

An instrumental good is good because of its consequences, e.g., work is good because of the wages it
earns, and wages are good because they provide buying power; buying power is good because it can
satisfy ones consumer needs, wants, and desires, and satisfying ones needs, wants and desires is
good as it makes us happy and contended, and so on. On the other hand,

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An intrinsic good is good by and of itself; e.g., happiness, honesty, integrity. These are terminal
goods sought for themselves. These are ends in themselves and not means towards further ends.

The concepts of moral value, obligation, instrumental and intrinsic good are important in the
understanding the free enterprise business system. [We will address the theory of intrinsic evil in Part
III, under the theory of double effect]. Normative ethical theory is the reasoning process that one uses to
justify the moral (instrumental or intrinsic) goodness of judgments, actions, or institutions, given a free
enterprise market system. Ethical scholars distinguish at least two primary positions (e.g., teleology,
deontology) when evaluating moral rectitude of decisions, actions and institutions (Beauchamp 1993;
Frankena 1973).
According to teleology, a right conduct is determined solely by what is achieved by the conduct, that
is, by the intrinsic good it brings into the world. Consequently, a teleological theory of moral value or
obligation is dependent on some theory of intrinsic good (Grassian 1992: 51). Some teleologists define
intrinsic good as pleasure (these are called hedonists); others define it as happiness (these are called
eudemonists); others, as ones own greatest good (this position is called ethical egoism), and yet others, as
the greatest good for everyone (this theory is called utilitarianism).
Teleologists further distinguish whether an intrinsic good is commensurable; that is, whether there is
some common unit or benchmark by which one can assess or rank the intrinsic good in terms of relative
value. Those utilitarians who are consequentialists affirm this common unit. Those who do not agree are
nonconsequentialists who invoke the natural law theory. According to this natural law theory, there are
several independent (noncommensurable) intrinsic goods such as human life, children, and the family that
one cannot tradeoff for another good by some common scale of comparison.
The intrinsic goodness of life, child, family, and society, according to the natural law theory, either
comes:

From the laws and purpose of nature upon which human nature is patterned (this was the position
of ancient Greek philosophers like Plato and Aristotle) or
From our innate conscience that is implanted and informed by God; (this is essentially the moral
theology of Christian moralists such as Aquinas and John Locke).

Both positions are called absolutist since the immutable laws of physical and human nature are
finally traced to the immutability of God. Obviously, atheists, agnostics, and those who do not want to
assume God in moral discourse, do not accept the natural law theory.

Teleological Schools of Moral Obligation

An objective teleological (consequentialist) assessment would imply that one can (Leys 1952):
1.
2.
3.
4.
5.
6.

Foresee all the critical consequences of the action.

Pre-estimate their impact on various stakeholders including the environment.
Ascertain which consequences are willed or intended explicitly and which unintended but implicitly built in.
Judge the net benefits of the willed action.
Seek other alternative actions that can do better, and
Accordingly, judge the merits of this action.

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All six steps call for serious research and objective reflection. There could be lingering doubts
whether corporate executives would foresee all critical consequences and pre-assess their impact on all
stakeholders (Hunt and Vitell 1986). Lack of time, data, skills and moral endurance often make objective
application of teleology very difficult, if not impossible. Given our rapidly changing informationintensive, volatile and turbulent environments (Achrol 1991; Glazer 1991, 1993), one may neither foresee
nor control all the consequences of one's executive decisions or strategies. Owing to this inherent
difficulty, teleology has evolved into many versions, each trying to be more practical than the other. The
major versions of teleology are egoism and enlightened egoism.

Egoism states that some desired results are exclusively personal, and personal good takes primacy over social good.
Enlightened Egoism states that when personal good is sought it should be sought in conjunction with long-term social
good.

Enlightened egoism appears under three versions: Hedonism, Utilitarianism, and Eudemonism,
depending upon the specific rule applied.

Hedonism states that an action is ethical when the social good desired is pleasure and when it results in the
gratification of the maximum number of people involved in that action and affected by that action.
Utilitarianism (especially, the version of Jeremy Bentham and John Locke) defines the rightness of an action or
institution as that which maximizes total utility (personal and social good) of the greatest number, or that an act or
institution is ethical only if the sum total of utilities generated by it is greater than the sum total of comparable
utilities produced by a competing alternative.
Eudemonism requires that the social good sought should be happiness and self-fulfillment of the maximum number.

The ethical systems of Plato (e.g., Republic) and Aristotle (e.g., Nicomachean Ethics) are
eudemonistic. In general, teleologists define morality of decision, action, or an institution by their
consequences.

Utilitarianism of Jeremy Bentham

Utilitarianism has a wider appeal among Americans because of its pragmatic nature. Most scholars
of ethics use the term utilitarianism to refer to the specific systematic theory of Jeremy Bentham (17481832), an English jurist and philosopher, who was the first to coin this term. It also refers to the later
refinements of this theory at the hands of his many disciples, in particular, John Stuart Mill (1806-73), an
English philosopher and economist. Bentham criticized the natural law theory since the bourgeoisie of
his day complacently used it to defend the natural and inalienable rights of private property of the
privileged class, binding themselves to the legalized inequalities and exploitation that the exercise of
these rights entailed (Grassian 1992).
In the place of the natural law theory, Bentham proposed a universal principle of moral criticism that
could cut through the partiality of the bourgeois status quo and the abstractness of natural law and rights:
the greatest happiness for the greatest number. Bentham called it the principle of utility. This
principle, as Bentham saw it, had two great values: a) it was universal in that it referred equally to all
human beings and not just to some, and b) equating morality with the maximization of happiness was
determinable real entity capable of scientific measure (Bentham 1789/1948). Happiness (pleasure and
unhappiness or pain) can be measured and compared in quantitative terms. For each alternative, one
could use a moral arithmetic or moral reasoning that sums up items of pleasure likely to be
experienced and subtracts items of likely pain, and choose the alternative that has the greatest net sum of

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pleasure for the greatest number (Bentham 1789/1948).

Thus, the rightness of an action or law depends upon its consequences. In this moral accounting,
all individuals would be treated equally, no individuals pain or pleasure dominating anothers. One may
not be able to foresee all the consequences of pleasure and pain, and hence, moral judgment is subject to
correction as new and unforeseeable consequences come into light. There may not be certainty regarding
any moral judgment, and nor would there be exception-less moral rules (other than the principle of
utility). This is the inevitable price one must pay for the finiteness of human foresight (Bentham
1789/1948).
According to Adam Smith, Benthams contemporary, self-seeking individual interest will tend, in the
long-run, to coincide with the general interest. In Smiths theory of laissez-faire economics, a situation of
unfettered economic competition where each producer attempts to sell ones own products and services
and maximizes ones own profits, laissez-faire leads in the long-run, without any conscious intention, to
the most efficient economic system for all concerned. This is the foundation of capitalism. However,
most reject the laissez-faire theory of Smith as an over-optimistic assumption of human nature - that
individual and community interest would ultimately converge.
Bentham used this principle to develop his hedonistic utilitarian theory. The goal of life, he said,
was to create as much human happiness as possible. We should condemn a human desire only when it
comes into conflict with other desires that promise to create greater human happiness in the long-run.
One should not construe morality as a conflict between inclination and an abstract duty, but rather as an
attempt to arbitrate between conflicting inclinations as to maximize happiness. Either in a situation of
individual moral choice or in legislative deciding between conflicting laws, the right act or law is that
which among all alternatives produces the greatest happiness for the greatest number. The conventional
morality rules such as never lie, never break promises, or never kill are not absolute exception-less
rules, but are mere social conventions or moral guides precisely because they maximize happiness of the
greatest number, and this is the principle of utility.
There are obvious problems with Benthams version of utilitarianism:
1.

If there are no absolute moral principles, so is the principle of utility. It may be a true principle, but how do
we know that our sole basic moral obligation is to maximize human happiness of the maximum? Bentham
never explained the source of our ultimate moral obligation to maximize human happiness, especially when
this obligation conflicted with our own interests (Grassian 1992: 76).

2.

According to utilitarianism, morality is nothing more than a maximization of human desires, such as the desire
for happiness. In which case, human reason is subservient to ones desires or passions. Reason is the slave of
the passions, said David Hume.

3.

Further, Bentham agreed that he could not prove this principle since it is used to prove everything else and a
chain of proofs must have their commencement somewhere (Bentham: Theory of Legislation, Preface). That
is, this principle is either self-evident or known by intuition (Sidgwick 1907). According to the utilitarian G. E.
Moore (Principia Ethica, 1903), there are certain moral rules whose violation so regularly leads to bad
consequences that one would be mistaken in violating them in any given situation. Such is the principle of
utility. It is exception-less because a person will never have sufficient information in a concrete situation of
moral choice to know that in this situation breaking such a rule will have the best consequences.

4.

The utility principle of maximizing happiness of the greatest number treats everyone equally; but there are
special social responsibilities that require we consider the happiness of our family, or close relatives and

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friends as more important. That is, one must fulfill ones special moral obligations that the principle of utility
seems to disregard.
5.

Related to this, the principle of utility involves but does not distinguish between two maxima: total happiness
for all individuals and the total number of individuals who share that happiness. Which maximum is better:
total amount of happiness, or its wider distribution? Can one voluntarily sacrifice ones share of happiness in
order to reach the sum of happiness to all, especially, the disadvantaged? Alternatively, can we kill someone in
order mistakenly to maximize the happiness of all? - Most martyrs were killed that way. Thus, the principle of
utility disregards principles of distributive justice. For instance, a war against a foreign country may
maximize happiness for all Americans, yet it does not justify it as thousands of innocent foreign people are
killed in the process. An act which maximizes the sum of human happiness is not the best until that happiness
is justly distributed among the greatest number, especially the most deserving.

6.

Which is better, a world population of 10 billion with the same sum of happiness thinly distributed among
them, or a world of 5 billion people with each ones happiness doubled? By the principle of utility, the first
should be better than the second alternative!

7.

Happiness is subjective: the pleasure of one may be the pain of the other; the gain in happiness of one could be
at the loss of happiness to another. One could easily delude oneself as maximizing the happiness of others
while maximizing their pain. The recent cases of corporate frauds illustrate this.

8.

Further, we may maximize our happiness, but thereby jeopardize the happiness of future generations. This
happens every time we damage our environment permanently by overusing or abusing its scarce resources.

9.

Our obligation not to harm people is much more stringent than our obligation to help people. Utilitarians
cannot give any justification to this moral distinction.

The major difficulty with utilitarianism is that it is unable to deal with two kinds of moral issues:
namely, rights and justice (Bowie: Toward a New Theory of Distributive Justice, pp. 20-4). Certain
actions that are morally right by the principles of utilitarianism may be unjust by deontological principles
when such actions violate peoples rights (Velasquez 2002: 83-6).

Utilitarianism of John Stuart Mill

J. S. Mill, an ardent disciple of Jeremy Bentham, tried to anchor the self-evident principle of
utility to the doctrine of psychological egoism that asserts: the pursuit of individual pleasure is the sole
human motive. According to psychological egoism, people seek only to maximize their own pleasure,
and seek the pleasure of others only as a means of satisfying their own pleasure. Both Bentham and Mill
agreed that there is no guarantee that self-interest would naturally lead to consider all humans equally and
seek the happiness of the greatest number. Hence, the theory of psychological egoism, far from proving
the principle of utility, disproved it. In his famous essay On Liberty, John Stuart Mill argued that the
principle of utility implies a commitment to the value of freedom that allows individuals to make their
own choices as to what is best for themselves and for others. There is no guarantee, however, that these
two values (individual and social) would coincide.
Thus, the principle of utility for Bentham and Mill demands courses of actions that produce the
maximum possible happiness. In other words, an action ought to be performed if the sum of the
happiness of all affected individuals would be maximized by the performance of action.
Success, money, prestige, and the like are normal sources of pleasure and happiness. These may not
be directly sought always. Thus, highly dedicated professionals among research scientists may dedicate
lifelong hours to the point of exhaustion for the sake of knowledge they hope to gain, even though the

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same individuals could have chosen different routes to happiness or pleasure. Knowledge, dedication,
integrity, and the like virtues are sought by the magnanimous. Friendship, health, and beauty are also
sought by people with high self-esteem. These are values that have intrinsic worth, apart from their
content of pleasure or happiness (Moore 1962). Those who seek these values seek happiness by making
humanity happy. Hence, the utilitarian principles of Bentham and Mill may not fully explain the
dedicated lives of scientists and saints, Olympic and major league athletes.

Deontological Schools of Moral Obligation

While in general, teleologists define morality of decision, action, or an institution by their
consequences, deontologists deny this claim and maintain that the morality of an action is independent of
its consequences. Moral rightness and wrongness are basic and ultimate moral terms (De George 1999:
80); they do not depend upon the commission or omission of good or evil, right or wrong. Ones duty is
do what is morally right and avoid what is morally wrong, regardless of the consequences of so doing.

The Theory of Kantian Ethics

Emmanuel Kant (1724-1804) wrote his famous ethical treatise Foundations of the Metaphysics of
Morals in 1785 before the rise of British utilitarianism, but he was well acquainted with the basic tenets
of that doctrine (Boatright 2003: 51). Hence, his ethical theory is best understood as a reaction to
hedonistic utilitarianism and its fundamental inadequacies: its reliance upon the notion of happiness as the
ultimate ground of morality, and its potential for injustice (Grassian 1992: 83). Kant rejected the view
that reason is a slave of human passions. Morality should be grounded in a value that gives human beings
their distinctive worth. Such a value cannot be a desire for happiness that is grounded in human
psychology. People may desire happiness, but they do not derive their dignity or moral worth as persons
from desiring happiness.
Human dignity is derived from human freedom and the ability to reason, characteristics that
distinguish humans from animals. What defines and grounds morality is human freedom and rationality.
Legal systems exist, said Kant, in order to secure the value of justice. Justice, in turn, demands that each
person enjoy the fullest possible liberty compatible with a like liberty to all. Hence, while the principle of
utility disregards distributive justice, Kants theory of moral worth affirms it.
Further, Kant, unlike the utilitarians, did not believe that people needed guidance in arriving at
enlightened moral judgments. The central problem of ethics is not what utilitarians pose: What would be
the right thing for a person to do in a given situation? Perhaps due to his deeply religious background,
Kant thought that the answer to this question should be obvious to every decent human being.
Discerning right from wrong was not the central problem for Kant; hence, he did not deal with moral
dilemmas or perplexities or conflicting obligations (this would be the central problem for Sartre). The
real problem is - having discerned what is right and what is wrong, how does one doggedly pursue right
and avoid wrong? That is, the ultimate question is, not what morality is, but how is morality possible?
Kant grew in a scientific world of deterministic laws, and consequently, his main inquiry was: how
do you reconcile free will (which is vital for any moral act) with physical determinism? If moral actions
were entirely governed by deterministic cosmic laws, then freewill would be an illusion, and people
would not be obliged to behave morally when they do not have a free will, which determinists seemed to

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deny.
Hence, Kant made a radical distinction between the physiological part of human nature (sensual or
animal natures) that deterministic physical laws may influence, and the psychological or spiritual nature,
which grounds freewill and moral choice. Unlike classical natural theorists who derived their concept of
morality from a biological and social view of nature, Kant attempts to free his moral theory from such
considerations and instead base it on the moral and free rational person. Hence, the basic principles of
morality bind all rational or free people, regardless of their psychological desires for happiness. Thus, the
concept of morality inextricably connects the concepts of rationality, freedom, impartiality and justice,
and respect for the autonomy of persons.
This concept of morality provides a ground for:

A theory of moral value (i.e., a theory of how we should determine when a person is morally
good).

A theory of moral obligation (that is, a theory of how we should determine when an act is right
and obliging), and also,

A theory of moral justification (that is, a theory of how we should determine when an outcome of
the act is good or harmful, and how the harm can be compensated).

Kants Theory of Moral Value

How do we determine if a person is morally good? It is insufficient to look at the persons actions
and their consequences without considering the motives and the intentions. Actions by themselves do not
reveal the moral character. A bad person may do right things for bad reasons, or a good person, with right
intentions, may mistakenly end up doing wrong things. The only thing that makes a person morally good
is that he/she acts from duty for its own sake; such a person has goodwill, and has moral character. A
person who does ones duty for any other motive (e.g., a retailer is honest for winning customer loyalty is
motivated by self-interest and not duty) does not deserve moral praise.
Even the person who is naturally good or kind and who does what is right or compassionate out of a
natural inclination without acting by a sense of moral duty is unworthy of moral praise. We should not
get credit for our natural inclinations since our heredity and environment largely determine them and over
which we have no control. However, if a person habitually does good out of duty, then his or her
subsequent actions, even if not done consciously out a sense of duty, are morally praise worthy because of
that persons learnt disposition to act from duty.
For Kant, responsibility or moral worth stems from the underlying principle of the will than from
the purposes or ends or excuses that precede the action or from the consequences that follow it. In this
sense, Kant's Groundwork of the Metaphysics of Morals (1964) is a treatment of an Ethic of Duty,
primarily as the Categorical Imperative, and secondarily, as an Ethic of Hypothetical Imperatives.
A categorical imperative demands that an action is as of itself objectively necessary, without regard
to any other end. It is fulfilling duty for its own sake, and not for any other ulterior motives.
Hypothetical imperatives are instrumental: here the actions are done for specific ends. For instance, if I
intend to lose weight, then I must eat less; eating less is a hypothetical imperative conditioned on the

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purpose of losing weight. If I do not need to cut down weight, then there is no imperative for eating less.
According to Kant, the "moral worth can be found nowhere but in the principle of the will,
irrespective of the ends which can be brought about by such action" (Kant 1964: 68). To use modern
terminology, Kant seems to argue for a deontological (i.e., duty-based) source of moral worth, than a
teleological (i.e., purpose-based) one. The underlying duty-principle makes an action a categorical
imperative, while the underlying purpose makes an action a hypothetical imperative. A categorical
imperative "declares an action to be objectively necessary in itself without reference to some purpose that is, even without any further end" (Kant 1964: 82). Categorical imperatives are "concerned not with
the matter of the action ... but with its form and with the principle from which it follows" (Kant 1964:
84).
On the other hand, hypothetical imperatives imply that "an action is good for some purpose or
other" (1964: 82). Such imperatives declare that an action is necessary "as a means to the attainment of
something else that one wills" (1964: 82); they concern ends and purposes, and hence, the matter (and not
the form) of an action. Categorical imperatives ignore purposes and ends, are not concerned with the
matter of the action (1964: 84) but only the principle guiding the will, and hence, refer only to the form of
the action (Wike 1987).5
Although Kant does not directly connect categorical and hypothetical imperatives to responsibility,
yet one can deduce the following relationship: categorical imperatives generate categorical or
unconditional responsibility; they ground absolute or necessary responsibility. Whereas hypothetical
imperatives generate hypothetical or relative responsibility, conditioned or relative to moral agent's ends,
purposes, and circumstances (Mascarenhas 2008). Absolute ends that are valued for their own sake often
rule categorical imperatives; that is, they are ends-in-themselves.

Kants Theory of Moral Obligation

Fundamental to most conceptions of morality is a commitment to the value of justice. With
utilitarians, our major concern might be maximizing the good in society, and most of us would not
consider this alone as right. No doubt, an efficient society is one that is most capable of maximizing the
good and minimizing the evil for its citizens, but such a society is not a moral one unless its goods are
justly distributed. Hence, the value of distributive justice is more fundamental than the value of teleology
or deontology.
Justice is the cornerstone of Kants theory of moral obligation. In his theory, the notion of justice is
inseparably tied to the notions of freedom and rationality (Grassian 1992: 88). Justice involves treating
individuals fairly, and this, in turn, involves considering them as rational moral agents who have the right
to make their own choices unless these choices interfere with the freedom of others. Justice demands,

5 However, it does not follow that the categorical imperative lacks purpose or ends.

While purpose or ends may not be the

source of the categorical imperative itself, nor of its moral worth, the categorical imperative itself may have ends or purposes,
just as the hypothetical imperative has ends or purposes. The major end of a categorical imperative is "objective" or absolute
end, valued in itself (Kant 1964: 95). Thus, persons or rational beings are objective ends (Zwecke) (Kant 1964: 96). If there is a
categorical imperative, it is because an end in itself, or an objective principle of the will, forms or makes it (Kant 1964: 96).
Thus, the end or matter of a categorical imperative is the objective or absolute end that makes it categorical. On the contrary
hypothetical imperatives have relative or subjective ends or purposes, these subjective ends make the imperatives hypothetical
(Wike 1987).

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therefore, that people cannot be used as means but treated as persons, free and rational moral agents.
Demands of morality are categorical imperatives. They are not means for achieving any desires or
objectives as such, but are pursued for their own ends; they are values or actions that are objectively
necessary by themselves without regard to any other ends. That is, moral demands are not conditional or
hypothetical imperatives. For instance, our moral obligations to keep our promises are in a way
dependent upon whether we desire to keep them.
Kant claims that specific categorical moral demands follow from a supreme categorical moral
principle that he calls the categorical imperative. This categorical imperative (CI), Kant claimed, is so
basic to moral thinking that all rational persons who understand what it means would accept it as binding,
regardless of their specific psychological, political or religious beliefs. Kant presents five formulations of
CI that he claims have an equivalent meaning. Some formulations are:

Act as if the maxim of your action (the subjective principle under which you act) were to become
through your will a universal law of nature (i.e., that everyone could not but follow that maxim).
Act in such a way that you always treat humanity, whether in your own person, or in the person of any
other, never simply as a means, but always at the same time as an end.

The first version is also called the principle of universalizability. That is, when we act on a certain
moral principle, we must be willing to accept the right of everyone else to act on the same principle. For
example, if I act on the principle, never break promises and never lie, regardless of the circumstances,
then this not universalizable, since there is an equally valid principle, lie if it is necessary to save an
innocent human life.
This first formulation also stands for and demands impartiality. Impartiality is at the heart of the
golden rule: Do unto others as you would have them do unto you. Confucius has a passive version of the
golden rule: Do not do unto others what you would not have them do unto you. But, what if a
sadomasochist hates himself: can he hate others by the golden rule? What if a person does not want to be
loved: Can he refuse to love others? Kants CI expresses in a more precise manner the real spirit behind
the golden rule without implicit reference to the vagaries or subjective preferences of human beings. To
what extent CI does this, however, is still debated.
The second formulation affirms human dignity that resides in rationality and freedom, equality, and
justice. This version of the CI expresses Kants view that if we treat people as means and not ends we do
not respect them as persons.
This Kantian doctrine has relevance for marketing. For instance, a recent marketing doctrine
considers customers as sovereign. One could interpret this to mean that customers are not means but
absolute ends-in-themselves, and therefore, marketers should bind themselves to customers by categorical
responsibility. Further, most marketing executive duties that directly deal with customers can be assumed
to be categorical imperatives such as, innovating and marketing consumer-safe products, truth in
advertising, being honest to customers, offering fair value to customers, and offering quality products and
services to all customers regardless of age, gender, color, race, and residence. On the other hand, some
executive duties may be deemed hypothetical or conditional responsibilities such as, offering discounts to
senior citizens, marketing state-of-the-art products, promoting salespeople based on sales-performance,
talent, education, age, or seniority, offering preferential credit terms to senior distributors, and satisfying
all company stockholders.

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The Kantian doctrine of categorical imperatives has also relevance for business management. For
instance, consider the doctrine that some of your stakeholders are sovereign. One could interpret this
to mean that certain stakeholders are not means but absolute ends-in-themselves, and therefore,
executives should bind themselves to at least certain stakeholders (e.g., employees, secured creditors,
long-term suppliers and distributors) by categorical responsibility. Further, some executive duties that
directly deal with some stakeholders can be assumed to be categorical imperatives, such as paying
accrued taxes, paying deferred wages to employees, paying bills of suppliers who supply only for your
company, workout schedules with the major bankers, due diligence before undertaking divestitures,
mergers and acquisitions, innovating and marketing consumer-safe products for your retailers and
customers, truth in financial statements, being honest with your bankers, honoring warranties and
guarantees on your products and services, and the like. On the other hand, some executive duties may be
reckoned as hypothetical or conditional responsibilities such as, paying dividends to your shareholders,
repaying unsecured loans, offering stock options to your senior management, paying hefty severance
packages to your CEO, cooperating with your hostile takeover sharks, and satisfying all company
stockholders.
Kants critics would argue that human freedom is not best manifested in choices involving moral
duty. The disposition to do ones duty may be as much determined by heredity, childhood training and
good school environment, for which they should not be morally praise worthy, rather than by any free
choice. Hence, why should a learnt disposition to duty be morally praiseworthy? Moreover, we do not
have a free choice whether we should have a good and kindly character even as we may not have a free
choice to be an evil and unkindly person. If the former does not deserve moral praise, the latter should
not deserve moral blame either. Kant would reply that people have less control over their temperament
and environment that makes them good or bad, but they can certainly control the moral principles under
which they choose to act.
Kants critics urge: it is one thing to act out of duty, but it is another to understand ones duty
correctly. What if one acts out of duty wrongly understood and another acts out of duty rightly discerned.
Should we praise both of them equally? Alternatively, should we blame the first and praise the second,
even though both acted out of duty? What if the first one wrongly understood duty because of inadequate
childhood training and improper environment, and the second understood it correctly because of adequate
childhood training and proper environment? In judging moral character, we must consider what a
conscientious (duty-conscious) person is conscientious about. Kant, given his deep religious training, did
not focus on this problem, as he thought that demands of duty were or should be clear to all.
Further, what if ones duty as informed by ones religion is not clear? For instance, consider this
case: Parents XYZ are Jehovahs witnesses who believe that blood transfusions are morally wrong. Their
only son, a minor, meets with an accident, bleeds profusely and when rushed to the hospital the doctors
urge blood transfusion without which he will die. XYZ are confused in their duty: duty to a religious
belief versus duty to their only son. There are many similar situations when the demands of duty may
not be too clear. What would Kant advise? What would you? Is one duty to religious belief just
fanatical, fickle or secondary when ones duty to save ones only son from imminent death is real, critical
and primary? Who should decide this: the parents, the son, or the society?
Furthermore, where does moral effort feature in ethics? For instance, consider A is by disposition
very calm and compassionate, and B is by disposition very excited and violent. If both restrain
themselves equally well under very similar circumstances, should not we commend B more than A, as B
would have exerted much more moral effort?

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Conscience and Moral Obligation

The existence of conscience is one of the most widely validated concepts in psychological,
sociological, religious, and philosophical literature (Covey, Merrill and Merrill 1994/2003: 65). Whether
called inner voice (Book of Wisdom) or the collective Unconscious (Sigmund Freud and Carl Jung),
our conscience has been recognized as a major part of human dignity and endowment. When corporate
executive develop their vision and mission statements, the collective unconscious of the corporate
executives frequently comes to the surface when most of them get deeper into their inner lives, regardless
of their religion, upbringing, nationality or culture. They seem to have a common unique sense of the
basic laws of life we call conscience. They all carry within them an educated conscience, and often, an
educated delicate moral conscience that we have nurtured, internalized and developed over almost all the
conscious years of our life.
Immanuel Kant said, I am constantly amazed by two things: the starry heavens above and the moral
law within. Conscience is the moral law within. It is the overlapping of moral law and behavior. It is
the voice of God in us or the innate sense in us of fairness and justice, of right and wrong, of kind and
unkind, of what is true or false, just or unjust, of what contributes and what detracts, of what beautifies
and what destroys. Ones culture may dress and translate this moral sense or conscience into different
kinds of practices and words, but this translation does not negate the underlying sense of right and wrong.
This universal conscience is a set of values, a sense of fairness, honesty, respect and contribution that
transcends culture, time, and space; it is self-evident; it is the requirement of trustworthiness . When
people live by their conscience, their behavior echoes in everyones souls. People instinctively feel trust
and confidence toward them. This is the beginning of moral authority (Covey 2002: 4-5).
Conscience was originally a term used by the Stoics in their gnostic moral philosophy. Conscience
was defined as that inner guide by which the wise persons regulated their activities regardless and spite of
the opinions of others. In this sense, conscience is conscientiousness or social consciousness. However,
conscience does not guarantee free autonomy, to think and do as far as ones knowledge guides that
person. Good conscience surrenders to higher good such as fraternal charity, responsible citizenship, and
religious faith. Sometimes, even rightful freedoms must be foregone (e.g., engaging in a just war). A
good moral conscience needs to be educated by (Covey, Merrill and Merrill 2003: 67):

Reading and pondering over the wisdom literature of various religions, especially their sacred scriptures; they
broaden our awareness of truth and common sense through time;
Standing apart from and learning from our own experience;
Carefully observing the experience of others;
Taking time to be still and listen to that deep inner voice, and
Responding to that inner voice.

Both listening and responding to the inner voice is needed. Otherwise we dull our conscience. As C
S Lewis said, disobedience to conscience makes conscience blind. With our educated moral conscience
we connect with the wisdom of the ages with the wisdom of our heart; we become less a function of the
social conscience or social mirror and more of a person f character and conscience. Our security does not
come from the people we associate with as much from our own sense of integrity, a moral integrity.
Stephen Covey (2004: 77-82) emphasizes the following features of a good informed conscience:

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Conscience is an inner light, a small voice within, a moral sense, and a universal phenomenon. It is quiet,
peaceful, and harmony. The opposite voice the ego can be tyrannical, despotic and dictatorial.
Conscience democratizes, challenges and elevates ego to a larger sense of the group, the whole, the community,
the greater good, - the common good. It sees life in terms of service and contribution, in terms of security and
fulfillment of the other.
Conscience introduces us into the world of relationships; it moves us from independent to an interdependent
state. Conscience teaches us that vision and values must be shared before people will be willing to accept the
institutionalized discipline of structures and systems that embody those shared values. Such shared vision
creates discipline and order without demanding it. Conscience of ten provides the why, vision identifies the what
we are trying to accomplish, discipline represents how we are going to accomplish it, and passion represents the
strength of feelings behind the why, the what, and the how (Covey 2002: 9).
Conscience also transforms passion into compassion. It engenders sincere caring for others, a combination of
both sympathy and empathy, where pain is shared and received. Compassion is the interdependent expression
of passion (Covey 2002: 9).
Conscience is sacrifice the subordinating of ones self or ones ego to a higher purpose, cause or principle.
Sacrifice gives up something good for something better, something immediate and vaporous for something
eternal and lasting.
Conscience is discernment discerning between right and wrong, good and evil, moral and immoral, ethical and
unethical, fair and unfair, just and unjust, and truth and falsehood.
Conscience empowers. It reflects the worth and value of all people and affirms their power for freedom to
choose. It sees their potential for self-control.
Conscience teaches us that ends and means are inseparable. That ends actually preexist in the means. That is,
means used to accomplish the ends could be as important as the ends (E. Kant). Machiavelli taught the opposite
- The ends justify the means.

The ego is threatened by negative feedback; it seeks to negate the message by destroying the
messenger or the prophet. It is myopic and interprets all life through its own agenda. It interprets all data
in terms of self-preservation. It constantly censors information for threatening elements. It denies much
of reality. On the contrary, conscience values feedback and attempts to discern whatever truth it contains.
It embraces information, does not censor it, but accurately interprets it. Conscience is a social ecologist
ever sensitive to and preservative of nature.
The spiritual and moral nature of people is independent of their religion, religious cult, culture or
religious approach, geography, nationality or race. Yet all the major enduring religious traditions of the
world are unified when it comes to certain basic underlying principles or values (such as respect,
compassion, kindness, fairness, contribution, honesty, and integrity). These values are timeless, transcend
ages, and are self-evident. Conscience is the moral law within. It is the intersection of moral law and
human behavior. It is the inner voice of God to his children (Covey 2004: 77-78).
A conscience raised and developed well can oblige. The human conscience is not merely a social
construction. It is a genuine human process of assessment and judgment. It derives etymologically from
con + scientia = with + knowing. In this sense, conscience is self-reflexive and socially connected, a
knowing that is accountable to our deepest self, to human communities, and ultimately to God. Larger
purposes and standards beyond our self-influence and form the individual through conscience. Loyalty
and obligation to those larger purposes related the conscientious person to others in common cause and
mutual accountability (Spohn 2000: 122-123).
Conscience eludes precise definition, just like rationality, emotion, and choice. Conscience is not a
distinct or separate faculty of the mind. It integrates a whole range of mental operations. Conscience is a
personal, self-conscious activity integrating reason, emotion and will in self-committed decisions about
right and wrong, good and evil, fair and unfair, just and unjust (Callahan 1991: 14). Conscience begins in

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initial sensitivity to moral salience and moves to conscious empathy. Conscience engages in crosschecking ones critical thought, intuitive insight, affective valence, empirical possibilities, imaginatively
grasped analogies, and social corroboration. Reason tutors emotion and emotion instructs reason;
intuition is assessed against remembered experience; imagination projects possible scenarios that are
evaluated by affective resonance and critical reflection. All of these operations converge to the act of
making a moral judgment with as much freedom and commitment as we can muster. Conscience enables
more than individual moral decisions; it enters into the self-constitution of the person over time. Our
moral choices shape our character; they can make us or mar us. We become what we decide and do
(Spohn 2000: 123-124).
Morality bears upon conscience, which must judge between right and wrong, good and evil, fairness
and unfairness of various alternatives or strategies such as firing, hiring, promoting, downsizing, plant
shut downs, massive layoffs, outsourcing, the plight of the laid-off or the displaced and their healthcare
coverage, preservation of the environment, and the dignity of human labor. Conscience is not just what I
think about these issues, but it is me in the act of thinking about what is just and true. Conscience is that
part of us that is bigger than us.
Conscience implies at least three levels of reflection (Bransfield 2008: 17-18):
a)

b)
c)

Conscience is an inward reflection where I find a norm that obliges me (Catholic tradition calls this
synderesis). This awareness of the inner moral sense is the capacity of the person to hear the voice of God
within or the voice of faith. Conscience is founded upon truth therefore, it looks to God as the author of
truth revealed through right reason and teaching of the sacred scriptures (especially, the prophets). This is
the subjective aspect of conscience it relates to joy versus sadness, happiness versus guilt.
Conscience is also an outward reflection to understand the truth of the nature of things in themselves. This is
the objective aspect of conscience conformity with nature outside us and its laws it relates to objective
right and wrong, good and evil.
Conscience is the last and the best judgment I make based on my inward [level (a)] and outward [level (b)]
reflection; it is a virtuous fitting together such that the conscience is a manifestation of truth itself rather
our own preferences. Conscience emerges as a voice, greater than our own, from the two reflections.
Hence, a conscience needs to be informed, trained and educated.

Conscience has been described under two senses: a) anterior conscience and b) subsequent
conscience. The former is a mental and moral process; the latter is an outcome (e.g., my conscience
bothers me). OConnell (1990: 110-114) distinguishes three meanings of anterior conscience as capacity,
as process, and as judgment.
Conscience as capacity: It is our capacity to determine good from evil, and right from wrong and to
recognize corresponding moral claims. It is our capacity for responsibility, accountability and
commitment. It defines the human species. Despite the skepticism of postmodernism, there is
considerable evidence for a common human morality. We live under analogous moral systems and can
argue about moral issues across cultural and linguistic boundaries.
Conscience as practical process: It is a reflective process. It seeks to determine the right and
appropriate action in particular situations by perceiving moral salience and by taking into consideration
the perspectives of others. Depending upon the complexity of the moral situation, we strive to seek the
best moral decision by scrutinizing our options and by assessing their relative moral worth; we foresee or
imagine their consequences, recall relevant standards and comparable experiences, seek advice, compare
one source against another, and then arrive at a moral judgment. This process of moral reflection is not
necessarily sequential but a more circular path integrating so many different aspects of a moral situation.

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In order to deliberate wisely and accurately we need specific skills such as honest searching for the facts,
prudent reflection, a willingness to entertain dissenting opinions and unpleasant consequences, and
acknowledgement of personal bias and fallibility. At this juncture, conscience as processing skills and
conscience as capacity merge. Conscience reflects the degree of our personal maturity, emotional
stability, social awareness, and our virtues and vices.
Conscience as judgment: Our capacity and process of conscientious deliberations result in a
judgment, a decision that embraces truth and avoids falsehood, discerns right from wrong, and recognizes
and pursues good and avoids evil, and acts accordingly. At this stage we achieve a full congruent,
reflective equilibrium of reason, intuition, and emotion, and commit ourselves in a wholehearted decision
of conscience (Callahan 1991: 137). This is moral competence at its best. The truth discovered in the
process of our conscientious deliberation makes a claim upon us. We have found the right thing to do, a
morally compelling course to pursue, or follow the least harmful option. Failing to obey this claim would
violate our personal integrity. This is moral obligation.
We must distinguish the skills of acting well from the skills of reflecting well. To decide to act on
ones conscience calls for another set of virtues: resoluteness, courage, persistence, and passionate
attachment to the moral good.

Conscience and Moral Formation

Conscience also relies on the moral quality of our family we were raised and nurtured, of the groups
(e.g., schools, college, workplace, religious and social affiliations) to which we belong. Our moral
formation comes from them; we gain our moral bearings from these communities; we carry their voices
and values, for better or worse. Values are transmitted through groups (OConnell 1990: 170). We live
up or down to the standards of the groups to which we belong. In these groups we find our identity and
the inspiration and accountability to lead a moral life. We may trace the lack of a sound moral formation
among the youth today to a lack of sound moral values and crucial moral resources in our families and
society; there is too much value-neutrality, and occasionally, moral cynicism. The importance of moral
and role models in moral formation and social learning is more crucial than ever before (Bandura 1986;
Walker and Taylor 1991). The youth moral conscience is dull in USA today, as we do not nurture it with
an adequate moral value and vocabulary and when our own moral values are dulled by self-interest and
utilitarian advantage (Bellah et al. 1985; 1992).
Simply stated, relativism asserts that everything is relative; there are no absolutes. Thus, there is no
objective truth (ontological relativism). We cannot know or arrive at truth (epistemological or cognitive
relativism). There is no moral absolute truth or value (moral relativism). There is no objectively true and
permanently valued meaning and culture (cultural relativism
Relativism has two major counterparts: cognitive relativism and moral relativism. Cognitive
relativism dates from the Greek classic period. In Theaeteus, Plato presents Socrates arguing Protagoras'
relativist doctrine: Man is the measure of all things (homo mensura). Hence, there is no objective truth
possible. Relativism lay dormant thereafter till it resurged in the twentieth century when cultural
anthropologists made us aware of cultural pluralism and genuine cultural diversity in values, customs and
habits. At the same time 18th century Classic Rationalism (triggered by Kant and his followers) proposed
that man's reason can arrive at (even moral) truth independent of any revelation or authority or one's
religious faith. Classic Rationalism and Cultural Pluralism begot philosophical pluralism or relativism.

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Cognitive relativism, in its modern version, holds that truth (or its cognates) is relative to a
conceptual framework or philosophical orientation. Truth is truth (i.e., univocal or uniquely assertable)
within that framework or paradigm or culture or philosophy. It becomes equivocal (i.e., not uniquely
assertable) outside that framework (Krausz 1984: 397). Thus, the central tenet of cognitive relativism is
that the truth or the evaluation of truth is relative to the conceptual schema of an individual or the
situational context within which the assertion is made (Muncy and Fisk 1987: 21). Hence, cognitive
relativism does not reject truth (or falsity), its existence and our capacity to find truth. Skepticism is the
philosophy that denies truth, but it is different from cognitive relativism (Krausz and Meiland 1982).
Relativism generally rejects the idea of categorical truth (something is either true or false) and
"absolute" truth that is valid and true across all times, places and cultures. Cognitive relativism does not
assert that such absolute truths are non-existent (there may be such truths or falsitudes), but they cannot
be proved or disproved as such, given the relativist framework of one's investigation. All that cognitive
relativism says is that truth is relative to one's investigative framework. Given this understanding of
cognitive relativism, one can distinguish several types of cognitive relativism:

Aletheic Relativism: all truth is relative, relative to the individual, his or her purpose, or to the
conceptual scheme within which the truth is asserted;

Epistemic Relativism: criteria for verifying truth are relative to the context or conceptual framework
in which truth is investigated;

Subjective Relativism: any truth should be assessed in relation to the beliefs and attitudes of the
investigator system;

Objective Relativism: ceteris paribus, truth is invariant; that is, other things being equal, truth can be
compared and assessed; when other things are not equal, then either the truth or its criteria are
relative;

Conceptual Relativism: the conceptual framework of the investigator defines and determines the
truth or the perception thereof; as stated, this is a subtype of epistemic relativism.

The first two versions are distinguished by Vallicella (1984), and the latter three come from
Mandelbaum (1979). Often, relativism can be a combination of two or more types. Thus, Mandelbaum
(1979: 403) claims that the most common basic common denominator of relativism is the contention that
assertions cannot be judged true or false in themselves, but must be so judged with reference to one or
more aspects of the total situation in which they have been made. Obviously, this version of relativism
combines epistemic and subjective types of cognitive relativism.
Obviously, aletheic relativism is untenable; its assertion that "all truth is relative" must be itself
relative, unless one makes one's own position an exception to this rule, which Mandelbaum (1962) calls
the "self-excepting fallacy." Epistemic relativism or conceptual relativism are counterproductive - if all
truth must be evaluated only within the conceptual framework it is developed in, then other critics cannot
evaluate it, cannot appreciate it, nor use it, and epistemic-conceptual relativism degenerates to cognitive
enclavism. If science cannot be shared or interacted against, then it ceases to be "knowledge" or the
"received doctrine" on anything. Any theory is best evaluated against a framework different from the one
in which it was developed.

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Moral relativism is closely associated with value relativism and cultural relativism. Cultural
anthropologists assert three propositions regarding cultural relativism (Krausz and Meiland 1982):

The imperatives or values in a given culture should only be evaluated relative to the norms of that
culture.
There are no transcendental or culture neutral norms to evaluate different cultures or cultural
elements within a culture.
Hence, culture comparisons are meaningless; there is no such thing as a better or the best culture.

Value relativism maintains that each set of values, including moral values, is as valid as each other set,
and hence no society has a right to change the values of any other society (Krausz and Meiland 1982: 7).
Following cultural relativism, moral relativism holds two major tenets:

Whether an action is right or wrong can only be evaluated relative to the moral code of the
individual, society, group or culture where the action occurs.
There are no absolute, impartial, objective moral standards for evaluating (praising, condemning, or
revising) decisions or actions across individuals, groups and cultures.

In general, cultural, moral and ethical relativism was motivated by an enlightened tolerance for
nonwestern cultures, by a desire for philosophical and theological pluralism, and by one's rejection of
ethnocentrism (a belief that one's culture is better than other cultures). While certain forms of value
relativism are laudable, using moral relativism to sanction social evils such as slavery, genocide, racism,
xenophobia, chauvinism, and anti-Semitism, far from indicating tolerance to other cultures, reveals deepseated intolerance of the equality status of others.
From a philosophical viewpoint, any relativism is self-refuting, since the principles on which it is
based (such as the principles stated above) are themselves relative and hence can be challenged. One
could always assess other values, cultures and moral imperatives, as long as one does not assert that the
criteria of assessment are "absolute" (Siegel 1987).
Following cognitive relativist and skepticist arguments, moral relativists have also denied the
possibility of ethical theory on the grounds that there is no ethical knowledge (e.g., Baier 1985: 263;
Williams 1985). This is typically a non-cognitivist normative theory stand. Arguments against cognitive
skepticism are also valid in combating this position. However, there are others who, while admitting the
possibility of ethical theory and knowledge, are against any sort of normative ethical theory that guides
human behavior by systematizing and generalizing moral judgments. Three major arguments supporting
this position are that normative theory is a) unnecessary, b) theoretically impossible, and c) undesirable.
Clarke (1987), Rawls (1971: 48-50) and others have successfully argued against this rationalist position
(which Clarke calls "anti-theory"). Rationalist normative theory requires moral principles that are definite
in meaning so that moral judgments may be deduced from them. The norms of actual moral practices,
however, are vague in order to permit context to play a role in determining their application. Most moral
norms (e.g., thou shall not kill, not covet they neighbor's wife) bring with them a very rich "cultural
baggage" (Baier 1985) if these norms are to have any moral content at all. These norms get determinate
content only against the histories of their background institutions and the ways of life of people affiliated
to these institutions. Moral rules or principles are too abstract to justify any definite conclusions without
the interpretive background of cultural institutions and moral practices. Most moral principles are best
interpreted and justified against social "conventions" that generated these rules or principles (Hamshire

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1983: 163).
Table 7.3 summarizes the impact of cognitive and moral relativism, in some of their versions and
subsets, on moral decisions and executive responsibilities. Thus, every type or version of moral
relativism does not equally diminish executive responsibility. For instance, cognitive relativism with
all its versions may affect ones intellectual development but not necessarily ones volitional
development or moral development.
Applied to the executives moral development, the several versions of cognitive moral relativism
could imply serious consequences. For instance, in Aletheic Relativism all truth and therefore, all value
is relative, relative to the company or the executive, his or her objective, or to the business plan within
which the truth or value is asserted. Hence, the truth of a company statement (e.g., in a balanced sheet,
profit and loss statements or packaging labels) could be judged only within its conceptual framework,
which hardly makes sense. Moreover, if this were true, truth or knowledge would be insulated and
confined within the system in which it was generated, and could be hardly imported, used, and referred
to outside that system.
Similarly, according to Epistemic Relativism, criteria for verifying truth or genuine stakeholder
values are relative to the contextual or conceptual framework in which truth or value is investigated.
This would destroy the project itself that tries to persuade and negotiate products, services, values and
motivations across all its stakeholders, most of which are outside ones contextual and conceptual
framework. If all truth should be assessed only in relation to the beliefs and attitudes of the executives
investigator system, then executives could not relate meaningfully to each other. If the conceptual
framework of the executive and the company solely defined and determined the truth/value of all
stakeholders, then this would lead to solipsism or business enclaves, both of which would defeat the
purpose of business management as a discipline or practice.
None of the above five versions of cognitive moral relativism, either individually or collectively, can
significantly and in the long run exonerate moral responsibility of the executive. Since, if all truth or
value is relative, the statement asserting moral relativism itself must also be relative (Mandelbaum 1962).
On the other hand, if the firm and the Corporate climate within it, are rampant with moral relativism eithe r
in terms of absolute moral values (value-relativism) or cultural mores (cultural relativism), and if the
executives working within this firm and its climate are inextricably and inevitably constrained to decide
and act within such moral relativist frames, then to that extent their responsibility may be diminished
(Mascarenhas 1995; Mascarenhas 2008: 145-147). Nothing stops, however, a morally conscientious
objector to quit the firm in search of more morally conducive organizational cultures and climates.

Moral Obligations in Business Practice

With the discussions on moral worth and moral obligation and their principles thus far, we should be
able to apply them and put them to concrete business practice. Let us consider some practical cases. What
rules of deontological, teleological and distributive justice or moral obligation do the following strategies
uphold or violate, and why?
a)

An aggressive marketing executive hires only at the entry level, and promotes employees from within. His reasons:
1) internal promotions enhance bonding and trusting relationships between the firm and its employees, 2) they
encourage job-training and skills development; 3) they promote informal relationships that make formal hierarchy
less important; 4) they provide a sense of justice and fairness (loyal employees will not be bypassed in favor of

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outside candidates), and 5) they offer better incentives for good performance (Pfeffer 1994).
b)

A sales force manager will not contract out work formerly done by one's employees (Pfeffer 1994).

c)

A purchasing manager prefers a small number of suppliers in order to 1) develop long term and mutually trusting
relationships, 2) so that suppliers may achieve reasonable economies of scale in their operations, and 3) that they
may timely invest in assets specific to the production of the purchasing firm's needs.

d)

Japanese firms are reported to enter into long term "relational contracts" with their first-tier (important) suppliers
by manufacturing less than 30 percent of their components in house, whereas Ford and GM manufacture 50 and 70
percent of their components in house, respectively (Aoki 1988).

e)

Recognizing that pressure from mining, tourism, ... could undermine local culture, hunting, fishing, ... of the Inuit
Eskimos in Alaska, the Alaska's Department of Natural Resources included the Eskimos in their planning process,
thus minimizing such intrusions and by encouraging more benign tourist activities [Schwab, Jim (1990), "Paul
Davidoff Award: Alaska's Northwest Area Plan," Planning, 56 (March), 11].

f)

Hewlett Packard (HP) proposes to be an "intellectual asset to each nation and each community in which we
operate. ... This means contributing talent, time, and financial support to worthwhile community projects.... As
citizens of their community, there is much that HP can and should do to improve - either working as individuals or
through such groups as churches, schools, civic or charitable organizations" [Hewlett Packard (1989), Corporate
Objectives, Palo, Alto: CA, 15-16].

g)

In view of the high cost of losing customers and high sensitivity of profits to the retention of customers (Reichheld
and Sasser 1990), a store manager adopts product return, guarantee, and recall policies.

In general, all seven cases (a) to (g) uphold rights of ones internal stakeholders (e.g., employees,
customers, suppliers) and executive duties towards them. Overall, all seven cases advocate good policies as
they will contain costs and augment benefits. Hence, seemingly, deontological and teleological moral
obligations are satisfied. However, how do you verify about distributive justice-based moral obligations?
For instance, will strategies (a) and (b) generate excessive internal breeding, and hence, often perpetuate
mediocrity, without fresh and proven talent from the outside world? Bypassing better talent from outside in
favor of internal lesser skills may hurt the company in the long run. Thus, under what conditions are the
five reasons justifying internal promotions in case (a) and the three reasons rationalizing the small number
of suppliers in case (c) valid, reliable and non-discriminatory? In this connection, case (d) is no different
from case (c).
What do you think of the motivations underlying strategies under cases (d) to (g)? To what extent are
they altruistic? Do they tend to use the publics they intend to serve and support more as means to Corporate
ends rather than ends-in-themselves? Do these strategies evenly distribute rights and duties, costs and
benefits involved across all concerned stakeholders, especially the external publics?
Moreover, all strategies (a) to (g) fulfill moral obligations, if ever, as hypothetical imperatives and
instrumental good. How can you refine these strategies such they can approximate Kantian categorical
imperative generating intrinsic good of the stakeholders concerned?
Next, analyze the following arguments from a distributive justice point of view.
1.

A firm has a social obligation to maximize profits. Firms buy the goods and services they need for production.
What they buy they pay for. What they receive in payment for selling their goods and services, they receive
because the buyers consider them worthwhile. This is a world of voluntary contracts; nobody has to sell or buy. If
they choose to sell or buy, they must be deriving benefits from the transactions measured by the price paid or
received. Hence, profits really represent the net contributions that the firm makes toward the social good, and the

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profits should therefore be made as large as possible - this regardless of the unequal distribution of income that
results from unrestrained profit maximization.
2.

When firms compete with each other in buying or selling, they may have to raise or lower prices in order to get
more of the market to themselves. In either case, benefits accrue both to the firms, the suppliers and the customers,
and hence society gains from competition.

3.

The primary benefit of coordinating marketing plans and activities of diverse marketing agents is to increase
macro efficiency through region wide resource optimization, rather than individual marketing efforts that suboptimize resource uses (Samli 1992). For instance, multiple marketing agents (e.g., the mayor's office, the chamber
of commerce, a regional economic development association, a utility company,) may purchase advertising for a
region in consultation with one another, or coordinate marketing efforts as advertising for new businesses (Vann
and Kumku 1995). Such "pluralistic coalitions" bring about both macro efficiency and distributive justice in
resource allocation (Vann and Kumku 1995).

4.

Adam Smith in his Wealth of Nations (1776) wrote more than two centuries ago, "To widen the market and to limit
competition is always the interest of the dealers. To widen the market may frequently be agreeable enough to the
interest of the public; but to narrow competition must always be against it, and can serve only to enable the dealers,
by raising their profits above what they naturally might be, to levy for their own benefit an absurd tax upon the rest
of their fellow citizens," (p. 211).

5.

A producer of luxury suitcases uses behavioral inputs (e.g., management, marketing, labor and craftsmanship) and
physical inputs (e.g., machines, plastics, leathers, and brass) at a cost of $200. The customer is willing to pay $400
for it, and so it is priced at $400. The surplus $200 generated in the process may be primarily attributable to the
value added by the behavioral assets, and can be consumed or transformed into either value paper (e.g. bank
deposit, commercial paper, ...) or into a physical asset (e.g., building a new plant), thus adding to the wealth of the
firm. By continuously creating new value for the customers, the firm also creates value for its owners - it increases
the wealth of the owners (Falkenberg 1996: 6).

6.

If defect-free used cars of a certain vintage are worth $5,000 (Class 1) and similar cars with an average number of
defects are worth $3,000 (Class 2), and if prospective buyers of such cars cannot tell which cars belong to which
Class, two behaviors will result. Owners of Class 1 cars will not bring them to the market for fear of receiving
Class 2 price. Secondly, if Class 1 cars are not available in the market, and only Class 2 cars are offered for sale,
then prospective buyers will come to know that, and their refusal to buy them will force Class 2 prices down, even
eliminating Class 2 cars from the market. Soon only worst cars (lemons) will be offered for sale. If the cost of car
repair exceeds $3,000 to $5,000, the used car market will collapse entirely. Hence, the absence of reliable
information about individual used cars can result in substantial market inefficiencies (Noreen 1988).

For a good distributive justice analysis of arguments (1) and (2), see Nobel Prize economist Kenneth J.
Arrow (1993). Argument (6) is similar to the lemon problem first stated and discussed by another Noble
Prize winner Akerlof (1970). All six arguments uphold competitive rights and free enterprise markets, thus
promoting market justice.
Arguments (1) and (2) reaffirm the invisible hand doctrine of Adam Smith (1776), (see argument
(4)), which still needs to be proven. Argument (3) favors "pluralistic coalitions" as they bring about both
macro efficiency and distributive justice in resource allocation (Vann and Kumku 1995).Pluralistic
allocations may spell macro-efficiency, but they do not automatically guarantee distributive justice. Our
modern healthcare in the U.S. is based on pluralistic coalitions of doctors, hospitals, pharmaceuticals and
insurance agencies but this coalition has hardly generated an evenly distributed healthcare system.
Currently in the U. S., over 40 million people are uninsured and over 60 million are underinsured in critical

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healthcare. Argument (5) assumes that by continuously creating new value for the customers, the firm also
creates value for its owners. Is the reverse true or often assumed true? Argument (6) tells us that serious
information asymmetry in the car industry can destroy markets because of either adverse selection or the
buyers curse (see Mascarenhas, Kesavan and Bernacchi 2008).
Distributive justice rules imply equity-based moral obligations to shareholders and to larger groups
of stakeholders such as competition, 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 (Goodpaster1991). Moral obligations are
not only toward just good deeds that an executive may or may not do. Long-term loyalty relationships
with consumers are generated more by observing equality than equity rules.

The Problem of Necessary Evil or Inevitable Harm

Thousands of American youth were agonizing over the Vietnam War during the 1970s. All college
youth were drafted to the war by lottery and had to enlist for war duty if called. For most of these young
men and women these were the most significant moral decisions of their lives. They were strongly
pulled in two directions: the obligation to serve their country the call of patriotism, and their conscience
that lead them to believe that the USA government had a made a grave moral mistake in Vietnam the
call of moral conscience. Despite their upbringing, moral and philosophical training, personal history and
life experiences, culturally inherited values, institutions and practices, most youth struggled with this
moral dilemma and did not know what to do. They had all the information they could want, some
marshaled all the arguments, pro and con, about Vietnam, and they had all the moral education they could
handle, and yet could not easily cope with the demand of duty and the demand of ones conscience. Some
had many ideals, goals, commitments, laws, arguments, and motivations, and some of them were quite
incompatible with each other. Some options were good and presented themselves as strong legal and
moral obligations, and at the same time some options were evil and presented themselves as strong illegal
and immoral decisions, choices and strategies.
We continue to face similar situations from time to time when dealing with other contemporary
political situations such as terrorism, preventive wars, religious bigotry, ethnic cleansing and genocide,
abortions and infanticide, civil wars and civil disobedience, patriotic duty and moral conscientious
objections. We run into situations where we are confronted with conflicting goals and values, disparate
commitments, ambiguous moral laws, and irreconcilable motivations. Under each dilemma we confront a
diversity of goods, and we have no ultimate overriding principle for rank ordering them. Short of
deceiving ourselves, there is no such thing as right or wrong answer, and there is no simple method
for deciding how to act (Johnson 1993: 186-187). In any case, what is my duty to do good and duty to
avoid harm? While accepting praise for doing good, should I be held guilty for doing harm that I did not
intend? How should I take responsibility for the harm that I could not avoid?
One of the principle functions of normative ethics is the guidance of human choice and activity.
Ethics not only deals with protecting values and meeting human needs; it also attempts to provide us with
guidance about how we should act, what we should do and what we should not do if these values and
needs are to be fulfilled (Rehrauver 1996: 232). Both the Maker and the Citizen Metaphors and
paradigms of human action (see Chapter 02) provide us with norms and principles useful for the making
of important moral decisions prior to acting. The Maker paradigm says act so as to produce or realize
the good, while the Citizen paradigm will affirm Act in a lawful and dutiful manner. Obviously, both
these injunctions are very inadequate in dealing with doing things that produce inevitable harm while also

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producing good. Both principles are very useful in evaluating actions after they have been performed, but
they do not provide with a foolproof recipe for determining what is the right thing to do in case of moral
dilemmas such as described above. Only the paradigm of the Responder could offer some relief and help
in this situation.

The Ethical Theory of Non-Malfeasance

Often, some harmful effects are inevitable. A good action (e.g., surgery, business venture) may have
both good effects (cure, profits) as well as bad side effects (risk of bleeding to death, risk of failure).
Similarly, most actions of organizational downsizing (e.g., closing plants, offshore outsourcing, asset
divestitures, retiring models or products) have both good effects and bad consequences.
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. The principle of non-malfeasance as applied to any
executive act can imply four elements (Frankena 1973: 47):
1.
2.
3.
4.

The act should not inflict evil or harm (strict liability);

It should prevent evil or harm (preventive justice);
It should remove evil or harm (protective justice), and
It 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
and removing harm are alternate forms of promoting good (Frankena 1973). Procedural justice whereby
one is obliged to establish just procedures to prevent harm (e.g., of convicting the innocent or wrongly
releasing the guilty) is a subset of preventive justice.
According to Curd and May (1984), the following elements are essential to be ethically responsible
for a violation of the duty of non-malfeasance: a) the institution must have a duty to the affected party; b)
the institution must breach that duty; c) the affected party must experience a harm, and d) this harm must
be caused by the breach of duty. Duty may relate to commission or omission of an act. Imputability
accrues with breached duty, and accountability accrues with harm caused by breached duty. Duties of
non-malfeasance include not only not inflicting actual harm, but also 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" through the laws of strict liability when the duty of nonmalfeasance is violated (Stern and Eovaldi 1984). Such violations may involve commission or omission.
Negligence is a failure to guard against risks of harm to others (Prosser 1971); it fails below the
"standards of due care" established by law and morality, or determined by the principle of protective
justice (Jonsen 1977).
Hence, given the principle of non-malfeasance whereby not only all harm must be avoided and
prevented, but also risks of Harm be minimized, when and how can we morally justify some inevitable
harm that accompanies or follows certain executive actions? It is under such conditions that we invoke
the principle of double effect.

The Principle of Double Effect

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When executives are puzzled by the undesirable side effects of actions they feel morally obliged to
execute, then they could have recourse to the principle of double effect. This doctrine is grounded on the
principle of non-malfeasance, but differs from it. As discussed earlier, the principle of non-malfeasance
states that an act should do no harm to anyone at any cost and at any time. This principle is incorporated
in the Hippocratic Oath of doctors and physicians 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".
The correct understanding of the principle of double effect (PDE) has implications not only for the
licit self-defense of an individual (the context in which it was first stated by Thomas Aquinas, see
footnote below), but also for noncombatants in war, persons undergoing surgery who are significantly at
the risk of death, terminally ill patients receiving morphine for palliative care, and other cases that present
medical moral issues such as hysterectomy during pregnancy, ectopic pregnancy, and craniotomy. In each
case, the unintended death, though a foreseeable consequence of self-defense or surgery or anesthesia, is a
side effect of the directly intended aim of preserving life (Anscombe 1982). The PDE applies to a police
officer who in defending himself kills the criminal aggressor, as long as the officer uses minimal force
and does not kill because of his animosity against the attacker. Self-defense in such cases may not only
be permissible, but also required, when not to defend ones own life is to act with too little virtue of selfcare (Keenan 2008). PDE rests on the ability to foresee harm without intending harm.
The principle of double effect states: when an action has a twofold effect, one good and another bad,
the agent is morally permitted to act as long as the bad effect is not intended. Five conditions must verify
in applying this principle (ODonnell 1991: 30:
1.

The action, in itself (independent of its consequences),must not be intrinsically wrong or evil; it must be morally
good or at least morally neutral;

2.

The agent must intend only the good effect and not the bad effect; the bad effect may be foreseen, tolerated or
permitted, but not intended; the bad effect is allowed, but not sought; otherwise, the evil effect becomes a direct
voluntary effect;

3.

The bad effect must not be a means to the end for bringing about the good effect; that is, the good effect must be
achieved directly by the action and not by way of the bad effect; otherwise, the evil effect, like any other means,
would be necessarily directly willed;

4.

The good result must outweigh the evil permitted; there must be a favorable balance or due proportion between
the good that is intended and the bad effect that is permitted;

5.

The good effect cannot be obtained in some equally expeditious and effective way without the concomitant evil.

The agent must verify all five conditions simultaneously, with no priority or bias for any one against
the other. Overemphasizing the second condition would reduce the principle of double effect to
deontologism. Insisting only on the fourth condition would reduce this principle to utilitarianism. When
the executive fulfills all five conditions, the principle of double effect kicks in to safeguard the principles
of strict liability, protective justice, pre-emptive justice, and the principle of beneficence.
How to apply these five conditions, however, to concrete cases is a matter of some debate. The
moral language of defense, self-defense, and unjust aggressor does not adequately resolve the

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enigma of whether it is morally licit to act under certain circumstances. 6

Hence, to make the principle of double effect even more rigorous one adds the fifth condition: that
the action undertaken be seriously necessary, that is, it is the last and only feasible alternative or resort,
given the then level and availability of technology. With this condition, an executive may not want to do
what he intends to do; that is, he reluctantly does something (e.g., plant closings, outsourcing) that he
cannot morally avoid under the circumstances, even though it causes a bad effect (e.g., massive labor
layoffs, impoverishing worker families).The executive wills and decides plant closing directly as
something inevitable (condition 5), but does not intend the bad effect that accompanies it (e.g., massive
layoffs). The latter is circumstantial necessity. The effect (massive layoffs) that the executive clearly
sees will happen or that is very likely to occur is not intended. Some ground for this fifth condition may
be found in Faden and Beauchamp (1986, chapter 7) and Beauchamp and Childers (1989: 131-34).
However, it is not true that just because someone does not want a particular effect of a voluntary
action, that the person is relieved of all moral responsibility for causing the effect. The theory of double
effect is "not an attempt to absolve persons of responsibility for what they bring about but only to
determine what it is permissible to bring about" (Beauchamp and Childers 1989: 132). In other words,
the PDE speaks of moral permissibility of the action and not its strict liability. Moreover, in judging
responsibility the underlying intentions, motivations and character of the agent should be the most
important factors to consider (Hauerwas 1981).
Schematically, the principle of double effect may be characterized as in Figure 7.2. There may a
situation that is unique to the agent of the action, to the act itself, to the good effect that follows and is
intended, and to the inevitable evil effect that follows and is just tolerated. Figure 7.2 incorporates the
fifth condition. The major problem in applying the principle of double effect is in determining the
difference between what is intended and what is unintended, what an intentional action is, and what an
un-intentional action is. The evil effect that is foreseen, even though not explicitly "sought," is indirectly
intended. Undesirable effects or risks of harm that attend particular procedures almost always fall into this
category.
Choices are actuations of the will, guided by moral norms, by which we determine ourselves with
respect to human goods (Grisez 1970). That is, a choice is a determination of the will following upon
deliberation among competing alternatives. Thus, not every form of voluntariness involves choice (e.g.,
spontaneous willing that responds to an attainable good without considering alternative courses of action).
In choice or choosing, one adopts a proposal to act in a certain way. This proposal includes both the good
at which the agent aims, and anything that one chooses to do as a means to an end. On the other hand, the
side effects of the agents action are not included in the proposal that one adopts. The side effects are not
chosen, and they do not determine the stance of the will involved in a choice. One may accept the bad
side effects of ones act but not cause them. One does not intend the bad side effects, even though they
one may accept them voluntarily or involuntarily. Such bad side effects are considered indirect effects.
The agents intention is the sole morally determinative factor. Thus, an act may be morally justified, if
the agents intention is morally good, and the bad effect is not necessarily included in the attainment of
the intended good. The causal relation between the good and the bad effect is not a criterion for moral
6 A classical clinical case when applying the PDE is hysterectomy when the woman is pregnant and her womb is malignant
(carcinoma of the cervix). If the physician takes no action, the cancer will likely metastasize throughout the womans body,
resulting in her death; chemotherapy or radiation therapy might cause malformation of the fetus, and eventual death. Assuming,
therefore, that surgery (hysterectomy) is the only and necessary treatment, PDE applies. But the fetus is not an unjust aggressor
in this case. Perhaps, the doctor would have performed hysterectomy even if the woman was not pregnant.

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evaluation.
For example, a woman who shoots her would-be-rapist in self-defense does not intend his death; she
intends to stop his attack, and only accepts his death as a side effect. Note that she could have stopped the
attack by seriously injuring or maiming him, but not killing him. An action with both good and bad
effects is not defined by the bad effect unless the bad effect is necessarily included in the agents
intention. The womans action is focused on the good effect (e.g., self-defense) and not on the bad effect
(e.g., killing). The action of self-defense may result in many other actions other than killing, as long as it
stops the attack. The more she considers other alternatives to stop the rapist (e.g., persuasion, pleading,
screaming, running away from the scene, diverting his attention, injuring the rapist that does not kill him)
the more morally defensible is her action of self-defense. 7
Certain goods are basic and intrinsic (e.g., life, knowledge, friendship) in the sense that they are
desirable as ends-in-themselves, while other goods are non-basic and extrinsic (e.g., wealth, physical
fitness, health) that are sought for the sake of attaining the basic goods. Each intrinsic good is intrinsic to
the human person and participates in the dignity of the person, a dignity that is beyond any price, a
dignity that is inalienable (Porter 1996: 615). The basic goods enable us to achieve integral human
fulfillment. We direct most of our actions to some basic good or other, though not every action aims at
attaining or safeguarding a basic good. Admittedly, we cannot aim at all the basic goods all the time, but
we can always act in such a way as to remain open to those basic goods that we do not actively pursue.
Only in this way will our actions be reasonable, that is, morally good.

Summary and Concluding Remarks

Not all moral rules bind equally, nor do they define the same degree of ethicality or morality. These
rules could be hierarchically arranged in relation to the degree of internal commitment they demand of the
executives, and in terms of their universal binding power. Deontology is a duty ethic based on norms and
commandments, while teleology is means-end ethics based on consequences of the act. For most
practical applications one would need a combination of both ethical theories. People cannot claim
complete control of their lives (as means-ends ethics seems to assume), nor can they reduce their
responsibilities to obedience to general norms (as duty ethics assumes). Rather, they have to respond to
persons and events that confront them in real life in ways that maximize human values. Morality then
becomes a prudential ethic.
Morality is not always a matter of obedience to the will of God (this is theonomous ethic of the
Judeo-Christian tradition) or of a lawmaker (heteronomous ethic), or even obedience to one's own
conscience (autonomous ethic). Often morality is the process of intelligently seeking socially
appropriate, positive (net benefits) human behavior that supports personal and communal goals. 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).

7 Distinguish this case from euthanasia.

A doctor, who kills her patient to relieve her from intractable suffering, directly kills the patient, even
though she may not will it. The death of the patient and the act of euthanasia are one and the same act. Whereas, in the case of the woman killing
her assailant in an act of self-defense, the death of the assailant is not necessarily connected to her act of self-defense, as she could use other
alternatives to overpower or dissuade him. Distinguish also the case where someone chooses to kill one person to save the life of another there
is intentional killing and intentional saving of life involved here (Porter 1996: 622-24).

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Figure 7.1: The Process of Justifying Corporate Executive

Moral Judgments and Decisions
Set A:
Normative
Ethical Theories

Act Application of
Ethical Theories

Corporate
Decisions and
Strategies

Act Deontological
Assessment

What rights/duties
and norms/
principles does the
corporate action
uphold?

Act Teleological
Assessment

What are the social

consequences of this
corporate decision
and action?

Act Distributive
Justice Assessment

Does this action

evenly distribute
costs/benefits and
rights/duties across
all stakeholders?

Act Virtue Ethics

Assessment

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Set C:
Moral
Standards

Set B:
Moral
Principles

Does this action

promote the physical,
functional and moral
well-being of all
stakeholders?

Set D:
Moral
Rules

Rule Application of
Ethical Theories

Rule Deontological
Assessment

Rule Teleological
Assessment

Rule Distributive
Justice
Assessment

Rule Virtue Ethics

Assessment

Figure 7.2: The Dynamic Structure of the Principle of Double Effect

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Situation Unique to the Agent/Act Situation Unique to the Good Effect

Situation Unique to the Bad Effect

Condition 1: The act must be morally good or Condition

at least morally
2a: The
neutral.
agent must Condition
intend the 2b:
good
effect.
The
agent must only tolerate the

Condition 3a: The evil effect must not be a means to bring about the good effect. That is,
Condition 3b: if the evil effect directly follows from the act, it must occur simultaneously with the good effect but not

Condition 4: The good effect must outweigh the evil effect.

Condition 5: The action must be the last resort or the best alternative.

Table 7.1: Some Practical Distributive Justice Principles

Distributive Justice
Theory

Distributive Justice Principle

Critical Comment

Egalitarianism

Equal access to the goods of life that every

rational person desires based on need and
equality.

What needs: real, felt or created?

What equality: human, economic,
social, racial?

Libertarianism

Equal access to social and economic liberty

to all.

Utilitarianism

Equal access to the goods of life such that

Advocates fair procedures and

systems rather than substantive
outcomes.
The free and equal access could

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public utility is maximized.

be abused, thus reducing public

utility.
This is a universalizable and
reversible principle (by Kantian
criteria) and very appropriate in
a situation.

Fair Opportunism
(Rawls 1971)

No person should be granted social benefits

based on undeserved advantage (e.g.,
royalty, inheritance, status) or disadvantage
(e.g., gender, age, race, color, disability,
religion, and nationality).

Non-malfeasance
Frankena (1973)

1.
2.
3.
4.
5.

Well-being by Due
Care (Jonsen 1977)

The act should serve the well-being of all

stakeholders by carefully employing
standards of due care and assessing
risk-benefits and detriment-benefits of the
act.

This can be a good and practical

management principle that seeks
welfare of all affected
stakeholders.

Libertarian theory
of justice, Nozick
(1974)

There is no pattern of just distribution other than

that of the unpatterned free-market system based
on three principles: acquisition, transfer, and
rectification:

Distributive justice should have two

components: from each and to each,
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.

a)

b)

c)

Above all, do not harm.

Protect or remove people from harm.
Prevent people from harm.
Set up procedures that minimize harm.
Do good whenever possible.

The principle of justice in acquisitions: it is

the principle and process whereby originally
"unheld things" began to be appropriated in
the first place.
The principle of justice in transfers: it is the
principle and process whereby people
acquire and transfer holdings from one to
another.
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.

Morality and goodness of the

executive act increases from the
first to the fifth principle.

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.

Table 7.2: A Hierarchical Process of Ethical-Moral Reasoning for

Corporate Executives
Reasoning
Step

One

Reasoning
Process

Moral
Justification
based on:

Deductive

Ethical Theory of:

Deontology
Teleology
Distributive Justice

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A Typical Example of Moral Judgments or

Ethical-Moral Reasoning in
Corporate Situations
Round-Trip Sales to boost profits in a
failing business is wrong because:
Round trip sales cannot be justified deontologically.
Round trip sales cannot be justified teleologically.
One cannot justify round trip sales based on distributive and

Corrective Justice
Virtue Ethics

Two

Deductive/
Inductive

Ethical-moral
Principles:
Deontology
Teleology
Distributive Justice
Corrective Justice
Virtue Ethics

Three

Deductive/
Inductive

Ethical-moral
Standards:
Deontology
Teleology
Distributive Justice
Corrective Justice
Virtue Ethics

Four

Inductive

Moral Rules:
Deontology
Teleology
Distributive Justice
Corrective Justice
Virtue Ethics

Five

Situational
Assessment

Six

Ethicalmoral
Assessment

Moral Judgments:
Deontology
Teleology
Distributive Justice
Corrective Justice
Virtue Ethics
Moral Justification:
Deontology
Teleology
Distributive Justice
Corrective Justice
Virtue Ethics

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corrective justice ethics.

Round trip sales cannot be justified from a virtue-ethics
theory.
It violates my duty towards those affected by it.
It harms the persons the corporation is dealing with.
It does injustice to the entire business and economy.
It needs to be rectified immediately
It is outright dishonest, deception and trickery.

It violates the moral standard (MS) of integrity towards those

affected by it.
It violates the MS of transparency towards all affected by it.
It violates the MS of entitlement towards all affected by it.
It violates the MS of fair procedures towards all affected by it.
It violates the MS of honesty towards all affected by it.
The affected stakeholders have the right to know the truth.
Every stakeholder must benefit from this action.
This action must treat every stakeholder with fairness and
equity.
The system that allows round-trip sales needs to be corrected.
The action is against the Corporate virtue of executive
integrity.
It violates my own duty to do the right thing.
I will eventually be unhappy about this strategy.
It will bring harm to numerous stakeholders down the line.
It will rationalize and justify incorrect procedures.
It is eventually self-deception and violates self-esteem.
It violates my duties towards all stakeholders.
Net benefits to most stakeholders are decidedly negative.
Uneven distribution of costs/benefits, rights/duties of this
action.
Round trip sales uncorrected will deceive and cheat the
public.
This action violates almost every executive virtue that must
promote the physical, functional and moral well-being of my
stakeholders.

Table 7.3: Corporate Responsibilities as a Function of Cognitive and Moral Relativism

[See also, Mascarenhas 2008: 150]

Relativism
Type

Objective
Relativism

Cognitive
Relativism

Moral
Relativism

Subsets of
Relativism

Moral Implications

Corporate Executive
Responsibilities

Ontological or
Absolute
Relativism, or
Skepticism
Categorical
Relativism

Man is the measure of all

things. There is no objective
truth.

Hence, the truth of corporate

assertions or the morality of
corporate actions can never be
verified or falsified.

Nor can absolute relativism as a

position be verified; hence, it is
untenable for executives.

There is no categorical truth;

i.e., a statement can be
partially true or false.

Even if true, the corporate

executive must take responsibility
for at least the partial falsehood.

Dogmatic
Relativism

Even revealed truth is

relative to the context and
culture in which it was
revealed.

Philosophical
Relativism

A statement is true only

within ones philosophical
system, and not outside it.

Contextual or
Aletheic
Relativism

Truth is relative to and

bound by its own conceptual
schema or investigative
framework.

Cultural
Relativism

Truth is relative to the

culture within which it is
born, nurtured or
investigated.

Hence, the truth of corporate

assertions or the morality of
corporate actions can only be
partially verified or falsified.
Hence, the truth of corporate
assertions or the morality of
corporate actions can only be
partially judged relative to a
dogmatic (religious) value
system.
Hence, the truth of a given
corporate statement or
assertion can be judged only
within ones philosophical
system.
Hence, the truth of a given
corporate statement or
assertion can be judged only
within its conceptual
framework.
Hence, the truth of a given
corporate statement or
assertion can be judged only
within its cultural framework.

Epistemic
Relativism

Criteria for verifying truth

are valid and relative to its
epistemological schema or
investigative framework.

Criteria for verifying the truth

of corporate statements or
assertions are valid only
within its epistemological
framework they apply.

This position creates knowledge

or culture enclaves. Universal
truths are universally verifiable,
and executives should explore and
endorse them.

Philosophical
Relativism

A moral norm or value is

true only within a given
philosophical system, and
not outside it. There are no
transcendental moral values
or norms.
A moral norm or value is
relative to and bound by its
own conceptual schema or
investigative framework.

Hence, the morality of a given

corporate decision or action
can be judged only within its
philosophical system or
framework.

This position insulates morality

and thus, falsely makes it immune
from criticism outside the
philosophical system.

Hence, the morality of a given

corporate decision or action
can be judged only within its
conceptual framework.

A moral norm or value is

relative to the culture within
which it is born, nurtured or
investigated.
Criteria for verifying a moral
norm or value are valid and
relative to its own
epistemological schema or
investigative framework.

Hence, the morality of a

corporate decision or action
can be judged only within the
culture it is made.
Criteria for verifying the truth
of corporate statements or for
judging morality of corporate
actions are valid only within
the epistemological
framework they apply.

This position also insulates

morality and thus, falsely
immunizes executives from
criticism outside its conceptual
framework.
This position also insulates
morality, and thus, falsely
immunizes it from criticism
outside its cultural system.
This position also creates morality
enclaves, and corporate executives
should explore their harmful
consequences.

Contextual or
Aletheic
Relativism
Cultural
Relativism
Epistemic
Relativism

0
48

Definitions and
Assumptions

Regardless of ones religion, one

is legally or morally accountable
for ones actions.

This insulates truth and

knowledge and thus, makes them
falsely immune from criticism
outside the philosophical system.
This also insulates truth and
knowledge and thus, falsely
immunizes it from criticism
outside its conceptual framework.
This also insulates truth and
knowledge, and thus falsely
immunizes it from criticism
outside its cultural system.