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Chapter 2 -- Ethical Reasoning in Practice (pp. 54-100)
Chapter 2 starts with a case study (pp. 54-56) about an American bank operating for the first time in
Italy. The American general manager for this branch filed an accurate tax statement. He had heard
about, but did not believe, the Italian custom regarding income taxes. In Italy, every company files a
preliminary tax document deliberately stating income about one-third of what it actually is. They do
this on “a wink and a nod” system with the tax authorities. The tax authorities then come in and more
than triple whatever amount the corporation has agreed to voluntarily pay. The company offers the
government representative a little envelope or “bustarella” generally containing a bribe. Then, both
sides settle on an amount roughly triple the taxes stated on the preliminary tax document. This then
reflects the correct taxes that are due and everyone ends up satisfied -- the taxing authorities can
believe themselves to be vigorously vigilant, and companies can believe themselves to be trying to
push the government to their own advantage (and the individual tax agent may increase his or her
income). Obviously, since everyone is aware of what is happening, neither side is really
accomplishing its goal; the taxes are just being paid as they should have been (and corruption
becomes institutionalized).
In the case study, the American bank’s tax filing was met with the blanket statement from the Italian
tax authorities that the bank needed to pay three times the amount of tax that it felt was due. The
general manager tried to state his case that he was being honest with the government, and that the
amount the bank stated was, in fact, the right amount of taxes. Ultimately, the customs of the revenue
service prevailed and the bank wound up paying a tax bill three times what it should have been liable
for.
The American company recalled their manager to the U.S. and replaced him with someone who,
presumably, would, year after year, lie on the tax returns -- stating income at one-third its actual level,
and the bank would, therefore, pay tax on the full amount of income in the way that the Italian
authorities prefer (rather than in the way that the tax forms and written tax rules seem to indicate).
Four articles, each detailing an approach to business ethics, follow this case study. The first article
details the approach that Immanuel Kant might take to business ethics; the second details an
Aristotelean approach adapted to support virtue ethics; the third takes a utilitarian approach, quoting
from both Jeremy Bentham and John Stuart Mill, and the fourth takes a pragmatic approach following
the philosophy of the American philosopher, John Dewey.
Article: “A Kantian Approach to Business Ethics” by Norman E. Bowie (pp. 56-66)
The first article begins on page 56 and is entitled “A Kantian Approach to Business Ethics” by
Norman E. Bowie. He states at the end of his first paragraph, “I then show why Kant’s emphasis on
the purity of our intentions in acting morally has created problems for a Kantian theory of business
ethics.” Needless to say, it is clear then that he’s going to demonstrate that there is some conflict
between the business system as we know it and the type of ethics that Immanuel Kant would support.
Kant’s ethics spring from his theory of the categorical imperative. As was stated earlier, this means
“the universal ought.” In other words, how we should always act. “Imperative” meaning “that which
we must or ought to do” and “categorical” meaning “universal.” It is important to note that in the
Bowie article, as well as in many commentators’ discussions of the Immanuel Kant, different
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formulations of the categorical imperative are discussed. It is true that Kant stated the categorical
imperative in many ways, however, the categorical imperative is only one thing. It is how we must
always act. Three of the ways in which Kant formulated this are exposited, however, Kant was
expressing the same idea each time, in three different ways; much the same as we might say
something in three different ways in our ordinary daily life. Let’s say, for example, that someone is
going to do some gardening in their backyard -- someone might say, “I’m going to do some gardening
in my backyard” or, “I’m going to work a little bit in the garden” or, “I’m going to do some work on
the landscaping.” In each case, they feel they are saying exactly the same thing; they do not feel that
they are saying three different things. Kant, in formulating the categorical imperative, always believes
himself to be giving the same rule of action; he was merely using different words to express his
concept. However, many commentators will treat each of these formulations as if it is distinct. The
three formulations which Bowie speaks of and which most commentators focus on are: 1) “act only
on maxims which you can will to be universal laws of nature” 2) “always treat the humanity in a
person as an end, and never as a means merely” and 3) “act as if you were a member of an ideal
kingdom of ends in which you were both subject and sovereign at the same time.”
A quick examination of each of these formulations should indicate to us that they are essentially the
same thing. Let’s start in the middle and work our way to either end from the middle formulation. The
middle formulation is given as “always treat the humanity in a person as an end, and never as a means
merely” (linguistically, you may find it easier to work with the construction “always treat the
humanity in a person as an end, and never merely as a means”). If we do that, then naturally the first
formulation -- that we should act only on rules which we can will to serve as a universal law of
nature, necessarily follows. For example, if I’m always treating each person as an end with the utmost
respect for their humanity, then naturally, whatever rules I use in my interactions with them I would
wish to be uniform and universal -- and I would want them to be applied to me by an actor as well as
be applied by me to a subject. Similarly, treating the humanity in a person as an end and never as a
means really is the same as if I am in an ideal state or ideal society and I can imagine myself both to
be the ruler of this society and a citizen of the same society. The society’s rules would naturally
reflect the humanity of each and every subject because essentially what I formulate in my mind when
I am playing both roles (sovereign and subject) is certainly not going to take advantage of the
citizenry, since I am also a citizen.
Nonetheless, Bowie does discuss each formulation, at least moderately, as if it is something different.
Bowie uses as an example a situation where he thinks Kant would have difficulty. Kant really says
that if you want to have effective promises, you cannot say it is ever permissible to allow promises to
count for nothing, since no one would know which promises were true and which were false and
therefore, no one would ever trust promises at all. Yet following through with that example, almost
every company has experienced a situation where the terms of a contract are not lived up to 100%.
This is taken by Bowie to mean that Kant would therefore say that contracts would become worthless
because companies could not trust them. What Kant is saying, though, is not that the breaking of
contractual promises does not happen, but that if it always (or perhaps with some certain degree of
regularity) happened it would prevent the activity of contracting. Bowie then backtracks a little bit
and talks about situations in which businesses modify how they behave based on how they are treated,
which is possibly more in line with what Kant would say.
Bowie treats the next conception of the categorical imperative “always treat the humanity in a person
as an end, and never as a means merely” by identifying persons with stakeholders.
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He goes on to point out that Kant makes a distinction between negative freedom and positive
freedom. “Negative freedom is freedom from coercion and deception. Positive freedom is the freedom
to develop one’s human capacities.” Again, simply because people are sometimes treated as a means
rather than an end in business doesn’t mean that Kant’s philosophy cannot apply. It simply means that
when these things happen -- for example, when a retail company lies to someone in order to hire them
during the holiday season by assuring them the job is a permanent position, but then lays them off
immediately once the new year begins -- the business acted immorally.
The last formulation given of the categorical imperative, the one that refers to being a sovereign and
subject in an ideal kingdom of ends, is the one Bowie uses to discuss the stakeholder theory. There are
many “citizens,” if you will, and if each one is a stakeholder in the business, then each one should be
treated by each other as if their roles were interchangeable – as if each plays the role of both
sovereign and subject.
Bowie concludes with a section called “The Purity of Motive” and explains that “it is a central tenet
of Kant’s moral philosophy that an action is only truly moral if it is morally motivated. Truly moral
actions cannot be contaminated by motives of self-interest.” He points out that corporations have an
obligation to strive for profits and by fulfilling that obligation they are not necessarily violating
Kant’s rules of ethics. He concludes by saying, “To put this in more Kantian terms, perhaps profits
will be enhanced if the manager focuses on respecting humanity in the person of all the corporate
stake holders. Perhaps we should view profits as a consequence of good business practices rather than
as the goal of business. . .”
Teaching Hint: These last statements can easily become the focus of a debate in class.
Article: “Corporate Roles, Personal Virtues: An Aristotelean Approach to Business Ethics” by Robert
C. Solomon (pp. 66-78)
Next up is Robert C. Solomon’s “Corporate Roles, Personal Virtues: An Aristotelean Approach to
Business Ethics.”
Aristotle preached virtue as an excellence.
Solomon interprets Aristotle to be supporting what has become known as of the latter part of the 20th
century as “virtue ethics.” He discusses six considerations, which, he believes, “make up the
framework of virtue ethics in business.” He labels them: “community, excellence, roll identity,
holism, integrity, and judgment.”
Solomon states that to fully understand business ethics, we must treat the corporation as one’s
community. The excellence that we seek is doing one’s best -- so every member of the corporation
should strive to do one’s best.
In explaining role identity, he points out his view that all ethics are contextual and that there is a
legitimacy to the roles and responsibilities of people in a business structure and that this should be
focused on more than it is in a typical treatment of business ethics. Solomon sums up his explanation
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of integrity by saying that “in harmony or in conflict, integrity represents the integration of one’s roles
and responsibilities and the virtues defined by them.”
In treating judgment, he points out that judgments cannot be made based merely on a set of rules since
every circumstance is different and requires us to adapt whatever we already know to that particular
situation and to make our own “judgment calls.”
Regarding holism, he talks about the need to integrate business and professional roles with the rest of
our lives so these become facets of a good life -- I don’t become a separate or different person at work
from what I am at home or from what I am on the golf course. I’m always the same person and I must
live up to the same set of personal values.
According to Solomon “the Aristotelean approach to business ethics ultimately comes down to the
idea that, while business life has its specific goals and distinctive practices and people in business
have their particular concerns, loyalties, roles and responsibilities, there is no ‘business world’ apart
from the people who work in business and the integrity of those people determines the integrity of the
organization as well as vice versa.” His final sentence then sums up what he feels the effect of
Aristotelean business ethics would be, and that is “another way of saying that people come before
profits.”
Article: “Utilitarianism and Business Ethics” by Andrew Gustafson (pp. 78-89)
The third article on ethics in this chapter is “Utilitarianism and Business Ethics” by Andrew
Gustafson.
Gustafson concentrates on utilitarianism, and starts off by mentioning that business people often
characterize utilitarianism as mistakenly, but expediently, as any rationale for using cost-benefit
analysis. In other words, as long as we get the maximum benefit out of every cost we are creating the
greatest happiness in society. He gives several examples later on in his article. He discusses some of
the differences between Bentham and Mill, and if you wish to stress the development of utilitarianism
these would be good to take into account. Gustafson specifically discusses some of Bentham’s best
points on page 80 and some of Mill’s best distinctions at the bottom of page 82 – ultimately he
follows the development of utilitarianism from Bentham to Mill and implicitly recognizes Mill’s
perspective (which includes both higher and lower pleasures) as the generally accepted utilitarian
perspective. On page 88 he talks about how some of Mill’s principles can be easily adapted for use in
business decision-making. He concludes that when Mill is properly understood, his philosophy can be
a very interesting model for business ethics.
Article: “Ethics and Pragmatism: John Dewey’s Deliberative Approach” by John McVea (pp. 89-
100)
The fourth and last article dealing with ethics in this chapter is entitled “Ethics and Pragmatism: John
Dewey’s Deliberative Approach” by John McVea.
In the pragmatic approach, we must always take with us our knowledge and experiences. We must
take with us the habits that we have formed in life and the idea that every situation we find ourselves
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in is new and therefore requires not that we simply apply the old to it, but that we recognize that there
needs to be an interplay of the old and the new in every situation.
Thus, the pragmatist does not expect his (or her) rules formulated last year to specifically indicate to
him (or her) how to solve a particular new situation; rather the pragmatist would take what happened
last year in some other situation and also would recognize some of the differences between that
situation and the current one, and then would formulate in his (or her) own mind how bringing those
same principles to a different situation might require either a new result or a reworking of some of the
principles, or both.
In that regard, Dewey’s theory is near what it is supposed to emulate -- the scientific method. Every
new interaction is essentially an experiment in which we are trying to find out what the results will be
and then recognize whether our hypothesis was a good one or one that needs some adjustment.
Pragmatic philosophy -- which is introduced in this chapter, brings with it a unique philosophical
treatment of certain concepts, including habits (dispositions acquired through natural social responses
to our environment), intelligence (the process of bringing our impulses, habits, and environment into
harmony), deliberation (intelligent decision making starting from previous experience, considering
present context, and including planning for the future), interpretation (critical analysis), contextual
discovery (experimentation and verification in each particular circumstance), dramatic rehearsal
(empirical discovery using our mind to discern consequences and how we feel about potential
outcomes), and, as regards business ethics specifically, the fact that “first, and most controversially,
the firm should consider ethical decision-making as no different from thoughtful intelligent decision-
making.” This is one of the five implications for managerial decision-making which McVea
concludes with on pages 99 and 100.
Teaching Hints
Note that this section of the book is one that has been revised since the 7th Edition, so if any of your
students are trying to use the older version of the text, they should realize that they would be better off
with a new book. The specific banking example is fine for illustrating any or all of the points in the
philosophical articles. However, you may want first to discuss that case and get a list of issues that
students see in it before bringing the philosophical theories to bear on it. If the concepts in that case
are too far a field for your students, perhaps concepts in the discussion questions in this section of this
manual or one of your own choosing might appeal to their willingness to have a meaningful
discussion.
Discussion Questions
1. The tax authorities question your tax return -- or rather they do not really question it; they
simply tell you that you must pay 10% more than you calculated because they “know”
everyone cheats by at least 10%. How would you feel? What would you do? Are you being
treated fairly?
2. Someone remarks of your aunt that, “She is a very good lady.” What do you suppose he or she
means? Is anyone capable of making such a judgment without basing it on someone’s
sanctions? Can it be that the person is actually referring to her character, or must it always be
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that they are referring to a presumption about her character, which is based solely on her
actions as they know them?
3. Since 1946, Target has contributed 5% of its federally taxable income to support communities
where it does business. It uses these funds to help support the arts, supplement educational
efforts, and strengthen families and communities. Today, this giving equates to more than $3
million a week. You are trying to make ends meet on a college student’s budget, and you wish
they would just lower prices by this amount instead -- does this mean you are a bad or selfish
person?
Resources for further study -- Film, Literature, and the Web:
Tin Men, Dir. Barry Levinson, Perfs. Danny DeVito, Richard Dreyfuss, Barbara Hershey, John
Mahoney. Film. Touchstone Pictures, 1987.
Forbes Global Tax Misery Index 2006, retrieved April 18, 2007 from
http://images.forbes.com/media/2006/05/Single_100_000.pdf
A Man in Full. Tom Wolfe. Farrar, Straus and Giroux. New York, New York, 1998.
The Producers. Brooks, Mel, and Tom Meehan. New York, New York: Hyperion, 2001.
“Lifting the Lid on Some Mysterious Money,” Time Magazine Online, June 23, 1975.
http://www.time.com/time/magazine/article/0,9171,913192-,00.html (April 18, 2007)
