VelazquezCh2 - CHAPTER TWO Ethical Principles in Business...

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C HAPTER T WO Ethical Principles in Business Overview Introduction In this chapter, we begin with a discussion of apartheid-era South Africa and Caltex, an American oil company operating in South Africa during that time. A large number of Caltex stockholders opposed the company's operations in South Africa, and introduced a series of shareholder resolutions requiring Caltex to leave South Africa, which they saw as racist and immoral. Caltex' s management did not agree. Rather than focusing on the financial assistance they were giving the South African government, they pointed to the positive effects their operations had on black workers. South African leaders, such as Archbishop Desmond Tutu, were not convinced by Caltex's arguments. He supported the shareholder resolutions, saying that comfort under an immoral regime was not preferable to freedom, even at the cost of economic hardship. The point of this example is to show how a real moral debate in business works. The arguments on both sides appealed to moral considerations and four basic types of moral standards: utilitarianism, rights, justice, and caring. The shareholders' argument referred to the unjust policies of the apartheid government and the fact that these policies violated the civil rights of black citizens. On the other side, Caltex's management made utilitarian arguments and arguments about caring: it was in blacks' best interests to have Caltex jobs, and Caltex had a duty to take care of these workers as best it could. In addition, both sides refer to the moral character of the groups involved, basing these distinctions on what is called the ethic of virtue. The following sections of this chapter explain each of these approaches, identifying their strengths and weaknesses and showing how they can be used to clarify the moral issues we confront in business. 2.1 Utilitarianism: Weighing Social Costs and Benefits Utilitarianism (or consequentialism) characterizes the moral approach taken by Caltex's management. Another example, Ford and its infamous Pinto, demonstrates just how closely the weighing of costs and benefits can be done. Ford knew that the Pinto would explode when rear-ended at only 20 mph, but they also knew that it would cost $137 million to fix the problem. Since they would only have to pay $49 million in damages to injured victims and the families of those who died, they calculated that it was not right to spend the money to fix the cars when society set such a low price on the lives and health of the victims. The kind of analysis that Ford managers used in their cost- benefit study is a version of what has been traditionally called utilitarianism. Utilitarianism is a general term for any view that holds that actions and policies should be evaluated on the basis of the benefits and costs they will impose on society. In any situation, the "right" action 1
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or policy is the one that will produce the greatest net benefits or the lowest net costs (when all alternatives have only net costs). Many businesses rely on such utilitarian cost-benefit analyses, and maintain that the socially
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This note was uploaded on 09/26/2010 for the course ETHC 3P82 taught by Professor E.d during the Spring '10 term at Brock University, Canada.

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VelazquezCh2 - CHAPTER TWO Ethical Principles in Business...

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