This paper utilises lines of ethical argumentation to analyse the ethical dilemma facing an operations director regarding manufacturing arrangements

Transcription

1 This paper utilises lines of ethical argumentation to analyse the ethical dilemma facing an operations director regarding manufacturing arrangements in an international supply chain (Crane & Matten, 2004). While specific in nature, the case study highlights the ethical dilemmas faced by businesses in an increasingly globalised world and how best to overcome those challenges. Modes of ethical reasoning are analysed to determine what the operations director should do but the complexities of ethics in business limits the validity of choosing one best solution. The paper asserts that a solution can be found, but it is dependent on the individual s personal development and organisational and situational variables.

2 Introduction Business ethics may be defined as: the study of business situations, activities and decisions where issues of right and wrong are addressed (Crane & Matten, 2004:8), with these issues of right and wrong addressed in the moral sense. Ethics is a profoundly human concept with its basis in reasoning and agency, the capacity for human beings to make choices. The globalised nature of business creates much uncertainty and this in turn leads to ethical issues. This uncertainty is accentuated by the constant desire to create products at a cheaper rate and make them available to a wider market (Steiner & Steiner, 2005). In today s globalised world, managerial decisions have consequences for many members of society. People s lives and welfare may be radically changed by a decision made by a manager, based on their moral agency. Therefore, business ethics is a very important subject. When one considers the recent wikileaks scandal or the older Enron and Arthur Andersen cases it further strengthens the importance of and the need for business ethics. In moving forward with this question, I will firstly address the ethical dilemma that was presented in class and upon which this question focuses. I will then look at different ethical theories and critically explore how they may help the manager resolve his dilemma. Finally I will conduct an analysis into ethics at the individual, situational and organisational level and how they shape decisions in light of ethical issues. The Ethical Dilemma The case in question is an intriguing one which represents the nature of ethical concerns faced by managers in this increasingly globalised world we live in. An operations manager of a chocolate company that sells accompanying toys has discovered a cheaper source of supply in the form of a Thai supplier. The deal is favourable for the manager as this deal is a third of the cost of his current Portuguese supplier but the quality is consistent. This desire to find cheaper sources of supply is undoubtedly one of his main job characteristics. He travels to Thailand and doesn t see the standard workshop that he has come to expect from experience. Instead, there was a line of 30 men who took away large boxes of small toy parts to their homes. The manager visited one of the houses and it was there that he encountered an entire family working together to assemble the toys. The family of eight, two parents and six children between the ages of 5 and 14 all looked content

3 in his opinion. A day s work would finish around 8pm and the toys that were completed would be boxed and prepared to be dispatched to the factory. While this experience was different to the product manager s previous encounters with a supply chain, his Thai counterpart assures him that this way of arrangement is quite common in Thailand and with that knowledge he leaves the workshop happy to put through the deal and quietly confident in making personal gain from the transaction. It is only when he is buying souvenirs for his nieces on the way home that the gravity of the situation hits him. He wonders what if the roles were reversed and it was his own young family members who were subjected to work long hours and be deprived an education. This leads him to question the ethics of this decision (Crane & Matten, 2004). When one considers the situation it is difficult to pick the most ethical outcome instantly as both aspects come with their merits and criticisms. The fact that the method of supply is common to Thai culture and the children seemed happy would suggest the product manager should use the Thai supplier. However, when one imposes Western norms upon them, the entrapment of children into work is most definitely unethical. This one small example shows how difficult some situations are to deal with for managers as there is no right or wrong answer and no set of rules that can be universally followed. Virtue Ethics The first ethical theory I will look at is virtue ethics. This is a principle based perspective which is not affected by outside influences. Virtues may be described as means which are attributes that help the individual to lead a good life (Fisher & Lovell, 2009). It is believed that those with virtuous character can take morally correct actions. Aristotle is considered to be the founding father of virtue ethics. He was a philosopher who lived in Greece between 384 and 322 BC (Fisher & Lovell, 2009). The individual is at the focus of Aristotle s theory but importantly, the individual within the societal context. In Ancient Greece, the view of one s self perceived by peers was critical to happiness and explains why such virtuous characteristics were desired by the people of that time. Virtue ethics is not a rule based theory but a theory based on possessing certain characteristics that would enable a person to carry out moral and correct judgements. Wisdom, courage, self-control and justice were the virtuous

4 characteristics according to Plato. Aristotle reinforced those virtues with truthfulness, patience, amiability, liberality and magnanimity, which means one who possesses self-control and pride (Fisher & Lovell, 2009). It is worth noting that Thomas Aquinas believed justice to be a global virtue needed to harmonise the insatiable commercial side and the social side of the world (Dierksmeir & Celano, 2012). Justice and temperance were central to Aristotle s ethical thinking also (Audi, 2012). Virtue ethics is based upon one possessing virtuous traits and is subjective so it is hard to analyse the ethical dilemma in question accurately. Added to this, virtue ethics does not automatically classify child labour as unethical as a virtue would need to exist that explicitly referenced the rights of the child to make the correct and virtuous decision (Fisher & Lovell, 2009). What would a virtuous person do in this situation? is a good question to ask in any given situation. A virtuous manager may look favourably upon choosing the Thai family as it would provide them with employment and remuneration. He may also consider that in many ways, the children s lives may be better and happier in the safe and secure environment the familial home represents. Conversely, the manager may contend that the children should be entitled to their right to education and choose a different supplier as a result. Virtue ethics have a role to play in business; however there is no right or wrong answer as the manager s dilemma shows. Instead, the decision maker must make an ethical judgement based on knowledge and experience acquired over time (Crane & Matten, 2004). Consequentialist Ethics Egoism is a philosophical idea that dates back to the time of Plato and focuses on what outcomes behold the decision maker in ethical dilemmas. With egoism, an act may be deemed morally right if man is freely able to pursue desires and self-interest. This is grounded in the belief that for an individual to lead a good life they should follow their self-interest. Adam Smith s Invisible Hand is an example of egoism which leads to a morally right outcome in the marketplace. Beauchamp and Bowie have described Smith s theory as egoist practice for utilitarian results (Crane & Matten, 2004) meaning that decision makers pursuing their own interest can lead to greater social welfare, according to Smith. An enlightened egoist approach is a deviation from the standard egoist theory in that it discerns a person s self-interest and desires should be measured against an objective value (Crane & Matten, 2004).

5 Two people may follow their own self-interest but one could be considered better or more morally correct. When we apply this enlightened egoist approach to this dilemma we consider that the manager, the Thai supplier and even the parents of the children are able to pursue the deal to be arranged to fulfil their own self interests. The children in the example could perceive their reality as being normal and happy and in this sense it is morally right. Where it becomes immoral however, is when one considers that the cost of using the children as part of the supply chain is the rejection of the child s right to pursue their own self-interest and attain an education. Egoist ethics is a weak theory as it works on the basis that one s pursuit of their own interests does not impact negatively on another s (Crane & Matten, 2004). As many examples from the business world would prove, this is nigh on impossible. Utilitarianism dates its origin back to 19 th Century social theorists Jeremy Bentham and J.S Mill. It contends that an action may be deemed morally right if it results in the greatest amount of happiness, or utility for the greatest amount of people (Crane & Matten, 2004). Bentham considers utility to be the greatest goal for an individual in life. Utility is an important tool as it is also used when referring to economics. Utilitarianism is different to egoist ethics as it not only focuses on the individual but also the notion of collective welfare. It is due to this that it is known as a consequential principle as it focuses on the outcomes and consequences of one s actions. It is a desirable theory as it entices the decision-maker to reflect upon the potential outcomes of each agent in the situation and not to become motivated by self-interest. In the theory, man is seen as a hedonist- one who maximises pleasure and minimises pain. A happiness and unhappiness view of utility is known as a eudemonistic view (Crane & Matten, 2004). Utilitarian view of ethics comes close to establishing a cost-benefit analysis as it is necessary to assign utility to each individual and consequence involved in a certain situation to ascertain which decision is morally correct. Crane and Matten (2004) apply this theory to the manager s dilemma with the use of a balance sheet, a list of the potential incidences of pleasure and pain. Through this analysis, the correct decision is for the manager to choose the Thai supplier as the aggregate pleasure derived from the relationship is higher than the aggregate pain. Not doing the deal also resulted in a high level of pain based on Crane and Matten s analysis. This

6 theory has its flaws which are quite obvious. It is subjective as different people may have varying opinions on what the consequences of an action may be. It is difficult to quantify as not all costs can be easily assigned. In this example, the pleasure or pain experienced by the children is very difficult to quantify whereas the product manager s own pleasure or pain could be quantifiable in monetary terms. Another flaw lies in the principle of the theory, that the greatest good should be achieved for the greatest amount of people. Under these guidelines, minority groups would suffer greatly at the hands of wealthy decision makers as the distribution of utility would be uneven (Crane & Matten, 2004). The theory has been differentiated to cope with these limitations however. The analysis of the manager s dilemma above is an example of act utilitarianism. This is the estimation of pleasure and pain derived from a single act which is morally judged. Rule utilitarianism questions whether the principles of an action will induce pleasure or pain in the long run. Interestingly, while Crane and Matten (2004) postulate that the dilemma is morally correct under act utilitarianism; a rule utilitarianism approach would deem it unethical as the underlying notion of child labour would be detrimental to society in the long run. Rule utilitarianism is especially beneficial as if a decision was to be made that all incidences of child labour are to be deemed unethical, it would reduce the number of similar ethical dilemmas that managers are faced with (Crane & Matten, 2004). Non-Consequentialist Ethics Non-consequentialist theories are theories that believe the moral decision should not be determined by the consequences of an action. Two types of these theories that have been applied to business ethics is ethics of duties and the ethics of rights and justice. The main subscriber of the ethics of duties was the German philosopher, Immanuel Kant. Kant believed that there were certain eternal, abstract, and unchangeable principles that humans should apply to all ethical problems (Crane & Matten, 2004:86). Kant believed individuals to be rational beings and he cultivated a framework that could be applied to moral issues regardless of all outside actors or subjects. He called this the categorical imperative and it was made up of three maxims (Fisher & Lovell, 2009). In short, the maxims focus on the ideas of consistency, human dignity and universality. These ideas become clearer when they

7 are applied to the product manager s ethical dilemma. Under maxim one, the manager must consider whether his decision could be applied to every incident of child labour. As he is ill at ease with the situation, he would not want it to become a universal law so it would be unethical. According to maxim two, a person should be regarded as an end and not a means only. In this example, it is safe to assume that the children have not chosen to work and are being used as child labour to satisfy the ends of another. This would indicate a denial of basic human dignity, and thus would deem this to be unethical. Finally maxim three is perhaps the most conclusive of all regarding the manager s decision. It contends that it is highly unlikely that every rational being would deem child labour to be ethical; this lack of universality would surmise that the deal is unethical (Crane & Matten, 2004). This is quite a complex theory which is difficult to apply to every situation. Kant s view that man acts according to self-imposed duties is a bit optimistic and not a true reflection of the world we live in today (Fisher & Lovell, 2009). Natural rights may be defined as certain basic, important, inalienable entitlements that should be respected and protected in every single action (Crane and Matten, 2004:89). Rights result in a duty that must be adhered to by others and is an approach that is similar to Kant s but does not reply on the use of the categorical imperative. The rights approach is seen in the American Constitution and The United Nations Declaration of Human Rights. Human rights are especially important as multi-national corporations are judged on the way they respect and acknowledge rights. This indicates that this form of ethics is very important in our globalised world. Using human rights the answer to the product manager s dilemma is obvious. A child has the right to education and freedom of consent and both of these rights are eliminated in the manager s decision. The uneven distribution of wealth that would arise from the deal would also be a rights issue. Justice may be described as the fair treatment of all individuals in any given situation to ensure everyone gets what they deserve (Crane & Matten, 2004). Aquinas argues that this fair treatment ought to be a habit and delivered with prudence to overcome ethical parochialism (Dierksmeier & Celano, 2012). John Rawls states that for justice to occur, the least-well off in society should benefit the most from socio-economic situations, justice must be fair in other words. In the manager s ethical dilemma the question is asked whether each individual involved has some liberty. The major

8 issue is that the children are missing out an education and thus this deal would not benefit the least well-off in the situation. Discourse Ethics Finally, discourse ethics when applied to the manager s dilemma would suggest rational dialogue between all those involved in the situation should take place to create norms through which future decisions could be made. Dialogue between all concerned would perhaps be the best and fairest way to settle the decision in the interest of all parties. This is a view supported by Jurgen Habermas on the basis that no pressure is applied to any party (Fisher & Lovell, 2009). Organisational, situational and Individual Variables Ethics at an organisational level is of great importance. Organisations should look past their economic role and recognise their role as agents of change (Svensson & Wood, 2008). The Enron case shows how an organisation can become infiltrated by unethical practices at a senior level which reverberates through the organisation. Linde s (1993) statement that individuals use socially-extant cognitive systems to structure their meaning is enhanced by Crane and Matten (2012) who state that a person s decision making is affected by their cognitive moral development stage. They go on to state that a person s cognitive thinking is affected by individual and situational factors that shape a person s decision when faced with an ethical dilemma. Situational variables may be organisational culture which impacts on an individual s response to an ethical dilemma as I alluded to earlier. Factors such as organisation structure, referent others, obedience to authority, responsibility for consequences and the existence of codes of ethical conduct would have a grand effect on an individual s ethical conduct in the workplace. At an individual level, field dependence, locus of control and ego strength are the variables which influence ethical decision making, according to Crane and Matten (2012). A manager who is field independent may display more consistency between what they believe to be moral and the action they actually take. The idea of ego strength is that the manager who possesses high ego strength is more likely to follow their own values and not be overly influenced by outside variables. Locus of control refers to how much influence a person believes they have over outcomes. A manager who takes no responsibility for unethical behaviour is one who s locus of control is external. Conversely, an internal locus of control is possessed by a manager who believed that outcomes are

9 a result of their own actions. Lawrence Kohlberg came up with a theoretical framework which helps to discern how individuals think about ethical decisions. There are six development stages and Kohlberg places most adults at stage three or four (Crane & Matten, 2012). When we relate this to the operations director in the dilemma, we can only theorise about his moral development stage and his susceptibility to outside influences. The fact that he has some reservations implies that he has a moral compass and is aware of the issues with child labour. However, we remain unaware as to his individual characteristics and to the culture of the organisation for which he works. Conclusion As my analysis shows, ethics has been of concern for thousands of years. Great thinkers such as Plato and Aristotle placed great emphasis on the importance of one s ethical conduct. This importance of ethics persists to contemporary times with many scandals brought about by ethical misconduct casting a shadow over the credibility of certain organisations. The case in question highlights the multi-cultural nature of today s world. This creates more ethical problems as local traditions, such as children working from home in Thailand, contradict with Western norms and create dilemmas that managers are faced with. As my analysis has shown, there are many individual and situational factors involved in coming to a decision and through the use of ethical theories it is clear that it is hard to define a right or wrong answer. One could argue that the Golden Rule would be the most ethical route to take in any given situation, however, such is the complexity of ethical situations one solution cannot be applied to the masses. While the theories help to breakdown the thought processes of the manager, we remain unaware of the so-called ethically correct action. It is this abstraction within ethics that leads to such dilemmas for managers within the workplace and why there is never an easy answer.

10 Bibliography Audi, R. (2012). Virtue Ethics as a Resource in Business. Business Ethics Quarterly. 22 (2), p Crane, A and Matten, D (2004). Business ethics : a European perspective: managing corporate citizenship and sustainability in the age of globalization. Oxford: Oxford University Press. P Crane, A and Matten, D (2012). New Directions in Business Ethics. Los Angeles: SAGE. Dierksmeier, C and Celano, A. (2012). Thomas Aquinas on Justice as a Global Virtue in Business. Business Ethics Quarterly. 22 (2), p Fisher, C and Lovell, A (2009). Business ethics and values : individual, corporate and international perspectives. Harlow: Financial Times Prentice Hall. Linde, C (1993) Life Stories: The Creation of Coherence, Oxford University Press Steiner, G and Steiner F (2005). Business, government, and society : a managerial perspective : text and cases. New York:London: McGraw Hill Irwin. Svensson, G and Wood, G. (2008). A Model of Business Ethics. Journal of Business Ethics. 77 (3), p