Table of Contents

(Book II)

PROLOGUE
Corporate Ethical Response to Turbulent Markets

CHAPTER 01
The Ethics of Dignity of the Human Person

CHAPTER 02
The Ethics of Corporate Executive Virtues

CHAPTER 03
The Ethics of Corporate Trusting Relations

CHAPTER 04
The Ethics of Corporate Ethical and Moral Charismatic Leadership

CHAPTER 05
The Ethics of Corporate Critical Thinking

CHAPTER 06
The Ethics of Corporate Stakeholder Rights and Duties

CHAPTER 07
The Ethics of Corporate Moral Reasoning, Moral Judgment, and Moral
Justification

CHAPTER 08
The Ethics of Corporate Legal, Ethical, Moral, and Spiritual (LEMS)
Responsibility

EPILOGUE
Corporate Cosmic Executive Spirituality for Today

References
Index

Prologue

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 Corporate Ethical Response to Turbulent Markets

More than at any other period in human history, humankind is currently at the cross-roads of war or
peace, growth or decline, progress or regress, life or death, hell or heaven. We cannot leave these
opposite polarities and possibilities to politicians and bureaucrats, to chance and expediency. These
are expressions of turbulent markets. We must design and invent, plan and predict, monitor and
control our future and that of our posterity. In this regard, the concept of human personhood cum
human dignity and responsibility is a fundamental part of this new self-understanding and
undertaking. Ethics and morality are a critical component on this creative journey to destiny.
Corporate ethics, in particular, requires the development of a clear understanding of the existential
situation of turbulent markets – that is, the relationship between executive autonomy and freedom,
between human creativity and innovation, and between human culture and corporate social
responsibility. Other critical concepts such as accountability and moral responsibility, the ethics of
rights and duties, the executive virtue of moral and ethical reasoning, the building of trusting and
caring relationships, and the like will be discussed in subsequent chapters.

Big technology firms are dominating global markets today, especially the big FAANG group of
five: Facebook, Amazon, Apple, Netflix, and Google. These five are more than the whole of FTSE
100.i Without them, America’s stock market would have fallen this year (The Economist, June 30,
2018, p. 9). At the same time, however, the tech digital giants have also been entangled with
controversial deals from data abuse and anti-competitive behavior to tax avoidance and smartphone
addiction, soaring share prices and suspicion.

Nevertheless, Netflix is a clear exception. Since its humble founding in 1997, the company has
morphed from a DVD-rental service to a streaming video upstart to the world’s first global TV
powerhouse. Its entertainment output this year will far exceed that of any TV network; its production
of over 80 feature films has exceeded that of any Hollywood studio in recent years. Netflix will spend
around $12.5 billion on content this year, around $3.5 billion more than last year. It currently serves
more than 125 million households, twice those it had in 2014, who watch at an average more than two
hours a day, exceeding a fifth of the world’s downstream Internet bandwidth. Netflix has transformed
without triggering a public or regulatory backlash. Its share price has more than doubled since the
start of 2018. Netflix is as popular with investors as it is with consumers – it uses the Internet to offer
consumers lower price and more quality choice.

It enjoys more subscribers outside America than inside it. It makes expert use of data, categorizes
individual preferences into about 2000 “taste clusters” to offer different shows to different target
audiences. It represents a great combination of scale and data science in consumer video services. It
is unmistakably global – making TV shows in 21 countries, dubbing and sub-titling them into
multiple languages. It uses data with care; it respects local markets; it has steered clear of news and
mostly offers entertainment, thus protecting it from the scandals of fake news, paid news, electoral
manipulation and political tribalism. Unlike ad-based platforms, its source of revenue is monthly
user-fee in return for quality TV shows users want to watch (See The Economist, June 30, 2018).

Netflix is a success of global conscious capitalism - a triumph of corporate ethics thus far. Will it
continue that forever? Can it go on keeping everyone happy? Such are the ethical and moral
challenges this book seeks to explore.

Ethics is fundamentally a science of social and collective responsibility. Ethics concerns human
behavior as responsible or accountable. Because of the nature of social interaction, certain members
of the society will bear greater authority, and hence, greater individual and social responsibility than
others. In our world, personal responsibility and social responsibility are hardly separable. Personal
responsibility becomes responsibility for the world because the person and the world are inseparable.
In this book, we use the term responsibility from a legal, ethical, moral and spiritual (LEMS)
standpoint as some promise, commitment, obligation, sanctioned by self, morals, law or society, to do

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good and avoid evil, and if inevitably harm results, to repair harm done on another. Hence,
responsibility in this sense is trustworthiness and dependability, moral worthiness and striving of
goodness of corporate executives in any enterprise.

Fundamental Questions of Corporate Ethics

Our common ground, regardless of our religion and religious beliefs, ethnic and national
composition or persuasion, is our recognition of the value of the human person and human
personhood. The centrality of the question of human personhood is common to theology and
philosophy, religion, morals and ethics, and even laws and values. Our first Chapter, accordingly,
deals with the fundamental human dignity of all people. Corporate ethics and morals deal not only
with executive decisions and actions, but even raise the more fundamental questions:

 What ought I to do as a corporate executive?

 What kind of executive person do I want to become?
 What kind of corporate executive ought I to be?

These questions deal with the fundamental operations that define us as humans: doing, becoming,
and being. Even those who consider basing ethics on a set of universal and absolute values
presuppose the necessity of the human personhood. We can never predicate moral goodness or moral
badness of beings that are not human persons (Häring, 1978, p. 85; Hildebrand, 1953, p.167).

Before we become educated executives, managers and bosses, brothers and sisters, lovers,
husbands and fathers, beloved wives and mothers, we are first and foremost a person, a human person,
one who needs to be acknowledged and affirmed by all of us. We are human persons every moment of
our being (this is the eternal valuable nature of human personhood); yet human personhood means
that we go beyond or transcend what we are at a given moment (this is the dynamic nature of human
personhood). Both aspects of human personhood are necessary; they make us what we are – human,
personal, ethical, moral, accountable and responsible, and spiritual persons and personalities.

The metaphysics of modern-day business can be described by the following statements: (a)
Being or ‘to be’ is to be a marketable resource; (b) Being or ‘to be’ involves being either an object
available for productive activity on the market, or else a subject who makes use of such objects; and
(c) the only mode of thinking is calculative thinking: the consideration and measurement of every
being as a marketable resource (Young, 2002). Such metaphysics destroys human personhood.
Hence, we need ethics of human personhood to counteract the modern-day metaphysics. Such market
metaphysics—what George Soros (1998) rightly calls “market fundamentalism”—necessarily leads to
the violation of natural and human beings. In many cases violent business practices result in
‘essential’ harms such as the exploitation of forests for timber or the commoditization of women as
mere sex objects (Zsolnai, 2015).

The capitalist world is advancing every day in its research and technology capabilities. It can
technically produce almost anything. The moral and ethical questions now are: Is it permissible to
make everything we are capable of making? Is it moral, for instance, to genetically enhance the human
embryo to enhance the subsequent offspring? Is it thereby morally justifiable to alter human nature? Are
we playing God with human nature in doing so? Is it permissible to market everything (e.g., growth
hormones, human reproductive technologies, pornographic products) we are capable of marketing?
These questions are very much similar, yet have different practical implications. Currently,
several theories influence our attitudes toward these questions:

1. Break-through theory: mankind will always achieve a technical break-through into all the
problems that arise in its technical environment.
2. Balance-of-nature theory: human life and the life of our environment will always adjust to each
other.

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 3. Neutrality theory: science and technology in themselves are neutral (a-moral or trans-ethical),
and must be freed from any ethical and moral impositions of a few, lest humanity's progress be
impeded.
4. Self-limitation theory: our commitment to quality life and moral values imposes limits on human
inquiry on the one hand, and on technological progress on the other.
5. Creation theory: our universe and the world of humankind are created realities. The world and
its nature should be left as God created it. Nature has been given a fixed form, and man and
woman have their place in it. Humankind should not play God, nor displace or dispense God,
nor try to take control of nature and thus author or alter its own destiny. We ought not to
create a new humanity that intends to solve all the problems of nature.
6. Anthropocentric theory: Humankind is the center of the universe; it has been given the task of
shaping the world to its own ends. Manipulation of the world and its resources (which includes
man himself) for the betterment and survival of mankind is not only a human right and duty,
but is essential for a better understanding and realization of human destiny.

The first four theories are primarily philosophical; the last two are theological. The best way to
approach these problems is through a holistic approach such as "integral humanism." Integral
humanism stands to better the whole human system, body and spirit, mind and matter, individual and
society, present and future, all human beings and the cosmos we live in. Integral humanism as
applied to capitalist business implies a basic shift in ethical and moral values such as:

1. From "big is better" to "small is beautiful;"

2. From unscrupulous profiteering to equitable profit-sharing;
3. From limitless possessions of the few to prosperity of the many;
4. From industrial concentration to wholesome competition to unraveling new markets;
5. From uncontrolled free trade to managing global trade;
6. From total mastery over nature to harmony with nature;
7. From the primacy of productivity to the primacy of human dignity;
8. From work as bondage and duty to work as freedom and right;
9. From unbridled individualism to a generous form of community;
10. From limitless consumption to resourceful conservation;
11. From total independence to healthy cosmic interdependence;
12. From exaggerated individualism to cooperative and shared cosmic partnership and harmony.

Doing the Right Thing Rightly

What is the “right thing” we must do? What should be the standard for the right thing? How can
we tell if we are doing the right thing? For example, the twelve ethical and moral mind-shifts listed
above indicate domains and examples of doing the right thing rightly. Doing the right thing is beyond
going green, beyond reducing carbon footprints, beyond fair labor practices, beyond strong corporate
governance, beyond CSR, beyond sponsoring an inner-city mentoring program, beyond giving
charity, beyond compassionate commerce - doing the right thing is all these and much more. All these
humanitarian and beneficial programs or practices do not themselves constitute the higher purpose of
life. Without a philosophy and committed corporate leadership, all these social activities are reduced
to ticks on a wish-to-do list.

Doing humanitarian good and living a good corporate ethical life mean following the Golden Rule,
expressed by all the religions of the world as Do unto others what you would like others to do unto
you. But interpreting and doing the Golden Rule may be complex and nuanced that we need to find a
simpler and more effective way of thinking and acting and talking about it. Defining what is “doing
the right thing” is difficult, especially across the world’s diverse cultures. We cannot prescribe new
rules for doing the right thing. Instead, we must rethink the process by which we make choices in
business, by reinterpreting some ancient moral concepts that boil down to a simple profound truth:
better outcomes result from asking the right questions than from having the right answers.

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 Hasty blinded decisions, quick-fix decisions and values, greed for instant wealth, heedless of bad
outcomes on the innocent stakeholders – all these marked some seventeen giant global investment
banks that were part of the Global Financial Crisis of September-October 2008. The crisis stunned
and impoverished the world, and we are still reeling from its evil consequences. But what can stop
these very mega banks from conspiring the same crisis or scam again? Only genuine, ready to
understand and convince, ready to motivate and empower, ethical, moral and spiritual theories and
principles, rules and moral standards - that this book is about to explore. All these banks confused
short-term profits and excess wealth with the higher purpose of life. Ethical, moral and spiritual
theories and principles deal with the higher purpose of life for humanity and for our planet home.

“Selfishness as the basis for happiness has been debunked and the soul of capitalism is in the
process of being redefined,” says Nitesh Gor (2012) in his Dharma of Capitalism (p. 9).ii People,
nations and businesses today feel the pressure and the imperative to “do the right thing.” The
movement towards compassionate commerce and individual integrity has been a global social
revolution bubbling up from below in thousands of places in thousands of forms” (Ibid, p. 11). The
Dharma of Capitalism believes in the “universal truth that all people and cultures are connected by
money and commerce and that there is a higher purpose to economic activity than the short-terms
goals of profit, wealth-creation, and personal gratification” (p. 6).

The Core of Dharma

Dharma, individually or socially, is an Oriental moral imperative to do the right thing - it evolves
as we journey through life. iii Its common usage implies righteousness, justice, wisdom, rightful or
correct action, behavior codes, ethics, and so on. Dharma relates to a sense of higher purpose. It is a
fluid concept, dependent on the context. There is material dharma as opposed to spiritual dharma.
There are different dharmic expectations depending on whether one is young, single, male or female,
married, older, and so on. All these different dharmas share a common purpose – to help people
remain mindful of the motivations and consequences of every decision they make, no matter how
minor (Gor, 2012, p. 17). Every choice we make has a motive and an outcome, and the two are often
at odds. Understanding our true motivations and owning responsibility for outcomes is at the core of
the Dharma of Capitalism. When we allow our choices to be driven by motivation or passion and
thereby ignore to foresee or investigate outcomes, the results are too often flawed or unintended.

Humans are myth-makers and meaning-seekers, constantly giving and receiving codes through
cultural practices. A real approach to business should be gaze-based (and not goal-based), highly
individualized and personalized. It should celebrate my truth and your truth, and the human capability
to expand the mind, thanks to imagination, and not sacrifice both for the so-called objective Truth.
Yet modern business practices that are goal-based reveal that the corporation is divorced from the
cultural. Very few managers see culture as a lever. This explains why industry is increasingly at odds
with society. It is because professionalism and business processes are aimed at domesticating people
and so would never directly inspire entrepreneurship, ethics, inclusiveness or social responsibility
[Pattanaik, D. (2013). Business Sutra: A Very Indian Approach to Management. New Delhi: Aleph
Book Company, p. 18].

“While morality deals with the right course of action, ethics is concerned with character. One
could be moral and do the right thing, yet be a person of poor character and ethically lacking” [Gor
(2012). Dharma of Capitalism, p. 16-17). Hence, we need a new construct to combine character and
motive, ethics with morality. That is, it is not enough to do just the right thing, we must do it for the
right reasons and intentions (motivation) and do it rightly with proper moral and spiritual dispositions
(character). We do not do the right thing or shun from violating rules and laws to avoid guilt, shame
or punishment (a negative approach), but in order to do good, be good, and become good (a positive
approach). This is intrinsic motivation. We must remain mindful of the motivations and
consequences of every decision we make, no matter how minor. Our worst instincts are not sins but
our natural tendencies to be acknowledged and tamed in the service of wise, compassionate thinking

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and behavior. Rather than the concept of evil, the Hindu and Buddhist scriptures speak of our
struggle to be consistently good.iv

The dharmic concept of higher purpose transcends short-term quick-fixes and profits, regional
and national boundaries - Dharma as a philosophy looks at every decision from both ends – what our
real motivations are behind these decisions, and how conscious and caring are we regarding outcomes
(as opposed to outputs).v

The Content and Challenge of a Previous Book

In a morally perplexed world wrought with market turbulence, economic chaos, global financial
crisis, corporate fraud, organized lobby and bribery, and gross income inequalities, my previous book
on Corporate Ethics for Turbulent Markets: The Market Context of Corporate Ethical Decisions and
Choices, sought to explore and analyze current turbulent markets as the context of corporate ethics and
ethical imperatives of business management. Specifically, the first Book characterized market
turbulence today as a source of market opportunity (Chapter 01), introduced major concepts,
directions, theories and challenges of ethics (Chapter 02), outlined a systems-thinking approach to
understand the challenge of corporate ethics in the turbulent markets of today (Chapter 03), described
the success of the free enterprise capitalist system (FECS) when designed and deployed rightly
(Chapter 04) and its scandals and abuses when infected by fraud, corruption and bribery (Chapter 05).
The book then addressed particular turbulent context of modern debt-overleveraged and promoter
dominated corporations (Chapter 06), artificial intelligence and its new challenges to corporate ethics
today (Chapter 07), and explored the ethics of reinventing the morally embattled corporation to face
turbulent markets (Chapter 08). The concluding Epilogue introduced the legality, ethicality, morality,
and spirituality (LEMS) concept and challenge of corporate governance today.

The Structure of this Book

In this sequel, Corporate Ethics for Turbulent Markets: Executive Response to Market Challenges,
we cover Strategies of Corporate Ethics, in terms of moral agencies as processes of corporate
deliberations, moral reasoning, moral judgment calls and their justification, moral choices, decisions
and implementation, and moral consequences as outputs. Global and domestic business cases of
current ethical market problems, challenges and moral imperatives are proposed and discussed
throughout the book in each chapter. Concretely, this Book provides a brief Prologue titled
Corporate Ethical Response to Turbulent Markets of Today that situates the discussion in the eight
chapters that follow:

 Chapter 01: The Ethics of Dignity of the Human Person

 Chapter 02: The Ethics of Corporate Executive Virtues
 Chapter 03: The Ethics of Corporate Trusting Relations
 Chapter 04: The Ethics of Corporate Ethical and Moral Charismatic Leadership
 Chapter 05: The Ethics of Corporate Critical Thinking
 Chapter 06: The Ethics of Corporate Stakeholder Rights and Duties
 Chapter 07: The Ethics of Corporate Moral Reasoning, Moral Judgment, and Moral
Justification
 Chapter 08: The Ethics of Corporate Legal, Ethical, Moral, and Spiritual (LEMS)
Responsibility
 A closing Epilogue explores Corporate Cosmic Executive Spirituality for Today.

The Target Audience

Organized thus, this book is uniquely designed for corporate executive leaders and boards of
directors, business scholars and business practitioners alike, and high potential business students. We
strive to enable and empower corporate executives and business entrepreneurs to engage in corporate-

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wide decisions and strategies that demand creative, imaginative, intuitive and innovative business
management skills that are optimally economic and legal, and at the same time highly ethical, moral
and spiritual. In the typical MBA program, this book could be useful for courses in Corporate Ethics,
Business Ethics, Managerial Ethics, Executive Ethics, and Ethics of Strategy, particularly at the
graduate level.

The Uniqueness of This Book

There are several books on ethics, on business ethics, on managerial ethics, presumably on
executive ethics, but hardly any on corporate ethics. A significant percentage of current business
students will very soon be corporate executives who will make decisions that will impact the whole
company and the industry, its stakeholders, its divisions, peoples, products, brands and services. Such
corporate-wide, industry-wide and nations-wide decisions need to be preceded by proper training in
moral reasoning, explanation and justification, ethical scanning and understanding of competition and
markets, moral deliberation and choices, prediction and control of high profit products and markets
such that corporate decision makers can foresee the consequences, and assume responsibility for their
intended and unintended consequences.

To make the content of each chapter relevant and exciting, each chapter is energized by several
contemporary business cases that reflect global, international, national and local real-time market
problems and cases as the latter emerge and develop, capitalize or exploit current market
opportunities. Each case follows by a set of pertinent ethical questions and moral challenges, and the
ethical concepts, theories, paradigms and models that follow are designed to empower the reader to
address these questions with ethical and moral solutions.

There is no closure to any book on corporate ethics. The content of each chapter is continuously
evolving and emerging reflecting turbulent markets. Particularly, a book that captures real-time
ethical and moral process of forming strategic leaders of corporate transformation experience and
accomplishment must be a “work in progress” that needs constant updates, upgrades, revisions and
restatements. In other words, this book is not about immutable and frozen conceptualizations and
theories, paradigms, models and strategies of past centuries. While using them freely, it also feeds and
expands on the real, day-to-day corporate world of ethical and moral business management.

We hope this book will continue to challenge corporate executives, managers, entrepreneurs,
professors and students, thinkers and innovators alike to this great world of strategic ethical, moral
and spiritual world of management and leadership and organizational learning and business
transformation management (Mascarenhas, 2011).

End Notes
Chapter 01
The Ethics of Dignity of the Human Person
“We are not human beings having a spiritual experience. We are spiritual beings having a
human experience. We are not physical beings having a spiritual experience; we are
spiritual beings having a physical experience.”
Pierre Teilhard de Chardinvi

Executive Summary
This first Chapter explores the basic foundation of corporate ethics: the human person in all its
dignity and mystery, its corporeality and emotionality, its cognitive and volitive capacities of moral
development. Four fundamental characteristics of the human person, namely, individuality,
sociality, immanence, and transcendence, will be examined for their potential to understand, live,

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 experience and witness corporate ethics and morals. We explore the profound meaning and mystery
of human personhood invoking several philosophies of the good and human dignity as exposed by
Aristotle and Thomas Aquinas in the West, and by the doctrine of Dharma in the East as expounded
by Gautama Buddha, Mahabharata and Bhagavad Gita, and by Prophets Confucius and Tao, in the
East. Several contemporary cases of great human personhood are analyzed: e.g., Peace Nobel
Laureate Nelson Mandela from South Africa (1993) and Peace Nobel Laureate Liu Xiaobo from
China (2017) - cases of human abuse that turned into triumphs of human dignity.

Introduction
The completion of the Human Genome Project at the beginning of the new millennium has
generated a great deal of knowledge about human DNA and about the correlation between certain
gene sequences and certain phenotypic traits. This advance holds promise for making genetic human
enhancement customized to people’s specific needs and desires. For instance, currently biomedicine
in the form of drug therapies and medical procedures can enhance some of our mental and physical
capacities above normal upper limits of the human species. While this biomedical advance is very
interesting and a big business market, several moral concerns arise:

 Is it morally justifiable to alter human nature by tinkering with the genetic code?
 Are we playing God with human nature in doing so?
 Is it a symptom of our hubris – to improve upon God’s gift of sacred human nature?
 Can we morally seek “mastery” over ourselves and others?
 Do technologies enhancing human nature have unforeseeable and irreversible evil
consequences?
 Are these concerns similar to those raised against human reproductive technologies?
 Or, are these moral concerns just cognitive biases that interfere with our moral reasoning?

These are also concerns of corporate ethics of human enhancement. These concerns question our
traditional doctrine of absolute human dignity which stems from the claim that God created man and
woman in his own likeness unto immortality and eternity – the subject of this Chapter. We need
philosophically and morally to justify our concerns or psychologically explain away current resistance
to human enhancement. We must look carefully at arguments resisting human enhancement as also
arguments supporting it. We do this towards the end of this Chapter.

Recent advances in the physical, social, biological, neurological and anthropological sciences
have not only spawned radical technological and market breakthroughs, but have, more importantly,
unearthed tremendous human potentiality for design, creativity and innovation, for invention,
discovery, venture and entrepreneurship, for capital accumulation and wealth creation, for individual
self-actualization and collective common good. We are experiencing a growing consciousness of the
increased power that human beings have over nature, and over the future development of the human
race. This power can be both a blessing and a curse: it is a blessing if harnessed to do good, to
preserve and respect human dignity, to bring about justice, and to promote peace and human
solidarity; it can be a curse if the same power is abused to do evil, destroy human worth, generate
unjust structures, and provoke war and terrorism, global destruction and disintegration. We can make
or mar our destiny.

What is man? What is being human? What is human personhood? What is corporate human
personhood? A related philosophical and more fundamental question is: what is human? And what is
being good? Aristotle’s balanced formula for man was: man is a rational animal.

Within ancient Greek philosophical thought and categorization this definition meant that the
human being is endowed with the highest of three types of souls:

1. As a vegetative soul, the human is capable of nutrition, growth, and reproduction;

2. As an animal soul, the human is capable of movement, sensations, emotions and experiences;

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 3. As a rational soul that unites the other two, the human is capable of knowledge and choice. That
is, this rational soul expresses itself in the twofold activity of thinking and willing.

We are even more: our knowledge is reflective (i.e., we know that we know) and our choices are
informed and reflective (i.e., we know what we are choosing, and we know why we are choosing it).
Our skills and potential for knowledge and choice empower us to be “causes” or “authors” of our own
actions, and hence, to be accountable and responsible for the consequences of our actions. Thus,
being and action are intrinsically linked in the rational and voluntary nature of our human being.

On the surface, human behavior is basically a set of actions that are governed by one's feelings,
emotions, attitudes and beliefs regarding proposed ends, ideals, goals and objectives. In general, most
decisions and actions stem from and are affected by our personality or character. To the extent that
these decisions and actions are human, they are usually assessed by several dyadic qualifications such
as right or wrong, good or bad, ethical or unethical, moral or immoral, just or unjust, and fair or
unfair. In general, actions are praiseworthy if good, and blameworthy, if bad. If good, one should be
credited for them; if bad, one must accept blame and responsibility for the intended and unintended
consequences.

Ethics is concerned with responsible human behavior. Corporate ethics is concerned with
responsible corporate governance in relation to decisions, actions and their outcomes that affect the
company as a whole. Good business executives execute good decisions and actions that generate
good outcomes, and avoid bad decisions and actions that result in bad or harmful consequences.

Why Ethics of Human Personhood?

Psychology as a science started with two distinct approaches: a) one emerged as the study of
human internal processes that are often difficult to observe directly; b) single-minded focus on
observable behaviors. The former began with the psychoanalytic tradition of Sigmund Freud who
believed that the reasons why people act and feel as they do are deep within them; hence change can
be promoted only when people probe their psychic depths and bring to surface and awareness those
inner, often unconscious, dynamics. The latter approach (b) began with the empirical tradition of B.
F. Skinner, its best exponent, called behaviorism, and assumed that the causes of people’s actions are
the rewards or punishments, they called reinforcements, they have received; hence, a person’s life can
be dramatically changed by precise adjustments in the administration of reinforcements.

From the psychoanalytic tradition of Sigmund Freud emerged two other approaches: a)
humanistic person-centered psychology that included the work of Carl Rogers who pioneered client-
centered therapy; and b) humanistic projective psychology that includes the work of Fritz Perls, who
pioneered Gestalt therapy. Both psychoanalytic and humanistic traditions, even though much
different, understand human behavior in terms of motivational and emotional dynamics, both focus on
promoting awareness as the basis for change, and both build theory using observations and direct
experience. Both build their theories on clinical experience.

On the other hand, behaviorism focused on observable behaviors and the environmental
conditions or contingencies that reinforce them. Citing the rules of science, behaviorism argued that
before a phenomenon is accepted as a fact, it must be independently investigated by other scientists
and replicated by them. This empirical tradition has evolved through many decades now. During the
last five decades or so, the empirical tradition has employed statistical analysis of data collected from
scientific experiments to analyze observable behaviors.

Many so called cognitive theorists now focused on individual’s thoughts and emotions rather than
just observable behaviors via environmental reinforcements. They explain behaviors in terms of
people’s thoughts, attitudes, expectations and interpretations about reinforcements. The cognitive
psychology theorist seemed to have moved “inside the person” to search for the causes of behavior.

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Other volitional psychology theorists (e.g., Harry Farlow, Abraham Maslow, Douglas McGregor, and
Fredrick Herzberg) have gone deeper to probe into human “motivations.”

Many so called deterministic psychology theorists (e.g., Frederick Taylor, BF Skinner) have
continued to view the person in observable mechanistic terms. The latter assert that humans are
information processing machines that work like computers to solve problems, make decisions, and
behave accordingly. By this view, human beings are machines waiting to be programmed by society
through homes and schools, colleges and universities, workplaces and worship places. Sociologist
Talcott Parsons proposed yet another view. He portrayed the birth of each infant as the invasion of a
barbarian; children are savages who need to be tamed. This infant-as-barbarian view is not too
dissimilar to the view of the human person as a passive information-processing machine waiting to be
programmed and tamed by society. Both views assert that society must shape and mold the person;
both suggest that socializing agents and agencies like parents, home, teachers, school, and managers
and the workplace should create the human self. Both view human development as something done
by the social world to children, adolescents and adults at various stages of their life.

Another approach considers humans as vital organisms, who, by their nature, explore, develop,
and take challenges, and thus develop themselves, of course, supported by parents, teachers and
workplace superiors. Alfred Kohn (1999), Edward Deci and Richard Ryan (1985, 1990) and Pink
(2009), to name a few, follow this approach in understanding intrinsic motivation. Their central thesis
is that people develop through the process of organismic integration as they proactively engage their
world. They believe that there is a basic tendency within people to move toward greater coherence
and integrity in the organization of their inner world. Inherent in the nature of human development is
the intrinsic tendency toward greater consistency and harmony within; that is, people are intrinsically
motivated to integration and harmony (Deci, 1975, p. 80).

Even other psychologists have hinted at human organismic integration. Freud spoke of the
synthetic function of the ego that suggested that throughout life people work to bring coherence to
their experience, and thus to the development of their own personality. Child psychologist Jean
Piaget hypothesized a similar organizational principle in children whereby they imbued everything
with life. Carl Rogers and fellow humanistic psychologist Abraham Maslow spoke of the self-
actualization principle within people leading them toward greater internal harmony and integrity. In a
similar way, argue Deci and Ryan, people’s perceived sense of competence and perceived sense of
autonomy enhance intrinsic motivation that empowers organismic integration. The development of
integration in personality reveals who you truly are and indicates becoming all you are capable of –
these ground and empower the concept of human authenticity.

A further and deeper question is: what grounds intrinsic motivation and organismic integration in
us whereby we discover, develop and enjoy ourselves as a human integrated personality that is truly
individual and social, immanent and transcendent at the same time? When Deci (1975, p. 82)
rightfully asserts “that intrinsic motivation and the inherent integrative tendency are natural,” my
question is what make them natural and what grounds this nature? The answers to these questions are
beyond psychology and empirical measurement, as empirical methods or cognitive theories cannot
stretch their horizons too far and deep. Hence we have recourse to philosophy. Table 1.1 summarizes
the taxonomy of research methodologies in psychology, arguing for the necessary complement of a
philosophical approach to the human person.

< Table 1.1 about here>

Philosophy of the Human Person

It is in the philosophy of the human person we discuss trans-empirical concepts like the human
nature, human dignity, fundamental human rights, the human soul and human destiny. We examine
such concepts in this chapter so as to enrich our understanding of intrinsic motivation and the inherent

10
integrative tendency that are so natural to us but one that are least lived and experienced. It is the
human person (richly created and even more designed and engineered by God) that grounds our
unique human nature, human personality, human dignity and authenticity, and human development
and potential.

Martin Heidegger claimed that modern technology, with its violent metaphysics, destroys being
(Heidegger, 1978). It is not modern technology itself, however, that is dangerous but its wanton and
wide-scale implementation by modern-day un-eco-sensitive businesses. With its exclusive focus on
profitability bottom line, businesses today tend to violate the integrity and diversity of natural
ecosystems, human systems, the autonomy and culture of local communities and the chance that
future generations will lead a decent life (Zsolnai, 2015, p. 3).

Case 1.1: Nelson Mandela Fights for Human Dignity

Nelson Mandela, the freedom fighter who led the emancipation of South Africa from white minority rule,
who emerged from 27 years in prison to become South Africa’s first elected black president and a global symbol
of reconciliation, died, age 95, on Thursday, December 5, 2013, at 8:50 pm at his home in Houghton,
Johannesburg, South Africa, after a protracted illness. As flags flew at half-mast across South Africa, a sense of
loss, blended with memories of inspiration, spread from President Obama in Washington, DC to the members of
the British royal family and on to those who saw Mandela as an exemplar of a broader struggle for peace,
harmony and equality.

Pope Francis praised “the steadfast commitment shown by Mandela in promoting human dignity of all the
nation’s citizens and in forging a new South Africa.” President Barack Obama eulogized: “He achieved more
than could be expected of any man. I am one of the countless millions who drew inspiration from Nelson
Mandela’s life. My very first political action, the first thing I ever did that involved an issue or a policy or
politics, was a protest against apartheid.” Manmohan Singh, then Prime Minister of India said, “A giant among
men has passed away. This is as much India’s loss as South Africa’s. He was a true Gandhian. His life and
work will remain a source of eternal inspiration for generations to come.” British Prime Minister David
Cameron declared in London: “A great light has gone out in the world.” Russian President Vladimir V Putin
added: Mandela was “committed to the end of his days to the ideals of humanism and justice.” The French
mourned differently: they bathed the Eiffel Tower in Paris in green, red, yellow and blue – the colors of the
South African flag. This is a testimony to the immense love, admiration, respect and inspiration Mandela
evoked across continents.

Nelson Mandela was born on July 18, 1918 in a royal family of the Xhosa-speaking Thembu tribe in the
South African village of Mvezo. Mvezo was a remote hilltop village, a tiny hamlet of cows, corn and mud huts
in the rolling hills of the Transkei that still is snaked around by Mbashe River in the southeast of South Africa.
His mother spent most of her working day drawing and hauling gallons of fresh water using a pair of donkeys to
the white master she worked for in the nearest town. His father, Gadia Henry Mphakanyiswa, was a chief of the
Thembu people, a subdivision of the Xhosa nation. Mandela was named Rolihlahla, meaning “troublemaker,”
until his first day at school, when at age 7 his teacher, Miss Mdingane, unceremoniously renamed him Nelson to
conform to the British bias in education.

Mandela was drawn to politics in his teens while listening to elders talk about the freedom they had before
white rule. Educated at a Methodist missionary school and the University College of Fort Hare, then the only
residential college for blacks in South Africa, where two years later he was expelled for leading a student
protest. Thereafter, Nelson got arrested several times for treason. He was arrested again in 1962 on the charges
of leaving the country illegally and incitement to strike - sentenced to five years in prison. In 1963, the police
raided a farm in Rivonia where the A.N.C. had set up its headquarters. The raiding police found a few
documents disclosing that Mandela and his members were planning a conspiracy to overthrow the government.
Consequently, the South African white rulers were determined to put Mandela and his comrades out of action.
That same year in 1963, Mandela and eight other ANC leaders were charged with sabotage and conspiracy to
overthrow the state capital. It was called the Rivonia Trial – named after the farm the defendants had conspired.

At Mandela’s suggestion, his comrades, certain of conviction, set out to turn the trial into a moral drama that
would vindicate them in the court of world opinion. They admitted they had engaged in sabotage and tried to
spell out its political justification. The four-hour speech Mandela opened the defense’s case was one of the most

11
eloquent of his life. Conducting his own defense in 1963, Mandela spelt out a dream of racial equality. Mandela
said in court: “I have fought against white domination, and I have fought against black domination. I have
cherished the ideal of a democratic and free society in which all persons will live together in harmony and with
equal opportunities. It is an ideal which I hope to live for and to see realized. But, my lord, if it needs be, it is
an ideal for which I am prepared to die.” (Bloomberg News, 2013; Keller, 2013, p. 11). The Rivonia trial
seemingly established Mr. Mandela’s central role in the struggle against apartheid. He was sentenced to Life in
Prison in 1964.

Under considerable pressure from liberals at home and abroad, including a nearly unanimous vote of the
United Nations General Assembly to spare the defendants, the judge acquitted one and sentenced Mandela and
the others to life in prison. P. W. Botha, then South Africa’s president, refused pardon. He offered to release
Mr. Mandela if he renounced violence. Mr. Mandela refused saying that government should abandon apartheid
first. Mandela was 44 when he was escorted on a ferry to the Robben Island prison in July 1963. Robben Island
was shark-infected water shed seven miles off Cape Town. Over the centuries the island was a naval garrison, a
mental hospital, and a leper colony. But for Mandela and his comrades, the Island was a university. Mandela
honed his skills as a leader, negotiator and a proselytizer. Both black and white prison administrators found his
charm and iron will irresistible. Perhaps because Mandela was so much revered, he was singled out for
gratuitous cruelties by the authorities. Still Mandela asserted that the prison had tempered any desire for
vengeance by exposing him to sympathetic white guards.

He left the Victor Verster Prison, on Robben Island, near Cape Town, on February 11, 1990, after spending
27 years in apartheid jails. Nelson was now 71. He walked to an inevitable moral and political victory cheered
by much of the then world. Mandela called it the “Long Walk to Freedom” in his 1994 Autobiography.

In 1990, when released from prison, Mandela persuaded the ANC to renounce violence in favor of peaceful
negotiation. He won the trust of Frederick Willem de Klerk, the last president of South Africa in a Whites-only
election, in their first meeting. This relationship helped to keep the negotiation on course for the next four years
as violence raged on the streets of South Africa’s townships. Aside from de Klerk, Mandela won most white
South Africans, who were reassured by his words of reconciliation. Mandela and de Klerk shared Nobel Prize
for peace in 1993. The A.N.C. won majority in election – Mandela assumed the role of the president of South
Africa in 1994.

Mandela even established a Truth and Reconciliation Commission that granted amnesty to soldiers,
policemen and even assassins, provided they confessed to what they had done. “Our goal was general amnesty
in exchange for the truth,” said Bishop Desmond Tutu (who chaired the Truth and Reconciliation Commission)
to Bloomberg News in a 1999 interview. The level of endurance, persistence and altruism displayed by Nelson
Mandela was exceptional and brought a major change in human thinking that all men and women are equal in
each respect and all persons should live together in harmony and with equal opportunities.

Nelson Mandela embodies the spirit of Ethics of Human personhood. Bearing no grudge even after being
imprisoned unfairly for 27 years, he championed the Gandhian way of fighting for freedom. Mandela’s
humanity, leadership, commitment and forgiveness are a source of learning for the entire world. He inspired
millions of people, from school students to world leaders, to adopt a more peaceful approach, and to practice
forbearance and forgiveness. He fought against not only white domination but also black domination, a
champion of gender equality

Ethical Questions:
1. Nelson explained why he changed his non-violence stance so abruptly to an armed one: “Forswearing
nonviolence was not a moral principle but a strategy; there is no moral goodness in using an ineffective
weapon.” Do you agree with this ethic, and why?
2. Before he would be sentenced for life imprisonment in 1963, Mandela said in court closing a four-hour long
speech, the best of his life: “I have fought against white domination, and I have fought against black
domination. I have cherished the ideal of a democratic and free society in which all persons will live together
in harmony and with equal opportunities. It is an ideal which I hope to live for and to see realized. But, my
lord, if it needs be, it is an ideal for which I am prepared to die.” How do you view the depth of Mandela’s
human personhood from this statement?
3. In 2007, when Bill Keller asked Mandela, “After such barbarous torment, how do you keep hatred in check?”
Mandela answered: “Hating clouds the mind. It gets in the way of strategy. Leaders cannot afford to hate.”
How would you deduce Mandela’s compassionate human personhood from this statement?

12
Case 1.2: Nobel Peace Prize Laureate Liu Xiaobo (2017)
Liu Xiaobo died Thursday, July 13, 2017, age 61, fighting liver cancer for more than a month after he was
transferred from prison (where he was in the eighth year serving a 11-year term for “subversion”) to a civil
hospital in northeast China. Born in December 1955, Liu was the son of a professor who remained a loyal
communist party member while his son was actively disobeying the party line. Liu was an academician and
author specializing in literature and philosophy. China’s most famous political activist and prisoner, he was
treated for terminal liver cancer in a heavily guarded hospital in north-eastern China. Liu was the unsung hero
along with other big name dissidents of the 20th century.

A human rights activist, Liu took active part in the 1989 pro-democracy Tiananmen Square demonstrations
and was arrested in 2008, after writing a pro-democracy manifesto titled Charter 08 in which he demanded an
end to one-party rule and called for improvements in human rights. Liu’s aim was not to trigger upheaval, but
to encourage peaceful discussion. Charter 08 was signed by thousands of people in China. After a year in
detention and a two-hour trial, he was sentenced in December 2009 for 11 years imprisonment for “inciting
subversion of state power.” He was held incommunicado since, in an attempt to do away with any memory of
him. Liu was awarded the Nobel Peace Prize in December 2010 while in prison, and not even his family was
allowed to travel to Norway to accept the award. The award was bestowed to an empty chair, which later
became a symbol of China’s repression.

In the weeks before his death, Liu’s case got increasing international attention when world leaders such as
German Chancellor, Angela Merkel, and Taiwan’s president, Tsai Ing-Wen called upon China to permit Liu to
travel abroad to receive palliative care that could extended his life. The government refused Liu and his family
when they asked if Liu could be allowed to seek treatment abroad. Instead, the Government posted guards
around his ward, deployed its army of Internet censors to rub out any expression of sympathy for him. The
Chinese police kept Liu’s wife, Liu Xia, under house arrest and heavy surveillance. She was barred from
speaking about Liu’s death and his cancer treatment.

Along with countess others, Amnesty International paid tribute to Liu: “Today we grieve the loss of a giant
of human rights. Liu Xiaobo was a man of fierce intellect, principle, wit and above all, humanity” said Salil
Shetty, Secretary General to Amnesty International, in a statement. [See The Statesman, Kolkata, Friday, 14
July, 2017, p. 1, 10].vii Liu Xiaobo represents the best kind of dissent in China. He was China’s conscience. His
suffering, death and repression hold a message for China and the West.

There are good reasons why Western leaders should speak out loudly for China’s dissidents. China cannot
retaliate too much as it depends upon the West for trade. Western silence may seem complicity, and Mr. Xi may
believe that jailing peaceful dissidents is normal. Our silence may encourage him to lock up yet more dissidents
and activists. Moreover, those who risk everything in pursuit of democracy in China may feel discouraged that
the West has abandoned them in their struggle for peace. Further, a vital principle is at stake. In recent years
there has been much debate in China about whether values are universal or culturally specific. Keeping quiet
about Liu Xiaobo signals that the West tacitly agrees with Mr. Xi, and what is worse, that there are no
overarching ethical or moral values. China, like Western countries, is a signatory to the UN’s Universal
Declaration, which says: “All human beings are born free and equal in dignity and rights.” If the West is too
selfish and cynical to fight for these universal values when China openly flouts them, it risks eroding such
values across the world and in its own countries too (See “Liu Xiaobo, China’s Conscience,” The Economist,
July 15-21, 2017, Cover Page and page 9).viii

Ethical Reflections:
1. Amnesty International paid tribute to Liu Xiaobo: “Today we grieve the loss of a giant of human rights. He
was a man of fierce intellect, principle, wit and above all, humanity.” Explain.

2. “Liu Xiaobo represents the best kind of dissent in China. He was China’s conscience. His suffering, death
and repression hold a message for China and the West.” Reflect.

3. Western silence about inhumanities to Liu Xiaobo may seem complicity, and Mr. Xi might have believed
that jailing peaceful dissidents is normal. Western silence may encourage China to lock up yet more
dissidents and activists. What is your moral obligation in this regard?

13
 4. “In recent years there has been much debate in China whether values are universal or culturally specific.
Keeping quiet about Liu Xiaobo signals that the West tacitly agrees with this, and what is worse, there are
no overarching ethical or moral values.” How would you counter this trend?

The Great Humanity of Nelson Mandela

“Mandela was no ordinary leader; he was a leader of leaders. His life was remarkable for its
achievements. … During his 27 years in jail, Mandela attained renown for his uncompromising
commitment to fighting injustice. This made him an icon of the oppressed. His fight against
apartheid was all the more laudable in that he engaged in principled negotiations with the white rulers
to end it. … When he walked out of jail in 1990, many believed that long decades in jail would have
made him bitter and angry with his oppressors and that he would seek retribution. He showed the
world there was another way to reach out and forgive one’s tormentors,” thus said the Deccan Herald
Editorial (Saturday, December 7, 2013, p.10). During the brutal years of his imprisonment on Robben
Island, thanks to his own patience, humor and capacity for forgiveness, he seemed freer behind bars
than those who kept him there, locked up in their own self-demeaning prejudices (The Financial
Express, Editorial, Saturday, December 7, 2013, p. 7).

Mandela founded the Truth and Reconciliation Commission (TRC) aimed at providing victims of
the apartheid years with closure. The TRC did help uncover the truth about violence unleashed by the
apartheid regime as well as its opponents, but it was only partially helpful in healing wounds or
ending racial hatred. Mandela never hesitated to speak truth to power. He was uncompromising in
expressing his anguish, even anger, over injustice. In 2003, Mandela lashed the United States for
committing “unspeakable atrocities” and for risking a “holocaust” by invading Iraq. His words were
prophetic and appealed to the conscience of millions, compelling even warring groups to lay down
their guns to build peace. It will not be easy for the post-Mandela world to accept the challenge of his
death – his moral authority will be sorely missed (Deccan Herald editorial, Saturday, December 7,
2013, p.10). Ever since Mandela voluntarily left the presidency of South Africa in 1999, he has
brought his moral stature to bear elsewhere around the continents of the world – he was a broker of
peace.

The question most often asked about Mandela was how, after South African whites had
systematically crushed and humiliated his people, tortured and murdered many of his friends, and
incarcerated him into prison for 27 long years, he could be so evidently free of spite and retribution.
When preparing for the Mandela obituary in 2007, Bill Keller, columnist of International New York
Times, asked Mandela, “After such barbarous torment, how do you keep hatred in check?”
Mandela’s answer was almost dismissive: “Hating clouds the mind. It gets in the way of strategy.
Leaders cannot afford to hate.” ix He was an apostle against apartheid – a word that literally means
“apartness” in the African language, but in reality means a system of racial gerrymandering that
stripped blacks of their citizenship in the country of their origin and relegated them to USA-template
“reservation” of so-called homelands and townships, a system that denied 80% of South Africans any
voice in their own affairs.

Among Mandela’s many achievements, two stand out: 1) he was the world’s most inspiring
example of fortitude, magnanimity and human dignity in the face of oppression and opposition,
serving over 27 years in prison for his belief that all men and women are equal. 2) Little short of the
miraculous was the way he engineered and oversaw South Africa’s transformation from a byword for
nastiness and narrowness into, at least in intent, a rainbow nation in which people, regardless of caste
or color, were entitled to be treated with respect and human dignity. Nelson Mandela was awarded
the Bharat Ratna, the highest Indian civilian award, in the year 1990.

His charisma was evident from his youth. He was a born leader who feared nobody, debased
himself before no one, and never lost his sense of humor. He was handsome and comfortable in his

14
own skin. In a country in which the myth of racial superiority was enshrined in law, he never for a
moment doubted his right to equal treatment, and that of all his compatriots. For all the humiliation
he suffered at the hands of white racists before he was released in 1990, he was never animated by
feelings of revenge. He was himself utterly without prejudice, which is why he became a symbol of
tolerance and justice across the globe. He was quite simply, a wonderful man (The Financial Express,
Editorial, Saturday, December 7, 2013, p. 7).

His persistent struggle against apartheid teaches us that if we are determined to achieve
something, if we have true willingness to change something for humanity, it is never impossible to
strike hard and win the battle. A right path could be difficult, long and full of obstacles but it will
definitely lead to success. His message of reconciliation, not vengeance, reaffirmed Mahatma
Gandhi’s philosophy that fighting violence with violence is never a good idea. The way he handled
South Africa’s affairs after he assumed the presidential powers demonstrates the highest human
values with regard to forgiveness, truth and altruism and social justice.

The Value and Function of Executive Personhood

Human behavior, however, cannot be reduced to a set of decisions and actions. There is a profound
unity and interrelatedness that affects four basic characteristics of what it means to be human:

 We are uniquely sensitive or sense human beings fed by our five senses that are nuanced by
observation, perception, internalization and pleasure;
 We are affective and feeling human beings also fed by our five senses, empowered and reinforced
by our attitudes, beliefs, instincts and drives, needs and wants, desires and aspirations, ambitions
and dreams;
 We are cognitive or knowing human beings with unique capacities for thinking, reasoning,
explanation, experimentation, creativity and innovation, imagination and intuition, hindsight and
foresight, judgment and decisions; and
 We are volitive, voluntary and intentional human beings who can deliberate, determine, use free
will, choose, select or “elect” among competing courses of alternative actions, subjects, objects,
properties and events.

The unity of these activities (i.e., sensitive, cognitive, affective, and volitive) has been identified
by many scientists as the nexus of human personhood, the fundamental unity of us as persons.
Contemporary science insists on the transcending unity of the human being brought about by different
powers. Our thinking is an activity that is highly dependent upon choice and intimately affected by
our emotional state (Strawson, 1959). According to Lopez Ibor (1964, p.157ff), feeling is the bridge
which enables biological data of sensory perception to reach the mind of evaluation, classification,
and choice of a response. I choose to accept or reject ideas based upon how I feel about them, about
their source, and about their relationship to my experience and manner of thinking. That is, I feel
something, I quickly interpret my feelings intellectually, and react to both by choosing a course of
action. We are publicly identified by the possession of a cluster of different attributes, some bodily,
some behavioral, and some mental and some volitional, and we call them our “character” or our
“personality.”

In the Greek classic tradition, this human personhood is represented by the “soul” that unifies the
body and spirit, the physical and the mental, the understanding and the will, the voluntary and the
involuntary, and human instincts and human drives (Harré & Shorter, 1983; Strawson, 1959).
Whether one holds with Socrates that all knowledge is innate ready to be drawn out through education
(e-ducere in Latin), or with Plato that all knowledge is fundamentally remembering, or with Aristotle
that all knowledge begins with sensation, in any case, the raw data for our reasoning is given through
our sensory organs of the body working in harmony with the soul (Thomas Aquinas, Summa
Theologiae, Ia, p. 77-78, 84-85). The unifying principle and power is the human person.

15
 While on the one hand, our human personhood is fed and molded by the internal stimuli of our
sensitive, cognitive, affective, and volitive lives, on the other, it is also influenced by external stimuli
such as:

 Our family and school stimuli: our childhood experiences of our parents, nursery school, siblings,
grandparents and relatives, our adolescent experiences of peers and teachers at middle- and high-
schools, colleges and universities.

 Our ergonomic Stimuli: experiences of the workplace in relation to gainful work, meaningful
work, co-workers and labor unions, native talent perfected, new skills picked up, new sources of
income and rewards merited, and the like.

 Our market stimuli: the whole world of supply and demand, consumer buying power and
shopping, an expanding world of thousands of brands, products, services, newspapers, magazines,
radio, television, movies, music, stores, malls, supermarkets, transportation, logistics, brick-and-
mortar markets, internet markets, www, blogs, e-bulletins, and Facebook.

 Our ideological stimuli: our unique value-experiences derived from our society, art and poetry,
language and literature, science and fiction, textbooks and novels, libraries and art galleries, local,
national and global governments, law and order systems, religion and religious institutions,
politics and political agenda, history and culture, philosophy and theology.

Our human personhood receives, internalizes, filters, sorts, unifies, blends, lives and relives all
the internal and external stimuli in a mysterious, transcending synthesis and unity that really defines
us. Given the internal and external stimuli, that is, our physical, spatial and temporal worlds, our
human personhood develops certain personality characteristics, behavior patterns, cultivates certain
virtues (or vices), capacities or limitations, needs and wants, desires and dreams, habits and passions
of heart, ethics and morals, and transforms us into responsible (or irresponsible) persons. These
phenomena of internal and external stimuli make and mold us as “human resources” ready for
contributing back to society and the world.

How this mysterious unity or self-attribution is done is still debated. Various religions attribute
this to a superior power in us that some call the soul, the spirit, the mind, the atman, the transcendent,
the immanent, or the divine in us. Others trace this power to our genes and chromosomes, or the
mysterious neural-physical body that we are endowed and engineered with. It is because of this unity
that we say: I feel, I speak, I did this, and not that our body feels, our body speaks or that our body
does something. More importantly, we say: I own certain actions and their consequences, and hence
we assert: I did this, I chose this, I am accountable for this choice and the deed that follows, and I am
responsible for the effects or outcomes. It is because of this superior power in us that we can
formulate a mission (personal, corporate, social or political) for ourselves that is beyond ourselves, a
vision to realize this mission, and accordingly, we can spell ideals, ends, goals, objectives and the
means to achieve this mission. It is because of this body-spirit, matter-mind unity, the body becomes
the home of the soul, the home of our intelligence, the home of our virtue or vice, the home of ethics
and morals, and the home of our responsibility. Hence, the body becomes human, is humanized, and
is sacred.

Figure 1.1 is a rudimentary attempt to sketch this great phenomenon of human personhood formed
by the internal (organic) and external (environmental) stimuli or influences of our daily life. As
indicated by the two-way arrows linking all the stimuli, the internal and external stimuli influence and
reinforce each other circularly (not necessarily linearly), and systematically impact and mold our
human personhood. Ethics and morals, and therefore, corporate ethics and corporate morals, deal
with both internal and external stimuli that affect the human person.

< Figure 1.1 about here>

What Constitutes our Human Personhood?

16
 Obviously, the human person is not a simple or random byproduct of the internal and external
stimuli, such as those depicted in Figure 1.1. Our human personhood is a unique combination of four
internal-external forces that unify, interpret, internalize and respond to the internal-external stimuli:
our immanence, our individuality, our sociality, and our transcendence. We explore each of these
four human vectors from the viewpoint of corporate executive ethical decisions, actions and duties.

Our Unique Immanence

Etymologically, immanence (in + manere in Latin) means to remain in, or to be operating and
living within something. We are living within our state that is within our country that is within this
earth, which is within the solar system that is within the universe. We are immanent in the world and
in the universe. The human person dwells in immanence. That is we are incarnated in a world that is
physical; both humans and the world are characterized as dwelling in the universe that is in a unique
intersection of time, space, motion and gravitation. Our immanence is unique and irrevocable: we
were birthed into this world at the unique interaction of the sun, moon and the seasons, galaxies and
constellations, stars and zodiacs, earth and planets, time, space, gravitation and motion. Oriental
philosophers and astronomers (e.g., China, India) have explored this aspect of our unique geo-cosmic
immanence. We are uniquely individualized and personalized by the unique intersection of hundreds
of celestial bodies listed above. Hence, we are unique, non-imitable, non-substitutable, non-
replaceable, non-replicable, non-repeatable and non-transferable. Each of us has a unique role and
responsibility for the universe that only we can fulfill.

Our immanence has two aspects: a) we are corporeal-material in nature; b) we are living physical
organisms made up of flesh and blood. Because of our immanence we have needs, wants and desires;
we have also, thereby, capacities and limitations. Our needs and limitations are sourced in the
interactions and unity that exist between each human being and its environment. We are bound by the
physical laws of the universe, and we are limited by the physical capabilities of our muscular and
skeletal structure and physical fitness. Accordingly, our needs, wants, desires, dreams, skills and
limitations change depending upon our age, gender, education, occupation, culture, religion, and
where we are at any given moment.

Needs and limitations, however, do not define us. There is a unity between our corporeality and
the flesh and blood living organism that we are. The body is the way in which the person is; it is the
source of our being in the world. The body is the foundation for feeling and the place where feelings
are experienced. It is the home of the intelligence. Without the body there cannot be a human person.
On the other hand, our body cannot be the sole source and locus of our human personhood. There is
a unity between the human person and the body, but also a distinction. The body needs a principle to
vivify it and provide a source of unity for the body with its corporeal function, activities and processes
of human nature. The Greeks and several religions call this principle of unity the soul (atman in
Sanskrit, pneuma in Greek, anima in Latin). Without the soul or spirit as the unifying principle we
cannot be human persons, and without the body we cannot be human persons either; we need and are
a unique combination of the two. Only human beings composed of spirit and body, mind and matter
can be human persons; to be human beings is to be both spiritual and corporeal. x

This is systems thinking applied to the human person: we are more than the efficiency of the
body or the spirit, taken individually; we are an interactive whole that has energy, direction, drive,
power and passion far beyond the power of the body and soul taken individually. Ethics must see the
human person not only in our universal aspects but in our unique combination of mind and matter,
body and soul, time and eternity, and unique immanence.

Our Unique Individuality

17
 The soul when joined to the body becomes the unifying principle of all activities, and becomes
the seat of intelligence and will. Because of this soul or spirit we are immanent in the world in a
unique way: we can sense the world, feel the world, love the world, explore, study and know the
world, experiment, change and manipulate the world, and control, forecast and predict the world. It is
precisely this interconnectedness between the spiritual principle of the soul and the unique
corporeality of our body that gives rise to the unique “individuality” by which we identify the
presence of the human person, and that we own our actions as not performed by the body or by the
soul in isolation, but as an unity and immanent combination of the body and the soul whereby we say
“I did it” or “we did it.” In the unique joining of the soul and the body something new comes into
being that is greater than the mere sum of the parts (soul and body) added together – this is the unique
human person.

Writing about his deep personal convictions that he picked up from many years of client-centered
therapy, its great founder Carl R. Rogers in his best-seller On Becoming a Person (1961/1989, p. 21)
wrote, “It has come to me that the separateness of individuals, the right of each individual to utilize
his experience in his own way and discover his meanings in it, – this is one of the most priceless
potentialities of life. Each person is an island unto himself, in a very real sense; and he can only build
bridges to other islands if he is first of all willing to be himself and permitted to be himself.”

We are a unique combination of body and soul, mind and matter, faculties and powers, the
conscious and the unconscious, the physical and the emotional, the intellectual and the spiritual, the
individual and the social, and the ethical and moral parts of our human personality. Such a unique
combination makes knowledge, thought, talent and skills, choice and freedom possible. Such a
unique process of individuation is not a simple or random byproduct of our body and genes, or a
victim of biological and economic exigencies of our human world. All these (including our genes and
genetic compositions) will not determine and control who we are and what we become. Nor will our
talents and skills, knowledge and thoughts, willed actions and behaviors totally determine the
outcome of our individual development. They all contribute to our specific personality and
uniqueness.

Our unique, non-repeatable, irreducible and irreplaceable individuality cannot be fully understood
and explained unless we accept that our uniqueness comes from being uniquely shaped and molded
into the image of God (or some such superior being) who crafted us into this unique and historical
composition of the body and soul, mind and matter, family, social and historical environments. We
are a unique meeting point between soul and body, the corporeal and the spiritual, the physical and the
social that we call the human personality or individuality. Each of us, accordingly, is born with a
unique destiny that forges and converges each one of us into a unique transcendent openness of
possibility that translates (from a near infinite number of possibilities) into a unique combination of
talents and skills, knowledge and ideologies, thoughts and actions, moral qualities and events, virtues
and values. That is, we are a limited but immanent and transcendent expression of unique human
personhood we claim as our personal mission, vision, character and self-identity. This particular
course of our growth and change, consciously or unconsciously, leads to the development of our
personality, and within the structure of this personality will eventually emerge a certain “character” by
which we designate ourselves as “I,” “Ego,” “Me” and experience consciously, express and project
externally in society as “self.”

Our Unique Sociality

We do not live, move and have our being in isolation. Because of our unique immanence and
individuality we are social creatures, members of a common human species. We can sense, feel and
manipulate the world around as animals do. But far more than animals we have “knowledge,”
because the activity of knowing is dependent upon a deeper reality, that of sharing. Knowledge by its
very essence is relational. Psychologists, philosophers, and sociologists are all in agreement that our

18
immanence and individuality are inseparable from our sociality. That is, unless there is another who
is like me yet distinct from me, I can never come to a full understanding of who I am and what I am .
Our very existence is dependent upon this social quality of human personhood. This principle can be
the foundation for human resources management, especially as recruitment, development and
retention, and as team work and spirit.

Even at the biological level, the physical structure of our body or corporeality is fundamentally
social. Thus, our genes exist in strands of DNA that form pairs of chromosomes; our birth is
conditioned on two individuals coming together; the basic genetic material of our corporeality comes
to us from others. Human reproduction, unlike animal reproduction, is not merely instinctual, but a
profound social experience of courting, conceiving, nesting, birthing, parenting, nurturing, and other
family activities, each of which contributes to our sociality of nurturance and dependence. From the
first moment of human existence until the last, human life is profoundly social (Rehrauer 1996, p. 37-
38).

We are individuals precisely because we are social beings. By our very nature we are gregarious
beings. We need contact with other beings like ourselves in order to understand that we are human
and what this means. Without sociality there is no individuality. We are born and inserted into
society. We cannot be personalized human persons in isolation. It is through our social contacts that
we activate and develop the ability to be individual and social, to be ethical and moral. The child
becomes aware as a person, as a human being of a particular individuality, as a function of its
relations with other human beings. Social action precedes the self and provides the materials for it
(Asch, 1987, p. 286; Flanagan, 1991, p. 122). In this sense, our sociality precedes and grounds our
individuality.

Human personhood is more than our personality. We primarily develop our human personalities
precisely because all human beings share a common social being. Our fundamental nature of human
personhood (expressed as being sensitive, affective, cognitive and volitive) becomes alive through our
sociality. The nature and development of our individuality is a social product of both the social nature
of our genetic heritage and the quality of our social interactions with others and with our cultural
heritage as a whole. We carry in our bones and in our minds, in our genetic and cultural sources,
something of all of those who have gone ahead of us and those who have been part of our lives. Our
basic sociality takes us from the nuclear family we are born into broader groups such as ethnic,
cultural, linguistic, national, religious, ergonomic, political, and other group affiliations. We learn to
be a member of a given society by coming to know and practice the norms, rules, conventions and
mores of that society. Societies and social regulations develop, pattern and shape our thinking, action
and behavior. We not only learn about social regulations, but also learn to live within the framework
and under the guidance of these social regulations (Heller, 1988, p. 19).

This is the metaphysical and transcendent foundation of our individuality and immanence, our
parenthood and sociality. Our family and society, our history and culture, our values and religion, our
interpersonal networking with others around us, all of these contribute to the make-up of who we are,
what we are, and who we are becoming, of how ethical and moral we are and can become (Flanagan,
1991). In particular, social systems of language, tradition, technology and communication, signs and
symbols, leaders, values and history, culture and civilization, morals and mores form an important
part of our social and individual world. It is within the context of this specific community that our
individuality and sociality, immanence and transcendence are situated and contextualized.

Our Unique Transcendence

Etymologically (from Latin ascendere = to climb; transcendere = to go beyond, to surpass),

transcendence implies going beyond one’s sense and experience, emotions and feelings, knowledge
and skills, capacities and limitations, in order to achieve excellence, moral integrity, and extraordinary

19
heights of self-actualization. In Kantian philosophy, transcendence means going beyond sense data
and hypothetical imperatives to categorical moral imperatives inherent in the organizing function of
the mind and the will, and which are necessary conditions for human knowledge. xi

Human transcendence is founded on our nature as human beings, the inherent nature of our self-
awareness as “I am” and as distinct from others, the transpersonal nature of human personhood, the
externalizing expression of underlying personhood through the process of character formation, and
with a world in which we are immersed yet which is totally other than us – all these reveal the
foundational reality or human transcendence. Our self-understanding is not purely individualistic; it
is relational; that is, in contact with other persons and with the world of other human beings do I begin
to understand myself (Fuchs, 1983, p. 177). As Erich Fromm (1955, p. 62) notes, it is only after we
have conceived of the outer world as being separate and different from ourselves that we come to self-
awareness as a distinct being from others.

Our self-awareness and self-identity are beyond the sum total of our experiences. We do not
identify ourselves with our experiences, even though they may be engaging and memorable; neither
do we define ourselves by what we see since we see, understand and identify ourselves beyond and
beneath our day-to-day experiences. That is, we transcend our experiences; our self-awareness and
self-identity are beyond the totality of our experiences of sensing, feeling, perceiving, observing,
believing, choosing, acting and accomplishing. This is because our human being-ness and our human
personhood underlie our experiences and unify them. This underlying personal being is
transcendence even of our own personal identity. Our personhood as personhood is often
inaccessible even to us because it is a creative reality with continuous possibility for change. But our
immanence and transcendence unify all our changes and experiences into a meaningful whole which
we call our character or personality or self-identity.

Our transcendence also grounds our ability to hope, to dream, to design, to create, to invent, to
innovate, to discover and venture – all these we do for what is not yet accomplished. Our
transcendence also empowers us to plan our future, to make plans not only for what we will do, but
for what we will not do, and for what we want to become and not become. We are transcendent
because we are temporal beings who are aware of our temporality. Our very nature as temporal
beings leads to define and plan our lives in terms of meaningful past, present, and future. Our
capacity for the future is the recognition of the reality of our transcendence. It is because of our
transcendence we have a future, or better, we are a future, or that we can reinvent our future. In our
actions we extend ourselves over a span of time from past into the future. But in our moral act and
behavior we transcend even the mere span of time, as we touch on the divine and eternal in us. All the
above statements apply to organizations and corporations: our organizational transcendence makes us
surpass ourselves, our constraints, our competition, and drives us to seek the impossible dream.

We can also think of "the transcendent" in the theological sense as God or in the philosophical
(specifically, Kantian) sense as that which is beyond the limits of all possible experience and
knowledge (i.e., that which is a priori and a necessary condition of human experience as determined
by the constitution of the mind). Likewise, "the immanent" may refer to either the theological
indwelling presence of God in the world and each individual (God among us) or that which operates
within the subject (our life force). Finally, "vital agent" may refer to either the Holy Spirit (the
divine life-giver) or that which gives the agent his or her conscious functions (the animating source
of the independent conscience (Moberg & Calkins, 2001, fn. iv, p. 267).

All human acts and actions, activities and planned actions are stemming from our human
person as individuality, sociality, immanence and transcendence. How do our individuality,
sociality, immanence and transcendence ground corporate ethical and moral decisions actions?

 Our human individuality as corporate executives makes our actions (decisions and strategies)
personal, with obligations of due ownership of the choices of inputs, processes and outputs we
make.

20
  Our human sociality as corporate executives makes our acts and actions (decisions and
strategies) social and society-oriented or common-good-oriented, with summons for social due
diligence of the choices of inputs, processes and outputs we make.
 Our human immanence as corporate executives makes our decisions and strategies, acts,
actions and activities concrete, historical, geographical, contextual, bounded by concrete space
(spatiality) and time (temporality), and hence, uniquely situational, irreversible, existential,
and accountable for their consequences.
 Our human transcendence as corporate executives makes our decisions and strategies, actions,
activities, acts and planned actions meta-individual, trans-social and trans-organizational in
relation to the choices of inputs, processes and outputs we make, such that transcendent
organizations are empowered to surpass themselves, their goals and objectives.

As temporal beings we are capable of many actions and choose many alternatives; we have within
our grasp an enormous range of events with their specific inputs, processes and outputs. We choose
some of these, and reject other competing alternatives. In the search, deliberation, choice, and
subsequent actions lies our transcendence – the power to bring unity, consistency and continuity in
our thoughts, desires and actions, to bring forth order in otherwise chaotic choices and environments,
and correspondingly, into our relationships with others (Asch, 1987, p. 122-123). As subjects who
are temporal, we transcend our activity, and this demands of us that we actively integrate every
moment of our existence into a broader pattern of self-conscious awareness (Rehrauer, 1996, p. 45-
47).

The discussion on our unique and essential experience of transcendence, in conjunction with our
immanence, individuality and sociality, can be applied, mutatis mutandis, to the corporation as a
whole, since it is composed of real human persons, all of whom are radically individual, immanent
and social in being and becoming. Transcendence can be experienced and incorporated into our
otherwise mundane and materialistic, competitive and aggressive corporate personality and strategy.
This is the foundation for corporate executive transcendent spirituality. Thus, we can understand,
interpret and apply the construct of our unique and necessary transcendence to define and live our
corporate spiritual individuality and immanence, individuality and sociality.

The concept of unique Human Personhood can be applied for Nelson Mandela:

 Unique Individuality - Being born in a royal family, Nelson Mandela had the required
confidence and leadership abilities.
 Unique Sociality – Mandela was affected by social oppression; he fought not only for racial
equality but also gender equality
 Unique Immanence – The objective of non-discrimination was achieved and Mandela was
unanimously elected as the President of the nation. He took care of his country, his people and
his followers.
 Unique Transcendence –Mandela rose above hatred and vengeance, even after being cruelly
oppressed in prison. He included colored and non-colored, men and women in his dream of a
perfect apartheid free nation. He mentioned that hatred clouds the mind and a leader cannot
afford to hate.

Given our individuality and sociality, immanence and transcendence, several rights and duties,
obligations and responsibilities follow, such as:

 As corporate executives, we are responsible to our unique individuality of talents and skills,
passions and drives, attitudes and perceptions, feelings and emotions, and that is specifically
individuated about us. While we expect others to respect our individuality, we must also learn
to respect the unique individuality of our employees, customers, distributors, creditors,
suppliers, local and national communities, and even our competitors.

 As corporate executives, we are responsible to our unique sociality, our social talents and
skills, and our unique capacity to interact, network, bargain, negotiate, argue, persuade, and
lead people. While we expect others to respect our sociality, we must also learn to respect the

21
 unique sociality of our subjects and reports, customers and partners, competitors and
regulators, shareholders and all stakeholders alike.

 Lastly, as corporate executives, we are responsible to our unique transcendence, our unique
mystique and philosophy, our unique vision and mission, our unique ideals and ideologies, our
unique values and virtues, our unique brand of inspiring and moral leadership, and our
unique ministry of servant leadership. While we expect others to respect our unique
transcendence, we must also learn to respect the unique and inaccessible transcendence of
others, our subjects and reports, our customers and partners, our employees and their
families, our local and global stakeholders alike.

Figure 1.2 captures this dynamic quadric-directional moral responsibility of our human
personhood. The challenge of Figure 1.1 is Figure 1.2 – given our lives influenced by multiple
internal and external stimuli, how do we humanize and divinize ourselves for others? All five major
constituents of executive human personhood and responsibility have starry borders or boundaries to
indicate ever widening scope, scale and domain of responsibilities under individuality, sociality,
immanence and transcendence, and therefore, under executive human personhood.

< Figure 1.2 about here >

Martin Heidegger once wrote that caring for things demands immanence in God (Heidegger,
1985). The ethics of human personhood suggests that we too may try to see the world as the face of
God and organize our business accordingly. (Heidegger, 1985).

Current Controversy of Human Dignity vs Human Enhancement

In bioethics, the term “human enhancement” refers to any kind of genetic, biomedical, or
pharmaceutical intervention aimed at improving human dispositions, capacities and well-being, even
though there is no pathology to be treated (Guibilini & Sanyal, 2015). For instance, such
interventions include selecting embryos before implantation during in vitro fertilization (IVF)
procedures, inserting or deleting gene sequences, taking enhancing drugs for better physical or mental
performance, pursuing life extension through stem cell applications, and other regenerative medical
procedures (Guibilini & Sanyal, 2016).

Arguments for Human Enhancement:

 People should be free to enhance themselves (and their offspring) through various means
mentioned above (including genetic engineering embryos) – this position is usually dubbed as
bio-liberal.
 Human enhancement may actually promote human dignity by improving those qualities and
virtues that confer a special worth on human beings (Bostrom, 2008, p. 175).
 Opposition to enhancement as violations of human dignity is based on a notion of human dignity
that is too vague or that it adds nothing to bioethical discussion (Macklin, 2003). In fact, the
notion of human dignity is a stupid concept that is relative, fungible, and even potentially
harmful and deceptive (Pinker, 2008).
 Far from being opposed to equality, human enhancement can be used to make up for the
unfairness of “genetic lottery” by bringing the least fortunate up to a decent minimum of
capacity and well-being (Savulescu, 2006). In this view, one could even institute a policy whereby
enhancements are subsidized for those who cannot afford them – this could level the playing field
(Mehlman, 2009; Buchanan, 2011).
 Other utilitarian considerations in favor of HE take into account the cost to society (rather than
to the individual) of failing to enhance the individual (Levy, 2013).
 While indiscriminate human enhancement may be irresponsible, some enhancements are highly
positive with low negative externalities.

22
  Human enhancements, however, should not be imposed or subsidized by the state for certain
groups of people.

Arguments Restricting Human Enhancement

 While human enhancement (HE) in principle may be defensible, there are certain objectionable
forms of enhancements such as the wealthy having access to enhancement that are not accessible
to the poor, thus exacerbating and increasing the already marked inequalities between the rich
and the poor (Mehlman & Botkin, 1998; Mehlman, 2003; McKibben, 2004) – this position is
usually dubbed as bio-conservative.
 Enhancement carried out over several generations may create two separate human species, one
of which will have the power to dominate the other (Silver, 1997).
 Human enhancement is in principle (i.e. per se) objectionable, as it violates the intrinsic sanctity
of nature and human dignity of life; it is “playing God” to improve upon human nature.
 It is human hubris to be dissatisfied with what God has endowed humans and exploit
biotechnology of HE to make up for God. Enhancing human nature while disregarding the
potential and unknown risk itself reveals certain hubris. Humans are neither omniscient nor
benevolent and might therefore overlook the risks of tampering with genes.
 In the process of improving upon God, we may create human “monsters” (Krauthammer, 2002,
p. 202) that might violate human nature, human dignity, God’s gift of being human (Cohen,
2006; Fukuyama, 2002; Kass, 1997; Levin, 2003; Sandel, 2004, 2007).
 A major limitation of the drive to “mastery” is its failure to appreciate the “giftedness of human
life” or its “openness to the unbidden.” (Sandel, 2007). This failure not only jeopardizes humility
but also human solidarity as some HE advocates would assume upon themselves the hyper
agency in determining exactly what kinds of people should exist and be left as a legacy.
 More than social or political issues, HE raises moral issues regarding the meaning and value of
life and death, the notion of personhood, the extent to which human life can be used as a
commodity or as a means to one’s ends.
 Francis Fukuyama (2002, p. 74-5 92-3) argues that HE is dangerous because the interactions
between single genes and phenotypic gene or genetic sequence to obtain a desirable trait might
have bad unintended consequences for the expression of other desirable traits.
 With certain HE technologies we may get more easily what we asked for only to realize it is vastly
less than what we really wanted and at a big cost to humanity (Kass, 2008, p. 303) – this is also
called the “perversity thesis.” (President’s Council on Bioethics, 2002, p. 287). That is, there is a
“precisely balanced” human nature such that any HE intervention to alter it could have
disastrous consequences.

Some people generally in favor of human enhancement may oppose specific types of
enhancement such as certain radical and impermissible forms of human enhancement that may lead to
a new species (e.g., post-humans – see Fukuyama, 2002) or a new state of what is normal humanity
(Agar, 2013) or may need a new rule to define a given activity (e.g., doping in sport). Others oppose
certain specific methods of human enhancement that are problematic (e.g., genetic manipulation of
embryos changing genetic identity of individuals may be more problematic that selecting a certain
embryo in IVF procedures).

According to Eric Cohen (2006), there is a “moral anthropology” by which we recognize a special
dignity in all human beings, which is an essential feature of human nature rather than something based
on contingent properties (e.g., rationality or self-awareness). Human anthropology calls for a
recognition of human experience as something beyond our comprehension that gives a special
meaning to our morality as the sign of the mystery surrounding our transcendent yet authentic human
experience, something we cannot fully “master” (Cohen, 2006, p. 49) via human cloning, gamete
engineering, creating man-animal hybrids that exert novel parental control over genetic makeup of
new life, creation of human-animal chimera embryos or eugenic projects, and the manufacturing,
selling of human body parts. In Chapter 5 we will revisit the problem of human enhancement and
apply moral reasoning methods to assess their justification.

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What is Human Nature or Dignity and
Why and How Sacrosanct is it?
Bio-conservatives frequently invoke human dignity to argue against human enhancement. xii There
is no single definition of human dignity as the term itself is abstract and highly ambiguous (Kass,
2008, p. 306; Fukuyama, 2002, p. 148). Hence, authors propose different and often conflicting
interpretations of human dignity based on varied concepts of allied constructs such as being human,
human personhood, human life, human nature, human equality, rationality, autonomy, freedom, moral
worth, basic human goals and values, and human destiny.

An important distinction between conceptions of human dignity is the exclusive, comparative or

aristocratic-elitist notion as opposed to the inclusive, non-comparative, egalitarian and universal
notion. The former is the presumptive notion of full dignity of being human predicated by a sense of
worthiness and nobility that is found not in every human being but only in those with certain
excellences, virtues or capacities – this is close to the divine monarchical right of kings or the
“blueblood” or “Brahmin” concept of exclusive dignity. The second is non-comparative egalitarian
notion that “basic dignity of being human” is shared by all forms of human life. Both concepts
considered separately are problematic and with shortcomings. The former is exclusive and
monarchical and seems to have had some historical roots, while the latter, according to Kass (2008, p.
316-20) cannot be justified on any ontological or theological grounds.

Accordingly, Kass (2008, p. 323-324) proposes an in-between position of human dignity, half-
way between other animals and God. Humans are god-like and have aspirations towards what is
higher and thus, are more than an animal. But they are dependent on their embodied nature for
everything high about human life – the latter trait of dependence, according to Kass (2008, p. 321-2),
seemingly reconciles the comparative exclusive and non-comparative inclusive notions of human
dignity. “The fullest dignity of the god-like animal is realized in its acknowledgement and celebration
of the divine” (Kass, 2008, p. 329). That is, both concepts cannot be reconciled or defended unless
from the context of religious beliefs that formed it (Meilaender, 2008, p. 262-3). In the final analysis,
following Emmanuel Kant, our exclusive distinction from the animals based on human dignity should
have to be based on our rationality (Lee & George, 2008, p. 410).

The most significant threat posed by human enhancement (HE) is that it may alter human nature
and thereby usher us into a “post-human” stage of history (Fukuyama, 2002, p. 7); or, that it may
jeopardize the idea of a natural quality among human beings. By sharing the same human nature,
humans, qua humans, have equal dignity. Altering human nature via HE (say, by embryo or gene
selection) would violate the God-given gift of being “begotten” and replace it by being made or
manufactured via HE (President’s Council of Bioethics, 2002, p. 112).

Liberals, however, oppose this normative concept of human nature as alternatives to a monolithic
concept of human nature have characterized our species (Lewens, 2012). Human nature cannot have
normative value un-problematically because it contains both good and bad aspects. Our concept of the
good is independent of, and indeed is used to evaluate, human nature (Buchanan, 2009).

There is a general fear that genetic manipulation technologies might blur existing species
boundaries – that genetic manipulation and engineering could create a new human species (Annas,
Andrews, & Isasi, 2002). However, as Eric Juengst (2009, p. 50) notes, we cannot literally preserve
the species against all genetic change. In the history of evolution, genetic profiles associated with a
species do change, as existing individuals pass away and new ones are born. Without much
exogenous intervention in the process, the typical genome of a given species is likely to vary both
over time and across populations that are geographically separated with little interaction. If we must
choose the current human species-typical genome as sacrosanct, then it may indicate certain
arbitrariness to take a snapshot at a particular point in time and space to be the general and final
definition of human species.

24
 This argument makes the current theory of the inviolability of the sacrosanctity and dignity of our
human species less plausible. It also asks what specific psychobiological features of our human
species make us specifically human and bestow a moral status to us (see Annas, Andrews, & Isasi,
2002). Also, what human rights attach to individual humans as specific human species with a moral
status? A subspecies of humans created by genetic interventions or by human enhancement might
come to possess relevant human characteristics to such a heightened degree that it no longer makes
sense to assign ordinary humans as much moral status as the new subspecies. This argument turns the
current “hubris” argument against HE in the favor of human enhancement (see Douglas, 2013).

Concluding Remarks:
Executive Freedom and Transcendence
An important aspect of our transcendence and our nature as executive human persons is our free
will or the realm of our freedom. Our executive freedom is twofold: a) we are free to make choices;
b) we are thereby free to determine the direction and meaning of our existence. When we
categorically exercise this twofold freedom, we exercise the basic transcendental freedom, which is
the freedom to create ourselves. Freedom of choice is largely dependent upon the domain and
situation of choices – it is situational. Our transcendental freedom whereby we determine the
meaning and direction of our existence is the autonomy of character which expresses the person
behind the character. My choices may be limited, but I can still be free in the autonomy of
personhood that makes the choices. As Agnes Heller (1988, p. 54) puts it: the referent of liberty is
action; the referent of autonomy is character. A completely autonomous person may have no choices
whatever owing to circumstances, but still be totally autonomous. Often, there might be no external
(e.g., market or economic or political) choices whatsoever; but there are real choices from within: to
do or not to do, to become or not to become, to be or not to be. This is autonomy at its best.

Personal executive autonomy is our transcendence over situations; it is mind over matter, soul over
body, the absolute over relative, the eternal over temporal, and life over death. We cannot choose our
birth, our genetics, our parents, our gender, our race, our nationality and culture – they are the
“givens” of our immanence. But still our transcendence enables us to go beyond these constraints to
exercise our autonomous freedom to create a meaningful existence and personal history. Human
transcendence may not be absolute transcendence, but it is transcendence nevertheless (John Paul II:
Veritatis Splendor, p. 35-53). Nelson Mandela exercised his transcendent freedom while he was
jailed for 27 years; he used all his apartheid prison years to learn, form and transform himself. He
was more free and transforming than the people who imprisoned him.

All these are aspects or dimensions of our individuality and sociality, transcendence and
immanence. But, in the final analysis, human transcendence is grounded primarily in its openness to
the absolute transcendence of God. The human person possesses a dignity precisely in that it is a
created reality which is able to open itself to the One who creates. That is, our human transcendence
is properly understood only in relationship to God’s absolute transcendence (John Paul II: Veritatis
Splendor, p. 28, 67, 72, 73, and 87). Thus, our human personhood as a reality is individual and social,
immanent and transcendent. This is the theology of executive spirituality.

Hence, given our individuality, sociality, immanence and transcendence, major values and
responsibilities accrue. There is a multidirectional responsibility involved in being human. There is,
additionally, a multidirectional responsibility involved in being an executive. We are responsible not
only for what we are (immanence), but who we are (individuality), what we do (sociality), and what
we have become (transcendence). That is, we are responsible for our individuality, sociality,
immanence and transcendence, individually and collectively; that is, we are responsible to ourselves
(individuality), to others, our community, society and culture (sociality), to the world and the universe

25
we are immersed and living in (immanence), and to God who created us and whose absolute
transcendence we share, and to something beyond ourselves, society and the universe (transcendence).

26
 Figure 1.1: The Human Personhood as the Foundation for Executive
Ethics

Internal Stimuli External Stimuli

Sensitive Stimuli: Family & School Stimuli:

Parents, Siblings, Peers, Relatives,
Via five senses,
Teachers
Observation, perception

Affective Stimuli: Ergonomic

Emotions, feelings, Stimuli:
Attitudes, Beliefs, Work, Meaning, Unions; Talents, Skills,
Anxiety, Vigilance Earnings,
Instincts &Drives
Dreams
Human Personhood: Risk &Rewards

Personality Traits;
Vision, Mission, Ends,
Ideals, Goals, Means,
Objectives;
Cognitive Stimuli: Soul, Spirit, Virtues, Habits; Market Stimuli:
Perception, Thinking, Reasoning, Products & Services;
Morals, Ethics; Responsibility; Supply & Demand;
Explanation, Experimentation,
Imagination, Intuition Transcendence; Offline & Online,
Local & Global Markets
Synthesis, Unity

Unity,

Volitive Stimuli: Ideological Stimuli:

Deliberation, Society, Lifestyles, Governments; Law &
Determination; Order; Religion, Politics, History,
Free will, Freedom; Philosophy, Theology;
Decision; Choice, God and Heaven
Selection, Election

27
Figure 1.2: The Quadri-Directional Responsibility of Human Personhood:
The Challenge of Executive Ethics
[See also Rehrauer 1996, p. 57]

Executive Transcendence: Executive Sociality:

Body-soul, mind-matter spatiality, Language, love, knowledge, customs,
temporality, freedom, will, & immortality communication, culture & civilization

Executive Personhood:
Self-actualization in terms of values, wisdom,
ethics, morality, spirituality and destiny

Executive Individuality: Executive Immanence:

Flesh & blood immersion in time, space,
Corporeality, Self as a project,
society, culture, history and civilization
personality,
drives & passions

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 Table 1.1: A Taxonomy of Psychological Investigations into Human
Identity
Investigatio Method of Methodology Data Criteria for Major truths
n Domain Investigatio of Analysis truth about Man
n Investigation
Empirical Experimentation Statistical Independent Man is a
Observation & Replication of Analysis: scientific repertoire of
& reinforced ANOVA investigation behaviors that
behaviors and replication can be
Measurement
(Thorndike, of findings conditioned and
(Skinner et al; Pavlov, programmed.
Observable Behaviorism) Wolfgang)
Behaviors
Speculative Deterministic Inductive Long standing Man is a machine
deductions on Hypothesis of Analysis; from tradition of programmed by
deterministic mechanistic semi- deterministic the factors of
behaviors deterministic behaviorism production,
human
(Frederick behaviors to history and
behavior Taylor) the theory of society
(David Hume, total
Karl Marx) mechanism

Cognitive Multiple Man is an

Psychology scholars within outcome of his
Humanistic Theories to the School of thoughts and
Person-Centered understand thought con- expectations and
or Personality- thoughts, firm or improve interpretations
Theoretical centered expectations findings (Jeremy
Understandin Psychology - and Bentham, JS
g of non- Client-centered interpretation Mill)
observable therapy s
behaviors (Moritime Adler; Cognitive Multiple Man is
(e.g., Carl Rogers) Psychology scholars within organically
Psychoanalysi Theories to the School of motivated by a
s of understand thought con- hierarchy of
inner firm or improve needs, wants and
unconscious
organismic findings desires (Farlow,
Non- behaviors motivations of Maslow,
ruled by ego,
observable superego and
behavior McGregor,
(Deci, Ryan) Herzberg)
Behaviors Id (Sigmund Humanistic Individual and Multiple Man is a
Freud) Projective social scholars within reflection of
analysis: structures or the School of individual and
Structural Gestalt thought con- social structures
Psychology of psychology: firm or improve expressed in
Carl Jung; man’s inner findings architectures and
Gestalt Therapy life is civilizations; or
(Fritz Perls) unraveled via one’s gestalt
pictures and projections
their
interpretation
s
Philosophical Transcendentalis Metaphysical Principle of Man is made unto
Deductions of m is a philosophy deductions of universalizabilit the likeness of
the human that seeks to human y (what is truth God, endowed
discover the understanding for me should with sensitive,
spirit, nature,
nature of reality and pursuit of be truth for appetitive,
dignity and by investigating truth all); cognitive and
destiny the process of (Descartes; Principle of volitive faculties
(Plato, thought rather Spinoza); a reversibility that empower
Aristotle, than the objects of search for (what is truth human nature,
Aquinas) sense experience reality for all others dignity, intrinsic
(Kant, Hegel and through should be truth motivation and

29
Fichte). spiritual for me) human behavior.
intuition
(Emerson).

30
End Notes
Chapter 02
The Ethics of Corporate Executive Virtues

Executive Summary

In the wake of the extraordinary financial scandals that both preceded and followed the
September-October Financial Crises of 2008, discussions about the executive virtues of honesty
and integrity are no longer academic or esoteric, but critically urgent and challenging. As
representatives of the corporation, its products and services, corporate executives in general, and
production, accounting, finance, and marketing executives in particular, must be the frontline
public relations and goodwill ambassadors for their firms, products and services. As
academicians of business education, we must also analyze these corporate wrongdoings as
objectively and ethically as possible. What is wrong must be declared and condemned as wrong,
what is right must be affirmed and acknowledged as right. We owe it to our students, our
profession, our stakeholders, and to the business world. Contemporary American philosopher
Alasdair MacIntyre (1981) proposes the issue of morality in a three-fold question: Who am I?
Who ought I to become? How ought I to get there? The answer to every question refers to the
virtues, especially to corporate executive virtues. This Chapter explores corporate executive
virtues, especially the classical cardinal virtues of prudence, temperance, fortitude and justice as
defining and enhancing corporate executive life.

Introduction
In the wake of the extraordinary corporate scandals in the turbulent markets of today, discussions
about the executive virtues of honesty and integrity are no longer academic or esoteric, but critically
urgent and challenging. As representatives of the corporation, its products and services, corporate
executives in general, and production, accounting, finance, and marketing executives in particular,
must be the frontline public relations and goodwill ambassadors for their firms, products and services.
As academicians of business education, we must analyze these corporate wrongdoings as objectively
and ethically as possible. What is wrong must be declared and condemned as wrong, what is right
must be affirmed and acknowledged as right. We owe it to our students, our profession, and to the
business world.

Contemporary American philosopher Alasdair MacIntyre, in his publication After Virtue (1981),
has ignited new enthusiasm for virtue theory and its attendant concerns with issues of character.
MacIntyre proposes the issue of morality in a three-fold question: Who am I? Who ought I to
become? How ought I to get there? The answer to each question refers to the virtues. Responding to
this three-fold question, Waddell (1989, p. 136) wrote: “The project of the moral life is to become a
certain kind of person.” That person is a virtuous one.

Know Yourself: The Supreme Corporate Virtue

Who am I? What am I? These are tough and rough but critical questions. How do I define
myself? How do I find myself? How do I discover myself? How do I reinvent myself? How do I rate
myself? These are equivalent, albeit different, questions. Gnoiti Seauton: in Greek this is “know
thyself” and still is preserved inscribed large on one of the main walls of ancient Athenian ruins. It is an
open moral challenge for the rest of mankind.

Most of us adults would like to define ourselves by our academic accomplishments of grades and
years in school, the prestigious school, our undergraduate, graduate and postgraduate grades and years in
college that we have painstakingly gained over the years. But this academic part of our life may be just
a small part of our self-definition. Next, we reflect on our genetic heritage – our parents and
grandparents, our siblings, and the genetic impact they have left on us. We may even add our neighbors,

31
neighborhoods, our playmates, our hangout generations, and our great adventures – they add quite a bit
to our self-definition. Next, we gather supplementary self-definitions from our school teachers, college
lecturers, university professors, our significant peers in school, college and university. More recent
additions to our self-definition may come from our work experience, industry experience, executive
experience, in different corporations or organizations, different cities or states or countries, different job
challenges and accomplishments, varied awards and recognitions and promotions that we treat as our
successes (or failures). We may also proudly recall the various strategic mistakes that we inevitably
made and that paved our corporate success. All these put together may just about describe 50 percent of
what I am.

In the final analysis, what really defines me is how virtuous I am: my honesty and integrity, my
prudence and moral wisdom, my moral audacity and courage, my sense of justice and fairness, my
kindness and compassion, how caring and forgiving I am. What I am is primarily a set of attitudes,
perceptions, beliefs and moral principles that enrich and empower my virtuous life – together they make
my character, mold my personality, and characterize my leadership. Finally, what I am is also my set of
friends whom I believe in and greatly trust. The domain, quality and depth of my belief and trust are
how virtuous I am. The test of my virtue is peace, contentment and happiness and the ways to get there.
Freedom to what you want to do, wealth, health, fame and recognition, power and popularity are all
good reasons to be happy about, but they are mere achievements. Every level of achievement makes
you strive for the next and the quest goes on until you run of time and stamina.

Unless I know myself, I cannot know others. Unless I believe in myself, I cannot believe others.
Unless I trust myself, I cannot trust others. In short, unless I know who I am, I will not know others –
who they are. The journey to my unique self-knowledge and self-discovery is life-long; it is often an
unbeaten path, a road less travelled, and an uncharted sea. As long as our self-definitions center round
us we have reached nowhere. Our best self-discovery is outside us, the larger things of life, goals and
objectives beyond our comfort zones – the others, the society, the powerless and the marginalized –
what we do to uplift and humanize the environment around us. That is, the real what am I may be
outside me. The greatest source of my inner glow that also shows on my outer being is my contribution
to making the world a better place (Bhatt, V. (2015). The Rear-View Mirror, p. xi). This is virtuous life.

Applied to business professionals, the three questions raised by Alasdair MacIntyre (1981) are:

 Am I a virtuous (e.g., prudent, temperate, brave, and just) business executive?

 What sort of a virtuous business person should I become?
 Which virtues specific to the business or corporate profession or practice should I pursue in
order to be the exemplary virtuous person I ought to be?

Virtue is its own reward. Retrieving Aristotelian doctrine on the ethics of virtue, MacIntyre
(1981, p. 178) defined virtue as “an acquired human quality the possession and exercise of which tends
to enable us to achieve those goods which are internal to practices and the lack of which effectively
prevents us from achieving any such good.” While acting virtuously may indeed yield good results,
virtuous business executives act primarily to be true to themselves. They recognize a range of goods
internal to business practices within the company not because of their utilitarian significance, but
primarily because of their capacity to shape and mold them to be the person they want to be for
humanity (Bollier, 1997; Peters & Austin, 1985; Williams & Murphy, 1990).

By its renewing influence, virtue is becoming once again the language of ethics (Keenan, 2006, p.
111). The language of virtue builds in a kind of flexibility, even ambiguity, which is not so evident in
the language of law or duty. That ambiguity and flexibility are what allow virtue to be the medium of
comparative ethics (Porter, 2005, p. 219, 206). The interest in personal transformation permeates much
of the contemporary writings on virtue ethics. Virtue ethics summons business executives to become
better people. The best practices of personal formation stem from virtue ethics – the latter believes that
we need to awaken from a slumber of moral complacency (Stalnaker, 2006, p. 386-391). We must re-
envision what it means to be moral – virtue ethics empowers us to do so (Flescher, 2003, p. 11).

32
Understanding Virtue: A Historical Perspective
Virtue (from "Areté" in Greek that stands for excellence) is difficult to define. However, the
definition of virtue, the virtues, and the virtuous person has occupied philosophers since Plato first
raised the question of virtue, its nature, number, and teachability. Despite numerous efforts since then,
no one has improved upon Aristotle’s imperfect but still useful definition of virtue (Pellegrino &
Thomasma, 1996, p. 7). In general, however, most agree that “a virtue is a disposition to act, desire,
and feel that involves the exercise of judgment and leads to a recognizable human excellence, an
instance of human flourishing” (Yearley, 1990, p. 2).

Socrates (c. 470-399 BC) began the discussion by identifying virtue with knowledge, and held
that one could not know the good without likewise willing it.
Plato (c. 428-347 BC) contributed an extensive and subtle analysis of four virtues: wisdom,
courage, temperance, and justice.
Aristotle (384-322 BC) in his Nicomachean Ethics (NE) described virtue as an acquired
character trait that manifests itself in habitual action.

Aristotle identified moral virtues as a state of character; that is, “the things in virtue of which we
stand well or badly with reference to the passions” (NE 1105 b 25-6). Honesty, for example, does not
consist in telling the truth occasionally but habitually. A person must become honest by proper
upbringing and self-training. That is, virtues suppose a good character. One hardly admires courage in
a villain, or charity in a thief who donates stolen goods, or fortitude in a murderer – these dispositions
are not virtues. Cowardice can be someone’s reason for not committing murder; vanity and
boastfulness can on occasion lead someone to tell the truth – these actions are not virtues (MacIntyre,
1984, p. 152).

Following Aristotle, Aquinas (1225-1274) defined moral virtues as dispositions for the formation
of passions and/or habits; moral virtues enable us to follow reason in dealing with our desires, emotions,
and actions and in accepting that the four pivotal or cardinal virtues are courage, temperance, justice and
prudence. xiii Aquinas also held that the purpose of a person is not merely the exercise of reason in this
world, but union with God in the next. Hence, to Plato’s four cardinal moral virtues he added three
“theological” virtues of faith, hope and charity – the virtues that enable persons to achieve union with
God. He also maintained that “charity” (or self-giving love – “agape” in Greek) is the virtue of virtues
that forms all other virtues. Aquinas also held that humility is a Christian virtue and pride is a vice.
Whereas Aristotle, who predominantly wrote to an Athenian aristocratic society, argued that for the
Greeks, aristocrat pride is a virtue and humility is a vice.

Like Aristotle, Aquinas distinguished between intellectual and moral virtues; both are human and
acquired virtues as opposed to faith, hope and charity, which are supra-human gifts from God and are
infused virtues. The end of the human virtues is proximate, a level of happiness that is imperfect that is
attainable through human nature. The end of the supra-human or theological virtues is the last end, God,
and, therefore, supreme happiness, attainable only through the infused virtues and grace. While the
object of theological virtues is God, that of the intellectual and moral virtues is “something
comprehensible to human reason” (ST I.II 62, 2c). The good or the perfection to which the human
virtues are directed is defined according to the rule of reason, from which their objects are derived. The
good or the perfection of the theological or infused virtues is the good as defined by divine law (ST I.II
63.2c; 63.4c; 65.3c). Moral and intellectual virtues are produced in us by humanly reasoned acts, and
they perfect us through the doing of “good” deeds; that which perfects the intellect is an intellectual
virtue, and that which perfects the appetite or will is a moral virtue (ST I.II 58.3c; 68.1c and 8c). By
human virtues, “we live a good life,” but the “good life” refers only to the “rectitude of life measured by
the rule of reason” (ST I.II 68.1 ad3). In contrast, the theological virtues, being beyond our capabilities,
are produced in us by God. Through these infused virtues God enables us to live a “good life” of union
with God.

33
 Immanuel Kant (1772-1804) related virtue to those categorical duties that are firmly settled in our
character. It does not concern directly with our happiness, but our worthiness to be happy. Hence,
virtue is its own end and reward. However, Kant did banish “virtuous dispositions” from morality since
they are strictly “hypothetical” and not “categorical” imperatives (Spohn, 1992, p. 65). According to
Foot (1978), virtues are specific dispositions determined by the need to correct certain deficiencies. For
MacIntyre (1981), virtues are skills internal to activities or practices that are necessary for the
performance of certain roles or offices in society. Thus, virtue is the most ancient, perdurable, and
ubiquitous concept in the history of ethical theory, especially given the inseparability of the moral agent
from the events and acts of moral life (Pellegrino, 1995).

Summarizing the Historical Perspective on Virtue by each major author:

 Socrates: Virtue is both knowing the good and willing the good of our actions.
 Plato: Four cardinal virtues of prudence, justice, fortitude and temperance.
 Democritus (460-370 BC) held that to call a person “good” one had not only to do the good but also
want to do it because it was good. Aristotle maintained that a virtuous person is not one who does
virtuous acts once in a while, but one who does them regularly over long periods of time and does
them as “second nature.” (p.19)
 Aristotle: Virtue is an acquired character trait that manifests itself in habitual action of doing good.
 Aquinas: Moral and intellectual virtues are produced in us by humanly reasoned acts, and they
perfect us through the doing of “good” deeds.
 Kant: Virtue is a categorical imperative; often it may be a hypothetical imperative.
 Foot: Virtues are specific dispositions determined by the need to correct certain deficiencies
 MacIntyre: virtues are skills internal to activities or practices that are necessary for the
performance of certain roles or offices in society.

The Executive Virtue of being Good

According to Aristotle, “Every art and every inquiry, every action and choice, seems to aim at
some good; whence the good has rightly been defined as that which all things aim” (Aristotle, 1985.
Nicomachean Ethics (NE), p. 1094, a 1-3). There are different goods, however, corresponding to
different arts and sciences. For the doctor’s art good is health, for the economy it is wealth, and for
business ethics it is, presumably, the happiness or fulfillment of all stakeholders. However, this
happiness is multidimensional and longitudinal, and thus, should include both the present (e.g., Fournier
& Mick, 1999; Oliver, 1997) and the future (e.g., Lemon, White, & Winer, 2002). In fact, Aristotle’s
concept of eudemonia or happiness that is the end result of virtue includes “human flourishing” (Cooper,
1986, p. 89) that lasts throughout one’s adult life (Sherman, 1987, 1989).

Some ends are subordinate to other more ultimate ends. The end of prescribing a certain medicine
may be to induce sleep, but this immediate end is subordinate to the wider and more comprehensive end
of health. But if there is an end which we desire for its own sake and for the sake of which we desire all
other subordinate ends or goods, then this ultimate good will be the best good, in fact, the good.
According to Aristotle (1985), this ultimate good for human beings is the subject matter of ethics and as
such cannot be deductively derived from any first principles with some mathematical exactitude but
inductively derived from the conclusions of actual moral judgments of good people (NE 1094, b 11-27).
Ethical inquiry should start from the actual moral judgments of good people that by comparing,
contrasting, and sifting can help formulate general principles. This view presupposes that human beings
have some natural tendencies for good, and Aristotle founded his ethic on the universal characteristics of
human nature.

The Dharma Concept of Good

34
 The word Dharma has been used in ancient scriptures from time immemorial. Many people have
tried to understand and explain the word Dharma from their own perspective. Some consider it a law,
others as guidelines, and some consider it as a way to worship and be closer to God. But defining it in
this way underdetermines its meaning. Dharma is all of it and beyond. A good explanation of
Dharma is provided in the Bhagwad Gita (The Song of the Lord) in the form of a dialogue between
Lord Krishna and Arjuna. As per Lord Krishna, Dharma is a righteous way of living a life. He
explains that every organism is born to serve a purpose. Understanding the purpose and living
accordingly is Dharma. But that is the most difficult thing to do. To differentiate between right and
wrong, is sometimes the most difficult thing to do. xiv

In Mahabharata, the great epic of Hinduism (the longest poem in 22,000 verses ever written,
possibly written between 400 BC and 300AD, and traditionally attributed to Vyasa), defines Dharma or
goodness more concretely and altruistically as “actively helping those in need as well as passively not
harming others, and being fair and just in one’s judgments” (see Gurucharan Das, 2010, p. 283).
Dharma is goodness. A good person is “who has in his heart always the well-being of others, and is
wholly given to acts, thoughts, and in speech, to the good of others, he also knows what dharma is”
(Mahabharata Book XII, 262.9).

Dharma of Buddhism and Taoism

In Buddhist culture, dharma describes the moral and religious precepts set down around 500 BC
by Gautama Buddha, a Nepalese-born teacher and philosopher. In Hindu culture, dharma refers to the
search for life’s universal truth and higher purpose. The Dharma of Capitalism blends Hindu and
Buddhist traditions with our current way of life in free enterprise capitalist systems (Gor, 2012).

Confucianism is a system of philosophical and ethical teachings founded by Confucius in the 6 th

century BC, and developed by Mencius (Meng-tzu) in the 4 th century BC. The most reliable source of
his teachings is the Lun yu (Chinese for conversions). The basic concepts of Confucianism are
ethical: love for one’s fellows, filial piety, decorum, virtue, and the ideal of the superior man. The
main texts of Confucius were published as late as 1190 AD that revitalized Confucianism throughout
China.

Lao-tzu, the legendary founder of Taoism and traditional author of the Tao-te-Ching, its most
sacred scripture, complements Confucianism. The central concept and goal of Taoism is the Tao, an
absolute principle underlying the universe denoting the forces in nature, yin and yang, and by
extension, the code of behavior that is in harmony with the natural order. To Confucius, the absolute
principle underlying the universe is Way of the superior man, while to Lao-tzu, it is the Way of
nature.

Case 2.1: Nelson Mandela Revisited

Humanity, Leadership, commitment to fight injustice, forgiveness, fierce determination, and
conviction – these were the virtues of Nelson Mandela. He stood up for fight against the apartheid,
standing up for the rights of millions of people. His strong leadership qualities, determination, and
commitment to fight injustice made him stand strong in all the ups and downs of his life. The
conviction to give up one’s entire life for the betterment of the community requires fierce resolve and
persistence. The ethical quotient was definitely high in the cause and process that Mandela followed.

The end state solution to the long standing social issues in South Africa was a vibrant democracy
with equal rights and opportunities to all citizens irrespective of the race or the skin color. Only the
path to reach there could have been violent and non-co-operative movements or non-violent and co-
operative process of a negotiated settlement. Mandela often chose the better course of peace and
harmony. The solution in this context can be optimal when it is supported by the general populace at
large and supported by the principles of universal justice and respect for human dignity. Nelson

35
Mandela chose this path which was a continuous and arduous process that lasted more than four years.
The outcome was a new constitution that defines South Africa as one undivided nation with equal
rights for all and which has become the benchmark of the country’s democracy.

The Primacy of Virtue Ethics

Virtue-based ethics is a new method of ethics: from action-based ethics (deontological ethics,
teleological ethics, and justice ethics) to person-based ethics. Principles, rules and guidelines tend to
concern the action in question and its objective moral character. Virtue ethics, by contrast, governs the
interior life of the agent who performs the action – one’s subjective moral character. Both are needed in
business executions in general, and in corporate management, in particular. Right actions with evil
intentions are no good; rules and principles unless interiorized and lived in virtue will not effectively
motivate in the long-run (Pellegrino & Thomasma, 1996, p. 15).

While the ethics of principles (deontology, teleology) and the ethics of consequences (distributive
justice, corrective justice) are valid and relevant, they are subordinate to the ethics of character (virtue
ethics). Unlike deontology, teleology, and distributive justice and corrective justice theories of ethics
that deal with human actions and their moral content, virtue ethics deals with the very person who acts.
Virtue ethics looks primarily on the type of persons we ought to be and become. That concern is
expanded to three questions – Who are we? Who ought we to become? How do we get there? Virtue
ethics is, therefore, proactive. It invites us to see ourselves as we are, to assess ourselves, and to see
what we can become. It not only beckons us to become something, but also indicates the means
(virtues) that can help us get there (Keenan, 2006). To a corporate virtue ethics practitioner, the first
question (Who are we?) is the same as “Are we virtuous?” Such a question focuses on: a) the standards
against which we measure ourselves, and b) how we know whether we are measuring ourselves fairly.

Aristotle (1965) proposed some basic virtues as standards – friendship, magnanimity, and
practical wisdom. Thomas Aquinas (1964) borrowed and proposed four other complementary (cardinal)
virtues: prudence, justice, temperance and fortitude, to which he later added the three theological virtues
of faith hope and love. The question of self-understanding (Who am I?) then, translates to, Are we just,
prudent, temperate, fortitudinous, friendly, magnanimous and wise? How do we know we are not
deceiving ourselves? Aristotle (1965) suggested that we could know ourselves by how we act in
spontaneous situations. For instance, if I acted bravely in unanticipated situations, then I am brave. If I
acted cowardly under such circumstances, then I am a coward.

If we can develop ourselves physically by regular exercises, we can also develop ourselves
morally by exercising virtues regularly. The virtues are therefore teleological guides that aim for the
right realization of the human person we want to be. Even pagan Rome espoused the four cardinal
virtues as follows:xv

 Prudentia: prudence, wisdom, foresight, planning ahead for emergencies, seeing the good of the
whole community;
 Fortitudo: fortitude, toughness, bravery, enduring pain in stoic silence, willingness to sacrifice or
suffer for the good of the whole community;
 Temperentia: moderation, avoiding extremes of appetite and enthusiasm, and seeking balance;
 Iustitia: justice, the preservation of the good and the eradication of evil.

Utilitarian vs. Deontological Virtue Ethics in Executive Life

Utilitarian utility calculus is not enough to live up to the challenges and standards of moral life. A
utilitarian defense of conduct is also subject to criticisms about the appropriateness of the accounting
stance and time horizon used in the utility calculus. As there is no principle determining their scope,
accounting stances and time horizons are arbitrarily determined. Consequently, every decision may
constitute a moral dilemma (Norcross, 1995), a state of affairs that produces perpetual moral

36
ambivalence. Utilitarian administrators can never be confident they are making the right decision
because they can never be sure that their choices actually increase net average happiness. Arbitrary
accounting stances and time horizons only conspire to provide the utilitarian administrator a clear
conscience, not direction for moral conduct.

In light of these difficulties, when it is adopted as the primary theory guiding conduct, we should
view utilitarianism as unsatisfying. The characterization of moral imperatives as suggestions to guide
behavior toward utility maximization offers administrators large degrees of moral flexibility. However,
with this flexibility comes a frame of mind to approach situations formalistically; administrators need to
be only armed with the proper tool -- a utility calculus -- in order to determine the moral course of
action. Utilitarianism implies that some action is moral and good when it maximizes average utility. But
what good is a moral theory in practice if the end result is that one is left, at best, unsatisfied, or, at
worst, ambivalent, about the outcomes? Hence, we need an ethics of virtue.

Deontological ethics argues that certain actions are wrong if they violate duties we owe to others
or they violate rights that others have. Many deontologists hold that dignity and respect are behaviors
that all humans deserve simply by virtue of them being human and that these mandates are not
contingent upon circumstances, the exigencies of position, or how much social utility is at stake.
Likewise, some writers argue that ethical administration is best achieved by adhering to a set of moral
guidelines (Blanchard & Peale, 1996; Campbell, 1999), not because of what adherence to these
guidelines might bring about but because we are obligated to adhere to them on principle.

We need Virtue Ethics beyond Utilitarian and Deontological Ethics

The foremost deontologist, Immanuel Kant (1785/1998), argued that moral imperatives are
binding on conduct because they are ruled by a universal principle of morality, the categorical
imperative, which requires us to act only on those moral principles that we reason as universal. In
considering whether we should obey the imperative, "Don't steal," then, we imagine what it would be
like to live in a world where everyone condoned stealing. Could scandalous administrators defend their
behavior on Kantian grounds? It is not likely, because one would need to show that a rational person
would enjoy living in a world where everyone, say, pilfered public funds for personal gain. Diverting
funds away from the company or customers reasonably falls under the category of stealing, and,
therefore, the administrators' behavior violates the "Don't steal" moral rule that more obviously holds
according to the categorical imperative.

Nevertheless, Kant's insistence that reason and duty are the keys to the moral life poses problems
for the executives. For instance, consider two moral rules that an administrator might reasonably face:
support students to succeed academically and support faculty academic freedom. Consider that recently
a professor was relieved of her teaching duties mid-semester because students complained she graded
too hard; the instructor replacing her raised students' previous test scores 25% (Jaschik, 2010). The
administrator charged with deciding how to handle the students' complaints faced a situation where two
rules conflicted and where both passed the categorical imperative. Kantian ethics does not provide the
administrator much assistance for determining which imperative should take precedence. Hence, we
need an ethics of virtue.

The Priority of the Ethics of Care

The heroic examples of business management practices [e.g., Johnson & Johnson’s timely
withdrawal of Tylenol, the Rely decision by Proctor & Gamble (see Williams & Murphy, 1990), Levy
& Strauss’s exemplary business management strategies (see Bollier, 1997, p. 339-51), the heroic
investments of Merck & Co. in inventing and distributing cure for river blindness disease that plagued
millions in the Third World (see Donaldson & Gini, 1996, p. 299-308) and hundreds of other business
management heroisms cannot be adequately explained by ethical theories of deontology, teleological, or
distributive justice theories. The heroic lives of Nelson Mandela, Captain Lakshmi and Amar Gopal

37
Bose are examples of heroic virtue. These exemplary business management strategies and practices are
outcomes of acquired executive virtue.

With over 25 million dead because of HIV+ AIDS, and another 42 million people infected, why is
there a universal hesitancy to recognize the moral summons that this fatal disease confronts us? Maria
Cimperman asks this haunting question, and develops a basic profile for the type of people we must
become if we are to be disciples in a time of AIDS. After reflecting on the need to be historical realists,
she proposes five virtues as constitutive of contemporary discipleship: justice, prudence, fidelity, self-
care, and mercy. Cimperman calls us to change now and offers us the virtues as the medium for such
transformation (Cimperman, 2005). Virtue, being transformative, leads inevitably to action. By
realizing the here and now as the moment for transformative change and action, we actually become
happier (Keenan, 2006, p. 114).

The ethics of care derives from “feminist ethics” in general and the work of Gilligan (1982) in
particular. This perspective focuses on personal relationships and the traits of personal character that
create and sustain them—friendship, compassion, sympathy, empathy, faithfulness, and loyalty, for
example. The focus on these human traits, which certainly qualify as virtues, deliberately eschews the
emphasis on rules and calculations that characterize Kantian and utilitarian thought. Also absent are
notions of universality and impartiality; the ethics of care regards actual relationships and the social
contexts in which they are embedded as valid and important elements of ethical decision making
(Jones, Felps, & Bigley, 2007, p. 139).

Virtue as the Theory of Ends

To the questions, “who ought we to become?” and “how to get there?” the answer is the theory of
“ends.” For the honest person, virtues are not what one acquires, but what one pursues as ends. The
ends of virtue is to be prudent, just, temperate and fortitudinous. Hence, we examine our ways of acting
and ask if these ways are making us more prudent, more just, more temperate and brave. These are
executive virtuous exercises.

Dorothy Day, a Christian political activist of early 19 th century America, believed that her moral
task was to combat poverty by assuming poverty, by living its challenges. Her invitation, argues
Andrew Flesher, is a real explication of our call to be moral. Virtue ethics maintains that if we do not
work on our character development, and thereby fail to dispose ourselves to love the neighbor and
subsequently act on behalf of the neighbor to a much larger degree than we currently do, then we can be
found to be morally blameworthy. While living virtuously is not synonymous with living altruistically,
living altruistically is the kernel of living virtuously (Flescher, 2003, p. 11).

Business management as a human activity is a social community of individuals or stakeholders:

customers, producers, suppliers, distributors, creditors, bankers, media, governments and the local
communities. Business management in general and corporate management in particular, is a public
and moral community activity by membership and function, goals and objectives. Business
management is a moral enterprise because it deals with human (stakeholder) problems. Hence, the
ethics of business management derives from business as a human activity. The art and science of
business management and the way it functions is exchange relationship implied in the executive-
stakeholder or producer-consumer relationship, and what is primarily at stake is the personhood of
the vulnerable stakeholder.

The stakeholder and the management executive, as rational beings, each play a part in
realizing the end of business management, which primarily is the good of the stakeholder
communities. In this relationship, the management executive is the embodiment of the business
management art, whose end is the stakeholders’ good, and the dignity and happiness of the human

38
person grounding the good. Beneficence and benevolence are both a moral obligation that should
inform and transform the art of business management, and both are crucial virtues for management
executives. A management executive who does harm to stakeholders violates the art; an executive
who is not benevolent to his customers compromises the art (see Sirdeshmukh, Singh, & Sabol,
2002). Thus, the art and science of business management should establish the way in which the
management executives and the stakeholders relate to each other – this is the internal morality of
business management, or to cite Macintyre (1981), it is the “internal practices” of the virtue of
business management.

While rules and guidelines may offer rational criteria for public agreement and public moral
policy, the latter also rest on public’s presuppositions of what is good life and what is happiness for
the community. The latter come from virtue and virtue ethics, and not necessarily from social
construction or political accommodation (Foot, 1978). Without a theory of good life and the good
society, there is no check on political expediency, market opportunism, and business management
malpractice. In a secular society, if moral rules and injunctions were to derive their binding force,
they must have such either from a theory of moral law or from the assent of virtuous individuals
who choose the rules and the society they live in as part of their self-definition (Anscombe, 1981, p.
30).

Since, according to MacIntyre (1981), the authority of moral law is best when it is theological
(i.e., based on divine law and revelation), the latter (i.e., the virtues of virtuous people) is the only
place to turn – it is only from the debate and shared life of virtuous people that we may obtain a
consensus on what is common good and what is good life. A business management situation
constitutes a moral community in which the debate about common good for society can take place,
and an account of the virtues is required therein.

Executive Virtue as Ethical Consideration of the Contingencies

The executive moral agent will be exposed to a wealth of diverse contingencies and
circumstances. It is not enough to have the right states of character, but one must have the
capacities for knowing when and how to exhibit them. An agent is praised not merely for the
possession of virtue, but for its exercise and exemplification in concrete circumstances. In this
sense, virtue is a capacity to choose (NE 1107 a1) and reason correctly. The virtuous person is one
who knows how to act and feel in ways appropriate to the circumstances. This entails not only that
efforts are well intentioned and appropriate, but that subsequent actions are correct and successful
(Sherman 1987, p. 51). Aristotle’s point, therefore, is not that a good and virtuous action requires
the achievement of causal consequences, but that it requires knowing how to exemplify virtue here
and now. Incidentally, this is the stance and philosophy of the Bhagvadgita. Thus, decisions are
clearly right or correct may nonetheless lead to unforeseeable ill consequences (NE 1135 a25; 1136
a5-10).

Practical reason does not start with a mere practical syllogism - start with some end, and then
decide how to act. On Aristotle’s view, an ethical theory that begins with the justification of a
decision begins far too down the road. The process begins with the perception and assessment of
circumstances and recognition of its morally salient features. Before we can know how to act, we
must assess the necessity of that action, and this reaction to circumstances is itself part of the

39
virtuous response - all these stages, perception, reaction and assessment, are ethical considerations
expressive of the agent’s virtue (Sherman, 1987, p. 29).

Perception informed by ethical considerations is the product of experience and habituation.

Through such education, we come to recognize and care about ethical consideration (Sherman,
1987, p. 31). Moral habituation is not a mindless drill but a cognitive shaping of desires through
perception, belief, and intention – capacities that involve character and emerge from acquiring
character. Thus, moral education will itself cultivate the perceptual and deliberative capacities
requisite for moral character (Sherman, 1987, p 7). It is not enough to know about virtue, but we
must also try to possess and exercise it, or become good in any other way (NE: 1179 a33-b4).

All perceptions, reactions and assessments are contextual. The virtuous act that hits the mean
is directed toward the right persons, for the right reasons, on the right occasions, and in the right
manner (NE 1106 b21). Thus, the overwhelming sense is that virtue must fit the case (Sherman,
1987, p. 35). Determining the mean will presuppose critical and self-reflective ways for accurately
reading the ethically relevant features of the case. Ethical perception requires methods by which we
can correct and expand our point of view. Conscientious discernment will entail adjusting one’s
perception to correct for biases and pleasures towards which one naturally tends, but which are
likely to distort (NE 1109 b1-12).

Corporate Executive Virtue as Eudemonia or Happiness

The classical quest of ethics was to find and teach the good life and how to live it. This was the
common task of philosophers as diverse as Plato, Aristotle, Augustine, Aquinas, the Stoics, Confucius,
the Hindu sages, and Lao-tsu. Despite their different reasoning, all these philosophers shared the
conviction that it is in the nature of human beings to seek the good and that happiness and a good moral
life are somehow synonymous (Pellegrino and Thomasma 1996, p. 7). To be a good person and to live
a good happy life are considered human aspirations in tandem. Such aspirations were not imposed on
human beings but rose from their very nature as individual and social human beings.

Aristotle postulated happiness (eudemonia) as the ultimate good for human beings, and carefully
defined it as something specific to human beings alone: an activity of virtue in accordance with reason.
This happiness may also be translated as blessedness or prosperity; “it is the state of being well and
doing well in being well” (MacIntyre 1984, p. 148). The virtues are precisely those qualities the
possession of which will enable us to achieve happiness and the lack of which will frustrate our
movement toward happiness. Activity of growth and reproduction cannot be the ultimate happiness for
humankind, since we share this happiness with the animal world.

Happiness as an ethical end cannot consist simply in virtues as such: it consists rather in activity
according to virtue or in virtuous activity, understanding by virtue both intellectual and moral virtues.
Moreover, if it really deserves the name of happiness, then we must manifest over a whole life and not
merely for brief periods (NE 1100, a 4ff; 1101 a 14-20). Moreover, the virtuous activity of pursuing
happiness may be itself pleasurable, since pleasure is the natural accompaniment of an unimpeded and
free activity. “Virtues are dispositions not only to act in particular ways but also to feel in particular
ways” (MacIntyre, 1984, p. 149). This makes virtuous activity worthwhile and endurable – this shows
the common sense (or non-transcendental) character of Aristotelian ethic of virtue (Copleston, 1963, p.
335).
Corporate Executive Virtue as “Human Flourishing”

40
 One’s conception of what happiness or human flourishing is should determine what it means to
flourish in one’s life, and what kind of life one regards as flourishing now (Cooper, 1986, p. 96).xvi
Human flourishing as an ultimate end belongs to a different order from any of the concrete ends one
might adopt in one’s life – ends like the exercise of one’s physical, intellectual or social capacities.
Thus to aim at having a flourishing life is to pursue a “second order end” towards which other first-order
ends are subordinated (Rawls, 1971).

From the discussion above, we draw the following eight propositions on executive happiness:

P1: It is in the nature of human beings to seek the good. Eudemonia or happiness is the extreme limit of all good
things achievable in action (Aristotle, 1985).
P2: Eudemonia is sought as an ultimate good for its own sake; every other good is sought for the sake of eudemonia
(Aristotle, 1985).
P3: To aim at having a flourishing life is to pursue a “second order end” towards which other first-order ends are
subordinated (Rawls, 1971).
P4: Happiness is blessedness or prosperity: it is the state of being well and doing well in being well.
P5: Real happiness must manifest over a full, long-lasting adult life and not merely for brief periods (Aristotle,
1985).
P6: Real happiness is eudemonia that is best defined as “human flourishing.” This postmodern term means the
possession, use and fulfillment of one’s mature powers or natural capacities over a long period of time
(Cooper, 1985).
P7: To be a good person and to live a good life are considered human aspirations in tandem. Happiness and a good
moral life are somehow synonymous
P8: Such aspirations are not imposed on human beings but rise from their very nature as individual and social
human beings.

Virtue is critical for corporate executives functioning in a management situation. The virtue of
virtues, eudemonia or “human flourishing,” bears additional implications to corporate executives. Each
of the above eight propositions has different challenges for management executives. Each proposition
implies different legal, ethical and moral obligations in a management situation. xvii Supplementary
propositions on executive happiness are definitions of happiness argued by various philosophers:

 Virtue is excellence in the knowledge of good that enables one for the good and happy life (Plato).
 Virtue is the state of character that makes a person good or happy (eudemonia) and makes that person to do
what is good (Aristotle).
 A virtuous person knows good, is good, and does good (Aristotle)
 Happiness virtue determines the end, and practical wisdom makes us do what is conducive to that end
 While practical wisdom is the central happiness virtue, "prudence" is a link between intellectual, moral and
theological virtues (faith, hope and love) (Aquinas).
 Prudence is a right way of acting according to reason; it disposes us to choose means most conducive to the
final end (telos) of an act (Aquinas).

The Nature of Happiness in the Corporate World

According to Aristotle (1985), the end of life that all human beings should aim is happiness
(eudemonia). The virtues are not merely means to happiness, but constitute it. However, happiness
does not merely consist of what we get in life but also includes who we are. Even Plato maintained that
a despot with all wealth and power would not be really happy because that person’s personality would
be disordered in the process. The distinction between happiness and pleasure is usually blurred. In
ordinary language, happiness is frequently used to indicate a more stable, less intense state than
pleasure. Yet one could hardly predicate happiness of life that was altogether without pleasure.

Developing a virtue-based ethics for business, Solomon (1992a, p. 104) argues that mere wealth
creation should not be the purpose of any business. Instead, we must conceive of business as an
essential part of the good life, living well, getting along with others, having a sense of self-respect, and
being part of something one can be proud of” (p. 17). Individuals are embedded in communities and
that business is essentially a community activity in which we work together for a common good, and

41
excellence for a corporation consists of making the good life possible for everyone in society (Solomon,
1992a, p. 209) (p.17).

According to MacIntyre, “internal practices” with goals and results can change, expand, diminish,
but not at the expense or gain of another. These “internal goods” are not competitive, not objects but
“outcomes” of competition to excel; they are unique to the internal practices; the more one has them, the
better off is the corporation and the community thereof (p.17). Business should be a human endeavor in
which executives ought to find fulfillment, and therefore, emphasize the need for virtue in business. This
is a valuable reminder that business is part of human and moral life (p.18). “To act rightly is to act
rightly in affect and conduct. It is to be emotionally engaged and not merely to have the affect as
accompaniment or instrument” (Sherman 1989, p. 2). Emotions themselves are modes of moral
response that determine what is morally relevant and, in some cases, what is required (p. 18).

Characterizing Virtuous Morality Corporate Actions

According to Hauerwas (1981), moral business management decision is not so much of what one
is obliged to do, but the kind of person one would be by doing it. To act rightly is to act rightly in affect
and conduct. Discerning the morally salient features of a situation is part of expressing virtue and part
of the morally appropriate response (p. 18). There may be a strategic virtue in doing things rightly, but
there is a moral virtue in doing right things rightly (Aristotle 1985).

Democritus (460-370 BC) held that to call a person “good” one had not only to do the good but
also want to do it because it was good. As cited before, Aristotle maintained that a virtuous person is
not one who does virtuous acts once in a while, but one who does them regularly over long periods of
time and does them as “second nature.” That is, just doing good or being occasionally virtuous is not
sufficient ground for characterizing a person as good.

Until very recently, moral philosophers, following Aristotle and Aquinas, had only one source for
moral description: the act. If a bad action was performed, mitigating circumstances were investigated to
see if the agent was partially or fully exonerated of moral guilt (Mascarenhas, 1995). The question of
subjective goodness was rarely raised, and if so, almost exclusively in the context of “imputability”
(Keenan, 1992, p. 4).

That is, philosophers did not examine cases on the other side of the distinction: they did not
discuss people who do objectively good acts but on selfish grounds (e.g., bad motives). The question of
the good person was rarely examined. The presupposition was: we are what we do. Thus, the person
who did good was good and the one who did bad was bad. Obvious other combinations, such as a good
person who did bad, or a bad person who did good, were not explored. Reinforcing the presupposition,
the word “good” primarily described acts. Goodness was not used, as it is today, primarily and
principally to describe persons (Keenan, 1992, p. 4-5).
One could characterize executive action sing two dichotomies: executives with good versus bad
motives that result in good versus bad actions. This 2 x 2 matrix (see Table 2.1) considers only four
possibilities:

 Executives with good motives doing good things; e.g., the upright executive.
 Executives with good motives doing bad things; e.g., the upright executive trapped with evil market
turbulence.
 Executives with bad motives doing good things; e.g., the dishonest executive derives good market outcomes
owing to market turbulence.
 Executives with bad motives doing bad things; e.g., the dishonest executives indulging in evil outcomes such
as fraud, corruption and bribery.
< Table 2.1 about here >

Table 2.1 is a first approximation. It puts too much emphasis on the so-called “good vs. bad”
motives, and the so-called “good vs. bad outcomes.” Both could be situational or contingent, and both

42
are not sufficient to characterize people as good or bad. For instance, the judgments in each of the
quadrants of Table 2.1 does not take into consideration habitual will or virtuous dispositions of
executives such as habitual striving to be good and wanting to do right things (or the converse). Further,
one could be striving to be good out of duty (this is deontological ethics) or spontaneously as a habitual
disposition of training and upbringing (this is virtue ethics).

Immanuel Kant argued that good was descriptive only of the human will: that is, not acts but
willing persons are good. His presupposition was not that we are what we do, but that we may not be as
good as our actions appear to convey. He distinguished a person who acts out of duty from any act in
accord with duty. An act in accord with duty, e.g., executing a prisoner, could not itself be called good.
Rather, good acts were those done by persons acting out of duty. A mother acting out of duty to parent a
child is doing good. But Kant did not examine the distinction whether persons were good who acted out
of duty but who performed acts not in accord with duty. Though Kant examined acts in accord with
duty performed by people not acting out of duty, he did not explore the converse (Keenan, 1992, p. 5).
For instance, a parent acting out of duty to taking care of her child may act not in accord with duty and
err through too much leniency or rigidity.

Twentieth century philosophers asked a different question: they did not ask questions about
goodness, but about rightness. Moore (1912) asked whether we could describe actions as right or wrong
without considering the motives of the agent. Moore’s answer to this question establishes the distinction
between goodness and rightness. Moore (1912, p. 80) sought to determine the objective notion of right.
His definition is utilitarian: the act that produces a maximum pleasure will always be called right, for an
act can only be wrong “if it produces less than maximum.” Moore (1912, p.187-9) distinguished the
agent’s motives from the act: whether an agent deserves praise or blame depends upon the agent’s
motives, and not on whether one’s action is right or wrong.

Secondly, Moore distinguished a person’s perception of the right from what in fact is objectively
right; even with the best of intentions a person may not perceive the right. On the other hand, a person
motivated by selfishness may nevertheless calculate what the right act is and do it. Thus, Moore (1912)
concluded with a paradox (later called the Moore’s Paradox) regarding the act of an agent with bad
motivations: “A man may really deserve the strongest moral condemnation for choosing an action which
actually is right” (1912, p. 193-5). But Moore came off with a new insight: that a person is bad does
not affect the rightness of an action.

With these two distinctions, Moore provided a fresh insight: persons are “good,” while actions
are “right.” However, like Democritus and Kant, Moore did not call a person good who with good
motives performed a wrong act. He also presumed that a right act was a necessary condition for calling
an agent good. Over against the presumption, we are what we do, Moore made it clear that right actions
can be done by good and by bad people. Hare (1952, p. 185) refined this distinction by identifying good
acting with good motives.

Realizing Goodness in Corporate Executives

Contemporary moral philosophers argue that executed acts are not necessary for the moral
description of persons. That is, goodness (or badness) is not consequent to questions of rightness or
wrongness but antecedent to it, distinct from it, and determinative of it. Persons are good who strive to
realize the right, and actions are right when they satisfactorily fulfill the demands of protecting and
promoting values. They hold a new presupposition concerning moral description: good and bad people
behave rightly and wrongly. With this new presupposition, a person who performs a wrong action can
be called good for performing the action, as long he strives to do the right. Thus, we no longer call
people good if they do good actions, rather we call them good when they strive to realize rightness.

43
Conversely, people are bad not when they perform “bad” actions but when they fail to strive to perform
the right. Badness, then, is not simply acting out of selfishness or malice; prior to act, badness pertains
to the failure to strive for rightness (Keenan, 1992, p. 6-7).

Goodness, then is striving for rightness, and badness, its contradictory, is failure to strive for
rightness. Thus, goodness is distinct from rightness but not independent of it. Thus, parents who simply
dote on their children without seeking the right cannot claim to love their children. A claim may be
made, but the claim remains empty. Similarly, parents who strive to raise their children well but err
through extreme severity or leniency truly love; that is, such parents are good, but their parenting is
wrong. Since goodness is antecedent to rightness, good parents are those who strive for right parenting,
and all of them may not succeed.

Good business management executives, accordingly, are those who strive for right business
management. Goodness in business managements simply asks whether one strives out of love or duty to
realize right business management activity. Rightness asks whether the activity itself protects and
promotes values. Goodness is not a term of acquittal. If good executives perform wrong actions, their
primary concern should be to remedy the situation in which harm has been done, because being good,
they want to do the right.

Contemporary understanding of moral goodness is fundamentally related to the concept of human

freedom (Schüller, 1979; Fuchs, 1983). Each individual enjoys a distinct degree of personal freedom.
Due to nature, nurture, economics, luck, and other external causes, some people are more capable of
realizing right activity; that is, realizing goodness. Some have a ready disposition to be temperate;
others have a ready disposition to be chaste; some can never be racist; some are timid by nature, while
others are innately brave. Personal strengths and weaknesses arise from a variety of formative forces
(Keenan, 1992, p. 8). In general, people perform right activity based on their strengths, and wrong
activity from their weaknesses. Since each person has a different set of strengths and weaknesses, each
person is differently inclined to right or wrong. One could improve upon one’s strengths and reduce
one’s weaknesses – this is the exercise of virtue by which one orders oneself. The more a person enjoys
personal freedom, the more is that person rightly ordered, and vice versa.

Conversely, the more a person is rightly ordered, the more is that person predisposed to realize
right activities, and this is goodness. The reason that some people behave more rightly than others is not
necessarily due to striving; rather, those who behave rightly tend to be persons that are rightly ordered,
and those who behave wrongly tend to be persons that are disordered (wrongly ordered) people. They
(e.g., those who are inclined to excessive drinking, dishonesty, or opportunism) are less likely to behave
rightly (Keenan, 1992, p. 9).
Rightness concerns two dimensions of human living: a) that the agent is rightly ordered; b) that
the act is rightly ordered. One does not follow from the other: temperate people may occasionally fall,
and not all alcoholics always drink excessively. Consider, prudence, the most important of the virtues:
the selfish and the amoral are as capable as the saints of giving right advice. Similarly, one can imagine
the loving and the selfish to be temperate, or the wicked to be brave (MacIntyre, 1981, p. 166-7).

No one, no matter how well ordered, is perfect; no one, no matter how disordered, is an absolute
failure. Hence the need to distinguish whether a person is actually living a rightly ordered life and
whether a person’s action is right; neither description, however, depends upon goodness. Goodness asks
whether one strives through right action to make oneself rightly ordered. The good person consistently
looks for opportunities that better one’s strengths and reduce one’s weaknesses that order oneself, and
that empower one to higher levels of freedom.

Summarizing the discussions thus far, we can characterize the morality of executive actions using
four dichotomous dimensions as follows:

1. Virtue as Habitual Pre-dispositions (Virtue Ethics): Goodness as striving and wanting to be right
vs.; badness as not striving and not wanting to be right (Kant, 1964).

44
 2. Agent’s Motives (Morality Ethics): Good motives that make executives praiseworthy vs. bad
motives that make executives blameworthy (Hare, 1952).
3. Nature of action (Deontology Ethics): Doing the right things as fulfillment of one’s duty vs. doing
the wrong thing as violation of one’s duty (Kant, 1964).
4. Nature of Outcomes (Teleology or Consequential Ethics): Market or corporate outcomes as good
if they benefit the maximum number of stakeholders vs. bad outcomes if they benefit the least
(Moore, 1912; Anscombe, 1958).

This structure in four dichotomies generates 2 x 2 x 2 x 2 = 16 possible different characterization

of corporate executive actions and outcomes in turbulent markets of today. Table 2.2 has all the details.

< Table 2.2 about here >

We generally call a person virtuous who is both rightly ordered and therefore, predictably good.
When we attribute a specific virtue to someone, we imply that we can predict a specific behavior
relative to that virtue. For instance, a temperate person will enjoy a party without getting drunk; a brave
person with neither shun nor search for danger; a just person will take delight in respecting the rights of
all people; a prudent person will always assess the costs and benefits before deciding on a value-
balanced activity. Each attribution of virtue describes someone as rightly ordered in a specific area of
human activity. Often goodness is not even presumed. And in general, we call someone virtuous, if that
person demonstrates striving to right activity in all the dimensions of his or her personality. To remark
that a person is virtuous is to predict that the person will consistently perform rightly ordered behavior
(Keenan, 1992, p. 10). In practice, that person is temperate, brave, just and prudent. People who are
rightly ordered are persons with virtues: their will, reason, and passions are ordered. As habits of living
or conduct, virtues belong to those who live rightly (Fagothey, 1959). In turn, virtues enable persons to
act rightly. The virtues are acquired not by repeatedly performing the same types of actions but by
intending and executing the same types of actions: the virtues are acquired willfully and not accidentally
(Keenan, 1992, p. 13).

In defending virtue, an important question is why should one live according to reason and choose
the golden mean between excesses? For instance, if our conception of a good and successful life were
amassing wealth and power, then would not ruthlessness be a virtue? If as business executives, our
corporate mission were to grow, expand, make profits, and dominate the market, then would not ruthless
cutthroat competition and price wars be a virtue? If as business management executives our success was
defined by higher sales, higher revenues, higher market share, and higher profits, then would not
ruthless undercutting competition, blocking market entry, price dumping, predatory pricing, exorbitant
pricing, price-gouging, and the like be executive business virtues than vices? Thus in defending both
intellectual and moral virtues, we cannot consider merely their contribution to some end, but must also
inquire into the morality of the end itself (Boatright 2000, p. 64).

Currently applying the Aristotelian approach of virtue to business, some recent authors (e.g.,
Gadamer, 1975; Morris, 1997; Solomon, 1992a) have developed the notion of business as a human
endeavor in which executives ought to find fulfillment, and therefore, emphasize the need for virtue
in business. Corporations are wherein many executives spend most of their adult life. If executives
must achieve happiness and develop as full human beings, then corporations should nurture a
corporate climate or culture that will facilitate this development. “The virtue approach to business is
a valuable reminder that business is part of human life and so part of moral life” (De George, 1999,
p.125).

Similarly, when thinking about a moral business management decision, one often thinks not so
much of what one is obliged to do, but instead of the kind of person one would be by doing it
(Hauerwas, 1981, 1983; Pincoffs, 1986). To act rightly is to act rightly in affect and conduct.
Discerning the morally salient features of a situation is part of expressing virtue and part of the morally
appropriate response. Pursing the ends of virtue does not begin with making choices, but with

45
recognizing the circumstances relevant to specific ends. In this sense, character is expressed in what one
sees as much as what one does (Sherman 1987: 4). Knowing how to discern the particulars is a mark of
virtue (Aristotle, 1985). Thus, in executing the business management decision, besides asking the
question whether the decision is morally good or bad, right or wrong, fair or unfair, one should also ask
more important questions such as - would I be honest or dishonest, sincere or insincere, selfish or
unselfish, in deciding and acting so?

Virtue ethics addresses these questions. While moral rules and principles (e.g., deontological,
teleological) are clearly essential to guide ethical executive choices, principles without virtuous
character traits are impotent (Anscombe, 1958; Francine, 1974, p. 65), and “ethics without virtue is an
illusion” (Kreeft 1992). Principles by themselves do not provide the vision of moral good life and
character that virtue ethics emphasizes (Keenan, 1995; Porter, 1991, 1997; Spohn, 1992; Williams &
Murphy, 1990). “An action motivated by the right principle but lacking in the right gesture or feeling
falls short of the mean: it does not express virtue” (Sherman, 1987, p. 2).

We must distinguish and contrast wisdom from cleverness, shrewdness, cunningness and other
manipulative capacities in business managements and transformations. The latter are often invoked in
the pursuit of overstating sales, revenue, market-share and profit; these so-called “creative
accounting” skills may often imply taking right steps but to wrong ends or wrong steps to defensible
ends (Alderson, 1964; Bollier, 1997; Galbraith, 1971). Real business management-transformation
wisdom or prudence takes right steps to right ends, especially those that serve the common good of all
stakeholder communities and society.

There may be a strategic virtue in doing things rightly, but there is a moral virtue in doing right
things rightly (Aristotle, 1985). In a similar sense, vices such as vanity, avarice, greed and
worldliness are contrary to wisdom, since they pursue wrong values. Vanity sees admiration as the
highest value; worldliness pursues good life primarily in terms of wealth and power; avarice and
greed seek money and other money equivalents (such as land, investments, businesses, wealth) as
supreme values. Virtues strike a golden mean between the excesses of too much or too little of the
kind.

Benevolence and the Four Cardinal Executive Virtues

Not all good people are virtuous or rightly ordered; some good people may still be disordered in
some areas of their life. Hence, beyond the virtues of temperance, courage, justice and prudence, moral
philosophers postulate a fifth virtue that conditions all these four cardinal virtues to make the person
good: charity or benevolence (Keenan, 1992, p. 11; Rahner, 1966). Charity or benevolence does not
only mean performing charitable acts; this is one of its outcomes. Real charity or benevolence is the
love that strives for greater union with God and neighbor through attempts that realize right living.

Charity or benevolence is a virtue of striving, whereas temperance, courage, justice, and prudence
are virtues of attaining. Benevolence (or charity) is the moral description for a person who literally
strives to realize rightness (Frankena, 1973). The benevolent person’s will is bent on right realization,
but it may not always attain the beneficial act (Schüller, 1979, p. 188ff). The benevolent person is good,
but his or her behavior may sometimes miss the mark (Keenan, 1992, p. 11). Thus, when someone
possesses the four cardinal virtues, that person is rightly ordered; if in addition that person is also
benevolent, that person is good. Conversely, one may be benevolent but not with the four cardinal
virtues: this person strives to be temperate, brave, just and prudent, but has not yet attained such
integration. That is, many people may be benevolent, but not yet brave, temperate, just and prudent; but
notwithstanding their failure to attain rightness, they often may mean well, try hard, and certainly wish
to be otherwise.

Any willful exercise is twofold: the primary exercise out of which we are moved, and the secondary
exercise by which we execute the judgment to act. The primary exercise defines goodness; the

46
secondary exercise defines rightness. For instance, out of benevolence a mother may judge to overlook
the wrongdoing of a child. The mother is good, because she is seeking what is right for the child.
Nevertheless, perhaps the child actually needs in this particular instance to be corrected or punished. If
so, then the act of “overlooking” is wrong in this case; by exercising this wrong judgment, the mother is
failing to grow in parental prudence. The first exercise of being moved by benevolence has no
connection to rightness, as it does not necessitate a right judgment. However, it requires the willingness
to exercise oneself toward what one believes is right judgment (Keenan, 1992, p. 55-6).

The cardinal virtues are connected. The basic intellectual virtue among these four is prudence:
the practical reason (phronesis according to Aristotle, 1985). It looks forward to the overall end of
life and sets the agenda for attaining that end and all intermediate ends (Aquinas, 1963); it discerns
and sets the standards of moral action. Hence, Aristotle (1985) and Aquinas (1963) held the absolute
priority of prudence: no acquired virtue is more important. That is, prudence governs all the other
three cardinal virtues. That is, prudence can properly direct the agent to be just, temperate, and
fortitudinous. Fortitude or courage perfects the irascible or struggling power; temperance or
moderation perfects the concupiscible or desiring struggle in us. Both fortitude and temperance
primarily reflect the morals of the body: they order us interiorly. However, we pursue temperance and
fortitude in order to be more just. Next to prudence, justice is the chief moral virtue. Justice is the
only relational virtue. Justice relates us to others and orders all our relationships and exterior
activities with people (Rawls, 1971). A virtue is greater to the extent it expresses higher and more
rational good. Justice expresses that greater good both by the fact that it is in the rational appetite and
thus nearer reason, and because it alone orders not only the agent, but the agent in relationship to
others. For this reason, justice is the chief moral virtue (Aquinas, 1963, p. I-II, 66.4).

Cardinal Corporate Virtues in Conflict

To the extent that prudence, justice, fortitude and temperance have their own domain and
subject matter, they may not conflict, nor have competitive claims against each other. In their
hierarchical relationship to reason, prudence comes first, then justice, then fortitude and
temperance. That is, while temperance governs all our interior appetites, fortitude governs our
appetites in relation to others, and justice governs all our external actions, prudence governs the
right dispensation of justice, fortitude and temperance. Hence, a descending hierarchical sequence,
both logical and ontological, from prudence to justice to fortitude, and to temperance seems
intuitively reasonable. If there is any conflict between temperance, fortitude and justice, then
justice would take simple priority (Aquinas, 1963; I-II, 61.2-4; 66.4). Thus, according to Aquinas,
justice holds a privileged place; it has no competition; it is both necessary and sufficient by itself.

But giving justice too much priority and prominence may degenerate virtue ethics back to a
distributive justice ethic of principles and rules, precisely what virtue ethics is trying to avoid. Hence,
contemporary virtue-ethics scholars do not accord justice its self-sufficiency, but instead twin justice
with other virtues such as trust or faith, love or charity. Contemporary virtue-ethics acknowledges
the possibility that cardinal virtues could be in competition or conflict with one another (Spohn,
1992). In this sense, virtue ethics concurs with deontologists and teleologists in maintaining that
conflict among key directing guidelines is inherent to all methods of moral reasoning (Keenan, 1995).

Frankena (1973, p. 52), for instance, saw irresolvable conflict between the two fundamental
principles of beneficence and justice. In the context of biomedical ethics, Beauchamp and Childress
(1989, p. 211) argue that there is no overriding authority or principle in either the patient or the
physician, not even to act in the patient’s best interest. Similarly, Hauerwas (1981, p. 144) argues

47
that we have the task of sorting out conflicting values throughout our moral lives; that is, in the long
run, we must live a life that ethically incorporates a variety of relational claims that are made on us.
This we do through the narrative of our lives we live.

Thus the virtues are related to one another not in some inherent way as was argued by the
classical exponents of cardinal virtues. Nor do they complement one another per se. Rather, “they
become integrated in the life of the prudent person who lives them” (Keenan, 1995, p. 722). The
unity of the virtues is found not in some theoretical apportioning of the cardinal virtues to specific
powers or faculties; it is found rather in the final living out of lives shaped by prudence anticipating
and responding to virtuous claims.

Concluding Remarks
Much of right moral conduct cannot be codified in rules and principles. Real moral situations
are too complex: while moral rules are too general and simplistic. “Substantive virtues” such as
benevolence, justice, and generosity make one more responsive to moral claims, and “enabling
virtues” like empathy and sensitivity can conscientize us to the demands of particular cases. In such
cases, the judgments of virtue will be primary and judgments of rightness derivative (Trianosky,
1990, p. 342). Prudent and wise persons whose virtue incorporates an appreciation of the basic
principles of moral rightness will make the best practical judgments (Hursthouse, 1991), most
tolerant pluralists (Mara, 1989), or good citizens (Burt, 1990).

Other skills-related excellences such as expertise in science (medicine, engineering, nuclear

physics), in commerce (business, law, politics), in arts (music, poetry, writing), in crafts (painting,
sculpting, building) and in sports (racing, skiing, skating, pitching) require tremendous body-power,
mind-concentration and will-power, and may be considered as "moral" virtues in so far as these
"capacities" are put to good humanitarian use. Virtue ethics also focuses on human virtues, albeit a
much longer list. For example, Pincoffs, giving new life to the ideas of Aristotle, offers a list of over
six dozen virtues (1986, p. 85). He argues that the development of virtuous character should be a
primary goal of the human condition, and he identifies four classes of virtues: aesthetic, ameliorating,
instrumental, and moral. Virtue ethics is about conditioning oneself to act morally as a matter of habit
(Jones, Felps, & Bigley, 2007, p.139-140).

Dimensions of Executive Virtue

Contemporary moral philosophers argue that executed acts are not necessary for the moral description of persons. That is, goodness (or
badness) is not consequent to questions of rightness or wrongness but antecedent to it, distinct from it, determinative of it.
Persons are good who strive to realize the right, and actions are right when they satisfactorily fulfill the demands of protecting and promoting
values (p. 20-21).
Thus, a person who performs a wrong action can be called good for performing the action, as long he strives to do the right. Thus, we no longer
call people good if they do good actions, rather we call them good when they strive to realize rightness (p. 21).
Conversely, people are bad not when they perform “bad” actions but when they fail to strive to perform the right. Badness, then, is not simply
acting out of selfishness or malice; prior to act, badness pertains to the failure to strive for rightness (Keenan, 1992). [p.21]
Contemporary understanding of moral goodness is fundamentally related to the concept of human freedom. Due to nature, nurture, economics,
luck, and other external causes, some people are more capable of realizing right activity and goodness. Some have a ready disposition to be
temperate, or just or prudent (p. 21).
In general, people perform right activity based on their strengths, and wrong activity from their weaknesses. Since each person has a different
set of strengths and weaknesses, each person is differently inclined to right or wrong (p. 21).
One could improve upon one’s strengths and reduce one’s weaknesses – this is the exercise of virtue by which one orders oneself. The more a
person enjoys personal freedom, the more is that person rightly ordered, and vice versa (p.21).

48
Moral goodness always requires that we strive to realize the right. Failure to strive to realize the right is moral failure.

Moral goodness as a striving is not simply wishing; it is actual self-motivation willing to consider all the factors necessary to moral living, to
deliberate about them, and to execute the decision. That is, moral goodness is found in the exercise of the will to do and be good – this is virtue
ethics.

The contrary of moral goodness is not the willingness to be bad, but the failure to be good. The will becomes or is morally bad in its failure to
consider all the values and factors that pertain to moral life.

We grow in virtue only if we exercise right acts in relation to that virtue. If we do not exercise right or virtuous acts, we do not become rightly
ordered or virtuous. Exercise needs both encouragement to execute the act and the wisdom to know which act to execute, in which case exercise
follows reason.

Not all good people are virtuous or rightly ordered; some good people may still be disordered in some areas of their life. Hence, beyond the virtues
of temperance, courage, justice and prudence, moral philosophers postulate a fifth virtue that conditions all these four cardinal virtues to make the
person good: charity or benevolence.
Charity or benevolence is a virtue of striving, whereas temperance, courage, justice, and prudence are virtues of attaining. Benevolence (or
charity) is the moral description for a person who literally strives to realize rightness.
Any willful exercise of virtue is twofold: the primary exercise out of which we are moved, and the secondary exercise by which we execute the
judgment to act. The primary exercise defines goodness; the secondary exercise defines rightness.

49
Table 2.1: A Partial Characterization of Goodwill and Good and
the Opposites

Executive Executive Actions

Motives Good Bad
[Right actions that promote [Wrong actions that
good values and good promote disvalues or evil
culture] culture]

Assumption 1: Right actions with Assumption 2: Wrong actions are

right motives are a necessary not a sufficient condition for
condition for calling a person good calling a person bad (Aquinas
(Hare 1952) 1964).
Good people doing good.
Good Good people doing bad.

Examples: Examples:

A “good” person A good-willed failure

A virtuous person An ignorant mistake
A moral person A misinformed disaster
An ethical person A conscientious boycott
A just person An addict’s violence
A righteous person Killing in a just war
An upright person Involuntary murder

Assumption 3: Right actions are not Assumption 4: Wrong actions are

a necessary condition for calling a not a necessary condition for
person good (Kant 1964). calling a person bad (Moore 1912)

Bad people doing good. Bad people doing bad.

Bad Examples: Examples:

A bad-willed success A “wicked” person acting wicked

A malevolent courage A vicious person’s vice
An ill-willed victory A malicious person’s malice
Parading charity A selfish person acting selfish
Almsgiving for power Deliberate drunken violence
Oppressive kindness Killing in an unjust war
Philanthropy for tax write-offs Voluntary murder

50
 Table 2.2: A Taxonomy of Corporate Executive Behaviors in Turbulent Markets
Virtue as Agent’s Nature Nature of Possible characterization of Corporate Executive
Habitual Motives of Outcomes Actions in Turbulent Markets
Pre- (Morality Action (Teleology Ethics)
Ethics) (Deontolo Consequentialism
dispositio
gy Ethics) Anscombe 1958)
ns
(Virtue
Ethics)
Good (benefits Case 01: Goodness-striving and with good motives, corporate
Right the maximum; executives do the right thing rightly (i.e., fulfill duty with good
(e.g., Moore 1912) corporate outcomes that benefit the maximum). This is corporate
Fulfilling Morality at its best.
one’s duty Case 02: Goodness-striving and with good motives, corporate
– (Kant executives do the right thing wrongly (i.e., fulfill one’s duty but
Bad
1964)] with bad corporate outcomes), owing to inevitable circumstances
(benefits the
or turbulent markets. This action predicates corporate morality
Good least; Moore
because of antecedent goodness striving, good motives, and doing
Motives 1912)
the right action. This could be at its worst, corporate failure
[Makes one without guilt.
praiseworth Good (benefits Case 03: Goodness-striving and with good motives, corporate
y (Hare the maximum) executives do the wrong action rightly (i.e., violating one’s duty
1952)] Wrong but resulting in good corporate outcomes). The latter could be due
Goodness (e.g., to luck, or one’s moral ingenuity of deriving good out of bad.
as violating This could be a moral hazard if the executive was forced to
striving one’s violate duty (due to turbulent markets) that clever executives turn
duty, into good results - this Case may reflect moral courage.
and Case 04: Goodness-striving and with good motives, executives do
Kant Bad
wanting 1964) (benefits the the wrong action wrongly (i.e., violate one’s duty and with bad
to be least) corporate outcomes). If both are forced by turbulent markets, then
right this case could reflect moral incompetence or weakness in
combatting market turbulence.
[Goodness
can make Right Good (benefits Case 05: Goodness-striving but with bad motives, executives do
people good (e.g., the maximum) the right action rightly (i.e., doing duty with bad motives that result
(Kant 1964)] Fulfilling in good corporate outcomes). This could be corporate ingenuity or
one’s moral shrewdness.
duty) Bad Case 06: Goodness-striving but with bad motives, executives do
Bad (benefits the the right action wrongly (i.e., do duty with bad motives that also
Motives least) result in bad corporate outcomes, possibly owing to turbulent
markets. This action could predicate corporate morality if
[Makes one
dominated by goodness-striving.
blameworth
y (Hare Good (benefits Case 07: Goodness-striving but with bad motives, corporate
the maximum) executives do the wrong action rightly (i.e., violating duty mixed
1952)] Wrong with bad motives with good corporate outcomes owing to luck.
(e.g.,
This is moral serendipity or contingency that the executive may
violating
not take credit.
one’s
Bad Case 08: Goodness-striving but with bad motives, executives do
duty)
(benefits the the wrong action wrongly (i.e., violating duty with bad motives and
least) bad corporate outcomes). This is moral perplexity – occasioned
by turbulent markets that may force bad motives, violation of duty,
and bad results.
Right Good (benefits Case 09: Badness-striving but with good motives executives doing
(e.g., the maximum) right things rightly - good corporate results (e.g., a benevolent
Fulfilling corporate success)
Good one’s Bad Case 10: Badness-striving but with good motives corporate
Motives duty) (benefits the executives doing right things wrongly – (i.e., with bad market
least) results (e.g., a benevolent market failure).
[Makes one
praiseworth Wrong Good (benefits Case 11: Badness-striving but with good motives corporate
Badness y] (e.g., the maximum) executives doing wrong things rightly - good corporate results
violating (e.g., a benevolent corporate contingency).
as not Case 12: Badness-striving but with good motives corporate
one’s Bad
striving duty) (benefits the executives doing wrong things wrongly (i.e., with bad corporate
and not least) outcomes) - a benevolent corporate and market failure.
wanting Right Good (benefits Case 13: Badness-striving with bad motives corporate executives
to be (e.g., the maximum) happen to do right things rightly – with good market results (e.g.,
Fulfilling an immoral corporate success).
right
[Badness Bad one’s Bad Case 14: Badness-striving with bad motives corporate executives
Motives duty) (benefits the happen to do wrong things rightly – with good market results -
can make
least) (e.g., an immoral market failure).
people bad [Makes one
(Kant 1964)] blameworth Wrong Good (benefits Case 15: Badness-striving with bad motives corporate executives
y] (e.g., the maximum) do wrong things rightly – with good market results - (e.g., an
immoral and evil corporate failure with market success).

51
violating Bad Case 16: Badness-striving with bad motives executives do wrong
one’s (benefits the things wrongly - with bad market results – (e.g., an immoral
duty) least) corporate outcome failure); if done persistently, it is moral
turpitude or moral depravity.

52
End Notes
Chapter 03
The Ethics of Corporate Trusting Relations
“You can have all the facts and figures, all the supporting evidence, all the endorsement that you
want, but if you don’t command trust, you won’t get anywhere,” (Nail Fitzgerald, Former Chairman,
Unilever).

“You can’t have success without trust. The word trust embodies almost everything that you can
strive for that will help you to succeed. You tell me any human relationship that works without trust,
whether it is a marriage or a friendship or a social interaction; in the long run, the same thing is true
about business, especially businesses that deal with the public,” (Jim Burke, former Chairman and
CEO, Johnson & Johnson).xviii

Executive Summary
Building trust and living interpersonal trust are crucial corporate executive virtues that are needed
today. Once you have developed and solidified a high level of genuine interpersonal trust with all
your stakeholders, especially customers, suppliers and employees, then you are on the right path of
managing and transforming your company. A high-level of interpersonal trust between all
stakeholders and corporates in a business situation will break down communication barriers, foster
serious conversation and sharing of ideas, and will eliminate corporate transactional anxieties of
fear, mistrust, guilt, rigidity, blame and resentment. When stakeholders trust you and you trust them,
then, you speak freely, they speak freely, and your mutual sustained transparency is a gateway to
survival, revival and sustained corporate recovery and transformation, and steady growth and
prosperity. Conversely, when there is low trust, high mistrust and high distrust among stakeholders
in a business situation, communications and conversations are stressed and fragmented, teamwork
and team spirit are very low, and the company is heading toward its ruin and extermination. Such is
the crucial role of interpersonal trust in business. This Chapter explores the crucial phenomenon of
corporate interpersonal trust. We review various cases, models, concepts, definitions and theories of
trust from the management literature in general, and from the marketing field in particular, to derive
psychological, behavioral, ethical and moral principles of corporate trust, trusting relations, and
trusting strategies.

Introduction
Trust is one of the most powerful motivations and inspirations. People want to be trusted. They
respond to trust. They thrive on trust. Trust is a function of at least two things: character and
competence. Character includes ethics, your integrity, your motives, your intentions and your intent
with people. Competence includes your capabilities, your skills, your outcomes or results, your track
record. And both are vital. Character and competence are both necessary. In his best seller, The
World is Flat, New York Times columnist Thomas Friedman observes that this new “flat” economy is
all about partnering and relationships that thrive or die based on trust. “Without trust, there is no open
society, because there are not enough police to patrol every opening in an open society. Without trust,
there can also be no flat world, because it is trust that allows us to take down walls, remove barriers,
and eliminate friction at borders. Trust is essential for a flat world.” Character is a constant; it is
necessary for trust in any circumstance. Competence is situational; it depends upon what the
circumstance requires.

Most of us do not know how powerful we are in building trust, in changing the level of trust in
any relationship, as we do not know how to build trust “from inside-out,” writes Covey (2006 , p. 33).
The key is in understanding and learning how to navigate in what he calls the “Five Waves of Trust”
that starting from within work outwards like a ripple effect. The five waves of trust model serves as a
metaphor for how trust operates in our lives. It begins with us individually, continues into our
relationships, expands into our organizations, and encompasses our global society at large – this is the

53
“inside-out” paradigm of this model. To build trust with others, we must start with ourselves. The five
waves also form a structure for understanding and making trust actionable in our day-to-day family
and corporate life

The Importance of Trusting Relationships in Business Management

Trust can be defined as the expectation that other people or organisations will act in ways that are
fair to us. Mistrust increases when people increasingly view our institutions, public or private, as
corrupt, strangers as suspicious, rivals as illegitimate and facts as negotiable. The share of Americans
who say “most people can be trusted” fell from 44% in 1976 to 32% in 2016, according to a survey
from the University of Chicago. Lack of faith strains boardroom discussions. In his latest letter to
shareholders, Jamie Dimon, CEO of JPMorgan Chase, described trust as America’s “secret sauce”
and worried that the bottle was running dry.

Our current mistrust outbreak can be analysed under two parts: what consumers think, and what
firms think. The share of people who have “little or no confidence” in big business has risen from
26% in 1976 to 39% in June 2017, according to Gallup. For banks it has risen from 10% in 1979 to
28% in 2017. Over decades big firms have broken implicit promises made to their employees, such as
providing a job for life and paying generous pensions. And the financial crisis of 2007-08 blew a giant
hole in mutual trust between global investors and global giant investment banks.

At the same time the S&P 500 index is near an all-time high, even though many economists say
that distrust is toxic for prosperity because transactions become dearer and riskier. An OECD study of
30 economies shows that those with low levels of trust, such as Turkey and Mexico, are far poorer.
Three scholars, Luigi Guiso, Paola Sapienza and Luigi Zingales, have shown that pairs of countries
(such as Britain and France) whose populations say they distrust each other, have less bilateral trade
and investment.

Trust between firms, and between firms and investors, is more resilient, but there is evidence of
greater wariness. Banks charge corporate borrowers a spread of 2.6 percentage points above the
federal-funds rate, compared with 2.0 points in the 20 years before the crisis. The equity-risk
premium, or the annual excess return that investors demand to hold shares rather than bonds, is 5.03
points, against a pre-crisis average of 3.45 points, notes Aswath Damodaran of the Stern School of
Business at NYU. [https://www.economist.com/business/2017/08/10/mistrust-in-america-could-sink-
the-economy Aug 10th 2017].

Scholars have seen trust as an essential ingredient for a healthy personality, as a foundation for
interpersonal relationships, as a foundation for cooperation, and as a basis for stability in social
institutions and markets. Mutual trust between business partners has been found to be very vital in the
uncertain, complex, volatile and fast-paced business environment of today, especially given modern
developments of globalization, and strategic global competitive alliances (Prahalad & Hamel, 1994),
multicultural and multilingual relations (Cox & Tung, 1997; Sheppard, 1995).

There are many reasons why reciprocal trust among corporate executives and various stakeholders
is becoming important in all business transactions. Trust leads to successful relationships and
improves communication, cooperation, satisfaction, and purchase intent in a marketing-exchange
context (Anderson & Narus, 1990; Doney & Canon, 1997; Morgan & Hunt, 1994). Interpersonal trust
can be an important social resource for facilitating cooperation and enabling social interactions
between various actors in a business environment (see Coleman, 1988; Zucker, 1986). Trust reduces
the need: a) to suspect and monitor each other’s behavior, b) to formalize monitoring and control
procedures, c) to create completely specified contracts, and thus, d) can reduce negotiation costs
(Powell, 1990). xix

What is Executive Trust?

54
 In recent years, the issue of trust has been seriously discussed in management and marketing
literature. The view of trust as a foundation for social order spans many intellectual disciplines and
levels of analyses (Lewicki, McAllister, & Bies, (1998, p. 438). Understanding why people trust, and
how trust shapes human relations has been the central focus of theologians, philosophers,
psychologists, sociologists, political scientists, economists, anthropologists, and students of
organizational behavior and marketing.

According to Lewicki and Bunker (1995), the study of trust may be categorized based on how
trust is viewed: as an individual difference, as a characteristic of interpersonal transactions, and as an
institutional phenomenon. Specific disciplines have been associated with these three approaches.
Thus,

 Personality psychologists view trust as an individual characteristic (Rotter, 1967, 1971, 1980);
 Social psychologists define trust as an expectation about the behavior of others in transactions,
focusing on the contextual factors that enhance or inhibit the development and maintenance of
trust (Lewicki & Bunker, 1995, 1996); lastly,
 Economists and sociologists have focused on trust building institutions that reduce uncertainty
and anxiety (Zucker, 1986).

Each discipline has its own focus, and accordingly, provides only a partial or incomplete
description of trust. McAllister (1995, p. 25) argues for two bases of trust, one (cognition-based trust)
grounded in cognitive judgments of the competence of an exchange partner, and the second (affect-
based trust) founded on affective bonds between exchange partners. Lewicki and Bunker (1995)
distinguish three types of trust: Calculus-, knowledge-, and identification-based trust, and Sitkin
(1995) proposes three others - competency-, benevolence- and value-based trust. Sirdeshmukh,
Singh, and Sabol (2002) derive customer trust in the service area from operational competence,
operational benevolence, and problem solving orientation on the part of both frontline employees and
management policies and practices that back frontline employees. Mayer, Davis, and Schoorman
(1995, p. 712) argue that trust is “the willingness of a party to be vulnerable to the actions of another
party based on the expectation that the other will perform a particular action important to the trustor,
irrespective of the ability to monitor or control the other party.” Most organizational scientists (e.g.,
Granovetter, 1985; Ring & Van de Ven, 1992) view trust as a mechanism that mitigates opportunistic
behavior among exchange partners. Rousseau, Sitkin, Burt, and Camerer (1998, p. 395) combine
common themes from trust definitions based on sociology, psychology, and economics, and define
trust as “a psychological state comprising the intention to accept vulnerability based on positive
expectations of the intentions or behaviors of another.”

Definitions of Trust in the Marketing Literature

Marketing scholars have emphasized different aspects of trust. In an organizational context of
trusting, independent marketing researchers, Moorman, Deshpande and Zaltman (1993, p. 82) define
trust “as a willingness to rely on an exchange partner in whom one has confidence.” According to
Morgan and Hunt (1994, p. 23) trust exists “when one party has confidence in an exchange partner’s
reliability and integrity.” In the context of buyer-seller relations, Doney and Cannon (1997, p. 36)
define trust as “the perceived credibility and benevolence of a target of trust.” In the service area,
Sirdeshmukh, Singh, and Sabol (2002, p. 17) define “consumer trust as the expectations held by the
consumer that the service provider is dependable and can be relied on to deliver on its promises.” An
important aspect across all definitions of trust in marketing is the notion of trust as a belief, a
sentiment, or an expectation about an exchange partner that results from the latter’s competence,
credibility, reliability or intentionality (Ganesan, 1994).

Further, according to Moorman, Zaltman and Deshpande (1992) and Mishra (1996), vulnerability
is an important constituent of trust; in the absence of risk or vulnerability, trust is not necessary, since
outcomes are not of consequence to trustors. Sabel (1993, p. 1133) defines: “trust is the mutual

55
confidence that no party to an exchange will exploit the other’s vulnerability.” Ganesan (1994) and
Mayer, Davis and Schoorman (1995) view trust in conative and behavioral terms. Other marketing
researchers use cognitive or evaluative definitions of trust, empirically verifying the link between trust
evaluations and behavioral response (Doney & Cannon, 1997; Morgan & Hunt, 1994; Sirdeshmukh,
Singh, & Sabol, 2002).

Further, earlier trust-studies in marketing (e.g., Anderson & Narus, 1990; Anderson & Weitz,
1989, 1992; Moorman, Zaltman, & Deshpande, 1992, 1993; Morgan & Hunt, 1994) have treated trust
as a uni-dimensional construct. However, later studies (e.g., Doney & Cannon, 1997; Ganesan, 1994;
Sirdeshmukh, Singh, & Sabol, 2002) have treated trust as a multidimensional construct; the latter
provides greater diagnostic with respect to the effect of trust on long-term or short-term orientation
(Ganesan, 1994).

Business literature, in general and marketing literature, in particular, has advocated for decades
the need for customer trust and stakeholder relationships. However, the need has been academically
expressed more recently. Some quotes and opinions in this regard:

 “One of the most salient factors in the effectiveness of our present complex social organization is the
willingness of one or more individuals in a social unit to trust others” (Rotter, 1967, p. 651).
 Trust is the “cornerstone of long-term relationships” (Spekman, 1988, p. 79).
 Trust is generally viewed as an essential ingredient for successful relationships (Berry, 1995; Dwyer, Schurr
& Oh, 1987; Moorman, Deshpande & Zaltman, 1993; Morgan & Hunt, 1994; Garbarino & Johnson, 1999).
 A central idea in the theory of partnering suggests that differences in trust and commitment are the features
that most distinguish customers as partners from customers who are single-transaction buyers (Berry, 1995;
Webster, 1992).
 Theories of partnering propose that customers with strong relationships not only have higher levels of trust
and commitment, but also that trust and commitment become central in their attitude and belief structures
(Morgan & Hunt, 1994).
 In personal selling or retailing what differentiates relational partnerships from functional (or transactional)
relationships is the level of trust and commitment to the other party (Levy & Weitz, 1995; Weitz,
Castleberry, & Tanner, 1995).
 Customer trust is an essential element in building strong customer relationships and sustainable market
share (Urban, Sultan & Qualls, 2000).
 To “gain the loyalty of customers, you must first gain their trust” (Reichheld & Schefter, 2000, p.107).
 The “inherent nature of services, coupled with abundant mistrust in America, positions trust as perhaps the
single most powerful relationship marketing tool available to a company” (Berry, 1996, p. 42).

Thus, for instance, there is much focus on mutual trust and trustworthy relationships in marketing,
especially in relation to commitment in marketing (Achrol, 1991; Gundlach, Achrol, & Mentzer,
1995; Morgan & Hunt, 1994), and buyer-seller relationships and contracts (Doney & Cannon, 1997;
Dwyer, Schurr, & Oh, 1987). This focus can and should be easily transferred to the discipline of
business management. The high levels of trust characteristic of relational exchanges enable exchange
partners and stakeholders to focus on long-term benefits of the relationship (Ganesan, 1994),
ultimately enhancing competitiveness and reducing transaction costs (Noordewier, John, & Nevin,
1990).
A company representative who proves to be dishonest and unreliable could easily jeopardize
long-term relationship with a trusted supplier (Kelly & Schine, 1992). On the other hand, highly
trusted salespeople have been found to sustain customer commitment despite management policies
that may not always benefit the customer (Schiller, 1992).

Case 3.1: The Tata Group: A Trusted Empire

Founded in 1868 by Jamsetji Nusserwanji Tata who belonged to a family of a long line of
Zoroastrian Parsee priests, the Tata Group currently operates as a conglomerate of more than 130
independently run companies (32 of which are traded on stock exchanges), employing over 500,000
people, earning revenues over $100 billion (profits over $6.2 billion) and controlling assets valued
over $80 billion in 2011-2012 (Casey, 2014, p. xvi-xvii). How did Tata transform itself from a

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family-owned business (which it still is) to one of the most professionally and ethically managed
successful enterprises of the world?

The dominant moral guiding principle for everyone at Tata is sharing wealth and opportunity. A
highly diversified multinational mega enterprise, humanistic and philanthropic at its core, the Tata
Group shares vision, mission, power and profits with customers, employees, shareholders, and in the
societies in which they live and work. A business phenomenon as highly moral as it is profitable,
with enviably high nobility of purpose and principle, and one which weathered toughest of domestic
and global economic storms, financial crises, and political chaos as it did through more than 150 years
of its existence, the Tata Group stands out as a beacon of light despite our cynical age, corporate and
political greed, and ever increasing income and opportunity inequalities (Casey, 2014, p. xix-xx). It is
a triumph of socialism amidst capitalism, honest transparency amidst exploiting market opacities, and
sharing-caring commitment. The Tata companies persistently strive to better ethics and business
practices in the whole wide world that otherwise consistently seeks to indulge in fraud, corruption and
chicanery.

In every sense of the word, the Tata House and Tata Trust represent a veritable triumph of social
capitalism. Tata Sons is the umbrella holding company weaving the conglomerates together. Social
capitalism creates value and wealth for all - shareholders, employees, customers and humankind itself.
Two-thirds of Tata is owned by philanthropic trusts (Tata is one of the biggest charities in the world)
– this is Socialism. TCS, the largest company in India as measured by market capitalization, is the
largest member of the Tata Group; Tata Steel is the fifth largest steel company in the world; Tata
Motors (originally Tata Engineering and Locomotive Co. or TELCO, now known as Tata Motors) has
expanded significantly of late with major acquisitions such as Jaguar and Land Rover, while
pioneering its own new models, including the Nano. Tata Tetley is the second largest tea producer in
the world; Tata is the biggest industrial-sector employer in the UK, and Tata Power is India’s largest
private-sector power supplier – this is Capitalism. Combine the two, true Socialism and successful
Capitalism, and you have the triumph of Social Capitalism. Tata has been highly successful for over
150 years in terms of increasing revenues, market share, profitability, market capitalization, growth
and prosperity – a highly diversified conglomerate and the world’s largest philanthropic. Tata thrives
because of its four major stakeholders – shareholders, employees, customers, and the society, the
fourth stakeholder and the largest among the four (Casey, 2014, p. xviii).

Great philanthropists have dotted the developed world – Andrew Carnegie, John D. Rockefeller,
J. P. Morgan, Warren Buffet, and Bill Gates to name a few from USA. To most of these philanthropy
was an afterthought – that is, after accumulating wealth for decades, they built great foundations or
endowments to help found educational trusts or charitable institutions. But for the Tata Group,
philanthropy was not an afterthought, but a concurrent strategy and a driving thought. The companies
the Tata Group established were built for the express purpose of empowering the customers,
employees, shareholders, and especially to lift the needy societies of the times they lived in. Jamsetji
Tata, right from the very first company he built in 1869 made it to be bigger and better, big and good
enough to make a difference in the life of India. “In a free enterprise the community is not just
another stakeholder in business, but is in fact the very purpose of its existence” (cited in Graham
2010).

As early as 1892, Jamsetji endowed an educational scholarship fund to enable deserving Indian
students study abroad in some of the world’s best universities. By 1924, some 20% of all Indian Civil
Service (ICS) employees had been beneficiaries of the Tata endowment. But Jamsetji had already
planned to start world class educational institutions in India to leverage local talent. To this effect in
1898, Jamsetji donated nearly half of his fortune amounting to some 10 million rupees (today around
$140 million) - fourteen buildings and four other properties in Bombay - for a university dedicated to
science. The result was the Indian Institute of Science in Bangalore, approved only in 1909, and
started in 1911, seven years after Jamsetji’s death. Another grand initiative of Jamsetji that he
realized during his lifetime was the magnificent Taj Mahal Hotel in Bombay, pioneered and built
against all opposition in 1903, with an investment of some 42 million rupees (about $176 million

57
today). This was a luxurious elegant hotel, the best of its kind in India then as it is now, the first
building in Bombay with electricity that ran USA electric fans, German-made elevators, Turkish baths
and English butlers. The Taj featured the first-ever licensed bar, the first restaurant serving meals all
day, and India’s first nightclub. It soon became the pride of India, and the most preferred hotel among
foreign kings and queens, nobilities and aristocracies, presidents and ambassadors, business tycoons
and domestic dignitaries. Even though attacked by terrorists in 2008, the Taj has been restored to full
splendor to this day.

The Tata Ethics Culture is best expressed by Jamsetji Tata in a speech of 1895 when he opened
the Empress Mills in Bombay: “We do not claim to be more unselfish, more generous and more
philanthropic than other people. But we think we started on sound and straightforward business
principles, considering the interests of the shareholders our own, and health and welfare of the
employees the sure foundation of our prosperity” (The quotable Jamsetji Tata, March 2008,
http://.www.tata.com/aboutus/articlesinside/).

The Tata Family

Jamsetji Nusserwanji Tata (1839-1904) was born March 3, 1839, the only son of the five
children born to a Zoroastrian priest Nusserwanji Tata and his wife Jeevanbai, in Navsari, one of the
oldest cities of Gujarat, India. The Parsees sought asylum in Gujarat when persecuted in their own
homeland of Persia, and the then King of Gujarat assigned Navsari to them around 1200 AD for their
camping. The Parsees made Navsari their center of religion, culture and learning. Nusserwanji Tata
was the first priest to break with tradition and became a banker and an entrepreneur instead. Like his
father, Jamsetji also chose a business career and at 14 joined his father in trading, then operating in
Bombay. Jamsetji, however, also studied in Elphinstone College, graduated in 1858, and while a
student married Hirabai Daboo, who gave him two sons, Dorabji and Ratanji. While graduating at
Elphinstone, Jamsetji lived through the turbulence of the Indian Rebellion in 1957.

Soon after graduation, Jamsetji was engrossed in his father’s trading business and quickly
studied the dynamics of trading, banking and the markets. Subsequently, he travelled through UK,
Europe and USA that broadened his education and opened his business visions to vast opportunities in
India. Jamsetji founded his own trading company in 1868 when he was barely 29, and started another
in 1869. His tours in England had exposed Jamsetji to the stagnant textile mills. He bought a
bankrupt oil mill in Chinchpokli on the outskirts of Bombay, converted it to cotton production naming
it Alexandra Mill, and turned it around and sold it two years later. He invested the profits into new
business ventures. He dared to think different: his next venture was the cotton country of Nagpur,
some 800 kilometers far away from the bustling city of Bombay. There, in 1877, he opened the
Central India Spinning, Weaving and Manufacturing Company, later named Empress Mills, after
Queen Victoria who was just then installed empress of India. He created a pension fund (1886
Provident Fund) at Empress Mills and an accident fund (1895 Accident Compensation Fund), both
rare even in the West during that period.
In 1902, Jamsetji drew elaborate plans for creating a truly modern industrial town – a town that
would attract, develop and retain the best and brightest steel workers and engineers for the Tata Iron
and Steel Company or TISCO he would found in 1904 in Sakchi, Jamshedpur. The town planned for
wide streets planted with shady trees, plenty of space for lawns and gardens and parks, large areas for
football and hockey fields as well; in a spirit of promoting their faith, Jamsetji even provided for the
building of Hindu Temples, Islamic Mosques, and Christian Churches. He recognized the importance
of building a religious and social community to support the industrial community. Sadly, Jamsetji
died on May 19, 1904 while traveling in Germany on work, much before he would see TISCO and the
planned city completed. He was 65. His son Dorabji Tata oversaw the completion of the
construction, and on May 25, 1907 TISCO was formally founded and inaugurated, and the first steel
ingot was produced in 1912. In 1919, Lord Chelmsford renamed the city Jamshedpur in honor of
Jamsetji Tata. By 1939, Tata was operating the biggest steel mill in the British Empire. Now TISCO
or Tata Steel operates in 26 countries, and is the fifth largest steel maker in the world.

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 Jamsetji’s second industrial goal was to build a vast hydroelectric plant. In the early 1990s in
India, factories and mills relied exclusively on coal for energy, a high cost non-renewable source. An
alternative source like hydro would not only be more ecofriendly, but spelt better economies of scale
for industrial growth and expansion. He harvested the monsoon flood waters of the Roha River that
were being wasted each year flowing from the Western Ghats into Bombay harbor, and harnessed
them to generate power – The Tata Hydro-Electric Power Company was established in 1910, about
five years after Jamsetji’s death. Today, Tata Power is the largest private sector electricity generating
company in India, providing around 4% of the nation’s electric power.

References:

Casey, Peter (2014) The Greatest Company in the World: The Story of Tata, New Delhi: Penguin Books.
Graham, Ann (2010), “Too Good to Fail,” Strategy + Business, Issue 58, Spring, February 2, 2010 (Also available at
http://www.strategy-business.com/article/10106?pg=all).

Reflections

1. From the above story of the Tata Group judge what makes the conglomerate a most trusted
institution today?
2. How did Jamsetji Tata instill trust in the best of engineers and other support professionals that
he lured to a then far-a-way town such as Jamshedpur in the early 1880s?
3. Does the proposition that the Tata Group represents the triumph of social capitalism assure its
trustworthiness among all its stakeholders, and why?
4. How will you use your organization to build institutional trust in your charges and why?

Case 3.2: How Organized Online Marketing and Kirana Shops Support
and Trust Each other
In 2006, when large retail giants in India such as Reliance Industries, Future Group, the Aditya Birla Group,
and others invested Rs 40,000 crore (then US$ 10 billion) to expand organized retailing, there was strong
sentiment that this project would kill the neighborhood kiranas. Today in 2015, barely nine years later, the
opposite has happened: the retail giants seem to empower the kiranas to survive, blossom and prosper.
Neighborhood kirana stores know their customers like none. Giant retailers like Amazom.com, Brand, Brand
Factory, Pantaloons, and City Bazaar have now learnt that partnering with them is their best bet. Jeff Bezos, the
founder of Amazon.com, wants to use the Kirana network, earlier seen as competition, to grow retail sales. His
target is to bring India’s 5,000 kiranas under Amazon umbrella within two years. His kirana business model is
simple: the kirana store earns Rs. 20 for every package delivered to the customer’s doorstep, and Rs 15 for
every packet picked up by the customer from his store.
Bhuvaneshwari Rice Shop, founded in 2012, is a 500 square foot kirana store of Madan Mohan Reddy, age
21, of Bangalore. He works hard over 17 hours a day and makes around Rs. 50,000 a month. He is a tech savvy
graduate, ambitious, and uses a large smartphone. A digital literate, he knows about products such as the mobile
wallet and is open to cash-on-delivery to win new customers. Some 18 months ago, January 2014,
Amazon.com, the $89 billion online retail giant, began its “I Have Space” (IHS) program using the street corner
mom & pop kirana network to deliver products to Amazon customers. Reddy saw his future instantly, made a
phone call and registered as a delivery partner. Rest is history. He provided his PAN card details to
Amazon.com, and the latter gave him a Samsung tablet and a palm-sized credit card payment device to connect
the payments to Amazon’s seller app and the cloud server on the backend. Reddy has not looked back since.
Because of Amazom.com he has extra reach and more customers. His sales have increased by Rs 20,000 per
month and he makes an additional Rs 15,000 by delivering products ordered on Amazon at his store. When
customers come to his store to pick up their Amazom.com orders, they buy products and services from his
stores. Moreover, when he began delivering Amazon products doorstep to some of his loyal customers, they
asked him if he would deliver groceries too. Madan earns currently Rs 85,000 a month.

Madan’s success story is infectious. The Amazon IHS program is catching on in Bangalore and will be
scaled up in other major cities of India. This recent kirana attention is “because the kiranas know the customer
better than anybody and their services add more value to our customer service experience,” says Amit Agarwal,

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Managing Director of Amazon India. The kiranas may know the customer more, but do not capture that
information, while Amazon can use this data mine for advantage.

Kiranas are also hubs for booking rail, air and bus tickets along with centers for filling up passport and tax
forms and mobile recharge vouchers to supplement their revenue. Over the years, kiranas have widened their
services to include selling apparel, mobile repairs, and ironing clothes. Reports by CRISIL and Ernst & Young
estimate the total number of kiranas in India at 12 million outlets and they clearly seem to dominate the $550
billion retail market. The organized retail sector accounts for less than 8% of Indian retail sales, and this share
has crept up only by 3% during the last ten years. If you can’t beat them, join them, is the current Amazon
strategy. While Flipkart and Snapdeal have not made the kirana partnership their immediate agenda, Kishore
Biyani’s $3 billion Future Group is committed to learning from and linking with the Kiranas.

References:
Bahree, Megha (2011). India Unlocks Door for Global Retailers. The Wall Street Journal, November 25, A1.
Bloomberg Business Week (2011). Wal-Mart waits with Carrefour as India wins Instant gain: Retail,” November 30.
Ministry of Commerce (2011). FDI Policy in Multi Brand Retail. Government of India, November 28.
Shekhar, Raja B. (2011). Impact of Service Quality on Apparel Retail Customer Satisfaction – A Study of Select
Metropolitan City of Hyderabad. Journal of Management Research, 3:2, 13-26.
The Indian Economist (2011). Indian Retail Reform: No Massive Rush. December 2.
The Indian Economist (2011). Indian Retail: The Supermarket’s Last Frontier. December 3.
Krishna, Vishal (2015). Lucrative Liaisons. Business World June 15, p. 62-66.

Ethical Questions:
1. Retailing is a buyer-seller trust building game. As an organized retailer executive, how do you plan and
strategize building the trusting brand community of suppliers and customers?
2. As a middleman between brands suppliers and highly brand-conscious customers, what vulnerabilities do you
foresee on both sides, and how do you plan on working round such vulnerabilities?
3. Sophisticated organized retailing today needs highly specialized talent of informed and problem-solving
salesmanship and building lifetime loyalties among major target markets – how will you recruit, train, develop
and retain such salesforce retailing talent, and all these with high principled ethics?
4. Taxation still favors small businesses in India; moreover, regulations restrict real estate purchases, especially
agricultural land for safeguarding backward integration of food production and logistics. In this context, how
will you build trusting relationships with government authorities and regulations enforcement people?
5. As a corporate retailing executive in India, how would you empower organized retailing by building trusting
relationships, and even with competition?
6. As a corporate organized retailing executive in India, how would you design and build a win-win partnership
by building trusting relationships with the immense 12-million kirana network in India? What will be its
ethical ramifications?
The Ethics of Executive Trust
“Hire well, manage little,” affirms Warren Buffett. He builds trust and relies on trusting
relationships. His model of extreme decentralization would not work unless he trusted the operating
managers, and they delivered. A notable fact is that nobody at Berkshire Hathaway is awarded stock
options. Having hired well, Buffett limits his interactions with his CEOs to the minimal, only to get
involved in capital expenditure (CAPEX) decisions. He allows 100% operating freedom to his
managers, with full expectation that they will be conscientious. This tightrope walk has ensured that
Berkshire has never lost a CEO to competition in all these decades. It also demonstrates the fiduciary
responsibility that is ingrained in the Berkshire culture. In May 2009, when the world was barely
merging out of the credit crisis, Warren Buffett’s partner Charlie Munger said something fundamental
about Berkshire Hathaway that resonated with the 35,000 people present at the annual meeting: “Our
model is a seamless web of trust that’s deserved on both sides. That’s what we are aiming for. The
Hollywood model, where everyone has a contract and no trust is deserved on either side, is not what
we want at all.” Warren Buffett added: “We don’t want relationships that are based on contracts.” It
is this seamless web of deserved trust that is unique to Berkshire (See Mahalakshmi N. & Padmashali,
R. (2015). 50 Master Moves that Shaped Berkshire Hathaway. Outlook Business, Special Issue, India,
June 12, p. 38, 40).

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 Franklin Covey said that trust is a combination of character and competence. Most executives
work on improving their competence, almost forgetting that building their character has far greater
impact on people round them than their skill sets. “Organizations and leaders high on competence but
low on character will not survive in the long run” said Shivkumar, Chairman and CEO of PepsiCo
India Holdings Pvt. Ltd, in his recent JRD Tata Ethics Oration, XLRI, Jamshedpur, Jharkhand, India.
He added, “Trust in a leader generates confidence and optimism in every sphere. Trust in a leader
builds a powerful ecosystem” (Shivkumar, 2014, p. 5).

Building trust and living interpersonal trust are crucial corporate executive virtues that are needed
today. Once you have developed and solidified a high level of genuine interpersonal trust with all
your stakeholders, especially employees and customers, then you are on the right path of managing
and transforming your company. A high-level of interpersonal trust between all stakeholders and you
in a business situation will break down communication barriers, foster serious conversation and
sharing of ideas, and will eliminate anxieties, fear, guilt, rigidity, blame and resentment. When your
stakeholders trust you and you trust them, then, you speak freely, they speak freely, and your mutual
sustained transparency is a gateway to survival, revival and sustained corporate recovery and
transformation. The informal and transparent communication networks that you establish between all
concerned parties will hoist and empower the company for steady growth and prosperity.
Conversely, when there is low trust, high mistrust and high distrust among stakeholders in a business
situation, communications and conversations are stressed and fragmented, teamwork and team spirit
are very low, and the company is heading towards its ruin and extermination. Such is the crucial role
of interpersonal trust in business. This Chapter explores the phenomenon of corporate interpersonal
trust.

Human beings are naturally predisposed to trust. It is a survival-mechanism, (that is, it is in our
genes and childhood and adolescent learning), that has served our species quite well. Our willingness
to trust, however, can get us into trouble, especially when we trust too readily, and have difficulty
distinguishing trustworthy people from untrustworthy ones. In the wake of massive and pervasive
abuses of trust (e.g., Enron, Tyco, WorldCom, AIG, Washington Mutual, Fannie May, Freddie Mack,
Bernie Madoff, and all other new corporate scandals that surface each day), social psychologist
Roderick Kramer suggests that we rethink trust today. May be we trust poorly, or trust too readily.
At a general or species level, this may not matter very much as long as there are more trustworthy
people than not. Nevertheless, at the individual level, it can be a real problem. We could be very
vulnerable. To survive as individuals, we must learn to trust wisely or temperately (Kramer, 2009).

Mutual trust is a symbiotic relationship – leaders must first trust others before others will trust
them. Building trust takes time, courage, and consistency, but the results and rewards are an
unimpeded flow of intelligence. Good leaders do not want yes-people around them; they want
everyone to tell the truth even though it may cost them jobs. Exemplary leaders encourage, and even
reward, openness and dissent. Dissent may make you briefly uncomfortable; but better information
(via dissent) helps you to make better decisions. Good leaders, moreover, admit mistakes. Admitting
your mistakes not only disarms your critics but also encourages your employees to own up their own
failings. Speaking truth to power (e.g., to a boss) requires both a willing listener and a courageous
speaker. It took tremendous courage for Sharron Watkins, an Enron senior employee, to confront
Jeffrey Skilling with the facts of the company’s financial deception (O’Toole & Bennis, 2009).

If trust facilitates informal cooperation and reduces negotiation costs, then it is invaluable to
corporate and business organizations that depend upon professional people, cross-functional teams,
interdepartmental synergies, skilled work groups, and other cooperative structures to coordinate
business treatment (see Creed & Miles, 1996; Powell, 1990; Ring and Van de Ven, 1992). The best
device for creating trust between business executives and stakeholders is to establish and support
trustworthiness of both parties (Hardin, 1996). Building trustworthy relationships by habitually
discharging mutual obligations between parties to transactions can mitigate the risk of opportunism on
the part of both parties, and forestall costly legal battles and the consequences of expensive fraudulent
insurance premiums (see Whitener et al., 1998).

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 Trust is one thing that changes everything in an organization. All things are rooted in trust.
While ethics is fundamentally important and necessary, it is absolutely insufficient. Trust is hard,
measurable, and impacts everything else in relationships, organizations, markets, and societies.
Financial success comes from success in the marketplace, and success in the marketplace comes from
success in the workplace, and the heart of all success is trust. Trust is the Ultimate Root and Source
of our Influence. Low trust causes friction, whether it is caused by unethical behavior or by ethical
but incompetent behavior (because even good intentions can never take the place of bad judgment).
Low trust is the greatest cost in life and in organizations, including families. Low trust creates hidden
agendas, politics, interpersonal conflict, interdepartmental rivalries, win-lose thinking, defensive and
protective communication – all of which reduce the speed of trust. Low trust slows everything, every
decision, every communication, and every relationship (Covey, 2006, p. xxiv-xxv).

Simply stated, trust means confidence. The opposite of trust – mistrust – is suspicion. When you
trust people, you have confidence in them – in their integrity and in their abilities. When you mistrust
people, you are suspicious of them – their integrity, their agenda, their capabilities, or their track
record. “The moment there is suspicion about a person’s motives, everything he does becomes
tainted,” Mahatma Gandhi. But when you begin to trust people in an organization, everything begins
to change – you increase speed of decision and actions, you lower cost, you increase sales, you
increase profits and growth – you improve results in all areas. The speed of trust affects the speed of
the marketplace you control. On the contrary, low trust (i.e., bad relationships) slows everything
(Covey, 2006, p. 9).

Before we trust others, do we trust ourselves? If we cannot trust ourselves, we will have a hard
time trusting others. This personal incongruence is often the source of our suspicion of others. We
judge ourselves by our intentions and others by their behavior. Hence, the fastest ways to restore trust
is to make and keep commitments – even very small commitments – to ourselves and to others
(Covey, 2006, p. 12-13).
The Economics of Trust: Low Trust Tax
“Mistrust doubles the cost of doing business,” (John Whitney, Columbia Business School).
“Widespread distrust in a society … imposes a kind of tax on all forms of economic activity, a tax that
high-trust societies do not have to pay,” (Francis Fukuyama: Trust) (cited in Covey, 2006). When
trust is high, speed of decisions goes up, and costs go down. Consider the following cases:

Case 3.3: Warren Buffett, CEO of Berkshire Hathaway, in 2004 completed a major acquisition of
McLane Distribution (a $23 billion company) from Wal-Mart. Both companies as listed public
corporations were subject to all kinds of market and regulatory scrutiny. Typically, a major merger of
this size would mean “due diligence” by lawyers, auditing by auditors and accountants to verify
mountains of information. But in this case both parties had high trust with each other, and a deal was
made in less than two hours, and the deal was cleared and completed in less than a month. In a
management letter that accompanied his 2004 annual report, Warren Buffet wrote: “We did no ‘due
diligence.’ We knew everything would be exactly as Wal-Mart said it would be – and it was.” High
trust is high speed, low cost.

Case 3.4: Herb Kelleher, chairman and CEO of Southwest Airlines, is another example of great
trust. Walking down the hall one day, Gary Barron, then executive VP of the $700 million
maintenance organization for all Southwest, presented a three-page summary memo to Kelleher
outlining a proposal for a massive reorganization. On the spot, Kelleher read the memo, asked one
question that Baron responded satisfactorily, and Kelleher concluded: “Then it’s fine with me. Go
ahead.” The whole interaction took about four minutes. Kelleher was a trusted leader, and he also
extended trust to others. He trusted Baron’s character and his competence. The deal moved with
incredible speed. High trust is high speed, low cost. Low trust is a tax, while high trust is a dividend.

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 According to a study by Warwick Business School in the UK, outsourcing contracts that are
managed based on trust rather than on stringent agreements and penalties are more likely to lead to
trust dividends for both parties – as much as 40% of a total value of a contract. High trust is high
speed, low cost. “Trust is something you can do something about, and probably much faster than you
think. … Nothing is as fast as the speed of trust. Nothing is as fulfilling as a relationship of trust.
Nothing is as inspiring as an offering of trust. Nothing is as profitable as the economics of trust.
Nothing has more influence than a reputation of trust. Trust truly is the one thing that changes
everything. And there has never been a more vital time for people to establish, restore, and extend
trust at all levels than in today’s global society” Covey (2006, p. 26).

Unlike the myth that trust is a soft, emotional concept and fuzzy, executive trust is a hard,
measurable and quantifiable concept, construct and strategy that affect speed and cost of corporate
operations. Unlike the myth that trust is slow and slowing operations, nothing is as fast as the speed
of trust. Trust can leverage any strategic advantage. Trust is a function of integrity (ethics and
character) and competence (skills, expertise). You can create trust when absent or destroy when
present. It is up to you to build trust in you and in your organization. Though difficult, in most cases
you can restore trust. Not all trust is inherited. When not inherited it can be nurtured, cultivated,
taught and learnt. Not trusting people is a greater risk and more vulnerable [See Covey, 2006, p. 25].

How Does Trust Work?

.
In his book, Covey (2006), Speed of Trust, p. 34ff), speaks about five waves of trust from inside-
out.

 The First Wave is Self-Trust: Credibility: Self-trust is confidence we have in ourselves, in our ability to set
and achieve goals, to keep commitments, and the like. The major questions that arise are: How credible am
I? How believable am I? A good and strong character with high competence of credibility, judgment, and
influence deserves and attracts trust from others.

 The Second Wave: Relationship Trust: Consistent behavior. Covey prescribes thirteen behaviors crucial to
high-trust leaders around the world: e.g., talk straight, demonstrate respect, create transparency, right
wrongs, show loyalty, deliver results, get better, confront reality, clarify expectations, be accountable, listen
first, keep commitments, and extend trust. Major executive questions, he suggests, are: How do you
establish and increase “trust accounts” with others? Exercise the 13 behaviors: they can be learnt,
cultivated and acquired by any individual at any level within an organization, including the family. The net
result is significantly increased ability to generate trust with all stakeholders.

 The Third Wave: Organizational Trust: Align your character and competence to organization’s systems,
symbols and structures that promote trust or reduce mistrust, and ask: How do you build, sustain and
enhance trust in organizations such as family, schools, colleges, workplace, office, boardroom, corporation,
governments, church, clubs and associations?

 The Fourth Wave: Market Trust: Reputation states that brands powerfully affect customer behavior and
loyalty. Customers always refer, buy and patronize high-trusted brands. Hence the questions: How can
your personal brand (reputation) and that of the company reflect the trust of customers, suppliers, investors
and local and national communities?

 The last and The Fifth Wave is Societal Trust that spells: Contribution. By contributing or “giving back”
we counteract suspicion, cynicism, and low-trust inheritance taxes within our society. Relevant questions
are: How can our “contributions” create value for others and for society at large? How can we inspire
others to create value and contribute as well?

Building Trusting Relationships

Based on reviews of interpersonal trust literature, and as applied to the business executive-
stakeholder context, we define trust under three facets (Whitener et al., 1998, p. 513):

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 a) A stakeholder’s trust in another party such as a business or corporate executive reflects an
expectation or belief that the other party will behave benevolently, competently, honestly, and
predictably.
b) The stakeholder cannot control or force the business or corporate executive to fulfill this
expectation, and thus, trust involves a willingness to be vulnerable and a risk that the executives
may not fulfill that expectation.
c) Thus, stakeholder trust involves some level of dependency on the business/corporate executive
and hence, stakeholder satisfaction (as an outcome) in a business situation will be influenced by
the actions of the business/corporate executives.

Defined thus, stakeholder trust is an attitude (see Fishbein & Ajzen, 1975; Robinson, 1996) held
by the stakeholder toward the business executive. This attitude derives from the stakeholder’s
perceptions, beliefs, and attributions about the business executive, and these, in turn, are based upon
stakeholder’s knowledge and observations of the business executive.

The Biochemistry of Human Trust

[See Kramer (2009, p. 70-73)]

Thanks to our large brain, humans are born physically powerless and highly dependent on
caretakers. Thus, we enter the world “hardwired” to make social connections. For instance, within an
hour of its birth, the baby will draw her head back to look into the eyes and the face of the person
gazing at her. Within a few more hours, the infant will orient her head in the direction of the mother’s
voice. Within a few more hours, the baby can actually mimic a caretaker’s expressions and keep on
exchanging mimics. In short, we are social beings socially hardwired from our birth. Scientists now
consider the nurturing qualities of life – the parent-child bonding and mutual exchanges between
caretakers – as the critical attributes that drive brain development. Serious lack of nurturing bonding
may even impair brain development. This partly explains the success of the human species in terms
of survival. We are born to be engaged and to engage others, which is what trust is largely about. The
natural tendency to trust makes sense in our evolutional history.

Research indicates that the brain chemistry governing our emotions plays an important role in
trust. According to Paul Zak, a cutting edge scientist in the new field of neuro-economics, oxytocin, a
powerful natural chemical found in our bodies (which, incidentally, also plays major role in a
mother’s birth-labor management and milk production) can enhance trust and trustworthiness between
people playing experimental trust games. Even a squirt of oxytocin-laden nasal spray is enough to do
it. Other researchers have confirmed this – oxytocin is connected with positive emotional states that
create social connections. Even animals become calmer, docile and less anxious when injected with
oxytocin.

We tend to trust people who resemble us physiologically. Lisa DeBruine provides compelling
evidence on this feature. She developed a clever technique for creating an image of another person
that could be morphed to look more and more (or less and less) like a study participant’s face. She
found that trust significantly increased with greater levels of similarity. The tendency to trust people
who are similar to us may be rooted in the possibility that such people might be related to us. Other
studies affirm that we like and trust people who are members of our own social group more than we
like and trust outsiders and strangers.

Psychologist Dacher Keltner and her associates have shown that physical touch also has a strong
connection to the experience of trust. In an experimental game widely used to study decisions to trust,
an experimenter would touch slightly and unobtrusively the back of some individuals when explaining
the game while distancing from others. The former were more likely to cooperate with their partner
than compete against. Keltner also notes that greeting rituals throughout the world involve touching.

Our brain wiring can also hinder our ability to make good decisions about how much risk to
assume in our relationships. Researchers identify two cognitive illusions that increase our propensity

64
to trust: a) person invulnerability (this illusion makes us underestimate the likelihood that bad things
will happen to us) and b) unrealistic optimism (this illusion overestimates the likelihood that good
things will happen to us). By the first illusion, we ignore high risks of street crimes, drunken driving,
over-speeding and the like thinking that nothing will happen to us. By the second illusion, we fondly
entertain high hopes of marrying well, having great industrial careers, long life, and so on when the
true odds of such combined outcomes is low.

The Psychology of Trust

Thus, it does not take much to tip humans towards trust. Trust is our regular default position; we
trust routinely, reflexively, and somewhat mindlessly across a broad range of social situations. Trust
rarely occupies the foreground of conscious awareness; we trust instinctively. Roderick Kraemer
prefers to call this “presumptive trust” – our tendency to approach many situations without suspicion.
Most of us, unless we have been victims of trust violation too early in life, have a predisposition or
bias toward trust (Kramer, 2009, p. 71).

Presumptive trust, however, can also be disastrous when combined with the way we process
information. For instance, we have a proclivity to see what we want to see. Psychologists call this the
confirmation bias. That is, we pay attention to and overweigh information that supports our
hypothesis or theory about the world, while we easily downplay or discount evidence to the contrary.
Moreover, we are heavily influenced by social stereotypes – we too easily link virtues such as
honesty, trustworthiness, reliability and likeability with facial characteristics, good looks, age, gender,
race, and the like. Psychologists call such tendencies our implicit theories of personality. We
categorize and label people quickly and render social judgments swiftly. Thus, we may easily
overestimate the trustworthiness of people while making ourselves physically, financially and
emotionally vulnerable. This could be even more dangerous if people fake outward sign of
trustworthiness. Virtually any indicator of trustworthiness can be manipulated or faked by smiles,
maintaining strong eye contacts, gentle touch, cheery banter, and the like.

Further, we often rely on trusted third parties to verify the character or reliability of other people.
Calling and interviewing “references” is a case in point. We easily “roll over” our trust from one
known and trusted party to another who is less known. This is “transitive trust” says Kramer (2009:
72). Transitive trust can lull people into a false sense of security. Evidence suggests that Bernie
Madoff was very skilled at cultivating and exploiting social connections – one of his hunting grounds
was the Orthodox Jewish community, a tight-knit social group.

Social Psychologist Roderick Kramer (2009, p. 74-77) offers many practical rules to adjust our
mind-set and behavioral habits that could reduce doubt and ambiguity. We cite two:

 Know Yourself: Do you trust too much and too readily? Are you an optimist that believes most
people are decent, harmless, and trustworthy? Hence, do you easily and indiscriminately open
up to people by disclosing sensitive and critical information about yourself and family, about
others, or about your company, before prudent, incremental foundations of trust have been
established? Alternately, are you the opposite of all of the above, and hence, too mistrustful
when venturing into relationships with others? Both are bad positions. Thus, figure out who you
are, easily trusting the wrong people or congenitally mistrusting the right people? If you are the
former, then you must get better at interpreting the cues of people you receive. If the latter, that
is, you are good at getting and interpreting cues but have difficulty forging trusting relationships,
then you will have to expand your repertoire of behaviors.

 Look at Roles as we as People: Adopt clear and compelling roles, and downplay social
connections. The latter are important, but often they get in the way of trust. For instance, we
trust engineers because we trust engineering theories and principles, and that engineers are
trained to apply them. Similarly with other professions and roles, such as Doctors and Lawyers.
Deep trust in a professional role can substitute our lack of personal experience with people.
Role-based trust, however, is not fool-proof, as the recent Wall Street meltdown and Bernie

65
 Madoff demonstrate.

Trust plays a critical role in business, economics and the social vitality of nations. Our
predisposition to trust, however, can make us vulnerable. The above seven rules are a primer on how
to temper and discipline your trust and trusting relationships. Although neuro-economists, behavioral
scientists and social psychologists provide powerful new techniques such as brain imaging and agent
modeling to discover how we make judgment of trust, yet in day-to-day operations we need some
rules to temper our trust by sustained and disciplined ambivalence (Kramer, 2009).

Building Trust in the Initial Stages

Trust can build even at earlier stages of interpersonal relationships, and does not necessarily have
to depend upon longer and relationships that are more frequent. It is more challenging to build trust
during initial stakeholder-business executive relationships when several factors are significantly low
such as interpersonal familiarity, perceived similarity of values and the length and frequency of
interactions. Additionally, there could be several situational factors that can stimulate mistrust and/or
distrust such as high risk, vulnerability, past damages sustained and past track record of questionable
behaviors among certain business executives. The latter have been found to build mistrust (e.g.,
Doney & Cannon, 1997; Nicholson, Compeau, & Sethi, 2001). A typical buyer-seller or stakeholder-
business executive exchange encounter is an interpersonal exchange of social and economic benefits.
Trust occurs in the context of this exchange.

Inter-organizational Trust and Investments

Fang, Palmatier, Scheer and Li (2008) explore inter-organizational trust that can occur at three
distinct organizational levels in an inter-firm collaboration:

a) Inter-organizational trust between collaborating firms (say, A and B),

b) Each firm’s (A or B) agency trust in its own representatives assigned to a collaborative entity
(co-entity such as suppliers or distributors of A or B collaborating among themselves), and
c) Trust among the representatives assigned to the entity (intra-entity).

Inter-organizational and agency trust can motivate collaborating firm’s resource investments in
the co-entity (e.g., suppliers, distributors), particularly in the context of a differentiating strategy.
Intra-entity trust promotes coordination within the co-entity, while inter-organizational trust and a
differentiating strategy can magnify that effect. Thus, managing and building trust at multiple levels
between collaborating organizations is critical to the success of that collaboration.

Inter-organizational trust affects and stimulates investments into one another. These investments
could be in tangible and nonfungible assets such as manufacturing facilities, specialized machine
equipment and tools, office buildings and corporate headquarters, as also in intangible assets such as
employees who possess irreplaceable tacit knowledge, employees who are trusted representatives of
the firm, and strategic technologies and patents. Inter-organizational trust increases relationship
investments, communication, and reduces costs of opportunistic behavior (Selnes & Sallis, 2003).
Mutual trust functions as a safeguarding and controlling mechanism that enables information sharing
and reduces the perceived risk of opportunism and conflict between collaborating firms (Lane, Salk,
& Lyles, 2001). Conversely, lack of such trust can lead to suspicion and conflict (Bamford, Ernst, &
Fubini, 2004) and may prevent future investments and even lead to the withdrawal of existing
investments (Inkpen & Beamish, 1997).

Given our understanding of inter-organizational trust in the context of social exchange and agency
theories, and given the fact that they can foster benefits of communication, information sharing, and
increased relational investments, we propose the following:

66
 Table 3.1 summarizes the theories of trust and corresponding propositions we have discussed thus
far. Most of these theories and propositions deal with the initial stages of trust among relatively
unfamiliar strangers. In general, as much as we can assume stakeholders to be unfamiliar with the
business situation and the newly appointed business expert or executive, these theories can help in
initiating and building trusting beliefs and intentions.

< Table 3.1 about here >

In summary, in explaining the initial stages of trust, personality psychologists view trust as a
personal psychological trait such as liking or as an individual difference (Deutsch, 1960; Mellinger,
1956). Others treating trust as a characteristic of interpersonal interactions, consider trust as an
interpersonal attitude (Anderson & Dedrick, 1990; Jones & George, 1998) or as socially embedded
expectations (Ross et al. 1987; Rotter 1971; 1980) and relationships (Morgan & Hunt, 1994). As an
institutional phenomenon, organizational scholars have focused on developing initial levels of
organizational trust among relative strangers (McKnight, Cummings, & Chervany, 1998) or building
deeper levels of trust among long partnerships and relationships (Williams, 2001). Finally, social
psychologists define trust as an expectation about the behavior of others in transactions, focusing on
the contextual factors that enhance or inhibit the development and maintenance of trust (Lewicki &
Bunker, 1996).

Later Stages of Trust Development

Knowledge-based trust theories propose that trust develops over time as one accumulates trust-
relevant knowledge through experience with the other person (Holmes, 1991; Lewicki & Bunker,
1995). Thus, time and interaction history can develop high levels of trust.

Typically, trust development is often conceived as one’s experiential process of learning about the
trustworthiness of others by interacting with them over time (Lewicki & Bunker, 1996; Mayer et al.,
1995; Ring & Van de Ven, 1994). Stakeholders and business executives may relate to each other in
multiple ways, in multiple encounters, and even multiple relationships within a given encounter. For
instance, a stakeholder sees in the business expert an excellent specialist in the field that the
stakeholder is interested in, a great diagnostician with a very high level of professionalism, a good
work ethic, but less patient, less friendly, less compassionate, less communicative, and less listening.
The stakeholder’s relationship with the business executive is a function of all these attributes and
encounters, and consequently, the stakeholder may trust the executive on some domains (such as
academic excellence, professionalism work-ethic, and business diagnostic skills), but distrust in other
domains and encounters (e.g., communication, listening, respect, compassion or patience with
stakeholders). That is, the stakeholder may feel comfortable to trust the executive on some counts,
but feel inappropriate to trust in other aspects (Baier, 1985; Govier, 1994). That is, parties to a trust
(distrust)-relationship can hold simultaneously different views of each other – not always consistent
and accurate. Continuous encounters with the executive may accumulate and interact to create a rich
texture of experience that may be dominantly trusting, but with occasional distrusting moments.
Within the stakeholder-executive relationship may occur many linkages (link multiplexity) depicting
the richness of interpersonal relationships (Katzenstein, 1996).

Figure 3.1 synthesizes stakeholder-business executive interpersonal relations as a function of

Low versus High, Trust and Distrust. Each quadrant suggests clear implications to various
stakeholders, including corporate and business executives. It is a challenge for all business executives
to generate in their stakeholders low fear, low skepticism and low cynicism such that costs of
monitoring and vigilance over all parties may be significantly reduced. On the other hand, business
executives also must do everything within their power and skills to generate high hope, high faith,
high confidence, high assurance in their stakeholders and welcoming high stakeholder initiatives.

67
Obviously, Quadrant 1 is the best for corporate executives. But the other three Quadrants have their
mixed benefits and challenges.

< Figure 3.1 about here >

Finally, Table 3.2 sketches costs versus benefits of various stakeholder-business executive trust-
distrust encounters. The bottom line of modern healthcare is profits so that the latter fuel ongoing
research and development and innovative modes of healthcare.

< Table 3.2 about here >

Trust in Buyer-Seller Business Management Relationships

Typically, a buyer-seller long-term exchange encounter represents a social exchange of benefits.
Obvious benefits voluntarily provided by the buyer include time, honesty, positive and negative
information about oneself, one’s credit, one’s family and social careers, and monetary reward for the
product or services; obvious benefits volunteered by the sellers relate to the quality and price of their
products and services, complemented by their competence, benevolence, honesty, reliability, as
reflected in care and concern for the customer.

The notion that customer relationships are key assets of any organization, whether pro-profit or
otherwise, is gaining increasing prominence among both practitioners and academicians (Gruen,
Summers, & Acito, 2000). This customer asset management approach has been referred to as
“relationship marketing,” and recently, has received much attention in the area of building long term
relationships among channel members (Brown, Lusch, & Nicholson, 1995; Kumar, Scheer, &
Steenkamp, 1995; Morgan & Hunt, 1994). Marketing strategies such as book and record clubs,
frequent flyer programs, gold and platinum credit card valued memberships, preferred customer
memberships, and supplier guilds are illustrations of practical long-term relationships. In the
professional service sector, lawyers, bankers, pastors, business executives and doctors employ
relationship-building approaches to their mission and ministry.

Specific examples of relationship marketing include: a) Ritz-Carlton with its personalized

welcome and farewell of guests, using the guest’s name whenever possible; b) Loyalty programs
initiated by airlines that consist not only of rewarding the most valuable customers in the form of
mileage prizes but also showing recognition of providing special privileges (Wulf, Odekerken-
Schröder, & Iacobucci, 2001); c) Compaq refused to sell computers directly to customers because that
would constitute competing with its own dealers; the latter considered this refusal as a sign of
Compaq’s commitment to them, and the dealers reciprocated by providing the brand greater support
and shelf space (Day, 1990); d) Proctor and Gamble desisted from selling its top of the line men’s
perfume “Boss” over the Internet lest this practice should hurt P& G’s relationships with Boss’s
regular brick and mortar retailers.

The view of trust as a foundation for social order spans many intellectual disciplines and levels of
analyses (Lewicki, McAllister, & Bies 1998, p. 438). Understanding why people trust, and how trust
shapes human relations, has been the central focus of psychologists, sociologists, political scientists,
economists, anthropologists, and scholars of organizational behavior and marketing. Researchers
have seen trust as an essential ingredient for a healthy personality, a foundation for interpersonal
relationships and cooperation, and as a basis for stability in social institutions and markets. Mutual
trust between business partners has been found to be very vital in the uncertain, complex, volatile and
fast-paced business environment of today, especially given modern developments of globalization,
strategic global competitive alliances (Prahalad and Hamel 1994), and multicultural and multilingual
relations (Cox & Tung, 1997; Sheppard, 1995).

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Trust and Relational Contracting in Business Management
Basically, a contract states relationships between an enterprise and its stakeholders
(Eisenhardt,1989). An enterprise is any pro-profit or non-pro-profit institution such as firms,
corporations, associations or governments that offers a product or service to its target markets. A
contract can take various forms such as exchanges, transactions, or the delegation of the decision-
making authority, as well as formal legal documents.

There are various reasons why we need contracts in our transactions with people. The primal
reason is the nature of the society we live in. Our freedom is expanded by the recognition of
contractual rights and duties (Rawls, 1971). Because people in any society are not very isolated from
others, share common needs and wants with others, need others in the areas they are not specialized
in, and cannot be certain of the future, that contracts arise (Macneil, 1980). Without the institution of
contracts and the right and duties that accompany them, modern business societies could not exist nor
cooperate (Velasquez, 1988). All contracts presume choices that project into the future, and imply
mechanisms of exchange relationships that reduce risk and uncertainty (Lusch & Brown, 1996).

Four basic ethical rules that govern social contracts are (Garrett, 1966, p. 88-91): 1) Both parties
to a contract must have full knowledge of the nature of the agreement they are entering; 2) Neither
party must intentionally misrepresent the facts of the contractual situation to the other party; 3)
Neither party must be forced to enter the contract under duress or force; and 4) The contract must not
bind the parties to an immoral act. Contracts that violate one or more of these ethical rules have been
traditionally declared null and void since they diminish freedom that constitutes the essence of
contracts (Rawls, 1971, p. 342-50). The parties have a duty of complying with the terms of the
contract. Failure to do so treats the other contracting party as a means and not as an end (Kant 1964),
and violates mutual trust (Rawls, 1971).

An enterprise has contracts (with varying degrees of formality and specificity) with its
stakeholders such as customers and clients, creditors and suppliers, shareholders and bondholders.
Basically, the enterprise may be considered as a "nexus of contracts between its top managers and its
stakeholders" (Jones, 1995, p. 407). The board of directors and shareholders can influence these
contracts. In as much as enterprise managers have a strategic position by which they enter directly or
indirectly into contracts with various stakeholders, they can be considered as contracting agents for
the enterprise.

In general, legal and formal agreements define transactional normative contracts, while ethical
and moral principles determine relational normative contracts (Gundlach & Murphy, 1993). Business
management can have both individual and group contracts that could be implicit or explicit, legal or
normative, transactional or relational. All these dyads (explicit/implicit, legal/normative,
transactional/relational) are not categorical but are exchanges that run on a continuum from implicit to
explicit, from legal to social normative, from discrete, short-term transactional to long-term relational
contracts. Other things being equal, legal responsibility increases with explicit, legal, and
transactional contracts, whereas moral responsibility increases with implicit, normative and relational
contracts.

Most transactions take place today in the context of ongoing relationships between producers,
suppliers, marketers, customers and consumers. Repeat purchases go beyond pure transactions to
brand loyalty, and sometimes, to an on-going buyer-seller relationship (Ganesan, 1994; Kalwani &
Narayandas, 1995). Industrial buyer-seller relationships have moved from arm's-length adversarial
price-battles to more friendly mutually dependent commitments (Jackson, 1985). Even market
transactions between competitor firms have become "domesticated" (Arndt, 1979) – they have
become more relational than adversarial. Such domesticated transactions take place between the focal
firm and its supplier firms, the focal firm and its channels (Anderson & Narus, 1990, 1991; Heide,
1994), between the focal firm and even its competitors, especially in the form of strategic alliances
and marketing co-alliances.

69
 In the wake of this trend of trust and long-term relationships in marketing, one should expect that
both suppliers and customers might build up their trust in those marketing executives who
consistently exhibit high levels of responsibility to all stakeholders. Obviously, the current thrust of
trust and relationships in marketing practice should also enhance the sense of executive responsibility
among marketing managers and practitioners.

Responsibility is best exercised in fostering long term relationships with stakeholders

(Drumwright, 1994; Ganesan, 1994) in a spirit of mutual trust and commitment (Gundlach and
Murphy 1993; Morgan & Hunt, 1994). The additional marketing executive responsibilities accrue
from the nature of relational trust. Howsoever conceived, defined or implemented, trusting long-term
relationships imply and mandate higher moral responsibilities than discrete and short-lived
transactional relations mandate.

Business Management Stakeholder-Executive Cooperation

Trust has long been considered fundamental to cooperative relationships (Blau, 1964; Deutsch,
1958). Stakeholder trust is morally desirable: the emotional states associated with trust suggest its
goodness; it creates economic benefits for all parties to the exchange (Wicks, Berman and Jones
1999). Mutual trust in stakeholder-business executive relationships – when both feel they can trust
each other and are worthy of trust in return, provide a critical basis for self-esteem and a sense of
security (Baier, 1994). In contrast, when people distrust others and do not trust themselves their self-
esteem may be harmed and their sense of security compromised. Since trust is a moral good, all
people involved in a business environment should try both to cultivate trusting relations and to be
seen as trustworthy (Baier, 1994; Wicks, Berman & Jones, 1999). Since business relationships with
stakeholders are often among relative strangers (who are likely to be self-interested), mutual trust
building is even more imperative (Frank, 1988). In addition, trustworthiness of corporate and
business executives can be a source of competitive advantage (Barney & Hansen, 1994).

Working together well requires some level of trust (Bromiley & Cummings, 1995), and
increasingly common new work encounters demand that the parties come to trust each other quickly
(Meyerson et al., 1996). Stakeholder-business executive encounters need working together and
involve increasingly new work encounters, both of which need high and quick levels of trust for
productive outcomes. Both need to know how trust initially forms.

Knowledge-based trust theories propose that trust develops over time as one accumulates trust-
relevant knowledge through experience with the other person (Holmes, 1991; Lewicki & Bunker,
1995). Thus, time and interaction history can develop high levels of trust.

Opportunism and Opportunistic Behavior

Opportunism is a central concept in the Transactions Cost Economics (TCE) theory of
Williamson (1975, 1985, 1993). Opportunism is a strategic behavior whereby one makes false or
empty "threats and promises in the expectation that individual advantage will thereby be realized"
(Williamson, 1975, p. 26). Opportunism is "seeking self-interest with guile" (Williamson, 1985) or of
seeking "self-interest unconstrained by morality" (Milgrom & Roberts, 1992). Opportunistic behavior
manifests itself in various ways such as lying, stealing, cheating or other "calculated efforts to
mislead, distort, disagree, obfuscate, or otherwise, confuse" (Williamson, 1985, p. 47) partners in
business. Opportunism is "the ultimate cause for the failure of markets and for the existence of
organizations" (Williamson, 1993, p. 102). However, for opportunism, "most forms of complex
contracting and hierarchy vanish", and markets alone would be sufficient for handling most
transactions through autonomous contracting (Williamson, 1993, p. 97).

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 TCE makes two behavioral assumptions: a) opportunism, which suggests that one cannot predict
others' behavior, and b) bounded rationality, which implies that one cannot identify one's own best
behavior. Not all are inclined to opportunistic behavior; those who do, the "determined minority"
(Williamson, 1993, p.98), may do because of the above two assumptions. Some may be inclined to
"instrumental behavior" in which there is no necessary self-awareness that the interests of a part can
be furthered by opportunism (Williamson, 1975). These people, without being aware, are
instrumental in opportunistic outcomes of others.

According to Williamson (1993, p. 102), opportunism is primarily a "human condition", a human

tendency or attitude (inclination, proclivity, and propensity). Opportunistic attitudes are "rudimentary
attributes of human nature" (Williamson, 1991, p. 8). Opportunism is distinguished from
opportunistic behavior; the latter are acts of self-interest with guile (Ghoshal and Moran, 1996).

Opportunism differs from mere "self-interested behavior." xx The latter is presumed to be

constrained by obedience to rules and faithfulness to promises, while opportunism (which is self-
interest with guile) is not. Opportunism seeks self-advantages with no concern for the advantages of
the other. Williamson, however, does not specify the mechanisms (e.g., economic institutions,
markets) through which opportunism is created or reduced (Hart, 1990), and instead assumes it be a
"human condition" (1993, p. 102). Even though this behavioral assumption of opportunism is
regarded as an "extreme caricature" of human nature (Milgrom & Roberts, 1992, p. 42), yet
Williamson believed that opportunistic behavior (specific acts of self-interest with guile) can be
controlled by proper social sanctions.

Concluding Remarks
The view of trust as a foundation for social order spans many intellectual disciplines and levels of
analyses (Lewicki, McAllister, & Bies (1998, p. 438). Understanding why people trust, and how trust
shapes human relations has been the central focus of psychologists, sociologists, political scientists,
economists, anthropologists, and students of organizational behavior and marketing. Scholars have
seen trust as an essential ingredient for a healthy personality, as a foundation for interpersonal
relationships, as a foundation for cooperation, and as a basis for stability in social institutions and
markets. Mutual trust between business partners has been found to be very vital in the uncertain,
complex, volatile and fast-paced business environment of today, especially given modern
developments of globalization, and strategic global competitive alliances (Prahalad & Hamel, 1994),
multicultural and multilingual relations (Cox & Tung, 1997; Sheppard, 1995).

Currently, there is a woeful lack of knowledge and technology in building trust of the public in
the health care system; in fact, some medical professionals are even cynical, believing that loss of
trust was so pervasive in our commercialized health care system that no initiatives to build it would
likely succeed (Mechanic & Rosenthal, 1999). Thus, creating social and interpersonal trust should be
a part of well-defined technology of structural innovations, positive incentives, teamwork,
interpersonal skills, and disease management initiatives (Landon, Wilson, & Cleary, 1998).

71
Figure 3.1: Stakeholder-Corporate Executive Interpersonal Relations as a
function of Low and High, Trust and Distrust
STAKEHOLDER DISTRUST:
STAKE- HIGH: LOW:
High fear Low fear
HOLDER High skepticism Low skepticism
TRUST: High cynicism Low cynicism
High monitoring Low monitoring
High vigilance Low vigilance

Quadrant I: Quadrant II:

High-Trust Stakeholder- Medium-Trust
Corporate Executive: Stakeholder-Corporate
Executive:
HIGH: High value congruence, common objectives, Sustained trust and distrust; trust
and frequent interactions; constantly verified;
High hope, Pooled positive and trust-reinforcing
High faith, Strong reason to be confident in certain
experiences; few defense mechanisms; areas and diffident in others;
High confidence Conversations are rich, deep, personal and
High assurance Relationships are multiplex, multifaceted,
occasionally complex; highly segmented and bounded; like in
High initiatives Hence, reason to be mutually confident; strategic alliances;
No reason for suspicion; Significant amounts of information
High willed pooled interdependence and shared under strict confidentiality;
cooperation; Collaboration opportunities pursued but
All opportunities for sharing information risks assessed;
pursued; Vulnerabilities continuously monitored
New trust-building initiatives sought. and protected.

Quadrant III: Quadrant IV:

Casual-Trust Stakeholder- High-Mistrust Stakeholder-
Corporate Executive: Corporate Executive:
Casual acquaintance; Undesirable eventualities expected and
LOW: feared;
Careful, bounded, arms-length discrete Conversations are cautious, guarded, and
Low hope, transactions; often laced with cynicism
Low faith, No pooled trust-reinforcing experiences; Pooled negative distrust-reinforcing
Low confidence Conversations simple and casual; experiences; bureaucratic checks;
Low assurance No reason to fear or be confident; No reason for mutual confidence;
Few initiatives No closeness or intimacy; Strong reason for watchfulness;
Low resistance No threats to confidentiality as little Significant resources for monitoring;
information of consequence is shared; Harmful or exploitative motives not ruled
out;
Limited interdependence and cooperation; Interdependence difficult over time or at
best, carefully managed;
Just professional courtesy. Offensive self-defense.

Source: Adapted from Lewicki, McAllister and Bies (1998, p. 445).

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 Table 3.1: Foundations of Interpersonal Trust between Stakeholders
and Corporate Executives
Basic Basic Theories Basic Factors Stakeholder-Corporate executive Trust
Concepts of Trust that promote Basic Hypotheses of Basic Factors that
of Trust Trust Stakeholder-Corporate promote Stakeholder-
executive Trust Corporate executive
Trust
Trust is Trust as a Personal reputation Higher the Corporate executive’s
something personality trait, for trustworthiness. trustworthiness of the techno-professional
personal an individual corporate executive, the and
difference. higher is stakeholder empathy skills can
trust. enhance trust-
worthiness.
Trust as Trust as rational Honesty, integrity Higher one’s honesty, Cultivate honesty,
Trusting Beliefs prediction of one’s and past good record integrity and past good integrity and a
good behavior of the trusted party record, the highest is reputation of
trust of the trustor. trustworthy behavior
Trust as Trust as rational Dishonesty, The higher the Repair and restitute
Mistrusting expectation of unpredictability and dishonesty, the damage of past
Beliefs one’s bad behavior past bad record of unpredictability and dishonesty, lack of
the trusted party past bad record of the integrity and
trusted party, the untrustworthy
higher is the mistrust of behavior
the trustor.
Trust as an Frequency of Higher the Frequent
interpersonal interactions and stakeholder’s positive stakeholder-corporate
attitude. interpersonal attitude toward the executive mutually
relations; corporate executive via open and cooperative
Trust is Mutual openness frequent, mutually relationships and
interpersonal (frank information open and cooperative interactions can foster
sharing); interactions, the higher positive attitudes of
Mutual cooperation. is stakeholder’s trust. trust.
Trust as Socially Similarity of values; Higher a stakeholders’ Similarity of
Embedded Similarity of beliefs, trust in the business stakeholder-corporate
expectations. goals and objectives; corporate profession, executive beliefs,
Trust as Faith in Similarity of the higher is values, goals and
Humanity expectations. stakeholder trust in the expectations
corporate executive
trust.
Trust as an Organizational Higher the Corporate company
Trust is institutional or values; stakeholder’s trust in reputation, past
Institutional Organizational Institutional the legal institution of track- record of
phenomenon dependence business and honesty, and
structures; bankruptcy provisions, corporate executive-
Organizational faith the higher is credentials can breed
building structures; stakeholder’s trust. trust.

Complex and Accepting need for The higher one’s Stakeholder’s

unfamiliar dependency under acceptance of the acceptance of the
interpersonal complexity and complexity- complexity, risk and
situations unfamiliarity. unfamiliarity of the uncertainty of the
Trust is necessitate trust. corporate situation, the corporate delivery
Situational higher is stakeholder- system
corporate executive
Trust as a shield to Willingness to be trust. Stakeholders’
one’s vulnerability. vulnerable Higher one’s willingness to be
willingness to be vulnerable
Trust can coexist Positive distrust can vulnerable, higher is Stakeholders’ positive
with distrust. enhance trust. one’s trust distrust of the
One’s positive distrust corporate-bankruptcy
of the health-delivery delivery system
system can enhance
stakeholder-corporate
executive trust.

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74
 Table 3.2: Profile of Stakeholder-Business Management Executive Trust
Levels: Costs versus Benefits
Business Trust Stakeholder’s Trust Level
Management Dimensions
executive’s Low High
Trust Level
Both stakeholder and business High agency costs for the stakeholder:
management executive: high trust investment costs;
low mutual cooperation, high affect and emotion costs;
Costs high profit-loss probability;
low mutual honesty,
low mutual benevolence high costs of very few options;
low monitoring ability.
For the executive: no significant costs
Low Both stakeholder and business Almost none to stakeholders;
management executive:
low involvement; Significant benefits to executives.
Benefits
low interdependence;
low investments, and
low benefits.
Business management executive- Stakeholder abuse;
Risks opportunism Stakeholder exploitation,
Low executive commitment Stakeholder dissatisfaction;
Stakeholder may switch & not return
High agency costs for the executive: Both for stakeholder and business
high trust investment costs; management executives:
high affect and emotion costs; low agency costs such as:
high loss probability; bonding costs
Costs very few options; monitoring costs
low monitoring ability. warranty-guarantee costs;
For the stakeholder: no significant search costs
costs
Almost none to executives; Both for stakeholder and corporate
executive:
Significant benefits to stakeholders. high commitment;
High high mutual cooperation,
Benefits healthy interdependence;
high mutual honesty,
high mutual benevolence
high satisfaction
Corporate executive abuse; Sustaining high mutual trust;
Corporate executive exploitation, High dependence;
Corporate executive dissatisfaction; Stifled creativity due to over-trust;
Risks Corporate executive may refuse Few other options due to over-trust.
cooperation.

Stakeholder opportunism.
Stakeholder betrayal

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End Notes
Chapter 04
The Ethics of Corporate Ethical and Moral Charismatic
Leadership

Executive Summary
Leadership cannot exist without follower-ship. The phenomenon of direction and guidance,
coaching and mentoring, has at least three components: The leader, leadership, and followers.
With each component, the composition of purpose and goals, ethics and morals, rights and
duties, skills and talents is critically important. While the leader is the central and the most
important part of the leadership phenomenon, followers are important and necessary factors in
the leadership equation. Leaders and followers are engaged in a common enterprise: they are
dependent upon each other; their fortunes rise and fall together. Relational qualities define the
leadership-followership phenomenon. A major component of such a relationship is how the
leaders create and communicate new meaning to followers, perceive themselves relative to
followers, and how the followers, in turn, perceive their leader. This mutual perception has
serious ethical and moral implications – how leader uses or abuses power, and how followers are
augmented or diminished. This Chapter features the essentials of ethical and moral, corporate
executive leadership in two parts: 1) The Theory of Ethical and Moral Leadership, and 2) The
Art of Ethical and Moral Leadership. Several contemporary cases such as inspirational
leadership of JRD Tata, Crisis of Leadership at Infosys, and Headhunting for CEOs will
illustrate our discussions on the ethics and morals of corporate executive leadership.

The Need for Moral Leadership Today

Warren Bennis, with over fifty years of leadership experience and extensive writing about it, is
one of the world’s leading experts on leadership. As a top-level advisor to four U. S. Presidents and
distinguished professor of Business Leadership at the University of Southern California, Bennis’
influence cannot be overestimated. Bennis affirms that leadership is not some set of tricks to be
studied and practiced, a how-to-manual for the ambitious; it is the all-encompassing study of the
human condition, its full potential, its vision and imagination, its dignity and sanctity. Know-thyself
was held as a precondition for success in ancient Greece, and so it is today, but it is best realized in
the crucible of hard experience. We come to know ourselves through self-invention and imagination.
People who cannot invent and reinvent themselves must be content with borrowed postures,
secondhand ideas, fitting in instead of standing out.

Leadership is nothing less than a full and proper preparation for life, if we want to leave even the
slightest of footprints in the sands of time. Bennis argues that bureaucracy is doomed and that
something flatter and more collegial with candor and transparency will triumph. Bennis also believed
that all organizational decisions inevitably have a moral dimension. He understood the vital role that
great followers play in successful leadership. Thus, the process of becoming a leader and the process
of becoming a fully integrated human being are one and the same, both grounded in self-discovery
(Bennis, 2009, p. ix-xii; 2, 5).

Case 4.1: Jehangir Ratanji Dadabhoy (JRD) Tata: A Moral Visionary

Leader
JRD was an interesting product of two continents: his father was a Parsee and his mother French. Born in
Paris in 1904, JRD schooled in Paris, Bombay and Yokohama. Most of his education was in France. He spoke
French par excellence, but not so English. Hence, he was sent to an English Grammar School in Cambridge.
But his education was interrupted, as when 20, he was drafted by the French army. After his draft he was
planning to go back to Cambridge, when his father summoned him back to India to join the Tatas. JRD

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regretted for decades thereafter that he never went to a university. His father died nine months later and JRD
took his place as director of Tata Sons. JRD was 21. Though he missed college education, JRD made up for
that: after office hours he read books in English to learn various aspects of business. When JRD was in his early
twenties and while recovering from typhoid, he would go to his room at the Taj, throw himself in bed and study.
When his sister Rosabeh pleaded: “Why don’t you rest, Jeh, you are tired and unwell,” he replied, “I want to be
worthy of the Tatas.” (Mambro, 2004, p. xvii-xviii).

As his mother was French, he spent much of his childhood in France and as a result, French was his first
language. He attended the Janson De Sailly School in Paris. Later, he attended the Cathedral and John Connon
School, Bombay. When his father joined the Tata Company, he moved the whole family to London. During
this time, J.R.D's mother died at an early age of 43 while his father was in India and his family was in France.

After his mother's death, Ratanji Dadabhoy Tata decided to move his family to India and sent J.R.D to
England for higher studies in October 1923. He was enrolled in a Grammar school, and was interested in
studying Engineering at Cambridge. Just as the Grammar course was ending and he was hoping to enter
Cambridge, a law was passed in France to draft into the army for two years all French boys at the age of 20. As
a citizen of France J.R.D Tata had to enlist in the army for at least one year. In between the Grammar school and
his time in the army, he spent a brief spell at home in Bombay.

JRD Tata’s Business Leadership

J. R. D. Tata was inspired early by pioneer Louis Blériot who was the first to fly across the English
Channel, and who had a home on the French coast near Tata’s country home. Jeh took to flying. On 10
February 1929, Tata obtained the first pilot license issued in India.  He later came to be known as the father of
Indian Civil Aviation. He founded India's first commercial airline, Tata Airlines in 1932, which became Air
India in 1946, now India's national airline.

In 1948, JRD Tata launched Air India International as India's first international airline. Within 10 years, he
was president of International Air Transport Association (IATA). In 1953, Air India International was
nationalized, and the Indian Government appointed JRD Tata as Chairman of Air India and a director on the
Board of Indian Airlines – a position he retained for 25 years till 1978, making it one of the most efficient
airlines of the world. For his crowning achievements in aviation, he was bestowed the title of Honorary Air
Commodore of India.

He joined Tata Sons as an unpaid apprentice in 1925. In 1938, at the age of 34, JRD was elected Chairman
of Tata Sons making him the head of the largest industrial group in India. He took over as Chairman of  Tata
Sons from his second cousin Nowroji Saklatwala. For decades, he directed the huge Tata Group of companies,
with major interests in steel, engineering, power, chemicals and hospitality. He was famous for succeeding in
business while maintaining high ethical standards – refusing to bribe politicians or use the black market.

He was the trustee of the Sir Dorabji Tata Trust from its inception in 1932 for over half a century. Under
his guidance, this Trust established Asia's first cancer hospital, the Tata Memorial Centre for Cancer, Research
and Treatment, in Bombay in 1941. He also founded the Tata Institute of Social Sciences (TISS, 1936), the Tata
Institute of Fundamental Research (TIFR, 1945), and the National Center for Performing Arts in Bombay. He
was also a founding member of the first Governing Body of NCAER, the National Council of Applied
Economic Research in New Delhi, India's first independent economic policy institute established in 1956.

He is best known for being the founder of several industries under the Tata Group, including Tata
Engineering and Locomotive Company (TELCO) in 1945, now Tata Motors; Tata Exports in 1962, today called
Tata International, one of the leading export houses in India; he founded Tata Computer Centre in 1968,
currently Tata Consultancy Services (TCS), he also founded Titan Industries in 1987, Tata Tea, Voltas and Air
India. In 1983, he was awarded the French Legion of Honor and, in 1992 and 1995, two of India's highest
civilian awards, the Bharat Ratna and Padma Vibhushan, were bestowed to him for his contributions to Indian
industry. Jamshedpur was also selected as a UN Global Compact City because of the quality of life, conditions
of sanitation, roads and welfare that were offered by Tata Steel.
Under his chairmanship, the assets of the Tata Group grew from US$100 million to over US$5 billion. He
started with 14 enterprises under his leadership and half a century later on 26 July 1988, when he left, Tata Sons
was a conglomerate of 95 enterprises which they either started or in which they had controlling interest.

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 JRD Tata cared greatly for his workers. In 1956, he initiated a program of closer 'employee association with
management' to give workers a stronger voice in the affairs of the company. He firmly believed in employee
welfare and espoused the principles of an eight-hour working day, free medical aid, workers' provident scheme,
and workmen's accident compensation schemes, which were later, adopted as statutory requirements in India. In
1979, Tata Steel instituted a new practice: a worker being deemed to be "at work" from the moment he leaves
home for work till he returns home from work. This made the company financially liable to the worker for any
mishap on the way to and from work.

“One of the qualities of leadership is to assess what is needed to get the best results for an enterprise. If that
demands being a very active executive chairman, as I was in Air India, I did that. On the other hand, if a
managing director of our company could do that and get good results, I let him do that. … Often a Chairman’s
main responsibility is to inspire respect” (Mambro, 2004, p. xix).

At the end of his life, JRD was searching for a deeper faith in God. In one of his numerous interviews with
JRD, just two weeks before he left for Geneva and never returned, RM Lala tells us that JRD was discussing
with him a hymn he liked, “Abide with me.” “God has to look after 800 million people in this country and six
billion in the world, how can I expect him to look after me or abide with me?” (cited in Mambro, 2004, p. xxi)

JRD Tata died in Geneva, Switzerland on 29 November 1993 at the age of 89 of a kidney infection. Upon
his death, the Indian Parliament was adjourned in his memory – an honor not usually given to persons who are
not members of parliament. He was buried at the Père Lachaise Cemetery in Paris.

References:
Casey, Peter (2014). The Greatest Company in the World: The Story of Tata, New Delhi: Penguin Books.
Graham, Ann (2010). Too Good to Fail. Strategy + Business, 58 (Spring), February 2.
Lala, R. M. (1992). Beyond the last Blue Mountains, Life of J.R.D Tata: Viking Books.
Lala, R. M. (2004). The Creation of Wealth: The Tatas from the 19th to the 21st Century. New Delhi, India: Penguin Books.
Nadkarni, A. & Branzei, O. (2008). The Tata Way: Evolving an Executing Sustainable Business Strategies. Ivey Business
Journal, April.
Witzel, M. (2010). Tata: The Evolution of a Corporate Brand. New Delhi: Penguin Books.
Also available on Tata Group website: http://www.tata.co/default

Ethical Reflections:
1. Study the Transformational Leadership of Jehangir Ratanji Dadabhoy Tata (JRD Tata).
2. Study the Transformational Visionary Leadership of JRD Tata.
3. Study the Transformational Inspirational Leadership of JRD Tata.
4. Study the Transformational Moral Responsible Leadership of JRD Tata.
5. Study the Transformational Ethical Responsible Leadership of JRD Tata.
6. Study the Transformational Servant and Humanitarian Leadership of JRD Tata.

Case 4.2: Excessive Executive Compensation Questions Morality of

Corporate Leadership
Recently, exorbitant executive compensation has distanced the leader from the followers. It is noted that in
Japan the executive compensation is about 17 times that of an average worker; in France and Germany, 23 to 25
times; in Britain, 35 times; in the USA, between 85-100 times. Edwards Deming (1992), the founder of total
quality management (TQM), believed that the enormous financial incentives of the executives have destroyed
teamwork at many American companies. The scandalously high executive packages have been offered despite
downward trend in corporate profits. For instance, in 1990, the CEO of United Airlines received $18.3 million
(1200 times what a new flight attendant made), while United Airlines’ profits fell by 71 percent. Such
compensation disparities alienate followers from the leaders; followers often resent such exorbitant benefits, and
begin to link them with the exercise and abuse of authority. Similarly, March 31, 1993, the New York Times
reported that IBM laid-off hundreds of even long-time employees, while also jacking up the salary of its new
CEO to a basic salary of $2 million, bonus of $5 million, and a host of other incentives worth millions more.
The NYT article commented on the devastation of the employees fired, and of the likely psychological toll on
those who survived this round of cuts. This is a crisis of moral executive leadership.

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Ethical Questions:
1. In general, discuss the ethics of executive compensation.
2. What is the ethical and moral justification and obligation of exorbitant executive compensation today?
3. Based on teleology and deontology argue the ethics of excessive executive compensation today.
4. Study the ethics of distributive justice and corrective justice issues in relation to exorbitant executive
compensation today.
5. Based on Ethics of Virtue and Ethics of Trust, explore the social ramifications of exorbitant executive
compensation today.

The Ethics of Executive Leadership

The past quarter-century has witnessed the rise, the fall, and the occasional resurrection of
transactional leadership, transformational leadership, charismatic leadership, authentic leadership,
autocratic leadership, steward leadership, servant leadership, collaborative leadership, laissez-faire
leadership, and value leadership. What is striking about this literature is that it has rarely focused on
ethics. Ethical leadership and moral leadership are very recent on the leadership literature radar. Yet,
all leadership has an ethical and moral dimension. One cannot be an effective leader without being a
good leader in terms of morality. Ethically neutral leadership is impossible – ethical views shape the
means and ends of leaders. The essence of effective leadership is ethical leadership. Leadership
cannot be successful without being moral (Rhode, 2006, p. 5-6).

Moral leadership seems to be an oxymoron as bad as business ethics. Neither term carries much
credibility in popular American culture today. Years ago Machiavelli asserted that “politics and
ethics don’t mix,” and the sole aim of any leader is “the acquisition of personal power.” Under such
concept of leadership, ethical or moral leadership is a contradiction in terms.

This chapter has two parts: 1) The Theory of Ethical and Moral Leadership, and 2) The Execution
of Ethical and Moral Leadership.

Part I: The Theory of Ethical and Moral Leadership

Leadership has been defined and understood across various leadership styles, perspectives,
situations, causes, and issues. For instance, Rost (1991) analyzed 221 definitions to argue that there is
no common definition of leadership. As a starter, all these definitions understand and denote
leadership as a process, act, or influence exerted by one or a few on many to get something done. The
definitions, however, differ in their connotation, particularly in their implications for the leader-
follower relationship. After all, how leaders influence people to do things (e.g., impress, inspire,
organize, lead, direct, or persuade), and how what is to be done is decided (e.g., forced obedience,
voluntary consent determined by the leader, participative management, collaborative leadership) have
normative implications and moral commitments (Ciulla, 2004, p. 11). Thus, a good workable
definition or paradigm of leadership may denote the same essential elements but may connote
different ramifications given the denotation of the definition. This denotation-connotation tension
enriches, widens, and deepens scholarly research.
A definition of leadership should normally precede leadership research and scholarship. The
choice of a definition can be aesthetic, moral, ethical, political, bureaucratic, psychological,
sociological, and Machiavellian – if you control the definition, you control the research agenda. A
dominant theme in the current leadership literature is the search for an all-encompassing definition
(paradigm, model) of leadership (Rost, 1991). Such a search for singular definitions is not very
impressive or useful when it relates to a complex and ambiguous social phenomenon such as
leadership; such a search can paralyze rather than clarify research (Solomon, 2004, p. 86-87; fn. viii).

Leaders, Leadership and Followers

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 Leadership cannot exist without follower-ship. The phenomenon of direction and guidance,
coaching and mentoring, has at least three components: The leader, leadership, and followers. With
each component, the composition of purposes and goals, ethics and morals, rights and duties, skills
and talents is critically important. While the leader is the central and the most important part of the
leadership phenomenon, followers are important and necessary factors in the equation (Hollander,
1978, p. 4, 5, 6, 12). Leaders and followers are engaged in a common enterprise: they are dependent
upon each other; their fortunes rise and fall together (Burns, 1979, p. 426). Follower-ship requires
that leaders recognize their true role and within the commonwealth of the organization. The choices
and actions of leaders must take into consideration the rights and needs of followers (Gini, 1997).
Further, in the context of stewardship responsibilities of leaders, the recognition and respect of rights
and duties of followers becomes critical. Followers set the terms of acceptance for leadership, and
with this drift has arisen the sharp need for ethical and moral leadership. Successful leaders need to
understand their followers as collaborators far more than followers need to understand their leaders
(Gini, 2004, p. 32-33).

Relational qualities define the leadership-followership phenomenon. A major component of such

a relationship is how the leaders perceive themselves relative to followers, and how the followers, in
turn, perceive the leader. This mutual perception has serious ethical implications – how a leader uses
or abuses power, and how the followers are used or abused.

“If leadership is an active and ongoing relationship between leaders and followers, then a central
requirement of the leadership process is for leaders to evoke and elicit consensus in their
constituencies, and conversely, for followers to inform and influence their leaders” (Gini, 2004, p.
36). Both influence processes are done through the use of power, education, expert knowledge,
charisma, vision, and mission. Real leadership, according to James McGregor Burns (1979, p. 36), is
not just about directed results; it is also about offering the followers a choice among all alternatives to
grow and reach their full potential. Power need not be dictatorial or coercive, but directive and
cooperative. Leaders as models and mentors must engage followers, and not merely direct them.

The leader is a teacher, said Peter Senge (1990, p. 353); but leadership is not just about teaching
people how to achieve their vision; rather, it is about fostering learning, offering choices, and building
consensus among followers. Leadership is based on a compact that binds those who lead and those
who follow into the same moral, intellectual and emotional commitment (Zaleznik, 1990, p. 12).
However, this “compact” could spell very uneven ground of relationships, given that often the leader
has the power and followers are powerless. It is up to a good moral leader to make it an even playing
field of fair interaction play.

What is Ethical Leadership?

Ethics is an evaluative enterprise. The best of ethics is an ethics of change – how to recognize the
need for change and bring it about with the right set of vision, mission and resource alternatives.
From a leadership perspective, such a process must be a collective discernment and consensual
decision approach between leaders and followers. How leaders and followers collectively decide the
right action to be taken to be implemented in the right way with the right people amidst various
contingencies can be very challenging in moral leadership. The vision and values of leadership must
have their origins and resolutions in the community of followers, of whom they are part, and whom
they wish to serve. Leaders can drive, lead, orchestrate, and even cajole; but they cannot force,
dictate, or demand. Leaders must be the necessary condition or catalyst for morally sound behavior,
but, by themselves, they are not the sufficient condition. Leaders may offer a vision and a mission,
but the followers must buy into it. Leaders may design and organize a plan, but the followers must
understand it and decide to take it on. In the new paradigm of leadership, neither the leader nor the
followers should displace or replace their willingness and commitment (Wills, 1994, p. 13).

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 Given the central role of ethics in the practice of leadership, it is remarkable that there has been
little in the way of sustained and systematic treatment of the subject by scholars (Ciulla, 2004, p. 3).
An increasingly common position in both scholarly and popular leadership literature is that the
essence of effective leadership is ethical leadership. The first major theorist to take this view was
historian McGregor Burns. In his book Leadership published in 1978, Burns distinguished between
transactional and transformational leadership. The former involves exchange relationships between
leaders and followers, while the latter leads both the leaders and the followers to higher levels of
motivation and morality, beyond everybody’s wants and needs. Transformational leadership aspires
to reach more principled levels of judgment in pursuit of end values such as liberty, justice, and self-
fulfillment. According to Burns, transformation leadership is ethical leadership.

Further, in the context of stewardship responsibilities of leaders, the recognition and respect of
rights and duties of followers becomes critical. Followers set the terms of acceptance for leadership,
and with this drift has arisen the sharp need for ethical and moral leadership. Successful leaders need
to understand their followers as collaborators far more than followers need to understand their leaders
(Gini, 2004, p. 32-33).

Other scholars see this definition as limiting. Some argue that effective leadership requires
morality in means, but not necessarily in ends. This is because there is wide agreement on the ethics
and morality of widely shared principles for judging the means or the process of executive actions,
whereas there is much less consensus on the morality of ends or objectives. In this view, leadership
cannot be coercive or authoritarian in the pursuit of ends, but it can seek ends that most people would
regard as morally unjustified (Rost 1991: 18, 165). But what about those who do wrong things (ends)
well, such as Hitler, Stalin, and Saddam Hussein – they were animated by a moral vision (e.g., ethnic
cleansing) and were extremely effective in inspiring others to follow them (Bennis, 1989, p. 18; Gini,
1997, p. 323, 325; Kellerman, 2004, p. 11-12, 30). “From a scholarly point of view, it is unproductive
to exclude from definitions of leadership those people whose means or ends are immoral and
abhorrent but nonetheless effective, and therefore, instructive. How can we stop what we do not
study?” asks Barbara Kellerman (2004, p. 12).

Other scholars define ethics of leadership as “experts in the protection of values” (Selznick, 1957,
p. 121-122). Peters and Waterman (1982, p. 245) studying high-performing businesses conclude that
the primary role of top executives is to “manage the values of the organization.” Successful
leadership requires infusing employees’ day-to-day behavior with long-term meaning and inspiring
commitment to a “grand vision” about quality, service, and excellence (1982, p. 218, 284, 287). But
the unaddressed central questions are: How are values determined and transmitted? Under what
circumstances are those processes effective? To what extent do corporate values have an explicit
ethical content? For instance, much of discussion on “excellence” in values-related ethics carries little
moral content. What is left is leadership ethics without ethics (Rhode, 2006, p. 8). Other
commentators who see an ethical dimension to value leadership discuss it only in most perfunctory
and platitudinous terms.

From a perspective of the importance of emotions in leadership, Solomon (2004, p. 89) defines an
ethical leader as “one who shares with his or her followers the emotions of fairness, mutual well-
being, and harmony.”xxi In corporations, ethical leadership deals with the concerns of all stakeholders
rather than on the bottom line. In politics, ethical leadership is the passion to do the right thing rightly
and at the right time rather than worry about the urgency of winning the next elections.

Publications aimed at managerial audiences frequently list just a few key qualities that have stood
the test of time such as integrity, honesty, fairness, kindness, concern, compassion, tolerance, honor
and mutual respect, without acknowledging any complexity or potential conflict in their exercise or
execution (Badaracco & Ellsworth, 1999, p. 100; Costa, 1998, p. 155, 276, 282; Gardner, 1990, p. 77;
Morris, 1997, p. 122). More important concerns such as diversity, community building, community
relations, environmental stewardship, accountability, moral responsibility, and the like, do not feature
prominently in such lists of corporate “virtues” touted as ethical leadership values. Others simply

81
add “moral” as an all-purpose label in the mix of desirable characteristics that leaders should have.
Others are more specific and invoke “moral imagination,” “moral courage,” “moral excellence,” and
“moral compass” as ethical leadership traits (Costa, 1998, p. 240-248). But few scholars recognize
the complexity of ethical leadership in terms of mixed motives, reconciling priorities, moral conflicts,
and the balancing among competing concerns (Rhode, 2006, p. 8-9).

According to Rost (1991, p. 161), “The leadership process is ethical if the people in the
relationship (the leaders and followers) freely agree that the intended changes reflect their mutual
purposes.” This proposition has two attractive moral elements: 1) For Rost, consensus is an important
part of what makes leadership real and ethical and this is because free choice is morally pleasing. 2)
Also implied in this definition is the recognition of beliefs, values and needs of the followers.
Followers are the leader’s partners in shaping the goals and purposes of a group or organization.
However, both moral elements may not be sufficient to make leadership and follower-ship ethical –
for instance, both parties could freely embrace and endorse values that imply moral relativism.
Otherwise, we do not get out of “the Hitler’s problem.” If leadership is mere consensual “influence
over history” (Heifetz, 1998, p. 17), then Hitler, Lincoln, and Gandhi fall in the same category.

To summarize, ethical leadership is exercising moral influence in the choice of means and ends.
The top companies make meaning and not money, concluded Peters and Waterman (1982, p. 279).
Moral and religious philosophers since Aristotle have generally assumed the existence of fixed
character traits that are largely responsible for ethical and unethical behavior (MacIntyre, 1981):

 Moral Awareness: recognizing that a situation raises ethical issues;

 Moral Reasoning: determining what course of action is ethically sound;
 Moral Intent: identifying which values should take priority in the decision at hand;
 Moral Behaviors: Acting on ethical decisions

One could presume that leaders who follow this process strictly and consistently are ethical
leaders. But we need more solidly grounded strategic analyses, packaged in forms accessible to those
in leadership positions. At a minimum, such analyses should address the roles of ethical codes and
compliance programs, the importance of integrating ethical concerns and stakeholder responsibilities
into all organizational functions, and the necessity for visible moral commitment at the top. The
commitment must go far beyond legal requirements to widely accepted principles of corporate social
responsibility. In contexts where there is no consensus about ethically appropriate conduct, leaders
should strive for a decision-making process that is transparent and responsive to competing
stakeholder interests (Rhode, 2006, p. 33-34).

What is Moral Leadership?

Efficiency is easily measured, but ethicality and morality are not, as scholars are not too sure
what relevant factors enable and ensure moral assessment of leadership. According to Aristotle,
excellent actions are good and noble in themselves, and not only by their outcomes; and a virtuous
person has appropriate emotions along with dispositions to act the right way. The actions and
strategies of ethical and moral leadership should be good and noble in themselves, and not only in
their outcomes.

Good moral leadership thrives on mutually agreed upon purposes that help people achieve
consensus, assume responsibility, work for the common good, and build community. Good
leadership is a collaborative experience between leaders and followers. Good leadership redistributes
power and responsibility among all employees. Good moral leadership is mutual dependency in a
shared enterprise. It is teamwork that thrives in maintaining meaning, responsibility, accountability,
authenticity, and integrity in the leader-follower relationship. The so-called crisis of leadership is an
absence of these elements (Hollander, 1978b). Leadership is essentially a shared experience, a
voyage through time, with benefits to be gained and hazards to be surmounted by both leaders and

82
followers. The leader voyages with others; the leader steers the ship; she is a key figure whose
actions or inactions can determine the well-being and the broader good of the followers and others
(Hollander, 2004, p. 47). In this sense, leadership is intrinsically value-laden – values that determine
communal social health and a desired destination (Hodgkinson, 1983, p. 202). It is right values that
enable us to discern some goals as good and others as bad in leadership (Gardner, 1990, p. 66-67).

John W. Gardner (1990), a great leader-practitioner (he held many distinguished posts in the
government and in business and taught at Stanford) offers a good multidisciplinary commonsense
discussion of ethics and leadership. Gardner conceptualizes morality as a dimension of leadership
(not a part or an element) thus pioneering a holistic way of studying leadership rather than just
investigating a part of it. Gardner derives this moral dimension of leadership using engaging
examples from several disciplines (e.g., history, politics, business), while offering wisdom from his
own experience of leadership. He urges scholars and leaders to go beyond law to values (that are not
easily embedded in laws) such as caring, honor, integrity, tolerance, mutual respect, and human
fulfillment. But much of Gardner’s work is hortatory (or “parenetic”) rather than theoretical.

Challenges of Moral Leadership

Leadership and follower-ship get strained during difficult times. When an organization begins to
experience hardship in the form of underperformance that results in declining sales, eroding market
shares, plummeting profits, and consequently, financial distress, cash flow crisis, downsizing, plant
closings, outsourcing, massive layoffs, insolvency, and bankruptcy threats, organizational leadership
gets challenged and challenging, questioned and tested, empowered or destroyed. During such
difficult periods, we normally have recourse to economic efficiency and instrumentalism. Economic
efficiency leads to ruthless cost-containment in the form of plant closings, mass layoffs, outsourcing,
and other strategies of downsizing. Instrumentalism (that often follows one’s economic efficiency
mode of thinking) forces leaders to use more powerful means of control than otherwise with the only
goal of getting the job done. Instrumentalism disregards the means and the people used to get the job
done.

Obviously, to the instrumentalists, the ends are more important that the means; things have no
intrinsic value other than their instrumental value in business. Under the instrumental philosophy,
business efficiency replaces and displaces the value of truth. Truths that make people feel better,
more efficient and profitable are more desirable than truths that rock the boat. Business leadership is
effective when it gets results, argue instrumentalists. Leaders and their organizations are declared
successful when they make the most amount of money in the least amount of time. Failure to deliver
results can lead to cynicism about executive leadership, alienation, and abdication of moral
responsibility by employers and employees alike. At such anxious and confusing moments of crises,
ethical and moral leadership assumes different roles – those of sympathy and empathy, sharing and
caring, discussion and dialogue, compassion and companionship, cooperation and collaboration,
stewardship and servant-hood, sacrifice and self-oblation.

In summary, Table 4.1 analyzes the distinguishing features between corporate leadership,
corporate ethical leadership and corporate moral leadership.

< Table 4.1 about here >

Moral Leadership and Emotions

Emotions are largely socially constituted, not so much in their biological origins, but in their
aims, expression, and nuances. But they play a large role in our lives, and much more so in the lives
of great leaders. Consider Abraham Lincoln and the Civil War, Winston Churchill and World War II,
and Harry Truman and the first thermonuclear bomb. All these leaders and the major crisis events
they grappled with stirred tremendous emotions. Extraordinary events generate extraordinary

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emotions and which, in turn, motivate extraordinary behaviors, that, in turn, produce and provoke
extraordinary emotions, and so on. But emotions also play a role in ordinary events and in the lives of
ordinary leaders. The old conventional wisdom was that the less one is prone to emotions, the more
effective leader one can be. Rich and energetic emotional life, on the contrary, can form, mold and
shape great leaders.

Most definitions of leadership contain terms (e.g., impress, induce, persuade, influence, respect,
loyalty) that evoke emotions. Burns is most explicit about emotions when his definition of leadership
includes such terms as exploiting tensions, rising consciousness, and strong values. However, most of
the emotions of leadership tend to fall on the side of the led or followers, rather than the leader. This
could easily indicate a reduction of leadership to manipulation, thus raising the question of
authenticity. Real leadership involves emotions of both the leader and the follower. Emotional
behavior is voluntary behavior. Most leaders try to get the followers “move” their emotions in the
direction already passionately chosen by the leader. While knowledge is important in leadership skills
and methods, managerial knowledge is effective only insofar as that knowledge is in the service of the
appropriate emotions (Solomon, 2004, p. 87-89).

Moral Leadership and Charisma

The much used and abused word “charisma” is traced to Max Webber, the German sociologist,
and perhaps is the only such term that so explicitly refers to the emotional quality of leadership, albeit
at considerable cost to clarity (Solomon, 2004, p. 90). xxii Burns (1978, p. 243) warns that the “term is
so overused it threatens to collapse under close analysis.” Solomon (2004, p. 91-92) argues that
charisma is not anything in particular as a distinctive personality trait, and it is not an essential
element of leadership. According to Solomon (2004, p. 91), “charisma is not a single quality, nor is it
a single emotion or set of emotions. It is a generalized way of pointing to and emptily explaining an
emotional relationship that is too readily characterized as fascination.” Solomon believes that it is not
the leader who is charismatic, but the message that is fascinating, rhetorical, persuasive, and inspiring
that it attracts great audiences whose hopes and aspirations are raised and fears allayed by that
message.
That said, charisma is supposed to be an extraordinary prophetic power (often considered as a gift
from God or the Holy Spirit) and a rare personal quality that arouses fervent popular devotion and
enthusiasm among one’s followers. The charisma of the founders of various Religious Orders and
Congregations is often invoked as a draw for the followers. Bernard Bass describes charisma of
leaders to whom followers form deep emotional attachments and who in turn inspire their followers to
transcend their own interests for super-ordinate goals. Presumably, this explains the heroic leadership
in the over 478-years old Jesuit Order (Lowney, 2003). Insofar as leadership is an emotional
relationship that concerns the future, responding to hopes, wishes, and fears may well be interpreted
as charisma by an appreciative audience. JRD Tata’s leadership described under Case 4.1 is also
charismatic or prophetic leadership in this sense.

Leadership as Meaning-Creation and Meaning Communication

Insofar as leadership is identified with meaning-creation and meaning communication that
impacts positive change, we can distinguish and label different types or strategies of leadership by
attributes and behaviors that provide meaning to one’s charges, and as long as those leadership
attributes and behaviors can be rightly attributed to the leader. Theoretically anything and everything
about a leader, from choices made to task design and communicating it can be potential determinants
of the meaning that leaders create and communicate. Impacting and imparting meaning must be the
major yardstick by which we identify and measure attributes and behaviors that constitute genuine
leadership and what do not. This yardstick can define the scope of leadership (Bresnen, 1995).

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 Following Podolny, Khurana and Besharov’s (2010) characterization of leadership as meaning
creation versus meaning communication, Table 4.2 outlines the meaning creation versus meaning
communication potential under transactional versus transformation leadership types.

< Table 4.2 about here >

In general, all meaning has at least two components: a) the tight connection between one’s actions
and one’s ideals, and b) a feeling of closeness to a natural community of every stakeholder of a
corporation. The corporation legitimately exists in and for the society it operates in, and hence there
should be connect of all the major visions, missions, goals and objectives, structures and architectures
of the company to its community of employees, customers, suppliers, creditors, distributors, locals,
governments, and the world at large. Some of these meaning-creating and meaning communicating
activities can be clearly spelt, as is done in Table 4.2. For instance, if a leader wants to create the
meaning of social equality and solidarity, then high pay disparities within an organization will not
communicate that meaning. The medium is very much a part of the message, and the organization is
the medium (Podolny, Khurana, & Besharov, 2010, p. 95).

Part Two: The Execution of Moral Leadership

The ethics of leadership should rest upon three pillars: a) the moral character of the leader; b) the
ethical legitimacy of the values embedded in the leader’s vision, articulation, and the program that
followers either embrace or reject, and c) the morality of the process of social ethical choice and
action that leaders and followers engage in and collectively pursue (Bass & Steidlmeier, 2004, p.
175). When leaders are morally mature, those that lead, display higher moral reasoning (Burns,
1978).

Transforming Leadership
James McGregor Burns, a political scientist, historian, and biographer, is probably the most
referenced author in leadership studies. His theory of leadership is drawn from his extensive
experience of studying history and biographies of great leaders. In his book, Leadership, Burns
(1978) distinguishes between transforming and transformational leadership; but he prefers to label his
leadership theory as transforming leadership. Transforming leaders, says Burns, should have very
strong values. His theory is prescriptive as he tells what morally good leadership should be.
Drawing insights from Abraham Maslow’s hierarchy of needs, Milton Rokeach’s theory of values and
value development, and Lawrence Kohlberg’s theory of moral development, Burns (1978, p. 42-43)
argues that good leaders must operate at higher need and value levels than those of followers. A good
leader exploits tension and conflict within people’s value systems and plays the role of raising
people’s consciousness. That is, good leaders do not water down their values and moral ideals by
seeking consensus among followers; rather they elevate people by using conflict to engage followers
and help them reassess their own values and needs. In this respect, Burns opposes Rost’s (1991, p.
xii) approach of consensual ethics.

Burns (1978) propounds his theory of transforming leadership built around a set of moral
commitments. These moral commitments have to do with two moral questions: 1) the morality of
means-end that includes the use of moral power, and 2) tension between private and public morality
of a leader. In this connection, he distinguishes between transactional and transforming leadership.
Transactional leadership deals with the value of the means of the act which he calls modal values
(e.g., responsibility, fairness, honesty, and promise-keeping). Transactional leadership helps leaders
and followers to reach their own goals by taking care of lower level needs and wants so that they
could move up to higher needs and values. Transforming leadership, on the other hand, is concerned

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with end values such as liberty, justice, and equality. Transforming leaders transform their followers
by raising them through various stages of higher moral development and values. Burns believes that a
good leader needs both transactional and transforming leadership. Lack of proper transactional
leadership can neglect the means, and “insufficient attention to means can corrupt the ends” (Burns,
1978, p. 426).

Based on this theory, Burns (1978, p. 3) argues that Hitler was not a good leader but a tyrant. He
offers three criteria for judging a good transforming leader (1978, p. 426):

 Test the authenticity of the leader’s modal values such as honor, integrity, and responsibility, and
test the extent to which the leader advanced or thwarted the standards of good conduct in
humankind;
 Test the morality of the leader by his end-values of equality and justice;
 The leader should be judged by the impact he has on the well-being of the people he touched.

According to Burns, Hitler failed on all three tests of a transforming leader – he chose the wrong
means, the wrong ends, and his moral impact on his followers during the process of leadership was
disastrous.

Burns criticizes leadership studies for bifurcating literature on leader-ship and follower-ship. The
leader-ship literature tends to make the leader elitist, heroic, authoritative, dictatorial, political,
military, and business power. The follower-ship literature tends to be populist in approach, linking
followers with the masses of civilians, commoners, and the illiterate. As Truman said, “a leader is a
man who has the ability to get other people to do what they don’t want to do, and like it.”

Steward Leadership
In his seminal work, The Fifth Discipline, Peter Senge (1990, p. 345-52) states that of all the jobs
of leadership, the most important is that of being a steward. Being a steward means recognizing that
the ultimate purpose of one’s work is others and not self. Leaders should “do what they do” for
something larger than themselves; that their life’s work may be the “ability to lead,” but the final goal
of this talent or craft should be other-directed.

According to Peter Drucker, leadership is performance. According to Jean Paul Sartre, leadership
is responsibility. Combining the two, steward leadership is responsible performance that achieves
group goals (i.e., those of the corporation and of its employees). A steward leader is trusted by the
followers, though occasionally over-trust could allow leaders undue latitude to set up their own
agenda, as is often the case with senior politicians (Hollander, 1992b).

In a society where people value individualism and freedom, the challenge of leadership in
organizations should be the challenge of responsible stewardship. SQC, TQM, and other programs
are good but not enough. Quality is a matter of ethics that requires ethical leaders at the top to give
customers what they have promised. Companies have a moral obligation to live up to the promises
they have made in advertisements, product brochures, and annual reports (Pierce, 1991, p. 13). But
ethical commitment in TQM focuses on customer-oriented stewardship. Some TQM scholars believe
that TQM also empowers the employees as the latter are empowered to participate in decisions and
management listens to their employees. Both, however, are thin descriptions of an ethical
arrangement. Does TQM enable better and more equal relationship to management? Has TQM
changed the uneven distribution of power between workers and the supervisors? Does TQM
empower the managers to treat employees like customers? Otherwise, TQM can be a “therapeutic
fiction” - it is a nice idea, but it breaks down in practice (Ciulla, 2004, p. 73).

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Servant Leadership
In 1977, Robert K. Greenleaf published his path-breaking book, Servant Leadership, thus
ushering a new paradigm of management in corporate offices of America, in general, and in
boardrooms, in particular. Greenleaf conceived the idea of servant leadership during a time of chaos
in the United States – the late 1960s. Greenleaf, a retired AT&T executive who subsequently lectured
at MIT, Harvard Business School and other great universities (he died in 1990), proposed that service
ought to be the most distinguishing characteristic of leadership. It would create not only stronger and
dedicated corporations, but business leaders “would find greater joy in their lives if they raised the
servant aspect of their leadership and built more serving institutions.” Greenleaf was among the first
to analyze the qualities of leaders and followers, and especially the necessity for leaders to be
attentive to the needs and feelings of others, such that those who are “served” grow as persons,
become healthier, wiser, freer, more autonomous, and more likely themselves to become servants, in
turn, of their reports. In the third of a century that has followed since the publication of Servant
Leadership, the notion of servant leadership has gained academic acceptance by way of theorization
and scholarship in business schools, executive acceptance and commitment in corporate boardrooms,
and even political recognition and assimilation in policy issues and governance. Responsible board or
executive behavior is impossible in the absence of servant leadership. The concept, construct, models
and theories of moral leadership that we explore in this chapter are best premised on those of servant
leadership.

Robert Greenleaf proposed as early as 1977 a normative theory of leadership called servant
leadership. xxiii In the introductory chapter of his book on Servant Leadership, Greenleaf wrote: “We
live at a time when leaders of power are suspect, and actions that stem from authority are questioned.
Legitimize power has become an ethical imperative….In this country there is a leadership crisis and I
should do what I could do about it.” His answer was servant leadership. If one is servant, either as
leader or follower, one is always searching, listening, giving and expecting. “A fresh critical look is
being taken at the issues of power and authority, and people are beginning to learn to relate to one
another in less coercive and more creatively supporting ways (1977, p. 19, 22).

A new moral principle is emerging that holds that the only authority deserving of one’s allegiance
is that which is freely and knowingly granted to the leader in response to, and in proportion to, the
clearly evident servant stature of the leader. Those who choose to follow this principle will not
casually accept the authority of existing institutions. Rather, they will freely respond only to
individuals who are chosen as leaders because they are proven and trusted as servants. To the extent
that this principle prevails in the future the only truly visible institutions will be those that are
predominantly servant led (Greenleaf, 1977, p. 23-24). The crisis of leadership continues now, after
30 years of the publication of Servant Leadership, in much more force and embarrassment. The need
for servant leadership as a remedy to this crisis cannot be overemphasized enough.

A servant leader seems an oxymoron. If one is a leader, how can he be a servant? If one is a
servant, how can she be a leader? The fusing of servant and leader is a “dangerous creation” (Albert
Camus titled his last lecture as “Create Dangerously”!). It is dangerous for the natural servant to
become a leader, equally dangerous for the leader to be a servant first, and still more dangerous for a
follower to insist on being led by a servant. The servant-leader concept is not based on logic; it is
based on intuition. Any intuition-based concept can be full of contradictions. It is like creating out of
chaos, freedom from bondage; to have strong individualism amid community, elitism among
populism, serenity amidst controversy, and logic intermixed with inconsistency. The servant leader is
a servant first, followed by conscious choices that bring one to aspire to lead. That person is sharply
different from one who is leader first, especially if one chooses leadership first to gain power and
amass riches, and then chooses to serve (Greenleaf, 1977/2002, p. 24-27).

A servant leader leads people on a journey. A servant leads because he wants to serve others.
People follow servant leaders freely because they trust them. Like the transforming leaders, the

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servant leader elevates his followers. A servant leader is blessed with an opportunity to lead, to serve.
A servant leader is a leader because of influence by example. A servant leads and convinces by
presence and not by rules and admonitions. Servant leaders differ from other persons of goodwill
because they act on what they believe. Servant leaders know experimentally, and there is a sustaining
spirit of trust when they venture and take risk. A servant leader comes to terms with the ambiguities
and challenges of executive leadership. According to Robert Greenleaf, the acid test of real servant
leadership that works: Do the people around the person grow? Do they, while being served, become
healthier, wiser, freer, more autonomous, and more likely themselves to become servants? If so, what
is the impact on the poor and the marginalized, and the least privileged in society (see Greenleaf,
2002, p. 27; Senge, 2002, p. 357).

The essence of leadership is service in a community that journeys together toward a destiny. A
leader helps us come to grips with who we are, what our common destiny is, and where we are on the
journey. The true leader is also a seeker – alert to new possibilities on the journey, open, listening and
ready for whatever develops. True leadership, thus, is also an inner quality as much as an exercise of
authority. In the midst of seemingly unrestrained and individualized materialism, Robert Greenleaf’s
sense of civil community can be a preserving principle of the free market system. In creating an
enterprise that stands for something beyond itself – a distinguished serving institution that is at once
successful and principled - servant leadership can provide the right beacon that will light the way.
Servant leadership can certainly influence a new generation worldwide to transform global capitalism,
to serve better the whole of humanity and our planet earth.

According to Greenleaf (2002, p. 31), only a true natural servant automatically responds to a
problem by listening first. The automatic response to any problem is to listen first. True listening
builds strength in people you listen to. One can observe remarkable transformation in people who
have been trained to listen. Most of us try to communicate first. The best test of whether we are
communicating is to ask ourselves first – Are we really listening? Do we really want to understand?
Are we listening to the one with whom we want to communicate? Are we totally silent and attentive
when we listen?

The servant leader accepts and empathizes, and never rejects. Acceptance is receiving what is
offered, with approbation, satisfaction, or acquiescence. Empathy is the imaginative projection of
one’s own consciousness into another being. The opposite of both is to reject, to refuse to hear or
receive. A great leader accepts, empathizes, and thus deserves the interest and affection of his
followers. Acceptance is often unqualified; it requires a tolerance of imperfections. Anybody could
lead perfect people, if there were any. Leaders (e.g., parents, teachers, executives) who try to raise
perfect children or followers are certain to raise neurotics. It is part of the enigma of human nature
that the typical person is imperfect, immature, stumbling, inept, and lazy, but is capable of dedication
and heroism if wisely led. People grow when those who lead them accept them for what they are and
empathize with their shortcoming – such leaders are easily trusted (Greenleaf, 2002, p. 34-35).

We could summarize the philosophy of Servant Leadership from the above with the following
points (Greenleaf, 2002, p. 21-61):

 A servant leader is servant first. It begins with the natural feeling that one wants to serve, to
serve first.
 One should be first a servant, and then become a leader by making conscious choices of service.
 Selfless service should define one’s leadership.
 Servant leadership is not individualism but collectivism – it is a community of servant leaders.
 Servant leadership is relational and not transactional – it builds great relations (and not merely
transactions).
 A servant leader, either leader or follower, is one who is always searching, seeking, listening,
expecting that a better “wheel” for this time emerges or is in the making.
 Servant leadership is prophetic, inspirational than logical, a praxis than mere philosophy.
 Servant leadership is positive, affirmative, empowering. It is based on faith in oneself and in
humanity - “faith is the choice of the nobler hypothesis” (Dean Inge).

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  The servant leader accepts and empathizes, and never rejects.
 Servant leadership enables followers to grow in faith, hope, wisdom, freedom, autonomy, self-
esteem, and hence, servant leadership.

Leadership and Empowerment

“Empowerment is about giving people the confidence, competence, freedom, and resources to act
on their own judgments” (Ciulla, 2004, p. 59). Thus, empowered people experience different
relationships to leaders who hold power and with whom they share mutual goals. The industrial era
with its paradigm of power leadership seems to be over. Organizations have entered a new age where
employees are partners and team members. Not only are employers leaders, even employees can be
empowered to be leaders.

Authentic empowerment entails a different set of moral understandings and commitments

between leaders and followers. Authentic empowerment is opposed to bogus empowerment – this is
empowerment without power. Ciulla (2004, p. 64-65) defines bogus empowerment as the use of
therapeutic fictions to make people feel better about themselves, eliminate conflict and satisfy their
desire to belong (niceness), so that the followers freely choose to work toward the goals of the
organization and be productive instruments. Leaders who offer bogus empowerment are unauthentic,
insincere, and disrespectful of others. They believe that they can change others without changing
themselves. Such leaders do not dominate, but manipulate people into cheerful subordination. It is a
submission of one’s identity to group or organizational identity. Increasingly, even management
theorists believe that groups and teams are the foundation of all that is good and productive (Whyte,
1956, p. 6-7, 51, 54).

Most of the traditional empowerment programs seem to have failed to empower the employees.
Reasons are many: 1) employees are a captive audience; their success in the organization is contingent
on buying into these programs. 2) These programs created a short-lived sense of euphoria among
employees (a Hawthorn effect) that quickly faded away. 3) The programs raised employee
expectations that they will be enriched and empowered, but did not deliver. 4) Some employees felt
indoctrinated and manipulated into submission by the training programs.

Honesty is a necessary condition for empowerment. The former entails a set of specific practical
and moral obligations such as integrity, sincerity, authenticity, vision-driven, mission-oriented,
truthful, and transparent. Information is power, and is a source of power. The use and access to
information and information technologies have empowered employees much more than in the past.
Computerized control systems can impose strict self-discipline on workers and replace layers of
management. Empowerment requires good faith. Empowerment is a kind of giving. Leaders do not
tell people that they are giving them power that they have already gotten through structural and
technological changes.

Leaders cannot empower people unless they have the moral courage to be honest and sincere in
their intention to change the power of relationship that they have with their followers. If leaders want
to be authentic about empowering people, they must be first honest with themselves. Hence, too
many leaders are not authentic. They talk about empowerment and participation and even behave that
they are participatory, but in practice they lead to autocratic ways. For instance, you empower
employees to organize their work on the one hand, but on the other, when they do, you manipulate
them to do it your way (Ciulla, 2004, p. 79).

One of the most ethically distinct features of being a leader is one’s responsibility for the actions
of one’s followers. An organization can always give employees more responsibility via
empowerment programs, and often employees feel betrayed when they are not been given enough.
But more the responsibility given to the followers, the higher is the responsibility of the leader.

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 Further, modern leadership consists of two ideals: trust and power that often conflict with each
other. But trust seems to have taken over from power as the modern foundation of leadership. The
moral concepts behind empowerment are responsibility, trust, respect, truth, honesty, and loyalty –
these are reciprocal moral concepts; that is, they exist only if they are part of the relationship between
followers and leaders.

Honesty is one way to resolve the tension between power and trust. It is morally wrong to lie
because lying shows lack of respect for the dignity of the person. Leaders lose credibility and respect
when they blatantly fail to respect their employees. If leaders do not demonstrate in substantive ways
that they are loyal and committed to their employees through good times and bad, they simply cannot
expect the employees to be loyal to them.

Max de Pree on Ethical Leadership

Max de Pree is Chairman emeritus of Herman Miller, an international high-quality furniture

company. He is an emblem of moral leadership. True leaders are sought after and cultivated.
Leadership is not an easy subject to explain, comments Max de Pree (1987/2004, p. 11). The measure
of leadership is not the quality of the head of the leader, but the tone of the body, the corporate
community. The signs of outstanding leadership appear primarily among the followers. When the
followers learn and yearn, serve and reach their potential, manage conflict and achieve the required
corporate results, there is great leadership. Leadership is a concept of owning certain things to the
institution. It is a way of thinking about institutional heirs, a way of thinking about stewardship as
contrasted with ownership. It is servant leadership, as Robert Greenleaf (1977/2002) defined it.

People are the heart and spirit of all that counts. Without people, there is no need for leaders.
Corporations, like the people that compose them, are always in a state of becoming. The art of
leadership requires us to think about the leader-as-steward in terms of relationships - relationships of
assets and legacy, of momentum and effectiveness, of civility and values. Relationships of assets
include vital financial health, and the relationships and reputation that enable the continuity of vital
financial health. Such relationships mean several duties (Max de Pree, 1987/2004, p. 13-22):

 Leaders, accordingly, must deliver to their organization the appropriate services, products, tools,
and creative innovations that people in the organization need to be accountable.
 Leaders must also provide the right institutional value system that leads to the principles and
standards that guide the practices of the people in the organization.
 Leaders must provide clear statement of these values such that they are broadly understood,
agreed on, and shape corporate and individual behavior.
 Leaders are also responsible for future leadership – they need to identify, develop, and nurture
future leaders for the organization.
 Effective leaders encourage contrary opinions, an important source of corporate vitality,
continuity and institutional culture.
 Leaders owe a covenant to the organization – a new reference point for what caring, purposeful,
committed people can be in an institutional setting. Covenants bind people together by meeting
the needs of one another.
 Leaders owe a certain maturity expressed in a sense of self-worth, a sense of belonging, a sense of
expectancy, a sense of responsibility, a sense of accountability, and a sense of equality.
 Leaders owe the corporation rationality that grounds reason, visible order, and mutual
understanding to programs and to relationships. Excellence, commitment and competence are
available to followers only under the rubric of rationality.
 Leaders provide the right value environment for people to trust each other, to respect human
dignity, to promote personal development and self-fulfillment in the attainment of corporate
goals.
 Leaders owe people space, space of freedom that enables our gifts of ideas, openness, dignity, joy,
healing and inclusion to be exercised, a space that enables the followers to grow, to be themselves,
to exercise diversity, and a space that offers them the gift of grace and beauty.

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 The mark of good leaders, therefore, is an attribute that puts them in a position to show the way
for others; that is, they are better than most of us at pointing the direction. A good leader that leads
always has a goal. The goal is as an overarching purpose, the big dream, the visionary concept, and
may be arrived at by a group consensus or by the leader acting on inspiration and aspiration, passion
and insight. A good leader knows the goal better, can better articulate it and state it imaginatively for
any who are unsure, and may provide, at times, some certainty to those who have difficulty in
achieving it for themselves. The goal is something presently out of reach; it is something we strive
for, to move forward, to become. A good leader empowers us to do so. He elicits trust in us,
confidence in him, and especially if the goal is a high-risk visionary purpose. Every achievement
starts with a goal; but great goals are great dreams that spell great direction, great achievement, and
great fulfillment. Behind every great achievement is a dreamer of great dreams (Greenleaf, 2002, p.
29-30).

How we can Train Moral Leaders

One of society’s abiding needs is to develop and mature its leaders. Mentoring, coaching and
counseling have become the best means for identifying, nurturing and maturing leaders. The give-
and-take of mentoring seems to be the best way of guiding leaders toward expanding their potential.
Mentoring a not a private management seminar. Its ultimate goal is to make mentors of mentees. xxiv
Mentoring is a process of becoming, not an unimpeded march to perfection.

Ethics relates to what we ought to do in a given situation and in a given time. Ethics is also a
communal, collective enterprise. We learn ethics and morality from our homes, schools, peers and
society. The wider and deeper the web of our relationships with others, the greater is the possibility
that we learn our ethics and morals from others. Given the presence of others and our need for others,
ethics, said John Rawls (1985, p. 223-51), is how we decide to behave when we decide we belong
together. The paradox and central tension of ethics lies in the fact that while we are by nature
communal and in need of others, we are at the same time, by disposition, more and more egocentric
and self-serving. Minimally, therefore, good leadership behavior intends no harm and respects the
rights of all. Bad behaviors is willfully or negligently trampling on the rights and interests of others.

Morality, argued John Dewey (1960), starts as a set of culturally defined goals and rules that are
external to the individual and are internalized gradually via habits through learning and training. Some
of these goals and rules come as customs, conventions, ordinances, government laws and policies, or
public opinions. Good moral leaders as independent agents need to be critical of these externally
imposed goals and rules, and embrace what is best and noble in them. Ethics and morality are
reflective conduct, affirmed John Dewey (1960, p. 3-28), and a good leader discerns the distinction
between what is custom and convention to what is morally and ethically acceptable and desirable. It
is never enough to do the right thing (custom and conventions do this), but one must do the right thing
rightly (this is ethics and morality).

A true commitment to moral leadership requires the integration of ethical concerns into all
organizational activities. A moral leader must identify the living and dying edges in the organization:

 Leaders must take a role in developing, expressing, and defending civility and values. Civility
has to do with identifying values as opposed to following fashions. Civility is the ability to
distinguish between what is actually healthy and what merely appears to be living. A leader must
tell the difference between living edges and dying ones.
 “To lose sight of the beauty of ideas and of hope and opportunity, and to frustrate the right to be
needed, is to be at the dying edge.
 To be part of a throwaway mentality that discards goods and ideas, that discards principles and
law, that discards persons and families, is to be at the dying edge.

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  To be at the leading edge of consumption, affluence, and instant gratification is to be at the dying
edge.
 To ignore the dignity of work and the elegance of simplicity, and the essential responsibility of
serving each other, is to be at the dying edge” (Max de Pree, 1987/2004, p. 21-22).
 Peter Drucker once said, efficiency is doing the thing right, but effectiveness is doing the right
thing. We may add: integrity is to do the right thing rightly. Followers look up to leaders for
effectiveness and integrity. Leaders can delegate efficiency, but they must deal personally with
effectiveness. A leader’s effectiveness comes about through enabling others to reach their
potential, both individual and institutional (Max de Pree, 1987/2004, p. 19-20).

Leaders need the ability to look at problems and reality through a variety of lenses – through the
lens of a follower, of a new reality, of hard experience and failure, of fairness and morality. We need
to look hard at our future. We must stop being boxed in by national boundaries and cultural
stereotypes. We need to make a commitment to civility and inclusiveness. Good leaders modulate
individual rights with the common good; they think of fairer ways to distribute economic results
among all people. Good leaders are not only successful, but faithful. The active pursuit of common
good gives us as followers the right to ask leaders and managers of all kinds to be not only successful,
but faithful. While success is easily measured by the traditional performance criteria, faithfulness is
harder to assess or measure.

One of the leader’s chief concerns is the problem of betrayal. Leaders often betray followers and
vice versa. Most betrayals surface after the fact, after one party clearly abandons a goal, promise or
commitment. Betrayals dot not normally arise from poor motivation or outright sabotage. They
spring from inertia or entropy – the tendency of everything to deteriorate; entropy creeps into an
organization when a leader fails to reflect seriously on what makes important things go awry. Slothful
people allow entropy to ruin things; leaders are directly responsible for the very existence of betrayal.
From a leader’s perspective, the most serious betrayal has to do with thwarting human potential, with
quenching the spirit, with failing to deal equitably with followers as human beings. The promises we
make as leaders should resonate our beliefs and values. Otherwise they ring false, and followers
know it and reckon it as betrayal. Often leaders know that professional qualifications are not enough,
their skills and techniques fail them, when promises made by them are broken owing to human
fragility. At such times, leaders need to resort to deeper resources, resources beyond skills and
techniques rooted in their beliefs and values (De Pree, 1992/2008, p. 26-28).

Covenantal Leadership
Contracts are a small part of business relationships. A complete relationship needs a covenant.
Table 4.3 contrasts contractual leadership with covenantal leadership under several dimensions.
Intelligence and education can ascertain the facts. Wisdom can discover the truth. Covenant can
strengthen relationships. The life of a corporation needs all three. To give one’s time does not
always mean giving one’s involvement. The former is contractual; the latter is covenantal.

< Table 4.3 about here >

Hierarchy and equality are not mutually exclusive. Hierarchy provides connections. Equality
makes hierarchy responsive and responsible. Covenant makes both hierarchy and equality thrive
together. Without forgiveness, there can be no real freedom to act within a group. Covenant
facilitates forgiveness.

Opportunity must always be connected to accountability. Without the promise of accountability,

there are no true opportunities and risk. Without true opportunity and risk, there is no chance to seize
accountability; it will remain elsewhere. Covenant blends opportunity, risk and accountability as
never before.

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 Goals and rewards are only parts of the human equation; they are different parts of human
activity. When rewards become our goals, we are only pursuing part of our work and covenant.
Goals, objectives, rewards, healthy and rational relationships are best achieved through covenantal
relationships. All these bring joy. Joy is an essential ingredient of leadership. Leaders are obliged to
provide joy to the followers (Max de Pree, 1987/2004, p. 141-146).

Concluding Remarks
One of society’s abiding needs is to develop, nurture and mature its leaders. Organizations do not
live on earnings alone, but they do live by its leaders and their followers. Vision is the basis for the
best kind of leadership, especially, ethical and moral leadership. Today, more than ever, leadership is
more an art than a science, more a lived project than an academic program. Ethical leadership is more
an ethical imperative than an organizational quality, more a desperate need of the day than a pious
wish of the future. Moral leadership is an urgent calling than a job, more a professional clarion call
for integrity than an organizational performance-drive.

Today’s best leaders, says Max De Pree, are attuned to the needs and ideas of their followers, and
even step aside at times to be followers themselves. Genuine leadership reveals how to hold people
accountable and give them space to reach their potential; to see the needs of employees and those of
the company as the same; to inspire change and innovation, and to work effectively with creative
people (De Pree, 1992/2008). “I am still learning about leadership at the age of eighty-three. I am
happy to tell you that becoming a better leader is a job that never ends.” Leadership is something we
never completely understand (De Pree, 1992/2008, p. xv; 173).

Corporations can and should have a redemptive purpose. Leaders must realize that reaching our
potential is more important than reaching our goals. We need each other in order to be learners
together. We need to become vulnerable to each other. We owe each other the chance to reach our
potential. “It is more difficult, but far more important, to be committed to a corporate concept of
persons, the diversity of human gifts, covenantal relationship, lavish communications, including
everyone, and believing that leadership is a condition of indebtedness” (Max de Pree, 1987/2004, p.
67-72).

Similarly, leadership is often measured by corporate success. Success is fragile. Success is one
of those fragile qualities of leadership. Success can expose to dangerous consequences – it tends to
breed arrogance, complacency, and isolation. Success can close a mind faster than prejudice. Leaders
are fragile precisely at the point of their strength, liable to fail at the height of their success. One
should be aware of one’s fragility – it is a step toward personal effectiveness, and do something about
it – cultivate inclusive leadership (Max de Pree, 1992/2008, p. 37-38).

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 Table 4.1: Corporate Leadership, Ethical Leadership and Moral
Leadership: Distinguishing Features
Essential Distinguishing Features
Dimension General Corporate Corporate Ethical Corporate Moral
s Leadership Leadership Leadership
Definition Leadership is exercising one’s Ethical leadership is exercising Leadership that serves the basic
influence in the choice of means moral influence in the choice of needs of their constituencies,
and ends. means and ends defends fundamental moral
principles, seeks the fulfillment
of human possibilities, and
improves the communities of
which they are a part.
Nature Leadership is a multidimensional Ethical leadership is a Moral leadership is a
(leader, follower, inputs, multidimensional (e.g., diversity multidimensional (e.g., religious
processes, relationships, and of attitudes, values, cultures, beliefs and mandates, conscience,
outcomes) concept, construct, mores, customs) concept, virtues, integrity, sincerity,
model, paradigm and experience construct, model, paradigm and caring, sharing) concept,
of leader-follower loyalty. experience of leader-follower construct, model, paradigm and
binding. experience of leader-follower
bonding.
Denotation Leadership denotes a process, The inputs, process, act, and The inputs, process, act, and
act, or influence exerted by one outputs by which leaders induce outputs by which leaders induce
or a few on many to get or influence follower-ship must or influence follower-ship must
something done. be ethical by company codes, be moral by one’s attitudes,
industry norms and competition beliefs, intentions, values, and
standards. virtues.
Connotation Leadership connotes the various The various ways leaders induce The various ways leaders induce
ways (e.g., force, incentives, or influence leader-follower or influence leader-follower
rewards, promises, threats) relationships (e.g., impression, relationships (e.g., impression,
leaders induce or influence inspiration, incentives, inspiration, incentives,
leader-follower relationships persuasion, organization, persuasion, organization,
council) must be ethical in council) must be moral in
content and motives. content and motives.
Domain & Employer vs. employees; Employer vs. employees; Employer vs. employees;
Supervisor vs. workers; suppliers Supervisor vs. workers; Supervisor vs. workers; Leader
Scope and distributors; Leader vs. suppliers and distributors; vs. followers; worker families
followers; Leader vs. followers; and communities; supplier
Leadership in ideas, technology, Local vs. global communities. family and communities;
innovation, products and Leadership in company industry distributors and families.
services, markets and market codes of ethical conduct, worker Leadership in wisdom, integrity,
share, profits and performance, morale, customer experience caring, sharing, giving,
growth and prosperity. and loyalty, ecological understanding, forgiving,
stewardship and global reconciling, compassion, mercy
sustainability
Driving Power Popularity, reputation, power, The need for doing right things, The need for doing rightly right
money, wealth, benefits, loyalty, just things, fair deals, amicable things, just things, fair deals,
and explanation, prediction and deals, lasting deals, and fulfilling amicable deals, lasting deals, and
control of follower behavior rights and duties fulfilling rights and duties
Basic Function Foster leader-follower Foster leader-follower Foster leader-follower
relationships that manage relationships that enhance long- relationships that fulfill fiduciary
transactions, fulfill contracts, term ethical codes, conventions duties, stewardship covenants,
reciprocity of costs and benefits, and covenants, that sustain long-term trusting and bonding
enhance long-term productivity, mutuality of rights and duties, communities, sharing and caring
profit/growth prospects claims and privileges societies
Major Types Conceptual leadership; Transformational leadership; Steward or fiduciary leadership;
Functional leadership; Collaborative leadership Servant leadership;
Transactional leadership; Participative leadership; Covenantal leadership;
Communicative leadership; Justice-equality leadership; Trust-building leadership
Major Achievement, success, customer Legal compliance, ethical code Mutual trust and respect,
loyalty, shareholder satisfaction compliance, healthy intimacy, community building,
Emotions relationships charisma
Major Virtues Persistence, perseverance, Prudence, diligence, Wisdom, integrity, caring,
bravery, courage, frugality, authenticity, transparency, sharing, giving, understanding,
camaraderie, networking, sincerity, respecting rights and forgiving, reconciling,
duties, justice compassion, mercy
Major Long term leader-follower Long term leader-follower Long term leader-follower
productive and profitable relationship should be prudent, productive, profitable and
Challenges relationships; diligent, authentic, transparent, mutual growth oriented

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 Economic efficiency; sincere, respectful and just. relationships
Instrumentalism
Major Performance in relation to Performance in relation to Performance in relation to moral
revenue, profits and growth. ethical values, revenue, profits values, virtues, revenues, profits
Outcomes and growth. and growth.

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 Table 4.2: A Typology of Leadership:
Activities that Create and Communicate Meaning
Leadership Transactional Leadership Transformational Leadership
Activity Meaning- Meaning- Meaning- Meaning-
Dimensions Creation Communication Creation Communication

Business vision Business vision message Community vision Community vision message
Product vision Product vision message Social vision Social vision message
Vision Market vision Market vision message National vision National vision message
Customer vision Customer vision message Global vision Global vision message
Business mission Business mission message Community mission Community mission
Product mission Product mission message Social mission message
Mission Market mission Market mission message National mission Social mission message
Customer mission Customer mission message Global mission National mission message
Global mission message
Business goals Business goals metaphors Community goals Community goals
Product goals Product goals targets Social goals metaphors
Goals and Market goals Market goals and shares National goals Social goals metaphors
Objectives Customer goals Customer goals as delight Global goals National goals metaphors
Profitability goals Profitability goals as ROI Ecology goals Global goals paradigms
Corp. growth goals Growth goals as % Sustainability goals Ecology goals paradigms
numbers Sustainability goals
paradigms
OD goals & structure OD goals & structure OD Community OD Community goal
OD Design message goals metaphors
architecture OD Design architecture OD Social goals OD Social goals messages
Organization OD Systems structure form OD National goals OD National goals
al Design OD communications OD Systems structure OD Global goals metaphors
(OD) OD social networks function OD Ecology goals OD Global goals
OD communications OD Sustainability frameworks
metaphors goals OD Ecology goals
OD social networking paradigms
patterns OD Sustainability goals
visions
HR skills and values HR skills and values HR Community HR Community goal
HR rights and duties message goals metaphors
Organization HR HR rights & duties HR Social goals HR Social goal messages
al Inputs promotions/rewards statements HR National goals HR National goal
HR design & HR promotions/rewards HR Global goals metaphors
development plans HR Ecology goals HR Global goal
HR design & development HR Sustainability frameworks
plans goals HR Ecology goal
paradigms
HR Sustainability goal
visions
Hierarchy & Hierarchy & delegation Community Community obligation
delegation schemes obligations pacts
Organization Centralization Centralization and Social obligations Social obligation codes
al Structure Decentralization Decentrali- zation process National obligations National obligation rules
Autonomy & messages Global obligations Global obligation mandates
accountability Autonomy/accountability Social accountability Social accountability
Cost containment forms Corporate principles
Cost containment responsibility Corporate responsibility
procedures norms

Creativity & Plans and Designs for: Creating Creating open communities
innovation Creativity & innovation communities Social innovation for
New product New product development Social innovation ecology
Organization development plans Social quality of life Social quality of life
al Processes Quality control & Quality control & mgmt.; Social legitimacy measures
mgmt Warranty/guaranty Social service Social legitimacy
Product: contracts bundling guarantees
Warranty/guaranty Product bundling/pricing Social project Social service bundling
Bundling & pricing Product launches schemes
Promotions/launch promotions/launch Social complaint Social project assessment
Complaints redress Product complaint redress redress Social complaint redress
Product Product expansion/growth Social awareness process
expansion/growth Social awareness challenges

Sales revenue & Sales revenue & growth Community asset Community asset growth

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 growth rates growth rates
Product market share Product market share Social capital Social capital growth
Product profitability rates growth numbers
Organization Market capitalization Product profitability Social profitability Social profitability ratios
al Return on sales (ROS) numbers Social capitalization Social capitalization values
Performance Return on Market capitalization ROS to community ROS to community
Marketing/ROM numbers ROM to community measure
Return on quality Return on sales ratios ROQ to community ROM to community
(ROQ) Return on Marketing ROI for community measure
Return on investment ratios ROA for ROQ to community
(ROI) Return on quality community measure
Return on assets numbers EPS for community ROI for community
(ROA) Return on investment P/E for community measure
Earnings per share numbers Tobin’s Q of ROA for community
(EPS) Return on assets numbers community measure
Price/earnings ratio Earnings per share EPS for community
(P/E) numbers measure
Tobin’s Q Price/earnings ratios P/E for community
Tobin’s Q numbers measure
interpreted Community’s Tobin’s Q
measure
Table 4.3: Leadership under Contractual versus Covenantal Relationships
[See also Max de Pree 1987/2004: Leadership is an Art. 57-72].

Leadershi Contractual Relationships Covenantal Relationships

p
Dimensio
ns
Philosophy of Followers are factors of production, paid Followers are persons, with human dignity
leadership contracted employees, subordinates and and purpose and made in the image of God.
subjects, to be controlled and commanded, to be God has given people a great diversity of
marched to submission, productivity and gifts. Understanding these gifts fosters trust,
efficiency, and used for growth and respect, and human solidarity.
profitability.

Power of Contractual relationships foster competitive Covenantal relationships empower

leadership management, win-lose negotiations, formal and participative and collaborative management.
distanced transactions. Leaders receive the Words such as love, respect, intimacy,
task of leadership from policies and procedures, warmth, personal chemistry define
contracts and agreements, laws and ordinances, covenantal relationships; they reflect unity
promotion and reward structures, formal and and grace and poise. They express the
bureaucratic structures. sacred nature of relationships. Leaders
receive the gift of leadership from the people
they lead.

Nature of Contractual relationships are the act or science Covenantal relationships are the art of
leadership of leadership. They are legal, and cover the leadership. Covenantal relationships are
quid prop quo of working together. Contracts relational; covenants enable us to deal with
almost breakdown under the inevitable duress change, with conflict, and to reach our
of conflict and change. Contractual potential. They fill deep needs and enable
relationships are exclusive, snobbish, clannish work to be meaningful and fulfilling.
and performance-driven. Leadership is Covenantal relationships are inclusive,
measured by revenue generation, cost welcoming, open, transparent, candid,
containment, accumulation of wealth, market intimate, caring, giving, and mission
power and dominance, and physical growth. fulfillment driven.

Domain of Contractual relationships foster current, short- Covenantal relationships tolerate risk, foster
leadership term, quick-fix solutions to problems, physical maturity, long-term performance and
growth than growth of its people. They do not stewardship, and forgive errors; they enable
incorporate necessarily a vision of the future, corporations to be hospitable to the unusual
care of the people that should implement them, person and unusual ideas.
care of the society they impact.
Driving Growth in revenues, market share, market Growth in relationships, intimacy,
Power of dominance, market power, independence, interdependence, community-building,
leadership competitive barriers, growth in size and reciprocity, compassion, hospitality, ethics
profitability, muzzle and combat. and morality, humane development and

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 Contractual relationships are a gift of the law fulfillment, local community enhancement,
and enforcement. and global sustainability.
Covenantal relationships are a gift of the
spirit and liberation.
Scope of Contractual relationships respond to efficiency Covenantal relationships respond to
leadership and performance of business, to policies and effectiveness and intimacy, to people and
rules, to standards and specifications, to relationships, visions and missions, history
manuals and code of conduct, to sanctions and and identity, social impact and progress,
penalties. Legalistic relationships create an human dignity and fulfillment, national and
atmosphere of spiritual mediocrity – they global citizenship.
paralyze our noblest impulses. Legalistic
thinking prevents us from seeing the scale and
meaning of events.
Limitations of “A society based on the letter of the law and Covenantal relationships induce freedom,
leadership never reaching higher, fails to take advantage not paralysis. They are open to influence.
of the full range of human possibilities. The They rest on shared commitment to ideas, to
letter of the law is too cold and formal to have a issues, to values, to goals and to
beneficial influence on society” (Alexander management process.
Solzhenitsyn).
Future of Leadership based on contractual relationships Leadership empowered by covenantal
leadership has a bleak future for society and mankind relationships has a great future for society
owing to their exclusive, bureaucratic, and mankind owing to their inclusive,
domineering, and colonizing nature. transparent, humanizing, equalizing,
Capitalism may soon breakdown under such compassionate, spiritualizing and
relationships. empowering nature. Capitalism can thrive
and prosper under such relationships.

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End Notes
Chapter 05
The Ethics of Corporate Critical Thinking
Executive Summary
“The unexamined life is not worth living” (Socrates). That is, without critically inquiring into the
knowledge of life which is well-being and valuable, life is not worth living. Critical thinking questions
existing theories and their unexamined and obsessive assumptions and generalizations, constraints
and “best” practices of the prevailing system of management, and tries to replace them with more
valid assumptions and generalizations that uphold the dignity, uniqueness and inalienable rights of
the individual person and the community. Better outcomes result from asking the right questions
than from having the right answers. In the diverse, pluralist cultural environment of today, the
promise of a truly generative dialogue among Occidental (Western) and Oriental (Eastern) cultures
and civilizations holds great hope for the future. Critical thinking is an “inclusive” thinking system
that can facilitate this dialogue such that all of us have a meaningful space and place in this universe.
After defining critical thinking and arguing its importance for executives, this Chapter introduces
critical thinking in three parts: Part One: Various Approaches to Critical Thinking; Part Two:
Major Theories of Critical Virtuous Thinking, and Part Three: Critical Thinking as applied to
corporate Problem Solving. Several contemporary business cases will be invoked to illustrate the
need, nature and scope of corporate critical thinking.

Introduction
The word critical (from the Greek word kritikos) means to question, to make sense of, or able to
analyze. It is by questioning, making sense of things, events and people, and by analyzing them that we
examine and improve our thinking and the thinking of others (Chaffee, 1988, p. 29). The word critical
is also related to the word criticize that implies questioning and evaluation in a constructive way. Thus,
at an initial and etymological level, critical thinking is thinking that questions and challenges our past
and present thinking on subjects and objects, their properties and events. Critical thinking is
constructive thinking about the world of ours that questions and evaluates its operations, history and
management.

The word “critical” is closely associated with the concept of a threshold or a critical point. For
instance, in physics, the critical point is the point above or below which certain physical changes will
not occur. In thermodynamics, the properties of the substance at this point are called its critical
constants. There are numerous other instances of this application of the word critical as “limiting.”
Applied to business knowledge, critical point would mean a critical threshold beyond which we want
the students to emerge free from their “critical constants” of management orthodoxy, apathy and
malaise, value-hibernation, self-centered rigidity and individuality to thinking for others, for the six
billion that are poor in the world, the masses that our business education or capitalist system does not
directly benefit.

Critical thinking thinks beyond the short-term to the long-term goals and consequences of our
thinking, decisions, choices and actions. Critical thinking, therefore, thinks beyond revenues, market
share, profits and shareholder value to other bottom lines that include the intended and unintended
long-term consequences of corporate decision-making, strategies and implementations.

Critical thinking is a discipline that questions and challenges “our prevailing system of
management” and its assumptions and generalizations. In the process, it is an attempt in transforming
the prevailing system of management. Deming believed that a “common system of management”
governed our modern institutions, and, in particular, formed a deep connection between work and

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school. From early infancy, we have been socialized in ways of thinking and acting that are embedded
in our most formative institutional experiences. The relationship between a boss and subordinate is the
same as the relationship between a teacher and student. The teacher sets the goals, the students respond
to them. The teacher has the answer, the students work to get the answer. Students know when they
have succeeded because the teacher tells them so. By the time the children are ten, they all know what it
takes to get ahead in school and please the teacher – a lesson they carry forward in their later academic
and management careers. Hence, Deming would often say, “We will never transform the prevailing
system of management without transforming our prevailing system of education. They are the same
system.” In a broader role, critical thinking questions and challenges our current system of education.

Why do we need Critical Thinking?

We need to own and respond to problems that we are or that we create, before we pass the buck
on to others. Stephen Covey said it eloquently: “If you think the problem is out there, that very
thought is the problem.” Lack of critical thinking makes us either incapable of recognizing problems
and their severity in ourselves or the organizations we work for, or we flatly trace their origin to
others.

We have never critiqued our education and learning systems: what are we teaching, how do we
teach, what do students learn, how do they use this knowledge, and what are the long term good
outcomes of our education systems on society? This is critical thinking and its application. David
Orr (1991), an environmental educator, reminded us long back that our education system could
unwittingly create monsters like Hitler and Stalin. These perpetrators of the Holocaust were heirs of
Kant and Goethe. In most respects the Germans were the most educated people on earth, but their
education did not serve them as an adequate barrier to barbarity. This is lack of critical thinking of
our education system.

David Orr (1991) argues that education is no guarantee of decency, prudence, or wisdom. More
of the same kind of education will only compound our problems. This is not an argument for
ignorance, but rather a statement that the worth of education must now be measured against the
standards of decency and human survival - the issues now looming so large before us in the decade of
the 1990s and beyond. It is not education that will save us, but education of a certain kind. It should
be an education that can stand the scrutiny of critical thinking.

The role of a teacher, a professional role, can be kept analytically separate from the role of a
scholar. Scholarship implies realized expertise or developing expertise in one's field, regular
updating of one's skills, intellectual honesty and respecting intellectual property. The role of a
teacher is to communicate one's expertise and skills, and advances of knowledge to one's students.
Both roles assume and imply ethical responsibilities.

Critical filtering of one's knowledge before it is communicated to others is important. Critical

thinking (CT) makes us good and professional scholars that become the "conscience" of our discipline
or field. A good scholar owes it to his/her profession to be its own objective critic. A scholar who
loves his/her profession is not afraid to criticize it. A good person who loves his/her institution is not
afraid to criticize it.

A Moral Canvas for Critical Thinking

In writing a preface to the new edition of The Fifth Discipline, Peter Senge (2006, p. xiv-xv)
summarized the maladies that afflict most organizations today. We capture and expand them in Table
5.1. Table 5.1 is fodder for critical thinking. Critical thinking questions obsessive generalizations,
constraints and “best” practices of the prevailing system of management, and tries to replace them with
more valid assumptions and generalizations that uphold the dignity, uniqueness and inalienable rights of
the individual person and the community. The old prevailing system of management focused on the

100
shareholders raising their share value, and most often, at the expense of individual, social and natural
capital. Following this prevailing system of management, the gaps between the poor and the rich, the
prosperous and the marginalized are widening in almost every country of the world.
An alternative to the prevailing system of management must be based on human dignity and
equality, self-respect and self-esteem, dialogue and sharing, love rather than fear, curiosity rather than an
insistence on “right” answers, transparency rather than secrecy, and executive privilege, a shared vision
and a shared ongoing journey rather than a fixed destiny of growth targets, and learning rather than on
controlling. Senge (2006, p. xviii) believes that the prevailing system of management is, at its core,
dedicated to mediocrity. It forces people to work harder and harder for the corporation and its
shareholders, while failing to tap the spirit and collective intelligence that characterizes working together
at their best. In the diverse, pluralist culture environment, the promise of a truly generative dialogue
among cultures and civilizations holds great hope for the future. Critical thinking can facilitate this
dialogue such that all of us have a meaningful place in this universe.

< Table 5.1 about here >

Case 5.1: GAIL Pipeline Blast Kills

An explosion in a Gas Authority of India Ltd (GAIL) pipeline around 5:00 am, Friday, June 27, 2014 near
Nagaram Village, East Godavari District, Andhra Pradesh, India killed at least 20 people while injuring 18
others and damaging 50 houses. Massive fires gutted houses, vehicles and coconut orchards, leaving a trail of
destruction in the village. Coconut orchards were reduced to ashes and several other crops were damaged too.
Over 300 birds which included several species like cormorant, pond heron and common crane (Eurasian crane)
were also killed. The injured were rushed to different hospitals nearby in the district. Chief Minister of Andhra
Pradesh (AP), N. Chandrababu Naidu, who was then in Delhi, and Petroleum Minister Dharmendra Pradhan
visited Nagaram and also the hospitals where the injured were being treated.

Once the blast was reported there was almost no time to act as the damages were caused almost
instantaneously. Though GAIL officials were successful in cutting off the gas supply to the suspect pipeline
within 15 minutes, this duration was enough for the crisis to wreak enormous damage to the area affected, both
in terms of losses to the local populace as also destruction of property and resources. GAIL dispatched multiple
teams to undertake foot-patrol of every inch of its pipeline network in the KG basin to check on its deficiencies.

Allegedly, GAIL had not paid attention to the many complaints on gas leaks that were made by the
Nagaram villagers. They said that the pipelines were laid 15-20 years ago and had become corroded and
defective. The Oil Industry Safety Directorate (OISD), under the petroleum ministry, carries out periodical
safety checks and audits of oil and gas installations across the country. Apparently, they did not detect the
GAIL pipeline defects near Nagaram village. Moreover, OISD has only powers of recommendation. It is not a
statutory body. Often, its recommendations have not been taken seriously. There have been talks now of giving
it such an authority but it has not materialized yet.

GAIL is a Government of India undertaking and is India’s largest state-owned natural gas processing and
distribution company. It procures natural gas from ONGC, Reliance Industries and Cairn Energy. It has 850 kms
of gas pipelines in Andhra Pradesh and supplies natural gas to 37 industrial units. A winner of the prestigious
award Maharatna, Gail is known for high standards in terms of quality. As per industry rules, GAIL did follow
all statutory and safety guidelines in their operations. They also had ensured that the pipeline had been certified
safe by various national and international agencies. The probability of a leak being present in their pipeline for
so long without any action being taken would therefore have been very small.

There are over a dozen gas gathering stations in the area. GAIL supplies gas to 37 industrial units in
Andhra Pradesh, including the Lanco Kondapalli power project near Vijayawada. Operations at Lanco,
however, were not affected as they resumed gas supply through an alternative pipeline. Supply to the 1,466
megawatt Lanco power station was restored within a few hours. GAIL supplies 0.7 million British thermal units
(BTU) a day to the Lanco plant.

The sudden stoppage of supply of natural gas to industries in Kakinada from the Oil and Natural Gas
Corporation’s (ONGC) Tatipaka terminal seems to have an adverse impact on the urea production. However,
absence of the supply of natural gas has forced the Nagarjuna Fertilizers and Chemicals Limited (NFCL), the

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largest manufacturer of fertilizer, to stop production forcibly in its plants located in the city. The firm that
produces 4,600 tons of urea a day was in idle mode for the next two weeks, which cost Rs. 1.5 crore a day in
terms of halted production.
GAIL faced a dilemma as to how to address this situation in the future. Even though there is a valve at
every 40 km of the pipeline and it gets shut in case of a leak, layout of pipelines through the residential area is
protested by people. Though they re-established supply to the various industries in the neighboring regions
through an alternate pipeline quite briskly, their goodwill and industry standing had taken a battering. Further
the blast also resulted in major capital losses through the destruction of the pipeline and loss of the gas that is
transported.

There were complaints of gas leakages by the Nagaram villagers but GAIL authorities did not pay heed to
these complaints. They said that the pipelines were laid 15-20 years ago and had become degraded and
defective. The Petroleum Minister Pradhan has ordered an inquiry into this debacle by a committee headed by a
joint secretary and with representatives from the Hindustan Petroleum Corporation, the Oil Industry Safety
Directorate (OISD), and the National Disaster Management Authority.

A public interest litigation was filed in the High Court seeking directions to the GAIL to shift the gas
control station (GCS) located in the midst of a habitation to an isolated place with immediate effect. The
Hyderabad high court on Monday, June 30, 2014 directed the Central government to file its reply within three
weeks to a petition that sought the shifting of gas collecting station (GCS) and pipelines of GAIL from Nagaram
area of East Godavari district.

The Oil Industry Safety Directorate, under the petroleum ministry, carries out periodical safety checks and
audits of oil and gas installations across the country. In a late-evening press release on Friday, June 27, 2014,
ONGC said there could be minor gas leaks in the trunk line, which due to zero wind in the vicinity get settled
over the area. During the early hours, when someone lights a stove for daily chores, the settled gas could trigger
fire amounting to a pipeline explosion. The GAIL terminal was closed instantly, but it took 15 minutes for the
gas source to cease. In the intervening time, the remaining gas in the pipeline might have caught fire and caused
the burst of the GAIL’s trunk line.

References:
GAIL Pipeline Blast Kills 15. Business Standard, Saturday, 2014, June 28, Kolkata, p. 1, 12.
Available at http://www.thehindu.com/news/national/andhra-pradesh/gail-gas-pipeline-leakage-impacts-urea-
production/article6221809.ece
Pearson, C. M. & Clair, J. A. (1998). Reframing Crisis Management. Academy of Management Review, 23(1), 59-76.

Ethical Questions:

1. Define the GAIL Pipeline disaster as an ethical organizational crisis. Describe its antecedents, determinants,
symptoms, concomitants and consequences in relation to GAIL.
2. Some crises can be recurrent and non-preventable, whether they are system breakdowns, human interventions
or natural disasters. To which type does GAIL Pipeline blast belong and why? To what extent is ONGC’s
explanation of this blast a crisis that is recurrent and non-preventable, and why?
3. Other crises are rare but their organizational impact is high. Effective management of such a crisis is difficult
and often partial. Does the GAIL Pipeline blast belong to this category?
4. In general, most organizational crises imply and/or accompany losses of capital, human resources, revenues and
reputation. Assess these losses for the Nagarjuna village and for GAIL. Assess GAIL’s moral responsibility to
prevent such disasters.
5. Hence, argue, develop and justify an ethics of organizational crisis by content, goals and objectives. Compare it
to the Bhopal Spill of December 2-3, 1984.
6. Apply critical thinking (CT) principles: which did GAIL violate most and why?
7. Apply ethical theory principles of teleology, deontology, distributive justice, and corrective justice: which ethical
theory and its principles did GAIL (together with OISD, PESO and ONGC) compromise most and why?
8. Hence, how would you detect, avert and preempt such disasters in the future, especially in relation to the
powerless poor villages of India?

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Case 5.2: Andy Fastow’s Critical Thinking after his Prison Sentence
Experience
For six years in a row Fortune magazine named Enron the “Most Innovative Company,” and Fastow
himself was praised for his creative use of structured finance and off-balance sheet accounting.
Released from the Prison in 2011 after serving a sentence for six years, Andy Fastow, ex-CFO Enron,
addressed University of New Mexico (UNM) B-students. The presentation, titled “Rules versus Principles,”
was put on by the Daniels Fund Ethics Initiative at UNM, which supports business ethics education. In a rare
public lecture, Andy Fastow held up his “CFO of the Year” award in one hand, and his federal prison ID card
in the other and said: “I got both of these for doing the exact same thing,” he said before a crowd of eager
UNM business students.

Fastow went on to talk about his role in the biggest corporate scandal of the century and the lessons he
learned about the ethics of business. In 2001 the Securities and Exchange Commission investigated Fastow’s
role in hiding massive amounts of Enron’s debt using off-balance sheet accounting and special-purpose
entities. Fastow was eventually convicted of fraud, money laundering and conspiracy, and was forced to
forfeit nearly $24 million in assets. He was sentenced to six years in federal prison and was released in
December 2011.

The collapse of Enron was a dramatic example of the failure of business people to put principles before
rules, Fastow explained — a mistake that corporations and governments still make to this day. “I didn’t set
out to commit fraud,” Fastow said. “I cannot remember any time that I ever considered I was committing
fraud.”

Fastow described the strange world that a CFO operates in, a gray area where the rules set by regulators
are complex, vague and sometimes non-existent. This gray area can be seen as an opportunity, a chance for
businesses to interpret the rules to suit their needs, he said. In these situations it is incredibly important for
individuals and organizations to recognize unethical behavior and determine the best ways to proceed, he said.
“I thought I was so smart; I thought I was a hero for bending the rules,” Fastow said. “It comes down to
individual people making a decision — we always asked ‘is it allowed?’ not ‘is it the right thing to do?’”

“Every day, corporate accountants cut and paste numbers in spreadsheets to magically turn problems into
profits, kicking the can down the road until their problems become unmanageable,” he said. “The obsession of
the corporate world with short-term profits, huge bonuses and stock prices has created a dangerous culture in
which business people look for every shortcut and loophole they can find to make their numbers, despite the
long-term consequences,” he said.

 His message to the students was simple: rules and regulations are not enough. Only employees can make a
difference by standing up and saying “no” when they encounter unethical practices in their business
careers.
 “You can always find an attorney to get you the answer you want. You can always find an accountant to
get you the answer you want,” Fastow said. “There’s only one gatekeeper — you.”

Source: Baca, Jonathan (2014, November 25). Ex-Enron CFO gives ethics lecture. DailyLobo.Com. Retrieved from
http://www.dailylobo.com/article/2014/11/11-25-enron-cfo-speech. Jonathan Baca is the news editor at the Daily
Lobo. He can be contacted at [email protected], or on Twitter @JonGabrielB.

Part One: Various Approaches to Critical Thinking

The concept of “critical thinking” is variedly defined in the relevant literature. We select a few
thematic views of critical thinking, especially as they relate to business and ethics of business education.

Critical Thinking as Making Better Sense of the World around Us

Chaffee (1988, p. 26) views critical thinking (CT) as an active and organized effort to make a better
sense of the world around us. Thinking represents “our active, purposeful, organized efforts to make

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sense of the world.” Thinking critically is “our active, purposeful, organized efforts to make sense of
the world by carefully examining our thinking and the thinking of others in order to clarify and improve
our understanding” (Chaffee, 1988, p. 27). Thinking is the way we make sense of the world; thinking
critically is thinking about our thinking so that we can clarify and improve it.

Critical thinking is not simply one way of thinking. It is a total holistic approach to understanding
how we make sense of the world and the universe. When we think critically, we are actively using our
intelligence, knowledge and skills to effectively deal with our life’s situations and ourselves (Chaffee,
1988, p. 30). Critical thinking involves taking an active attitude toward the situations encountered in
life. Thinking critically does not mean simply having thoughts and waiting for things to happen. This
would be passive thinking – we would be letting events, others and their thinking to control us and
define us. Watching too much television or indulging in social media, for instance, is passive thinking;
we allow ourselves to be influenced by the thinking and acting of others. Critical thinking is active,
proactive and interactive dialogue with our world of people, properties and events.

Critical Thinking as Reflective Thinking

According to Paul and Elder (2002), critical thinking is reflective thinking or thinking critically.
Thinking critically is reflection – to think back on what we are thinking or feeling. It is thinking back on
thinking. To think critically is to think carefully about our thinking and the thinking of others. It is a
serious study of thinking. It is serious thinking about thinking. You become the “critic” of your own
thinking.

CT is to improve your thinking. “Critical thinking is the disciplined art of ensuring that you use the
best thinking you are capable of in any set of circumstances” (Paul & Elder, 2002, p. 7). Our thinking
influences everything we do, want or feel. Critical thinking refuses biases, prejudices or stereotypes,
false beliefs, myths or illusions to influence our thinking.

There is what we might call a first-order thinking that is our everyday thinking, spontaneous and
non-reflective thinking. It contains insights, prejudices, truth and errors, good and bad reasoning,
misconceptions and ideological rigidities. Critical thinking is second-order thinking: it reflects on,
reconstructs, analyzes and assesses the first-order thinking (Paul & Elder, 2002, p. 14). Critical thinking
is “self-directed, self-disciplined, self-monitored, and self-corrective thinking. It presupposes assent to
rigorous standards of excellence and is a careful command of their use. Critical thinking implies and
empowers effective communication and problem-solving abilities” (Paul & Elder, 2002, p. 15).

Critical Thinking as Questioning and Challenging

According to Collins (2001), critical thinking (CT) is questioning and challenging what you learn.
Critical thinking is letting students question and challenge what you teach. The best students are those
who never quite believe their professors (Collins, 2001, p. 16).

CT does not reject the data merely because one does not like what the data implies. CT confronts
the implications. CT does not reject the data merely because it rejects the theory one espouses. CT
questions one’s espoused theory. CT does not reject the data merely because it rejects one’s
assumptions and presuppositions. CT questions and challenges one’s assumptions and presuppositions
about oneself, the society and the world.

CT does not reject the theory merely because the data does not confirm it. CT sifts the data and
questions its reliability, validity and objectivity or veracity. CT is prepared to revise the theory if the
data justifies it. CT does not generalize when there is no evidence to back the generalization.

Critical Thinking as Spiritual Intelligence

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 According to Stephen Covey (2004), the four magnificent parts of our nature consist of body, mind,
heart, and spirit that have corresponding four capacities or intelligences: physical or body intelligence
(PQ), mental intelligence (IQ), emotional intelligence (EQ) and spiritual intelligence (SQ).

PQ is something that happens within our body controlling the respiratory, circulatory, metabolic,
nervous and other vital systems. PQ constantly scans our environment, adjusts to it, destroys diseased
cells and fights for survival. PQ controls and coordinates the function of roughly 7 trillion cells of our
body with a mind-boggling level of biochemical and biophysical coordination that controls our reflexes,
instincts, drives, passions, habits, manual skills and body routines. PQ manages the entire system, much
of it unconscious. IQ or mental intelligence is our ability to reason, analyze our reasons and reasoning,
think abstractly, use language, visualize, conceptualize, theorize and comprehend. Emotional
intelligence (EQ) is one’s self-knowledge, self-awareness, social sensitivity, empathy and ability to
communicate successfully with others. It is a sense of timing and social appropriateness, having the
courage to acknowledge weaknesses, and express and respect differences. Abilities such as leadership,
successful communications and relationships are primarily a function of EQ than IQ (Covey, 2004, p.
50-51).

Spiritual intelligence (SQ) is today becoming mainstream in scientific inquiry, philosophical and
psychological discussion. SQ is the central and the most fundamental of all four intelligences because it
becomes the source of guidance of the other three. SQ represents our drive for meaning and connection
with the infinite. SQ is “thinking with your soul” (Wolman, 2001, p. 26) and represents the ancient and
abiding human quest for connectedness with something larger and trust-worthier than our world and us.
Unlike IQ that computers and robots have, and EQ that higher mammals possess, SQ is uniquely human
and most fundamental. It stands for our quest for our longing for meaning, vision and value; it allows us
to dream and to strive; it underlies the things we believe in and hope for; it makes us human.

SQ relates to the whole reality and dimension that is bigger, more creative, more loving, more
powerful, more visionary, wiser, and more mysterious – than the materialistic daily human existence.
While IQ relates to becoming more knowledgeable, PQ to becoming healthier and strong, EQ relates to
becoming more relational and sensitive, and SQ relates to becoming a person (see Rogers, 1961).

High IQ is not enough: brilliance is not necessarily humanizing. High PQ is not enough: athletes,
boxers and heavyweight fighters have it and it did not necessarily humanize them. High EQ is good but
not sufficient: it provides passion but not humanity. High IQ may provide vision, high PQ may imply
discipline and high EQ may mean passion. Adolph Hitler had all three but produced shockingly
different result (Collins, 2001, p. 69). High IQ, EQ and SQ is a great combination: Nelson Mandela,
Martin Luther King, Jr., and a few others had them. High IQ, PQ, EQ and SQ is a perfect combination.
The prophets and patriarchs of the Old and New Testaments are good examples. A contemporary
example is Mohandas Gandhi or Mother Teresa.

Critical Thinking as Valuing Resources Hierarchically

In discussing information privacy, De George (1999, p. 346-350) distinguishes between facts,

data, information, knowledge, and understanding. These distinctions help in clarifying the language
of executive ethics.

 A fact is defined as "a statement of the way the world is" (p. 348), the way of the world being
independent of our knowledge.
 Knowledge can be of facts, known, or at times unknown but speculated.
 Understanding consists of knowledge that is integrated in some unified way and evaluated.
 Information is sometimes used to include data, facts, and knowledge, as when we speak of
information systems.
 Data: Information that is entered or fed into the (computer) information system by way of
codes as numbers, words, letters or symbols.

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 Any individual may appropriate facts without depriving anyone else from them. In this sense,
facts, information and knowledge are infinitely shareable. However, the discovery of some facts,
collecting and sorting them, often involves time and expense, and this provides a basis for claims of
“intellectual property” in relation to some "facts" as proprietary, at least for a short time-period. That
is, while facts are common property and cannot be owned, data representing facts may be owned to
the extent that one painstakingly collected and verified facts and entered such facts into the computer
as classified and organized data. Data are not owned as tangible objects are owned; but printout of
data can be owned to the extent one has collected, organized and classified them and made available
in a package form usable for a given target market.

Facts cannot be falsified, but data can be. Data may represent falsehood as well as facts. Such
distinctions have legal implications. For instance, to what extent are mailing lists (collection of
names, addresses, social security numbers, credit card numbers, and the like) stored and sorted in
computers by an information broker are data that can be owned, and hence sold as a commodity?
[These problems deal with the Ethics of Consumer Privacy; see, for example, Mascarenhas, Kesavan,
& Bernacchi (2003)].

Critical Thinking should distinguish between the following layers of intellectual resources
(Mascarenhas, 2011):

 DATA/EVENTS: facts, figures, events, anecdotes, vignettes, information, narratives,

descriptions, history and statistics.

 INFORMATION/MEANING: Analysis and interpretation of “data” in terms of finding trends,

patterns and connections between “data,” deriving inferences or conclusions from “data,” and
thus, seeking meaning and significance of “data.”

 EXPERIENCE/KNOWLEDGE: Based on “analysis” and interpretation of data from various

fields, disciplines and domains one derives intelligent (or empirically verifiable) propositions,
hypotheses, connections and conclusions, and accordingly, builds theories, axioms, and
paradigms. Knowledge can grow from theory that is verified by data (deductive: theory to data)
or from data that grounds theory (inductive: data to theory), and based on both theory and data
to forecasting the future (predictive: from the past to the future).

 VALUES/PRINCIPLES: what are the lasting, enhancing and humanizing values or principles in
the data, and our analysis of and knowledge from it, which will make life better for all? What
are also the temporal, degrading and dehumanizing values that could make life worse for all?

 WISDOM/FREEDOM: Based on data, experience, analysis, knowledge and values, one finally
derives or absorbs and cumulatively stores wisdom that discerns what is truth from error and
falsehood, what is right from wrong, good from evil, just from unjust, ethical from the unethical,
moral from the immoral, virtue from vice, grace from sin, life from death, lasting values from the
ephemeral, and from earth to heaven, and from time to eternity.

 ETHICAL AND MORAL STRATEGY: Based on right discernment derived from wisdom of the
previous stage, we should have the moral courage and pertinacity to speak and affirm the truth
while denouncing falsehood, of doing what is right and avoiding what is wrong, of doing what is
good, just, and fair and rejecting what is wrong, unjust and unfair, of doing what is ethical and
moral and desist from what is unethical and immoral, of pursuing virtue and resisting vice, of
seeking grace and life as opposed to sin and death, and persistently seek perennial and universal
values while downplaying the ephemeral and temporal, and thus, peacefully and collectively
journey from earth to heaven, from time to eternity.

Critical thinking based education should lead us from data/events to analysis that generates
information and meaning, from information and meaning to experience and knowledge, from
experience/knowledge to lasting values and universal principles, from values and principles to
wisdom and freedom to pursue wisdom, and from wisdom to ethical and moral actions and outcomes.

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 Mere increase in knowledge does not imply a proportionate increase in human goodness, argues
Orr (1991). The current information explosion in terms of increased data, numbers, words, paper and
the like does not imply an increase in knowledge, wisdom, and virtue. Such learning does not make
us better people, ethical people, especially if the knowledge of the good, of ecology, of land health,
etc., is excluded from our curricula by default, if not by design. Our education may make us ignorant
of things we must know to live well and sustainably on the earth.

Good critical thinking (CT) is many sequential intellectual activities such as analyzing,
conceptualizing, defining, examining, inferring, listening, questioning, reasoning and synthesizing,
doing and reflecting, growing and becoming. All these activities combined will help us to evaluate
information, and evaluate and refine our thought processes in a disciplined way. Thus, CT helps us to
think more comprehensively, and more ably to identify and reject false ideas and ideologies, our flaws
of thinking, our biases and prejudices of our culture and upbringing, our assumptions, presumptions
and presuppositions of cherished doctrines and beliefs, and thus to seek to be guided by true
knowledge and evidence that fits with reality, and even refutes our cherished beliefs and dogmas.

CT is curiosity that widens our perspective and knowledge; it empowers us to do all the work
required and to keep ourselves properly informed. CT is healthy skepticism that does not discriminate
against people but doubts and suspends judgment in order to understand people better, to explain
things better by testing, evidence, factual claims, and sound reasoning.

CT does not seek 100% clarity and certainty; it can handle uncertainty of knowledge, ambiguity
of not-knowing, ambivalence of goals and objectives, and tolerate current levels of ignorance. CT
waits for valid evidence, for evidence-based answers, and awaits further research from scientists and
scholars. CT does not rely on only one solution to a problem, but investigates multiple problem
formulations and multiple solutions, and finally, converges to one solution based on solid irrefutable
evidence. Thus, CT avoids errors (Types I, II, III and IV) and flawed thinking. CT is prepared to
make unavoidable mistakes and absorb risk so that we can learn from our mistakes. CT takes the risk
of being wrong, is prepared to be wrong. If we are not prepared to be wrong, we are not prepared to
be creative.

In general, Type I error refers to rejecting a hypothesis, candidate, product or a service when it is
good or true; Type II error relates to accepting a hypothesis, candidate, product or a service when it is
bad or false; Type III error is to define a problem wrongly in terms of what is good or false in judging
a hypothesis, candidate or statement as good or false, and Type IV error is finding a wrong solution to
a right problem.

Type I is producer risk (e.g., a good but rejected product or market is a producer’s loss); Type II
error is consumer risk; e.g., a wrong product or service accepted and sold can harm consumers. Type
III and Type IV errors are social risks or scientific flaws, as they affect consumers and producers,
markets and industries. Good critical thinking seeks to reduce all four types of errors and their
associated producer and consumer risks.

Critical Thinking as Building on your Strengths

Guided by the belief that good is the opposite of bad, or right the opposite of wrong, we have
unduly focused on our faults and failures in building our strengths. For instance, doctors study
diseases and its symptoms in order to learn about health; psychologists investigate sadness in
exploring joy; marriage therapists study causes of divorce in identifying characteristics of a happy
marriage; in schools and workplaces we are advised to look into our faults and weaknesses assuming
that we can build strengths by eliminating weaknesses. Buckingham and Clifton (2001) disagree with
this approach. According to these authors, faults and failing deserve investigation, but they reveal

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little about strengths. Strengths have their own patterns. To excel in your chosen field and to find
lasting satisfaction in doing so, you will need to understand your strengths and their unique patterns.
HR managers must not only accommodate the fact that each employee is different, they must
capitalize on these differences. They must watch for clues to each employee’s natural talents and then
position and develop each employee so that his or her talents transform into bona fide strengths. By
changing the way you select, measure, develop and channel the careers of your people, your
organization can be revolutionary and could build your entire enterprise around the strengths of each
person. To spur high-margin growth and thereby increase their value, great organizations need only
focus inward to find the wealth of unrealized capacity that resides in every single employee
(Buckingham & Clifton, 2001, p. 6).

Most organizations are built on two flawed assumptions about people: a) Each person can learn to
be competent in almost anything; b) Each person’s greatest room for growth is in his or her areas of
greatest weakness. Thus, if everyone can learn to be competent in almost anything, those who have
learnt the most must be most valuable, and hence, by design, the organization gives the most prestige,
respect and promotions based on the skills or experiences they have acquired in the company. Hence,
organizations spend more money in training people once they hire them than on selecting them
properly in the first place. They spend most of their training time and money on trying to plug the
gaps in employee’s skills or competencies, calling the latter weaknesses as “areas of opportunity.” In
training the incompetent, organizations prescribe work styles by emphasizing on work rules, policies,
procedures, and behavioral competencies. Most organizations take their employees’ strengths for
granted and focus on minimizing their weaknesses. Most HRD learning-experiments focus on fixing
each employee’s weaknesses than building on their strengths. Most often, however, this is not
human development, but just damage control. Damage control is a poor strategy for elevating either
the employee or the organization to world-class performance.

Buckingham and Clifton (2001, p. 8) offer alternative counter-assumptions: a) each person’s

talents are enduring and unique; b) each person’s greatest room for growth is in the areas of his or her
greatest strength. These two assumptions should guide HR managers to select, develop, measure and
channel the strengths and careers of their people. These assumptions should explain why great
managers are careful to look for talent in every role, why they focus performance on outcomes than
on work styles, why they treat each person differently, and, finally, why they spend most time with
their best people.

Hence, in this context, a critical thinking exercise should start with yourself: What are my
strengths? How can I capitalize on them? How can I combine them? What are my most powerful
combinations? Where do they take me? The real tragedy of life is not that each of us does not have
enough strengths but that we fail to use the ones we have. Benjamin Franklin called wasted strengths
“sundials in the shade.” Hence, identify your sundials in the shade. Look inside yourself and identify
your strongest strengths, reinforce them by practice, learning and training, and then carve out a role
that draws on these strengths every day. When you do, you will be more productive, more fulfilled,
and more successful (Buckingham & Clifton, 2001, p. 21).

Tiger Woods had a different strength – his length with his woods and his irons and tremendous
accuracy in his putting. His ability to chip out of a bunker was no good; he did not need it either; and
much less did he cultivate it. Instead, he deliberately played to his strengths. He loved what he did
because he deliberately worked on his strengths.

Bill Gates’s strength was at taking information technology (IT) inventions to the market and
transforming them into user-friendly applications and marketing them effectively. His ability to
maintain and build an enterprise in the face of legal and commercial assault was his weakness – he let
Steve Ballmer handle that.

Talents, knowledge and skills are raw materials to building strengths; but most important among
these are talents. Talents are innate, while knowledge and skills can be learned and cultivated. You

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can never possess strengths (e.g., salesmanship, closing a sale) without requisite talents (e.g., gift of
persuasion, talent for negotiation). The key to building your strengths is to identify your dominant
talents and then refine them with knowledge and skills. Skills determine if you can do something,
whereas talents reveal how well and how often you do it.

Part Two: Some Theories of Critical Thinking

Critical thinking is a nascent science and tradition. Part One has suggested various approaches to
critical thinking (CT). We now present some doctrines that could be used as emerging theories of CT.

Critical Thinking and Defensive Routines

[See Peter Senge (2006), The Fifth Discipline, p. 232-240]

For more than forty years, Chris Argyris and his colleagues have studied the dilemma why bright
capable managers often fail to learn effectively in management teams. Their work suggests that
success of team learning and productivity is dependent upon how a manager faces conflict and deals
with the defensiveness that invariably surrounds conflict. Argyris (1985) coined the concept in this
regard and proposed the theory of “Defensive Routines” that can help us further hone our critical
thinking skills. Writes Argyris, “We are programmed to create defensive routines, and cover them up
with further defensive routines. … This programming occurs early in life.”

Defensive routines are mental models that express our entrenched habits of thinking, deciding and
acting that we use to protect ourselves from the embarrassment and threat that come with exposing
our thinking. Defensive routines are our deepest assumptions that not only defend us against pain but
also keep us from learning about the causes of pain. The source of our defensive routines is the fear
of exposing the thinking that lies behind our views. “Defensive reasoning” protects us from learning
about the validity of our reasoning. We often feel that exposing our thinking is very threatening
because we are afraid that people will find flaws and errors in it. This perceived threat from exposing
our thinking starts early in life at home, and is steadily reinforced in schools, colleges and the
workplace. Other things being equal, most of our defensive routines surround our thinking about
religion, caste, color, creed, races, ethnicity, gender and age discrimination, cultural enclaves, and
national exclusivity.

Top executives or senior managers, who pride themselves as skilled communicators and risk
takers, may be, in fact, so brilliant at articulating their vision that they intimidate everyone around
them. Consequently, their subordinates rarely challenge their views publicly. Further, people feel
afraid to express their own views and opinions around them. Such CEOs may not see their own
entrenchment and forcefulness as a defensive strategy, but they function in exactly that way. This
strategy has become the CEOs’ most effective defensive routine. Presumably, the CEOs hoped to
provoke others into expressing their thoughts, but their overbearing behavior prevented them from
doing so, thereby further protecting their views from challenge.

Defensive routines are a response to a problem. In general, a problem is a need to learn, arising
from the “learning gap” between what a company knows and what the company should know. The
“fundamental solution” is objective inquiry that eventually generates new understanding about the
problem and new behavior – that is, organizational learning. However, the need for learning also
creates a threat, which, in turn, leads to “symptomatic solutions” or “quick-fix band aid solutions”
prompted by defensive routines that apparently reduce the learning gap by reducing perceived need
for learning.

Problems caused by defensive routines compound in organizations where to have incomplete or

faulty understanding is a sign of weakness or incompetence. Deep within the mental models of
managers in many organizations is the belief that managers must know what is going on. All

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managers are expected to know the causes of problems within their organization. Some managers
respond to this expectation by internalizing an air of confidence that makes their subordinates believe
they know the right answers to the most important problems in their division or company. Often, to
protect their air of confidence, they will close themselves to alternative views, become rigid, and
make themselves un-influenceable, even though, deep down they may be fully conscious of the
uncertainty in their understanding of the problems and the solutions. Alternatively, to maintain a
façade of confidence they may even obscure their ignorance. In short, managers who must take on the
burden of having to know the answers become highly skilled in their defensive routines. They play
political games in their organizations. Defensive routines are like diseases – the top executives carry
them, and the organizations are the hosts. Soon the organizations are infected, and they too become
carriers.

To illustrate how defensive routines function within an organization, consider the case of ATP
Products, a young division of an innovative and highly decentralized company. Tim Tabor, 33, was
the divisional president, deeply committed to the corporate values of freedom and local autonomy.
He believed strongly in the state-of-the-art technology products (e.g., new printed circuit boards) of
ATP, rallied tremendous support from his subordinates, who in turn shared Tim’s enthusiasm for their
prospects. Divisional bookings grew rapidly – 30% to 50% each year until sales reached $50 million
in 1994. Accordingly, ATP doubled its capacity. In 1995, with the disastrous downturn in the
minicomputer industry, ATP experienced a 50% shortfall on projected bookings. The industry did not
bounce back in 1996. Tim Tabor was fired from division president to an ordinary engineering
manager.

What happened? Tim’s locked-in strategy was flawed owing to several defensive routines. His
team had set aggressive growth targets, in part, to please the top management; he strongly believed in
the product without letting his beliefs challenged; meeting these targets he put too much pressure on
his subordinates that they had no time to question what they were doing; and they relied on a few
major customers upon whom they became very dependent. When the business of these customers
failed, ATP was doomed.

Why did not the top management at ATP sanction a strategy that was so vulnerable, and force
Tim to diversify its customer base? The top management had its own defensive routines. Although
the CEO had recognized the problem of the narrow customer base, he did not want to violate the
corporation’s decentralized policy or interfere with the forceful strategy of the young ATP division
president. Moreover, Tim had questions that he was reluctant to discuss with his superiors, as he did
not want to let them down, nor was he prepared to face criticism from them. Hence, there were
defensive routines throughout the organization that did not enable free inquiry and reflection.

The more effective defensive routines are, the more effectively do they cover up underlying
problems, the less effectively do you face the problems, and the worse the problems tend to become.
The paradox, writes Argyris, is that when defensive routines succeed in preventing immediate pain
they also prevent us from learning how to reduce what causes pain in the first place. Defensive
routines are “self-sealing” – they obscure their own existence. If you cannot easily identify or state
your defensive routines, you do not have leverage for reducing them either.

One of the most useful skills of a learning team is the ability to recognize when we are not
reflecting on our own assumptions, when we are not objectively inquiring into each other’s thinking,
and when we are not exposing our thinking in a way that encourages others to inquire into it. This is
critical thinking. It is to dismantle our defensive routines and defensive reasoning and have
everything exposed for checks and balances.

Critical thinking enables us to acknowledge our own defensiveness without provoking more
defensiveness. Often, the stronger the defensiveness, the more important is the issue or the problem
around which we defend or protect our views. If these views are made transparent, they will provide
windows onto each other’s thinking. It is not the absence of defensiveness that characterizes learning

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teams, but the way defensiveness is faced. A team committed to learning must be committed to tell
the truth about our thinking and about the assumptions underlying the forceful strategies we propose.
To see reality of the markets more clearly, we must also assess and see our strengths for obscuring
reality.

Critical Thinking applied to Human Resource Management

The most important asset in a company is the right people – the ones who provide the team and
customer service behavior the organization needs. Employees represent a company’s first market. If
companies are not investing in and listening to their employees, as well as their customers, they are
probably missing opportunities to create competitive advantage (Jones, 2000).

High turnover is a major problem that can be addressed through trust. If employees do not trust
their organization to provide equitable pay, training, and advancement, they will not stay long enough
to become effective and affective team members. When a company focuses on creating quality for
employees and competence in employees, they can be empowered to create happy customers. And,
happy customers buy more (Jones, 2000).

Human resource planning is an essential part of successful customer service, because to a

customer anyone working for an organization represents the organization. Each employee is a
potential customer service representative (Jones, 2000), and salespersons, particularly, are frontline
company ambassadors (Sirdeshmukh, Singh, & Sabol, 2002). Customers truly enjoy having a well-
trained, knowledgeable person to deal with their concerns and orders. An organization needs to know
how it impresses on its customers who contact it. Much of the impression would depend upon how the
organization’s employees interact with the customers. Value-chain involvement enables this
knowledge.

Three philosophies underlie personnel management:

1. Organizational Theory: This theory believes that human needs are either so irrational or so varied
and adjustable to specific situations that the major function of personnel management is to be
pragmatic as occasion demands. Hence, if jobs are organized and structured in terms of clarity of
job goals and objectives, favorable worker attitudes will follow.
2. Industrial Engineering: Humankind is mechanistically inclined and economically motivated and
human needs are best met by attuning the individual to the most efficient work process. Personnel
managers should therefore concoct the most appropriate incentive systems and design specific
working conditions that maximally utilize the human machine, and worker attitudes will follow.
3. Behavioral Science: Mankind is basically social, group-oriented. Hence, personnel managers should
work on group sentiments, organizational, psychological and social culture and climate. Personnel
managers should focus on human values and human relations and these in turn will generate healthy
employee attitudes.

All three theories duly applied should motivate employees as evidenced by a significant reduction
in absenteeism, errors, and violation of safety rules, strikes, restriction of output, higher wages, greater
fringe benefits and labor turnover.

Herzberg’s (1968) motivation-hygiene theory works on the same principle of industrial

engineering but for opposite goals. Rather than rationalize work to increase efficiency, his theory
suggests that work be enriched to bring about effective utilization of employees. The theory advocates a
systematic manipulation of the motivation factors for motivating the employees.

Applying CT to the above theories of HRM, we may ask the questions as listed in Table 5.2.
Changing the way people work means changing the way they behave. Changing behavior requires
changing thinking, feeling and communicating. That is, changing the head, the heart and the hands.

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Without adjustments in the way we think, feel and act, nothing really changes. Questions that need
attention under each body-part arena are:

 Head: Where are we? What brought us here? Where are we going? What change of behavior
can get us there?

 Heart: Why are we here? Why do we want to go there? Why must we change? What is in it for
me? Am I capable of change? Do have the heart and the will to change?

 Hands: What do I need to do? What skills should I train myself in? What behavior changes do I
require? Do I have the energy and the team-support to acquire those behavior changes and skills?

Any strategic change requires energy, discipline and time. A successful change process passes
through three stages:

 Coming to grips with the problem: Do the people involved perceive and acknowledge the
problem? Do they still resist or deny it? Have people’s mindsets changed? Do they intellectually
recognize the need for change? Do they have a sense of how their organization must respond to
the problem, and the change the problem demands?

 Working it through: Are people intensely and honestly working to accept and internalize the
required change and its implications? Have the things that must change been well
communicated? How do people feel about the changes? Are they adequately ready in mind,
heart and hands for the change?

 Maintaining Momentum: Is the organization committed to bring about this change and support
it with all its resources? Is the organization keeping the required pace of change? Is the
organization ready to incorporate the change into its management practice, climate and culture?

How do I know that my team, the organization and I are really changing? Is there is an
appreciable difference between the “before” and the “after”? What is this difference? Is this the real
change we want? Measuring change is a powerful change-management technique. Implementing
strategic change requires that people learn new ways of thinking, feeling and behaving. We know that
people learn and change much more efficiently when they receive fair and objective feedback on how
they are doing.

Table 5.2 lists the critical questions when the three body-part arenas are crosschecked against the
three stages of implementing change. One can develop a scorecard that measured progressive change
in response to the relevant questions raised in each of the nine cells of Table 5.2. This is a change
process tracking scorecard and not an outcome realization scorecard. The change implementation
scorecard can diagnose problems that arise while the people learn (head), internalize learning (heart)
and live, witness and communicate (hands) learning.

< Table 5.2 about here >

Critical Thinking as Identifying and Combating Biases, Prejudices and

Presumptions in Business Thinking

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 A quick analysis of all these definitions and approaches to critical thinking reveals that CT identifies
biases, prejudices and presumptions in our thinking, and rectifies them by replacing them with strong
normative imperatives. Hence, our approach to CT is to identify typical biases, prejudices, presumptions
and presuppositions inherent in the Capitalist Free Enterprise System (CFES) that grounds our business
enterprise, business schools, the MBA and the PGDBM programs, and to help executives and students
to identify them, analyze them, and correct them. In the following sections, we analyze CFES from this
perspective.

According to the Webster’s New World College Dictionary (2000):

 A bias is a mental leaning or inclination, partially bent. From a statistical viewpoint, a bias is any
systematic error that contributes to the difference between statistical values in a population and a
sample drawn from it. Hence, we define bias as the systematic leaning of one’s thinking that
deviates from the norm.
 A prejudice implies a judgment or opinion formed before the facts are known. It is a
preconceived idea, mostly unfavorable, marked by a suspicion, intolerance or irrational hatred
for other races, creeds and occupations.
 An assumption is a more basic act of assuming a fact, property or event for granted without
critically assessing its accuracy and veracity, reliability and validity.
 A presumption is a subset of assumption and implies taking something for granted or
unjustifiably accepting it as true, usually on the basis of improper evidence.
 A supposition is the act of assuming something to be true for the sake of an argument or to
illustrate a proof. It is regarding something as true without actual knowledge, hence, often
tantamount to conjecture, guessing or mere imagination. In this sense, it is a subset of
assumption.
 A presupposition is an act or statement of supposing or assuming beforehand. It also means to
require or imply as a preceding condition for something.

All of the above, biases, prejudices, assumptions and presumptions, suppositions and
presuppositions, can be wrong inclinations or systematic errors in our thinking. CT intends to unearth
them, confront them and rectify them or eliminate them.
Based on the discussions thus far, Table 5.3 captures some major themes of the capitalist business
system where unhealthy biases, prejudices and presumptions can arise and contaminate human
thinking. To counteract these wrong drifts of thinking we need some strong human imperatives, some
of which are listed in the last column of Table 5.3. Table 5.3 examines the biases, prejudices,
presumptions and presuppositions in our business education and learning.

< Table 5.3 about here >

According to Godel's theorem (Hofstadler, 1979), as a formal system, no theory can be both
complete and consistent. Consistency is the condition under which symbols acquire meanings;
consistency seeks to derive true statements. Completeness, on the other hand, is the confirmation of
these meanings; completeness seeks all true statements. Formal theory systems have to balance
inconsistency and incompleteness. No theory is intended to answer all questions. Theories that seek too
much comprehensiveness can become so overextended as to become ambiguous and complicated. As a
social science, marketing theory can best develop through layered assertions into an integral theory. Just
as a collection of sentences does not necessarily make a story, nor can a collection of assertions, even
when verified, necessarily becomes a theory (Sutton & Staw, 1995). Critical thinking accepts Godel’s
theorem and its practical realism in formulating a comprehensive business turnaround management
theory.

Legal, Ethical and Moral Issues of GAIL (Case 5.1)

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 With the advent of capitalism, environment ethics has become somewhat skewed towards the viewpoint of
corporate anthropocentrism. The GAIL case is a classic example where the local interest of life and safety were
not considered while corporate goals got undue prominence.

• Legal: Agreed that the Laws of the Land were not technically and strictly violated, there are other ethical
and moral obligations such as the duty and right of regular and quality maintenance of the pipeline and its
environment, especially when GAIL was alerted by several complaints of the locals.
• Ethical issues: No transfer of benefits to the locals except for employment of a few when the pipeline was
routed through their village properties. Also no proactive responsibility was designed and executed even
when it was known that explosive gas-bearing pipelines would jeopardize surrounding villages and their
livelihoods.
• Moral: The intention of ignoring the complaints of the poor smacks of power and might of big
corporations. Not taking responsibility for the wellbeing of the local villages is a serious omission.
Narrowing duty to mere law compliance regarding protecting pipes, and not considering it as a true safety
issue is lack of critical thinking. Mere cost-containment and growth-expansion strategies at the expense of
locals are exclusive and not inclusive growth strategies.

Hence, Problem Resolution Alternatives:

• Giving statutory powers to OISD

• Merging Petroleum and Explosive Safety Organisation (PESO) to OISD.
• Increasing the accountability of industries to the communities they impact
• Setting up quick action response teams for natural and man-made disasters
• Strong investigating and complaints body to address local concerns
• Awareness on safety and hazards to the locals living close to oil and petroleum set ups.
• Triple bottom should be implemented: ecology, safety, and profitability. Workplace and operational
safety should be top priorities coupled with taking care of the community interests.
• Consequences for all internal and external stakeholders should be foreseen and avoided:

The case of GAIL pipeline blast is clearly a question of moral lapse. Every organization has certain values
that it needs to prioritize because its presence in the ecology itself is an intervention. Value is something which
characterizes the way we behave. The very fact that the GAIL, OSID, PESO and ONGC authorities treated the
matter as a mere compliance issue and not a village safety issue made them overlook the very nature of the
problem that jeopardized the lives of the powerless locals.

Analysis of Harmful Consequences:

• Lack of statutory obligations and regulations by Government may partially explain lack lustre
behaviour of GAIL, ONGC, PESO and OSID regarding the GAIL pipeline consequences.
• Mostly focused on short term cost-containment and marginal maintenance strategies in relation to the
pipelines, the officials did not plan nor try to check the safety or replace the pipelines wherever
required.
• Possibly, they did not foresee the impact any possible mishap could cause to the people living in the
vicinity and how it would negatively impact the reputation of their public institutions.
• Precautionary steps and proper maintenance could have averted the whole situation. Poor maintenance
often leads to future breakdowns. Hazardous systems if not managed with due care can be very
detrimental to human lives.
• It is a collective responsibility of GAIL, ONGC, PESO and OSID to detect and pre-empt disasters,
failing which to own and compensate for the fatal consequences of the pipeline tragedy.

Ethical Analysis of Consequences

Teleological Analysis: The GAIL pipeline service-strategy is a moral action if it produced decidedly more
benefits than costs to the largest number of stakeholders. Judged by the manifold harmful consequences to the
villagers in terms of deaths, injuries, and environmental degradation, the unsupervised and unchecked GAIL
pipeline project fails to be ethical and moral on teleological grounds. The final outcome was a huge systems-
breakdown or man-made disaster for the villagers, while pipeline project continues to be beneficial to the
industrial units it was serving.

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Deontological Analysis: The GAIL pipeline service-strategy is a moral action if it upholds the rights of the
powerless much more than it upholds the rights of the powerful across the largest number of stakeholders.
Judged by the violated rights of life, community life, safety, village property, village ecology and the like in
terms of harmful consequences of deaths, injuries, and environmental degradation, and disproportionate number
of rights of GAIL and its industrial clients in Andhra Pradesh upheld, the GAIL pipeline strategy, unsupervised
and unchecked, fails to be ethical and moral on deontological grounds. It’s the right of the industrial clients to
get essential supplies of CNG but that does not mean that they can sacrifice the safety and security of others. It
is gross negligence of duties by the authority. Lack of responsibility of GAIL Authorities and the Government
led to deaths and loss of many who were not directly related to the whole business. The gainers did not do much
to alleviate the lot of those who suffered untold damages.

Distributive Justice Based Analysis: Regardless of the nature and magnitude of the benefits and costs, rights
and duties of the GAIL pipeline tragedy, the GAIL service-strategy is a moral action if it distributes benefits and
costs, rights and duties equitably across the largest number of internal and external stakeholders. Judged by the
disproportionately high costs (including deaths, injuries, and environmental degradation) and duties (of
safeguarding life, safety, property, ecology and livelihood of Nagarjuna) violated of a very great number in
Nagarjuna village, and the disproportionately high benefits realized and many rights upheld of GAIL and its 37
industrial clients in Andhra Pradesh, the GAIL pipeline enterprise grossly violated distributive justice principles.
Though the pipeline supplied essential CNG used for transportation in the surrounding cities including
Hyderabad, and helped thereby GAIL earn profits and growth, it does not justify the miseries of families of
several people who died and others who suffered injuries.

Corrective Justice Based Analysis: Regardless of the nature, magnitude and distribution of the benefits and
costs, rights and duties of the GAIL pipeline tragedy, the GAIL service-strategy is a moral action if it set up just
processes and procedures to correct the existing violations of rights and duties, and unjust distribution of costs
and benefits in relation to the largest numbers of internal and external stakeholders. Judged by the lack of any
corrective processes and procedures, disproportionately high costs (including deaths, injuries, and
environmental degradation) and duties (of safeguarding life, safety, property, ecology and livelihood of
Nagarjuna) violated of a very great number in Nagarjuna village, and the disproportionately high benefits
realized and many rights upheld of GAIL and its 37 industrial clients in Andhra Pradesh, the GAIL pipeline
enterprise grossly violated distributive justice principles.

First corrective step to take in this case is to stop using the pipeline any further until it has passed all health
integrity checks and maintenance work. Lives can never be returned, but at least the Government and GAIL
authorities should take responsibility of the family members of the deceased by compensating them and
providing them with livelihood. Precautionary steps and proper maintenance could have averted the whole
situation. Poor maintenance always leads to final breakdown one day or the other. Hazardous things if not
handled with enough care can be very detrimental to human lives. Second, for the disabled and injured, they
should provide best medical and healthcare so that they can recover quickly and help them to get employment,
either through jobs or skill trainings. Thirdly, all victims should be more than adequately compensated.
However, instead of distributing huge compensation to the victims if Government and GAIL authorities had
used the same money for maintenance and pipeline health integrity checks we would not have to sacrifice 21
lives and accept sufferings of so many. Fourthly, for all losses to crops and houses and other public utilities,
they should rebuild all the facilities and houses of the people, help them rehabilitate and also compensate at
market rate all their losses.

As part of corrective justice procedures, government should form a high priority committee to check all
pipelines laid across the country immediately within next couple of months and the ones which are not fit should
be replaced and repaired as necessary. Petroleum and Natural Gas Regulatory Board of India should come up
with stringent guidelines for safety and security and penalize any corporation or firm whether public or private
for any negligence in this regard. Officials handling such sensitive operations which can cause havoc if
neglected should be periodically sensitized about all safety measures. More invigilation of pipelines and general
awareness among people staying in areas where the pipeline is laid is also very important. Proper safety
message boards should be installed at the major junctions all along the pipeline so as to make people aware of
the risks in those areas and what are the preventive measures.

Virtue-Ethics Based Analysis: Virtue ethics is a framework that focuses on the character of the moral agent
rather than on the rightness of an action. In considering human relationships, emotional sensitivities and
motivations that are unique to human society, virtue ethics provides a fuller ethical analysis and encourages
more flexible and creative solutions than deontological or consequentialist teleological analysis. In order to do

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something we must first perceive that an action is necessary, and often, mere cost-benefits analysis (teleology),
or rights-duty analysis (deontology) may not trigger quick action. We must observe what is going on and study
a crisis situation like the GAIL pipeline disaster from a person-based ethical and moral perspective such as
virtue ethics. Emotional reactions make us sensitive to particular circumstances, and virtue based sensitivities
illuminate our perceptions. It is possible to perceive a situation dispassionately but we would then have an
incomplete appreciation of the circumstances. Thus perception and affect are closely intertwined in informing
our choices. Virtues of honesty, integrity, due care, and compassion would have precipitated proactive actions
that were remedial, pre-emptive and reactive.

Trust-Ethics Based Analysis: Among virtues, one of paramount importance is the executive virtue of trust and
the practice of building trusting relations among critical stakeholders. Trust has both intrinsic and instrumental
value. Trust is intrinsically important because it is a core characteristic that affects the emotional and
interpersonal aspects of owner/stakeholder relationship. As an instrumental value, trust is widely believed to be
essential for effective emotional encounters. Sadly, in this situation, the executives did not pay heed to or trust
the complaints of the local residents which led to the tragedy. The village of Nagarjuna might have gradually
lost its trust in GAIL, OISD, PESO and ONGC owing to their inactions, insensitivities to their concerns, and
their general malaise in dealing with their GAIL pipeline related problems and concerns. Lack of mutual trust
and trusting relations can precipitate tragedy; converse is also true.

Concluding Remarks
To summarize the main imperatives of critical thinking, a turnaround executive should be a critic
of one’s own thinking and test the validity and reliability of one’s turnaround thinking and solution
against the following heuristics:

 Does this thinking and your “best solution” make a better sense of the world? (Chaffee, 1988)
 Does the best solution help me to be unbiased and unprejudiced in my thinking? (Paul &
Elder, 2002).
 Does it help me to understand the assumptions and presuppositions behind this thinking?
(Collins, 2001; Collins & Porras, 1989)
 Does it help me to appreciate the positive and normative content in this thinking? (Hunt,
1991, 2002)
 Does it inspire me with spiritual meaning, vision, value and motivation to reach out to others?
(Covey, 1989)
 Does it help me to rise beyond data, information and knowledge to lasting values and
wisdom? Does it empower me to be a servant leader for others? (Kahl & Donelan, 2004).

A hundred years from now, the economic system may be very different. Technology may be
unrecognizable; education and consumption levels will be far greater. New information and media
technologies will continuously modify human behavior. Will this be still a capitalist system? The
present imbalance between a scarce supply of capital and employment opportunity and an abundant
supply of labor is producing a substantial shift of income growth from wages to profits. The modern
corporation has shown considerable ability to shift incremental taxes forward to customers through
higher prices, and shift them backward to workers through lower wages, or shift them to Washington
by finding new loopholes to avoid taxes.

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 Table 5.1: The Prevailing System of Management with its Constraints and
Regimentation
Prevailing Obsessive Preoccupations, Freedom from Benchmarking against
System of Generalizations and Overemphasizing Generalizations and Corporate “Best”
Managemen “Best” Corporate Practices Practices
t
Management Focusing on short-term metrics. Focusing on long term metrics, since “you can only
Overvaluing tangibles - Devaluing intangibles. measure 3% of what matters” (W. E. Deming)..
by Overvaluing intangibles - Devaluing tangibles.
measurement
Compliance- Getting ahead by pleasing the boss. Getting ahead by pleasing all the stakeholders.
Compliance is rewarded - Non-compliance is punished. Compliance is expected and duly fulfilled.
based Cultures Management by fear, rewards and punishments. Management by intrinsic motivation.
Managing Management sets goals and targets that employees Management sets goals and targets together with
must accept them. Employees are held accountable to employees who gladly own and accept them.
outcomes realize them (regardless of whether they are possible Employers and employees are accountable to realize
within existing systems and processes). them.
Realizing targets is considered success worthy of Realizing targets is considered success worthy of
promotions promotions; not realizing targets is admittance of
Not realizing targets is deemed failure and disloyalty, collective mistake that can be avoided.
punishable by firing.
Problem- “Right answers” versus “wrong answers” “Right answers” and “wrong answers”
Technical and linear problem solving is emphasized Non-technical and nonlinear problem solving should
Solving Short-term solutions are readily accepted be explored and pursued.
Non-linear or circular innovative thinking is held Short-term solutions should be critically scrutinized
suspect. for their long-term unintended effects.
Diverging (systemic) problems are discounted. Non-linear or circular innovative thinking is
encouraged.
Uniformity Diversity is either discouraged, or is a problem to be Diversity is encouraged as an opportunity.
solved. Uniformity and conformity are discouraged if
and Uniformity and conformity are praised and leading to mechanization and over-
Conformity institutionalized. institutionalization.
Consensus-building is stressed at the expense of Consensus-building not at the expense of dissent
suppressing individuality. suppression. Conflict is accepted and expected as a
Conflict is suppressed in favor of superficial way forward to of community agreement.
agreement. Employees are hubs in the wheel of progress and
Employees are cog in the wheel or “factors of growth.
production” (Frederick Taylor)
Predictability To manage is to command and control To manage is to commend and respect.
The “holy trinity” of management is: planning, The “holy trinity” of management is: co-planning,
and organizing, and controlling sharing, and joint responsibility
controllability Linear analysis of data to explain, predict and control Non-linear analysis of data to explain, predict and
Quantitative analysis based on systematic variance in control.
data Qualitative analysis based on systematic variance in
Qualitative analysis of non-systemic variance (e.g., data.
outliers; beyond 6 ∑) is discouraged Qualitative analysis of non-systemic variance (e.g.,
outliers; beyond 6 ∑) is encouraged
Excessive Success is to suppress competition – win-lose game! Success is to ignore competition – a win-win game!
Competition between people is essential to achieve Competition between people is not essential to
Competitivene desired performance achieve desired performance
ss “Without competition among people, there is no “Innovation is an ongoing exercise regardless of
innovation.” competition. Fighting competition might be a ”red”
“We have been sold down the river by competition” source of SCA besides “blue oceans.” Small is
(W. E. Deming).Fighting competition is the only source beautiful - growth is by continuous creative
of SCA and not “blue oceans.” Bigger the better: innovation.
growth is by destroying competition
Loss of the Excessive fragmentation/compartmentalization of Progressive integration and non-
functions - divide and rule compartmentalization of functions - unite and rule
whole The efficiency of the whole is the sum of the efficiency The efficiency of the whole is greater than the sum of
of its parts. Optimizing each part optimizes the whole! the efficiency of its parts. Optimizing each part may
The whole is defined by its parts, and not vice versa. not optimizes the whole! The whole is defined by the
Interconnectedness and interrelationships are ignored interaction of its parts, and vice versa.
Interactive effects are either not considered or Interconnectedness and interrelationships are
irrelevant emphasized.
Interactive effects are always considered as relevant.
Equality and We are not equal but unequal in talents, skills, We are equal despite unequal in talents, skills,
intelligence and possessions. intelligence and possessions.
Inequality Hence inequality of income, wealth and opportunity is Hence inequality of income, wealth and opportunity
Management essential for progress! is not essential for progress!
Egalitarianism is a myth; it defies and negates reality. Egalitarianism is a good goal; it defines and reflects

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Inequalities between the rich and the poor spur growth reality.
and innovation. Inequalities between the rich and the poor are
Creation of wealth and not redistribution of wealth is outcomes of unbridled growth and innovation.
the engine of growth Creation of wealth and just redistribution of wealth
Survival of the fittest, the best, and the most productive is the engine of growth and prosperity.
is the law of evolution. Survival of the fittest, the best, and the most
Hence cultivate the best in this limited world; flotsam productive is the law of social revolution and not
and jetsam the rest (Club of Rome) social harmony and human solidarity.

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 Table 5.2: Critical Questions for Managing Required Change in
Organizations

Strategy Strategic Arenas

Implementation
Stages The Head: The Heart: One’s The Hands: One’s
One’s mindset emotions ergonomics

 Do the people  Do they still resist  Where are we going?

involved perceive or deny the  Why are we going
and acknowledge problem and the there?
the problem? need for change?  What change of
Coming to Grips  Have people’s  Do they have a behavior can get us
with the Problem mindsets sense how their there?
changed? organization must  Do we have the energy
 Do they respond to the to reach there?
intellectually problem and the
recognize the change it
need for change? demands?

 Are people  Are people  Is there a lead team to

intensely and wholeheartedly help them work
honestly working facing the through the problem?
Working through to accept and problem in all its  Has the lead team
the Problem and internalize the dimensions? changed enough to
Change required change  How do people demonstrate to others
and its feel about the the need for change?
implications? changes?  Are we ready to
 Have the things  Are they cooperate with the lead
that must change adequately ready team to change
been well in mind, heart ourselves in the
communicated? and hands for the required direction?
change?
 Is the  Is the  How do we know that
Maintaining organization management we are really
committed to committing its changing?
Momentum bring about this best resources to  How do we measure
through Strategic change? bring about the change in behavior
Change  Is the change? and outcome?
organization  Is the  How do we know we
keeping the organization have really changed
required pace of ready to for the better?
change? incorporate the
change into its
management
practice, climate
and culture?

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 Table 5.3: A Set of Biases, Prejudices, Presumptions and Human
Imperatives

Thinkin Biases Prejudices Presumptions Value

g Base Imperatives

Wealth is limitless We are the world. America is or should be The wealth of the nations
Wealth possessions of the We are the superpower. the wealthiest and most is the prosperity of all
few. Wealth is The world is for USA. powerful nation in the people. The primacy of
individual world. human dignity is the
aggrandizement. Wealth is power. condition of all progress.
Profitability is the Profits of one Profit is the bottom line Shared profitability is the
necessary condition corporation are the of all business. engine of growth.
Profit for growth. losses of its competitor High buying power and The poor can be
(the Win-Lose high market demand profitable too (CK
prejudice). assure profitability. Prahalad).

The primacy of Productivity is the Industrial concentration All human beings are
productivity is a increased efficiency of spurs productivity. ends in themselves and
Productivit supreme principle. all resources. cannot be used for the
y Humans are mere ends of others.
factors of production.
Big is better. Limitless growth is Larger corporations are Small is beautiful.
Scale corporate prosperity. more productive than
small ones.
Mastery over nature is Mankind will always Human life and the life Harmony with nature is
critical. achieve a technical of our environment will growth.
Control Technology is break- through into all always adjust to each Respect for nature is
conquest of nature. the problems that arise other civilization.
in its technical
environment
We ought not to create Manipulation of the Science and technology Our commitment to
a new humanity that world and its resources in themselves are neutral quality life and moral
Research & intends to solve all the (which includes (a-moral or values should impose
Experi- problems of nature. humans) for the trans-ethical), and must limits on human inquiry
mentation betterment and survival be freed from any on the one hand, and on
of mankind is not only ethical or moral technological progress on
a human right and duty, impositions of a few, the other.
but is essential for a lest humanity's progress
better understanding be impeded.
and realization of
human destiny.
The mobility of Respect for the dignity Current international Shared values, including
employment, capital, and interests of all its laws and market forces a commitment to shared
Globali- produce and stakeholders are are necessary but prosperity are as
zation technology across fundamental to insufficient guides for important for a global
countries and trade globalization. global business conduct. community as for
regions is critical for communities of smaller
globalization. scale.

Our responsibility is Compensating peoples The only responsibility Accepting global

Respon- for ourselves. and nations for the of corporations is to responsibility for the
sibility harm that our global make profits. politics and actions of
greed and actions cause business is imperative.
is global justice.
Limitless Individual claims of Global social and Scarce resource
Rights and consumption is our rights are more economic betterment is conservation is our global
Duties birthright. important than claims the duty of all. duty.
of duties toward others.
Happiness Limitless possession Happiness is the Money is the root of all Happiness doubles when
is supreme human fulfillment of all our unhappiness. shared.
happiness. wants and desires.

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 Chapter 06
The Ethics of Corporate Stakeholder Rights and Duties

Executive Summary

Rights and duties are involved in every area of business and markets, society and governments. Most
often, rights and duties involve serious ethical and moral issues of conflict. A good theory of the ethics of
rights and duties, obligations and responsibilities will empower us to understand the impact of our actions
on various stakeholders. Additionally, a deep understanding of rights and duties could help us to analyze
better the impact of our executive actions on various stakeholders, and in particular, to fathom the
damaging effects of rights and duties violated by the man-made current financial crisis when seen from
an ethical and moral point of view. Our coverage on the ethics of corporate rights and duties will
comprise of two parts: Part One: The Nature of Corporate Business Rights and Duties, and Part Two:
Respecting Business Rights and Duties in Business. The Chapter will feature Newcomb Wellesley
Hohfeld’s framework of legal interests such as claims, privileges, power, and immunity and its various
applications to contemporary market and corporate executive situations. We illustrate the theory of
rights and duties using several cases from the current turbulent markets.

Case 6.1: Apple’s Rights versus those of FBI or Terrorists

Tim Cook, CEO Apple, has been tweeting for months playing on media interest. On February 16, 2016, after
consulting with his cabinet of advisers, Tim Cook made a vigorous statement on privacy rights that attacked the
governments. He vowed to fight government “overreach” and help “people around the country to understand
what is at stake.” “We feel we must speak up in the face of what we see as an overreach by the US
Government,” said Tim Cook, when he explained on February 16 why he felt his firm should refuse to comply
with an FBI request to break into an iPhone used by Fyed Sharook, a dead terrorist, but one of the terrorists
involved in the San Bernardino, California shootings in December 2015. Sharook and his wife Tashfeen Malik,
who were sympathizers with the Islamic State (IS), shot and killed 14 people in San Bernardino, CA, December
12, 2015, before both were gunned down by the police. The US government dismissed Tim Cook’s letter, tweet
and statement as a stunt to bolster Apple’s sales.

Ever since 2013, Edward Snowden leaked sensitive information to the public, the issue of public security
and private privacy has been surfacing and getting to be conflicting and expanding. Lately, the problem has
taken national and global dimensions.

The files on any phone or iPhones are encrypted. Unless the correct code is entered to unlock the phone, the
files are meaningless gibberish. By itself, such a code provides little security. It is, by default, a mere four
digits long passcode, easy to memorize; but it has 10,000 possible combinations. One could try every
combination until by chance you hit the right one, a process called “brute-forcing.” Of course, there are
methods to make brute-forcing harder. For instance, after six wrong tries a user has to wait a minute before
trying a seventh. That delay rises rapidly to an hour. That is, on an average, brute-forcing a four digit iPhone
passcode could take 5,000 hours – nearly seven months. This could be surmountable for some hackers, but for
the fact that some computers automatically wipe themselves clean after every ten failed attempts to log in.

But all this process of brute-forcing can be circumvented by the phone’s internal operating system (IOS),
and an IOS can be changed. Apple does so regularly, issuing updates that add new features or fix bugs. In
essence, the FBI is just asking for such an update which can brute-force quickly, (albeit with reference to
Farook’s phone). Theoretically, the FBI’s office could write such an update, but it can do so only with Apple’s
help, as Apple itself uses a special cryptographically signed certificate. Currently, only Apple possesses this
long, randomly generated number code as a key to this process.

FBI’s request for that code may not be that simple. Many security officials are skeptical; they do not believe
looking inside Farook’s phone is the only motive of FBI. Possibly knowing this, Farook and his wife destroyed
two phones and a laptop, while leaving the iPhone intact. The iPhone, incidentally, belonged to Farook’s
employer. In fact, a few weeks before the rampage, Farook did disable the phones’ online backup feature, data
from which the FBI would have access to.

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The Apple-FBI Confrontation Problem

When Public Security is threatened, whose rights should prevail: Apple or FBI? Do citizens have
a right to privacy or security, both or none? The issue at stake is as old as mass communication: how
much power the governments should have to subvert regular innovative communication products and
services that citizens and companies use to keep their private business private?

The problem endangers the rights and duties of at least four groups: a) privacy and security rights
of the American public; b) the right and duty of American IT firms who create privacy-security
devices to safeguard them as strictly as possible c) the right and duty of the US government
represented in this case by the FBI to protect the safety and security of the American people, and do
whatever it takes to fulfill their duty, and d) the rights of over a billion phone and iPhone users (such
as Syed Farook) to remain private and secure in the use of their devices.

The problem arises when two or more sets of rights are in conflict. Indeed such is the case with
Apple and FBI, and on a larger scale, the rights of American information technology (IT) firms that
have been locked in battle with their own government in this regard, and the safety-security rights of
the American public.

On the other hand, the issue of “trade-off is not security versus privacy, but security for everyone
versus the police’s ability to investigate specific crimes,” argues Dr. Kenneth White, a director of the
Open Crypto Audit Project, an American Charity [The Economist, February 27, 2016, p. 70].

Some Defend Apple and for Valid Reasons:

Apple, arguably the most valuable company in the world, has refused to comply with a court order
from the FBI as the order fundamentally compromises the privacy of its users.

Those who defend Apple argue: the firm has the right to appeal against a court order, especially
when that court order seems to be an overreach by the US government. If Apple eventually loses the
legal battle, it will have to comply. But currently, Apple is right in refusing to comply.

FBI’s request to Apple will create a precedent that cannot be justified on legal or moral grounds.
As a legal precedent, the FBI case would let policemen and other spies break into private computers
and iPhones more easily and wantonly. Moreover, soon defense lawyers would use the unlocking
code, and so would court-appointed experts given the job of checking crimes or verifying evidence.
Hence, where does this forced breach into people-privacy stop?

Apple is global. It has governments beyond that of USA that it must respond to. Deliberately
compromising its security for the Americans will encourage other countries to make similar, even
perhaps broader requests for access, says Dr. Kenneth White. Having conceded the point once, Apple
will find it hard to resist in the future. In countries less concerned with human rights, civil liberties
and the rule of law, this compromise would have even more serious consequences.

Once Apple succumbs to PR pressure that the FBI’s request is staging and creating, it will find
impossible to refuse similar requests from domestic and foreign governments. In fact, the department
of justice (DOJ) was demanding Apple’s help in at least nine similar cases, seven of which Apple has
been resisting. Some IT experts fret that the FBI might even require Apple to start sending subverted
codes to specific suspects over the air, using the technology it employs to distribute legitimate
updates. Cyber-security experts feel aggrieved that policemen and politicians do not seem to grasp
what they view as a fundamental point: weakening security for the benefit of the police will inevitably
weaken it for everyone.

Some defend FBI and Governments and for Valid Reasons:

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 FBI, the most famous law enforcement agency in the USA, feels right in ordering Apple to help it
to unlock an iPhone used by Syed Farook. It is a request to unlock a specific device, akin to wire-
tapping a single phone line. Apple and other tech firms regularly cooperated with the authorities on
criminal cases; this is no different.

FBI has argued many times that encryption can thwart legitimate investigation, leaving vital clues
undiscovered. But security experts also argue that what works for the good guys can also for the bad
guys. If a subverted operating system managed to escape into the “wild’ even once, then the security
of every iPhone could be at risk.

The phone as a public service belongs to the government department, not Farook. Farook was a
government servant.

The FDI wants help unlocking Farook’s iphone because it may contain information on the motive
or contacts of a dread terrorist. What could be more reasonable?

FBI says that Apple’s defiance jeopardizes the safety of Americans. National security is more
important than a private firm’s patents and IPR, or Farook’s right for privacy!

The Apple and FBI Debate Implications

Will FBI’s request create a precedent? The law enforcers say: No. This is not an attempt to build
a generic flaw in Apple’s encryption, through which the government can walk as needed.

Yet Apple feels it is being asked to do something new: to write a piece of software that does not
currently exist in order to sidestep an iPhone feature that erases data after ten unsuccessful password
attempts. But Apple and IT firms have other commercial interests as well: they have made privacy
and security important selling points for their products and services.

If the court order is upheld, it signals that firms can be compelled by the state to write new
operating instructions for their devices. That breaks new ground. If the courts rule against Apple, it
will work to make its devices so secure that they cannot be over-ridden by any updates. On the other
hand, if courts succumb, legislators will be tempted to mandate backdoor access via the statute book.
If Tim Cook is not to hasten the outcome he wishes to avoid, he must lay out the safeguards that
would have persuaded the firm to accede to the FBI’s request. If Apple rejects FBI’s request, then it
must propose its own solution.

Another major issue is when and whether a precedent is justified. This entails a judgment call on
whether security would be enhanced or weakened by Apple’s compliance. In the short-term, security
will be enhanced. Farook was a terrorist; his phone is the only one being currently unlocked; and the
device may reveal the identity of other malefactors. If information is needed to avert a specific and
imminent threat to many lives, then the end justifies the means, as long as the means are not
something intrinsically evil. But in the long-term, this invasion of privacy may lead to other
cybercrimes. Are cryptographic backdoors and skeleton keys the only way to unlock terrorists?

Moreover, security does not just mean protecting people from terrorism, but also warding off the
threat of rogue espionage agencies, cybercriminals and enemy governments. If Apple writes a new
software that could circumvent its password systems on one phone, that software could fall into the
hands of hackers and be modified to unlock other devices.

Concluding Thoughts

All these arguments will be rehearsed when Apple meets FBI in court, March 22, 2016. That will

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not be the last word on the matter. It could reach the Supreme Court. Meanwhile, Apple and other IT
firms are taking steps to lock themselves out of their own customers’ devices, deliberately making
harder to fulfill official requests for access.

Perhaps, the ultimate question would be if the American government could be trusted not to abuse
its powers of surveillance. People now trust businesses more than their governments, according to
surveys by Edelman, a PR agency. Firms like Google and Facebook have taken over the role of
dissemination of information that governments once claimed. Tim Cook and Mark Zuckerberg often
publish their views in blog posts rather than give interviews, often taking no questions [The
Economist, February 27, 2016, p. 58].

References:

Code to Ruin: The Right and Wrong of Apple’s Fight with the FBI. The Economist, February 27, 2016, 12.
Schumpeter on the Stump: Why Tech Bosses are playing at being Statesmen. The Economist, February 27, 2016, 58.
Cryptography: Taking a Bite at the Apple. The Economist, February 27, 2016, 69-71.

Corporate Ethical Questions

1. What is the crucial legal issue in this case: legal compliance? Apple’s defiance? Legality and legitimacy of
FBI’s request, or brute-forcing total transparency?
2. What is the crucial ethical issue here: What is the “right thing to do”? Using legal defiance as a sales-
stance? Defense of free-enterprise capitalism? Force industry-government non-interference?
3. What is the critical moral issue here: How to do the “right thing rightly”? Moral obstinacy? Moral
courage? CEO statesmanship? Moral corporate citizenship?
4. Of the four parties identified in this case, whose rights/duties should prevail and why? Under what
circumstances: non-emergency? Emergency of national threat because of persistent IS-related terrorism?
Under peaceful negotiations?
5. In the light of your answers to questions 1-4, if you were Apple’s head, how will you resolve this matter and
most effectively?
6. Terrorism thrives on global networking of the IS, conspiracy, complicity, secrecy, information, financing,
and arms. What should be the collective roles of various agencies involved, including IT companies, Swiss
banks, Private Equity Funds, Airlines, NGOs, NRIs, and private and public investigative agencies?
7. Or, is the real solution to this global threat beyond law, ethics and morals? Should we have recourse to
corporate executive spirituality that surpasses corporate egos, to political transcendence that goes beyond
political agenda, to national and international cooperation for religious tolerance, racial harmony, human
solidarity, and global peace?

Case 6.2: The Debacle of “Paid News” Media in India

India is the largest democracy in the world, and the media has a powerful purpose and presence in the
country for safeguarding its democracy. Of late the abuse of “paid news” has corrupted the media. Paid news
indicates favors towards the institution which has paid for it. The news is more like an advertisement praising
the person or hiding the faults of the institute or ruining the reputation of the opposition party, all these for
some significant payment. Paid news is also called as one-sided news in which privilege is given to an
individual or group of individuals. Paid news is advertorial, that is, it is an advertisement in the form of an
editorial. The advertorials are designed to look like articles of objective new which they are not.

Sometimes, there is no money paid: media houses show favoritism towards the groups having more power.
Paid news became widespread during the 2009 elections. Most campaigning politicians paid media heavily for
positive coverage and for ignoring obvious skeletons in the closet. Also, the mode of payment in paid news can
violate tax laws and election spending laws of the country. It can seriously buy and bias national and state
elections thus ruining democracy at its roots.

The alarmingly increasing phenomenon of “paid news” transcends the corruption of individual journalists
and media companies. It is omnipresent, structured and highly organized; it has been steadily destroying the
concept of democracy in India. For instance, in the April-May 2009 general elections to the Lokh Sabha,
despite the clear guidelines of the Press Council of India, a number of political candidates had started paying
generous sums of money to the media personnel for giving them benevolent spotlights. Such “paid news”

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disables the public in making right franchise decisions. The paid news phenomenon was ten times worse during
the 2014 general elections.

With massive paid news by the powerhouses, the Indian media is not available to the powerless in India for
self-publishing newsworthy items. Open confessional criticisms by marginalized people include:

 “I offered to pay for positive coverage.”

 “A TV channel demanded Rs 2.5 lakhs to cover a Rahul Gandhi visit.”
 “I was told to pay up like others had.”
 “No one covers my party (BSP). So we pay.”
 “I paid Rs. 50,000 for three featured articles.”
 “Every paper in my constituency was on sale.”
 “Take an ad if you want to get the news, we were told.”

It was advertising that financed the media originally and set it free from Government subsidies. Now that
advertisements liberated the press for giving us objective and accurate news, we hope the advertisements via
paid news will not take this freedom back via corporatization.

Indian Media has grown tremendously in the last two decades. Over 100 million copies of newspaper are
sold every day. The number of news channels has grown to 80 dedicated ones, whereas originally there was just
one national news channel, Doordarshan. From the black and white TV broadcasting on a single national TV
channel (Doordarshan) in the 1980s, the Indian TV broadcasting media has grown to almost 600 channels with
about one-third operating in the General Entertainment Channels (GEC) space. Exhibit 6.2.1 provides a brief
timeline of the growth of the Indian Media Empire.

Paid news has increased with the increase in media power concentration. Most of the media are controlled
by a few corporate and politician powerhouses. For instance, the father-in-law of Congress MP Naveen Jindal
holds a 15% interest in NDTV. Aditya Birla Group owns 27.5% in India Today Group. CA Media owns 49%
stake in Endemol India (famous for Big Boss). Reliance Industries Ltd (RIL), India’s largest Private
Corporation, transferred Rs 2,100 crore to enter into India’s media industry with strategic associations with the
Network 18 Group and the Eenadu Group.

The business tycoons control news coverage. The presence of conglomerates in the Indian media is
currently posing a serious threat to democracy. Collusion may erode the plurality of ideas and diversity of
opinion, both of which are essential for the smooth running of a democracy. However, the ownership patterns
of the media in India and abroad is alarming. A higher concentration of media increases the risk of a monopoly
and hence, the phenomenon of captured media. Worse, major national newspaper editorials in India are biased,
and even controlled by politicians, and corporate powerhouses that own them. This has seriously endangered
media objectivity and credibility in news coverage and in serving public interest. Paid news is a serious
malpractice as it deceives the innocent citizens into believing a paid political campaign or product advertisement
as real news.

Exhibit 6.2.1: A Timeline of Indian Media Growth

Year Media Growth Event

Up to 1980s Doordarshan was the national single broadcaster.
1992 Five new channels were introduced by Hong Kong based Star TV.
1996 More than 50 channels were available to Indian viewers.
2002-2003 More International Channels such as Nickelodeon, Cartoon Network, VH1, and Disney were introduced in
India; the number of channels increased to 100.
2003 Entry of authentic news channels such as AajTak and Star News.
2006 Two million Digital TV Households in India.
2009 394 TV Channels. Non-news and Current Affairs TV Channels grew from 0 to 183.
News and Current Affairs TV Channels grew to 211.
2010 Over 500 Channels in India and another 100 waiting to go live.
Launch of HD Channels, Food First, Movie Now; launch of HD feed of Star, Zee Channels.
2013 The Indian press is over 220 years old, the Indian Radio, about 100 years going, and Doordarshan was half a
century strong.
2010-2015 Annual growth rate for the TV industry is projected to be 12% over the next five years.

Few years back, the Radia Tapes clearly indicated the cross-linkages between industrialists and politicians
and how the media acts as an interface between them. Over the years, Securities and Exchange Board of India

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(SEBI) has observed and warned that media companies have been entering into agreements with listed
companies and in return were providing coverage through favorable news reports, editorials and advertisements
– a clear case of conflict of interest and dilution of independence of the press.

A major news report on the phenomenon of paid news in India’s media was submitted to Parliament in
2013 by the Standing Committee on Information Technology. The report pointed out that self-regulation by
India’s media has failed to stop the practice of paid news. It suggested a more-powerful regulator and stiffer
penalties, including criminal charges possibly leading to imprisonment, for those who accept payment for news.
It lambasted the Ministry of Information and Broadcasting for “dithering” by failing to tackle the issue. “The
rise of ‘Paid News’,” the report says, “has undermined the essence of a democratic process.” But the document,
submitted to the Lok Sabha on May 6, generated little media coverage.

Bennett Coleman was among the few media companies mentioned by name in the report. The quoted
portion named Bennett Coleman as a pioneer of the private-treaty agreement, an arrangement by which Indian
media firms accept an equity stake in an advertiser’s company in lieu of payment for ad space. The committee
report found this practice, initially meant to pay for marketing, as being used by companies to ensure “favorable
coverage.”

Sources:
Indian Media: Irresponsible or Ignorant? Retrieved from (http://www.viewpointonline.net);
Paid News: The Bane of Ethical Journalism. Retrieved from (http://esternpanorama.in);
Paid News: The Cancer in India Media. Retrieved from (http://theindianeconomist.com);
Paid News: How Corruption in the Indian Media is undermining Democracy. Retrieved from (http://www,realpolitik.in);
Paid News Pandemic undermines Democracy. Retrieved from (http://ww.thehindu.com);
India’s Dodgy ‘Paid News’ Phenomenon. Retrieved from (http://www.guardian.co.uk).

Ethical Questions:
1. How can paid media reflect objective reality when it is obliged to patronize the views and news of the owners
or of those why pay? Explain.
2. What is the overall positive and negative impact of paid media upon people’s right for all important and
objective news? Discuss.
3. How do “paid media” violate the rights of the Indian consumer public? Explain.
4. How do “paid media” violate the duties of the Indian media to the consumer public?
5. How do “paid media” compromise news reporting and coverage rights in a democratic country?
6. Can media assume to be the national or state conscience of India without jeopardizing individual and
collective consciences resulting from one’s religions and cultures?
7. What corrective justice measures would you suggest for immediate enforcement such that democracy and
freedom of the press and of the citizens are safeguarded?
Case 6.3: Women Discrimination: Violation of Human Dignity Rights
Male dominance and consequent deep prejudice against women assumes different forms in different cultures.
For instance, the second oldest institution in the world is prostitution. Girl babies have been less than welcome
in certain societies even to this day. Female feticide is over 95% among infanticides. Other atrocities in certain
societies include female child labor, females being deprived of education beyond elementary level, dowry
deaths, overworked home keepers, women used as baby producing machines, women trafficking, women paid a
lesser wage for the same work, and more recently, gang rape, murder, and brutal domestic violence against
women. Women are commonly treated as sex objects in advertising and in the media, and are used as mistresses
in promoting international sex tourism. Moreover, there is systematic discrimination against women in
economic, social, educational, ergonomic, political, religious, and even linguistic structures of our society; it is
often part of an even deeper cultural prejudice and stereotype. Many women feel that men have been slow to
recognize and honor the full humanity and dignity of women.

This situation, however, has begun to change, chiefly because of the critical awakening and courageous
protest of women themselves. Men too have joined hands with women in fighting such attitudes which offend
against the dignity of men and women alike. Nevertheless, the systematic legacy of discrimination and
alienation of women continues unabated. In many parts of the world, women already disadvantaged because of
civil war, poverty, religious intolerance and bigotry, persecution, poverty, economic migration and ethnic
cleansing, suffer a double disadvantage precisely because they are women. There is a distinctive feminine face
of oppression. [See “Jesuits and the Situation of women …,” General Congregation 34; Decree 14, #s 361-384].

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 The Convention on the Elimination of All Forms of Discrimination against Women (CEDAW) adopted by
the UN General Assembly in 1979 is often considered as an international Bill of Rights of Women. It consists
of a preamble and 30 articles; it defines what constitutes discrimination against women, and sets up an agenda
for national action to fight such discrimination. It was only 20 years later in 1999, that following CEDAW
(General Recommendation No 19), the Indian Supreme Court in the Vishaka vs. State of Rajasthan case
recognized for the first time that sexual harassment (SH) was a violation of human rights, and that gender-based
systemic discrimination affects women’s right to life and livelihood (Vishaka 1999). The Court defined SH
very clearly as well as provided guidelines for employers to redress and prevent SH in the workplace. The
Court also recognized that equality in employment can be seriously impaired when women are subjected to
gender specific violence, such as SH at workplace.

Ethical Challenges:
1. In recognizing and restoring equality and dignity of men and women, what model or strategies would you
design and justify?
2. How would this model incorporate and recognize the dedication, sacrifice, generosity, and joy that women
bring to home, schools and colleges where they teach, to places where they work, and other social,
technological, and political fields where they have made significant contributions?
3. How will you render your men-women equalizing model to be delicate and sensitive to women, and avoid
alienating them in their own culture?

The Ethics of Business Rights and Duties

Thomas Jefferson once wrote, "We hold these truths to be self-evident, that all men are created
equal, they are endowed by their creator with certain inalienable rights, which among these are life,
liberty and the pursuit of happiness" (Declaration of Independence of the United States of America,
July 4, 1776). The Declaration said that “all men are created equal,” it did not mean that all were of
equal ability. It possibly meant that all men should be equal in their political rights. Even this was
not clear in the USA when even though every citizen had a right to vote, the rules of the game
affected the ability and likelihood of exercising that right. For instance, by making it more difficult to
register to vote, or even to vote, for certain groups (e.g., those without driver’s license, the usual ID in
the USA) who were discouraged from voting (Stiglitz, 2015, p. 71-72).

Thus, in the Declaration of Independence, the Founding Fathers spoke of the “natural”
inalienable rights of life, liberty, and the pursuit of happiness. Today, we prefer to call these rights
“human.” The American Constitution upholds some fundamental God given human rights.
Currently, almost all nations and their Constitutions grant human beings the rights of life, liberty,
property, and the pursuit of happiness. To begin with, all corporate executives should recognize,
protect and respect the human or natural rights of all their stakeholders for life, liberty, property, and
the pursuit of happiness.

We discuss the topic of rights and duties under two heads: Part I: The Nature of Corporate
Rights and Duties; Part II: Respecting Stakeholder Rights and Duties.

Part I: The Nature of Corporate Rights and Duties

Rights are important to our lives. We are ready to defend them, demand their recognition and
enforcement, and to complain of injustice when they are not complied with or violated. We use them as
vital premises in arguments that proscribe courses of action. When we receive no redress for violations

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of our natural rights, we even consider civil disobedience. At a larger collective level we are even
prepared to undertake civil war. Thus human rights were the justification for the American and the
French Revolutions in the eighteenth century and for a succession of revolutions for political
independence in the nineteenth and twentieth centuries. The basic motivation for the American civil
rights movement in the 1960s and the women's movement in the 1970s was also the defense of human
rights.

There are many approaches to the subject of rights and duties. One is based on prima facie
principles such as autonomy, non-malfeasance, beneficence, and justice (Beauchamp, 1983, 1993;
Beauchamp & Childress, 2001). The others, in contrast, are based on the development of character
and virtue, as well as on social, religious, and cultural determinants of moral experience and moral
agency (e.g., Dubose, Hamel & O’Connell, eds. 1994). The former is more Western or Occidental,
while the latter is more Eastern or Oriental. We advocate a combined orientation, focusing on the
plus points of both approaches.

What are Rights?

The term “rights” is used in many different ways in relation to different types of rights versus duties
we have. Much would depend upon what legal, social, ethical, moral, philosophical or theological
principles from which we derive our rights (and duties). Often legal, ethical, social and moral rights
come into conflict, and hence, a common universal definition of “rights” is not possible or necessary.

A right is a claim we make on others regarding something about us, our human dignity, our life and
its basic needs, our talents and our accomplishments, and certain objects and property. Every right
implies a freedom to possess a claim, and a claim to safeguard that possession. Thus, a right is a
conjunction of a freedom and a claim-right.

Some regard rights as entitlements. Rights entitle you that you act in some way or that others act
or treat you in some way without asking permission of anyone or being dependent on other people’s
goodwill. Entitlement enables and empowers us to make claims on other people either to refrain from
interfering in what we do or to contribute actively to our well-being. Voting, K-12 education, access
to colleges and universities, unemployment compensation, disability claims, veteran claims, pension
claims, severance compensation claims, senior citizen claims, healthcare claims, gainful employment
claims, safety and privacy claims, and the like may be better explained as entitlements or privileges
rather than rights. Entitlements are bestowed on us for being bona fide and one-time contributing
citizens. Some philosophers explain rights this way (e.g., McCloskey, 1966; Wasserstrom ,1964).

In this connection, moral philosophers distinguish several types of rights:

a) Natural rights are those fundamental human rights we have because of our human nature.
These rights accrue to us naturally because of our inalienable God-given human dignity. Such rights
include right to life, liberty, and the pursuit of happiness. These natural rights are inalienable rights -
i.e., nobody can take them from us nor can we abdicate them.

b) Moral rights are those rights justified by a moral system (e.g., Deontologism, Utilitarianism,
and Distributive Justice Canons). For instance, the right to work is not guaranteed by the American
Constitution, but is based on the deontological moral principle that all human beings have a right to
work in order to sustain themselves and their families. Similarly, rights to education, healthcare,
shelter, welfare, and the like basic necessities may be construed as moral rights that belong to us as
humans in a civilized society.

c) Positive rights or legal rights are those that law or society, state or government provide for its
members; e.g., the Bill of Rights for Americans; e.g.: the right to freedom of speech, the right to
practice one’s religion, and the right to vote. Economic rights (e.g., rights to subsistence, welfare,
education, employment) are often positive rights. Legal rights derive from and are rooted in the laws
of a given nation.

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d) Negative rights require others to forebear acting in certain ways such that the bearer of the
rights can act without impediment (e.g., All humans have negative rights not to be killed, raped,
maimed, abused, or emotionally destroyed). Positively stated, I cannot kill, rape, abuse or maim
others because of their right to life and the pursuit of happiness; I cannot trespass on my neighbor’s
property since it impedes the neighbor from using it. These negative rights are important, precisely
because they protect the basic preconditions of participation in society. Often, the line between
positive and negative rights is not clear. For instance, the state may have to legislate (positive rights)
in order to protect our negative rights.

e) Prima facie rights are presumptive rights that may not necessarily be actual or written rights in
a given situation but they just seem obvious (e.g., my right to listen to loud music in my car or
backyard may be overridden by somebody's prima facie right to peace and quiet).

f) Absolute rights are those rights that cannot be overridden (e.g., right to life, right to basic
freedom) by any utilitarian considerations. Most agree that few rights are absolute, total, and
without infringement on the rights of others (e.g., right to life, right to marriage, right to procreation,
right to subsistence, and other basic necessities). In principle, these absolute rights are inalienable,
and cannot be overridden by other rights. Most of these are natural rights that God endows us with.

Since rights often conflict with one another and there is no widely accepted hierarchy of rights,
some moral philosophers have concluded that rights should be accorded prima facie validity. That is,
rights should be respected unless there are good moral reasons for violating them; the moral force of a
right depends on its “strength” in relation to other moral considerations applicable to the context in
question (Jones, Felps & Bigley, 2007, p.139).

A Hohfeldian Analysis of Rights and Duties

According to Newcomb Wellesley Hohfeld, an early 20 th century American philosopher and
jurisprudential scholar, the nature and extent of a person’s rights are dependent upon the correlative
duty of others. Hohfeld (1913, 1919) argued that any legal right or interest we have could be of four
types: claim, privilege, power, and immunity, and reasoned that each legal right type relies on a
structure of correlatives and opposites. That is, each type of legal interest (e.g., claim, privilege,
power, and immunity) is accompanied by a matching interest held by at least one person. Hohfeld
called this matching interest a “jural correlative.” Thus, Hohfeld argued that the correlative of a claim
is duty, the correlative of a privilege is no-right, the correlative of a power is liability, and the
correlative of immunity is disability.

Further, each legal interest has also a “jural opposite.” Like jural correlatives, Jural Opposites are
fourfold: right versus no-right; privilege versus duty; power versus disability; and immunity versus
liability. Whereas a jural correlative is what others must have if I have a legally protected interest, a
jural opposite is what I cannot have if I have a legally protected interest, both with respect to a certain
type of act (Hohfeld, 1913, p. 32-33). Thus, if one has a right, one cannot simultaneously have a no-
right; if one has a privilege, one cannot also have a duty; having a power precludes having a
disability, and having immunity, precludes having a liability (Hohfeld, 1913, p. 30).

Thus, Hohfeld distinguished four different levels of legal interests or concepts of rights and
identified each with its appropriate “jural correlative” and “jural opposite.”

1. The first concept of “right” is that of “claim.” Hohfeld uses the word “right” (or claim, demand)
specifically for the case in which one says: “X has a right to something from Y,” and its correlative is
duty (obligation) whereby “Y has a duty to do something for X, if X demands so.” This does not
imply that every right has a corresponding duty. What characterizes a right-duty relationship is that
Y is obliged to act only if X demands that Y should do so. There are some duties, however, such as
duties of benevolence or compassion, where no one has a corresponding right to demand their

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 performance.

2. The second concept of right is a “privilege” or a “liberty,” the opposite of a duty, and its correlative is
“no-right.” Thus, “X has the liberty to do L” entails both that X has no duty to do or not to do L and
that Y has no right (i.e., no basis for claim) that X shall or shall not do it. Consistent with this,
however, is that Y has no duty to urge or prevent X from doing L. This is the case with two people in
legitimate competition. Hence, a no-right is distinct from a duty not to interfere, and correlatively X
may possess both a liberty to do L and a right (claim) that Y (and others) should not interfere.

3. The third concept of right is a “power,” a legal capacity for altering the jural relations of another
person; e.g., the power to make a will, power to transfer ownership by sale, or to appoint an agent.
For instance, “X has power against Y” implies that X can change Y’s legal relations in some way, and
Y has liability with respect to X. For example, an employer has power against the employee if the
latter signs a contract of employment under which he/she will work for the employer; the signing of
the contract generates a set of claim-rights and duties (as specified in the contract) between the
employer and employee. The correlative of power is “liability” (risk or subjection) that one’s jural
relations may be changed, for better or for worse, at the instance of the other person.

4. The fourth concept of right is “immunity” (or no-liability) when Y is “disabled” from making (or has
no power to make) changes in X’s jural relations. For instance, X has an immunity against Y means
that Y cannot change X’s relations in some way; i.e., Y has a “disability” with respect to X. For
example, A has signed a contract of employment with employer B, but A is a minor. Then A is
immune from liability from B; i.e., B does not have power to bring the set of contractual claim-rights
between A and B.

From (1) follows: the [claim] right and the duty share the same content [e.g., “that Y stay off
X’s land”]. They share a content that is satisfied by “Y’s staying off X’s land” (Sreenivasan, 2002).
In this sense, there cannot be a right without a duty; right in one person presupposes a duty in another
person or institution. The concept of right without corresponding duty is meaningless. As a corollary
it also follows that there is no right unless there is someone who is subject to that right accepts that
duty (Cooray, 1998).
From (1) and (2) follow: A right is an entitlement, while a privilege is available from
sufferance; the latter is a discretion vested in the person granting it. Hence, what are commonly called
rights to education, employment, welfare, healthcare, etc., are not rights, but privileges given to
certain persons by those who had discretion to grant them, such as employers or the government. A
right to employment or welfare is meaningless because there is no person under a duty to employ you
or provide you with welfare (Cooray, 1998).

Hohfeldian analysis can be easily applied to everyday events or properties. A simple

assertion such as “As a shareholder, I have voting rights” implies the following embedded legally
protected interests or rights:

1. RIGHT: “The board must have elections each year.” I have a RIGHT to demand elections be held in a
timely way. The board has a correlative DUTY to hold elections. Without this right, I would have NO-
RIGHT.

2. PRIVILEGE: “Shareholders may vote as they please.” I have the PRIVILEGE to vote as I choose, or
just not to vote. The board has NO-RIGHT to demand that I vote in a certain way. Without this
privilege, I would have a duty to vote only in a particular way.

3. POWER: “Shareholders can vote to mend the bylaws.” I have POWER (shared with other
shareholders) to amend the bylaws; for instance, to change the venue, date and timing of annual
meetings. The board has a LIABILITY to abide by shareholder-initiated bylaw changes, if so specified.
Without this power, I would be DISABLED from changing the bylaws; that is, I would be
disempowered.

4. IMMUNITY: “The board cannot manipulate the voting process during an insurgency.” I have
IMMUNITY from the board manipulating with the voting process. That is, the board is DISABLED

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 from interfering with my voting rights. Without this immunity, I would be LIABLE to (i.e., forced to
accept) the board’s actions.

Hohfeld insisted on the differences between natural and legal relations; he even believed that
there was a world of legal relations alongside the world of natural relations. However, Hohfeld’s four
distinctions of right express primarily “legal relations” between persons, and not natural relations.
That is, law lays down the rules and conditions under which persons may enter into binding relations
with another, by contract, joint venture, marriage, sale, alliance, and so on. Hohfeld also believed that
most jural relations could be satisfactorily analyzed only as complex bundles of relations of different
types.xxv

Hohfeldian Analysis and Legal Realism

Based on Hohfeld’s analysis, a distinction might be made between first-order relations (such as
claims-duties and privileges-no-rights) and second-order relations (such as power-liabilities and
immunities-disabilities). The first-order relations can be expressed in terms of prescription or the
absence of them (permissions), while the second-order relations define the conditions under which
actions will be legally significant, and hence, under which new rules and changes in legal relations
can be made. If powers and immunities can be treated as rights at all (e.g., power to offer a sale, and
immunity of ambassadors from libel proceedings are often referred as rights), then some rights are
neither correlated to sanctioned duties nor expressive of the absence of such duties. Such rights
require a conception of law that is not simply prescriptive and permissive but regulatory, in the sense
that the law lays down conditions under which persons can enter into binding relations with one
another.

It follows from Hohfeld’s work that what constitutes a legally protected interest (e.g., claim,
privilege, power or immunity) is arbitrary, and is not defined by the nature of things; rather it is
defined, shaped and created by mutually defined legal and political rights, powers and duties.
Concepts like private property, consent, and liberty do not simply re-present previously existing
things in the world; rather, they result from the system of differences between legal and moral
concepts, and in so doing constitute the political world we live in (Balkin, 1990: 5).

Thus, according to Hohfeld, a right is an entitlement, while a privilege is available from

sufferance. The latter is a discretion vested in the person granting it. Hence, what we commonly call
rights to vote, education, or employment are not really rights but privileges given to certain persons
by those who had the discretion to grant it, such as employers or governments. A right to
employment is an abstraction that is meaningless because there is no one who has an enforceable duty
to employ us. Table 6.1 is a Hohfeldian Analysis of Corporate Executive Rights and Duties.

< Table 6.1 about here >

Exhibit 6.1: Analyzing Case 6.2 using Hohfeldian Analysis of Rights & Duties
Legally Protected Interest Paid Media
or Right
Jural Paid media may have some duty to satisfy their paying clients in terms of covering
news and information that positively features them, especially if the latter demand
Claim Correlate as them.
Duty
Jural Opposite But by the same token, paid media has no right to feature the clients exclusively
nor portray the competition or opponents negatively, or deny the general public’s
as No Right right for a broader coverage of news and services.
Jural Media may have some privilege to accept paid media contracts but they have no
right to give them exclusive coverage on several channels thus virtually shutting
Correlate as the public from alternate news and information sources.
Privilege No Right
Jural Opposite In fact, paid media has the duty not to exclusively feature the client at the expense
of other claimants and the general public’s right for news on other parties and
as no Duty

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 issues.
Jural The paid media has some power to cover their clients in news coverage, but it is
under liability not to harm by blocking the completion and opponents thereby.
Correlate as
Power Liability
Jural Opposite Paid media has some power to cover its clients in coverage, but it is thereby
disabled from exclusively doing it because of its duty to protect the rights of the
as Disability general public, competition or opponent parties.
Jural The paid media has some immunity from being sued for over-covering its paying
clients, but it can also be disabled from doing so, especially if thereby it is forced to
Correlate as under- or not cover opponents or competition.
Immunit Disability
Jural Opposite The paid media has some immunity from being sued for over-covering their
y paying clients, but they can also be under liability for doing so, especially when
as Liability thereby they undercover opponents or competition.

Stakeholder Hohfeldian Rights in Corporate Situations

The conflicting rights involve basically two parties: the corporation which undertakes merger,
acquisition or turnaround and its executives versus the corporation’s stakeholders (e.g., customers,
employees, governments, creditors and suppliers). The rights and duties of each stakeholder group
are predicated along a) the four Hohfeldian concepts of right: claims-right, privilege, power, and
immunity and b) under each concept, along corresponding jural correlates and jural opposites.

Thus, for instance, under a claim-right and its jural-correlative duty, the responsibilities of
executives include respecting the rights of all stakeholders by providing them the right financial
information (e.g., accurate financial reports such as profit and loss statements, balance sheets and cash
flow statements) at the right time, by not over-marketing or inappropriately promoting the company
when it is declining or bankrupting, and the corresponding duties of the stakeholders would include
seeking clear and adequate information on corporate performance, studying it, so that they could
make timely decisions of investing or disinvesting in the said corporation. Assuming an equally
balanced relationship between the turnaround executives and the stakeholder public, under claim-
right and its jural opposite no-right, turnaround executives have ‘no-right’ to deceive stakeholders by
false financial statements, round trip sales, exorbitant compensations (e.g., high severance
compensations such as golden parachutes or handshakes) or any other fraudulent practices or
declarations, while the stakeholders cannot claim ignorance of the turnaround situation when by due
diligence they must assess their commitments to the failing corporation.

Under the third concept of right as ‘power,’ different rights and duties follow. Turnaround
executives have the power to withdraw their operations anytime or sell them to approved buyers under
prior stipulated conditions, but they also bear the liability for creating “ghost towns,” significant labor
layoffs, and other undesirable social externalities. Similarly, stakeholders are empowered to equitable
compensations for what the corporation owes them. The jural opposite of power is disability. If
stakeholders claim too much power and interfere with honest turnaround operations, then they could
disable turnaround executives from the proper functioning of their duties. At the same time, if
turnaround executives deluge stakeholders with false financial reports or other fraudulent business
practices, they equally disable the stakeholders from their honest involvement in and compensation
from the failing corporation.

Lastly, under the fourth concept of right as ‘immunity’ there arise several forms of possible
‘disability’ and ‘liability’ outcomes to both executives as well as stakeholders. Thus, on the one hand,
while legally approved turnaround executives are immune from unfair external interference from
stakeholders and governments, they are also disabled from immunity and thus held liable for unjust
and illegal turnaround operations (e.g., deprivation of rightful compensation to stakeholders or for
degrading the social and/or physical environment). Equivalently, legally approved stakeholders may
seek immunity from disability of further losses by being timely warned and counseled on the distress
or bankruptcy situation of the company they have invested in, and they will incur liability if they
unduly interfere with business turnaround operations. When immunity is linked with its jural
opposite of liability, then turnaround executives may he held liable for generating too many losses or

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engaging in too many unjust practices in bringing about turnarounds and transformation. Under the
same conditions, stakeholders would not be immune from liability if they unduly stall executives in
the execution of their duties.

Part II: Respecting Corporate Rights and Duties

We need to understand the different ways in which rights implicate responsibility and
irresponsibility and the interplay of notions of responsibility as accountability and as autonomy.
Libertarians justify rights by asserting that responsibility should be understood as the opportunity to
exercise one's moral and intellectual capacities, which requires individual freedom. On this account,
loss of the opportunity to develop and exercise moral responsibility, to take responsibility for and act
on one's life plan, is a casualty or cost of not protecting individual freedom. In this context,
responsibility is understood as autonomy. Although protecting responsibility as autonomy may entail
some irresponsible decisions, this conception considers it a more serious cost to move the locus of
such responsibility from the individual to the community or state.

According to Chris Argyris (1986, 1991), we need to redesign organizations for a fuller utilization
of our most precious resource, the workers, in particular, their psychological energy. Giving up the
pyramidal and hierarchical structure of decision-making, Argyris (1993) suggests that decisions
should be undertaken by small groups rather than by a single boss. Satisfaction in work will then be
more valued than material rewards. Work should be restructured in order to enable individuals to
develop to the fullest extent. At the same time, work will become more meaningful and challenging
through self-motivation. Rensis Likert confirms this trend of thought. He identified four different
types of management styles: exploitative-authoritative, benevolent-authoritative, consultative, and
participative. He found the participative system to be most effective since it satisfied a whole range of
human needs. For instance, if major decisions are taken by groups this results in achieving high
standards and targets and excellent productivity.

Participative management can generate complete trust within the group, and high participation
can lead to a high degree of human motivation and conflict resolution (Weiss & Hughes, 2005). As
Rosabeth Kanter (2003) observes, open dialogue in a group setting where decisions are made fosters
mutual respect. When employees feel self-confident enough to actively participate and where
corporate leaders move them toward respect and reconciliation, the organization is more likely to
transform itself from a dysfunctional, under-performing organization into one that raises the quality of
its products and services, formulates stronger customer relations and interface, and thus, improves its
strategic financial position. All this success emanates from small group team work. In any
organization, once the beliefs and energies of a critical mass of people are engaged, conversion to a
new idea will spread like an epidemic (Kim & Mauborgne, 2003: 62).

Corporate negative behaviors destroy employee rights, duties and responsibilities. According to
Theory X of McGregor, common such behaviors include:

 Being intolerant, vindictive, recriminatory, and punitive;

 Being aloof and arrogant, distant and detached from the workers;
 Unconcerned about worker welfare, morale and family problems;
 Blaming, finger-pointing, and imposing guilt upon workers;
 Being unjust, unsympathetic, not-listening, short-tempered, proud, elitist and anti-social;
 Being non-participative, non-team-building, one-way-communicating and not fostering worker-
learning.
 Not inviting suggestions, feedback or interactions, and being ungrateful.
 Taking criticism badly from one’s reports or peers, and tendency to retaliate.
 Poor in delegating, but good in giving orders and commands.
 Issuing threats to enforce people follow instructions;

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  Issuing mandates, directions and edicts to force worker obedience and submission.
 Withholding pay, rewards, bonuses, commissions and other remunerations to demand obedience.
 Suppressing pay-raises, promotions, recognitions, and acknowledgements of challenging
workers.
 Scrutinizing work-expenditures to the point of mistrust and false economy.

Obviously, the opposite of these negative behaviors (i.e., positive corporate behaviors) will
produce positive effects of empowering and upholding everyone’s rights, duties, and worker and
management responsibilities. Opening channels of communication and transparency, starting from
the top, is the best way for resolving problems. Open dialogue means that everyone deserves a
response; it exposes facts and tells the truth. It is hard to play politics when everyone discusses and
everything is discussed openly. Successful turnarounds and transformations arise from long-term
relationships built on mutual trust and reciprocal openness (Kanter, 2003, p. 64).

According to Herzberg’s (1968) two-factor theory of motivation, workers are affected by

biological or hygiene factors, and psychological or motivation factors. Hygiene factors are extrinsic
to the job and relate to dissatisfaction-avoidance; hence, they indirectly motivate the worker on the
job (such as pay, safe working conditions, non-boredom, and social interaction on the job).
Motivation factors are intrinsic to the job and make the job interesting, enriching and rewarding (e.g.,
training, recognition, respect, promotion, and personal growth on the job). In energizing, motivating
and empowering workforce, one could emphasize on the psychological and motivation factors,
however, not to the exclusion of hygienic factors. The former empower rights, duties, and
responsibilities.

How do employees find work exhilarating and perform best on their job? According to Mihalyi
Csikzentmihalyi, who pioneered the research on workflow, the key to worker-exhilaration is not the
task itself (which often could be routine), but a special state of mind that the workers create as they
work, a state called “flow.” Csikzentmihalyi (1990, p. 1997) found that the most successful workers
were in flow most of the time, while those who were apathetic and dissatisfied were the least in flow.
The feeling of work flow is analogical to the feeling or emotion of being in the zone or in the groove.
The flow state is an optimal state of intrinsic motivation, where the person is fully immersed in one’s
work or duty. Following Csikzentmihalyi, we must first define “work flow” in a firm, its nature and
properties, especially in the critical departments. Next, one could incorporate the following findings
in order to optimize the workflow in your employees under a rights-duties claim situation:

a) Those who control and organize their job had the maximum flow.
b) Flow is maximized with control of critical parts of the job.
c) For some, excellence and pleasure in work are the same, and workflow was very high.
d) Flow moves people to do their best at work, no matter what work they do.
e) Flow blossoms when the workers’ skills are fully engaged.
f) Flow enhances when the challenges of work stretch workers to new and creative ways.
g) Flow is heightened when workers are fully absorbed in their work, handle the demands of
work effortlessly and nimbly adapt to shifting demands.
h) It is not so much the work, but what you bring to the workplace, your mind and heart, skills
and talent, passion and emotions, commitment and dedication, that create the flow.
i) Workflow itself is a pleasure.
j) Encouraging and supporting supervisor presence can increase workflow.
k) Intensifying one’s psychological presence by being empathetic, understanding, recognizing
and rewarding, compassionate and caring, can empower and maximize workflow and best
performance.
l) Psychological absence, on the other hand, characterized by suspicion, mistrust, eves-
dropping, interference and impersonal vigilance can minimize workflow, productivity and
worker-involvement.

In general, the higher the work flow and its internalization, the higher is the perception of worker
duties, worker rights, and worker responsibilities. Similarly, Amabile and Kramer (2007) believe
strongly that job performance is positively linked with inner work life of the workers. People perform

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better when their daily work-day experiences include more positive emotions, passion for work, and
more favorable perception of their work, their team, their leaders, and their organization (Amabile &
Kramer 2007, p. 77). The dynamics of inner work life of people, their mind and heart, their emotions,
perceptions and motivations, do affect work performance, and hence, by implication, the organization.

Every worker’s performance is affected by the constant interplay of perceptions, emotions, and
motivations triggered by workday events, including managerial action – yet inner work life mostly
remains invisible to management (Amabile & Kramer, 2007, p. 75). The knowledge-based worker’s
inner life is “the dynamic interplay among personal perceptions, ranging from immediate impressions
to more fully developed theories about what is happening and what it means; emotions, whether
sharply divided reactions (such as elation over a particular success or anger over a particular obstacle)
or more general feeling states, like good and bad moods; and motivation – your grasp of what needs to
be done and your drive to do it at any given moment” (Amabile & Kramer, 2007, p. 76).

Human Solidarity as a Commitment to Human Rights

To defend and recognize human rights, it is not enough to respect other human beings as
possessing fundamental human dignity. In a spirit of real human solidarity, we next need to recognize
them as partners or fellow members of a community. xxvi There are various degrees of solidarity with
our fellow human beings:

 On the negative extreme, we may totally ignore them; or, refuse to see them – this is crass
neglect.
 To see them as mere pawns in our own plans and purposes – we use them as “factors of
production;” we use them as “instruments with a work capacity and physical strength to be
exploited at low cost and then discarded when no longer useful,” - this is exploitation or
slavery.
 We can use legal rules as “masks” to render human beings invisible. In the legal realm, to
pierce the legal constructs that “mask” the plight of other human beings, and reckon the
persons and faces that are forced to lie behind suck masks.
 We can see the world of “others” as moral agents with plans and purposes of their own.
 We can recognize our commonality with all humans, despite differences in culture or native
ability.
 Willingness to imagine ourselves in the concrete circumstances of the other in order to reshape
our perception of the other and of the right course of action.
 We maintain a community in which all persons are able to participate in a productive manner.
 We pledge to observe the Golden Rule in all that we do: Do unto others what you want done
unto yourself.

Merely honoring human rights does not necessarily imply appropriate and effective action. Each
community or corporation needs to strategize a step-by-step concrete approach to identifying,
recognizing and fulfilling human rights of all its members for the common good of all its inhabitants.
Table 6.2 lists a set of consumer rights and a corresponding Bill of Rights and Duties of corporate
executives and stakeholders. The commonest consumer rights in relation to market offerings include
rights to product safety, to know (i. e., to be informed about the product or service), to product choice
or variety, to be heard, to redress, to full value, to education and representation and participation.
While the first four rights are normally provided by any Constitution, the remaining four are still
being debated as a Bill of Constitutional Rights.
< Table 6.2 about here >

The Debate about Moral Rights

Nobody disputes about positive and negative rights. The debate surrounds moral rights. Some

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philosophers (e.g., Bentham 1845) reject the idea that citizens have any rights (positive or negative)
apart from what law happens to give them. Others (e.g., Dworkin, 1977) following John Locke
(1632-1704) defend citizens' rights (e.g., natural or human rights) quite apart from any law. These
rights are inalienable or non prescriptible; that is, we do not give them to people, nor can we take
them away or give our own rights away. Some rights can be even moral rights against the
government (e.g., conscientious objector’s rights against war-draft). Dworkin (1977) argues that the
collective goals of the state (such as prosperity, legitimate national defense, and political efficiency)
are not a sufficient justification for denying individuals their rights; rights are like trump cards that
prevail over all other political considerations.

Moral rights are important, normative, justifiable claims or entitlements, often argued from a
moral or ethical theory, but are rooted in morality and in the nature of the members of the moral
community. They are rooted in the fact that human beings are rational beings that are ends-in-
themselves (Cfr. “ens pour soi” of J. P. Sartre) and not means unto others, that they are worthy of
respect, and should be treated with dignity. Hence, human rights cannot be overridden by other rights
or by considerations of utility. Legal rights are rooted in law and protected by it. In a just society,
moral and legal rights often overlap.

Rights are valid moral claims that give us inherent human dignity (Feinberg, 1970). Conversely,
the dignity of the human person means nothing if by virtue of natural law the human person has no
human rights apart from any law (Maritain, 1944). Finally, there are others who hold that rights are
simply entailments of moral obligations (e.g., Frankena, 1973; Kant, 1964; Ross, 1930), or are simple
derivations from our understanding of utility (e.g., Mill, 1974). Gewirth (1984) argues that rights are
the basis of morality; based on generic features of action, freedom and purposiveness, we can
conclude that there are universal human rights.

Rights can conflict. I compromise my right to life when I unjustly kill another. The right to life
of the unjust attacker may be overridden by the right of life of the innocent victim. In general, the
right to life is superior to the right to private property, and, in a conflict, the former takes precedence.
For instance, Jean Valjean (in Victor Hugo’s Les Miserables) steals a loaf of bread because he is
starving and that is the only way he can survive. Jean’s right to life overrides the baker’s right to
private property (e.g., the loaf). The conditions necessary for one right to override another, however,
are very stringent. The point of the story of Jean Valjean is not so much to justify his taking or
stealing the bread as it is to condemn an unjust society that makes it impossible for people to exercise
their right to life (De George, 1999, p. 100).

Labor Law Reform and Labor Rights and Duties in India

During the last decade, the corporate world has argued that labor laws in India are excessively
pro-worker in the organized sector, and this has led to serious rigidities and adverse consequences in
terms of productivity. Hence, the corporate world has asked for labor law reform. One of the chief
reasons for such a reform is that many labor laws in India are ancient, irrelevant and do not reflect the
requirements of the day. For instance, the Industrial Disputed Act, the Trade Unions Act, among
many others, were crafted in an era when concepts like liberalization, privatization and globalization
were either not fully evolved or understood. Indian labor laws need reform to give appropriate
flexibility to the management side to compete with the international world markets of intense
competition. Existing laws are also less employment friendly – despite GDP growth there has not
been proportionate growth in employment in India as robotics, automation, outsourcing, and plants
redesign and relocation have adversely affected jobs in India.

While labor law reform has been both on supply and demand sides, employee and employer sides,
the exact content and direction of labor reform is far from clear. The pluralist industrial relations
paradigm (traced to Sidney and Beatrice Webb in England, to John R. Commons, the father of US
industrial relations, and to members of the Wisconsin School of Industrial Relations in the early 20 th

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century) analyzes work and the employment relationship as a bargaining problem between
stakeholders with competing and conflicting interests. John Commons proposed a balancing
paradigm that focused on the need for equilibrium between capital and labor rather than the
dominance of one over the other.

Whatever and whenever the labor law reform in India, it should safeguard all stakeholders,
especially labor and customers as human beings and not as economic agents, as partners in production
and not economic factors of production. That is, rights and duties on both sides must be recognized,
upheld, and enforced. Moreover, labor law reform should consider the nature of work and the lives of
workers. A new industrial relations paradigm is needed that explicitly considers the interest of the
employees, employers, the employment relationship, humanization of labor and labor markets via
equity and self-actualization, and not mere productive efficiencies and profitability. John Budd (2004)
extends the content of labor reform by including efficiency and equity with “voice.” Equity reflects
fair employment conditions and standards, while voice is the ability to have meaningful input into
employment-related decisions, including both industrial democracy and personal autonomy.

“Paid” Media’s Violation of Rights and Duties

“A free press should be neither an ally nor an adversary … but a constructive critic” (Mahatma
Gandhi). Media is the bridge between the ruler and the ruled for transport of information inputs. The
media, particularly the Press, the Radio, the Television and the Cinema, together or independently,
have the potency to either make or mar, and reform or deform the society.

The advancement and diffusion of knowledge is the only guardian of true liberty (James
Madison). Media, one of the four pillars of modern democracy, is entrusted with the responsibility of
providing and diffusing truthful and objective information to all people. By definition, media
collects, frames, and objectively communicates non-trivial worthy information to the public it serves.
The way information is collected, stored, sorted, structured and disseminated has a deep impact on
how it is read and interpreted by the public. Hence the media can and does wield much power and
control in informing the public and even in “forming” its economic, ethical and moral conscience.
People form views and beliefs, values and lifestyles often on the basis of what they see and hear in the
media. “Whoever controls the media, controls the mind” (Jim Morrison). Knowledge is power, and
the media that collects, stores and disseminates knowledge is power. Hence, the critical need of
media scrutiny and media ethics – an ethic of rights and duties.

In general, information has four dimensions: structure, content, provision and dissemination
understood as follows:

 Structure: this determines what of the information (if at all) will be remembered by the audience and how.
It encompasses not only the mode of presentation, but also the modules and the rules of interaction between
them.
 Content: incorporate ontological (reality) and epistemological (truth) elements; “hard” data that can be
verified represents the reality; “soft” data or data interpretation offered with the hard data represents the
truth of reportage. A message comprises both world-view (theory) and an action and direction-inducing
element (practice).
 Provision: this comprises the intentional input of structural content into information channels. The
equation of provision also includes the timing, quantities of data fed into the channels, and their quality.
 Dissemination: these are channels that bridge between the information providers (media) and the
information consumers. Some channels are merely technical with respect to bandwidth, noise to signal
ratios and the like. Other channels are metaphorical, and the relevant determinants are effectiveness in
conveying content to target consumers.

Today in 2018, the Indian press is over 225 years old, the Indian Radio is about 100 years going,
and Doordarshan is half a century strong. Media has about five main functions: information,
interpretation, education, entertainment, and evaluation. While some of these functions are still
provided, the Indian Media Empire is indulging in sensationalism, yellow journalism, paid news,
TRP-domination, politician-control, and corporatization. The Press Council of India that is supposed

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to enforce values and ethics in the print medium is seemingly passive and teeth-less. “The sole aim of
journalism is service. The newspaper press is a great power, but just as an unchained torrent of water
submerges the whole countryside and devastates crops, even so an uncontrolled pen serves but to
destroy. If the control is from without, it proves more poisonous than want of control. It can be
profitable only when exercised from within” (MK Gandhi).

Article 19(1) of the Indian Constitution states that, “everyone has the right to freedom of opinion
and expression.” And so is the media – the Free Press. This right includes freedom to hold opinions
without interference and to seek, receive and impart information and ideas through any media,
regardless of frontiers. The successful survival and flourishing of the world’s largest democracy owes
a great deal to the freedom, power and vigor of the press. However, the freedom of the media is not
absolute. Article 19(2) puts reasonable restriction on the media in the interest of the sovereignty and
integrity of the country, the security of the state, public order, decency or morality, or in relation to
contempt of court, defamation or incitement to an offence, and the like. The right of freedom of
speech of individuals and of the media is a great power; but with great power comes great
responsibility.

Corresponding media duties towards the public include: freedom of publications, plurality in
media ownership, diversity in information, culture and opinion, support for democracy, support for
public order and security, universal reach, quality on information and culture disseminated to the
public, avoiding harm to individuals and the society, respect for human rights, and informing citizens
about current events and developments in society. Media should be a fact finding body engaged in
firsthand reports whenever possible and presenting the facts to the public without much interpretation
or representation. Media can get into argumentation. More information is required to support the
truths that media claims in a given case. But arguments are not correct if the media does not back
them with accurate facts, figures or events, laws and doctrines. Arguments are not correct if the
media neglects facts that actually support a different claim.

World Media Ethics Code specifies the following media duties:

1. Honesty and fairness: duty to seek the views of the subject of any critical reportage I advance of
publication; duty to correct factual errors; duty not to falsify events and facts or to use them in a
misleading direction.
2. Duty to provide an opportunity to respond to critical opinions as well as to critical factual
reportage,
3. Appearance as well as reality of objectivity; in this connection, some codes prohibit members of
the press to receive gifts.
4. Duty to respect privacy.
5. Duty to distinguish between facts and opinion.
6. Duty not to discriminate on such grounds as race, religion, nationality, color, gender or language;
some codes call on the press to refrain from mentioning the race, religion or the nationality of the
subject of news unless relevant to the story; some codes call for coverage that promote tolerance.
7. Duty not to use dishonest means to obtain information.
8. Duty not to endanger people.
9. General standards of decency and taste.
10. Duty not to prejudge the guilt of an accused and to publish the dismissal of charges against or
acquittal of anyone.

In India, the legislature makes laws, the judiciary interprets them, and finally, the executive body
executes them. These are three pillars of democracy. The media can become a fourth pillar of
democracy by being a watchdog of all the three pillars. Unfortunately, in the last decade the media has
become a fourth pillar instead on its own right by being selective about news, by subjecting itself to
“paid news,” by faking sting operations to settle personal scores with rival firms, and by
tabloidization of news. Further, by assuming partisan affiliation with certain political parties, the
India media has patronized those parties and failed to objectively represent them to the voter public.
By focusing on TRP ratings and due to fierce media rivalries, the ethics of journalism has been

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seriously compromised.

Often media writes many articles in order to push an agenda. Some media writers try to convince
us what they believe by collection of facts that support their proposal or agenda. There is a huge
difference between decision-based evidence making versus evidence-based decision making. There is
a difference between truth when an agenda is pushed and when the media lets the facts speak the
truth. When media content is biased towards certain race, sex, gender, religion, nationality, region or
political party, then media begins to lose its independence to observe and collect facts, and worse, it is
difficult for the media to “represent” truth with accurate facts and figures. A neutral and objective
presentation of news is the duty of the media and the right of the public.

India is the largest democracy in the world, and the media has a powerful presence in the country
for safeguarding its democracy. Of late the abuse of “paid news” has corrupted the media. Paid news
indicates favors towards the institution which has paid for it. The news is more like an advertisement
praising the person or hiding the faults of the institute or ruining the reputation of the opposition
party, all these for some significant payment. Sometimes, there is no money paid: media houses show
favoritism towards the groups having more power. Paid news became widespread during the 2009
elections. Most campaigning politicians paid media heavily for positive coverage and for ignoring
obvious skeletons in the closet. Also, the mode of payment in paid news can violate tax laws and
election spending laws of the country. It can seriously buy and bias national and state elections thus
ruing democracy at its roots.

Concluding Remarks
Perhaps the most basic institution of civil society, the family, which should be a moral educator
schooling the next generation of citizens in the interplay of rights and responsibilities, is in peril and
that "the second line of defense" (schools and colleges) cannot alone prevent the decline of a
responsible citizenry. Although schools are reluctant to engage in moral education and character
formation, they must do so to combat the "moral deficit" among young people. There seems to be
among the young an increasing tendency to express needs and wants in terms of rights and to invoke
rights talk, a tendency summed up by social critics and popular media as "rights inflation" or a "rights
explosion." For example, people call for new rights without regard to the duties and obligations that a
right creates (e.g., asserting affirmative rights to healthcare without considering the implications for
the public finance). Exaggerated rights talk only shuts down debate and makes compromise difficult
but also devalues rights. We need a return to a language of social virtues, interests, and, above all,
social responsibilities that will reduce contentiousness and enhance social cooperation. xxvii

Any discussion of rights and duties must be prefaced by a discussion of certain principles that
rights and duties are based upon: principles of distributive justice, contributory or participatory
justice, social and family justice. The approach allows for balancing the responsibilities of individual
(contributive or participatory justice) with that of family need (social and family justice) and that of
institutions and governments (distributive justice, corrective justice). An optimal situation of rights
and duties should, accordingly, include strategies for avoiding poverty, as well as emphasize the
social duty emerging from private property, all this in spirit of solidarity and subsidiarity. Lastly, any
discussion of rights and duties should be framed within the context of global and ecological
sustainability.

Moreover, the discourse on human rights should be a systematic attempt to work out the
implications of the Golden Rule in political and social life. “Do unto others as you would have them
do unto you”– this rule encapsulates an ethic of reciprocity and serves as the logic of rights and duties.
By this golden rule, executives need to shift their consideration from the implications of their
strategies for their lives and that of the company to the implications of these actions for the lives of
employees, their families and local communities.

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140
Table 6.1: A Hohfeldian Analysis of Corporate Executive Rights and Duties

Hohfeldian Jural Corporate Executive Stakeholders’ Duties &

Concept of Correlates/ Duties & Responsibilities Responsibilities under
Right as: Opposites under bankruptcy situations bankruptcy situations

Corporate executives have a duty to Duty for seeking and studying clear and
respect the rights of all stakeholders by adequate information on corporate
Duty providing them all material financial financial performance and related
information on corporate performance, business activities before acting upon it.
Claim if they so demand it.
Corporate executives have no-right to No-right to claim ignorance on
deceive stakeholders by exaggerated unintended consequences that are
No-right financial statements of corporate reasonably foreseeable in companies
performance. under a bankruptcy or turnaround
situation.
Corporate executives have no-right for No-right but privilege to invest or
legal approval or social legitimacy if disinvest in distressed companies either
No-right distressed corporations arbitrarily as employees, customers, suppliers or
close plants and force massive layoffs. creditors.
Privilege Corporate executives have a privileged Privileged duty to protect themselves
duty to safeguard the corporation and and other stakeholders when they
Duty not to abuse Chapter 7 or 11 suspect decline, distress or insolvency of
bankruptcy provisions but honestly corporations they have a stake in.
strive to Corporate the company for
good.
Power to operate, downsize or close All legitimate stakeholders are
plants or parts of the corporations or empowered for equitable
sell them to others under stipulated compensations, as also be prepared for
Liability conditions, but as long as these are the incurring substantial losses.
last and only alternatives.
Power Despite power to manage and operate Stakeholders are normally disabled
corporate situations, executives are from harassing turnaround executives
disabled from harassing their by severe public and social scrutiny or
Disability stakeholders by deceptive financial interference, especially, when the latter
reports and other fraudulent business are honestly trying to save the
practices. corporation.

Once legally approved for bankruptcy Disable stakeholders of losing

or business corporate, executives are corporations from further losses by
Disability immune from external interference, providing timely warning and counsel
unless they seriously violate on imminent bankruptcy consequences.
stakeholder rights.
Immunity Despite legal approval, corporate Despite legal protection, stakeholders
executives may be held liable for could be liable for harassing turnaround
Liability generating disproportionate losses or or bankruptcy executives in the
injustices in the fulfillment of their fulfillment of their reorganization or
Corporate duties. liquidation duties.

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 Table 6.2: Bill of Rights and Duties of Corporate Executives and
Stakeholders
Hohfeldian Corporate Corporate Corporate Executive Corporate Stakeholder
Consumer Executive Stakeholder “No-Rights” “No-Rights”
Privileges Privileges Privileges
To Safety Privilege to safe entry in Privilege to corporate “No-right” not to protect Society and public have “no-right”
the legally approved strategies, products and corporate customers and not to provide safe market entry to
competitive corporate services that are non-customers from all responsible corporate executives
market; privilege of safety personally and socially personal and social harm of even though they may not ensure
from public harassment. safe and just. unsafe and addictive socially safe corporate products
products. and services.
.
To Know Privilege that corporate Privilege to truth in “No-right” not to truthfully “No-right” not to search, shop and
executives receive objective corporate advertising and inform and instruct compare corporate products and
(i. e., to be feedback on the firm’s promotions without corporate stakeholders services from representative
informed) products and operations. information overload or through objectively clear and competitive corporate offerings
under-disclosure. meaningful promotions and and thus learn about their justice
products. Hence, no over- and equity.
marketing and deceptive
corporate offerings!
To Choice Privilege to offer a wide Privilege to choose from a ‘No right’ not to offer a wide ‘No-right’ to demand or expect
variety of competitively variety of socially safe variety of corporate product access and choice to a variety of
good and socially safe corporate products and bundles that are socially and competitively and socially safe
corporate products and service packages. competitively safe. Hence, corporate products and price
services. build justice before variety. packages. Hence, choose
cautiously.
To be Heard Privilege to be heard by Privilege to complain to ‘No-right’ to immunity when ‘No-right’ to be heard and acted
proper authorities when proper authorities about legitimately opposed by upon by proper authorities when
unduly harassed by corporate abuses and be corporate stakeholder and complaining about corporate
corporate stakeholder and heard. non-stakeholder publics. abuses. Hence, negotiate redress
non-stakeholder public. Hence, avoid corporate prior to corporate contracts.
abuses and seductions.
To Redress Privilege to adequate Privilege to recourse and ‘No-right’ to demand undue ‘No-right’ to undue compensation
compensation when unduly adequate compensation compensation when unjustly when justly or unjustly tricked into
maligned or vandalized by when unjustly tricked into maligned or vandalized by attractively deceptive but losing
corporate stakeholder and attractively deceptive corporate stakeholder and corporate packages.
non-stakeholder public. corporate packages. non-stakeholder public.

To Full Privilege to advertise and Privilege to receive on ‘No-right’ to assume that ‘No-right’ to assume that corporate
deliver full value of purchase full value of corporate stakeholder and products will always deliver full
Value corporate product-bundles corporate product-bundles non-stakeholders will not value that includes no harm.
that includes no harm. that include no harm. expect full value that includes Hence, buyers beware!
no harm. Hence, sellers
beware!
To Privilege to educate Privilege to educate ‘No-right’ to demand that ‘No-right’ to educational and
corporate stakeholder and yourself on corporate current and prospective counseling programs that enable
Education non-stakeholders about the products and services. stakeholders will seriously better education on corporate
costs and benefits of Hence, learn when to say educate themselves about the products and services. Hence, also
corporate. “no.” costs and benefits of work on your own.
corporate. Hence, counsel
them.
Represen- Privilege to an objective Privilege to represent ‘No-right’ to an objective ‘No-right’ to demand to be heard
representation and objectively serious representation and unbiased and redressed when corporate
tation and unbiased participation of corporate stakeholder participation of corporate executives rightly represent to the
Partici- corporate stakeholders issues as and when they stakeholder and non- right stakeholders with just
pation when serious corporate occur to proper corporate stakeholders when serious procedures. Hence, act much
product/service issues or government product/service issues arise. before problems arise.
arise. authorities. Hence, preempt problems.

End Notes
Chapter 07

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The Ethics of Corporate Moral Reasoning, Moral Judgment,
and Moral Justification

Executive Summary

This focal Chapter deals with the understanding of important ethical theories used in executive
moral reasoning such as teleology, deontology, distributive justice and corrective justice, virtue
ethics versus ethics of trust, from the perspectives of intrinsic versus instrumental good, moral
worth versus moral obligation, and moral conscience versus moral justification. Ethical and
moral reasoning will power executives to identify, explore and resolve corporate moral dilemma,
especially in the wake of emerging grey market areas where good and evil, right or wrong, just or
unjust, truth and falsehood cannot be easily distinguished. We focus on developing corporate
skills of awareness of ethical values and moral imperatives in current otherwise highly
commoditized and turbulent human, market and corporate situations. The challenges of morality
are multifaceted and diverse. Professionals usually have self-discipline and self-regulation
abilities, ego strength and social skills. Morality in the professions is not concerned with the issues
of rudimentary socialization; rather the issues involve deciding between conflicting values, where
each value represents something good in itself. There are problems in both knowing what is right,
good, true and just on the one hand, and on the other, in doing what is right and avoiding wrong,
doing good and avoiding evil, and being fair and just while avoiding being unfair and unjust.
Several contemporary cases will illustrate the challenging dimensions of ethical and moral
reasoning, moral judgment and moral justification embedded in executive decision processes and
corporate growth and profitability ventures.

Case 7.1: Samuel D. Waksal, founder of cancer-drug company Imclone Systems, and his acquaintance, Martha
Stewart, founder of Martha Stewart Living Omnimedia, were two phenomenally successful businesses who
overnight ruined their reputation and nearly destroyed two multi-billion dollar enterprises, simply by selling a
few Imclone shares just before the release of the bad news that the FDA had de-licensed the cancer drug. Both
were accused of insider trading, were driven out of the businesses they had founded, fined heavily, and served
prison sentences for years. Imclone shares fell initially after the FDA adverse decision, but within two years
they rebounded to new highs. In 2009 the company was sold to Eli Lilly for $6.5 billion. Had Waksal and
Stewart been patient, acted on their better instincts, the outcomes would have been totally different. What they
gained by insider trading was nothing compared to the losses they incurred in terms of gossip, ridicule, loss of
human dignity and freedom. Martha Stewart’s brand eroded in value substantially and has yet to regain original
credibility and renown.

Case 7.2: Latent demand for low-priced, high-quality goods is enormous. Consider the reaction when
Hindustan Lever, the Indian subsidiary of Unilever, recently introduced what was for it a new product category
—candy—aimed at the bottom of the pyramid. A high-quality confection made with real sugar and fruit, the
candy sells for only about a penny a serving. At such a price, it may seem like a marginal business opportunity,
but in just six months it became the fastest-growing category in the company’s portfolio. Not only is it
profitable, but the company estimates it has the potential to generate revenues of $200 million per year in India
and comparable markets in five years. Hindustan Lever has had similar successes in India with low-priced
detergent and iodized salt. Beyond generating new sales, the company is establishing its business and its brand
in a vast new market. There is equally strong demand for affordable services. TARAhaat, a start-up focused on
rural India, has introduced a range of computer-enabled education services ranging from basic IT training to
English proficiency to vocational skills. The products are expected to be the largest single revenue generator for
the company and its franchisees over the next several years. Credit and financial services are also in high
demand among the poor. Citibank’s ATM-based banking experiment in India, called Suvidha, for instance,
which requires a minimum deposit of just $25, enlisted 150,000 customers in one year in the city of Bangalore
alone. [See Prahalad & Hammond (2002)].

Case 7.3: Can making profits be moral? Here are some reasons:

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

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 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 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. 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).
4. 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, p. 6).
5. 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 (5) is similar to the “lemon problem” first stated and discussed by another
Noble Prize winner Akerlof (1970). All five arguments uphold competitive rights and free enterprise
markets, thus promoting market justice.

The Ethics of
Executive Moral Reasoning and Moral Judgment
Most of our activities center around feeling, thinking, and choosing, and all three are connected. In
every act of reason, in every act of affect or experience, and in every act of choice there is a link
between the activities and the one who performs them and owns them. We are more than our
thoughts, experiences and choices, even though all three activities are ours. Our transcendence unites
them, owns them, and takes responsibility for them. There is an intimate connection between what we
do and what we are. We transcend our actions while they still remain “our” actions (Flanagan, 1991 ,
p. 134-136). There is a unity between the person who acts and the actions performed that lasts over
time and integrates them all into the context of what we have been before, what now, and what we
will be in the future. The condition for the possibility of this abiding unity between us and all that we
do over time is the transcendent principle of human personhood. This principle brings unity to our
life and actions, and gives coherence and meaning to what we do and what we become. Personhood
as transcendence is an existential condition for the possibility and interpretation of our personal unity,
individuality, sociality, ethicality and morality (Von Hildebrand & Von Hildebrand, 1966, p. 88).

We revisit major ethical theories of teleology, deontology, distributive justice and corrective
justice that we briefly stated in an earlier volume on corporate ethics. We now study them from the
viewpoint of intrinsic versus instrumental good, moral worth and moral obligation, moral conscience
and moral justification. Such advanced reviews and synthesis of major ethical theories can provide
additional insights as practical and readily applicable principles for ethical reasoning and moral

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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 Chapter has two parts:

 Part I: General Application of Moral and Ethical Theories to Executive Decisions and Moral
Dilemma;
 Part II: Applying Specific Moral and Ethical Theories to Executive Decisions and Moral Obligations

Part I: General Application of Moral and Ethical

Theories to Executive Decisions and Moral Dilemma

Ethics is all about making good and moral decisions. As a corporate executive our moral and
ethical concerns, decisions and dilemmas should be:
1. What should I do? What should I not do?
2. What ought I to do? What I ought not to do?
3. What am I obliged to do? What am I not obliged to do?
4. What should I become? What should I not become?
5. What should I be? And what should I not be?

All five sets of questions deal with executive commissions (first question under each set) and
omissions (the second question in each set) from the viewpoint of executive duty (first two sets),
obligation (sets three and four), and responsibility (set five). The first two sets of questions refer to
executive inputs of action; the next two relate to processes of executive action, and the fifth set deals
with executive action outcomes. Various ethical theories of moral reasoning help us in answering
these questions.

Kohlberg’s Theory of Phases in Moral Reasoning

It is generally agreed among psychologists (e.g., Kohlberg, 1969, 1984; Rest, 1979) 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), and
 On personal, moral or ethical standards (Post-conventional Phase).

We assume that most corporate 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 work hard lest I should be fired (reward/punishment)

2. I work hard as it benefits both the company and me (cost/benefits).

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 3. I work hard that I may learn and grow on my job. (instrumental)
4. I work hard for my colleagues and superiors (interpersonal).

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

5. I work hard, as everybody does it (social compliance)

6. I work hard, as I need to be recognized (social approval)
7. I work hard, because of my contract to do so (contractual)
8. I work hard, as this is my duty (obligation).

Post-conventional Phase: We do certain things based on personal, moral or ethical standards and convictions.

9. I work hard, for work unites humankind regardless of race, color, age, gender or creed (sociological).
10. I work hard, because everybody should work for a living (deontological)
11. I work hard, for work is human and humanizes me (philosophical)
12. I work hard, for work is a divine mandate (theological).

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

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

b) Ideally or normatively, where should we be at this stage of our executive life?
c) 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?
d) Does our executive moral reasoning become more objective, universalize-able 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 book or course in business or
corporate 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 B-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.

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): xxviii

Teleological Moral Reasoning

 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

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 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 outcomes of 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. In general, there is a distance of space and
time between causes and effects. Victims of asbestos white-lung disease discovered the harmful
effects of asbestos particles they inhaled while working in asbestos-using environments only 25 to 35
years later. Similarly, coal-mine workers inhaling crystalline coal dust suffered from black lung
disease decades later during retirement.

Hence, this version of out-based teleology fails to be a useful rule of moral assessment of
executive judgment or action. Moreover, when are you sure that you have exhausted search and study
all the costs or benefits of an action, especially when there could be unforeseen and unintended
consequences to many executive actions. A later version (Broad 1946) 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?

Deontological Moral Reasoning

A second theory of moral reasoning, deontology, 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, and rights or duties that concern the greatest number. But the problem is when and how
does the executive know the nature, content, 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. For
instance, despite our rapid globalization, digitization and ubiquitous networking we still do not have a
corpus of international laws to rule and adjudicate our international and intercontinental behavior
other than through a few pacts and conventions of the IMF, UNO, World Bank, WTO, and the like.
The existence and operation of international courts are far from desirable and effective. International
labor laws, patents, trademarks and copyrights are still not taken seriously, while counterfeiting and
trademark infringements are very common and often overlooked. International financial products and
markets are still opaque, confusing and deceptive leading to unnecessary financial crisis as those of
the Great Depression of October 1929 and the September-October 2008 collapse of mega investment
banks.

Hence, this version of process-based deontology often fails to be a readily applicable rule for
ethical and 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

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are. This traces the morality of the act to the universalizability principle of Kant that we internalize as
an input to all our actions. With utilitarianism, 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, 1992, p. 88). Hence, teleology and deontology need
to be supplemented by distributive justice, and distributive justice by corrective justice.

Distributive Justice Based Moral Reasoning

The third theory of ethical and moral reasoning is distributive justice:

 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, rights and privileges there may be gross 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 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
equitable distribution of benefits versus costs, of 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 output-based distributive justice also fails to be a useful rule of
moral reasoning and assessment of executive judgment or action.

The Rawlsian concept of justice mandates giving to others what rightfully belongs to them
(Rawls, 1971). Justice, therefore, has both deontological and teleological (utilitarian) aspects. The
theory of distributive justice is particularly relevant when different people put forth conflicting claims
on society's rights and duties, benefits and burdens and when all claims cannot be satisfied. In such
cases, the standards of distributive justice are generally taken more seriously than utilitarian
considerations (Hare, 1978; Rawls, 1958). The moral right to be treated as free and equal persons is
the basic egalitarian foundation of distributive justice (Vlastos, 1962).

Corrective Justice Based Moral Reasoning

The fourth theory of ethical and moral reasoning is corrective justice:

 Regardless of costs and benefits, rights and duties, and their existing distributions, that executive
action is moral if it sets up legitimate laws, and effective procedures and processes to rectify
unjust structures in society that inequitably distribute costs and benefits, rights and duties across
the greatest number of affected stakeholders. Thus, while teleologically an action may have
positive net benefits, and deontologically the same action may not violate any known moral
principles, rights or duties, yet if in the distribution of these net benefits, rights and privileges
there is gross injustice, then executive actions should rectify such unjust structures such that the
rich may become richer while the poor become poorer. Hence, the need for a fourth ethical system
that of corrective justice.

 To the question: what should I do? The corrective justice theory answers: Act in such a way that,
while fulfilling most of your duties and moral obligations, the benefits of your action clearly

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 exceed the costs, and that the costs and benefits, rights and duties are equitably spread across all
people affected by the action, and if not, set up processes and procedures to rectify unjust
distributions of costs and benefits, and rights and duties among the greatest number of affected
stakeholders, especially, the marginalized and the poor.

The Theory of Equality and Corrective Justice

The problem underlying all forms of justice (e.g., distributive, retributive and corrective) is the content or domain of equality. The
fundamental problem, however, is, as Amartya Sen (1979, p. 307) expressed it, “equality of what?” That is, what is the appropriate
equalizandum (the entity to be equalized)? There is hardly a consensus among egalitarians justice theorists. For instance, some
egalitarians define the domain of equality as resources (Dworkin 1981), as primary goods (Rawls, 2001, p. 62, 92), as opportunity for
welfare or access to advantage (Cohen, 1989, p. 99), or as buyer-seller information asymmetry reduction (Mascarenhas, Kesavan, &
Bernacchi, 2008).

The next question is, given an equalizandum such as opportunity for education, earning,
healthcare, and property, what limitations should be imposed on its distribution? For instance, what
would justify a deviation from equal opportunity to basic education or basic health among citizens of
a given country? Alternately, what is the role of justice, liberty or responsibility in the distribution of
the equalizandum? Most egalitarian theorists of distributive justice attempt to design a distributive
policy that is endowment-insensitive but ambition-sensitive. That is, any equalizing of opportunity
should not be based on individual endowments such as wealth, race, color, power, social status and
other such considerations, but on the needs, wants and use of that opportunity for all citizens (Cohen,
1989; Dworkin, 1981).

Virtue Ethics and Moral Reasoning

Frankena (1973, 1980) maintains that virtue ethics cannot be an independent method of moral
reasoning. For him, virtues merely augment an existing method; they do not supply specific directives
for determining right or wrong conduct. Principles and rules direct, while virtues merely enable us to
perform what the principles command. But Nussbaum (1986, 1988) counter-argues that the Greeks
used virtues precisely to judge moral conduct. That is, virtues can provide the standards of morally right
conduct, and hence, virtues, not moral principles, are the source for understanding normative conduct.
In fact, principles and rules are derived from virtues: they are directives that obtain their content from
the virtuous activity which humanity enjoins (Nussbaum, 1988). Dunfee (1991), on the other hand,
considers virtue-ethics theory as an alternative to the stakeholder theory or the social-contracts theory.

Developing a virtue-based ethics for business, Solomon (1992a, p. 104) argues that mere wealth
creation should not be the purpose of any business. “We have to get away from “bottom line” thinking
and conceive of business as an essential part of the good life, living well, getting along with others,
having a sense of self-respect, and being part of something one can be proud of.” Individuals are
embedded in communities and that business is essentially a community activity in which we work
together for a common good, and excellence for a corporation consists of making the good life possible
for everyone in society (Solomon, 1992a, p. 209).

Some argue that a true understanding and living the virtue concept will be antithetical to
competitive economic activity. Thus, corporate executives fundamentally engaged by their profession
in the competitive acquisition of wealth, opportunity and growth could only exercise simulacra of the
true virtues (Dobson, 1998). According to MacIntyre (1984, p. 254), “the tradition of the virtues is at
variance with central features of the economic order.” According to MacIntyre (1984, p.187), a
necessary condition for a business person to be “virtuous” is cooperative or communal business activity
within the firm that qualifies for “internal practice.” The concept of “internal practice” involves that
“any coherent and complex form of socially established cooperative human activity through goods
internal to that form of activity are realized in the course of trying to achieve those standards of
excellence which are appropriate to, and partially definitive of, that form of activity, with the result that

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human powers to achieve excellence, and human conceptions of the ends and goods involved, are
systematically extended” (1984, p. 187).

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 a 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 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. An ethical “dilemma” is not seen as an abstract problem with only one
ethically “correct” solution that can be agreed on by impartial observers applying universally accepted
principles (Gilligan, 1982). Instead, solutions can and should emerge from mutually caring
relationships and the contexts in which the problems are embedded. Particular human beings in
particular settings should generate “caring” solutions appropriate to unique situations (Jones, Felps,
& Bigley, 2007, p. 139).

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. A set of normative ethical theories;

B. A set of moral principles derived from set A;
C. A set of moral standards derived from sets A and B;
D. A set of moral rules derived from set C, and
E. 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 Chapter 01), virtue ethics (Chapter
02), ethics of trust (Chapter 03), ethics of leadership (Chapter 04), ethics of rights and duties (Chapter 06),
ethics of moral reasoning (Chapter 07), and ethics of moral and ethical responsibility (Chapter 08).

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  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 non-malfeasance: 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: Be honest; do not lie; do not kill; do not steal; 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: Human “enhancement” is playing God. Capital
punishment is wrong. Child labor is evil. Sweatshops are dehumanizing.

Two criteria characterize moral principles:

 Supremacy: moral principles override other considerations such as contingencies, situations, self-interest,
group interest or politics. Examples: Do not harm. Keep promises. 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, creed, nationality or social status. Examples:
Kant’s Universalize-able principle: Whatever you do should be a moral rule for all others. Kant’s
reversible principle: What all others do should be a moral principle that you should follow. The Golden
Rule: Do unto others what you would like others do unto you.

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.

We distinguish two processes of moral judgment calls in this connection: Forward Moral
Judgment, and Reverse Moral Judgment. Exhibits A and B illustrate these two moral reasoning
processes as corporate exercises.

< Exhibit 7A about here >

< Exhibit 7B about here >

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 7.1 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.

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 < Table 7.1 about here >

Rule versus Act Applications of Ethical Theories

Application problem: teleology, deontology, distributive justice and corrective 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 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 one’s actual moral judgments and decisions, and work one’s
way upwards in Figure 7.1 and derive moral judgments and justification via moral rules, moral
standards, moral principles and moral theories. The vertical bi-directional arrows in Figure 7.1
indicate this forward (see Exhibit 7A) and reverse (see Exhibit 7B) dynamic of assessing executive
decisions.

< Figure 7.1 about here >

Figure 7.1 characterizes the process of deriving and 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.

Corporate Moral Dilemma and Executive Challenges

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 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 (Whitbeck, 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 satisfied but which are definitely not just
dichotomous or multi-chotomous choices (Whitbeck, 1992). Most business situations imply a real
human narrative form that extends over time, and not just faceless theoretical dichotomous dilemmas.

An ethical dilemma is an undesirable or unpleasant choice relating to a moral principle or practice

(Maxwell, 2003, p. 5). What do we do in such situations – the easy thing or the right thing? 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 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 today’s 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. Using this 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, p. 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. xxix

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. 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, p. 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

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punishment. Under federal guidelines, companies that have ethic programs are eligible for reduced
fines if convicted of wrongdoing (Ryan, 2002).

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. xxx 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. xxxi

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:

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 moral reasoning
procedure:

1. Specify the conflicting moral (teleological, deontological, distributive justice and virtue ethics) principles
involved in the dilemma.
2. 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

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 place of Jane may involve conflict of interest.
3. 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.
4. Consider which alternative would you choose if by fulfilling one obligation (alternative) another must be
contravened, and why?
5. What crucial circumstance would change the priority of obligations (alternatives) you have identified under
(1) to (3)?

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 and Moral Reasoning

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 might be a sign of an unhealthy organization. When dealt
constructively, conflicts enhance creative definition, formulation and solution of problems (King,
1999, p.1); conflict 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, p. 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.

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 one’s own
needs, desires and dreams. On the contrary, cooperativeness is the desire to satisfy another’s needs,
concerns and desires.

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?”

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 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 one’s consumer needs, wants, and desires, and satisfying one’s needs, wants and desires is
good as it makes us happy and contended, and so on. On the other hand,

 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
understanding the free enterprise business system. 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, p. 51). Some teleologists define intrinsic good as pleasure (these are called hedonists); others define it as happiness
(these are called eudemonists); others, as one’s 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 non-consequentialists who invoke the natural law theory. According to this natural
law theory, there are several independent (non-commensurable) 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 or the Dharma philosophy of the Orient).

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.

Kant’s Theory of Moral Obligation

Justice is the cornerstone of Kant’s 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

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demands, 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 is not universalize-able, 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? Kant’s 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 Kant’s view that if we treat people as means and not ends we do not respect them as persons.

Conscience and Moral Obligation

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, p. 14). Conscience begins in initial sensitivity to moral salience and moves to conscious
empathy. Conscience engages in “cross-checking” one’s 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, p. 123-
124).

The existence of conscience is one of the most widely validated concepts in psychological,
sociological, religious, and philosophical literature (Covey, Merrill & Merrill, 1994/2003, p. 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 executives develop their vision and mission statements, the collective unconscious of

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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. One’s 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
everyone’s souls. People instinctively feel trust and confidence toward them. This is the beginning of
moral authority (Covey, 2002, p. 4-5).

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, p.: 77-78).
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.

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, p. 47):

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

2. It should prevent evil or harm (preventive justice);
3. It should remove evil or harm (protective justice), and
4. 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.

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 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 non-malfeasance is violated (Stern & 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

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 one’s
own life is to act with too little virtue of self-care (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 (O’Donnell, 1991, p. 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

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

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, p. 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 & Childress, 1989, p. 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).

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 agent’s 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 one’s act but not cause them. One does not intend the
bad side effects, even though one may accept them voluntarily or involuntarily. Such bad side effects
are considered “indirect” effects. The agent’s intention is the sole morally determinative factor.
Thus, an act may be morally justified, if the agent’s 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 evaluation.

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

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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, p. 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.

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 & O'Rourke, 1989, p. 161).

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Figure 7.1: The Process of Deriving and Justifying Corporate Executive
Moral Judgments and Decisions

Set A: Set B: Set C: Set D:

Normative Ethical Moral Moral Moral
Theories Principles Standards Rules

Act Application of Corporate

Rule Application of
Ethical Theories Judgments, Ethical Theories
Decisions and
Strategies

What rights/duties and

Act Deontological norms/ principles does Rule Deontological
Assessment the corporate action Assessment
uphold?

What are the social

Act Teleological consequences of this
corporate decision and Rule Teleological
Assessment Assessment
action?

Does this action evenly Rule Distributive

Act Distributive Justice
distribute costs/benefits Justice Assessment
Assessment
and rights/duties across
all stakeholders?

Does this action

promote the physical,
Act Virtue Ethics functional and moral Rule Virtue Ethics
Assessment well-being of all Assessment
stakeholders?

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Exhibit 7A: A Framework for Forward Corporate Moral Judgment Call

Step Forward Moral Judgment Call Assessment of Judgment Call

A Study a given Case thoroughly, holistically, Be sure you have invoked the best ethical theories relevant
and identify the critical problem that defines for the Case. How do you justify the selection of ethical
and undergirds the Case. What ethical theories to resolve this Case? Are you sure your selection
theories would you invoke in understanding, has the most important and relevant theories to resolve the
characterizing and defining this problem? Case? Otherwise, go through Step A again and revise your
What are the key subjects, objects, set of theories selected for a better understanding of the
properties and events (SOPE) of the Case? Case.
Why?
B From these ethical theories what specific If your derivation and selection of moral principles is
moral principles would you derive that will inadequate to understand the Case Problem, then go back
enable you to explain, analyze and morally to Steps A and B and revise your selection of ethical
assess the key subjects, objects, properties theories (Step A) and the derivation of moral judgments
or events (SOPE) of this problem, and why? (Step B) for a better and more holistic understanding of the
Case.

C What specific moral standards would you If your derivation and selection of moral standards from the
derive from the moral principles derived at moral principles and ethical theories is inadequate to
Step B in order to justify your explanation, understand the Case Problem, then go back to Steps A to C
analysis and moral assessment of SOPE and revise your selection of ethical theories (Step A), the
under Step B, and why? derivation of moral judgments (Step B), and the
specification or derivation of moral standards (Step C) for a
better and more holistic understanding of the Case.

D Fourthly, what specific moral rules would If your derivation and selection of moral rules from the
you extract from the moral standards (Step moral standards, moral principles and ethical theories is
C), moral principles (Step B) and ethical inadequate to understand the Case Problem, then go back
theories (Step A) to further justify your to Steps A to D and revise your selection of ethical theories
explanation, analysis and moral assessment (Step A), the derivation of moral judgments (Step B), the
of SOPE under Steps B and C, and why? derivation of moral standards (Step C), and the selection or
derivation of moral rules (Step D) for a better and more
holistic understanding of the Case.

E Given Steps A, B, C and D, and the moral Be sure you think clearly, objectively and rationally before
assessment of SOPE under each, what you arrive at this moral judgment regarding SOPE in the
specific moral judgments can you arrive at Case. Why do you judge so? Why is this moral judgment
regarding key SOPE in the Case, how and critical and important for the understanding, analysis and
why? How can you thereby justify this moral resolution of the Case?
judgment and the rules, standards, If no acceptable moral theories, principles, standards or
principles, and ethical theories it is based on, rules justify your moral judgment at this stage, then go
and why? back to Steps A to E and look for other moral theories (Step
A), sound moral principles (Step B), sound moral standards
(Step C) or moral rules (Step D), and thereafter, revise your
moral judgment (Step E) and/or re-justify your moral
judgment. This iterative process may be continued till you
arrive at the best, moral and just judgment.
Steps What have you learnt in this iterative moral In general, how would you frame, compose, and formulate
A-E reasoning and forward moral judgmental your considered moral judgment about a given case so that
justification process? it is morally (forward) justifiable to the greatest number of
affected persons in this Case?

163
Exhibit 7B: A Framework of Reverse Corporate Moral Judgment Calls
Step Reverse Moral Judgment Call Assessment of Judgment Call

E Start with a specific moral judgment Be sure you think clearly, objectively and rationally before
based on a given Case[See examples of you arrive at this judgment. Why do you judge so? Why is it
several moral judgments under Set E critical and important for the understanding and analysis of
above] the Case?
D What specific moral rules justify this If no acceptable moral rules justify this moral judgment at this
moral judgment and why? [See Set D stage, then go back to Step E and revise your judgment, or
above]. look for other rules (Step D).
C What specific moral standards justify If no acceptable moral standards or rules justify this moral
this moral judgment and the rules it is judgment at this stage, then go back to Step E and revise your
based on, and why? [See Set C above]. judgment, or search for other sound rules (Step D) or moral
standards (Step C).
B What specific moral principles justify If no acceptable moral principles, standards or rules justify
this moral judgment and the rules and this moral judgment at this stage, then go back to Step E and
standards it is based on, and why? [See revise your judgment, or search for other moral rules (Step D),
Set B above]. sound moral standards (Step C) or moral principles (Step B).
A What specific moral or ethical theories If no acceptable moral theories, principles, standards or rules
justify this moral judgment and the justify this moral judgment at this stage, then go back to Step
rules, standards and principles it is E and revise your judgment, or look for other moral rules
based on, and why? [See Set A above]. (Step D), sound moral standards (Step C) or moral principles
(Step B), or ethical theories (Step A).
Steps What have you learnt in this iterative In general, how would you frame, compose, and formulate
moral reasoning and backward your considered moral judgment about a given case so that it
E-A judgment and justification process? is morally justifiable (backward) to the greatest number of
affected persons in the Case?

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 Table 7.1: Some Practical Distributive Justice Principles
Distributive Distributive Justice Principles Critical Comments
Justice Theory

Egalitarianism Equal access to the goods of life that every What needs: real, felt or created?
rational person desires based on need and What equality: human, economic,
equality. social, racial?
Libertarianism Equal access to social and economic liberty to Advocates fair procedures and
all. systems rather than substantive
outcomes.
Utilitarianism (J. S. Equal access to the goods of life such that The free and equal access could be
Mill) public utility is maximized. abused, thus reducing public utility.

Fair Opportunism No person should be granted social benefits This is a universalize-able and
(Rawls 1971) based on undeserved advantage (e.g., royalty, reversible principle (by Kantian
inheritance, status) or disadvantage (e.g., criteria) and very appropriate in a
gender, age, race, color, disability, religion, and situation.
nationality).

Non-malfeasance 1. Above all, do not harm (Non-maleficent Morality and goodness of the
Frankena (1973) Justice). executive act increases from the
2. Protect or remove people from harm first to the fifth principle.
(Protective Justice). Beneficent justice is voluntary; it
3. Prevent people from harm (Preventive cannot be legally mandated, but
Justice). parenetically or morally urged.
4. Set up procedures that minimize harm
(Corrective Justice).
5. Do good whenever possible (Beneficent
Justice).

Well-being by Due The act should serve the well-being of all This can be a good and practical
Care (Jonsen 1977) stakeholders by carefully employing standards management principle that seeks
of due care and assessing risk-benefits and welfare of all affected stakeholders.
detriment-benefits of the act.

There is no pattern of just distribution other Distributive justice should have two
than that of the unpatterned free-market components: from each and to each,
system based on three principles: acquisition, and the two component principles
transfer, and rectification: are related. What society chooses to
do for one may be a function of
a) The principle of justice in acquisitions: it is what one chooses to do for society.
Libertarian theory the principle and process whereby
originally "unheld things" began to be A person who acquires a holding in
of justice, Nozick appropriated in the first place. accordance with any of these three
(1974) b) The principle of justice in transfers: it is the principles is entitled to that holding.
principle and process whereby people If principles (a) and (b) are just,
acquire and transfer holdings from one to then we have a just distribution of
another. holdings; given (a) and (b), the
c) The principle of rectification in acquisitions: complete principle of distributive
it relates to rectification of acquisitions and justice states that a distribution is
transfers if the original principles and just if all are entitled to the holdings
processes of acquisitions and transfers were they possess under a given
unjust. distribution.

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End Notes
Chapter 08

The Ethics of Corporate Legal, Ethical, Moral and Spiritual

(LEMS) Responsibility

Executive Summary

Ethics is fundamentally a science of social and collective responsibility. Ethics concerns

human behavior as responsible or accountable. Because of the nature of social interaction,
certain members of the society will bear greater authority, and hence, greater individual
and social responsibility than others. In our world, personal responsibility and social
responsibility are hardly separable. Personal responsibility becomes responsibility for the
world because the person and the world are inseparable. In this Chapter, we use the term
responsibility from a legal, ethical, moral and spiritual (LEMS) standpoint as some promise,
commitment, obligation, sanctioned by self, morals, law or society, to do good, and if harm
results, to repair harm done on another. Hence, responsibility from a moral perspective is
trustworthiness and dependability of the agent in some enterprise. Its inverse is
exoneration- the extent to which one is excused from commitment and repairing the harm
done to others by one's actions. We apply the theories and constructs of executive
responsibility to two contemporary cases: a) India’s Superrich in 2014; b) The Fall and Rise
of Starbucks. After exploring the basic notion of responsibility, we present a discussion on
the nature and obligation of corporate responsibility in two parts: Part I: Classical
Understanding and Discussion on Corporate Responsibility; Part II: Contemporary
Understanding and Discussion on Corporate Responsibility. We conclude with a synthesis
of classical and post classical views of responsibility and their applications to corporate
executive responsibility.

Case 8.1: India’s Superrich in 2014

[Note: This case includes researched facts from the Business World Report (Business World, July 14,
p. 42-101) that BW publishes every year. It is a vigorous, incisive and accurate exercise carried out by
BW. The standards for research and accuracy levels were further upped this year as BW partnered
with Motilal Oswal Financial Services (MOFS) for numerical and spreadsheet support. The first step
taken was to scan through a list of about 37,000 strong promoters of 4,000 listed companies, which
included multinational companies (MNCs) and Indian Public Sector Units (PSUs). Cross holdings of
promoters across various companies were also taken into account. The net worth of promoters was
calculated by multiplying the number of shares held by the promoters with stock price on 31 March
2013 and 31 March 2014. Although utmost care would have been taken by BW in making the
Superrich list of 2014, inherent constraints like unclear shareholding patterns, number fatigue and
poor disclosure standards by corporates can introduce a certain margin of error. There was also a
report on The Wall Street Journal about the spending habits of India’s superrich. While the common

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man waited for good times to return, India’s superrich were on a spending spree. The report stated
that the number of Indians worth of $ 4.2 million or more went up by 16% as compared to the
previous year. The superrich are moving out of their comfort zones and spending in areas like private
equity, exotic food and even space travel. More than 150 super rich Indians interviewed by Kotak
last year, increased their spending on average (as opposed to saving and investment) to 49% of their
income, compared to 30% for the year before].

While the 2013-2014 financial year saw the Indian economy slowing to a crawl, and it was
terrible for the employees across the board, it was a very good year for Indian billionaires, as the
Business World 2014 Super Rich survey revealed. Between April 1, 2013 and March 31, 2014, the
stock market was on steroids – the BSE Sensex shot up 18.67% and the NSE Nifty rose 17.53%. Many
of the Indian billionaires saw their net worth rise even faster than both indices. The stock market
boom created a record number of new rupee and dollar billionaires, even though the rupee-dollar-
exchange-rate has been hovering between Rs. 55 to Rs. 60 during the same 2013-2014 fiscal year.
The collective wealth of India’s 500 odd superrich, with at least 100 crore in stock value, grew 22%
from Rs. 18 lakh crore in FY 2012-13 to Rs. 22 lakh crore by March 31, 2014. India has one of the
highest shares of super-rich people in the world. India has the highest share of poverty and
destitution too.

At today’s prices, the wealth will be substantially higher this year as both Sensex and Nifty
indices have risen (as of June 15, 2014) by 12.39% and 12.22%, respectively, since April 1, 2014.
Also, since April 1, 2014, the markets have risen sharply, presumably owing to great expectations
that the Modi government will herald a new era of rapid growth and development. Many market
watchers are predicting a multi-year bull run, unless some unforeseen circumstances can trip it up
such as poor monsoons, uncontrollable food inflation, and slippages in fiscal discipline.

Some promoters did extremely well. For instance, Chairman, Adani Group, Gautam Adani’s
wealth rose to meteoric heights with Narendra Modi’s 13-year reign in Gujarat, where most of
Adani’s big projects, including the port and the power plant, are located. From the time Narendra
Modi was announced as the BJP’s prime ministerial candidate on September 13, 2013 until March
31, 2014, Adani’s market cap rose 73% - the highest among his category in the last six months.
During FY 2013-14, his market cap has arisen by 54.42%, his wealth crossing Rs. 70,000 crore. Since
April 1, 2014 to June 18, 2014, it has gone up another 26% to Rs. 88,200 crore!

The FY 2013-2014 was a drought year for IPOs. Of the only 38 companies that raised capital via
IPOs during this year, 37 were “mini” public issues on BSE, NSE’s and SME platforms. The lone main
board IPO was floated by Justdial, a search engine business, with VSS Mani as its promoter. The
company debuted in June 2013 at a list price Rs 590 a share with an offer price of Rs 530 (quoting at
an 11.32% premium to the offer price). Justdial floated 1.74 crore shares and raised a capital of Rs
919.1 crore from retail and institutional investors. The current (June 15, 2014) price is Rs 1,400
apiece, and Justdial’s market cap has surged to Rs 9,900 crore. VSS Mani owns 33% of the stake and
has earned a promoter wealth of Rs 3,597 crore – another first time rupee billionaire in 2014 (See
Business World, July 14, 2014, pp. 64-65).

India’s richest household, Mukesh D. Ambani and Family increased their wealth by Rs 22,874
crore (20.2%) to stand at Rs 1.36 lakh crore. How did he create this wealth? His flagship Reliance
Industries Ltd (RIL) recorded great performance. While the refining business delivered the highest
ever profits, earnings from petrochemicals rose on account of margin expansion across polymers

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and downstream polyester products. The Ambanis also made new investments in shale gas which
garnered Rs 363 crore in profits (EBITDA). Recently, Mukesh has also invested Rs 18,000 crore
(about $3 billion) on buying 4G spectrum to create a sizeable telecom vertical – Reliance Jio. RIL has
already signed agreements with sectoral rivals Bharti Airtel, and Reliance Communications (his
brother Anil Ambani owns this). Reliance Jio has won a unified license for all 22 service areas across
India for voice telephony and high speed data services.

References:
Bansal, S. N. (2014). India’s Super Rich: Testing Time for Rich Heirs. Business World, July 14, 80-82.
Chopra, P. (2014). India’s Super Rich: When Patience is a Virtue. Business World, July 14, 76-78.
Datta, P. (2014). A Good Year for the Super Rich. (A Letter from the Editor), Business World, July 14, 4.
Menon, S. (2014). India’s Super Rich: Up, Up and Way. Business World, July 14, 60-62.
Menon, S. (2014). India’s Super Rich: Minting Mani: Only one Promoter opted for a proper IPO last year. And he struck it
rich. Business World, July 14, 64-65.

India’s Super Rich: The Elite Club of 2014. Business World, July 14, 2014, 86-101.

Spending habits of India’s super rich revealed. Retrieved from (http://blogs.wsj.com/indiarealtime/2014/07/25/the-spending-

habits-of-indias-super-rich-revealed/); How India's super-rich are growing their personal wealth.
Retrieved from https://in.finance.yahoo.com/news/indias-super-rich-growing-personal-183200047.html?page=all

India Has Highest Percentage of Super-Rich Wanting to Give Back to Society. Report, Press Trust of India, Updated On: June
22, 2014 12:25 (IST); Retrieved from http://profit.ndtv.com/news/your-money/article-india-has-highest-percentage-of-
super-rich-wanting-to-give- back-to-society-report-557887

Retrieved from http://www.businessworld.in/news/business/corporate/listing-wealth/1418459/page-1.html

Retrieved from http://blogs.wsj.com/indiarealtime/2014/07/25/the-spending-habits-of-indias-super-rich-revealed/

Ethical Questions:

1. Discuss the ethics of legitimate wealth enrichment processes and outcomes at the individual level. Do they
safeguard maximum benefits over costs, or maximum rights honored over duties violated, for the largest group
of stakeholders? Discuss.
2. Does wealth maximization stimulate extravagant consumption of luxury in an otherwise poor country? Discuss.
3. Discuss the ethics of legitimate wealth accumulation processes and outcomes at the collective country level.
Does it safeguard maximum benefits over costs, or maximum rights honored over duties violated for the
country? Discuss.
4. Similarly, discuss the ethics and morality of wealth accumulation in the hands of very few promoters in India.
5. When can individual wealth aggrandizement outcomes be ethical and beneficial to the country, and why?
6. When can individual wealth aggrandizement outcomes be unethical and harmful to the country, and why?
7. Besides being philanthropic, how can the rupee or dollar billionaires of India mobilize their wealth to evenly
spread job, income and wealth opportunities across the board in India?
8. Discuss the role of creativity, imagination, innovation and risk taking venture in creating individual wealth
ethically and morally, both individually and nationally.
9. Explore some ethical ways of creating wealth for the “bottom of the pyramid” in India.
10. What is the legal, ethical, moral and spiritual (LEMS) responsibility of the superrich in India?

Case 8.2: The Fall and Rise of Starbucks Coffee Company

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 As of March 2013, Starbucks operated 20,891 stores (ownership and franchises) in 62 countries,
including 13,279 in the United States, 1,324 in Canada, 989 in Japan, 851 in the People's Republic of
China, 806 in the United Kingdom, 556 in South Korea, 377 in Mexico, 291 in Taiwan, 206 in the
Philippines, 179 in Turkey, 171 in Thailand, and 167 in Germany. March 30, 2014: with total stores
20,519, Starbucks featured in Fortune 100 best Companies to work for (CNN Money, 2013).

The product line of Starbucks includes more than 40 blends of coffee, hot and iced espresso
beverages, baked pastries, sandwiches and salads. Starbucks’ major strengths is its single flavor but
with 40 diverse coffee beverages (e.g., traditional brew, espresso, Frappuccino). All coffee
beverages are made from highly trained coffee Baristas, ensuring consistency in the quality of coffee
across all product lines and across the globe. Specially trained employees make the Starbucks
unique experience of coffee very enjoyable and memorable. Thus far, there has been low employee
turnover in Starbucks, which makes customer service consistent and dedicated, regardless of store
location. Customers feel appreciated and respected when entering a Starbucks environment.

In the U.S., Starbucks is facing stiff competition from Dunkin Brands. Dunkin Brands has solid
presence in the northeastern United States; it has a large number of successful brands under its
umbrella, out of which Baskin-Robbins is the market leader. But Dunkin Brands' key growth driver is
its Specialty Coffee sales. Specialty Coffee enjoys great margins and also enjoys increasing demand
among coffee loving populations. However, recently, Starbucks seems to have turned around and
expanding aggressively, as its brief history suggests.

A Brief History of Starbucks

Starbucks Coffee Company was founded in 1971 and opened its first location in Seattle’s Pike
Place Market. By 2007, the company became the world’s leading coffee retailer, roaster, and brand
of specialty coffee house in North America, Europe, Middle East, Latin America, and the Pacific Rim.
No one else was offering what customers were seeking – a high-quality coffee, individualized service,
and a comfortable coffeehouse atmosphere. From a few dozens of stores in 1992 when Starbucks
went public, the coffee bar giant has grown exponentially.

Actually, by the end of 2008, Starbucks had 16,875 locations worldwide, with 11,537 locations in
the US alone. The company began opening its stores following new housing developments into the
suburbs and exurbs, where its outlets became pit stops for real estate brokers and their clients. It
also carpet-bombed the business districts of large cities, especially the financial centers, with nearly
200 outlets in Manhattan alone. Fueled by the capital markets, during 2007-2008, it opened an
average of six stores a day! Starbucks appeared determined to have as many locations as
McDonald’s in half the amount of time! Since its IPO in 1992, its stock price appreciated close to
6,000% by 2007!

In 2014, it opened its 1,000th stores in China and Japan. The same year, it announced
collaboration with Oprah Winfrey to co-create Teavana® Oprah Chai tea. It also announced the
Starbucks College Achievement Plan to help thousands of U.S. Starbucks employees complete their

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education. Starbucks is bringing its evening menu (available after 4 pm), including beer and wine, to
thousands of stores nationwide.

Industry Structure

Starbucks belongs to the restaurant industry. The latter includes some 500,000 restaurants in
the USA with combined annual 2008 revenues of almost $400 billion. Major companies include
McDonald’s, YUM! Brands (e.g., KFC, Pizza Hut, Taco Bell), and Darden Restaurants (Olive Garden,
Red Lobster). The restaurant industry is highly fragmentized – the 50 largest companies hold just
about 20% of the market. Large companies have advantages in purchasing, centralizing, finance,
and marketing. Smaller units do better on food and service. The industry is highly labor-intensive,
with annual revenue per employee/worker varying from $40,000 to $45,000. Independent
restaurants could easily take about 18 months to be profitable (RestaurantOwner.com).

Some innovative fast-food companies are growing exponentially: McDonald's is at top for quick
bites, commanding about 12% market share among fast-food purchases. Chipotle Mexican Grill and
Subway nearly tie for second place, with about 6 percent share each. Followed by Yum! Brands' Taco
Bell, Wendy's and privately held Chick-Fil-A, which all score around 4% of the market.

Trends like demographics, consumer tastes, changing palates, dietary preferences and personal
discretionary income levels drive restaurant demand. Sales are slightly seasonal, and peak during
summer. Consumer price sensitivity can be a major factor for demand. The US Consumer
Confidence Index (CCI) for November 2008 was the lowest it has been since April 1980. About 75%
of CCI survey respondents believe that economic conditions will not improve in the near future.
Hence, restaurants can expect discretionary spending to be soft for the coming months. Bad
weather can depress sales throughout the year. Receivables are low since most customers pay with
cash or third party credit card (in case of business clients) or personal credit cards. Credit card fees
are 1 to 3% of sales.

Many restaurant ingredients are perishable; hence, most companies keep low inventories.
Gross margins are about 60% of sales. For diners, cost accounting is important – as the profitability
of individual dishes can vary significantly. Chain restaurants in the USA are introducing new menu
items to bolster sales in a tight economy. October 2008 alone saw 547 new menu items, a 40%
increase over the monthly average of 2008, according to Technomic, a foodservice consulting firm.

Meanwhile, Starbucks seems to be inflexible. It charges too much. It is inflexible in terms of its
premium locations. Starbucks charges the same price for their products whether in LA or in Beijing.
In Israel, Starbucks is having a hard time, as it has to maintain kosher standards. It has a frozen
business plan formulaic that is highly centralized, and Starbucks rarely customizes or localizes its
products to international challenges. Presumably stuck by its own coffee farms, Starbucks offers
only one flavor of coffee (but in 40 different beverages ranging from traditional brewed coffee to

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espresso and Frappuccinos). The lack of flavor selection has bothered its domestic and foreign
customers. Meanwhile, new competition (e.g., Peet’s; Coffee Bean) has arisen with multiple coffee
flavors. Whereas competing companies (e.g., Dunkin Donuts, McDonald’s) have diversified,
Starbucks has not. Its plain vanilla format, particularly in suburbia, makes it difficult to justify the
premium its customers pay relative to independent coffee houses, local coffeehouse chains, and
even McDonald’s and Dunkin’ Donuts (Favaro, Romberger, & Meer, 2009, p. 68).

Coffee beans are a major expense for Starbucks, and the company purchases premium coffee
beans traded above commodity coffee prices. In 2004, Starbucks established the Starbucks Coffee
Agronomy Company, a wholly owned subsidiary located in Costa Rica, to ensure company’s
continued role in the Central American coffee industry. Despite this, Starbucks could not insulate
itself from the reality of world coffee fluctuations. Coffee prices in 2008 were higher by 20%
compared to 2007. Coffee beverage sales of Starbucks have been averaging 66% of its total
revenues, while food sales averaged at 14%, equipment sales at 11% and whole bean coffee sales at
9%. Starbucks is also a major consumer of dairy products, and dairy prices were up by 10% in 2007.

References:

Effects of the 2007 Financial Crisis on Starbucks. Retrieved from http://www.freepatentsonline.com/article/International-

Journal-Business-Strategy/293813025.html

Coffee Crisis? Starbucks closing 600 stores. ABC news. Retrieved from http://abcnews.go.com/Business/story?id=5288740

Retrieved from http://www.cnbc.com/id/101331766#.

Retrieved from http://hbr.org/2010/07/the-hbr-interview-we-had-to-own-the-mistakes/ar/1

Retrieved from http://www.nbcnews.com/id/25498374/ns/business-us_business/t/struggling-starbucks-woes-could-get-

worse/#.U_o_lPmSzkY

Ethical Questions:

1. In general, discuss the ethics of outdoor dining in the context of social exclusivity of those who can afford it.
2. In general, discuss the ethics of the culture of fast food restaurants in the context of more organic and healthier
homemade meals and fellowship that strengthen family solidarity.
3. Discuss the ethics of Starbucks in overextending its capital resources by over-expanding both domestically (USA)
and abroad.
4. Starbucks wanted to increase faster and bigger than McDonald’s in half the time. Is growing bigger and better
always moral? Is aping McDonald’s in this context healthy competition?
5. Its recent over-expansions ended up locating stores too close together and cannibalization raged. Starbucks
misjudged the risks of planting stores close to each other leading to decline in store sales. Discuss the ethics of
establishing Starbucks stores so close together in the context of cannibalization.
6. Starbucks desecrated its original unique Starbucks coffee image by adding commoditized products like over-the-
counter food, thus instantly eroding its brand and uniqueness. Discuss the ethics of this commoditization as a
brand-deception strategy.

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 The Ethics of Executive Moral Responsibility for Corporate
Decisions and Outcomes

“Each of us has the capacity to make business not only a source of

economic wealth, but also a force for economic and social justice. Each of us needs
to recognize and use the power we have to define the character of our enterprise, so
they nurture values important to our society. Only then will each of us know full
rewards that a career in business can yield. Only then will business achieve the true
potential of its leadership. Only then will business fulfill its obligation to help build
an economy worthy of a free society and a civilization worth celebrating.” [Walter
Haas, Jr., ex-CEO of Levi Strauss & Co.] xxxiii

Each of us is responsible for each other, the world, and ourselves. Ethics is fundamentally a
science of social and collective responsibility. Ethics concerns human behavior as responsible or
accountable. Because of the nature of social interaction, certain members of the society will bear
greater authority, and hence, greater individual and social responsibility than others. In our world,
personal responsibility and social responsibility are hardly separable. Personal responsibility
becomes responsibility for the world because the person and the world are inseparable. In a fast
morally deteriorating world such as ours currently, we all bear an obligation to contribute to and
purify the moral understanding of ourselves, our society and of our social world. 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 guide us about how we
should act, what we should do, and what we should avoid if these human values and human needs
are to be fulfilled (Rehrauer, 1996, p. 232). This chapter focuses on moral corporate social
responsibility for executive outcomes.

Human behavior is a matter of feelings and emotions, actions and attitudes, beliefs and values.
Actions, attitudes, beliefs and values can be assessed as right or wrong, and finally described as
'good' or 'bad.' This assessment is based on: a) when the total intention of the person concerned is
taken into account (deontology); b) when the consequences of such actions, attitudes, beliefs and
values are assessed in terms of benefits and burdens on self and society (teleology); c) when benefits
and burdens are evenly distributed among all people affected by these actions, attitudes, beliefs and
values (distributive justice), and d) when procedures and structures are in place when (a), (b), and (c)
are not realized (corrective justice).

What is Responsibility?

As its etymology suggests (from Latin respondere = to answer, responsabilis = requiring an

answer), the most obvious meaning of “responsibility” is accountability, being answerable to one’s
behavior. Simply stated, responsibility means to be accountable for one’s actions; that is, to take
ownership of one’s actions and their good and bad outcomes, to accept praise for the good and

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blame for the bad consequences, and be ready to compensate for the harm, if any, resulting from
the bad consequences.

The term "responsibility" xxxiv has several synonyms: accountability, answerability, imputability,
liability, duty, and obligation. Long before the word was introduced into philosophical ethics,
philosophers spoke about it when they argued about the manner in which a person could be
considered the author of one’s own actions. Presently, the term responsibility is applicable to
persons, institutions and opinions. Thus, one speaks about responsible people, responsible
governments or societies, responsible corporations and institutions, and even, responsible economic
views or estimates.xxxv

We next present a discussion on the nature and obligation of corporate responsibility from three
perspectives: Part I: Classical Understanding and Discussion on Corporate Responsibility; Part II:
Contemporary Understanding and Discussion on Corporate Responsibility, and Part III: A synthesis of
classical and post-classical views of responsibility and their applications to corporate responsibility.

Part I: Classical Understanding and Discussion on Corporate

Responsibility

Aristotle (384-322 B.C.) treats responsibility in his Nicomachean Ethics (see Book III, Ch. 1), a
work that is often cited as the foundation for the juridical theory of culpability (Austin, 1961;
Bradley, 1876; Jonsen, 1968). Subsequent treatments on responsibility are mostly further
developments of Aristotelian thought. Hence, we start with Aristotle and give him adequate space
he deserves.

Aristotle’s Notion of Responsibility

Aristotle (1985) deals with the topic of responsibility in the context of voluntary and involuntary
actions. According to Aristotle, human responsibility is a function of voluntary and involuntary
actions. Because most corporate executive decisions and/or actions are a blend of voluntary and
involuntary actions (Mascarenhas, 1995), Aristotle's theory is particularly helpful in assessing the
responsibility-exoneration content of such decisions. Aristotle claimed that what makes actions
voluntary or involuntary, is the role factors such as "constraints," "duress," and "ignorance" (or
knowledge) play in formulating and implementing actions. Aristotle argues “involuntary actions
seem to be those that arise either from force or from ignorance” (1985, p. 53).xxxvi A constraint is a
physical or psychological force brought to bear on the agent. An act done under force or constraint
is one in which the initiative or source of motion comes from without and to which "the agent or
victim contributes nothing" (1985, p. 53).xxxvii

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 Involuntary actions arise from force or violence, on the one hand, or from ignorance, on the
other. On the contrary, voluntary actions are those “that originate within the agent who has
knowledge of the circumstances of the action” (1985, p. 58). Commenting on these definitions in
Nicomachean Ethics, Thomas Aquinas (1964, Vol. 1, p. 175) adds: “Voluntary actions are freely done,
the choice is end-driven, and the end itself is also willed…. Involuntary actions are a privation of the
voluntary; hence they do not merit praise or blame.”

Applied to a corporate decision/action, two conditions are needed for it to be suffering from
“constraints” such that it can be justified as an involuntary action done under force:

1. The executive does not initiate the decision or action; others initiate it.
2. Once initiated by others, the executive contributes nothing to the action.

Both conditions are necessary. According to Aristotle, involuntary actions can occur in two
ways: a) under total force or violence, and b) under total ignorance. Aristotle also gives two
examples of involuntary or “compulsory” actions: when someone is driven somewhere by the wind,
or when one is totally under the power of other people (1985: 53). The former is an example of a
natural disaster, the latter, of tyranny or terrorism. Both examples imply some form of violence.
However, circumstances under both can make them voluntary. For instance, a person driven by
wind can rush to take shelter, or based on meteorology foresee the tornado. A person under
terrorism can still resist or placate the terrorist. Hence, Aristotle adds, “Some actions that in
themselves are involuntary become voluntary under particular circumstances” (1985, p. 55).

Given this definition of a “constraint,” corporate business decisions and actions rarely qualify to
be categorized as compulsory actions driven by violent force. There could be some cases of
involuntary strategies, however, that could be driven totally “under ignorance.” Violence, fear,
passion, habit, psychological and social influence, and pathological conditions may all be some forms of
constraints or force. Nevertheless, they are factors that may prevent or inhibit the agent from taking
the "initiative" in the formulation of decisions and in the execution of subsequent actions. The latter
are best considered as cases “under duress” that we discuss shortly. Thus, passion, habit,
psychological, social and competitive market-pressures cannot be routinely and justifiably invoked for
rationalizing the design, manufacture and marketing of certain addictive products such as gambling,
cigarettes, alcohol, drugs, pornographic products, or violent sports, since the agents or executives
willingly contribute something in these cases. For instance, Aristotle (1985, p. 56) argued that the
following conditions do not make an action involuntary: a) pleasure even though compellingly
pleasurable; b) emotions or appetites, however strong, and c) willed ignorance or ignorance without
regret. Similarly, passion, habit, psychological, social and competitive market-pressures cannot be
automatically or justifiably invoked for rationalizing plant closings, massive labor lay-offs, mass-
expansions, or other organizational downsizing strategies.

Aristotle’s Theory of Actions under Duress

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 According to Aristotle, actions under duress are undertaken because of fear of greater evils or
because of something better. For example, a tyrant forces you to do something shameful; if you do,
you live, if you do not, you die. Or, you throw cargo overboard in a storm to save yourself and
others. Such actions, says Aristotle, are a mixture of voluntary and involuntary actions, but "taken
as a whole, they are voluntary" (1985, p. 54). They are more voluntary than involuntary since at the
time they are done there could be other feasible alternatives to pursue. That is, such actions are
choice-worthy, (the goal of the action reflecting the occasion), and since the action originates from
the person who acts. Moreover, in each case, one could act or not act. However, these mixed
actions are 'conditioned', since no one would choose them for themselves. They are done under
duress, and deserve no praise but pardon, especially because they are executed under "conditions
of a sort that overstrain human nature, and which no one would endure" (1985 , p. 55). Under such
circumstances, it is difficult to decide what should be chosen under what circumstances and under
what pain, price, or shame.xxxviii

Applied to business, at least three conditions are needed for an executive action to be qualified
as "under duress:"

 The executive does not choose the action for itself, even though it may be
choice-worthy.
 The executive is forced into action because of extreme (i.e., non-endurable) fear
of greater evil or of avoiding some serious good.
 Though pressured into action morally or psychologically, the executive can still
act or not act.

For example, when executives, under threat of being fired, are forced by their bosses to do
something illegal or unethical such as receiving bribes from suppliers or distributors, hiring boss’s
relatives even though incompetent, exorbitant pricing in ghetto areas, or creating artificial shortages
of life-saving drugs, they act under duress. These actions verify all three “under-duress” conditions.
The best of businesses know how to act responsibly despite the worst duress or constraints. Table 8.1
summarizes Aristotelian doctrine on executive responsibility.

Referring to Case 8.2, Starbucks had its usual constraints in surviving, reviving and expanding its
operations. For instance, the restaurant industry had structural “constraints” that could force
actions or strategies “under duress” such as:

 Volatile supply costs: – unstable manufacturer prices for raw ingredients used in
restaurants can significantly impact profitability. In general, commodity markets affect
wholesale prices for beef and poultry, where prices can change more than 20% in a given
year. Supply issues affect the cost of seafood. The wholesale price of flour, eggs, dairy
products, fats and oils can also increase rapidly and affect restaurant margins.

 Competition: – from a broad range of businesses vying for consumer food dollars. Grocery
stores and warehouse clubs (Costco, Sam’s) are providing more ready-to-eat meals and

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 sides, often at a better value than the restaurants. Moreover, convenience stores, gas
stations, coffee shops, and delis sell sandwiches and beverages, cutting into restaurants’
share of lunch market. Home cooking is also a competition. Restaurant meals are
generally more expensive than home cooking. Reasons for eating out less include high gas
prices, cheaper and healthier food alternatives at home, and higher quality of home
cooked meals than fast foods. In tough economic times, most consumers may consider
restaurants meals an unnecessary dispensable expense.

 Health concerns: Contaminated food and raw ingredients causing illnesses and death have
been well publicized. Contamination through poor sanitation, worker error, and other
avoidable factors can affect restaurant business significantly. The presence of E coli, mad
cow disease, salmonella, avian flu, and the like can affect meat/poultry supply/demand.
Growing consumer and government concerns over fat/calorie content and excessive
portion size of some restaurants stir bad publicity and state-sponsored legislation. Adding
green menu options (e.g., using organic ingredients, sustainable seafood, antibiotic and
hormone-free meats) can boost sales among environmentally conscious customers.
Offering smaller portions (e.g., bit-size desserts, tapas, multiple flavors with smaller
servings) are hot trends, according to a National Restaurant Association (NRA) survey.

 Legal concerns: Multiple class-action lawsuits accusing fast food restaurants of

contributing to obesity have provoked harmful publicity. The remote possibility of high-
damage settlements can paralyze the food industry. Related state bans on trans-fats may
require restaurants to change recipes or incur additional costs. Risks associated with
serving alcohol include liability for the actions of intoxicated customers and legal
consequences from serving alcohol to underage patrons. Companies that serve alcohol to
underage customers may incur heavy fines and the risk of closure. Certain states have
“dram shop” laws holding restaurants liable for damages caused by inebriated customers.

Ignorance as a Source of Involuntary Executive Actions

Aristotle does not detail too much about the second source of involuntary actions, which is
ignorance. Ignorance, according to Aristotle, is a lack of awareness of the details that make up the
situation in which the agent is acting (1985, p.57). Knowledge is the converse of ignorance: it is
conscious awareness of the details that make up the situation in which the agent is acting. Aristotle
distinguishes an action “done in ignorance” from one “caused by ignorance.” Actions done in
drunken stupor or in a fit of anger are done in ignorance (or, not in knowledge) but not caused by
ignorance, and hence, cannot be considered as involuntary (Aristotle ,1985, p. 56-7). The cause of
the action is vice and not ignorance.

Aristotle (1985, p. 57-58) specifies six conditions regarding ignorance in a list that has become
archetypal in jurisprudence and morals (Austin, 1961; Jonsen, 1968):

1. Who is doing it: e.g., one is unaware of oneself during an action;

2. What is being done- e.g., an unguarded action;

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 3. What the action is all about- e.g., a veiled or ambiguous action;
4. With what instrument the action is done- e.g., a concealed weapon or a fuzzy financial
instrument;
5. What consequences flow from the action- e.g., one may give CPR to save someone's life that
accidentally kills the person; very few outcomes of business strategies can be foreseen
accurately;
6. How the action is done: when does a strategic action start, where, when and how? Does it
occur gently or harshly, directly or indirectly, in one action or multiple actions?

Major and frequent sources of ignorance, according to Aristotle, occur along conditions 2 and 5
above. For instance, for rapid cash flow generation a sales clerk unknowingly sells unsafe or
untested products as provided by his company and/or as ordered by his boss. He may not know, for
instance, who produces them (condition 1), how they became part of his charge or sales territory
(conditions 2 and 6), what effects the products have on customers or users (condition 5), how the
effects are brought about (conditions 3 and 4), or the extent of damage brought about by these
products (condition 5).

Subsequent moralists, (e.g., Thomas Aquinas) have added that the agent can also be inculpably
"ignorant" of the moral quality of his or her action. In regard to this, moralists distinguish various
types and levels of ignorance such as excusable and invincible ignorance, antecedent and
consequent ignorance, ignorance of law and ignorance of fact. All these have a bearing on the
morality and moral responsibility of the act. In this context, the following distinctions are useful: (De
George, 1990, p. 89-90, 176; Velasquez, 1988, p. 36-37, 112):

 Excusable Ignorance: Actual lack or failure of knowledge of either the circumstances or the
consequences of the action, through no fault of one’s own, before or during the action.
Example: Ignorance of the harmful effects (e.g., asbestosis) of asbestos products when
they were first manufactured and sold in the early 1950s in USA and Canada.

 Invincible Ignorance: Also a failure of knowledge: but no one (say, an average person of
good will) was expected to know or could have known either the circumstances or the
consequences of the action, before or during the action. Example: Ignorance of the
carcinogenic effects of tobacco products some 50 years ago.

 Ignorance of law or fact: This is a subset of excusable ignorance. In this case, one could be
ignorant of the relevant moral standard or the relevant facts about a given action. For
example, a marketing executive may be sure of the Foreign Corrupt Practices Act (FCPA) of
1977 and the Omnibus Trade and Competitiveness Act (OTCA) of 1988 in the United States,
but in actual practice may not know what act really constitutes a violation of either of
these Acts. This is ignorance of fact. On the other hand, one may not know both the Acts,
yet in practice believe that all bribing is wrong everywhere - this is ignorance of law but
not ignorance of fact. In addition, one could be ignorant both of law and of fact.

 Vincible Ignorance: One’s ignorance, whether of law or of fact, is inexcusable but

correctable. For example, a marketing executive trained for foreign posting is supposed to

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 know the FCPA of 1977, the OTCA of 1988, and the laws regarding bribing in the foreign
countries he or she operates in. Such ignorance does not exonerate moral responsibility.
One could even fake or manipulate ignorance: for instance, an avid cigarette smoker may
stay away from doctors that warn him of the carcinogenic effects of smoking.

In general, invincible ignorance, excusable ignorance, and inevitable ignorance of law and fact
can excuse moral responsibility. Vincible or faked ignorance do not excuse but heighten moral
responsibility. For instance, did Starbucks have to deal with invincible ignorance?

What went wrong at Starbucks?

Something, however, went very wrong in 2008. The company desecrated the original unique
Starbucks coffee image by adding commoditized products like over-the-counter food (thus
destroying the unique Starbucks coffee aroma), drive-through windows, cookie-cutter store formats,
thus reducing Starbucks to a fast-food chain. Obviously, comparable fast food chains like
McDonald’s and Dunkin’ Donuts started offering unique coffee flavors via newly installed coffee
machines in their restaurants. Little wonder, within a few months, over 40% of Starbucks’ customers
migrated to McDonald’s and Dunkin’ Donuts, where they found better and higher variety coffee
aromas at less than one-third price (Favaro, Romberger, & Meer, 2009).

Similarly, Starbucks wanted to surpass McDonald’s in the number of outlets or franchises in less
than half the years McDonald’s took to build its empire. By the end of 2008, it boasted 16,875
locations worldwide with 11,537 in the U. S. alone. Meanwhile, Starbucks forgot its original core
product and objective of being a great coffee bar and experience. Starbucks is failing since, its
market share and stock price have decreased significantly, and currently, Dunkin’ Donuts and
McDonald’s are vigorously competing in the coffee experience market. In recent market tests,
Dunkin’ Donuts is #1, McDonald’s is #2, and Starbucks is #3 in the coffee experience business. A
misguided corporate objective could spell one’s demise.

The company was long renowned for its expertise at selecting prime locations for its ubiquitous
stores. For much of the last 15 years, the commercial real estate executives at Starbucks were
known for their rigor in selecting locations for their stores. Besides studying demographics,
Starbucks evaluated its potential locations by other specific factors such as the education level in
various neighborhoods, the traffic flow on both sides of a given street, the ease by which drivers
could make a right turn for their java fix on their way to the office. Nevertheless, currently, the
company has been straying from the exacting real estate science that it had perfected and that
which guided it through its first expansion-wave of 1992-2008. Though a flagging recessionary
economy and soaring gas prices could account for at least some of Starbuck’s woes, there seem to
be other major in-company problems triggering this sudden decline.

Aristotle on Voluntary Actions

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 “Since, then, what is involuntary is what is forced or is caused by ignorance, that which is
voluntary seems to be what has its origin in the agent himself when he knows the particulars that
the action consists in” (Aristotle, 1985, p. 58). Thus, a voluntary action is one in which the initiative
lies with the agent who knows the particular circumstances in which the action is performed.
Voluntary actions imply taking initiatives; they imply deliberation. Deliberation "concerns what is
usually [one way rather than another], where the outcome is unclear and the right way to act is
undefined. And we enlist partners in deliberation on large issues when we distrust our own ability
to discern [the right answer]" (Aristotle, 1985, p. 62).

Decisions are voluntary, but not all voluntary actions are decisions (e.g., children or animals
exhibit voluntary actions, but do not decide these actions). Decisions imply deliberation over means
conducive to ends. According to Aristotle, we wish certain ends first; next, we believe in these ends
as good for us, and we then choose the means to realize these ends. Decisions make our character
and us because we can choose only those things we can do; our beliefs define our character; our
wishes and we condition our character and us.

From a corporate executive’s perspective, decisions and strategies are "voluntary" when the
executive:

1. Deliberates over the ends (or various outcomes) of the action or strategy;
2. Deliberates over the means (or various alternatives) conducive to the ends under (1);
3. Initiates the action, individually or in partnership, based on the best alternatives
under (2);
4. Is cognizant of the action-circumstances under (3);
5. Wills the action strategy and its consequences (means or end) under (2) or (1)

Reflecting on Case 8.1, there are several promoters who deliberated rightly on various means
and ends, did the right things rightly, at the right time and with the right people, and hence, reaped
enormous wealth increases during FY 2013-2014. These were strategic voluntary actions.

 For instance, C. Krishna Prasad, MD and promoter of Granules India,

maker of active pharmaceutical ingredient (API), made a strategic
decision to create a manufacturing value chain of popular APIs from
powder to finished dosages, as opposed to being a contract manufacturer.
Granules India is one of the few companies in the world to be present
across the pharmaceutical manufacturing value chain - starting from APIs
to pharmaceutical formulation intermediaries (PFIs) to making capsules
to finished dosages (FDs). Granules India is a leader in several basic
drugs including Paracetamol and Metformin. Granules India grew at 22%
to snap over Rs 1,000 crore in revenues, while its wealth grew nearly
300%! That is, the promoter’s wealth jumped from Rs 84.76 crore a year
ago to Rs 253.42 crore by March 31, 2014 (see also Business World, July
14, 2014, p. 58).

 Similarly, Atul Auto started off in 1970 with a vision to create

affordable transportation for people. Its promoter, Jayantibhai Chandra

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 registered a 136% growth in his net worth in a year ending FY 2014 when
the Indian automobile sector was in one of its worst slumps. His wealth
is Rs 217 crore in 2014. Atul Auto started by modifying Enfield
Motorcycles into a travel innovation called “chakkda” in Gujarat – by
attaching a plank behind a motor cycle it transformed a two-wheeler into
a vehicle that could transport at least ten people at a time. The
company recently launched Shakti, a half-ton commercial three-wheeler.
The company plans to set up a new three-wheeler plant in Ahmedabad with
an annual capacity of 60,000 units. It also seeks to tap markets in the
emerging economies. At a time when the auto industry is focusing on the
higher end of the auto spectrum, Chandra is capitalizing on the bottom
of the pyramid (see also Business World, July 14, 2014, p. 59).

Based on Aristotle (1985) and Aquinas’ Commentary on Aristotle (1964, see endnote v), Table
8.1 summarizes and distinguishes between voluntary, involuntary, and under-duress actions using
three dimensions: a) originating principle of the action, b) role of the intellect and will in the action,
and 3) consequent nature of the action-outcomes. Voluntary actions originate from or are initiated
by the agent; they are motivated by principles or passions intrinsic to the agent; the agent is
cognizant of the action-circumstances, and deliberates over means and ends. The involuntary is
exactly the opposite of the voluntary. Actions under duress are a blend of the voluntary and
involuntary.

< Table 8.1 about here >

In addition, note, most executive business decisions and actions are either fully voluntary, or
under duress. Very few can be classified as involuntary under force; some qualify to be involuntary
under ignorance. In conclusion, from Aristotle's theory of responsibility as applied to responsible
business management we learn the following:

 Several business strategies could be a blend of voluntary and involuntary actions in as

much as they involve hastened deliberations over goals under constraints of cash-flow
crisis, insolvency, stakeholder pressure, time pressure, bankruptcy, and regulatory
demands.
 Ignorance can occur over both goal-specification, the choice, and over efficacy of means;
the higher the ignorance, the higher is involuntariness and hence, the higher is
exoneration.
 Most business decisions are also made after consultation or partnership with others; other
things being equal, the more people involved in the partnership, the larger is the spread of
risk and guilt, and hence, the larger is the scope for exoneration.
 On the other hand, the larger the base of good consulting, the broader the base of
executive knowledge, and hence, the higher is executive responsibility.

Immanuel Kant: Responsibility as Moral Worth

Apparently, for Aristotle, responsibility is not an intrinsic characteristic of the action itself but
rather "a dimension in which the actions are assessed" (Austin, 1961, p. 129). That is, by addressing
the problem of responsibility negatively through the excuse of constraints, duress and ignorance,

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Aristotle did not describe the intrinsic quality of voluntary actions. He rather referred to the context
of circumstantial evidence and customary norms within which judgments of praise and blame are
placed and justified (Jonsen, 1968). Immanuel Kant (1724-1804), on the other hand, describes the
special intrinsic quality of voluntary actions. 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.

According to Kant (1964, p. 68), the "moral worth can be found nowhere but in the principle of
the will, irrespective of the ends that can be brought about by such action." The underlying duty-
principle makes an action a categorical imperative, while the purpose makes an action a
hypothetical imperative. A categorical imperative renders an action to be objectively necessary in
itself without reference to some purpose; that is, it is concerned not with the matter (purpose) of
the action, but its form (duty) and with the principle from which it follows. On the other hand,
hypothetical imperatives imply that an action is good for some purpose; that it is necessary "as a
means to the attainment of something else that one wills" (1964, p. 82). Categorical imperatives
ignore purposes and ends, are not concerned with the matter of the action (p. 84) but only with the
principle guiding the will, and hence, refer only to the form of the action (Wike, 1987).

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. This Kantian doctrine has relevance for
corporates.

Immanuel Kant enlightens our understanding of moral responsibility by the following insights:

 Executive actions are most often driven by ends, motives and purposes, and are therefore,
hypothetical imperatives, and not necessarily, categorical imperatives.

 Hypothetical imperatives generate hypothetical or conditional responsibility that may be

exonerated.

 Categorical imperatives ground absolute or unconditional moral responsibility that cannot

be exonerated.

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  Most duties that directly deal with stakeholders may be categorical; that is, corporates
cannot use stakeholders as means to their own ends, but should consider them as ends-in-
themselves.
Karl Marx: Responsibility as Historical Determinism

Throughout his life, Karl Marx (1818-1883) struggled reconciling freewill with determinism. xxxix
Marx's major thesis was - politics, economy, religion, ideologies and philosophies – all these
elements that constitute human history - determine our individual motivations, and hence, our will.
In brief, history determines us - Marx called this "historical determinism." However, what
determines history itself? History cannot be determined by individual wills such as those of
monarchs, feudal lords or political revolutionaries, because all these wills are created by history.
Hence, it is collective or "social consciousness" that determines history. Consciousness is primarily
social than individual. "It is not the consciousness of men that determines their existence, but on
the contrary, their social existence that determines their consciousness" (Marx, 1964, p. 11).

Thus, the principal postulate of Historical Determinism is that the "social being determines
social-consciousness" (Afansyev, 1965, p.172). A person is born in a given social milieu or social
group that molds his or her mind according to its standards. That is, individual consciousness is
posterior to social consciousness (McFadden, 1963, p. 84-90). However, what determines social
consciousness? Marx believed that the ultimate determinant of people and society is the production
process that creates and satisfies their needs. The material resources, the production process, the
products, and the marketing system that distributes these products, they all condition humankind
and human history.

Karl Marx was partly right. Historical determinism partly explains history. We create and control
technology that in turn creates and controls us (see Bell, 1973, 1976; Toffler, 1971). There can be
several executive actions that may be "historically determined," and to that extent, exonerable.
However, with Adam Smith we should note that the "invisible hand" of self-interest and profitability
works both ways: it guides history; and history guides the invisible hand.

Bradley: Attributional Responsibility

Francis Herbert Bradley (1846-1924) starts his philosophy of responsibility by opposing John
Stuart Mill’s determinist position and by reestablishing the existence and operation of the human
freewill. Bradley (1876, p. 33) argued that Mill’s stand on the freewill "altogether ignores the
rational self in the form of will; it ignores it in the act of volition, and it ignores it in the abiding
personality, which is the same throughout all its acts, and by which alone imputation gets its
meaning." Bradley argues that on the one hand, we implicitly assume that we cannot legitimately
be held morally responsible for an action unless we are the real author of the action, and unless the
action proceeds from our true self as effect from cause. On the other hand, if one is a real author,
then one cannot be fully determined by outside forces as determinism affirms. Without personal
identity, responsibility is sheer nonsense. This rules out determinism but not indeterminism. The
latter assumes that actions are totally uncaused.

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 While it is obvious that an agent's acts are one’s own insofar as one causes them, it is not always
obvious that one causes them as a moral agent. Attributing responsibility, accordingly, should go
beyond the consequences of the act and the action itself to the very process of how an agent takes
possession of one’s action, moves from the outer-directed to inner-directed sphere of moral activity;
in short, one becomes a real moral agent – this is appropriational responsibility. The latter judges
not only the discrete acts, but also the unity of such acts in the moral agent, the self. It is not
enough to limit consideration of the nature of the moral agent to character alone. Character
explains tendency to act or disposition to act; but it does not explain the act itself. Character
denotes a complex of "effects," but the moral agent seems to be a complex of controls,
self-governance, self-direction, and self-organization - in short, self-actuation (Bradley, 1876).

From Francis Bradley we may derive the following insights for corporate executives:

 Historical determinism to a certain extent may influence a business’s life and values,
decisions and actions. But Bradley argues that historical determinism ignores the rational
and volitional self-actuation of the executive in the form of a trained intellect and morally
guided will, the abiding and underlying executive personality that remains the same
throughout various acts of the intellect and will and by which alone imputation gets its
meaning.

 Hence, any appropriation of business responsibility must include an explicit consideration

of the self as a reflecting agent transcending market forces.

 Appropriation of business responsibility judges not only the discrete acts, means and ends
or discrete outcomes, but the total process of action by which means or ends are chosen
and outcomes generated.

 This process is often called the “corporate culture” within a firm or the “industry climate”
within an industry. Both may condition several business actions. These climates can
"externally" determine executive actions. Business may rarely act on them as total
"autonomous moral agents."

Part II: Contemporary Understanding of Corporate Moral

Responsibility

Our contemporary discussion on the nature and obligation of corporate responsibility starts with
Dietrich Bonhoeffer, and moves on to other modern major philosophers and jurisprudentialists on
liability and responsibility.

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Dietrich Bonhoeffer: Responsibility as Commitment and Deputyship

For Dietrich Bonhoeffer (1906-1945) xl responsibility is not so much a response to the call of
values, it means free commitment of oneself to act, regardless of what the act might be. xli However,
there are limits to this action: God and neighbor. Irresponsible action disregards these limits
(Bonhoeffer, 1955, p. 204).

The structure of responsible life consists in a life bound both to God and to humankind and a life
that is free. Life bound to God and humankind is deputyship. We must work in the world and take
account of its human needs, its nature and its possibilities. In all this we should be aware that the
decision that we take and the deeds we do are truly our own. Moreover, law does not protect us;
we cannot take refuge in any principles that might justify our inaction or failure. The acceptance of
responsibility involves the acceptance of the guilt of failure and of evil consequences. Responsible
action must often decide not between right and wrong, but between right and right, or between
wrong and wrong. "It is precisely in the responsible acceptance of guilt that a conscience proves its
innocence ... the responsible man becomes guilty without sin" (Bonhoeffer, 1955, p. 214-216).

From Dietrich Bonhoeffer we derive the following propositions that bear on business executive
responsibility:

 The acceptance of responsibility may involve the acceptance of the guilt of failure and evil
consequences.

 Most executive choices may not be between good and evil or between right and wrong,
but between right and right, and between wrong and wrong. The committed executive
chooses the better right and the lesser wrong.

 The ethic of responsibility allows for uncertainties and guilt instead of demanding an
absolutely untainted conscience (Weber and Bonhoeffer).

According to Weber and Bonhoeffer, the ethic of responsibility allows for uncertainties and
guilt instead of demanding an absolutely untainted conscience. The acceptance of responsibility
sometimes involves the acceptance of the guilt of failure and harmful consequences.

Bernard Lonergan: Responsibility as Effective Freedom

Bernard Lonergan (1912-1993) views responsibility as a function of one’s effective freedom. He

distinguishes between "essential" and "effective" freedom (Lonergan, 1970, p. 595-633). "The
difference between essential and effective freedom is the difference between a dynamic structure
and its operational range. We are free essentially inasmuch as possible courses of action are

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grasped by practical insight, motivated by reflection, and executed by decision. Nevertheless, we
are free effectively to a greater or less extent inasmuch as this dynamic structure is open to grasping,
motivating and executing a broad or a narrow range of otherwise possible courses of action. Thus,
“one may be essentially free but not effectively free to give up smoking” (Lonergan, 1970, p. 619-20).
Effective freedom is not something given. It must be cultivated. It must be won. The key point is to
reach a willingness to persuade oneself of some objective good or to submit to the persuasion of
others. One must be persuaded to genuineness and openness too. Incomplete intellectual and
volitional development leads to moral impotence.

According to Lonergan (1970, p. 618-634), there are four major conditions that limit effective
freedom, that, in turn, impact blame or credit. We summarize them as applied to business executive
situations, especially since all four conditions affect day-to-day business decisions and actions,
tactics and strategies. They are important considerations in assessing the quality of business
responsibility today.

 EXTERNAL CONSTRAINTS: These constraints limit the range of concretely possible

alternatives available to business, either because they are not available at the time of the
decision, or they are too cost-prohibitive to pursue, or they cannot be backed with other
required resources. The lesser the number of competing business turnaround strategies
(e.g., rapid cash recovery, overstock inventory clearance, product repositioning, predatory
pricing, aggressive distribution or promotion) alternatives to choose from, the lesser the
responsibility of the final choice.

 INTERNAL STATE: This has to do with one's sensitive skills and mental habits, intellectual
and psychological development, the syndrome of one's anxiety, stress and strain,
obsessions, and other neurological phenomena that mal-adjust intellectual development
to psycho-neural development - all these factors restrict one's capacity for effective
deliberation and choice. There is considerable literature that addresses the strains and
stresses of business executive life.

 INTELLECTUAL DEVELOPMENT: this refers to one's understanding the business situation,

the possible courses of rescuer or transformation strategies, critically grasping the content
and consequences of their alternatives, and in general, one's struggle with the process of
learning and appraising a concrete business situation. The greater one's accumulation of
market and business turnaround insights, the greater is the development of one's practical
intelligence, the greater is the range of the possible courses of action one can grasp and
consider, and the wider is the domain of critical assessment.

 VOLITIONAL DEVELOPMENT: this relates to one's ability to deliberate over alternatives

and choices, to reflect over one’s motivations and intentions, and exert full freedom over
one’s turnaround decisions and actions. The human "will" is the bare capacity to make
decisions. Human "antecedent willingness" is the state in which persuasion is not needed
to bring one to a decision. Human "willing" is the act of deciding. The function of
willingness runs parallel to the function of the habitual accumulation of practical insights.

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 What one does not understand yet, one can learn. Nevertheless, learning takes time, and until
it takes place, otherwise possible courses of action are excluded. Similarly, when antecedent
willingness is lacking, persuasion can be invoked. However, persuasion takes time, and till one
persuades oneself or others, one remains closed to otherwise possible courses of action.

From Lonergan we deduce the following responsibility-insights for business executives:

 Responsibility is executives' response to an event/action upon them that they

interpret, whose consequences they anticipate and evaluate - hence,
responsibility presupposes moral potency.
 Moral impotence exonerates under certain conditions. Lack of congenital sensitivity,
lack of inherited psycho-neural balance, lack of intellectual development and
opportunity, and lack of challenges to one's volitional development - all these
constitute moral impotence in varying degrees.
 The gap between one's proximate effective freedom and the remote hypothetical
effective freedom that one would possess if certain conditions fulfilled, measures
one's moral incompetence, and the latter measures one's degree of exoneration.

Elizabeth Beardsley: Ascribing Moral Responsibility to Corporate Executives

From a phenomenological viewpoint, there are many moral perspectives by which a corporate
executive act can be judged for its moral content and worth, for its praiseworthiness or
blameworthiness, and for its moral and economic sanction of reward or punishment. Elizabeth
Beardsley (1914-1990) explores these multiple moral perspectives.

According to her, it is too simplistic to make judgments of moral worth, praise or blame, from a
single perspective. Given a human act, she observes, several questions arise in relation to ascribing
moral responsibility to it: a) its moral worthiness or unworthiness, b) its praise-worthiness or blame-
worthiness and c) its sanction in terms of reward or punishment. How are each of these steps of
moral responsibility ascription arrived at? Beardsley (1960) suggests that such judgments are made
from several different standpoints she calls “moral perspectives.” We summarize this discussion
here.

She considers the terms praise and blame only in their moral content as “moral praise” and
“moral blame.” Both are correlative concepts such that everything said about moral praise may also
be said about moral blame, and vice versa. A “judgment of praise (or blame)” is an affirmative or
negative judgment of praise (or blame). An “affirmative judgment of praise” is an explicit attribution
of praiseworthiness to a person.

Conversely, a “negative judgment of praise” is an explicit denial that a person is praiseworthy.

An objective judgment of rightness or wrongness, praise or blame, is a judgment made about an act,

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not the agent. A subjective judgment, on the contrary, relates to the agent. Thus, the statement
that “my act is objectively right but may not deserve praise” is perfectly consistent. The judgment
that an act is objectively right offers insufficient evidence for judgment about its praiseworthiness .
For instance, I could have committed that act either inadvertently or from reprehensible motives or
reasons.

According to some “soft” determinists, if an agent has acted wrongly, the following conditions
are necessary and sufficient to judge that the agent acted wrongly and is blameworthy:

a) That the agent acted wrongly without external constraints (i.e., this is a voluntary act),
b) Without ignorance of relevant facts (i.e., this is an informed act), and
c) From a motive or character trait that is undesirable (this is an immoral act).

Opposite conditions account for praiseworthiness: That the agent acted rightly a) without
external constraints (i.e., this is a voluntary act), b) without ignorance of relevant facts (i.e., this is an
informed act), and c) from a motive or character trait that is desirable (this is a moral act).

While the judge must attend to several key factors among the causal conditions that produced
the acts, he or she does not have to go any further, e.g., to antecedents of antecedents, or to the
nature or existence of antecedents.

According to Beardsley (1960), the above three conditions are sufficient for judging only the
moral worth (moral worthiness or unworthiness) of the act but not its moral credit (moral
praiseworthiness or blameworthiness). Moral worth refers to the act while moral credit relates to
the agent.

Moral worth is judged by four standards: did the person act:

1. Rightly or wrongly,
2. Voluntarily or involuntarily,
3. With knowledge or ignorance of relevant facts, and
4. From a desire that was good or evil in the situation.

Moral credit needs different standards:

1. Was the act easy (no moral effort) or difficult (great moral courage and effort) to
perform?
2. Were the circumstances favorable or unfavorable for positing the act? And
3. From all that an external judge could know and ascertain about the agent, was it
probable or improbable that the agent should act that way?

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 Judgments of moral credit obviously supplement (and not supplant or suppress) judgments of
moral worth. Beyond factors that determine moral worth or moral credit, Beardsley (1960)
considers “ultimate” causal factors, which simply are those factors that are left out of account when
one makes judgments of moral worth and moral credit. While judgments made from the
perspective of moral worth and moral credit are judgments of discrimination (i.e., these perspectives
seek factors that are specifically unique to each agent), and they are mostly comparative and either
affirmative or negative, the ultimate causal factors go beyond moral worth and moral credit and
consider all agents on equal footing. Here all agents are equal and none has any ultimate claim to
praise or blame.

The judgment from the perspective of ultimate causal factors is always negative and takes two
forms:

1. Given positive moral worth and/or positive moral credit, the agent A is not ultimately
praiseworthy for act X, and hence, does not deserve to be rewarded.
2. Given negative moral worth and/or negative moral credit, the agent B is not ultimately
blameworthy for act Y, and hence, does not deserve to be condemned or punished.

Both negative judgments are because agents A or B have ultimate external causes that may be
common for A and B. In this sense, agents A and B are moral equals – the causal similarities between
them are of moral significance, perhaps more significant than their differences. They eradicate
moral discriminations. They remind us that judgments based on moral worth and moral credit are of
moral inequality and may not tell the whole story about the individuals being judged. No one is ever
the first cause of good or evil deeds or finally responsible for reward or punishment when
confronted by moral odds. No one is ever the total cause of one’s actions. The realm of external
causes may significantly determine most of our actions, especially in a turnaround situation. Based
on Elizabeth Beardsley, Table 8.2 provides useful Perspectives of moral responsibility assessment for
corporate executives.

< Table 8.2 about here >

This sphere of ultimate causality and moral equality, however, does not negate but presuppose
the legitimacy of moral worth and moral credit. All three moral perspectives, moral worth, moral
credit and moral sanction, are necessary but not sufficient. That is, each perspective is incomplete
and needs to be supplemented by the other two perspectives. That is, not all our acts go back to
ultimate causes; but those that do, invite compassion and tolerance. Equanimity in the face of moral
iniquity is moral callousness, particularly when the wrongdoer is oneself.

Concluding Remarks

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 We have covered a fairly representative group of major philosophers from Aristotle to Elizabeth
Beardsley who have made significant contributions to a better understanding of moral responsibility,
especially as applicable to executive decisions. From this historical development of the notion of
moral responsibility and its cognates, we note that these authors have deliberately refrained from
defining responsibility precisely, but have freely used it for diverse purposes. There has been a
pronounced lack of accuracy in denotation, even though the term responsibility has emerged quite
comprehensive in its connotation. However, despite its variety and ambiguity of use, responsibility
can be said to imply at least five aspects of human choice:

 THE CHOOSING PERSON: As a moral agent, with a unique self, abiding character and
personality, the responsible person is often described as conscientious, dutiful, committed,
reliable and responsive. The person behind the executive choice may be designated as the
AGENT or CHOOSING PERSON of responsibility.

 THE CHOICE SITUATION: Executive choice is often characterized by situational variables

such as time and place, constraints and stresses, number of alternatives to choose from,
challenges and opportunities, contingencies and circumstances, risks and uncertainties of
alternatives, frequency and distribution of choice-alternatives. All these variations may be
reckoned as the SITUATION of responsibility.

 THE CHOICE PROCESS: The actual executive choice is often described as identification,
enumeration and assessment of various choice alternatives, as also anticipation,
expectation, critical understanding, interpretation, and choice of some alternative over
others, and executive intentions and motivations in the deliberation over and
consideration of these alternatives, and the final choice. All these elements may be
construed as the PROCESS of choice and responsibility.

 THE CHOICE PRINCIPLE: This component of executive choice relates to the moral reasoning
or principles behind the choice - teleological ends and objectives, deontological laws,
contracts, rights, duties and character, and the justice of the distribution of these costs
and benefits and rights and duties involved in executive choices - these elements
constitute the "FORM" or CAUSE of executive responsibility.

 THE CHOICE OUTCOME: This involves the consequences of executive decisions and
subsequent actions in terms of success or failure, costs or benefits, the degree of good or
evil in the consequences, and the types of stakeholders they affect in the challenging
environment - all these elements describe the EFFECT of responsibility.

In general, one can distinguish two broad levels of responsibility: Responsibility for the action
itself, and responsibility for the consequences of the action (Hart & Honoré, 1975):

 Responsibility for the action is primarily moral, and involves the

concepts of duty, obligation, blame, and answerability.

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  Responsibility for the consequences is primarily legal and is
associated with the concepts of liability, imputability,
accountability, and punishment/compensation for the harm accruing
from the action.

This double use of the expression responsibility arises from the important fact that doing an
action and compensating harm from the action are two distinct sources of holding persons
responsible. Both sources of responsibility are independent of, but may be influenced by, a third
consideration: did the said action cause the harm for which compensation is sought? Or,
equivalently, did the doer of the action cause the harm? These questions are too complex to resolve,
and for practical purposes, legal responsibility, especially under the rubric of “strict liability,” may
not always deal with this third consideration. The principle of strict liability asserts that all harm
should be compensated for via compensatory justice, regardless of the fact, state and direction of
causality of the action between the said parties.

Causal and Agent Responsibility

Responsibility for the consequences can impute in two ways (Mascarenhas, 1995):

If the executives themselves act or omit an act that causes harm to some stakeholder, then
the executives are directly responsible for it - this is called consequent causal
responsibility.
If the executives command or delegate an action (commission or omission) that causes harm,
then they are indirectly responsible for the harm - this is called consequent agent
responsibility.

The corporation authorizes the advertising agency to act on its behalf. The corporation assumes
that the ad agency will work on behalf of the interest of the entire company and its stakeholders and
not be ‘opportunistic’ by serving its own interests. The principal or the corporation assumes
“vicarious liability” or “vicarious responsibility” for the advertising agent.

In early moral philosophy, the topic of responsibility has regularly surfaced under the question
of necessary and sufficient conditions that must exist if one is to be truly declared author of one's
actions, and thereby, to be justly praised or blamed. At the very dawn of Western Classical
Philosophy, Heraclitus (c.540-480 B.C.) asserted that it was a human being's formed character and
not some external force that constituted one’s fate. Since then, philosophers have debated and
connected the issues of fate and freedom, character and causality, motivation and intention,
deliberation and consideration, justification of praise and blame, and punishment and reward with
the notion of responsibility.

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Accountability and Commitment

Two questions, therefore, can be raised regarding causal or agent responsibility:

 How can the judge know when and whether the executive should be justly praised or blamed,
punished or rewarded for his or her executive actions? - This situation is often designated as
the judge's problem.
 How can the agent know when the acts or effects of one's executive behavior really belong to
him or her as a human agent? - This question is usually called the agent's problem.

For instance, how can the judge ascertain if the corporation or the ad agency should be held
responsible for the harmful social consequences of the products they manufacture and advertise?
The judge who must pass judgment on the executive conduct must sift through evidence, conditions
and circumstances in each case before responsibility or accountability can be "attributed" to the
persons – this is called attributional responsibility (ATR) (Dewey, 1925).

Secondly, how can the executives know if the harmful effects of their products really belong to
them, either as individuals or as corporate executives? In order to pass moral judgment on their own
conduct, the executives must also sift in each case through their own principles of choice, intentions,
motivations and deliberations so as to own or “appropriate” the consequences of their actions – this
is called appropriational responsibility (APR) (Bradley, 1876; Feinberg, 1975).

Thus, there have been two distinct patterns that characterize human responsibility: pattern of
attribution and pattern of appropriation. As attribution, responsibility is retrospective; it assigns
praise or blame depending upon the degree of intention, deliberation and motivation in the action
chosen and executed. As appropriation, responsibility is prospective; it is remedial, developmental
and character building through commitment (Bradley, 1876; Dewey, 1925; Niebuhr, 1963).

While in ATR, the judge looks principally for external evidence of moral causality and does not
strike so deeply into the interior of moral agency, in APR, the moral agent lives responsibility in
his/her innermost self. Moral agents can be held responsible (by imputation) because they have
acted as responsible causes (ATR) and so that they may become responsible persons (APR).

Both ATR and APR imply a fault such as a wrong, harmful or unfair product (goods or services)
or an unfair action (promotion or advertising strategy) (Mascarenhas, 1995). The fault can be either
externally (e.g., by courts) attributed to the person or internally (e.g. by virtue, conscience)
appropriated by the person. Once the fault is attributed to an executive, he or she must assume
accountability for the harmful consequences of the fault. Once the executive appropriates the fault,
he or she must assume commitment to avoid the fault in the future. Thus, we focus on both
accountability and commitment aspects of executive responsibility.

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 Obviously, when we speak of ‘responsible business management’ we need to go beyond legal or
strict liability. In fact, a deeper etymology of the word responsibility unravels another dimension:
within the word for response is hidden the Greek word for “promise” that invites people to reliably
perform one’s part in a common undertaking or to perform one’s promised part in a solemn
engagement Thus, “responsible persons are not only those who are un-coerced and aware of the
nature of their action and its consequences; they are also persons who demonstrate certain stable
or habitual attitudes to their relationships with other persons. In this sense, responsibility describes
the character of a person” (Jonsen, 1968, p. 547), and is a virtue (Aristotle, 1985; Aquinas, 1984).

Following this long discussion, we redefine responsibility from a legal, ethical and moral
standpoint as some promise, commitment, obligation, sanctioned by self, morals, law or society, to
do good, and if harm results, to repair harm done on another.

Hence, responsibility from a moral perspective is trustworthiness and dependability of the agent
in some enterprise. Its inverse is exoneration - the extent to which one is excused from commitment
and repairing the harm done to others by one's actions.

Moral agency is deputyship, argued Dietrich Bonhoeffer, and we are deputed not so much to
choose right and avoid wrong, but often to choose between right and right and between wrong and
wrong in an imperfect business world such as ours. Corporate executive responsibility, then,
accepts guilt and failure but without sin. Richard Niebuhr added that all our actions should arrive at
a perfect cathekontic fit between our values and those of the community, nature and the cosmos.
That is, responsibility is a constant dialogue with our environment. In order to do this we need
intellectual, volitional and moral development, said Bernard Lonergan; all three aspects of
development enable us to fight moral incompetence and develop antecedent willingness to do good.
This is effective freedom, and the latter grounds moral responsibility for all corporate executives.

However, the free will problem is quite tangled. Each of the traditional solutions (e.g.,
determinism, indeterminism, fatalism, libertarianism) of this problem tends to oversimplify a
multidimensional problem that involves the resolution of conceptual, scientific and moral questions.
We must first decide which of the ethical theories or moral principles we can use in making
judgments of moral responsibility. Next, we must agree on the meaning of certain key concepts
such as responsibility, moral responsibility, free will, free action, determinability, compulsion and
trying. Most of these terms do not have single meaning in ordinary usage, and most meanings
derive from different moral perspectives, different moral concerns and attitudes we bring to the
discussion. Thirdly, we must attempt to answer such scientific questions as - How wide is the area of
compulsive behavior. Did I adequately assess causal antecedents such as heredity, hang-ups,
cultural baggage, company history, competition, and environmental pressure in my corporate
executive decisions? Have I objectively assessed my current capacities and constraints in arriving at
a given corporate executive decision? How deferrable, if at all, was this decision in this instance of a
turnaround crisis? How much, if at all, did the corporate executive in this concrete situation have in
his power to try to do otherwise? All this analysis done, the question whether a corporate executive

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is morally responsible for a given downsizing decision involves taking a moral position and not simply
covering the relevant facts. This is because it is our moral position and decision that will specify
which of the facts and causal antecedents are relevant. The final answer to the question on moral
responsibility will depend upon what we are willing to excuse or not excuse (Grassian, 1992, p. 184-
191).

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 Table 8.1: Aristotle’s Theory of Responsibility: Executive Voluntary Acts,
Involuntary and Under-Duress Actions

Moral Executive Voluntary Executive Involuntary Executive Actions

Structure Of Actions
Acts Under Duress
Executive Acts

Within the corporate Outside the corporate Within and without the
executive; intrinsic to the executive; extrinsic to the corporate executive;
corporate executive. corporate executive. intrinsic and extrinsic to
the corporate executive.
The corporate executive The corporate executive
Partly done on one’s own
Originating operates on one’s own does not operate on one’s
accord.
principle or accord. own accord.
passions:

For instance, actions For example, actions done

done out of anger, out of violence, extreme For instance, actions done
sensual desire, or any fear and ignorance, or any out of anger, passion,
other passions originate other invincible constraint competitive pressure,
within the corporate do not originate within the survival pressure, under
executive; they can be corporate executive; they some force, fear, and
resisted by the corporate cannot be resisted by the ignorance, can be partly
executive, and therefore, corporate executive, and resisted, and are,
are voluntary. are, therefore, involuntary. therefore, under duress.

Strong. The corporate Non-existent. Actions are Weak. Actions are

executives, cognizant of not initiated by the
partly initiated by the
their particular corporate executive, nor
corporate executive,
Role of the circumstances, and with deliberated over as means
partly cognizant of the
intellectual and deliberation, initiate and ends; if they are under
circumstances,
volitional actions over their means ignorance, there is low
and ends. mental awareness; if under and partly deliberated
faculties: violence, there is no will. over as means and ends.

Hence, actions are almost Hence, actions are a blend

Hence, actions are
“non-human” and non- of the human and the
“human” and
accountable. non-human, and partially
accountable.
responsible.

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 Could result in good acts Could result in good acts Could result in good acts
(success, virtue) worthy (success, virtue) that do (success, virtue) partly
of praise, and which worthy of praise, and
not merit praise.
make us happy. which make us partly
happy.
Outcomes of
actions
Or, end in evil deeds
(faults, vice, harmful Or, result in evil deeds (vice, Or, end in evil deeds
outcomes) that are failure) that do not deserve (faults, sins, vice) that are
blameworthy, to be blame, but make us sad, partly blameworthy, partly
censored, and which and invoke pity and pardon. censorable, and which
make us guilty and sad. make us somewhat guilty
and sad.

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 Table 8.2: Perspectives of Moral Responsibility Assessment for Corporate
Executives
[See Beardsley, 1960]

Perspectives of Relevant Definitions Probing Questions

Moral
Responsibility
Assessment
Characteristic of moral value that Standards of Positive Moral Worth:
belong to the agent who has
performed an act that meets
certain pre-specified conditions.
1. Has the agent acted rightly?
2. Has the agent acted voluntarily?
3. Does the agent have knowledge of relevant
The term “moral worth” can refer
facts?
to either positive or negative moral
4. Does the agent act from a desire that is good in
worth.
its situation?
Moral Worth:
Positive or A judgment of moral worth may be Standards of Negative Moral Worth:
positive or negative depending
Negative upon whether moral worth is
asserted to be present or absent. 1. Has the agent acted wrongly?
2. Has the agent acted voluntarily?
3. Was the agent ignorant of relevant facts?
4. Does the agent act from a desire that is evil in its
situation?

Given that an act has positive or Standards of Positive Moral Credit:

negative moral worth, moral credit
refers to the next moral judgment
that determines whether the agent 1. Was the right act “difficult” to perform?
is praiseworthy or blameworthy for
2. Did the agent act rightly despite obstacles or
the act.
unfavorable circumstances?
3. Was it antecedently improbable that the agent
would act rightly under such unfavorable
Moral credit looks at the circumstances?
performance of the act under its
circumstances. That is, was the
A “yes” to all three questions enhances positive
Moral Credit: balance of known circumstances
moral credit.
causally relevant to the
performance of the act favorable or
Praise or unfavorable?
Blame Standards of Negative Moral Credit:

Favorable circumstances mean that

their presence makes the act more 1. Was the wrong act “difficult” to perform?
likely to occur than in their absence. 2. Did the agent act wrongly despite favorable
circumstances not to act?
Unfavorable circumstances mean
3. Was it antecedently improbable that the agent
that their presence makes the act

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 more unlikely to occur than in their would act wrongly under such favorable
absence. circumstances not to act?

A “yes” to all three questions enhances negative

moral credit.

Does A unconditionally deserve moral worth for his

honest act?

Moral
Final judgment regarding reward
Sanction: and punishment should be Does A deserve to be absolutely condemned for his
tempered by the third moral cowardly act?
Reward or perspective of ultimate causality
and moral equality.
Punishment
If not, investigate into ultimate causal factors that
mitigate praise, exonerate guilt or moral
responsibility.

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End Notes

Epilogue
Corporate Executive Cosmic Spirituality for Today

Executive Summary

Every human being is spiritual, and has spirituality, whether it is existential and subconscious or
reflective and explicitly conscious. The existential subconscious level of spirituality informs and
empowers our conscious decisions, choices and actions. In this sense, spirituality is the continuous
line of action that fashions our personal and collective human and cosmic identity. Despite our
native spirituality that unites and harmonizes humanity, we also experience the fallen nature of the
human heart and the resulting brokenness of human relations as the major cause of crises in our
lives, families, corporations and nations, and now the life-threatening ecosystems that form our
common planetary home. Hitherto we have falsely presumed that the earth and the universe are for
the use of mankind – an anthropocentric concept of ecology and sustainability. Hence, we are on the
verge of destroying the planet. We need planetary ethics and cosmic spirituality to change our
mindset - from anthropocentricism to cosmocentricism; from being the conqueror of nature to being
a caring partner of nature. This is the essence of corporate cosmic spirituality. Human spirituality
in general and corporate executive spirituality in particular, seems to be the best way to understand
and offer a way out of the personal, communal, and planetary disorders of our age. This concluding
note of this book is a summons to all corporate executives to rise to the call of cosmic spirituality.

Introduction
The central thesis of Laudato Si, an Encyclical on the Spirituality of Sustainability issued by Pope
Francis on May 24, 2015, is that the fallen nature of the human heart and the resulting brokenness of
human relations is the cause of the crises in our lives, families, nations, and now, the life-sustaining
ecosystems that form our common home. The document focuses on the heart of man and the disorders
of our age. Pope Francis stresses the link between human and environmental crises, which he says
“are ultimately due to the same evil: the notion that there are no indisputable truths to guide our lives,
and hence, human freedom is limitless.” In other words, Laudato Si' follows the arc of salvation
history to understand and offer a way out of the personal, communal, and planetary disorders of our
age.

Today many people do feel a deep sense of ecological commitment that has been awakened by
observing how our planet is fragile and threatened. The effect of this observation of planetary fragility
is not only a sentiment of responsibility but a call to act in a responsible way. In this transition from
inner feeling to concrete ecological action we need our rationality. We have to conceptualize our
intuition, make a tradeoff between different aims and allocate time and scarce means. But what is
clear is that there is a spiritual sense of responsibility that precedes the stage of rational
conceptualization and implementation.

What is Corporate Spirituality?

Spirituality cannot be captured in one standardized definition. Spirituality is a rich, intercultural
and multilayered concept. As a guideline, Zsolnai (2015, p. 4) proposes a working definition
(developed by the European SPES Forum): spirituality is people’s multiform search for the deep
meaning of life that interconnects them to all living beings and to ‘God’ or Ultimate Reality
(European SPES Forum 2014).

“It is reasonable to think that every human being has a spirituality” (Haight, 1987, p. 21).
According to Roger Haight (1987, p. 22), “the term spirituality can be understood on at least two
levels, the one existential and the other reflective and explicitly conscious. On the first and the

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deepest level of action, spirituality is constituted by the conscious decisions and actions that make the
person to be who he is or she is; spirituality is the continuous line of action that fashions a person’s
identity. On the second reflective level, spirituality refers to a theory or theoretical vision of human
life in terms of the ideas, ideals, and ultimate values that should shape it. These two levels constantly
interact in the thinking person.”

Human spirituality is a phenomenon beyond legality, ethics and morals; beyond any ethical theory
or paradigm. Spirituality is beyond any exercise, regime, program, regimen, project, or enterprise. It
is something internal and intrinsic to humankind arising from being created in the “image and likeness
of God.” It is a gift from God by which we participate in the love, sanctity and divinity of God.
Spirituality is native to us, inborn in us, as also cultivated by wisdom and virtue, renunciation (tyaga)
and service (seva), integrity (dharma) and holiness.

The central claim of The Spiritual Dimension of Business Ethics and Sustainability Management,
(Laszlo Zsolnai, ed., 2015), is that both business ethics and sustainability management require
spirituality as a foundation. Without spiritually-motivated actors, ethical business initiatives and pro-
environmental activities can become ineffective and meaningless, and sometimes even counter-
productive and destructive. That is, we need spirituality.

Spirituality is the science of the heart. When we learn to connect with it we will find that
everything is there. Most amazingly we find out that we are all connected to each other through
our hearts. When we tune ourselves to the same frequency, we will be in the same wave length,
same page, same cosmic space and journey where we are all one. When we have less
resistance in our hearts, we let go and become a part of that journey. Then we become unified as
one single entity, in one cosmic flow of love and forgiveness, harmony and solidarity with nature.

Corporate Ethics is not enough

Business ethicist Luk Bouckaert (2015, p. 20) argues that a more spiritual approach to business
ethics is needed; that business ethics needs a spiritual foundation. The basic reason is that people—
due to the current crises—have lost confidence in institutions and institutional leadership. Institutions
are part of the problem and not just the remedy for restoring a sustainable future. If we have to
reshape our economic, political and religious institutions we need something that has deeper roots
than our institutional settings.

Unless leaders in the academic community as well as in corporate, consulting, regulating and
advisory bodies actively focus on motivating and inspiring decision makers to supplement their
traditional success criteria with spiritual-based perspectives, business ethics will continue to deal
more with non-ethics than with ethics; CSR will continue to emphasize the protection of corporate
reputation and success rather than responsibility to broader constituencies; and sustainability will
continue to focus on promoting conditions and technologies that enable business growth rather than
the maintenance and improvement of the ‘common good’—including embracing constituencies that
lack voice, such as nature and the yet-unborn (Pruzan, 2015a).

There have been significant developments in the broad fields of Business Ethics, CSR and
Sustainability, referred to collectively in the sequel as B-C-S. In the relatively short period of time of
roughly 30–40 years, observes Peter Pruzan (2015a, b), all three fields have been characterized by a
movement from philosophical reflection and critical perspectives on organized commercial activity, to
disciplines characterized by their own vocabularies, measures of performance, university curricula,
professional journals, consultancies, non-governmental organizations, international organizations and
reporting systems.

Some realities, including intangibles such as justice, beauty, serenity, love and respect, but which
do not readily lend themselves to economic measurement, have shown rapid developments from the

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metaphysical to the physical, from the intrinsic to the extrinsic. Philosophically deep concepts such as
ethics, responsibility and sustainability, each pregnant with significance for reflection on the human
condition, have been operationalized and reduced to indicators and variables that can be measured,
evaluated and reported. We should avoid this problem particularly with the concept of spirituality.

Pruzan (2015b) emphasizes the fact that unless a leader’s behavior is grounded on existential
inquiry that leads to self-knowledge, ethics, no matter how it is taught or what ethical codices are
developed to guide behavior in organizations, will, continue to succumb to the demands of economic
rationality. Scandals will continue to anger and frustrate us no matter how much focus our business
schools place on business ethics and how many Green Papers are developed to promote corporate
social responsibility.

On Corporate Spiritual Leadership

The evolution of a spiritual-based leadership implies not just a transformation of the teaching and
the practice of leadership, but also, and more fundamentally, the transformation of the individual
leader’s mind-set. What is required is a consciousness that resonates with a conviction that a
precondition for the long-term success of purposeful, organized mercantile activity is spiritual-based
leadership and not just the pursuit of material gain (Pruzan, 2015b). Scholars and theoreticians must
face the challenge of developing vocabularies, perspectives and research methods that can support
leadership that is spiritually-based. Instead of a focus on deliberate and willed action that is
considered to be the result of logical generalizations and prescriptive principles, this implies a focus
on the emancipation and empowerment of inner guidance and embodied knowledge, leading to a shift
in consciousness and conscience. Business schools and other institutions of higher learning must face
the challenge of integrating spiritual-based leadership in their educational programs without
pragmatically reducing it to an instrument of economic rationality - of developing and mediating a
leadership paradigm that cannot be taught but which must be accessed via the emancipation of
embodied knowledge (Pruzan, 2014).

According to Pruzan (2015a), the concept of spiritual-based leadership is emerging, if not

mainstream, as an inclusive and yet highly personal approach to leadership. This concept integrates a
leader’s inner perspectives on identity, purpose, responsibility and success with one’s decisions and
actions in the outer world of business. Spiritual-based leaders are nourished by their spirituality,
which is a source within them that informs and guides them. They search for meaning, purpose and
fulfillment in the external world of business and in the internal world of consciousness and
conscience. Their external actions and their internal reflections harmonize so that rationality and
spirituality are mutually supportive (Pruzan, 2011).

If the business ethics paradigm of moral self-regulation through stakeholder management and CSR
programs is not sufficient to overcome the contradictions in our economic system, what can business
ethics offer in this context of uncertainty and distrust? Luk Bouckaert (2015, p. 18) responds: We can
choose to continue our reformist role within the system as we have done up to now, or we can
distance ourselves, apply self-criticism and try to transform our way of looking at things. The latter
route was followed by Socrates in Athens, Lao Tzu in Ancient China and the Prophets of Israel.
Referring to a more recent example, in his Guide for the Perplexed, Ernst Schumacher (1977) also did
the same towards the end of his life. In all these writings we will not find grand theories of leadership
and ethics but thoughts about the spiritual way to wisdom, leadership and shared responsibility for the
common good. Instead of founding business ethics in the grand rational theories of modernity, such as
utilitarianism, Kantianism and social constructivism, we could find inspiration in the older spirit-
driven philosophies of life and community. They can be very helpful with rediscovering the difference
between the ratio and the spirit as faculties of the human mind. Modern philosophy and education
have prioritized human rationality at the cost of spirituality. Along with many others, I believe that it
is time to restore the balance between rationality and spirituality and to re-vitalize our faculty of
‘spiritual intelligence’ as a source of wisdom in management and leadership.

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Reflection-Based Corporate Spirituality
The word “reflection” comes from Latin reflectere, meaning to bend back. Reflection implies
turning back on oneself to review and assess one’s life, actions and decisions, one’s outcomes and
achievements. In an organizational context, reflection also means reviewing and learning from an
organization’s past of deliberations, choices, selections, strategies, implementation, prediction,
monitoring, control and subsequent performance. Boyd and Fales (1983, p. 100) define reflection as
“the process of internally examining and exploring an issue of concern, triggered by an experience,
which creates and clarifies meaning in terms of self, and which [potentially] results in a changed
conceptual perspective.” Reflection, accordingly, should lead to new understandings and
appreciations (Boud, Keogh, & Walker, 1985). Reflection involves “bending back” upon oneself to
take stock, question and assess one’s experiences (Barell, 1995; Moberg & Calkins, 2001).

Reflection does not have to be “retrospective” or “self-reflection” as implied by the above

definitions. It can be synchronous or contemporary (Schön, 1995) reflecting on current issues of
concern, and even “prospective” or anticipatory (Perkins, Jay & Tishman, 1993). Whether
retrospective or introspective or prospective, reflection is interpretative – it reviews and interprets and
re-interprets one’s experiences with self, organization or the world of society and environment.
Objective and unbiased reflection or self-insight can be positive (Hixon & Swann, 1993) and can
empower one to eliminate some negatives of one’s past individual or organizational life such as
impulsivity (Wilson et al., 1993), aggressiveness, fraud, corruption and unethicality (Weick, 1995).
However, being a largely personal process, one could also be deluding, self-deceiving and condoning
one’s evil past (Kottkamp, 1990, 1999). But when objective, unbiased, and striving for goodness,
reflection can be healing, remediating, and help discerning good from bad, fair from unfair, right from
wrong practices or experiences of the past. Sincere reflection can empower us to reorganize our
resources and realign our priorities for the future (Shapiro & Reiff, 1993). Reflection then can be a
positive, transforming humanizing and spiritual experience.

Is Interfering with Human Nature “Playing God” and hence Morally

Problematic?
Think of nature rather than what is natural. Trees, grass, birds, forests, animals, mountains,
rivers, and the like that we see and enjoy in the countryside are natural; they are not affected by
people. Humans, however, are part of nature, part of the natural world just as kangaroos and polar
bears are. But are some human interventions such as crops and irrigation, dams and aqua ducts, game
hunting and fishing, mining for minerals and clearing forests for road-construction, gardening and
landscaping for beauty and building parks for recreation, and the like – are we interfering with nature,
and so unnatural? Are we moving into God’s domain? Is interfering with nature natural for humans?
Are technology and human skills that do it destruction or “enhancement” of nature? Of course, when
we overdo it we harm nature ecologically and jeopardize sustainability.

If humans are part of nature, and all other non-humans are part of the same nature, then what we
naturally do is similar: birds build nests while humans build houses; beavers build dams out of trees
and sticks while humans build dams with rocks and concrete. Houses and concrete dams are just as
part of nature as nests and beaver dams are (Weckert, 2016, p. 89-92). However, since humans have
free will and autonomy that animals do not have, they have to be responsible for what they do. This is
the way we evolved. Kangaroos evolved with strong tails to jump and we evolved as bipedal erect
locomotives that enabled our prognathic face to reduce and move backwards to make room for the
brain to grow with a decision-making capacity that makes us autonomous.

In this sense, humans and non-humans have no choice but to interfere with nature (or cooperate
with nature) in order to survive. However, now that we have earthmoving technologies and human
enhancement biotechnologies, our responsibilities increase and need to be reassessed in the light of

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these new situations. In the areas we have control, we have choice, and with choice, responsibility. In
the areas we have no control, we have chance, and less responsibility. As Ronald Dworkin (2000 , p.
444) wrote: “the crucial boundary between choice and chance is the spine of our ethics and morality,
and any serious shift in that boundary is seriously dislocating.’ In the past this boundary did not shift
dramatically but now it has (Weckert, 2016, p. 94).

Formerly flooding, droughts, famine, and the like were considered to be acts of God and we could
not play God in controlling them. Today with major dams we can control all of them to a certain
extent – the boundary between choice and chance has changed, and human responsibility is no longer
narrowly circumscribed. When boundaries and responsibilities change, decisions and choices must be
made in situations where previously none were necessary. The situations of interest are those where
no human decision-making was possible but now it is (Weckert, 2016, p. 94-95).

The current field of geo-engineering and its impact on climate change and its difficulties of
gaining international cooperation in dealing with it, offers more pertinent examples. Consider solar
radiation management also called albedo modification. We are told that by shooting sulphate particles
or other chemicals into the upper atmosphere to stop some of the sunlight from reaching the earth, the
increase in temperature could be slowed, or the temperature held stable or lowered. According to Ken
Caldeira, a climate scientist at the Carnegie Institute for Science at Stanford, this is what volcanoes
do. He observed that the 1991 Mount Pinatubo volcano in the Philippines spewed lots of small
particles high in the atmosphere, and the next year the earth cooled, despite continuous rise in
greenhouse gases (Caldeira, 2015). Not only is this process relatively simple, inexpensive, but with
quick desirable results. However, tampering with high atmosphere could cause droughts or affect trees
and crops causing food shortages or contamination. This is the price of “nature enhancement.”

Regarding “human enhancement” we hear about new advances: from organ transplants we are
now moving to body transplants and head transplants (Thomson, 2015). Thus far we have never been
able to choose our bodies. But we have been already modifying our bodies in parts through
prostheses, various implants, sex-change, growth hormones and the like. But changing the whole
body (with or without head) to make it stronger, more tanned, more masculine or feminine, a race-
change, gender change, species change and immortality are something new with new alteration or
enhancement biotechnologies. Some of these body-transplant interventions can be considered
treatments when one’s body gets diseased or too old; but most are human enhancements, as the latter
change self-identity, self-autonomy, determination and responsibility. Even if biotechnologies that
could make body and head transplants feasible and affordable one day, they raise serious moral
problems. They willfully change the boundary between choice and chance, to use Dworkian terms,
and our bodies would be matters of choice and not chance or dependent upon God. Given the many
unknowns, it is not clear if we have the competence to make good decisions, unless we choose to play
God or choose to create a Frankenstein monster. However as Coady (2009, p. 179) opines, the charge
of playing God may be an intrinsic moral objection to the idea of changing human nature.

Ignatian Spirituality: Finding God in All Things

The Society of Jesus, an organization more than 478 years old, founded by Ignatius of Loyola
(1491-1556), whose major work, the Spiritual Exercises, is the foundation for Ignatian or Jesuit
Spirituality. Developed after a conversion experience and a long period of renunciation and
meditation, the Exercises are a multifaceted, contemplative, personal, religious activity that is
typically conducted over a protracted period of time.

The Spiritual Exercises (SE) of Ignatius are structured to enable one “to conquer oneself and
regulate one's life without determining oneself through any tendency that is disordered" (Fleming,
1991, no. 21). The chief aim of the Exercises is to help the one who does them (traditionally called
“the exercitant”) attain greater spiritual freedom. They do this by challenging the exercitants to look at

202
their final end (telos) and the behaviors, habits, and values that lead them toward or away from that
final good end. In practice, the Exercises are typically undertaken in solitude and silence – that is
removing oneself or "retreating" from others. The retreatant usually starts meditating on the so-called
"principle and foundation" - an exercise that makes us consider the overall purpose of human
existence and the individual's relationship with the transcendent and immanent God. At this point, the
exercitant begins to look beyond a narrow self-interested set of desires to the overarching purpose of
one’s life, being and becoming. The exercitant also begins to scrutinize one’s relationship with God
and the proper responses to God's creative designs. From the start, the Spiritual Exercises encourage
purposeful reflection on the relationship between one's everyday activities and the end or set of ends
associated with those activities.

One of the fundamental principles of Ignatian spirituality is to “to seek and find God in all things.”
In Spanish: “La presencia de nuestro Señor en todas las cosas.” According to Ignatius, this formula
came from God in two ways: a) through his great and personal mystical life; b) the Trinity whose
vision Ignatius experienced throughout life gave him this formula and confirmed it many times
thereafter. Hence, Ignatius expected all his followers to tread the same path of seeking God in all
things in order to better serve and love him.

Ignatius made this dynamic formula the central principle of religious and spiritual life, and thereby
gave his own order a unique spirituality and the lay people an anxiously awaited method of unifying
one’s faith with one’s everyday living. “If God isn’t here, then God isn’t anywhere.” If God is not
present in your day-to-day work and struggle and fun, in your emotions and discoveries, and even in
the incidental things that happen—then why should you invest so much time and energy trying to get
to whatever place God inhabits? This isn’t a form of pantheism—of believing that God is in
everything all the time. The idea of finding God in all things points to the love and grace of God that
find us no matter what we’re going through and no matter what shape we’re in.

Concluding Remarks
“Life is short and we are simply passing through here. We cannot stay. It is therefore essential
that we find guides whom we can trust and who can help us discover and realize our higher purposes
in life before it is too late. We can channel our deepest creative impulses in loving ways toward
fulfilling our higher purposes, and help evolve the world to a better place” (John Mackey, CEO,
Whole Foods in Mackey & Sisodia (2014), Conscious Capitalism, p. 7).

We need something that can restore a sense of shared meaning, responsibility and purpose. This
‘something’ is what we may call spirituality. Spirituality as far as it is defined as an introspective and
purely individual search for meaning and happiness may not take us too far. This search of
individualized spiritual wellness is fine, but will not suffice as a lever for social and institutional
change. That is, we should not reduce spirituality to a hermit’s enterprise. As a personal and
individual experience, spirituality has the power of reconnecting the self from within to all living
beings and to the inner Source of Life. Because of this capacity of reconnecting people, spirituality
has a strong social and public good character and is linked with the practice of value-driven leadership
and with a deep sense of social responsibility. Without the involvement of intrinsic motivation,
corporate ethics may be reduced to being an instrument of reputation and risk management and any
genuine moral commitment is lost. Spirituality should therefore be promoted as a public good and a
public virtue in any private or public organization. This is spirituality-based leadership with a deep
sense of social responsibility.

There is always the risk, however, that this intuitive knowledge will be crowded out by a
dominance of rational and pragmatic knowledge that is much focused on problem-solving and
controlling our environment. When we observe the wisdom and practice of spiritual-based leaders in
history and modern times, we discover that the openness of their minds is always related to a great

203
sensitivity to the vulnerability of life and future generations. Their spirituality is embedded in a deep
sense of social responsibility that drives them to action and into being aware of having a historical
mission to accomplish. It is this openness of mind, linked to the idea of a historical mission, which
forms the motivational and psychological basis for spirituality-based cosmic leadership.

In this book as well as the one that preceded it we have outlined a journey of ethical, moral and
spiritual corporate executive leadership. The first book described in detail the context of turbulent
markets and their challenges that the corporate executives must confront in their day-to-day decisions
and strategies. This second book has provided the arsenal of ethical, moral and spiritual theories,
principles, rules and standards that can inform, form and transform corporate executive decisions,
strategies and their consequences. Empowered corporate executive ethical life is a life-time mission,
vision and journey that must be travelled together with others in the organization, with all its
stakeholders, will all people, and especially, with close partnership with nature – this is the call of
cosmic spirituality and sustainability.

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i
Financial Times Stock Exchange 100 Index (FTSE 100 Index), is maintained by FTSE Group, and now wholly owned subsidiary of
the London Stock Exchange which originated as a joint venture between the Financial Times and the London Stock Exchange in
1984.

ii
Nitesh Gor, BA from the University of London and an MBA from London Business School, is the author of The Dharma of
Capitalism: A Guide to Mindful Decision Making in the business of life (First published in Great Britain in 2012 by Kogan Page
Limited). He has served in executive, leadership and consulting roles in asset management, investment banking and the natural
resource exploration industry. As co-founder and CEO of Dharma Investments, Nitesh oversaw development of the Dow Jones
Dharma Index, a global stock market index that tracks companies who maintain high standards of ethical behaviour He is chairman
of the I-Foundation, a charity establishing the first state-funded schools in the UK based upon Dharma principles. Nitesh Gor is also
a regular columnist for Forbes. He lives in London with his family.

iii
The word Dharma has been used in ancient scriptures from time immemorial. Many people have tried to understand and explain
the word Dharma from their perspective. Some consider it a law, others as guidelines and some consider as a way to worship, and to
be closer to God. But defining it in this way underdetermines its meaning. Dharma is all of it and beyond. And, the best explanation
is provided in the Bhagavad Gita in the form of a dialogue between Lord Krishna and Arjuna. As per Lord Krishna, Dharma is a
righteous way of living a life. He explains that every organism is born to serve a purpose. Understanding the purpose and living
accordingly is Dharma. But that is the most difficult thing to do. To differentiate between right and wrong, is sometimes the most
difficult thing to do. (We will try to understand how Dharma makes it easy to differentiate between right and wrong while trying to
answer our second question – importance of Dharma).

iv
The East can teach the West. By some estimates, one in ten professors of the top MBA schools of USA is Indian in heritage. In
2010, Harvard University named Mumbai-born Nitin Nohria to become the tenth dean of the prestigious Harvard Business School.
Indian born businessmen and business consultants are playing a growing role in shaping best practices in the West, teaching
corporate executives to take a more holistic approach that puts purpose before goals and stakeholders before stockholders (Gor 2012,
p. 24).

v
Dharma is not the same as Karma, another concept common to Buddhist and Hindu traditions and belief systems. Karma describes
the good and bad quality in every act or deed as defined by the consequences, unseen, foreseen, or unintended. Karma can be
reckoned as life’s running subtotal of actions and outcomes, and Dharma explains why it matters (p.6).

vi
Cited in Stephen Covey (2000). Living the 7 Habits: Stories of Courage and Inspiration. NY: Simon & Schuster, p. 47.

vii
Retrieved from Nobel Laureate Liu dies at 61. The Statesman, Kolkata, Friday, 14 July, 2017, pp. 1, 10. Retrieved from
http://epaper.thestatesman.com/1281145/Kolkata-The-Statesman/14th-July-2017#page/1/2

viii
Retrieved from Liu Xiaobo, China’s Conscience. Cover Page, and page 9 of The Economist, July 15-21, 2017. Retrieved from
https://www.economist.com/leaders/2017/07/15/liu-xiaobos-death-holds-a-message-for-china

ix
Keller, Bill (2013). Nelson Mandela, South Africa’s Liberator as Prisoner and President, Dies at 95. The New York Times,
December 5. Retrieved from https://www.nytimes.com/2013/12/06/world/africa/nelson-mandela_obit.html

x
Over against the quantitative theory that held all economic actions were driven by mathematical expectations of benefits, John
Maynard Keynes, the famed economist, coined and introduced the term “animal spirits” into economics, with which he meant our
souls that animate us, or consequently, our spontaneous urges that give meaning and energy to our acts. “Most of our decisions to do
something positive, the full consequences of which will be drawn out over many days to come, can only be taken as a result of
animal spirits – of a spontaneous urge to action rather than inaction, and not the outcome of a weighted average of quantitative
benefits multiplied by quantitative probabilities. An enterprise only pretends to itself to be mainly actuated by the statements of its
own prospectus, however candid and sincere. Only a little more than an expedition to the South Pole could be based on an exact
calculation of benefits to come. Thus, if the animal spirits are dimmed and the spontaneous optimism falters, leaving us to depend on
nothing but a mathematical expectation, enterprise will fade and die” (Keynes, 1936, p. 161-162). Similar was the position of
Ackerlof & Schiller (2009).

xi
Accordingly, transcendentalism is a philosophy (attributed to 18 th century German philosophers Kant, Hegel and Fichte) that
proposes to discover the nature of reality by investigating the process of thought rather than the objects of sense experience. By
extension, Emerson and other 19 th century New England philosophers, defined transcendentalism as a search for reality through
spiritual intuition.

xii
President’s Council on Bioethics (2008) provides a collection of essays on Human Dignity and Bioethics, commissioned in 2008,
written by prominent modern representative conservatives and non-conservatives. The collection does not provide a single definition
of human dignity as the term itself is abstract and highly ambiguous (Kass, 2008 , p. 306). Fukuyama (2002, p. 148) maintains a
similar position. Hence, authors propose different and often conflicting interpretations of human dignity. A working definition of
human dignity is that of Lee and George (2008, p. 410), “The dignity of a person is that whereby a person excels other beings,
especially other animals, and merits respect and considerations from other persons.” This definition bears the risk of being circular.
Different definitions arise based on different definitions of the person, human excellence and respect, different understanding of
human nature and of the foundations of human dignity [See Giubilini, A. & S. Sanyal (2016). Challenging Human Enhancement. In
Steve Clarke, Julian Savulescu, CAJ Coady, Alberto Giubilini, and Sagar Sanyal (eds.), The Ethics of Human Enhancement:
Understanding the Debate (p. 1-24): Oxford University Press, pp. 1-24].
xiii
St. Thomas Aquinas’s (1225-1274) greatest work was the Summa Theologica (Designated as ST) written in Latin and in three
Parts (STI, STII-I, STII-II, and STIII), with the second part written in two parts. In general, STI is on God and Creation; STII-I and
STII-II are on ethics and virtues; STIII is on Christ and Eschatology. ST is the fullest presentation of his views. He worked on ST
from the time of Pope Clement IV (after 1265) until the end of his life. When he died, he had reached Question 90 of Part III (on the
subject of penance). The Summa was translated into Greek (c.1327), Armenian, many European languages, and Chinese. The earliest
well circulated translation in English dates from 1907. STII is divided into two parts. The first part comprises 114 questions, and the
second part comprises 189. STII-I and STII-II (both relevant to us) are composed as follows: STII-I: Treatise on the last ends (qq. 1-
5); on human acts: Acts peculiar to humans (qq. 6-21); on the passions (qq. 22-48); on habits in general (qq. 49-54); on habits in
particular (qq. 55-89; Good habits, i.e., virtues (qq. 55 to 70)}; on law (qq. 90-108), and treatise on grace (qq. 109-114). Second part
of Part II (ST II-II) is a treatise on the theological virtues (qq. 1-46); on the cardinal virtues (qq. 47 -170): on prudence (qq. 47-56),
on justice (qq. 57-122), and on fortitude and temperance (qq. 123-170); on gratuitous graces (qq. 171-182) and treatise on the states
of life (qq. 183-189). The major theme of STII is man's striving for the highest end, which is the blessedness of the beatific vision. St.
Thomas develops his system of ethics that has its root in Aristotle.

xiv
In the Indian tradition, the primary sources of wisdom about human nature and evolution are in two categories. The first category,
which includes the Vedas, the Upanishads, and the Bhagavad Gita, deals with the fundamental nature of the ultimate reality that
transcends time and approaches that facilitate experiential awareness and knowledge of this reality (Griffith, 2005; Radhakrishnan,
1973, 1994; Radhakrishnan & Moore, 1957). The second category, which includes the epics Mahabharatha and Ramayana (Ganguli,
1883; Griffith, 1915), recognizes the contingent nature of how beliefs about the nature of reality translate into values and accordingly
dwells on delineation of values according to place and circumstance. The epics, though ancient, are well known and disseminated.
These ancient texts contain detailed descriptions of philosophical systems clarifying ontological and epistemic issues with direct
implications for values and appropriate modes of action. A study of both these texts enables a complete description of a personal
belief system (Brendel et al., 2016).

xv
For Thomas Aquinas (ST I-II, 61) the cardinal virtues correspond to and perfect four powers: a) Prudence is related to the power of
practical reason; b) Justice to the will-power; c) Temperance to the concupiscible power, and d) Fortitude to the irascible power.
According to Aquinas, the virtue of justice is “a habit whereby a man renders to each one his due by a constant and perpetual will” (ST
II-II, q 58, a 8). Thus, justice as a particular type of virtue is an external virtue. It does not primarily focus on regulating the internal
character of the agent by ordering the passions (as do the virtues of temperance and fortitude); instead, it focuses on the results of the
agent’s actions in the external world, the concrete effect they have upon the lives, property and interests of other people (Keaveny, 2009,
p. 119). Temperance and fortitude are predominantly at the service of justice, and prudence determines the nature and choices of justice.

xvi
The traditional English translation of eudemonia is happiness, possibly stemming from its Latin translation, felicitas. Cooper
(1985, p. 89, footnote 1) finds this inadequate, since happiness is predominantly a subjective psychological state that is temporal and
recurrent. Much of what Aristotle says about eudemonia is not fully captured by “happiness” since eudemonia implies a full, long
lasting adult life of fulfillment (NE 17 1098 a18-20; EE 1219b5). Cooper (1985, p. 89), following Anscombe (1958), suggests
instead the postmodernist term “human flourishing” as an adequate rendering of eudemonia: flourishing implies the possession, use
and fulfillment of one’s mature powers or natural capacities over a long period of time (NE I 10 1100 a22-30, 1101a22ff).
Eudemonia is central to Aristotelian ethics. Even though Aristotle treats it only in the Fourth Book of Nichomachean Ethics, yet the
first two chapters prepare for it by seeking answer to the question: “What is at the most extreme limit of all good things achievable in
action?” (NE I 2 1094a18-9; EE I 2 1214b7-9). Eudemonia is this “ultimate end” of all human yearning.

xvii
We may characterize the current debate on ethical assessment of executive behavior as polarized along three behavior aspects: the
person acting, the act itself, and the consequences. The first, person-based ethics, popularly known as virtue ethics, is advocated by
many moral philosophers such as Aristotle (1985), Aquinas (1971), Carney (1973), Frankena (1973, 1975), Hauerwas (1975), and
MacIntyre (1981), and among marketing scholars, by Morgan and Hunt (1994) and Williams and Murphy (1990). The second, act-
based ethics is basically deontological ethics, while the third consequences-based ethics is teleological ethics. After Alasdair
MacIntyre's (1981) most influential work After Virtue, virtue or person based ethics is gathering momentum and advocates.
xviii
Cited in Covey, S. M. (2006). The speed of trust: The one thing that changes everything. Simon and Schuster.

xix
The growing importance of relationships in business has also heightened interest in the role of trust in fostering such relationships
(Bendaupudi & Berry, 1997; Garbarino & Johnson, 1999; Kozak & Cohen, 1997; Sirdeshmukh, Singh, & Sabol, 2002). For instance,
considerable effort has been devoted to examining the role of trust in relationship development, particularly within distribution
channels in marketing (Doney & Capon, 1997; Morgan & Hunt, 1994; Nicholson, Compeau, & Sethi, 2001). Several conceptual
(e.g., Gundlach & Murphy, 1993; Nooteboom, Berger, & Noorderhaven, 1997) and empirical (e.g., Garbarino & Johnson, 1999; Tax,
Brown, & Chandrashekaran, 1998) approaches have proposed trust as a key determinant of relational commitment. We can adopt
these approaches to incorporate and build trust in business situations.

xx
Williamson's theory of TCE has been critiqued by several scholars. Common weaknesses detected are: a) TCE exaggerates
opportunism in markets; over time the invisible hand of the markets will weed out habitual opportunism (Hill, 1990); b) according to
TCE, organizations primarily exist because of their ability to attenuate opportunism through control; that is, organizations begin
where markets fail; for one thing, organizations may not weed out all opportunism by rational or social control, and the other is, that
in the bureaucratic process of doing so, they may generate more opportunism, as is argued by the "self-fulfillment prophecy" theory
advocated by Ghoshal and Moran (1996); c) the distinction between markets and hierarchies is overstated; most markets function
within an organizational economy that continuously generates innovations and new products in the market place; thus "markets begin
where organizations begin to fail" may be a more realistic assumption (Rumelt, Schendel, & Teece, 1991 , p. 19); d) TCE over-
focuses control; although control is necessary in all organizations, a preoccupation with control obscures and weakens an
organization's fundamental source of advantage over markets (Ghoshal & Moran, 1996).
xxi
This raises an important debate as to whether Hitler was a leader, a ruler or a tyrant, and if he was a leader, was he an ethical
leader? Hitler inspired great devotion among his followers as Roosevelt, Lincoln or Truman did, with relatively the same set of
emotions such as trust, fealty and loyalty. One could not, therefore, arbitrarily state that the set of emotions evoked by Hitler were
inferior to those raised by other great contemporary leaders. In general, there are no standards for emotion apart from those
already contained within the emotion. But in relation to values there are common standards – for instance values that promote
social harmony, solidarity and wellbeing are better than those that do not. But these characteristics are not self-contained within a
society, nor can they apply to one part of a society without including consideration of all other parts as well. Hence, this suggests a
criterion for distinguishing between effective but evil leadership, and effective but good leadership – the promotion of social
harmony, fairness and public good of all society. To the extent that Hitler did not promote social harmony and general social well-
being of all, but only of a part that fitted his exclusive philosophy, his was an effective but evil or unethical leadership (see Solomon
2004: 89). We could use similar analysis to weed out other questionable leaders like Jim Jones and David Koresh.

xxii
Weber (1947) was the first to use the term “charisma” and describe the charismatic leader as one who could bring about social
change. He identified these types of leaders who arise “in times of psychic, physical, economic, ethical, religious, [or] political
distress” (Weber, 1968). For Weber (1968), charisma in leaders referred to “specific gifts of the body and spirit not accessible to
everybody” (p. 19). These leaders were attributed “with supernatural, superhuman, or at least specifically exceptional powers or
qualities” (Weber, 1947, p. 358), and could undertake great feats. Weber (1968) believed that followers of a charismatic leader
willingly place their destiny in their leader’s hands and support the leader’s mission that may have arisen out of “enthusiasm, or of
despair and hope” (p. 49). Weber (1968) argued that charismatic authority is different from bureaucratic authority and that at the
core of charisma is an emotional appeal whose “attitude is revolutionary and transvalues everything; it makes a sovereign break with
all traditional or rational norms” (p. 24).

xxiii
In presenting his theory of servant leadership, Robert Greenleaf (1977) first introduces the readers to a story from Journey to
the East by Hermann Hesse. This story is about a spiritual journey. On the journey, a servant named Leo carries the bags and does
all the chores of a typical servant. But, Leo is special: he keeps the group together with his presence and songs. When later Leo
disappears mysteriously, the group falls apart and loses the way. Later in the journey, the group discovers that Leo was actually the
leader – he represented a paradigm shift: from the followers following the leader, Leo the leader followed the followers serving
them. He represents servant leadership – an old normative model of leadership found in ancient Eastern thought.

xxiv
Mentor was a character in Homer’s Odyssey who advised and helped Odysseus’s young son Telemachus. The word mentor over
the millennia has come to mean exactly the same – a trusted advisor and counselor. To the pianist Franz List, himself a great
mentor, mentoring is about conjugating the verb “to be,” and not the verb “to have.” Mentoring is a two-way street, a process of
being and becoming together, the mentor and the mentee (see Max de Pree, 1992/2008, p. xxi-xxii).

xxv
This notion comes very close to that of H. L. A. Hart. Hart (1954) argued that it is a mistake to ask for a definition of “right” or
“duty” because legal words can only be illustrated by considering the conditions under which certain statements (such as “X has a
right to $10 from Y”) are true. The conditions are: a) there is a legal system in existence, and b) under the rules of that system some
person Y, given the events that have actually happened, is obliged to do (or abstain from doing) something for X provided X or his
agent chooses that Y should. Under these conditions, the statement “X has a right” is used to draw a conclusion of law in a particular
case falling under those rules. However, not all rights are conclusions of the law. For instance, the Second Amendment to the U. S.
Constitution (the right of the people to keep and bear arms shall not be infringed) and the Sixth Amendment (in all criminal
prosecutions the accused shall enjoy the right to a speedy and public trial) are not conclusions of law, but “rules” of law.

xxvi
One of the best definitions of human solidarity was provided by Pope John Paul II in his 1987 Encyclical Solicitudo Rei Socialis:
“Solidarity helps us to see the ‘other’ – whether a person, people, or nation – not just as some kind of instrument, with a work
capacity and physical strength to be exploited at low cost and then discarded when no longer useful, but as our ‘neighbor,’ a ‘helper’
(Gen 2: 18-20), to be made sharer, on a par with ourselves, in the banquet of life to which all are equally invited by God.” [Pope John
Paul II (1987), Solicitudo Rei Socialis, No 39; (http://www.vatican.va/holy_father/john_Paul_ii/encyclicals).

xxvii
Communitarians appeal to use the moral voice of the community to exhort people to meet their responsibilities. They claim
responsibility originates in community. There is an implicit certitude about what the responsible choice is and a striking lack of
attention to the problems of conflicting responsibilities and values, particularly for people who are members of many communities
and who find themselves pulled by conflicting obligations. Moreover, the particularity with which some communitarians are willing
to spell out what responsibility requires and what fosters community seems to replace the role of personal autonomy, of taking
responsibility for one's own conception of the good life, with accountability to the prescriptions of the community. But what they
mean by “community” is far from clear. Often such definitions and discussions are amorphous and wishful. Communitarians are
vague on such issues as the relationship between community and polity, the possibility of consensus on values and responsibility, the
role of law in achieving a communitarian moral revival, and the role of rights in responsive communities.

xxviii
The distinction between teleological and deontological ethical theories is usually attributed to C. D. Broad (1930 , p. 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 “wrong-making” 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-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.

xxix
Technically, 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.

xxx
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 & Childress,
1989).

xxxi
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).

xxxii
A classical clinical case when applying the PDE is hysterectomy when the woman is pregnant and her womb is malignant
(carcinoma of the uterus). If the physician takes no action, the cancer will likely metastasize throughout the woman’s 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.

xxxiii
In his closing remarks at the 1992 Business Enterprise Awards ceremony, cited by David Bollier in his Aiming Higher (1997, p.
351).

xxxiv
Responsibility as a word has a short history in the English language. According to Albert Jonsen (1968, p. 3), the word makes its
philosophical debut in David Hume's Treatise of Human Nature (1740) in the oft-quoted passage: "Actions may be blamable ... but
the person not responsible for them." The word thereafter appears as a synonym for accountability, imputability, liability, duty,
and obligation. In the late 19 th century, two works gave the term responsibility a central place in the lexicon of morality: F. H.
Bradley’s (1876) essay “The Vulgar Notion of Responsibility and its Connection with the Theories of Freewill and Determinism,” and
Lucien Lévy-Bruhl’s study of the problem of freedom in “L’Idée de Responsabilité” (1883).

xxxv
There are obvious differences between corporations as moral agents and executives as moral agents: corporations do not vote
and are not drafted, but executives in corporations think and deliberate over goals, strategize realization of goals, and accordingly
make decisive choices. Hence, both corporations and executives are accountable (Donaldson 1992). That is, corporations and
executives can control their actions, make rational decisions, make reasoned choices, and thus, can be held accountable for the
choices they make. For further discussions, see De George, 1990, p. 97-107; 1995, p. 122-33; Donaldson, 1992, p. 18-34; French,
1979, 1984; Goodpaster & Matthews, 1982.

xxxvi
We cite Nicomachean Ethics (NE) written in Greek (and as translated by Terence Irwin in1985) by Aristotle, a Greek philosopher
(384-322 BC), a pupil of Plato, and tutor of Alexander the Great. In 335 BC he founded a school and library (the Lyceum) just
outside Athens. His surviving works, in the form of dry lecture notes, constitute a vast system of analysis treating a wide variety of
subjects such as logic, physical science, biology, zoology, psychology, astronomy, metaphysics, ethics, politics and rhetoric. In
reasoning, he established the inductive method. In metaphysics, he argued against the mystical speculations of Plato, whose
Theory of Forms he rejected. For Aristotle, form and matter were the inseparable constituents of all existing things. As an
empirical scientific observer he had no rival in antiquity.

xxxvii
Commenting on Nicomachean Ethics of Aristotle, Thomas Aquinas (1964, Volume 1, p. 175-6) writes: “A thing is involuntary on
two counts: one, because the movement of the appetitive power (will) is excluded – this is the involuntary resulting from violence –
the other, because mental awareness is excluded – this is the involuntary resulting from ignorance…. The forced action is one
whose principle is from outside … however, not every action whose principle is from the outside is a forced action but only that
action which is derived from an extrinsic principle in such a way that the interior appetitive faculty (will) does not concur in it. This
is what he (Aristotle) means by his statement that a forced action must be such that a man contributes nothing to it by his own
appetitive faculty. A man is here said to be an agent (operans) inasmuch as he does something because of violence and a patient
inasmuch as he suffers something because of violence.”

xxxviii
“It is sometimes hard, however, to judge what [goods] should be chosen at the price of what [evils], and what [evils] should be
endured at the price of what [goods]. And it is even harder to abide by our judgment, since the results we expect [when we
endure] are usually painful, and the actions we are compelled [to endure, when we choose] are usually shameful. That is why those
who have been compelled or not compelled receive praise and blame" (Aristotle, 1985, p. 55).

xxxix
This was also the preoccupation of Marx's one-time teacher, George Hegel (1770-1831). The English Economists, particularly
Adam Smith (1723-1790) and David Ricardo (1772-1823), seemed to offer some insight: the economic development of a nation is
deterministic; it can be predicted, and laws verified about it, as is the case with natural physical phenomena. In 1844, Marx and his
friend, Fredrich Engels, who also confirmed and supported his revolutionary ideas, protested that the laws that rule an economic
system escape all human control. Social reforms cannot be achieved without attacking the very roots of social evil: the existing
political economy. The present economic system has already and inescapably determined human beings; they have lost their
freedom, and with freedom, responsibility.

xl
Dietrich Bonhoeffer was born in Breslau in 1906, the son of a famous German psychiatrist. He studied in Berlin and
New York. His political activities in the Resistance during the early years of the Second World War led to his arrest by
the Nazis on April 5, 1943. He was hanged in April 1945. Much of his life of struggles as a teacher, father and
statesman is reflected in his writings, especially The Cost of Discipleship (SCM Press 1948) and Ethics (MacMillan
1955).

xli
In fact, for Dietrich Bonhoeffer, conscience is the center of responsibility. It is the source of response to value. Conscience is our
spiritual instinct for self-preservation arising from the urge for complete unity and harmony within us. Conscience "makes itself
heard as the call of human existence to unity with itself ... it protests against a doing which imperils the unity of this being with
itself” (Bonhoeffer, 1955, p. 211).