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philosophy question 3-5 pages  answer in 20 hours max  question attached below  (re phylo 1 ) Journal of Business Ethics Education 1(1): 75-88. © 2004, S

philosophy question 3-5 pages  answer in 20 hours max 

question attached below  (re phylo 1 ) Journal of Business Ethics Education 1(1): 75-88.

© 2004, S

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philosophy question 3-5 pages  answer in 20 hours max 

question attached below  (re phylo 1 ) Journal of Business Ethics Education 1(1): 75-88.

© 2004, Senate Hall Academic Publishing.

The Case Against Business Ethics
Education: A Study in Bad Arguments
John Hooker
Carnegie Mellon University

Abstract. Several popular arguments against teaching business ethics are examined: (a) the ethical
duty of business people is to maximize profit within the law, whence the irrelevance of ethics
courses (the Milton Friedman argument); (b) business people respond to economic and legal
incentives, not to ethical sentiments, which means that teaching ethics will have no effect; (c) one
cannot study ethics in any meaningful sense anyway, because it is a matter of personal preference
and is unsusceptible to rational treatment; (d) moral character is formed in early childhood, not while
sitting in ethics class; and (e) business students see no motivation to study ethics and will not take
it seriously. The mistakes and confusion that underlie these arguments are exposed.

Keywords: teaching business ethics, moral development, economic incentives, fiduciary duty.

1. Introduction

The case for business ethics education is many-faceted, evolving, and difficult to
summarize. A central mission of the present journal is to contribute to its
development. But the case against teaching business ethics, or at least one that
seems to be in wide circulation, yields to a simple characterization: it is utterly
unconvincing. It rests on layers of mistakes and confusion. Perhaps it is fitting,
in the inaugural issue of a journal dedicated to business ethics education, to root
out some of these mistakes and expose them to the light of day.

Popular arguments against business ethics instruction might be organized as
follows:

• The Milton Friedman argument. The ethical duty of business people is
to maximize profit. This means they should study marketing, finance,
and operations and should not waste time studying ethics.

• The argument from incentives. Even if there are duties beyond profit
maximization, the only practical way to encourage ethical behavior is to
install financial and legal incentives. Business people respond to these,
not ethics lectures.

76 The Case Against Business Ethics Education: A Study in Bad Arguments
• The gut feeling argument. One cannot study ethics in any meaningful
sense anyway, since it is something you feel, not something you think
about.

• The moral development argument. Moral character is formed in early
childhood, not while sitting in ethics class. By the time students enter
business school, it is too late to change.

• The motivational argument. Even if there is reason to study ethics,
business students see no motivation to study it and do not take the
subject seriously.

This sort of skepticism is far from universal, as many acknowledge the
relevance of ethics instruction and call on business schools to do a better job of it.
Yet time and again I have detected such arguments lurking behind views
expressed by students, colleagues, business people, and media commentators.

2. The Milton Friedman Argument

Economist Milton Friedman’s (1970) essay, “The Social Responsibility of
Business Is to Increase its Profits,” is a perennial favorite of my students. It
argues that corporate officers have no obligation to support such social causes as
hiring the chronically unemployed or reducing pollution beyond that mandated by
law. Their sole task is to maximize profit for stockholders, subject to the limits
of law and “rules of the game” that ensure “open and free competition without
deception or fraud.” It follows that the only kind of ethics instruction one needs
for a business career is finance, marketing, and operations management, perhaps
along with some business law to make sure that one knows the rules of the game.

Friedman does not rule out such pro bono activity as supporting the arts or
sponsoring social service organizations. But it must always be justifiable on the
grounds that it enhances the long-term profitability of the corporation, if only
through image building or good public relations.

Friedman advances two main arguments for his position. First, corporate
executives and directors are not qualified to do anything other than maximize
profit. Business people are expert at making money, not at making social policy,
and it is by making money that they contribute to human welfare. They lack the
perspective and training to address complex social problems, which should be left
to governments and social service agencies.

The second argument, which is rooted in Friedman’s libertarian philosophy,
maintains that corporate officers have no right to do anything other than
maximize profit. If they invest company funds to train the chronically
unemployed or reduce emissions below legal limits, they in effect levy a “tax” on

Journal of Business Ethics Education 1(1) 77
the company’s owners, employees and customers in order to accomplish a social
purpose. But they have no right to spend other people’s money on social welfare
projects. At best, only elected representatives of the people have such authority.
Sole proprietors can spend the company’s money any way they want, since it is
their money, but fiduciaries and hired managers have no such privilege. If they
want to contribute to social causes, they are free to donate as much of their own
money as they please.

These are beguiling arguments, and the first one contains an important
element of truth. Business people may in fact make their greatest contribution
when they efficiently marshal resources in a competitive environment to provide
a vast array of products and services. Friedman’s essay in fact says surprisingly
little about this immensely positive side of business.

What Friedman does say in his first argument is fallacious, because it sets up
a straw man. No one claims that managers must address social problems in the
comprehensive way that government regulators or social agencies do. Theirs is
the lesser task of evaluating their particular company’s impact. Determining just
how far they must go to meet this obligation is what business ethics is all about.
Business ethics, rather than social ethics in general, is the required competency.
Friedman gives us no reason to doubt that business people can acquire it.

Students generally concede this point but maintain that business ethics, once
distinguished from ethics in general, simply collapses into the duty to maximize
profit within the law. There are no other specifically business-related obligations
than this, and no training beyond business law and the traditional managerial
skills is necessary. Yet this claim is not only unsupported but highly implausible,
particularly in an international context. The famous Nestlé infant formula case is
useful for making this point (Buchholz 1997). Nestlé promoted its formula in
developing countries by hiring nurses in local clinics to recommend formula over
breast feeding. Since clean water was often unavailable to mix with the powdered
formula, babies became ill. The company continued its marketing efforts despite
worldwide protests and relented only after years of massive consumer boycotts of
its products. Friedman’s theory finds no fault with Nestlé’s perfectly legal
conduct so long as it maximized profits.

At this point students invariably insist that Nestlé’s callousness actually hurt
its long-run profitability, due to the public relations fallout, and it was therefore
unethical by Friedman’s criterion. It is a classic example of adjusting the facts to
fit the theory, but I make a different point. I suggest that they are so insistent that
Nestlé’s behavior reduced profit, without really knowing this to be true, precisely
because they know a priori that this behavior was wrong regardless of its
financial or legal implications. Business ethics is therefore irreducible to law and
profit maximization.

Friedman’s second argument asserts that company officers overstep their
authority as agents for the owners when they do anything other than maximize
profit. Corporate law may sometimes limit their authority in this way, but it is

78 The Case Against Business Ethics Education: A Study in Bad Arguments
unclear why such a limitation is implicit in an agent’s role. On the contrary, it
seems more plausible that the agent inherits the ethical duties of the owners, as
suggested for instance by Kenneth Goodpaster (1991) in his critique of
stakeholder analysis.

When I discuss Friedman’s article in class, I sometimes make this point by
way of a parable (which is based on an actual incident). A hurricane strikes and
cuts off electricity as well as routes to the outside world. There is a desperate need
for portable electric generators, and local sellers take the opportunity to charge an
exorbitant price. Assuming this sort of price gouging is legal, a store manager has
no right, on Friedman’s view, to “tax” the owners by charging less than the market
will bear. The dealer does, however, have a right to ask the buyer to pay more,
since the purchase decision is voluntary.

I next ask the students to agree with me that it is wrong for an individual to
exploit hurricane victims, for instance by demanding a high price for something
they need. (If we cannot agree on this, I change the example.) Friedman admits
that it is perfectly all right for a sole proprietor to give customers a break on the
price. But if the owner turns the business over to professional managers, ethical
obligation does not suddenly vanish. Can it be permissible to exploit victims of
disaster through agents, when it is wrong to do it personally? One might as well
say that an organized crime boss can avoid responsibility for murder by hiring a
hit man. Agents who act ethically at company expense therefore do not usurp the
authority of owners. On the contrary, they carry out duties that the owners are
bound to observe, whether they run the business themselves or through agents.

This is not to say that managers must use company funds to advance any
ethically defensible cause that may attract the owners, such as preserving the
Amazonian rainforest or promoting peace in the Middle East. Again, it is a matter
of distinguishing business ethics from social ethics. The owners have no
obligation as business people to advance general environmental or foreign policy
positions. Only business-related obligations, such as the duty not to price gouge
or dump untreated waste, transfer to agents hired to run a business. Managers
must somehow distinguish business-related from other obligations, but this is
precisely one of the reasons they should study business ethics.

Friedman’s appeal to libertarian principles is equally specious. He states that
spending the owners’ money in the service of ethics is coercion and therefore
wrong, while raising prices is permissible because customers can choose not to
buy. But price gouging “taxes” hurricane victims no less surely than lower prices
“tax” the owners. It forces a choice between paying ridiculous prices and letting
a warehouse full of food spoil. Both taxes are involuntary, and simply to state
that one is legitimate and the other not is to beg the question.

In a final attempt to salvage Friedman’s case, one might maintain that
whatever may be the merits of single-mindedly maximizing profit, business
people will in fact do so. It is human nature to respond to incentives. Since
college instruction will not change human nature, business ethics courses are

Journal of Business Ethics Education 1(1) 79
pointless. Yet this is not Friedman’s argument. It is the argument from
incentives, to which I now turn.

3. The Argument from Incentives

The argument begins with the familiar hypothesis that economic phenomena are
best explained as resulting from the choices of utility-maximizing, self-interested
individuals. Moral sentiments (to use Adam Smith’s term) therefore play no
significant role in economic life. If business people behave ethically, it is only
because financial inducements and legal sanctions are properly calibrated, not
because Kant or Aristotle inspired them to do the right thing. Such ethical lapses
as the recent series of U.S. business scandals can only be addressed by such
measures as regulatory reform, improved corporate governance, and removal of
conflicts of interest. Ethics instruction has no place in this picture.

Many students (and faculty) believe strongly in this world view, which has
been part of Western intellectual furniture since the Scottish Enlightenment. Yet
the seminal figure of that movement, Francis Hutcheson, had a very different
outlook. He held that human actions are best explained as motivated by
sympathy, not self-interest. His admiring student Adam Smith expressed a
related view in his first book, The Theory of Moral Sentiments, where he
maintains that we respond to and judge the actions of others out of empathy with
their situation. The idea that self-interest motivates human beings was advanced
by David Hume, Smith’s Scottish contemporary. Hume’s compelling case
influenced Smith and many others, and Smith deals with it in his second book, An
Inquiry into the Nature and Causes of the Wealth of Nations, the one we almost
always quote today.

There is little doubt that mainstream Western thinking honors Hume more
than Hutcheson. Yet Hutcheson’s moral psychology may be closer to the truth:
there is in fact a fair amount of evidence to support the thesis that humans are
naturally altruistic. Common sense alone suggests that creatures who work for
the good of the group would have a long-term survival advantage relative to
selfish individuals. Martin Hoffman (2000) makes a comprehensive case that the
human species in fact exhibits multiple and redundant layers of altruism, and his
conclusions are corroborated by a number of investigators (Gibbs, 2003).

It is not necessary to make a case for altruism, however, to refute the
argument from incentives. It suffices to show that financial incentives and legal
penalties alone cannot regulate business behavior. They cannot because
economic behavior is radically dependent on preexisting cultural practices.
Culture shapes our attitudes toward work, authority, commitment, negotiation,
consumption, fairness, and obedience to rules, and these are the foundation of
economic activity—the last one being particularly important in a market system.

80 The Case Against Business Ethics Education: A Study in Bad Arguments
The incentive system of the business world does not create these structures; it
presupposes them.

At one level we are misled by a confusion of necessary and sufficient
conditions. We see corrupt systems in which the incentives are all wrong, and we
infer that if the incentives were right, the corruption would go away. But this does
not follow. Even if proper economic and legal incentives are necessary for ethical
behavior, they may be insufficient.

I illustrate the point in class by telling a (true) story. A colleague of mine
attended a conference in a certain country that is known for its high crime rate.
During the conference he took a day off to relax on the beach. When a boy
suddenly appeared and made off his beach bag, my colleague gave chase. On
reaching a major avenue, he waved down a police cruiser and exclaimed, “Stop
that boy! He stole my bag.” The officer responded, “Did he get your money?”
“No, thank God. It’s hidden in my shoe.” At this point the officer drew his
revolver and said, “Hand it over.”

The incentives are in place. Laws provide for the punishment of theft. Yet
unless people are generally predisposed to live by the rules, the enforcers—those
who are supposed apply the incentives and sanctions—will be as corrupt as
everyone else. Well-designed incentives and regulations are undeniably
important in a market system. Yet the system can succeed only if cultural
mechanisms inculcate norms and behavior patterns that allow it to operate under
real-world conditions. Ethics instruction may well be one of these mechanisms.

The U.S. business scandals, for example, illustrate the insufficiency of
sanctions and economic incentives no less than their necessity. They show how
easy it is, in the U.S. business context, to violate the rules that do exist and get
away with it. The system clearly relies on voluntary compliance by the vast
majority of players, compliance that derives from underlying cultural values.

Culturally instilled values temper the profit motive as well. Corporations that
ruthlessly exploit every profit opportunity are prominent in the news, but they are
the exception. I invite the reader to make acquaintance with some local business
people and observe how they operate. My own observation is that they balance
profitability against a desire to behave decently, perhaps by dealing
sympathetically with employees or being a good citizen of the community,
whether or not these actions have bottom-line justification. They understand that
business is not a game unto itself but an integral part of a larger society that makes
business possible. They instinctively recognize the connection between business
and culture. It is the balanced and socially responsible approach of these rank-
and-file business people, not a single-minded imperative to maximize shareholder
value, that allows the business system to work in the real world.

These arguments may yet fail to convince staunch believers in incentives. In
their view, one need only look a little harder to find the inducements that explain
everything. They have a ready response, for example, to my story of the corrupt
police officers: the system failed because the police themselves were improperly

Journal of Business Ethics Education 1(1) 81
incentivized. If officer salaries were adequate, if their supervisors received some
reward for crime reduction, and so on with their bosses, the outcome would have
been different. This brings us to a deeper appreciation of what is going on here.
Incentives provide not so much an explanation of behavior as a regulative
principle for explanation itself. Only explanations that are grounded in legal/
economic rewards and penalties are allowed to count as explanations. We must
therefore keep looking for an incentive-based rationale for the police officer’s
conduct until we find one that is more or less plausible, even if it is unverified.
Obviously, once we make this sort of move, the argument from incentives is
beyond refutation. (See Brockway, 1995, for a different critique of the incentive
principle.)

This situation calls for an oblique maneuver. One tactic is to draw attention
to the role of culture in business without explicitly broaching the issue of
behavioral explanation. I do this at length elsewhere (Hooker, 2003), but in a
classroom setting where there is limited time, I find it helpful to approach the
matter through cross-cultural ethics. I describe how the business system in one
culture may rest on entirely different norms and practices than in another.
Cronyism and nepotism, for example, may reflect moral virtue in a high-context,
relationship-based culture (to use the terminology of Edward T. Hall, 1966,
1983), whereas they may signal corruption in a low-context, rule-based culture.
They undergird the system in one case and undermine it in the other. When
students see the radical dependence of business on cultural support in another
country, they may be more inclined to recognize it in their own. The discussion
and refinement of ethical ideas may of course be one element of this cultural
support.

4. The Gut Feeling Argument

If one has not studied ethical reasoning, it is hard to imagine what it could be like.
Too often the conclusion is that ethics is not amenable to rational treatment.
Different people simply have different values, much as some people like broccoli
and some do not.

Even if ethics is a matter of taste, one might yet insist that education can
refine tastes, an assumption that seems to underlie some art appreciation courses.
But it is a curious view indeed that ethics has no intellectual content, when so
many of history’s most renowned intellectuals have contributed to the field.

The best antidote to ethical anti-intellectualism is to show ethical reasoning
in action. Distinctions must be drawn, terms defined, and bad arguments
distinguished from good ones. Ethics class is the ideal place for this. My own
view is that ethical theories should be developed and applied as rigorously in
ethics class as physics in engineering class, even if this may not be the current
fashion. Taking ethical theory seriously does not imply that there is a single

82 The Case Against Business Ethics Education: A Study in Bad Arguments
theory that explains everything, nor does it deny that ethical choice requires
praxis as well as theoria—any more than applying Newton’s laws to bridge
building presupposes that they explain everything, or that good engineering
design reduces to stress calculations. It simply recognizes that to treat ethics
intellectually at all is, by virtue of the nature of reason, to commit oneself to
making that treatment as complete and closely reasoned as human faculties allow.
An added benefit of theoretical rigor is that when students find the subject as
intellectually demanding as integral calculus, they are likely to take it more
seriously.

The identification of ethics with gut feeling does not stem wholly from a lack
of acquaintance with ethical reasoning, however. Another factor is popular
psychology: a vague notion that cognitive development has little to do with moral
development. Ethical judgment is seen as an essentially nonrational function that
is tied to emotions and early childhood experience. One learns ethics from Mom
and Dad, not from college professors. This view is perhaps warmed-over Freud,
but it is very much alive today. It is integral to the moral development argument
against ethics instruction, and I will deal with it in that context.

5. The Moral Development Argument

I now come to what may be the most prevalent and most insidious of the specious
arguments against business ethics education. In its simplest expression it might
go like this. Moral character is formed in childhood. By the time a young person
reaches college age, it is too late to change. Ethics instruction therefore serves no
practical purpose.

The premise of this argument, that character is fully formed in childhood, is
neither true nor sufficient for the conclusion. I will first show the latter.

Let us assume, for the sake of argument, that moral character is fixed early in
life. This does not imply that ethics instruction serves no useful purpose, since it
can change behavior even if it does not change character.

It is generally acknowledged that college education can change behavior,
irrespective of whether it changes character. Otherwise we ought to shut down
business schools, indeed all professional schools. The opponent of ethics
education presumably concedes that finance, marketing and operations courses
change behavior, but insists that an ethics course does not. Yet this distinction is
quite arbitrary. Where is the evidence? Why is ethics class, the one class that
deals directly with how one should behave, incapable of changing behavior, when
all the other classes in the building have practical effect?

There are a number of reasons to suspect that ethics instruction can affect
conduct without going so far as to change character. It provides a language and
conceptual framework with which one can talk and think about ethical issues. Its
emphasis on case studies helps to make one aware of the potential consequences

Journal of Business Ethics Education 1(1) 83
of one’s actions. It presents ethical theories that help define what a valid ethical
argument looks like. It teaches one to make distinctions and avoid fallacies that
are so common when people make decisions. It gives one an opportunity to think
through, at one’s leisure, complex ethical issues that are likely to arise later, when
there is no time to think. It introduces one to such specialized areas as product
liability, employment, intellectual property, environmental protection, and cross-
cultural management. It gives one practice at articulating an ethical position,
which can help resist pressure to compromise. Perhaps none of this is of interest
to the scoundrels in the class, but it can be quite useful to everyone else.

Now, what are the reasons to suspect that ethics instruction cannot influence
behavior in the absence of character change? The moral development argument
is silent on this point.

The argument’s premise is questionable as well. It is far from clear that moral
character is fixed in early childhood and cannot develop during college years. On
the contrary, there is a good deal of evidence that moral and cognitive
development are closely related and can continue throughout young adulthood
and beyond.

The evidence is found in the developmental psychology literature, which has
offered a major alternative to Freudian views since the 1930s. The field’s
founder, Jean Piaget, is best known for describing stages of cognitive
development in early childhood, but he had broader interests. If Piaget stood for
anything, he stood for the close relationship between the cognitive and other
aspects of human development. Lawrence Kohlberg (1981) proposed stages of
moral development that parallel the cognitive stages. Robert Kegan (1981) and
James Fowler (1982) found further parallels with the development of meaning
structures and spiritual values. William Perry (1968) and Sharon Parks (1986)
focused on college-age development, and Gibbs (2003) provides a recent review
of the field.

Descriptions of the developmental stages vary in the literature, but most
accounts include a stage, normally attained in adolescence, that is marked by a
striving for independence. Cognitively one learns how to think analytically and
to criticize ideas that were passively accepted in earlier years. Morally this phase
often begins with a thoroughgoing relativism, followed by doctrinaire adherence
to a certain philosophy or ideology, such as Marxism, laissez-faire capitalism, or
fundamentalist religion. Cognitive development therefore ushers in a new stage
of moral development.

Business students in their twenties are typically somewhere in this stage of
development or are perhaps beginning to move beyond it. From an ethical point
of view, it is clearly inadequate for business leadership, as it cannot deal with the
complexity and ambiguity of real-life situations. It too often relies on simplistic
solutions, such as a doctrinaire insistence that a business person’s sole duty is to
maximize shareholder value.

84 The Case Against Business Ethics Education: A Study in Bad Arguments
There is a subsequent stage in which one learns to tolerate uncertainty and
ambiguity. Cognitively, one accepts that there is merit on both sides of an
argument and that an issue may never be completely resolved. One does not
abandon critical analysis, but on the contrary perseveres in an effort to think
systematically even while recognizing that no existing system is adequate to the
complexity of life. This extends into the moral sphere, where one undertakes the
lifelong task of working out a personal philosophy while respecting the nuance
and unpredictability of real situations. If all goes well, this stage is reached in
mature adulthood.

The relevant lesson here is that business education can and must assist with
the cognitive development that enables movement toward ethical maturity.
Sharon Parks (1993) indicates several ways in ethics instruction can play a role in
this.

Developmental psychology has its critics, and the stages are not as clean cut
as their descriptions may suggest. They may vary across cultures, and empirical
work suggests that people often occupy two or three stages at once. Yet the
essential point for present purposes is the interconnectedness of cognitive and
moral growth. This basic thesis is not only consistent with a large body of
evidence but is often confirmed in our personal experience. At any rate it cannot
simply be dismissed with a wave of the hand, as is attempted by the moral
development argument considered here.

6. The Motivational Argument

This final argument takes us into ethics class on the first day of the semester.
Whatever may be the merits of teaching the material in the syllabus, the students
in the room do not want to hear it. They see no relevance to their careers. They
would much rather be in a finance or marketing course, or interviewing with some
additional …

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