[8.] Introduction to Business Ethics.
[8.1.] Business Ethics as Normative and Descriptive.
Like medical ethics and legal ethics, business ethics is an area of applied ethics (and thus an area of ethics, and thus an area of philosophy, and thus an area of inquiry).
Joseph DesJardins (author of your textbook and professor at the College of St. Benedict, St. Joseph, MN) defines business ethics as follows:
business ethics (df.): the area of applied ethics that studies the “standards, values, and principles” “that [do in fact] operate within business” and “seeks to articulate and defend the ones that ought [to] or should operate in business.” (8 / 9, emphases added)
According to this definition, the discipline of business ethics has two aspects:
· descriptive: what values actually do guide people engaged in business?
· normative: what values should guide those people, i.e., what ought they to do?
In studying business ethics, we want to know the facts about what people actually do value. But we also want to know what people ought to value. Business ethics asks questions about how things should be done, and it thus goes beyond simply asking questions about ethos:
ethos (Gk.): that which is customary or conventional; that which is valued, as opposed to that which ought to be valued. (12 / 13)
In this section of the course, we will consider what actual people working for actual companies have done, and thus what their actual values are. We will also ask what those people should have done and thus what their values should be.
[8.2.] Values and Ethical Values.
DesJardins gives the following definitions:
values (df.): “beliefs or standards that incline us to act or to choose in one way rather than another” (5 / 6, emphases added); values are essentially motivating, in a way that purely descriptive or factual beliefs are not.
Values are essentially action-guiding and decision-guiding beliefs and standards. But what makes for specifically ethical values?
ethical values (df.): “beliefs and principles that seek to promote human well-being in an impartial way.” (6 / 7, emphasis added)
Notice that this definition of ethical values rules out the possibility of a specific normative theory being true:
ethical egoism (df.): the form of consequentialism according to which the morally right thing to do is always whatever benefits you.
This theory says that people should seek to promote their own well-being and thus act in as partial a way as possible.
At first, DesJardins’ definition of ethical values seems to beg the question in favor of utilitarianism.
begging the question (df.): to assume that a claim is true when one should really be arguing in its defense.
· Were DesJardins begging the question in favor of utilitarianism, he would simply be assuming without argument that it is true and thereby assuming without argument that Kantian deontology and virtue ethics are false.
But DesJardins has a very broad understanding of “human well-being.”
· He takes it to include all of the following: happiness, health, companionship, meaning, integrity, freedom, respect and autonomy (6 / 7).
· Those last three values are more closely associated with Kant than with the standard utilitarian criterion of well-being. So DesJardins is not necessarily assuming that utilitarianism is true; he seems to be incorporating both utilitarian and Kantian considerations into his approach.
· His inclusion of integrity under the banner of “human well-being” may also indicate that there is room within his approach for considerations of virtues, as well.
Each of items listed by DesJardins can be considered a value that the actions of a company can promote or undermine.
[8.3.] Core Values of Companies.
According to James Collins & Jerry Porras (in their book Built to Last, 1994), many large and successful companies have something in common, viz., they have some explicitly articulated set of core values:
core values of a company (df.): “the ‘essential and enduring tenets’ that help define the company and are ‘not to be compromised for financial gain or short-term expediency’”; “[a] company’s core values … are those beliefs and principles that provide the ultimate guide in its decision making.” (5 / 6)
· E.g., Sam Walton, founder of Wal-Mart, cited three “basic beliefs”: “respect for individuals, service to customers, and striving for excellence.” (ch.3, 47 / ch.3, 49)
But Collins & Porras also say that a company’s success doesn’t depend on its having any particular core values; a successful company’s core values need not be ethical. For example, Philip Morris, the largest tobacco company in the United States, may have as its core value the “ruthless and cold-blooded promotion of smoking.” (6 / 7)
As it happens, Philip Morris and its parent company, Altria Group, Inc., claim to have the following as their core values:
· “Integrity, trust and respect”
· “Passion to succeed”
· “Executing with quality”
· “Driving creativity into everything we do”
· “Sharing with others”
[8.4.] Case Study: Malden Mills.
About Malden Mills:
· Founded in 1906 by Henry Feuerstein; until recently his grandson, Aaron Feuerstein, was the president and owner of the company.
· Located in Lawrence, MA.
· Manufactures Polartec®, a high-tech fabric used in clothing manufactured by J. Crew, REI, L.L. Bean, Land’s End, and others. Sales in the hundreds of millions per year.
· In December 1995, a devastating fire destroyed three Malden Mills factories, shutting the company down.
· More than 1000 employees were suddenly without work. Malden Mills was the largest and most important employer in the area. Including taxes and salary paid to employees, it contributed more than $100 million annually to the local economy.
· Instead of taking the insurance money and retiring, or moving the company overseas where labor is much cheaper, Feuerstein pledged to rebuild. He also continued to pay employees while the factories were rebuilt, as well as maintaining their health insurance.
Feuerstein’s choice is surprising, because we think of business people as willing to do just about anything to maximize profit. Because Feuerstein went another direction, he was widely praised, featured in newspaper and magazine articles, interviewed on 60 Minutes, and invited by President Clinton to attend a State of the Union address.
· In November 2001, Malden Mills filed for chapter 11 bankruptcy protection.
· In October 2003, the company announced that it had emerged successfully from bankruptcy protection.
· After the company emerged from bankruptcy, the board of directors was controlled by the company’s creditors, who replaced Feuerstein as CEO and Board chairman.
· In early December 2004, the company’s workers union voted to authorize a strike. But the strike never happened, as they reached an agreement with the company on a new three-year contract shortly thereafter.
· In January 2007, Malden Mills announced that they would file for bankruptcy yet again. But soon after, the company’s assets were purchased by Chrysalis Capital Partners (now known as Versa Capital Management) and its name was changed to Polartec, LLC.
· Last month (October 2010) news broke that Versa is seeking a buyer for Polartec LLC. They are hoping to get $200 million for the company.
DesJardins suggests that Malden Mills suffered financially because of its emphasis on ethical values. It also seems accurate to say that Aaron Feuerstein suffered for this, since he lost control of the company.
Stopping point for Friday November 5. For next time, begin reading DesJardins ch.3, on Corporate Social Responsibility. Read up to the end of section 3.2 (p.53 in the 3rd edition, p.56 in the 4th edition).
 Citations of DesJardins will be to both the 3rd edition and 4th edition, when the quoted material occurs in both. The first page cited is in the third edition, and the second page cited is in the 4th edition. For example, the passage just quoted occurs on p,5 of the 3rd edition and on p.6 of the 4th edition.
 In the first part of this definition, DesJardins is quoting Collins and Porras, p.73
 Altria, “Our Values,” URL = < http://www.philipmorrisusa.com/en/cms/Company/Mission_Values/default.aspx?src=top_nav >, retrieved on November 5, 2010.
 http://www.polartec.com/contentmgr/showdetails.php/id/755 [no longer online]
 “Malden Mills Returns to Bankruptcy,” New York Times, January 11, 2007 <http://www.nytimes.com/2007/01/11/business/11mills.html>
This page last updated 11/5/2010.
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