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On eagles wings: Our recovery from Coronavirus (XVIII). Ethics Codes are not a painting to hang on a wall.

Last week, we promised to continue explaining to you why a code of ethics is crucial when it comes to recuperating humanity (defined as our human purpose aligned with God´s values) in all our endeavors. I also promised to share with you the slides of a pretty basic material that Professor Everardo Rivera and myself prepared for this specific topic when we were teaching business ethics to junior undergraduate university students in El Salvador. This week, when I was reflecting on how to approach the ethics codes subject, I decided to bring you some background, an introduction…

Tuga Tortuga x blog

“Tuga Tortuga”. Better slowly than destroying ourselves. A handmade aquarelle by Eleonora Escalante. Painted with love on Fabriano 5 paper. Size: 7 inches x 5 inches.

Thirty years of Business Ethics fashion in Business Schools. Before proceeding “to walk the talk” about codes of ethics; we need to face the context of them. During the last 30 years, business schools sat up at least a course of business ethics, faculty professors who were considered as communists (falsely accused of that “tag”) or with antibusiness reputation, were finally taken into account. Ethicists are not antibusiness. They are against the lack of integrity of how business operate.  Many executive education management courses started to include business ethics, beyond the simple cases of fraud or honor, particularly after the Enron scandal.  For those who were born after the year 2000 (generation Z), it is relevant that you understand why ethics courses were on-demand to be taught in business schools: It was a post-Enron world.

Ethics in the post-EnronWorld. The Enron scandal is likely the largest, most complicated, and most notorious accounting scandal of all time. Through deceiving accounting tricks, Enron Corporation – a US-based energy, commodities, and services company – was able to trick its investors into thinking that the firm was doing much better than it actually was.Enron Enron was just the tip of the iceberg of many companies that were doing the same (Cendant, Waste Management, Sunbeam, Global Crossing, Tyco International). Many books have been written about Enron, specifically, as the top example of a company that has been coined to reflect greed, raw selfishness, dishonesty, cheating, by utilizing financial engineering innovation in asset-light technologies, etc. Enron wanted to make revenues and economic profits look stronger than they actually during each reporting period to the SEC (during a decade). Enron provided indicators of lies and deception using the Internet and Communications technology advancements which gave them space for illegal maneuvers. The issue was so huge at that time, that even the economist Paul Krugman wrote an article in the New York Times, deriding the notion that “the future belonged to fabless (non-fabricating) asset-light companies with attitude”.  Enron was offering fake accounting measurement of  “economic value” to an innovative approach of financial derivatives of energy trading and the broadband new economy of that decade. If you wish to know a bit more about Enron click here:

Business ethics in theory. Nowadays the work of business ethics teachers and professors has not been in vain. The majority of big and medium-size corporations all over the world have staged at least a code of values, regardless of the methodology to define them.  Twenty years after Enron´s debacle,  I am confident that big global companies have gathered their main values not just to embellish their websites, but “in theory”, the values definition exercise has permeated a bit more, in one way or another, as a key component of the “Corporate Strategy” Workout at the Board of Directors and top management levels. There is evidence that since the year 2000, the codes of ethics began to be trendy. It was fashionable to create them with some standards of professionalism. But one thing is to hang the ethical values on a wall, and another one is to change the actions of the company.

ethical theories

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How to solve moral problems in business? Seventeen years ago, I started to get some perspective on the business ethics field. I was teaching three courses of business ethics to business and economic students using the methods that were outstanding at that time. Business ethics courses were designed to instruct “what is the basis for making ethical decisions?”. Like everything in “decision making”, there are multiple solutions.  When it comes to ethical decision making there are three general approaches to ethical theory. According to Professors Thomas Donaldson and Al Gini, each of these 3 classical types can be used in ethical reasoning. Each of these theories has its advantages and its concerns and/or critics.

    1. Consequentialism
    2. Deontology
    3. Human Nature Ethics

Consequentialism. It concentrates on the consequences of human actions. These theories are labeled as teleological. There are two types of consequential conceptions. The first one is what philosophers call egoism (actions to maximizing my own good) or individualism, and the second one called utilitarianism (actions to maximizing overall entire human community good). The most famous utilitarians are the philosopher Jeremy Bentham (18th Century) and the English philosopher John Stuart Mill (19th century). Modern-day utilitarians divide themselves into two groups: act utilitarians and rule utilitarians.  An act utilitarian believes that a principle of utility should be applied to individual acts.  A rule utilitarian believes that instead of considering the results of specific actions, one must weigh the consequences of adopting a general rule exemplified by that action.  Utilitarianism ethical theories have multiple objections. The most serious objections are that these theories of ethical reasoning are unable to account for justice. In addition, utilitarians have issues of identifying, prioritizing and ranking whatever “good” is to be maximized. Personally, I believe that the premise of “maximizing shareholder value” (shareholder value lies around the notion of economic profit) in business comes from the utilitarianism theory. The concept of shareholder value has been taken as the primary performance metric in businesses, it is the cornerstone of management and it has been the “free-enterprise” ultimate purpose and goal. For better or for worse, when economics took the way to maximize profits (and discounted cash flows), they were not properly focusing the roadmap for an integral business value proposition.  I personally don´t like the utilitarian approach as an adequate theory of ethics.

Deontologism. The term deontological comes from the Greek word “duty”. For deontologists, the crucial are the rules and principles that guide actions. Deontological ethical reasoning has two approaches:  the first one is the Kantian Deontology (18th century), which focuses on duty and universal rules to determine correct actions; and the second approach is known as the “Social Contract”, which focuses not on the individual decision making, but on the general social principles that rational persons in certain ideal situations would agree upon and adopt. Let me explain what has been the influence of Kant in ethics. Kant is best known for defending a version of “the respect for the person”, a principle which implies that any business practice that puts money on a par with people is immoral,.  He argued that the highest good was the “good -will”. And to act from a good-will is to act from duty.  For example, for Kant, if a merchant is honest so as to earn a good reputation, these acts of being honest are not genuinely moral. The merchant is only truly moral if he or she is honest because being honest is right (one´s duty).  For Kant, persons of good-will do their duty because it is their duty and for no other reason. Let me explain a brief about what is the impact of Kant´s moral philosophy which enables business ethicists to develop a useful definition of meaningful work.

For a Kantian, meaningful work is:

    1. Is freely chosen and provides opportunities for the worker to exercise autonomy on the job
    2. Supports the autonomy and rationality of human beings, work that lessens autonomy or that undermines rationality is immoral
    3. Provides a salary sufficient to exercise independence and provide for physical well-being and the satisfaction of some (if not all) of the workers´desires
    4. Enables a worker to develop rational capacities, and
    5. Does not interfere with a worker´s moral development

Any manager with a Kantian approach to business ethics would regard providing meaningful work as a moral obligation. In addition, the Kantian approach to organizational design of a business firm must endorse the principle of considering the interests of all the affected stakeholders in any decision it makes.

Ethical Theories need to be studied. I cannot extend this material for much today (maybe I will write a saga about the ethical theories in the future), but it is imperative for us to review it. If we dig deeper into the origin cornerstones of business, we will find that there is a philosophy, an ethical theory behind it. And that is why we must rewind to the past (to the 17th and 18th centuries). We have to review the philosophical theories that triggered our economic-business frameworks used after World War II. We need to understand what these philosophers created, line by line, not just because they paved the way we currently live in, but because many of our current economics and business models troubles (including the inequality aspects of business and the environmental issues that we have created) is coming from the “limited or incorrect” philosophy used to create the economic theories of our times.  I believe that the next generations of economists will have a lot to do, they will prove with science research all my hints, warnings, and suggestions from this blog, and that is just great.

The Ethics Codes are not a painting to hang on a wall. Since primary school,  students must get a philosophical tool-kit about ethics. Each school level at its own. Why? Some of those students will be successful at the university and will be groomed later to create new economic-business theories, which require a correct ethical philosophy. It doesn´t matter if later, you decide to study economy, engineering or biology or literature. We have to discover the roots of our problems in our inherited mindsets. Remember we are the legacy of our ancestors´ theories.  The reason why the business has evolved to create disruptive business modeling using the technology flag comes from the inadequacy of ethical thoughts of those who design and create theories which then are taught in the University.  Also, the current business model disasters come from the ineptitude of thoughts of those who invest in them.

For example, today morning I was reading an article from the magazine MIT Technology Review “Covid-19 could accelerate the robot takeover of human jobs” from Erika Hayasaki. With all my respect for Erika´s article, I wish you to read it and become keen enough to put the issues described by the author on an ethical dilemma.  We can´t solve ethical dilemmas if we don´t have the right ethical values in place. By proceeding with the deployment of the robot era as a business trend in the industries described by Hayasaki, we may end up creating more worst problems for humans in the future. If human dignity is replaced by machines (using a once in a lifetime pandemic as a sinister cause), what type of business ethics do we have? What are we doing?

In my next publication, we will continue to rewind our journey to Aristotle’s virtues, to finally review Jesus-Christ values described in the New Testament. That is the third ethical theory approach to business ethics: The Human Nature Ethics. 

Blessings, and thank you for reading to me.

eagle flying

Sources of reference utilized today:

Disclaimer: Illustrations in Watercolor are painted by Eleonora Escalante. Other types of illustrations or videos (which are not mine) are used for educational purposes ONLY.  Nevertheless, the majority of the pictures, images, or videos shown on this blog are not mine.  I do not own any of the lovely photos or images posted unless otherwise stated.

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