Corporate Ethics:

Contemporary Challenges
and Imperatives:
Module 01, Prologue & Syllabus

Fr. Oswald A. J. Mascarenhas S.J., Ph.D.

Rev. Sr. Doris DSouza A.C., Ph.D.
JRD Tata Ethics Research Center, XLRI,
Jamshedpur
September 22, 2016
 Mahatma Gandhi on Good
Corporate Morality &Governance
Nobody should ever indulge in what
Mahatma Gandhi once warned us about
the Seven Capital Sins of Humanity:

Wealth without Work

Pleasure without Conscience
Knowledge without Character
Science without Humanity
Commerce without Morality
Worship without Sacrifice, and
Politics without Principle
 Writes David Orr (1990):
If today is a typical day on planet Earth, we
will lose 116 square miles of rainforest, or
about an acre a second.
We will lose another 72 square miles to
encroaching deserts, as a result of human
mismanagement and overpopulation.
We will lose 40 to 100 species, and no one
knows whether the number is 40 or 100.
Today the human population will increase
by 250,000.
And today we will add 2,700 tons of
chlorofluorocarbons to the atmosphere and
15 million tons of carbon.
Tonight the Earth will be a little hotter, its
waters more acidic, and the fabric of life
more threadbare.
 Continues David Orr (1990):
The truth is that many things on which
our future health and prosperity depend
are in dire jeopardy: climate stability,
the resilience and productivity of natural
systems, the beauty of the natural
world, and biological diversity.
It is worth noting that this is not the
work of ignorant people; they were all
people with BAs, BSs, LLBs, MBAs, and
PhDs.
A course in business ethics should
provide enough ecological and moral
sensitivity to reverse this trend.
The Thrust of this Course
The tapestry of human behavior in the
marketplace today is so turbulent,
unpredictable, and chaotic, yet so diverse,
so rich and so global that it presents a rare
ethical and moral opportunity and challenge
to out-behave competition and create
enduring value.
In this process, lie our greatness, success
and our future. This is ethics for corporate
advantage. This is what this Course is all
about.
This Course is about HOW of doing business
the economic, social, ethical, moral and
spiritual values we bring with our business
venture - and how thereby we impact the
world.
 A Moral Wake-Up Call
In the grip of scandals and organized crimes
of systematic accounting and financial
irregularities, a strong sense of business and
corporate ethics is urgently imperative in
every business school curriculum and
corporation conduct.
The massive bankruptcies and financial
crises of October 2008 that followed cannot
be ignored.
Recent consumer boycotts of hitherto
industrial icons such as Levi-Strauss, Gap,
Home Depot, McDonalds, Nike, Kmart, Wal-
Mart, Shell Oil & Nestl are moral wake-up
calls.
 Definition of Definition
Definitions define limits or boundaries within
which you include the domain of the concept or
practice you are defining. There are two basic
types of definitions:
Conceptual definition: this describes the thing
you want to define in terms of what it is. For
example, man is a rational animal; an animal is a
sentient being; business is a buyer-seller
exchange; the corporation is a listed company,
and the like, are conceptual definitions.
Operational definition: this this describes the
thing you want to define in terms of what it
does. For example: Man is a husband, father and
a provider; an animal is a multi-legged mobile
creature that hunts for its living; a market is
where buyers and sellers meet to exchange goods
and services; a corporation serves the public as
its lives by societys capital and resources, and
the like, are operational definitions.
 What is Morality?
Ethical scholars distinguish between morality
and ethics. Conceptually, morality is the
moral quality or character of a person, family,
group or society.
Operationally it is rightness or wrongness
experienced and witnessed in action of a
person, group, or society.
Morality (from the Latin moralitas) is
generally used to describe a sociological
phenomenon, namely, the existence of a
society with rules and standards of social
behavior.
In this sense, morality is best understood as
special forms of social control (such as
corporate governance structures and rules)
and special forms of practical reasoning.
 What is Ethics?
Conceptually, ethics is the theory and
practice of good, good action, and good life.
Operationally, ethics is what we need, in
order to live well, is a proper appreciation
of the way in which such goods as
friendship, honor, promise, commitment,
virtue, wealth and pleasure fit together as a
whole.
In order to do this we must acquire, the
ability to see, on each occasion, which
course of action is best supported by
ethical and moral reason and values.
This is practical wisdom, as Aristotle
conceives it; it cannot be acquired solely by
learning general rules. It must be a lived
experience.
 Ethics versus Morality
On the other hand, ethics (as derived
from the Greek word ethikos) generally
refers to the rules and norms of specific
kinds of conduct or the code of conduct
for specialized groups.
Thus, we speak about ethics of doctors,
ethics of lawyers, ethics of engineers,
ethics of the nursing profession, code of
ethics for the accounting profession,
ethics of business executives, and so
on, rather than morality of doctors,
lawyers, accountants, and business
executives.
 The Purpose of Corporate
Ethics:
This Course targets moral
reawakening among students and
executives challenging them with
Moral issues/dilemma identification,
Ethical and moral reasoning,
Ethical and Moral deliberation,
Ethical and Moral judgment, and
Ethical and Moral justification of
business plans, decisions, actions
and their consequences.
 Why Corporate Ethics?
Corporate or business ethics is a
Value-based Action Program for
ethical and moral training in
corporate deliberations, decisions
and actions that can prevent deviant
corporate behavior.
Business ethics, in general, and
corporate ethics, in particular,
should aid ethical reasoning, critical
thinking, moral deliberation, moral
judgment, moral justification, and
ethical decision making among
business students and business
executives.
 Why Managerial Ethics
ME provides concepts and theories,
tools and techniques, models and
paradigms of ethical and moral
governance via ethical/moral reasoning
and responsibility, values and principles
that can empower corporate behavior.
Every field of business, such as
scanning and new product designing,
accounting, finance, human resources
management, business law, marketing,
business research, and production
management, involves ethical issues,
moral dilemma and challenges that ME
must identify and address.
 Corporate Ethics and the
Ethics Cycle
Corporate ethics empowers corporate
executives to execute the exchange
process of the ethics cycle:
Problem research solutions evaluation
deliberation explanation
prediction control decision choice
implementation responsibility
accountability with assurance and
clarity.
Hence, while there are several books on
ethics, on business ethics, and on
managerial ethics, there are hardly any
on executive ethics or corporate ethics.
 Ethics in the best sense is:
Practical wisdom experiential and
rational skills of intellectual and
moral virtues that help us to discern
right from wrong, truth from
falsehood, justice from injustice,
Moral courageous skills - for
pursuing right and avoiding wrong,
seeking truth while rejecting
falsehood, and striving for justice
while combating against unjust
structures and their harmful
consequences.
 The Domain & Scope of ME
Every field of business such as
organizational behavior, strategy,
accounting, finance, HRM, HRD,
business law, NPD, marketing,
business research, and production
management
Involves people, and, therefore,
involves ethical issues and moral
challenges for Managerial and
Corporate Ethics
 The Dynamic of Corporate
Ethics
If we define Ethics as a science and a
principled life of moral values and
principles, then
Business ethics is a science and a
principled life of moral values and
principles in business exchanges, and
Corporate ethics is a science and a
principled life of executive moral values
and principles relative to corporate-wide
strategic exchange processes of
corporate deliberations, decisions,
choices, and their consequences.
 Course Pedagogy for
Assurance of Learning
Even as research method and
methodology are determined by the
specific subject matter of inquiry,
So also a course method and pedagogy
are dependent upon the specific subject
matter of managerial ethics: Human
persons as subjects, objects, events and
properties (SOPE).
We will be using a pedagogy that is
specific to Managerial Ethics that
enables built-in assurance of learning
(AOL1 AOL7) models and attributes.
 Assurance of Learning
Models
We propose three models AOL1,
AOL2 and AOL3 that are outlined
in Table 1, Table 2 and Table 3.
All three models deal with the
domain of defining and resolving
management problems
They have an ethical and moral
content, but deploy different
approaches of formulating and
resolving the starting problem.
 AOL 1: Inputs Analysis
Learning
AOL1 explores the problem from its
component input variables that are
either:
Controllable (X) or uncontrollable (Y) to
the company that owns the problem, and
accordingly, investigates and evaluates
solution alternatives based on inputs.
Problem primarily arises when Y
dominates X.
Problem formulation is to identify X and
Y, and their inter-relationships; Problem
solution is to find out areas where X can
combat Y.
 AOL 2: Process Analysis
Learning
AOL2 explores the AOL1 problem from
its process variables such as
Constituent legal, ethical, moral and
spiritual issues and processes, and
Seeks a solution based on these
processes by invoking relevant ethical
concepts or constructs, theories or
paradigms that
Could best resolve the problem legally,
ethically, morally, and spiritually.
 AOL 3: Output Analysis
Learning
AOL3 explores the AOL1 and AOL2
problem-resolution from its output
variables or consequences that can
be characterized as:
Right or wrong, good or bad, just or
unjust, intended or unintended) to
various stakeholders,
Especially the powerless and the
marginalized, and seeks to analyze
if these consequences can be
justified using various ethical
theories.
 AOL 4: Concept & Theory
Learning
Assurance of Learning (AOL4) is
based on:
Applying various substantive
propositions of ethical theories in a
given context to
Concrete case situations as
processes that enable learning.
It is illustrated in Chapter 08 (Ethics
of Virtue) and Chapter 09 (Ethics of
Trust) and presented in Exhibits 8.1
to 85 in Chapter 08, and Exhibits 9.1
to 9.5 in Chapter 09.
 AOL via Current Business
Cases
All three AOL models will be
based on three specific business
cases that are presented in the
beginning of each Chapter.
They have different learning
possibilities, opportunities and
challenges that we must explore
and appropriate.
 AOL5 - AOL7
AOL5 is learning based on the Moral Reasoning
Process of Executive Judgments and Justification
as applied to concrete moral cases (illustrated in
Chapter 13 on Ethical-Moral Reasoning for Moral
Judgment Call).

AOL6 is learning based on applying theories and

principles of Moral Responsibility and Moral
Distributive Justice Rules to Executive Outcomes
(illustrated in Chapter 14 on Corporate Moral and
Social Responsibility and Distributive Justice.

Finally, AOL7 is a new systems-framework for

detecting and identifying good versus bad
corporations based on what they do and on what
they say they do [See Chapter 13].
AOL Goals and Objectives
Learning Goals Operational Definitions of Learning Goals or
Outcomes
Communication Ability to effectively listen, inform, persuade
through this medium;
Stakeholder Sensitivity Ability to understand and factor in the
perspectives of all stakeholders as persons,
groups and organizations;
Global Perspective Ability to identify, define, formulate and
analyze business problems from a global
perspective;
Decision Making Ability to generate alternative solutions to a
problem and then take an integrated
approach to seek an optimum solution;
Quest for Excellence Ability to raise the bar in quest for higher
standards in learning and living, and
Functional Knowledge Ability to effectively identify and apply
conceptual frameworks while dealing with
business problems.
 AOL Outcomes
Learning Operational Definition of
Outcomes Learning Outcomes

Behavioral The kind of integrity between

change in self self and behavior under
learner control conditions.

Behavioral The kind of integrity between

change in self self and behavior under
project control conditions.
 Learner controlled
conditions:
We assume these conditions are
controlled by the student, such as:
Homework, class-preparation, use of
Google and Internet, punctuality, class
attendance,
Serious reading and analysis habits,
enthusiasm for learning, curiosity for
learning,
Intrinsic motivation versus extrinsic
motivation for learning,
Use of social media such as Face
Book, YouTube, WhatsApp, and the
like.
 Project Controlled
Conditions:
We assume these conditions are controlled
by the teacher throughout the course
(project):
Using different teaching pedagogies and
tools such as lectures, classroom dynamics
of dialog and discussions, tutorials,
management labs, take home exams,
Field projects, student assignments, class
participation models, individual or group
student viva, course handouts, class
presentation PPTs, use of media such as
movies and YouTube to support lectures,
student assessment, and the like.
 Student Evaluation
Class Participation = 20% broken as
follows:
a) 10% for class attendance and class
participation: Content Review, Current
Market Events Review, Readings Review;
b) 15% Student Viva: Case Analysis and
presentation cum intergroup debate:
Each student with ones group (of 5) with
three other groups will be called on stage
at least twice during the course (see
Course Learning Objectives above), with up
to 7.5 marks attached to each stage-
outcome
Total 25% = 15% for class viva + 10% for
attendance & participation.
Student Evaluation
First Group Take Home Exercise in
Managerial Ethics for 20%: (Modules 01-
03; Chapter 01-09; Sessions 1-7)
delivered by 15/10/16 and due by
midnight, Monday, 24/10/16.
Second Group Take Home Exercise in
Managerial Ethics for 20%: (Modules 04-
06; Chapter 10-14; Sessions 8-12),
delivered by 8/11/16 and due by
midnight, Sunday, 20/11/16.
End of the Course Final Exam
(Individual) for 35%: (Modules 01-06;
Chapters 01-14; Sessions 1-13);Date and
time to be announced (TBA).
 Welcome to Managerial
Ethics
Retain, sustain and Celebrate
Ethics Learning through:
Freedom: Free yourself from
constraints of rewards and
punishments (R&P)
Fun: Enjoy what you do with
passion and enthusiasm
Play: Discover, explore and
experiments various alternatives
 Thank you.

Have a great Semester.

God bless you.
 Chapter 01:
The Domain of
Corporate Ethics:
Introductory Concepts
and Directions
Ozzie Mascarenhas SJ

Module 01, Session 02

October 6, 2016
 Corporate Ethics & Change
Management
All of us need the right change in the right
direction, at the right time, in the right
place, and with the right people.
The corporations should lead this ethical
and moral change.
We have excellent examples of such change
as documented by David Bollier (1997), Jim
Collins (1998, 2002), Jim Collins and Morten
Hansen (2011), Stephen Covey (1989; 1994;
2004), Patrick Lencioni (1998), to name a
few.
This Course is all about the process of
designing and managing change using
ethical and moral means and convictions in
corporations and their executives.
 Corporate Value Ethics
Value ethics is the theory and practice
of good, good action, and good life.
What we need, in order to live well, is a
proper appreciation of the way in which
such goods as friendship, honor,
promise, commitment, virtue, wealth
and pleasure fit together as a whole.
Aristotle follows Socrates and Plato in
taking the virtues to be central to a well-
lived life.
Like Plato, he regarded the ethical
virtues (justice, courage, temperance
and so on) as complex rational,
emotional and social skills.
 Organizational Value Ethics
If ethics is a principled action program of
deriving and experiencing moral values,
then
Organizational Value Ethics (OVE) is a
hierarchically or democratically or
consensually derived and guided action
program in an institution that
Consistently seeks new values, new
directions, new meanings and imperatives,
new visions and missions, new goals and
objectives, and new ends and ideals.
OVE seeks to serve humanity better
through principled institutions such as
family, school, college and university,
company and corporation, entrepreneurship
and startups, government and NGOs, media
and the marketplace.
 The Language of Ethics
We need to clarify the notion of signs,
symbols and language that we use in our
day-to-day discourse and expressions, and
particularly, the signs and symbols of our
ethical and moral language such that we
can employ a commonly understood
terminology for an ethical and moral
understanding and discourse.

Definitions of ordinary ethics-related

concepts such as morality versus
ethics, "moral" versus "ethical," true
versus false, "right" versus wrong,
good versus bad, "fair" versus unfair
and "just" versus unjust are not fully
established among scholars.
 Linguistic Bewitchment!
Our language is complicated. It is riddled
with synonyms. Most of the dyadic terms
such as right/wrong, good/bad, just/unjust,
fair/unfair, ethical/unethical, and
moral/immoral, seem to be equivalent or
synonymous.
Moreover, as dyadic constructs they are
bounded, constrained, and imprison
thinking.
There are many shades between right and
wrong, good and evil, and fair and unfair,
that we must consider.
Most of our choices are not between good
and evil, right and wrong, fair and unfair, ,
but between good and better, right and
more right, fair and fairer, MAGIS.
 The Grey Area of Corporate
Ethics
There is a large spectrum of grey area
in ethics where values and cultures are
involved (e.g., be non-hierarchical; be
inclusive; be good; be fair; be just; be
generous; be contributing; be happy).
It is the grey area that tests
corporations, its leaders and chief
executives.
Values such as social compliance,
industrial codes of conduct, consumer
privacy, personal security, patent rights
and duties, intellectual property rights
and duties, and employee rights and
duties may not be similar across
countries and continents.
 Other Grey Areas in
Business Ethics
Certain questionable strategies such as
aggressive competitive practices, wash
trading, insider trading, domestic vs.
international dumping, and other
financial shenanigans, acceptable in
certain countries may not be in others,
thus creating conflict of values and
interests.
Often business executives will have to
operate in this grey area that is prone to
personal dilemmas, conflicts and
choices, each of which tests individual
ethical sensitivities, decision abilities
and personality characters.
 Shades of HRM Grey Areas
When is recruitment objective and morally
justified?
When is HR development ethical and moral
and humanizing?
When is HR performance appraisal moral?
When is promotion just and moral?
When is labor strike legal, ethical and
moral?
When are labor union negotiations and
arbitrations fair and just?
When is mega executive compensation just
and moral?
When is whistle-blowing due, just and
moral?
 Shades of Market Grey
Is market dominance fair or unfair?
Is government intervention good or bad?
When is aggressive marketing just?
When is exorbitant pricing morally
wrong?
When are market-entry barriers right
and when wrong?
When is market dumping wrong?
Why is bait and switch unethical?
When is seductive marketing ethical?
When is price collusion or cartelization
ethical?
 Shades of Legal Grey
Is supplier gift-giving in India bribery?
When is competition anti-trust and bad?
Is merger/acquisition for market
dominance economically good or bad?
When are plant closings legal, fair and
acceptable?
When is tax evasion legally justifiable?
Is black money evil?
Is the underground economy bad?
I the non-tax paying unorganized sector
good for India?
 Shades of Grey and
Corporate Ethics Failures
Throughout history, when profits are
to be made, some schemes attempt
to skirt the law or even cross
boundaries.
It is a choice between short-term
gain and long-term stability.
Is short-termism some form of self-
indulgence or moral bravery.
Obviously, ethical and moral
dilemmas are not always black and
white.
 Recent Giant Corporate
Failures
In the past two decades,
corporate fraudulent business
practices have precipitated cash
crises and subsequent
bankruptcies.
Consider Enron, WorldCom, Global
Crossing, Qwest Communications,
and Tyco; Satyam, 2G, 3G, 4G,
CWG, Adarsh, King Fisher, and
Sahara Group.
 Corporate Grey
Challenges
There are shades of grey between
black and white, between good
and evil, between right and wrong,
between just and unjust, fair and
unfair, equal and unequal, truth
and falsehood, ...
The sweatshops of China and
India represent grey areas even to
this day for a lack of a proper
definition of the concept.
 Complex Corporate
Dilemma
As corporate executives take on
more responsibilities and juggle
more roles and commitments, their
dilemma become increasingly
complex, loaded with grey areas,
and difficult to resolve.
For e.g., is promoter dominance (but
easy financing via private equity or
hedge fund firms) good?
Is debt-stressed overleverage good
for the corporation?
 Confronting Conflicting
Dilemmas
Requires careful attention to:
Facts, objects, people, events,
properties,
Values and cultures that are
involved, and
Investigating many possible
solutions to the problems
originating the dilemma.
 Adam Smith (1776),The
Wealth of Nations
This was not a book on economics
as a source of wealth.
It spoke about moral principles as a
source of wealth and a way of life.
Adam Smith was a British moral
philosopher; he was not trained as
an economist.
He spoke about ethics as a Way of
Life For Corporate Advantage.
 Operationally, Ethics is a
Way of Life
Operationally, ethics is the
way we deliberate, judge,
chose, act, or behave that
reveal our underlying
values, norms, principles
and standards it is a way
of life.
 Tacit Knowledge of Ethical
Behavior
How we choose to be bold, to stand
out, to excel, to seek greater
excellence how we behave; this is
a long and tacit ethical process that
is hard to copy or duplicate.
The tapestry of ethical human
behavior is so diverse, so rich and
so global that it presents a rare
opportunity to outdo the
competition and create enduring
value (Seidman 2012: xiv).
This is ethics as a way of for
corporate advantage.
Universal Ethical Values for
Strategic Advantage
In the networked global economy,
we cannot succeed just on the basis
of what we produce or provide.
Whatever we do can be easily
copied by our competition and even
done better.
What really matters for success is
HOW we do the things we do, how
we differentiate from the rest,
personally, professionally,
organizationally and even nationally.
 Ethics via Value Chain
A companys real core capability is its
ability to redesign continually its value
chain and to reshuffle its structural,
technological, financial and human assets
in order to achieve maximum competitive
advantage.
Nevertheless, competitive advantage is, at
best, a fleeting commodity that must be
won again and again.
That is, all players in the value-chain -
producers, suppliers, employees, retail
channels, and customers are also seeking
their own competitive advantage.
This competitiveness makes every value-
chain dynamic.
 The Ethics Value Chain
While what we do, create, innovate,
ideate, design, develop, and promote in
the marketplace are always important,
HOW we choose these upstream,
midstream and downstream value-chain
activities is critical.
How and why we choose our industries,
markets, products and services, how we
choose our customers and employees,
suppliers and distributors, and more
importantly, how we build trusting
relationships with them, are getting to
be critically more important than ever
before.
 Figure 1 is Ethics and SCA via a
Way of Life of Value Chain
Organizations today must
continually disintegrate and
reintegrate in order to quickly and
continually assess which parts of
their value chain are vulnerable,
which parts are defensible, which
corporate alliances make the most
strategic sense, and which
competitive threats are deadly.
In this value-chain process the value
of the customer must be reinforced
and recognized throughout the
chain.
Figure 1: Ethical and Moral Relationships
to Build Relational Brand Advantage

Suppliers:
SCM

Technology of
Moral Processes
and Strategies, Employees:
Customers:
Moral Metrics ERM
CRM
and Moral
People

Channel
Partners:
PRM
 CRM, SCM, ERM & PRM are
Ethical Value Challenges
While current technology interacts with
four vital and ethical zones of organizations
(CRM, ERM, SCM and PRM), it can use four
ethical lenses or approaches for each of
these four zones of responsibility: moral
people, moral processes, moral metrics,
and moral strategy.
Human values are those benefits and
principles that bring meaning and fulfillment
in our lives, both individually and socially.
Such values include honesty, integrity,
compassion, authenticity, transparency,
courage, responsibility, respect & fairness.
 Prudence, Wisdom and
Moral Judgments
Making the right judgment/decision
depends less on feelings and
emotions but on rational moral
deliberation.
We need what Aristotle called
phronesis, a kind of prudence or
practical judgment of knowing that
apprehends theories but also
appreciates how these theories
apply to experience and good
judgment.
 Corporate Ethics and
Leadership
Leadership is about motivating others to
achieve superior results.
Corporate Ethics should empower us to
rise above the five inherent temptations
executives could face every day (Lencioni
1998):

Choosing ones corporate status over corporate

results;
Choosing ones popularity over accountability;
Choosing certainty over clarity;
Choosing harmony over productive conflict, and
Choosing invulnerability over trust.
 Major Ethical Theories:
Teleology
That action is moral if it produces
benefits decidedly more than
corresponding costs to the largest
number of stakeholders.
Problems:
Benefits to whom? Costs to whom?
How do you predict and assess them
exhaustively?
Do you do this before the action, during
or after?
What is this greatest number of
stakeholders?
 Major Ethical Theories:
Deontology
That action is moral if it upholds the rights
decidedly more than corresponding duties it
violates to the largest number of
stakeholders.
Problems:
What are rights? What are duties?
Determined by whom?
How do you predict and assess them
exhaustively?
Do you do this before the action, during or
after?
What is this greatest number of
stakeholders?
 Major Ethical Theories:
Distributive Justice
Regardless of costs and benefits, rights and
duties, that action is moral if it distributes costs
and benefits, rights and duties equitably across
the largest number of stakeholders.
Problems:
What is an equitable distribution?
Based on need, merit, efforts, social value,
market value, entitlement, ?
How do you predict, organize and assess the
distribution?
Do you do this before the action, during or
after?
What is this greatest number of
stakeholders?
 Major Ethical Theories:
Corrective Justice
That action is moral if it sets up just and
corrective procedures to rectify unjust
distribution of costs and benefits, rights and
duties to the largest number of stakeholders.
Problems:
What are these procedures? Who designs
them? Who assesses them?
How do you predict and assess their effects?
Do you do this before the action, during or
after?
What is this greatest number of
stakeholders?
A Systems-Thinking View Point
If from a systems-thinking viewpoint we
consider ethics, business ethics, and
corporate ethics as specific systems,
and if each system has its own specific
inputs, specific processes, and specific
outputs, then we may distinguish ethics,
business ethics, and corporate ethics as
in Table 1.1.
A similar table can also be drawn to
distinguish between morality, business
morality, and corporate executive
morality.
 Metaphors as Systems-
Thinking
Metaphors are images that give
expression to our cognitive
configurations of clustered
concepts in human reasoning.
That is, we avoid the assumption
that all our moral discourse and
moral reasoning is based on
literal meaning of words and
concepts we use.
 The Metaphorical Nature of the
Language of Ethics
Contemporary cognitive sciences
have heightened our awareness of
the essential metaphorical nature
of our moral reasoning and moral
discourse, in general, and of our
language of ethics, in particular.
Given our moral imagination, our
moral reasoning displaces usual
lexical terms into domains of
discourse in which they are not
customarily used.
 Critical Corporate Ethics
Questions
What sort of business executive
should I be?
What should be the moral quality of
the corporation that I (choose to)
govern?
What types of corporate
governance, ownership and control
mechanisms should we adopt such
that we ensure long-term objectives
of all stakeholders of the
corporation?
 Critical Corporate Ethics
Questions
What moral qualities, virtues and
attitudes should best characterize
the corporate executives and
their governance of ownership
and control?
What sort of corporations and
corporate executives should best
manage a given country?
 More General Corporate
Ethics Questions
Does the (American or European or
Asian) capitalist free market system
with its socio-political environment and
corporate governance structures
determine which virtues an executive
should value most?
Are there universally accepted and
admired corporate executive values,
principles and practices that optimize
and indicate corporate governance of
ownership and control?
Can executive Corporate Ethics-virtues
be taught?
Ancient Ethics Questions
These are some of the central questions
discussed today in corporate and
political Europe and America, in
institutions of learning, and particularly,
in schools of business throughout the
world.
Similar were the questions discussed by
Greek moral philosophers starting from
Socrates (470-399 B.C.), Plato (427-347
B.C.) and Aristotle (384-322 B.C.).
History repeats itself.
 Critical Corporate Ethics
Questions
What sort of business executive
should I be?
What should be the moral quality of
the corporation that I (choose to)
govern?
What types of corporate
governance, ownership and control
mechanisms should we adopt such
that we ensure long-term objectives
of all stakeholders of the
corporation?
 Critical Corporate Ethics
Questions
What moral qualities, virtues and
attitudes should best characterize
the corporate executives and
their governance of ownership
and control?
What sort of corporations and
corporate executives should best
manage a given country?
 More General Corporate
Ethics Questions
Does the (American or European or
Asian) capitalist free market system
with its socio-political environment and
corporate governance structures
determine which virtues an executive
should value most?
Are there universally accepted and
admired corporate executive values,
principles and practices that optimize
and indicate corporate governance of
ownership and control?
Can executive Corporate Ethics-virtues
be taught?
Ancient Ethics Questions
These are some of the central questions
discussed today in corporate and
political Europe and America, in
institutions of learning, and particularly,
in schools of business throughout the
world.
Similar were the questions discussed by
Greek moral philosophers starting from
Socrates (470-399 B.C.), Plato (427-347
B.C.) and Aristotle (384-322 B.C.).
History repeats itself.
 Concluding Thoughts
All behavior is guided by values. If
we are guided by short-term,
situational and sensational values
we end in economic, moral and
spiritual disasters.
On the contrary, if we are fired by
long-term, well-tried, sustainable
and humanizing values we must
inevitably lead the world to
prosperity, harmony, solidarity and
peace.
This is ethics as a Way of Life
leveraging corporate advantage.
 Systems Thinking to
Analyze Organizational
Behavior from Ethical and
Moral Viewpoints

Corporate Ethics Chapter 2

Sem II - XLRI
Fr. Ozzie Mascarenhas, S. J., Ph.D.
October 8, 2016
 The Power of Systems
Thinking
Archimedes said,
Give me a lever long enough
and single-handed I can move the
world.

Systems thinking is leverage

thinking.
 The Domain of Corporate
Ethics as a System
This introductory chapter deals with major
concepts, definitions, theories, paradigms,
models and strategies of corporate ethics
and morality from a systems-perspective.
Everything in the world is a system, and so
are a corporation and corporate ethics and
morality.
Systems-thinking empowers a holistic and
integrated approach to the dynamic and
challenging problem of corporate ethics
and morality.
A systems approach studies every system
as a dynamic exchange of inputs,
processes and outcomes systems.
 What is a System?
The word system originates from a
Greek verb sunisthnai, which originally
meant to cause to stand together.
Etymologically, therefore, a system
implies a structure that holds the parts
together in a functional whole.
In this sense, the human body, the heart
and its organs, the home and the
factory, the ecology and the
atmosphere, diseases and epidemics,
are systems or structures that hold
together via forces of interrelationships
and interactions.
In this world and the universe,
everything is connected to everything
else. Everything that exists is a system.
 A System as SOPE
A system is anything (subject,
object, property or event) that
is made up of two or more
interdependent parts.
In fact, everything in the
universe has two or more
interdependent parts, and,
therefore, is a system. The
universe with all its
constellations, galaxies, stars
and planets is a system.
 What is Systems Thinking?
At its broadest level, systems thinking or
systemic thinking encompasses a large and
fairly amorphous body of methods, tools and
principles, laws and archetypes, all oriented
to looking at the interrelatedness of forces,
and seeing them as part of a common
process.
We tear or dissect things to understand them.
If we reassemble and reorganize the pieces,
however, we see connections, interactions
and interrelationships between parts and
components we have never seen and
registered before.
Eventually see a larger whole, and
understand reality around us better.
This is systems thinking. It helps us to
destroy our illusion that the world is created
of separate and unrelated forces.
 Every System has an
Environment
Every system has an environment composed of
elements that you cannot control.
A system without an environment does not exist
in our universe.
The system unrest is caused by its internal or
external environments beyond its control, but still
controlling it as a system or organization.
If a system can control a part of its environment,
then that part of the environment becomes a part
of the system.
For instance, if competitors, new government
regulations, or new technologies impact and
control your firm, and your firm, in turn, cannot
control them, they form your environment.
Buy you an buy competitors or influence
regulation for controlling them.
 What is Thinking?
As a transitive verb (think well, think good
thoughts, think success, think your next
move);
As an intransitive verb (to think about a
problem, think through a situation, think as
reflection, think as speculation) or
As an adjective (think fit, think loud, think
piece, think tank).
Real thinking is intransitive: to exercise your
mental faculties to describe, to analyze; i.e.,
to understand, explain, predict, and to
control; to reflect, to deliberate, to speculate,
to investigate, to draw conclusions, to decide
and to act; to form new ideas, to generate
new concepts, theories, models and
paradigms, and the like.
How is Thinking Sourced?
Thinking is sourced and executed by
the mind in conjunction with the
heart and the will.
We call the will by many equivalent
words such as will-power, freedom,
free-will, deliberation, commitment,
endurance, courage, responsibility
and obligation.
The human mind-heart-will
composite does many functions
that require thinking.
 In the Stimulus-Response (S-R)
Theory Tradition:
The mind-heart-will composite appreciates,
acknowledges, and responds to a given stimulus.
The mind-heart-will faculty complex appreciates,
acknowledges, and responds to the space, time, the
motion, the problem-space between stimulus and
response by a suitable decision, act, action or activity.
The mind-heart-will unit appreciates, acknowledges,
and responds to the problem-identification-
specification domain between stimulus and response
by a suitable decision, act, action or activity.
The mind-heart-will capacity appreciates,
acknowledges, and responds to the alternatives , the
solution-space and the final decision between stimulus
and response by a suitable decision, act, action or
activity.
The mind-heart-will assessment faculty appreciates,
acknowledges, and responds to the outcomes or
cause-effect relationship between stimulus and
response by a suitable decision, act, action or activity.
Various Levels in Thinking
Some are disabled to think; their
thinking is inactive or passive - the
objects of their inactive thinking are
everyday events they either ignore
them or leave them unexplained.
The next most common level of
thinking is reactive, whereby most
people react to everyday events.
Some anticipate events in proactive
thinking and offer futuristic
explanation.
Higher Levels of Thinking
Some think together their thinking is
interactive or team thinking, and the
outcome of such thinking is consensual
explanation of events.
The next higher level of thinking is
responsive whereby you search for
patterns of behavior among everyday
events, and thus, derive pattern
explanation.
Presumably, the highest level of thinking
is generative whereby we search,
research, analyze and explain underlying
causes of patterns of behavior (Senge
2006: 52).
 What is Systems Thinking?
Systems-thinking is more than a
powerful problem-solving tool; it is a
powerful language, augmenting and
changing the ordinary ways we
think and talk about complex issues
and problems.
It is a dynamic language for
describing how to achieve fruitful
change behavior in organizations.
Jay Forrester and his colleagues at
MIT developed this language as
systems dynamics over the last 50
years.
 What is Systems Thinking?
You cannot practice systems-
thinking as an individual you
need many perspectives from
different cross-functional
disciplines to bear upon complex
problems and issues.
Hence, systems thinking by its
very nature seeks and thrives on
interdependencies and
collaboration it is a collective
and collaborative team discipline.
 A Systems-Thinking
Methodology
We study Ethics, Business Ethics, and
Corporate Ethics as inputs, processes
and outputs of corporations, especially
in relation to
Problem identification and formulation,
alternative solutions determination,
Corporate deliberations among
competing solutions, corporate
decisions making and choice,
Corporate strategy of solution
implementation, and corporate
prediction and control of outcomes.
The Discipline of Systems-Thinking
Senge (1990: 6-13) speaks of five
disciplines as component technologies
that converge to help us to innovate a
learning organization: self-mastery, mental
models, building shared vision, team-
learning, and systems thinking.
It is vital that the five disciplines develop as
an ensemble; this is challenging because it
is much harder to integrate new
independently developed tools into one
learning organization than apply them
separately.
This is why systems thinking is the Fifth
Discipline a discipline that integrates the
first four disciplines, fusing them into a
coherent body of theory and practice.
 Features of Systems Thinking
System thinking is a discipline for seeing
wholes.
It is a framework and sensitivity for seeing
interrelationships rather than linear cause-
effect chains and things, for seeing processes
and patterns of change rather than static
snapshots.
Systems-thinking is a sensibility for the
subtle interconnectedness that gives living
systems their unique character.
It is a discipline for seeing the structures
that underlie complex situations, and for
discerning high from low leverage change.
 Features of Systems Thinking
It is a shift of mind from seeing parts to
seeing wholes, from reacting to the present
to creating the future, from seeing
ourselves as helpless reactors to changing
reality to seeing ourselves as active
participants in shaping that reality.
More specifically, systems thinking is a way
of thinking about, and a language for
describing and understanding, the forces
and interrelationships that shape the
behavior of systems.
The discipline helps us to see how to
change systems more effectively, and to act
more in tune with the larger processes of
the natural and economic world.
Laws and Systems Thinking
Systems thinking is a fundamental shift
from linear thinking to circular thinking,
from seeing things as static structures
or objects to viewing them as
processes.
Often order emerges from chaos,
stability from turbulent environments,
meaning from confusion, and unity from
diversity.
Thus emerge what Peter Senge calls
laws of systems thinking that can help
us in understanding the origins of
problems, their underlying structures
and behaviors, and their solutions.
Law 1: Todays Problems come
from yesterdays Solutions.
That is, the causes of our problems are
immediate we merely need to look at our own
solutions to other problems in the past.
This law is particularly true when yesterdays
solutions are a) short-term, b) quick-fix, and c)
patchwork or band-aid resolutions of a problem
that is ill-defined. For instance:
A well-established firm finds its current quarters
sales are off sharply a problem. The cause: the
highly successful rebate program last quarter
allured many customers to buy last quarter than
this quarter.
A new manager cuts down high inventory levels to
solve the high carrying cost problem. But sales
people are now spending more time responding to
angry customers who are still either waiting for
shipments or for the brands they want.
Law 2: Harder you push, harder the
system pushes back.
This is the second law that describes another source-
pattern of problems (Senge 1990; 2006: 58-59):
In the USA of 1960s, there were massive federal
programs to build low-income housing and improve job
skills in decrepit inner cities in the U. S. Despite this
great welfare program, these cities were worse off in
the 1970s.
Why? One reason was that low-income people from
other cities and rural areas migrated to these high-
welfare cities, thus overcrowding them and the job
training programs were swamped with applicants. The
citys tax base began to erode being overcrowded with
welfare recipients.
The developed countries have great programs that
subsidize or assist food and agricultural programs of
the developing countries. More food, however, reduces
deaths due to malnutrition, that, in turn, causes higher
net population growth, and eventually more
malnutrition.
Law 2: Illustrative Verifications
Jagan quits smoking only to find he is gaining
weight, and suffers so much loss in self-
image that he takes up to smoking again to
relieve the stress.
A protective mother who wants so much for
her young son to get along with his
schoolmates that she repeatedly steps in to
resolve problems, ending up with a child that
never learns to settle differences by himself.
Janaki is an enthusiastic newcomer so eager
to be liked that she never responds to subtle
criticisms of her work and ends up
embittered soon she is labeled a difficult
person to work with.
We hope that hard work will overcome all
obstacles, all the while blinding ourselves to
how we are contributing to the obstacles
ourselves.
 Law 3: Behavior grows better
before it grows worse.
Low-leverage investments and solutions actually
work, but mostly in the short term. Consider the
following problems:
New housing developments mushroom new
houses. But low and behold, the connecting
roads get congested, water supply is
overstrained, sewerage buckles up, electricity
runs in short supply, trash collection gets
delayed, children need to be bussed to far away
schools, groceries and gas stations are too far,
The new housing development was great addition
to the township, but soon faces unintended
consequences .
Everybody believes that more homework means
better mastery of the subject. Soon the child is
bored, the overseeing parent is overtaxed, and
the teacher that must grade all these repetitive
homework assignments is overworked.
 Law 4: The Easy Way Out usually
Leads back in
This fourth law follows from the previous three laws.
We all find comfort applying familiar solutions to
complex or unfamiliar problems, sticking to what we
know best. If solutions were easy to find to these
problems, they would already have been found.
In complex human systems, there are always many
short-term strategies to make things look better. Only
eventually the compensating feedback comes back to
haunt you.
A typical short-term solution feels wonderful when it
first cures the symptoms. You feel the improvement;
you think the problem has gone away. It may be a year
or two later, however, when the problem recurs with
vengeance.
The initial cure can be worse than the disease.
Pushing harder and harder on familiar solutions, while
fundamental problems persist or worsen, is a reliable
indicator of non-systemic thinking (Senge 1990; 2006:
61).
 Systems Laws 1-4 Verified
Global financial crisis worsened when many
credit markets stopped working normally
during September-October of 2008, and as
investors around the world moved their
money into ultra safe investments like
Treasury Bills (Bajaj 2008).
This in turn, sent the yield on one-month
treasury bills from 1.507 a week earlier to
0.259 percent, down by almost 83 percent
within the space of three business days.
That is, during September 15-17, 2008, the
yield on short-term Treasury bills
plummeted from 1.507 percent to 0.259
percent as nervous investors scrambled for
financial safety.
 Systems Laws 1-4 Verified
During the same three-day period,
borrowing costs for banks and
companies escalated from 2.50% to
3.03%, fueling the credit crisis.
The NYSE was down on Monday
(September 15, 2008) by 4.4%,
rebounded a little (+1.3%) on the
news that the Fed agreed to help
AIG, and tumbled again on the
following Wednesday by 4.1% as the
federal government bailout failed to
stem runaway fears (NYT Sept. 18,
2008, A1).
 Systems Laws 1-4 Verified
Meanwhile, Secretary of the Treasury,
Henry Paulson, in conjunction with Fed
Chairman, was desperately trying to bail
out the financial market in crisis. A
former CEO of Goldman Sachs, Paulson
accepted this job in 2006 with
trepidation.
Earlier in 2008, he had brokered the
compromise between Congress and the
White House producing a $168 billion
economic stimulus package.
He was a point man for the rescue of
Bear Stearns in March 2008.
Early September 2008, he bailed out
Fannie May and Freddie Mac, each one
by $100 billion.
 All these Tragic Events
Verified System Laws 1-4
Yesterdays solutions became
todays problems Law 1).
Harder you push, harder the
system pushes back; (Law 2).
Behavior grew better before it
grew worse (Law 3), and
Easy Way Out usually Leads back
in (Law 4).
Good Hindsight Leads to Good Foresight
Psychologists distinguish between acts of
commission and those of omission. Although
their economic impact is the same in economic
terms (e.g., a dollar not lost is a dollar earned),
yet risk managers do not treat them equally.
We place a greater emphasis on earning profits
than we do on avoiding losses. Risk managers do
not like not to invest and thereby conserve value.
However, a company can be also successful by
preventing losses while its rivals fail, and it can
then grab market share from them.
In chess, grand masters focus on avoiding errors;
rookies try to win.
Suppose you had not invested in stocks during the
last two years but kept your money in low-interest
paying banks, when everyone else investing in
stocks lost capital by 40%. Not losing half your
retirement is undoubtedly a victory.
 Law 5: The Cure Can Be Worse Than
The Disease.
Often, the easy, familiar and short-term solution is not
only ineffective, it could be addictive and dangerous.
Consider the following cases:
Social drinking starts often as a solution to the
problem of low-self esteem or work-related stress.
Gradually, the cure becomes worse than the disease;
among its other problems, it makes self-esteem and
stress even worse than before.
Government welfare, subsidy, unemployment, and
disability programs are great, but they foster
increasing addictive dependencies on public resources
and lessen abilities of local people to solve their own
problems (see the Nordic Model).
In business, we shift the burden of internal problems
to consultants who make the company dependent
upon them instead of training the managers to solve
problems on their own.
In cities, we shift the burden from diverse local
communities to low-income uniform mono-ethnic
housing projects this often leads to gangsters.
 Shifting the Burden to the Intervener
In each of these cases, the phenomenon of
short-term improvements leads to long-term
dependency. Systems thinking calls this
malady, Shifting the burden to the
intervener - a Corollary to Law 5.
The intervener may be federal assistance to
cities, the elderly, the unemployed, the
disabled, food relief agencies, public
schools and other welfare programs.
All help a host system on a short-term
basis, only to leave the system
fundamentally weaker than before and more
in need of help.
Long-term solutions, on the other hand,
strengthen the ability of the system to be
self-sufficient and shoulder its own
burdens.
 The Cure was Worse than the
Disease!
Consider the dreadful consequences of the financial
markets crisis and the quick-solutions:
The cost of borrowing soared for many companies, and
global financial investment companies, like Goldman
Sachs and Morgan Stanley, that declared themselves
relatively strong a week ago, came under assault by
waves of selling.
Less than a week thereafter, both Morgan Stanley and
Goldman Sachs who almost faced bankruptcy
requested the federal government for a change of
status from investment banks (that served as
securities brokers and under SEC vigilance) to
mainline commercial banks (that can do loans and
deposits but come under more federal regulatory
control).
The financial services industry posted losses close to
$800 billion since July 2007. Giant financial
companies experienced deep trouble (see Case 3.1)
they suffered a total of $865.6 billion by September 12,
2008 (47.8%), or an average of $46.6 billion per
company.
 Law 6: Faster is Slower
For most economists and business
technocrats, the best rate of growth is fast,
faster and fastest.
Together with this illusion are other parallel
illusions: bigger is better; taller the better;
more is desirable; sooner the better; the
more pleasurable the more awesome; the
less risky the better, and the more I get the
better it is.
Hence, we love gigantic corporations,
massive cities, sky-reaching massive
structures, larger GDPs and annual
incomes, instant and immediate
gratification, sensuous and sensational
products, exotic theaters, restaurants and
sports arenas, and massive accumulation of
wealth.
 In the Long-run, all these
Illusions Slow us Down
Gigantic corporations are soon weighed down by
massive bureaucratic hierarchies;
Massive cities are congested in traffic, dwelling
places, transportation, recreation parks and other
public spaces;
Sky-topping massive structures have killed
migratory birds, slowed down elevators, and
experienced storm and wind shakes;
Larger and faster growing GDPs and household
incomes have caused meltdown and slowing
mechanisms such as overheated economies,
wage-inflation, price-inflation, higher interest
rates, currency devaluation and foreign currency
appreciation, and increasing trade deficit, federal
deficit, and foreign debt;
Instant and immediate gratification have slowed
us down via obesity and disease, and slowed
progress via degraded ecology and ecosystems.
 Law 7: Cause and Effect are not
closely related in Time or Space
Delays between cause and effects are normal
since cause and effect are not closely related in
time and space this is the fundamental
characteristic of complex systems, human or
organizational.
Effects are the obvious symptoms (e.g., declining
sales, eroding profits, worker malaise,
absenteeism, or under-productivity) that indicate
there are problems.
Causes, on the other hand, are the interaction of
the underlying system that is most responsible for
generating the symptoms (Senge 1990: 63).
If you recognize the symptoms in time and do
something about it, you can bring about
appropriate change to stop the symptoms. Here
lies the difficulty symptoms do not appear soon
after the causes.
Causes and Effects are Rarely Close in
Time and Space
There is a fundamental mismatch between the
nature of reality in complex systems and our
predominant ways of thinking about that reality.
The root of our difficulties is neither recalcitrant
problems nor evil adversaries, but ourselves.
The first step in correcting that mismatch is to let
go the notion that cause and effect are close in
time (Senge 1990: 63).
The consequences of our current hasty actions
will show bad effects years from now creating
problems for our posterity in time and space.
Consider asbestosis or the white lung disease;
consider also black lung diseases among coal
mine workers, as also autoimmune disorders of
women with breast reconstruction.
The real effects of Brexit, the GST Bill, 2016
Summer Olympics of Brazil, will take years to
show and impact.
 Do Not Look for Leverage Near the
Symptoms of the Problem
We look for immediate effects from causes. Hence, if
there is a problem on the manufacturing line, we look
for a cause in manufacturing. When sales people
cannot meet targets, we think the problem is with the
sales force and devise new incentives. If there is
inadequate housing, we build more houses. If there is
poverty, we increase welfare.
In systems thinking, we do not look for leverage near the
symptoms of the problem we need to go upstream and
back-stream in time and space to ferret out the root cause.
Often, the most effective action is the subtlest. Sometimes
it is best to do nothing, letting the system make its own
correction or guide the action.
Other times, the highest leverage is found in a completely
unexpected source.
For instance, Cray Supercomputer Company found its highest
leverage for supercomputer applications not within the
supercomputer industry, but in aeronautical engineering and
movie animation (Disney World) projects that need
supercomputers (Senge et al. 1994: 92)
Law 8: Small Changes can produce big Results
but high-Leverage points are less obvious.

Small well-focused actions that take place at the

right place and the right time can sometimes
produce significant, enduring improvements in
systems thinking we call this principle as
leverage.
Tackling a difficult problem is often a matter of
seeing where the high leverage lies a small
strategic change that produces lasting and
significant improvements.
High-leverage change-points, however, are usually
not obvious, as effects are separated from causes
in time and space (Law 7).
There are no simple rules to find high-leverage
changes. Learning to see underlying structures
and processes (rather than events) is a good
starting point.
Law 9: You can have your cake and
eat it too but not at once.
For over a century American manufacturing engineers
believed that they had to choose low cost and high quality,
but not both. But Toyotas TPS system does both.
The basic argument was that higher quality implies higher
technology, better materials, more time to assemble, more
start-up costs, more expensive parts and components, and
more expensive and continuous quality controls.
Systems or process thinking that looks at the whole system
enables us to have both low cost and high quality, both have
cake and eat it, though in different times, ways and
sequences.
High-quality basic improvements in materials and work
processes eventually should eliminate re-work, recall,
reduce quality inspectors, reduce customer complaints,
lower warranty and guarantee costs, lower promotions costs
such as rebates and free samples, and increase customer
loyalty each of which more than makes up for the higher
costs of higher quality processes.
 Avoid Thinking in False
Dichotomies
Most of our so called problematic dilemmas are
not real dilemmas; they are products of static
thinking; they are effects of snapshot thinking
rather than process thinking.
The classical dilemmas such as cost-containment
versus revenue generation, low costs versus high
quality products, earning gains versus avoiding
losses, centralization versus decentralization,
global versus local control, individualization
versus standardization, individual one-on-one
training versus team training, and the like, are by-
products of static thinking.
These dilemmas imply either-or choices only at
a static, fixed point snapshot view of reality.
But when we view reality dynamically as a
continuous flow, and study the processes
involved, then the either-or choices become
both choices, but at different times.
 Law 10: Dividing an Elephant in half
does not produce two Elephants
Most of our institutions and organizations suffer
from man-made boundaries that impede
organizational learning and effectiveness.
For instance, businesses comfortably divide
business functions into manufacturing or
production, accounting or financing, marketing or
human resources management.
Correspondingly, most MBA programs teach these
business functions as separate disciplines.
Each one sees a business problem blindly from
the narrow perspective of ones discipline, but
does not see how the policies and strategies of
their solutions impact and interact with other
departments or disciplines.
This is like several blind men examining different
parts of the elephants independently and arriving
at different definitions or descriptions of the
elephant.
Holistic Thinking is Thinking Better
Living systems and organisms have integrity, and their
character and quality depend upon the whole.
Hence, organizations, institutions such as schools and
homes, should be viewed as living organisms with
different parts constantly interacting to produce whole
effects.
If we systematically do so, then we could resolve
some age-old social problems such as school crime
and violence, increasing high school dropout rates,
family dysfunctions and divorce, street gangs and
crime, crowded prisons, entrenched poverty,
structured injustices, and income inequality, obesity
and healthcare problems.
Ghetto areas today such as Harlem in New York and
Roxbury in Boston were originally upper-class suburbs.
Corporations buy businesses to harvest them rather
than reinvest in them to strengthen them.
This is what Cerberus did with Chrysler, and the latter
is experiencing financial crisis again. This is boundary
thinking; it is, often, exploitative thinking.
 Law 11: There is no Blame
This law follows from most of the
previous ten laws.
We tend to finger point at others for the
problems we face such as the
competition, regulation, taxes, erratic
marketplace, labor unions, legacy
issues, and, now, outsourcing and
globalization.
At a deeper level, there is no difference
between the inside and the outside of
the business, the inner sanctum and the
outer forum, as most of these are
created by artificial boundaries we
impose upon ourselves, our thinking,
disciplines and departments, our
corporations and institutions.
 Blaming and Boundaries are symptoms of
linear thinking.
Hence we ask linear questions such as: who was
responsible for the arms race? Who perpetrated
9/11? Who was the terrorist group behind the Bali
massacre? Who master-minded the November 26,
2008 attack on Mumbai? Who caused the 2008
Wall Street meltdown? Who propelled the 2007-
2009 global recessions?
We ask linear, one-way-causation questions, and
we expect linear, one-way causation answers.
Instead, if we think in feedback circles, however,
then we must remember the axiom, every
influence is both cause and effect.
Every incident mentioned above, from this
perspective, is a chain of causes and effects. We
ignore some, and over-emphasize others; that is,
we search for scapegoats, and this generates
problems in thinking and problems in
understanding solutions.
Circular Thinking is Thinking Better
 Concluding Remarks
Systems thinking shows that there is no
outside; that we and the causes and
effects of our problems are part of a
single system.
The cure or solution lies in the
relationship we build with the outside or
the enemy.
Hence, a corollary to Law 11: Everyone
shares responsibility for problems
generated by a system.
This axiom does not imply that everyone
involved exerts equal leverage in
changing the system. Some may share
responsibility (i.e., blame or guilt) more,
some accountability, some guilt.
 Archetypes of Systems
Thinking
These are Natures Templates that Control Human
Events.
Systems seem to have a mind of their own.
Nowhere is this more evident than in delays
delay between cause and effect, interruptions
between our actions and their consequences.
One of the highest leverage points for improving
system performance is the minimization of
system delays.
For instance, American manufacturers typically
reduce delay by controlling inventory, while
Japanese counterparts reduce delays by reducing
the entire new product development cycle a
much better competitive advantage.
 Systems Archetypes as
Generic Structures
Structures of which we are unaware
hold us prisoners.
Conversely, learning to see structures
within which we operate begins a
process of freeing ourselves from
previously unforeseen forces.
Certain patterns of structures recur
again and again. These systems
archetypes or generic structures
empower us to see structures in our
personal and organizational lives.
In Greek, archetypes mean the first of
its kind.
 What Systems Archetypes do
Archetypes are accessible tools with which
managers can quickly construct credible
and consistent hypotheses about the
governing forces of their systems.
They are also a natural vehicle for clarifying
and testing mental models about those
systems.
They are powerful tools for coping with the
astonishing number of details that
frequently overwhelm novices in systems
thinking (Senge et al. 1994: 121).
Systems archetypes are reinforcing
(amplifying) processes that set in motion to
produce a desired result. They create a
spiral of success or a spiral of failure.
Archetype 1: Limits to Growth
Management Principle: Do not push
growth; remove the factors limiting
growth.
Archetypes are limits to growth
structures.
Individuals and organizations grow for a
while, and then slow or stop growing.
Many well-intentioned efforts to improve
can meet with bumps or limits to
growth.
Often growth suddenly comes to a halt,
and even reverses itself.
Limits to growth structures operate in
organizations at many levels.
 Archetype 1: Limits to
Growth Illustration 1
A high-tech organization grows rapidly because of
its innovative products.
As new products grow, revenues grow, the R&D
budget grows, and the technical staff grows.
Eventually, the burgeoning staff becomes
increasingly complex and difficult to manage;
bureaucracy sets in; internal competition for
promotions, positions and power slows down
innovation and the introduction of new products.
Senior management is divided, or just cannot
handle this complexity. Your quality suffers; you
lower standards.
These, in turn, after a delay, reduce revenues,
then, R&D budget, and eventually, growth
mysteriously levels off.
Archetype 1: Limits to Growth Illustration 2

Consider a services firm such as a law firm, a

consultancy firm, or an investment bank. Initially,
each firm draws the best talent, brings in good
clients, grows rapidly, and the profits are fed into
the business to grow even more.
Morale grows; the young talent is highly
motivated, and hopes to become partners within
ten years.
As the firm grows larger, however, complexity
sets in, and its growth slows.
Perhaps, tough competition or market saturation
slows growth. Possibly, the founding partners are
no longer interested in sustaining rapid growth.
Occasionally, some in-fighting disaffects company
morale. The growth rate slows, which means less
promotion opportunities, less hiring, even firing,
and the limits to growth have already set in.
 Limits to Growth are Powerful
In both cases, limits to growth become
powerful.
Often, the high-tech company, the law firm,
the consultancy firm, or the investment
bank may never recapture their capabilities
for developing breakthrough new products
and services or generating rapid growth.
The more aggressively you try to change
the process, the more your subordinates
perceive risk, and the more they resist.
Eventually, relationships sour, mutual trust
breaks down, adversarial attitudes develop,
and rumor and suspicion dank the
organization climate.
The reinforcing spiral turns around and runs
in reverse.
 Reactions to Limits of
Growth
Typically, most managers react to limits
to growth by trying to push hard.
When the rate of growth or improvement
slows down, managers compensate by
striving even harder.
Unfortunately, the more vigorously you
push the familiar levers (e.g., R&D,
innovation, promotions, strategic
alliances, recruitment of new and young
talent, venture capital, mergers and
acquisitions, or new joint ventures), the
more strongly the balancing process
resists, and the more futile your efforts
become.
 Archetype 2: Shifting the Burden.
Management Principle: Beware the
symptomatic solution.
Symptomatic solutions address only the
symptoms of a problem, and not the
fundamental causes, and tend to have
short-term benefits at best.
There is always an underlying problem
that generates the symptoms; it may be
obscure and difficult to notice, or too
costly to confront.
Thus, you shift the burden of the
problem to well-intentioned easy fixes
that may work well for the short-term.
 Shifting the Burden
Unfortunately, easier solutions only
worsen the symptoms; they leave the
underlying problem unaltered or even
worse. In the long term, the problem
resurfaces and there is increased
pressure for symptomatic response.
Meanwhile, the system loses whatever
abilities it had to solve the underlying
problem; the capability for fundamental
solutions can atrophy (Senge 2006: 103).
 Thank You

Your Comments?
Your Concerns?
Your Questions?
 Chapter 03:
Ethics of Capitalism
Capitalized

Ozzie Mascarenhas SJ, PhD

JRD Tata Chair Professor of
Business Ethics, XLRI,
Jamshedpur
 Case 3.1:
Worldwide Collapse of Financial
Markets in 2008
September 8, 2008: the Treasury commits
to bail out Fannie May and Freddie Mac,
each with $100 billion, to backstop any
shortfalls in capital for mortgage lending.
Fannie May and Freddie Mac hold or
guarantee $5.4 trillion in mortgages (42%
of all home loans in the USA).
Between the two companies, they lost
over $105 billion in market capitalization,
a combined loss of 98.7 percent in less
than a year (See Table 3.1).
September 15, 2008: Lehman Brothers
collapses.
 Worldwide Collapse of
Financial Markets in 2008
September 16, 2008: the Federal
Reserve agreed to lend $85 billion to
American International Group (AIG)
to emerge out of trouble in return
for a 79.9 percent stake in the
company.
September 17, 2008: Washington
Mutual, the largest thrift or Savings
& Loans Bank in the nation, is put up
for sale; TPG Capital when
approached refuses to help; Morgan
Stanley and Wachovia engage in
merger talks.
 Worldwide Collapse of Financial
Markets in 2008
September 15-17, 2008: Global financial
investment companies, like Goldman Sachs
and Morgan Stanley, that declared
themselves relatively strong a week ago,
came under heavy assault by waves of
selling.
September 18, 2008: Morgan Stanley and
Goldman Sachs who almost faced bankruptcy
requested the federal government for a
change of status from investment banks (that
served as securities brokers, under broad
SEC vigilance) to mainline commercial banks
(that do loans and deposits like any other
commercial bank, but come under more
federal regulatory scrutiny and control called
FDIC).
 Worldwide Collapse of
Financial Markets in 2008
October-November 2008: The Secretary of
the Treasury, Henry Paulson, in conjunction
with Fed Chairman, desperately tries a $700
billion bailout plan to save the financial
market in crisis.
The plan is approved after much debate and
discussion in the respective government
branches. Paulson has also laid out a blue
print to modernize regulation of the
financial markets.
December 2008: Bernard L. Madoff is
arrested and accused for orchestrating a
$50 billion fraudulent Ponzi scheme. His
business collapses.
 Table 3.1: Shrinking U. S. Financial Giants
[Columns 2 and 3 are compiled from New York Times, September 17, 2008, C8]

Financial Firm Market Market Absolute Loss Percentage

Capitalization Capitalization in $ Billions Change
in $ Billions in $ Billions
(October 9, 2007) (Sept. 12, 2008)

Citigroup 236.7 97.76 139.10 -58.7

Bank of 236.5 150.18 86.32 -36.5

America
A. I. G. 179.8 32.36 147.44 -82.0

JP Morgan 161.0 142.16 18.84 -11.7

Chase
Wells Fargo 124.1 113.18 10.92 -8.8

Wachovia 98.3 30.87 67.43 -68.6

Goldman 97.7 61.36 36.34 -37.2

Sachs
American 74.8 45.03 29.77 -39.8
Express
Morgan 73.1 41.08 32.02 -43.8
Stanley
Fannie May 64.8 0.713 64.09 -98.9
 Table 3.1: Shrinking U. S. Financial
Giants (Contd.)
Financial Firm Market Market Absolute Loss Percentage
Capitalization Capitalization in $ Billions Change
in $ Billions in $ Billions
(October 9, 2007) (Sept. 12, 2008)
Merrill Lynch 63.9 24.22 39.68 -62.1

U. S. Bancorp 57.8 58.44 +0.64 +1.1

Bank of NY 51.8 45.43 6.37 -12.3

Melon
Freddie Mac 41.5 0.291 41.21 -99.3

Lehman 34.4 2.546 31.85 -92.6

Brothers
Washington 31.1 2.892 28.21 -90.7
Mutual
Capital One 29.9 17.13 12.77 -42.7

Total 1,657.20 865.64 791.60 -47.76

Mean 97.48 50.92 46.56 -52.04

Std. Deviation 65.66 46.59 41.53 32.13

Stocks throughout the world lost 42
percent of their value in 2008:
The MSCI (Morgan Stanley Capital
International) world Index erased more than
$29 trillion in value almost all the gains
made since 2003.
The Shanghai composite index fell 65.4
percent.
The Russian RTS index crumbled by 72%.
The Sensex 30 in Mumbai, India depleted by
52.4%.
The Dow Jones Euro Stoxx 600 index, a
measure of the broad European market,
closed 2008 with a 46% loss.
The U. S. Dow Jones industrial average lost
33.8 percent, its worst year since 1931.
The broader Standard & Poors 500-stock
index plummeted by 38.5 percent.
Extended Financial Collapse
Equities are just one part of the
overall economic picture.
Credit default swaps (CDS) and the
dreaded mortgage-backed securities
game are smoking guns what
happens in these markets will
determine where stocks go.
Meanwhile, crude oil prices peaked
in July 2008 at more than $145 a
barrel; but by the end of 2008, crude
oil traded slightly above $44 after
falling to less than $40 a barrel.
 Case 3.1: Questions
Is this global financial crisis a failure
of the Free Enterprise Capitalist
System of the West, and why?
If so, with the collapse of the Global
Financial Markets as described
above, is Capitalism a safe business
exchange system for the world and
India?
To what extent were the financial
crisis and the economic recession it
created different from all the
economic recessions the world has
experienced since the Great Black
Friday of October 1929 in the USA?
Case 3.1: More Questions
To what extent was this global
financial crisis man-made and
fraudulent in nature, and why?
How can we detect, prevent and
avert such a disastrous man-made
financial crisis in the future?
We will address some of these
critically important questions in the
following sections. They offer a
challenging and relevant context for
this Course.
 Ethics of Capitalism
Questions about the viability or the
political fragility of the capitalist
system, preposterous a decade and a
half ago, are reasonable and urgent now,
affirm Rajan and Zingales (2014).
Is unbridled capitalism still the best or
the least bad economic system today?
Are major reforms needed, where and
when?
Or should the system of capitalism be
changed completely such that it can
survive in the 21st century?
 Ethics of Capitalism
Our answers to these questions
must go beyond the current market
financial scams and crises they
created, to the very essence of free
enterprise capitalism.
What are the fundamental strengths
and weaknesses of the capitalist
system, not only in its ideal form,
but in its historical realizations
(Rajan and Zingales 2014: ix)?
 Case 3.2: The Grameen Bank: A
Defense of Capitalism
Suffiya Begum was a young mother in a
Bangladesh village called Jobra who earned her
living weaving bamboo stools. She had no access
to finances, and each day she had to borrow 22
cents from a local lender to buy the raw materials
required for the stools.
The middleman lender forced Suffiya to sell the
stools back to him for 24 cents as repayment for
the loan, leaving Suffiya with just two cents of
wages for the day with which she had to fend for
the family.
Suffiya could hardly afford to send her children to
school and pay for the tuition and books with that
kind of earnings. Hence, she was trapped in her
poverty for years.
Muhammad Yunus (Nobel Laureate 2003)
found a solution: The Grameen Bank.
Yunus invented the micro-lending
Grameen bank precisely to take care of
millions of people like Suffiya who
needed small monies to finance their
mini-businesses.
That is the justification of banks, of
financial markets, and of free enterprise
capitalism the need of and access to
capital.
Today, Grameen Bank functions in more
than 50 countries supplying capital to
millions of small businesses in villages
thus alleviating poverty at its roots.
 The Need of Financial
Markets
The financial markets have been financing
new ideas, new designs, new ventures, new
start-ups, and corporations.
They have thus spearheaded marvelous
innovations or creative destruction that
have kept economies and markets alive,
industries burgeoning, and countries
progressing.
Despite their inherent contradictions and
unpredictable devastations, we owe to the
free markets, especially free financial
markets, much of the prosperity, creativity,
innovation and increased opportunity in our
civilization today.
The Free Enterprise Capitalist System:
Its Success
Adam Smith (1776) defined a capitalist
corporation as an institution for:

Managing productive skills of the labor

force;
Stimulating, diffusing and
institutionalizing technological
innovations;
Accumulating the nation's human,
physical, and money capital;
Developing a strong and large market
that controls itself, and thus, for
Raising sufficiently high living standards
among the nation's people.
 Is the Free Enterprise Market
System Worth Preserving?
American capitalism has basically fulfilled
this fivefold mission. Hence, today, the USA
is the best surviving model of free enterprise
capitalism and the largest industrial capital
base in the world. This incredible success
story demonstrates that capitalism works.

To the extent that the free market system has

succeeded for the last 300 years in fulfilling
its basic fivefold mission with minimal levels
of government interventions and regulation, it
proves that the capitalist enterprise as
originally conceived by Adam Smith (1776) is
a viable, valid and legitimate institution.
 The Justification of
Capitalism
Capitalism, or more precisely, the free
enterprise market system, is the most
effective way we know to organize
research and development, recruitment
and retention, procurement and
production, transportation and logistics,
and distribution and marketing that
human beings have ever found (Rajan
and Zingales 2014: 3).
Free markets, particularly free financial
markets, have been the most visible
form of capitalism, and perhaps, the
most criticized and least understood
parts of the capitalist system.
 The Justification of
Capitalism
At the same time, healthy and
competitive financial markets can be an
extraordinarily effective tool in
spreading opportunity and fighting
poverty.
But because free markets depend on
political goodwill and infrastructure for
their existence, and because they have
powerful political enemies among the
establishment, their continued survival
and revival cannot be taken for granted
even in developed countries, argue
Rajan and Zingales (2014: 3).
 Major Ethical Concerns Regarding
Capitalism and its Assumptions
The interplay of self-interested suppliers and
self-interested buyers will not necessarily
result in the good of the individual or of the
society.
Individual decision-making may not always
be well informed in terms of all personal and
social choices, and their intended or
unintended consequences.
The marketplace is often dominated by very
large corporations that are frequently not
brought to heel by the forces of the market or
by consumerist movements.
In relation to certain addictive products (e.g.,
casinos, pornography, alcohol, and
cigarettes), commercial ads may not be the
right form of appeal or the right medium to
inform and instruct.
 Major Concerns Regarding Capitalism
and its Assumptions
Expanding consumption is presumed essential
to an expanding economy. Expanding
consumption involves more people spending
more money for more goods and services to
satisfy more needs, wants and desires.
Nevertheless, "civilization, in the real sense of
the term, consists not in the multiplication but
in the deliberate and voluntary restriction of
wants. This alone promotes real happiness and
contentment, and increases the capacity for
service" (M. K. Gandhi: Yeravada Mandir 1935).
Thus, big is not always better than small
indeed, small is beautiful (Shoemaker 1964). In
fact, less can be more (e.g., ads, websites,
billboards, aerial ads can be more effective
with less information, and graphics clutter)!
 Past Solutions to Unbridled
Capitalism
1. Cross-Border Flows of Capital
2. The Gold Standard
3. World War I Economics Restoration
4. The Stock Market Crash of October 1929
5. Unbridled Monopolistic Markets
6. The United Nations Organization (UNO)
7. The World Bank of Reconstruction and
Development (WBRD)
8. The International Monetary Fund (IMF)
9. The European Union (EU)
10. The Crumbling Berlin Wall
11. The Group of Seven (G7) Countries
 Enable Cross-Border Flows of
Capital
Opening cross-border flows has been a
better solution to all financial crises
than in closing such borders.
Countries tend to remain open when the
rest of the world is open.
There are many good reasons why a
country remains open and tends to stay
open unless many other countries begin
closing their borders.
They enable cross-border flows of
capital, products, services, employment,
skills, patents and technologies.
 Enable Cross-Border Flows
of Capital
In general, importers, exporters,
multinational companies and
international traders gain power from
open countries and develop their own
political constituencies in open
countries
These form a countervailing force to
those who want to close their borders.
In general, open border economic
systems are more ethical and moral
than closed systems.
The Tyranny or Explosion of Choice
Today, many products and services are so
complex that even a reasonably well-informed
buyer needs the aid of the Internet, Google and
Wikipedia, blog, Facebook, twitter or you-tube
interaction, a nutritionist, an engineer or a doctor
to make wise decisions about the often
bewildering array of possible choices. This is the
tyranny or explosion of choice (Trout 2004).

This is particularly true when we have so many

"parity products" and so many apparently
unnecessary products such as cheap disposable
products, artificial products, showy or show-off
products, too many brands of snacks, candy bars,
soft drinks, dog foods, children's toys, beers,
cigarette and alcohol products.
 The Tyranny of Choice
Freedom from tyranny is freedom to
make a mistake, freedom to fail, but a
serious duty to learn from the mistakes,
as well as freedom to be right.
While some will have to learn by making
mistakes of wrong choices,
over-consumption, substance abuse or
bankruptcy, others will enjoy their
freedom by making the right choices at
the right time, right place, right space,
and with right intentions.
 Audacity to Hope
Despite financial crisis, economic recession,
market turbulence and market chaos, some
will always do better than others.
Their secret is not divestiture, diversification,
risk-taking or market withdrawal, but vision,
creativity, imagination, innovation and
forward thinking.
Jim Collins and his colleague, Morten
Hansen, have proved this stunning result in
Great by Choice (2011), a massive research
study that spanned over 9 years.
Creativity and innovation management will
always be an ongoing solution to all our
economic, market, political and social crises.
 How can we Avert Future
Financial Crises?
One Possible Answer: Corporate
Ethics.
That is:
Moral Corporate Governance
Responsible Citizenship
Responsible Decisions & Control
Corporate Integrity &
Accountability
 Chapter Four:
Ethics of Corporate Fraud,
Corruption and Bribery

Ozzie Mascarenhas SJ, PhD

JRD Tata Chair Professor of Business Ethics,
XLRI, Jamshedpur
Managerial Ethics:
Semester II, October 18, 2016, XLRI
 Fraud as old as Humanity
Fraud, under various forms, has existed
since the dawn of humanity and will
continue until the end of times.
Given human nature and its weaknesses,
ones avarice and greed for money, power
and popularity have been the major trigger
for fraudulent crimes.
Fraud exists even today and can occur
anytime in an organization.
There is no special recipe or checklist for
detecting and preventing corporate or
personal fraud at all times.
No such thing exists and no such thing is
truly capable of being developed to monitor
and control all forms of fraud. One can only
try to detect and prevent crime during a
given period in time.
 Basic Definitions of Fraud,
Corruption and Bribery
In general, fraud is a deliberate
misrepresentation.
Specifically, fraud is a deliberate
misrepresentation of subjects, objects,
properties and events (SOPE) of your
organization to your internal or external
stakeholders.
Corruption is fraud with moral depravity.
Bribery is money or equivalent offered to
process a corrupt action in favor of the
giver.
Defined thus, corruption is a subset of
fraud, and bribery is a subset of corruption.
 Other Fraud Forms
Misleading: To lead in a wrong direction,
error of judgment or into wrongdoing. This
may or may not be intentional.
Obfuscation: to confuse or obscure the
mind or a topic so as to stupefy or bewilder
people.
Subterfuge: An artifice or stratagem used
to deceive others in order to evade
something or gain some end.
Trickery: Implies the use of tricks or ruses
in deceiving others.
Chicanery: Implies the use of petty trickery
and subterfuge, especially, in legal actions.
Beguile: To mislead people by ones charm
or persuasion of cheating or tricking.
 Fraud vs. Larceny
Fraud is different from larceny, the latter is a form
of stealing. The legal term for stealing is larceny.
Larceny is felonious stealing, taking and carrying,
leading, riding, or driving way another persons
personal property, with the intent to convert it or
to deprive the owner thereof (Blacks Law
Dictionary 1979: 792).
Thus, the essential elements of a larceny are a)
an actual or constructive taking away of the
goods of another, b) without the consent or
against the will of the owner, and c) with a
felonious intent.
Obtaining possession of property by fraud, trick
or devise with preconceived design or intent to
appropriate, convert or steal is larceny.
Thus, larceny is also a subset of fraud.
 Fraud as Non-Physical
Abuse
Most instances of fraud are non-
physical abuses that are
fraudulent in nature.
Table 1.2 describes theft in detail
as a case of physical abuse.
Table 1.3 lists other forms of non-
physical fraudulent abuses.
 What is Occupational Fraud?
The Association of Corporate Fraud
Examiners (ACFE) in 1996 defined an
occupational fraud as The use of ones
occupation for personal enrichment through
the deliberate misuse or misapplication of
the employing organizations resources or
assets (ACFE 1996: 4).
This definition has remained more or less
the same in 2004: an occupational fraud is
the use of ones occupation for personal
enrichment through the deliberate misuse
or misapplication of the employing
organizations services or assets (ACFE
Report 2004). Thus, ACFE defines
occupational fraud against ones
organization.
ACFEs Definition of Fraud
Fraud as an unethical activity is:
a) clandestine, b) which violates the
employees fiduciary duties to the
organization, c) is committed for the
purpose of direct or indirect financial
benefit to the employee and d) which costs
the employing organization assets,
revenues or reserves (ACFE 1996: 9).
The term employee in this definition
includes employees of all categories: blue-
and white-collar labor, managers, corporate
executives, including CEOs, CFOs, BOD and
presidents.
Fraud can encompass any crime that uses
deception as its primary method or modus
operandi.
 Types of Corporate Fraud
Albrecht and Albrecht (2004) classify occupational
fraud as using ones occupation to cheat ones
organization or to benefit ones organization.
Table 2.3 lists commonest frauds by type,
perpetrators, methods, victims, and costs of
deception. It lists fraud types in the descending order
of the magnitude of fraud losses in relation to money,
market valuation, brand equity, supplier goodwill and
customer loyalty, cash crisis, insolvency and
bankruptcy.
Hence, Table 2.3 heads with management fraud
followed by securities scams or insider trading,
investment scams, tax fraud, racketeering, vendor
fraud, employee fraud, computer fraud, bribery, and
customer fraud.
Other things being equal, historically, the magnitude of
money and non-monetary damages of frauds could be
estimated along the rank order suggested in Table 2.1.
Table 2.4: Is a Taxonomy of Occupational Fraud and
Abuse.
 Basic Instruments of Corporate Frauds
1. Unscrupulous brokers: sale of fictitious limited
partnerships to boost revenues.
2. Wash Trades: sale of a product to another company
with a simultaneous repurchase of the same product
at the same price; these swindles uniquely inflate
sales by units and dollar volume without recording
any profits.
3. Oil and gas schemes (scammers speculate on oil
shortages or a rise of natural gas prices).
4. Equipment leasing (scammers sell interest in pay
phones, cash machines;
5. Aggressive accounting (e.g., converting long-term
debts to assets, purchase intentions to actual
purchases, future orders to current ones).
6. Analyst research conflicts (e.g., Merrill Lynch, Arthur
Anderson, issued misleading research reports,
which were then restated to correct major errors.
7. All these corporate scam-types involve selling or
buying under fraudulent conditions, and hence, fall
well within the domain of fraudulent marketing.
 Deception in Marketing
Deception: Those instances in which
consumers change their behavior for
reasons not grounded on fact or
reality but on beliefs and impressions
made on them by the influencer (such as
advertising, marketers, sales
representatives) (Gardner 1975).
Often, consumers are influenced by non-
substantial attributes and features of a
product (such as style, looks, feel, color,
sheen, display) at the expense of
disregarding the intrinsic aspects (e.g.,
quality, benefits, functionality) of the
product (Gardner 1975: 43).
 Seduction in Marketing
Seduction: means interactions between
marketer and consumer that transform the
consumers initial resistance to a course of action
into willing, even avid, compliance (Deighton and
Grayson 1995: 660).
It is the enticement of a consumer into an
exchange where ambiguity is resolved by a
private (non-institutionalized) social consensus
that the consumer plays a part in constructing
(Ibid 668).
Seduction is a strategy whereby consumers are
induced to tolerate or overlook unsustainability,
or even to connive in denying it. In this sense,
seduction is more voluntary than fraud and more
collaborative than entertainment - a playful,
game-like social form (Ibid 661).
Seduction is voluntary conning.
 Deception versus Fraud
Thus, deception is a broader term that
applies to anything that deceives, whether
by design (fraud), by delusion (trickery or
illusion) or by device (subterfuge and
chicanery).
A fraud is a deliberate misrepresentation or
nondisclosure of a material fact made with
the intent that the other party will rely upon
it.
If the party did in fact rely upon such a
misrepresented statement, and if this
causes injury, then the person may bring an
action to rescind the contract.
Statements of opinion, however, may not be
usually used as a basis for fraud or
misrepresentation (e.g., puffery, salesmans
opinion).
 Deception versus Lie
A lie is not the same as deception or fraud. The
Oxford English Dictionary defines: "A lie is a
deliberate false statement that is intended to
deceive others".
From a legal perspective a lie is a) a deliberate
withdrawal of b) material information from c) a
person who has d) a right for that information e)
at the time of the withdrawal.
Thus, lie is a form and subset of deception.
Deception does not always need a false
statement to deceive.
A lie is a deliberate false statement that is either
intended to deceive others or foreseen as likely to
deceive others.
Most frauds in the form of creative accounting
practices are lies in this sense.
 A Simple Taxonomy of Deviant
Behaviors
Task Task Ambiguity
Execution Low High

Non-Physical: Discrimination Trickery

Persuasion, Corruption Beguile
Forced Bribery Chicanery
consensus Fraud Conning
Theft by Fraud Seduction
Deception
Cheating
Theft by Stealth
Physical: Much Larceny Terrorism
Force and Undue Stealing Ethnic Cleansing
Power-pressure Robbery Genocide
Burglary Preemptive Wars
Theft by Force Aggressive wars
 Distinguishing Fraud, Corruption and Bribery
Fraud as Deliberate Deliberate Misrepresentation
Misrepresentation As:
Regarding:
Conspiracy or Abuse
/Deception
Past and Current Corruption as Deception,
Accounting Irregularities
Corruption as Accounting
Bribery (e.g., kickbacks, wash
Facts, Figures and (e.g., ghost or shell trading) or Accounting Abuses
History companies; hostile
takeovers;
(e.g., over-under-invoicing;
dumping).

Past, Current and Corruption as Deceptive

Advertizing (e.g., lies, under-
Future Decisions, disclosure, promoting non-
Actions and existent or unpatented
products and services;
Strategies hyping IPOs; covering or
disguising product defects).
Corruption as Financial Bribery
(e.g., Insider Trading; active or
passive bribery; excessive
executive compensation).
Corruption as Promotional
Bribery (e.g., hyped IPOs,
seduction; market dominance;
undue market entry barriers;
exorbitant pricing; price wars;
dishonored warranties and
guarantees).

Corporate Financial Corruption as Deceptive

Reporting (e.g., understating
Statements and debt; overstating revenues;
Annual Reports overvaluing tangibles and
intangibles; massive
writedowns).
Corruption as Abusive
Reporting (e.g., over-borrowing
based on inflated collateral;
inflating bad debts, theft,
damage for tax exemptions
and insurance claims).
 Distinguishing Fraud, Corruption and Bribery
Fraud as Deliberate Misrepresentation
Deliberate As:
Misrepresentat Conspiracy or Abuse
ion Regarding: /Deception

Past and Corruption as Corruption as

Current Facts, Deception, Accounting
Figures and Accounting Bribery (e.g.,
History Irregularities kickbacks,
(e.g., ghost or wash trading)
shell or Accounting
companies; Abuses (e.g.,
hostile over-under-
takeovers; invoicing;
dumping).
 Distinguishing Fraud, Corruption and Bribery
Fraud as Deliberate Deliberate Misrepresentation
Misrepresentation As:
Regarding:
Conspiracy or Abuse
/Deception
Past, Current and Corruption as Corruption as Financial
Future Decisions, Deceptive Advertizing Bribery (e.g., Insider
Actions and Strategies (e.g., lies, under- Trading; active or
disclosure, promoting passive bribery;
non-existent or excessive executive
unpatented products compensation).
and services; hyping Corruption as
IPOs; covering or Promotional Bribery
disguising product (e.g., hyped IPOs,
defects). seduction; market
dominance; undue
market entry barriers;
exorbitant pricing;
price wars; dishonored
warranties and
guarantees).
 Distinguishing Fraud, Corruption and Bribery
Fraud as Deliberate Misrepresentation
Deliberate As:
Misrepresentat Conspiracy or Abuse
ion Regarding: /Deception

Past and Corruption as Corruption as

Current Facts, Deception, Accounting
Figures and Accounting Bribery (e.g.,
History Irregularities kickbacks,
(e.g., ghost or wash trading)
shell or Accounting
companies; Abuses (e.g.,
hostile over-under-
takeovers; invoicing;
dumping).
 Why do Frauds Occur?
Edwin H. Sutherland (1883-1950), a pioneer
criminologist at Indiana University, was the
first to propose a theory in this regard.
He focused on white-collar crime, a word
that he coined in 1939, relating to crime
perpetrated by corporate executives in
their corporate capacity against customers,
shareholders, investors, employees,
suppliers and the public.
In the late 1930s, Sutherland developed the
theory of differential association, a
landmark theory that would prove to be the
foundation of modern criminology.
Prior to Sutherlands theory, most
criminologists and sociologists believed
that the propensity to crime was
genetically inherited criminals beget
criminal offspring.
 Theory of Differential Association
Opposed to this doctrine, Sutherland maintained
that crime is learnt, primarily from ones
environment in the process of interactive
communication.
Criminality, Sutherland argued, cannot occur
without the assistance and influence of other
people.
Potential criminals learn crime within intimate
personal groups (e.g., dysfunctional family,
buddies, street gangsters, high school peers,
neighborhood clans, and close workmates).
The learning process involves two elements: a)
the techniques to commit the crime, and b) the
attitudes, motives, drives and rationalizations of
crime.
The incidence, frequency, and intensity of crime
are dependent upon both elements, but more so
on drives and rationalizations.
 The Fraud Triangle
Donald R. Cressey (1919-1987), Sutherlands
student, focused on embezzlement and embezzlers.
His primary data was derived from interviewing 200
prison inmates serving jail for embezzlement.
He called embezzlers as trust violators. He
argued that trusted persons become trust violators
when they face insurmountable financial problems
that are non-sharable.
If they shared the financial problem with others,
possibly they could have helped them.
Crimes occur when financial problems become non-
sharable, when they exert pressure on the
embezzler, and when the embezzler rationalizes that
the crime (embezzlement) under such
circumstances is justified and not totally dishonest.
The embezzler with this frame of mind waits for the
right time and opportunity, and perpetrates the
crime.
Figure 1: The Fraud Triangle

Opportunity

The Fraud
Triangle

Pressure Rationalization
 The Fraud Triangle
All three factors in the Fraud
Triangle are often needed to initiate
a crime: opportunity, pressure and
rationalization (Cressey 1972: 139).
In the Fraud Triangle, pressure
relates to a non-sharable financial
need.
This is the key element of the
model.
The need is current, almost
insurmountable, and one, that under
the circumstances, could not be
shared.
 Concluding Remarks
The discussion of free enterprise
capitalism and its manifold assumptions
must be done within the framework of
moral language and discourse.
The capitalist system and its basic
assumptions use certain moral
principles such as: egoism, enlightened
egoism, corporate egoism, market
egoism, enlightened corporate and
market altruism.
All these are best discussed and
understood within the framework of
fairly well accepted moral language and
discourse.
 Concluding Remarks
The language and definition of moral rules
and principles, and rights and duties cannot
be precise as scientific concepts and
definitions.
It seems logically impossible to introduce
into moral discourse the careful definition
of terms employed, the very high standards
of checking and testing hypotheses, the
prodigious use of experiment, which are the
marks of science.
When we import mathematical-
experimental method into morality, we
thereby automatically mutate it into
something different. We are not then doing
better what we did before, but doing
another thing (Baier 1965: 5).
 Concluding Caveats
Morality itself cannot be made respectable and
reliable by the introduction of scientific method.
Scientific discourse is concerned with
statements of fact - to state the facts, to describe
and explain the world, to say how things are,
were, and will be under certain conditions, and to
say what makes them the way they are.
Moral discourse, on the other hand, concerns with
value judgments they direct our feelings,
attitudes, beliefs, and behavior; most of these
judgments are subjective, often vague and
ambiguous, and unverifiable by our senses.
These can neither be empirically verified nor
disproved, nor deduced from any statements of
facts.
Statements of facts, however, can be relevant to
moral value judgments.
 Chapter 11
Ethics of Executive Moral
Reasoning, Decisions and
Moral Judgment

Oswald A. J. Mascarenhas S.J., Ph.D.

JRD Tata Chair Professor of Business
Ethics, XLRI, Jamshedpur
November 25, 2016
 Structure of Chapter 11
This 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, ethics of trust, ethics of
responsibility, ethics of care and
compassion,
From the perspectives of intrinsic
versus instrumental good, moral worth
versus moral obligation, and moral
conscience versus moral justification.
 We revisit the same questions we
started in Chapter 1:

Our Moral and Ethical, Reasonig, 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?
 Ethical Structure of These
Five Questions
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 three sets of questions refer to
executive inputs of action;
The fourth relates to processes of
executive action, and
The fifth one deals with executive action
outcomes.
 Moral Judgments and Moral
Justification
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 has no
difficulty making moral judgments
such as whether to tell the truth,
whether a given decision is morally
right or wrong, or whether there is
conflict of interest, and so on.
 Moral Justification
A typical moral justification starts with
a moral judgment that is upheld 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.
Moral justification goes further to
deliberate about these moral judgments
and justifies them or the principles
underlying them.
 Part I:

General Application of
Moral and Ethical Theories
to Executive Decisions and
Judgments
 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?
 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 ones
consumer needs, wants, and desires, and
satisfying ones 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 Purpose of Ethical Theories
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.
 Teleology or Utilitarianism
Teleology or Utilitarianism: 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
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.
 Problems with Teleology
This is an output-based version of teleology
since it judges the moral correctness of the
executive action from its benefits versus
costs, or 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.
Hence, this version of out-based teleology
fails to be a useful rule of moral
assessment of executive judgment or
action.
 Ethical Theory of Deontology
The moral correctness of all actions is
always also, but not always only, determined
by its consequences.
Hence, 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 the
greatest number of stakeholders.
This position is called deontology (deon =
duty in Greek) or existentialism or
situationalism.
 Problems with Deontology
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,
rights or duties that concern the
greatest number.
But the problem is when and how does
the executive know the nature, 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.
 Emmanuel Kants Version of
Deontology
Hence, this version of process-based
deontology fails to be a readily
applicable rule for pre-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 are.
This traces the morality of the act to the
universalizeability principle of Kant that
we internalize as an input to all our
actions.
 The Ethical Theory of Distributive
Justice
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 there may be some 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.
 Problems with the Theory of
Distributive Justice
But when and how does the executive know the nature
and degree and seriousness of benefits versus costs,
or advantages over disadvantages, rights over duties,
pacts and agreements over non-existent ones, and
about their just distribution?
Often, it may take days, weeks or months to do that.
Hence, this version of process or out-based
distributive justice fails to be a useful rule of moral
assessment of executive judgment or action.
Hence, a later version of teleology argues
thus: Act in such a way that your action is
geared to produce at least more good
consequences than evil ones, more
advantages than disadvantages, and upholds
more right that it violates corresponding
duties, and to the greatest number.
This traces the morality of the act to the process than
to the outputs.
 More Problems with DJ
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, more advantages, and
protecting more rights than duties it
violates?
To this the distributive justice scholars
would counter by saying: Act in such a way
that you are pre-disposed to do good and
make it right rather than the opposite.
This as an input-based version of
distributive justice, and boils down to
striving right-making actions and striving
for moral goodness in all your actions, a
position that Ross (1930) maintained.
 Executive Moral Conflict
Management
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.
 Modern View of Conflict
Management
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.
It is even believed that within certain limits
conflict may be essential to heighten
productivity.
Some even argue that the absence of
conflict might be a sign of an unhealthy
organization.
 Constructive Conflicts
When dealt constructively, conflicts
enhance creative definition,
formulation and solution of
problems; it can lead to change,
adaptation, and survival.
In fact, most scholars view today
that conflicts, if properly channeled,
can be an engine of innovation and
change.
 Conflict Management
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, it
will impact the organization
positively.
The issue then is to design and
engage techniques that empower
individuals and organizations to
handle conflicts productively.
 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 Hippocratic Oath
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:

The act should not inflict evil or harm (strict liability);

It should prevent evil or harm (preventive justice);
It should remove evil or harm (protective justice), and
It should do or promote good (beneficent justice).
 Principle of Beneficence.

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.
 Part II:

A Moral Reasoning
Systems Framework for
Ethically Analyzing Good
versus Bad Corporations
(See Table 11.1, Chapter 11).
(See Table 11.2, Chapter 11).
 Basic Assumptions of the
Model
Assumption one:
We can adequately judge ethical and moral
behavior of firms by examining two of their
fundamental and complementary aspects of
business behaviors:
a) their corporate executive decisions,
choices, tactics and strategies, and
b) their official corporate statements,
advertisements, announcements, and
annual reports regarding what they do
under (a).
 Assumption Two:
We can adequately judge the content of ethical and
moral behaviors (a) and (b) against seven independent
reference points or standards along which (a) and (b)
are judged moral and ethical or otherwise: namely:

1. Corporations Data, facts and performance

figures;
2. Relevant corporate Laws, Acts and
Ordinances;
3. Corporate Rules of Common Good;
4. Corporate Codes, Pacts, and Agreements of
Business Conduct;
5. Moral Standards, Rights and Duties;
6. Principles of Distributive Justice, and
7. Principles of Corrective Justice.
 Assumption Three:
The ethicality and morality of (a), that
is, corporate executive decisions,
choices, tactics and strategies can be
adequately assessed by judging
If they conform or do not conform to
each of the seven ethical reference
points stated above, and
That the ethicality and morality of (b)
can be adequately assessed by judging
If they verify or do not verify the
norms and standards intrinsic to each of
the same seven ethical reference points.
 A Systems Approach
This technique is a systems framework composed
of specific:

Inputs (e.g., seven ethical reference points and

standards based on several accepted ethical
theories and moral principles),
Processes (e.g., a judgment call that assesses
whether (a) as defined and specified above
conform or not conform to each of these seven
ethical reference points and standards, and
whether (b), that is, official corporate statements,
advertisements, announcements and annual
reports about (a) verify or not-verify the same
ethical reference points,
Outputs which enables us to identify good
corporations from the bad ones (system outputs).
 Model Efficiency
Each company can thus be assessed by
7x2 = 14 ethical and moral judgment
calls:
Based on known ethical reference points
or standards as inputs, and
Conformance-non-conformance,
verification or non-verification of such
reference points (as processes)
Such that good corporations can be
identified and detected from the bad
ones in a timely and systematic manner
(outputs).
 An Illustration
A real mini case of Cummins India Ltd.
with its new product design and market
penetration strategies is presented and
analyzed as a concrete illustration of
this ethical and moral framework.
Using this theoretical framework (see
Table 11.2, Chapter 11), actual research
can be carefully designed, vetted, and
conducted for judging, identifying, and
detecting good from bad corporations
long periods before their good or bad
outcomes hit the markets.
Was the Cummins heretical model
ethical and moral than orthodox?
Cummins was factually ethical and truthful: without directly
hurting the competitors, sourcing engines from Tata Motors
and Simpson, Cummins soon designed and assembled small
standardized generator sets in high volumes in an ultra-low
cost facility and tax-free zone, using a new distribution and
low-cost service model.
It produced 25,000 units a year, commanded a 30% market
share of the segment by 2008, barely six years since
production design. Their decisions and choices and action
conformed to facts, and their financial statements verified
facts and real performance data.
It was legally licit and valid: It obtained licenses to assemble
its generators in tax-free zones, and even got them to export
quality standards and requirements.
It was teleologically ethical and truthful: its strategic action
produced more benefits than corresponding costs to the
largest number of smaller diesel generator customers.
 Cummins Behavior
It was parenetically compliant and legitimate: no
existing pacts with suppliers or employers or
customers or bankers were severed, while new
ones were made with Tata Motors and Simpson.
It was deontologically moral and honest: its
strategic action of entering and boosting its
smaller generators segment in India did not
violate the rights of any stakeholders nor
compromised corresponding duties. Instead, it
served a very large competitive market in India
with competitive quality, service and prices.
By distributive justice, Cummins action was
impartial, just and fair: it redistributed more
evenly the costs and benefits, rights and duties
related to the smaller generator market segment
that was increasing by thousands every month.
 Justice at Cummins
By corrective justice standards, Cummins
strategy was also ethical, as it quickly set
up just procedures, albeit unconventional,
to fulfill the market segment need relative
to the greatest number of domestic and
export, smaller generator customer
segments, including farmers.
By beneficent justice, the smaller diesel
generator is a good product that enables
the small farmers to humanize labor and
increase productivity.
Judged by ends and means theory, its end
was a good product for the smaller diesel
engine segment, and the means deployed to
produce it were effectively and profitably
moral.
 Thank You

Any Questions?
Any Concerns?
Any Comments?
 Chapter 13:
Moral Responsibility for
Corporate Decisions and
Outcomes

Ozzie Mascarenhas S. J., Ph. D.

JRD Tata Chair Professor of Business
Ethics, XLRI
November 29, 2016
Business and Responsibility
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.]
Corporate Responsibility Spells
Success
According to the Ethics Resource Center,
Washington DC:
Companies that are dedicated to doing the
right thing, have a written commitment to
social responsibility, and act on it, and
consistently are more profitable than those
who do not.
If your company is ethical and socially
responsible, it automatically cannot make
you rich and successful, but it will definitely
pave the way for you to become successful.
Ethics + competence = success is a winning
equation.
 Corporate Responsibility
Spells Success
On the other hand, companies that
continually attempt to test the edge of
ethics inevitably go over the edge.
Shortcuts, deception, cheating and cutting
corners test the edge of ethics and never
pay off in the long term.
In the long term, people always lose when
they live without ethics.
If any institution, such as family,
corporation, state or country, must prosper,
it must be built on the foundations of a
moral character, and this moral character is
the principal element of its strength, and
the only guarantee of its permanence and
prosperity.
 Corporate Responsibility
Spells Success
The moral foundation cannot be built,
however, by the organization as a whole;
it must be built beginning with each
individual.
We must be honest with ourselves
before being honest with others. We
must do it in the face of continuous
pressure to perform at the expense of
doing the right thing.
Ethics is about how we can meet the
challenge of doing the right thing when
that will cost more than what we will
want to pay (Maxwell 2003).
 Mutual and Cosmic
Responsibility
Each of 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 and social responsibility
are hardly separable.
Personal responsibility becomes responsibility for
the world because the person and the world are
inseparable.
 What is Responsibility?
As its etymology suggests (from Latin
respondere = to answer, responsabilis =
requiring an answer, responsum =
response), the most obvious meaning of
responsibility is accountability, being
answerable to ones behavior.
Simply stated, responsibility means to be
accountable for ones actions; that is, to
take ownership of ones actions and their
good and bad outcomes, to accept praise
for the good and blame for the bad
consequences, and be ready to compensate
for the harm, if any, resulting from the bad
consequences.
 Two Broad Levels of
Responsibility
In general, we can distinguish two broad
levels of responsibility: responsibility for
the action itself, and responsibility for
the consequences of the action.
Responsibility for the action is primarily
moral, and involves the concepts of
duty-of-care, obligation not to harm,
blame, culpability and answerability.
Responsibility for the consequences is
primarily legal and is associated with
the concepts of liability, imputability,
accountability, punishment and
compensation for the harm accruing
from the action.
Responsibility for Action Vs
Consequences
Duty

For the action: Obligation

Moral Culpability
Responsibility Answerability
Blame/Praise
Responsibility
Accountability
For the
Liability
Consequences:
Punishment/
Legal
Reward
Responsibility
Compensation
 Causal and Agent
Responsibility
Responsibility for the consequences can
impute in two ways:

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.
 Accountability and
Commitment
Two questions 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.
 Attributional Responsibility
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).
 Appropriational Responsibility
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).
 A Taxonomy of
Responsibility

Attributional

Causal

Appropriational

Responsibility
Attributional

Agent
Appropriational
 Retrospective and
Prospective Responsibility
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
 ATR vs. APR
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).
Descriptive, Prescriptive, and Ascriptive
Responsibility
We use the word responsibility
descriptively, prescriptively, ascriptively,
and appropriationally, and under each
usage, it has both an objective and
subjective sense.
In description we describe the where,
when, who, what, how, with whom, and
through whom of responsibility.
In prescription, we argue the normative,
obligatory, rights and duties of
responsibility.
In ascription or attribution, we probe into
the causality, origination, initiation,
authorship and ownership of the effects of
actions.
 An Illustration of Descriptive,
Prescriptive, Ascriptive and
Appropriational Responsibility
Responsibility Subjective Objective
Usage
Descriptive He is a responsible His responsibility is
executive. unmatched.

Prescriptive He should be His responsibility for

responsible for this this event is absolutely
event. clear.

Ascriptive He can be held His responsibility for

(Attributional) responsible for this this damage is beyond
damage. a doubt.

Ascriptive He accepted His ownership of

(Appropriational) responsibility for the responsibility for the
harm done. harm that resulted was
as expected
 The Exxon Valdez Disaster
of March 4, 1989
A big oil tanker ran into a sandbar in Prince
William Sound off the coast of Alaska, USA,
spilling almost eleven million gallons of
crude oil that then washed onto the
beaches, devastating the environment of
water, fish, wildlife, nature lovers, tourists
and local cities and villages along miles of
North Pacific coastline.
It was later ascertained that the captain of
the ship had been drinking on the bridge
before the accident occurred, and that at
the moment the crucial turn that resulted in
the grounding of the tanker was executed
he was not in fact present on the bridge.
One Can Objectively make the Following
Statements on the Responsibility or
Accountability of the Captain:
The captain was responsible for the fact
that he had been under the influence of
alcohol while serving as captain of the
ship entrusted to his care (subjective
descriptive responsibility).
His navigation of the ship while under
the influence of alcohol was
irresponsible (objective descriptive
responsibility).
Insofar as the captain was not at the
helm when the ship ran aground, he was
not directly responsible for the oil spill
(subjective ascriptive responsibility).
Responsibility of the Captain
As the captain of the ship, however, it should
have been his responsibility to be present
when the crucial turn was executed
(objective prescriptive responsibility).
The captain should be responsible for all
major operations in navigating the ship
(subjective descriptive responsibility).
But he did not seem to own the wrong deed
(subjective appropriational responsibility) nor
own the harmful consequences (objective
appropriational responsibility)
 Captains Responsibility
To the extent that the spill of eleven
million gallons of crude oil destroyed
miles of scenic coastline and wildlife,
the captain, even though he was not at
the helm, should be held at least
partially responsible for the loss in
income of all those villages whose
livelihood was based on Alaskan fishery
(objective ascriptive responsibility).
He should also be held responsible for
the revenue loss of all those businesses
whose market was harmed by the lack
of tourists who did not visit these places
for quite few years thereafter (objective
ascriptive responsibility).
 Captains Ascriptive
Responsibility
Yet the courts decided that the captain
was not to be held personally
accountable for damage caused by the
spill (subjective ascriptive
responsibility).
[The charges concerning the influence
of alcohol were dropped in a plea
bargain, and his license to captain a
ship was revoked for a period of six
months].
But the Exxon Corporation was held
responsible for the action of its
employee, the captain (objective
ascriptive responsibility).
 Immanence/Transcendence &
Responsibility
Recall from Chapter 02 regarding the nature of the
human person expressed as a four-dimensional
vertical function of transcendence and immanence
and horizontal function of individuality and sociality.
Given this four-fold characterization of human nature,
responsibility is a first order:

Response to ones vertical tension of transcendence

(experienced as eternity, destiny, freedom, freewill,
subjectivity) and immanence (experienced as
temporality, earthly, determinism, constrained
freedom, and objectivity) and
Response to ones horizontal tension of individuality
(expressed as identity, continuity, self-project,
experience, knowledge, personality, and corporeality)
and sociality (expressed as a social-project, language,
interaction, integration, and culture).
 Second-Order Tensions of
Responsibility
According to Rehrauer (1996: 146), responsibility
is also a response to second-order tensions
between:

Transcendence and sociality by universal, human,

social values and principles, and a global human
vision;
Transcendence and individuality by individual
values, duties, norms, principles, and
understanding;
Individuality and immanence by individual
biological and psychological needs, wants, goals,
projects, desires and dreams;
Individuality and sociality by social norms, laws,
customs, constraints, institutions and
organizations, and governments
 Tensions of Corporate
Responsibility

Table 13.6 captures the

individuality, sociality, immanence
and transcendence tensions of
corporate executive
responsibility.
 Existing Paradigms of Executive
Responsibility

In the backgrounds of several paradigms of the human

personhood and human action we have discussed in
Chapter 03, we may define human responsibility using
the following paradigms:

For the metaphor Maker, responsible action is that

action which brings about the good. The Maker says,
Do what is good; Act so as to produce or realize the
good.
For the metaphor Citizen, responsible action is that
action which conforms to the social norms and laws.
The Citizen says, Do what is right; Act in a lawful
and dutiful manner.

But what is good? What is right? The two

supplementary paradigms of volitionalism and
motivationsim reply:
 Existing Paradigms of Executive
Responsibility
From a volitionalist viewpoint, responsible
action becomes action when we freely and
deliberately choose it.
Hence the volitionalist says, The good and
the right are what conform to the ideals and
values that you must freely and deliberately
choose.
From a motivationist perspective,
responsible action is one that is goal-
oriented, intentionally planned and
executed.
Hence, the morivationist says, The good
and the right are what enable you to meet
your needs while not interfering with others
who are meeting their needs.
 Concluding Remarks
Moral responsibility is a purposive answer to ones tensions
or challenges. In order to be morally responsible as a
corporate executive:

You must understand the nature of the activity for

which you are held responsible and for which you
are rendering an account.
You must at least develop enough sense of
reflective awareness to realize that the said action
is yours.
Your response of rendering an account must be
purposive.
Purposive action is impossible if you are incapable
of consciously selecting a goal, formulating a
strategy for its attainment, and evaluating the
effects of performance.
You must know what you are doing in response and
why you are doing it otherwise, there is no proper
accountability.
 Concluding Remarks
Not every answer or response is socially
acceptable. In understanding the nature of
your action and giving an account for it, you
must also understand the moral language of
the social group to whom you are giving an
account.
That is, the moral metaphors, concepts,
values, meanings and judgments that you use
should be socially intelligible to and
understandable by the social group or the
cultural milieu in which you are making the
response.
That is, you must know what is socially or
morally permissible and what is not
permissible in the society to which you are
supposed to respond.
 Concluding Remarks
Each social group or epistemic community
(e.g., priests, doctors, lawyers,
academicians, politicians, or religious
affiliations) has its specific moral language,
conceptual and moral universe, code of
conduct, hierarchical structures and power-
wielding processes.
Hence, you must know to whom you are
responsible, and who can demand an
answer from you for your action. Authority
derives from ones roles, status and
membership involvement in the group.
 Chapter 08:
Corporate Executive
Ethics of Rights and
Duties
Oswald A. J. Mascarenhas S.J., Ph.D.
JRD Tata Chair Professor of Business
Ethics, XLRI, Jamshedpur
Thomas Jefferson on Human
Fundamental Rights
"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).
Currently, almost all nations and their
Constitutions grant human beings the rights of
life, liberty, property, and the pursuit of
happiness.
 Focus on Rights and Duties
This chapter focuses on the ethics of rights and
duties. 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.
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, in particular, to fathom the
damaging effects of rights and duties violated by
the current financial crisis when seen from an
ethical and moral point of view.
Additionally, a deep understanding of rights and
duties could help us to analyze better the positive
and negative impact of our executive actions on
various stakeholders, and
Many Approaches to Rights and Duties
One approach is based on prima facie
principles such as autonomy, non-
malfeasance, beneficence, and justice.
Other approaches, 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.
The former is more Western or Occidental,
while the latter are 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, social and moral rights
come into conflict, and hence, a
common universal definition of rights
is not possible or necessary.
 Defining a Right
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 right and a claim right.
 Rights are Basically Relational in Character

If A has a right against B regarding X, then B has

a duty to A regarding X.
In such cases, all rights have a correspondence
of duties. Every right of A in relation to X implies
a corresponding duty of B in relation to X.
If we had a right to life, and others did not have a
duty to respect this right, our right to life would
be futile.
If consumers had a right to product safety, and
manufacturers and marketers did not have a duty
to produce and market safe products, then
consumer rights to product safety would be
meaningless.
If the public has a right for objective information
on public facts and events, and the media did not
have a duty to respect this right, then our right to
freedom of expression would be jeopardized.
 Rights as Entitlements
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 peoples 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, healthcare claims, gainful
employment claims, safety and privacy claims,
and the like may be better explained as
entitlements rather than rights.
Entitlements are bestowed on us for being bona
fide and one-time contributing citizens. Some
philosophers explain rights this way.
 Moral Philosophers Distinguish Several
Types of Rights:
Natural rights are those fundamental human rights we have because
of our human nature - because of our inalienable God-given human
dignity.
Moral rights are those rights justified by a moral system (e.g.,
Deontology, Utilitarianism, Distributive Justice). For instance, the
right to work is not guaranteed by our Constitution, but is based on
the moral principle that all human beings have a right to work in
order to sustain themselves and their families.
Positive rights or legal rights are those that law or society, state or
government provide for its members; e.g., rights to subsistence,
welfare, education, employment and vote are often positive rights.
Negative rights require others to forbear acting in certain ways
such; (e.g., all humans have negative rights not to be killed, raped,
maimed, abused, or emotionally destroyed.. For instance, the state
may have to legislate (positive rights) in order to protect our
negative rights.
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 right to peace and quiet); and
Absolute rights are those rights that cannot be overridden (e.g., right
to life, right to basic freedom) by any utilitarian considerations.
 Essentials of Natural Rights

Natural rights have some important properties:

Universality: they are possessed by all persons regardless

of race, color, nationality, creed, gender, age, or socio-
economic status.

Unconditionality: these rights are not dependent upon any

human or social condition such as particular social
practices, institutions or situations.

Inalienability: these rights cannot be terminated or taken

away from any human person. Nor can humans relinquish or
deprive themselves of such rights, nor can anyone deprive
them to others.

This, these rights are imprescriptible; they cannot be

rightfully taken away, lost, or revoked; they are inviolable.
 Right as an Entitlement
Despite the great variation in classifying
and defining rights, most agree that a
right is an individuals entitlement for
something.
That is, a right is a justifiable claim or
entitlement against others that at the
same time includes a liberty on one's
own behalf.
Rights are specifications of important
ways human beings are to be treated.
For instance, the right to life (i.e., the
duty of others not to kill us) is a
justifiable claim based on our rational
rights of being human.
 Right of Rights
Immanuel Kant (1724-1804) grounds rights on his
conception of humans as rational agents, that is,
beings who are capable of acting autonomously.
Such rights must be in accord with universal law; that
is, we have rights that justify our limiting the freedom
of others only to the extent that others have the same
rights to limit us. (This is an application of Kants
principle of Universalizability).
Kant believed that we have one fundamental innate
right the right to be free from the constraint of the
will of others insofar as this is compatible with a
similar freedom for all. (Hence, this is a negative right
of noninterference and not a positive right to human
wellbeing!).
From this fundamental right other subsidiary rights
follow such as right to equality, right to equal
treatment, and right to property
 A Taxonomy of Rights
Hollenbach (1979) provides a comprehensive
schema of human rights from the viewpoint of
general justice. He distinguishes three types of
rights (personal, social, and instrumental) that
are refracted through eight different realms of
human concern (bodily rights, political rights,
rights of movement, associational rights,
economic rights, sexual and family rights,
religious rights, and communication rights).
Table 8.1 spells out these rights from the
perspective of what human rights business
executives should be aware of and recognize in
arriving at turnaround and transformation
decisions.
Taken together, these rights constitute a
framework supporting human dignity, understood
as dignity in and supported by the community
 Content of Rights
Different people use the concept and content of
rights in many different ways. Different rights
come into conflict the rights of employees (e.g.,
to leave the employer and join a competitor, to
organize unions) often come into conflict with
employer rights (e.g., right to conduct business as
they see appropriate, to make decisions about
hiring, promoting and firing, to downsize).
Even consumers and the general public have
certain rights, especially in relation to non-
harmful or defective products, environmental
hazards, fair price, and variety of choices,
informative advertising, and complaint redress.
Hence, we need to clarify or define the concept of
a right and various kinds of rights earlier in the
discussion on rights.
 Basic Rights and Duties of
Employers and Employees
Table 8.2 lists some basic rights and duties of
employers and employees in relation several contexts
such as hiring, firing, promoting, retaining, quitting,
complaining, due process, worker safety and privacy.
There is some debate on every aspect of employee
right. For instance, some companies may honor
complaints and grievances and treat them justly, but
will not grant the right to due process to employees.
Employers may dismiss workers only for good reasons
and only after a thorough and impartial hearing, but
there is no contractual right given to the employee for
due process.
Thus, a dismissed employee may not challenge
employers or have recourse by right (but only by
sufferance).
Rights are a function of employers goodwill, and not a
function of employee claims. Some philosophers
explain rights this way (e.g., Joel Feinberg 1970).
 Hohfeldian Analysis of Rights and
Duties
According to Newcomb Wellesley Hohfeld, an
early 20th century philosopher and jurisprudential
scholar, the nature and extent of a persons rights
are dependent upon the correlative duty of
others.
Hohfeld (1913, 1919) reasoned that each legal
right 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 other person.
Hohfeld called this matching interest a jural
correlative. Thus, he argued that the correlative
of a right is a duty, the correlative of a privilege is
no-right, the correlative of a power is liability, and
the correlative of immunity is disability.
 Hohfeldian Analysis of
Rights and Duties
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 one has a legally protected interest, a
jural opposite is what one cannot have if one has
a legally protected interest with respect to a
certain type of act.
Thus, if one has a right, one cannot
simultaneously have a no-right; if one has a
privilege, one cannot have a duty; having a power
precludes having a disability, and having an
immunity precludes having a disability.
 Hohfeldian Concept of Right or
Claim
The first concept of right is that of claim.

He 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 performance.
 Hohfeldian Concept of
Privilege or Liberty
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.
The right of freedom of speech, the right to vote, and
in general, the Bill of Rights, are privileges or
protected liberties of American citizens
 Hohfeldian Concept of
Power
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 Ys 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 ones jural relations may be changed,
for better or for worse, at the instance of the other
person.
 Hohfeldian Concept of
Immunity
The fourth concept of right is immunity (or
no-liability) when Y is disabled from making
(or has no power to make) changes in Xs
jural relations.
For instance, X has an immunity against Y
means that Y cannot change Xs 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.
Hohfeldian Matrix of Rights
and Duties
Legal Jural Jural
Interest Correlative Opposite
Claim Duty No-right
Privilege No-right Duty
Power Liability Disability
Immunity Disability Liability
 Hohfeldian Analysis and
Consequences
From (1) we may argue as follows: The most important
point Hohfeld makes is that a persons possession of a
right [claim] is equivalent to someone elses
possession of a duty a duty, moreover, with the same
content
In Hohfelds example: the [claim] right and the duty
share the same content [e.g., that Y stay off Xs
land]. They share a content that is satisfied by Ys
staying off Xs 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).

 Hohfeldian Analysis and

Consequences
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
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
Summarized
Hohfeld, accordingly, distinguished four notions of
legally protected interests called rights (Bass
2003):

A right as a claim has no-right as its jural

opposite and a duty as its jural correlative.
A right as a privilege has a duty as its jural
opposite and a no-right as its jural correlative.
A right as a power has disability as its jural
opposite and liability as its jural correlative.
A right as an immunity has liability as its jural
opposite and disability as its jural correlative.
 Person Based Ethics of
Executive Virtue

Sr. Doris DSouza, A.C., Ph.D.

Professor of Business Ethics and Sustainability
Fr. Ozzie Mascarenhas, S.J., Ph.D.
JRD Tata Chair Professor of Business Ethics, XLRI
 Critical Questions of Ethics of
Virtue
Alasdair MacIntyre, in his After Virtue (1981), has
ignited new enthusiasm for virtue theory and its
attendant concerns with issues of character by
proposing a three-fold question:

Who am I?

Who ought I to become?

How ought I to do to get there?

Who am I? Its a Tough and
Rough Question
Who am I?
How do I define myself?
How do I find myself?
How do I discover myself?
How do I reinvent myself?
How do I assess myself?
These are equivalent, albeit different,
questions.
 Who Am I?
Most of us adults would like to define ourselves by:

Our academic accomplishments of grades and years in

school, the prestigious school;

Our grades and years in college, the prestigious college;

Our ranks and years at the University, the famed University;

Our academic degrees that I have picked up all along.

But all this may be just a small part of my self-definition.

 Who Am I?
Next, I gather supplementary self-definitions from my association
with:

School teachers,

College lecturers,

University professors,

My peers in school, college and the university,

And the things we did together.

 Who Am I?
Next, we reflect on our genetic heritage - my parents and
grandparents, my siblings, and the genetic impact they have
left on me.

I may even add my neighbors, neighbor-hoods, my

playmates, my hangout kids, my XYZ generation, and my
greatest adventures with them they add quite a bit to my
self-definition.
 Who Am I?
More recent additions to my self-definition may come from
my:

Work experience, industry experience, executive experience,

In different corporations or organizations, different cities or

states or countries,

Different job challenges and accomplishments, successes or

failures, and from making strategic mistakes.

All of the above put together may just about describe 50

percent of what I am.
 What Am I?
What I am is also my set of friends whom I believe in and
greatly trust.

Freedom to what I 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 me strive for the next and

the quest goes on until I run of time and stamina.
 What Am I Really?
What really defines me is how virtuous I am: my honesty
and integrity, prudence and moral wisdom, 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 my virtuous life
together they make my character, mold my personality,
empower my decision-making, and characterize my
leadership.
 What Am I Really?
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.

 How Do I Know Myself?

The journey to my unique self-knowledge and self-

discovery is life-long.

It is often an unbeaten path, a road less travelled, a risky

adventure, and an uncharted sea.

But as long as our self-definitions center round us we

have reached nowhere.
 What Am I
May Be Outside Me!
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.

The greatest source of my inner glow that also shows on

my outer being is my contribution to making the world a
better place for all of us.
 What is Virtue?
Virtue (from "Aret" in Greek) stands for excellence.

Virtue from Latin (virtus) means power.

Hence, virtue is powered excellence or a quest for

greater excellence.

It is Magis the quest for Greater Good

Hence, it is a dynamic concept.

 What is Virtue?
Retrieving Aristotelian ethic of virtue, MacIntyre
(1981: 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.
 Applied to business executives, the three
questions are:
Am I a virtuous (e.g., prudent, temperate, brave,
just) business executive?

What sort of a virtuous business person should I

become?

Which virtues specific to the business profession

should I pursue in order to be the virtuous person I
ought to become?
 How Virtuous am I?
The domain, quality and depth of my belief and
trust are how virtuous I am.

The test of my virtue is the level of peace,

contentment and happiness that I enjoy and
knowing the ways to get there.
 The Goal of Virtue Ethics
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
mould them to be a person they want to be for
humanity.
 The Importance of Virtue Ethics
Virtue ethics looks primarily on the type of persons we
ought to 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).
 The Cardinal Virtues
For Thomas Aquinas, the cardinal virtues correspond to
and perfect four powers

Prudence is related to the power of practical reason;

Justice to the will-power;

Temperance to the concupiscible power, and

Fortitude to the irascible power.

 The Practice of Virtue
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.
 Virtues as Means to 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 more brave. These are executive
virtuous exercises.
 How to Build Executive Moral Virtue
Aristotle argued that on moral virtue implies five logically sequential steps:

A moral virtue is a habit that enables us to act in accordance with the specific purpose
of human beings.

The specific purpose of human beings that distinguishes us from animals is to exercise
reason in all our activities.

Hence, moral virtues are habits that enable us to live according to reason; that is, to
exercise reason in all our activities.

We live according to reason when we know and choose the reasonable middle ground
between two excesses: one going too far and the other not going far enough in ones
actions, emotions and desires.

Finally, prudence is the virtue that enables us to know what a reasonable middle ground
in a given situation is.
 Executive Physical Virtue
Challenges

Executive virtue ethics focuses on executive human

physical virtues:

Draw your list of feasible (it can be done), viable (I can

do it), and desirable (I should do it) virtues that relate
to PQ (what Stephens called physical quotient in his
Eighth Habit (2004), especially physical fitness.

List and implement concrete actions and activities to

exercise your physical fitness daily.
Executive Intellectual Virtue Challenges

Executive virtue ethics focuses on executive

human intellectual virtues:

Draw your list of feasible (it can be done), viable (I

can do it), and desirable (I should do it) virtues that
relate to IQ (what Covey (2004) called intellectual
quotient), especially intellectual fitness.

List and implement concrete actions and activities

to exercise your intellectual fitness daily.
Executive Emotional Virtue Challenges

Executive virtue ethics focuses on executive human

emotional virtues:

Draw your list of feasible (it can be done), viable (I

can do it), and desirable (I should do it) virtues that
relate to EQ, (what Covey (2004) called emotional
quotient), especially emotional fitness.

List and implement concrete actions and activities

to exercise your emotional fitness daily.
 Executive Spiritual Virtue
Challenges
Lastly, and most importantly, executive virtue
ethics focuses on executive human spiritual and
moral virtues:

Draw your list of feasible (it can be done), viable (I

can do it), and desirable (I should do it) virtues that
relate to SQ (what Covey (2004) called spiritual
quotient), especially spiritual and moral fitness.

List and implement concrete actions and activities

to exercise your spiritual and moral fitness daily.
 Executive Virtue Challenges
Everyday dedicate some quality time for reflecting
on your PQ+IQ+EQ+SQ fitness progress.

Check it with your significant other.

Consult your friends.

You will be happy.

Ethics of Executive
Trust
.
Sr. Doris DSouza A.C., Ph.D.
Professor of Business Ethics and Sustainability, XLRI

Fr. Ozzie Mascarenhas, S.J, Ph.D.

JRD Tata Chair Professor of Business Ethics, XLRI
 Topics for Discussion
You can have all the facts and figures, all the
supporting evidence, all the endorsement that you
want, but if you dont command TRUST, you wont
get anywhere. (Nail Fitzgerald, Former Chairman,
Unilever). Discuss (Groups 1, 2 & 3)

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. Discuss (Groups 4, 5, & 6)
 What is Trust?
Simply stated, trust means confidence.

The opposite of trust mistrust is suspicion.

The moment there is suspicion about a persons motives,

everything he does becomes tainted, Mahatma Gandhi.

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.
 Jim Burke, former Chairman and
CEO, Johnson & Johnson, on Trust:
You cant 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.
Peter Drucker on Organizational
Trust
You cannot prevent a major catastrophe,
but you can build an organization that is
battle-ready, that has high morale, that
knows how to behave, that trusts itself,
and where people trust one another.

In military training, the first rule is to

install soldiers with trust in their officers,
because without trust they wont fight
(Peter Drucker).
 The World is Flat when there is
Trust
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.

 Importance of Trust
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 and Hamel 1994).
 Trust is One thing that Changes
Everything in an Organization
All things are rooted in trust.
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 place of bad judgment).

Low trust is the greatest cost in life and in

organizations, including families.

Low trust slows everything, every decision, every

communication, and every relationship (Covey (2006)
Speed of Trust, pp.: xxiv-xxv).
 The Speed of Trust Empowers
The Speed of Market
But when you begin to trust people in an
organization, everything begins to change.

You increase speed of decision and action,

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.
 Trust Changes Everything
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 todays global society
Stephen MR Covey (2006: 26).
 Importance of Trust
Understanding why people trust, and how
trust shapes human relations has been the
central focus of psychologists, sociologists,
political scientists, and students of
organizational behavior and marketing.
Importance of Executive Trust
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 turning around and
transforming your company.
 A Systems Approach to Trust
Inputs to Trust: Trusting predispositions of the trustor
and the trusted; trusting institutional environment;
expected and required skills and competences of the
trusted; initial trusting relations in an exchange
contest.

Process of Trust: Willingness to believe; accepting

vulnerability; mutuality and compatibility; ongoing
trusting relations.

Outcomes of Trust: Successful exchanges; long-

standing trusting relationships; empowered mutual
trust; trust-building skills, competences and brand
loyalties.
 The Physiology of Trust

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.
 The Psychology of Trust
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.
 Presumptive Trust
Roderick Kraemer calls presumptive trust as 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
toward trust (Kraemer 2009: 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 overweigh information that supports our

hypothesis or theory about the world, while we easily
discount evidence to the contrary. The same thing
works with trust.
 Type I and II Errors of Trust
We can never be certain of anothers motivations,
intentions, character, or career/business ambitions.

We simply have to choose between trust (thereby

opening ourselves to potential abuses) this is Beta or
Type II error), or

Distrust (which means missing out on all the benefits if

the other person happens to be honest and caring this
is alpha or Type I error).

This doubt and ambiguity lingers over every decision to

trust.
 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
relationships that are more frequent.

It is more challenging to build trust during

initial relationships when several factors are
significantly low such as interpersonal
familiarity, perceived similarity of values, and
the length and frequency of interactions.
 Institution-based Trust
Stimulators
Trusting intention at the beginning of a
relationship may be high because of
institution-based trust stimulators.

Institution-based trust literature speaks of

two such stimulators: situation normality and
structural assurances.
Situation Normality Affect Trusting
Beliefs and Trusting Intentions

For instance, a patient who enters a

clinic or a hospital environment may
anticipate a successful visit with the
doctor because of normal situations
such as safe and adequate parking,
clean and secure physical
surroundings, professional credentials
(as indicated by doctors certificates
displayed prominently).
 Situation Normality Affect
Trusting Relations
Other subsequent experiences may also
reinforce trusting beliefs and intentions
such as keeping appointments, good
customer service and fiduciary
responsibility as reflected in the
professional appearance of doctors and
nurses, and the friendly, yet professional
healthcare providing services.
 Situation Normality Affect
Trusting Relations
Similarly, customers, clients,
employees, suppliers, creditors, and
distributors may believe that what
they observe in the corporate or
business environment is normal or
more than customary, and which may
help them feel comfortable enough to
rapidly form trusting beliefs in the
firm.
Thank You
 The Ethics of
Human Personhood

Sr. Doris DSouza A.C., Ph.D.

Fr. Ozzie Mascarenhas S.J., Ph.D.
JRD Tata Ethics Research Center, XLRI,
Jamshedpur
 The Human Person :
The Foundation of Corporate Ethics
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.

We cannot leave these opposite polarities and

possibilities to chance. We must design and invent 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 collective journey of human personhood to
destiny.
 The Human Person:
The Foundation of Corporate Ethics
Corporate ethics requires the
development of a clear understanding
of the relationship between executive
autonomy and freedom, between
human creativity and market
innovation, and between human culture
and corporate social responsibility.

In this chapter we explore two crucial

concepts in this endeavor: the
corporate human: personhood, the
corporate human act and actions
 The Structure of this Chapter
We explore the awesome domain of the human
person, the foundation of all ethics, particularly
corporate ethics, under two Parts:

Part I:
The Ethics of Corporate
Human Personhood
Part II:
The Ethics of Corporate
Human Act and Actions
 Part I
The Ethics of Corporate
Human Personhood
 What is Human Personhood?
A proper sequence of questions on the
human person are:

What is a human person?

What is being human?

What is human personhood?

What is corporate human personhood?

A related philosophical and more fundamental

question is: what is human? What is being
good?
 What is Man?
Aristotles balanced formula or answer to this
question 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:

As a vegetative soul, the human is capable of

nutrition, growth, and reproduction;

As an animal soul, the human is capable of

movement and experiences;

As a rational soul that unites the other two, the

human is capable of knowledge and choice.
 What is Human?
Our 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, our potential for knowledge and choice

empower us to be causes or authors of our
own action, 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.
 What is Being Human?
Corporate ethics and morals deal not only with
executive decisions and actions, but even raise
the more fundamental normative questions such
as:

As a corporate executive, what ought I to do?

As a corporate executive, what ought I to be?

As a corporate executive, what ought I to

become?

Even those who consider basing ethics on a set of

universal and absolute values presuppose the
necessity of the human personhood.
What Constitutes our Human
Personhood?
Our human personhood is a unique
combination of four internal-external
forces that unify, interpret, internalize
and respond to the internal-external
stimuli namely:
Our Immanence

Our Individuality

Our Sociality and

Our Transcendence
 Our Unique Immanence
Etymologically, immanence (in + manere in Latin)
means to remain in, or to be operating and living
within something. The cosmos lives within us in
a unique way. We are immanent in the world and
in the universe.

We were uniquely incarnated in a world and the

universe during a unique combination 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, stars and zodiacs, earth
and planets, moon and the seasons, time, space,
gravitation and motion. Oriental philosophies
(e.g., China, India) have explored this aspect of
our unique immanence.
 Our Unique Body Immanence
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.
Our Unique Spirit-Body Immanence
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.

Most religions call this principle of unity the soul

(atman in Sanskrit, pneuma in Greek, anima in
Latin).

Without the soul as the unifying principle we

cannot be human persons, and without the body
we cannot be human persons either; we need a
unique combination of the two.
 Our Unique Individuality
We are a unique combination of body and soul, mind and
matter, the conscious and the unconscious, the physical and
the emotional, the intellectual and the spiritual, 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 who we will
become.

Nor will our talents and skills, knowledge and thoughts,

willed actions and behaviors totally define us or determine
the outcome of our individuality. They all contribute to our
specific personality and uniqueness called individuality.
 Our Unique Individuality
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 made us into this
unique and historical composition (i.e., originated
in specific combinations of space, time, motion
and gravitation, body and soul, mind and matter,
family, social and cosmic 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.
 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
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.
 Our Unique Sociality
Our human nature has evolved in a unique
way such that we can communicate in a
special way with other human beings.

We develop language of signs and symbols,

and all these can only happen within a
social nexus.

Language enables us to share and

communicate knowledge with each other.
Language makes interpersonal sharing of
meaning and relationships possible.
 Our Unique Transcendence
Etymologically (from Latin ascendere = to
climb; transcendere = to go beyond, to
surpass), transcendence implies going
beyond ones sense and experience,
emotions and feelings, knowledge and
skills, capacities and limitations, in order to
achieve excellence, moral integrity, and
extraordinary 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.
Nelson Mandela
 Nelson Mandela
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 Africas 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.

Nelson Mandela struggled against

apartheid for more than half a century.
He was a cofounder and leader of the
African National Congress (ANC).
 Tributes to Mandela
President Obama eulogized: He achieved more than
could be expected of any man. I am one of the
countless millions who drew inspiration from Nelson
Mandelas 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.

Prime Minister Manmohan Singh said: A giant among

men has passed away. This is as much Indias loss as
South Africas. 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.
 Nelson sought the
Greater Good
Released from prison in 1990, Mandela negotiated
a peaceful end to the old regime with leaders of
South Africas White minority government.

Three years later in 1993, he was awarded the

Nobel Peace Prize.

He served as President of South Africa from 1994

to 1999, declined a second term, before stepping
down voluntarily, and cheerfully handed over
power to an elected successor, Thabo Mbeki.

Nelson was and became an international emblem

of human dignity and forbearance.
He Forgave; He Loved Peace
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?

Mandelas answer was almost

dismissive: Hating clouds the mind.
It gets in the way of strategy.
Leaders cannot afford to hate.
Captain Lakshmi Sahgal
 Captain Lakshmi Sahgal
A Life of Struggle: Freedom Fighter, Doctor,
Communist, Lakshmi Sahgal dies, 97, July 24, 2012.

She felt the whole freedom struggle had gone wrong.

Partition had been a disaster, and the modern pursuit
of money had ruined all.

Her dream of free women: she hoped to abolish child

marriage, dowries and the ban on remarriage of
widows.

She wanted women to have chances like hers: to be

educated, self-supporting if they cared to be, and able
to make their own choices about marriage.

With SC Bose in Singapore she joined the INA, became

Captain, and fought for freedom and womens rights.
 Her Achievements
As a young doctor of 26, Lakshmi left for Singapore in 1940. Three years later
she met Subhas Chandra Bose, a meeting that would change the course of her
life.

Captain Lakshmi married Col. Prem Kumar Sahgal, whom she met at
Singapore, a leading figure of the INA, in March 1947. The couple moved from
Lahore to Kanpur.

Here she plunged into medical service for the rest of her life for more than 50
years.

She worked among the flood of refugees who had come from Pakistan, and
earning the trust and gratitude of both Hindus and Muslims.

She was one of the founding members of the All India Democratic Women's
Association (AIDWA), set up by the Party.

She was awarded Padma Vibhushan in 1998, in recognition for her service to
the nation.

The Left parties nominated her candidacy for the Presidential election in 2002,
during which time she said, "My one-point objective would be to maintain the
unity and integrity of this great nation."
 Dr. Amar Gopal Bose
(1929-2013)
BSc, MSc, and PhD from MIT in Electronic
Engineering.

He never went into business to make money.

He went into business so that he could do

interesting things that hadnt been done before in
acoustic engineering.

He always said: Never lose your imagination.

Always dream of things that are better and think
about ways to reach those things.

This is intrinsic motivation.

 Amars Philosophy of IM
Bose talked not only about acoustics but
about philosophy, personal behavior, what
is important in life.

He was somebody with extraordinary

standards.

He persistently refused to offer stock to the

public so that he could freely pursue risky
long-term research such as noise-cancelling
headphones and innovative suspension
systems for cars, without the pressure of
quarterly earnings and annual financial
statements and announcements.
 What is being a Good Corporate?
Cognitively, the good corporate executive knows
what is good versus evil, right versus wrong, truth
versus falsehood, and fair versus unfair.

Volitively or voluntarily, the good corporate

executive actively strives:

To do what is good and to avoid evil,

To do what is right and to avoid doing wrong,

To speak the truth and to avoid speaking falsehood,

and

To do what is fair and just and to avoid what is

unfair and unjust.
Table 2.1A: Summarizing Potentiality of Human
Personhood
Human Vegetative Soul Animal Soul Rational Soul
Dimensions
What is Man? Nutrition Movement Knowledge
Biological Growth Sensations Choices
Reproduction Experience Willing

What is Human? Meals Time Management Reflective Thinking

Maturity Talent Nurturing Reflecting choices
Family Skills Management Authoring Choices

What is Being As a vegetative soul: As an animal soul: As a rational soul:

Human? What I ought to do? What I ought to do? What I ought to do?
What I ought to be? What I ought to be? What I ought to be?
What I ought to What I ought to What I ought to become?
become? become?
What is Good Health, safety, Work, society, teams, Knowledge, wisdom,
security, talent, skills, great decisions and
Sports, athletics, programs, projects, choices, peace, harmony,
physical fitness wealth, possessions, happiness

What is Being Natural tendencies Natural tendencies to Natural tendencies to be

Human to be good with be good with self, pursuing the ultimate
environment family, work and good in decisions,
society choices and strategies.

What is being a To do what is To do what is To speak the truth and

Good Corporate corporate good and corporate right and to avoid falsehood;
to avoid corporate avoid all corporate To do what is fair and just
Executive?
evil. wrong. and avoid the opposites.
How do our Immanence, Sociality, Individuality
And Transcendence (ISIT) Ground Corporate
Ethical and Moral Decisions Actions?
Our human immanence as corporate
executives makes our decisions and
strategies, acts, actions and activities
concrete, historical, geographical,
contextual, and hence, uniquely
situational, irreversible, existential, and
accountable for their consequences.

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.
 How do our ISIT Ground Corporate
Ethical and Moral Decisions
Actions?
Our human sociality as corporate
executives makes our acts and actions
(decisions and strategies) social and
society-oriented, with summons for due
diligence of the choices of inputs,
processes and outputs we make.
Our human transcendence as corporate
executives makes our decisions and
strategies, acts, actions, activities, meta-
individual, trans-social and trans-
organizational in relation to the choices of
inputs, processes and outputs we make.
 The Static and Dynamic Nature of
the Human Person
We are human persons every moment of our life
and being - this is the fixed 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 persons and personhoods.
 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 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, understanding, explanation, experimentation,
creativity and innovation, imagination and intuition, judgment and
decisions, prediction and control; and

We are volitive, voluntary and intentional human beings who can

deliberate, be determined, use free will, choose, select or elect
among competing courses of actions, subjects, objects, properties
and events.
Ethics of Human Behavior
Ethics is concerned with responsible human
behavior.

Business Ethics is concerned with responsible

human behavior in relation to managerial
decisions, actions and their outcomes.

Corporate Ethics is concerned with responsible

human executive behavior in relation to corporate
decisions, actions and their outcomes.

Good Corporate executives execute good

decisions and actions that generate good
outcomes, and avoid bad decisions and actions
that result in bad or harmful consequences.
 The Influence of External Stimuli on the
Human Person
Our family and school stimuli: our childhood
/adolescent experiences of our parents, nursery
school, siblings, grandparents and relatives, peers and
teachers at middle- and high- schools, colleges and
universities.

Our ergonomic Stimuli: experiences in relation to

gainful work, meaningful work, co-workers and labor
unions, native talent perfected, new skills picked up,
and the like.

Our market stimuli: the expanding world of thousands

of brands, products, services, stores, malls,
supermarkets, www, blogs, e-bulletins, Facebook .

Our ideological stimuli: our value-experiences of

society, art and poetry, language and literature,
history and culture, law and order systems, religious
institutions, and political agenda.
The Human Ethical Person in Action
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, 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. This is
ethics in action.
 Part II
The Ethics of Corporate
Human Act and Actions
 The Human Person and the
Human Act
From Part I it should be clear that the human person is a multi-polar unity
of several faculties and powers:

Sensitive (5 senses and their combinations, instincts, drives,

observations and sense memory),

Affective (moods, emotions, feelings, attitudes, beliefs and passions),

Cognitive (perceiving and conceiving, thinking and reasoning, intuition

and imagination, exploration and experimentation),

Volitive (deliberation and will, choice and freedom, liberty and autonomy,
commitment and dedication);

Personhood: a unique individual and social, immanent and transcendent

combination and composition of the body and soul, mind and matter, self
and others;

Environment: a planned and highly engineered product of the internal and

external stimuli and worlds.
 What is an Executive Human Act?
Human acts are those that stem from human actors as human beings.
Since the human personhood is basically constituted of body and soul,
mind and matter, emotion and spirit, intellect and will, and because of
this unique composition it has ISIT, it reasonably follows that human acts
are those that define the human person as person.

They are acts that are characterized by knowledge (derived from ones
intellect and rationality) and freedom (capacity for choices based on
ones will).

Human acts are thus freely willed acts.

Hence, two elements are essential to human acts: an element of ones

reason and ones volition.

Human reasoning is the combined effect of the intellect via thinking,

intuition, imagination, explanation and experimentation on the sense
and affective stimuli.
Human willing or volition is the combined effect of freedom and
choice, commitment and dedication, deliberation and perseverance
on sense, affective and cognitive stimuli.
 Human Acts are Deliberate
and Voluntary
Hence, they imply human control through
rationality and will; they are willed.

A truly human act is deliberate and voluntary; it is

not forced or unduly constrained.

Deliberation implies knowledge of what one is

doing, and

Voluntary implies a free choice on the part of the

human person to act.

Hence, executive human acts are those corporate

acts that are deliberate and voluntary.
 Concluding Moral Challenges
Our transcendental freedom empowers us
to change ourselves, to redefine ourselves,
even to reinvent ourselves and the image of
God in us.

We are, therefore, responsible not only for

our individual acts and their consequences,
but through these acts, responsible for our
human personhood.

This is because we image ourselves

through our choices, decisions, values, acts
and actions; we image ourselves through
our character, personality and
temperament.
 Discussion
(Group work)
With your perception of Human
Personhood and Dignity post this
session, how would you treat:

Self and

Others (in general and at work place)?

Thank You