Ethical Reasoning in Business
How to Make Ethical Decisions
by Richard C. Bayer, Ph.D.

Business leaders make ethical decisions every day. We might be tempted to assume that let your conscience be your guide is the simple formula that most people follow when they grapple with ethical issues. But it’s actually far more complex than that—usually because the situations and issues that we face in the workplace are complex.

“Let your conscience be your guide” does not
provide the necessary guidance.

 For example, what should hiring managers do about questions of diversity, quotas, and affirmative action? How should a CEO go about deciding how much to spend to reduce air and water pollution caused by his company? How much pollution is acceptable, and how much is too much? When is advertising a forceful presentation of a product’s strengths, and when does it claim too much and betray the public’s trust? How should a reduction in workforce be carried out, and how does the firm determine the right amounts for severance, career counseling (outplacement), and benefits coverage for those being terminated?

Let your conscience be your guide falls far short of providing necessary guidance in such matters. We shall see, in fact, that there are concrete methods for ethical reasoning. Indeed, historically there are several methods that people have used. Examining these methods can be fascinating, and in the paragraphs that follow, I’m going to describe three of the most highly regarded, with emphasis on Economic Personalism, which I consider to be the most helpful and comprehensive (it includes the insights contained in the first two).

Let’s look at the inspirational Johnson & Johnson Tylenol case to help us examine ethical reasoning.

 To prevent this from sounding too theoretical, the best approach will be to present a case study, involving real people in a life and death situation—literally. Let’s look at the inspirational Johnson & Johnson Tylenol case. It provides a very good example for analyzing methods of ethical reasoning.

On September 30, 1982, three people in the Chicago area died from cyanide introduced into Extra-Strength Tylenol capsules. The link between the deaths and the tainted capsules was made with remarkable speed, and authorities notified Johnson & Johnson. As the number of deaths grew—the final total was seven—the firm faced a crisis and, indeed, potential disaster. Tylenol, a leading pain-reliever, was Johnson & Johnson’s single largest brand, accounting for almost 18 percent of the corporation’s income.

The executives involved in deciding how to respond did not know:

· Had the cyanide been put in the Tylenol capsules during the manufacturing process or later?
· Were the deaths that had already been reported just the first of a very large number?
· Would the deaths be limited to the Chicago area?

The U.S. Food and Drug Admini-stration had issued a warning not to take Tylenol, but the government had not ordered the company to take any specific action. Perhaps the deaths would be local, and there would not be more than seven. Perhaps the authorities would not demand a recall. Perhaps a temporary cessation of sales until the source of the contamination was determined could prevent more harm to the public.

Against all these unknowns, the Johnson & Johnson executives had to weigh several certainties:

· A recall would involve a loss of up to $100 million.
· The loss was not covered by insurance.
· News of a recall could so damage the product that Tylenol might never be able to regain public confidence and its 37 percent of market share.
· The news and loss would surely result in a dramatic drop in the company’s stock (it did in fact go down 15 percent in the first week of October).
· The competition in the analgesic market was fierce. Competitors would try to make Tylenol’s loss their gain.

Public welfare and the company’s reputation were both protected by ethical decision-making.

 These were certainties; the rest was guesswork and speculation. But, unwilling to expose consumers to further risk —and in a decision that puts it in the Ethics Hall of Fame— Johnson & Johnson ordered a recall of all Tylenol bottles. In the long run, public welfare and the company’s reputation were both protected by ethical decision-making.

The Tylenol case obviously presents a major case of ethical reasoning. But ethical issues, large and small, present themselves every day. Business leaders need methods for dealing with them and arriving at reasonable decisions. There are three major approaches in ethics that have been defined by philosophers and theologians, which are applied every day by many leaders who may never have read the works of the philosophers and theologians!

There are three major approaches to ethical
decision-making.

Approach One: Universal Obligation
 One way to look at it is this: moral rules derive from our rights and duties toward one another. The thinker most closely connected with this approach is the great philosopher Immanuel Kant (1724-1804), as expressed in his Groundwork of the Metaphysic of Morals. For Kant, actions are not good or bad based on the purposes for which we act. Rather than considering purposes, we should ask if the basis of our action could become a “universal law” for all moral actors in similar circumstances. If it is wrong for any company to sell a potentially defective product, it is wrong for Johnson and Johnson to do so—despite the considerable cost of a recall. The focus is on motivation, not on the consequences of an action. Furthermore, since all human beings share this ability to reason about moral actions, Kant believed that no person must ever be treated purely as a means, but as an end in himself. We cannot use other persons purely for some benefit to ourselves.

This rule would prohibit seeing the consumer purely as a means to corporate profit—as could have been done in the Tylenol case (but was not). Johnson & Johnson correctly recognized its duty to consumer welfare. However, the Kantian approach fails to consider the ends of an action. Indeed, it is often said, “the way to hell is paved with good intentions.” I believe that morality should consider consequences (not just motives) of an action on the actual human beings who are impacted.

Universal Obligation:
never use other persons purely for some benefit
to ourselves.

A Modern Understanding of Universal Obligation
 One of the foremost philosophers of the 20th century, John Rawls, takes a position very similar to Kant. Now Professor Emeritus at Harvard, in 1971 Rawls first published A Theory of Justice. He argued that people will choose proper rules when they are forced to reason impartially. Rawls asks people to reason from what he calls an “original position.” They should, in fact, imagine themselves behind a veil of ignorance. That is, they are free, equal, rational, self interested, but, in the original position, they do not know their place in society, they have no idea about how well they will fare in the natural lottery of talents, nor do they know their likes, dislikes, religious beliefs, etc. They know only the general facts about human society. It is assumed that they have different aims (life plans), but they cannot advance them at the cost of others since all knowledge is held behind the veil of ignorance. Ignorance of these things guarantees impartiality in ethical choice.

According to this method of reasoning (from behind the veil of ignorance), the management and stockholders of Johnson & Johnson would have reasoned impartially, that is, they would never have put the consumer at risk any more than they would have been willing to put themselves at risk! However, the Rawls method has a serious flaw; I doubt that many of us can reason so abstractly about concrete daily moral problems. This especially becomes clear when Rawls spells out what we must “forget” to reason ethically (our place in society, our talents, likes, dislikes, religious beliefs, etc.)! Rawls is also subject to some of the same criticisms as Kant; the actual impact of any moral decision on concrete human beings never comes clearly into focus. The failure to consider consequences is remedied in our next approach.

Consequences:
take actions that produce the most good for the most people.

Approach Two: What Is the Impact of What You Do?
 There are those, however, who do not believe that morality is about rules and duty, but about consequences. This approach to ethical reasoning is known as Utilitarianism, and was argued most strongly by John Stuart Mill (1806 -1873). According to Mill, actions that produce the most good for the most people are considered morally right. Utilitarianism seeks “the greatest good for the greatest number.” Following this course, the decision makers at Johnson & Johnson would be forced to consider not only the interests of Johnson & Johnson, but also the interests of the public at large. Determining the greatest good for the greatest number would require a cost and benefit analysis for all parties concerned.

This method of reasoning probably would have required the product recall. The protection of the millions of Tylenol users represents the greater good and outweighs the financial costs to Johnson & Johnson.

But if only a few would be poisoned, what then? Unfortunately, utilitarianism would allow large and unfair burdens to be placed on the few to benefit the greatest number. This runs against many of our ethical sensibilities. It also does not say much about what is meant by the greatest “good” for human beings. This flaw is remedied in a Personalist approach.

Approach Three: Economic Personalism
 Personalism has human dignity at its center. The focus on human dignity has support from sources as varied as the United Nations, Economic Personalism in Christian social thought, and the Dalai Lama. Ethical reasoning according to this approach will ask the question: which action most leads to the protection and promotion of human dignity? Of course, the key to answering this question for any issue will be how one understands the human person.

The approach I prefer,
Economic Personalism :
choose the action that most likely leads to the
protection and promotion of human dignity.

Aspects of the Person to Consider
  Those within the Judeo-Christian tradition believe that all persons were created in the image and likeness of God. It is this belief that gives a foundation for protecting and promoting human dignity. Catholic social thought in particular has latched on to this approach to answer questions of business and economic ethics. (As I have indicated, it is not only Jews and Christians who affirm human dignity, but also others—Muslims, philosophers, and others—who do so for their own reasons and within their own traditions. I trust that the reader who is neither Jew nor Christian can find application for all or most of the ideas presented here.)

The following discussion covers the six basic aspects of the human person to consider when making ethical decisions in your everyday worklife using the Economic Personalism approach. After surveying these aspects, we’ll look at how they would have affected decision-making in the Tylenol situation.

1. Spiritual
 In Economic Personalism, all things on earth are understood as being ordered to human beings as their center and summit. Indeed, human persons are spiritual beings, distinguished from other creatures by their capacity to know and to love. In other words, God gives persons their true being, not simply in the sense of existence in time and space, but in the sense of life purpose, meaning, and ethical structure.     

To become truly what he or she is meant to become spiritually, a person must have ‘space’ to practice spirituality. This means that your ethical decisions must have respect for and encourage various belief systems. For example, people need time off from work for religious holidays. It is your duty to help a Muslim be a good Muslim, for example, by giving him the space to practice spirituality.

Human beings are distinguished from other
creatures by their capacity to know and to love.

2. Communal
 Christians believe that God’s being is not solitary, but communal. For example, we speak of a community of persons, Father, Son, and Spirit, who give and receive the gift of love. Human persons, created in the image and likeness of God, also find their true being in the process of giving and receiving love and in the experience of unity amidst difference. Since Economic Personalism indicates that a person only develops to his or her fullest with others, it is your ethical responsibility to encourage this. For example, you can give employees the opportunity to socialize, participate, work in cooperative settings, and join appropriate associations.

3. Material
 In making ethical decisions using Economic Personalism, you would also consider the material aspect of a person. The basis for this is that God has created persons as body and spirit, and our everyday material processes should serve to reveal the hidden presence of God. Although, realistically speaking, the activities of caring for the body, providing for the needs of family and self, participating in economic life, do involve some repetition and at times toil, the more salient truth is that in the process of these activities we can discover and recognize the activity and presence of the Creator.

Consider the act of eating. You eat and provide nourishment for the material needs of your body, but we almost always prefer to do this communally. The material overlaps with the spiritual. Eating can become almost a spiritual event. Indeed, for Christians, the Eucharist, a meal, is the high point of worship.

As an ethical decision maker, you would consider that a person requires food, shelter and clothing to survive, and you would pay just wages and benefits and provide safe and pleasant working conditions to protect people in the material sense.

J&J put people before money. They understood their social responsibility to protect persons, whose unique value is inestimable.

4. Free and Creative
 Economic Personalism emphasizes freedom for the individual because it is only in the exercise of our freedom that we can turn ourselves toward what is truly good. In our freedom and creativity, we may participate in and contribute to that process of giving and receiving love that involves God and other persons. The more people are involved, the more giving and receiving of love there is.

As an ethical decision-maker at work, you will help people move forward professionally, to exercise their creative abilities.

Protecting Human Dignity At The Workplace
Characteristics of Human Beings	Definition	Example Application
1.         Spiritual	A person must have ‘space’ to practice spirituality.	Respect and encouragement for various belief systems. Time or days off for religious holidays are very important.
2.         Social	A person only develops to his/her fullest with others.	Employees should have opportunities to socialize, participate, work in cooperative settings, and join appropriate associations.
3.         Material	A person requires food, clothing shelter, etc. to survive.	Payment of just wages and benefits. Safe and pleasant working conditions.
4.         Free & Creative	We all want to move forward professionally, to exercise our creative abilities.	Assignments should assign creative responsibility to the lowest level possible.
5.         Fragile	We are all prone to error; have our weaknesses; and failings.	Employees need oversight, second chances, extra training, or re-assignment.
6.         Equal	Person have a basic equality regardless of race, color creed, etc.	Thee should not be discrimination on a non performance basis.

5. Fragile
 Of course, a realistic understanding of the human person must recognize the significance of human finitude and the significance and tenacity of our moral failings. In our finitude, we realize that we can never achieve the good that we often desire. We must learn patience,  humility, and realism in setting objectives. Refusal to do this is a rejection of our bodily nature. Furthermore, in our freedom we have all refused to participate as we should in the process of giving and receiving love; the image of God in us all is thereby lessened and distorted. 

Since we are all prone to our weaknesses and moral inconsistencies, you should give your employees compassionate oversight, second chances, extra training, or even re-assignment.

6. Equal
 We may speak of human equality in the sense that all persons are called to know and to love God, all have certain rights and duties with respect to other persons, and all should have equal opportunity. The basic equality among persons has been the basis for the call to provide all persons, and especially the least advantaged, with the necessary material and non-material support to achieve the ends of human life. You must be careful not to discriminate on a non-performance basis.

Back to Johnson & Johnson
  It seems that Johnson & Johnson understood its social responsibility to protect persons, whose unique value is inestimable. Human beings were put before things (money in this case). This action was consistent with the protection of human dignity, and therefore the recall was a proper exercise of managerial freedom. Given our nature as morally inconsistent and shortsighted creatures, there was surely the temptation to do otherwise.

This approach also includes the wisdom contained in the prior methods. Universal obligation (Kant and Rawls) must be respected because of our equal human dignity, and we must consider carefully the ultimate impact (utilitarianism) on actual human beings when reaching a judgment. However, Economic Personalism far surpasses utilitarianism in actually defining what we mean by human beings and their innate dignity.

Recognizing their social obligation, Johnson & Johnson acted to protect people on the material level. Because they too were fragile and morally inconsistent, the J&J executives could have chosen otherwise. Spiritually, they maintained our trust. They recognized basic equality by not putting their own good above others.

In sum, they chose the action that most led to the protection and promotion of human dignity.

Given our nature as morally inconsistent and shortsighted creatures, J&J was surely tempted to do otherwise.

Conclusion
 So, how do we make ethical decisions in business? How are we to handle the complex situations mentioned at the beginning of this article? I believe that Economic Personalism is overall the most comprehensive and helpful. It is the most comprehensive because it includes the insights of Kant, Rawls, and Mill; and it is most helpful in fulfilling “human dignity.”

It is a great relief to ethicists and moralists—and a source of deep satisfaction—that Johnson & Johnson fared so well in the long run in the wake of its highly ethical actions. We see that ethical behavior can be consistent with surviving and making money. 

1.  Richard T. DeGeorge, "Business Ethics," 5th edition  (Upper Saddle River, NJ; Prentice Hall,  1999). Page 3.
2.  "Gaudium et Spes," in Vatican Council II: The Conciliar and Post Conciliar Documents, General Editor Austin Flannery, O.P., (Collegeville, Minn.: The Liturgical Press 1979), paragraph 12.
3.  "Gaudium et Spes," in Vatican Council II: The Conciliar and Post Conciliar Documents, General Editor Austin Flannery, O.P., (Collegeville, Minn.: The Liturgical Press 1979), paragraph 17.

Richard C. Bayer , Ph.D. is a theologian and an economist, and is the Chief Operating Officer of The Five O’Clock Club.