Discussion of Business Ethics

Read Sandbu, Chapter 12: Fulfilling Social Contracts, Garrett Hardin’s article “The Tragedy of the Commons” and Michael J. Sandel, What Money Can’t Buy, Chapter 2:Incentives, and answer the following questions in no less than two paragraphs(5-7 sentences) each:

(1) In Sandbu’s re-formulation of John Rawls’s social contract theory of justice, what basic principles would it be rational for individuals to commit to in an imaginary social contract position for business transactions? Choosing the debate about shareholders vs. stakeholders or the Guidant dilemma, explain what the parties to a social contract for business would agree to? (Sandbu, 180-86)

Majority of people are prejudiced by their circumstances, but how can people agree to a “social contract” to regulate how the world can function. Philosopher John Rawls suggests that we should imagine that we are sitting under a curtain of denial that prevents us from understanding who we are and from interacting with our circumstances. By ignoring our conditions, we will think more critically about how communities can work. Two main concepts accompany Rawl’s curtain of ignorance: the principle of equality and the principle of distinction. According to the theory of freedom, the social contract should aim to ensure that everyone enjoys the greatest possible freedom without interference with the freedom of others.

According to the theory of differentiation, the social contract should ensure that everybody has an equitable chance to succeed. In other words, whether there are social or economic gaps in the social contract, they can support those who are the worse off. And all the benefits of the deal should be open to everyone. So according to Rawls, tackling difficult problems without a curtain of indifference, and applying these values will allow one to determine more reasonably how the laws of society can be organized. Fairness, as Rawls and many others claim, is the core of justice.

(2) What exactly is partial compliance theory, and why is such a theory needed? Choosing either the issue of deception or corruption, explain what rules or behavior in business– from the point of view of partial compliance theory–individuals would agree to in an imaginary social contract setting? (Sandbu,192-95)

Ideal philosophy suggests full conformity, people are subject to state laws and cooperate entirely with them. Not only do these laws need to be in place, but conformity with them is what leads to an optimal culture. Laws in ideal philosophy also outline what should take priority to make desirable circumstances appear and be preserved. Concerning the concept of absolute conformity with ideal theory, partial compliance is a function of non-ideal theory. Complete conformity cannot be accomplished within non-ideal theories because they take into account adverse societal circumstances that lead to harmful outcomes, such as crises. Partial conformity is more closely reminiscent of today’s functional social configuration, but another aspect that varies between ideal and non-ideal ideas is the realistic factor of both.

A lot of people are misunderstanding legal and ethical compliance. However, they are entirely different and call for different levels of conduct. In every meaning of the word, the terms are not synonymous. Rules are important to create and sustain a functioning society. Except for this, our world will be in disorder. Keeping with these legal requirements is purely compulsory: if we exceed these standards, we shall be disciplined under the rules of the statute. Compliance with corporate ethics, however, usually refers to the degree to which a corporation performs its business activities following relevant laws, statutes, and legislation. Yet this is just the baseline minimum. The ethical observance is founded on this premise and shows the values of a particular business executive or a specific organization. Ethical actions are usually perceived to be voluntary and personal—often based on our interpretation or our position of right and wrongADDIN CSL_CITATION {“citationItems”:[{“id”:”ITEM-1″,”itemData”:{“DOI”:”10.1002/(SICI)1099-1050(199908)8:5<369::AID-HEC456>3.0.CO;2-Q”,”ISSN”:”10579230″,”PMID”:”10470544″,”abstract”:”Individual attitudes to distributions of life years between two groups in a society are explored by means of an experiment. Subjects are asked to place themselves behind a veil of ignorance which is specified in terms of risk (known probabilities) for some subjects and in terms of uncertainty (unknown probabilities) for some subjects. The latter is argued to be the appropriate interpretation of Rawls’ notion. It is found that subjects exhibit convex preferences over life years for the two groups, and that preferences do not differ between the risk and the uncertainty specifications.”,”author”:[{“dropping-particle”:””,”family”:”Andersson”,”given”:”Fredrik”,”non-dropping-particle”:””,”parse-names”:false,”suffix”:””},{“dropping-particle”:””,”family”:”Lyttkens”,”given”:”Carl Hampus”,”non-dropping-particle”:””,”parse-names”:false,”suffix”:””}],”container-title”:”Health Economics”,”id”:”ITEM-1″,”issue”:”5″,”issued”:{“date-parts”:[[“1999″,”8″,”1″]]},”page”:”369-378″,”publisher”:”John Wiley & Sons, Ltd”,”title”:”Preferences for equity in health behind a veil of ignorance”,”type”:”article-journal”,”volume”:”8″},”uris”:[“http://www.mendeley.com/documents/?uuid=4e92bcdd-81ed-397e-8a1b-579aafbcf32e”]}],”mendeley”:{“formattedCitation”:”(Andersson & Lyttkens, 1999)”,”plainTextFormattedCitation”:”(Andersson & Lyttkens, 1999)”,”previouslyFormattedCitation”:”(Andersson & Lyttkens, 1999)”},”properties”:{“noteIndex”:0},”schema”:”https://github.com/citation-style-language/schema/raw/master/csl-citation.json”}(Andersson & Lyttkens, 1999).

(3) Explain how you understand the idea of the ‘tragedy of the commons.’ What does the ‘tragedy of the commons’ suggest about the future of our planet? In what way is Hardin’s “tragedy of the commons” a counter-argument to Adam Smith’s ‘invisible hand’ approach to economics? (Read-only the sections of Hardin’s article titled “Tragedy of Freedom in a Commons” and “Pollution”.)

The tragedy of the commons is a very real economic problem where individuals seek to manipulate shared resources in such a way that demand far exceeds supply and, consequently, the resource becomes scarce for the whole. Every person has an opportunity to consume a resource, but at the cost of every other individual—no way to exclude others from consuming it. It was initially conceived by asking what would happen if every shepherd, acting in his self-interest, allowed his flock to graze in the common field. If everyone behaves in their apparent best interest, it results in unhealthy over-consumption (all the grass is consumed, to the detriment of all)

As demand for resources overwhelms supply, each person who consumes an additional unit directly harms others—and themselves, too—who can no longer enjoy the benefits. Generally, the resource of interest is freely accessible to all individuals without barriers (i.e. “commons”). On the other side, the tragedy of the commons reappears in the form of environmental concerns. Here it is not a matter of getting anything out of the commons, but of putting something in the sewage, or toxic, radioactive, and heat waste into the water; noxious and harmful gases into the air; and irritating and unpleasant advertising signs into the line of sight. Utility equations are much the same as before. The reasonable man finds that his share of the cost of the waste he discharges into the commons is less than the cost of purifying his waste before it is released. As this is valid for all of us, we are trapped in a system of “fouling our own nest,” as long as we function only as autonomous rational, free-entrepreneursADDIN CSL_CITATION {“citationItems”:[{“id”:”ITEM-1″,”itemData”:{“DOI”:”10.7135/upo9781843318637.006″,”ISBN”:”9781315092546″,”author”:[{“dropping-particle”:””,”family”:”Hardin”,”given”:”Garrett”,”non-dropping-particle”:””,”parse-names”:false,”suffix”:””}],”container-title”:”International Environmental Governance”,”id”:”ITEM-1″,”issue”:”3859″,”issued”:{“date-parts”:[[“2017″]]},”page”:”47-52″,”title”:”The tragedy of the commons”,”type”:”chapter”,”volume”:”162″},”uris”:[“http://www.mendeley.com/documents/?uuid=f79223de-3515-3160-bf29-802ef173a04e”]}],”mendeley”:{“formattedCitation”:”(Hardin, 2017)”,”plainTextFormattedCitation”:”(Hardin, 2017)”,”previouslyFormattedCitation”:”(Hardin, 2017)”},”properties”:{“noteIndex”:0},”schema”:”https://github.com/citation-style-language/schema/raw/master/csl-citation.json”}(Hardin, 2017).

(4) By what means can society achieve its environmental goals and what, according to your opinion, are the most effective means and why? READ MICHAEL J. SANDEL’S WHAT MONEY CAN’T BUY, CHAPTER 2: INCENTIVES, ESPECIALLY PP. 72-91, AND EXPLAIN IN WHAT WAY INCENTIVES PRESENT A CHALLENGE FOR ETHICS IN THE PRACTICE OF BUSINESS.

Hardin claims that human short-term desire – to take as much of a resource as possible – is in contrast to the welfare of society. If anyone were to act on this individual interest, the situation would worsen for society as a whole-the demand for a common resource would outweigh supply, and the resource would ultimately become fully inaccessible. Conversely, the exercise of restraint would reap long-term benefits for everyone as the common resource would remain availableADDIN CSL_CITATION {“citationItems”:[{“id”:”ITEM-1″,”itemData”:{“DOI”:”10.1504/IJGE.2018.097865″,”ISSN”:”17449936″,”abstract”:”The increase in the population level, followed by a subsequent expansion in national and international markets, has resulted in a rampant exploitation of public and common resources. Primarily, the paper addresses and analyses examples of the ‘land grabbing’ cases in Noida and West Bengal, ‘Kaveri river water dispute’ between Karnataka and Tamil Nadu and the ‘Bhopal gas tragedy’ in Madhya Pradesh. The paper also emphasises the regulation and governance of the legitimate right of citizens over their own commons resources, using the methodology and concepts of the classical contributions of Garret Hardin’s important work, the “Tragedy of Commons”. The paper will suggest alternative ideas which might help to reduce the tragedy of commons by introducing Elinor Ostrom’s conflict resolving mechanisms. Furthermore, the paper would facilitate the design of strategies to promote and ensure more environmental justice and a more sustainable and reliable pattern of the development of the environment.”,”author”:[{“dropping-particle”:””,”family”:”Kharkongor”,”given”:”Natalie West”,”non-dropping-particle”:””,”parse-names”:false,”suffix”:””},{“dropping-particle”:””,”family”:”Singh Kanwar”,”given”:”Abhay Vir”,”non-dropping-particle”:””,”parse-names”:false,”suffix”:””}],”container-title”:”International Journal of Green Economics”,”id”:”ITEM-1″,”issue”:”3-4″,”issued”:{“date-parts”:[[“2018″]]},”page”:”182-191″,”publisher”:”Inderscience Publishers”,”title”:”Tragedy of commons from Garret Hardin to elinor ostrom: A governance perspective, drawing excerpts from India”,”type”:”paper-conference”,”volume”:”12″},”uris”:[“http://www.mendeley.com/documents/?uuid=30dbce3c-f2dd-3132-84fd-c0517d647303″]}],”mendeley”:{“formattedCitation”:”(Kharkongor & Singh Kanwar, 2018)”,”plainTextFormattedCitation”:”(Kharkongor & Singh Kanwar, 2018)”,”previouslyFormattedCitation”:”(Kharkongor & Singh Kanwar, 2018)”},”properties”:{“noteIndex”:0},”schema”:”https://github.com/citation-style-language/schema/raw/master/csl-citation.json”}(Kharkongor & Singh Kanwar, 2018). Ethical conduct allows one to comply with the required standards of the law, but it is not enough. For example, an action may be legal, which we consider being unethical. Companies today need to concentrate not only on compliance with the letter of the law but also on moving above and above the basic legal obligation to remember their stakeholders and to do what is right.

As the global population rises and the need for capital follows, the downsides of the Commons are becoming more evident. Some may argue that this will challenge the position and practicality of nation-states, leading to the redefinition of international governance. Besides, it may lead some to challenge the position of supranational governments, such as the United Nations or the World Trade Organization; as resources become more scarce, some may argue that managing the commons may not have a solution at all. A possible alternative is to affix land rights to public spaces. For example, charging a toll to use the highway or imposing a wastewater tax will limit the number of users to those working in the best interests of others, not just themselves. Other options could involve government involvement or the implementation of methods to cause collective action, such as assigning a piece of land to small groups in the neighborhood to look after.

References

ADDIN Mendeley Bibliography CSL_BIBLIOGRAPHY Andersson, F., & Lyttkens, C. H. (1999). Preferences for equity in health behind a veil of ignorance. Health Economics, 8(5), 369–378. https://doi.org/10.1002/(SICI)1099-1050(199908)8:5<369::AID-HEC456>3.0.CO;2-Q

Hardin, G. (2017). The tragedy of the commons. In International Environmental Governance (Vol. 162, Issue 3859, pp. 47–52). https://doi.org/10.7135/upo9781843318637.006

Kharkongor, N. W., & Singh Kanwar, A. V. (2018). The tragedy of commons from Garret Hardin to Elinor ostrom: A governance perspective, drawing excerpts from India. International Journal of Green Economics, 12(3–4), 182–191. https://doi.org/10.1504/IJGE.2018.097865