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1 - An Overview of Business Ethics

Published online by Cambridge University Press:  22 December 2022

Kevin Gibson
Marquette University, Wisconsin


This overview chapter introduces philosophical tools that can be used to aid managers in making decisions in situations which go beyond simple cost/benefit analyses. Value terms such as right, wrong, fair, justice, beneficence, responsibility, eco-consciousness, and discrimination are discussed and illustrated using real-world examples. Starting with the world’s worst industrial disaster in Bhopal, India and the contemporary aftermath, it examines the complexities such situations present and assesses the usefulness of creating a theoretical framework that can lead to principled and defensible policies and actions. The challenges of exclusive self-interest and ethical relativism are examined, where morality simply echoes personal preference. Immediate profit maximization is compared to a more subtle long-term and more encompassing stakeholder approach. Reliance on the law is shown to be an insufficient ethical guide, while principle-based approaches that can be applied across a wide range of cases are more successful in working out what we should do in novel and difficult situations.

Ethics and Business
An Introduction
, pp. 1 - 33
Publisher: Cambridge University Press
Print publication year: 2023

The Bhopal Disaster

While most of the population slept during the night of December 3, 1984, a toxic cloud of over forty tons of methyl isocyanate (MIC) gas escaped from a Union Carbide (UCC) plant in Bhopal, India.Footnote 1 Heavier than air, the lethal gas blanketed slums surrounding the facility and spread over the city of 800,000 people. At least 3,000 died immediately although accurate numbers are hard to come by. It is estimated that up to 20,000 people may have died prematurely and 500,000 were injured. The mortality rate for those exposed to the gas was almost a third higher than those who were not exposed, and they are twice as likely to die of cancers and three times more susceptible to kidney disease. According to medical reports, current residents exhibit compromised immune systems, growth retardation, and miscarriage rates seven times the national average. Children have unusually high rates of muscular dystrophy, autism, and learning difficulties, among other conditions. Infant mortality is twice the national average.Footnote 2 “It would be better if there was another gas leak which would put us out of our misery,” said a resident. “Just let it end. This is not life, this is not death, we are in the terrible place in between.”Footnote 3 The chemical plant, long defunct, has polluted the local aquifers with carcinogens and exposed open puddles of toxic waste. Local municipal workers tend to the area without any protective gear. Meanwhile, both UCC and the Indian government deny any culpability or obligation to remediate the effects of the disaster.

A decade before the disaster, India had actively solicited investment by foreign companies and formed a joint venture with UCC to build a plant producing Sevin, a common pesticide. However, by the early 1980s the Bhopal facility was operating at one-quarter of its capacity due to poor harvests, a reduction in the capital available to farmers, and lack of demand. In 1982, a visiting UCC team declared the factory unsafe. By July 1984 the plant was for sale and UCC was planning to dismantle some components for shipment elsewhere. However, despite cutbacks and warnings the plant continued to operate.

After the event, UCC maintained that the spill was due to deliberate sabotage by a disgruntled employee. Whether or not that is correct, other independent investigations have pointed to poor maintenance and lax safety controls leading to water mixing with the volatile MIC after several fail-safe mechanisms failed to operate, and found that the health and safety standards were well below those of its sister plant in West Virginia.

In 1989, the government of India negotiated a deal with UCC on behalf of the victims, restricting lawsuits to Indian courts. The company paid $470 million in compensation and accepted moral responsibility with an average settlement to the bereaved of about $2,200.Footnote 4 In return, all pending legal action against the company was dropped. Nevertheless, the regional courts charged CEO Warren Anderson personally with manslaughter, and, when he failed to appear, seized UCC’s Indian assets, including the now defunct and polluted plant. The company insisted that all claims arising from the gas release were discharged by the settlement and denied any enduring responsibility, maintaining that the regional government had now taken control of the situation. The central Indian government considers cleanup efforts to be a local responsibility, but the state of Madhya Pradesh has not been active in doing so, saying only the federal government has the required resources. In 2006, local activists walked 500 miles to the capital Delhi to demand action, apparently without much response from the government. In 2010, the Indian government submitted a petition to Dow Chemical, the successor company to UCC, to improve the earlier inadequate compensation. Documents from the organization WikiLeaks indicate that when the Indian government sought to renegotiate the settlement they met resistance from American authorities who did not want to chill American investment in the country.Footnote 5 As Dow’s website comments, “Although Dow never owned or operated the plant and was not connected to the event … we learned from the tragedy and do all we can to ensure that similar accidents never happen again.”Footnote 6 The tragedy no longer appears on the municipal corporation’s website.

In recent years, India’s economy has grown steadily at about 7 percent a year, outpacing many more developed countries. This is in part spurred by World Trade Organization rulings since 2000 that encourage foreign investment. Some commentators link the rapid growth and industrialization with poor environmental practices, dumping of pollutants, and risks to public health.

The Philosophical Contribution

The Bhopal case typifies the complexity, mixed motives, and potential for benefit or harm characteristic of contemporary business activity. Merely reciting the facts or reviewing the legal decisions will fail to tell us what values have been determined to have priority and how we might approach difficult issues in the future. Because of this complexity, it is critical to start by stepping back and trying to work out a normative response, that is, what we should do. In this way, philosophical inquiry is vital to any considered discussion since it can help us understand the nature of business and arrive at moral judgments.

Philosophy – literally, the love of wisdom – is hard to pin down as an academic activity. It embraces fundamental and abstract questions about human nature and our relationships, the existence of God, the meaning of language, and how we establish and implement our values. However, at the most basic level, philosophy has two primary functions:

  • the examination of concepts

  • the study of arguments.

At first glance, these may not seem to be highly important activities, and yet they underlie all human behavior. We literally shape our lives by the way we organize our world – by the way we create the conceptual framework we use to make sense of things and by the values we consequently embrace. For example, many people throughout the ages have laid down their lives for the sake of glory or liberty or have demanded rights of independence and sovereignty, and yet we rarely step back to examine exactly what these words signify. Thus, it is worthwhile to begin by examining these very basic concepts and how they apply to our lives.

This is especially true when we apply these concepts to business and the workplace. Most of the Western world operates under a capitalist economic system based on fundamental assumptions – assumptions that are often taken for granted, say, about the benefits of economic growth, what constitutes a fair return on investment, or who should be responsible for harms that result from faulty products. The consequences of these assumptions are momentous for our quality of life. Furthermore, many of us will spend the majority of our adult lives in a work setting, usually employed by an institution or someone else, and we will inevitably be affected by baseline moral assumptions about, for example, justice and fairness in such areas as working conditions, terms of employment, privacy, assumption of risk, and concerns about health and safety.

In the Bhopal case, the Indian government had made value-laden decisions about the desirability of foreign investment and UCC was looking to realize a profit for its shareholders. The company’s actions reveal certain assumptions about safety and the environment, at least in the Indian context, because UCC appears to have applied less stringent safety standards there than at their American plants. Before rushing to judgment on governments, corporations, and the consumer, it will be valuable at the outset to seriously examine the conceptual foundations underlying business and how they are put into practice.

The second major task of philosophers is to look at arguments. As viewed by philosophers, arguments are a linked series of statements that force a conclusion. They can go wrong in a couple of important ways: Either the statements themselves may be faulty or the links may not connect as claimed. Analysis of this kind is critical because we often decide what to do based on a set of claims and what they purportedly conclude. So, for example, Dow Chemical claims that UCC and its successors completely fulfilled their obligations to victims because the Indian government approved the legal settlement. A philosopher might examine whether paying a fine does, in fact, discharge one’s duties of reparation. In another common practice, a business may lay off workers without notice because it believes employees who know they will soon be out of a job will slack off and lower the morale of the firm. A philosophical approach would be to question those empirical claims and ask whether they will in fact cause the result management suspects.

We may be misled by clever rhetoric or invalid arguments and one of the philosopher’s tasks is to sort out sound reasoning about any particular claim. In the case of the business laying off workers without giving notice, the employer is making a causal claim about human behavior and comes to a conclusion primarily based on the purported effect on company efficiency. That is, a worker who begins to slack off may lower profitability, and profitability is the thing that matters most. But if we analyze the employer’s argument closely we may see that the claim is not as obvious or compelling as it initially seems. For instance, we could empirically examine the premise that knowledge of the impending layoff will hurt productivity, or we might accept this premise yet still disagree with the employer’s conclusion that it is right to keep employees in the dark. Perhaps there are moral reasons to treat people decently that are independent of the bottom line. If layoffs are imminent, perhaps it might be appropriate to give employees some time to adjust and make plans rather than making it a surprise and escorting them to the door on a Friday afternoon. In short, we need to look carefully at both the assumptions that are at work in an argument and at the way these assumptions are linked to arrive at a conclusion.

One way to critically assess an argument is to look for counterexamples that refute the claims being made. If it turns out that there are a number of cases where businesses have given notice of impending layoffs and found that employees still worked diligently, it would speak against the assumptions implicit in the claim that the best way to deal with layoffs is not to give notice. Similarly, we might contrast the Bhopal case with one where a company has undertaken to do whatever is necessary to remedy harms that its actions initiated, whether or not there have been intervening independent causes.

Another method of assessment is to discern the principles at work and see if they apply in other settings. For example, take the claim that a firm is responsible for any and all consequences arising from the use of its products. While this might be appropriate in, say, the case of damage resulting from exposure to toxic chemicals, the principle may not hold quite as well in cases such as obesity resulting from habitual consumption of fast food. Philosophers find it useful to examine the differences between cases and their underlying principles to determine the significant distinction – such as the acceptance of risk by the individual consumer – and then determine if the distinction has value in other contexts as well.

In this way, philosophy fundamentally differs from disciplines such as economics or sociology. In these disciplines, scholars study how people actually behave and produce descriptive reports. An economist might examine the nature of economic growth in central India and balance the wealth created against the costs incurred. However, this is a neutral endeavor until policymakers make the further value-laden claim that, for example, growth ought to be permitted as long as the benefits outweigh the costs. Similarly, it may turn out that a quarter of all students in MBA programs admit cheating at some point in their academic career. Importantly, this finding tells us nothing about what the students should do. The very fact that many students cheat is instructive, yet we must recognize the gap between a factual statement – one that can be verified – and the value claim that cheating is wrong. Economists and sociologists report behavior but do not suggest that it is right or wrong. If we read a news report telling us that there were 65 million attempts by employees to extract source code from their corporate network in 2021, we have purely descriptive information.Footnote 7 The report does not automatically carry the ethical implication that downloading and removing code is wrong and should stop. Disciplines such as economics are explicitly nonnormative in that they make certain presumptions about human behavior – such as the desire to increase personal welfare – but do not take moral positions about them or their consequences. To bridge the so-called fact/value divide between what there is and what there should be, we need to adopt a prescriptive moral framework – one that informs us how we ought to behave.

It is worth distinguishing philosophical ethics from religion. The two do not compete, in that both ask about what it is to have a good life and how we should behave. Both are teleological, meaning that they look to an end or purpose for what we do. A religious person will take certain beliefs as foundational and then derive how to act accordingly or they may be influenced by understanding that there is a supernatural being watching and they may subsequently be judged. Humanists, those who don’t believe in a deity, may also share many bedrock assumptions, for instance, that we should be respectful of others, look after children and the elderly, and be good stewards of the earth. What sets philosophy apart is that it engages in assessment of our assumptions and arguments, relying on the value of critical analysis.

Philosophy consists of subdisciplines. Broadly speaking, ethics is the branch of philosophy dealing with issues of morality. Morality includes notions of good and bad, justice, fairness, right and wrong, and the way we develop and apply our values. Metaethics is concerned with the various theories that promote ideas of what constitutes the good. Another area, normative ethics, applies standards or norms and reaches conclusions about what we ought to do. Business ethics is the area within normative ethics that is concerned with the special moral issues and concerns arising in the context of business activities. These issues may be expansive, such as whether there should be any restraint on economic globalization, or specific, such as how a firm should deal with a dangerous plant, a defective product, or an injured worker.

Two Meanings of Business Ethics

The term business ethics is ambiguous. It has at least two different meanings, each with significantly different implications depending on its use. The first meaning of business ethics is to set out rules of acceptable behavior or specific practices in a limited domain. In sports or competitive games, players know what behavior is acceptable. It may be fair to bluff or lie to win in poker but wrong to mark the cards or use a confederate. This sense of the term is sometimes used to describe, say, the ethics of a criminal gang, where shooting rivals is acceptable but ratting out someone to the police is not. When we use the term ethics like this to delineate a set of activities within a certain domain, it need not refer to concepts of decency or morality.

This use of the term business ethics typically appeals to people who have a strong sense of role morality, where individuals take on the behavior of the office they hold rather than relying on their personal judgment. By this way of thinking, it would be appropriate for a professional to ask a client whether they should respond to a question as a friend or as an accountant, with the idea that different standards apply depending on the function that a person undertakes. When managers reporting to NASA were deliberating whether to ask for a postponement before what turned out to be a fateful launch of the space shuttle Challenger, the chair of the meeting literally said, “Take off your engineering hat and put on your management hat.”Footnote 8 The hats symbolize the various roles people take on in different situations.

Therefore, if the overall rule of business is just to maximize profit, businesspeople would be allowed to act as if business were an amoral game where success is measured solely in financial terms. Part of this game, like not hiding cards up your sleeve in poker, is minimal compliance with the law; beyond that, any artifice or brinksmanship that brings in more profit is not only appropriate but encouraged. Often those who hold this point of view will make claims to the effect that they have done nothing illegal, or they have paid the required penalty and therefore have done nothing wrong.

The second understanding of business ethics makes no distinction among the different roles in our lives and in fact rejects the notion that we can divide our moral lives into discrete sections labeled “home,” “family,” “business,” “romance,” and so on, each with its distinct set of rules. Instead, this view proposes that we have a single set of standards that apply throughout our lives. The difference is that business presents us with new and different situations that require specialized assessment. Thus, relationships between producer and consumer may involve a set of considerations that do not apply to interactions between two people without the element of commercial interest and questions of how to treat employees during a downsizing require special analysis. Nevertheless, the baseline of moral decency would be consistent throughout and the same moral principles of justice, fairness, goodness, and what is right would hold in business as they do in our everyday dealings. By this light, the legal and ethical spheres may overlap, but we gauge correct action by personal morality rather than by reference to a legal code or set of rules of behavior for specific situations. Typical maxims of a manager who adopts this approach might be stated as questions such as “Would I be prepared to have my actions printed on the front page of the newspaper?” or “Would I think it acceptable if others treated me the way I treat them?”

Instrumental and Prudential Approaches

We can also think about morality in terms of intrinsic and instrumental motivation. Those holding intrinsic views believe good should be done for its own sake, whereas instrumentalists would take the action that results in some form of personal benefit whether or not it is also the “good” thing to do. Imagine that a company could make a significant amount of money in a negotiation if it lies. Company officials could decide to be honest because it is intrinsically wrong to lie and, irrespective of the consequences, decide not to exploit the advantage. On the other hand, instrumentalists would examine the situation to see what course of action is most economically beneficial. Again, the answer might be not to lie. Although lying would provide an immediate reward, there may be greater economic payoff in the long run from acting honestly and thereby benefiting from an enhanced reputation in the marketplace. For instance, research has found that sellers with negative customer feedback on the web-based auction house eBay are likely to sell their items for up to 10 percent less than those with positive feedback.Footnote 9 The technical term for following the moral path because of an anticipated benefit is prudence.

Prudential benefits need not be immediate. For example, a company might invest in a poor community because it believes that doing so will mean it will have an educated pool of workers in the future. Similarly, individuals may donate blood although they do not perceive any immediate personal gain. Rather, they may see that this behavior enhances everyone’s welfare and they are better off in a community where there is an attitude of common concern. Actions that have a general benefit, although ultimately motivated by personal well-being, are described as benign self-interest. Take the case of a car repair company: It may benefit in the short run by inflating the amount of work that needs to be done to customers’ cars, but as with many firms it will retain its customers based on its credibility and if that is lost it will have nothing to fall back on. If customers start to question their bill or suspect shoddy workmanship, they are less likely to return and may post their concerns on social media and the company will falter. Hence, a prudential company might adopt the attitude that it makes economic sense in the long run to build a reputation for fair dealing and trust.

In another case, think of a firm that sponsors a charity run to benefit sick children. The firm prominently displays its logo on the start and finish lines and prints its logo on the event T-shirt. The company is allocating resources to the charity, which may result in increased sales, but the beneficial consequences may not be immediate or obvious. However, the elusive evidence may not matter as long as there is a general sense that doing good has a financial payoff. As an analogy, a faithful religious believer might resist temptation and do charitable works because of a promise of eternal salvation, even though there is no evidence this will occur. As a practical matter, the evidence becomes secondary to the individual’s belief. The same might be true of business dealings, because despite the difficulty in proving that a business would benefit by doing good works, it may become self-verifying if everyone involved in commerce adopts the belief as a matter of course.

The company clearly has some element of advertising in their sponsorship and they could be taking the expenses associated with the charity run as a tax deduction. Some commentators might argue that the corporation’s actions are therefore impure as they are tainted by some element of a payoff. However, the question may be misplaced, as doing well by doing good doesn’t necessarily mean an act is corrupt or wrong and self-interest can coincide with benevolence. For instance, the blood donor could derive personal satisfaction and let their friends know about how often they give, but it would be wrong to condemn the donation as immoral or even as less worthy based on those grounds alone. Similarly, we can concede that private firms in a capitalist society are often motivated at least in part by prudential concerns, just as individuals may get personal psychological satisfaction, and in both cases perhaps the better focus should be on whether total welfare has been increased by what they do.

There is some anecdotal evidence that firms that act morally do better in the marketplace. Still, the evidence is not robust and tends to reflect the empirical difficulties firms have in finding out whether advertising is effective. For instance, it is hard to know if any single given action translates directly into individual purchasing decisions. We may choose to go to one department store over another because it offers scholarships to needy students, but the store may also have the quality and range of goods we prefer, among a constellation of other factors, so it is hard to isolate corporate moral actions sufficiently to draw definitive conclusions.

A further confound is that companies doing good works and prospering in the market often tend to be well established, stable, and profitable anyway. This is not to deny that firms that act morally may prosper as a result, especially over time, but the direct causal link is hard to establish and the empirical evidence is mixed, at best. The upshot is that we cannot incontrovertibly prove the claim that corporations benefit from ethical action. Conversely, it is reasonable to suggest that unethical firms are likely to do badly, especially when reputation and repeat business is an essential component of what they do. In the absence of evidence either way, and given the choice, acting morally may be a practical and judicious self-interested strategy. Moreover, it turns out there may be very strong reasons to do the intrinsically right thing regardless of its instrumental effect on the bottom line.

Rule-Based Approaches

A belief often associated with the economist Milton Friedman is that the moral requirements of business are fulfilled simply by following the law. In fairness, this view also calls on firms to adhere to the moral norms of society, but for the sake of argument we can assume from this belief that the law is not only the ethical threshold but also its ceiling. This may mean emitting greenhouse gasses, polluting, or not disclosing relevant information in order to facilitate deals, so long as it is not clearly illegal to do so.

From this perspective, employees in a private corporation are agents for investors seeking to maximize their returns. Consequently it is not up to the employees to promote their own social and political agendas as their duty is to put profits first. For example, suppose a manager is concerned about habitat loss for wildlife because of a proposed expansion that would discharge dirty water into nearby rivers. By this view, they should work to maximize profits while at work and disregard any jeopardy for animals and flora not protected by existing laws. The check and balance, according to Friedman, is that they can take their wages and do whatever they wants with them: If they choose to support a wildlife organization that then mobilizes the political process to change the law, they are welcome to do so. At the point the law changes, so does the firm’s obligation to the environment. But it is not their place to unilaterally make the decision to preserve more wildlife or plants if it will hurt the company’s profits. Friedman points out that managers are paid for their workplace expertise, so such matters as social welfare or environmental protection are usually beyond their scope and should be left to those with the training and experience.

Nevertheless, the company is not precluded from voluntarily reducing pollution, giving to charity, or doing other good works that are over and above the law, but the acid test will be profitability. If there is a benefit through improved public relations or avoiding a costly lawsuit, then the company will have an incentive to act beyond the legal minimum and a wise manager will take these broader and more long-term factors into account. However, absent any financial justification, the company will default to legal compliance as its ethical guide.

Ethics and the Law

There is a temptation in life and in business literature to use the law as a moral template, in the sense that following the law is considered to be morally sufficient, with the implication that if we have done nothing illegal, then we have done nothing wrong. While we must admit that abiding by the law is a good start, it shortchanges the essential dialogue needed to establish appropriate standards and responses. Ethics and legislation are not symmetrical, and we can see this by considering cases that are either legal but immoral, perhaps like selling life insurance to geriatrics, or illegal but moral, such as civil disobedience protests. Furthermore, laws are local and subject to change in ways we might hope ethics is not – slavery was legal in many parts of the world until the law changed, but has always been immoral. The law cannot cover every case, and lawyers make a good living arguing about what precedent applies. Hence, it is usually easier and more productive to discuss the moral principles and policies involved in business dilemmas than to haggle over the merits of legislation, especially in the international arena. In addition, the law is a reactive instrument that often remedies harms that have already taken place, so if we wait around to have a case decided before we stop releasing a new chemical into the groundwater, the damage will have been done before the case is decided. Many cases fall into a legally gray area, where people are called on to use their discretionary judgment. Finally, consider what a world would be like that relied on the law alone – we might believe every transaction was predatory, and we would rely on regulation as our guide, litigation would be the norm, and we would have armies of legislators, enforcers, judges and juries, and punishers. This vision alone should propel us into taking virtues of honesty, trust, fair dealing, and personal integrity seriously – in other words, it is well worthwhile spending some time talking about the ethics as well as the legality of business.

The watchword of rule-based systems is compliance. Minimally, compliance means making sure that the law is followed. Many companies have tried to institutionalize ethics by generating a code of conduct that lays out acceptable and sanctionable behavior. An illustration of this approach is accounting in America prior to the scandals of the late 1990s, where the profession was very much rule-governed, with a strict and comprehensive code of conduct. Yet the rules themselves restricted the scope of what accountants were required to do, so that in auditing a company they only had to make sure that the relevant accounting standards were met and that the books were balanced, but they did not need to question business practices that appeared improper. In the wake of the Enron fiasco where the firm lost some $74 billion in the four years before its bankruptcy, accountants excused themselves on the basis that they had seen nothing illegal and therefore were not implicated in any wrongdoing.Footnote 10 The claim subsequently damaged the credibility of the profession and helped bring down Arthur Andersen, one of the world’s largest accounting firms at the time.Footnote 11

Principle-Based Approaches

One of the chief difficulties with a rule-based approach is that it does not deal well with new or difficult issues where it is unclear what rule should apply. Furthermore, in some cases rules will clash, and there needs to be a way to adjudicate between them. So, for example, a cooking spray that contains nothing but fat might be sold as “fat free” because the serving size does not reach the reportable threshold amount. That might be acceptable if the serving size were listed as more than a spray lasting one-third of a second, which seems unrealistic and manipulative. In a similar vein, a soup manufacturer might claim that it has reduced the amount of sodium in its product, whereas all it has done is to reduce the recommended serving size from twelve ounces to eight. A firm might demand that its employees submit to drug testing and then use the samples to test for susceptibility to genetic diseases to protect the firm’s insurance costs, or a sales agent may want to treat her client to a lavish dinner that goes against company policy but not the law. Using the law or rules alone gives little guidance on vague issues, and in some cases prompts ingenious people to research the law for the purpose of figuring out loopholes.

An alternative is to move to a more principle-based approach, where moral considerations are thought of in more general and abstract terms. The benefit is that when a novel issue arises people will have a point of reference from which to work. For example, if an overarching principle is to “do no harm,” then it can be applied to a wide range of more concrete issues. The associated problem, of course, is that applying principles in any given situation requires a degree of interpretation, which will, in turn, rely on the moral discernment of the individual involved. In practical terms, a principle-based approach is likely to require additional resources for training and discussion rather than strict adherence to simple directives.

Ethical Relativism

Some educational institutions have an honor code along the following lines: “I will not lie, cheat, or steal, and I will not tolerate those who do.” While most students feel comfortable with the first clause, they tend to be less compliant with the second, because they believe that individuals should be responsible for their own actions, and there is no moral imperative to interfere with the conduct of others if it does not affect them directly. Very often they may disapprove of poor behavior by other people but will not do anything about it because they feel each of us should be in command of our own actions. However, there may be problems with that attitude as well. Consider an exam where it turns out that most of the students have brought in calculators with some formulae already programmed in. Sticking to the honor code in that kind of situation may leave the honest students feeling they are foolish to put themselves at a disadvantage when they aspire to a higher moral standard than the prevailing norm. Many of these same dynamics are echoed in business dealings, especially across different cultures.

Experience shows us that people, not surprisingly, have varying moral judgments, tempting us to believe that therefore all moral beliefs and principles are relative, in the sense that someone’s judgment will apply only to that individual, in that situation, at that time. This implies that it will be difficult to criticize anyone else’s actions, and consequently we would have no grounds to intervene and tell them they are mistaken. It would also mean that there is no universally accepted absolute standard of morality, since everything will be context dependent. In the case of sweatshop labor, for example, a relativist would say that the use of child labor has to be seen in the context of the prevailing standards or needs of the local people, such that we are in no position to judge the actions of others.

We could think about the difference by imagining two islands with no passage between them. People on the first island practice what might be termed absolutism or objectivism, wherein there are real moral truths that hold constant throughout space and time. They might claim, for example, that torture or incest are always wrong. For them, the fact that certain societies have allowed these practices to exist does not show that standards vary by context but instead shows that humans can discover moral truths over time.

People on the other island, on the other hand, practice what might be termed relativism or coherentism. Their view is that we cannot make moral judgments apart from understanding the context involved. They believe that the acceptability of an act depends on the individual facts and the prevailing norms. This is not to say they believe that anything goes, however. The coherentist label indicates that they feel the object of moral theory is to make sure our values are internally consistent and do not contradict each other. People may believe both in property rights and in individual liberty but would condemn slavery where one concept overrides the other.

One version of relativism says that we only generate norms within a cultural context, and so the meaning of the word good within a society is that which is in accord with an accepted practice. Hence, there is no objective sense of right and wrong, but only what the society has sanctioned over time. This would explain some of the radical differences in the way various cultures deal with the same issues. For example, it is inappropriate for women to take an active role in business affairs in some countries in the Middle East, and abortion is legal and accessible in some countries but not in others. It also means that the notion of good may change over time. The subjugation of women was once widely accepted, but societies have changed, and some would say become more enlightened, and what was once thought of as proper is now condemned.

However, this approach does not mean that differing cultural norms cannot be criticized. A more sophisticated relativist position would suggest it is possible to assess different cultures once we truly understand what is going on. It could be that one society takes heroic medical measures for its elderly members, whereas another believes in minimal intervention. What initially looks like opposite approaches may, in fact, be manifestations of the same human concern, that is, respect for the elderly. Each society may value its elderly and wish the best for them, but the way this is manifested turns out to be quite different; one sees respect as dignity in maximizing the quality of life whereas the other seeks to extend the quantity.

The counterclaim by absolutists is that without an anchor, there is no way to validly criticize practices. In effect, there must be some overarching principles – such as respect – that allow us to compare different practices.

This tells us that it may be that the two views – absolutism and relativism – are not as different as they originally appeared, and we can draw on insights from both. However, it is important to realize that the mere existence of moral disagreement does not imply that there is no moral truth or that it can never be found. Take the analogy of religion: Clearly, there are many different religions, but we do not take from that fact alone that a spiritual quest is meaningless and futile. The plurality of religious beliefs may paradoxically support the validity of the religious dimension of human life. Similarly, the fact that there are disputes over particular moral issues may reinforce the fact that moral values are a constant and important feature of human life. Another way to put this is that people become invested in issues they see as value-laden, and disputes arise over whether they are moral or immoral, but we rarely find people being amoral, that is, completely indifferent to value questions.

A better model than the two islands is perhaps a sphere with a crust that represents variations and a core that is constant. Consider the anthropological fact that contracts form the basis of human society. Even in a basic society there will be some exchanges. Unless we keep our word with respect to them, society cannot operate. Thus, if we want some anchor point, one that avoids the so-called slippery slope, we could say that society requires a concept of contracts to function. Again, that is not to say that people would never break contracts. The point is that the very idea of a contract requires an agreement in principle that people keep their promises, and someone who does not would be punished in some way in order to preserve the practice. This is a very minimal level of agreement, but it shows that there will be at least some universal agreements. The list could be expanded: All human societies have systems for looking after their young and forming families. From this start we could develop a core of common values that all humans share. The question then becomes whether the core is small with a wide band of disagreement, or whether the surface of differences only represents a thin crust. As we saw in the case of respect for the elderly, many societies may have similarities in principle that are manifested in different ways. It could be that various societies have a notion of a fair profit that is contrasted to usury or exorbitant gains, but the actual percentages involved may vary considerably in practice; or that bribery is condemned although the difference between a gift, a “grease payment,” and a bribe lies on a broad spectrum.

The upshot is that there are valid ways to deal with relativism in business. While there may be startling differences in standards of moral acceptability across cultures, that does not mean that they are all equally legitimate. It will be important to find out the operating beliefs that lie behind particular actions and start the discussion at the level of the underlying principles involved. Hence, although there may be no countries that endorse the practice of bribery, there may be different understandings of what constitutes a bribe.

The second step is to decipher whether there are threshold values that should never be compromised. For example, just as genocide is never acceptable, we might say that it is universally wrong to expose workers to deadly hazards unawares, or to deprive native people of traditional lands without compensation merely because the land has desirable mineral deposits. As we shall see in Chapter 7, the language of rights may be a useful way to frame the debate. Furthermore, we can examine the moral posture of a company within a culture for inconsistencies in need of resolution. We also need to be sensitive to the prevailing norms of the country and determine whether there are legitimate differences that merit accommodation or whether we should impose the company’s domestic standards.


The other major challenge to developing an ethics of business is posed by ethical egoism. An egoist would say that we rightly put our own interests and concerns above those of others, regardless of external ethical standards. This is critical in discussing business behavior because many practitioners tend to have an initial intuitive reaction that business operation is predatory and competitive, and therefore a special kind of self-interested morality has to apply: the so-called law of the jungle, where only the strong and ruthless survive. In contrast, ethical altruism suggests there are times when we do good purely for its own sake, perhaps by anonymously donating to charity or volunteering in the community. It is important to note that the egoist claim is often self-verifying as it may assert opaque psychological motives that the individual may deny: the charity donor or volunteer gets to have warm self-satisfaction, or forestalling guilt for a privileged lifestyle.

The long tradition of egoism contends it is human nature to do whatever is best for ourselves, and ethical action is no more than a social construction upheld by a legal system. Over 2,000 years ago the Greek philosopher Plato (427–347 bce) used the character Glaucon to illustrate this point in his work The Republic. Glaucon tells of a shepherd who discovers a magical ring that can make him invisible. The question posed is whether, if we were released from the constraints of the law, we would still behave decently. Glaucon concludes that our conscience would be overcome by the temptation to do whatever we want, so long as there are no personal consequences.Footnote 12

Machiavelli and Hobbes

Current advocates of egoism often appeal to the works of major historical figures: Niccolò Machiavelli (1469–1527) and Thomas Hobbes (1588–1679) as well as the more recent work of Ayn Rand (1905–82) and her book The Virtue of Selfishness (1964). Machiavelli is best known for his work The Prince, which was published after his death. He considers the nature of a principality and advocates that a bold leader should acquire and use power to his personal advantage by whatever means possible. He felt that whatever private morality someone had, if the individual was a leader he had to be prepared to act to promote his own interests above all others. In the public sphere, right and wrong did not matter as much as praise or blame. The prince had to act expediently for himself in every case and do whatever was necessary at the time. This meant, as he put it, that although it was desirable to be both loved and feared by one’s subjects, it was safer to be feared. There is some debate about Machiavelli’s sincerity in what he wrote. However, his work has been influential in advancing an attitude that leaders need to be self-promoting without concern about the welfare of others, and to adapt their morality to changing circumstances. Machiavelli says:

It is necessary for a prince wishing to hold his own to know how to do wrong, and to make use of it or not according to necessity … He need not make himself uneasy at incurring a reproach for those vices without which the state can only be saved with difficulty, for if everything is considered carefully, it will be found that something which looks like virtue, if followed, would be his ruin; whilst something else, which looks like vice, yet followed brings him security and prosperity.Footnote 13

The English philosopher Thomas Hobbes also starts from the assumption of constant competition and moral relativism. His view is that we are all necessarily self-interested but because of risks from the actions of others we need to create a society that has sufficient power to dominate us all, like a super police force. He observes:

For moral philosophy is nothing else but the science of what is good and evil in the conversation and society of mankind. Good and evil are names that signify our appetites and aversions … Hereby it is manifest that during the time men live without a common power to keep them all in awe, they are in that condition which is called war; and such a war as is of every man against every man … where every man is enemy to every man, the same consequent to the time wherein men live without other security than what their own strength and their own invention shall furnish them withal. In such condition there is no place for industry, because the fruit thereof is uncertain: and consequently no culture of the earth … no arts; no letters; no society; and which is worst of all, continual fear, and danger of violent death; and the life of man, solitary, poor, nasty, brutish, and short.Footnote 14

For our purposes, the insight that matters most Hobbes’ his recognition that it is not always in our interest to compete or dominate: The features of a life worth living come from cooperative endeavors. In many ways, we might describe his posture as strategic rather than moral, since it is the way rational people would behave. We can be indifferent to the situation of others and only care about their welfare insofar as it affects us personally, but then grasp that humans necessarily live in communities and exchange goods and services, and so the individual may be best served by mutual cooperation. Despite its current usage, the author Rudyard Kipling, who coined the term “law of the jungle,” saw it as collaborative, not competitive:

Now this is the law of the jungle, as old and as true as the sky,

And the wolf that shall keep it may prosper, but the wolf that shall break it must die.

As the creeper that girdles the tree trunk, the law runneth forward and back;

For the strength of the pack is the wolf, and the strength of the wolf is the pack.Footnote 15

Game Theory

We can model Hobbes’ view of strategic morality using game theory, the term mathematicians and social scientists apply to competitive scenarios where individual parties are seeking to maximize their own outcomes. The name is somewhat misleading, since some of the nontrivial subjects they have researched include warfare and economics. The theories are useful in many disciplines because they can provide quantitative data about rational choices under varying conditions. For simplicity’s sake, many of the dynamics are represented by two sides that have to make decisions that will result in a payoff. The most straightforward case is a zero-sum game, where a win for one side (+1) represents a loss (−1) for the other and the outcome is balanced out (+1 and −1 = 0).

We can dramatically illustrate this dynamic by thinking of two nuclear powers poised to confront each other. If one side launches by surprise, they are likely to win. However, strategic game theory demands that we consider how the opponent is thinking. If they are rational and deliberate like us, then they would also be considering a surprise attack, and the worst overall outcome would be both launching at the same time. The options, then, are individual launches, mutual launches, or, most preferably, mutual restraint. In business too we can imagine that there are temptations in a competitive field to take opportunistic actions that lead to immediate benefits. On the other hand, if all parties are thinking the same way then such a dynamic may easily lead to a spiral of mutually damaging acts.

Hobbes assumed that in the absence of full trust and information our self-interested nature would necessarily lead to destructive behavior, and we can see that is certainly one possible outcome. On the other hand, there may be other options, especially if we see that many, if not most, encounters are not zero-sum – there is a greater payoff for both parties if we work together. So, for instance, a person might be more adversarial in a one-time negotiation because playing “hard ball” may be very effective. However, if we have to deal with the same people over and over, we tend to be more cooperative. For example, if two gas stations are on opposite sides of an intersection, neither is served well by consistently cutting prices to beat the other. While they do not have to directly collude, each could independently reason that maximum profit is achieved by each posting the same price. In repeated computer simulations, the evidence suggests that defection by one side (say, undercutting the rival station) would likely be met with defection on the other, leading to mutual harm; this makes it very hard to restore cooperation in the future. Consequently, a fully rational player would strategize that it is worthwhile to cooperate voluntarily and perhaps forsake the allure of immediate profits, because the long-term benefit matters more than the short-term gains.

The actions of corporations acting internationally provide a helpful indication about the limits of egoism. A firm that operates away from its home base is usually free to operate by the rules that apply in the host country. If the overseas laws are lax, then the natural temptation will be to exploit the potential economic efficiencies. Extrapolating, we can imagine that there are regimes where, for example, child labor and exposure to asbestos are legal, and trying to organize a trade union is a criminal offense.

The descriptive evidence is that some companies do make the most of weaker laws in developing countries, especially in unskilled or low-skilled industries such as apparel and assembly work. There are reports of workers suffering physical abuse, of people being forced to work long hours without breaks or paid overtime, and of employees being made to spend their earnings at a company store at inflated prices, effectively making them indentured servants.Footnote 16 Corrupt regimes may permit or encourage these practices because of the promise of hard currency and side payments to those in power.

The striking feature of business behavior is not so much the existence of exploitative conditions, though, but the fact that such features are not universal. One reason for these constraints is that there is usually some level of transparency available, so our actions, even overseas, will leave a trail of information, especially when monitored by nongovernmental and consumer organizations. Hence, there may be self-interested reasons to maintain certain standards in the long term. Several cases are instructive here. Reports surfaced in the 1990s of worker abuse in third world sweatshops where a dress that retailed for $100 in the United States netted $15 to the contractor but less than a dollar to the seamstress; or a pair of sneakers made in Vietnam that cost the manufacturer less than 1 percent of its final retail price.Footnote 17

One firm, Nike, responded by saying they were merely marketers and the factories were run by their subcontractors, and so it had little control over them. However, after a string of bad publicity, the stock price and earnings slumped over 25 percent. Nike chairman Phil Knight publicly admitted there had been problems and announced a series of measures to address them, including international monitoring and a higher minimum wage for overseas workers, greater transparency, better air quality in the factories, a minimum age for employees, and education programs. While it would be wrong to make direct causal connections, Nike is no longer considered an archetype of global exploitation, and its earnings have consistently risen in recent years.

In another case, Apple products are often produced by a firm called Foxconn. Foxconn’s Shenzhen factory employed 450,000 workers at one point, and it is said that the company installed nets on its buildings to catch suicidal workers who could no longer tolerate the working conditions such as being required to work twelve-hour shifts, six days a week. Apple also got bad publicity from its dealings with precious metal mining companies in Banka, Indonesia, where it appeared the supplier was using child labor. Apple was sensitive to consumer reaction and in both cases it subsequently required adherence to a supplier code of conduct and issued an annual public audit report. As one official put it:

The simplest course of action would be for Apple to unilaterally refuse any tin from Indonesian mines. That would be easy for us to do and would certainly shield us from criticism. But that would also be the lazy and cowardly path, since it would do nothing to improve the situation. We have chosen to stay engaged and attempt to drive changes on the ground.Footnote 18

The association with these companies led Apple to join the Fair Labor Association, a monitoring group demanding due diligence and transparency from companies with global supply chains.Footnote 19 Whether or not Apple was responding to market feedback, conditions for the workers in its supply chain have undoubtedly improved as a result. Apple’s current vision statement announces that they want to “make the best products on earth, and to leave the world better than we found it.”Footnote 20

In conclusion, even if morality in business turns out to be self-interested and firms act strategically, the evidence indicates they will be motivated to maintain certain standards and build a solid reputation rather than descending into Hobbes’ war of all against all.

Morality and Strategy

As described in the previous section, there may be prudential reasons causing companies to resist complete exploitation, just as individuals may see that over the long term their own benefit lies in cooperation. Nevertheless, taking a strategic approach to morality presents difficulties. It depends crucially on the calculations involved – the actions of companies are still profit-driven; if the numbers were to show they could make more money by acting badly, there would be no independent reason to change their behavior.

The moral problems of expedient changes in moral attitude are further highlighted by the presence of public relations specialists. Company sales, as we have seen, may depend on the way a company is perceived. The Nike case is often used as an example of a successful public relations campaign that changed public perception. Taking this logic to its conclusion, the lesson for a corporation would be that hypocrisy pays. That is, the truth of the matter is immaterial, since the important variable is the public image and what is perceived to be the case. So, if a company could cleverly mask its actual operations or consistently confuse the public through some well-promoted charitable work, and if these campaigns cost less than, say, raising the minimum wage of overseas workers, the program of masking and confusion would be the most appropriate course of action. Further, they could base all their operations on a game-theoretic strategy. Morality would become subordinate to strategy and a matter of expedience. If they could maximize profits by using cheap labor overseas they would do that, and if it turned out that customers would pay a higher price for organic goods or union-made apparel, they would follow market demand and do that. Notice that they follow the moral tide, so that they will do whatever it takes to make the most profit. They are constrained from out-and-out competitive behavior only because they realize there may be a future payoff.

There is something jarring about the notion that a company should alter its moral stance depending on its cost-effectiveness like a chameleon changing its color to suit its surroundings, and yet this is the correlate of an egoist working out what is in their best interest and plotting their behavior accordingly. Still, we should again return to the positive aspect of business behavior and look for a common element that underlies these discussions. Many companies do have a baseline of acceptable behavior that is independent of external monitoring. Furthermore, the fact that many consumers choose not to buy brands associated with poor working conditions illustrates that there will be a point where individuals are willing to pay more to preserve higher principles. Moreover, even in a corrupt regime where there are virtually no laws restricting the terms of employment, many foreign companies are unwilling to compromise what they perceive as basic human rights. In the same vein, consumers are often willing to accept that there are relative standards that mean workers in other countries do not have the same complement of benefits as workers at home. However, there is a point where consumers feel that their economic welfare matters less than guaranteeing the humane treatment of the people who produce their goods.

Responses to Egoism

Plato’s magic ring story suggests that, left to our own devices and without any accountability, no one could resist the temptation to do whatever it took to increase personal power and wealth. However, that may not be entirely true. The likelihood is that some people and companies would, in fact, restrain themselves because they recognize that it is wrong to deprive others of life, liberty, or property, based on the idea that humans are entitled to individual rights.

There is also another line of response against egoism, based on the character of the person involved. Glaucon, along with Machiavelli, Hobbes, and many others, believed that human nature was essentially self-aggrandizing, power-hungry, and hedonistic. Glaucon’s shepherd acted on his whims when freed from any accountability. It could be that there is more to human nature, and indeed many people would not exploit magic powers at all, or would do so only to improve the general welfare rather than just their own. Individuals are rarely called to publicly declare what their values are and what they are going to do to bring them about. Businesses, on the other hand, very often do make public statements of their core values, and often these incorporate a lot more than the desire to return yield to investors. They have statements about public responsibility and their corporate practices: in effect, a summary of corporate character. So, for example, Nike changed its corporate mission statement in the late 1990s from one that declared an ambition to be the best sports company in the world to the more recent version:

Our mission is what drives us to do everything possible to expand human potential. We do that by creating groundbreaking sport innovations, by making our products more sustainably, by building a creative and diverse global team and by making a positive impact in communities where we live and work.Footnote 21

The mission is more focused on serving people and communities than enriching the company and its investors. Of course, we should acknowledge that there may be some rhetorical flourish in these statements, but nevertheless, they do not have to make them at all, let alone broadcast them and follow up by directing resources to substantiate what they espouse. If we look at some of the top international companies, we find that the vast majority make announcements of this kind on their websites and in their company literature. Moreover, public statements give activist groups some leverage insofar as they can point out potential “hypocrisy gaps” when they confront companies that are not conforming to their public assertions. For instance, some firms have promoted their ecological stance while continuing unstainable practices, an effect known as “greenwashing.”

The effect of having a mission statement along these lines is to project the image that the company may not, after all, have a purely egoistic nature. A publicly held corporation will be interested in making a profit, to be sure. However, the evolution of mission statements that are more outwardly directed to other stakeholders seems to indicate that companies often assert a set of values that may sometimes conflict with increasing investor returns.

One question we will explore further in this book is whether a company prioritizes doing the right thing in terms of acting ethically and expects that profits will follow, or does it seek profit as its paramount goal and see ethical action as the most advantageous strategy to achieve it? Although there are undoubtedly companies that act as if their sole goal is constantly increasing profits, there are many others that believe that their prime mission is one of service, and improving human welfare and earnings are seen as a secondary benefit. Therefore, it is important not to treat all businesses as part of a monolithic structure. Individual corporations vary widely both in their goals and in their perceptions of the appropriate means to achieve them.


The Bhopal disaster underscores the difficulty in fully analyzing ethical issues in business and the number of factors to be considered: The facts of individual cases can be highly significant. In Bhopal, circumstances set the stage and a series of problems came together to make the gas leak as widespread and deadly as it was. There are many stakeholders with widely varying interests in the case, and many of them are incompatible. Some commentators will emphasize the perceived difference between legal and moral responsibility, the acceptability of risk, and the nature of compensation. There are diverse cultural expectations that have complicated the issues, as well as tensions between rich developed nations and poor developing ones. We also have to think about the long-term effects of business activity: Although the incident happened decades ago, its damage to human health and the polluted environment continue to affect the region.

This preliminary survey has explained some of the ways in which philosophers approach situations and also the limitations of those approaches. Philosophy is unlikely to be able to transform hard questions into simple ones, and in fact may only be able to illustrate the complexity and nuanced nature of moral questions. Nor will it provide a simple algorithm that can tell us exactly what to do in any given situation. However, it does offer the promise of developing a reasoned analysis of business practice and a framework for making decisions on a normative basis.

In the rest of the text we will look in more detail at several of the key concepts that frame ethical debates in business. In Chapter 2, we will look at the ethical theories underlying business ethics so that we have a basis for evaluating issues. Then, in Chapter 3, we look at the nature of capitalism and some of its implications for corporate and individual actions. We will also examine what is meant by the key concepts of responsibility (Chapter 4), autonomy (Chapter 5), justice (Chapter 6), rights (Chapter 7), and beneficence (Chapter 8). This will better equip us to systematically study the morality of business and its impact on our lives.

Issues for Reflection

  1. 1. Are there any absolute rules that should never be broken, whatever the circumstances?

  2. 2. Does morality change when you are in different roles, such as a business executive or manager versus a subject-matter expert or line worker?

  3. 3. Are those hurt in industrial accidents owed compensation? If so, who should pay it?

  4. 4. Does moral motivation matter? If a company does good works, should we be indifferent to the fact that they may lead to increased profits?

  5. 5. How much do you think reputation matters in business? Would you pay a premium for an item if it came from a retailer with a reputation for being honest?

  6. 6. If you were giving employees ethical training, would you stress knowing the law and the company rules, or try to explain the principles behind the rules?

Case: Vaping

Smoking is bad for you. Cigarette packages routinely carry required government warnings from the fairly tame prose, “Caution: Cigarette Smoking May Be Hazardous to Your Health,” in the United States to the more direct message, “Smoking Causes Lung Cancer,” in New Zealand, accompanied by pictures showing the disease that cover 30 percent of the front and 90 percent of the back of a pack.

The active ingredient in cigarettes is nicotine. Nicotine has a complex effect on the brain, in that it can enhance moods by either relaxing or exciting the smoker. Proponents compare it to caffeine, while detractors say it has the addictive properties of heroin. The way cigarettes deliver nicotine is to burn tobacco while users inhale the smoke along with other side-products, such as tar.

Worldwide, about one in five people smoke, and 15 percent of all deaths are attributed to smoking with higher rates in some countries in Asia, Northern Europe, and Eastern Europe. Second-hand smoke, that is, inhaling the smoke of others, accounts for 2 percent of deaths, and is implicated in a number of conditions including asthma, respiratory infections, and sudden infant death syndrome.Footnote 22

The act of smoking can be a social activity. Until the 1990s smoking was allowed on airlines and there are stories of flight attendants not being able to see the rear rows of the aircraft because of the blue haze once the no smoking sign was turned off. Theaters and cinemas routinely provided ashtrays. At one point, doctors were recruited to endorse smoking, and “mild” or “menthol” cigarettes were promoted as less irritating. Only in 1998 did the tobacco industry abandon its attempt to maintain that there was a controversy over the purported ill effects of smoking, such as increased risk for lung cancer and chronic bronchitis.Footnote 23

A challenge for the tobacco industry has been to find a purer delivery method for nicotine. Various attempts have been made such as chewing gum or patches, but neither give the instant stimulus of smoking nor mimic the habitual behavior of puffing. Two graduates at Stanford University, Adam Bowen and James Monsees, came up with the idea of a vaping device. Their solution was to use nicotine salts, glycol, glycerin, and flavors and integrate them in a single unit that creates an aerosol that can be inhaled. The product they developed has the trade name JUUL, looks similar to a smart phone and is powered through a USB connector.

There are clear benefits for smokers if they switch to vaping, and JUUL’s mission statement says it aims “to transition the world’s billion adult smokers away from combustible cigarettes.”Footnote 24 Vaping delivers the satisfaction of the habit while limiting many of the risks. On the other hand, the purity of delivery can have its own drawbacks. Ten puffs of JUUL provide more than five times the nicotine of a cigarette with greater absorption into the bloodstream.Footnote 25 Vaping has been promoted as a method of quitting smoking, but the evidence is mixed – many smokers take up both, and often-cited studies that claim double the success rate of other replacement therapies also included dedicated behavioral therapy as part of the program, and still had a four-fifths failure rate.Footnote 26

For its initial launch, JUUL purchased advertising on such sites as the cartoon network, and both and owned by Nickelodeon. It effectively used Twitter, where it turned out that over 80 percent of followers were between 13 and 20 years old. JUUL dominates the market to the point that the company name is synonymous with vaping products. Their original advertising campaigns included younger-looking models and enrolled social media influencers. One aspect of vaping is that it is almost indetectable as it does not have the telltale aroma of cigarette smoke and the dispensers can be disguised in various forms. A 2019 study by the American Medical Association found that 7% of 13-year-olds, 15% of 15-year-olds, and 16% of 16-year-olds had used a JUUL product in the previous month. The most popular flavors among the younger age group were mango, mint, crème brûlée, and fruit.Footnote 27

In response to lawsuits, JUUL removed flavors other than menthol and tobacco from stores and offline and agreed to pay $40 million to the state of North Carolina. It was also required to “abandon all marketing strategies and content that appeals to young people. JUUL will be prohibited from influencer advertising, outdoor advertising near schools, sponsoring sporting events and concerts, and most importantly, social media advertising … JUUL cannot make claims that its e-cigarettes are safer or better for your health than combustible cigarettes.”Footnote 28 Despite growing restrictions fueled by fears of health concerns and underage sales in many countries, the market size for e-cigarettes was valued at $15 billion worldwide in 2020 and is expected to grow at over 25 percent from 2021 to 2028. It has seen considerable investment from all the major tobacco companies such as R. J. Reynolds, and Philip Morris.Footnote 29 Moreover, there are many imitation products, and distributors often buy in bulk online, with the effect that regulations are hard to enforce.

Questions from the Case

1. Is there any legal product or service that a firm should not provide?

2. How do you react to the claim that a firm is morally neutral, and only fulfilling consumer demand?

3. If JUUL is one of the most profitable investments someone could make, are there any moral reasons not to get involved in the industry?

4. What would you say about the claim that selling vaping devices that attract young users is acceptable because everyone else in the market is doing so?

5. Smoking in any form is harmful and may have long-lasting effects. Should a manufacturer be responsible for any or all consequences of its products?


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2 K. Fortun (2001). Advocacy After Bhopal: Environmentalism, Disaster, New Global Orders. Chicago, IL: University of Chicago Press.

3 H. Ellis-Petersen (2019). “Bhopal’s Tragedy Has Not Stopped.” Guardian, December 8,

4 E. Broughton (2005). “The Bhopal Disaster and Its Aftermath: A Review.” Environmental Health, 4(6),

5 J. Raymond (2010). “Obama Told to ‘Change Stance’ and Stop Protecting Dow Chemical from Bhopal Liability.” Storm Clouds Rising, December 3,–06-11%20Freechild%20interview.pdf.

7 H. Murphy (2021). “Workers Increasingly Steal Company Data during ‘Turnover Tsunami’.” Financial Times, August 12,

8 D. Vaughan (1996). The Challenger Launch Decision. Chicago, IL: University of Chicago Press.

9 R. Mickey (2010). “The Impact of a Seller’s eBay Reputation on Price.American Economist, 55 (2), pp. 162169,; E. Laitinen, T. Laitinen, and O. Saukkonen (2016). “Impact of Reputation and Promotion on Internet Auction Outcomes: Finnish Evidence.Journal of Internet Commerce, 15 (2), pp. 163188.

10 T. Segal (2021). “Enron Scandal: The Fall of a Wall Street Darling,” Investopedia, November 16,

11 B. Toffler (2003). Final Accounting: Ambition, Greed, and the Fall of Arthur Andersen. New York:Broadway Books.

12 Plato (1947). The Republic, trans. B. Jowett. New York: Random House, Book II, 358d–361d.

13 N. Machiavelli (1992 [1592]). The Prince, trans. W. K. Marriott. New York: Alfred A. Knopf, pp. 7071.

14 T. Hobbes (1998 [1651]). Leviathan, ed. J. Gaskin. Oxford: Oxford University Press, p. 84.

15 R. Kipling (1922). “The Law of the Jungle,” The Jungle Book,

16 E. Martinez (2001). “Sweatshops, Firsthand.” The Nation, November 19,

17 J. Ballinger (1997). “Nike Does It to Vietnam.” Multinational Monitor.

18 R. Bilton (2014). “Apple ‘Failing to Protect Chinese Factory Workers’.” BBC News, December 18,

20 C. Rowland (2022). “Apple Inc.’s Mission Statement and Vision Statement (An Analysis).” Panmore Institute, May 22,

22 “Health Effects of Secondhand Smoke,” Centers for Disease Control and Prevention,

23 K. Keck (2009). “Big Tobacco: A History of Its Decline,” CNN, June 19,

25 P. Rao, J. Liu, and M. L. Springer (2020). “JUUL and Combusted Cigarettes Comparably Impair Endothelial Function.Tobacco Regulatory Science, 6 (1), pp. 3037,; M. Blaha (2022). “5 Vaping Facts You Need to Know.” Johns Hopkins Medicine,

26 A. Mozes (2019), “Vaping Beats Patch, Gum in Helping Smokers Quit,” WebMD, January 30,

27 A. Leventhal, R. Miech, J. Barrington-Trimis, et al. (2019). “Flavors of E-Cigarettes Used by Youths in the United States.Journal of the American Medical Association, 322 (21), pp. 21322134.

28 V. Langmaid (2021). “E-Cigarette Company JUUL to Pay $40 Million in North Carolina Lawsuit Settlement,” CNN, June 28,

29 State of North Carolina v. Juul Labs, Inc. Final Consent Judgment, 19-cvs-2885, June 28, 2021.

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