Handout 10 – Managerial Ethics – XLRI 2014The Ethics of Executive Moral Responsibility

Ozzie Mascarenhas, S.J., Ph.D.JRD Tata Chair Professor of Business Ethics

August 04, 2014

Case 10.1: India’s Superrich in 2014

While the 2013-2014 financial year saw the Indian economy slowing to a crawl, and it was terrible for the employees across the board, it was a very good year for Indian billionaires, as the Business World 2014 Super Rich survey revealed. Between April 1, 2013 and March 31, 2014, the stock market was on steroids – the BSE Sensex shot up 18.67% and the NSE Nifty rose 17.53%. Many of the Indian billionaires saw their net worth rise even faster than both indices. The stock market boom created a record number of new rupee and dollar billionaires, even though the rupee-dollar-exchange-rate has been hovering between Rs 55-60 during the same 2013-2014 fiscal year. The collective wealth of India’s 500 odd super rich, with at least 100 crore in stock value, grew 22% from Rs 18 lakh crore in FY 2012-13 to Rs 22 lakh crore by March 31, 2014.

At today’s prices, the wealth will be substantially higher this year as both Sensex and Nifty indices have risen (as of June 15, 2014) by 12.39% and 12.22%, respectively, since April 1, 2014. Also, since April 1, 2014, the markets have risen sharply, presumably owing to great expectations that the Modi government will herald a new era of rapid growth and development. Many market watchers are predicting a multi-year bull run, unless some unforeseen circumstances can trip it up such as poor monsoons, uncontrollable food inflation, and slippages in fiscal discipline.

Some promoters did extremely well. For instance, Chairman, Adani Group, Gautam Adani’s wealth rose to meteoric heights with Narendra Modi’s 13-year reign in Gujarat, where most of Adani’s big projects, including the port and the power plant, are located. From the time Narendra Modi was announced as the BJP’s prime ministerial candidate on September 13, 2013 until March 31, 2014, Adani’s market cap rose 73% - the highest among his category in the last six months. During FY 2013-14, his market cap has arisen by 54.42%, his wealth crossing Rs 70,000 crore. Since April 1, 2014 to June 18, 2014, it has gone up another 26% to Rs 88,200 crore!

Exhibit 10.1 lists the top forty richest promoters (investor families) in India as of March 31, 2014. The data is from the annual Business World Super Rich Survey of 2014. The Business World (BW) calculates wealth by tracking the values of the shares held by promoters of listed companies (i.e., companies whose stock is publicly traded). These and others, however, may have their wealth also invested in unlisted companies. Thus, the BW survey could not include the top rich people of India such as Cyrus Poonawalla of the Poonawalla group, T. S. Kalyanaraman of Kalyan Jewellers, Nitin Sandesara of the Sandesara group, B. Ravi Pillai, and Yusuffali M. A. as they have kept their companies private.

In India, currently, there are more than 37,000 strong investment promoters investing in about 4,000 listed companies (excluding public sector units (PSUs) and MNCs). Wealth is measured by market cap (number of shares held by promoters multiplied by the stock price on 31 March 2013 versus 31 March 2014). The BW survey omits promoters whose listed net worth was below Rs 100 crore as of March 31, 2014. That filtered a list of 1,130 promoters. This list was checked and counter-checked, and adjusted for changes in shareholding during FY 2013-2014. Promoter wealth included dominant promoter and his immediate family (wife and older children) and others intimately connected with the dominant promoter. The list resulted in 550 entries that he BW survey lists in terms of decreasing promoter wealth (see Business World, July 14, 2014, pp. 86-101). Exhibit 10.1.1 features the top 40 from this list; it does not feature some of the world’s richest NRI (non-resident Indians), such as Arcelor Mittal’s Lakshmi Niwas Mittal (worth $20 billion), the Hinduja Brothers – Srichand, Gopichand, Prakash and Anand ($12.4 billion), Jaipur-born Kamlesh Punjabi, now Japanese Ryuko Hira, whose hospitality empire is estimated at $10 billion, and Ananda Krishnan of Malaysia’s Maxis Communications ($7 billion), and other magnates such as Mickey Jagtiani (UAE-based Landmark group), Swaraj Paul (London-based Caparo group) and Vinod Khosla (USA-based Khosla Ventures).

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Exhibit 10.1: India’s Super Rich (Dollar Billionaires) in 2014[Source: Business World, July 14, 2014, pp.86-87]

Rank Promoter Families Companies Market Cap Wealth2013-14

(Rs. Crore)

Market Cap Wealth

2012-2013(Rs. Crore)

Absolute Difference(Rs. Crore)

Change(%)

1 Mukesh D. Ambani Reliance Industrial Infra, RIL … 1,36,348 1,13,474 22,874 20.162 Sunil B. Mittal Bharat Airtel, Bharati Infra 1,13,827 1,02,516 11,311 11.033 Anil Agarwal Cairn India, Hind Zinc, Sesa

Sterlite,..1,03,756 88,555 15,201 17.17

4 Azim Premji Wipro 98,319 84,279 14,040 16.665 Kumar Mangalam Birla Grasim Inds. Hindalco Inds, Idea

Cellular, UltraTech84,118 67,788 16,330 24.09

6 Dilip Shanghvi SPARC. Sun Pharma Inds. 77,903 55,774 22,128 39.677 Gautam S. Adani Adani Enterprises, Adani Ports,

Adani Power70,005 45,335 24,670 54.42

8 Shiv Nadar HCL Infosystems, HCL Technologies

60,488 34,791 25,696 73.86

9 Rahul Bajaj Bajaj Auto, Bajaj Electricals, Bajaj Finance, Bajaj Finservices

50,269 42,587 7,682 18.04

10 Anil Ambani Rel. Communications, Reliance Broadbnd, Reliance Capital

44,441 29,255 15,185 51.91

11 Keshub Mahindra EPC Inds, M&M, M&M Financial, MUSCO

41,237 34,978 6,259 17.89

12 Savitri Devi Jindal Hexa Tradex, Jindal Saw, Jindal Stain, Jindal Steel

35,011 35,151 -140 -0.40

13 Adi Godrej Geometric, Godrej Consumer, Godrej Inds.

29,750 27,589 2,162 7.84

14 Uday Suresh Kotak Kotak Mahindra Bank 26,118 21,859 4,258 19.4815 K.P. Singh DLF 23,580 31,322 -7,742 -24.7216 Anand Burman Dabur India 21,494 16,403 5,091 31.0417 Vijay Malya KF Airlines, Mangalore Chemicals,

McDowell Hold.20,393 20,622 -229 -1.11

18 D. B. Gupta Lupin 19,618 13,187 6,431 48.7719 Brijmohan Lall Munjal Hero Motor Corp. Munjal Auto

Inds.,Munjal Showa18,624 16,396 2,229 13.59

20 Pankaj R. Patel Cadila Healthcare, Zydus Wellness 17,126 12,583 4,544 36.1121 Subhash Chandra Dish TV, Essel Propack, Zee Ent,

Zee Learn16,858 14,913 1,945 13.04

22 M. V. Murugappan Carborundum Uni., Chola Invest., Coromandel Engg.

16,026 10,126 5,900 58.27

23 Vivek Chaand Sehgal Motherson Sumi 14,804 7,448 7,357 98.7724 B. G. Bangur Shree Cement 12,727 9,160 3,568 38.9525 Kalanithi Maran SpiceJet, Sun TV Network 12,292 12,507 -214 -1.7126 Y. K. Hamied Cipla 11,337 11,220 117 1.0427 G. V. Prasad, K. S. Reddy Dr. Reddy’s Labs 11,116 7.658 3,449 44.9828 Ajay B. Parekh Pidilite Inds., Vinyl Chemicals 10,985 9,459 1,526 16.1429 Jaiprakash Gaur Andhra Cements, Jaypee Infratech,

JP Associates10,284 16,136 -5.852 -36.27

30 M Krishna Prasad Divi Divi’s Lab 9,465 6,810 2,655 38.9831 Siddharta Lal Eicher Motors 8,873 3,792 5,082 134.0232 S. Mehta, Samir Mehta Guj. Lease Fin., Torrent Cables.,

Torrent Pharma8,740 7,778 962 12.36

33 SP Hinduja Ashok Leyland, Gulf Oil Corp., Hinduja Foundries

8,402 6,818 1,584 23.24

34 Nityananda Reddy Aurobindo Pharma 8,132 2,330 5,802 249.0335 Rajan Raheja Exide Inds., Hathway Bhawani;

Hathway Cable8,078 8,627 -548 -6.36

36 Harsh C. Mariwala Marico 8,068 8,175 -106 -1.3037 Late TV Iyengar TVS Motor, Sundaram Brake,

Sundaram Fastners7,719 4,545 3,174 69.83

38 R. Thyagarajan Orient Green; Shri City Union; Shriram AMC

7,431 7,945 -514 -6.47

39 Glenn Mario Saldanha Glenmark Pharma 7,410 6,053 1,357 22.4140 Radheshyam Agarwal Emami; Emami Infra.; Emami Paper;

Zandu Realty7,351 6,779 572 8.44

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Exhibit 10.1 does not feature Business houses. The top most among them is the House of Tata with over Rs 3 lakh crore in shareholder wealth which grew by 32.79% to Rs 4.11 lakh crore during 2013-2014. The Tata contributions came from TCS (which grew by 35%), Tata Motors (grew by 48% reflecting Jaguar Land Rover performance) and Tata Steel (surged 26% due to improved sales in Europe). Tata Chemicals lost 11% in market cap while Tata Power remained unchanged. Thus, just the Tata group companies added around Rs 1.11 lakh crore to India’s wealth in FY 2013-2014. The wealth of the Tata group does not so much go to private families unlike others. Tata Sons is the holding company in which the Tata philanthropic trusts have a 66% stake (most prominent among these are the Sir Dorabji Tata Trust and its allied trusts, the Sir Ratan Tata Trust, and the Navajbai Ratan Tata Trust). The second biggest shareholder in Tata Sons is industrialist Shapoorji Pallonji Mistry with 18.4% stake.

One should also note that a stock price is nothing but the current price of a share’s future earning potential. Since equities do not have a lien on the company’s assets, they offer not only unlimited earnings potential, but also, a 100% capital erosion risk. In this sense, equities are an “all or nothing” investment avenue. Investors in the stock market research their target companies thoroughly before investing. They constantly scan the companies for innovations, expansions and diversifications they engage in. For instance, Shiv Nadar’s HCL Group was the biggest market cap gainer last year, largely due to an organizational restructuring at HCL Infosystems that led to greater efficiency and better than expected performance. Globus Constructors, promoted by Arush Tandon and Akash Khanna, whose stock value shot up by 57,000% from Rs 2.13 crore in fiscal 2012-13 to Rs 1,216 crore. The company changed its business from carpets and wool garments to real estate to clean energy to construction. In general, a sudden jump in market value is almost always accompanied by a new plant, a new retail facility, a new business, or a new acquisition.

The FY 2013-2014 was a drought year for IPOs. Of the only 38 companies that raised capital via IPOs during this year, 37 were “mini” public issues on BSE, NSE’s and SME platforms. The lone main board IPO was floated by Justdial, a search engine business, with VSS Mani as its promoter. The company debuted in June 2013 at a list price Rs 590 a share with an offer price of Rs 530 (quoting at an 11.32% premium to the offer price). Justdial floated 1.74 crore shares and raised a capital of Rs 919.1 crore from retail and institutional investors. The current (June 15, 2014) price is Rs 1,400 apiece, and Justdial’s market cap has surged to Rs 9,900 crore. VSS Mani owns 33% of the stake and has earned a promoter wealth of Rs 3,597 crore – another first time rupee billionaire in 2014 (See Business World, July 14, 2014, pp. 64-65).

India’s richest household, Mukesh D. Ambani and Family increased their wealth by Rs 22,874 crore (20.2%) to stand at Rs 1.36 lakh crore. How did he create this wealth? His flagship Reliance Industries Ltd (RIL) recorded great performance. While the refining business delivered the highest ever profits, earnings from petrochemicals rose on account of margin expansion across polymers and downstream polyester products. The Ambanis also made new investments in shale gas which garnered Rs 363 crore in profits (EBITDA). Recently, Mukesh has also invested Rs 18,000 crore (about $3 billion) on buying 4G spectrum to create a sizeable telecom vertical – Reliance Jio. RIL has already signed agreements with sectoral rivals Bharti Airtel, and Reliance Communications (his brother Anil Ambani owns this). Reliance Jio has won a unified license for all 22 service areas across India for voice telephony and high speed data services. Further, the depreciation of rupee against the dollar helped RIL exports by over 15%. Standard & Poor’s has raised RIL’s long-term corporate credit rating to BBB+ (from BBB), among the best for an Indian corporate and the best for an Indian oil and gas company (See Business World, July 14, 2014, p. 46). For a good account of wealth gains of the other tycoons listed in Exhibit 10.1, see Business World, Jul 14, pp. 47-82).

References:

Bansal, Satya Narayan (2014), “India’s Super Rich: Testing Time for Rich Heirs,” Business World, July 14, p. 80-82.Chopra, Pankaj (2014), “India’s Super Rich: When Patience is a Virtue,” Business World, July 14, p. 76-78.Datta, Prosenjit (2014), “A Good Year for the Super Rich,” (A Letter from the Editor), Business World, July 14, 2014, p. 4.Menon, Shailesh (2014), “India’s Super Rich: Up, Up and Way,” Business World, July 14, p. 60-62.Menon, Shailesh (2014), “India’s Super Rich: Minting Mani: Only one Promoter opted for a proper IPO last year. And he struck it rich,” Business World, July 14, p. 64-65.“India’s Super Rich: The Elite Club of 2014,” Business World, July 14, 2014, pp. 86-101.

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Ethical Questions:

1. Discuss the ethics of legitimate wealth enrichment outcomes at the individual level.2. Discuss the ethics of legitimate wealth accumulation outcomes at the collective country level.3. Discuss the ethics and morality of wealth accumulation in the hands of very few promoters in India.4. When can individual wealth aggrandizement outcomes be unethical and harmful to the country, and why?5. Besides being philanthropic, how can the rupee or dollar billionaires of India mobilize their wealth to evenly spread

job, income and wealth opportunities across the board in India?6. Discuss the role of creativity, imagination, innovation and risk taking venture in creating wealth ethically and

morally both individually and nationally.7. Explore some ethical ways of creating wealth for the bottom of the pyramid in India.

Case 10.2: Dubious Outcomes at Starbucks Coffee Company

Starbucks Coffee Company was founded in 1971 and opened its first location in Seattle’s Pike Place Market. By 2007, the company became the world’s leading coffee retailer, roaster, and brand of specialty coffee house in North America, Europe, Middle East, Latin America, and the Pacific Rim. No one else was offering what customers were seeking – a high-quality coffee, individualized service, and a comfortable coffeehouse atmosphere. From a few dozens of stores in 1992 when Starbucks went public, the coffee bar giant has grown exponentially. Actually, by the end of 2008, Starbucks had 16,875 locations worldwide, with 11,537 locations in the US alone. The company began opening its stores following new housing developments into the suburbs and exurbs, where its outlets became pit stops for real estate brokers and their clients. It also carpet-bombed the business districts of large cities, especially the financial centers, with nearly 200 outlets in Manhattan alone. Fueled by the capital markets, during 2007-2008, it opened an average of six stores a day! Starbucks appeared determined to have as many locations as McDonald’s in half the amount of time! Since its IPO in 1992, its stock price appreciated close to 6,000% by 2007!

One of Starbucks’ strengths is its single flavor but with 40 diverse coffee beverages (e.g., traditional brew, espresso, frappuccino). All coffee beverages are made from highly trained coffee Baristas, ensuring consistency in the quality of coffee across all product lines and across the globe. Specially trained employees make the Starbucks unique experience of coffee very enjoyable and memorable. Thus far, there has been low employee turnover in Starbucks, which makes customer service consistent and dedicated, regardless of store location. Customers feel appreciated and respected when entering a Starbucks environment.

Industry Structure

Starbucks belongs to the restaurant industry. The latter includes some 500,000 restaurants in the USA with combined annual 2008 revenues of almost $400 billion. Major companies include McDonald’s, YUM! Brands (e.g., KFC, Pizza Hut, Taco Bell), and Darden Restaurants (Olive Garden, Red Lobster). The restaurant industry is highly fragmentized – the 50 largest companies hold just about 20% of the market. Large companies have advantages in purchasing, centralizing, finance, and marketing. Smaller units do better on food and service. The industry is highly labor-intensive, with annual revenue per employee/worker varying from $40,000 to $45,000. Independent restaurants could easily take about 18 months to be profitable (RestaurantOwner.com).

Trends like demographics, consumer tastes, changing palates, dietary preferences and personal discretionary income levels drive restaurant demand. Sales are slightly seasonal, and peak during summer. Consumer price sensitivity can be a major factor for demand. The US Consumer Confidence Index (CCI) for November 2008 was the lowest it has been since April 1980. About 75% of CCI survey respondents believe that economic conditions will not improve in the near future. Hence, restaurants can expect discretionary spending to be soft for the coming months. Bad weather can depress sales throughout the year. Receivables are low since most customers pay with cash or third party credit card (in case of business clients) or personal credit cards. Credit card fees are 1 to 3% of sales.

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Many restaurant ingredients are perishable; hence, most companies keep low inventories. Gross margins are about 60% of sales. For diners, cost accounting is important – as the profitability of individual dishes can vary significantly. Chain restaurants in the USA are introducing new menu items to bolster sales in a tight economy. October 2008 alone saw 547 new menu items, a 40% increase over the monthly average of 2008, according to Technomic, a foodservice consulting firm.

Retailing Chains in a Wave of Bankruptcies

The consumer spending slump and tightening credit markets are unleashing a widening wave of bankruptcies in American retailing. Moreover, the surging costs of necessities such as oil, corn, rice and vegetables are tightening the credit squeeze. That is, spending on food and gasoline is crowding out other purchases, leaving families with less to spend on furniture, clothing and electronics. Consequently, chains specializing in such discretionary goods are proving vulnerable. Hence, thousands of store closings are expected to reconfigure suburban malls and downtown shopping districts across USA.

During fall of 2007 until early spring of 2008, eight midsized chains have filed for bankruptcy (e.g., furniture store Levitz, the electronics seller Sharper Image, the furniture chain Wickes, Fortunoff, the jewelry and home furnishing chain in the Northeast, the catalog retailer Lillian Vernon, and Harvey Electronics) as they staggered under mounting debt and declining sales. Even retailers that can avoid bankruptcy are shutting down stores to preserve cash through what could be a long economic downturn. This is a wicked problem.

The trouble is spreading to bigger national companies as well. Linens ‘n Things, the bedding and furniture retailer with 500 stores in 47 states, which is owned and operated by Apollo Management, a private equity firm, is considering bankruptcy after years of poor performance and mounting debt. Foot Locker threatens to close 140 stores over the next year (2009), Ann Taylor will start to shutter 117 stores, and the jeweler Zales will close 100 stores. Charming Shoppes, which owns the women’s clothing retailers Lane Bryant and Fashion Bug, is closing at least 150 stores in 2008. Wilsons, the Leather Experts, will close 158. Pacific Sunwear is shutting its 153-store chain called Demo. Most of the ailing retailing companies have filed for Chapter 11 reorganization, but not Chapter 7 liquidation.

Some retail chains that are doing better (e.g., J. C. Penney, Lowe’s. and Office Depot) are scaling back or delaying expansion. Office Depot had planned to open 150 new stores in 2008; it has scaled them back to 75. The International Council of Shopping Centers, a trade group, estimates there will be 5,770 store closings in 2008, up 25% from 4,603 store closings in 2007 (Barbaro 2008: A16). Research indicates that premium food and beverage are among the top areas where people are trimming their spending (http://money.cnn.com/2008/04/25 /news/economy).

Early July 2008, Starbucks announced it would shutter 600 of its underperforming stores and lay-off some 14,000 employees in the process. The number of stores, apparently, simply outpaced themselves. Starbucks has significantly scaled back plans to open new outlets. The current recession in the U. S. is hurting countless retailers and restaurant chains. [Incidentally, the company did close over 600 stores in 2008, and there are additional plans to close more stores in 2009].

Starbucks is increasingly becoming a “wicked” problem. Some of the indicators include:

Starbucks was so determined to meet its growth promises to Wall Street that it relaxed its standards for selecting new store locations. The potential rewards of rapid growth led Starbucks astray.

Its recent overexpansion in some regions and putting stores too close together in others have backfired. Starbucks misjudged the risks of planting stores close to each other, leading to decline in store sales.

The company agreed that 70 percent of the stores marked for closing in July 2008 were opened after 2006.

It also overextended itself in certain regions (e.g., Florida and the South and in Southern California which are among the hardest hit by the housing crisis) where the older demographics and hot weather are not generally conducive to creating long lines of customers eager to cough up $4 for foam-top lattes.

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Starbucks in inflexible. It charges too much. It is inflexible in terms of its premium locations. Starbucks charges the same price for their products whether in LA or in Beijing. In Israel, Starbucks is having a hard time, as it maintain kosher standards. It has a frozen business plan formulaic that is highly centralized, and Starbucks rarely customizes or localizes its products to international challenges. Presumably stuck by its own coffee farms, Starbucks offers only one flavor of coffee (but in 40 different beverages ranging from traditional brewed coffee to espresso and frappuccinos). The lack of flavor selection has bothered its domestic and foreign customers. Meanwhile, new competition (e.g., Peet’s; Coffee Bean) has arisen with multiple coffee flavors. Whereas competing companies (e.g., Dunkin Donuts, McDonald’s) have diversified, Starbucks has not.

Thus, Starbucks’ plain vanilla format, particularly in suburbia, makes it difficult to justify the premium its customers pay relative to independent coffee houses, local coffeehouse chains, and even McDonald’s and Dunkin’ Donuts (Favaro, Romberger and Meer (2009: 68).

In 2004, Starbucks announced it would double its pace of expansion with a goal of reaching 15,000 stores in the USA by 2010. That ambitious target led to a frenzy of getting locations opened disregarding cannibalization and location demographics, psychographics and ergographics.

With 77% of its revenue coming from the U. S. alone, the 2007-2008 consumer credit crunch and mortgage meltdown made the wicked problem worse. One third of the company’s US revenue comes from California and Florida, and both states have been worst affected by the economic meltdown.

Coffee beans are a major expense for Starbucks, and the company purchases premium coffee beans traded above commodity coffee prices. In 2004, Starbucks established the Starbucks Coffee Agronomy Company, a wholly owned subsidiary located in Costa Rica, to ensure company’s continued role in the Central American coffee industry. Despite this, Starbucks could not insulate itself from the reality of world coffee fluctuations. Coffee prices in 2008 were higher by 20% compared to 2007. Coffee beverage sales of Starbucks have been averaging 66% of its total revenues, while food sales averaged at 14%, equipment sales at 11% and whole bean coffee sales at 9%. Starbucks is also a major consumer of dairy products, and dairy prices were up by 10% in 2007.

Both McDonald’s and Burger King have been outperforming the market in 2008 in the USA, and for the first time, Consumer Reports rated McDonald’s coffee above that of Starbucks in 2008. Little wonder, Starbucks’ annual store sales growth has decreased from 11% in 2004 to 4% in 2007-2008.

Many of the newer stores were located in areas of potential but unrealized population growth. The housing crisis and real estate chaos derailed much of that planned potential for development – the projected traffic patterns never materialized. Some of these areas did not pan out as expected.

Starbucks has too many licensed stores in bookstores and supermarkets and which can siphon traffic from more profitable company-owned stores. Some stores were licensed to locate within hundred yards from an existing licensed or company-owned store.

In trying to tame this wicked problem, CEO Schultz, is launching a raft of changes aimed at restoring customer momentum at Starbucks. Besides cutting 600 more jobs, he is:

Introducing free wireless Internet connection in stores; Eliminating hot breakfast sandwiches that have been criticized for interfering with the coffee aroma; Introducing a proprietary and seemingly revolutionary in-store Clover brewing system that delivers the best cup of

brewed coffee available anywhere; Reinventing the in-store brewed coffee system that the coffee Baristas will bring to life through the USA – a system

by which the customer can scoop and grind a new and unique coffee blend, connecting customers to the early days of Starbucks;

Introducing a new state-of-the-art Espresso system that will provide the best coffee shot every time and help facilitate the critical connection between Barista and the customer;

Introducing the Starbucks Card Rewards program, rewarding registered coffee cardholders with new and unique benefits;

Launching MyStarbuckside.com that can build a first Starbucks online community to provide regular feedback to Starbucks management;

Expanding relationship with Conservation International that will enhance Starbucks’ 37-year commitment to source ethically the world’s finest coffee.

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Ethical Questions:

1. In general, discuss the ethics of outdoor dining in the context of social exclusivity of those who can afford it.2. In general, discuss the ethics of the culture of fast food restaurants in the context of more organic and healthier

homemade meals and fellowship that strengthen family solidarity. 3. Discuss the ethics of Starbucks in overextending its capital resources by over-expanding both domestically (USA)

and abroad. 4. Starbucks wanted to increase faster and bigger than McDonald’s in half the time. Is growing bigger, better and

always? Is aping McDonald’s in this context healthy competition?5. Its recent over-expansions ended up locating stores too close together and cannibalization raged. Starbucks

misjudged the risks of planting stores close to each other leading to decline in store sales. Discuss the ethics of establishing Starbucks stores so close together in the context of cannibalization.

6. Starbucks desecrated its original unique Starbucks coffee image by adding commoditized products like over-the-counter food, thus instantly eroding its brand and uniqueness. Discuss the ethics of this commoditization as a brand-deception strategy.

Case 10.3: Plant Relocation and Possible Labor Displacement at Bajaj Auto’s Chakan Plant near Pune (Business Standard, Friday, June 28, 2013, pp. 1-2; Wednesday, July 3, p.1).

Production at Bajaj Auto’s Chakan plant near Pune, Maharashtra, has crippled following a labor strike that entered its third day on Friday, June 28, 2013. For all practical purposes the Chakan plant has been shut down for the last thirteen months. There is no sign of activity around the 300-acre plant campus. The plant has been operational since 1999. It accounts for about 2,000 workers engaged in manufacturing 1.2 million units of motorbikes per year, including the Pulsar, Ninja and KTM brands.

Before the labor trouble, Bajaj produced over 350,000 motorbikes a month across its three plants – 80,000 units in Chakan, 150,000 at Aurangabad, and about 120,000 at Pantnagar. Bajaj Auto’s technologically most advanced production facility in Chakan, produced, among other brands, Avenger (2 models), KTM (3 models) and Kawasaki (2 models), the five models of its high-margin and popular brand, Pulsar. The production of the KTM models (Duke 125, the export model, the Duke 200 and the Duke 390) and the Pulsar at Chakan is important as Bajaj Auto is giving priority to the export market. The Chakan plant has been working perfectly for the last 14 years. Problems have periodically risen here mostly in the last two to three years when Chakan began to experience hiring issues and loss in production.

The Chakan plant has a capacity of 4,000 units per day, but its utilization had already slipped to 3,000 units per day for the past few months of FY 2013. More recently, production at the facility plunged even more dramatically to about 600 units per day as only a small number of its 1,500 strong workforce reported to duty. Allegedly, only 200 workers reported to duty on Thursday (June 27, 2013), while only 100 had worked the day before.

The independent Bajaj Auto Trade Union, the Vishwa Kalyan Kamgar Sanghatana (VKKS), founded in January 2010, and currently led by Dilip Pawar (who belongs to Bajaj’s Akurdi plant) has now made some demands to the Chakan plant management. Allegations include: excessive workload; relatively low wages; low annual pay increases; the management has made overtime mandatory but refuses to pay for the additional hours of work. Employees have even reported harassment owing to the above reasons. Moreover, union members said that based on fabricated performance reports, the management has started issuing warning letters, show-case notices, dismissals and suspensions, and pending inquiries. Between January and May 2013, workers across segments such as engines, vehicles, and aluminum shops have complained against the management at the Chakan Police Station.

“We are always in favor of the company and we are strictly against any kind of violence or unrest in the company, said Dilip Pawar, president of VKKS. We do not want a Manesar-like situation in Chakan. So we are not protesting and there is no agitation against the management. The workers have not gone on strike; we have stopped work. It cannot be called a strike.”

On Tuesday, July 1, 2013, in a key move to break the strike at its Chakan plant, Bajaj Auto management had decided to shift manufacturing of its best Pulsar bikes to its Aurangabad facility, which also makes three-wheelers.

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About 100 units of the Pulsar brand were produced on Thursday, June 27 at Aurangabad, said Rajiv Bajaj, Managing Director, Bajaj Auto. “When you buy 80% of parts from suppliers, they can supply that to any plant. The rest of welding, painting and assembling, too, can be dome at another plant. But I would do that only after waiting for a couple of weeks. If we think the situation is going to drag on for a few months, we obviously would do that” added Rajiv Bajaj. In fact, Bajaj plans to transfer much of its production from Chakan to Aurangabad and Pantnagar, if the strike situation continues to paralyze production for more than a month.

The workers had asked for equity shares – 500 shares to each worker at a highly discounted rate of Rs 1.0 per share, and a 25% increase in wages. But the Bajaj management turned both demands down. “This is a public limited company, not a kirana shop that I can handle company shares like that. And we are not going to do anything of that sort” retorted Rajiv Bajaj to editors of Business Standard when interviewed on this sensitive issues of equity shares. According to the Bajaj management, the union leader Dilip Pawar has resorted to intimidation and pressure tactics and is not allowing workers to enter the factory at Chakan. According to the management, Dilip Pawar has been trying to muscle his way into the Pantnagar and Chakan plants.

But the Bhartiya Mazdoor Sangh (BMS), one of the largest trade unions in India, is supporting the workers’ claim for equity shares. The BJP-affiliated BMS said that the Chakan workers’ demand was “totally justifiable.” Said Baijanath Rai, General Secretary of BMS, “I strongly believe workers should be given equity shares. The employees are providing their labor and if you treat labor as capital, the demand is appropriate.”

To handle the Chakan plant crisis, Bajaj’s top management deliberated at a meeting attended by Rajiv Bajaj, MD, Pradeep Srivastava, chief operating officer, Kailash Zanzari, VP Manufacturing and a few others. They arrived at the crucial decision on Tuesday, July 1, 2013, to shift manufacturing to Aurangabad. Following the decision, the production of 70,000 Pulsars per month will now be at Aurangabad, while 10,000 units of the Avenger, KTM, and the Kawasaki will continue to be made at the troubled Chakan plant. In order to do this, Bajaj is shifting 200-300 workers from its Pantnagar plant to the Aurangabad facility, to make exclusively the Pulsar brands. Their place will be filled by new recruits. The recruitment process has already started.

On Tuesday, July 2, 2013, as the strike at the Chakan plant entered its eighth day, only a third of its 1500 workers reported to work. Even as of July 31, 2014, more than a year later, the Chakan plant situation is hardly resolved to optimal working conditions.

Ethical Questions:

1. You are hired as an HRM external “consultant” to resolve this issue before it escalates into a major strike that could force close down the Chakan plant or block its transfer of operations to Aurangabad or Pantnagar. What will you do?

2. What is the moral dilemma in this case? What is the moral trilemma or multi-lemma that you can convert the Chakan case to and why? Accordingly, what is your strategic plan of action? Why and with what intended effect? [See Handout 07, Managerial Ethics].

3. Specifically, what are the legal rights and duties of management versus labor (Unions) in this regard at the Chakan plant, and why? [See Handout 08, Managerial Ethics].

4. What are the underlying assumptions, presumptions, suppositions and presuppositions, biases and prejudices of the workers and the management, and in resolving the strike how will you eliminate them progressively? [See Handout 04, Managerial Ethics].

5. How can you legally, ethically and morally defend Rajiv Bajaj, the Managing Director of Bajaj Auto, and his stance on this issue? [For his full interview with Business Standard editors, Surageet Das Gupta and Swaraj Baggonkar, June 27, 2013, visit www.business.standard.com].

6. Following Frederick Taylor’s theory of motivation (1907) you could treat labor as mere “factors of production.” But following Mazlow, Herzberg, McGregor, and others thereafter, you could treat workers as human beings with dignified human personhood endowed with immanence, individuality, sociality and transcendence. Hence, how will you strategize your “consultancy” plan so that both workers and management win in the long-run?

Ethics of Responsibility for Corporate Decisions and Outcomes

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“Each of us has the capacity to make business not only a source of economic wealth, but also a force for economic and social justice. Each of us needs to recognize and use the power we have to define the character of our enterprise, so they nurture values important to our society. Only then will each of us know full rewards that a career in business can yield. Only then will business achieve the true potential of its leadership. Only then will business fulfill its obligation to help build an economy worthy of a free society and a civilization worth celebrating.” [Walter Haas, Jr., ex-CEO of Levi Strauss & Co.] 1

Each of us is responsible for each other, the world, and ourselves. Ethics is fundamentally a science of social and collective responsibility. Ethics concerns human behavior as responsible or accountable. Because of the nature of social interaction, certain members of the society will bear greater authority, and hence, greater individual and social responsibility than others. In our world, personal responsibility and social responsibility are hardly separable. Personal responsibility becomes responsibility for the world because the person and the world are inseparable. In a fast morally deteriorating world such as ours currently, we all bear an obligation to contribute to and purify the moral understanding of ourselves, our society and of our social world. One of the principle functions of normative ethics is the guidance of human choice and activity. Ethics not only deals with protecting values and meeting human needs; it also attempts to guide us about how we should act, what we should do, and what we should avoid if these human values and human needs are to be fulfilled (Rehrauer 1996: 232). This chapter focuses on moral corporate social responsibility for executive outcomes.

Human behavior is a matter of feelings and emotions, actions and attitudes, beliefs and values. Actions, attitudes, beliefs and values can be assessed as right or wrong, and finally described as 'good' or 'bad.' This assessment is based on: a) when the total intention of the person concerned is taken into account (deontology); b) when the consequences of such actions, attitudes, beliefs and values are assessed in terms of benefits and burdens on self and society (teleology); c) when benefits and burdens are evenly distributed among all people affected by these actions, attitudes, beliefs and values (distributive justice), and d) when procedures and structures are in place when (a), (b), and (c) are not realized (corrective justice).

What is Responsibility?

As its etymology suggests (from Latin respondere = to answer, responsabilis = requiring an answer, responsum = response), the most obvious meaning of “responsibility” is accountability, being answerable to one’s behavior. Simply stated, responsibility means to be accountable for one’s actions; that is, to take ownership of one’s actions and their good and bad outcomes, to accept praise for the good and blame for the bad consequences, and be ready to compensate for the harm, if any, resulting from the bad consequences. The Webster Dictionary defines responsibility as a) the condition, quality, fact, or instance of being responsible, answerable, accountable, or liable, as for a person, trust, office or debt; b) a person or thing for which one is responsible. It also means a quality of a person (e.g., she is a responsible woman; he has a responsible position; he is responsible for the car-collision) as trustworthy, dependable, and reliable. It is also a term used to describe and qualify the causality of an event (e.g., the icing of the wings was responsible for the airliner crash). It can also mean a personal capacity (e.g., the CEO’s responsibility has no boundaries), an obligation (e.g., this is your responsibility), as an adverb (e.g., she has acted responsibly).

1 In his closing remarks at the 1992 Business Enterprise Awards ceremony, cited by David Bollier in his Aiming Higher (1997: 351). Throughout this chapter we will illustrate responsibility principles drawn from philosophers reviewed here by suitable vignettes and anecdotes from the story of Levi Strauss & Co. as featured by Bollier (1997: 339-51) under the title “A Value-Driven Business in a Global Marketplace.” These illustrative observations are blocked and italicized for effect as well as for distinguishing them from the main text.

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The term "responsibility" has several synonyms: accountability, answerability, imputability, liability, duty, and obligation.2 Long before the word was introduced into philosophical ethics, philosophers spoke about it when they argued about the manner in which a person could be considered the author of one’s own actions. Presently, the term responsibility is applicable to persons, institutions and opinions. Thus, one speaks about responsible people, responsible governments or societies, responsible corporations and institutions,3 and even, responsible economic views or estimates.

In general, one can distinguish two broad levels of responsibility: Responsibility for the action itself, and responsibility for the consequences of the action (Hart and Honoré 1975):

Responsibility for the action is primarily moral, and involves the concepts of duty, obligation, blame, and answerability.

Responsibility for the consequences is primarily legal and is associated with the concepts of liability, imputability, accountability, and punishment/compensation for the harm accruing from the action.

This double use of the expression responsibility arises from the important fact that doing an action and compensating harm from the action are two distinct sources of holding persons responsible. Both sources of responsibility are independent of, but may be influenced by, a third consideration: did the said action cause the harm for which compensation is sought? Or, equivalently, did the doer of the action cause the harm? These questions are too complex to resolve, and for practical purposes, legal responsibility, especially under the rubric of “strict liability,” may not always deal with this third consideration. The principle of strict liability asserts that all harm should be compensated for via compensatory justice, regardless of the fact, state and direction of causality of the action between the said parties.

Causal and Agent Responsibility

Responsibility for the consequences can impute in two ways (Mascarenhas 1995):

If the executives themselves act or omit an act that causes harm to some stakeholder, then the executives are directly responsible for it - this is called consequent causal responsibility.

If the executives command or delegate an action (commission or omission) that causes harm, then they are indirectly responsible for the harm - this is called consequent agent responsibility.

The corporation authorizes the advertising agency to act on its behalf. The corporation assumes that the ad agency will work on behalf of the interest of the entire company and its stakeholders and not be

2 Responsibility as a word has a short history in the English language. According to Albert Jonsen (1968: 3), the word makes its philosophical debut in David Hume's Treatise of Human Nature (1740) in the oft-quoted passage: "Actions may be blamable ... but the person not responsible for them." The word thereafter appears as a synonym for accountability, imputability, liability, duty, and obligation. In the late 19th century, two works gave the term responsibility a central place in the lexicon of morality: F. H. Bradley’s (1876) essay “The Vulgar Notion of Responsibility and its Connection with the Theories of Freewill and Determinism,” and Lucien Lévy-Bruhl’s study of the problem of freedom in “L’Idée de Responsabilité” (1883).

3 There are obvious differences between corporations as moral agents and executives as moral agents: corporations do not vote and are not drafted, but executives in corporations think and deliberate over goals, strategize realization of goals, and accordingly make decisive choices. Hence, both corporations and executives are accountable (Donaldson 1992). That is, corporations and executives can control their actions, make rational decisions, make reasoned choices, and thus, can be held accountable for the choices they make. For further discussions, see De George 1990, 97-107; 1995, 122-33; Donaldson 1992, 18-34; French 1979, 1984; Goodpaster and Matthews 1982.

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‘opportunistic’ by serving its own interests. The principal or the corporation assumes “vicarious liability” or “vicarious responsibility” for the advertising agent.4

In early moral philosophy, the topic of responsibility has regularly surfaced under the question of necessary and sufficient conditions that must exist if one is to be truly declared author of one's actions, and thereby, to be justly praised or blamed. At the very dawn of Western Classical Philosophy, Heraclitus (c.540-480 B.C.) asserted that it was a human being's formed character and not some external force that constituted one’s fate. Since then, philosophers have debated and connected the issues of fate and freedom, character and causality, motivation and intention, deliberation and consideration, justification of praise and blame, and punishment and reward with the notion of responsibility.

Accountability and Commitment

Two questions, therefore, can be raised regarding causal or agent responsibility:

How can the judge know when and whether the executive should be justly praised or blamed, punished or rewarded for his or her executive actions? - This situation is often designated as the judge's problem.

How can the agent know when the acts or effects of one's executive behavior really belong to him or her as a human agent? - This question is usually called the agent's problem.

For instance, how can the judge ascertain if the corporation or the ad agency should be held responsible for the harmful social consequences of the products they manufacture and advertise? The judge who must pass judgment on the executive conduct must sift through evidence, conditions and circumstances in each case before responsibility or accountability can be "attributed" to the persons – this is called attributional responsibility (ATR) (Dewey 1925).

Secondly, how can the executives know if the harmful effects of their products really belong to

them, either as individuals or as corporate executives? In order to pass moral judgment on their own conduct the executives must also sift in each case through their own principles of choice, intentions, motivations and deliberations so as to own or “appropriate” the consequences of their actions – this is called appropriational responsibility (APR) (Bradley 1876; Feinberg 1975).

Thus, there have been two distinct patterns that characterize human responsibility: pattern of attribution and pattern of appropriation. As attribution, responsibility is retrospective; it assigns praise or blame depending upon the degree of intention, deliberation and motivation in the action chosen and executed. As appropriation, responsibility is prospective; it is remedial, developmental and character building through commitment (Bradley 1876; Dewey 1925; Niebuhr 1963). While in ATR, the judge looks principally for external evidence of moral causality and does not strike so deeply into the interior of moral agency, in APR, the moral agent lives responsibility in his/her innermost self. Moral agents can be held responsible (by imputation) because they have acted as responsible causes (ATR) and so that they may become responsible persons (APR).

4 Obviously, because of its multi-polar and multivalent use (as a noun, adjective, adverb, object, subject, predicate, verb, etc.,), the word responsibility can be ambiguous in connotation and denotation when used. The fact that responsibility is a relatively modern word (i.e., it appeared in the English language just about four centuries ago) and has picked up such a diversity of meaning and usage indicates that the word is extremely potent and flexible in concept. Further, since we link responsibility to a human action, and given that human action can be a very complex phenomenon (see Chapter 03), the concept of responsibility will be even more complicated (Rehrauer 1996: 139-144).

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Both ATR and APR imply a fault such as a wrong, harmful or unfair product (goods or services) or an unfair action (promotion or advertising strategy) (Mascarenhas 1995). The fault can be either externally (e.g., by courts) attributed to the person or internally (e.g. by virtue, conscience) appropriated by the person. Once the fault is attributed to an executive, he or she must assume accountability for the harmful consequences of the fault. Once the executive appropriates the fault, he or she must assume commitment to avoid the fault in the future. Thus, we focus on both accountability and commitment aspects of executive responsibility.

Obviously, when we speak of ‘responsible business management’ we need to go beyond legal or strict liability. In fact, a deeper etymology of the word responsibility unravels another dimension: within the word for response is hidden the Greek word for “promise” that invites people to reliably perform one’s part in a common undertaking or to perform one’s promised part in a solemn engagement Thus, “responsible persons are not only those who are un-coerced and aware of the nature of their action and its consequences; they are also persons who demonstrate certain stable or habitual attitudes to their relationships with other persons. In this sense, responsibility describes the character of a person” (Jonsen 1968: 547), and is a virtue (Aristotle 1985; Aquinas 1984).

Thus, in this Chapter, we use the term responsibility from a legal, ethical and moral standpoint as some promise, commitment, obligation, sanctioned by self, morals, law or society, to do good, and if harm results, to repair harm done on another. Hence, responsibility from a moral perspective is trustworthiness and dependability of the agent in some enterprise. Its inverse is exoneration - the extent

to which one is excused from commitment and repairing the harm done to others by one's actions.

Aristotle’s Notion of Responsibility

Aristotle (384-322 B.C.) treats responsibility in his Nicomachean Ethics (see Book III, Ch. 1), a work that is often cited as the foundation for the juridical theory of culpability (Austin 1961; Bradley 1876; Jonsen 1968). Subsequent treatments on responsibility are mostly further developments of Aristotelian thought. Hence, we start with Aristotle and give him adequate space he deserves.

Aristotle (1985) deals with the topic of responsibility in the context of voluntary and involuntary actions. According to Aristotle, human responsibility is a function of voluntary and involuntary actions. Because most business executive decisions are a blend of voluntary and involuntary actions (Mascarenhas 1995), Aristotle's theory is particularly helpful in assessing the responsibility-exoneration content of such decisions. Aristotle claimed that what makes actions voluntary or involuntary, is the role factors such as "constraints," "duress," and "ignorance" (or knowledge) play in formulating and implementing actions. Aristotle maintains, “involuntary actions seem to be those that arise either from force or from ignorance” (1985: 53).5 A constraint is a physical or psychological force brought to bear on the agent. An act done under force or constraint is one in which the initiative or source of motion comes from without and to which "the agent or victim contributes nothing" (1985: 53).6

5 We cite Nicomachean Ethics (NE) as translated by Terence Irwin (1985).

6 Commenting on Nicomachean Ethics of Aristotle, Thomas Aquinas (1964, Volume 1: 175-6) writes: “A thing is involuntary on two counts: one, because the movement of the appetitive power (will) is excluded – this is the involuntary resulting from violence – the other, because mental awareness is excluded – this is the involuntary resulting from ignorance…. The forced action is one whose principle is from outside … however, not every action whose principle is from the outside is a forced action but only that action which is derived from an extrinsic principle in such a way that the interior appetitive faculty (will) does not concur in it. This is what he (Aristotle) means by his statement that a forced action must be such that a man contributes nothing to it by his own appetitive faculty. A man is here said to be an agent (operans) inasmuch as he does something because of violence and a patient inasmuch as he suffers something because of violence.”

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Involuntary actions arise from force or violence, on the one hand, or from ignorance, on the other. On the contrary, voluntary actions are those “that originate within the agent who has knowledge of the circumstances of the action” (1985: 58). Commenting on these definitions in Nicomachean Ethics, Thomas Aquinas (1964, Vol. 1, p. 175) adds: “Voluntary actions are freely done, the choice is end-driven, and the end itself is also willed…. Involuntary actions are a privation of the voluntary; hence they do not merit praise or blame.”

Applied to a business executive action, two conditions are needed for the action to be suffering from constraints; that is, to be justified as an involuntary action done under force:

1. The executive does not initiate the decision or action; others initiate it. 2. Once initiated by others, the executive contributes nothing to the action.

Both conditions are necessary. According to Aristotle, involuntary actions can occur in two ways: a) under total force or violence, and b) under total ignorance. Aristotle also gives two examples of involuntary or “compulsory” actions: when someone is driven somewhere by the wind, or when one is totally under the power of other people (1985: 53). The former is an example of a natural disaster, the latter, of tyranny or terrorism. Both examples imply some form of violence. However, circumstances under both can make them voluntary. For instance, a person driven by wind can rush to take shelter, or based on meteorology foresee the tornado. A person under terrorism can still resist or placate the terrorist. Hence, Aristotle adds, “Some actions that in themselves are involuntary become voluntary under particular circumstances” (1985: 55).

Given this definition of a “constraint,” business decisions and actions rarely qualify to be categorized as compulsory actions driven by violent force. There could be some cases of involuntary turnaround strategies, however, that could be driven totally “under ignorance.” We will consider them later. Violence, fear, passion, habit, psychological and social influence, and pathological conditions may all be some forms of constraint or force. Nevertheless, they are factors that may prevent or inhibit the agent from taking the "initiative" in the formulation of decisions and in the execution of subsequent actions. The latter are best considered as cases “under duress” that we discuss shortly. Thus, passion, habit, psychological, social and competitive market-pressures cannot be routinely and justifiably invoked for rationalizing the design, manufacture and marketing of certain addictive products such as gambling, cigarettes, alcohol, drugs, sex-products, or violent sports, since the agents or executives willingly contribute something in these cases. 7

Similarly, passion, habit, psychological, social and competitive market-pressures cannot be automatically or justifiably invoked for rationalizing plant closings, massive labor lay-offs, mass-expansions, or other organizational downsizing strategies, as Cases 10.2 and 10.3 seem to indicate.

Aristotle’s Theory of Actions under Duress

According to Aristotle, actions under duress are undertaken because of fear of greater evils or because of something better. For example, a tyrant forces you to do something shameful; if you do, you live, if you do not, you die. Another instance, you throw cargo overboard in a storm to save yourself and others. Such actions, says Aristotle, are a mixture of voluntary and involuntary actions, but "taken as a whole, they are voluntary" (1985: 54). They are more voluntary than involuntary since at the time they are done there could be other feasible alternatives to pursue. That is, such actions are choice-worthy, (the goal of the action reflecting the occasion), and since the action originates from the person who acts. Moreover, in each case, one could act or not act. However, these mixed actions are 'conditioned', since no one would choose them for themselves. They are done under duress, and deserve no praise but

7 Aristotle (1985:56) argued that the following conditions do not make an action involuntary, a) pleasure even though compellingly pleasurable; b) emotions or appetites, howsoever strong, and c) willed ignorance or ignorance without regret.

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pardon, especially because they are executed under "conditions of a sort that overstrain human nature, and which no one would endure" (1985: 55). Under such circumstances, it is difficult to decide what should be chosen under what circumstances and under what pain, price, or shame. 8

Applied to business strategies, at least three conditions are needed for an executive action to be qualified as "under duress:"

The executive does not choose the action for itself, even though it may be choice-worthy. The executive is forced into action because of extreme (i.e., non-endurable) fear of greater

evil or of avoiding some serious good. Though pressured into action morally or psychologically, the executive can still act or not

act.

For example, when executives, under threat of being fired, are forced by their bosses to do something illegal or unethical such as receiving bribes from suppliers or distributors, hiring boss’s relatives even though incompetent, exorbitant pricing in ghetto areas, or creating artificial shortages of life-saving drugs, they act under duress. These actions verify all three “under-duress” conditions. The best of businesses know how to act responsibly despite the worst duress or constraints. Table 10.1 summarizes Aristotelian doctrine on executive responsibility.

Referring to Case 10.2, Starbucks had its usual constraints in surviving, reviving and expanding its operations. For instance, the restaurant industry had structural “constraints” that could force actions or strategies “under duress” such as:

Volatile supply costs: – unstable manufacturer prices for raw ingredients used in restaurants can significantly impact profitability. In general, commodity markets affect wholesale prices for beef and poultry, where prices can change more than 20% in a given year. Supply issues affect the cost of seafood. The wholesale price of flour, eggs, dairy products, fats and oils can also increase rapidly and affect restaurant margins.

Competition: – from a broad range of businesses vying for consumer food dollars. Grocery stores and warehouse clubs (Costco, Sam’s) are providing more ready-to-eat meals and sides, often at a better value than the restaurants. Moreover, convenience stores, gas stations, coffee shops, and delis sell sandwiches and beverages, cutting into restaurants’ share of lunch market. Home cooking is also a competition. Restaurant meals are generally more expensive than home cooking. Reasons for eating out less include high gas prices, cheaper and healthier food alternatives at home, and higher quality of home cooked meals than fast foods. In tough economic times, most consumers may consider restaurants meals an unnecessary dispensable expense.

Health concerns: Contaminated food and raw ingredients causing illnesses and death have been well publicized. Contamination through poor sanitation, worker error, and other avoidable factors can affect restaurant business significantly. The presence of E coli, mad cow disease, salmonella, avian flu, and the like can affect meat/poultry supply/demand. Growing consumer and government concerns over fat/calorie content and excessive portion size of some restaurants stir bad publicity and state-sponsored legislation. Adding green menu options (e.g., using organic ingredients, sustainable seafood, antibiotic and hormone-free meats) can boost sales among environmentally conscious customers. Offering smaller portions (e.g., bit-size desserts, tapas, multiple flavors with smaller servings) are hot trends, according to a National Restaurant Association (NRA) survey.

Legal concerns: Multiple class-action lawsuits accusing fast food restaurants of contributing to obesity have provoked harmful publicity. The remote possibility of high-damage settlements can paralyze the food industry. Related state bans on trans-fats may require restaurants to change recipes or incur additional costs. Risks associated with serving alcohol include liability for the actions of intoxicated customers and legal consequences from serving alcohol to underage patrons. Companies that serve alcohol to underage customers may incur

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"It is sometimes hard, however, to judge what [goods] should be chosen at the price of what [evils], and what [evils] should be endured at the price of what [goods]. And it is even harder to abide by our judgment, since the results we expect [when we endure] are usually painful, and the actions we are compelled [to endure, when we choose] are usually shameful. That is why those who have been compelled or not compelled receive praise and blame" (Aristotle 1985: 55).

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heavy fines and the risk of closure. Certain states have “dram shop” laws holding restaurants liable for damages caused by inebriated customers.

Ignorance as a Source of Involuntary Executive Actions

Aristotle does not detail too much about the second source of involuntary actions, which is ignorance. Ignorance, according to Aristotle, is a lack of awareness of the details that make up the situation in which the agent is acting (1985:57). Knowledge is the converse of ignorance: it is conscious awareness of the details that make up the situation in which the agent is acting. Aristotle distinguishes an action “done in ignorance” from one “caused by ignorance.” Actions done in drunken stupor or in a fit of anger are done in ignorance (or, not in knowledge) but not caused by ignorance, and hence, cannot be considered as involuntary (Aristotle 1985: 56-7). The cause of the action is vice and not ignorance.

Aristotle (1985: 57-58) specifies six particulars regarding ignorance in a list that has become archetypal in law and morals (Austin 1961; Jonsen 1968):

1. Who is doing it: e.g., one is unaware of oneself during an action;2. What is being done - e.g., an unguarded action;3. What the action is all about - e.g., a veiled or ambiguous action;4. With what instrument the action is done - e.g., a concealed weapon or a fuzzy financial instrument;5. What consequences flow from the action - e.g., one may give CPR to save someone's life that accidentally

kills the person; very few outcomes of business strategies can be foreseen accurately;6. How the action is done: when does a strategic action start, where, when and how? Does it occur gently

or harshly, directly or indirectly, in one action or multiple actions?

Major and frequent sources of ignorance, according to Aristotle, occur along conditions two and five above. For instance, for rapid cash flow generation a sales clerk unknowingly sells unsafe or untested products as provided by his company and/or as ordered by his boss. He may not know, for instance, who produces them (condition 1), how they became part of his charge or sales territory (conditions 2 and 6), what effects the products have on customers or users (condition 5), how the effects are brought about (conditions 3 and 4), or the extent of damage brought about by these products (condition 5).

Subsequent moralists, (e.g., Thomas Aquinas) have added that the agent can also be inculpably "ignorant" of the moral quality of his or her action. In regard to this, moralists distinguish various types and levels of ignorance such as, excusable and invincible ignorance, antecedent and consequent ignorance, ignorance of law and ignorance of fact. All these have a bearing on the morality and moral responsibility of the act. In this connection, the following distinctions are useful: (De George 1990: 89-90, 176; Velasquez 1988: 36-37, 112):

Excusable Ignorance: Actual lack or failure of knowledge of either the circumstances or the consequences of the action, through no fault of one’s own, before or during the action. Example: Ignorance of the harmful effects (e.g., asbestosis) of asbestos products when they were first manufactured and sold in the early 1950s in USA and Canada.

Invincible Ignorance: Also a failure of knowledge: but no one (say, an average person of good will) was expected to know or could have known either the circumstances or the consequences of the action, before or during the action. Example: Ignorance of the carcinogenic effects of tobacco products some 50 years ago.

Ignorance of law or fact: This is a subset of excusable ignorance. In this case, one could be ignorant of the relevant moral standard or the relevant facts about a given action. For example, a marketing executive may be sure of the Foreign Corrupt Practices Act (FCPA) of 1977 and the Omnibus Trade and Competitiveness Act (OCTA) of 1988 in the United States, but in actual practice may not know

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what act really constitutes a violation of either of these Acts. This is ignorance of fact. On the other hand, one may not know both the Acts, yet in practice believe that all bribing is wrong everywhere - this is ignorance of law but not ignorance of fact. In addition, one could be ignorant both of law and of fact.

Vincible Ignorance: One’s ignorance, whether of law or of fact, is inexcusable but correctable. For example, a marketing executive trained for foreign posting is supposed to know the FCPA of 1977, the OCTA of 1988, and the laws regarding bribing in the foreign countries he or she operates in. Such ignorance does not exonerate moral responsibility. One could even fake or manipulate ignorance: for instance, an avid cigarette smoker may stay away from doctors that warn him or her of the carcinogenic effects of smoking.

In general, invincible ignorance, excusable ignorance, and inevitable ignorance of law and fact can excuse moral responsibility. Vincible or faked ignorance do not excuse any responsibility. For instance, did Starbucks have to deal with invincible ignorance?

What went wrong at Starbucks?

Something, however, went very wrong in 2008. The company desecrated the original unique Starbucks coffee image by adding commoditized products like over-the-counter food (thus destroying the unique Starbucks coffee aroma), drive-through windows, cookie-cutter store formats, thus reducing Starbucks to a fast-food chain. Obviously, comparable fast food chains like McDonald’s and Dunkin’ Donuts started offering unique coffee flavors via newly installed coffee machines in their restaurants. Little wonder, within a few months, over 40% of Starbucks’ customers migrated to McDonald’s and Dunkin’ Donuts, where they found better and higher variety coffee aromas at less than one-third price (Favaro, Romberger and Meer 2009).

Similarly, Starbucks wanted to surpass McDonald’s in the number of outlets or franchises in less than half the years McDonald’s took to build its empire. By the end of 2008, it boasted 16,875 locations worldwide with 11,537 in the U. S. alone. Meanwhile, Starbucks forgot its original core product and objective of being a great coffee bar and experience. Starbucks is failing since, its market share and stock price have decreased significantly, and currently, Dunkin’ Donuts and McDonald’s are vigorously competing in the coffee experience market. In recent market tests, Dunkin’ Donuts is #1, McDonald’s is #2, and Starbucks is #3 in the coffee experience business. A misguided corporate objective could spell one’s demise.

The company was long renowned for its expertise at selecting prime locations for its ubiquitous stores. For much of the last 15 years, the commercial real estate executives at Starbucks were known for their rigor in selecting locations for their stores. Besides studying demographics, Starbucks evaluated its potential locations by other specific factors such as the education level in various neighborhoods, the traffic flow on both sides of a given street, the ease by which drivers could make a right turn for their java fix on their way to the office. Nevertheless, currently, the company has been straying from the exacting real estate science that it had perfected and that which guided it through its first expansion-wave of 1992-2008. Though a flagging recessionary economy and soaring gas prices could account for at least some of Starbuck’s woes, there seem to be other major in-company problems triggering this sudden decline.

Starbucks showed tremendous revenue and financial strength during 2004-2007 with a consistent upward trend of financial stability (judged by ROE, ROI and ROA). Since 2007, however, recessionary trends have diminished demand for the hefty priced Starbucks coffee. The stock price that climaxed to $30 in 2007, slipped to $20 in January 2008 and traded around $15 in 2012, a 50% drop since 2007. From a return on equity (ROE) of 16% in 2004, 24% in 2005, 25% in 2006 and 29% in 2007, it dramatically decreased to 13% in 2008. ROE reflects final outcome of all firm’s activities and decisions made during the year. Return on investment (ROI) was 12% in 2004, remained at 11% during 2005-2007, but declined to 4% in 2008. ROI measures the profitability of Starbucks’ investments – the rapid decline indicates that the company has been making wrong investments in 2007-2008. Similarly, ROA [= (net income + interest)/total assets] was 12% in 2004, 14% in 2005, 13% in 2006 and 2007, but plummeted to 6% in 2008.

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A typical turnaround situation of Starbucks involves stopping cash bleeding. In order to stop cash bleeding (this is the end), the turnaround executive must devise various ways of stopping cash flows and accelerating cash inflows, (these are the means). Some of the means for accelerating cash inflows might be underselling overstocked inventory of finished products, rapid recovery of receivables, divesting useless fixed assets, and borrowing money at sub-prime interest rates. Similarly, some of the means for stalling cash outflows might be postponing trade payables, deferring accrued taxes, deferring accrued payroll, and delaying short-term debts or interest payments. Other cash-saving methods include innovating energy-saving, timesaving and ecologically safe products, or mass-producing and standardizing quality products to reduce unit costs. All these could be “good” means conducive to the Good” end of stopping cash bleeding. These are voluntary and ethical actions if they verify one or more of the above five conditions. On the other hand, dumping goods on retailers, over-pressurizing suppliers to reduce prices or agree on postponed trade payables, producing counterfeit products, violating patents, infringing trademarks, pilfering competitor's ideas, overstating revenues to increasing borrowing capacity, are “wrong” means towards the good end of improving the cash position. These are voluntary but unethical actions if they verify most of the above five conditions.

Aristotle on Voluntary Actions

“Since, then, what is involuntary is what is forced or is caused by ignorance, that which is voluntary seems to be what has its origin in the agent himself when he knows the particulars that the action consists in” (Aristotle 1985: 58). Thus, a voluntary action is one in which the initiative lies with the agent who knows the particular circumstances in which the action is performed. Voluntary actions imply taking initiatives; they imply deliberation. Deliberation "concerns what is usually [one way rather than another], where the outcome is unclear and the right way to act is undefined. And we enlist partners in deliberation on large issues when we distrust our own ability to discern [the right answer]" (Aristotle 1985: 62).

Decisions are voluntary, but not all voluntary actions are decisions (e.g., children or animals exhibit voluntary actions, but do not decide these actions). Decisions imply deliberation over means conducive to ends. According to Aristotle, we wish certain ends first; next, we believe in these ends as good for us, and we then choose the means to realize these ends. Decisions make our character and us because we can choose only those things we can do; our beliefs define our character; our wishes and we condition our character and us.

From a corporate executive’s perspective, decisions and strategies are "voluntary" when the executive:

1. Deliberates over the ends (or various outcomes) of the action or strategy; 2. Deliberates over the means (or various alternatives) conducive to the ends under (1); 3. Initiates the action, individually or in partnership, based on the best alternatives under (2);4. Is cognizant of the action-circumstances under (3);5. Wills the action strategy and its consequences (means or end) under (2) or (1)

Reflecting on Case 10.1, there are several promoters who deliberated rightly on various means and ends, did the right things rightly and at the right time and with the right people, and hence, reaped enormous wealth increases during FY 2013-2014. These were strategic voluntary actions.

For instance, C. Krishna Prasad, MD and promoter of Granules India, maker of active pharmaceutical ingredient (API), made a strategic decision to create a manufacturing value chain of popular APIs from powder to finished dosages, as opposed to being a contract manufacturer. Granules India is one of the few companies in the world to be present across the pharmaceutical manufacturing value chain - starting from APIs to pharmaceutical formulation intermediaries (PFIs) to making capsules to finished dosages (FDs). Granules India is a leader in

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several drugs including Paracetamol and Metformin. Granules India grew at 22% to snap over Rs 1,000 crore in revenues, while its wealth grew nearly 300%! That is, the promoter’s wealth jumped from Rs 84.76 crore a year ago to Rs 253.42 crore by March 31, 2014 (see also Business World, July 14, 2014, p. 58).

Similarly, Atul Auto started off in 1970 with a vision to create affordable transportation for people. Its promoter, Jayantibhai Chandra’s registered a 136% growth in his net worth in a year ending FY 2014 when the Indian automobile sector was in one of its worst slumps. His wealth is Rs 217 crore in 2014. Atul Auto started by modifying Enfield Motorcycles into a travel innovation called “chakkda” in Gujarat – by attaching a plank behind a motor cycle it transformed a two-wheeler into a vehicle that could transport at least ten people at a time. The company recently launched Shakti, a half-ton commercial three wheeler. The company plans to set up a new three-wheeler plant in Ahmedabad with an annual capacity of 60,000 units. It also seeks to tap markets in the emerging economies. At a time when the auto industry is focusing on the higher end of the auto spectrum, Chandra is capitalizing the bottom of the pyramid (see also Business World, July 14, 2014, p. 59).

Other investors reaped from price gains. For instance, shrimp exporter Alluri Indra Kumar of Avanti Feeds, which is into shrimp exports and fish feed culture, was flooded with orders from Western Europe, Chinese and Japanese markets, and reported a 75% growth in net revenues to Rs 1,131 crore, and 130% hike in profits to Rs 65.75 crore during FY 2014-2014, especially since global prices of shrimp surged by 150% last year. Luck also played a part. Reports of shrimp crop damage in Vietnam and Thailand, the world’s largest shrimp exporting nations, brought more business to Avanti Feeds last year. The wealth of AI Kumar, who holds over 42% in Avanti Feeds, swelled from Rs 38 crore in FY 2012-2013 to Rs 201 crore in FY 2013-2014, a jump of almost 530%! This year, the company plans to commence operations at its new 80,000 ton-a-year fish feed mill in Andhra Pradesh and also to modernize its shrimp processing unit in East Godavari District of AP (see also Business World, July 14, 2014, p. 56).

Based on Aristotle (1985) and Aquinas’ Commentary on Aristotle (1964; see footnote 5), Table 10.1 summarizes and distinguishes between voluntary, involuntary, and under-duress actions using three dimensions: a) originating principle of the action, b) role of the intellect and will in the action, and 3) consequent nature of the action-outcomes. Voluntary actions originate from or are initiated by the agent; they are motivated by principles or passions intrinsic to the agent; the agent is cognizant of the action-circumstances, and deliberates over means and ends. The involuntary is exactly the opposite of the voluntary. Actions under duress are a blend of the voluntary and involuntary.

In addition, note, most executive business turnaround decisions and actions are either fully voluntary, or under duress. Very few can be classified as involuntary under force; some qualify to be involuntary under ignorance. In conclusion, from Aristotle's theory of responsibility as applied to responsible business management we learn the following:

Several business strategies could be a blend of voluntary and involuntary actions in as much as they involve hastened deliberations over goals under constraints of cash flow crisis, insolvency, stakeholder pressure, time pressure, bankruptcy, and regulatory demands.

Ignorance can occur over both goal-specification, the choice, and over efficacy of means; the higher the ignorance, the higher is involuntariness and hence, the higher is exoneration.

Most business decisions are also made after consultation or partnership with others; other things being equal, the more people involved in the partnership, the larger is the spread of risk and guilt, and hence, the larger is the scope for exoneration.

On the other hand, the larger the base of good consulting, the broader the base of executive knowledge, and hence, the higher is executive responsibility.

Immanuel Kant: Responsibility as Moral Worth

Apparently, for Aristotle, responsibility is not an intrinsic characteristic of the action itself but rather "a dimension in which the actions are assessed" (Austin 1961: 129). That is, by addressing the problem

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of responsibility negatively through the excuse of constraints, duress and ignorance, Aristotle did not describe the intrinsic quality of voluntary actions. He rather referred to the context of circumstantial evidence and customary norms within which judgments of praise and blame are placed and justified (Jonsen 1968). Immanuel Kant (1724-1804), on the other hand, describes the special intrinsic quality of voluntary actions. As discussed in Chapter Three, for Kant, responsibility or moral worth stems from the underlying principle of the will than from the purposes or ends or excuses that precede the action or from the consequences that follow it. In this sense, Kant's Groundwork of the Metaphysics of Morals (1964) is a treatment of an Ethic of Duty, primarily as the Categorical Imperative, and secondarily, as an Ethic of Hypothetical Imperatives.

According to Kant (1964: 68), the "moral worth can be found nowhere but in the principle of the will, irrespective of the ends that can be brought about by such action." The underlying duty-principle makes an action a categorical imperative, while the purpose makes an action a hypothetical imperative. A categorical imperative renders an action to be objectively necessary in itself without reference to some purpose; that is, it is concerned not with the matter (purpose) of the action, but its form (duty) and with the principle from which it follows. On the other hand, hypothetical imperatives imply that an action is good for some purpose; that it is necessary "as a means to the attainment of something else that one wills" (1964: 82). Categorical imperatives ignore purposes and ends, are not concerned with the matter of the action (p. 84) but only the principle guiding the will, and hence, refer only to the form of the action (Wike 1987).

Although Kant does not directly connect categorical and hypothetical imperatives to responsibility, yet one can deduce the following relationship: categorical imperatives generate categorical or unconditional responsibility; they ground absolute or necessary responsibility. Whereas hypothetical imperatives generate hypothetical or relative responsibility, conditioned or relative to moral agent's ends, purposes, and circumstances. This Kantian doctrine has relevance for business management.

Immanuel Kant enlightens our understanding of marketing executive responsibility by the following insights:

Executive actions are most often driven by ends, motives and purposes, and are therefore, hypothetical imperatives, and not necessarily, categorical imperatives.

Hypothetical imperatives generate hypothetical or conditional responsibility that may be exonerated.

Categorical imperatives ground absolute or unconditional responsibility that cannot be exonerated.

Most executive duties that directly deal with customers are categorical; that is, marketers cannot use consumers as means to their own ends, but as ends-in-themselves.

Karl Marx: Responsibility as Historical Determinism

Throughout his life, Karl Marx (1818-1883) struggled reconciling freewill with determinism.9 Marx's major thesis was - politics, economy, religion, ideologies and philosophies – all these elements that

9 This was also the preoccupation of Marx's one-time teacher, George Hegel (1770-1831). The English Economists, particularly Adam Smith (1723-1790) and David Ricardo (1772-1823), seemed to offer some insight: the economic development of a nation is deterministic; it can be predicted, and laws verified about it, as is the case with natural physical phenomena. In 1844, Marx and his friend, Fredrich Engels, who also confirmed and supported his revolutionary ideas, protested that the laws that rule an economic system escape all human control. Social reforms cannot be achieved without attacking the very roots of social evil: the existing political economy. The present economic system has already and inescapably determined human beings; they have lost their freedom, and with freedom, responsibility. [See also footnotes 12-13 below].

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constitute human history - determine our individual motivations, and hence, our will. In brief, history determines us - Marx called this "historical determinism." However, what determines history itself? History cannot be determined by individual wills such as those of monarchs, feudal lords or political revolutionaries, because all these wills are created by history. Hence, it is collective or "social consciousness" that determines history. Consciousness is primarily social than individual. "It is not the consciousness of men that determines their existence, but on the contrary, their social existence that determines their consciousness" (Marx 1964: 11).

Thus, the principal postulate of Historical Determinism is that the "social being determines social-consciousness" (Afansyev 1965: 172). A person is born in a given social milieu or social group that molds his or her mind according to its standards. That is, individual consciousness is posterior to social consciousness (McFadden 1963: 84-90). However, what determines social consciousness? Marx believed that the ultimate determinant of people and society is the production process that creates and satisfies their needs. The material resources, the production process, the products, and the marketing system that distributes these products, they all condition humankind and human history.10

Karl Marx was partly right. Historical determinism partly explains history.11 We create and control

technology that in turn creates and controls us (see Bell 1973; 1976; Tofler 1971). There can be several executive actions that may be "historically determined", and to that extent, exonerable. However, with Adam Smith we should note that the "invisible hand" of self-interest and profitability works both ways: it guides history; and history guides the invisible hand.

Within the corporation there could be many negative historical negative determinants such as low corporate morale among middle managers, Machiavellian culture among salespeople, or lack of corporate ethics codes, but at the same time there could be positive historical antecedents such as top-executive commitment to integrity and innovation, and commitment to safe and moral market offerings. Such historical factors, may, both individually and collectively, bind or free marketing executive decisions and practices.

Bradley: Attributional Responsibility

Francis Herbert Bradley (1846-1924) starts his philosophy of responsibility by opposing John Stuart Mill’s determinist position and by reestablishing the existence and operation of the human freewill. Bradley (1876: 33) argued that Mill’s stand on the freewill "altogether ignores the rational self in the form of will; it ignores it in the act of volition, and it ignores it in the abiding personality, which is the same throughout all its acts, and by which alone imputation gets its meaning." Bradley examines what the ordinary (‘vulgar’) human understands by responsibility and imputability. On the one hand, the ordinary

10 See Marx 1964: 152-53; Marx and Engels 1958, Vol. 1: 167-70; Vol. 2: 16-18. Humankind may change history, but thereby it changes itself. This is the dynamic of socio-economic formation that underlies human history. Marxism affirms historical necessity as the paramount phenomenon of social change. This necessity does not undermine human freedom that, according to Marx, is ‘one's knowledge of objective necessity,’ and the employment of this knowledge in the interests of humankind constitutes human freedom and responsibility. Freedom is the result of prolonged historical development (Afansyev 1965: 176-178).

11 Marx (1930) summarizes his thought in his Das Capital. The history of humankind is a class struggle: freeman and slave, patrician and plebeian, king and subject, lord and serf, employer and employee ... the oppressor and the oppressed. The current social emancipation of mankind to freedom and responsibility would mean that we should be directly associated with or disalienated from: a) the product of our labor, (the worker is a mere instrument of production; b) the act of production - the employer and technology force us to work, not always along our line of competence; c) the very social nature of labor - the more we produce the wealthier is our employer, and the poorer we become. Thus, according to Marx, human responsibility is to disalienate oneself from the deterministic mechanisms of product, production and profit (See Mascarenhas 1981). Freedom is emancipation of self. Thus, Marx’s Das Capital ends: “workers of the world, unite!”

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human being implicitly assumes that one cannot legitimately be held morally responsible for an action unless one is the real author of the action, and unless the action proceeds from one’s true self as effect from cause. On the other, if one is a real author, then one cannot be fully determined by outside forces as determinism affirms. Without personal identity, responsibility is sheer nonsense. This rules out determinism but not indeterminism. The latter assumes that actions are totally uncaused.

One’s station in life and its attendant duties, one’s religion and an absolute God influences one’s actions. For Bradley, accordingly, the end of morality is not a mere feeling of self-realization (this is true for Hedonists), but is the self-realization of good will that is both relative to one’s religion and society and one that is universal and absolute in relation to an absolute God. On the one hand, we are what we are because of and by virtue of the community we live in – this is social morality. On the other hand, we must transcend the social (which is relative to one’s history and civilization) to realize the true ideal self that is rooted in an absolute God – this is transcendent absolute morality. 12

Thinking somewhat along Marxian lines, Bradley (1876) maintained that human character has two aspects: 1) that which is formed and molded from without through social and parental values, customs, traditions and norms, and other economic forces, and 2) that which is formed and formulated from within by one's own self, will and volition, personality and biography. The former external aspects of character make us hetero-deterministic. We are mostly what our family, culture, economy and technology are. The latter internal aspects make us auto-deterministic. They safeguard freedom of our will and the ownership of our personality and character. 13

While it is obvious that an agent's acts are one’s own insofar as one causes them, it is not always obvious that one causes them as a moral agent. Attributing responsibility, accordingly, should go beyond the consequences of the act and the action itself to the very process of how an agent takes possession of one’s action, moves from the outer-directed to inner-directed sphere of moral activity; in short, one becomes a real moral agent – this is appropriational responsibility. The latter judges not only the discrete acts, but also the unity of such acts in the moral agent, the self. It is not enough to limit consideration of the nature of the moral agent to character alone. Character explains tendency to act or disposition to act; but it does not explain the act itself. Character denotes a complex of "effects," but the moral agent seems to be a complex of controls, self-governance, self-direction, and self-organization - in short, self-actuation (Bradley 1876).

For instance, business executives set goals and strive after them, plan and strategize their executions, warn and advise stakeholders, reward and punish salespeople, praise and blame suppliers and distributors - all these actions make sense only if there is freedom of choice and action. They are both hetero-deterministic and auto-deterministic. They constitute self-actuation in executive actions.

Even business turnaround researchers as scientists judge that one turnaround model is good and the other bad, one argument for bankruptcy valid and other fallacious, and this judgment must be a free act,

12 Summarizing the moral philosophy of Bradley, Copleston (1966: 195) writes: “Morality, therefore, consists in the realization of the true self. The true self, however, is infinite. This means that morality demands the realization of the self as a member of an infinite whole. But the demand cannot be fully met on the level of the ethics of my stations and its duties. Ultimately, indeed, it can be met only by the transformation of the self in the Absolute.”

13 By its very nature as something unobjectifiable and unobservable, free will would seem to be something that could be neither proved nor disproved. The observable overt happenings belonging to any human act may be seen as constituting a chain of causally linked physical events, while even the internal states of the agent’s mind might be explicated in terms of some determinist psychology. But upholders of free will argue that at least some human actions (and on which moral judgment may be passed) are the result of free rational choice on the part of agents. They are not compelled to act by forces outside of their moral consciousness (Bradley 1876).

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based solely on rational grounds. Human quest for historic facts, scientific truth, and real causes, therefore, itself presupposes the existence of free will. If determinists were all correct then their judgments themselves would also be determined and not based on rational grounds – truly, a self-destroying skepticism!

From Francis Bradley we may derive the following insights for business:

Following Mill, Historical determinism to a certain extent may influence a business business’s life and values, decisions and actions. But Bradley argues that historical determinism ignores the rational and volitional self-actuation of the executive in the form of a trained intellect and morally guided will, the abiding and underlying executive personality that remains the same throughout various acts of the intellect and will and by which alone imputation gets its meaning.

Hence, any appropriation of business responsibility must include an explicit consideration of the self as a reflecting agent transcending market forces.14

Appropriation of business responsibility judges not only the discrete acts, means and ends or discrete outcomes, but the total process of action by which means or ends are chosen and outcomes generated.

This process is often called the “corporate culture” within a firm or the “industry climate” within an industry. Both may condition several business actions. These climates can "externally" determine executive actions. Business may rarely act on them as total "autonomous moral agents."

Dietrich Bonhoeffer: Responsibility as Commitment and Deputyship

For Dietrich Bonhoeffer (1906-1945) 15 responsibility is not so much a response to the call of values, it means free commitment of oneself to act, regardless of what the act might be. 16 However, there are limits to this action: God and neighbor. Irresponsible action disregards these limits (Bonhoeffer 1955: 204).

The structure of responsible life consists in a life bound both to God and to humankind and a life that is free. Life bound to God and humankind is deputyship.17 We must work in the world and take account

14 The moral agents in some sense transcend what happens to them, transcend what has been formed in them as permanent tendencies and dispositions; they even transcend themselves in self-reflection, self-criticism, and self-realization. An adequate philosophical consideration of appropriation of responsibility must therefore include an explicit consideration of the self as a transcending and reflecting agent (Jonsen 1968, 1988). This is beyond the scope of this book. [See Bradley (1876) and footnote 17].

15 Dietrich Bonhoeffer was born in Breslau in 1906, the son of a famous German psychiatrist. He studied in Berlin and New York. His political activities in the Resistance during the early years of the Second World War led to his arrest by the Nazis on April 5, 1943. He was hanged in April 1945. Much of his life of struggles as a teacher, father and statesman is reflected in his writings, especially The Cost of Discipleship (SCM Press 1948) and Ethics (MacMillan 1955).

16 In fact, for Dietrich Bonhoeffer, conscience is the center of responsibility. It is the source of response to value. Conscience is our spiritual instinct for self-preservation arising from the urge for complete unity and harmony within us. Conscience "makes itself heard as the call of human existence to unity with itself ... it protests against a doing which imperils the unity of this being with itself (Bonhoeffer 1955: 211).

17 "The fact that responsibility is fundamentally a matter of deputyship is demonstrated most clearly in those circumstances in which a man is directly obliged to act in the place of other men, for example as a father, as a statesman, or as a teacher. The father acts for the children, working for them, caring for them, interceding, fighting and suffering for them. Thus, in a real sense he is their deputy. He is not an isolated individual, but combines in himself the selves of a number of human beings. Any attempt to live as though he was alone is a denial of the actual fact of his responsibility. He cannot evade the responsibility that is laid on him with his paternity. ... No man can altogether escape responsibility, and this means that no man can avoid deputyship. ... Whether or not life resists, it is now always deputyship, for life or for death, just as a father is always a father, for

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of its human needs, its nature and its possibilities. In all this we should be aware that the decision that we take and the deeds we do are truly our own. Moreover, law does not protect us; we cannot take refuge in any principles that might justify our inaction or failure. The acceptance of responsibility involves the acceptance of the guilt of failure and of evil consequences. Responsible action must often decide not between right and wrong, but between right and right, or between wrong and wrong. "It is precisely in the responsible acceptance of guilt that a conscience proves its innocence ... the responsible man becomes guilty without sin" (Bonhoeffer 1955: 214-216).18

From Dietrich Bonhoeffer we derive the following propositions bear on business executive responsibility:

The acceptance of responsibility may involve the acceptance of the guilt of failure and evil consequences.

Most executive choices may not be between good and evil or between right and wrong, but between right and right, and between wrong and wrong. The committed executive chooses the better right and the lesser wrong.

The ethic of responsibility allows for uncertainties and guilt instead of demanding an absolutely untainted conscience (Weber and Bonhoeffer).

According to Weber and Bonhoeffer, the ethic of responsibility allows for uncertainties and guilt instead of demanding an absolutely untainted conscience. The acceptance of responsibility sometimes involves the acceptance of the guilt of failure and harmful consequences.

Richard Niebuhr: Responsibility as Response Richard Niebuhr in his book The Responsible Self (1963) outlines a new dimension of responsibility

as response. Niebuhr contests that, thus far, two models of human response have been proposed: man as a maker and man as a citizen. As a maker, man conceives of human life as material before the creative mind and hand of the artist, who shapes it in the light of an ideal form or ultimate purpose . As a citizen, the inexorable laws of nature and society that all human beings must obey surround us. Niebuhr proposes a third model of human response - a man in dialogue. Human life is a conversation in which humankind, nature and the cosmos pose questions to which human beings must respond fittingly. The image of man as a maker gives rise to the teleological theory of consequences. The image of man as a citizen gives rise to the deontological theory of norms. The image of man as a dialogue responder should give rise, to what Niebuhr calls, the "cathekontic" (fitting) theory of norms.

good or for evil. ... Deputyship, and therefore also responsibility, lies only in the complete surrender of one's own life to the other. Only the selfless man lives responsibly, and this means that only the selfless man lives." (Dietrich Bonhoeffer (1955: 224-5), Ethics, paperback edition 1965, The MacMillan Company).

18 It is very difficult to separate Bonheoffer’s (1955) Christian understanding of ethics from a secular understanding of the same. For Bonhoeffer all ethics must be founded on Jesus Christ. Most of his writings fight ethical duality, one founded on the sacred scriptures, and the other founded on moral philosophy. However, some of his notions of responsibility could be, even though with difficulty, abstracted from his Christian ethics. Responsibility means that the totality of life is pledged and that our life becomes a matter of life and death (Bonhoeffer 1955: 193). Responsibility means that we respond with our entire life to the word of God addressed to our entire life. Bonhoeffer is essentially religious in his approach to responsibility; he works almost exclusively within a theology of incarnation. The command of God to act responsibly is mediated and inspired through Jesus Christ, the Word of the Father. Christ, for Bonhoeffer, is the major and critical source and principle of moral reasoning and responsibility. [See Ethics, 1955: 204-54].

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All life has the "characteristics of responsiveness" (Niebuhr 1963: 46). We are engaged in a continuous "conversation of life" in which we formulate our responses in relation to the questions that challenge us. It is possible to understand our ethical life in terms of this action-response model. A right action is not only one that conforms to laws, or is conducive to one's ultimate purpose in life, but also one that is a "fitting action," that is, "an action that fits into a total interaction as response and anticipation of further response" (1963: 61). "Responsibility may be summarily and abstractly defined as the idea of an agent's action as response to an action upon him in accordance with his interpretation of the latter action and with his expectation of response to his response; and all this in a continuing community of agents" (1963: 65).19

From Niebuhr business executives can note the following:

Turnaround management is a continuous "conversation of life" in which business executives formulate responses to challenging questions. Ethical life is a right response to the challenge.

A right action is not only one that conforms to duties and laws (deontological), or is conducive to one's ultimate purpose and ends in life (teleological), but also one that fits into a total response-dialogue with the challenging business turnaround environment and with anticipation of further responses to that environment (cathekontic).

For instance, following Niebuhr, an ethical and moral business strategy is not only one that conforms to product safety laws (deontological), or one conducive to corporate goals of increasing profits and market share (teleological), but particularly the one that engages in a continuous responsive interaction with its customers and other stakeholders. Such a strategy calls for an interactive dialogue that responds to all employee and customer concerns regarding product safety and quality, and one that provides fair value to customer and other stakeholder dollars, and supports quality of life among local communities by protecting their economic and natural environments. Such cathekontic or responsive strategies generate long-term relationships of loyalty among customers and local communities alike, and hence, ensure long-run renown and profitability for the company.

Bernard Lonergan: Responsibility as Effective Freedom

Bernard Lonergan (1912-1993) views responsibility as a function of one’s effective freedom. He distinguishes between "essential" and "effective" freedom (Lonergan 1957/1970: 595-633). "The difference between essential and effective freedom is the difference between a dynamic structure and its operational range. We are free essentially inasmuch as possible courses of action are grasped by practical insight, motivated by reflection, and executed by decision. Nevertheless, we are free effectively to a greater or less extent inasmuch as this dynamic structure is open to grasping, motivating and executing a broad or a narrow range of otherwise possible courses of action. Thus, “one may be essentially free but not effectively free to give up smoking” (Lonergan 1970: 619-20). Effective freedom is not something given. It must be cultivated. It must be won. The key point is to reach a willingness to persuade oneself of some objective good or to submit to the persuasion of others. One must be persuaded to genuineness and openness too. Incomplete intellectual and volitional development leads to moral impotence.

19 As in the case of Bonhoeffer, it is difficult to separate Niebuhr's ethics from his theology. For Niebuhr (1963: 87 -126), the source of interpretation and anticipation, that really ground responsibility, is God and his perfect revelation through Jesus Christ. The ethical imperative is derived also from a theological affirmation of God who has reconciled the world to himself in Jesus Christ. Niebuhr does approach the problem of responsibility from a philosophical viewpoint in his article "Center of Value" (in Radical Monotheism and Western Culture, New York: Harper and Brothers, 1960), but this brief treatment hardly does justice to his theory of responsibility that is more fully treated in the Responsible Self. Following Bonhoeffer and Niebuhr, one could strictly pursue also a Biblical or at least a theological approach to human responsibility for a complete understanding of executive responsibility. However, for obvious reasons, this is beyond the scope of this book.

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According to Lonergan (1970: 618-634), there are four major conditions that limit effective freedom, that, in turn, impact blame or credit. We summarize them as applied to business executive situations, especially since all four conditions affect day-to-day business decisions and actions, tactics and strategies. They are important considerations in assessing the quality of business responsibility today.

EXTERNAL CONSTRAINTS: These constraints limit the range of concretely possible alternatives available to business, either because they are not available at the time of the decision, or they are too cost-prohibitive to pursue, or they cannot be backed with other required resources. The lesser the number of competing business turnaround strategies (e.g., rapid cash recovery, overstock inventory clearance, product repositioning, predatory pricing, aggressive distribution or promotion) alternatives to choose from, the lesser the responsibility of the final choice.

INTERNAL STATE: This has to do with one's sensitive skills and mental habits, intellectual and psychological development, the syndrome of one's anxiety, stress and strain, obsessions, and other neurological phenomena that mal-adjust intellectual development to psycho-neural development - all these factors restrict one's capacity for effective deliberation and choice. There is considerable literature that addresses the strains and stresses of business executive life.

INTELLECTUAL DEVELOPMENT: this refers to one's understanding the business turnaround situation, the possible courses of rescuer or transformation strategies, critically grasping the content and consequences of their alternatives, and in general, one's struggle with the process of learning and appraising a concrete turnaround situation. The greater one's accumulation of market and business turnaround insights, the greater is the development of one's practical intelligence, the greater is the range of the possible courses of action one can grasp and consider, and the wider is the domain of critical assessment.

VOLITIONAL DEVELOPMENT: this relates to one's ability to deliberate over alternatives and choices, to reflect over one’s motivations and intentions, and exert full freedom over one’s turnaround decisions and actions. The human "will" is the bare capacity to make decisions. Human "antecedent willingness" is the state in which persuasion is not needed to bring one to a decision. Human "willing" is the act of deciding. The function of willingness runs parallel to the function of the habitual accumulation of practical insights.

What one does not understand yet, one can learn. Nevertheless, learning takes time, and until it takes place, otherwise possible courses of action are excluded. Similarly, when antecedent willingness is lacking, persuasion can be invoked. However, persuasion takes time, and till one persuades oneself or others, one remains closed to otherwise possible courses of action.

From Lonergan we deduce the following responsibility-insights for business executives:

Responsibility is executives' response to an event/action upon them that they interpret, whose consequences they anticipate and evaluate - hence, responsibility presupposes moral potency.

Moral impotence exonerates under certain conditions. Lack of congenital sensitivity, lack of inherited psycho-neural balance, lack of intellectual development and opportunity, and lack of challenges to one's volitional development - all these constitute moral impotence in varying degrees.

The gap between one's proximate effective freedom and the remote hypothetical effective freedom that one would possess if certain conditions fulfilled, measures one's moral incompetence, and the latter measures one's degree of exoneration.

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Determinism and Moral Responsibility

It is generally agreed among moral philosophers that human free will is the precondition of moral responsibility. As we have discussed thus far, several moral philosophers uphold free will and, therefore, affirm the existence of moral responsibility. There are also those who deny human free will and hence, often reject the concept, theory and existence of moral responsibility. In general, we may distinguish four schools of thought that deal with human free will and moral responsibility:

1. Determinism: we can never do other than what we do; hence, we are never responsible for what we do. This is the classical position of Karl Marx and David Hume, and among modern scholars, Schopenhauer, Paul Holbach and others.

2. Indeterminism: Some events, namely, human actions, are random and chance events, and hence not free, and therefore, we are never responsible for what we do. This is the position held by A. J. Ayer, C. A. Campbell, Thomas Hobbes, John Locke, John Stuart Mill, Walter Stace and others.

3. Fatalism: Besides being causally determined, every event is bound to happen when it happens: it would have happened no matter what the “free” agent might have done to avoid it. That is, in a fatalistic world, human actions and choices are powerless to affect the future. H. B. Hobart and Richard Taylor (1974) are fatalists in this sense. Freedom is incompatible with fatalism.

4. Libertarianism: Human actions are neither determined nor fortuitous (random), nor fatalistic; we could have always done otherwise. Hence, determinism is not true; indeterminism and fatalism are false. No matter what the antecedent causes may be, some events are free and could have been chosen otherwise. A large group of moral philosophers belongs to this school: Aristotle, Thomas Aquinas, Immanuel Kant, William James, Francis Bradley, Max Weber, John Dewey, Jean Paul Sartre, Richard Niebuhr, Dietrich Bonhoeffer, Bernard Lonergan, Elizabeth Beardsley and others.

Indeterminism is the logical contradictory of determinism. Fatalism is a subset of determinism. Libertarianism rejects determinism, indeterminism and fatalism, but relies on the dictates of commonsense, which assure that we are free human beings and that most of our actions , despite external circumstances, are free, if not always totally free. Hence, we are morally responsible to what we do. In this book, we maintain and affirm libertarianism, and, accordingly, uphold and defend moral freedom and responsibility.

Hard and Soft Determinists

The basic claims of determinism are (Taylor 1974: 48-57):

All human behavior, voluntary or involuntary, like the behavior of all other animate and inanimate things, arises from antecedent causes and conditions (e.g., heredity, biological and racial determinants, environment), given which no other behavior is possible. In short, all human behavior is caused and determined.

“A man can surely do what he wills to do, but he cannot determine what he wills,” (Arthur Schopenhauer (Cited in Grassian 1992: 184). Distinctions between free and unfree actions may be conceptual and logical, but not real and valid; they are meaningless. How can we grasp the full network of causes that serve to explain why individuals behave as they do?

Voluntary behavior, nonetheless, is free to the extent that it is not externally constrained or impeded. What has happened need not have happened.

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In the absence of such obstacles and constraints, the causes of voluntary behavior are certain states, events or conditions within the agents, namely, their own acts of will or volition, desires, emotions, motives, goals, choices and decisions.

Those who affirm only the first two of these four tenets and reject the latter two are “hard” determinists (e.g., Holbach 1770; Schopenhauer 1841). Authors discussed in Part One of this chapter, namely, Karl Marx (1930; 1964) and David Hume (1740), are “hard” determinists in this sense. They deny free will and consider it as a mere modification of the brain. The will (and hence, desires, emotions, motives and goals) is necessarily determined by the qualities, good or bad, agreeable or painful, of the object or motive that acts upon our senses, or of which the idea remains with us, and is resuscitated by our memory of it. As H. B. Hobart put it (cited in Grassian 1992: 176):

“An action which is not causally determined by the character of the agent (together with the situation in which he is acting) cannot be said to have stemmed from him, from the particular person that he is, and hence is not anything for which he can be held responsible. If it is causally determined by something independent of his character, it is not his act; while if it is not causally determined at all, it is a chance happening and, again, something for which he cannot be held responsible.”

Those who hold all four tenets firmly are “soft” determinists (e.g., Ayer 1954; John Locke 1894; Stace 1952). Soft determinists reconcile determinism with free will. All human actions may be caused, but they are still free as long as they are unimpeded and unconstrained from motions that arise from our own inner desires, choices and volitions. Feinberg (1993: 357) prefers the word “reconciling” instead of “soft” determinism since the latter has pejorative connotations of weakness.

We may further ask several questions: Are my own inner choices, decisions and desires caused? Are these causes within my control? Whence those inner states that determine what I do or shall do? Are they within my control or not? Having made my choice or decision and acted upon it, could I have chosen otherwise or not? Or, if the causes of these inner states (e.g., gender, racial or ethnic heritage, religious attitudes, natural inclinations, compulsive impulses, drugs, media pressure) were different, then would their effects (i.e., the inner states) be different and would I have acted otherwise or differently? One can raise such questions ad infinitum, since every chain of causes and effects, if determinism is true, is infinite.

These are, however, valid questions. Nevertheless, so are valid the following human experiences that endorse the existence of free will in us:

In a deterministic and fatalistic world, we could punish no crime, felony or misdemeanor as it would be predetermined and forced upon the criminal by universal forces of determinism. Our jails would be housing criminals for crimes they were not responsible!

Our courts and damage (punitive and compensatory) award systems presume that the criminal acts (e.g., murder, embezzlement, sexual assault, fraud) were done deliberately and not through some pre-determined power in us (e.g., the demon, our invincible passions, our irresistible impulses, or inevitable circumstances).

The fact that we are not aware of the causes of our action in no way shows that there is no cause for our actions. Sigmund Freud contended that many apparently random slips of the tongue were quite significant revelations of unconscious mental processes that are capable of causal explanation.

It is sometimes up to me what I am going to do, and I can always do otherwise. If it is really up to me whether to do this thing or that, then each alternative course of action must be

such that I can do it. It is within my power to do it. I am free to do it not do it. If things are caused, we can learn how to prevent similar events from occurring again. We cannot equate freedom with chance. Most free acts are caused by a self whose actions are not

always caused or perfectly predictable.

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My behavior, for instance, as a turnaround executive, is sometimes the outcome of my own deliberation; I can definitely deliberate about my own actions.

As business executives, we all experience, at least occasionally, deep moral feelings of regret that some things that happened need not have happened. Hardly a day passes, in which we do not wish that something we did might be otherwise.

Any genuine regret implies that the future is open to our control through knowledge of the causes. Otherwise, our regret is a self-fabricated illusion!

Our genuine feelings of remorse imply that we should not have done certain things, and that we could have not done those things we consider bad or harmful.

Given this experience of a free will, determinism is not true if it asserts that whatever I do any time is the only thing I could do because of all that precedes this action. Antecedent causes or conditions may often condition my actions. They may even be necessary for some of my actions. Often they can be sufficient conditions. But they can never be necessary and sufficient conditions. The distinctive characteristic of human beings is that we are moral agents whose actions can transcend the promptings of our character as formed by heredity and environment. Moral persons are more than their character; they are autonomous moral agents whose choices may be influenced but not totally determined by character or environment. Our moral effort is precisely this that we fight the forces that influence us from within and without. It is possible for the moral self to transcend the desires and tendencies toward action that comprise the promptings of character or the determinants of environment.

As long as I am a human being, a self, a person and a self-moving being, I can be and am an agent of my own actions. I cause an event to occur without anything else causing me to do so. I do not cause them in the sense that inanimate things, irrational animals or programmed robots do. I cause the actions in the sense that I initiate them, originate them, own them and perform them. Despite external circumstances, I can author my actions, I could have acted otherwise, own their consequences, and hence, take responsibility for them. Most business strategies in general, and turnaround decisions and actions in particular, are well-researched, planned, organized and controlled choices and actions, and hence, to that extent are free acts such that moral responsibility can be ascribed to them.

Free Will and Business’s Moral Responsibility

Since free will is a precondition of moral responsibility, it is important to discuss in what precise sense free will is a precondition to moral responsibility, and thus, a postulate of moral responsibility in business behavior.

Campbell (1957/1993) argues thus: Free will (and its cognate, freedom) primarily refers not to overt (observable) acts but to inner (non-observable) acts. Most overt acts are an expression of inner acts. Moral freedom, however, pertains either to inner acts that one wills or deliberately chooses or to overt acts insofar as they emanate from and reflect one's inner life of choices and acts. Thus, if a turnaround executive has definitely elected to follow a course of action that he/she believes to be wrong, but has been prevented by external circumstances from transiting the inner choice to an overt act, the agent is still morally blameworthy, since moral freedom pertains to inner acts. For example, if a business was determined to inflate sales revenue for a given quarter so as to influence his bank’s loan-approval for that quarter, but was disabled from doing it owing to unusually timed social audits, then he is morally blameworthy, even though the heinous act could not be followed through.

Further, moral responsibility accrues only to those acts for which the person held responsible is regarded as the sole author. If there are other determinants of the act, such as one’s major shareholders, management consultants, CEO pressure, unfavorable economic environment or social pressure, then to that extent moral responsibility is diminished, but one takes full responsibility for that part of the act of

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which one is the full author. In this sense, sole authorship is a necessary condition of the morally responsible act. For instance, if the turnaround executive was highly pressurized to inflate the sales revenues for a given quarter by the retailers (whose franchise was at stake) or by the district sales managers (whose quotas and commissions would be jeopardized) or by the media department (whose promotion budget would not be approved unless targeted sales were achieved), then to that extent he or she is not a sole author of the intended wrong action.

Furthermore, another necessary condition of the morally free act is that the agent could have acted otherwise at the time of the act. That is, given real, open and viable alternatives, the turnaround executive chose this particular one. This condition of “could have acted otherwise” is categorical, and not hypothetical as some philosophers understand. In the latter sense, the agent would have acted otherwise if one had other alternatives, or if one had a different character, or if one had been placed in different circumstances. The categorical question is - Despite all these circumstances, could the executive have chosen otherwise than inflating sales to demonstrate revenue performance? This categorical precondition is the necessary precondition for moral responsibility. True ascription of moral responsibility is based on the answer to this categorical question.

In conclusion, the type of free-will act that is a precondition to moral responsibility is the one in which a) the agent is the sole author or cause, and b) only if the agent could have acted otherwise.

Following Kant, some would add a third condition: c) the will should be free and rational in the sense that it is informed and disciplined by the moral principle; this makes freedom really dutiful and ‘elective.’ This may be an idealist position, and the main problem in ascribing moral responsibility will be how to verify and measure the third condition. We would need evidence of the moral agent’s own inner experience. Moreover, how could an external judge trust the evidence of an inner experience of one external to him or her?

Even if we postulate the first two conditions as requirements for ascribing moral responsibility, can we prove

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that there was free will in a given act? That is, how can the judge verify that a) the agent (turnaround executive) was the sole author of the action and b) that the agent could have done otherwise? Can the agent prove both these conditions to oneself?

Regarding condition one: how can one separate and eliminate influences from one’s character, passions, heredity, upbringing, education, religion and one’s sociopolitical environment, and declare oneself as the sole author of the act? Here, the agent is the best judge as to where he or she acted on one’s own despite one’s inner and external determinants? That is, to what extent the turnaround executive was pressured by desire or motivated by a sense of duty.

The ultimate touchstone is our moral consciousness as it manifests itself in our more critical and considered moral judgments (Campbell 1957). Following Bradley, we could say that the turnaround manager is best disposed to “appropriate” responsibility while the external judge can at best “attribute” responsibility for the act. The turnaround manager possesses enough free will to exert or withhold the moral effort needed to rise to executive moral duty or succumb to desire. The creative act of moral decision may be meaningless to the mere external observer; but from the inner standpoint of the business, it is real, and as significant, as anything in human experience is.

Regarding the second condition: the business could enumerate a range of alternatives he or she could choose from at the time of the act. The lesser the viable and real alternatives, the lesser is moral responsibility. Lonergan’s concept of “effective freedom” implies that the agent should inform oneself about the alternatives, their nature and viability, and choose accordingly.

From Campbell (1957), the business could gather the following guidelines:

Human free will, and therefore, moral freedom and responsibility, primarily refer to inner (non-observable) and not to overt (observable) acts. Most overt acts, however, are an expression of inner states and acts.

Moreover, moral responsibility accrues only to those acts for which the person held responsible is regarded as the sole author. Sole authorship is a necessary condition of the morally responsible act.

Because of inner and external constraints (e.g., genetics, family, heritage, executive pressure, competition, and governments) it is difficult to establish sole authorship, but the business is responsible for that part of act for which he/she is the sole author.

The ultimate touchstone is our moral consciousness as it manifests itself in our more critical and considered moral judgments. It is our moral consciousness through our actions that empower us to appropriate responsibility for them.

The turnaround manager possesses enough free will to exert or withhold the moral effort needed to rise to executive moral duty or succumb to desire.

Another necessary condition of the morally free act is that the agent could have categorically acted otherwise at the time of the act. That is, despite all external and internal constrainingcircumstances, could the business have acted otherwise in a given situation? If so, responsibility accrues to the agent.

Elizabeth Beardsley: Ascribing Moral Responsibility to Corporate Executives

From a phenomenological viewpoint, there are many moral perspectives by which a corporate executive act can be judged for its moral content and worth, for its praiseworthiness or blameworthiness,

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and for its moral and economic sanction of reward or punishment. Elizabeth Beardsley (1914-1990) explores these multiple moral perspectives.

According to her, it is too simplistic to make judgments of moral worth, praise or blame, from a single perspective. Given a human act, she observes, several questions arise in relation to ascribing moral responsibility to it: a) its moral worthiness or unworthiness, b) its praise-worthiness or blame-worthiness and c) its sanction in terms of reward or punishment. How are each of these steps of moral responsibility ascription arrived at? Beardsley (1960) suggests that such judgments are made from several different standpoints she calls “moral perspectives.” We summarize this discussion here.

She considers the terms praise and blame only in their moral content as “moral praise” and “moral blame.” Both are correlative concepts such that everything said about moral praise may also be said about moral blame, and vice versa. A “judgment of praise (or blame)” is an affirmative or negative judgment of praise (or blame). An “affirmative judgment of praise” is an explicit attribution of praiseworthiness to a person.

Conversely, a “negative judgment of praise” is an explicit denial that a person is praiseworthy. An objective judgment of rightness or wrongness, praise or blame, is a judgment made about an act, not the agent. A subjective judgment, on the contrary, relates to the agent. Thus, the statement that “my act is objectively right but may not deserve praise” is perfectly consistent. The judgment that an act is objectively right offers insufficient evidence for judgment about its praiseworthiness. For instance, I could have committed that act either inadvertently or from reprehensible motives or reasons.

According to some “soft” determinists, if an agent has acted wrongly, the following conditions are necessary and sufficient to judge that the agent acted wrongly and is blameworthy:

a) That the agent acted wrongly without external constraints (i.e., this is a voluntary act), b) Without ignorance of relevant facts (i.e., this is an informed act), and c) From a motive or character trait that is undesirable (this is an immoral act).

Opposite conditions account for praiseworthiness: That the agent acted rightly a) without external constraints (i.e., this is a voluntary act), b) without ignorance of relevant facts (i.e., this is an informed act), and c) from a motive or character trait that is desirable (this is a moral act).

While the judge must attend to several key factors among the causal conditions that produced the acts, he or she does not have to go any further, e.g., to antecedents of antecedents, or to the nature or existence of antecedents. 20

According to Beardsley (1960), the above three conditions are sufficient for judging only the moral worth (moral worthiness or unworthiness) of the act but not its moral credit (moral praiseworthiness or blameworthiness). Moral worth refers to the act while moral credit relates to the agent.

Moral worth is judged by four standards: did the person act:

1. Rightly or wrongly, 2. Voluntarily or involuntarily,

20 The “hard” determinists [e.g., Holbach (1770), David Hume (1740), Karl Marx (1930; 1964) and Arthur Schopenhauer 1841)] are concerned about antecedents of antecedents and thus, the implied infinite causal chains. They worry that even the immediately causal antecedents and relevant facts might not have been properly investigated in ascribing blame or praise to acts. They conclude, therefore, that no one ever deserves praise or blame for anything, and that no valid distinction can be made between “voluntary” and “involuntary” acts.

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3. With knowledge or ignorance of relevant facts, and 4. From a desire that was good or evil in the situation.

Moral credit needs different standards:

1. Was the act easy (no moral effort) or difficult (great moral courage and effort) to perform? 2. Were the circumstances favorable or unfavorable for positing the act? And 3. From all that an external judge could know and ascertain about the agent, was it probable or

improbable that the agent should act that way?

Judgments of moral credit obviously supplement (and not supplant or suppress) judgments of moral worth. Beyond factors that determine moral worth or moral credit, Beardsley (1960) considers “ultimate” causal factors, which simply are those factors that are left out of account when one makes judgments of moral worth and moral credit. While judgments made from the perspective of moral worth and moral credit are judgments of discrimination (i.e., these perspectives seek factors that are specifically unique to each agent), and they are mostly comparative and either affirmative or negative, the ultimate causal factors go beyond moral worth and moral credit and consider all agents on equal footing. Here all agents are equal and none has any ultimate claim to praise or blame.

The judgment from the perspective of ultimate causal factors is always negative and takes two forms:

1. Given positive moral worth and/or positive moral credit, the agent A is not ultimately praiseworthy for act X, and hence, does not deserve to be rewarded.

2. Given negative moral worth and/or negative moral credit, the agent B is not ultimately blameworthy for act Y, and hence, does not deserve to be condemned or punished.

Both negative judgments are because agents A or B have ultimate external causes that may be common for A and B. In this sense, agents A and B are moral equals – the causal similarities between them are of moral significance, perhaps more significant than their differences. They eradicate moral discriminations. They remind us that judgments based on moral worth and moral credit are of moral inequality and may not tell the whole story about the individuals being judged. No one is ever the first cause of good or evil deeds or finally responsible for reward or punishment when confronted by moral odds. No one is ever the total cause of one’s actions. The realm of external causes may significantly determine most of our actions, especially in a turnaround situation.

Some causality is beyond a given agent, and this is what determinists thrive on, and on these grounds, the “hard” determinists deny that human actions can be either voluntary or involuntary. There are honest acts whose agents do not possess positive moral worth, and there are cowardly acts whose agents earn no negative moral credit. This is the zone of ultimate unlimited causality and hence, of moral equality . This is the domain of “moral democracy” that makes equals of un-equals. This area invites tolerance, compassion and equanimity in human judgments. Seen from this broad perspective, distinctions of worthy and unworthy, creditable and discreditable melt into insignificance. The concept, theory and doctrine of ultimate causality and moral equality invites us to make all our judgments of moral worth and moral credit with less finality and dogmatism, and with less assurance that they represent the whole truth.

This sphere of ultimate causality and moral equality, however, does not negate but presuppose the legitimacy of moral worth and moral credit. All three moral perspectives, moral worth, moral credit and moral sanction, are necessary but not sufficient. That is, each perspective is incomplete and needs to be supplemented by the other two perspectives. That is, not all our acts go back to ultimate causes; but those that do, invite compassion and tolerance. Equanimity in the face of moral iniquity is moral callousness, particularly when the wrongdoer is oneself.

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From Beardsley we summarize the following practical guidelines in ascribing moral responsibility to businesss and their actions:

Ascribing moral responsibility to turnaround executives would involve three moral perspectives: a) moral worth: the moral worthiness or unworthiness of their business strategies; b) moral credit: the praise-worthiness or blame-worthiness of their business strategies, and c) moral sanction in terms of reward or punishment for their business strategies.

Moral worth refers to the act while moral credit and sanction relate to the agent

An objective judgment of rightness or wrongness is a judgment made about an act (e.g., business strategies), not the agent (e.g., businesss). A subjective judgment, on the contrary, relates to the agent.

Moral worth is judged by four standards: did the person act 1) rightly or wrongly, 2) voluntarily or involuntarily, 3) with knowledge or ignorance of relevant facts, and 4) from a desire that was good or evil in the situation.

Moral credit is judged by different standards: 1) Was the act easy (no moral effort) or difficult (great moral courage and effort) to perform? 2) Were the circumstances favorable or unfavorable for positing the act? And 3) from all that an external judge could know and ascertain about the agent, was it probable or improbable that the agent should act that way? Judgments of moral credit supplement judgments of moral worth.

Moral judgments based on moral worth and moral credit are of moral inequality and may not tell the whole story about the individuals being judged. No one is ever the first or total cause of good or evil deeds and hence, totally responsible for reward or punishment when confronted by moral odds.

Thus, we must allow enough room for “ultimate causal factors” that might influence most business decisions and strategies. Such ultimate determinants could be traced to external circumstances such as stiff competition, globalization, demanding new legislations, technology obsolescence, patent infringements, hostile takeovers, volatile financial markets, and fast-changing customer lifestyles.

Table 10.2 summarizes Beardsley’s contributions to understanding moral worth, moral credit and moral sanction.

We have covered a fairly representative group of major philosophers from Aristotle to Elizabeth Beardsley who have made significant contributions to a better understanding of moral responsibility, especially as applicable to executive decisions. From this historical development of the notion of moral responsibility and its cognates, we note that these authors have deliberately refrained from defining responsibility precisely, but have freely used it for diverse purposes. There has been a pronounced lack of accuracy in denotation, even though the term responsibility has emerged quite comprehensive in its connotation. However, despite its variety and ambiguity of use, responsibility can be said to imply at least five aspects of human choice:

THE CHOOSING PERSON: As a moral agent, with a unique self, abiding character and personality, the responsible person is often described as conscientious, dutiful, committed, reliable and responsive. The person behind the executive choice may be designated as the AGENT or CHOOSING PERSON of responsibility.

THE CHOICE SITUATION: Executive choice is often characterized by situational variables such as time and place, constraints and stresses, number of alternatives to choose from, challenges and opportunities, contingencies and circumstances, risks and uncertainties of alternatives, frequency

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and distribution of choice-alternatives. All these variations may be reckoned as the SITUATION of responsibility.

THE CHOICE PROCESS: The actual executive choice is often described as identification, enumeration and assessment of various choice alternatives, as also anticipation, expectation, critical understanding, interpretation, and choice of some alternative over others, and executive intentions and motivations in the deliberation over and consideration of these alternatives, and the final choice. All these elements may be construed as the PROCESS of choice and responsibility.

THE CHOICE PRINCIPLE: This component of executive choice relates to the moral reasoning or principles behind the choice - teleological ends and objectives, deontological laws, contracts, rights, duties and character, and the justice of the distribution of these costs and benefits and rights and duties involved in executive choices - these elements constitute the "FORM" or CAUSE of executive responsibility.

THE CHOICE EFFECT: This involves the consequences of executive decisions and subsequent actions in terms of success or failure, costs or benefits, the degree of good or evil in the consequences, and the types of stakeholders they affect in the challenging environment - all these elements describe the EFFECT of responsibility.

Table 10.3 summarizes responsibility theories from Aristotle to Beardsley along these five constitutive components of responsibility, thus providing a synthetic summary of the historical development of the concept and content of moral and ethical responsibility. Note that incremental contributions to the understanding of responsibility under each author are italicized. From Table 10.3, it is clear that different moral philosophers have emphasized varied aspects of the human choice, and accordingly, different dimensions of responsibility.

Descriptive, Prescriptive, Ascriptive and Appropriational Responsibility

We use the word “responsibility” descriptively, prescriptively, ascriptively, and appropriationally, and under each usage, it has both an objective and subjective sense. In description we describe the where, when, who, what, how, with whom, and through whom of responsibility. In prescription, we argue the normative, obligatory, rights and duties of responsibility. In ascription or attribution, we probe into the causality, origination, initiation, authorship and ownership of the effects (harmful or beneficial) of responsible (or irresponsible) actions. In appropriation, the agent freely accepts and owns the act and its consequences. For an illustration of this usage, see Exhibit 10.2:

Exhibit 10.2: An Instance of Descriptive, Prescriptive, Ascriptive and Appropriational Responsibility

Responsibility

Usage

Subjective Objective

Descriptive She is a responsible executive. Her responsibility is unmatched.

Prescriptive She should be responsible for this event.

Her responsibility for this event is absolutely clear.

Ascriptive(Attributional)

She can be held responsible for this damage.

Her responsibility for this damage is beyond a doubt.

Appropriational She accepted responsibility for the harm done.

Her ownership of responsibility for the harm that resulted was very

laudable

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Consider the Exxon Valdez disaster of March 4, 1989. A big oil tanker ran into a sandbar in Prince William Sound off the coast of Alaska, USA, spilling almost eleven million gallons of crude oil that then washed onto the beaches, devastating the environment of water, fish, wildlife, nature lovers, tourists and local cities and villages along miles of North Pacific coastline. It was later ascertained that the captain of the ship had been drinking on the bridge before the accident occurred, and that at the moment the crucial turn that resulted in the grounding of the tanker was executed he was not in fact present on the bridge. We can objectively make the following statements about the responsibility or accountability of the captain:

The captain was responsible for the fact that he had been under the influence of alcohol while serving as captain of the ship entrusted to his care (subjective descriptive responsibility).

His navigation of the ship while under the influence of alcohol was irresponsible (objective descriptive responsibility).

Insofar as the captain was not at the helm when the ship ran aground, he was not directly responsible for the oil spill (subjective ascriptive responsibility).

As the captain of the ship, however, it should have been his responsibility to be present when the crucial turn was executed (objective prescriptive responsibility).

The captain should be responsible for all major operations in navigating the ship (subjective descriptive responsibility).

But he did not seem to own the wrong deed (subjective appropriational responsibility) nor own the harmful consequences (objective appropriational responsibility)

To the extent that the spill of eleven million gallons of crude oil destroyed miles of scenic coastline and wildlife, the captain, and/or the Exxon company that he represents, should be held at least partially responsible for the loss in income of all those villages whose livelihood was based on Alaskan fishery (objective ascriptive responsibility).

He should also be held responsible for the revenue loss of all those businesses whose market was harmed by the lack of tourists who did not visit these places for quite few years thereafter (objective ascriptive responsibility).

Yet the courts decided that the captain was not to be held personally accountable for damage caused by the spill (subjective ascriptive responsibility). [The charges concerning the influence of alcohol were dropped in a plea bargain, and his license to captain a ship was revoked for a period of six months].

But the Exxon Corporation was held responsible for the action of its employee, the captain (objective ascriptive responsibility).

Existing Paradigms of Executive Responsibility

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

For the metaphor Maker, responsible action is that action which brings about the good. The Maker says, “Do what is good;” “Act so as to produce or realize the good.”

For the metaphor Citizen, responsible action is that action which conforms to the social norms and laws. The Citizen says, “Do what is right;” “Act in a lawful and dutiful manner.”

But what is good? What is right? The two supplementary paradigms of volitionalism and motivationsim reply:

From a volitionalist viewpoint, responsible action becomes action when we freely and deliberately choose it. Hence the volitionalist says, “The good and the right are what conform to the ideals and values that you must freely and deliberately choose.”

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From a motivationist perspective, responsible action is one that is goal-oriented, intentionally planned and executed. Hence, the morivationist says, “The good and the right are what enable you to meet your needs while not interfering with others who are meeting their needs.”

For all these positions, responsibility becomes reduced to nothing more than an alternative expression of the principal concepts of the selected pre-existing paradigm or moral models. All the above four paradigms do not tell us clearly what is the one right thing or what is the one good thing that we should do. Human life is just not that simple an endeavor as a moral statement. Especially after the Holocaust, the ethnic cleansing genocides of Rwanda and Burundi, Bosnia and Herzogovina, and currently ongoing genocide in Darfur, West Sudan, after the September Eleven, the Iraq War, the terrorist attack on Mumbai in 2008, and the current widespread disease of corporate fraud, political lobby and bribery, the awareness of the reality of profound evil in our world has altered our assessment of what is ethically possible. Achieving justice in a particular situation and country simultaneously creates injustice in other parts of the world. In our complex evil world, presumably human needs can be met only by a gradual lessening of structured injustice than by the complete fulfillment of the demands of justice (Gottlieb 1983: 220).

Moreover, there is considerable tautology in each of these responsibility models: responsibility is defined as the fact of being held accountable, of being required to give an answer or an explanation for one’s actions (or omissions thereof) by a predefined or predetermined norm or reason. This reduces responsibility to just another term for acting as a rational animal, and responsible action becomes nothing more than the traditional human action. For instance, the Maker paradigm expresses an absolute and universal normative principle: responsibility is an act that seeks to maximize good and minimize evil. The Citizen metaphor also expresses an absolute and universal normative principle: one should act dutifully and in conformity with the existing laws, in order to bring about social cooperation and harmony.

The volitionalist, motivationist, the Maker and the Citizen metaphors do not necessarily relate to responsibility that is essentially social in character and scope. They do not emphasize the collective and socially structured nature of ethical behavior. Individual action affects the context of meaning of all human action within the societal whole, and this meaning is a reality that develops as time unfolds and we respond to it as moral agents (Rehrauer 1996: 232). Justice is fundamentally social justice, and social justice as a moral virtue is a disposition that tries to make society more just or withdraw from society bent on injustice. We have a responsibility to make correct choices and to be responsible for the consequences of the choices of a society as a whole. Since there is a mutual creative interplay between the human person in his unique individuality and the quality of his interpersonal relationship to society, every person must bear responsibility for the goodness or evil present in the society they mutually create and constantly are called to refine (Haring 1978: 99-101). Ethics should also tell us how to live with each other in such a way that we can also live with ourselves.

The Responder paradigm, however, is grounded on the metaphor and paradigm of interpersonal motivation action and makes up for the failure of other paradigms to account for a change in human reality brought about by human moral decision-making and moral responsibility. In our daily experience we observe that sometimes good people do wrong things but for good reasons. Performance of one’s duties can be motivated by evil intentions, and forbidden actions can often be prompted by the highest motives. Hun history records a legion of cases when in the name of social duty and objective duty-bound morality, generally good people have indulged in genocidal atrocities (e.g., Aristophanes IV, Adolf Hitler, and Mesolovich). Ernst Kaltenbrunner, the head of SS and the administrator of the death camps in Nazi Germany and who was executed after the Nuremberg Trials, was regularly described as good father. Conversely, even perverse people often do good. Some of the greatest moral heroes of history were those who fought against socially established moral norms.

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Hence, one begins to question the efficacy of moral rules and norms when people violate them regularly, commonly, and quite openly. Technically, moral norms (and non-norms, for that matter) should live through their application (Heller 1988: 80). It is fair to say that neither the axiological or deontological principles, and neither the Maker or the Citizen paradigms have been effective in the fulfillment of their teleological function (Rehrauer 1996: 180). Moral law, moral acts and moral responsibility are best understood in their dialogical tension between value and law, rationality and relationality, the transcendent and the immanent, the individual and the social, between the moral metaphors we use and their conceptual clusters, and between the absolute universalization of the past and the fleeting demands of the real present.

Vertical and Horizontal Tensions and Responsibility

In general, all things “respond” to a state of tension in one’s environment. For instance, a metal responds to heat by expanding (a non-reflexive first-order or primary response); a sunflower responds to the sun by turning towards the sun as the source of light (second order-response in which the responder monitors its condition and acts to do something about that condition). The fundamental difference between first-order and second-order response is the ability to be sensitive to one’s responses. According to Frankfurt (1987: 31), who makes this distinction, the capacity to effect a second-order response is essential for the response to be considered purposive. The human person has a heightened capacity to relate his purposive action to a broader sense of importance of who and what he is, how others see him, and how he fits into the scheme of things. It is the nature of the human person to experience tension or disequilibrium on various levels, and hence, to possess a high-level capacity for rational reflexivity that makes both purposive activity and the awareness of ourselves as purposeful actors possible. Thus, the notion of responsibility is integral to one’s deepest sense of oneself as a self-determining planner and performer of action, someone who can create things, make a sacrifice, do a misdeed, or who can invent oneself (Strawson 1993: 91).

Let us recall from Chapter 03 regarding the nature of the human person expressed as a four-dimensional vertical function of transcendence and immanence and horizontal function of individuality and sociality. Given this four-fold characterization of human nature, responsibility is a first order:

Response to one’s vertical tension of transcendence (experienced as eternity, destiny, freedom, freewill, subjectivity) and immanence (experienced as temporality, earthly, determinism, constrained freedom, and objectivity) and

Response to one’s horizontal tension of individuality (expressed as identity, continuity, self-project, experience, knowledge, personality, and corporeality) and sociality (expressed as a social-project, language, interaction, integration, and culture).

According to Rehrauer (1996: 146), responsibility is also a response to second-order tensions between:

Transcendence and sociality by universal, human, social values and principles, and a global human vision;

Transcendence and individuality by individual values, duties, norms, principles, and understanding;

Individuality and immanence by individual biological and psychological needs, wants, goals, projects, desires and dreams;

Individuality and sociality by social norms, laws, customs, constraints, institutions and organizations, and governments

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Through all these tensions human persons as actors express their individuality and actualize themselves through free thoughts, experiences, choices and activities integrated as a narrative whole of an earned and lived repertoire of internal stability, identity, congruity and history. It is the quality and construction of these responses to these vectors of tensions that will ultimately configure the moral character of the person expressed as a “persisting pattern of attitudes and motives that produce a rather predictable kind and quality of moral behavior (Peck and Havighurst 1960: 15, 164). Table 10.6 captures the individuality, sociality, immanence and transcendence tensions of corporate executive responsibility.

All action is a response to something within us or without, and hence, is “responsible” in the sense of basic responsibility. Basic responsibility results in action. It is a response to an existing tension between the individual who acts and his internal and/or external environment that challenges him. When basic responsibility is executed in a consciously self-reflective manner, it becomes moral responsibility. In fact, any directed choice or the creation of personal and public meaning is being morally responsible.

Every human action can be morally responsible. Moral responsibility deals with purposive and rational choice, with prescription, motivation, intention, explanation, justification, evaluation, and adequacy and efficacy of the action taken (Niebuhr 1963: 97). Moral responsibility activates and manifests the great morality power that every human being possesses. Moral responsibility is a subset and conscious modality of basic responsibility; it is the harmonization and ordering of the tensions between the rational and the relational, the transcendent and the social, the objective immanent and the subjective individual in all of us (Rehrauer 1996: 165-166).

Moral norms and principles, absolute and universal, are important but they must be brought into the real human world of response and incarnated in concrete human actions. “Changed circumstances modify theology and ethics, and modified theology and ethics introduce new factors in the circumstances” (Keck 1980: 44). The radical alteration in the structure of metaphysical, epistemological, and ethical conceptual clusters that has occurred in the past two centuries requires of us a new moral dialogue between what was once taken for granted concerning right and wrong, good and evil, lawful and unlawful, and what we believe today to be humanly possible (Kenny 1978: 9-10). We no longer understand ourselves in the way that we used to; we know much more about the nature and structure of human behavior than we did some 100 years ago. Today we must dialogue with problems raised by theories of determinism, with the problem of Cartesian dualism, with the reality of cultural diversity and relativity of moral norms and practices, and in the light of all these, with the possibility and justifiability of any normative ethical system.

While respecting the past moral norms and paradigms, we must also dialogue with the world-view of our time (as did ancient philosophers like Socrates, Plato and Aristotle, ancient theologians like Augustine, Thomas Aquinas, and Martin Luther, and modern philosophers like Emmanuel Kant, George Heidegger, Karl Marx and Fredrick Nietzsche) and absorb its insights and new forms of understanding. No one theologian, philosopher, psychologist or sociologist can create or capture a perfect and unchangeable system or structure of human understanding. Each tries to do the best he can given one's knowledge and understanding, with the tools and resources of his time. Each tries to dialogue between the eternal truths of one’s sacred scriptures, the wisdom of tradition, his own personal moral insights and experiences, and the needs, wants, limitations and realities of his own social space and time. The dialogue that builds and challenges corporate moral responsibility must occur in the context of our dialogical tensions between immanence and transcendence, individuality and sociality, freewill and constraints, freedom and servitude (Rehrauer 1996: 181-187).

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Concluding Remarks

Our understanding about the nature of human action (Chapter 01), and about the nature of human personhood and about what it means to be human (Chapter 02) has broadened significantly, and so should our understanding of human responsibility. Following this development, in this Chapter we have analyzed the notion of human responsibility from a sampling of great moral philosophers and theologians, psychologists and sociologists, and, in the concluding synthesis, we have presented the underlying paradigm of human being as a capacity or response to the various tensions of reality within and outside us. Unlike the past, most of the modern developments in theology, philosophy, morals and ethics have not occurred in an academic, theoretical and speculative vacuum, but as responses to tensions resulting from concrete experiences of human beings and their attempts to make sense of these tensions at the individual, social and cultural levels. These experiences were integrated into the narrative structures of the individuals who lived them, the social groups and cultural environments in which they lived, and eventually, they became part of who and what they were and who and what they became. Human responsibility in general, and corporate executive responsibility in particular, is best understood as a dialogical response to the tensions we face in our day to day life and environment.

The list of moral philosophers reviewed in Parts One and Two is obviously not exhaustive. We have chosen a representative group of moral philosophers such that several polar aspects of moral responsibility are adequately covered: hard and soft determinism, indeterminism, fatalism and libertarianism, free and unfree, voluntary and involuntary actions, free will and constrained will, accountability and commitment, responsibility and exoneration. There are other theories and bases of responsibility, however, that we could consider but are too controversial to be featured here.21

From the theories of ethical responsibility we have discussed thus far, one can note that different moral philosophers emphasize different aspects of the human choice, and accordingly, focus on different dimensions of responsibility. The last column (Table 10.2 and 10.4) under each author does not fully describe the Choice-Effect or Choice-consequences (as these are circumstantial or very specific to the agent) but characterize responsibility for the Choice-Effect as understood by each moral philosopher. We encourage readers to further discussion on these entries as they apply the theories of responsibility to concrete business executive exercises added at the end of this Chapter.

Most of the moral philosophers we have considered in this chapter have tried to reestablish human free will and therefore, human responsibility. We may be influenced by a complex of external and internal controls, said Francis Bradley, yet we all experience self-governance, self-direction and self-organization, and in short, self-actuation. The latter can transcend market forces and enable us to appropriate responsibility for our actions. Our world may be a highly deficient world of morally dubious means and ends, added Max Weber, but nevertheless with some value balancing we must search for the best means with a moral purity of intention; hence, responsibility is engagement or active involvement in the world. John Dewey counsels us that we can learn from our past actions and their evil social consequences and thus, progressively amend our behavior. Hence, responsibility is prospective amendment. In a contingent world of competing alternatives we are condemned to be free, reflected Jean Paul Sartre; but we are ends-in-themselves, and not means for others; by due consideration of all circumstances we can elect each business decision.

21 For instance, Paul Holbach’s (1770) discussion on the illusion of free will, Arthur Schopenhauer’s (1841) discussion on determinism, Hart's (1985) treatment of ascription of responsibility, as opposed to description, has been much debated, and so is Austin's (1961) treatment on "excuses." Interested readers can pursue these discussions for researching additional aspects of responsibility. Also, there are areas of executive responsibility that do not necessarily terminate in action such as role-play, causal or capacity responsibilities (Gundlach and Murphy 1993; Toffler 1986), leadership, delegation, communication-motivation responsibilities (Murphy 1988) – these could also be studied as complementary aspects of executive responsibility.

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Moral agency is deputyship, argued Dietrich Bonheoffer, and we are deputed not so much to choose right and avoid wrong, but often to choose between right and right and between wrong and wrong in an imperfect business world such as ours. Corporate executive responsibility, then, accepts guilt and failure but without sin. Richard Niebuhr added that all our actions should arrive at a perfect cathekontic fit between our values and those of the community, nature and the cosmos. That is, responsibility is a constant dialogue with our environment. In order to do this we need intellectual, volitional and moral development, said Bernard Lonergan; all three aspects of development enable us to fight moral incompetence and develop antecedent willingness to do good. This is effective freedom, and the latter grounds moral responsibility for all corporate executives.

However, the free will problem is quite tangled. Each of the traditional solutions (e.g., determinism, indeterminism, fatalism, libertarianism) of this problem tends to oversimplify a multidimensional problem that involves the resolution of conceptual, scientific and moral questions. We must first decide which of the ethical theories or moral principles we can use in making judgments of moral responsibility. Next, we must agree on the meaning of certain key concepts such as responsibility, moral responsibility, free will, free action, determinability, compulsion and trying. Most of these terms do not have single meaning in ordinary usage, and most meanings derive from different moral perspectives, different moral concerns and attitudes we bring to the discussion. Thirdly, we must attempt to answer such scientific questions as - How wide is the area of compulsive behavior. Did I adequately assess causal antecedents such as heredity, hang-ups, cultural baggage, company history, competition, and environmental pressure in my corporate executive decisions? Have I objectively assessed my current capacities and constraints in arriving at a given corporate executive decision? How deterrable, if at all, was this decision in this instance of a turnaround crisis? How much, if at all, did the corporate executive in this concrete situation have in his power to try to do otherwise? All this analysis done, the question whether a corporate executive is morally responsible for a given downsizing decision involves taking a moral position and not simply covering the relevant facts. This is because it is our moral position and decision that will specify which of the facts and causal antecedents are relevant. The final answer to the question on moral responsibility will depend upon what we are willing to excuse or not excuse (Grassian 1992: 184-191).

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Table 10.1: Aristotle’s Theory of Responsibility: Voluntary Acts, Involuntary and Under-Duress Actions

Moral Structure Of

Acts

VoluntaryActs

Involuntary Actions

ActionsUnder Duress

Originating principle or passions:

Within the agent; intrinsic to the agent.The agent operates on one’s own accord.

For instance, actions done out of anger, sensual desire, or any other passions originate within the agent; they can be resisted by the agent, and therefore, are voluntary.

Outside the agent; extrinsic to the agent.The agent does not operate on one’s own accord.

For example, actions done out of violence, extreme fear and ignorance, or any other invincible constraint do not originate within the agent; they cannot be resisted by the agent, and are, therefore, involuntary.

Within and without the agent; intrinsic and extrinsic to the agent. Partly done on one’s own accord.For instance, actions done out of anger, passion, competitive pressure, survival pressure, under some force, fear, and ignorance, can be partly resisted, and are, therefore, under duress.

Role of the intellectual and volitionalfaculties:

Strong. The agent, cognizant of their particular circumstances, and with deliberation, initiates actions over their means and ends.

Hence, actions are “human” and accountable.

Non-existent. Actions are not initiated by the agent, nor deliberated over asmeans and ends; if they are under ignorance, there is low mental awareness;if under violence, there is no will.

Hence, actions are almost “non-human” and non-accountable.

Weak. Actions arepartly initiated by the agent, partly cognizantof the circumstances,and partly deliberated over as means and ends.

Hence, actions are a blend of the human and the non-human, and partially responsible.

Outcomes of actions

Could result in good acts (success, virtue) worthy of praise, and which make us happy.

Or, end in evil deeds (faults, vice, harmful outcomes) that are blameworthy, to be censored, and which make us guilty and sad.

Could result in good acts (success, virtue) that donot merit praise.

Or, result in evil deeds (vice, failure) that do not deserve blame, but make us sad, and invoke pityand pardon.

Could result in good acts (success, virtue) partly worthy of praise, and which make us partly happy.Or, end in evil deeds (faults, sins, vice) thatare partly blameworthy, partly censorable, and which make us somewhat guilty and sad.

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Table 10.2: Perspectives of Moral Responsibility Assessment for Corporate Executives

[See Beardsley 1960]Perspectives of

Moral Responsibility

Assessment

Relevant Definitions Probing Questions

Moral Worth:Positive or Negative

Characteristic of moral value that belong to the agent who has performed an act that meets certain pre-specified conditions.

The term “moral worth” can refer to either positive or negative moral worth.

A judgment of moral worth may be positive or negative depending upon whether moral worth is asserted to be present or absent.

Standards of Positive Moral Worth:

1. Has the agent acted rightly?2. Has the agent acted voluntarily?3. Does the agent have knowledge of relevant facts?4. Does the agent act from a desire that is good in

its situation?

Standards of Negative Moral Worth:

1. Has the agent acted wrongly?2. Has the agent acted voluntarily?3. Was the agent ignorant of relevant facts?4. Does the agent act from a desire that is evil in its

situation?

Moral Credit:Praise or Blame

Given that an act has positive or negative moral worth, moral credit refers to the next moral judgment that determines whether the agent is praiseworthy or blameworthy for the act.

Moral credit looks at the performance of the act under its circumstances. That is, was the balance of known circumstances causally relevant to the performance of the act favorable or unfavorable?

Favorable circumstances mean that their presence makes the act more likely to occur than in their absence.Unfavorable circumstances mean that their presence makes the act more unlikely to occur than in their absence.

Standards of Positive Moral Credit:

1. Was the right act “difficult” to perform?2. Did the agent act rightly despite obstacles or

unfavorable circumstances?3. Was it antecedently improbable that the agent

would act rightly under such unfavorable circumstances?

A “yes” to all three questions enhances positive moral credit.

Standards of Negative Moral Credit:

1. Was the wrong act “difficult” to perform?2. Did the agent act wrongly despite favorable

circumstances not to act?3. Was it antecedently improbable that the agent

would act wrongly under such favorable circumstances not to act?

A “yes” to all three questions enhances negative moral credit.

Moral Sanction:Reward or Punishment

Final judgment regarding reward and punishment should be tempered by the third moral perspective of ultimate causality and moral equality.

Does A unconditionally deserve moral worth for his honest act?

Does A deserve to be absolutely condemned for his cowardly act?

If not, investigate into ultimate casual factors that mitigate praise, exonerate guilt or moral responsibility.

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Table 10.3: Dimensions of Responsibility: A Review from Aristotle to Modern Philosophers

MoralPhilosopher

Dimensions of Executive Responsibility

The Choosing

Person

The Choice Situation

The Choice Principle

The Choice Process

The Choice Consequences

ARISTOTLE:(384-322 BC)

The moral agent

Voluntary:No constraintsInvoluntary; Constraints of force or ignorance;Under Duress:Some constraints;

Motivation from within;Compulsion from without;

Compelling from within and without;

Voluntary deliberation;Involuntary or forced execution;

Deliberation under duress;

Praise or blame.

Pardon or pity; full exoneration;

Some exoneration;

IMMANUEL KANT:(1724-1804)

Agent as moral worth

Categorical imperatives;Hypothetical imperatives;

Absolute moral principles;Purposes, ends and motives;

Ethic of moral duty;Ethic of social responsibility;

Categorical responsibility;Hypothetical responsibility;

KARL MARX:(1818-1883)

Agent as alienated and historically determined

Historical determinism;

Social consciousness;

Individual consciousness & choice are posterior to social consciousness & choice.

Historical necessity is freedom and responsibility.

FRANCIS BRADLEY:(1846-1924)

Moral agent as complex of external and internal controls;

Family & social controls; Self-governance, self- direction, and self- organization;

Social determinism;Self-actuation principle;

Market-determined choices;Self-actuation choices transcending market forces;

Responsibility is self-actuation despite constraining market forces.

JEAN PAUL SARTRE:(1905-1980)

Agent as end in-oneself

Contingent world andcompeting alternatives;

Elect and act as to make history and universal law.

Consideration – think through all consequences.

Responsibility is ownership of and commitment to the consequences.

DIETRICH BONHOEFFER:(1906-1945)

Agent as a deputy

Choices among right and right, wrong and wrong;

Given faith and conscience, free commitment to act;

Choose the better right and the lesser wrong; choice is deputyship.

Responsibility is acceptance of guilt and failure but without sin.

REINHOLD NIEBUHR:(1892-1971)

Agent as in dialogue with community and nature

Inexorable laws of life, nature and cosmos.

Right action is a cathekontic fit with humankind and nature.

Cathekontic fit with nature: total interaction as response and anticipation of further response.

Responsibility is to arrive at a cathekontic fit of action with community, nature and the cosmos.

BERNARD LONERGAN:(1906-1980)

Agent as developing intellectually, volitionally and morally

External constraints; Internal psycho-neural state

Antecedent willingness: fight moral impotence to competence

Practical insight, reflection, decision, cultivation

Effective freedom defines responsibility

ELIZABETH BEARDSLEY: (1914-1990)

Moral worth refers to the act while moral credit and sanction belong to the agent.

Moral worth is a function of rightness, voluntariness, knowledge, and desire to do good.

Moral credit stems from moral effort, external circumstances, and probability of acting.

The choice process is determined by free will and avoidability.

Not all causes can be traced; some ultimate external causality can exonerate.

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Table 10.4: Capturing the Individuality, Sociality, Immanence and Transcendence Tensions of Corporate Executive Responsibility

[See also Rehrauer 1996: 148-164]

Vector of Responsibility

Negative Tensions Positive Tensions

Individual-Immanent

Our material nature and biological corporeality impose certain fundamental needs and wants that require satisfaction if we are to survive, grow and flourish.

Our individualized self, comprised of a life history of concrete experiences, choices, and activities, empowers us to manage these needs and wants efficiently.

Our material nature imposes certain spatial-temporal structures that limit the number of ways/alternatives we can fulfill our needs and wants.

Our moral character expressed in our persistent and consistent moral attitudes and beliefs can produce a predictable kind and quality of response to our fundamental needs and wants

Our bodily instincts, drives, passions, impulses and compulsions further actuate our needs and wants.

The nature, stability and the internal congruity of our character and experiences can provide us the required controls to manage our needs and wants.

Individual-Transcendent

The only way to be good and just is by doing what is good and just. But just doing the good and the just cannot make us good and just, or vice versa. We may do the good and the just for the wrong reasons or we may do what is wrong with the best of intentions.

Self-formation and self-transcendence go together; as rational individuals we have a transcendent sense, a spiritual capacity to recognize value and our capacity for freedom to realize that value. We can learn from our moral mistakes and failures.

The values and norms that we choose to define, evaluate and understand ourselves may be abstract, too universal and transcendent that they may be hard to actualize in concrete actions.

An integral part of the process involves the projection of an idealized self that embodies the values and future orientations that, in turn, provide grounding to our self-reflection and the unique meaning of our existence. The absolute, transcendent, abstract and the universal can be personalized into one’s self-narrative.

The real existent self at a given moment may fall short of the ideal we frame for ourselves. The complete realization of our idealized self is impossible.

The healthy development of our personality involves the construction and projection of a structured and stable personal narrative. This process of becoming individual is marked by transcendent quality.

Immanent-Social

Because we are immanent and social at the same time, there is additionally both a biological and social need to express and share with others our personal experiences and understanding of the world we live in.

As individuals we are remarkably flexible, adaptive and resilient. Over the years we develop a repertoire of strategies for harmonizing the demands and practices of our social groups and their needs, goals and demands.

Our genetic endowment is domesticated to social compliance, and social regulation displaces our native instinct regulation, and we are programmed for a “life-in-society” that subjects our thinking, writing, speaking and acting to cope with social regulations.

Our social domestication can itself empower us to create and invent our social environment, history, culture and narratives. Conformity to our social roles and diversity of roles can be our strength. We can create our own social world of personalized individuals.

We physically need to be with others. Neither the individual nor the society can adequately satisfy our social needs, wants, goals and objectives without the others. We cannot survive without our social connectedness.

The society needs us as much as we need society; our culture cannot survive without its connectedness to the biological organisms that live and make the culture. Thus, there is a dialogical tension and mutuality of need between the individual and the society.

Transcendent-Social

Social groups have needs, values and ideals that condition their survival. The institutions, roles, traditions and customs of our society must be continuously legitimized and humanized if they must survive. The experience of alienation between one’s true self, and the self that others perceive, or that is projected to others, is inevitable.

Our spiritual (transcendent) and our social natures provide us with certain transcendental values that are also experienced as needs and desires that can make us fully human. Sociality is interdependence, and interdependence is an essential characteristic of personal being.

Our social reality and our social transcendental needs, desires, wants and values will often compete with each other and among themselves. While we proclaim liberty and justice for all, some are more free than others, and justice depends in large part upon who one is and how much one has.

Values, by their very nature as values, possess supervening quality whereby they transcend both the individuals and the societies. One of the major functions of culture is that of preserving the common recognition, understanding, and strategies for the communication, protection, and realization of values across temporal boundaries.

Each social group transcends humanity while The society is more than the sum of its individuals;

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remaining part of it. There is constant tension between the idealized, stratified and institutionalized norms, symbols, strategies that spell social survival.

each person transcends his society while remaining dependent upon it. The values of the past are carried into the present and prescribed for the future in the norms, laws, structures and institutions of every society.

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