Philosophical Issues of Business Ethics - Essay Example

? PHILOSOPHICAL ESSAY ON BUSINESS ETHICS (Case Study of Yahoo, Inc. in China) of the Name: Date Submitted: Introduction Man has always wrestled with the ethical and moral questions concerning his actions in which he and other members of society are affected, either adversely or positively. This made it imperative that he contemplate first the possible consequences of his actions on others. There is no shortage of philosophical principles on the subject of ethics and their complexity has made it a key topic of discussion or debates among students, academicians, politicians and businessmen. The main purpose of the study of ethics is to enable people to be guided by their principles and to see to it that their actions are not only legal and moral but also ethical. This may seem like a superfluous argument but there are decidedly many fine distinctions between the various lines of ethical thought over the centuries, as propounded by the great minds of bygone eras. There are so many situations in real life where people are confronted with ethical challenges and a knowledge of some of the more prominent ethical principles can be of great help in looking for answers. Discussion Ethics has been applied in a number of areas such as politics (cheating and lying), medicine (abortion, organ donations, surrogate motherhood, euthanasia), legal or justice system (juvenile delinquency, retribution, incarceration, capital punishment), economics (distribution of equity and benefits), environment (exploitation of resources, pollution, tragedy of the commons), society (race, ethnicity, minority rights), the military (gay rights, DADT, torture, assassination) and in business (corruption, bribery, industrial espionage, human resources management) and the list could go on to extend to practically all aspects of human life. Businesses today have to grapple with ethical issues as well, and this paper looks at how Yahoo, Inc. dealt with China. The moral philosophy of Immanuel Kant, a German philosopher and thinker, has cast a very long shadow on the study of ethics. His thoughts have influenced several succeeding lines of philosophers even up to this modern day and age, because most of his arguments are cogent. A careful re-reading of his philosophy shows how these are still very applicable today, even with many situations not even contemplated yet during his time. An example is the rapid advances in medical technologies, in which man can play and act like God, in determining issues of life and death. Questions such as abortion, euthanasia, organ transplants and surrogate motherhood are just some of the issues that have to be settled by moral ethics in which Kantian philosophy can be put to good use in having relevant discussions and hopefully arrive at good decisions. Legal systems have not kept up with these advances in medical knowledge and technologies such that the laws currently in place are grossly inadequate and cannot provide helpful answers. Ethical issues and moral considerations have likewise presented new challenges for the business entities, especially with the advent of the globalization in trade and commerce. There are many situations in which firms operate in other countries, often with laws at variance or even contrary with the domestic laws in their country of domicile. This situation can present a tricky business environment because higher management has to contend with conflicting demands from contradictory standards of what constitutes good governance and best practices. Oftentimes, it is left to the best discretion of senior management on the best course of action, navigating a sea of laws which can work well in one country but not in another country. Ethics has seeped into the world of business in the form of corporate social responsibility (CSR) which provide guidelines on what to do in adverse or ambiguous situations without sacrificing profits. In the final analysis, there can be no clear-cut answers and it is better left to the best judgment of management. This point of doing business on a global scale is best exemplified by the case of Yahoo, Inc. doing business in mainland China. This country is one of the fastest-growing economies in the world, this despite the recession which affected the United State of America in 2008 due to the implosion of toxic assets from a sub-prime mortgage crisis and now the sovereign debt crisis gripping most of Western Europe, in particular the PIIGS or Portugal, Italy, Ireland, Greece and Spain. China rose from being a less-developed country in just a few decades after opening its centrally-planned communist or socialist economy to adopt market-oriented capitalist reforms, to surpass Japan as the second-largest economy in the world today, next only to America. In the process of rapid double-digit economic growth, it amassed the largest foreign exchange reserves in the world and is the envy of most economies struggling with the recession, flat growth, unemployment and budget deficits. The Chinese domestic market represented a new source of a revenue stream not found in other countries for global business, due to the rise of a middle-class spurred by the growth in exports and consumer-led economic expansion. This market represents an attractive opportunity for expansion of business firms looking for new growth areas. However, Chinese economic reforms aimed at boosting its productivity and exports do not extend to the political arena. In other words, it is still a totalitarian one-party state with the Chinese Communist Party firmly in control of society. Wealth and political freedoms usually go together in most other countries as a natural consequence of democracy and personal liberties but sadly, this is not the case in China. It is an exception to the commonly-held belief that people ask for greater freedoms once they get richer but the party elite will not loosen or relinquish control. In the case of Yahoo, Inc. it has to decide whether to comply with its strict censorship laws or to stop doing business in China due to some conflicts with its legal laws as well as ethical reasons. The case of Yahoo, Inc. in China is not something unique because it is a common event in which global firms wanting to do business in that country has to comply with its complex laws and an opaque legal system. There are a myriad of regulations and government policies which in many ways constrict how business is conducted in China, which is very sensitive with its foreign or sovereignty issues. However, Yahoo, Inc. is an Internet-based business enterprise which relies on access to local markets as a way to earn profits from its advertising revenues. What is unique about the case of Yahoo, Inc. was that it got caught with its finger in the cookie jar, so to speak, and only belatedly admitted to what it did when it was confronted with overwhelming evidence. It had first stayed silent on the whole issue and then even issued a denial before finally coming up clean on the whole subject matter. It got itself embroiled in a squall of controversy when it is apparently just a business issue but ethics cannot be separated from consequences of its actions (Shaw & Barry, 2012, p. 224) when it would have preferred to keep everything under wraps. The Internet has grown by leaps and bounds due to two overriding principles imposed by its creators, that it should be free and there is universal access. These two considerations had propelled Internet growth over the years by the anonymity it offers all its users, not subjected to any form of censorship or control with regards to its content and exchange of communications or ideas. However, totalitarian regimes like that in China see the Internet as a threat to its continued hegemony on political power and saw the need to impose censorship controls over its contents. It is contrary to the principle of free and universal access but China wants to have its way because it knew that companies doing business have to deal with its Communist Party, whether they like it or not. It is the cost of doing business, some sort of a bargain with the Chinese government; foreign businesses must do its own bidding or otherwise get out (McGregor, 2005, p. 58). This paper focuses its discussions on the way Yahoo, Inc. helped the Chinese authorities to identify certain individuals in its attempt to monitor and control the Internet in its country. The case is instructive for the way how businesses must or should conduct themselves in the global arena or elsewhere; if profits should only be the main motive or other considerations can also be taken into account in the overall scheme of things in the age of globalization today. The concept of the categorical imperative is the center or core of Kant's moral philosophy. It means that this imperative (or requirement) is absolute and inclusive; it allows for no exceptions. He formulated three categorical imperatives in this regard and these will be applied in the case of Yahoo, Inc. The first imperative is called as the Formula of Universal Law, which states that anyone should act only on a maxim (a subjective principle of action) if it can be universalized or when it could be applied to everybody (making it universal). It is based on the idea that the maxim can be applied using only reason and logic, and further, that it is applicable in all situations. Based on reason and logic, Yahoo can be faulted for making concessions to the Chinese government by its disclosure of the identities of its users, when this violated the principle of Internet anonymity. All users of its Web site had trusted Yahoo, Inc. to keep information absolutely confidential but it choose to breach this confidentiality instead in consideration of its business in China. It had acted to make an exception in China and this is not in keeping with Kant's universal law formula. If it is strict in other countries with regards to confidentiality rules but disregards it because of those bullying tactics by the Chinese authorities, then it does not make any sense to do business at all. Its company policies pertaining to confidentiality must apply to everybody everywhere and for its actions, Yahoo cannot claim to having applied its rules on a universal basis. It means it has its rules for someone and applies different rules for everybody else, a violation of Kantian ethics. The second categorical imperative is called as the Formula of Humanity as an End in Itself. This means all people should act in the way to treat all human beings as rational beings. It calls for actions that treat people as an end in themselves and never as a means to an end. In this regard, what it states is to avoid manipulating or using people as a means to attain an end. There is a universality in this requirement because people should not be allowed to use other people just in order to further their own welfare. This second categorical imperative is simply another way of saying the old biblical saw of “do unto others what you want others do unto you” in that it enjoins people to observe what is right in order to have harmonious relationships. People must act on the principle to always do good to others; this desire to extend good will to other people is not dependent on the results or consequences of one's actions but out of a sense of duty. Yahoo, Inc. failed on this requirement of the second imperative because it allowed the Chinese authorities access to the identities of its users who were the subject of a manhunt. There is a double standard employed by Yahoo because instead of standing up to the Chinese and tell them that it cannot allow the disclosure of its users' identities, it had willingly furnished needed information which allowed the Chinese police to capture and detain several dissidents. Its sense of duty was grossly amiss in this case because Yahoo, Inc. knew very well the totalitarian nature of the Chinese government and a disclosure of identity is sure to result in incarceration. Yahoo, Inc. had behaved badly and justifies the critics of virtue ethics that it is bad for social science by using character as a basis (Winter, 2011, p. 7) because senior Yahoo management was found wanting. It used its sensitive information to sell some people down the river and effectively used people as a means to an end, which is prohibited by the second categorical imperative. It manipulated its users into believing information it held is strictly confidential at all costs. The third categorical imperative is termed as the Kingdom of Ends. It means all laws or regulations passed or made by man must be harmonious to produce a desirable set of ends itself. He termed this set of ends as a “kingdom” or an aggrupation or a collection of desired results. In this imperative, he combined the aspects of both the first and second imperatives as the best of all possible worlds. Since this third categorical imperative combined the first and second laws or imperatives, it follows that rules are applied in a universal manner, which means no exceptions. It further implies that being universal makes the rules a tool for achieving fairness and justice. In the instant case, Yahoo, Inc. failed in this test of the third categorical imperative as it did not observe universality in its application of its own rules regarding confidentiality of users' information. It therefore committed an immoral act with regards to helping the Chinese police in tracking down some of the dissidents who had posted objectionable content on the Internet. This is a fundamental rule of Kant and Yahoo cannot just cavalierly treat some people as different in the pursuit of its business objectives. The main principle in the first categorical imperative is now restated in the form of consistency in the third categorical imperative, in the interest of fairness, justice and equity. What is applicable to me or you is equally applicable to everyone else. So in the Yahoo case, it cannot act in one market differently than in other nations or markets. It must act consistently across all markets and geographic locations as it is a global company. The second formula reappears in the third categorical imperative as a restatement of the requirement to treat all people equally regardless of creed, nationality, belief, ethnicity, etc. as all people are special and all people are the same everywhere. In this regard, all people are ends in themselves and not used as a means to an end and Yahoo must safeguard all information it has. Utilitarianism is a philosophical construct which claims that people should strive for all actions which promote the greatest happiness for the greatest number of people. In this regard, it considers the value of an action as a utility in terms of promoting happiness. It is a consequential theory in the sense that the correctness of an action is judged by the results that it will produce. It is very useful in a number of situations, especially in an organizational context because it thinks of the greatest benefit for the greatest number of people involved or will be affected. However, it has certain drawbacks as well, that is with regards to the concept of equity and justice. There are essentially two main branches of utilitarianism theory which are act utilitarianism and the rule utilitarianism. Both will be discussed in relation to the Yahoo, Inc. case in this paper. Act utilitarianism would tend to say that the actions of Yahoo in China would appear to be justified. This is because it acted out of consideration for its other Chinese clients other than the dissidents whom it might have tried to protect from the authorities. A few dissidents can also be sacrificed for the greater good of the larger Chinese market who are in need of Yahoo services in terms of communications and other services, such as search engines. Many Chinese people are in need of getting in touch with their relatives in other parts of the world and Yahoo is good at providing this service because it is very widely used almost anywhere in the world. The actions of Yahoo, Inc. in China is in consonance with act utilitarianism in that it is expected to maximize the utility or value of its Internet services to a very large market. In terms of its usefulness, giving access to Yahoo services by granting the request of Chinese authorities is in keeping with the aims of act utilitarianism. What Yahoo did was to try to please authorities and the greater Chinese market which is growing fast and very lucrative. It is also for its profits. Rule utilitarianism, on the other hand, says that rules are necessary to guide actions that will tend to promote the greatest good for the greatest number of people (again, utility). Rules are made and adopted so that people will know how to act in all various situations and hopefully produce the same desired results no matter what happens. Rule utilitarianism is particularly very useful in an organizational context because the rules help to resolve conflicts and to mediate any disputes arising from the usual self-interest and ulterior motives of most people (hedonism and egoism). Although it has some limitations, rule utilitarianism can work if managed properly and implemented correctly in most confrontational situations, especially in large organizations. This theory makes it easy for everyone to follow rules, policies and regulations in an organization. Rule utilitarianism would dictate that Yahoo did wrong in China by its cooperation with the authorities. It broke the foremost rule on the Internet which is anonymity and confidentiality. Its actions resulted in the capture and incarceration of some dissidents which are clearly harmful to them, in terms of their freedom of movement, civil liberties and maybe even physical safety. Yahoo tried to save its own skin by breaking probably even its own rules on confidentiality of its users and tried to keep everything under wraps because precisely it knew it had broken its rules. Conclusion Yahoo's actions can be contrasted with that of Google, which unlike Yahoo, did not succumb to blackmail by the government. Google put ethics above business considerations, such that it lost market share to a local rival Baidu (Shaw & Barry, 2012, p. 225). Individuals acting ethically produce good results, collectively, like an “invisible hand” (Smith, 1776, p. 28) while the reverse can also happen, as in the tragedy of the commons (Nonini, 2006, p. 164). If I were in the position of Jerry Yang, I would probably choose Kantian ethics as the yardstick by which to guide my actions with regards to comply with the demands of the Chinese government and so continue doing business in a big market, or like Google refuse to cooperate and exit this market altogether. With the benefit of hindsight, Kantian ethics provide the most comprehensive and the most appropriate ethical philosophy because it operates on a higher moral plane, unlike the other ethical philosophies like utilitarianism which depends on rules made by man and are therefore could be subjective and not like Kantian ethics which is highly objective in its requirement to be absolute (allows no exceptions) and also in terms of justice, equity and uniformity (consistency). Yahoo, Inc. as an Internet-based global company must operate under only one set of rules in any place of the world; its set of rules apply to everybody with no exceptions allowed whatsoever. Reference List McGregor, J. (2005). One billion customers: Lessons from the front lines of doing business in China. New York, NY, USA: Free Press. Nonini, D. M. (2006). “The Global Idea of the Commons.” Social Analysis, 50(3), 164-177. Shaw, W. H. & Barry, V. (2012). Moral issues in business (12th ed.). Belmont, CA, USA: Wadsworth Publishing. Smith, A. (1869). An inquiry into the nature and causes of the wealth of nations. London, UK: MacMillan and Company. (with a re-print in 1776). Winter, M. (2011). Rethinking virtue ethics. Heidelberg, Germany: Springer Read More