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Home arrow Management arrow Strategic Management in the 21st Century. Corporate Strategy

THE NATURE OF VIRTUOUS CORPORATE BEHAVIOR

Contemporary discussion of ethical decision making has been dominated by (1) the deontological approach that studies decision-making behavior in terms of binding obligations, as in duty, (2) the utilitarian approach, which examines decisions in terms of the importance of utility over beauty or other considerations, or (3) the teleological approach that looks at the quality of the consequences of decisions. Ethical behavior, however, focuses on the question "What and how should I do the right thing?" Epstein offered a detailed review of the development of business ethics and corporate social policy.81 However, Dhir reported that "in the evolving literature on ethical decision making one can discern emergent interest in virtuous decision-making behavior as well."82 Virtuous behavior is discernible in its focus on the quality of individual or corporate char-acter.83 It is demonstrated by the courage to act in protecting the rights and welfare of others even with incomplete information about the potentially significant cost to oneself.84 Courage is an essential element in virtuous behavior. The cost to the decision maker can be exorbitant and unmitigated. Cuff provided a review of the works of philosophers, psychologists, and theologians on the role of courage in decision making in the face of threats to one's well-being.85 Virtuous behavior focuses on the question, "How should I be a better individual, a better decision maker?" As discussed by Dhir, ethical behavior need not necessarily be virtuous or courageous.86 It may very well be motivated by self-interest in cases where the welfare of others and self-interest coincide. An ethical action does not necessarily demand courage. Indeed, even unethical behavior may be courageous, requiring the individual to face up to imminent danger, as would be the case if one was to steal or commit fraud in spite of the prospect of being incarcerated. Virtuous behavior, however, is unique in that it is both ethical and courageous.

Virtuous decision making is evident when an agent attempts to ameliorate a special class of ethical dilemma. These dilemmas are characterized by following attributes: (1) a situation emerges that presents an agent with a conflict between alternative courses of action, (2) urgent action is demanded of an agent that cannot be postponed, and (3) the situation requiring action is encountered unexpectedly, without foreknowledge of the emergent situation. The emergent situation is not of the agent's making, and at least one of the courses of action benefits the agent's personal interests, often with relatively low associated costs or risks borne by the agent. In contrast, other courses of action are in the interest of others, often with relatively high associated costs or risks borne by the agent. The timing of decision making may be awkward or inconvenient in that it allows little, if any, time for study and research, consultation with experts, or detailed analysis. As is the case with any decision-making process, virtuous decision making in the corporate setting requires that the agent make an informed choice. Nevertheless, information is incomplete. Although insufficient time is available for the agent to research the situation, it is evident that certain alternatives may have different consequences for others, and some would potentially yield significant benefits to others. To be virtuous, the agent must first recognize the dilemma, that is, the agent must recognize that (1) there are conflicting obligations to be met, and (2) there is no solution that would satisfy all the demands of the situation. Knowledge is a prerequisite for virtuous decision making. Through knowledge, the agent must seek wisdom, or understanding or deep insight. A virtuous decision maker must minimize the costs to stakeholders and maximize their benefits, even at great cost to themselves.87

Consider the example of Dr. Jeffrey Wigand, vice president of research and development at Brown & Williamson from 1989 to 1993. Just 10 months into his employment with the company, he realized that he had a dilemma. His employers were claiming that their tobacco-based products were safe for consumption, but since he had a confidentiality agreement, he could not speak up about his doubts about these claims. He described his dilemma as follows: "I realized after ten months with the company that I had made a mistake. I was making a lot of money. I had a wife, and two daughters, one of whom required extensive medical coverage, and I wasn't ready at that time to bring the wrath of the tobacco industry on my family and me. So I looked the other way until laboratory testing showed a controversial pipe tobacco additive, called Coumarin, to be a lung-specific carcinogen in mice and rats."88 Finally, in 1993, troubled by the addictive nature of the additive and its potentially harmful effects on unsuspecting consumers, Wigand took issue with his employers over the continued use of coumarin in pipe tobacco. They fired him. When, during a 1994 congressional hearing, the CEOs of seven major tobacco companies swore that nicotine was not addictive, Wigand decided to expose the perjury. He broke the confidentiality agreement with his former employers and appeared on the news show 60 Minutes in 1996 to report that Brown & Williamson was aware of the addictive nature of nicotine. He also described how he and his family were being harassed with death threats. Initially, CBS, the television network that airs the show, shelved the interview, fearing a lawsuit from Brown & Williamson. Wigand paid a heavy personal price in terms of the breakdown of his marriage and financial insecurity. However, the interview was subsequently aired, and Brown & Williamson sued Wigand for breach of confidentiality. In 1997, Liggett Group broke rank with the larger tobacco giants and came clean. With the subsequent settlement between the tobacco industry and the states, Brown & Williamson's suit against Wigand was dropped the same year.89

In the context of the virtual decision-making paradigm described above, Wigand recognized that he had a dilemma in terms of the conflicting demands of (1) his personal well-being, security of his family, and continuity of his career, and (2) obligations to others, including (a) his confidentiality agreement with Brown & Williamson, and (b) obligations to society in terms of savings human lives and protecting human health. Dr. Wigand had faced the alternatives of relative safety by complying with the agreement he had with his employer and the grave danger to his well-being by talking to the news media. The situation was urgent since consumers were being put in danger. Dr. Wigand opted to protect human life over his own welfare. He was a trained researcher with specialized scientific knowledge that helped him make a decision. His insight into the nature of the dilemma guided his choice. He took on huge personal risk to safeguard tobacco consumers and incurred significant personal costs, despite the uncertainty surrounding the outcome of decision. As a scientist-executive, he exhibited behavior that had all the hallmarks of virtuous decision making: defiance, strength, courage, and honor.90 The case of Sherron Watkins at Enron offers a similar illustration of such virtuous decision making.91

Examples also exist of corporations dealing with ethical dilemmas as a matter of policy. For example, corporations have recalled products from the marketplace in the interests of society at large.92 The recall by Johnson & Johnson in 1982 of packages of Tylenol that may have been tampered with is an example of corporate decisions exhibiting uncommon virtue. Johnson & Johnson withdrew the suspect product even though they were not necessarily liable for the consequences of it remaining in the marketplace. Corporate executives took actions that did not necessarily fulfill their obligations to the full spectrum of their stockholders, employees, and other parties. However, they acted to protect human welfare and save lives, even though the cost of doing so could have been enormous to the company. They chose to fulfill their obligation of social responsibility at the expense of their own corporate interest, and resolved the dilemma effectively. The Washington Post reported, "Johnson & Johnson has efficiently demonstrated how a major business ought to handle a disaster. From the day the deaths were linked to the poisoned Tylenol . . . Johnson & Johnson has succeeded in portraying itself to the public as a company willing to do what's right regardless of cost."93 Not only did Johnson & Johnson emerge stronger, they demonstrated their deep knowledge and research strength by revolutionizing packaging technology for pharmaceuticals, cosmetics, and food products.

 
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