Instructions for Business Ethics Discussion - Week 12 After reading the enclosed article from National Geographic, entitled "Eating Meat has 'dire' consequences for the planet," create a thread in the

A n OER Textbook for MNGT 140

D. Ethical Duties & Theory of Justice

D uties

“S hould I steal that?”

“N o, stealing’s wrong.”

Basic ethics. There are things that are right and others that are wrong, and the discussion ends. This lev el

of clarity and solidity is the main strength of an ethics based on duties. We all have a duty not to steal, so

we shouldn’t do it. More broadly, when w e’re making moral decisions, the key to deciding w ell is

understanding what our duties are and obeying them. An ethics based on duties is one where certain

rules tell us what we ought to do, and it’s our responsibility to know and follow those rules.

T he M adoff F am ily

If w e’re supposed to obey our duties, then what exactly are they? That’s a question Andrew Madoff faced

in December 2008 when he learned that some—maybe most, maybe all—of the money he and his family

had been donating to the charitable Lymphoma Research Foundation and similar medical inv estigation

enterprises was, in fact, stolen.

It was big money—in the millions—channeled to dedicated researchers hot on the trail of a remedy for

lymphoma, a deadly cancer. Andrew, it should be noted, w asn’t only a cancer altruist; he was also a

victim, and the charitable money started flowing to the researchers soon after he w as diagnosed.

It’s unclear whether Andrew knew the money was stolen, but there’s no doubt that his dad did. Dad—

Bernard “Bernie” Madoff—was the one who took it. The largest Ponzi scheme in history, they call it.

A Ponzi scheme—named after the famous perpetrator Charles Ponzi—makes suckers of inv estors by

briefly delivering artificially high returns on their money. The idea is simple: Y ou take $100 from client A,

promising to invest the money clev erly and get a massiv e profit. You spend $50 on yourself, and at the

end of the y ear, you send the other $50 back to the client along with a note saying that the original $100

investment is geing excellent results and another $50 should come in next y ear and every year from then

on. Happy client A recommends friends, who become clients B, C, and D. They bring in a total of $300, so

it’s easy to make good on the original promise to send a $50 return the next y ear to client A. And you’ve

now got $250 remaining from these three new clients, $150 of which you will soon return to them ($50 for

each of the three new clients), leaving you with $100 to spend on yourself. The process repeats, and it’s

not long before people are lining up to hand ov er their money. Everyone makes off like bandits. Bandit is the right term for Madoff, who ran his Ponzi empire for around fifteen years. So many people

handed over so much cash, and the paper trail of fake stock-purchase receipts and the rest grew so

complicated that it’s impossible to determine exact numbers of victims and losses. Federal authorities

have estimated the victims w ere around five thousand and the losses around $65 billion, which works out

to about $13 million squeezed from each client.

M adoff had, obviously, rich clients. He met them at his home in New Y ork City; at his mansion in

hyperwealthy P alm Beach, Florida; or on his fifty-fiv e-foot yacht clev erly named Bull . He impressed them

with a calm demeanor and serious know ledge. While it’s true that he was mostly taking clients’ money

and sticking it in his wallet, the investments he claimed to engineer w ere actually quite sophisticated; they

had to do with buying stock in tandem with options to buy and sell that same stock on the futures

market. He threw in technical words like “put” and “call” and left ev eryone thinking he was either crazy

or a genius. Since he w as apparently making money, “genius” seemed the more likely reality. P eople also

found him trustworthy. He sat on the boards of several Wall Street professional organizations and w as

known on the charity circuit as a generous benefactor. Health research w as a favorite, especially after

Andrew’s cancer was diagnosed.

Exactly how much money Madoff channeled to Andrew and other family members isn’t clear. By late

2008, however, Andrew knew that his father ’s investment company had hit a rough patch. The stock

market w as crashing, inv estors wanted their money back, and Madoff w as having trouble rounding up

the cash, which explains why Andrew w as surprised when his father called him in and said he’ d decided

to distribute about $200 million in bonuses to family members and employ ees.

It didn’t make sense. How could there be a cash-flow crisis but still enough cash to pay out giant

bonuses? The blunt question—according to the Madoff family—broke Madoff down. He spilled the truth:

there was lile money left; it w as all a giant lie.

The next day, Andrew reported the situation to the authorities.

M adoff sits in jail now. He’ ll be there for the rest of his life. He claims his scheme w as his project alone

and his children had no knowledge or participation in it, despite the fact that they w ere high executives in

his fraudulent company. Stubbornly, he has refused to cooperate with prosecutors interested in

determining the extent to which the children may hav e been involved. His estate has been seized. His

wife, though, w as left with a small sum—$2.5 million—to meet her day-to-day living expenses. Bilked

investors got nearly nothing.

O ne of those inv estors, according to ABC News, w as Sheryl Weinstein. She and her family are now

looking for a place to liv e because after investing everything with Madoff and losing it, they w ere unable

to make their house payments. At Madoff’s sentencing hearing, and with her husband seated beside her,

she spoke passionately about their plight and called Madoff a “beast.” The hearing concluded with the

judge calling Madoff “evil” (Ross 2011).

W einstein was well remembered by Madoff’s longtime secretary, Eleanor Squillari. Squillari reported that

Weinstein would often call Madoff and that “he would roll his ey es and then they’d go meet at a hotel.”

Their affair lasted tw enty years, right up until the finance empire collapsed.

W hat D o I O we M yse lf ? H is to ric a lly A ccu m ula te d D utie s to th e S elf

O v er centuries of thought and inv estigation by philosophers, clergy, politicians, entrepreneurs, parents,

students—by just about everyone who cares about how w e live together in a shared world—a limited

number of duties hav e recurred persistently. Called perennial duties , these are basic obligations w e have as human beings; they’re the fundamental rules telling us how w e should act. If we embrace them, w e can

be confident that in difficult situations w e’ll make morally respectable decisions.

Broadly, this group of perennial duties falls into two sorts:

1. D uties to ourselv es

2. D uties to others

D uties to the self begin with our responsibility to develop our abilities and talents . The abilities w e find

within us, the idea is, aren’t just gifts; it’s not only a strike of luck that some of us are born with a knack

for math, or an ear for music, or the ability to shepherd conflicts betw een people into agreements. All

these skills are also responsibilities. When we receive them, they come with the duty to dev elop them , to not

let them go to waste in front of the TV or on a pointless job.

M ost of us have a feeling for this. It’s one thing if a v aguely clumsy girl in a ballet class decides to not sign

up the next semester and instead use the time trying to boost her GP A, but if someone who’s really good

—who’s strong, and elegant, and a natural—decides to just walk away, of course the coach and friends

are going to encourage her to think about it again. She has something that so few hav e, it’s a shame to

waste it; it’s a kind of betray al of her own uniqueness. This is the spot where the ethics come in: the idea is

that she really should continue her development; it’s a responsibility she has to herself because she really

can develop.

W hat about Andrew Madoff, the cancer sufferer? He not only donated money to cancer research charities

but also dedicated his time, serving as chairman of the Lymphoma Research Foundation (until his dad

was arrested). This dedication does seem like a duty because of his unique situation: as a sufferer, he

perfectly understood the misery caused by the disease, and as a w ealthy person, he could muster a

serious force against the suffering. When he did, he fulfilled the duty to exploit his particular abilities.

The other significant duty to oneself is nearly a corollary of the first: the duty to do ourselves no harm . At

root, this means w e have a responsibility to maintain ourselv es healthily in the world. It doesn’t do any

good to dedicate hours training the body to dance beautifully if the rest of the hours are dedicated to

alcoholism and Xanax. Similarly, Andrew should not only fight cancer publicly by advocating for medical

research but also fight privately by adhering to his treatment regime.

A t the extreme, this duty also prohibits suicide, a possibility that no doubt crosses Bernie Madoff’s mind

from time to time as he contemplates spending the rest of his life in a jail cell.

W hat D o I O we O th ers ? H is to ric a lly A ccu m ula te d D utie s to O th ers

The duties w e have to ourselv es are the most immediate, but the most commonly referenced duties are

those we have to others.

A void wronging others is the guiding duty to those around us. It’s difficult, how ever, to know exactly

what it means to wrong another in ev ery particular case. It does seem clear that Madoff wronged his

clients when he pocketed their money. The case of his wife is blurrier, though. She w as allowed to keep

more than $2 million after her husband’s sentencing. She claims she has a right to it because she nev er

knew what her husband was doing, and anyway, at least that much money came to her from other

perfectly legal investment initiatives her husband undertook. So she can make a case that the money is

hers to keep and she’s not wronging anyone by holding onto it. Still, it’s hard not to wonder about

investors here, especially ones like Shery l Weinstein, who lost ev erything, including their homes. H onesty is the duty to tell the truth and not leave anything important out. On this front, obviously,

Madoff wronged his investors by misleading them about what w as happening with their money.

R espect others is the duty to treat others as equals in human terms. This doesn’t mean treating ev eryone

the same way. When a four-y ear-old asks where babies come from, the stork is a fine answ er. When adult

investors asked Madoff where the profits came from, what they got w as more or less a fairy tale. Now, the

first case is an example of respect: it demonstrates an understanding of another ’s capacity to comprehend

the world and an aempt to provide an explanation matching that ability. The second is a lie; but more

than that, it’s a sting of disrespect. When Madoff invented stories about where the money came from, he

disdained his investors as beneath him, treating them as unworthy of the truth.

Beneficence is the duty to promote the w elfare of others; it’s the Good Samaritan side of ethical duties.

With respect to his own family members, Madoff certainly fulfilled this obligation: ev ery one of them

received constant and lavish amounts of cash. There’s also beneficence in Andrew’s work for charitable

causes, ev en if there’s a self-serving element, too. By contrast, Madoff display ed lile beneficence for his

clients.

G ratitude is the duty to thank and remember those who help us. One of the curious parts of Madoff’s last

chapter is that in the end, at the sentencing hearing, a parade of witnesses stood up to berate him. But

even though Madoff had donated millions of dollars to charities ov er the years, not a single person or

representativ e of a charitable organization stood up to say something on his behalf. That’s ingratitude, no

doubt.

But there’s more here than ingratitude; there’s also an important point about all ethics guided by basic

duties: the duties don’t exist alone . They’re all part of a single fabric, and sometimes they pull against each

other. In this case, the duty Madoff’s beneficiaries probably felt to a man who’ d given them so much w as

overwhelmed by the demand of another duty: the duty to respect others, specifically those who lost

everything to Madoff. It’s difficult to imagine a w ay to treat people more disdainfully than to thank the

criminal who stole their money for being so generous. Those who receiv ed charitable contributions from

Madoff were tugged in one direction by gratitude to him and in another by respect for his many victims.

All the receiv ers opted, finally, to respect the victims.

Fidelity is the duty to keep our promises and hold up our end of agreements. The Madoff case is liered

with abuses on this front. On the professional side, there’s the financier who didn’t inv est his clients’

money as he’d promised; on the personal side, there’s Madoff and W einstein staining their wedding vows.

From one end to the other in terms of fidelity, this is an ugly case.

R eparation is the duty to compensate others when w e harm them. Madoff’s wife, Ruth, obviously didn’t

feel much of this. She walked away with $2.5 million.

The judge ov erseeing the case, on the other hand, filled in some of what Ruth lacked. To pay back bilked

investors, the court seized her jew elry, her art, and her mink and sable coats. Those things, along with the

couple’s three multimillion-dollar homes, the limousines, and the y acht, were all sold at public auction.

T he C once pt o f F air n ess

The final duty to be considered—fairness—requires more dev elopment than those already listed because

of its complexity.

A ccording to Aristotle, fairness is treating equals equally and unequals unequally. The treat equals equally

part means, for a professional investor like Madoff, that all his clients get the same deal: those who inv est

equal amounts of money at about the same time should get an equal return. So ev en though Madoff was sleeping with one of his investors, this shouldn’t allow him to treat her account distinctly from the ones

belonging to the rest. Impartiality must gov ern the operation.

The other side of fairness is the requirement to treat unequals unequally . Where there’s a meaningful

difference between investors—which means a difference pertaining to the inv estment and not something

extraneous like a romantic involvement—there should correspond a proportional difference in what

investors receiv e. Under this clause, Madoff could find justification for allowing two distinct rates of

return for his clients. Those that put up money at the beginning when ev erything seemed riskier could

justifiably receive a higher payout than the one yielded to more recent participants. Similarly, in any

company, if layoffs are necessary, it might make sense to say that those who’v e been working in the

organization longest should be the last ones to lose their jobs. In either case, the important point is that

fairness doesn’t mean everyone gets the same treatment; it means that rules for treating people must be applied

equally . If a corporate executiv e decides on layoffs according to a last-in-first-out process, that’s fine, but it

would be unfair to make exceptions.

O ne of the unique aspects of the idea of fairness as a duty is its hybrid status betw een duties to the self

and duties to others. While it would seem strange to say that we have a duty of gratitude or fidelity to

ourselv es, it clearly makes sense to assert that w e should be fair to ourselves. Impartiality—the rule of no

exceptions—means no exceptions. So a stock inv estor who puts his own money into a general fund he

runs should receive the same return as ev eryone else. A poor inv estment that loses 10 percent should cost

him no more than 10 percent (he has to be fair to himself ), and one that gains 10 percent shouldn’t net

him any more than what the others receive (he has to be fair to others).

M odern F air n ess: R aw ls

The recent American philosopher John Raw ls proposes a veil of ignorance as a w ay of testing for fairness,

especially with respect to the distribution of w ealth in general terms. For example, in society as Madoff

knew it, vast inequalities of w ealth weren’t only allow ed, they were honored: being richer than anyone

else was something to be proud of, and Madoff liv ed that reality full tilt. Now, if you asked Madoff

whether we should allow some members of society to be much w ealthier than others, he might say that’s

fair: everyone is allow ed to get rich in America, and that’s just what he did. How ever, the guy coming

into Madoff’s office at 3 a.m. to mop up and empty the trash might see things differently. He may claim to

work just as hard as Madoff, but without geing fancy cars or P alm Springs mansions. People making the

big bucks, the suggestion could follow, should get hit with bigger taxes and the money used to provide

educational programs allowing guys from the cleaning crew to get a beer chance at climbing the income

ladder. Now, given these two perspectiv es, is there a way to decide what’s really fair when it comes to

wealth and taxes?

R aw ls proposes that w e try to reimagine society without knowing what our place in it would be. In the

case of Madoff, he may like things as they are, but would he stick with the idea that ev erything’s fair if he

were told that a rearrangement w as coming and he was going to get stuck back into the business world at

random? He might hesitate there, seeing that he could get dealt a bad hand and, y es, end up being the

guy who cleans offices. And that guy who cleans offices might figure that if he got a break, then he’d be

the rich one, and so he’s no longer so sure about raising taxes. The v eil of ignorance is the idea that when

you set up the rules, you don’t get to know beforehand where you’ll fall inside them, which is going to

force you to construct things in a way that is really balanced and fair.

A s a note here, nearly all children know the v eil of ignorance perfectly. When two friends together buy a

candy bar to split, they’ll frequently have one person break it, and the other choose a half. If you’ re the

breaker, you’re under the v eil of ignorance since you don’t know which half you’ re going to get. The

result is you break it fairly, as close to the middle as you can. B ala ncin g th e D utie s

D uties include those to

dev elop abilities and talents,

do ourselv es no harm,

avoid wronging others,

honesty,

respect others,

beneficence,

gratitude,

fidelity,

reparation,

fairness.

Taken on their own, each of these plugs into normal experience without significant problems. Real

troubles come, though, when more than one duty seems applicable and they’ re pulling in different

directions.

Take Andrew Madoff, for example. Lying in bed at night and taking his ethical duties seriously, what

should he do in the wake of the revelation that his family business w as in essence a giant theft? On one

side, there’s an argument that he should just keep on keeping on by maintaining his life as a New Y ork

financier. The route to justifying that decision starts with a duty to himself:

D evelop abilities and talents. As an expert in finance, someone with both know ledge of and

experience in the field, Andrew should continue cultiv ating and perfecting his talents, at least those he

had acquired on the legitimate side of the family’s dealings.

Beyond the duty to himself, Andrew can further buress his decision to keep his current life going by

referencing a duty to others:

B eneficence. This may demand that Andrew continue along the lines he’ d already established because

they enabled his involvement with cancer research. He’s got money to donate to the cause and his

very personal experience with the disease allows rare insight into what can be done to help sufferers.

To the extent that’s true, beneficence supports Andrew’s decision to go on living as he had been.

O n the other side, what’s the duty-based argument in favor of Andrew taking a different path by

breaking aw ay from his old lifesty le and dedicating all his energy and time to doing what he can for the

jilted investors the family business left behind?

R espect. The duty to treat others as equals demands that Andrew take seriously the abilities and liv es

of all those who lost everything. Why should they be reduced to powerlessness and poverty while he

continues maximizing his potential as a stock buy er and nonprofit leader? Respecting others and their

losses may mean leaving his profession and helping them get back on their feet.

R eparation. This duty advances as the proposal for Andrew to liquidate his assets and divide the

money as fairly as possible among the ruined inv estors. It may be that Andrew didn’t orchestrate the

family Ponzi scheme, but wiingly or not, he participated and that opens the w ay to the duty to

repayment.

So which path should Andrew follow? There’s no certain answer. What duties do allow Andrew—or

anyone considering his situation—to achieve is a solid footing for making a reasonable and defendable

decision. From there, the ethical task is to weigh the various duties and choose which ones pull harder and make the stronger demand.

W here D o D utie s C om e F ro m ?

The question about the origin of duties belongs to metaethics, to purified discussions about the theory of

ethics as opposed to its application, so it falls outside this book’s focus. Still, two commonly cited sources

of duties can be quickly noted.

O ne standard explanation is that duties are wrien into the nature of the univ erse; they’re part of the w ay

things are . In a sense, they’ re a moral complement to the laws of physics. W e know that scientists form

mathematical formulas to explain how far arrows will trav el when shot at a certain speed; these formulas

describe the way the natural world is. So too in the realm of ethics: duties are the rules describing how the

world is in moral terms. On this account, ethics isn’t so different from science; it’s just that scientists

explore physical reality and ethicists explore moral reality. In both cases, how ever, the reality is already

there; w e’re just trying to understand it.

A nother possible source for the duties is humanity in the sense that part of what it means to be human is

to hav e this particular sense of right and wrong. Under this logic, a computer-guided robot may beat

humans in chess, but no machine will ev er understand what a child does when mom asks, “Did you

break the vase? Tell me the truth.” Maybe this moral spark children are taken to feel is wrien into their

genetic code, or maybe it’s something ineffable, like a soul. Whichev er, the reason it comes naturally is

because it’s part of our nature.

W hat A re th e A dva nta ges a nd D ra w ba cks o f a n E th ic s B ase d o n D utie s?

O ne of the principal adv antages of working with an ethics of duties is simplicity: duties are fairly easy to

understand and work with. W e all use them every day. For many of us these duties are the first thing

coming to mind when w e hear the word ethics . Straightforward rules about honesty, gratitude, and

keeping up our ends of agreements—these are the components of a common education in ethics, and

most of us are w ell experienced in their use.

The problem, though, comes when the duties pull against each other: when one says y es and the other

says no. Unfortunately, there’s no hard-and-fast rule for deciding which duties should take precedence

over the others.

R oss, Brian et al. “Bernie Madoff’s Other Secret: His Hadassah CFO Mistress,” ABCNews.com . 16 April

2011, hp://abcnews.go.com/Bloer/Madoff/story?id=8319695&page=1

(hp://abcnews.go.com/Bloer/Madoff/story?id=8319695&page=1) .

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