Virtuism: The Role of Virtue in Business and Management
Justin Haggerty | The Daily Knight
In our efforts to continue to research and expand on the socio-economic concept of Virtuism, as presented in the past two articles of "Debating Distributism & Capitalism - How about Virtue based Socio-Economics, Virtuism?" and "Fr. Patrick Troadec on Virtuism and Professional Work," the discussion leads to not only macroeconomics and personal responsibilities, but also to business management.
The highest form of organizational management is Servant Leadership, which would require a whole additional article to explore; however, for this current discussion, we can view philosophical concepts on virtue and business that have existed since Plato and Aristotle. Aliza Racelis, writing on "The Role of Virtue in Business and Management," has developed a concise, albeit extensive, review on the contributions of philosophy and moral psychology. Her citations can be found at the end of the below white paper.
I. Virtue Ethics: Historical Background
The development of ethical theory in Western civilization has been by the gradual accretion of insights, rather than by a systematic evolution in a straight line of progress. The first principal influence had been the classic Greek philosophers, who conceived ethics as relating to the “good life” and, thus, can be considered the first in Western history to examine virtue and character ethics(Denise et al., 2002; Murphy, 1999).
Virtue ethics possesses deep historical importance and its roots can be traced to such great ancient historians such as Socrates, Plato and Cicero (Card, 2004). Plato, through the influence of Socrates was convinced that there is an objective truth which is not simply relative to an individual's beliefs - philosophized a great deal on important ethical concepts, including some specific virtues: he wrote Charmides which was about temperance; the
Laches was about courage, and the Euthyphro was about piety. Believing that man is deprived of true life for as long as he remains chained to the body since the essence of man is his soul, Plato's ethics essentially looked to freeing the soul from its bondage to the body. Plato therefore, highlighted that sensible pleasures are devoid of moral value; the road towards the true life of the spirit, then, is a path of purification where man exerts effort to reach genuine wisdom. For Plato, the life which most closely reflects the divinity - which he conceived as a multiplicity possessing diverse characteristics- is the life of virtue (Denise et al., 2002;Yarza, 1994).
Aristotle's Nicomachean Ethics is widely viewed as the most influential early work on virtue ethics. Historically, Aristotle's Ethics is the first systematic treatment of ethics in Western civilization: it belongs in the tradition that stresses both the supremacy of our rational nature and the purposive nature of the universe. Aristotle pointed out that an ultimate end for people must be one that is self-sufficient, final and attainable; he maintained that happiness is the goal that meets these requirements. Consideration of the conditions are requisite to the attainment of happiness that led Aristotle into a discussion of virtue, which for him refers to as the excellence of a thing and hence it refers to the disposition to perform effectively its proper function (Denise et al., 2002). Thus, Aristotelian virtue ethics is concerned with pursuing a certain type of morally inclusive excellence, called eudaimonia in his Ethics, which can be roughly translated as happiness or human flourishing through moral excellence (Dobson, 1997).
For Aristotle, just like for the other classical philosophers, happiness was a type of activity and an achievement, rather than a feeling. His definition of happiness contains two vital concepts: “Activity of soul,” which means the exercise of reason, and this is “in accordance with virtue,” which describes the quality of the performance. His virtue theory, then, is focused on character development and describes a right action as one that a virtuous agent is disposed to make in the circumstances in order to flourish or live well. Happiness was a term indicating success: to have lived a happy life was the same as having been a success at human life (Denise et al., 2002; Pakaluk and Cheffers, 2011;Dobson, 1997).
In this classic virtue theory, four human virtues stand out as being the “hinge” or “cardinal” virtues: courage, moderation, justice, and prudence. Plato was the first philosopher to give such list of the four main virtues, although the label itself, “cardinal virtues,” was not coined until the second half of the 4th century A.D. by Ambrose of Milan. In the 13th century, Thomas Aquinas, preserving the pattern and most of the detail of Aristotle's ethics, judged that Aristotle's account of the moral virtues was correct in outlining but incomplete in details. Being a Christian, Aquinas maintained that as human we have two sources of truth rather than one: those that human faculties provide, and those that God reveals. The teleology of Aquinas, thus, differentiates and raises his ethics from that of Aristotle: that all human action has an end, and that this end is the first and most important source of morality of human action, but that these particular ends presuppose a last end which communicates its finality, and this is none other than divine causality. Hence, the eternal law -the plan containing what God wants to do - is the supreme norm of morality (Denise et al., 2002; Saranyana, 1996).
David Hume, carrying on the work of Shaftesbury, Hutcheson, Butler and others, in emphasizing the role of what we may call the emotional aspect of human nature in man's moral life, maintained that moral distinctions are derived ultimately, not from reasoning, but from feeling, from the moral sentiment. Having examined the overwhelming case against reason, Hume came down squarely on the side of sentiment as the source of morality. With regards to the virtues, he differs from Aristotle and Aquinas in at least two ways: in distinguishing between original and secondary impressions, he categorizes pride (vice) and humility (virtue) as being part of the latter (which he also refers to as „passions‟); also, in his lengthy discussion of justice, he always assumed social utility as an overarching intention of human, thus rendering the otherwise virtuous action of the just person as idle, that is, superfluous or unworkable (Copleston, 1994; Denise et al., 2002).
Immanuel Kant, to whom we owe the largely deontological branch of ethical theory, believed in and taught the existence of a priori moral principles which are held by all rational beings as necessary and universal - independent of our actual experience. For example, we know that we ought to tell the truth; but such knowledge is not knowledge of what is, of how men actually behave, but of what ought to be, of how men ought to behave. And this knowledge is a priori in the sense that it does not depend on men's actual behavior. Now, he believed and taught that the universal basis of morality in people must lie in their rational nature; this alone is the same in everyone. This meant that the fundamental moral law - which he called the categorical imperative - can be stated as follows: Those actions are right that they conform to principles one can consistently will to be principles for every one, and those actions that are wrong that are based on maxims that a rational creature could not will that all persons should follow. Thus, Kantian ethics has come to be considered “duty ethics”: the categorical imperative
is the unconditional directive for behavior: it is binding on everyone because each rational acknowledges an obligation to follow reason (Copleston, 1994; Denise et al., 2002).
Several contemporary scholars have championed the resurgence of virtue/character ethics, the foremost among them being Elizabeth Anscombe, particularly through her essay, “Modern Moral Philosophy,” and Alasdair MacIntyre through his all -important book, After Virtue. MacIntyre, viewed as one of the most prominent proponents, defines virtue as acquired human qualities that enable persons to achieve the “good” in their chosen profession. Virtue ethics has likewise seen a renaissance with popular writers, such as William J. Bennett and his
The Book of Virtues (Pakalukand Cheffers, 2011; MacIntyre, 1984; Murphy, 1999; Card, 2004).
One criticism of scholarly work in virtue ethics is its lack of recognition of virtues in other than Western cultures, e.g., Asian and African perspectives. In any case, we know of the Confucian ethical principles in the Chinese society. Also, as a moral philosopher, Mencius was similar to Aristotle on philosophical anthropology and moral psychology. Like Aristotle, Mencius thought that human beings have a uniquely exalted nature which may be fulfilled by developing moral character. In addition to that, Mencius also thought that the right is discovered through reasoning by analogy, and reasoning is that which seeks the most coherent set of moral judgments (Ryan, 1998).
II. Why Virtues Should Matter in Management and Finance
Managing in ethical ways is not merely about avoiding bad outcomes. There are many arguments for bringing ethics to bear on business decision-making. Recently, finance ethicists have begun emphasizing that the focus should be on virtues and the qualities of the practitioner. The attention to consequences or duty is fundamentally a focus on compliance. Rather, one should consider whether an action is consistent with being a virtuous person. This view argues that personal happiness flowed from being virtuous and not merely from comfort (utility) or observance (duty). It acknowledges that vices are corrupting, whereas virtue leads to eudaimonia or human flourishing (Bruner, Eades and Schill, 2009).
With the resurgence in recent times of the interest in aretaic or virtue ethics, especially that which was found in Aristotle's ethical doctrine, ethics literature has come to propose virtue theories as one which unites the descriptive and the normative, yet insists upon doing so in the pursuit of a purpose unlike that proposed by the other theoretical systems. The theory of virtue addresses the question "What is the purpose of business?‟: it provides a recipe by which any organization can define its own purposeful existence. By so doing, Aristotelian virtue is just as focused on outcomes as consequentialism, and as concerned with the act itself as non-consequentialist theory, and this places high value on pure motives like Kantianism. Specifically, for Aristotle, character development is an inevitable outcome of the act. In addition to that, his system places tremendous weight upon the act because life itself is an energeia or activity of performing various acts (Koehn, 1995; Crockett,2005).
The "virtue" in virtue ethics is defined as some desirable character trait, such as courage, that lies between two extremes, such as rashness and cowardice. Thus, the "virtuous" agent is involved in a continual quest to find balance in decision making. Such an agent does not apply any specific rules in making decisions but rather attempts to make decisions that are consistent with the pursuit of a particular kind of excellence that, in turn, entails exercising sound moral judgment guided by such virtues as courage, wisdom, temperance, fairness, integrity, and consistency (Dobson, 1997).
Aristotle's Nicomachean Ethics categorizes virtues according to the part of the human soul in which they inhere: he distinguishes between the thinking related or “intellectual” virtues and the character-related virtues. With regard to the latter, he discusses at length the following virtues, among others: Courage, Moderation, Generosity, Magnificence, Magnanimity, Amiability, Truthfulness, and Justice (Pakaluk, 2005).
The virtue approach to ethics emphasizes people's character: an ethic of virtues (and vices) focuses on the process of personal moral character development. It stresses how the good habits or virtues inherent in a person's character give them the propensity to act in ways that promote the human race to flourish. Thus it has been proposed that managers add an attention to virtues and vices of human character as a full complement to moral reasoning according to a deontological focus on obligations to act and a teleological focus on consequences (Dawson & Bartholomew, 2003;Whetstone, 2001).
III. The Virtuous Business Professional
Much of the assessment-type business ethics literature of late has been motivated by the huge losses and disastrous financial crises experienced by the global economy, especially that of the U.S. ,in the last decade or so. A good portion of those critiques focused on the culture promoted by unethical accounting and untruthful financial reporting (Pakaluk and Cheffers, 2011) and the exaggerated focus on the bottom line, and on “skill” instead of “virtues” such as honesty, perseverance, consistency, and fairness (Dobson, 1997).
In regard to wealth, the business professional has much to learn from Aristotle's Doctrine of the Mean, that is to say, to act virtuously is a matter of hitting the right and appropriate intermediate place between two extremes. To say that one should do what is intermediate is the same as to say “nothing in excess”, because a deficiency can always be described as an excess of restraint or caution (Pakaluk and Cheffers, 2011). In the specific case of the management of wealth, the mean is "Liberality”, whereas the excess is "Prodigality" and the deficiency, "Meanness". In explaining how to find the mean, liberality, Aristotle advises that we attend to a check-list. In giving money, one should give to the right people, in the right amount, and at the right time. In general, hitting the mean will entail action conducted at the right time, on the right occasion, towards the right people, for the right purpose and in the right manner. In the end, virtue in this regard requires a sympathetic discerning of the particulars or what can be called "contextual perception”. As a result, finding the mean consists in a skill which, like medicine and navigation, requires tempering principles with the particular case (Hadreas, 2002).
The study by Shanahan and Hyman (2003) resulted in an initial listing of 34 virtues of individuals in firms as a result of focus group discussions and questionnaire pretests. They based themselves on Solomon (1999) who provides a workable listing of business virtues. After submitting responses to factor analysis, the six resulting virtues were: empathy, Protestant work ethic, piety, respect, reliability, and incorruptibility.
Pakaluk and Cheffers (2011) identified, by induction, the specific virtues needed by an accounting professional so he may carry out attest or truth-telling work well. These are: integrity, pride, tenacity in seeking the truth, tenacity in stating the truth, stubbornness, and simplicity. The list was derived from sample affirmations taken from the founders of modern accounting. To explain “pride”, there is need to supplement the list of virtues and look briefly at the virtue which was highly regarded by classical writers and referred to as “magnanimity”. “Magnanimity” means “greatness of spirit”: it refers to someone who knows his worth or value, and who acts in such a way as to preserve that worth. Magnanimity so understood leads us to excel, and it helps us to triumph against adversity.
An empirical virtue ethics study in Asia elicited the following as managerial virtues in a particular sample: care and concern, competence, ambition, and superiority. A managerial implication drawn was that the study's results can give practitioners an idea of the virtues or character traits observed in business professionals. This can have implications for human resource management, particularly for superior-subordinate matching, for person-organization fit, and for the process of socialization, whereby organizational members most “suited” to the corporate style are hired and subsequently led along the path of “immersion” in the specific organizational culture and aims (Racelis, 2013).
A good part of the Virtue Ethics literature seems to propose virtue theory as an improved ethical paradigm for business. The evidence corroborates the reality that there is a need to continuously debate ethics and values, especially since these impact the direction that the business community will take in the years to come. In turn, the results may provide the evidence that there is a need for further training in „ethical sensitivity‟ on the part of managers and employees (Racelis,2008). Considering managerial ethics from a virtues perspective allows us to discuss the strengths or weaknesses of the character of the individual. For instance, a person can, and should, resist given pressures, even at considerable cost to oneself. That is the very basis on which virtue ethics has proven to be so appealing to people in business. It is the hope that they can, and sometimes will, resist or even rise up against pressures and policies that they find to be unethical. The ultimate test of virtue ethics is whether these character traits are practiced in day to day business activities. Thus, this approach can be taken heretofore in case analyses in business ethics: the focus can be on the decider/person more than on the decision (Solomon, 2003; Murphy, 1999).
Further research is needed to show whether the possession of specific desirable character traits or virtues leads to ―or at least is correlated with―successful organizational performance(financial or otherwise). Examples of non-financial outcomes that can be correlated are: employee and customer satisfaction, loyalty, retention and differentiation, etc. Further work in this area can contribute a great deal to research on Corporate Social Performance (CSP), and thus be a step towards showing that firms which pursue ethically-driven strategies can realize a greater profit potential than those firms which currently use purely profit-driven strategies (Racelis, 2013).
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