LEARNING OBJECTIVES

The specific things you’ll learn to do in this section include:

1. Define an ethical duty.
2. Distinguish specific duties.
3. Show how ethical duties work in business.
4. Consider advantages and drawbacks of an ethics based on duties.

Duties

“Should I steal that?”

“No, stealing’s wrong.”

Basic ethics. There are things that are right and others that are wrong, and the discussion ends. This level 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 we’re making moral decisions, the key to deciding well 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.

The Madoff Family

If we’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 investigation 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, wasn’t only a cancer altruist; he was also a victim, and the charitable money started flowing to the researchers soon after he was 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 investors by briefly delivering artificially high returns on their money. The idea is simple: You take $100 from client A, promising to invest the money cleverly and get a massive profit. You spend $50 on yourself, and at the end of the year, you send the other $50 back to the client along with a note saying that the original $100 investment is getting excellent results and another $50 should come in next year 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 year 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 over 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 were around five thousand and the losses around $65 billion, which works out to about $13 million squeezed from each client.

Madoff had, obviously, rich clients. He met them at his home in New York City; at his mansion in hyperwealthy Palm Beach, Florida; or on his fifty-five-foot yacht cleverly named Bull. He impressed them with a calm demeanor and serious knowledge. While it’s true that he was mostly taking clients’ money and sticking it in his wallet, the investments he claimed to engineer were 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 everyone thinking he was either crazy or a genius. Since he was apparently making money, “genius” seemed the more likely reality. People also found him trustworthy. He sat on the boards of several Wall Street professional organizations and was known on the charity circuit as a generous benefactor. Health research was 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 was crashing, investors wanted their money back, and Madoff was having trouble rounding up the cash, which explains why Andrew was surprised when his father called him in and said he’d decided to distribute about $200 million in bonuses to family members and employees.

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 little money left; it was all a giant lie.

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

Madoff sits in jail now. He’ll be there for the rest of his life. He claims his scheme was his project alone and his children had no knowledge or participation in it, despite the fact that they were high executives in his fraudulent company. Stubbornly, he has refused to cooperate with prosecutors interested in determining the extent to which the children may have been involved. His estate has been seized. His wife, though, was left with a small sum—$2.5 million—to meet her day-to-day living expenses. Bilked investors got nearly nothing.

One of those investors, according to ABC News, was Sheryl Weinstein. She and her family are now looking for a place to live because after investing everything with Madoff and losing it, they were 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.”Brian Ross, Anna Schecter, and Kate McCarthy, “Bernie Madoff’s Other Secret: His Hadassah CFO Mistress,” ABCNews.com, April 16, 2011, accessed May 11, 2011, http://abcnews.go.com/Blotter/Madoff/story?id=8319695&page=1.

Weinstein was well remembered by Madoff’s longtime secretary, Eleanor Squillari. Squillari reported that Weinstein would often call Madoff and that “he would roll his eyes and then they’d go meet at a hotel.” Their affair lasted twenty years, right up until the finance empire collapsed.

What Do I Owe Myself? Historically Accumulated Duties to the Self

Over centuries of thought and investigation by philosophers, clergy, politicians, entrepreneurs, parents, students—by just about everyone who cares about how we live together in a shared world—a limited number of duties have recurred persistently. Called perennial duties, these are basic obligations we have as human beings; they’re the fundamental rules telling us how we should act. If we embrace them, we can be confident that in difficult situations we’ll make morally respectable decisions.

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

1. Duties to ourselves
2. Duties to others

Duties to the self begin with our responsibility to develop our abilities and talents. The abilities we 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 between people into agreements. All these skills are also responsibilities. When we receive them, they come with the duty to develop them, to not let them go to waste in front of the TV or on a pointless job.

Most of us have a feeling for this. It’s one thing if a vaguely clumsy girl in a ballet class decides to not sign up the next semester and instead use the time trying to boost her GPA, 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 have, it’s a shame to waste it; it’s a kind of betrayal 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.

What 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 wealthy 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 we have a responsibility to maintain ourselves 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.

At 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.

What Do I Owe Others? Historically Accumulated Duties to Others

The duties we have to ourselves are the most immediate, but the most commonly referenced duties are those we have to others.

Avoid wronging others is the guiding duty to those around us. It’s difficult, however, to know exactly what it means to wrong another in every 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 was allowed to keep more than $2 million after her husband’s sentencing. She claims she has a right to it because she never 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 Sheryl Weinstein, who lost everything, including their homes.

Honesty 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 was happening with their money.

Respect others is the duty to treat others as equals in human terms. This doesn’t mean treating everyone the same way. When a four-year-old asks where babies come from, the stork is a fine answer. When adult investors asked Madoff where the profits came from, what they got was 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 attempt 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 welfare of others; it’s the Good Samaritan side of ethical duties. With respect to his own family members, Madoff certainly fulfilled this obligation: every one of them received constant and lavish amounts of cash. There’s also beneficence in Andrew’s work for charitable causes, even if there’s a self-serving element, too. By contrast, Madoff displayed little beneficence for his clients.

Gratitude 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 over the years, not a single person or representative 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 was 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 way to treat people more disdainfully than to thank the criminal who stole their money for being so generous. Those who received charitable contributions from Madoff were tugged in one direction by gratitude to him and in another by respect for his many victims. All the receivers 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 littered with abuses on this front. On the professional side, there’s the financier who didn’t invest his clients’ money as he’d promised; on the personal side, there’s Madoff and Weinstein staining their wedding vows. From one end to the other in terms of fidelity, this is an ugly case.

Reparation is the duty to compensate others when we harm them. Madoff’s wife, Ruth, obviously didn’t feel much of this. She walked away with $2.5 million.

The judge overseeing the case, on the other hand, filled in some of what Ruth lacked. To pay back bilked investors, the court seized her jewelry, her art, and her mink and sable coats. Those things, along with the couple’s three multimillion-dollar homes, the limousines, and the yacht, were all sold at public auction.

The Concept of Fairness

The final duty to be considered—fairness—requires more development than those already listed because of its complexity.

According 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 invest equal amounts of money at about the same time should get an equal return. So even 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 govern 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 investment and not something extraneous like a romantic involvement—there should correspond a proportional difference in what investors receive. 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 everything 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’ve 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 executive decides on layoffs according to a last-in-first-out process, that’s fine, but it would be unfair to make exceptions.

One of the unique aspects of the idea of fairness as a duty is its hybrid status between 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 ourselves, it clearly makes sense to assert that we should be fair to ourselves. Impartiality—the rule of no exceptions—means no exceptions. So a stock investor who puts his own money into a general fund he runs should receive the same return as everyone else. A poor investment 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).

Modern Fairness: Rawls

The recent American philosopher John Rawls proposes a veil of ignorance as a way of testing for fairness, especially with respect to the distribution of wealth in general terms. For example, in society as Madoff knew it, vast inequalities of wealth weren’t only allowed, they were honored: being richer than anyone else was something to be proud of, and Madoff lived that reality full tilt. Now, if you asked Madoff whether we should allow some members of society to be much wealthier than others, he might say that’s fair: everyone is allowed to get rich in America, and that’s just what he did. However, 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 getting fancy cars or Palm 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 better chance at climbing the income ladder. Now, given these two perspectives, is there a way to decide what’s really fair when it comes to wealth and taxes?

Rawls proposes that we 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 everything’s fair if he were told that a rearrangement was 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, yes, 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 veil 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.

As a note here, nearly all children know the veil 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 veil 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.

Balancing the Duties

Duties include those to

• develop abilities and talents,
• do ourselves 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 was 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 York financier. The route to justifying that decision starts with a duty to himself:

• Develop abilities and talents. As an expert in finance, someone with both knowledge of and experience in the field, Andrew should continue cultivating 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 buttress his decision to keep his current life going by referencing a duty to others:

• Beneficence. 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.

On the other side, what’s the duty-based argument in favor of Andrew taking a different path by breaking away from his old lifestyle and dedicating all his energy and time to doing what he can for the jilted investors the family business left behind?

• Respect. The duty to treat others as equals demands that Andrew take seriously the abilities and lives of all those who lost everything. Why should they be reduced to powerlessness and poverty while he continues maximizing his potential as a stock buyer and nonprofit leader? Respecting others and their losses may mean leaving his profession and helping them get back on their feet.
• Reparation. This duty advances as the proposal for Andrew to liquidate his assets and divide the money as fairly as possible among the ruined investors. It may be that Andrew didn’t orchestrate the family Ponzi scheme, but wittingly or not, he participated and that opens the way 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.

Where Do Duties Come From?

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.

One standard explanation is that duties are written into the nature of the universe; they’re part of the way things are. In a sense, they’re a moral complement to the laws of physics. We know that scientists form mathematical formulas to explain how far arrows will travel 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, however, the reality is already there; we’re just trying to understand it.

Another possible source for the duties is humanity in the sense that part of what it means to behuman is to have this particular sense of right and wrong. Under this logic, a computer-guided robot may beat humans in chess, but no machine will ever 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 written into their genetic code, or maybe it’s something ineffable, like a soul. Whichever, the reason it comes naturally is because it’s part of our nature.

What Are the Advantages and Drawbacks of an Ethics Based on Duties?

One of the principal advantages of working with an ethics of duties is simplicity: duties are fairly easy to understand and work with. We all use them every day. For many of us these duties are the first thing coming to mind when we 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 well experienced in their use.

The problem, though, comes when the duties pull against each other: when one says yes and the other says no. Unfortunately, there’s no hard-and-fast rule for deciding which duties should take precedence over the others.

KEY TAKEAWAYS

• Duties include responsibilities to oneself and to others.
• Duties do not exist in isolation but in a network, and they sometimes pull against each other.

PRACTICE REVIEW QUESTIONS

1. Bermie Madoff was a very good—though obviously not a perfect—fraudster. He got away with a lot for a long time. How could the duty to develop one’s own abilities be mustered to support his decision to become a criminal?
2. In the Madoff case, what duties could be mustered to refute the conclusion that he did the right thing by engaging in fraud?
3. Madoff gave up most of his money and possessions and went to jail for his crimes. Is there anything else he should have done to satisfy the ethical duty of reparation?
4. In your own words, what does it mean to treat equals equally and unequals unequally?