LESSON DIFFERENT NORMATIVE ETHICAL

THEORIES COMMONLY USED IN

BUSINESS DECISION MAKING
4

TOPICS
The Norms of Morality According to the Scholastic Philosophy and Traditional Ethics
Kantian Ethics
The Machiavellian Principle
Utilitarianism of Jeremy Bentham and John Stuart
Moral Positivism
 Ethical Egoism
 Virtue Ethics: Socrates, Plato, and Aristotle
 EPICUREANISM: The Doctrine of Pleasure
 Ethical Egoism
LEARNING After studying this chapter, you should:
OUTCOMES

 Understand and evaluate critically the various ethical theories and principles as proposed
by different philosophers
 Appreciate ethics as a normative science
 Resolve moral issues and ethical dilemmas in business from the perspective of various
ethical theories
 Develop the ability to identify and resolve moral issues in business

INTRODUCTION

The concepts of business ethics are not primarily concerned with what is wrong and bad
conducts in the business. Its applicability is broad and can also be integrated in the business
decision-making process. Since decision-making process is very critical, managers should be
more careful in assessing and evaluating their ethical decisions. This chapter focuses on the
different ethical theories as proposed by different philosophers which
are commonly used by businessmen, managers and decision makers to
benchmark and evaluate their ethical decisions.
THE NORMS OF MORALITY ACCORDING TO THE SCHOLASTIC PHILOSOPHY AND TRADITIONAL
ETHICS

Norm s
Hum an Ethical Principles, Judgm ent
Conduct Rules, am ong
others
 Conformity of Non-conformity
Evaluating the Human Conduct
The Norms of Morality

Conscience
Traditional ethics defined conscience as the proximate norm of morality. It is known as the
practical judgment of reason deciding upon an individual act as good and to be followed or as
evil and therefore, to be avoided. Conscience is the nearest criterion in terms of evaluating the
It tells us further that a thing is good and should be
human conduct.
followed and some things are evil and thus, should be avoided. Although
conscience is one of the criteria for evaluating the human act, its judgment may not be correct
all the time. That's
why there is a need to educate our conscience so that it
can form correct moral judgment.
Types of Conscience
Moralists say that there are eight kinds of conscience, to wit: Antecedent, consequent, right or
true, erroneous, certain, doubtful, scrupulous, and lax.

1. Antecedent conscience is a judgment before an action is done. Its main functions are to
command, to advice, to forbid, and to permit.
2. Consequent conscience is a judgment after an act is done. It bears the following effects:
inner peace and remorse.
3. True conscience is a conscience which judges things truly as they are. Knowledge and
the sense of responsibility for one's actions help greatly in forming a correct conscience
4. Erroneous conscience is also called false conscience. It judges things in a distorted
manner since it considers bad acts as good and good acts as bad.
This distorted judgment in erroneous conscience is brought about by a false
interpretation of the moral principles. There are two kinds of erroneous conscience,
namely: Invincible or inculpable and Invincible or culpable. The former means that the
agent is without fault or knowledge while the latter means that the conscience is
erroneous through the agent's fault.
5. Certain conscience is a subjective certainty of the legality of particular actions to be
done or to be omitted. This is the kind of conscience that moralists recommend to be
always followed by man.
6. Doubtful conscience happens when a person not certain about a moral judgment.
Moralists recommend that this kind of conscience should not be followed unless the
person has resolved the doubt.
7. Scrupulous conscience is one which sees wrong where there is none. It is a conscience
which is extremely austere; it is always scared to commit evil.
 8. Lax conscience is the opposite of scrupulous conscience. It is the kind of conscience
which fails to see wrong where there is wrong.

Business Applications

According Traditional Ethics the three norms of morality must be able to

guide our business decision making process. However, these three criteria are not
widely accepted by decision makers.
Common sense directs that the "dictates of reason" should be enough to guide our
evaluation between the actions that we perform and the norms that determine what is
acceptable and what is not in our human behavior.

Kantian Ethics
Kant believed that reason is independent. For him, reason is "the be all and end all of
everything. Following this line of thinking, Kant maintained that all truths and all knowledge are
derived from human reason. And therefore, all laws and all moral principles also came from
human reason. Also, Kant argue that reason commands and we must obey it without
questioning. In effect, Kant is proposing an absolute morality which for him requires absolute
obedience.

For Kant, morality is:

 A priori. (Not based and not derived from experience.)
 It is universal. (It applies to everybody.)
 It is absolute. (Moral laws are complete and fixed.)
 Moral laws are immutable. (Moral laws cannot be changed.)

The "Why must we do good?” argument was answered by Kant by saying, that "we must do
good, because we must, it is our duty to obey immediately without questioning." "Duty" then
for Kant, is the test and the mainspring of all morally good acts. Duty as motive helps people to
do good. Kant claims that the motive in moral acts cannot be happiness, pleasure, God, or
religion but simply-duty. The measure of a good motive or will or intention is in the context of
one's sense of duty.
 Business Applications

The importance of humanistic dimension into business

decisions, e.g., treat human beings not as means to an
end, because human beings have ends in themselves was
introduced by Kant.
Kant stresses the importance of motives and of acting on principles, e.g.,
business decisions are based sometimes on personal convictions and principles
regardless of the outcomes or results.
Kant's Categorical Imperative gives us firm rules to follow in moral decision
making, rules that do not depend on circumstances or results and that do not permit
individual exceptions e.g., no matter what the consequences may be or who does it,
some actions are always wrong, e.g., lying, breaking promises, and others.

The Machiavellian Principle

The negative perceptions about human nature and social problems of his time leads to a
Machiavelli’s Principle. From these, he made very thorough recommendations on how a leader
should govern effectively. Machiavelli recommends his radical principle of governance – “the
end justifies the means, “which was necessary for the survival of a government and a leader in
his time. The following words from The Prince can somehow summarize this principle:
“Any man who tries to be good all the time is bound to come to ruin among the great number
who are not good. Hence a prince who wants to keep his authority must learn not be good, and
use that knowledge, or refrain from using it, as necessity requires.”

Leader Means End

Creation of an
Do anything
Absolute ideal state (gain
illegal or
Monarch & maintain
immoral
power)

The Machiavellian Principle

 Business Applications

Different management styles can be reinforced. There are

management styles where all employees are obligated to work very hard no matter
what it takes just to achieve the end result is where the Machiavellian principle can be
applied. The sacrifice of the employees for their time for family, relationship with others
and with God to comply with the demands of the competitive work environment. Some
may even be required to leave their homes to be assigned to a far destination accessible
to the demands of the job but not to the requirements of a good family life. Ultimately,
no matter how an employee achieve - the goal of a corporations should be given
priority, even changing the lifestyle of a person.

Utilitarianism of Jeremy Bentham and John Stuart

The word utilitarian is derived from the Latin words "utile bonum" or "utilis" which means
usefulness. It is considered the most important consequentialist theory, whose principle is best
explained by the maxim, "Do whatever produces the greatest good for the greatest number."
The theory also states that consequences makes a person to act right and not the motive of the
action.

According to Bentham, the term utilitiz has two meanings.

 By utility, it means that property in any object which tends to produce benefit,
advantage, pleasure, good, or happiness. Utilitarian ethics puts emphasis and
significance on the consequences as a result of an act and completely disregards the
motive of an act. An action is considered right or wrong depending on the consequence.

 Utilitarian principle disregards the importance of motive because motive is known only
to the person who has it. It would be difficult or impossible for others to praise or blame
a moral agent of a person's action if motive alone will determine human act as good or
bad, or right or wrong. For instance, if a man builds a wooden bridge where people can
cross to avoid the flood, the action is said to be praiseworthy. However, if the man
collects money from those who use the bridge, then the motive is selfish and the act
would not be praiseworthy.

The phrase “the greatest good is the greatest pleasure of the greatest number” was given
emphasis." This simply implies that an action is considered to be good if it gives the person the
greatest pleasure or happiness (in the view of Mill) to the majority of people affected by the
action. An action is bad or evil if it does otherwise.
 Business Applications

a. This principle can be used in Cost-Benefit Analysis. (E.g. Measures the

projects on how it benefits the body or how it cost the body).
b. The principle can also be used in the formulation of budgets (e.g., determining the
overall impact of the budget).
c. Utilitarianism as a guide in decision making can also be applied in the resolution of
labor and management conflicts (e.g., win-win solution for both management and
labor).
d. Utilitarianism as an ethical principle can also be used in the calculation of opportunity
costs, (e.g., the foregone benefit in choosing).

Moral Positivism

According to Hobbes, the role of the government is to protect people from their own
selfishness and evil. The best government is one that has the great power of a leviathan,
or sea monster. The rule of a king was believed by Hobbes because he felt that a
country needs an authority figure to provide direction and leadership. Because the
people are only interested in promoting their own self-interests, Hobbes believed
democracy-allowing citizens to vote for government leaders-would never work. Hobbes
wrote, "All mankind [is in] a perpetual and restless desire for power.. that [stops] only in
death. “Consequently, giving power to the individual would create a dangerous situation
that would start a war of every man against even man and make life "'solitary, poor,
nasty brutish, and short."

Business Applications

The laws of the state and government regulations must be followed

by all businesses.
To maintain discipline and order within the organization business must create policies
and regulations.
Businessmen and managers must be law abiding citizens.
To prevent people from doing evil things a strong authority must be implemented.

Ethical Egoism

The promotion of one's own good in accordance with morality is the central focus of the
Ethical Egoism Theory. It is the perspective that one have to do what is in man's self-
interest, if necessary, to the exclusion of what is in other people's interests. The moral
rule for ethical egoism is to look after his own self and it is about how a person should
behave. This simply implies that a person should be selfish or self-interested.

Business Applications

a. Sometimes self-interest is considered and given priority over and above the
interest of others in the business decision making, e.g., saving the company from
bankruptcy by laying off or terminating employees.
b. The decision making process in business must be done wisely, e.g., thinking before
acting, thinking before clicking
c. The promotion of self-interest, especially on the part of the employees, is more
preferred over the interest of the organization. (For example, a beginner employee is
performing his job diligently for fear that breaches of his duties may lead to dismissal
and eventually the loss of his job.)
d. Self-esteem and confidence are important personality factors for business leaders
and managers. (A manager for instance, can be confident but not necessarily arrogant.)

Virtue Ethics: Socrates, Plato, and Aristotle

The focus of the virtue theory is on the character of the person and the virtues
he manifests. The appropriate moral virtues and integrity must be reflected in making
decisions rather than focus on reasons for doing the action., as proposed by
Deontological Ethics and on the result of his actions as proposed by Teleological Ethics.
 Business Applications

Critical decision making may have several effects on the operation of

the company. The result might lead to uncertainty. For example, when
a private company is contemplating giving an increase in salaries to its employees. The
moral issue here lies on the impact of the increase on the families of the employees
rather than (but not sacrificing) on the continued operation of the company due to the
diversion of funds.

EPICUREANISM: The Doctrine of Pleasure

For Epicurus, pleasure is closely tied to satisfying one’s desires. And he

distinguishes four types of pleasures:

1. Intense, short-lasting pleasure (spending all money in clothes).

2. Less intense, longer-lasting pleasure (saving money for future schooling).
3. Pleasures that culminate in pain (going to the dentist because one has eaten a lot of
chocolate).
4. Pleasures that give us peaceful well-being (acting morally).

A. The measurement of the profit (pleasure) or loss (pain) is among

the applications of this theory.

B. When businessmen derive reasonable returns from business activities the concept
of pleasure can also be used.

ACTIVITIES

Activity 1 (This case was prepared by Fr. Floriano C. Roa)

Golden Taurus Garment Company
 Golden Taurus is a garment company managed by a Taiwanese national the company is
experiencing near bankruptcy because of the current strikes of its employees' union. The
management attributes the current difficulty in the company's financial condition to labor
unrest. Eva Wu, the owner, has experienced being bullied and received several death threats.

Some of the issues raised by the employees against the management are the below minimum
wage salaries, series of unpaid SSS premiums, and delayed payment of salaries. Also,
employees do not get their 13h month pay even if the law entitles every employee regardless
of employment status. Also, employees are asked to sign a five-month contract, which excludes
them from getting the year-end bonus. Per company policy, only those employed with six
months employment contract can get the year- end bonus.

Long working hours and less break time add to the complaints of the employees. Working hours
start at seven in the morning and end at six in the evening. Break time in the morning is from
10:00 to 10:15 and none in the afternoon. Employees can eat their lunch between 12:45 and
1:00 which gives them only a fifteen-minute lunch break.

Employees are also concerned with violation of contract. Sewers are given quota which is
against the agreed per piece basis. They are also troubled with the poor working conditions and
the inadequate supply of water for their personal hygiene in the restroom.

Without the knowledge of employees, Golden Taurus filed a bankruptcy status, and later
operated under a new company name.

Questions:

 Does the company's current financial condition justify the compensation given to the
employees? Explain
 Is it ethical to deny the employees the information abo the company's financial
conditions and decisions?
 Is it moral to let the employees sign a five-month contract instead of a six-month
contract?
Activity 2 (This case was prepared by Fr. Floriano C. Roa)
XYZ Cement Company

In 1982, XYZ Cement Company began its plant operation in Pampanga. Local residents
were very happy because of the economic benefits they got from the plant especially the 400
local residents employed. After a few years of operation, the plant started to emit large
volumes of pollution. Local residents noticed the constant vibration and loud noise coming from
the plant.

Local residents filed a suit against the company asking the court to issue an injunction to close
the plant. The residents claimed that the loud noise and the vibrations posed dangers to their
health and damaged their property.

The company was using the best available technology in their operation. The court refused to
issue the injunction arguing that closing the plant would mean more harm than good to both
parties.
The court instead ruled that the XYZ should pay the residents a one-time fee to compensate
them for the damages done. The amount was computed based on the fair market price the
residents would receive if they were inclined and able to rent their property.

Questions:

 Was the decision of the court fair? Why or why not?

 If you were the owner of the cement plant, what will you solve the problem?
 Discuss the cost and benefit of the case from the perspective of the principle of
utilitarianism.

Activity 4
Do you agree with Machiavelli that:

“The end justifies the means.”