Evaluating Business Ethics—normative ethical

theories
Prepared for class discussion
By
Prof.S.Suryanarayanan
 What are normative ethical theories?
• Ethical theories are the rules and principles that determine right and
wrong for any given situation.
• Normative ethical theories are those that propose to prescribe the
morally correct way of doing.
• Descriptive ethical theories seek to describe how ethics decisions are
actually made in business.
The role of ethical theory
• Two extreme positions:
• Ethical absolutism claims there are eternal, universally applicable
moral principles
• Right and wrong are objective qualities, can be rationally determined.
• Typically traditional theories
• Ethical relativism claims morality is context dependent and
subjective
• No universal right and wrong that can be rationally determined;
depends on person making the decision and culture in which they are
located.
• Typically contemporary ethical theories.
• Differences between Anglo-American and European approaches based
on philosophical arguments
• Individual versus Institutional morality.
• US tend to individualistic perspective
• Europe towards wider economic and governing institutions.
• Questioning versus accepting capitalism
• US tend to accept the capitalistic approach
• Europe tend to question the ethical justification of capitalism.
• Justifying versus applying moral norms
• US tend to focus on application of morality
• Europe focus on justification and ethical legitimation of norms
• In contrast Asian perspective tend to be based on religion ( Islam,
Buddhism, Hinduism )
 Traditional ethical theories
• Generally offer a certain rule or principle which one can apply to any
given situation
• These theories generally can be differentiated into two groups

Motivation
/
Principles Action Outcomes

Non-consequentialist Ethics Consequentialist Ethics

(deontological theory) ( teleological theory)
( means ) ( ends )
 Major normative theories
Egoism Utilitarianism Ethics of duties Rights of justice

Contributors Adam Smith Jermy Bentham, Immanuel Kant John Locke

John Stuart Mill John Rawls

Focus Individual desires Collective welfare Duties Rights

and interests

Rules Maximisation of Act/rule Categorical Respect for human

desires, self utilitarianism imperative beings
interest

Concept of human Man as an actor Man is controlled Man is a rational Man is a being that
beings with limited by avoidance of moral actor is distinguished by
knowledge and pain and gain of dignity
objective pleasure
( hedonist )

Type Consequentialist Consequentialist Non- Non-

Consequentialist consequentialist
 Egoism
• Theory of Egoism—an action is morally right if the decision maker
freely decides an action to pursue either their ( short term ) desires
or their ( long term ) interests.
• Adam Smith: Pursuit of individual interest morally acceptable as
invisible hand of market creates benefit for all.
• Relies on free competition and good information
• “ enlightened egoism “
• However markets do not function perfectly
• Anti globalization movements
• Sustainability debate.
 Utilitarianism
• According to utilitarianism, an action is morally right if it results in
the greatest amount of good for the greatest number of people
affected by the action

• Also called the ‘greatest happiness principle’

• Based on cost-benefit analysis
 Ethical dilemma pp 99

• Producing toys-child’s play?

• As the product manager what is your immediate gut reaction?

• Can you give your moral reasoning of your decision?
 Utilitarian analysis of ethical dilemma-producing toys—child’s play
Action 1 doing the Action 2 not
deal doing the deal

Pleasure Pain Pleasure Pain

Product Goo deal for the Bad conscience; Good Loss of good deal
manager business; potential possible risk for conscience; less
for personal bonus. company risk
reputation

Thai dealer Good deal Loss of good deal;

search for a new
customer in Europe
Parents Secure the family’s Limited prospects Search for other
income for children. sources of income

Children Feeling of being Hard work; no No hard work; Potentially forced to do

needed, being ‘grown chance of school time to play and other, more painful
up'; approval of the education go to school. work
parents
Grand mother Family is able to Loss of economic
support her. support
 Problems with Utilitarianism
• Subjectivity
• This has led to refinement of theory
• Act utilitarianism
• Rule utilitarianism
• Issues around quantification and distribution of utility
 Act- and Rule-Utilitarianism
Act utilitarianism
• Looks to single actions and bases the moral judgement on the
amount of pleasure and the amount of pain this single action
causes.

Rule utilitarianism
• looks at classes of action and ask whether the underlying
principles of an action produce more pleasure than pain for
society in the long run.
 Ethics of duties
Categorical Imperative’ (Kant)
‘

•Maxim 1: Consistency
•Act only according to that maxim by which you can at the same time
will that it should become a universal law.

Maxim 2: Human Dignity

•Act so that you treat humanity, whether in your own person or in
that of another, always as an end and never as a means only.

•Maxim 3: Universality
•Act only so that the will through its maxims could regard itself at the
same time as universally lawgiving (would others agree? Would you
be happy to see your decision reported in the press?)
 Golden rule and categorical imperative

• Kant’s Categorical Imperative, in particular Maxim 1, comes

close to tenets of many religions, referred as “ Golden Rule
“:
• “ Treat others as you wanted to be treated yourself”

• Applying Kant’s moral test to ethical Dilemma 3;

1.Product Manager is against principle of child labour and
would not like this acceptable as universal law.
2.No dignity to children- cheap labor
3.He would not like Child Labor as legal in his country.
Ethics of rights and justice
Natural rights
• Certain basic, important, unalienable entitlements that should be
respected and protected in every single action.
• Based on consensus about nature of human dignity
• Strongly based in western view of morality
Justice
• The simultaneously fair treatment of individuals in a given situation
with the result that everybody gets what they deserve
• Fair procedures (procedural justice)
• Fair outcomes (distributive justice)
 John Rawls’s ‘Theory of Justice’
1. Each person is to have an equal right to the most extensive total
system of basic liberties compatible with a similar system of
liberty for all.
2. Social and economic inequalities are to be arranged so that they
are both:
a. to the greatest benefit of the least advantaged;
b. attached to offices and positions open to all under conditions of
fair equality of opportunity.
 Ethics in action—India’s SEZs-an ethics in black hole.
Alternative perspectives on ethical theory
Approaches based on character and integrity
Virtue ethics
Contends that morally correct actions are those undertaken by actors
with virtuous characters. Therefore, the formation of a virtuous
character is the first step towards morally correct behaviour
Acquired traits
Intellectual virtues-wisdom
Moral virtues— honesty, courage, mercy, patience and so on
 ARISTOTELIAN ETHICS

• Central to ethics of virtue is notion of ‘ good life ‘ .

• Aristotle was the first proponent of virtue ethics:
• Originally subject of ethics is concerned with the question of virtue
(Greek aretē) of character (ēthos), or in other words having excellent
and well-chosen habits. The acquisition of an excellent character is
in turn aimed at living well and Eudaimonia, a Greek word often
translated as well-being or happiness.In other words, ethics is a
systematic study of how individuals should best live.
Approaches based on relationships and responsibility
Feminist ethics
• An approach that prioritizes empathy, harmonious and healthy
social relationships, care for one another, and avoidance of harm
above abstract principles
Key elements
• Relationships
• Decisions taken in context of personal human interrelations
• Responsibility
• Active ‘taking’ of responsibility, rather than merely ‘having’ it
• Experience
• Learn and develop from experience
• Similar to Buddhist approaches as well as Confucian approach
Approaches based on procedures of norm generation

Discourse ethics
• Aims to solve ethical conflicts by providing a process of norm
generation through rational reflection on the real-life experiences of
all relevant participants
Key elements
• Ultimate goal of ethical issues in business should be the peaceful
settlement of conflicts
• Different parties in a conflict should sit together and engage in a
discourse about the settlement of the conflict, and ultimately provide
a situation that is acceptable to all
• ‘ideal discourse’ criteria
Approaches based on empathy and moral impulse

Postmodern ethics
• An approach that locates morality beyond the sphere of rationality
in an emotional ‘moral impulse’ towards others. It encourages
individual actors to question everyday practices and rules, and to
listen to and follow their emotions, inner convictions and ‘gut
feelings’ about what they think is right and wrong in a particular
incident of decision-making.
 Postmodern business ethics

• Postmodern ethics is an approach that locates morality beyond the sphere of

rationality in an emotional ‘ moral impulse’ towards others. It encourages
individual actors to question everyday practices and rules and listen to and follow
their emotions and ‘ gut feelings’ about what they think is right and wrong in a
particular situation.
• Postmodern business ethics emphasises (Gustafson, 2000:21)
• Holistic approach
• Examples rather than principles
• ‘Think local, act local’
• Preliminary character
 Considerations in making ethical decisions: summary of key insights from
ethical theories
Consideration Typical question you might ask yourself Theory
One’s own interests Is this really in my, or my organization’s, best long - term interests? Would it be Egoism
acceptable and expected for me to think only of the consequences to myself in this
situation?
Social consequences If I consider all of the possible consequences of my actions, for everyone that is Utilitarianism
affected, will we be better or worse off overall? How likely are these
consequences and how significant are they?
Duties to oth ers Who do I have obligations to in this situation? What would happen if everybody Ethics of duty
acted in the same way as me? Am I treating people only to get what I want for
myself (or my organization) or am I thinking also of what they might want too?
Entitlements of Whose rights do I need to consider here? Am I respecting fundamental human Ethics of rights
others rights and people’s need for dignity?
Fairness Am I treating everyone fairly here? Have processes been set up to allow everyone Theories of justice
an equal ch ance? Are there major disparities between the ‘winners’ and ‘losers’
that could be avoided?
Moral character Am I acting with integrity here? What would a decent, honest person do in the Virtue ethics
same situation?
Care for others and How do (or would) the other affected parties feel in this situation? Can I avoid Feminist ethics
relationships doing harm to others? Which solution is most likely to preserve healthy and
harmonious relationships among those involved?
Process of resol ving What norms can we work out together to provide a mutually acceptable solution Discourse ethics
conflicts to this problem? How can we achieve a peaceful settlement of this conflict that
avoids ‘railroading’ by the most powerful player?
Moral impulse a nd Am I just simply going along with the usual practice here, or slavishly following Postmodern ethics
emotions the organization’s code, without questioning whether it really feels right to me?
How can I get closer to those likely to be affected by my decision? What do my
e motions or gut feelings tell me once I’m out of the office?
 Example of a Utilitarian Approach to BTC Case
Group Action 1 – RSDP carried out Action 2 – RSDP cancelled
  Pleasure Pain Pleasure Pain
Consortium Reduce criticism Pay out money to Cost savings Risk reputational
of project fund non-financial damage resulting
issues from critics
Local land owners Appropriate     Uncertainty
compensation for surrounding
property and whether
relocations, and compensation will
property rights be provided or
upheld rights upheld

Turkish Citizens less likely Some demand No demand on Citizens complain

Government to complain and that royalties be the distribution of and protest in
have access to distributed royalties conjunction with
new and equally powerful NGOs
improved
infrastructure and
projects
Maxim 1: Act only according to that maxim by which you can at the same time will
that it should become a universal law

• Consistency - if implemented in spirit and intent the creation of the RSDP works
to ensure that the social, environmental and economic impacts of local
communities are considered but does not address the issue of consent by the
local communities. Also, if the RSDP is being used as a form of ‘greenwash’ to
distract or cover the less responsible operations of the consortium, then it would
be immoral because if everyone followed this principle, it would have the same
effect as lying and the notion of ‘truth’ would be impossible.
• RSDP—Regional Sustainability Development Programme.
Maxim 2: Act so that you treat humanity, whether in your own person or in that of
another, always as an end and never as a means only

• Human dignity – if implemented in spirit and intent, the RSDP is a good vehicle
for maintaining human dignity by respecting people’s property and
circumstances, and by working together with them to facilitate a better quality of
life through completion of local projects. If not implemented in sprit and intent
the RSDP strips all those involved of their human dignity by using this program as
a way of distracting people from the pipeline. In these circumstances, the RSDP
would be a tool for using people as a means to an end.
Maxim 3: Act only so that the will through its maxims could regard itself at the
same time as universally law giving

• Universality – if implemented in spirit and intent, the RSDP could be judged by

other moral actors as the ethical approach to take in these circumstances. If not
implemented in spirit and intent, the RSDP could be judged by others as an
immoral act by the consortium. Would BP managers be happy to see criticisms of
the project in the papers? Perhaps, but only if they believe that they’ve done all
they can and have proceeded within the spirit of the programme. Here it is
interesting to note that BP’s response to the CDAP’s recommendations was
largely positive
• CDAP—Caspian development Advisory Panel.