ETHICAL

PRINCIPLES
IN BUSINESS
 Utilitarianism: Weighing
Social Costsand
Benefits
• Utilitarianism (consequentialism) is a general term
for any view that holds that actions and policies
should be evaluated on the basis of the benefits and
• costs they will impose on society.
In any situation, the “right” action or policy is the
one that will produce the greatest net benefits or the
• lowest net costs.
The benefits of an action may include any desirable
goods (pleasures, health, lives, satisfactions,
knowledge, happiness) produced by the action, and
costs may include any of its undesirable evils
(pain, sickness, death, dissatisfaction, ignorance,
unhappiness).
How does one determine the moral thing
to do on any particular occasion?

There are three considerations to follow:

1.You must determine what alternative
actions are available.
2.You must estimate the direct and
indirect costs and benefits the action
would produce for all involved in the
foreseeable future.
3.You must choose the alternative that
produces the greatest sum of utility.
• However, traditional utilitarians would deny
that an action of a certain kind is always
either right or wrong.
• Instead, each action would have to be
weighed given its particular circumstances.
• Measurement Problems

1. Comparative measures of the values

things have for different people cannot be
made,
2. Some benefits and costs are impossible
to measure. How much is human life worth
for example?
3. The potential benefits and costs of an
action cannot always be reliably predicted,
they also cannot be adequately measured.
4. It is unclear exactly what counts as
benefits or cost. People see these things in
different ways.
5. Utilitarian measurement implies that all
goods can be traded for equivalents of each
other. However not everything has
monetary equivalent.Critics have argued
that there are some none-economic goods
– such as life, love, freedom, equality,
health, beauty, whose value is such that no
quantity of any economic good is equal in
value to the value of the none-economic
good.
Two widely used common-sense criteria

(a) Distinction between Instrumental goods and

intrinsic goods

• Instrumental goods: are things that are considered

valuable only because they lead to other good
things (e.g., a radio is instrumentally good in order
to hear music).
• Intrinsic goods: Intrinsic are things that are
desired for their own sake (is worth for itself, not as
a means to something else) such as health and life.
These goods always take precedence over
instrumental goods, which are things that are good
because they help to bring about an intrinsic good.
(b) Distinction between needs and wants

• Goods that bring about needs are more

important than those that bring about
wants.

• NOTE: These commonsense methods

of weighing goods are only intended to
aid us in situations where quantitative
methods fail.
Problems with Rights and Justice

• The major difficulty with utilitarianism is

that it is unable to deal with two kinds of
moral issues: those relating to RIGHTS and
those relating to JUSTICE. That is, the
utilitarian principle implies that certain
actions are morally right when in fact they
are unjust or violate people’s rights.
• Rights: look at individual entitlements to
freedom of choice and well-being
• Justice:looks at how benefits and burdens
are distributed among people
Utilitarian Replies to Objections on
Rights and Justice

• In response to the critics on rights and justice,

utilitarians have devised or proposed an
important and influential alternative version of
utilitarianism called rule-utilitarianism.

• Rule-Utilitarianism

• According to the rule-utilitarian, when trying to

determine whether a particular action is ethical, one
is never supposed to ask whether that particular
action will produce the greatest amount of utility.
Instead, one is supposed to ask whether the action
is required by the correct moral rules that everyone
should follow.
• If the action is required by such rules,
then one should carry out the action.
• Example: Imagine the following scenario

• A prominent and much-loved leader has been rushed to the

hospital, grievously wounded by an assassin’s bullet. He
needs a heart and lung transplant immediately to survive. No
suitable donors are available, but there is a homeless person
in the emergency room who is being kept alive on a respirator,
who probably has only a few days to live, and who is a perfect
donor. Without the transplant, the leader will die; the homeless
person will die in a few days anyway. Security at the hospital
is very well controlled. The transplant team could hasten
the death of the homeless person and carry out the transplant
without the public ever knowing that they killed the homeless
person for his organs. What should they do?
–
For rule utilitarians, this is an easy choice. No one could
approve a general rule that lets hospitals kill patients for
their organs when they are going to die anyway. The
consequences of adopting such a general rule would be
highly negative and would certainly undermine public
trust in the medical establishment.
 Quick Review

Evaluating Utilitarianism

• Critics say not all values can be measured

• Utilitarians respond that monetary and
commonsense measures can
measure everything
• Critics say utilitarianism fails with rights
and justice
• Utilitarians respond that rule-utilitarianism
can deal with rights and justice.
 Rights and Duties
• In general, a right is an individual’s entitlement to
something. A person has a right when that person
is entitled to act in a certain way or is entitled to
• have others act in a certain way toward him or her.
The entitlement may derive from a legal system
that permits or empowers the person to act in a
specified way or that requires others to act in
certain ways toward that person. The entitlement
• is then called a legal right.
Legal rights are limited, to the particular
jurisdiction within which the legal system is in
force.
• Entitlements can also derive from a
system of moral standards
independently of any particular legal
system. Such rights are called moral
rights or human rights and they are
based on moral norms and principles
that specify that all human beings
are permitted or empowered to do
something or are entitled to have
something done for them.
• Unlike legal rights, moral rights are not
limited to a particular jurisdiction.
Three important features defining moral rights

1. Moral rights are closely related to duties

2. Moral rights provide individuals with
autonomy and equality in the free pursuit
of their interests.
3. Moral rights provide a basis for justifying
one’s actions and for invoking the protection
or aid of others.
• Moral judgements made on the basis of
rights differ substantially from those
based on utility
Moral rights vs. utilitarianism

• Moral rights express the requirements of

morality from the point of view of the
individual, whereas utilitarianism expresses
the requirements of morality from the point
of view of society as a whole.
• Rights limit the validity of appeals to
social benefits and to numbers.
• On the other hand although rights
generally override utilitarian standards,
they do not always do so. In times of war
for example, civil rights are commonly
restricted for the public good.
Negative and Positive Rights

• Negative rights: Duties others have to

not interfere in certain activities of the
person who hold a given right. For e.g
right to privacy.
• Positive rights: Duties of other agents
(it is not always clear who) to provide
the holder of the right with whatever he
or she needs to freely pursue his or
interest. For e.g right to education,
right to medical care.
Contractual Rights and Duties

• Contractual rights and duties (sometimes called

special rights and duties or special obligations)
are the limited and correlative duties that arise
when one person enters an agreement with
another person. This rights are closely
connected to business.
• These rights attach only to specific
individuals, and the duties they give rise to
attach only to specific individuals.
•
In addition, they arise out of specific
transactions between parties and depend upon
• a publicly accepted system of rules.
Without the institution of contract, modern
businesses could not exist.
Four ethical rules governing contracts

• Both parties to a contract must have full

knowledge of the nature of the
agreement.
• Neither party must intentionally
misrepresent the facts.
• Neither party must be forced to enter
a contract.
• The contract must not bind the parties to
• an immoral
NOTE: act.
Generally, a contract that violates
one or more of these conditions is
considered void.
A basis for Moral Rights: Kant

• A more satisfactory foundation for moral rights is

provided by the ethical theory developed by
Immanuel Kant.
• Kant in fact attempts to show that there are certain
moral rights and duties that all human beings
possess regardless of any utilitarian benefits that
the exercise of those rights and duties may
provide for others.
• His principle known as categorical imperative
requires that everyone be treated as a free and
equal person.
• Kant provides at least two ways of formulating this
basic moral principle, each formulation serves as
an explanation of the meaning of this basic moral
right and correlative duty.
The first formulation of Kant’s categorical imperative

• It states: “ I ought never to act except in a such a

way that I can also will that my maxim should
become a universal law".

• According to Kant a maxim is the reason a person

has for doing what he plans to do.
• Therefore, an action is morally right if the person’s
reason for doing it is a reason he would be willing to
have every person in a similar situation act upon.
For Kant
• “An action is morally right for a person in a
certain situation if, and only if, the person’s
reason for carrying out the action is a reason that
he or she would be willing to have every person
act on, in a similar situation”.
• Categorical imperative incorporates two
criteria for determining moral right and
wrong: universalizability and reversibility.
• Universalizability: The person’s reasons for
acting must be the reasons that everyone
could act on at least in principle.
• Reversibility: The person’s reasons for
acting must be reasons that he or she would
be willing to have all others use, even as a
basis of how they treat him or her.
The second formulation of Kant’s categorical
Imperative

• “ act in such a way that you simply treat

humanity, whether in your own person or in the
person of any other, never simply as a means, but
always at the same time as an end”.
This version of the categorical imperative
implies that human beings have an equal
dignity that sets them apart from things
such as tools or machines and that is
incompatible with their being manipulated,
deceived, or otherwise unwillingly exploited
to satisfy the self-interests of another.
 Quick Review
Kant’s Categorical Imperative Formulas

1. Never do something unless you are willing

to have everyone do it.
2. Never use people merely as means, but
always respect and develop their ability
to choose for themselves.

Kant’s principle advocate the following;

“Do unto others as you would have them
do unto you.”
The libertarian objection: Nozick

• Some important views on rights that are

different from the ones we have
sketched have been proposed recently
by several libertarian philosophers,
such as Robert Nozick.
• They claim that freedom from constraint is
necessarily good and that all constraints
on one by others are necessarily evils,
except when they prevent even a greater
human constraints.
• If I have a right to unionize for example, I
constrain the rights of my employer to treat
me as he sees fit.
 Justice and Fairness
• Justice, like rights, is an important moral
concept with a wide range of applications.
•
We use it to evaluate not only the actions of
individuals but also social, legal, political
• and economic practices and institutions.
Although the word “just” is sometimes used
interchangeably with “right” and “good,” it generally
has a more restricted meaning that is closer to
•
“fair”.
Questions of justice often arise when there is
something to distribute. If there is a shortage of
organ donors, for example, we ask, what is a just,
 or fair, way of deciding who gets a
transplant? If there is a burden, such as
taxes, we want to make sure that
everyone bears a fair share.
• Justice is also concerned with the righting
of wrongs. It requires for example, that a
criminal be punished for a crime and that the
punishment fit the crime by being neither
too lenient nor too severe.
• To treat people justly is to give them what
they deserve.
• The concept of justice is relevant to
business ethics primarily in the distribution
of benefits and burdens.
Types of justice

• Distributive justice: Concerned with the fair

distribution of society’s benefits and burdens.
• Retributive justice: refers to just the imposition
of punishments and penalties on those who
do wrong.
• Namibia’s Stock Theft Act which prescribe a
sentence of at least 20 years’ imprisonment without
the option of a fine for anyone convicted of stealing
livestock worth N$500 or more, when the conviction
is the offender’s second stock theft, then a sentence
of at least 30 years’ imprisonment without the
option of a fine which is prescribed for people
convicted of stock theft for a second or subsequent
time is given.
• Compensatory justice: concerns the
just way of compensating people for
what they lost when they were wronged
by others.
Distributive Justice

• The fundamental principle of distributive

justice may be expressed as follows:

“individuals who are similar in all respects

relevant to the kind of treatment in question
should be given similar benefits and burdens,
even if they are dissimilar in other relevant
respects and individuals who are dissimilar in a
relevant respect ought to be treated dissimilarly,
in proportion to their dissimilarity.”
Principles of Distributive Justice

• Fundamental: distribute benefits and burdens

equally to equals and unequally to
unequals
• Egalitarian: distribute equally to everyone
• Capitalist: distribute by contributions
• Socialist: distribute by need and ability
• Libertarian: distribute by free choices
• Rawls: distribute by equal liberty, equal
opportunity, and needs of
disadvantaged
• Some of the egalitarians have tried to strengthen
their position by distinguishing between two kinds
of equality; political equality and economic equality.

1. Political equality: refers to an equal participation

in, and treatment by, the means of controlling and
directing the political system. This includes rights
to participate in the legislative process, equal civil
liberties and equal rights to due process.
2. Economic equality: refers to the equality of
income and wealth and equality of opportunity.
The criticisms levelled against equality, according
to some egalitarians, their criticisms about equality
only apply to economic equality not political equality.
• The main question that is raised by contributive
justice is how the value of contribution of each
should be measured, some say it should be
measures in terms of work effort, the harder one
works the more one deserves.
• This is the assumption behind the Puritan ethic,
which held that individuals had a religious
obligation to work hard at their calling (the
career to which God summons each individual)
and that God justly rewards hard work with
wealth and success, while He justly punishes
laziness with poverty and failure.
• A second part says that contribution should be
measured in terms of productivity, the better
quality of a person’s contributed product, the
more he or she should receive.
Rawls’ theory of justice

 Each person is to have an equal right to the most

extensive total system of equal basic liberties compatible
with a similar system of liberty for all. ( The Principle of
equal Liberty)
1. Social and economic inequalities are to be arranged so that
they are both:
a) to the greatest benefit of the least advantaged,
consistent with the just savings principle, (the
difference principle) and
b) attached to offices and positions open to all under
conditions of fair equality of opportunity. (the principle
of equal opportunity)
• # Rawls tells us that Principle 1 is supposed to take
priority over Principle 2, should the two of them ever come
conflict,
into and within Principle 2, Part b is supposed to take
priority over Part a.
• Principle of equal liberty: it says that each
citizen’s liberties must be protected from
invasion by others and must be equal to those of
others. These basic liberties include the right to
vote, freedom of speech and conscience and
the other civil liberties, freedom to hold personal
property, and freedom from arbitrary arrest.
• Difference principle: It assumes that a
productive society will incorporate
inequalities, but it then asserts that steps
must be taken to improve the position of the
most needy members of society, such as the
sick and the disabled, unless such
improvements would so burden society that
they make everyone, including the needy,
worse off than before.
• Principle of fair equality of opportunity: It
says that everyone should be given an
equal opportunity to qualify for the more
privileged positions in society’s
institutions.

• Rawls theory incorporates with the

Kantian principles of reversibility and
universability, though some critics of
Rawls point out that just because a group
of people would be willing to live under a
principle it does not mean that it is morally
justified.
Retributive justice and compensatory justice

• They both deal with how best to deal

with wrongdoers.
• Retributive justice concerns blaming or
punishing those who do wrong.
• Compensatory justice concerns restoring to
a harmed person what he lost when someone
else wronged him. A person should be
compensated if these three conditions
pertain:
1. The action that the inflicted injury was
wrong or negligent.
2. The action was the real cause of the injury
3. The person did theaction voluntarily
 The Ethics of Care
• Ethic of care is an ethic that
emphasises that we have an obligation
to exercise special care toward the
people with whom we have valuable
close relationships.
• Compassion, concern, love, friendship,
and kindness are all sentiments or
virtues that normally manifest this
dimension of morality.
 Virtue
• Ethics
According to virtue ethics, one should not only look
at the kind of actions an agent ought to perform,
but should pay attention to the kind of person an
agent ought to be.
• An “agent-based” focus on what one ought to be, in
contrast to an “action-based” focus on how one
ought to act, would look carefully at a person’s
moral character, including, in particular, whether a
person’s moral character exhibits virtue or vice.
• A more adequate approach to ethics, according to
these ethicists, would take the virtues (such as
honesty, courage, temperance, integrity,
compassion, self-control) and the vices (such as
dishonesty, ruthlessness, greed, lack of integrity,
cowardliness) as the basic starting point for ethical
reasoning.