Chapter Two

Concepts and Theories of Business

Ethics
 INTRODUCTION

Today we use the word ethos in a different connotation

meaning a characteristic, or attitude of a group of people,
culture and so on. When we talk of ‘business ethos’, we
mean the attitude, culture and the manner of doing
business of the business community. Philosophers
generally distinguish ‘ethics’ from ‘morality’. To them while
‘morality’ refers to human conduct and values, ‘ethics’
refers to the study of human character or behaviour in
relation to moral values, that is, the study of what is
morally right or morally wrong. In ordinary parlance,
however, people use these expressions interchangeably.
When we say something was done ‘ethically’ or ‘morally’,
we mean that things were done correctly.
 PERSONAL ETHICS AND BUSINESS ETHICS
Personal ethics refer to the set of moral values that form the character
and conduct of a person.
Organization ethics, on the other hand, describes what constitutes right
and wrong or good and bad, in human conduct in the context of an
organization. It is concerned with the issue of morality that arises in
any situation where employers and employees come together for the
specific purpose of producing commodities or rendering services for
the purpose of making a profit.
An organization can be described as a group of people who work
together with a view to achieving a common objective, which may be
to offer a product or service for a profit. Organization ethics,
therefore, deals with moral issues and dilemmas organizations face
both in business and non-business settings that include academic,
social and legal entities.
NORMATIVE THEORIES
Ethics is a normative study, that is, an investigation that attempts to
reach normative conclusions. It aims to arrive at conclusions about what
things are good or bad, or what actions are right or wrong. In other words, a
normative theory aims to discover what should be, and would include
sentences such as ‘companies should follow corporate governance standards’
or ‘managers ought to act in a manner to avoid conflicts of interests’. This is
the study of moral standards which are correct or supported by the best
reasons, and so ‘attempts to reach conclusions about moral rights and wrong,
and moral good and evil’.13 For instance, the stakeholder theory has a
‘normative’ thrust and is closely linked to the way that corporations should be
governed and the way that managers should act.
 Accor to William Shaw
• Egoism, both as an ethical theory and as a
psychological theory.
• Utilitarianism, the theory that a morally right
action results in the greatest good to the
largest number of people.
• Kant’s ethics, with his emphasis on moral
motivation and respect for persons.
• Other non-consequentialist normative themes:
duties, moral rights and prima facie principles.
 Egoism
‘The view that associates morality with self-interest is referred
to as egoism.’ Therefore, it can be said that egoism is an
ethical theory that treats self-interest as the foundation of
morality. Egoism contends that an act is morally right if and
only if it best promotes an agent’s (persons, groups or
organizations) long-term interests. Egoists make use of their
self interest as the measuring rod of their actions. Normally,
the tendency is to equate egoism with individual personal
interest, but it is equally identified with the interest of the
organization or of the society. (Contin…)
Decisions based on egoism mainly are intended
to provide positive consequences to a given
party’s interest without considering the
consequence to the other parties.
Philosophers distinguish between two kinds of
egoism: personal and impersonal. The
personalist theory argues that persons should
pursue their long-term interest, and should not
dictate what others should do. Impersonal
egoists argue that everyone should follow their
best long-term interest.
 Psychological Egoism
Egoism asserts that the only moral obligation we
have is to ourselves, though it does not openly
suggest that we should not render any help to
others. However, we should act in the
interests of others, if that is the only way to
promote our own self-interest.
 Utilitarianism: Ethics of Welfare

According to the utilitarian principle, a decision is

ethical if it provides a greater net utility than any
other alternative decision.
The utilitarian principle assumes that we can
somehow measure and add the quantities of
benefits generated by an action and deduct from it
the measured quantities of harm that act produced,
and determine thereby which action produces the
greatest total benefits or the lowest total costs.y
than any other alternative decision.
 Kantianism: Ethics of Duty

• Immanuel Kant (1724–-1804) is regarded as the

most important ethician in the rationalistic school
in modern times. One of the basic principles of
his ethics is his most famous ethical doctrine that
a goodwill is the only unqualified good. Kant said
that for an action to be morally worth it should
reflect a goodwill. By will Kant meant the unique
human capacity to act from principle.
Continu….
For Kant, ethics is based on reason alone and not on human
nature. In Kant’s perspective, the imperatives of morality
are not hypothetical but categorical. He says that the
moral duty that binds us is unconditional.

The two formulations of Kant are as follows:

• To act only in ways that one would wish others to act
when faced with the same circumstances; and
• Always to treat other people with dignity and respect.
 Theories
• Stockholder & Stakeholder