Ethical Principles

in Business
 Caltex in South Africa
• A discussion of apartheid-era South Africa and Caltex,
an American oil company operating in South Africa
during that time.
• A large number of Caltex stockholders opposed the
company's operations in South Africa, and
introduced a series of shareholder resolutions
requiring Caltex to leave South Africa, which they
saw as racist and immoral.
• Caltex’s management did not agree.

Copyright © 2012 Pearson Education, Inc. All rights reserved.

Caltex in South Africa (continued)

• Rather than focusing on the financial assistance they

were giving the South African government, they
pointed to the positive effects their operations had
on black workers.
• South African leaders, such as Archbishop Desmond
Tutu, were not convinced by Caltex's arguments.
• He supported the shareholder resolutions, saying
that comfort under an immoral regime was not
preferable to freedom, even at the cost of economic
hardship.

Copyright © 2012 Pearson Education, Inc. All rights reserved.

Caltex in South Africa (continued)

• The point of this example is to show how a real moral debate in

business works.
• The arguments on both sides appealed to moral considerations and
four basic types of moral standards: utilitarianism, rights, justice,
and caring.
• The shareholders' argument referred to the unjust policies of the
apartheid government and the fact that these policies violated the
civil rights of black citizens.
• On the other side, Caltex's management made utilitarian arguments
and arguments about caring: it was in blacks' best interests to have
Caltex jobs, and Caltex had a duty to take care of these workers as
best it could.
• In addition, both sides refer to the moral character of the groups
involved, basing these distinctions on what is called the ethic of
virtue.
Copyright © 2012 Pearson Education, Inc. All rights reserved.
 Ford Pinto’s Case
• Ford knew that the Pinto would explode when rear-ended at
only 20 mph, but they also knew that it would cost $137
million to fix the problem.
• Since they would only have to pay $49 million in damages to
injured victims and the families of those who died, they
calculated that it was not right to spend the money to fix the
cars when society set such a low price on the lives and health
of the victims.
• The kind of analysis that Ford managers used in their cost-
benefit study is a version of what has been traditionally called
utilitarianism.

Copyright © 2012 Pearson Education, Inc. All rights reserved.

 Utilitarianism: Weighing Social
Costs and Benefits
• Selecting the course of action that would have
the most beneficial consequences is
sometimes referred to as a consequentialist
approach and sometimes as a utilitarian
approach.
• Utilitarianism 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.
Copyright © 2012 Pearson Education, Inc. All rights reserved.
 Utilitarianism
• Actions and policies should be evaluated on
the basis of the benefits and costs they will
impose on society.
• The only morally right action in any situation is
that whose utility is greatest by comparison to
the utility of all the other alternatives.
• Leading utilitarian theorists:
– Jeremy Bentham
– John Stuart Mill
Copyright © 2012 Pearson Education, Inc. All rights reserved.
 How to Apply Utilitarian Principles
• First, determine what alternative actions or policies are
available to me in that situation.
• Second, for each alternative action, estimate the direct and
indirect benefits and costs that the action will probably
produce for all persons affected.
• Third, for each action, subtract the costs from the benefits to
determine the net utility of each action.
• Fourth, the action that produces the greatest sum total of
utility must be chosen as the ethically appropriate course of
action.

Copyright © 2012 Pearson Education, Inc. All rights reserved.

 Criticisms of Utilitarianism
• Critics say not all values can be measured.
– Utilitarians respond that monetary or other
commonsense measures can measure everything.
• Critics say utilitarianism fails with rights and
justice.
– Utilitarians respond that rule-utilitarianism can
deal with rights and justice.

Copyright © 2012 Pearson Education, Inc. All rights reserved.

 The Concept of a Right
• Right = an individual’s entitlement to something.
– Legal right = An entitlement that derives from a legal
system that permits or empowers a person to act in a
specified way or that requires others to act in certain ways
toward that person.
– Moral (or human) rights = rights that all human beings
everywhere possess to an equal extent simply by virtue of
being human beings.
• Legal rights confer entitlements only where the
particular legal system is in force.
• Moral rights confer entitlements to all persons
regardless of their legal system.
Copyright © 2012 Pearson Education, Inc. All rights reserved.
 Moral Rights
• Can be violated even when “no one is hurt”.
• Are correlated with duties others have toward the
person with the right.
• Provide individuals with autonomy and equality in
the free pursuit of their interests.
• Provide a basis for justifying one’s actions and for
invoking the protection or aid of others.
• Focus on securing the interests of the individual
unlike utilitarian standards which focus on securing
the aggregate utility of everyone in society.

Copyright © 2012 Pearson Education, Inc. All rights reserved.

 Three Kinds of Moral Rights
• Negative rights require others leave us alone.
• Positive rights require others help us.
• Contractual or special rights require others
keep their agreements.

Copyright © 2012 Pearson Education, Inc. All rights reserved.

 Contractual Rights and Duties
• Created by specific agreements and conferred only
on the parties involved.
• Require publicly accepted rules on what constitutes
agreements and what obligations agreements
impose.
• Underlie the special rights and duties imposed by
accepting a position or role in an institution or
organization.
• Require (1) the parties know what they are agreeing
to, (2) no misrepresentation, (3) no duress or
coercion, (4) no agreement to an immoral act.
Copyright © 2012 Pearson Education, Inc. All rights reserved.
 Kant and Moral Rights
• Individuals generally must be left equally free
to pursue their interests.
• Moral rights identify the specific interests
individuals should be entitled to freely pursue.
• An interest is important enough to raise to be
a right if:
– we would not be willing to have everyone
deprived of the freedom to pursue that interest
– the freedom to pursue that interest is needed to
live as free and rational beings.
Copyright © 2012 Pearson Education, Inc. All rights reserved.
Kant’s Categorical Imperative (First
Version)
• We must act only on reasons we would be
willing to have anyone in a similar situation act
on.
• Requires universalizability and reversibility.
• Similar to questions:
– “What if everyone did that?”
– “How would you like it if someone did that to
you?”

Copyright © 2012 Pearson Education, Inc. All rights reserved.

 Kant’s Categorical Imperative
(Second Version)
• Never use people only as a means to your
ends, but always treat them as they freely and
rationally consent to be treated and help them
pursue their freely and rationally chosen ends.
• Based on the idea that humans have a dignity
that makes them different from mere objects.
• It is, according to Kant, equivalent to the first
formulation.

Copyright © 2012 Pearson Education, Inc. All rights reserved.

 Criticisms of Kant
• Both versions of the categorical imperative are
unclear.
• Rights can conflict and Kant’s theory cannot
resolve such conflicts.
• Kant’s theory implies moral judgments that
are mistaken.

Copyright © 2012 Pearson Education, Inc. All rights reserved.

 Libertarian Philosophy
• Freedom from human constraint is necessarily good
and that all constraints imposed by others are
necessarily evil except when needed to prevent the
imposition of greater human constraints.
• Robert Nozick’s Libertarian Philosophy:
– the only moral right is the negative right to freedom
– the right to freedom requires private property, freedom of
contract, free markets, and the elimination of taxes to pay
for social welfare programs

Copyright © 2012 Pearson Education, Inc. All rights reserved.

 Types of Justice
• Distributive Justice
– requires the just distribution of benefits and burdens.
• Retributive Justice
– requires the just imposition of punishments and
penalties.
• Compensatory Justice
– requires just compensation for wrongs or injuries.
• Procedural justice
– requires just allocation of resources and roles in the
processes
Copyright © 2012 Pearson Education, Inc. All rights reserved.
 Principles of Distributive Justice
• Fundamental – distribute benefits and burdens
equally to equals and unequally to unequals
• Egalitarian – distribute equally to everyone
• Capitalist – distribute according to contribution
• Socialist – distribute according to need and
ability
• Libertarian – distribute by free choices
• Rawls – distribute by equal liberty, equal
opportunity, and needs of disadvantaged.
Copyright © 2012 Pearson Education, Inc. All rights reserved.
Retributive, Compensatory, and Procedural
Justice
• Retributive Justice = fairness when blaming or punishing
persons for doing wrong.
• Compensatory Justice = fairness when restoring to a
person what the person lost when he or she was
wronged by someone else.
• Procedural justice concerns the fairness and the
transparency of the processes by which decisions are
made. and may be contrasted with distributive
justice (fairness in the distribution of rights or resources),
and retributive justice (fairness in the punishment of
wrongs).
Copyright © 2012 Pearson Education, Inc. All rights reserved.
 Ethic of Care
• Ethics need not be impartial.
• Emphasizes preserving and nurturing concrete
valuable relationships.
• We should care for those dependent on and
related to us.
• Because the self requires caring relationships
with others, thosae relationships are valuable
and should be nurtured.

Copyright © 2012 Pearson Education, Inc. All rights reserved.

 Objections to Care Approach in
Ethics
• An ethic of care can degenerate into
favoritism.
– Response: conflicting moral demands are an
inherent characteristic of moral choices
• An ethic of care can lead to “burnout”.
– Response: adequate understanding of ethic of
care will acknowledge the need of the caregiver to
care for him or herself

Copyright © 2012 Pearson Education, Inc. All rights reserved.

 Theories of Moral Virtue
• Aristotle – virtues are habits that enable a person to live
according to reason by habitually choosing the mean
between extremes in actions and emotions
• Aquinas – virtues are habits that enable a person to live
reasonably in this world and be united with God in the
next
• MacIntyre – virtues are dispositions that enable a person
to achieve the good at which human “practices” aim
• Pincoffs – virtues are dispositions we use when choosing
between persons or potential future selves

Copyright © 2012 Pearson Education, Inc. All rights reserved.

 Objections to Virtue Theories
• It is inconsistent with psychology which
showed that behavior is determined by the
external situation, not moral character.
– Response: moral character determines behavior in
a person’s familiar environment.
– Response: recent psychology shows behavior is
determined by one’s moral identity which includes
one’s virtues and vices.

Copyright © 2012 Pearson Education, Inc. All rights reserved.

 Unconscious vs. Conscious Moral
Decisions
• Unconscious Moral Decisions – Comprise most of our
moral decisions. – Made by the brain’s “X-system” using
stored prototypes to automatically and unconsciously
identify what it perceives and what it should do.
• Conscious Moral Decisions – Is used in new, strange, or
unusual situations for which the brain has no matching
prototypes. – Consists of the conscious, logical but slow
processes of the brain’s “C-system”. – Evaluates
reasonableness of our intuitions, cultural beliefs, and the
norms stored in our prototypes.

Copyright © 2012 Pearson Education, Inc. All rights reserved.

 Trados Bank
• A small British bank or financial institution.
• Ethical bank which offers saving accounts
and investment.
• Declared as “the world’s leading ethical and
sustainable bank.”
• Decision making was guided by six
principles  ethical code of conducts

Copyright © 2012 Pearson Education, Inc. All rights reserved.

 Six Business Principles
• Promote sustainable development – considering the
social, environment and financial impact of everything we do
• Respect and obey the law – in every country where we
do business
• Respect human right – of individuals, and within different
societies and cultures; supporting the aims of the UN’s
Declaration of Human Rights
• Respect the environment – doing all we can to create
and encourage positive environmental effects
• Be accountable – to anyone for anything we do
• Improve continuously – always looking for better ways of
doing things in every area of our business
Copyright © 2012 Pearson Education, Inc. All rights reserved.
 Roche
• A pharmaceutical company.
• Met bank’s ethical criteria and so qualified for including its
stock in the bank’s portfolio of investments in year 2009.
• Using systems to monitor and enforce social standards in its
supply chains.
• Reduce energy consumption and greenhouse gas emissions.
• Received the Public Eye Award that is sponsored by the
Berne Declaration and Greenpeace in January, 2010 
unethical social.
• Testing CellCept in China. CellCept is a drug that prevents a
patient’s immune system from rejecting an organ that has
been transplanted into the patient.

Copyright © 2012 Pearson Education, Inc. All rights reserved.

 Case Summary
• In 2009, Traidos Bank had determined that Roche had
met the banks ethical criteria and qualified for including
its stocks in the banks portfolio
• On September 23, 2010, Traidos Bank announced that
they had removed Roche from is investment Portfolio
• Several months later the bank found out about Roches
Research programs in China
• A large part of transplanted organs in China originate
from executed prisoners
• Roche does not verify the origins of the organs in its
China based trials
Copyright © 2012 Pearson Education, Inc. All rights reserved.
Case Summary (continued)

• After further investigations, the bank decided Roche no

longer met its ethical criteria
• Roche was testing the drug Cell-Cept on Chinese transplant
patients because Chinese law requires that any drug sold in
China must first be tested on Chinese patients
•  Up to 90% of transplanted organs in China come from
executed prisoner
• Roche was concerned by the growing controversy over its
participation in transplant operations that in many cases,
the company had to use organs taken from prisoners with
out their consent, or forced out of thems

Copyright © 2012 Pearson Education, Inc. All rights reserved.

Case Summary (continued)
• Dr Schwan stated that Cell-Cept was a medicine which had
saved and continued to save thousands f patients lives by
preventing post transplant organ rejection
• Not only were the organs of deceased people sold covertly
to doctors, hospitals, but living donors also secretly sold
their organs by using easily forged documents testifying that
they were related
• A large number of the prisoners were political dissidents or
those who were jailed because of their religious or political
beliefs
• In 2010, human rights groups announced that their
investigations had uncovered evidence that more than 9000
members of Falon Gong had been executed in Chinese
Prisons
Copyright © 2012 Pearson Education, Inc. All rights reserved.
 Ethical Issues
• Doing a transplant illegally
• Take out organs from someone body without their
consents
• Selling and buying organs in black market is also an
unethical action to do
• Forging documents to sell organs
• People imprisoned and then executed them for their
organs against their will
• Harvested organ of the human body

Copyright © 2012 Pearson Education, Inc. All rights reserved.

12 business ethics principles:
• Leadership
• Accountability
• Integrity
• Respect for others
• Honesty
• Respect for laws
• Responsibility
• Transparency
• Compassion
• Fairness
• Loyalty
• Environmental concern

Copyright © 2012 Pearson Education, Inc. All rights reserved.

12 business ethics principles:

Copyright © 2012 Pearson Education, Inc. All rights reserved.