Business Ethics &
Sustainability
BUSI 3157 | Lecture 2
Normative Ethical Theories
Dr Patricia Ang
Lecture 2 | Normative Ethical Theories
Learning Goals
By the end of this session, you
should be able to:
 Locate the role of ethical
theory
 Provide critical overview of
traditional ethical theories
 Determine what an ethical
decision is
 Review prominent ethical
decision-making models
© R. Caruana, 2019. Business Ethics | NUBS UK | 1
Required Readings:
* Crane & Matten, Chapter 3 & 4
Further reading:
- Hasnas, J. (1998). The Normative
Theories of Business Ethics: A Guide
for the Perplexed, Business Ethics
Quarterly, 8(1): 19–42.
- Jones, T.M. (1991). Ethical Decision
Making by Individuals in
Organizations: An Issue-Contingent
Model, Academy of Management
Review, 16(2): 366-395.
© R. Caruana, 2019. Business Ethics | NUBS UK | 2
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What are ethical theories?
• Ethical theories are the rules and
principles that determine right and
wrong for any given situation (Crane and
Matten, 2010)

• Normative ethical theories are those

that propose to prescribe the morally
correct way of acting
– What should be done?

• Descriptive ethical theories seek to

describe how ethics decisions are
actually made in business
– What is actually done?

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What should managers or

corporations do when facing and
ethical issue?

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Traditional Western ethical theories

Motivation
or Action Outcomes
Principles

Consequentialist ethics
Non-consequentialist ethics teleological view
deontological view

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Role of Ethical Theory (De George, 1999)

• Ethical absolution
– There are external, universally applicable moral
principles.
– Right & Wrong are objective qualities, that can be
rationally determined.

• Ethical relativism
– Morality is context- dependent, and subjective.
– Relativists believe there are no universal right and
wrongs, it depends on the person making the
decision, and the culture in which they are located.
* Different from descriptive relativism = different cultures have
different ethics.

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Major normative theories in Business ethics
Egoism Utilitarianism Ethics of duties Rights and
justice
Contribu- Adam Smith Jeremy Bentham Immanuel Kant John Locke
tors John Stuart Mill John Rawls
Focus Individual desires or Collective welfare Duties Rights
interests
Rules Maximization of Act/rule Categorical Respect for human
desires/self interest utilitarianism imperative beings

Concept of Man as an actor with Man is controlled by Man is a rational Man is a being that
human limited knowledge avoidance of pain moral actor is distinguished by
beings and objectives and gain of pleasure dignity
(“hedonist”)
Type Consequentialist Consequentialist Non- Non-
consequentialist consequentialist

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• Armain, Product Manager at Happy Chocs.

Visits Thailand before finalizing new supplier of toys.
– 30 men collect toy components at 6am. Bring back assembled toys
in the evening. At home, whole family including kids aged 5 – 14.
– Toys are shipped to Europe weekly

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Ethical egoism (e.g., Smith)
• 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 (1793): In the economic system, the pursuit of

individual interest is morally acceptable, as the ‘invisible hand’ of
market creates benefit for all

– Relies on free competition and good information

– Limitations | However, markets do not function perfectly

• Anti-globalisation movement. Unequal distribution of wealth globally

• Sustainability debate. Future generations = victims of global climate

change, resource depletion. But they are not present to take part
in the market.

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Lab tests on
animals ..
Ethical, or
not ?

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Utilitarianism (e.g., Bentham and Mill)
• 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’

– Collective welfare.
• In contrast, Egoism looks only at each individual
involved, are individual desires & interests met?

– Based on cost-benefit analysis

• Figure 3.3 analyses Pleasure and Pain of Product manager, Thai supplier,
Parents, Children, Grandmother (Crane & Matten, 2010)

• Animal testing – Do you support this?

– Cruelty to little bunnies !
– Users (us humans) are protected from harm
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Utilitarianism (e.g., Bentham and Mill)

• Problems with utilitarianism

– Subjectivity: assessing consequences of pleasure & pain is from a subjective
perspective of person doing the analysis
– Issues around quantification (e.g. can the value/ figure of forced child labor, health
& safety be calculated to determine costs/ benefits? May have intrinsic worth)
– Distribution of utility (e.g. the minority/ children might suffer, so that the majority
benefits from greater utility)

• Refinement of theory
– Act utilitarianism (single actions, moral judgement based on the amounts of
pleasure and pain the single action causes (Fig 3.3 – To do the business deal, or not)
– Rule utilitarianism (classes of actions, asks whether the underlying principles of an
action produce more pleasure than pain for society in the long run)
– E.g. Should a bank foreclose mortgage on a widowed customer who can’t pay?

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Non-consequentialist theories
• Stem from assumptions about basic universal
principles of right and wrong

• Ethics of rights. Starts by assigning a right to one

party, then advocates a corresponding duty on
another party to protect that right

• Ethics of duties
– Immanuel Kant: Morality is external, abstract,
unchangeable principles. A set of a priori moral laws
that humans should apply to all ethical problems.
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Ethics of duties

• Immanuel Kant: Morality is external, abstract,

unchangeable principles. A set of a priori moral
laws that humans should apply to all ethical
problems.
• A Enlightenment thinker. “Human beings do not
need God, church, or other superior authority to
identify principles for ethical behaviour”
• Humans are rational actors, can decide principles
for self. Humans are independent moreal actors,
make own decisions re: right and wrong
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Ethics of duties (e.g., Kantianism)
‘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.
– E.g. Murder is immoral, if everyone could do it, no possibility of human life on earth

• 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?)

• Thus in theory: Managers would have a duty to fairly compensate employees,

• and/or a duty to ensure a safe working environment, and/or a duty of
• care to customers and/or a duty to not deceive them!
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Ethics of rights
 Can be helpfully conceived as the reverse of duty
based theories
 Natural rights are certain basic, important, unalienable entitlements
that should be respected and protected in every single action
 Types of rights - human rights, citizen rights, legal
rights, contractual rights

 Examples of rights Documents:

- The Declaration of the Rights of Man and of the Citizen (1789)
- US constitution (1789)
- UN Declaration of Human Rights (1948)
- Charter of Fundamental Human Rights for the European Union (2000)

 Rights confer certain duties and obligations on others (often nation-

states, and, very importantly, businesses) © R. Caruana, 2019. Business Ethics | NUBS UK | 16

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Economic and Social Rights (as stipulated by the
Universal Declaration of Human Rights)
 Social Security

 Just and favourable remuneration

 Rest and leisure

 Adequate standard of living for health and

well-being

 Health care

 Special care during childhood and motherhood

 The right to educational opportunities

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Lecture 2

Normative & Descriptive

Ethical Theories
Materials from Professor Rob Caruana

Director of International Centre for Corporate Social Responsibility

Nottingham University Business School

Business Ethics (UK), Spring 2019

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