BUMA 20033 (Good Governance and CSR): Module 2

Topic: Different Normative Ethical Theories Commonly Used in Business Decision-Making

References: Investopedia, Google, Scribd Files, Stodocu.com Files, Personal notes of the
instructor from his Bachelor and MBA degree

I. Learning Objective

1. Identify and Explain the different normative ethical theories commonly used
in business decision making.

II. Contents
1. Kohlberg’s Stages of Moral Development
2. Machiavellian Principle
3. Utilitarianism
4. The Principle of Rights and Virtues: The Kantian Ethics
5. John Rawl’s Principle of Justice
6. Moral Positivism of Hobbes
7. Divine Command Ethics
8. Ethical Egoism of Ayn Rand

III. Kohlberg’s Stages of Moral Development

 Kohlberg's theory proposes that there are three levels of moral development,
with each level split into two stages.

 Kohlberg suggested that people move through these stages in a fixed order,
and that moral understanding is linked to cognitive development. The three
levels of moral reasoning include:

a. Preconventional Morality,
b. Conventional Morality, and
c. Postconventional Morality.

1. Level 1: Preconventional Morality 

At the lowest level of moral development individuals haven’t yet

internalized a sense of morality. Moral standards are dictated by adults
and the consequences of breaking the rules. Children nine years old
and younger tend to fall into this category.

 Stage 1: Punishment and Obedience Orientation.

Children believe the rules are fixed and must be obeyed to the
letter. Morality is external to the self. The child/individual is good
in order to avoid being punished. If a person is punished, they must
have done wrong.

 Stage 2: Individualism and Exchange.

 Children begin to realize that the rules aren’t absolute. Different
people have different perspectives and therefore there isn’t just one
correct point of view.

2. Level 2: Conventional Morality 

A majority of adolescents and adults fall into the middle level

of conventional morality. At this level, people start to internalize moral
standards but not necessarily to question them. These standards are
based on the social norms of the groups a person is part of.

 Stage 3: Good Interpersonal Relationships.

Morality arises from living up to the standards of a given group,

such as one's family or community, and being a good group
member.

 Stage 4: Maintaining the Social Order.

The individual becomes more aware of the rules of society on a

broader scale. As a result, they become concerned with obeying
laws and maintaining the social order.

3. Level 3: Postconventional Morality 

If individuals reach the highest level of moral development, they start

to question if what they see around them is good. In this case, morality
stems from self-defined principles. Kohlberg suggested that only 10-
15% of the population was able to achieve this level because of the
abstract reasoning it required.

 Stage 5: Social Contract and Individual Rights.

Society should function as a social contract where the goal of each

individual is to improve society as a whole. In this context,
morality and individual rights like life and liberty may take
precedence over specific laws.

The child/individual becomes aware that while rules/laws might

exist for the good of the greatest number, there are times when they
will work against the interest of particular individuals.

The issues are not always clear-cut. For example, in Heinz’s

dilemma, the protection of life is more important than breaking the
law against stealing.

 Stage 6: Universal Principles.

 People develop their own principles of morality even if they
conflict with society’s laws. These principles must be applied to
every individual equally.

IV. Machiavellian Principle

 This is the principle of “the ends justifying the means”. This principle
suggests that goals should be given more importance than the method that will
be used to achieve them.

 This includes using deception, manipulation, theft and, in the extreme, even
physical coercion or murder.

 This focuses on achieving one’s goal without considering if the methods is

wrong. It attempts to make people believe that if the result of an action is good
then it is also done in a right manner.

V. Utilitarianism

 Utilitarianism is a theory of morality that advocates actions that foster

happiness or pleasure and oppose actions that cause unhappiness or harm.
When directed toward making social, economic, or political decisions, a
utilitarian philosophy would aim for the betterment of society as a whole.

Utilitarianism would say that an action is right if it results in the happiness of

the greatest number of people in a society or a group.

VI. The Principle of Rights and Virtues: The Kantian Ethics

 This principle opposes the principle of utilitarianism. Some types of actions

including murder, theft and lying were forbidden, even if it would bring more
happiness. A person shouldn’t perform an action if it is bad even though it
will bring goodness to other people.

 This principle is very virtuous. For someone to sacrifice his or her own
happiness to do is morally duty is a very selfless act. He doesn’t care if he or
she will not gain something. The goodness or badness of a person depends on
his motive or reason for doing it even if it doesn’t bring good result.

VII. John Rawl’s Principle of Justice

 John Rawl, the author if this theory, sought to solve the problem regarding the
equal distribution of goods in the society which is called distributive justice
through the use of different familiar devices of the social contract specifically
the original position wherein everyone decides principles of justice from
behind a veil of ignorance.
  He derived his two principles of justice from the resultant to be known as
justice as fairness.

 The first principle ensures that each person has the right to basic liberty
consistent with the liberty of the others which is mainly concerned with the
basic liberties such as the political liberty, to vote and run for office, freedom
of speech and assembly, liberty of conscience, freedom of personal property
and freedom from arbitrary arrest.

 The second principle states that social and economic positions are to be of
everyone’s advantage and open to all under conditions of fair equal of
opportunity.

VIII. Moral Positivism of Hobbes

 Thomas Hobbes was an American philosopher who is recognized as one of the

founders of the political philosophy. His theory of moral positivism largely
depends on the law of the state.

 According to him, an action is good if it is consistent with the law and it is

bad if it is against the law.

IX. Devine Command Ethics

 This theory suggests that an action is morally good if it is equivalent to what

God commands and for a person to be morally upright, he or she should
follow God’s commands.

 Followers of these theory recognize the importance of these commandments in

establishing morality.

X. Ethical Egoism of Ayn Rand

 According to this theory, the basis in determining whether a thing is ethical

is self-interest. Individuals tend to choose to maximize their own benefit
every time in any given situation.

 Rand believes that a man should not sacrifice his own good for others and
should not sacrifice the good of others for himself either. This theory suggests
that any living creatures want to protect himself.

 This theory opposes the principle of altruism which means that man only
exists to serve other.

XI. References

1. Kohlberg’s Stages of Moral Development

 https://www.thoughtco.com/kohlbergs-stages-of-moral-development-4689125
 2. Utilitarianism
 https://www.investopedia.com/terms/u/utilitarianism.asp

3. John Rawl’s Principle of Justice

 https://www.crf-usa.org/bill-of-rights-in-action/bria-23-3-c-justice-as-fairness-
john-rawls-and-his-theory-of-justice

4. Machiavellian Principle, The Principle of Rights and Virtues: The Kantian

Ethics, Moral Positivism of Hobbes, Divine Command Ethics, Ethical Egoism
of Ayn Rand
 https://www.studocu.com/en-us/document/university-of-michigan/advanced-
accounting/good-governance/4058971

Assessment:

A specific kind of cancer was killing your mother. A brand-new medication, according to
doctors, could save her. You attempted trying to get the drug after learning about it from a
local chemist, but the chemist was charging ten times what it cost to produce the drug, which
was much out of your price range.

Even with assistance from relatives and friends, you were only able to raise half the funds.
You told the pharmacist that your mother was ill and requested a cheaper prescription or the
option to pay the balance later.

The chemist declined, claiming that he had found the medication and would profit from it.
Later that evening, in your desperation to save your mother, you broke into the pharmacy and
stole the medication.

Question 1: Should you have stolen the drug?

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Question 2: Would it change anything if you did not love you mother?
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Question 3: What if the person dying was a stranger (not your mother), would it make any
difference?
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Question 4: Should the police arrest the chemist for murder if your mother died?
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