ETHICS AND SOCIAL RESPONSIBILITY

LECTURE: 03

NORMATIVE ETHICAL THEORIES

◦ Normative ethical theories are divided into teleological and deontological theories. The
most prominent historical examples of a teleological and a deontological theory are
utilitarianism and the ethical theory of Immanuel Kant, respectively.

1) TELEOLOGICAL THEORIES

◦ Teleological theories hold that the rightness of actions is determined solely by the amount
of good consequences they produce. (The word “teleological” is derived from the Greek
word “telos,” which means an end.) Actions are justified on teleological theories by
virtue of the end they achieve, rather than some feature of the actions themselves.

◦ For example, if a man steals for buying medicine for his ailing children, his action
(stealing) is justified under teleology because it focuses on consequence i.e., saving lives.

2) DEONTOLOGICAL THEORIES

◦ Deontological theories deny that consequences are primary in determining what we ought
to do. Deontologists typically hold that we have a duty/obligation to perform certain acts
not because of some benefit to ourselves or others, but because of the nature of these
actions or their inherent value. (The word “deontological” is derived from “deon,” the
Greek word for duty.)

◦ Thus, what makes lying wrong is the very nature of lying, not the consequences of lying.
Other examples of non-consequentialist reasoning in ethics include Golden Rule
(philosophy for leading one's life that suggests that other people should be treated fairly
and with respect) and basic notions of rights, human dignity, and respect for other
persons.
 FEATURES

A teleologist would say that one should kill an innocent person if that would save two other
innocent lives.

A deontologist would say that if killing is wrong, it remains wrong, even if it could save
lives.

VIRTUE ETHICS

A third type of ethical theory identifies virtue as the key element and focuses on a given set of
rules like “do not steal” etc. Instead of defining them merely as obligatory duties, the emphasis
lies on the individual to develop good habits of character based on these rules (and avoid vices).
Thus, virtue ethics/ theory emphasizes moral education. Morality on this view is mainly about
acquiring and practicing the character traits that conduce to a good life. Virtue ethics does not
attempt to answer the central question of teleological and deontological theories about what
makes actions right; rather, it asks how we can live a life of right action?

These theories are not only a valuable resource for enabling us to think through ethical
issues in business but also the foundation for the ethics of business.
 LECTURE: 04

1. UTILITARIANISM (TELEOLOGICAL THEORY)

◦ The most important classical utilitarians are Jeremy Bentham (1748-1832) and John
Stuart Mill (1806-1873). Bentham and Mill were both important theorists and social
reformers. Their theory has had a major impact both on philosophical work in moral
theory and on approaches to economic, political, and social policy.

◦ Bentham and Mill thought that the moral value of an act was determined by the pleasure
it produced.

DEFINITION

An action is right if and only if it produces the greatest balance of pleasure over
pain for everyone.

An example of utilitarianism in business is the practice of having tiered pricing for a

product or service to different types of customers. Customers who fly in first or business
class pay a much higher rate than those in economy seats, but they also get more
facilities.

PRINCIPLE OF UTILITY

a) Consequentialism: The principle holds that the rightness of actions is determined solely
by their consequences. It is by virtue of this thesis that utilitarianism is a teleological
theory.

Example; Telling a lie or breaking a promise is right if it has better consequences than
any alternative action. Utilitarian morality thus seems to place no value on observing
rules, such as “Tell the truth” or “Keep your promises”.
 b) Hedonism: Utility in this statement of the theory is identified with pleasure and the
absence of pain. Hedonism is the thesis that pleasure and only pleasure is ultimately
good.
Example; a constant quest for pleasure and satisfaction. The belief that pleasure or
happiness is the highest good in life.

c) Minimalism: A right action produces the greatest good consequences and the least bad.
Example;
1) a person loves baking
2) Baking pie is what he enjoys more
3) He loves baking apple pie as it would give him further satisfaction
4) The experience would be more pleasurable if he takes it to the family who just moved
in across the street. And so on and so forth.

d) Universalism: The consequences to be considered are those of everyone affected, and

everyone equally.
Example; actions that are universally considered wrong like murder, torture or rape.

COST-BENEFIT ANALYSIS

The utilitarian ideal of a precise quantitative method for decision making is most fully
realized in cost–benefit analysis. This method differs from classical utilitarianism,
with its measure of pleasure and pain, primarily in the use of monetary units to
express the consequences of various alternatives. Any project in which the dollar
amount of the benefits exceeds the dollar amount of the costs is worth pursuing,
according to cost–benefit analysis, and from among different projects, the one that
promises the greatest net benefit, as measured in dollars, ought to be chosen.

Example; would scarce resources be better spent on preschool education or on the

development of new sources of energy? In cost–benefit analysis, decision makers have an
analytic framework that enables them to decide among such dissimilar projects in a
rational, objective manner.
EVALUATION OF COST BENEFIT ANALYSIS (CBA)

1. Cost– benefit analysis is criticized for problems with assigning monetary values to costs
and benefits. First, not all costs and benefits have an easily determined monetary value. A
further criticism of cost–benefit analysis is that some non-market goods cannot be
assigned a monetary value. Steven Kelman argues that placing a dollar value on some
goods reduces their perceived value because they are respected/treasured as they cannot
be bought and sold in a market.

Example; friendship, love and loyalty are obvious examples. Assigning blood collection,
a monetary value decreases its perceived value whereas given as a donation it increases
its worth as a gift for society.

2. Another criticism of CBA is that people’s individual and collective decisions are not
always rational.
Example; people who drive without seat belts are probably aware of their benefit for
other people but are convinced that nothing will happen to them because they are such
good drivers. As a result, they (irrationally) expose themselves to risks that do not
accurately reflect the value they place on their own lives.

SHADOW PRICING

◦ Experts in cost–benefit analysis attempt to overcome the problem of assigning a dollar

figure to non-market goods with a technique known as shadow pricing.

◦ This consists of determining the value of a good (market or non-market) reflected by

people’s behavior. For example, by comparing the prices of houses near airports, busy
highways, and the like with the prices of similar houses in less noisy areas, it is possible
to infer the value that people place on peace and quiet. The value of life can be similarly
estimated by considering the amount of extra pay that is needed to get workers to accept
risky jobs.
CRITICISM ON SHADOW PRICING

◦ There are some pitfalls in using the technique of shadow pricing, especially when human
life is involved.

1. Many people accept risky jobs because they are unable to secure safer employment.

2. Some job seekers may not fully consider the risks they face, especially when the
hazards are hidden.

3. People who accept work as steeplejacks— (an artisan who scales buildings, chimneys,
and churches to carry out repairs or maintenance) are possibly less concerned with danger
than is the general population. We certainly do not want to assume, however, that
workplace safety is of little value simply because a few people are so heedless of danger
that they accept jobs that more cautious people avoid.

PROS AND CONS OF COST- BENEFIT ANALYSIS

PROS CONS
Consequences measured by The market price or value of Not all costs and benefits have a
monetary value in a market goods and services can be used distinct market value or can be
to compare outcomes. objectively valued.

Shadow pricing of nonmarket Market value can be estimated Not all people are able to act or
goods by analyzing the relative worth choose in accordance with their
of choices suggested by actual preferences, or make rational
behavior. decisions.

Placing a value on human life Can apply cost–benefit analysis Seems cold-hearted and
and experiences to issues such as human health devaluing; life, love, happiness,
and safety etc. cannot be bought and are
devalued by assigned values