Business Ethics

Lecture 04:

Chapter Two: Types of Ethics & Types of Ethical

Theories

Sources: Shaw (Primary)

Velasquez (Secondary)
Learning Objectives:

1. Why ethical theory is required?

2. What are the different types of ethical theories? (from
the point of view of consequences)
3. What are the basic differences among those theories?
4. Logical comprehensiveness and feasibility of those
theories.
5. Criticism of all those theories.
6. How can we implement those theories in different
contexts of our life?
What is/ how is it ethical?

Earlier we learned that when we make a particular

decision we refer to a certain moral standard and then
make the judgment. (Refer to moral reasoning).

But it is very difficult to produce an universal right and

wrong judgment. Because people make decision based on
different ethical theories and viewpoints.
What is/ how is it ethical?

So, whenever we make a particular decision it could

be backed up by such theory of ethics which might
be acceptable to me or not.

So, lets get to the face of those ETHICAL

THEORIES….
Theories of Ethics

Descriptive ethics: What do people think is right?

Normative (prescriptive) ethics: How should people

act?

Applied ethics: How do we take moral knowledge and

put it into practice?

Meta-ethics: What does 'right' even mean?

Normative theories of Ethics

Normative theories can proposes some principles or

principle for distinguishing right action from wrong
action. These are divided into two parts:

a) Consequential
b) Non-consequential
Normative theories of Ethics

Consequential Theories: Here the moral rightness of an

action is determined solely by its result. If its
consequences are good, then the act is right; if they are
bad, the act is wrong.
Moral theorists who adopt this approach are called
consequentialists.

The right actions are those which produce at least equal

good as compared to the amount of evil.
Normative theories of Ethics

Non-Consequential (Deontological) Theories: Here the

right and wrong are determined by more than the likely
consequences of an action. In this theory, the moral
significance of consequences are not ignored; other factors
are also considered while going for the moral assessment
of an action.

Here the ratio of good or bad is not considered rather that

nature of action is considered.
Normative theories of Ethics

Consequential theories:
a) Egoism
b) Utilitarianism

Non-consequential theories:
a) Kant’s Ethics (Universalism)
b) Virtue Ethics
Egoism

The view that identifies morality with self interest

is referred as Egoism.

Egoism contends that an act is morally right if and

only if it best promotes an agent’s long-term
interests.
Egoism

If any action produces or will probably produce, for

the agent, a greater ratio of good to evil in the long
run than any other alternative, then the action is
the right one to perform, and an agent should take
that course to be moral.

Egoism doesn’t preach that we should never assist

others but rather, that we have no moral duty to do
so.
Egoism

There are two kinds of egoism:

a) Personal
b) Impersonal
Personal: Personal egoists claim that they should
pursue their own best long term interest, but they
don’t say what others should do.

Impersonal: They claim that everyone should follow

his or her best long term interest.
Psychological Egoism

Human beings are by nature selfish creature and

psychological egoism flows from this thought.
People are as a matter of fact so constructed that
they must behave selfishly.

Psychological egoism asserts that all actions are

selfishly motivated and therefore truly unselfish
actions are impossible.
Psychological Egoism
Example:

1. A father intended to sacrifice his life to save

his children’s life.

➢According to psychological Egoism, the parent

may seek to perpetuate the family line or to avoid
guilt.
Psychological Egoism
Example:

2. An employee has blown a whistle (Whistle-blowing)

to disclose the fraud and misdeed of the organization
or an individual; even if the employee knows that he/
she has to pay for this to a great extent.

➢According to psychological Egoism, the employee

wants to take revenge or he/she is after fame.
Problems with Egoism (criticisms)

1.Psychological egoism is not a sound theory .

Although self-interest motivates us to some extent and
there are also some situations in which we pretend to act
morally; but in all situations, we are not only motivated
by self interests.

Anything that you do is the result of your desire; but this

doesn’t mean that your desire always follows self-interest.
Problems with Egoism
Example:
While driving, a driver saw a crashed car at the
roadside which was burning. A little girl was inside
the car suffocating from severe smoke. The driver
stopped the car and saved the life of that little girl
risking his own life.

➢Here the psychological egoists may argue that the

heroic deed was done so that the hero might get
praise from other or to get his self esteem up!!!
Problems with Egoism
Example:

Consider a vice versa case where the driver saw the

car and fled away; just to save himself from the
dangerous job. Isn’t he a coward?

Now we can question the logical/scientific

understanding of this theory; because here both the
coward and the hero turned out to be equally self-
interested and egoistic; ultimately being ethical!!
Problems with Egoism

2. Egoism is not really a moral theory at all.

Egoism misunderstood the nature and point of morality.
Morality serves to restrain our purely self interested acts,
so we can altogether live in harmony.

In a society of egoists, the social system would fall apart

in pieces and there would be no means to resolve
conflicts/disputes. Because, all people would behave in
their own interest and think that they can get away with
this.
Problems with Egoism

3. Ethical egoism ignores deliberate wrongs. Egoism

takes no stand against seemingly disgraceful acts
like stealing, murder, racial and sexual
discrimination, deliberately false advertising and
environment pollution.

All such tests are morally neutral until the test of

self interest is applied.
 Utilitarianism
It is the moral doctrine that we should always act to
produce the greatest possible balance of good over
bad for everyone affected by our action. Here good
equals to happiness or pleasure.

Jeremy Bentham and John Stuart Mill were the first

to develop the theory in detail. They used the
utilitarian standard to evaluate and criticize the
social and political system of their days. Such as the
prison system.
Utilitarianism (Bentham’s view)

Bentham viewed a community as no more than the

individual person who composes it. The interests of
the community are simply the sum of interest of its
members. An action promotes the interest of an
individual when it adds to the individual’s pleasure
or diminishes the person’s pain.
Utilitarianism (Bentham’s view)
Example: Suppose there are ten members in a society,
and they have the following happiness score.

A road is made to improve the communication facility.

So, the whole society would enjoy the benefit of a
better communication infrastructure and the happiness
would normally go up.
Utilitarianism (Bentham’s view)
But, the people who had to sacrifice their land to get the road
done would possess a lower pleasure than the other people.

Yet, if the total happiness of the society goes up; it would be a

better/ethical decision from the point of view of
Utilitarianism.
Happiness score after the road construction:
Utilitarianism (Bentham’s view)

For Bentham, pleasure and pain are merely types of

sensations. He offered a “Hedonic Calculus” of six
criteria for evaluating pleasure and pain exclusively
by their quantitative differences; namely a)
intensity and b) duration.

Bentham rejected any distinction between quality

of pleasure except insofar (to the extent) as they
might indicate differences in quantity.
Utilitarianism (Bentham’s view) (Criticisms)

Thus, whenever equal amounts of pleasure are

involved, throwing dirt is as good as writing poetry.

Here the only issue is which act ignites the greater

amount of enjoyment by not considering the
intellectual height of that particular work.
Utilitarianism (Bentham’s view)
Example:
Mr. X threw a dirt and wrote a poem on the same day.

Here, According to Bentham, Both the work holds the

same goodness!! (Left Qualitative variables, like
intellectual height of those two works)
Utilitarianism (Mill’s view)

The pleasure of the intellect & imagination, in particular

has a higher value than those of mere physical sensation.

Thus, for Mill, the utility principle allows consideration of

the relative quality of pleasure and pain, not just their
intensity and duration.
Utilitarianism (Criticism of Both Bentham & Mill)

1.Both men equated pleasure and happiness and

considered pleasure the ultimate value. In this
sense they are “Hedonists”.

The people who follow the theory of “Hedonism”

are called hedonists. They only care for their
internal pleasure.
Utilitarianism (Criticism of Both Bentham & Mill)

Hedonism: Hedonism is a school of thought which

argues that pleasure is the only intrinsic good. This is
often used as a justification for evaluating actions in
terms of how much pleasure and how little pain (i.e.
suffering) they produce.

In very simple terms, a hedonist strives to maximize

this net pleasure (pleasure minus pain).
Utilitarianism (Criticism of Both Bentham & Mill)

2. Critics of Bentham & Mill contended that things

other than happiness are also inherently good. For
example: knowledge, friendship & aesthetic
satisfaction.

The implication is that these things are valuable

even if they don’t lead to happiness.
Utilitarianism (Six points )

1. When deciding which action will produce the

greatest happiness, we must consider unhappiness or
pain as well as happiness.
2. Actions affect people to different degrees.
3. Utilitarians evaluate actions according to their
consequences, and actions produce different results
in different circumstances, almost anything might, in
principle, be morally right in some particular
circumstances.
Utilitarianism (Six points )
4. Utilitarians wish to maximize happiness not simply
immediately but in the long run as well. All the indirect
implications of act have to be taken into account.
5. Utilitarians sometimes acknowledge the most favorable
outcome without considering the apparent evil with it.
6. When choosing among possible actions, we should give
equal importance to our own pleasure; no more no less.
Sometimes we can use rule of thumb to avoid lengthy
calculations.
Utilitarianism (In an organizational context)

1. Utilitarianism provides us a clear and straightforward

basis for formulating and testing policies.
2. Utilitarianism provides an objective way of resolving
conflicts of self-interest. Thus individuals within
organizations make moral decisions and evaluate their
actions by appealing to a uniform –standard the general
good.
Utilitarianism (In an organizational context)

3. Utilitarianism is a flexible, result oriented approach to

moral decision making. Utilitarianism encourages
organizations to focus on the results of their actions and
policies, and it allows them to tailor their decisions to suit
the complexities of their situations.

Thus managers can take realistic and workable moral

decisions.
Utilitarianism (Weighing Social Cost & Benefits)

During the last century, Ford lost market share to Japanese

companies making compact, fuel-efficient cars. At that time
Ford president decided to regain Ford’s position by rapidly
developing new small car called “pinto”.
When an early model of pinto was crash tested, it was found
that, when struck from the back at 20 miles per hour or
more, the gas tank would some time rupture and gas would
spray out into the passengers compartment.
Utilitarianism (Weighing Social Cost & Benefits)

In a real accident, sparks might explosively ignite the

spraying gasoline and possibly burn any trapped passengers.
This problem could still be fixed by modifying the gas tank
@ $11 per unit.

Though the car had some severe safety problems, Ford

managers gave a thumbs up for the pinto production
(without any modification) for the following reasons:
Utilitarianism (Weighing Social Cost & Benefits)

1. The design met all the applicable legal & Government

standards,
2. Ford managers thought that the car was comparable in
safety to several other cars produced in the same
industry,
3. According to an internal cost-benefit analysis carried out
by Ford, the cost of modifying the pinto would not be
balanced by the benefits.
Utilitarianism (Weighing Social Cost & Benefits)

Assumptions:
Cost:
$11× 12.5 million autos = $137 million

Benefits:
Statistical data showed that the modification would
prevent the loss of about 180 burn deaths, 180 serious burn
injuries, and 2100 burned vehicles.
Utilitarianism (Weighing Social Cost & Benefits)

At that time (1970) Government officially valued a

human life @$2,00,000; insurance company valued
a serious burn injury @$67,000, and the average
residual value on sub compacts was $700.

So benefits = (180 deaths × $200000) + (180

injuries × $67,000) + (2100 vehicles × $700) =
$49.15 million.
Utilitarianism (Weighing Social Cost & Benefits)

Cost: Benefits:
$137 million $49.15 million
According to this study Ford went for pinto
production. Then 60 people died in fiery accidents
and at least 120 suffered sever burns.

Ford eventually ended Pinto production.

Utilitarianism (Weighing Social Cost & Benefits)
(Problems in cost benefit analysis)

The Ford managers reduced cost & benefit analysis

primary to economic costs & benefit.

Such as medical cost, loss of income, and damage to

buildings; and these were measured in monetary
terms.
Utilitarianism (Weighing Social Cost & Benefits)
(Problems in cost benefit analysis)

But the benefits of an action may include any

desirable goods:
➢Pleasure
➢Health
➢Lives
➢Satisfaction
➢Knowledge
➢Happiness
Utilitarianism (Weighing Social Cost & Benefits)
(Problems in cost benefit analysis)

But the cost of an action may include undesirable

evils:
➢Pain
➢Sickness
➢Death
➢Dissatisfaction
➢Unhappiness
Utilitarianism (Critical Inquires)

1. Is Utilitarianism really workable?

a) In some difficult cases, we might be very
uncertain about the probable outcome of our
action,
b) Comparing my level of happiness with you is a
very tricky and subjective job,
c) It is not realistic to expect that people would
take that much time to make those
calculations,
Utilitarianism (Critical Inquires)

2. Are some actions wrong even if they produce

good?

Utilitarianism focuses on the consequences of

the action only, not on the action itself. There
might be some action which could bring good,
but the action itself is an immoral one.
Utilitarianism (Critical Inquires)

3. Is Utilitarianism unjust?

Utilitarianism is concerned with the sum total

happiness produced, not with how that
happiness is distributed. Even if someone has
to pay severe price for mass, it is allowed from
utilitarian viewpoint.
Kant’s Ethics (Universalism)

When we say someone has a moral right to do

something is to say that person is entitled to do it
regardless of the utilitarian benefits it provides for
others.
Immanuel Kant attempts to show that there are
certain moral rights and duties that all human
beings possess regardless of any utilitarian benefits
that the exercise of those rights and duties may
provide for others.
Kant’s Ethics (Universalism)

Kant’s theory is based on a moral principle that is

called “Categorical Imperative”. It requires that
everyone should be treated as free person equal to
everyone else. Everyone has a moral right to such
treatment; and everyone has the correlative duty to
treat others in this way.
Kant’s Ethics (Universalism)
Categorical Imperative (First Formulation)

I ought never to act except in such a way that I can

also will that my “maxim” should become a
universal law.
Maxim: The reason a person in a certain situation
has for doing what he or she plans to do.
A maxim becomes a universal law, if everyone in a
similar situation chose to do the same thing for the
same reason.
Kant’s Ethics (Universalism)
Categorical Imperative (First Formulation)

Simply put; An action is morally right for a person

in a certain situation if, and only if the person’s
reason for carrying out the action is a reason that he
or she would be willing to give every person act on,
in any similar situation.
The first formulation of categorical imperative
incorporates two criteria for determining moral right
& wrong: Universalizability and Reversibility
Kant’s Ethics (Universalism)
Categorical Imperative (First Formulation)

Reversibility: Reason behind acting must be that he

or she would be willing to have all others use, even
as a basis of how they treat him or her.

Example: I don’t like the race of a particular

employee and I want to fire him just because of the
race.
Kant’s Ethics (Universalism)
Categorical Imperative (First Formulation)

In this case, I must ask myself whether I would be

willing to be fired myself because my employer don’t
like my race. If I am not willing to have everyone
act in this way, even toward me, then it is morally
wrong for me to act in this way toward others.
Kant’s Ethics (Universalism)
Categorical Imperative (First Formulation)

Universalizability: The person’s reasons for acting must

be reasons that everyone could act on at least principle.

Example: suppose I am considering breaking a contract

because it has forced me to do something that I don’t
want to do. In this case, I would think that would
everyone break an agreement like me just because he
cannot keep the commitment?
Kant’s Ethics (Universalism)
Second formulation of categorical imperative

It postulates that, human beings have an equal

dignity that sets them apart from things such as
tools or machines and that is incompatible with
their being manipulated, deceived or otherwise
unwillingly exploited to satisfy the self interest of
another.
Kant’s Ethics (Universalism)
Second formulation of categorical imperative

By this principle, an employee may legitimately be

asked to perform the unpleasant or even dangerous
tasks involved in a job if the employee freely
consented to take the job knowing that it would
involve these tasks. But it would be wrong to
subject an employee to health risk without the
employee’s knowledge.
Kant’s Ethics (Universalism)
Second formulation of categorical imperative

By this, Kant meant two things:

a) Respect each person’s freedom by treating
people only as they have freely consented to be
treated beforehand,
b) Develop each person’s capacity to freely choose
the aims to pursue.
Kant’s Ethics (Universalism)
Comparison with Utilitarianism

Kant’s categorical imperative focuses on a person’s

interior motivation and not on the consequences of
external actions. Moral right and wrong are
distinguished not by what a person accomplishes ,
but by the reasons the person has for the action.

If a person only acts based on consequences then

that action has no “moral worth”.
Kant’s Ethics (Criticism)

1. Kant’s theory is too unclear to specify whether a

particular activity is morally right or wrong. We can
explain this criticism from two points of view:

a) From universalism’s (first categorical imperative) point

of view: one difficulty is trying to determine whether one
would “be willing to have everyone follow” a certain
policy.
Kant’s Ethics (Criticism)

Example: Suppose I am a murderer. In this

situation, should I want everyone to follow the
policy that murderer should be punished? If I do
hold that belief, then two things might happen
➢I would be protected because other murderers
would not be punished,
➢I would also be punished, because other
murderers are being punished at the same time.
Kant’s Ethics (Criticism)

b) From humanity’s (Second categorical) point of

view: We know that people should not be used as
means like machines rather they should be treated as
ends.

Example: One employer pays the employee below

the subsistence level payment and doesn’t provide
the employees with a safe working environment.
(contd…)
Kant’s Ethics (Criticism)

Here the employer argues that he is not violating

the humanity’s basic grounds, because he is letting
them work elsewhere if they want to do so; they
have the freedom to switch among jobs if they want
to.

In both the previous cases, Kant’s theory fails to

identify a crystal clear distinction between morally
right and wrong activities.
Kant’s Ethics (Criticism)

2. Although we might be able to agree on the kinds of

interests that have the status of moral rights, there is
substantial disagreement concerning what is the limit of
each of this right is; and concerning how each of these
rights should be balanced against other conflicting rights.

Example: Say you have the freedom to associate anyone

we want. Again, you also have the right ….
Kant’s Ethics (Criticism)

not to be injured by other people. Say, you are in a

situation where you are with a group who are
injuring other group. what should you do now?

Kant did not give any clear cut idea about which
interest might be human right or what we should do
when we have to balance several moral rights at the
cost of other in the said case.
Kant’s Ethics (Criticism)

3. There are counterexamples that show that Kant’s

theory sometimes goes wrong.

Example: An employer can get away with discriminating

against Blacks by paying them lower wages than the
Whites for the same work. Suppose, he is so focused in his
dislike of Blacks that he is willing to accept the
proposition that if his own skin were Black, employers
should also discriminate …
Kant’s Ethics (Criticism)

against him.

Then according to Kant’s theory (Reversibility), the

employer would be acting morally in that sort of
situation. (Whereas we know that discrimination is
absolutely immoral).
Virtue Ethics

It places less emphasis on which rules people should allow

and instead focus on helping people to develop good character
traits. Such as, kindness and generosity. These character traits
will, in turn, allow a person to make the correct decision later
on life. Virtue theory also emphasize the need for people to
learn how to break bad habits of character like greed or
anger. These are called vices/evils and stand in the way of
becoming a good person.
Virtue Ethics
Virtue ethics:
a) Deemphasizes rules, consequences, particular acts and
places the focus on the kind of person who is acting.
b) Doesn’t focus on issues like whether an intention is right
(though it is important),
c) Doesn’t focus primarily on issues like whether someone is
following the correct rule,
d) Doesn’t focus primarily on issues like whether the
consequences of an action are good or bad.
(though all the said issues are not irrelevant)
Virtue Ethics

What is primary here is whether the person acting is

expressing good character (moral virtues) or not.

The cornerstone of virtue ethics (why this is popular):

a) They emphasize the central role played by motives in

moral questions,
b) Certain virtues are necessary for correct moral decision,
only motivation or intention alone can’t make ethical
decision.
Virtue Ethics

Key questions asked by virtue ethics:

a) What sort of a person do I want to be?

b) If I want to be that person what sort of virtues
should I highlight in my characteristics?
c) What action will correlate with the virtues that
I want to possess?
d) What action will characterize the person that I
want to be?
Virtue Ethics

Guidelines to implement virtue ethics:

a) An action or choice is morally right if, in carrying
out the act, one exercise exhibits or develops a
morally virtuous character.

b) To apply virtue ethics to a given case, one should

discuss which character traits are relevant and
reflect on the kind of action (reflection should be
precise relating to a certain virtue).
Virtue Ethics

Guidelines to implement virtue ethics:

c) Virtue ethics can be used to praise or criticize
institutions. Do they express virtues or vices? Do
they promote or hinder the development of virtue?

d) We should get inside a certain person while judging

the virtue and one situation or one action is not
enough to say whether a person is virtuous or
vicious.