BUSINESS ETHICS

UNIT II.
APPLICATION OF ETHICAL
THEORIES IN BUSINESS
 Ethical
Theories

Descriptive Normative

Describe Provide
ethical general rules
phenomena and principles
of behaviour
 Five Theories
⚫ Egoism
⚫ the self and its needs

⚫ Utilitarianism
⚫ overall pleasure and pain for all concerned

⚫ Deontology
⚫ duty

⚫ Care Ethics
⚫ relationships, vulnerability, and empathy

⚫ Virtue Ethics
⚫ character
 A descriptive approach to ethics
attempts to describe the moral systems

of groups or societies.

As such it involves empirical research

on individuals, groups, and societies in

order to uncover moral beliefs.

 Descriptive Ethics

• Values
• Ethical ideals
• Moral virtues
• Wrong and right actions and
behaviours
• Moral systems (relativism)…
Disciplines Related to the Study of
Descriptive Ethics

• Psychology
• Biology
• Sociology
• Anthropology
• Cultural Studies…
 Traditional ethical theories developed
mainly in Europe due to the work of

many philosophers, from ancient times

until modernity (e.g.: Aristotle, Epicurus,

Seneca, J. Locke, A. Smith,

J. Stuart-Mill…)
 Traditional
Ethical Theories

Consequentialists Non-consequentialists

Deontology Virtue Ethics

Utilitarianism Egoism Hedonism (Kant, Ross) (Aristotle)
Motivation/Principles/
Duties Action Outcomes

Non-consequentialist ethics Consequentialist ethics

Consequentialist Ethical Theory
An ethical theory which bases moral

judgement on the outcomes of an

action is called Consequentialist (or

Teleological).
 Corollaries (Fact)

▪ Whether an act is right or wrong depends only on the

results of that act;

▪ The more good consequences an act produces, the

better or more right that act is;

▪ A person should choose the action that maximizes good

consequences

▪ People should live so as to maximize good

consequences
 Utilitarianism

An action is morally right if it results in

the greatest amount of good/happiness for

the greatest amount of people affected by

the action

(Crane & Matten, 2010)

“After assessing as best we can expect the likely

results of each action, not just in the short

term but in the long run as well, we are to

choose the course of conduct that brings

about the greatest net happiness”

(Shaw,
2011)
 From an utilitarian point of view,

GOOD/HAPPINESS may be understood as:

▪ Freedom
▪ Knowledge
▪ Life
▪ Pleasure
▪ Political Rights
▪…
 Main Corollaries

▪ The rightness or wrongness of an action is separated from the

goodness or badness of the agent (worth of action ≠ worth of
agent)

▪ The right moral action is the one that maximizes the good

▪ The general principle of utility does not provide a rule to

decide on the moral worth of an action in face of actual
consequences and foreseen consequences, except that we
should do what we have most reason to believe will bring
about the best consequences of the known available
alternatives
 Act Utilitarianism
“The measure of the value of an act is the amount by which it
increases general utility or happiness. An act is to be preferred to its
alternatives according to the extent of the increase it achieves,
compared to the extent the alternatives would achieve. An action is
thus good or bad in proportion to the amount it increases (or
diminishes) general happiness, compared to the amount that could
have been achieved by acting differently. Act utilitarianism is
distinctive not only in the stress on utility, but in the fact that each
individual action is the primary object of ethical evaluation.”
 Rule Utilitarianism

“It maintains that the correct principles of right and

wrong are those that would maximize happiness if society

adopted them. Rule utilitarianism applies the utilitarian standard

not directly to individual actions but rather to the choice of the

moral principles that are to guide individual action.”

(Shaw,
2011)
 Prominent Proponents

J. Bentham
(1748-1832)

J. Stuart-Mill
(1806-1873)
 Egoism

The doctrine according to which the

correct moral action is the one that meets

the self-interest of individuals.

 Main Corollary

The most important moral principle is the

principle of self-interest, personal advantage

or gain
▪ Moral egoism is based on psychological
egoism, according to whichall human by
behaviour is motivated self-interest

(=welfare, well-being).
▪ Self-interest is understood as either:
• one’s desire (self-regarding/ not self- or regarding)
• possession of states independently of being desired
(virtue, knowledge, peace…)
 Moral egoists do not necessarily claim:
▪ that all people should be egoists and act
egoistically (=every individual should pursue

self-interest)

▪ that seeking pleasure, doing harm to others, behaving

disonestly and so on are good things in themselves but
only as far as doing so brings us any kind of personal
advantage
Prominent Proponents

H. Sidgwick
(1838 -1900)

A. Rand
(1905-1982)

F. Nietzsche
(1844 -1900)
 Hedonism
The doctrine that pleasure is the sole good. (…)

Men not only in fact seek pleasure, but further

they ought to do so since pleasure alone is good.

(…)

(Popkin & Stroll, 1956)

 Main Corollaries
▪ To say "all pleasure is intrinsically good" is not to say "all
pleasure is good, simply."
▪ Though pleasure is the only intrinsically and ultimate
good, it is not the only thing desirable, other things are
desirable at least as a means to something (peace, money,
education…)
▪ Some pleasures are not good because they lead to pain
instead of pleasure (taking drugs, getting drunk, making
fun of other people…)
Prominent Proponents

Epicurus
(341BC - 270BC)

Aristippus of Cyrene
(435BC – 356 BC)
 Non-consequentialist Ethical Theory

Any ethical theory which bases moral judgement not

on the outcomes (consequences) of an action but on

its principle (intrinsic properties) or on the agent’s

character.
 Non-
consequentialist

Deontology Agent’s
(Kant, Virtue
Ross) (Aristotle)
 Deontology

An ethical theory which bases moral

judgement on the moral principle (duty) underlying

the action, and thus the action’s intrinsic features, is

called Deontological.
 Main Corollaries

▪Morality is a matter of duty, compliance to a

moral law
▪Whether something is right or wrong doesn’t depend
on its consequences

▪Actions are right or wrong in themselves

▪We have duties regarding our own actions

 The ethical theories proposed by I. Kant and W. D.

Ross are called a deontological philosophies because

they assume the moral value of an action to depend on

the agent’s intention relative to it (namely, complying

to the moral principle) rather than its consequences.

 Prominent Proponents

W. D. Ross
I. Kant (1877-1971)
(1784-1804)
 “Kant believed that moral reasoning is not based on
factual knowledge and that the results of our actions do
not determine whether they are right or wrong.”

(Shaw,
2011)
▪ According to Kant, human action is motivated either by

reason or happiness

▪ So morality depends either on reason or happiness

▪ Happiness is conditional because it differs from

individual to individual and it can be either good or bad

▪ Reason alone is universal, thus unconditional, so

morality must be based on reason in order to become

truly universal

▪ Kant named this moral universal reason “the Good

Will” (= the power of rational moral choice)

▪ According to W. D. Ross, there are several
prima facie duties that we can use to
determine what, concretely, we ought to do.

▪ A prima facie duty is a duty that is obligatory

other things equal, that is, unless it is
overridden by another duty or duties. Where
there is a prima facie duty to do something,
there is at least a fairly strong moral reason in
favor of doing it.
 The Agent’s Virtue

According to a Virtue Theory, the central moral

concept is that of the morally good character or
morally good disposition. It analyzes the rightness
or wrongness of individual choices indirectly in
terms of the character or dispositions of the agent
making the choices
 “Virtue ethics contends that morally correct
actions are those undertaken by actors with
virtuous characters. Therefore, the formation of a
virtuous character is the first step towards
morally correct behaviour.”

(Crane & Matten, 2010)

 Main Corollaries
▪ Moral virtue is simply a matter of performing well
in the function of being human

▪ Practice is very important to achieve excellence

▪ The motivation for being good is not based in a
divine legislator or a set of moral laws but rather
in the same kind of perception of excellence that
might be found in anything else that exists to
perform a function
▪ We can only be held responsible for actions we
perform voluntarily and not for cases involving
physical compulsion or ignorance.
▪ The best measure of moral judgment is choice,
because choice is made voluntarily by means
of rational deliberation.
▪ People always choose to aim at the good, but
they’re often ignorant of what is good and so
aim at some apparent good instead, which is in
fact a vice.
2.3 Contemporary Ethics
These new approaches to ethical thinking
and theorizing mirror changes in how

people think about societies and their

relations with cultural/intellectual

achievements, such as philosophical

thinking…..
JUSTICE
 JUSTICE

• Justice is the ideal, morally correct state of things and persons.

• It is based on individual moral rights.

• Justice can be handled in three subcategories which are

distributive justice, retributive justice, and compensatory

justice.
•JUSTICE
•DISTRIBUTIVE JUSTICE

•RETRIBUTIVE JUSTICE

•COMPENSATORY JUSTICE
 DISTRIBUTIVE JUSTICE

• It is interested in the fair distribution of society’s benefits and

burdens.

• The main principle of distributive justice is; “If individuals are

similar in the relevant aspects, they should be given similar

benefits and burdens; if they are not, they should be treated

dissimilarly in proportion to their dissimilarity.”

 DISTRIBUTIVE JUSTICE VİEWS

• Justice as Equality: Egalitarianism

• Justice Based on Contribution: Capitalist Justice

• Justice Based on Needs and Abilities: Socialism

• Justice as Freedom: Libertarianism

• Justice as Fairness: Rawls

 Justice as Equality: Egalitarianism
• Each individual in the society or group should be given exactly

the equal shares of benefits and burdens.

• There are objections to this view claiming that people do not

have the same degree in a single aspect and some

characteristics are disregarded like need, ability, and effort.

 Justice Based on Contribution:
Capitalist Justice
• What should be the basis of an individual’s share of benefits

must be the contribution to the society or group.

• Work effort, productivity, and market forces of supply and

demand are the terms argued by critics to measure the value of

contribution.
 Justice Based on Needs and Abilities: Socialism

• People’s abilities should be the determiner of work burdens

and their needs should be the determiner of benefits.
• Potential, which is a value, can only be realized by exercising
ability so burdens should be distributed considering abilities.

• There is an opposing argument claiming that if needs, not

effort, determine benefits, there will be no motivation to strive
which will decline productivity in return.
 Justice as Freedom: Libertarianism
• Free individual choices are the cornerstone of the libertarian
view of justice according to Robert Nozick, a famous
libertarian.
• Freedom from coercion is the right of every individual. If an
individual is forced to do something, it is unjust.

• This argument completely disregards people needs counting

freedom from coercion supreme over anything.
 Justice as Fairness: Rawls
• According to John Rawls, two principles should be used to
distribute the benefits and burdens of a society justly.
• First principle, called as principle of equal liberty, states that
each individual has a right to protect his/her liberties from
invasion by others.
• Second principle consists of two parts. First part, called as
difference principle, says that although there will be inequalities
in the society, most needy people should be given special
importance unless this causes everyone get worse than before.
Second part, called as principle of fair equality of opportunity,
argues that every individual be given an equal opportunity to
qualify for the more privileged positions in society’s institutions.
 RETRIBUTIVE JUSTICE

• All, and only, guilty people deserve appropriate punishment.

• In order to maintain justice while punishing the person, some

criteria should be taken into account. First, ignorant or unable

people should not be punished. Second, there must be evidence

of guilt. Finally, punishment system must be consistent and

proportionate
 COMPENSATORY JUSTICE

• It deals with just offsetting the loss of a person who is wronged

by others.

• The rationale behind this theory is that the person who

damages someone else by doing a wrong must compensate that

person’s loss.
 Economic Justice
• Economic justice, which touches the individual person as well
as the social order, encompasses the moral principles which
guide us in designing our economic institutions.
• These institutions determine how each person earns a living,
enters into contracts, exchanges goods and services with others
and otherwise produces an independent material foundation for
his or her economic sustenance.
• The ultimate purpose of economic justice is to free each person
to engage creatively in the unlimited work beyond economics,
that of the mind and the spirit.
 Principles of Economic Justice
• Participative Justice (the input principle) describes how each
of us makes an “input” to the economic process in order to
earn a living. It requires equal access to the means (through
social institutions such as our money and credit system) of
acquiring private property in productive assets, as well as equal
opportunity to engage in productive work.
• Distributive Justice (the out-take principle), and

• Social Justice (the feedback and corrective principle).

RIGHTS
 RIGHTS
• A right is an individual’s entitlement to
something.
• If this entitlement may be derived from a legal
system that allows the person to behave in a
certain way, it is called a legal right.
• Rights can also be the consequences of moral
standards. In this case, they are called as moral
rights or human rights.
 RIGHTS

• Rights can be understood in several ways. They

can be interpreted as absence of prohibitions,
authority, or existence of prohibitions.
 RIGHTS
• MORAL RIGHTS
– They are tightly correlated with duties because
what is one’s right is another’s duty.
– Moral rights enable individuals in the free trace of
their interests.
– Moral rights constitute a basis for justifying one’s
actions and for invoking the protection or
assistance of others
 THE BASIS OF RIGHTS

• Utilitarians argue that moral rights exist because

their existence maximizes utility. However, right
is an entitlement and it should be regardless of
utility maximization so there should be another
source of moral rights
 SCOPE OF PROFESSIONAL ETHICS
ETHICS IN COMPLIANCE
• High level oversight
• Written policies and procedures
• Education and training programs
• Monitoring and auditing
• Investigating and reporting
• Response and prevention
• Enforcement and discipline
• Program effectiveness
 ETHICS IN FINANCE
⚫ To act with honesty and integrity, avoiding real or clear conflicts
of interest in personal and professional relationships.
⚫ To provide information which is full, fair, accurate, complete,
objective, relevant, timely and understandable with regard to
reports and documents of the company to be submitted to the
public.
⚫ To act in accordance with all applicable laws, rules and
regulations of governments and other appropriate private and
public regulatory agencies.
⚫ To act in good faith, responsibly, with due care, competence and
carefulness without misrepresenting material facts or allowing
any independent judgment to be subordinated.
⚫ To respect the confidentiality of information acquired in the
course of business except when authorized or otherwise legally
obligated to disclose the information.It should not be used for
personal advantage.
⚫ To promote ethical behavior among the other associates.
 ETHICS IN HUMAN RESOURCES
⚫ The HR executives are accountable for faithfully carrying out
their responsibilities to the benefit of all the employees in the
organization.
⚫ The HR professionals should give fair and equitable treatment
to all the employees.
⚫ It is the duty of HR executives to keep the company
information in the strictest confidence and protect the
integrity of the company proprietary information while dealing
with employees or individuals outside the company.
⚫ Human resource professionals are responsible for learning and
understanding the entire body of knowledge required to carry
out their duties and responsibilities. They are also responsible
for continuing education to remain experts in their field.
 continued
⚫ HR professionals must maintain competence in carrying out
professional responsibilities and provide services in an honest
and diligent manner.
⚫ It is the duty of the HR executives to adhere to any statutory
acts, regulation or by-laws which relate to the field of human
resource management, as well as all civil and criminal laws,
regulations and statutes that apply in one’s jurisdiction.
⚫ The HR executives should support, promote and apply the
principles of human rights, equity, dignity and respect in the
workplace within the profession and in the society as a whole.
⚫ The HR executives should strive to balance organizational and
employee needs and interests.
 Ethics in Marketing
• A shared standard of truth in marketing communications.
• A clear distinction between advertising and sensationalism.
• Endorsements (a public or official statement of support or
approval) should be clear and transparent.
• Consumers’ privacy should be maintained at all times.
• Government standards and regulations must be adhered to
and practiced by marketers.
 ETHICS IN PRODUCTION
⚫ No forced labour should be employed in the process of production.
Manufacturers shall acknowledge the right of their employees to leave
their employer after reasonable notice.
⚫ Manufacturers and suppliers shall not employ minors i.e. children below
the age of 14. Young workers shall not work during night hours or in
hazardous conditions.
⚫ Manufacturers and suppliers shall not apply any type of discriminatory
practice with regard to the recruitment, compensation, access to training,
promotion, termination of the employment agreement or retirement,
based on race, caste, creed, nationality, religion, age, gender, marital
status, etc.
⚫ Manufacturers and suppliers shall ensure that their employees, without
distinction, have the right of association, union membership and collective
bargaining.
⚫ Manufacturers and suppliers shall treat their employees with dignity and
respect.
 Continue
⚫ Manufacturers and suppliers shall provide a safe and healthy workplace
to their employees, ensuring minimum conditions of light, ventilation,
hygiene, fire prevention, safety measures and access to a drinking water
supply.
⚫ Manufacturers and suppliers shall ensure that wages should always be
enough to meet at least the basic needs of workers and their families and
any other which might be considered as reasonable additional needs.
⚫ Manufacturers and suppliers shall not require their employees to work,
as a rule of thumb, in excess of 48 hours a week and workers shall be
granted at least one day off in a week. Overtime shall be voluntary, not
exceeding 12 hours per week and shall always be compensated.
⚫ Manufacturers and suppliers must ensure the production of safe and
good quality products.
⚫ Manufacturers and suppliers shall be duly committed at all times to
protect the environment and shall comply with the standards and
requirements of the applicable laws and regulations.
 ETHICS IN RESEARCH
⚫ Honesty –To Strive for honesty in reporting data, results, methods and
procedures, and publication status.
⚫ Objectivity–To avoid bias in experimental design, data analysis, data
interpretation, peer review, personnel decisions and other aspects of
research where objectivity is expected or required.
⚫ Integrity –To Keep the promises and agreements, act with sincerity,
strive for consistency of thought and action.
⚫ Carefulness–To avoid careless errors and negligence, carefully and
critically examining the work and the work of the peers. To keep good
records of research activities such as data collection, research design
and correspondence with agencies or journals.
⚫ Openness - To share data, results, ideas, tools, resources. To be open
to criticism and new ideas.
 Continue
⚫ Respect for Intellectual Property –To honor patents, copyrights, and
other forms of intellectual property by not using unpublished data,
methods, or results without permission.
⚫ Confidentiality – To protect confidential communications such as
papers or grants submitted for publication, personnel records, trade
or military secrets and patient records.
⚫ Social Responsibility – To strive to promote social good and prevent
or minimize social harms through research, public education and
advocacy. It includes:
⚫ Competence - To maintain and improve the professional competence
and expertise through lifelong education and learning and to take
steps to promote competence in science as a whole.
⚫ Legality - To know and obey relevant laws and institutional and
governmental policies.
 Principles Of Professional Ethics
• Honesty
• Integrity
• Accountability
• Loyalty
• Fairness
• Concern for others
• Respect for others
• Law abiding
• Leadership
• Commitment to excellence
• Reputation and morale
• Promise-keeping & trustworthiness
 Culture & Ethics
• Generally, culture describes a shared way of doing things.
Culture also reflects the moral and ethical standards of how
people should interact with each other.
• While ethics characterizes moral principles that guide
individuals in determining right and wrong.
• In this context, the relationship between different cultural
norms, which feeds and mediates the emergence of ethical
behaviour and the ethical perceptions are discussed.
• Culture is a set of common values, norms, beliefs, and ideas
shared by members of the same group and not written
 Case Study - 22: Development vs
Environmental and Human Rights
• You are the Managing Director of Metro Rail Corporation (MRC) of a
metropolitan city and you have received orders and funding for
construction of the metro track and a parking space in a densely forested
area of the city with houses of few underprivileged families as well in it.
• For the construction, the forest has to be cleared and the families have
to be moved to some other place. The locals have started a protest after
knowing about the order. They are highly raged about cutting down
thousands of trees and the affected families have also joined them
because the forest holds emotional value for them.
• On the other hand, the minister who directly controls the MRC is
pressuring you to start the felling process as soon as possible. You know
that going against his orders will have serious repercussions.
 Questions
• (a) What are the ethical issues involved and the
options available to you in such a situation?
• (b) what are justice issues involved related to
community
• Also, suggest a course of action you would like
to follow. (250 words)
 Solution
• Being the Managing Director of the Metro Rail
Corporation, my foremost duty is to maintain
the sustainability of project along with fulfilling
my constitutional and ethical duty towards the
environment and the underprivileged.
• As per Gandhian philosophy, the public servants
are the trustees of natural resources, therefore
the development process should be inclusive of
the voice of all without compromising on future
developmental needs.
 Stakeholders Involved

• Government
• Underprivileged people living in the forest area
• Members of Civil Society protesting against
environmental damage
• Metro Rail Corporation
• Future commuters
 The ethical issues involved

• Development vs Environment: As the population in

cities is increasing, infrastructural development is
essential to accommodate the growing demand, but
environmental protection is a necessity for the
sustainability of life which cannot be neglected at any
cost.
• Rights of Underprivileged: Development cannot be
done at the cost of marginalised section and their
rights should be safeguarded at any cost. So, evicting
people’ from their homes is not just treatment.
 The various options available are
• Starting the felling of trees and eviction process as per the orders: This
option allows me to fulfil my duty of following the administrative orders.
But it violates the universal virtue by exploiting nature and legal rights of
underprivileged.
• Stop the felling of trees and eviction orders: It may fulfil my duty
towards the environment and will reflect my ethical concerns towards
the marginalized people. However, I may face punitive actions for not
discharging the official orders as the minister is personally involved in the
case.
• Forming a committee to resolve the issue: It will provide an opportunity
to incorporate the views of different stakeholders and arrive at a
peaceful solution. It will make the development process more inclusive.
 Cont……..
• In such circumstances, it would be necessary to ensure the sustainability
of the project so that needs and rights are not compromised on either
side.
• Firstly, proper two-way communication should be established between
the protestors and authorities so that both sides get a due chance to
present their views.
• Secondly, a proper plan for rehabilitation of underprivileged (to be
evicted) should be put into action in order to safeguard their rights,
along with taking care of their livelihood and adequate compensation.
For this purpose, the Corporate Social Responsibility (CSR) Fund could
be utilized.
 Cont……..
• Thirdly, the design of the project should be reconsidered in order to cause minimum
harm to the environment. A pooled fund could be created, where a certain percentage
of revenues earned from the project could be used for environmental restoration.
• In fact, the protestors should be motivated to help local authorities to create an even
bigger green patch in the city and Compensatory Afforestation Fund (CAMPA
Fund) could be used by the local government for afforestation.
• Finally, the political and public pressure can be averted by forming an independent
committee involving the members from civil society, environment experts, design
engineers and government representatives to resolve the issue as soon as possible.
• Development needs in this dynamic world cannot be compromised but environmental
protection as mandated by Directive Principles of State Policy is also a State
responsibility, therefore a proper balance between the two is essential for a peaceful
existence.
•