Chapter Three:

Philosophical
Ethics and
Business

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 Chapter Objectives 1

After reading this chapter, you will be able to:

• Explain the ethical framework of utilitarianism.

• Describe how utilitarian thinking underlies economic and business
decision making.
• Explain how the free market is thought to serve the utilitarian goal of
maximizing the overall good.
• Explain some challenges to utilitarian decision making.
• Explain the principle-based, or rights-based, framework of ethics.

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 Chapter Objectives 2

• Explain the concept of human rights and how they are relevant to
business.
• Distinguish moral rights from legal rights.
• Explain several challenges to principle-based ethics.
• Describe and explain virtue-based framework for thinking about ethical
character.

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 Philosophical Ethics and Business 1

The unexamined life is not worth living.

Socrates, Apology, Plato’s Account of the Trial of Socrates
(Translated by Benjamin Jowett)

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 Ethical Frameworks 1

An ethical framework is nothing more than an attempt to

provide a systematic answer to the fundamental ethical
question.
• How should human beings live their lives?
• Ethics attempts to answer the question of how we should live, but it also
gives reasons to support the answers.

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 Ethical Frameworks 2

Anyone can offer prescriptions for what you should do and how
you should act, but a philosophical and reasoned ethics must
answer the "why?" question as well.
• "Why" matters because without offering reasons, one is giving an opinion.
• "Why" matters because superficial agreement can mask underlying
disagreement.
• Many people attempt to answer “why” in religious terms, but religions
differ from culture to culture.
• Philosophical ethics provides justifications applicable to all people
regardless of their religious starting points.

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 Ethical Frameworks
Ethics is not comprised of a single principle or framework.

Ethical frameworks that have proven influential in the

development of business ethics and that have a practical
relevance in evaluating ethical issues in modern business.
• Utilitarianism is an ethical tradition that directs us to decide based on
overall consequences of our acts.
• The principle-based framework directs us to act on the basis of moral
principles such as respecting human rights.
• Virtue ethics tells us to consider the moral character of individuals and
how various character traits can contribute to, or obstruct, a happy and
meaningful human life.

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 Philosophical Ethics and Business 2

It’s better to hang out with people better than you. Pick out
associates whose behavior is better than yours and you’ll drift in
that direction.
Warren Buffett

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 Utilitarianism: Ethical Consequences 1

Utilitarianism’s fundamental insight is that outcomes matter, and

so we should decide what to do by considering the
consequences of our actions.
• In that sense, utilitarianism has been called a consequentialist approach
to ethics and social policy.
• We should act in ways that produce better consequences than the
alternatives.
• What is meant by better consequences?
• Better consequences are those that promote human well-being: the
happiness, health, dignity, integrity, freedom, and respect of all the people
affected.

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 Utilitarianism: Ethical Consequences 2

Utilitarianism is commonly identified with the rule of producing

"the greatest good for the greatest number."
• The emphasis on producing the greatest good for the greatest number
makes utilitarianism a social philosophy that opposes policies that aim to
benefit only a small social, economic, or political minority.

Utilitarians tend to be very pragmatic thinkers, and no act is ever

absolutely right or wrong in all cases in every situation.
• Utilitarian reasoning usually acknowledges some support for competing
available alternatives.

Utilitarian position is that happiness is the ultimate good, the

only thing that is and can be valued for its own sake.
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 Utilitarianism and Business
The free market is decidedly utilitarian.
• So, utilitarianism has a strong impact on business and business ethics.

How to achieve the goal of maximizing the overall good?

• Two answers prove especially relevant in business and business ethics.
• Some utilitarians agree with Adam Smith, claiming that free and competitive
markets are the best means for attaining the goal.
• Policy experts in predicting human action are familiar with the specifics of how
society works, and they therefore are in a position to determine which policy
will maximize the overall good.
• The dispute between the "market" and the "administrative" versions of
utilitarianism characterize many disputes in business ethics.
• Egoism is also a consequentialist theory, but it focuses exclusively on the
happiness of the individual making the decision.
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 Challenges to Utilitarian Ethics 1

Problems concern the need to count, measure, compare, and

quantify consequences.

Utilitarians determine both ethical and unethical acts by their

consequences—so the end justifies the means.
• This seems to deny one of the earliest ethical principles that the end doe
not always justify the means.
• We have certain duties or responsibilities that we ought to obey even
when doing so does not produce a net increase in overall happiness.

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 Challenges to Utilitarian Ethics 2

Utilitarian reasons contributes to ethical decision by requiring

that we consider the consequences of our actions.
• Important to remember that utilitarian reasoning does not exhaust the
range of ethical concerns.
• Responsible ethical decision making also involves duties, principles, and
personal integrity.

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 An Ethics of Principles and Rights 1

Some decisions should be a matter of principle, not

consequences—the ends do not always justify the means.
• Which principles should be followed?
• When does a principle outweigh producing good consequences?

The ethical framework that will prove crucial for business ethics
begins with the insight that we should make some ethical
decisions as a matter of principle rather than consequences.
• Principles are ethical rules that put values into action.
• Principles create ethical duties that bind us to act or decide in certain
ways.

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 An Ethics of Principles and Rights 2

What principles or rules should guide our decisions?

• Legal rules.
• Organizational rules.
• Role-based rules.
• Professional rules.

Ethical duties should be categorical imperatives rather than

hypothetical.
• A categorical imperative is an overriding principle of ethics.

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 An Ethics of Principles and Rights 3

Hypothetical duties.
• Could include a professional code of conduct that binds you only if you in
that profession.

Categorical duties.
• Do not contain an "if" clause.
• I should or must obey a fundament ethical rule no matter what.

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 Human Rights and Duties 1

Are there any fundamental or "categorical" duties?

• Immanuel Kant believed we all have a duty to treat each person as an end
in themselves and never only as means to our own ends.
• Persons must never be treated as mere tools.

The U.S. Declaration of Independence speaks of "inalienable

rights" that cannot be taken away by government.

Human, or moral rights is central to principle-based ethics.

• The inherent dignity of each individual means that we cannot do whatever
we choose to another person.

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 Human Rights and Duties 2

Human rights protect individual dignity.

Rights imply that some acts and some decisions are "off-limits."
• Our moral duty is to respect the human rights of others.

Humans are said to have a fundamental human right of

autonomy, or "self-rule."

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 Human Rights and Social Justice 1

Two rights emerged as fundamental components of social justice

—liberty and equality.
• More fundamental and persistent than legal rights created by
governments and communities.
• They are particularly fundamental to theories of social justice upon which
democratic societies and capitalist economies have been built.
• Crucial to an understanding of business ethics.

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 Human Rights and Social Justice 2

Libertarian Egalitarian
Here, individual liberty is the • Here, equality is the central
central element of justice. element of justice.
• A just society is one in which • Socialist egalitarian theories
individuals are free from argue for equal distribution
government intrusion as long as
they are not harming others. of basic goods and services.
• Other theories argue that
equal opportunity is crucial.
Ethical business pursues profit
within the law. • Supports greater
governmental responsibility
• Unethical businesses would
in the economy to
include fraud, deception, and
anticompetitive behavior. guarantee equality of
opportunity outcomes.
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 Human Rights and Legal Rights 1

What is the difference between human rights and legal rights?

• Using employee rights as an example, there are three kinds of employee
rights common in business.
• First, there are those legal rights granted to employees on the basis of
legislation or judicial rulings.
• Minimum wage and equal opportunity are some examples.
• Second, employees have rights to those goods that they are entitled to on the
basis of contractual agreements with the employer.
• Health care, pension, and paid holidays are examples.
• Finally, employees have rights grounded in moral entitlements to which
employees have a claim independently of any particular legal or contractual
factors.
• Examples include the right not to be bullied, right not to be lied to, and
the right not to be sexually harassed.

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 Human Rights and Legal Rights 2

Legal rights place certain issues outside the realm of the

employment contract.
• Such legal rights set the basic legal framework within which business
operates.

Human rights lie outside the bargaining that occurs between

employers and employees.

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 Challenges to an Ethics of Rights and Duties
There are two big challenges to this ethical tradition.
• There is disagreement about what rights truly are basic human rights.
• It is unclear how to apply this approach to practical situations, especially
in cases where rights appear to conflict.

Critics charge that unless there is a specific person or institution

that has a duty to provide the goods identified as “rights,” talk of
rights amounts to little more than a wish list of things that
people want.

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 Philosophical Ethics and Business

A business that makes nothing but money, is a poor type of

business.
Henry Ford

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 Virtue Ethics: Integrity and Character 1

Virtue ethics seeks a full and detailed description of those

character traits that constitute a good and full human life.

Virtues are those character traits that would constitute parts of a

good and meaningful human life.
• The best place to see the ethics of virtue is in the goal of every good
parent who hopes to raise happy and decent children.

To understand how virtue ethics differs from utilitarian and

principle-based frameworks, consider egoism.
• There is a gap between self-interest and altruism.
• Ethics requires us to act for the well-being of others at times, something
egoism claims is not possible.

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 Virtue Ethics: Integrity and Character 2

An ethics of virtue shifts the focus from questions of what a

person should do, to a focus on who that person is.
• A person’s character is not independent of that person’s identity.
• Character: Those dispositions, relationships, attitudes, values, and beliefs that
popularly might be called a "personality."
• This shift changes the nature of justification in ethics.

Ethical controversies often involve a conflict between self-

interest and ethical values.

How much we act for the well-being of others depends on our

character.

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 Virtue Ethics: Integrity and Character 3

Virtue ethics recognizes that human beings act according to who

they are, according to their character.
• Given that character plays a key role in our behavior and given that our
character can be shaped by controllable factors, virtue ethics seeks to
understand how those traits are formed and which traits are conducive to
and which ones undermine a meaningful, worthwhile, and satisfying life.

Virtue ethics offer us a more fully textured understanding of life

within business.

Virtue ethics reminds us to examine how character traits are

formed and conditioned.
• Many individual moral dilemmas arise when tension between who we
seek to be and the type of person business expects us to be.
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 Virtue Ethics: Integrity and Character 4

Virtue ethics should lead us to ask questions about the choices

we make and how those choices affect our character.
• First, note that each decision you make has a subtle but meaningful
impact on subsequent decisions.
• This suggests a reciprocal relationship between character and action.
• Our character affects how we act, but how we act ends up affecting our
character.
• The second way in which our choices affect character is through the
people we choose to associate with and the organizations we choose to
become part of.
• This has important implications for the companies we choose to work for.
• The organizational culture that we become part of will inevitably change who
we are, so choose carefully.

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 Decision-Making Model for Business Ethics Revisited 1

This chapter introduced three historically and philosophically

ethical frameworks.

Understanding the philosophical basis of ethics enables you to:

• Become more aware of ethical issues.

• Better able to recognize the significance of your decisions.
• More likely to make better informed and more reasonable decisions.
• Articulately explain yourself when asked about a decision.

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 Decision-Making Model for Business Ethics Revisited 2

Ethical theories also provide ways to develop the decision-

making model introduced in chapter 2.
• These theories provide systematic and sophisticated ways to think and
reason about ethical questions.
• The decision-making model now has ethical theories integrated into an
explicit decision procedure.

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 Decision-Making Process Revisited 1

• Determine the facts.

• Identify the ethical issues involved.
• Identify stakeholders.
• Consider the available alternatives.

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 Decision-Making Process Revisited 2

Compare and weigh the alternatives.

• Consequences.
• Duties, rights, and principles.
• Implications for personal integrity and character.

Make a decision.

Monitor and learn.

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