Evaluating Business Ethics:

Normative Ethical Theories

 Overview
• Discuss role of ethical theory
• Highlight international differences
• Provide critical overview of traditional ethical
theories
• Discuss contemporary ethical theories
 What are normative ethical
theories?
• Ethical theories are the rules and principles
that determine right and wrong for any given
situation Crane and Matten (2010)
• Normative ethical theories are those that
propose to prescribe the morally correct way
of acting

• As opposed to descriptive ethical theories

which seek to describe how ethics decisions
are actually made in business
 The role of ethical theory
• Two extreme positions (De George 1999)
• Ethical absolutism claims there are eternal,
universally applicable moral principles
– Right and wrong are objective qualities, can be
rationally determined
– Typically traditional ethical theories
• Ethical relativism claims morality is context-
dependent and subjective
– No universal right and wrongs that can be
rationally determined; depends on person making
the decision & culture in which they are located
– Typically contemporary ethical theories
Normative ethical theories
 North American and European
origins and differences
• Differences between Anglo-American and
European approaches based on philosophical
arguments
– Individual versus institutional morality
• US tend to individualistic perspective
• Europe towards wider economic and governing institutions
– Questioning versus accepting capitalism
• US tend to accept the capitalist framework
• Europe tend to question the ethical justification of capitalism
– Justifying versus applying moral norms
• US tend to focus on application of morality
• Europe focus on justification and ethical legitimation of norms
• In contrast, Asian perspectives tend to be
based on religion (e.g. Islam, Buddhism)
Western modernist ethical theories
 Traditional ethical theories
• Generally offer a certain rule or principle
which one can apply to any given situation
• These theories generally can be
differentiated into two groups

Motivation
/ Action Outcomes
Principles

Non-consequentialist Ethics
Consequentialist Ethics

Source: Crane and Matten (2010)

 Major normative theories
Egoism Utilitarianism Ethics of duties Rights & justice

Contributors Adam Smith Jeremy Bentham Immanuel Kant John Locke

John Stuart Mill John Rawls

Focus Individual desires or Collective welfare Duties Rights

interests
Rules Maximization of Act/rule utilitarianism Categorical Respect for human
desires/self interest imperative beings

Concept of Man as an actor with Man is controlled by Man is a rational Man is a being that is
human limited knowledge avoidance of pain and moral actor distinguished by
and objectives gain of pleasure dignity
beings
(“hedonist”)
Type Consequentialist Consequentialist Non-consequentialist Non-consequentialist

Source: Crane and Matten (2010)

 Egoism
• Theory of egoism - an action is morally right if
the decision-maker freely decides an action to
pursue either their (short-term) desires or
their (long-term) interests.
– Adam Smith (1793): pursuit of individual interest
morally acceptable as invisible hand of market
creates benefit for all
– Relies on free competition and good information
– ‘Enlightened egoism’
– However, markets do not function perfectly
• Anti-globalisation movement
• Sustainability debate
 Utilitarianism
• According to utilitarianism, an action is
morally right if it results in the greatest
amount of good for the greatest number of
people affected by the action

– Also called the ‘greatest happiness principle’

– Based on cost-benefit analysis
 Problems with Utilitarianism
• Subjectivity
– This has led to refinement of theory
• Act utilitarianism
• Rule utilitarianism
• Issues around quantification and distribution
of utility
 Act- and Rule-Utilitarianism
Act utilitarianism
– Looks to single actions and bases the moral
judgement on the amount of pleasure and the
amount of pain this single action causes.

Rule utilitarianism
– looks at classes of action and ask whether the
underlying principles of an action produce more
pleasure than pain for society in the long run.
 Ethics of duties
‘Categorical Imperative’ (Kant)
• Maxim 1: Consistency
– Act only according to that maxim by which you can at the same time will
that it should become a universal law.

Maxim 2: Human Dignity

– Act so that you treat humanity, whether in your own person or in that of
another, always as an end and never as a means only.

• Maxim 3: Universality
– Act only so that the will through its maxims could regard itself at the
same time as universally lawgiving (would others agree? Would you be
happy to see your decision reported in the press?)
 Problems with ethics of duties
• Undervaluing outcomes
• Complexity
• Misplaced optimism?
 Ethics of rights and justice
Natural rights
• Certain basic, important, unalienable entitlements that
should be respected and protected in every single action.
– Based on consensus about nature of human dignity
– Strongly based in western view of morality
Justice
• The simultaneously fair treatment of individuals in a given
situation with the result that everybody gets what they
deserve
– Fair procedures (procedural justice)
– Fair outcomes (distributive justice)
 John Rawls’s
‘Theory of Justice’
1. Each person is to have an equal right to the
most extensive total system of basic liberties
compatible with a similar system of liberty
for all.
2. Social and economic inequalities are to be
arranged so that they are both:
a. to the greatest benefit of the least advantaged;
b. attached to offices and positions open to all
under conditions of fair equality of opportunity.
 Limits of traditional theories
• Too abstract
• Too reductionist
• Too objective and elitist
• Too impersonal
• Too rational and codified
• Too imperialist
Alternative perspectives on ethical
theory
 Approaches based on character and
integrity
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
Acquired traits
• Intellectual virtues – personal qualities for good thinking and learning -
wisdom, contemplation.
• Moral virtues – courage and temperance or moderation of self restraint.
 Approaches based on ethics and
responsibility
Feminist ethics
• An approach that prioritizes empathy, harmonious and healthy
social relationships, care for one another, and avoidance of
harm above abstract principles
• that traditionally ethical theorizing has under-valued and/or
under-appreciated women's moral experience, (Alison Jaggar)
Key elements
• Relationships
– Decisions taken in context of personal human interrelations
• Responsibility
– Active ‘taking’ of responsibility, rather than merely ‘having’ it
• Experience
– Learn and develop from experience
 Approaches based on procedures of
norm generation
Discourse ethics (Main Proponent: Jürgen Habermas)
• Aims to solve ethical conflicts by providing a process of norm
generation through rational reflection on the real-life experiences of all
relevant participants
• ‘...in discourse the unforced force of the better argument prevails.’
simply put
• ‘What the Others are saying could be right’
Key elements
• Ultimate goal of ethical issues in business should be the peaceful
settlement of conflicts
• Different parties in a conflict should sit together and engage in a
discourse about the settlement of the conflict, and ultimately provide a
situation that is acceptable to all
• ‘ideal discourse’ criteria
 Approaches based on empathy and
moral impulse
Postmodern ethics (Main Proponents:
Jean-François Lyotard, Jacques Derrida)
• An approach that locates morality beyond the sphere of
rationality in an emotional ‘moral impulse’ towards others. It
encourages individual actors to question everyday practices
and rules, and to listen to and follow their emotions, inner
convictions and ‘gut feelings’ about what they think is right and
wrong in a particular incident of decision-making.
• Logical outgrowth from a prior commitment to a particular set
of rules/principles.
• Destabilises epistemic certainty.
 Postmodern business ethics
• Postmodern business ethics emphasises
(Gustafson, 2000:21)
– Holistic approach
– Examples rather than principles
– ‘Think local, act local’
– Preliminary character
 Summary

Towards a pragmatic use of ethical

theory
 Ethical Pluralism? (Isiaah Berlin)
Crane and Matten (2010) argue that for the practical
purpose of making effective decisions in business:
• Not suggest one theory or one approach as the best or true view of a
moral dilemma
• Suggest that all these theoretical approaches throw light from
different angles on one and same problem
• Complementary rather than mutually exclusive
Advocate position of pluralism
• Occupies middle ground between absolutism and relativism
• That there are conflicting moral views worthy of respect
• Being open minded when faced with competing view points
 Considerations in making ethical decisions: summary of key insights from
ethical theories

Consideration Typical question you might ask yourself Theory

One’s own interests Is this really in my, or my organization’s, best long-term interests? Would it be Egoism
acceptable and expected for me to think only of the consequences to myself in this
situation?
Social consequences If I consider all of the possible consequences of my actions, for everyone that is Utilitarianism
affected, will we be better or worse off overall? How likely are these
consequences and how significant are they?
Duties to others Who do I have obligations to in this situation? What would happen if everybody Ethics of duty
acted in the same way as me? Am I treating people only to get what I want for
myself (or my organization) or am I thinking also of what they might want too?
Entitlements of Whose rights do I need to consider here? Am I respecting fundamental human Ethics of rights
others rights and people’s need for dignity?
Fairness Am I treating everyone fairly here? Have processes been set up to allow everyone Theories of justice
an equal chance? Are there major disparities between the ‘winners’ and ‘losers’
that could be avoided?
Moral character Am I acting with integrity here? What would a decent, honest person do in the Virtue ethics
same situation?
Care for others and How do (or would) the other affected parties feel in this situation? Can I avoid Feminist ethics
relationships doing harm to others? Which solution is most likely to preserve healthy and
harmonious relationships among those involved?
Process of resolving What norms can we work out together to provide a mutually acceptable solution Discourse ethics
conflicts to this problem? How can we achieve a peaceful settlement of this conflict that
avoids ‘railroading’ by the most powerful player?
Moral impulse and Am I just simply going along with the usual practice here, or slavishly following Postmodern ethics
emotions the organization’s code, without questioning whether it really feels right to me?
How can I get closer to those likely to be affected by my decision?What do my
emotions or gut feelings tell me once I’m out of the office?