Chapter 3: Theories of Business Ethics

Ethics are the well-defined standards that impose obligations to refrain human beings
from any misconduct, which could be harmful to the self as well as for the society.

Ethics can be classified into three major study areas:

• Descriptive ethics: Presentation

• Analytical ethics: Reasons

• Normative ethics: Specified course of action

 Theories of Business Ethics

Teleological Theories

∙ Teleological ethics, (teleological from Greek telos, “end”; logos, “science”),

∙ theory of morality that derives duty or moral obligation from what is good or desirable as an end to be
achieved.

∙ Also known as consequentialist ethics, it is opposed to deontological ethics (from the Greek Deon, “duty”),

which holds that the basic standards for an action’s being morally right are independent of the good or evil
generated.
Under consequentialist Theory (Teleological), the consequences of an action determine its moral rightness

Depending on the consequences of actions on different groups consequentialist theory has

three forms:
a. Ethical Egoism: An action is morally right if the consequences of that action are more
favourable than unfavourable only to the agent performing the action
b. Ethical Altruism: An action is morally right if the consequences of that action are more
favourable than unfavourable to everyone except the agent
c. Utilitarianism: An action is morally right if the consequences of that action are more
favourable than unfavourable to everyone.
There are three main types of theories brought
under the rubric of teleological theory of ethics:

∙ Theory of Utilitarianism

∙ Theory of Justice and Fairness

∙ Theory of Virtue
Teleological Theories Deontological
Theories
End and Science Duties and Rights
1. Theory of utilitarianism (Greater good for greater number of people)

a. Consequentialism (Action>Consequences)

b. Hedonism (Increase in Pleasure and Decrease in Pain) Act Utilitarianism

c. Maximalism (Greater good for greater number of people) Rule Utilitarianism

d. Universalism (Applicable to everyone)

Theory of justice and fairness

a. Liberty principle (for all)

b. Difference Principle (greatest benefit to the least

advantaged member of the society)
 
There are three types of Justice.

1. Distributional Justice
2. Redistributive Justice
3. Compensatory Justice
Theory of virtue ethics (Honesty, Loyalty, Patience)

a. Eudaimonism (Well-being)
b. Agent-based theory (Admissible traits)
c. Ethics of care (Feminine-nurturing)

 
1. Distributional Justice – Benefits and losses – equally distributed among
members of society

2. Redistributive Justice – Defaulters - punishment – act as a deterrent

3. Compensatory Justice – Compensation to be given in proportion of the

harm caused
Deontological Theory
• According to this theory, when people adhere to their obligations
and duties, their acts are considered ethically correct or right
Duty Theory
• Duty to God: Theoretical duty and Practical duty
• Duty to oneself: Duty of Soul and Duty of Body
• Duty towards others

SUPEREROGATION:

Duty theory is also known as ‘supererogation’, when a person does an

act exceeding his duty for the goodwill of others.
Rights Theory- According to this theory rights of one person implies
duty of another person

• Legal Right: Where a person derives entitlement from judiciaries

• Moral Right: It is based on moral norms that entitle all human
beings to do something or to have something done for them. It is
divided into i. Natural ii. Universal iii. Equal iv. Inalienable
• Positive Rights: Right that others have a duty to supply e.g., Right to
education
• Negative Rights: Free from interference from others e.g. Right to
Privacy
Relevance of Business Theories
▪ It helps to serve and protect the business interest
▪ It protects the interest of shareholders and fulfills their
expectations
▪ It prevents damages and harm to society caused by business
operations
▪ It helps to know how to contribute
▪ To the revenue of Govt. by paying fees and taxes