Lecture 2:

Theories & Principles of Business Ethics

Business Ethics
BUS 4023
Ethical Theories
Ethical theories are the rules and principles that
determine right and wrong for any given Situation
concepts such as good and evil, right and wrong, virtue
and vice, justice and crime, etc. Major branches of ethics
include:

1. Meta-ethics
2. Normative ethics
3. Applied ethics
4. Moral psychology - how moral capacity or moral
agency develops and what its nature is;
5. Descriptive ethics - what moral values people
actually abide by.

2
1. Meta-ethics
3
Concerns the theoretical meaning of moral
propositions and how their truth values may be
determined.

Divided into cognitivism and non-cognitivism:-

a) Cognitivism is seen as the claim that when we talk
about right and wrong, we are talking about matters of
fact.

b) Non-cognitivism is the claim that when we judge
something as right or wrong, this is neither true nor
false. We may be only expressing our emotional
feelings about these things.

Cognitivism vs Non-Cognitivism
4
COGNITIVISM there are objective moral truths
which can be known. Hence statements of moral
belief can be true or false

NON-COGNITIVISM objective assessment of moral
truth is not possible. It is all subjective

Cognitive
(moral judgements can
be known)
Non-cognitive
(moral judgements cannot
be known)
META-ETHICS
5
2. Normative Ethics
Ethical theories that propose to prescribe the morally
correct way of acting.

Categories:
a) Consequentialist ethics: the moral judgment in
these theories is based on the intended outcomes, the
aims, or the goals of a certain action.

b) Non- Consequentialist ethics: start from reasoning
about the individuals rights and duties.


2. Normative Ethics
6
Motivation
/Principles
Action Outcomes
Source: Crane & Matten (2004)
Non-consequentialism Consequentialism
Ethics of Duties (Deontology)
Ethics of Right & Justice
Utilitarianism
Hedonism/Egoism
7
2. Normative Ethics
2.1 Non-consequentialism

a) Deontology
'Duty Based' Ethics
Argues that decisions should be made considering
the factors of one's duties and other's rights.
Deontologists deny that what ultimately matters is an
action's consequences.
They claim that what matters is the kind of action it is.
What matters is doing our duty.



8
Some deontological theories include:
Immanuel Kant's Categorical Imperative
Kant claims that all our actions should be judged
according to a rule he calls the Categorical
Imperative.
First Version: "Act only according to that maxim [i.e.,
rule] whereby you can at the same time will that it
become a universal law.
Ms. Sheela often takes credit for the work done by her
subordinates
Second Version: "Act in such a way that you treat
humanity, whether in your own person or in the
person of another, always at the same time as an end
and never simply as a means."
Mr. Chua is trying to decide whether or not to choose an
interviewee based on physical characteristics. He must
ask himself whether he will be willing to have an employer
reject him based on his physical characteristics.


2. Normative Ethics
9
John Locke - Natural rights are certain basic,
important, inalienable entitlements that should
be respected and protected in every single
action-rights to life, freedom, and property.

Justice can be defined as the simultaneously
fair treatment of individuals in a given situation
with the result that everybody gets what they
deserve

2. Normative Ethics
b) Ethics of Right & Justice
The Concept of a Right
Right = an individuals entitlement to something.
Legal right = An entitlement that derives from a legal
system that permits or empowers a person to act in a
specified way or that requires others to act in certain ways
toward that person.
Moral (or human) rights = rights that all human beings
everywhere possess to an equal extent simply by virtue of
being human beings.
Legal rights confer entitlements only where the
particular legal system is in force.
Moral rights confer entitlements to all persons
regardless of their legal system.

Rights & Duties
Moral rights / human rights:
Human beings of every nationality possess to an
equal extent simply by virtue of being human
beings.
All human beings are permitted/empowered to do
something (the right to get education) or are
entitled to have something done for them (the
duty of the government to provide schools &
universities).
Prohibitions/requirements on others that enable
the individual to pursue certain interests or
activities. Ie: the right not to be tortured.
These rights create duties of others towards an
individual.
Rights & Duties
Moral Duties (moral judgments):
(1) Moral duties other people have toward that
person (positive rights/must be done).
Ie: child-parents, consumer-company

(2) Provide individuals with autonomy and
equality in the free pursuit of their interests.

(3) Justifying ones actions and for invoking the
protection or aid of others (negative rights/
must not be dome).
Ie: child-parents, consumer-company

Aristotle (384 322 B.C.) divided the
concept of justice into three types:

Distributive justice

Retributive justice

Compensatory justice
13
2. Normative Ethics


Distributive Justice
Divides benefits/burdens among individuals
Requires that equals be treated as equals
Question: what principle should govern the
distribution of benefits and burdens?





14
Equality (egalitarians) Need
Effort Productivity
Ability
2. Normative Ethics



Retributive Justice

Concerned with retribution or punishment when
someone has committed a crime or
a wrong-doing
The punishment must fit the crime

15
2. Normative Ethics

Compensatory Justice
Concerned with what kind of compensation
someone should receive for a wrong done to
him or her

The compensation should be in proportion to the
damage someone has received

The greater the damage, the greater the
compensation should be
16
2. Normative Ethics
17
2. Normative Ethics
2.2 Consequentialism
c) Utilitarianism
Utilitarianism holds that an action is right if it leads to the most
happiness for the greatest number of persons
The Basis of Utilitarianism: ask what has intrinsic value
and assess the consequences of an action in terms of
intrinsically valuable things.

Instrumental Value - a thing has only instrumental value if it
is only valuable for what it may get you, e.g., money
Intrinsic Value - a thing has intrinsic value if you value it for
itself,


Utilitarianism
Actions and policies should be evaluated
on the basis of the benefits and costs they
will impose on society
Benefits (utilities): monetary, pleasures,
health, lives, satisfactions, knowledge,
happiness.
Costs: monetary, sickness, death,
ignorance, unhappiness.
Utilitarianism
An action is right from an ethical point of view if:
(1) Utilities: the sum total of utilities produced by
an action is greater than the sum total of utilities
produced by any other act/s, provided the
action would be required by those moral rules
that are correct. (Class attendance)
(2) Cost-Benefit Analysis: desirability of investing
in a project depends on the present and future
economic benefits outweighing present and
future economic costs. (Training &
Development)
(3) Efficient: produces a desired output with the
lowest resource input, produces greatest
benefits at the lowest costs. (conservation,
maximisation)
d) Hedonism/Egoism, which holds that an action is
right if it maximizes pleasure amongst people.
Personal egoists: Pursue their own self-interest but do
not make the universal claim that all individuals should
do the same.
Impersonal egoists: Claim that the pursuit of ones self-
interest should motivate everyones behavior.
Egoists do not necessarily care only about pursuing
pleasure (hedonism) or behave dishonestly and
maliciously toward others.
Egoists can assist others if doing so promotes their own
advantage.
20
2. Normative ethics
21
3. Applied Ethics
How do we take moral knowledge and put it into
practice? Virtue, values, moral obligation
Concerns how moral outcomes can be achieved in
specific situations. Decision making
It argues that moral correctness evolves similarly to
scientific knowledge: socially over the course of many
lifetimes. Thus, we should prioritize social reform over
concern with consequences, individual virtue or duty
(although these may be worthwhile concerns, provided
social reform is also addressed).

22
4. Moral Psychology
A field of study in both philosophy and psychology.

Moral behaviors are typically the product of multiple
levels of moral functioning, energized by:
The "hotter" levels of intuition, emotion, and behavioral
virtue/vice.
The "cooler" levels of values, reasoning, and willpower,
while still important, are proposed to be secondary .

The "Moral Foundations Theory" of psychologist
Jonathan Haidt examines the way morality varies
between cultures and identifies five fundamental moral
values shared to a greater or lesser degree by different
societies and individuals. According to Haidt, these are:
care for others, fairness, loyalty, authority and purity.

23
5. Descriptive Ethics
comparative ethics.
study of people's beliefs about morality.
a form of research into the attitudes of individuals
or groups of people.
aim is to uncover people's beliefs about such
things as values, which actions are right and
wrong, and which characteristics of moral agents are
virtuous.
investigate people's ethical ideals or what actions
societies condemn or punish in law or politics.

24
5. Descriptive Ethics
Observers often note the moral and ethical diversity
between individuals and human cultures, and point to
this diversity as supporting the theory that right and
wrong are not absolute but relative.

Most commonly, morality is seen as relative to culture or
relative to each individual.

Throughout human history, it has not been possible to
find consensus on a single moral code.
This is often taken to support the thesis that morality is a
social construct

25
Stages of Moral Development
Stage 1: Pre-conventional
1. Sticking to rules to avoid punishment
2. Following rules only when doing so is in your
immediate interest. (Follow the rule, fulfill class
attendance)

Stage 2: Conventional
3. Living up to what is expected by people close to
you. (Friends, parents)
4. Maintaining conventional order by fulfilling
obligations to which you have agreed.

5. Descriptive Ethics


Kohlberg: Theory of moral development
26
Stage 3: Principled

5. Valuing rights of others and upholding absolute
values and rights regardless of the opinion of the
majority.

6. Following self chosen ethical principals even if they
violate the law (punctuality)


5. Descriptive Ethics
27
Importance of Kohlbergs Theory:

Shows individuals can change or improve their moral
development
Supports managements development of employees
moral principles
The best way to improve employees business ethics is
to provide training for cognitive moral development.
5. Descriptive Ethics
6. Virtue Ethics
Virtue Ethics - An ethics of virtue is based
on the idea that a morally right act in
some situation that calls for a moral
decision is what a virtuous person would
do in that situation. There are certain
characteristics which are virtues. People
possessing these virtues is what makes
one moral, one's actions are a reflection of
their inner morality. Inherited.
28
7. Ethics of Care
Emphasizes caring for the concrete well being of
those near us.
(1) Ethics need to be impartial. (fair,justice n equal)
(2) Emphasizes preserving and nurturing concrete
valuable relationships.
Communitarian Ethics: communities and communal
relationships as having fundamental value that should
be preserved/maintained.
(3) Says we should care for those dependent on
and related to us.
Tak Nak

Malaysian Context
The Malaysian government is spending
millions of ringgit every year creating
awareness on the Tak Nak campaign.
Adversely, there are numerous tobacco
manufacturers which have been allowed to
operate and sell their products in
Malaysia.
Evaluate this scenario using ethics of
utilitarianism
Review and Discussion Question
1. Explain the differences between the
Cognitivism and Non-Cognitivism.
2. Explain the differences between the
Consequentialism and Non-
Consequentialism Ethics.
3. Describe THREE (3) categories of justice.
4. Describe with explanations, Kohlberg's
stages of Moral Development with
examples.


32