Ethical Approaches & Theories

• Two extreme positions (De George 1999)

• Ethical absolutism claims there are eternal,
universally applicable moral principles
• 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
 Ethical Absolutism/Universalism
• Same standards of what is right and what is wrong are
universal and transcend most cultures, societies, and
religion
• Universal agreement on basic moral standards allows a
multinational company to develop a code of ethics that is
applied evenly across its worldwide operations
• Examples:
– Honesty; Trustworthiness; Respecting the rights of others;
– Avoiding unnecessary harm to
• Workers
• Users of a company’s product or service
 Ethical Relativism
• According to the school of ethical relativism . . .
– What is ethical or unethical must be judged in light of
local moral standards and can vary from one country to
another

• Companies’ code of conduct based upon the

principle of ethical relativism assume that local
morality is an adequate guide for ethical behavior
 Drawbacks of Ethical Relativism
• The ethical relativism rule of “when in Rome, do as
the Romans do” presents problems
– It is ethically dangerous for company personnel to assume
that local ethical standards are an adequate guide to
ethical behavior
» What if local standards condone kickbacks and
bribery?
» What if local standards blink at environmental
degradation?
 Pluralism or Integrative Social Contracts Theory

• According to the integrative social contracts theory,

the ethical standards a company should try to uphold
are governed by both
1. A limited number of universal ethical principles that put
ethical boundaries on actions and behavior in all situations
and
2. The circumstances of local cultures, traditions, and values
that further prescribe what constitutes ethically permissible
behavior and what does not
• Integrative social contracts theory provides that “first
order” universal ethical norms always take precedence
over “second order” local ethical norms when local
norms are more permissive
 Business Ethics
Ethical Theories
• Normative Theories
– Ethical theories that propose to prescribe the morally
correct way of acting

• Descriptive Ethical theories

– which seek to describe how ethics decisions are actually
made in business
 Normative Ethical Theories
Egoism
Consequential Utilitarianism
Traditional (Teleological)
Theories Ethics of Duty
Non-Consequential
Ethics of
(Deontological)
Rights & Justice

Virtue Ethics
Contemporary Feminist / Care Ethics
Theories
Discourse Ethics
Post-modern Ethics
 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)

 Traditional Theories: Consequential
• Measured by probable outcome or consequences
• Types
– Egoism : Self benefits
– Utilitarianism: Max. Benefits to Max. people
 Ethical Egoism
• Famous Proponents: Ayn Rand, Adam Smith
• What makes something good or bad, right or wrong, is
that it satisfies one’s desires, or meets one’s needs
• Basic Principle: Self-interest of person doing, considering,
or affected by the action
• One should chose the action which most realizes or
conduces to one’s own self-interest
• Self interest may be wealth, fame, happy family great job
etc.
• Important Variation: should the person look simply to
self-interest, or to enlightened or rational self-interest?
– CSR ….enlightened egoism?
– Conception of Rational Self-Interest is basic component
of capitalist economy and business models
 Utilitarianism
• Famous Proponents: Jeremy Bentham, J.S. Mill
• What makes something good or bad, right or wrong, is that it
produces
– the greatest amount of pleasure (or lack of pain)
– for the greatest number of people
• Basic Principle: “Greatest Happiness Principle”
• Maximizing positive outcomes for the largest number of
people, negative outcomes for lowest number of people
• One should choose the action which will lead to the greatest
happiness (i.e. pleasure, lack of pain) overall
• One’s own pleasure and pain only count as much as any other
person is affected
• Outcome measure: Quantitative or Qualitative (Pleasure or
pain)
•
 Utilitarianism..contd.
• Problems
– Subjectivity…pleasure or pain
– Outcome quantification?
– Distribution of Utility: interest of minority
shareholders
• Subjectivity: led to important Variations:
– Act Utilitarianism: bases the moral judgment on the
amount of outcome any single action brings
– Rule Utilitarianism: looks to classes of action and ask
whether the underlying principles of an action
produce more pleasure than pain for society in the
long run
 Traditional Theories:
Non-Consequential
• Rights-based theories tend to start by assigning a
‘Right to one party’ and then advocating a
‘corresponding duty’ on another to protect the
rights
• Duty based begin with ‘assigning of the duty’ to
act in certain way
• Central to religious perspectives on business
ethics
• Types:
– Ethics of Duty (Deontology)
– Ethics of Rights and Justice
 Ethics of Duty (Deontology)..1/2

• Famous Proponent: Immanuel Kant

• What makes something good or bad, right or
wrong, is that it conforms to some (rational) duty
• Basic Principle: Fulfilling duties towards self or
other persons
• One should choose the action which best
conforms to one’s recognized duties
• The rule prescribes a rule for the means without
concern for the consequences (Arjuna-Krishna in
Mahabharata)
 Ethics of Duty (Deontology)…2/2
• Categorical Imperative: the theoretical framework to decide
– Maxim 1: Consistency (apply to you also)
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 (acceptable to every human being)
Act only so that the will through its maxims could regard itself at
the same time as universally lawgiving.
• Limitations
• Undervaluing outcomes
• Complex..for ordinary person
• Optimism ..human is viewed as ‘rational’
 Ethics of Rights & Justice
• Natural rights are certain basic, important, unalienable
entitlements that should be respected and protected in
every single action
• Human Rights to
– Life, Liberty, Fair Trial, Freedom of Belief, Speech, Association
• Rights to someone……Duties on other one
• Notion of rights???
– West / east/ middle-east
• Distributive Justice: conflicting claims on common assets
• Justice as Equality: Egalitarianism Vs. Non-Egalitarianism
• Business examples:
– Employment..discrimination; Globalisation
 Contemporary Ethical Theories..1/2
• Virtue Ethics- (Plato and Aristotle)
– What makes something good or bad, right or wrong, is
that it actually embodies or promotes traits culturally
acknowledged as good or bad (e.g. courage, justice)
– Basic Principle: actions reflective or productive of
good or bad character, embodied in developed and
lasting traits or habits
– Important Variation(s): different traditions and
theorists develop different lists of virtues and vices
– Example: return of overpayment
 Contemporary Ethical Theories…..2/2
• Feminist ethics/Care
– An approach that prioritizes empathy, harmonious and healthy
social relationships, care for one another, and avoidance of harm
above abstract principles
– One should chose the action which supports or nurtures other people,
particularly those who are most vulnerable (e.g. children, workers)
• Discourse ethics
• Aims to solve ethical conflicts by providing a process of norm
generation through rational reflection on the real-life experiences of
all relevant participants
• Postmodern ethics
– 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.
 Summary
Consideration Typical question you might ask yourself Theory
One’s own Is this really in my, or my organization’s, Egoism
interests best long-term interests? Would it be
acceptable and expected for me to think
only of the consequences to myself in this
situation?
Social If I consider all of the possible Utilitarianism
consequences consequences of my actions, for everyone
that is affected, will we be better or worse
off overall? How likely are these
consequences and how significant are
they?
Duties to Who do I have obligations to in this Ethics of
others situation? What would happen if everybody 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
 Summary

Consideration Typical question you might ask yourself Theory

Moral Am I acting with integrity here? What would Virtue
character a decent, honest person do in the same ethics
situation?
Care for others How do (or would) the other affected parties Feminist
and feel in this situation? Can I avoid doing harm ethics
relationships to others? Which solution is most likely to
preserve healthy and harmonious
relationships among those involved?
Process of What norms can we work out together to Discourse
resolving provide a mutually acceptable solution to ethics
conflicts this problem? How can we achieve a
peaceful settlement of this conflict that
avoids ‘railroading’ by the most powerful
player?
Moral impulse Am I just simply going along with the usual Postmodern
 Case: Rosy’s accident
• Rosy, a secretary who has worked for your corporation
for fifteen years is involved in a car accident in which
she permanently loses the use of her right hand. Thus,
she can no longer effectively type, file, or perform
many of the other functions that she previously had
performed and that are included in her job description.
• Your corporation has a very tight budget and does not
have sufficient funds to pay for an additional secretary
without reallocating budget items. The injured
secretary has been very loyal to your corporation, and
you have been very satisfied with her work and
dedication. She wants to stay at her job.
 Case: Rosy’s accident…..cntd.
• Moreover, she does not believe that she could
find other employment at this time. Should
your corporation fire her, lay her off with
compensation, or find a way to retain her? In
resolving this dilemma, apply:
– Utilitarianism
– The Rights Model
– Feminist ethics
– Your own personal opinion
 Case: Producing Toys-Child’s Play
• What would you decide?
• Apply all ethical decision making framework
 Caselets
• Tomco sold to HUL in 1990s; not to Reliance
• Tata-Ulfa
• Save a drowning boy
• Your uncle in a chemical factories
• Examples from Indian history/mythology:
– Krishna, Karna, Bhishma, Chanakya with Alexander
• Accountant’s dilemma
 Business Ethics
Ethical Theories
• Normative Theories
– Ethical theories that propose to prescribe the morally
correct way of acting

• Descriptive Ethical theories

– which seek to describe how ethics decisions are actually
made in business
 Descriptive Ethical theories..1/2
• Why do some business people make what appear
to be the right ethical choices, whilst some do
things that are unscrupulous or even illegal?
• Are people who make these unethical decisions
inherently bad, or are there other reasons that
can explain the incidence of ethics problems in
business?
• Do people have different ethical beliefs and
values at work from those they have at home?
• These questions ....by examining what are called
descriptive ethical theories.
 Descriptive Ethical theories...2/2
• Provide an important addition to the
normative theories covered earlier; rather
than telling us that business people should do
(normative theory)
• Seek to describe
– how ethics decisions are actually made in
business, and
– why they do it? (what influences the process and
outcomes of those decisions)
 How ethics decisions are actually made :
Stages in ethical decision-making

Ethical decision-making process

Recognise Make Establish Engage in

moral moral moral moral
issue judgement intent behaviour

Source: Derived from Rest (1986), as cited in Jones (1991).

 What Influences
ethical decision-making?
Two broad categories: individual & situational
(Ford and Richardson 1994)

• Individual factors - unique characteristics of the individual

making the relevant decision
– Given at birth
– Acquired by experience and socialisation
• Situational factors - particular features of the context that
influence whether the individual will make an ethical or
unethical decision
– Work context
– The issue itself including
• Intensity
• ethical framing
 Framework for understanding ethical decision-
making

Individual factors

Recognise Make moral Establish Engage in

moral issue judgement moral intent moral
behaviour

Situational factors
 Individual influences on ethical decision-making
Factor Influence on ethical decision-making

Age and gender Very mixed evidence leading to unclear associations with ethical decision-making.

Appear to have a significant effect on ethical beliefs, as well as views of what is deemed
National and cultural characteristics
an acceptable approach to certain business issues.

Somewhat unclear, although some clear differences in ethical decision-making between

Education and employment
those with different educational and professional experience seem to be present.

Psychological factors:
 Cognitive moral development
 Locus of control
 Small but significant effect on ethical decision-making.
 At most a limited effect on decision-making, but can be important in predicting the
apportioning of blame/approbation.

Personal Values Significant influence – some empirical evidence citing positive relationship.

Personal integrity Significant influence likely, but lack of inclusion in models and empirical tests.

Moral imagination A new issue for inclusion with considerable explanatory potential.
 Situational influences
on ethical decision-making
Type of Factor Influence on ethical decision-making
factor
Moral intensity Reasonably new factor, but evidence suggests significant effect on ethical decision-
Issue-related making.
Moral framing Fairly limited evidence, but existing studies show strong influence on some aspects of
the ethical decision-making process, most notably moral awareness.
Rewards Strong evidence of relationship between rewards/punishments and ethical behaviour,
although other stages in ethical decision-making have been less investigated.
Authority Good general support for a significant influence from immediate superiors and top
management on ethical decision-making of subordinates.

Context- Bureaucracy Significant influence on ethical decision-making well documented, but actually
related exposed to only limited empirical research. Hence, specific consequences for ethical
decision-making remain contested.
Work roles Some influence likely, but lack of empirical evidence to date.

Organizational Strong overall influence, although implications of relationship between culture and
culture ethical decision-making remain contested.

National Context Limited empirical investigation, but some shifts in influence likely.
 Concluding Ethical Theories
• Normative Theories
– Ethical theories that propose to prescribe the morally
correct way of acting

• Descriptive Ethical theories

– which seek to describe how ethics decisions are actually
made in business
– Complement normative
– Influences: Individual & Situational
 (Un)ethical Behavior

Prescriptive
Norms
Other factors:
Individual
Ethical issue
Situational –
intensity
Orgn Culture

(Un)ethical
behaviuor