THEORIES OF

ETHICS
OBJECTIVE
 To study the theoretical framework of business ethics
 Toanalyze the various ethical decisions that are applied in
the modern day corporate world
 ETHICAL THEORY
 Attempts to explain the existence and facts of ethics and ethical
behavior
 Attempt to provide a clear, unified account of what our ethical
obligations are.
 Represent the viewpoints from which individuals seek guidance as
they make decisions.
 Provide a framework for making moral decisions and for assessing
their rightness or wrongness
 Andrew Crane and Dirk Matten - ethical theories are the rules
and principles that determine right and wrong for any given situation
 PHILOSOPH
Y OF ETHICS

NORMATIVE META- APPLIED

ETHICS ETHICS ETHICS
 CLASSIFICATION

CONSEQUENTIALIS
T

NON-
NORMATIVE CONSEQUENTIALIS
ETHICS T

OTHERS
 TELEOLOGICAL
(CONSEQUENTIALIST)

ETHICAL UTILITARIANIS EUDAEMONIS

EGOISM M M
 OTHERS

STOCK HOLDER STAKE HOLDER SOCIAL CONTRACT

THEORY THEORY THEORY
 PHILOSOPHY OF ETHICS

 NORMATIVE ETHICS/ NORMATIVE THEORY/MORAL THEORY –

which action are right and wrong/ which character traits are good and bad

 META-ETHICS – study of moral thought and moral language

 APPLIED ETHICS – practical application of moral considerations.

Attempts to apply ethical theory to real-life situation
 NORMATIVE ETHICAL THEORIES

 Normative – “Norm”- standards or a rule

 Moralnorms are standards or principles with which people are
expected to comply
 Study of ethical behavior
 Brach of philosophy ethics
 How one act, in a moral sense
 Hypothesis about what is wrong and right, desirable or
undesirable, just or unjust
 TELEOLOGICAL
(CONSEQUENTIALIST)
 Theory based on moral judgments or consequences – consequentialist theory
 Telos – Greek – goal or end or purpose
 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
 Opposed to deontological ethics
 Consequence oriented
 States that people should adhere to their obligations and duties when analyzing
the ethical dilemma
 ETHICAL EGOISM
 Introduced by Henry Sidgwick – “The Methods of Ethics”.
 Egoism – Latin term “ego” means “I”.
 People should act in their own self interest
 Argues that do anything which is best for ourselves
 Ayn Rand – Pioneer
 Egoism v. Altruism : Self interest v. Other’s interest
 AYN RAND’S ARGUMENTS

 Each person has one life to live

 Altruism rejects the value of the individual, whereas
ethical egoism views the individual’s life as having
supreme value
 Therefore ethical egoism is the moral philosophy we ought
to accept
 TYPES OF ETHICAL EGOISM

 PERSONAL ETHICAL EGOISM

act from the motive of self-interest

 INDIVIDUAL ETHICAL EGOISM

serve self interest

 UNIVERSAL ETHICAL EGOISM

pursue his/her self interest

 Psychological Egoism
v.
Ethical Egoism
PSYCHOLOGICAL EGOISM ETHICAL EGOISM

Thomas Hobbes and Friedrich Neitzche Henry Sidgwick and Ayn Rand
Self interest motivated human action Human action motivated by self interest
Descriptive theory – what is Prescriptive theory/Normative theory – what ought to
be
Scientific theory Philosophical theory
Describes reason for human behaviour and Recommendation
action
 CRITICISM OF ETHICAL EGOISM

 Egoism as an ethical theory is not really a moral theory

 Ignores wrong doings
 Extreme ethical egoism is self-defeating
 Violates Universalism
 Arbitrary doctrine
 UTILITARIANISM

 JEREMY BENTHAM AND JOHN STAURT MILL

 Utility – greatest happiness to greatest number people
 A decision is ethical – provides a greater net utility than any other
alternative decision
 Maximum happiness to maximum number of people
 Action evaluated by consequences
 Hedonistic calculus
 Principle of Utilitarianism

 CONSEQUENTIALISM – action depends on consequences

 HEDONISM – pleasure alone is good
 MAXIMISATION – greatest amount of pleasure
 UNIVERSALIM – everyone’s consequences are alike
 FORMS OF
UTILITARIANISM
 ACT UTILITARIANISM – action is good if produces more happiness than
unhappiness
 RULE ULTILITARIANISM – adopt a moral rule and if followed by everybody,
would lead to a greater level of overall happiness
 CRITICISM

 Difficult to measure quantities of pleasure and pain

 Pleasure does not constitute human being
 Measure difficult as it changes from time to time and place to place
 EUDAEMONIST THEORY OF
ETHICS
 Greek word eudaimonia – “happiness”
 “Eu” – good & “daimon” - spirit
 “Well-being” or “human flourishing” or “good life”
 Action is good if it results in the fulfillment of goals along with the welfare of the
human beings.
 Shows that leading a life of virtue will also be attended by happiness
 CRITICISM

 IMMANUEL KANT – opponent

 Rejected the view that happiness is the highest good and insisted that happiness
can be an ingredient of the highest good, but only if it is deserved.
 ADVANTAGES - TELEOLOGICAL

Consistentwith ordinary moral reasoning

Precise method for decision-making
Economic theory based on utilitarianism
 LIMITATIONS

 Not consider the basic obligations

 Not possible to measure and compare goodness/badness of
various action
 Disregard rights and justice
DEONTOLOGICAL
THEORY
 DEONTOLOGICAL ETHICS
( NON- CONSEQUENTIALIST)
 Immanuel Kant and W.D.Ross
 Deontological ethics/ deontology
 Deontology – Greek- deon, obligation, duty
 The morality of an action should be based on whether that action itself is
right or wrong under a series of rules, rather than based on the consequences
of the action
 Action is more important than the consequences
 Actions are morally right independent of their consequences
3 ways to test an act to see whether it is
morally permissible : KANT
 Universality : act only on those maxims one can will to be universal
laws
 Human dignity : act only on those maxims consistent with treating
each person as an end, not merely as a means.
 Moral legislation : act only on those maxims that all rational persons
could adopt as universal rules governing all.
 CLASSIFICATION

 ACT DEONTOLOGY
act deontologists, the morality of acts cannot be determined by rules
alone for rules can have exceptions
 RULE DEONTOLOGY
the morality of action is determined by moral rules
FORMS OF DEONTOLOGY THEORY

4 FORMS OF DEONTOLOGY THEORY:

 DUTY THEORY

 RIGHTS THEORY

 CATEGORICAL IMPERATIVE

 Prima Facie Duties

 DUTY THEORY : Hugo Grotius and Samuel Von Pufendorf
They classified duties under three headings:
 • duties to God
 • duties to oneself and
 • duties to others : 1. Family duties
2. Social duties
3. Political duties
 RIGHT THEORY : John Locke & Thomas Jefferson
There are 4 features associated with moral rights :
1. Natural
2. Universal
3. Equal
4. Inalienable
 CATEGORICAL
IMPERATIVE
 Kant called the fundamental principle of morality as categorical imperative (CI)
 Imperative is command – what we ought to do or what we should do

2 formulations of Kant are as follows:

1. Universability
2. Always to treat other people with impartial respect
IMPERATIVES : 2 Types
1. hypothetical – conditional –acting inorder to receive some reward
Not absolute
“If”
2. categorical – unconditional ---to act for the sake of duty only
Absolute
 FORMULATIONS
1. Act only according to that maxim by which you can at the same time will that it
would become a universal law.” – UNIVERSALITY AND LAW OF NATURE
2. ‘Act so that you treat humanity, whether in you’re your own person or that of
another, always as an end and never as a means only.’ – HUMANITY
3. The idea of the will of every rational being as a universally legislating will –
AUTONOMY
4. Act according to maxims of a universally legislating member of a merely possible
kingdom of ends – KINGDOM OF END

*MAXIM – a principle that underlies or informs an act or set of actions

 CRITICISM
1. The theory applies only to rational agents. It would not
apply to non-human or to humans who are not rational.
2. The theory cannot resolve conflicts between duties:
a.     between two perfect duties
b.     between a perfect duty and an imperfect duty  
 PRIMA FACIE DUTIES
 Revision of duty theory
 Developed by W.D.Ross
 MORAL RULES
a. fidelity
b. Reparation
c. Gratitude
d. Justice
e. Beneficence
f. Self-improvement
g. Non-maleficence
 MERITS OF DEONTOLOGY
THEORY
 Care for relation than for consequences
 They consider the role of motives in evaluating to charity
 Emphasizes the value of every human being
 Provides more certainity in individual situations
DEMERITS OF DEONTOLOGY
THEORY
 Failed to give a criteria for moral duties
 No order of priority in rules
 Sets absolute rules
 Hard to reconcile conflicting duties
 VIRTUE THEORY

 Character based
 Founded by Aristotle
 Ethical value of an individual is determined by his character
 Virtue may be defined as any disposition of character or personality that
an individual desires in him or others
 Greek word -“arête” means “excellence”
 Virtues are developed from childhood to adolescence, and to the final
stages of an adult
 Plato’s cardinal virtues - wisdom, courage, temperance and justice

 WISDOM – good moral decision making

 COURAGE – self abnegation and control of fear
 TEMPERANCE – self-control of pleasures
 JUSTICE/FAIRNESS – giving others what is their due

 Aristotle’s Gold Mean Doctrine – mean between more extreme

character traits
 CATEGORIES
 INTELLECTUAL VIRTUE : virtues of mind
developing intellectual abilities
taught through instruction
Examples : wisdom, prudence, rationality
2 types of intellectual virtues : theoretical intelligence & Practical wisdom
 MORAL VIRTUE : not natural or inborn
acquired through practice
derive from attitudes in us
EXAMPLES : Fairness, benevolence, honesty, loyalty, conscientiousness, courage
 VIRTUES BY ARISTOTLE
 COURAGE
 TEMPERANCE
 LIBERALITY
 MAGNIFICENCE
 MAGNANIMITY
 AMBITION
 PATIENCE
 FRIENDLINESS
 TRUTHFULNESS
 WIT
 MODESTY
 JUSTICE
 CHARACTER ETHICS

 INDIVIDUAL CHARACTER ETHICS

courage, self-discipline, prudence, gratitude, wisdom, sincerity,
 WORK CHARACTER ETHICS
honesty, loyalty, honor, trust worthiness, empathy
 PROFESSIONAL CHARACTER ETHICS
loyalty, impartial judgment, altruism, truthfulness, public service
 CRITICISM
 Culturally relative
 Not focus on what sort of actions are morally permitted
 Self centred
 Lacks clarity in resolving moral conflicts
 NORMATIVE ETHICS

 STAKE HOLDER THEORY

 STOCK HOLDER THEORY
 SOCIAL CONTRACT THEORY
 STAKE HOLDER THEORY

 Any individual or group who can affect or is affected by the achievement

of the corporation’s objectives – Stake holder (Freeman 1984)
 Groups who are vital to the success and survival of organization
 A conceptual framework of business ethics and organizational
management which addresses moral and ethical values in the management
of a business or other organization
 TYPES OF STAKE HOLDERS

 INTERNAL STAKE HOLDERS : Employees

Manager
Owners

 EXTERNAL STAKE HOLDERS : Customers

Shareholders
Creditors
Government
Society
Suppliers
 DIFFERENT FORMS
 NORMATIVE STAKE HOLDER THEORY : attempts
to provide a reason why organizations should take into
account stakeholder interests
 DESCRIPTIVE STAKE HOLDER THEORY : attempts
to ascertain whether and how corporations actually do take
into account stakeholder interest
 INSTRUMENTAL STAKE HOLDER THEORY :
attempts to answer the question of whether it is beneficial
for the organization to take into account stakeholder
interests
 CRITICISM

 Criticized as problematic
 Not applicable in practice by corporations
 Extends the rights of stakeholders for too much
 STOCK HOLDER THEORY

 Also – SHAREHOLDERS THEORY

 Milton Friedman (1960)
 Relationship between the owners and their agents
 A share holder or stockholder is an individual or institution, including a
corporation that legally owns any part of a share of stock in a public or
private corporation – Definition
 Shareholder theory claims corporation managers have a duty to maximize
shareholder returns.
 SHAREHOLDER V. STAKEHOLDER

 Stakeholders have a vested interest in the success of the

organization or project
 Has stake in the company

 Shareholders are the partial owners of the organization

 Owns share in the company
 SOCIAL CONTRACT
THEORY
 All businesses are ethical duty bound to increase the welfare of society
 Based on Principals of social contract
 Social contract theory holds that all businesses operate under an unwritten contract
with the society as a whole, in which the society allows the company to do business
under the condition that its actions benefit society.

Welfare activities :
Social contract theory aims at doing some welfare activities to society and they include :
1. Avoiding pollution, depletion of natural resources
2. Protecting worker’s interests etc.
 CRITICISM
 The social contracts theory is no contract at all it is just like a promise from one
person to do something in consideration of other’s agreeing to do
 Those who believe in laissez faire model of capitalism usually argue that companies
benefit society by creating wealth, providing services and employing people
 It is difficult for company to do the good by concentrating on ethical concerns.