Crane and Matten

Business Ethics (3rd Edition)

Chapter 3

Evaluating Business Ethics: Normative Ethical Theories

Lecture 3

Overview

• Locate the role of ethical theory

• Highlight international differences in

perspectives

• Provide critical overview of traditional ethical

theories

• Explore 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

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

Source: Crane and Matten (2010)

Motivation

/

Principles

Action

Outcomes

Consequentialist Ethics

Non-consequentialist Ethics

Major normative theories

Source: Crane and Matten (2010)

Non-consequentialist Non-consequentialist Consequentialist Consequentialist Type

Man is a being that is

distinguished by

dignity

Man is a rational

moral actor

Man is controlled by

avoidance of pain and

gain of pleasure

(“hedonist”)

Man as an actor with

limited knowledge and

objectives

Concept of

human

beings

Respect for human

beings

Categorical

imperative

Act/rule utilitarianism Maximization of

desires/self interest Rules

Rights Duties Collective welfare Individual desires or

interests Focus

John Locke

John Rawls Immanuel Kant Jeremy Bentham

John Stuart Mill

Adam Smith Contributors

Egoism Utilitarianism Ethics of duties Rights & justice

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

• Moral virtues

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

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

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

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 procedures of

norm generation

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.

Approaches based on empathy and

moral impulse

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

Typical Perspective

Single normative consideration

for solving the ethical dilemma

Ethical

Dilemma

‘Lens’ of ethical theory

Pluralistic Perspective

Pluralism?

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

• Middle ground between absolutism and relativism

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 acceptable and expected for me to think only of the consequences to myself in this

situation ?

Egoism

Social consequences If I consider all of the possible 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?

Utilitarianism

Duties to oth ers Who do I have obligations to in this situation? What would happen if everybody 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?

Ethics of duty

Entitlements of others

Whose rights do I need to consider here? Am I respecting fundamental human rights and people’s need for dignity?

Ethics of rights

Fairness Am I treating everyone fairly here? Have processes been set up to allow everyone an equal ch ance? Are there major disparities between the ‘winners’ and ‘losers’ that could be avoided?

Theories of justice

Moral character Am I acting with integrity here? What would a decent, honest person do in the same situation?

Virtue ethics

Care for others a nd relationships

How do (or would) the other affected parties feel in this situation? Can I avoid doing harm to others? Which solution is most likely to preserve healthy and harmonious relationships among those involved?

Feminist ethics

Process of resol ving conflicts

What norms can we work out together to provide a mutually acceptable solution to this problem? How can we achieve a peaceful settlement of this conflict that avoids ‘railroading’ by the most powerful player?

Discourse ethics

Moral impulse a nd emotions

Am I just simply going along with the usual practice here, or slavishly following 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

e motions or gut feelings tell me once I’m out of the office?

Postmodern ethics